AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 27, 2000
EXACT CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 8731 02-0478229
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification Number)
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COPIES TO:
WILLIAM J. SCHNOOR, JR., ESQ. ROHAN S. WEERASINGHE, ESQ.
TESTA, HURWITZ & THIBEAULT, LLP SHEARMAN & STERLING
125 High Street 599 Lexington Avenue
Boston, Massachusetts 02110 New York, NY 10022
Tel: (617) 248-7000 Tel: (212) 848-4000
Fax: (617) 248-7100 Fax: (212) 848-7179
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If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. / /
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / __________________
If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / __________________
If 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. / / __________________
CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED OFFERING PRICE(1) AMOUNT OF REGISTRATION FEE
Common Stock, $.01 par value.................. $69,000,000 $18,216
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
EXPLANATORY NOTE
This registration statement contains two forms of prospectus: one to be used in connection with a United States and Canadian offering of the registrant's common shares and one to be used in connection with a concurrent international offering of common shares. The U.S. prospectus and the international prospectus will be identical in all respects except that they will have different front and back cover pages and a different "Underwriting" section. The form of the U.S. prospectus is included herein and is followed by the alternate front cover page to be used in the international prospectus. The form of the front cover page of the international prospectus is labeled "Alternate Front Cover Page for International Prospectus", and the form of the back cover page for the international prospectus is labelled "Alternate Back Cover Page for International Prospectus." The form of the Underwriting section for the international prospectus is labelled "Alternate 'Underwriting' Section for International Prospectus." Final forms of each prospectus will be filed with the Securities and Exchange Commission under Rule 424(b) of the General Rules and Regulations under the Securities Act of 1933.
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED OCTOBER 27, 2000
P_R_O_S_P_E_C_T_U_S
SHARES
[LOGO]
COMMON STOCK
This is EXACT's initial public offering of common stock. EXACT is selling all of the shares of common stock. The U.S. underwriters are offering shares in the U.S. and Canada and the international managers are offering shares outside the U.S. and Canada.
We expect the public offering price to be between $ and $ per share. Currently, no public market exists for the shares. After pricing of the offering, we expect that the common stock will trade on The Nasdaq National Market under the symbol "EXAX."
INVESTING IN OUR COMMON STOCK INVOLVES RISKS THAT ARE DESCRIBED IN THE
"RISK FACTORS" SECTION BEGINNING ON PAGE 4 OF THIS PROSPECTUS.
PER SHARE TOTAL
--------- -----
Public offering price....................................... $ $
Underwriting discount....................................... $ $
Proceeds, before expenses, to EXACT......................... $ $
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The U.S. underwriters may also purchase up to an additional shares from EXACT at the public offering price, less the underwriting discount, within 30 days from the date of this prospectus to cover over-allotments. The international managers may similarly purchase up to an additional shares from EXACT.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The shares will be ready for delivery on or about , 2000.
------------------
MERRILL LYNCH & CO.
CIBC WORLD MARKETS
THOMAS WEISEL PARTNERS LLC
-----------
The date of this prospectus is , 2000.
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TABLE OF CONTENTS
PAGE
--------
Summary..................................................... 1
Risk Factors................................................ 4
Use of Proceeds............................................. 11
Dividend Policy............................................. 11
Capitalization.............................................. 12
Dilution.................................................... 14
Selected Historical Financial Data.......................... 16
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 17
Business.................................................... 21
Management.................................................. 36
Related Party Transactions.................................. 43
Principal Stockholders...................................... 45
Description of Capital Stock................................ 47
Shares Eligible for Future Sale............................. 51
Material United States Federal Tax Considerations for
Non-United States Holders................................. 53
Underwriting................................................ 57
Legal Matters............................................... 61
Experts..................................................... 61
Where You Can Find Additional Information................... 61
Index to Financial Statements............................... F-1
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You should rely only on the information contained in this prospectus. We have not, and the underwriters have not, authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus or other date stated in this prospectus. Our business, financial condition, results of operations and prospects may have changed since that date.
We were incorporated in the State of Delaware on February 10, 1995 as
Lapidus Medical Systems, Inc. We changed our corporate name to EXACT
Laboratories, Inc. on December 11, 1996 and changed our name to EXACT
Corporation on September 12, 2000. Our executive offices are located at
63 Great Road, Maynard, Massachusetts 01754. Our telephone number is
(978) 897-2800. Our web address is http://www.exactlabs.com and is not a part of
this prospectus.
SUMMARY
THE FOLLOWING SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS. YOU SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY, ESPECIALLY THE RISKS OF INVESTING IN OUR COMMON STOCK DISCUSSED UNDER "RISK FACTORS" AND OUR
FINANCIAL STATEMENTS AND ACCOMPANYING NOTES.
EXACT CORPORATION
We have developed proprietary technologies in applied genomics that we believe will revolutionize the early detection of colorectal cancer and several other types of common cancers. We believe that medical practitioners will order tests based on our technologies as part of a regular screening program for the early detection of such cancers and pre-cancerous lesions. We also believe that the widespread and periodic application of these tests will reduce mortality, morbidity and the costs associated with these cancers.
We have selected colorectal cancer as the first application of our technology platform because the target market is large and not well served. Colorectal cancer is the most deadly cancer among non-smokers, curable if detected early and well understood from a genomics point of view. Detection of colorectal cancer in its early stages increases the number of patients who survive and reduces the cost of care. As a result, the American Cancer Society and National Cancer Institute recommend that the roughly 74 million Americans age 50 and above undergo regular colorectal cancer screening tests.
Despite the availability of colorectal cancer screening and diagnostic tests for more than 20 years, the rate of early detection of colorectal cancer remains low. Fecal occult blood testing, flexible sigmoidoscopy and colonoscopy are the three principal methods that have been used to detect colorectal cancer. Each of these methods is either inadequate in detecting the presence of disease, not scalable or so invasive as to seriously deter its use as a screening method. We therefore believe that no screening method is commercially available today that allows for the effective early detection of colorectal cancer in a manner that is acceptable to patients, medical practitioners and payors.
We believe that our technologies will enable early genomics-based detection of colorectal cancer and several other types of common cancer so that more people can be treated effectively. We believe that our technologies isolate human DNA shed from the colon into stool and then detect the minute amount of abnormal DNA associated with colorectal cancer. As of October 20, 2000, we had eight issued U.S. patents and 23 pending U.S. patent applications for our technologies and processes.
In conjunction with the Mayo Clinic, we have conducted three blinded clinical studies since the fall of 1998. In these studies, screening tests using our technologies demonstrated an ability to detect the presence of colorectal cancer that is superior to that of current early detection screening methods. Based on these results, in August 2000 we initiated our first multi-center blinded clinical study, which includes both high-risk and average-risk patients. Upon completion of this study, we intend to initiate a multi-center blinded clinical trial, expected to include approximately 5,300 patients. The goal of this trial is to compare the accuracy of our colorectal cancer screening tests to that of existing technologies for an average-risk population.
Our goal is to become the leading company applying genomics to the early
detection of cancer.
The key components of our business strategy are to:
- commercialize our colorectal cancer screening technologies;
- extend our genomics technologies to other cancers; and
- continue to make scientific and technological advances in applied genomics.
If successful, we believe our strategies will lead to regular screening of large portions of the population for colorectal cancer and several other types of cancer, which would result in a significant recurring revenue stream for us.
THE OFFERING
Common stock offered by EXACT:
U.S. offering................................. shares
International offering........................ shares
Total..................................... shares
Shares outstanding after the offering........... shares
Use of proceeds................................. We will use the net proceeds from this offering
for clinical studies and trials, research and
development activities, working capital and
other general corporate purposes. See "Use of
Proceeds."
Risk factors.................................... See "Risk Factors" and other information
included in this prospectus for a discussion of
factors you should carefully consider before
deciding to invest in shares of the common
stock.
Proposed Nasdaq National Market symbol.......... EXAX
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The share data in the table above is based on shares outstanding as of June 30, 2000 and excludes:
- 399,556 shares of common stock issuable upon exercise of options outstanding with a weighted average exercise price of $2.30 per share; and
- 196,174 shares of common stock reserved for future issuance upon exercise of additional grants which may be made under our 1995 stock plan. Subsequent to June 30, 2000, we reserved, for future issuance upon exercise of grants which may be made, an additional 250,000 shares of common stock under our 1995 stock plan, 1,000,000 shares of common stock under our 2000 option plan and 300,000 shares of common stock under our 2000 purchase plan. No options have been granted under our 2000 option plan or 2000 purchase plan.
Except as otherwise indicated, all information in this prospectus assumes that the underwriters will not exercise their over-allotment option and the conversion of each outstanding share of convertible preferred stock into shares of common stock upon the completion of this offering.
SUMMARY HISTORICAL FINANCIAL DATA
You should read the following summary financial data together with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our financial statements and the related notes included elsewhere in this prospectus.
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------- --------------------
1997 1998 1999 1999 2000
-------- -------- --------- -------- ---------
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Research and development expenses......... $ 1,222 $ 2,849 $ 3,689 $ 1,814 $ 2,299
Loss from operations...................... (2,037) (4,021) (5,263) (2,567) (4,391)
Net loss.................................. (1,883) (3,578) (4,964) (2,389) (3,900)
Net loss per share:
Basic and diluted....................... $(29.43) $(16.73) $ (14.57) $ (8.27) $ (10.83)
Pro forma basic and diluted............. (1.53) (0.83)
Weighted average common shares
outstanding:
Basic and diluted(1).................... 63,983 213,870 340,763 289,020 360,075
Pro forma basic and diluted............. 3,246,559 4,683,405
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AS OF JUNE 30, 2000
-------------------------
ACTUAL AS ADJUSTED(2)
-------- --------------
BALANCE SHEET DATA:
Cash and cash equivalents................................. $32,157 $
Total assets.............................................. 33,638
Total stockholders' equity................................ 33,110
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(1) Computed as described in Note 1 to the financial statements included elsewhere in this prospectus.
(2) Presented on an as adjusted basis to give effect to the automatic conversion of each outstanding share of convertible preferred stock into shares of common stock upon the closing of this offering and the sale of shares of common stock at an assumed initial public offering price of $ per share, the mid-point of the expected range, after deducting the estimated underwriting discount and commissions and offering expenses payable by us.
RISK FACTORS
AN INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW, TOGETHER WITH ALL OF THE OTHER INFORMATION IN THIS PROSPECTUS, BEFORE MAKING AN INVESTMENT DECISION.
WE CANNOT ASSURE YOU THAT WE WILL EVER REALIZE REVENUE FROM OUR PRODUCTS OR SERVICES, ACHIEVE OR SUSTAIN PROFITABILITY OR THAT OUR OPERATING LOSSES WILL NOT INCREASE IN THE FUTURE.
We are a development stage company and have incurred losses since we were formed. From our date of inception on February 10, 1995 through June 30, 2000, we have accumulated a total deficit of approximately $15.1 million. Since our colorectal cancer screening tests are still in development, we do not expect to have any revenue from the sale of our products and services for the foreseeable future. Even after we begin selling our products and services, we expect that our losses will continue and increase. We cannot assure you that we will ever commercialize any of our products or services, or that the revenue from any of our products or services will be sufficient to make us profitable.
IF OUR CLINICAL STUDIES DO NOT PROVE THE SUPERIORITY OF OUR TECHNOLOGIES, WE MAY NEVER SELL OUR PRODUCTS AND SERVICES.
The results of our clinical studies may not show that tests using our technologies are superior to existing screening methods. In that event, we will have to devote significant financial and other resources to further research and development, and commercialization of tests using our technologies will be delayed or may never occur. Our earlier clinical studies were small and included samples from high-risk patients. The results from these earlier studies may not be representative of the results we obtain from any future studies, including our next two clinical studies, which will include substantially more samples and a larger percentage of average-risk patients.
IF MEDICARE AND OTHER THIRD-PARTY PAYORS, INCLUDING MANAGED CARE ORGANIZATIONS, DO NOT PROVIDE ADEQUATE REIMBURSEMENT FOR OUR PRODUCTS AND SERVICES, MOST CLINICAL REFERENCE LABORATORIES WILL NOT USE OUR PRODUCTS OR LICENSE OUR TECHNOLOGIES TO PERFORM CANCER SCREENING TESTS.
Most clinical reference laboratories will not perform colorectal cancer screening tests using our products and licensing our technologies unless they are adequately reimbursed by third-party payors such as Medicare and managed care organizations. There is significant uncertainty concerning third-party reimbursement for the use of any test incorporating new technology. Reimbursement by a third-party payor may depend on a number of factors, including a payor's determination that tests using our products and technologies are sensitive for colorectal cancer, not experimental or investigational, medically necessary, appropriate for the specific patient and cost-effective. To date, we have not secured any reimbursement approval for tests using our products and technologies from any third-party payor, nor do we expect any such approvals in the near future.
Reimbursement by Medicare will require approval by the Secretary of Health and Human Services, or HHS. The Federal Budget Act of 1997 provides for reimbursement of new technologies such as ours, but only with action of the Secretary of HHS. We cannot guarantee that the Secretary of HHS will act to approve tests based on our technologies on a timely basis or at all. In addition, the assignment of a current procedural terminology, or CPT, code facilitates Medicare reimbursement. The process to obtain a CPT code is lengthy and we cannot guarantee that we will receive a CPT code on a timely basis, or at all.
Since reimbursement approval is required from each payor individually, seeking such approvals is a time-consuming and costly process. Failure to obtain adequate reimbursement by Medicare and managed care organizations could have a material adverse effect on our business, financial conditions and results of operations.
WE WILL NOT BE ABLE TO COMMERCIALIZE OUR TECHNOLOGIES IF WE ARE NOT ABLE TO LOWER COSTS THROUGH AUTOMATING AND SIMPLIFYING KEY OPERATIONAL PROCESSES.
Currently, colorectal cancer screening tests using our technologies are very expensive because they are labor-intensive and use highly complex and expensive reagents. In order to price our products and services competitively, we will need to reduce substantially the costs of tests using our technologies through significant automation of key operational processes and other cost savings procedures. If we fail to sufficiently reduce costs, tests using our technologies either may not be commercially viable or may generate little, if any, profitability.
OUR INABILITY TO ESTABLISH STRONG BUSINESS RELATIONSHIPS WITH LEADING CLINICAL REFERENCE LABORATORIES TO PERFORM COLORECTAL CANCER SCREENING TESTS USING OUR TECHNOLOGIES WILL LIMIT OUR REVENUE GROWTH.
A key step in our strategy is to sell reagents and license our proprietary technologies to leading clinical reference laboratories that will perform colorectal cancer screening tests. We currently have no business relationships with these laboratories and have limited experience in establishing these business relationships. If we are unable to establish these business relationships, the number of tests that can be processed each year will be limited to our in-house capacity, thereby limiting our revenue growth.
WE MAY BE UNABLE TO RECRUIT A SUFFICIENT NUMBER OF PATIENTS FOR OUR PLANNED AVERAGE-RISK CLINICAL TRIAL.
We intend to conduct a clinical trial of approximately 5,300 average-risk patients. If we are unable to enroll the required number of average risk patients, we will be unable to validate the superiority of our technologies, which would make it difficult to sell our products and services. Despite the availability of colorectal cancer screening methods today, most Americans who are recommended for colorectal cancer screening do not get screened. Participants in our clinical trial will only have an average risk of developing colorectal cancer, yet will have to undergo a colonoscopy. This procedure requires sedation and causes patient discomfort. We cannot guarantee that we will be able to recruit patients on a timely basis, if at all.
OUR FAILURE TO CONVINCE MEDICAL PRACTITIONERS TO ORDER TESTS USING OUR TECHNOLOGIES WILL LIMIT OUR REVENUE AND PROFITABILITY.
If we fail to convince medical practitioners to order tests using our technologies, we will not be able to sell our products or license our technologies in sufficient volume for us to become profitable. We will need to make leading gastroenterologists aware of the benefits of tests using our technologies through published papers, presentations at scientific conferences and favorable results from our clinical studies. Our failure to be successful in these efforts would make it difficult for us to convince medical practitioners to order colorectal cancer screening tests using our technologies for their patients.
OUR REVENUE AND PROFITABILITY WILL BE LIMITED IF ONLY AN INSIGNIFICANT NUMBER OF PEOPLE DECIDE TO BE SCREENED FOR COLORECTAL CANCER.
Even if our technologies are superior to alternative colorectal cancer screening technologies, adequate third-party reimbursement is obtained and medical practitioners order tests using our technologies, an insignificant number of people may decide to be screened for colorectal cancer. Despite the availability of current colorectal cancer screening methods as well as the recommendation of the American Cancer Society and the National Cancer Institute that all Americans age 50 and above be screened for colorectal cancer, most of these individuals decide not to complete a colorectal cancer screening test. If only an insignificant portion of the population decides to complete colorectal cancer screening tests, our revenue and profitability will be limited.
IF WE LOSE THE SUPPORT OF OUR KEY SCIENTIFIC COLLABORATORS, IT MAY BE DIFFICULT TO ESTABLISH TESTS USING OUR TECHNOLOGIES AS A STANDARD OF CARE FOR COLORECTAL CANCER SCREENING AND THEREFORE LIMIT OUR REVENUE GROWTH AND PROFITABILITY.
We have established relationships with leading scientists and research institutions that we believe are key to establishing tests using our technologies as a standard of care for colorectal cancer screening. If any of our collaborators determine that colorectal cancer screening tests using our technologies are not superior to available colorectal cancer screening tests or that alternative technologies would be more effective in the early detection of colorectal cancer, we would encounter difficulty establishing tests using our technologies as a standard of care for colorectal cancer screening, which would limit our revenue growth and profitability.
OUR INABILITY TO APPLY OUR PROPRIETARY TECHNOLOGIES SUCCESSFULLY TO DETECT OTHER COMMON CANCERS MAY LIMIT OUR REVENUE GROWTH AND PROFITABILITY.
To date, we have focused substantially all of our research and development efforts on colorectal cancer. We intend to devote significant personnel and financial resources in the future to extending our technology platform to the development of screening tests for other selected common cancers and pre- cancerous lesions. To do so, we may need to overcome technological challenges to develop reliable screening tests for these cancers. We may never realize any benefits from these research and development activities.
IF THE U.S. FOOD AND DRUG ADMINISTRATION, OR FDA, DECIDES THAT OUR IN-HOUSE LABORATORY TESTS OR THE SALE OF OUR ANALYTE SPECIFIC REAGENTS AND LICENSES TO OUR INTELLECTUAL PROPERTY USED IN COLORECTAL CANCER SCREENING TESTS OR OUR STOOL COLLECTOR REQUIRE APPROVAL OR CLEARANCE PRIOR TO MARKETING, A LENGTHY AND TIME-CONSUMING REGULATORY PROCESS MAY DELAY OR PREVENT THE COMMERCIAL RELEASE OF OUR PRODUCTS AND SERVICES.
The FDA does not actively regulate laboratory tests that have been developed and used by the laboratory conducting the test. Although the FDA does regulate the analyte specific reagents used in such tests, its regulations provide that most such reagents are exempt from the FDA's premarket review requirements. If the FDA were to decide to regulate in-house developed laboratory tests, decide to require premarket approval or clearance of our analyte specific reagents, conclude that our reagents do not meet the requirements for analyte specific reagents, or conclude that licensing our intellectual property constitutes non-compliant labeling, the commercialization of our products and services could be delayed, halted, or prevented, and we could be subject to penalties and enforcement actions. Any such FDA action would have a material adverse effect on our business, financial condition, and results of operations. Similarly, if the FDA were to determine that our stool collector requires premarket approval or clearance, it could have a material adverse effect on our business, financial condition, and results of operations.
IF WE FAIL TO COMPLY WITH REGULATIONS RELATING TO CLINICAL LABORATORIES, WE MAY BE PROHIBITED FROM PROCESSING OUR OWN TESTS IN-HOUSE, BE REQUIRED TO INCUR SIGNIFICANT EXPENSE TO CORRECT NON-COMPLIANCE, OR BE SUBJECT TO OTHER REQUIREMENTS OR PENALTIES.
We are subject to U.S. and state laws and regulations regarding the operation of clinical laboratories. For example, the federal Clinical Laboratory Improvement Act, or CLIA, imposes certification requirements for clinical laboratories, and establishes standards for quality assurance and quality control, among other things. Clinical laboratories are subject to inspection by regulators, and the possible sanctions for failing to comply with applicable requirements include prohibiting a laboratory from running tests, requiring a laboratory to implement a corrective plan, and imposing civil money or criminal penalties. Accordingly, if we fail to meet CLIA requirements, it could cause us to
incur significant expense, or otherwise have a material adverse effect on our business, financial condition, or results of operations.
OTHER COMPANIES MAY DEVELOP AND MARKET METHODS FOR DETECTING COLORECTAL CANCER, WHICH MAY MAKE OUR TECHNOLOGIES LESS COMPETITIVE, OR EVEN OBSOLETE.
The market for colorectal cancer screening, which includes approximately 74 million Americans age 50 and above, has attracted competitors, some of which have significantly greater resources than we have. These companies may focus their research and development efforts on any one or more alternative screening methods or may develop a superior genomics-based screening test. If so, we may be unable to compete effectively against them either because their test is superior or because they may have more expertise, experience and business relationships.
THE LOSS OF KEY MEMBERS OF OUR SENIOR MANAGEMENT TEAM COULD ADVERSELY AFFECT OUR BUSINESS.
Our success depends largely on the skills, experience and performance of key members of our senior management team, including Stanley N. Lapidus, our Chairman, Don M. Hardison, our President, John A. McCarthy, Jr., our Vice President and Chief Financial Officer, and Anthony P. Shuber, our Vice President of Molecular Biology. Messrs. Lapidus and Shuber have been critical to the development of our technologies and business. Mr. Hardison, who joined us in May 2000, and Mr. McCarthy, who joined us in October 2000, are key additions to our management team and will be critical to directing and managing our growth and development in the future. If we were to lose one or more of these key employees, our ability to compete successfully, the development of our technologies or the implementation of our business strategy could be materially adversely affected.
IF WE ARE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY EFFECTIVELY, WE MAY BE UNABLE TO PREVENT THIRD PARTIES FROM USING OUR TECHNOLOGIES, WHICH WOULD IMPAIR OUR COMPETITIVE ADVANTAGE.
We rely on patent protection as well as a combination of trademark, copyright and trade secret protection, and other contractual restrictions to protect our proprietary technologies, all of which provide limited protection and may not adequately protect our rights or permit us to gain or keep any competitive advantage. If we fail to protect our intellectual property, we will be unable to prevent third parties from using our technologies and they will be able to compete more effectively against us.
We cannot assure you that any of our currently pending or future patent applications will result in issued patents, or that any patents issued to us will not be challenged, invalidated or held unenforceable. A third-party institution has asserted co-inventorship rights with respect to one of our issued patents relating to our loss of heterozygosity detection method. A second third-party institution has asserted co-inventorship rights with respect to one of our pending patent applications relating to our DNA integrity assay detection method. We cannot guarantee you that we will be successful in defending these or other challenges made in connection with our patents and patent applications. These third-party assertions, if successful, would result in co-ownership of such patents with a third party that may allow the third party to fully exploit these technologies or might result in the unenforceability of the challenged patent.
In addition to our patents, we rely on contractual restrictions to protect our proprietary technology. We require our employees and third parties to sign confidentiality agreements and employees to also sign agreements assigning to us all intellectual property arising from their work for us. Nevertheless, we cannot guarantee that these measures will be effective in protecting our intellectual property rights.
We cannot guarantee you that the patents issued to us will be broad enough to provide any meaningful protection nor can we assure you that one of our competitors may not develop more effective technologies, designs or methods to test for colorectal cancer or any other common cancer
without infringing our intellectual property rights or that one of our competitors might not design around our proprietary technologies.
WE MAY INCUR SUBSTANTIAL COSTS TO PROTECT AND ENFORCE OUR PATENTS.
In order to protect or enforce our patent rights, we may initiate actions against third parties. Any actions regarding patents could be costly and time-consuming, and divert our management and key personnel from our business. Additionally, they could put our patents at risk of being invalidated or interpreted narrowly.
WE MAY BE SUBJECT TO SUBSTANTIAL COSTS AND LIABILITY OR BE PREVENTED FROM SELLING OUR SCREENING TESTS FOR CANCER AS A RESULT OF LITIGATION OR OTHER PROCEEDINGS RELATING TO PATENT RIGHTS.
Third parties may assert infringement or other intellectual property claims against our licensors or us. Because patent applications in the United States are maintained in secrecy until a patent issues, others may have filed patent applications for technology covered by our pending applications. There may be third-party patents, patent applications and other intellectual property relevant to our potential products that may block or compete with our products or processes. Even if third-party claims are without merit, defending a lawsuit may result in substantial expense to us and may divert the attention of management and key personnel. In addition, we cannot assure you that we would prevail in any of these suits or that the damages or other remedies if any, awarded against us would not be substantial. Claims of intellectual property infringement may require us to enter into royalty or license agreements with third parties that may not be available on acceptable terms, if at all. We may also become subject to injunctions against the further development and use of our technology, which would have a material adverse effect on our business, financial condition and results of operations.
Also, patents and applications owned by us may become the subject of interference proceedings in the United States Patent and Trademark Office to determine priority of invention, which could result in substantial cost to us, as well as a possible adverse decision as to the priority of invention of the patent or patent application involved. An adverse decision in an interference proceeding may result in the loss or rights under a patent or patent application subject to such a proceeding.
OUR BUSINESS WOULD SUFFER IF CERTAIN LICENSES WERE TERMINATED.
We license certain technologies from Roche Molecular Systems, Inc. and Genzyme Corporation that are key to our technologies. The Roche license, which relates to a gene amplification process used in almost all genetic testing, is a non-exclusive license for the term of the licensed patents. In order to maintain this license, we must pay royalties and submit certain reports. The Genzyme license is a non-exclusive license to use the APC and P53 genes and methodologies relating thereto in connection with our products and services for the term of the licensed patents. In order to maintain this license, we must pay milestone payments and royalties, achieve a certain level of sales and use reasonable efforts to make products and services based on these patents available to the public. If either Roche or Genzyme were to terminate the licenses, we would incur significant delays and expense to change a portion of our testing methods and we cannot guarantee that we would be able to change our testing methods without affecting the sensitivity of our tests.
CHANGES IN HEALTHCARE POLICY COULD SUBJECT US TO ADDITIONAL REGULATORY REQUIREMENTS THAT MAY DELAY THE COMMERCIALIZATION OF OUR TESTS AND INCREASE OUR COSTS.
Healthcare policy has been a subject of discussion in the executive and legislative branches of the federal and many state governments. Changes, if implemented, could substantially delay the use of our tests, increase costs, and divert management's attention. We cannot predict what changes, if any, will be
proposed or adopted or the effect that such proposals or adoption may have on our business, financial condition and results of operations.
OUR INABILITY TO RAISE ADDITIONAL CAPITAL ON ACCEPTABLE TERMS IN THE FUTURE MAY LIMIT OUR GROWTH.
We may need to raise additional funds to execute our business strategy. Our inability to raise capital would seriously harm our business and development efforts. In addition, we may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operations. To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of these securities could result in dilution to our stockholders.
We currently have no credit facility or committed sources of capital. If our capital resources are insufficient to meet future requirements, we will have to raise additional funds to continue the development and commercialization of our technologies. These funds may not be available on favorable terms, or at all. If adequate funds are not available on attractive terms, we may be required to restrict our operations significantly or obtain funds by entering into agreements on unattractive terms.
OUR EXECUTIVE OFFICERS, DIRECTORS AND PRINCIPAL STOCKHOLDERS OWN A SIGNIFICANT PERCENTAGE OF OUR COMPANY AND COULD EXERT SIGNIFICANT INFLUENCE OVER MATTERS REQUIRING STOCKHOLDER APPROVAL.
After this offering, our executive officers, directors and principal stockholders and their affiliates will together control % of our outstanding common stock, without giving effect to the exercise of outstanding options under our stock plans and to the exercise of the underwriters' over-allotment options. As a result these stockholders, if they act together, will have significant influence over matters requiring stockholder approval, such as the election of directors and approval of significant corporate transactions. This concentration of ownership may have the effect of delaying, preventing or deterring a change in control, could deprive you of the opportunity to receive a premium for your common stock as part of a sale and could adversely affect the market price of our common stock.
CERTAIN PROVISIONS OF OUR CHARTER, BY-LAWS AND DELAWARE LAW MAY MAKE A TAKEOVER DIFFICULT.
Our corporate documents and Delaware law contain provisions that might enable our management to resist a takeover. These provisions include a staggered board of directors, limitations on persons authorized to call a special meeting of stockholders and advance notice procedures required for stockholders to make nominations of candidates for election as directors or to bring matters before an annual meeting of stockholders. These provisions might discourage, delay or prevent a change of control or in our management. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors and cause us to take other corporate actions. The existence of these provisions could limit the price that investors might be willing to pay in the future for shares of common stock and could deprive you of an opportunity to receive a premium for your common stock as part of a sale.
OUR STOCK PRICE MAY BE VOLATILE.
The market price of our stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including:
- technological innovations or new products and services by us or our competitors;
- clinical trial results relating to our tests or those of our competitors;
- reimbursement decisions by Medicare and other managed care organizations;
- FDA regulation of our products and services;
- the establishment of partnerships with clinical reference laboratories;
- health care legislation;
- intellectual property disputes;
- additions or departures of key personnel; and
- sales of our common stock.
In addition, the Nasdaq National Market and the market for applied genomics companies in particular, have experienced significant price and volume fluctuations that have often been unrelated or disproportionate to the performance of those companies.
THE MARKET PRICE OF OUR COMMON STOCK MAY DROP SIGNIFICANTLY WHEN THE RESTRICTIONS ON SALE BY OUR EXISTING STOCKHOLDERS LAPSE.
Following this offering, we will have approximately shares of common stock outstanding. Sales of substantial amounts of our common stock after this offering, or the possibility of such sales, could adversely affect the market price of our common stock. All of the shares of common stock to be sold in this offering will be freely tradable without restriction or further registration under the federal securities laws. The remaining , or %, of our outstanding common stock will be subject to restrictions on resale under U.S. securities laws. Holders of % of these shares have agreed not to sell these shares for at least 180 days following the date of this prospectus.
We intend to file a registration statement on Form S-8 to register approximately million shares of our common stock that are reserved for issuance or sale under our existing stock plans. Once registered, these shares will be freely tradable without restriction or further registration under the federal securities laws unless purchased by one of our affiliates.
INVESTORS WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION IN THE BOOK VALUE OF THEIR INVESTMENT.
If you purchase shares of our common stock in this offering, you will experience immediate and substantial dilution because the price you pay will be substantially greater than the net tangible value per share of the shares you acquire. This is due, in large part, to the fact that our current investors paid substantially less than the public offering price when they purchased our stock. In addition, the issuance of additional shares of our common stock or of securities convertible into our common stock or the exercise of outstanding options on our common stock could result in the substantial dilution of the percentage ownership of holders of our common stock at the time of any such issuance and substantial dilution of our earnings per share.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. These statements relate to future events or our future financial performance. We have attempted to identify forward-looking statements by terminology such as "anticipates", "believes," "can," "continue," "could," "estimates," "expects," "intends," "may," "plans," "potential," "predicts," "should" or "will" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks outlined under "Risk Factors," that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We are under no duty to update any of the forward-looking statements after the date of this prospectus or to conform such statements to actual results, unless required by law.
USE OF PROCEEDS
We estimate the aggregate net proceeds of the offering to be approximately $ , after deducting the estimated underwriting discount and offering expenses. If the underwriters' over-allotment option is exercised in full, we estimate that such net proceeds will be approximately $ . See "Underwriting."
We intend to use the net proceeds for clinical studies and trials, research and development activities, working capital and other general corporate purposes. We have not yet finalized the amount of net proceeds we will use specifically for each of the foregoing purposes. Accordingly, our management will have significant flexibility in applying the net proceeds of the offering. Pending such uses, we will invest the proceeds of the offering in short-term, interest-bearing, investment-grade securities, certificates of deposit or direct or guaranteed obligations of the United States.
DIVIDEND POLICY
We have never declared or paid dividends on our capital stock, and we do not anticipate paying any cash dividends in the foreseeable future. We currently intend to retain any future earnings to fund the development of our business.
CAPITALIZATION
The following table sets forth our capitalization as of June 30, 2000:
- on an actual basis;
- on a pro forma basis to give effect to the automatic conversion of each outstanding share of convertible preferred stock into shares of common stock; and
- on an as adjusted basis to adjust the pro forma information to give effect to the sale of shares of common stock at an assumed initial public offering price of $ per share, the mid-point of the expected range, after deducting the estimated underwriting discount and commissions and offering expenses payable by us.
This table should be read together with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our financial statements, notes thereto and other financial information included elsewhere in this prospectus.
AS OF JUNE 30, 2000
----------------------------------
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(DOLLARS IN THOUSANDS,
EXCEPT SHARE AMOUNTS)
Cash and cash equivalents................................... $ 32,157 $ 32,157 $
======== ======== ========
Stockholders' equity:
Series A--1,000,000 shares authorized, 902,414 shares
issued and outstanding actual; none authorized, issued
or outstanding pro forma or as adjusted................. $ 9 $ -- $
Series B--1,250,000 shares authorized, 996,196 shares
issued and outstanding actual; none authorized, issued
or outstanding pro forma or as adjusted................. 10 --
Series C--1,015,000 shares authorized, 1,007,186 shares
issued or outstanding; none authorized, issued or
outstanding pro forma or as adjusted.................... 10 --
Series D--1,435,373 shares authorized, 1,417,534 shares
issued and outstanding actual; none authorized, issued
or outstanding pro forma or as adjusted................. 14 --
Common stock, 7,500,000 shares authorized, 950,809 shares
issued and outstanding actual; 7,500,000 shares
authorized, 5,274,139 shares issued and outstanding pro
forma; shares authorized, shares issued and
outstanding as adjusted................................... 9 52
Subscriptions receivable.................................... (693) (693)
Deferred compensation....................................... (3,896) (3,896)
Additional paid in capital.................................. 52,762 52,762
Deficit accumulated during the development stage............ (15,115) (15,115)
-------- -------- --------
Total stockholders' equity................................ 33,110 33,110
-------- -------- --------
Total capitalization...................................... $ 33,110 $ 33,110 $
======== ======== ========
|
The share data in the table above is based on shares outstanding as of June 30, 2000 and excludes:
- 399,556 shares of common stock issuable upon exercise of options outstanding with a weighted average exercise price of $2.30 per share; and
- an aggregate of 196,174 shares available for future issuance upon exercise of additional grants which may be made under our 1995 stock plan. Subsequent to June 30, 2000, we reserved, for future issuance upon exercise of grants which may be made, an additional 250,000 shares of common stock under our 1995 stock plan, 1,000,000 shares of common stock under our 2000 option plan and 300,000 shares of common stock for our 2000 purchase plan. No options have been granted under our 2000 option plan or the 2000 purchase plan.
DILUTION
Our pro forma net tangible book value at June 30, 2000 was approximately $32.3 million, or approximately $6.12 per share, after giving effect to the conversion of all outstanding shares of convertible preferred stock into common stock upon the closing of the offering. Pro forma net tangible book value per share represents the amount of our total tangible assets less total liabilities, divided by the number of shares of common stock outstanding before giving effect to the sale of the shares of our common stock in the offering. See "Capitalization." After giving effect to the sale of the shares of common stock in the offering, assuming a public offering price of $ per share, less the estimated underwriting discount and commissions and other expenses of the offering, our pro forma net tangible book value as of June 30, 2000 would have been $ per share. This represents an immediate increase in net tangible book value per share of $ to existing stockholders and immediate dilution in net tangible book value of $ per share to new investors purchasing our common stock in the offering at the public offering price. The following table illustrates the per share dilution without over-allotment options:
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share at June 30,
2000.................................................... $6.12
Increase per share attributable to new investors..........
-----
Pro forma net tangible book value per share after the
offering..................................................
-----
Dilution per share to new investors......................... $
=====
|
Dilution per share to new investors is determined by subtracting pro forma net tangible book value per share after the offering from the public offering price per share paid by a new investor. If any shares are issued in connection with outstanding options or the underwriters' over-allotment options, you will experience further dilution.
The following table summarizes the number of shares of common stock purchased from us, the total consideration paid and the average price per share paid by the existing stockholders and by new investors in the offering, before deduction of the estimated underwriting discount and commissions and other expenses of the offering.
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- -------- ----------- -------- -------------
Existing stockholders.......... 5,274,139 % $48,359,772 % $9.17
New investors..................
--------- --- ----------- ---
Totals..................... 100% $ 100%
========= === =========== ===
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The share data in the table above is based on shares outstanding as of June 30, 2000 and excludes:
- 399,556 shares of common stock issuable upon exercise of options outstanding with a weighted average exercise price of $2.30 per share; and
- 196,174 shares of common stock reserved for future issuance upon exercise of additional grants which may be made under our 1995 stock plan. Subsequent to June 30, 2000, we reserved, for future issuance upon exercise of grants which may be made, an additional 250,000 shares of common stock for issuance under our 1995 stock plan, 1,000,000 shares of common stock under our 2000 option plan and 300,000 shares of common stock for our 2000 purchase plan. No options have been granted pursuant to our 2000 option plan or 2000 purchase plan.
If the underwriters' over-allotment option is exercised in full, the following will occur:
- the percentage of shares of common stock held by existing stockholders will decrease to approximately % of the total number of shares of our common stock outstanding after the offering; and
- the number of shares held by new investors will be increased to or approximately % of the total number of shares of our common stock outstanding after the offering.
SELECTED HISTORICAL FINANCIAL DATA
The selected historical financial data set forth below as of December 31, 1998 and 1999 and for the years ended December 31, 1997, 1998 and 1999, are derived from our financial statements, which have been audited by Arthur Andersen LLP, independent public accountants, and which are included elsewhere in this prospectus. The selected historical financial data as of December 31, 1996 and for the year ended December 31, 1996 are derived from our financial statements, which have been audited by Arthur Andersen LLP, independent public accountants and which are not included elsewhere in this prospectus. The selected historical financial data as of December 31, 1995 and for the year ended December 31, 1995 are derived from our unaudited financial statements which are not included elsewhere in this prospectus. The selected historical financial data as of June 30, 2000 and for the six-months ended June 30, 1999 and 2000 are derived from our unaudited financial statements which are included elsewhere in this prospectus. The unaudited financial statements include, in our opinion, all adjustments, consisting only of normal, recurring adjustments, necessary for a fair presentation of our financial position and the results of our operations for those periods.
The selected historical financial data should be read in conjunction with, and are qualified by reference to "Management's Discussion and Analysis of Financial Condition and Results of Operations," our financial statements and notes thereto and the report of independent public accountants included elsewhere in this prospectus. Operating results for the six months ended June 30, 2000 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2000.
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
----------------------------------------------------- ---------------------
1995 1996 1997 1998 1999 1999 2000
-------- -------- -------- -------- --------- -------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Research and development.......... $ -- $ 366 $ 1,222 $ 2,849 $ 3,689 $ 1,814 $ 2,299
General and administrative........ 144 312 814 1,170 1,560 751 1,306
Stock-based compensation.......... -- -- 1 2 14 2 786
------- ------- ------- ------- --------- ------- ----------
Loss from operations.............. (144) (678) (2,037) (4,021) (5,263) (2,567) (4,391)
Interest income................... 6 26 154 443 299 178 492
------- ------- ------- ------- --------- ------- ----------
Net loss.......................... $ (138) $ (652) $(1,883) $(3,578) $ (4,964) $(2,389) $ (3,900)
======= ======= ======= ======= ========= ======= ==========
Net loss per common share:
Basic and diluted(1)............ $ (4.65) $(18.63) $(29.43) $(16.73) $ (14.57) $ (8.27) $ (10.83)
======= ======= ======= ======= ========= ======= ==========
Pro forma, basic and diluted.... $ (1.53) $ (0.83)
========= ==========
Weighted Average Common Shares
outstanding:....................
Basic and diluted............... 29,738 35,000 63,983 213,870 340,763 289,020 360,075
======= ======= ======= ======= ========= ======= ==========
Pro forma basic and diluted..... 3,246,559 4,683,405
========= ==========
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AS OF DECEMBER 31,
----------------------------------------------------- AS OF
1995 1996 1997 1998 1999 JUNE 30, 2000
-------- -------- -------- -------- --------- -------------
BALANCE SHEET DATA:
Cash and cash equivalents....... $ 53 $ 3,896 $ 1,792 $ 8,826 $ 3,553 $32,157
Total assets.................... 62 4,119 2,417 9,708 4,754 33,638
Stockholders' equity............ 40 4,010 2,305 9,298 4,410 33,110
|
(1) Computed as described in Note 1 to the financial statements included elsewhere in this prospectus.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR FINANCIAL
STATEMENTS AND RELATED NOTES APPEARING ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
We apply proprietary genomics technologies to the early detection of common cancers. We have selected colorectal cancer screening as the first application of our technology platform. Since our inception on February 10, 1995, our principal activities have included:
- researching and developing our technologies for colorectal cancer screening;
- conducting clinical studies to validate our colorectal cancer screening tests;
- negotiating licenses for intellectual property of others incorporated into our technologies;
- developing relationships with opinion leaders in the scientific and medical communities;
- conducting market studies and analyzing potential approaches for commercializing our technologies;
- hiring research and clinical personnel;
- hiring management and other support personnel; and
- raising capital.
Initially, we intend to offer colorectal cancer screening services ourselves to establish the market. We then intend to license our proprietary technologies and sell reagents to leading clinical reference laboratories to enable them to develop tests. We may also package our technologies and seek approval for diagnostic test kits with which any clinical laboratory could conduct our tests.
We have generated no operating revenues since our inception and do not expect operating revenues for the foreseeable future. As of June 30, 2000, we had an accumulated deficit of approximately $15.1 million. Our losses have resulted principally from costs incurred in conjunction with our research and development initiatives.
Research and development expenses include costs related to scientific and laboratory personnel, clinical studies and reagents and supplies used in the development of our technologies. We expect that the cost of our research and development activities will increase substantially as we continue activities relating to the development of our colorectal cancer screening tests and the extension of our technologies to several other forms of common cancers and pre-cancerous lesions. We are currently conducting a clinical study which includes a population of both high-risk and average-risk patients and thereafter intend to conduct a clinical trial that will include approximately 5,300 average-risk patients at an estimated forty locations, the costs of which will be borne by us.
General and administrative expenses consist primarily of non-research personnel salaries, office expenses and professional fees. We expect general and administrative expenses to increase significantly as we hire additional personnel and build our infrastructure to support future growth.
Stock-based compensation expense includes expenses incurred as a result of granting stock options to employees and others with exercise prices per share which, for financial reporting purposes, were subsequently determined to be below the fair values per share of our common stock at the dates of grant. The stock compensation is being amortized over the vesting period of the applicable options, which is generally 60 months.
RESULTS OF OPERATIONS
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses increased to $2.3 million for the six months ended June 30, 2000 from $1.8 million for the six months ended June 30, 1999. This increase was primarily the result of costs incurred in connection with two multi-center clinical studies, an increase in research and development personnel and leasing additional laboratory space.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses increased to $1.3 million for the six months ended June 30, 2000 from $751,000 for the six months ended June 30, 1999. This increase was primarily the result of costs incurred in connection with the initiation of our marketing program, an increase in general and administrative personnel, including the hiring of our president, leasing additional administrative space and an increase in legal fees related to our patent portfolio.
STOCK-BASED COMPENSATION. Stock-based compensation expense increased to $786,000 for the six months ended June 30, 2000 from $2,000 for the six months ended June 30, 1999.
INTEREST INCOME. Interest income increased to $492,000 for the six months ended June 30, 2000 from $178,000 for the six months ended June 30, 1999. This increase was primarily due to an increase in our cash and cash equivalents balances resulting from the issuance of $31.7 million of preferred stock in April 2000.
COMPARISON OF THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses increased to $3.7 million for the year ended December 31, 1999 from $2.8 million for the year ended December 31, 1998, and increased in 1998 from $1.2 million for the year ended December 31, 1997. Each of these expense increases was attributable primarily to an increase in research and development personnel and the leasing of additional laboratory space. In addition, we began conducting clinical studies in 1998 and the cost of our ongoing clinical studies increased during 1999.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses increased to $1.6 million for the year ended December 31, 1999 from $1.2 million for the year ended December 31, 1998, and increased in 1998 from $814,000 for the year ended December 31, 1997. Each of these expense increases was attributable primarily to an increase in general and administrative personnel and an increase in legal and consulting fees.
STOCK-BASED COMPENSATION. Stock-based compensation expense increased to $14,000 for the year ended December 31, 1999 from $2,000 for the year ended December 31, 1998, and increased in 1998 from $1,000 for the year ended December 31, 1997.
INTEREST INCOME. Interest income decreased to $299,000 for the year ended December 31, 1999 from $443,000 for the year ended December 31, 1998, and increased in 1998 from $154,000 for the year ended December 31, 1997. The decrease in 1999 was primarily due to a decrease in our cash and cash equivalents balances as a result of losses from operations. The increase during 1998 was primarily due to an increase in our cash and cash equivalents balances resulting from the issuance of preferred stock in March 1998.
LIQUIDITY AND CAPITAL RESOURCES
We have financed our operations since inception primarily through private sales of preferred stock. As of June 30, 2000, we had received net proceeds of $47.2 million from the issuance of preferred stock. As of June 30, 2000, we had approximately $32.2 million in cash and cash equivalents.
Net cash used in operating activities was $2.8 million for the six months ended June 30, 2000, $4.6 million in 1999, $3.0 million in 1998 and $1.8 million in 1997. These increases are primarily due to the increase in our research and development activities.
Net cash used in investing activities was $414,000 for the six months ended June 30, 2000, $722,000 in 1999, $496,000 in 1998 and $499,000 in 1997. For each of these periods, cash used in investing activities reflected increased investment in our intellectual property portfolio and the expansion of our laboratory and office space.
Net cash provided by financing activities was $31.8 million for the six months ended June 30, 2000, $57,000 in 1999, $10.6 million in 1998 and $171,000 in 1997. Cash provided during these periods resulted from the sale of our preferred stock during the six months ended June 30, 2000 and the year ended 1998.
We expect that the proceeds from this offering, together with our current working capital, will fund our operations over the foreseeable future. Our future capital requirements include, but are not limited to, launching our marketing efforts, supporting our clinical trial efforts, and continuing our research and development programs. Our future capital requirements will depend on many factors, including the following:
- the success of our clinical studies;
- the scope of and progress made in our research and development activities; and
- the successful commercialization of colorectal cancer screening tests based on our technologies.
NET OPERATING LOSS CARRYFORWARDS
As of December 31, 1999, we had net operating loss carryforwards of $10.7 million and research and development tax credit carryforwards of $389,000. The net operating loss and tax credit carryforwards will expire at various dates through 2019, if not utilized. The Internal Revenue Code and applicable state law impose substantial restrictions on a corporation's utilization of net operating loss and tax credit carryforwards if an ownership change is deemed to have occurred.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board, or the FASB, issued Statement of Financial Accounting Standards (SFAS) No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. This statement established accounting and reporting standards for derivative instruments and hedging activities. SFAS 133, as amended by SFAS 137, will be effective for our financial reporting beginning in the first quarter of 2001. SFAS 133 will require that we recognize all derivatives as either assets or liabilities on the balance sheet and measure those instruments at fair value. The accounting for gains and losses from changes in the fair value of a particular derivative will depend on the intended use of that derivative. We believe the adoption of this statement will not have a significant impact on our financial position, results of operations or cash flows.
In December 1999, the SEC issued Staff Accounting Bulletin No. 101, REVENUE RECOGNITION. This bulletin establishes guidelines for revenue recognition and is in effect for periods beginning October 1, 2000. We do not expect that the adoption of this guidance will have a material impact on our financial condition or results of operations.
In March 2000, the FASB issued Interpretation No. 44, ACCOUNTING FOR CERTAIN TRANSACTIONS INVOLVING STOCK COMPENSATION--AND INTERPRETATION OF APB OPINION NO. 25. The interpretation clarifies the application of APB Opinion No. 25 to accounting for stock issued to employees. The interpretation is effective July 1, 2000, but covers events occurring during the period between December 15, 1998 and July 1, 2000. If events covered by the interpretation occur during this period, the effects of applying the
interpretation to the events would be recognized on a prospective basis from July 1, 2000. As a result, the interpretation will not require that any adjustments be made to our consolidated financial statements for periods before July 1, 2000 and no expense would be recognized for any additional compensation cost measured that is attributable to periods before July 1, 2000. We believe the adoption of this interpretation will not have a significant impact on our financial position, results of operations or cash flows.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
We have no derivative financial instruments in our cash and cash equivalents. We invest our cash and cash equivalents in securities of the U.S. governments and its agencies and in investment-grade, highly liquid investments consisting of commercial paper, bank certificates of deposit and corporate bonds. We anticipate investing our net proceeds from this offering in investment-grade and highly liquid investments pending their use as described in this prospectus.
BUSINESS
OVERVIEW
We have developed proprietary technologies in applied genomics that we believe will revolutionize the early detection of colorectal cancer and several other types of common cancers. We believe that medical practitioners will order tests based on our technologies as part of a regular screening program for the early detection of such cancers and pre-cancerous lesions. We also believe that the widespread and periodic application of these tests will reduce mortality, morbidity and the costs associated with these cancers.
We have selected colorectal cancer as the first application of our technology platform because it is the most deadly cancer among non-smokers, curable if detected early and well understood from a genomics point of view. There are an estimated 74 million Americans age 50 and above for whom the American Cancer Society and National Cancer Institute recommend regular colorectal cancer screening. Moreover, current detection methods for colorectal cancer have proven to be inadequate screening tools.
We have developed proprietary technologies that isolate the human DNA shed from the colon into stool. We then identify mutations in DNA shed from abnormal cells associated with colorectal cancer and pre-cancerous lesions. We have conducted blinded clinical studies at the Mayo Clinic that we believe indicate the superiority of our colorectal cancer screening tests to current early detection screening methods. We are currently conducting an additional blinded clinical study for colorectal cancer screening tests using our technologies and are seeking to develop commercial products and services based on these technologies.
Our goal is to become the leading company applying genomics to the early detection of cancer. The key components of our business strategy are as follows:
- commercialize our colorectal cancer screening technologies;
- extend our genomics technologies to other cancers; and
- continue to make scientific and technological advances in applied genomics.
If successful, we believe our strategies will lead to regular screening of large portions of the population for colorectal cancer and several other types of cancer, which would result in a significant recurring revenue stream for us.
GENOMICS AND COLORECTAL CANCER
Genomics, broadly defined, is the study of the genome and its importance in human physiology and disease. Initial efforts in genomics centered on identifying the definitive sequence of every gene in the human genome. Scientists are now focusing on applied genomics--understanding the function of individual genes and the role of genetic variation in disease and disease management.
Cancer develops when the DNA in a single normal cell mutates or changes to encourage uncontrolled cell growth. In a ground-breaking paper published in the NEW ENGLAND JOURNAL OF MEDICINE in 1988, Dr. Bert Vogelstein, one of our scientific collaborators, and his colleagues described a multi-step model of colorectal cancer development. In 1990, Dr. Eric Fearon, a former member of our scientific advisory board, and Dr. Vogelstein published a diagram depicting the development of
colorectal cancer. An updated version of this diagram showing many of the genomic events involved in the development of colorectal cancer is shown below:
The graphic on this page consists of the words "Chromosome" and "Mutation" on the left side of the chart with the word "Chromosome" listed above "Mutation". Equally spaced and in line with the word "Chromosome" from left to right are the phrases "5q loss", "18q loss", "17p loss" and "8p loss". Equally spaced in line with the word "Mutation" from left to right are "Apc" directly underneath "5q loss", with the word "Beta-Catenin" directly underneath "Apc", "K-ras" directly underneath "18q loss", "Bat-26" directly underneath "17p loss", with "p53" directly underneath "Bat-26". Below these words are 5 equally spaced boxes connected by arrows from left to right. The following phrases are in the indicated box: "Normal Epithelium" in the first box, "Early Adenoma" in the second box, "Late Adenoma" in the third box, "Early Cancer" in the fourth box and "Late Cancer" in the fifth box. There is also an arrow connecting the corresponding chromosome and mutations to the space between the boxes.
The diagram illustrates that cancer develops in steps, and that it arises from alterations in multiple genes in an individual cell, frequently with chromosome loss. The diagram shows that these alterations lead to pathologic changes in the colon from normal epithelium--the tissue that lines the surface of the colon--through early and late adenomas, which are a form of pre-cancerous growth, to early cancer and late cancer. These alterations, shown in the above diagram, usually accumulate over many years, and are typically due to:
- mutations in individual genes, such as the APC, K-RAS and P53 genes;
- larger scale effects in which large parts of a chromosome or even entire chromosome arms, such as 5q, 18q, 17p and 8p, are deleted; or
- deletions in DNA regions such as BAT-26.
The multi-step process provides genomic targets for the early detection of cancer. The detection of genetic alterations associated with cancer allows for the direct, early detection of cancer before the onset of symptoms.
COLORECTAL CANCER
OVERVIEW
Colorectal cancer is the most deadly cancer in the U.S. among non-smokers and the second most deadly cancer overall. Only lung cancer kills more people each year. The American Cancer Society estimates that in the U.S. there will be approximately 136,000 new cases and approximately 57,000 deaths in the year 2000 from colorectal cancer. Almost 50% of the patients with a new diagnosis of colorectal cancer will die within five years.
Medical practitioners commonly classify colorectal cancer into four stages at the time of diagnosis as shown in the following table:
The chart is a rectangle with six vertical columns and three horizontal rows. The vertical columns, from left to right, are titled as follows: Column one is titled "Stage"; Column two is titled "Classification"; Column three is titled "Extent of Disease"; Column four is titled "% of Patients Diagnosed at This Stage"; Column five is titled "5-Year Survival Rates (approximate)"; and Column six is titled "Typical Treatment". The first row has the words: "Early" in the first column; the second column, which is subdivided into two rows, has the phrases "Dukes' A" in the top subdivison and "Dukes' B" in the bottom subdivision; the third column, which is subdivided into two rows, has the phrases "Confined to the surface lining of the colon" in the top subdivision and "Below the surface; no lymph node involvement" in the bottom subdivision; the fourth column has the percentage "37%" in the first row; the fifth column, which is subdivided into two rows, has the percentages "95%" in the top subdivision and "85%" in the bottom subdivision; the sixth column has the word "Surgery". The second row has the word "Late" in the first column; the second column, which is subdivided into two rows, has the words "Dukes' C" in the top subdivision and "Dukes' D" in the bottom subdivision; the third column, which is also subdivided into two rows, has the phrases "Lymph node involvement" in the top subdivision and "Metastatic disease" in the bottom subdivision; the fourth column has the percentage "63%"; the fifth column, which is subdivided into two rows, has the percentages "50%-60%" in the top subdivision and "10%" in the bottom subdivision; and the sixth column has the phrase "Surgery and chemotherapy".
Detection of pre-cancerous adenomas and cancer in its earliest stages increases the number of patients who survive and reduces the cost of treatment and care. As a result, the American Cancer Society and National Cancer Institute recommend that the 74 million Americans age 50 and above undergo regular colorectal cancer screening tests.
PROBLEMS WITH CURRENT DETECTION METHODS FOR SCREENING
Fecal occult blood testing, flexible sigmoidoscopy and colonoscopy are the three principal methods that have been used to detect colorectal cancer. Despite the availability of these and other screening and diagnostic tests for more than 20 years, the rate of early detection of colorectal cancer remains low, with only limited effect on mortality. In 1999, Medicare reimbursement records showed that only 14% of Americans over age 65 were screened for colorectal cancer. We believe that no screening strategy is commercially available today that allows for the highly sensitive, early detection of colorectal cancer in a manner that is acceptable to patients, medical practitioners and payors.
Medical practitioners characterize cancer-screening tests using three principal parameters: sensitivity, specificity and compliance. Sensitivity measures a test's ability to detect the presence of disease when the patient has disease. Specificity measures a test's ability to correctly identify individuals who are disease-free. A failure of specificity, commonly referred to as a false positive, is the failure of a test to correctly identify an individual who is disease-free. Compliance rates measure the percentage of patients for whom screening is recommended that are screened at the recommended interval.
FECAL OCCULT BLOOD TESTING (FOBT). FOBT does not detect cancer directly but rather detects the presence of blood in stool. Typically, a patient must retrieve two small portions of stool from the toilet on each of three successive days and smear each portion onto a small chemically impregnated card. The patient must modify his or her diet to eliminate red meat and certain fruits and vegetables and also eliminate the use of certain medications such as aspirin for three days prior to the stool sample collection, as well as during the three days of stool sample collection. If the FOBT results are positive, medical practitioners refer the patient for colonoscopy for a definitive diagnosis.
Although FOBT is non-invasive, it has the following limitations:
- LOW SENSITIVITY. FOBT detects on average only 25%-30% of patients with cancer in any stage and only approximately 12% of patients with pre-cancerous adenomas greater than one centimeter.
- LOW RATE OF EARLY-STAGE DETECTION. FOBT is less effective in detecting Dukes' A and B cancers, for which survival rates are higher and treatment costs are less expensive, than in detecting Dukes' C and D cancers.
- LOW SPECIFICITY. Because blood can be present in the stool for many reasons other than colorectal cancer, such as hemorrhoids or red meat in the diet, FOBT has a reported false positive rate of approximately 7%, based on Medicare claims data. We estimate that six to ten million FOBT tests are completed each year. This means approximately 420,000-700,000 patients per year are unnecessarily referred for follow-up colonoscopies.
- LOW COMPLIANCE. Of the 74 million Americans age 50 and above who should be annually screened, only 20 million receive FOBT cards annually and we estimate only six to ten million of those complete the FOBT test. This means less than 15% of those Americans who should be screened each year complete an FOBT test. We believe this low compliance is a result of low sensitivity at detecting early stages of cancer, the dietary restrictions and unappealing nature of the process.
FLEXIBLE SIGMOIDOSCOPY. Flexible sigmoidoscopy is a procedure performed without sedation, and after an often unpleasant bowel preparation, in which a physician inserts a fiber-optic endoscope one to
two feet into the colon to explore the lower third of the colon. If flexible sigmoidoscopy results are positive, medical practitioners refer patients for colonoscopy for further diagnosis.
Although flexible sigmoidoscopy is more sensitive and more specific than FOBT, it has the following limitations:
- INVASIVE PROCEDURE. Before a flexible sigmoidoscopy procedure, a patient must undergo a bowel preparation procedure to remove stool from the lower third of the colon to make a visual examination possible. Since medical practitioners perform flexible sigmoidoscopy without sedation, patients feel varying degrees of pain and embarrassment.
- LOW SENSITIVITY. Flexible sigmoidoscopy at best can directly visualize no more than half of all colorectal cancers and adenomas. The other half of cancers are located in the upper two thirds of the colon, beyond the range of the endoscope. A patient's inability to tolerate the procedure and incomplete bowel preparation further limit sensitivity.
The above current screening methodologies are summarized below:
SENSITIVITY SPECIFICITY
METHOD PROCEDURE DESCRIPTION (APPROXIMATE) (APPROXIMATE)
---------------------- ------------------------------- ------------- -------------
FOBT - Detects presence of blood in 25%-30% 93%
stool
- Non-invasive
- Three days of retrieving
stool
FLEXIBLE SIGMOIDOSCOPY - Physician inserts endoscope 48% 95%
one
to two feet into colon
- Performed without sedation
- Unpleasant bowel preparation
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COLONOSCOPY. Colonoscopy is a procedure that allows a physician to visualize the entire length of the colon and, during the same procedure, remove some cancerous and pre-cancerous lesions. A colonoscope is identical to a flexible sigmoidoscope except that its insertion depth is approximately six feet instead of one to two feet. Medical practitioners perform colonoscopy with the patient under sedation after undergoing a thorough bowel preparation prior to the procedure.
Although medical practitioners view colonoscopy as the definitive method for diagnosis, we believe it is not a practical method for mass screening. The short supply of skilled clinicians, the cost of the procedure and patient discomfort, as well as a small risk of complications and death have limited the use of colonoscopy as a screening test. If opinion leaders were to recommend colonoscopy for screening of average-risk individuals, we estimate that it would take more than a decade to perform a first round of screening on every one of the recommended 74 million Americans age 50 and above.
OUR SOLUTION
Many non-invasive cancer screening methods are not effective early detection methods. For example, PSA for prostate cancer screening, mammography and FOBT find only indirect evidence of cancer and suffer from lack of sensitivity or specificity. As a result, mortality, morbidity and the cost of treatment of many cancers remain high. We have made significant scientific advances that we believe will allow for the direct early detection of several types of common cancers. Our business opportunity is to use our technologies to lower mortality, morbidity and the costs associated with these cancers.
The first application of our technologies is colorectal cancer screening. We believe medical practitioners will order tests using our technologies every one to three years to screen for the presence of colorectal cancer. Using our proprietary genomic technologies, a laboratory will isolate the human
DNA shed into the stool from the colon. The laboratory will then use our technologies to identify mutations in the genome shed from abnormal cells associated with adenomas and colorectal cancer. When individuals test positive in these tests, medical practitioners will refer them for colonoscopy for follow-up. Through regular screening, we believe that tests using our technologies will enable the detection of colorectal cancer and adenomas earlier so that patients can be treated effectively.
We believe colorectal cancer screening tests using our technologies will become a widely-accepted and regularly-used screening tool as a result of the following features and benefits:
- EARLIER DETECTION. Early detection saves lives. We believe colorectal cancer screening tests using our technologies will detect Dukes' A and B cancers, as well as some pre-cancerous lesions. We believe that this will represent a marked improvement over current colorectal cancer screening methods.
- HIGHER SENSITIVITY. Since the fall of 1998, we have conducted a series of blinded clinical studies at the Mayo Clinic using our colorectal cancer screening tests. In these clinical studies, the sensitivity of our tests for colorectal cancer substantially exceeded the sensitivity reported for FOBT and flexible sigmoidoscopy.
- HIGHER COMPLIANCE. We designed our technologies to detect colorectal cancer from a single whole stool sample obtained non-invasively. Patients are not required to touch their stool, modify their diet or undergo bowel preparation. Moreover, we believe that, based on the results of our clinical studies and trials, opinion leaders will educate primary care physicians, about the potential for improving detection of colorectal cancer with our technologies. We also believe that this will lead many primary care physicians to make regular testing based on our technologies a part of their physical examinations of patients aged 50 and above who, upon learning of the benefits, will be likely to submit to such testing.
- COST-EFFECTIVE PREVENTION AND TREATMENT. We believe that colorectal cancer screening tests using our technologies will detect early stage lesions more effectively than current screening methods. As a result of this early detection, medical practitioners can treat early stage colorectal cancer and pre-cancerous lesions in a less expensive and more effective manner than late stage cancer.
- SCALABILITY. Screening 74 million Americans age 50 and above requires a scalable process. Procedures such as flexible sigmoidoscopy and colonoscopy suffer problems of scalability because of the short supply of skilled clinicians. We believe tests using our technologies will enable mass screening on a regular basis.
OUR STRATEGY
Our goal is to become the leading company applying genomics to the early detection of cancer. The key components of our strategy are as follows:
- COMMERCIALIZE OUR COLORECTAL CANCER SCREENING TECHNOLOGIES. We selected colorectal cancer as the first application of our technologies because the target market is large and not well served. We intend to commercialize our products and services through a staged market entry. Initially, we intend to offer colorectal cancer screening services ourselves to establish the market. We then intend to license our proprietary technologies and sell reagents to leading clinical reference laboratories to enable them to develop tests. We may also package our technologies and seek approval for diagnostic test kits with which any clinical laboratory could conduct our tests.
- EXTEND OUR GENOMICS TECHNOLOGIES TO OTHER CANCERS. We believe that our current technologies will be applicable to the early detection of several other types of common cancers. We believe that certain of our technologies allow for the early detection of cancers without knowledge of the precise genomic basis of the cancer. As a result, we may be able to develop tests for cancers before the genomic basis of such cancers is discovered. In our clinical trials, we have achieved
promising results in detecting certain aerodigestive cancers. We intend to test for these and other types of common cancers in future clinical trials and will commercialize tests using our technologies to detect cancers that we believe have the most potential.
- CONTINUE TO MAKE SCIENTIFIC AND TECHNOLOGICAL ADVANCES IN APPLIED GENOMICS. Our proprietary sample preparation and detection methods have enabled us to produce significant improvements in the early detection of cancer from a minute amount of altered DNA. Because we believe our detection methods are novel, we are developing and testing multiple detection methods to minimize our technical and business risk. We intend to continue to develop additional proprietary sample preparation and detection methods for the early detection of common cancers.
If successful, we believe our strategies will lead to regular screening of large portions of the population for colorectal cancer and several other types of cancer, which would result in a significant recurring revenue stream for us.
OUR TESTING PROCESS
Diagnostic tests typically require sample collection and preparation procedures as well as detection methods. We have overcome significant technical challenges in the development of a three-step sample collection and preparation process and four detection methods that apply genomics to the early detection of colorectal cancer. We have eight issued U.S. patents and 23 pending U.S. patent applications relating to our testing process.
This chart has three boxes and one oval connected by arrows from left to right with the following words in each box or oval: "Specimen Collection and Transportation", "Representative Sampling", "DNA Extraction, Purification and Amplification" and "Cancer Detection Methods".
SPECIMEN COLLECTION AND TRANSPORTATION. We have based our tests on collecting a single whole stool in a self-contained device. Patients will bring the samples to their physicians who will forward them to the laboratory performing the colorectal cancer screening test.
REPRESENTATIVE SAMPLING. In the past, DNA testing using stool samples lacked sensitivity. We believe that this was due to the non-uniform distribution of abnormal DNA in stool. We have invented proprietary methods to assure that the portion of stool that is processed at the laboratory is representative of the entire stool. We believe these methods lead to increased sensitivity.
DNA EXTRACTION, PURIFICATION AND AMPLIFICATION. The isolation and amplification of human DNA found in stool is technically challenging because over 99% of DNA is not human DNA, but is DNA from bacteria normally found in the colon. In addition, there are substances in stool that make the isolation and amplification of human DNA a difficult task. Our proprietary technologies simplify the isolation and amplification of human DNA found in stool.
CANCER DETECTION METHODS. We have designed four proprietary methods for detecting and identifying genomic markers associated with colorectal cancer that can be performed on instruments commonly available in clinical laboratories conducting molecular testing.
OUR PROPRIETARY CANCER DETECTION METHODS
Our technology platform consists of the proprietary cancer detection methods set forth in the table below. Each of these methods enables the early detection of cancer in a minute amount of altered DNA obtained from a sample that is composed of DNA largely from normal cells.
NAME ROLE IN DETECTION OUR SCIENTIFIC ADVANCE
------------------ ---------------------------------- ----------------------------------
MULTIPLE MUTATION - Each element of MuMu detects a - Sensitive and specific detection
DETECTION (MUMU) single mutation of a of single DNA mutations
cancer-related gene
DELETION - Detects short deletions and - Distinguishes between deletions
TECHNOLOGY insertions in the BAT-26 region and insertions resulting from
of a specific gene the testing itself, and those
associated with mismatch-repair
cancers
DNA INTEGRITY - Detects longer human DNA - Proprietary marker associated
ASSAY (DIA) fragments associated with with cancer that does not require
abnormality knowledge of which genes cause
cancer
ENUMERATED LOSS OF - Enumerates ratio of paternal DNA - Statistical method that applies
HETEROZYGOSITY as compared to maternal DNA at a a commonly used analytical
(E-LOH) given genomic site to identify technique to indicate a missing
chromosomal loss that is gene and does not require
characteristic of many cancers knowledge of which genes cause
cancer
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MULTIPLE MUTATION. Multiple Mutation, or MuMu, identifies DNA mutations at specific sites. We have selected 15 sites that are commonly mutated in the colorectal cancer-related genes APC, P53 and K-RAS. We have designed our proprietary MuMu method to allow simultaneous probing of different DNA sequences and to allow analysis even though only a small amount of DNA in the sample is derived from abnormal cells while the vast majority is derived from normal human cells or bacteria.
DELETION TECHNOLOGY. Deletion Technology detects short deletions and insertions in segments of DNA that are indications of defects in cellular mechanisms for DNA repair. Approximately 15% of colorectal cancers, referred to as mismatch-repair cancers, result from inactivation of the proteins that normally repair errors in DNA after DNA replication. We have developed a proprietary method for identifying this condition by detecting the presence of short deletions and insertions in a DNA segment known as BAT-26. This altered gene segment appears in virtually all colorectal cancers resulting from defects in the mismatch repair mechanism.
DNA INTEGRITY ASSAY. DNA recovered from the stool of many cancer patients contains a small but detectable population of DNA that is longer than DNA recovered from individuals who are normal and have never had cancer or an adenoma. Use of this proprietary detection method does not require knowledge of which genes cause cancer. In addition to its utility for our colorectal cancer tests, we believe that this discovery may lead us to the development of a marker for other cancers, including lung, pancreas, gall bladder and bile duct cancers.
ENUMERATED LOSS OF HETEROZYGOSITY. In normal cells, the quantity of DNA inherited from each parent is generally equal. This is not true for cells from many different types of cancers, including virtually all non-mismatch repair colorectal cancers. This condition, which is an imbalance of maternal
and paternal chromosomal fragments, is called loss of heterozygosity, or LOH. Prior to our development efforts, we believe that scientists were unable to detect LOH in stool samples. We have developed proprietary methods for detecting LOH in a highly heterogeneous DNA sample such as stool by enumerating the ratio of fragments of DNA that are inherited from each parent at defined locations in the genome. We call this detection method e-LOH. Use of this detection method does not require knowledge of which genes cause cancer. We believe that our novel e-LOH detection method may be broadly applicable to early cancer detection from many body sites.
SALES AND MARKETING
We are building our organization and programs to support our commercialization strategy--applying our proprietary technologies to the early detection of colorectal cancer initially and then extending our technologies to several other types of cancers. We believe that opinion leaders in genomics, gastroenterology and primary care are key to establishing tests using our technologies as a standard of care for colorectal cancer screening. We have worked closely with leading researchers and academic institutions, including the Mayo Clinic and Johns Hopkins University, since our inception to evaluate our technologies and our colorectal cancer screening tests, and to gain support for our clinical studies. We participate in conferences and scientific meetings. Our first full-length peer-reviewed article has been accepted for publication in GASTROENTEROLOGY. We also believe our continuing efforts will make our products and services attractive to third-party payors, medical practitioners and patients.
In addition, we intend to build upon public awareness about colorectal cancer. Several stories of high profile individuals with colorectal cancer have increased public awareness about colorectal cancer and the need for effective early detection. We believe that this publicity has a heightened effect on the public given an increasing perception that people wish to take more control over decisions relating to their medical care.
We intend to commercialize our products and services through a staged market entry. Initially, we intend to offer colorectal cancer screening services ourselves to establish the market. We then intend to license our proprietary technologies and sell reagents to leading clinical reference laboratories to enable them to develop their own tests. We may also package our technologies and seek approval for diagnostic test kits with which any clinical laboratory could conduct tests using our technologies.
In support of our staged market entry strategy, we plan to execute a multi-channel sales approach. Initially, we intend to create our own dedicated business development team whose efforts will focus on securing adequate reimbursement for our products and services. This team will also educate senior staff of the Health Care Financing Administration, or HCFA, large managed care organizations, or MCOs, insurance companies, large employers and large physician groups about the cost effectiveness of using our products and services. In parallel with this effort, we intend to enter into business relationships with leading clinical reference laboratories that will market their own tests utilizing our technologies through their dedicated sales forces. In addition, we may enter into business relationships with distributors of other medical products to distribute our products and services.
We believe that our business relationships with leading clinical reference laboratories will support the strategies of these laboratories to expand their molecular diagnostic businesses. In addition, we believe that tests utilizing our technologies will be attractive to the clinical reference laboratories because such tests:
- enable laboratories to perform higher volumes of testing with their existing infrastructure;
- enable the laboratories to differentiate themselves technologically; and
- offer potentially higher gross margins than most existing tests.
CLINICAL STUDIES
COLORECTAL CANCER
In conjunction with the Mayo Clinic, we have conducted three blinded clinical studies since the fall of 1998. These clinical studies included stool samples from 219 patients, 58 of whom had cancer. Each patient participating in our clinical studies received a colonoscopy to determine whether cancer was present. The first two clinical studies were conducted using frozen, partial stool samples. The sensitivity for each of these two clinical studies was 91% and 67%, respectively. When excluding the data from patients who began bowel preparation before their stool samples were collected, which we believe may have lowered sensitivity, sensitivity was 91% and 72%, respectively. In the spring of 2000, we conducted a third clinical study at the Mayo Clinic in which we collected fresh, whole stool. The sensitivity for this clinical study was 78%. These sensitivity rates are superior to the 25%-30% sensitivity of FOBT and the approximately 48% sensitivity of flexible sigmoidoscopy for colorectal cancers located throughout the colon. Specificity ranged from 95% to 100% across all three clinical studies. These specificity rates are comparable or superior to rates reported for FOBT and flexible sigmoidoscopy.
The results of these three blinded clinical studies are set forth in the table below:
NUMBER OF
STUDY COMPLETION DATE PATIENTS SAMPLE TYPE SENSITIVITY SPECIFICITY
------------------------- --------------- ---------- -------------------- ----------- -----------
Mayo Clinic I Pilot Study November 1999 61 Frozen partial stool 91% 95-100%
Mayo Clinic II Study April 2000 129 Frozen partial stool 67-72% 95%
Mayo Clinic III Study June 2000 29 Fresh whole stool 78% 100%
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Based on these results, in August 2000 we initiated our first multi-center clinical study expected to include patients who are at high risk of having colorectal cancer, as well as average-risk patients. This clinical study is designed to provide additional sensitivity data for freshly collected whole stools. As of October 6, 2000, we have enrolled 160 patients for this clinical trial. We believe that this clinical study will be completed in the third quarter of 2001.
Upon completion of the clinical study that began in August 2000, we intend to initiate a blinded multi-center clinical trial that will include an estimated 5,300 patients age 50 and older with average-risk profiles from approximately 40 academic and community-based practices. The goal of this clinical trial will be to compare the sensitivity and specificity of our tests for colorectal cancer to that of existing technologies on average-risk individuals. We intend to conduct this clinical trial in accordance with the applicable guidelines of the Food and Drug Administration, or FDA, so that the results may be used in any application that we may make to the FDA.
ADENOMAS
While most adenomas do not progress to cancer in a patient's lifetime, those that do are more likely to have villous features characterized by an irregular surface and associated with more rapid growth. In the Mayo Clinic II study, there were 24 patients with adenomas greater than one centimeter. The sensitivity of our screening tests in detecting these adenomas with villous features was 56%. The sensitivity results for villous adenomas are much better than those obtained with FOBT and are comparable to those obtained by flexible sigmoidoscopy. We believe that by detecting adenomas more likely to progress to cancer during a patient's lifetime through a non-invasive screening procedure we will provide additional medical value for our technologies. We intend to test for adenomas in our planned 5,300-patient clinical trial.
HOLIDINGS OF OUR COMMON STOCK
The Mayo Foundation for Medical Education and Research, an affiliate of the Mayo Clinic, holds 37,500 shares of our common stock, 80,952 shares of our Series C convertible preferred stock and 5,494 shares of our Series D convertible preferred stock. The Series C convertible preferred stock and Series D convertible preferred stock will automatically convert into shares of our common stock upon the completion of this offering. Dr. Ahlquist, a member of our scientific advisory board, was a principal investigator on the Mayo studies. Dr. Ahlquist holds none of our capital stock and has been paid no consulting fees by us.
REIMBURSEMENT
We intend to obtain reimbursement for tests using our technologies from Medicare, major national and regional MCOs and insurance carriers. We currently do not have reimbursement approval from any organization. Medicare and other third-party payors will independently evaluate our technologies by reviewing the published literature with respect to the results obtained from our clinical studies. We intend to assist them in evaluating our technologies by providing scientific and clinical data to support our claims regarding the superiority of our technologies. In addition, we intend to present analysis showing the benefits of early disease detection and the resulting cost-effectiveness of our technologies. We also intend to apply for a current procedural terminology code which facilitates Medicare reimbursement.
The Federal Balanced Budget Act of 1997 required Medicare to reimburse for colorectal cancer screening for average-risk patients beginning on January 1, 1998 and mandated Medicare coverage for FOBT and flexible sigmoidoscopy. Based on evidence provided by the Black Caucus and the Black Caucus Health Brain Trust, Congress amended the Budget Act of 1997 to include coverage for double contrast barium enema, a radiographic imaging test used to detect colorectal cancer in areas beyond the reach of flexible sigmoidoscopy. We believe these actions provide evidence of the public interest in new colorectal cancer screening methods and the federal government's willingness to fund these methods.
Most importantly, the Budget Act of 1997 allows new technologies to be included as colorectal cancer screening tests by action of the Secretary of Health and Human Services without the need for additional Congressional action. In the spring of 1999, we met with senior staff members of HCFA to apprise them of our progress and to determine the steps we would need to take prior to a reimbursement determination. Following that meeting, we successfully petitioned HCFA staff to cover all medical expenses of a patient participating in our clinical studies who tests positive for colorectal cancer, which we believe is a departure from HCFA's policy of not reimbursing for these costs.
In addition, we have met with several members of Congressional staffs and national organizations with an interest in colorectal cancer. In October 1999, we testified before the Subcommittee on Health of the House Ways and Means Committee in support of the Eliminate Colorectal Cancer Act of 1999, sponsored by Senators Edward Kennedy and Jesse Helms. The Eliminate Cancer Act of 1999 requires private insurers to cover colorectal cancer screening tests deemed appropriate by the third-party payors and patients. In addition, we have worked with the Black Caucus and the Black Caucus Health Brain Trust.
We are also meeting with senior executives, medical directors and chiefs of service in gastroenterology and primary care at MCOs, insurance companies, large employers and large physician groups. The person in each of these positions will play a key role in the reimbursement determination for tests using our technologies.
We believe that colorectal cancer screening tests based on our technologies will save more lives more cost-effectively than any other colorectal cancer screening method available today.
Reimbursement for FOBT tests ranges from $5 to $30, but FOBT is most effective in detecting later stage cancers where survival rates are low and treatment costs are high. Reimbursement for flexible sigmoidoscopy ranges from $180 to $500, but flexible sigmoidoscopy at best can directly detect no more than half of all colorectal cancers and adenomas. We believe that reimbursement for colonoscopy for cancer screening will be approved in the near future. The cost of this procedure ranges from $700 to $2,000, and while colonoscopy is sensitive, the use of colonoscopy as a screening test has been limited.
RESEARCH AND DEVELOPMENT
Our research and development efforts aim to develop multiple genomics methods for the early detection of cancer and pre-cancerous lesions. We believe that the evaluation of these methods in a clinical setting will determine the best approaches for commercialization. Finally, we believe it is necessary to develop methods to automate and simplify the collection, preparation and analysis of samples to produce cost-effective commercial tests.
PROCESS DEVELOPMENT. We have undertaken a multi-year effort to automate our testing process and reduce the cost of processing stool samples. Our objectives include eliminating many of the manual steps, reducing the use of expensive reagents and increasing screening throughput. This effort is important so that we will be able to offer our products and services at commercially reasonable prices in our own laboratory and then enter into business relationships with leading clinical reference laboratories.
EXTENSIONS TO OTHER CANCERS. Our proprietary DIA detection method uses a marker that may be broadly applicable to the detection of cancers other than colorectal cancer. In the course of our blinded clinical studies at the Mayo Clinic, we tested 50 stool samples from patients diagnosed with aero-digestive cancers at sites other than the colon, such as cancer in the lung, pancreas, esophagus, stomach and duodenum, gall bladder and bile ducts. The results are shown in the table below.
NUMBER DETECTED/
LOCATION OF CANCER NUMBER WITH CANCER PERCENT DETECTED
---------------------------------------------- ------------------- ----------------
Lung, non-adenocarcinoma 7/8 88%
Lung, adenocarcinoma 3/13 23%
Pancreas 10/11 91%
Esophagus 3/7 43%
Stomach/Duodenum 1/5 20%
Gall Bladder/Bile Ducts 6/6 100%
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Combined, these cancers kill more people than colorectal cancer. We intend to collect additional data on these aero-digestive cancers in our planned 5,300-patient clinical trial. If the results are promising, we will develop methods and technologies to detect these cancers.
ADENOMAS. While our research focus has been the detection of cancer, we intend to conduct research on improved methods for adenoma detection as well, particularly those adenomas with villous features. We have invented a new method for scanning regions of DNA at which mutations associated with adenoma development are often found.
NEW TECHNOLOGY PLATFORM. As part of this effort, we are also conducting research on a new technology that may enable us to develop new instrumentation and methods for life sciences research. If successful, we believe this technology may be used in both clinical and research laboratories for detecting abnormalities in DNA, identifying single nucleotide polymorphisms in populations of individuals and for high throughput screening in the pharmaceutical industry.
RESOURCES AND EXPENSES. As of September 30, 2000, we had 23 employees engaged in research and development. For the year ended December 31, 1999, research and development expenses were approximately $3.7 million. For the six months ended June 30, 2000, research and development expenses were approximately $2.3 million.
GOVERNMENT REGULATION
We are subject to extensive regulation by the FDA under the Federal Food, Drug and Cosmetic Act and regulations thereunder, including regulations governing the development, marketing, labeling, promotion, manufacturing and export of our products. Failure to comply with these requirements can lead to stringent sanctions, including withdrawal of products from the market, recalls, refusal to authorize government contracts, product seizures, civil money penalties, injunctions and criminal prosecution.
We intend to offer colorectal cancer screening services performed in our own laboratories. We then intend to license our intellectual property and sell our reagents that target specific areas in the genome to leading clinical reference laboratories to enable them to perform their own colorectal cancer screening services, using their own test methods, equipment and additional reagents. We may also package our technologies in the form of diagnostic test kits with which clinical laboratories could conduct colorectal cancer screening tests.
Generally, medical devices, a category that includes our products, require FDA approval or clearance before they may be marketed. The FDA has not, however, actively regulated laboratory tests that have been developed and used by the laboratory conducting the tests. The FDA does regulate the sale of analyte specific reagents used in such tests, or ASRs, such as our reagents that target specific areas of the genome. ASRs generally do not require FDA approval or clearance if they are used in in-house laboratories or are sold to clinical laboratories licensed by the government to perform high complexity testing and are labeled in accordance with FDA requirements, including a statement that their analytical and performance characteristics have not been established. A similar statement would also be required on all advertising and promotional materials relating to ASRs such as ours. Laboratories also are subject to restrictions on the labeling and marketing of tests that have been developed using ASRs. The ASR regulatory category is relatively new and its boundaries are not well defined, and there has been some discussion within the government of changing the ASR regulation, although it is not certain whether any such changes would affect our tests. We believe that our in-house testing and the ASRs that we intend to sell to leading clinical reference laboratories licensed by the federal government to develop their own tests do not require FDA approval or clearance. We cannot be sure, however, that the FDA will not assert that our tests or one or more of our reagents require premarket approval or clearance. In addition, we cannot be sure that the FDA would not treat the licensing of our intellectual property as labeling that would subject the reagent to premarket approval or clearance and other FDA regulation. In addition, we cannot be sure that the FDA will not change its position in ways that could negatively affect our operations.
Any diagnostic test kits that we may sell would require FDA approval or clearance before they could be marketed. There are two review procedures by which a product may receive such approval or clearance. Some products may qualify for clearance under a premarket notification, or 510(k) procedure, in which the manufacturer provides to the FDA a premarket notification that it intends to begin marketing the product, and demonstrates to the FDA's satisfaction that the product is substantially equivalent to a legally marketed product, which means that the product has the same intended use as, is as safe and effective as, and does not raise different questions of safety and effectiveness than a legally marketed device. A 510(k) submission for an in vitro diagnostic device generally must include manufacturing and performance data, and in some cases, it must include data from human clinical studies. Marketing may commence when FDA issues a clearance letter.
If a medical device does not qualify for the 510(k) procedure, the FDA must approve a premarket approval application, or PMA, before marketing can begin. PMA applications must demonstrate, among other matters, that the medical device is safe and effective. A PMA application is typically a complex submission, usually including the results of preclinical and extensive clinical studies. Before FDA will approve a PMA, the manufacturer must pass an inspection of its compliance with the requirements of the FDA's quality system regulations.
We believe that most, if not all, of our products sold in diagnostic test kit form will require PMA approval. The PMA process is lengthy and costly, and we cannot be sure that the FDA will approve PMAs for our products in a timely fashion, or at all. FDA requests for additional studies during the review period are not uncommon, and can significantly delay approvals. Even if we were able to gain approval of a product for one indication, changes to the product, its indication, or its labeling would be likely to require additional approvals.
To use our tests either in diagnostic test kits or as ASRs in colorectal cancer screening, physicians who order tests using our technologies will need to provide patients a specimen container to collect stool. Specimen transport and storage containers are also medical devices regulated by the FDA although they generally have been exempted by regulation from the FDA's premarket clearance or approval requirement. We believe that our specimen container falls within the exemption, but we cannot be sure that the FDA will not assert that our container is not exempt and seek to impose a premarket clearance or approval requirement.
Regardless of whether a medical device requires FDA approval or clearance, a number of other FDA requirements apply to its manufacturer and to those who distribute it. Device manufacturers must be registered and their products listed with the FDA, and certain adverse events and product malfunctions must be reported to the FDA. The FDA also regulates the product labeling, promotion, and in some cases, advertising, of medical devices. Manufacturers must comply with the FDA's quality system regulation which establishes extensive requirements for quality control and manufacturing procedures. Thus, manufacturers and distributors must continue to spend time, money and effort to maintain compliance, and failure to comply can lead to enforcement action. The FDA periodically inspects facilities to ascertain compliance with these and other requirements.
We are also subject to U.S. and state laws and regulations regarding the operation of clinical laboratories. The federal Clinical Laboratory Improvement Act, or CLIA, and laws of certain other states, impose certification requirements for clinical laboratories, and establish standards for quality assurance and quality control, among other things. Clinical laboratories are subject to inspection by regulators, and the possible sanctions for failing to comply with applicable requirements. Sanctions available under CLIA include prohibiting a laboratory from running tests, requiring a laboratory to implement a corrective plan, and imposing civil money penalties. If we fail to meet CLIA or state law requirements, it could cause us to incur significant expense.
INTELLECTUAL PROPERTY
In order to protect our proprietary technologies, we rely on combinations of patent, trademark, copyright, and trade secret protection, as well as confidentiality agreements with employees, consultants, and third parties.
We have pursued an aggressive patent strategy designed to maximize our patent position with respect to third parties. Generally, we have filed patents and patent applications that cover the methods we have designed to detect colorectal cancer as well as other cancers, including lung, pancreas, gall bladder and bile duct cancers. We have also filed patent applications covering the preparation of stool samples and the extraction of DNA from heterogeneous stool samples. As part of our strategy, we seek patent coverage in the United States and in foreign countries on aspects of our technologies that we believe will be significant and that provide barriers to entry for our competition. As of October 20,
2000, we had eight issued patents in the United States, three issued foreign patents, twenty-three pending patent applications in the United States, five of which have been allowed, and thirty-eight pending foreign applications. Our success depends to a significant degree upon our ability to develop proprietary products and technologies and to obtain patent coverage for such products and technologies. We intend to continue to file patent applications covering any newly-developed products or technologies.
Each of our patents has a term of 20 years from their respective priority filing dates. Consequently, our first patents are set to expire in 2016. We have filed terminal disclaimers in certain later-filed patents, which means that such later-filed patents will expire earlier than the twentieth anniversary of their priority filing dates, from 2016 through 2017.
Two third-party institutions have asserted co-inventorship rights in our patents and patent applications. One third-party institution has asserted co-inventorship rights with respect to one of our issued patents relating to use of our e-LOH detection method on pooled samples from groups of patients. Our current cancer screening detection methods do not include pooled samples. A second third-party institution has asserted co-inventorship rights in a pending patent application owned by us relating to our DIA detection method using stool in the detection of cancer other than colorectal cancer, and filed a later-dated patent application covering substantially the same claims we made in our patent application relating to our DIA detection method. To date, no legal proceedings have been initiated by either third party.
If any third party, including the third parties discussed above, asserting co-inventorship rights is successful in challenging our inventorship determination, we may be required to add that third party inventor to the applicable patents, resulting in co-ownership of such patents with the third party. Co-ownership of a patent would allow the co-inventor to exercise all rights of ownership, including the right to use the rights protected by the applicable patent and, if we do not have a previously filed patent, to transfer and license the rights protected by the applicable patent. In addition, a challenge of our inventorship determination under any patent or patent application by any third party, if successful, may result in the unenforceability of the challenged patent or patents.
We license on a non-exclusive basis technology for performing a step in our testing methods from Roche Molecular Systems, Inc. This license relates to a gene amplification process used in almost all genetic testing, and the patent that we utilize expires in mid-2004. In exchange for the license, we have agreed to pay Roche a royalty based on net revenues we receive from tests using our technologies.
We license on a non-exclusive basis technology for performing a step in our testing methods from Genzyme Corporation, the exclusive licensee of patents owned by Johns Hopkins University and of which Dr. Vogelstein is an inventor. This license relates to the use of the APC and P53 genes and methodologies related thereto in connection with our products and services and lasts for the life of the patent term of the last-licensed Genzyme patent. In exchange for the license, we have agreed to pay Genzyme a royalty based on net revenues we receive from performing our tests and the sale of our reagents and diagnostic test kits, as well as certain milestone payments and maintenance fees. In addition, we must use reasonable efforts to make products and services based on these patents available to the public.
COMPETITION
To our knowledge, none of the large genomics or diagnostics companies is developing tests to conduct stool-based DNA testing; however, companies may be working on such tests that have not yet been announced. In addition, other companies may succeed in developing or improving technologies and marketing products and services that are more effective or commercially attractive than ours. Some of these companies may be larger than we are and can commit significantly greater financial and other
resources to all aspects of their business, including research and development, marketing, sales and distribution.
We face potential competition from alternative procedures-based detection technologies such as sigmoidoscopy, colonoscopy and virtual colonoscopy as well as traditional screening tests such as FOBT. Virtual colonoscopy involves a new and experimental approach that requires patients to undergo bowel preparation similar to a colonoscopy after which they are scanned by a spiral CT scanner. Three-dimensional images are constructed to allow a radiologist to virtually travel through the colon.
In addition, serum-based testing is an alternative cancer-screening approach that is based on detection of proteins or nucleic acids that are produced by colon cancers and may be found circulating in blood. We believe serum-based testing is not able to detect disease at the earliest stages of cancer at levels of sensitivity and specificity comparable to that of stool-based testing.
We believe the principal competitive factors in the cancer screening market include:
- improved sensitivity;
- non-invasiveness;
- acceptance by the medical community and primary care medical practitioners;
- adequate reimbursement from Medicare and other third-party payors;
- cost-effectiveness; and
- patent protection.
EMPLOYEES
As of September 30, 2000, we had 35 employees, six of whom have Ph.Ds. Twenty-three persons are engaged in research and development, three persons in sales and marketing and nine persons in general and administration. None of our employees is represented by a labor union. We consider our relationships with our employees to be good.
FACILITIES
We lease approximately 17,185 square feet of space in our headquarters located in Maynard, Massachusetts. The lease expires on June 30, 2003. We have an option to extend the lease for an additional three-year term and have a right of first refusal on approximately 11,000 square feet of space as it becomes available in the building. We believe that this facility is adequate to meet our current and foreseeable requirements and that suitable additional or substitute space will be available on commercially reasonable terms if needed.
LEGAL PROCEEDINGS
From time to time we are a party to various legal proceedings arising in the ordinary course of our business. We are not currently a party to any legal proceedings.
MANAGEMENT
EXECUTIVE OFFICERS, KEY EMPLOYEES AND DIRECTORS
The following table sets forth specific information regarding our executive officers, key employees and directors as of September 30, 2000:
NAME AGE POSITION ---- -------- -------- Stanley N. Lapidus............................. 51 Chairman and Director Don M. Hardison................................ 49 President and Director John A. McCarthy, Jr.(1)....................... 41 Vice President and Chief Financial Officer Anthony P. Shuber.............................. 42 Vice President of Molecular Biology Barry M. Berger, MD............................ 48 Vice President of Laboratory Medicine Robert B. Rochelle............................. 38 Vice President of Marketing Noubar B. Afeyan, Ph.D......................... 38 Director Richard W. Barker, Ph.D.(2).................... 52 Director Sally W. Crawford(3)........................... 47 Director Wycliffe K. Grousbeck(2)....................... 39 Director William W. Helman.............................. 42 Director Edwin M. Kania, Jr.(2)(3)...................... 43 Director Lance Willsey, MD(3)........................... 39 Director |
(1) Mr. McCarthy joined us as Vice President and Chief Financial Officer on October 2, 2000.
(2) Member of Compensation Committee.
(3) Member of Audit Committee.
STANLEY N. LAPIDUS, our founder, has served as a director since our inception in February 1995, as President since our inception to May 2000 and as Chairman since May 2000. In 1987, Mr. Lapidus founded Cytyc Corporation and served as its President through 1994. In addition, Mr. Lapidus has been a Research Assistant Professor in the pathology department of Tufts University Medical School in Boston since Fall of 1994. Mr. Lapidus is an advisor of the Harvard MIT Division of Health Services and Technology and has served on the advisory board of Cooper Union School of Engineering since 1999. Mr. Lapidus has also served on the advisory board of the Harvard School of Public Health's Center for Cancer Prevention since 1995. Mr. Lapidus holds 15 issued U.S. patents and 14 pending U.S. patent applications. Mr. Lapidus holds a BS degree in electrical engineering from Cooper Union.
DON M. HARDISON has served as President and Director since May 2000. From August 1998 to April 2000, Mr. Hardison was Managing Partner for Siebel Systems, Inc. From January 1996 to February 1998, Mr. Hardison was Vice President of Sales and Marketing for Quest Diagnostics Inc. From April 1978 to December 1995, Mr. Hardison held various positions at SmithKline Beecham Corporation, most recently as Vice President of Sales and Marketing for SmithKline Beecham Clinical Laboratories. Mr. Hardison has an AB in political science from the University of North Carolina, Chapel Hill.
JOHN A. MCCARTHY, JR. has served as Vice President and Chief Financial Officer since October 2000. From October 1999 to October 2000, Mr. McCarthy was President, Chief Operating Officer and Director for InfoMedtrics, Inc., a developer of integrated data warehouse and decision support systems for large self-insured employers and managed care organizations. From January 1998 to August 1999, Mr. McCarthy was general partner of Crescent Gate, L.P., a private equity fund that he co-founded. From August 1994 to January 1998, Mr. McCarthy was employed by Concentra Managed Care, Inc., a nationwide provider of managed care services to the workers' compensation, auto and disability marketplaces, most recently as President of the Managed Care Services Division. From June 1992 through July 1994, Mr. McCarthy served as Senior Vice President and Chief Financial Officer of
MedChem Products, Inc., a specialty medical device and biomaterial company. Mr. McCarthy holds a BS degree in finance from Lehigh University and an MBA from Harvard Business School.
ANTHONY P. SHUBER has served as Vice President of Molecular Biology since January 1998 and as Director of Molecular Biology from June 1996 to January 1998. From October 1993 to June 1996, Mr. Shuber was Senior Scientist and Manager of the Technical Development Laboratory for Genzyme Corporation. Mr. Shuber holds a BS and MS degree in biology from Marquette University.
BARRY M. BERGER, MD has served as Vice President of Laboratory Medicine since January 1999. Dr. Berger also serves on the faculty of Harvard Medical School. From January 1988 to January 1999, Dr. Berger was Director of Pathology and Laboratory Medicine for Harvard Pilgrim Healthcare, a healthcare delivery and insurance managed care organization. Dr. Berger is a board certified pathologist. Dr. Berger holds a BS in biology and chemistry from the University of Miami and an MD degree from the University of Pennsylvania School of Medicine.
ROBERT B. ROCHELLE has served as Vice President of Marketing since February 2000. Mr. Rochelle worked at the Pharmaceutical Products Division at Abbott Laboratories as Director of Managed Care Marketing from December 1998 to January 2000, as Senior Product Manager from October 1997 to December 1998, as the Senior Product Manager of the Antimicrobial Business Unit from April 1996 to October 1997 and as the Manager of Business Development from May 1995 to April 1996. Mr. Rochelle holds a BS degree in biology and psychology from Trinity College and an MBA from the Tuck School of Business of Dartmouth College.
NOUBAR B. AFEYAN, PH.D. has served as a director since September 1997. Dr. Afeyan is the President and CEO of NewcoGen Group Inc., a new ventures firm he founded in August 1999. NewcoGen Group Inc. is comprised of NewcoGen, a venture firm focusing on information technology and life science fields, as well as AGTC Funds, a new venture capital fund for the genomics industry. From January 1998 to August 1999, Dr. Afeyan served as Senior Vice President and Chief Business Officer of Applera Corporation (formerly PE Corporation), and remains affiliated with Applera Corporation in an advisory capacity. In November 1987, Dr. Afeyan founded PerSeptive Biosystems, Inc. and served as its Chairman and Chief Executive Officer until it was acquired by PE Corporation in January 1998. Dr. Afeyan is also a director of Antigenics Inc. Dr. Afeyan holds a degree in chemical engineering from McGill University and a Ph.D. in biochemical engineering from Massachusetts Institute of Technology.
RICHARD W. BARKER, PH.D. has served as a director since November 1999. Since January 2000, Dr. Barker has served as President and Chief Executive Officer of iKnowMed, Inc., a clinical knowledge network. From June 1996 to December 1999, Dr. Barker worked at Chiron Diagnostics Corporation, a medical diagnostics technology company, as Senior Vice President of Corporate Development from November 1998 to December 1999 and as President and Chief Executive Officer from June 1996 to November 1998. From May 1994 to May 1996, Dr. Barker served as Worldwide General Manager for Healthcare Solutions, IBM, a healthcare and information solution company. Dr. Barker is also a director of Sunquest Information Systems, Inc. Dr. Barker holds a Ph.D. in biophysics from Oxford University.
SALLY W. CRAWFORD has served as a director since August 1999. Ms. Crawford has been an independent healthcare consultant since January 1997. From April 1985 to January 1997, Ms. Crawford served as Chief Operating Officer for Healthsource, Inc., a managed care organization which she co-founded. Ms. Crawford is also a director of Chittenden Corp. and Cytyc Corporation. Ms. Crawford holds a BA in English from Smith College and a MS in communications from Boston University.
WYCLIFFE K. GROUSBECK has served as a director since December 1996. Mr. Grousbeck has been a general partner of Highland Capital Partners, a venture capital fund, since August 1996 and was an associate of Highland Capital Partners from July 1995 to August 1996. Mr. Grousbeck is also a director
of LivePerson, Inc. Mr. Grousbeck holds an AB in history from Princeton University, a JD from the University of Michigan and an MBA from Stanford Graduate School of Business.
WILLIAM W. HELMAN has served as a director since May 1996. Mr. Helman has served as general partner of Greylock X Limited Partnership since 2000 and Greylock IX Limited Partnership since 1997, both venture capital funds. Mr. Helman has been a general partner of Greylock Equity GP Limited Partnership, a venture capital fund, since 1994. Mr. Helman is also a director of Jupiter Media Metrix, Inc. Mr. Helman holds a BA from Dartmouth College and an MBA from Harvard Business School.
EDWIN M. KANIA, JR. has served as a director since September 1995. Mr. Kania has been managing general partner of OneLiberty Ventures, a venture capital firm which he co-founded, since January, 1995. Mr. Kania also serves as a Special Partner for AGTC Funds, a specialty genomics venture capital fund. Mr. Kania is also a director of Aspect Medical Systems. Mr. Kania holds a degree in physics from Dartmouth College and an MBA from Harvard Business School.
LANCE WILLSEY, MD has served as a director since May 2000. Dr. Willsey has been a founding partner of DCF Capital since July 1998. From July 1997 to July 1998, Dr. Willsey served on the Staff Department of Urologic Oncology at Dana Farber Cancer Institute at Harvard University School of Medicine. From July 1996 to July 1997, Dr. Willsey served on the Staff Department of Urology at Massachusetts General Hospital at Harvard University School of Medicine, where he was a urology resident from July 1992 to July 1996. Dr. Willsey is also a director of Exelixis, Inc. Dr. Willsey holds a BS in physiology from Michigan State University and an MS in biology and an MD from Wayne State University.
Upon the completion of the offering, Messrs. Afeyan, Hardison and Helman will become Class I directors, Messrs. Barker, Grousbeck and Willsey will become Class II directors and Ms. Crawford and Messrs. Kania and Lapidus will become Class III directors.
COMMITTEES OF THE BOARD OF DIRECTORS
Our compensation committee consists of Dr. Barker, Mr. Grousbeck and Mr. Kania. The compensation committee reviews and evaluates the compensation and benefits of all of our officers, reviews general policy matters relating to compensation and benefits of our employees and makes recommendations concerning these matters to the board of directors. Our compensation committee will also administer our 1995 stock plan, 2000 option plan and 2000 purchase plan.
Our audit committee consists of Ms. Crawford, Mr. Kania and Dr. Willsey. The audit committee reviews with our independent auditors the scope and timing of the auditors' services, the auditors' report on our financial statements following completion of our auditors' audit, and our internal accounting and financial control policies and procedures. In addition, the audit committee will make annual recommendations to the board of directors for the appointment of independent auditors for the ensuing year.
DIRECTOR COMPENSATION
Our directors are reimbursed for out-of-pocket expenses incurred in attending meetings of the board of directors. In addition, directors are also eligible to participate in the 1995 stock plan and the 2000 option plan. In accordance with a policy approved by our board of directors, our current directors will be granted an option to purchase 10,000 shares of common stock under the 2000 option plan on the date the shares issued in connection with this prospectus are sold to the underwriters. All of these options will be fully vested. In addition, new directors will be granted options to purchase 10,000 shares of common stock under the 2000 option plan on the date they are elected to the board of directors. Each director will be granted an additional option to purchase 5,000 shares of common stock at the first meeting of the board of directors following each annual stockholders meeting. Options granted to
new directors and options granted at the first meeting of the board of directors following an annual stockholders meeting will be exercisable immediately, subject to our right to repurchase 100% of the shares. Our right to repurchase terminates monthly over each of the following twelve months with respect to 8.33% of the shares.
SCIENTIFIC ADVISORY BOARD
We have assembled a distinguished group of scientific advisors covering all aspects of our scientific, medical and technical activities. Our advisory board provides advice and guidance to our board of directors on strategic matters including research and development and clinical studies. Our advisory board serves only in an advisory capacity and has no managerial responsibility or authority. The members of our advisory board are listed below.
NAME POSITION AND AFFILIATION
---- ------------------------
David A. Ahlquist, MD.... Professor of Medicine at Mayo Medical School and Director of
the Colorectal Neoplasia Clinic of Mayo, GI Division
Kenneth Kinzler, Ph.D.... Professor of Oncology at Johns Hopkins University School of
Medicine
Bert Vogelstein, MD...... Professor of Oncology and Pathology at Johns Hopkins
University School of Medicine and Investigator at Howard
Hughes Medical Institute
C. Richard Boland, MD.... Professor of Medicine and Chief, Division of
Gastroenterology at the University of California, San Diego
George Q. Daly, MD....... Whitehead Fellow and Primary Investigator for the Whitehead
Institute for Biomedical Research
David A. Lieberman, MD... Chief, Division of Gastroenterology at Oregon Health
Sciences University and Section Chief, Gastroenterology at
Portland VA Medical Center
David F. Ransohoff, MD... Professor of Medicine and Clinical Professor of Epidemiology
at the University of North Carolina at Chapel Hill
James Winkelman, MD...... Vice President of Clinical Laboratories at Brigham & Women's
Hospital and Professor of Pathology at Harvard Medical
School
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Under our 1995 stock plan, we have granted options to purchase common stock to each member of our advisory board other than Dr. Ahlquist. These options vest over 2 to 5 years. In addition, we have consulting agreements with each of Drs. Boland, Daly, Kinzler, Lieberman, Ransohoff, Vogelstein and Winkelman whereby we have agreed to pay consulting fees or reimburse out-of-pocket expenses for their service on our advisory board. Dr. Ransohoff is a principal investigator in the multi-center blinded clinical study that we initiated in August 2000.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Our board of directors reviewed salaries and incentive compensation for our employees and consultants during 1999. Stanley N. Lapidus, our Chairman, participated in deliberations of our board of directors concerning executive compensation in 1999. None of our executive officers has served as a director or member of the compensation committee, or other committee serving an equivalent function, of any other entity, whose executive officers served as a director or member of our compensation committee. In March 2000, Mr. Lapidus executed a promissory note in favor of us in the aggregate principal amount of $104,000. The note provides for 9% interest and is payable on the earlier of March 2010, two years following the closing of our initial public offering or upon the termination of Mr. Lapidus' employment. Mr. Lapidus used the proceeds of the note to exercise options to purchase
100,000 shares of our common stock. In connection with the issuance of the note and the exercised options, Mr. Lapidus executed a pledge agreement granting us a security interest in these shares. In addition, he executed a restricted stock purchase agreement with respect to 75,000 of the shares, under which our right to repurchase terminates monthly over each of the next forty-five months with respect to 1,667 of the shares originally granted under the option. In addition, our right to repurchase shares granted under an option to Mr. Lapidus will terminate upon:
- the sale of all or substantially all of our assets, a merger or consolidation resulting in a change of control, or a sale, or a series of sales, of our capital stock resulting in a change of control;
- the termination of Mr. Lapidus' employment without cause or for cause other than gross negligence or criminal misconduct, each in connection with the performance of his duties;
- a substantial diminution in job responsibility or reduction in compensation; or
- a change in location of Mr. Lapidus' employment more than 60 miles from our current location.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid to our Chairman and each of our two most highly-compensated named executive officers whose total compensation exceeded $100,000 during the year ended December 31, 1999.
ANNUAL
COMPENSATION
-------------------
NAME AND PRINCIPAL POSITION YEAR SALARY
--------------------------- -------- --------
Stanley N. Lapidus ........................................ 1999 $210,000
Chairman & Director
Barry M. Berger, MD ....................................... 1999 210,000
Vice President of Laboratory Medicine
Anthony P. Shuber ......................................... 1999 160,000
Vice President of Molecular Biology
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OPTION GRANTS
No stock options were granted during the year ended December 31, 1999 to Mr. Lapidus, Dr. Berger or Mr. Shuber.
YEAR-END OPTION TABLE
The following table sets forth information regarding exercisable and unexercisable stock options held as of December 31, 1999 by each of the named executive officers. There was no public trading market for the common stock as of December 31, 1999. Accordingly, as permitted by the rules of the Securities and Exchange Commission, the value of unexercised in-the-money options has been calculated by determining the difference between the exercise price per share payable upon exercise of such options and an assumed initial public offering price of $ .
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
Stanley N. Lapidus.......... -- -- -- -- -- --
Barry M. Berger, MD......... -- -- -- -- -- --
Anthony P. Shuber........... -- -- -- 25,000 $ $
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OUR STOCK PLANS
1995 STOCK OPTION PLAN. Our 1995 stock plan was adopted by our board of directors and approved by the stockholders on February 24, 1995. A total of 1,450,000 shares of common stock has been authorized and reserved for issuance under the 1995 stock plan. As of June 30, 2000, there were outstanding options to purchase a total of 399,556 shares of common stock at a weighted average exercise price of $2.30. As of June 30, 2000, 604,270 shares of common stock had been issued in connection with the exercise of options. Under the terms of the 1995 stock plan, we are authorized to grant incentive stock options as defined under the Internal Revenue Code and non-qualified options to our officers, directors, consultants and other employees.
The 1995 stock plan is administered by our compensation committee. The board of directors selects the individuals to whom options will be granted and determines the option exercise price and other terms of each award, subject to the provisions of the 1995 stock plan. Options generally provide that 20% of the shares exercisable under each option will vest one year following either the date of grant or the optionee's date of employment and thereafter vest in equal monthly installments over the next 48 months. However, some options granted under our 1995 stock plan are immediately exercisable subject to our right to repurchase 100% of the shares until one year following the date of grant, at which time our right to repurchase terminates, generally with respect to 20% of the shares originally granted. Thereafter, our right to repurchase terminates monthly in equal installments over each of the next 48 months. In addition, options held by certain employees, including our key employees, provide that our right to repurchase shares granted will terminate upon the sale of all or substantially all of our assets, a merger or consolidation resulting in a change of control, or a sale or series of sales of our capital stock resulting in a change of control and:
- termination of employment without cause or for any reason other than negligence or criminal misconduct, each in connection with the performance of duties;
- substantial diminution in job responsibility; or
- a change in location of employment more than 60 miles from our current location.
An option is not transferable by the recipient except by will or by the laws of descent and distribution, or, in the case of non-qualified stock options, only to the extent set forth in the agreement relating to the non-qualified stock option or pursuant to a valid domestic relations order. The 1995 stock plan will terminate upon the effective date of the registration statement of which this prospectus is a part. Options granted prior to the date of termination will remain outstanding and may be exercised in accordance with their terms, unless sooner terminated by vote of our board of directors.
2000 STOCK OPTION AND INCENTIVE PLAN. Our 2000 stock option and incentive plan was adopted by our board of directors and approved by the stockholders on October 17, 2000. A total of 1,000,000 shares of common stock has been authorized and reserved for issuance under the 2000 option plan. The 2000 option plan provides that the number of shares authorized for issuance will automatically increase each January 1 (beginning in 2002) by the greater of 5% of the outstanding number of shares of common stock on the immediately preceding December 31 and the aggregate number of shares made subject to equity-based awards during the one year prior to such January 1, or such lesser number as may be approved by the board of directors. The maximum number of shares that may be authorized for issuance under the 2000 option plan is 20,000,000. Under the terms of the 2000 option plan, we are authorized to grant incentive stock options as defined under the Internal Revenue Code, non-qualified options, stock awards or opportunities to make direct purchases of common stock to our or our subsidiary's employees, officers, directors, consultants and advisors.
The 2000 option plan is administered by our compensation committee. Our compensation committee determines the individuals to whom equity-based awards will be granted and the option
exercise price and other terms of each award, subject to the provisions of the 2000 option plan. The 2000 option plan provides that upon an acquisition, all equity-based awards will accelerate by a period of one year. In addition, upon the termination of an employee without cause or for good reason prior to the first anniversary of the completion of an acquisition, all equity-based awards then outstanding under the 2000 option plan held by that employee will immediately become exercisable.
An option is not transferable by the recipient except by will or by the laws of descent and distribution order. The term of the 2000 option plan is ten years, unless sooner terminated by vote of the board of directors. To date, no options have been granted under the 2000 option plan.
2000 EMPLOYEE STOCK PURCHASE PLAN. The 2000 purchase plan was adopted by the board of directors and received stockholder approval on October 17, 2000. A total of 300,000 shares of common stock have been authorized and reserved for issuance under the 2000 purchase plan. The 2000 purchase plan provides that the number of shares authorized for issuance will automatically increase on each February 1 (beginning in 2002) by the greater of .75% of the outstanding number of shares of common stock on the immediately preceding December 31 and that number of shares made subject to options under the 2000 option plan during the one year prior to such February 1, or such lesser number as may be approved by the board of directors. The maximum number of shares that may be authorized for issuance under the 2000 purchase plan is 1,000,000.
The 2000 purchase plan will be administered by our compensation committee. Generally, all employees who have completed three months of employment and whose customary employment is more than twenty hours per week and for more than five months in any calendar year are eligible to participate in the purchase plan. The right to purchase common stock under the 2000 purchase plan will be made available through a series of offerings. On the first day of an offering period, we will grant to each eligible employee who has elected in writing to participate in the 2000 purchase plan an option to purchase 1,000 shares of common stock. The employee will be required to authorize an amount, between 1% and 10% of the employee's compensation, to be deducted from the employee's pay during the offering period. On the last day of the offering period, the employee will be deemed to have exercised the option, at the option exercise price, to the extent of accumulated payroll deductions. Under the terms of the 2000 purchase plan, the option exercise price is an amount equal to 85% of the fair market value of one share of common stock on either the first or last day of the offering period, whichever is lower. No employee may be granted an option that would permit the employee's rights to purchase common stock to accrue in excess of $25,000 in any calendar year. The first offering period under the 2000 purchase plan will commence on the date the shares issued in connection with this prospectus are sold to the underwriters and continues through July 31, 2001. Thereafter, the offering periods will begin on each February 1 and August 1. Options granted under the 2000 purchase plan terminate upon an employee's voluntary withdrawal from the plan at any time or upon termination of employment. No options have been granted to date under the 2000 purchase plan.
401(k) PLAN. We maintain a 401(k) plan qualified under Section 401(k) of the Internal Revenue Code. Under the 401(k) plan, a participant may contribute a maximum of 15% of his or her pre-tax salary through payroll deductions up to the statutorily prescribed annual limit. The percentage of more highly compensated participants may be required to be lower. In addition, at the discretion of our board of directors, we may make discretionary profit-sharing contributions into the 401(k) plan for all eligible employees. We have not made any contributions to the 401(k) plan to date.
RELATED PARTY TRANSACTIONS
From December 31, 1996 through September 30, 2000, we issued shares of preferred stock in private placement transactions as follows:
- an aggregate of 31,645 of Series B convertible preferred stock at $3.95 per share in February 1997;
- an aggregate of 1,007,186 of Series C convertible preferred stock at $10.50 per share in March 1998; and
- an aggregate of 1,417,534 shares of Series D convertible preferred stock at $22.50 per share in April 2000.
The following table summarizes the shares of preferred stock purchased since December 31, 1996 and held as of September 30, 2000 by our executive officers, directors, holders of more than 5% of our outstanding stock and their affiliates.
SERIES C SERIES D
NAME PREFERRED PREFERRED
---- --------- ---------
Stanley N. Lapidus.......................................... 12,657 --
Affiliates of the OneLiberty Ventures Entities(1)........... 190,476 77,776
Greylock Equity Limited Partnership(2)...................... 190,476 57,777
Affiliates of the Highland Capital Entities(3).............. 266,666 57,778
Affiliates of DCF Capital(4)................................ -- 222,221
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(1) Mr. Edwin M. Kania, Jr., a director, is a general partner of OneLiberty Partners III, L.P., the general partner of OneLiberty Fund III, L.P. Mr. Kania is also managing member of OneLiberty Partners IV, L.L.C., the general partner of OneLiberty Fund IV, L.P. and a general partner of OneLiberty Advisors Fund IV, L.P.
(2) Mr. Wycliffe K. Grousbeck, a director, is a general partner of Highland Management Partners III Limited Partnership, the general partner of Highland Capital Partners III Limited Partnership. Mr. Grousbeck is also a member of HEF III L.L.C., the general partner of Highland Entrepreneurs' Fund III Limited Partnership.
(3) Mr. William W. Helman, a director, is a general partner of Greylock Equity GP, Limited Partnership, the general partner of Greylock Equity Limited Partnership.
(4) Dr. Lance Willsey, a director, is a limited partner of DCF Partners L.P. Dr. Willsey is also a limited partner of DCF Life Sciences Fund Limited and a non-managing member of DCF Capital Advisors Inc., the investment advisor of DCF Life Sciences Fund.
As set forth in our certificate of incorporation, each share of Series A convertible preferred stock, Series B convertible preferred stock, Series C convertible preferred stock and Series D convertible preferred stock will automatically convert into shares of common stock upon the closing of this offering.
In connection with the preferred stock financings, we granted registration rights to preferred stockholders. See "Description of Capital Stock--Registration Rights."
OTHER RELATED PARTY TRANSACTIONS
In March 2000, Stanley N. Lapidus executed a promissory note in favor of us in the aggregate principal amount of $104,000. The note provides for 9% interest and is payable on the earlier of
March 2010, two years following the closing of our initial public offering or upon the termination of Mr. Lapidus' employment. Mr. Lapidus used the proceeds of the note to exercise options to purchase 100,000 shares of our common stock. In connection with the issuance of the note and the exercise of options, Mr. Lapidus executed a pledge agreement granting us a security interest in these shares. In addition, he executed a restricted stock purchase agreement with respect to 75,000 of the shares, under which our right to repurchase terminates monthly over each the next forty-five months with respect to 1,667 of the shares originally granted under the option. In addition, our right to repurchase shares granted under an option will terminate upon:
- the sale of all or substantially all of our assets, a merger or consolidation resulting in a change of control or a sale, or series of sales, of our capital stock resulting in a change of control;
- the termination of Mr. Lapidus' employment without cause or for cause other than gross negligence or criminal misconduct, each in connection with the performance of his duties;
- a substantial diminution in job responsibility or compensation; or
- a change in location of Mr. Lapidus' employment more than 60 miles from our current location.
In June 2000, Don M. Hardison, our President, executed a promissory note in favor of us in the aggregate principal amount of $299,999. The note provides for 9.5% interest and is payable on June 2010. Mr. Hardison used the proceeds of the note to exercise options to purchase 71,111 shares of our common stock. In connection with the issuance of these shares, Mr. Hardison executed a restricted stock purchase agreement under which we have the right to repurchase the common stock 100% of the shares until one year following the date of the option grant, at which time our right to repurchase terminates with respect to 20% of the shares originally granted. Thereafter, our right to repurchase terminates monthly over each the next forty-eight months with respect to 1.666% of the shares originally granted under the option. In addition, our right to repurchase shares granted under an option to Mr. Hardison will terminate upon the sale of all or substantially all of our assets or a merger or consolidation resulting in a change of control and
- termination of Mr. Hardison's employment without cause or for any reason other than negligence or criminal misconduct, each in connection with the performance of his duties;
- a substantial diminution in job responsibility or reduction in compensation; or
- a change in location of Mr. Hardison's employment more than 60 miles from our current location.
We believe that all of the transactions set forth above were made on terms fair to us as to the time they were authorized, approved or ratified. We have adopted a policy whereby all future transactions between us and our officers, directors and affiliates will be on terms fair to us as to the time they are authorized, approved or ratified and will be approved by a majority of disinterested members of our board of directors.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial ownership of our common stock as of September 30, 2000, and as adjusted to reflect the sale of common stock in the offering assuming no exercise of the underwriters' over-allotment option, by:
- each person or group of affiliated persons known by us to be the beneficial owner of more than 5% of our common stock;
- each person who is an executive officer or key employee;
- each of our directors; and
- all executive officers and directors as a group.
Unless otherwise noted below, the address of each person listed on the table is c/o EXACT Corporation, 63 Great Road, Maynard, Massachusetts 01754.
PERCENT OF COMMON
STOCK OUTSTANDING
-------------------
SHARES BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER HELD OFFERING OFFERING
------------------------------------ --------- -------- --------
The OneLiberty Fund Entities(1)
150 CambridgePark Drive
Cambridge, MA 02140 ...................................... 950,554 18.0%
Greylock Equity Limited Partnership
One Federal Street
Boston, MA 02110 ......................................... 806,592 15.3%
The Highland Capital Partners Entities(2)
2 International Place
Boston, MA 02110 ......................................... 602,924 11.4%
Edwin M. Kania, Jr.(3) ..................................... 950,554 18.0%
William W. Helman(4) ....................................... 806,592 15.3%
Wycliffe K. Grousbeck(5) ................................... 602,924 11.4%
Stanley N. Lapidus(6) ...................................... 536,333 10.2%
Lance Willsey(7)
One Newbrook Circle
Brookline, MA 02167 ...................................... 222,221 4.2%
Anthony P. Shuber(8) ....................................... 110,000 2.1%
Barry M. Berger ............................................ 76,000 1.4%
Noubar B. Afeyan(9)
c/o NewcoGen Group, Inc.
150 CambridgePark Drive
Cambridge, MA 02140 ...................................... 74,052 1.4%
Don M. Hardison ............................................ 56,111 1.1%
Robert B. Rochelle ......................................... 50,000 *
Richard W. Barker
2239 Fifth Street
Berkeley, CA 94710 ....................................... 16,600 *
Sally W. Crawford
140 High Street
Exeter, NH 03833 ......................................... 15,000 *
John A. McCarthy, Jr.(10) ................................. -- *
All executive officers and directors as a group
(10 persons)(11) ......................................... 3,390,387 63.5%
|
* Indicates ownership of less than 1%
FOOTNOTES ON FOLLOWING PAGE
(1) Includes 777,540 shares beneficially owned by OneLiberty Fund III, L.P, of which One Liberty Partners III, L.P. is the general partner. Also includes 169,126 shares beneficially owned by OneLiberty Fund IV, L.P., of which One Liberty IV, L.L.C. is the general partner, and 3,888 shares beneficially owned by OneLiberty Advisors Fund IV, L.P.
(2) Includes 578,808 shares beneficially owned by Highland Capital Partners III Limited Partnership, of which Highland Management Partners III Limited Partnership is the general partner. Also includes 24,116 shares beneficially owned by Highland Entrepreneurs' Fund III Limited Partners, of which HEF III L.L.C. is the general partner.
(3) Includes shares owned by the OneLiberty Fund entities as set forth in note 1. Mr. Kania is a general partner of OneLiberty Partners III, L.P. and a general partner of OneLiberty Advisors Fund IV, L.P. Mr. Kania disclaims any beneficial ownership of the shares.
(4) Includes 806,572 beneficially owned by Greylock Equity Limited Partnership, of which Greylock Equity GP, Limited Partnership is the general partner. Mr. Helman is a general partner of Greylock Equity GP, Limited Partnership. Mr. Helman disclaims any beneficial ownership of the shares.
(5) Includes shares owned by the Highland Capital Partner entities as set forth in note 2. Mr. Grousbeck is a general partner of Highland Management Partners III Limited Partnership and a member of HEF III L.L.C. Mr. Grousbeck disclaims any beneficial ownership of the shares.
(6) Includes 25,000 shares held by David D. Lapidus and 25,000 shares held by Joel B. Lapidus.
(7) Includes 144,444 shares beneficially owned by DCF Partners L.P., of which DCF Advisors, L.L.C. is the general partner. Dr. Willsey is a limited partner of DCF Partners L.P. and a non-managing member of DCF Advisors, L.L.C. Also includes 77,777 shares beneficially owned by DCF Life Sciences Fund, of which DCF Capital Advisors Inc. is the investment advisor. Dr. Willsey is a limited partner of DCF Life Sciences Fund Limited and a non-managing member of DCF Capital Advisors Inc. Dr. Willsey disclaims any beneficial ownership of the shares.
(8) Includes 10,000 shares issuable to Mr. Shuber in connection with options that are currently exercisable.
(9) Includes 52,500 shares issuable to Dr. Afeyan in connection with options that are currently exercisable.
(10) Mr. McCarthy joined us as Vice President and Chief Financial Officer on October 2, 2000.
(11) Includes shares pursuant to notes 3-9.
Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission. For the purposes of calculating the number of shares and the percentage beneficially owned by a person or entity, shares of common stock issuable by us to that person or entity pursuant to options which may be exercised within 60 days after September 30, 2000 are deemed to be beneficially owned and outstanding. Except as otherwise indicated, each stockholder named in the table has sole voting and investment power with respect to the shares set forth opposite that stockholder's name.
DESCRIPTION OF CAPITAL STOCK
The following description of our capital stock and provisions of our amended and restated certificate of incorporation and amended and restated by-laws are summaries and are qualified by reference to the certificate of incorporation and the by-laws that will become effective upon the effective date of the registration statement registering shares included in this offering. Copies of these documents have been filed with the Securities and Exchange Commission as exhibits to our registration statement, of which this prospectus forms a part. The descriptions of the common stock and preferred stock reflect changes to our capital structure that will occur upon the closing of this offering.
Upon the completion of this offering, our authorized capital stock will consist of 100,000,000 shares of common stock, par value $.01 per share, and 5,000,000 shares of preferred stock, par value $.01 per share.
COMMON STOCK
As of September 30, 2000, there were shares of common stock outstanding held of record by 149 stockholders, after giving effect to the conversion of all of the outstanding shares of preferred stock upon the closing of this offering.
Holders of common stock are entitled to one vote for each share of common stock held on all matters submitted to a vote of stockholders and do not have cumulative voting rights. Directors are elected by a plurality of the votes of the shares present in person or by proxy at the meeting and entitled to vote. Holders of common stock are entitled to receive ratably any dividends as may be declared by the board of directors out of funds legally available for distribution, after provision has been made for any preferential dividend rights of outstanding preferred stock, if any. Upon our liquidation, dissolution or winding up, the holders of common stock are entitled to receive ratably the net assets available after the payment of all of our debts and other liabilities, and after the satisfaction of the rights of any outstanding preferred stock, if any. Holders of the common stock have no preemptive, subscription, redemption or conversion rights, nor are they entitled to the benefit of any sinking fund. The outstanding shares of common stock are, and the shares offered by us in this offering will be, when issued and paid for, validly issued, fully paid and non-assessable. The rights, powers, preferences and privileges of holders of common stock are subordinate to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock which we may designate and issue in the future. Upon the closing of this offering, there will be no shares of preferred stock outstanding.
PREFERRED STOCK
Upon the closing of the offering, our board of directors will be authorized, without further vote or action by the stockholders, to issue from time to time up to an aggregate of 5,000,000 shares of preferred stock in one or more series. Each series of preferred stock shall have such number of shares, designations, preferences, voting powers, qualifications and special or relative rights or privileges as shall be determined by our board of directors, which may include, among others, dividend rights, voting rights, redemption and sinking fund provisions, liquidation preferences, conversion rights and preemptive rights.
The issuance of preferred stock, while providing desired flexibility in connection with possible acquisitions and other corporate purposes, could adversely affect the voting power or other rights of the holders of common stock, and could make it more difficult for a third party to acquire, or could discourage a third party from attempting to acquire, a majority of our outstanding voting stock. We have not issued and have no present plans to issue any shares of preferred stock.
REGISTRATION RIGHTS
Holders of shares of common stock are entitled to require us to register the sale of their shares under the Securities Act. Under the terms of an agreement between us and the holders of the registrable securities, if we propose to register any of our securities under the Securities Act, either for our own account or for the account of other security holders exercising registration rights, these holders are entitled to notice of and to include their shares of common stock in the registration statement. The underwriters may limit the number of shares included in such offering held by these holders, provided that such shares shall not be less than one-third of such offering. All registration rights have been waived in connection with this offering.
Additionally, these holders of our common stock are entitled to specified demand registration rights at any time following 180 days after the effective date of the registration statement registering the shares included in this offering, as follows:
- The holders of at least 30% of the then outstanding registrable securities may require, on three occasions beginning six months after the effective date of any registration statement, including this registration statement, that we use our best efforts to register the registrable securities for public resale, provided that the proposed aggregate selling or offering price is at least $10,000,000.
- The holders of the then outstanding registrable securities may require us, on up to four occasions, to register all or a portion of their registrable securities on a registration statement on Form S-3 when use of such form becomes available to us, provided that the proposed aggregate selling or offering price is at least $5,000,000.
We are generally required to bear the expenses of such registration, except underwriting discounts and commissions.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF DELAWARE LAW AND OUR CERTIFICATE OF INCORPORATION AND BY-LAWS
We are subject to the provisions of Section 203 of the Delaware General Corporation Law. Subject to certain exceptions, Section 203 of Delaware law prohibits a publicly-held Delaware corporation from engaging in a "business combination" with an "interested stockholder" for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the interested stockholder attained such status with the approval of our board of directors or unless the business combination is approved in a prescribed manner. A "business combination" is defined as a merger, asset sale or other transaction resulting in a financial benefit to the interested stockholder. Subject to various exceptions, an "interested stockholder" is a person who, together with affiliates and associates, owns, or within the past three years did own, 15% or more of a corporation's voting stock. This statute could prohibit or delay the accomplishment of mergers or other takeover or change in control attempts with respect to us and, accordingly, may discourage attempts to acquire us.
In addition, some provisions of our amended and restated certificate of incorporation and amended and restated by-laws may be deemed to have an anti-takeover effect and may delay, defer or prevent a tender offer or takeover attempt that a stockholder might deem to be in his or her best interest. The existence of these provisions could limit the price that investors might be willing to pay in the future for shares of our common stock. These provisions include:
STOCKHOLDER ACTION; SPECIAL MEETING OF STOCKHOLDERS. Our certificate provides that stockholders may not take action by written consent, but only at a duly called annual or special meeting of stockholders. The certificate further provides that special meetings of our stockholders may be called only by the Chairman of the board of directors or a majority of the board of directors, and in no event may the
stockholders call a special meeting. Thus, without approval by the Chairman of the board of directors or a majority of the board of directors, stockholders may take no action between meetings.
ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS. Our by-laws provide that a stockholder seeking to bring business before an annual meeting of stockholders, or to nominate candidates for election as directors at an annual meeting of stockholders, must provide timely notice of this intention in writing. To be timely, a stockholder's notice must be delivered to our secretary at our principal executive offices not less than 120 days prior to the first anniversary of the date of our notice of annual meeting provided with respect to the previous year's annual meeting of stockholders. However, if no annual meeting of stockholders was held in the previous year or the date of the annual meeting of stockholders has been changed to be more than 30 calendar days from the time of the previous year's proxy statement, then a proposal shall be received no later than the close of business on the tenth day following the date on which notice of the date of the meeting was mailed or a public announcement was made, whichever occurs first. The amended and restated by-laws also include a similar requirement for making nominations at special meetings and specify requirements as to the form and content of a stockholder's notice. These provisions may preclude stockholders from bringing matters before an annual meeting of stockholders or from making nominations for directors at an annual or special meeting of stockholders.
AUTHORIZED BUT UNISSUED SHARES. The authorized but unissued shares of common stock and preferred stock are available for future issuance without stockholder approval, subject to any limitations imposed by the Nasdaq National Market. These additional shares may be utilized for a variety of corporate acquisitions and employee benefit plans. The existence of authorized but unissued and unreserved common stock and preferred stock could make more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise.
SUPER-MAJORITY VOTING. Delaware law provides generally that the affirmative vote of a majority of the shares entitled to vote on any matter is required to amend a corporation's certificate of incorporation or by-laws, unless a corporation's certificate or by-laws requires a greater percentage. We have provisions in our certificate which require 75% of the voting power of all of the then outstanding shares of our capital stock to amend or repeal certain provisions in our certificate which include, but are not limited to, provisions which would reduce or eliminate the number of authorized common or preferred shares and all indemnification provisions. We also have provisions in our certificate which require 80% of the voting power of all of the then outstanding shares of our capital stock to adopt, amend or repeal any provision of our by-laws.
STAGGERED BOARD. Our certificate and by-laws provide for the division of our board of directors into three classes, as nearly equal in size as possible, with staggered three-year terms. In addition, our certificate and by-laws provide that directors may be removed without cause only by the affirmative vote of the holders of 75% of the shares of capital stock entitled to vote for the election of director at an election of directors. Any one or more or all of the directors may be removed with cause only by the holders of at least a majority of the shares then entitled to vote at an election of directors. Under our certificate and by-laws, any vacancy on the board of directors, for the election of directors, including a vacancy resulting from an enlargement of the board, may only be filled by vote of a majority of the directors then in office. The classification of the board of directors and the limitations on the removal of directors and filling of vacancies would have the effect of making it more difficult for a third party to acquire control of us, or of discouraging a third party from acquiring control of us.
LIMITATION OF LIABILITY
Our certificate provides that no director shall be personally liable to us or to our stockholders for monetary damages for breach of fiduciary duty as a director, except that the limitation shall not
eliminate or limit liability to the extent that the elimination or limitation of such liability is not permitted by the Delaware General Corporation Law as the same exists or may hereafter be amended.
Our certificate of incorporation further provides for the indemnification of our directors and officers to the fullest extent permitted by Section 145 of the Delaware General Corporation Law, including circumstances in which indemnification is otherwise discretionary. A principal effect of these provisions is to limit or eliminate the potential liability of our directors for monetary damages arising from breaches of their duty of care, subject to certain exceptions. These provisions may also shield directors from liability under federal and state securities laws.
TRANSFER AGENT AND REGISTRAR
Upon the closing of this offering, the transfer agent and registrar for the common stock will be American Stock Transfer & Trust Company.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the offering, there has been no market for our common stock. Future sales of substantial amounts of common stock in the public market could adversely affect prevailing market prices. Sales of substantial amounts of our common stock in the public market after the restrictions lapse could adversely affect the prevailing market price and impair our ability to raise equity capital in the future.
Upon completion of the offering, we will have outstanding shares of common stock. Of these shares, the shares sold in the offering, plus any shares issued upon exercise of the underwriters' over-allotment option, will be freely tradable without restriction under the Securities Act, unless purchased by our affiliates as that term is defined in Rule 144 under the Securities Act. In general, affiliates include officers, directors and 10% stockholders.
The remaining shares outstanding are "restricted securities" within the meaning of Rule 144. Restricted securities may be sold in the public market only if they are registered or if they qualify for an exemption from registration under Rules 144, 144(k) or 701 promulgated under the Securities Act, which are summarized below. Sales of the restricted securities in the public market, or the availability of such shares for sale, could adversely affect the market price of the common stock.
Our directors, officers and security holders have entered into lock-up agreements in connection with these offering generally providing that they will not offer, sell, contract to sell or grant any option to purchase or otherwise dispose of our common stock or any securities exercisable for or convertible into our common stock owned by them for a period of 180 days after the date of this prospectus without the prior written consent of Merrill Lynch & Co. Notwithstanding possible earlier eligibility for sale under the provisions of Rules 144, 144(k) and 701, shares subject to lock-up agreements will not be salable until such agreements expire or are waived by Merrill Lynch & Co. Taking into account the lock-up agreements, and assuming Merrill Lynch Co. does not release stockholders from these agreements, the following shares will be eligible for sale in the public market at the following times:
- Beginning on the date of this prospectus, shares sold in the offering will be immediately available for sale in the public market.
- Beginning 180 days after the date of this prospectus, shares will be eligible for sale, of which will be subject to volume, manner of sale and other limitations under Rule 144.
- The remaining shares will be eligible for sale pursuant to Rule 144 upon the expiration of various one-year holding periods during the six months following 180 days after the effective date.
In general, under Rule 144 as currently in effect, after the expiration of the lock-up agreements, a person who has beneficially owned restricted securities for at least one year 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 number of shares of common stock then outstanding which will equal approximately shares immediately after the offering; or
- the average weekly trading volume of the common stock during the four calendar weeks preceding the sale.
Sales under Rule 144 are also subject to requirements with respect to manner of sale, notice and the availability of current public information about us. Under Rule 144(k), a person who is not deemed to have been our affiliate at anytime during the three months preceding a sale, and who has beneficially owned the shares proposed to be sold for at least two years, is entitled to sell such shares
without complying with the manner of sale, public information, volume limitation or notice provisions of Rule 144.
Rule 701, as currently in effect, permits our employees, officers, directors or consultants who purchased shares pursuant to a written compensatory plan or contract to resell such shares in reliance upon Rule 144 but without compliance with specific restrictions. Rule 701 provides that affiliates may sell their Rule 701 shares under Rule 144 without complying with the holding period requirement and that non-affiliates may sell such shares in reliance on Rule 144 without complying with the holding period, public information, volume limitation or notice provisions of Rule 144.
In addition, we intend to file a registration statement under the Securities Act on the effective date of the registration statement of which this prospectus is a part to register shares to be issued pursuant to our employee benefit plans. As a result, any options or rights exercised under the 1995 stock plan, the 2000 option plan, the 2000 purchase plan, or any other benefit plan after the effectiveness of the registration statement will also be freely tradable in the public market, subject to the terms of the lock-up agreements. However, shares held by affiliates will still be subject to the volume limitation, manner of sale, notice and public information requirements of Rule 144 unless otherwise resalable under Rule 701. As of June 30, 2000 there were outstanding options for the purchase of 399,556 shares of common stock, of which options to purchase 138,265 shares were exercisable.
MATERIAL UNITED STATES FEDERAL TAX CONSIDERATIONS FOR
NON-UNITED STATES HOLDERS
The following is a general discussion of the material U.S. federal income and estate tax consequences of the ownership and disposition of our common stock by a non-U.S. holder. As used in this discussion, the term non-U.S. holder means a beneficial owner of our common stock that is not, for U.S. federal income tax purposes:
- an individual who is a citizen or resident of the United States;
- a corporation, an entity taxable as a corporation, or a partnership created or organized in or under the laws of the United States or of any political subdivision of the United States, other than a partnership treated as foreign under U.S. Treasury regulations;
- an estate whose income is includible in gross income for U.S. federal income tax purposes regardless of its source; or
- a trust, in general, if a U.S. court is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust.
An individual may be treated as a resident of the United States in any calendar year for U.S. federal income tax purposes, instead of as a nonresident, by, among other things, being present in the United States on at least 31 days in that calendar year and for an aggregate of at least 183 days during a three-year period ending on December 31 of the current calendar year. For purposes of this calculation, you should count all of the days present in the current year, one-third of the days present in the immediately preceding year and one-sixth of the days present in the second preceding year. Residents are taxed for U.S. federal income purposes as if they were U.S. citizens.
This discussion does not consider:
- U.S. state and local or non-U.S. tax consequences;
- specific facts and circumstances that may be relevant to a particular non-U.S. holder's tax position, including, if the non-U.S. holder is a partnership or trust, the fact that the U.S. tax consequences of holding and disposing of our common stock may be affected by certain determinations made at the partner or beneficiary level;
- the tax consequences to the stockholders, partners or beneficiaries of a non-U.S. holder;
- special tax rules that may apply to particular non-U.S. holders, such as financial institutions, insurance companies, tax-exempt organizations, U.S. expatriates, broker-dealers, and traders in securities; or
- special tax rules that may apply to a non-U.S. holder that holds our common stock as part of a straddle, hedge, conversion transaction, synthetic security or other integrated investment.
The following discussion is based on provisions of the U.S. Internal Revenue Code of 1986, as amended, applicable U.S. Treasury regulations and administrative and judicial interpretations, all as in effect on the date of this prospectus, and all of which are subject to change, retroactively or prospectively. The following summary assumes that a non-U.S. holder holds our common stock as a capital asset for U.S. federal income tax purposes. EACH NON-U.S. HOLDER SHOULD CONSULT A TAX ADVISOR REGARDING THE U.S. FEDERAL, STATE, LOCAL, ESTATE, GIFT AND
NON-U.S. INCOME, ESTATE, GIFT AND OTHER TAX CONSEQUENCES OF ACQUIRING, HOLDING AND DISPOSING OF SHARES OF OUR COMMON STOCK.
DIVIDENDS
We do not anticipate paying cash dividends on our common stock in the foreseeable future. In the event, however, that we pay dividends on our common stock, we will have to withhold a U.S. federal withholding tax at a rate of 30%, or a lower rate under an applicable income tax treaty, from the gross amount of the dividends paid to a non-U.S. holder. A non-U.S. holder who claims the benefit of an applicable income tax treaty rate generally will be required to satisfy applicable certification and other requirements. Non-U.S. holders should consult their tax advisors regarding their entitlement to benefits under a relevant income tax treaty.
Dividends that are effectively connected with a non-U.S. holder's conduct of a trade or business in the United States and, in the event that an income tax treaty applies, are also attributable to a permanent establishment maintained by the non-U.S. holder in the United States, are taxed on a net income basis at the regular graduated rates and in the manner applicable to U.S. persons. In that case, we will not have to withhold U.S. federal withholding tax if the non-U.S. holder complies with applicable certification and disclosure requirements. In addition, a branch profits tax may be imposed at a 30% rate, or a lower rate under an applicable income tax treaty, on dividends received by a foreign corporation that are effectively connected with such foreign corporation's conduct of a trade or business in the United States.
Dividends paid prior to 2001 to an address in a foreign country are presumed, absent actual knowledge to the contrary, to be paid to a resident of such country for purposes of the withholding discussed above and for purposes of determining the applicability of an income tax treaty rate. For dividends paid after 2000, a non-U.S. holder who claims the benefit of an applicable income tax treaty rate generally will be required to satisfy applicable certification and other requirements. However,
- in the case of common stock held by a foreign partnership, the certification requirement will generally be applied to the partners of the partnership and the partnership will be required to provide certain information;
- in the case of common stock held by a foreign trust, the certification requirement will generally be applied to the trust or the beneficial owners of the trust depending on whether the trust is a foreign complex trust, foreign simple trust, or foreign grantor trust as defined in the U.S. Treasury regulations; and
- look-through rules will apply for tiered partnerships, foreign simple trusts and foreign grantor trusts.
A non-U.S. holder which is a foreign partnership or a foreign trust is urged to consult its own tax advisor regarding its status under these U.S. Treasury regulations and the certification requirements applicable to it.
A non-U.S. holder that is eligible for a reduced rate of U.S. federal withholding tax under an income tax treaty may obtain a refund or credit of any excess amounts withheld by filing an appropriate claim for a refund with the U.S. Internal Revenue Service.
GAIN ON DISPOSITION OF COMMON STOCK
A non-U.S. holder generally will not be taxed on gain recognized on a disposition of our common stock unless:
- the gain is effectively connected with the non-U.S. holder's conduct of a trade or business in the United States and, in the event that an income tax treaty applies, is also attributable to a permanent establishment maintained by the non-U.S. holder in the United States; in these cases, the gain will be taxed on a net income basis at the regular graduated rates and in the manner applicable to U.S. persons, unless an applicable treaty provides otherwise, and, if the non-U.S. holder is a foreign corporation, the branch profits tax described above may also apply;
- the non-U.S. holder is an individual who holds our common stock as a capital asset, is present in the United States for 183 or more days in the taxable year of the disposition and meets other requirements; or
- we are or have been a U.S. real property holding corporation for U.S. federal income tax purposes at any time during the shorter of the five-year period ending on the date of disposition or the period that the non-U.S. holder held our common stock.
Generally, a corporation is a U.S. real property holding corporation if the fair market value of its U.S. real property interests equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests plus its other assets used or held for use in a trade or business. The tax relating to stock in a U.S. real property holding corporation generally will not apply to a non-U.S. holder whose holdings, direct and indirect, at all times during the applicable period, constituted 5% or less of our common stock, provided that our common stock was regularly traded on an established securities market. We believe that we are not currently, and we do not anticipate becoming in the future, a U.S. real property holding corporation.
FEDERAL ESTATE TAX
Our common stock that is owned or is treated as owned by an individual who is a non-U.S. holder at the time of death will be included in that individual's gross estate for U.S. federal estate tax purposes, unless an applicable estate tax or other treaty provides otherwise and, therefore, may be subject to U.S. federal estate tax.
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
We must report annually to the U.S. Internal Revenue Service and to each non-U.S. holder the amount of dividends paid to that holder and the tax withheld from those dividends. Copies of the information returns reporting those dividends and withholding may also be made available to the tax authorities in the country in which the non-U.S. holder is a resident under the provisions of an applicable income tax treaty or agreement.
Under some circumstances, U.S. Treasury regulations require additional information reporting and backup withholding at a rate of 31% on some payments on our common stock. Under currently applicable law, non-U.S. holders generally will be exempt from these additional information reporting requirements and from backup withholding on dividends paid prior to 2001 if we either were required to withhold a U.S. federal withholding tax from those dividends or we paid those dividends to an address outside the United States. After 2000, however, the gross amount of dividends not otherwise subject to U.S. federal withholding tax paid to a non-U.S. holder that fails to certify its non-U.S. holder status in accordance with applicable U.S. Treasury regulations generally will be reduced by backup withholding at a rate of 31%.
The payment of the proceeds from the disposition of our common stock by a non-U.S. holder to or through the U.S. office of a broker generally will be reported to the U.S. Internal Revenue Service and reduced by backup withholding at a rate of 31% unless the non-U.S. holder either certifies its status as a non-U.S. holder under penalties of perjury or otherwise establishes an exemption and the broker has no actual knowledge to the contrary. The payment of the proceeds from the disposition of our common stock by a non-U.S. holder to or through a non-U.S. office of a non-U.S. broker will not be reduced by backup withholding or reported to the U.S. Internal Revenue Service unless the non- U.S. broker is a U.S. related person. In general, the payment of the proceeds from the disposition of our common stock by or through a non-U.S. office of a broker that is a U.S. person or a U.S. related person will be reported to the U.S. Internal Revenue Service and, after 2000, may in limited circumstances be reduced by backup withholding at a rate of 31%, unless the broker receives a statement from the non-U.S. holder, signed under penalties of perjury, certifying its non-U.S. status or the broker has documentary evidence in its files that the holder is a non-U.S. holder and the broker has no actual knowledge to the contrary. For this purpose, a U.S. related person is generally:
- a controlled foreign corporation for U.S. federal income tax purposes;
- a foreign person 50% or more of whose gross income from all sources for the three-year period ending with the close of its taxable year preceding the payment, or for such part of the period that the broker has been in existence, is derived from activities that are effectively connected with the conduct of a U.S. trade or business; or
- effective after 2000, a foreign partnership if, at any time during the taxable year, (A) at least 50% of the capital or profits interest in the partnership is owned by U.S. persons, or (B) the partnership is engaged in a U.S. trade or business.
Non-U.S. holders should consult their own tax advisors regarding the application of the information reporting and backup withholding rules to them, including changes to these rules that will become effective after 2000.
Any amounts withheld under the backup withholding rules from a payment to a non-U.S. holder will be refunded, or credited against the holder's U.S. federal income tax liability, if any, provided that the required information or appropriate claim for refund is furnished to the U.S. Internal Revenue Service.
UNDERWRITING
We intend to offer the shares in the U.S. and Canada through the U.S. underwriters and elsewhere through the international managers. Merrill Lynch, Pierce, Fenner & Smith Incorporated, CIBC World Markets Corp. and Thomas Weisel Partners LLC are acting as U.S. representatives for each of the U.S. underwriters named below. Subject to the terms and conditions set forth in a U.S. purchase agreement between us and the U.S. underwriters, and currently with the sale of shares of common stock to the international managers, we have agreed to sell to the U.S. underwriters, and the U.S. underwriters severally have agreed to purchase from us, the number of shares of common stock set forth opposite their names below.
NUMBER
U.S. UNDERWRITER OF SHARES
---------------- ---------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated......................................
CIBC World Markets Corp. ...................................
Thomas Weisel Partners LLC..................................
-------
Total.............................................
=======
|
We have also entered into an international purchase agreement with the international managers for whom Merrill Lynch International, CIBC World Markets plc and Thomas Weisel Partners LLC are acting as lead managers for sale of the shares outside the U.S. and Canada. Subject to the terms and conditions set forth in the international purchase agreement, and concurrently with the sale of shares to the U.S. underwriters pursuant to the U.S. purchase agreement, we have agreed to sell to the international managers, and the international mangers have agreed to purchase from us, an aggregate of shares. The initial public offering price per share and the underwriting discount per share are identical under the U.S. purchase agreement and the international purchase agreement.
The U.S. underwriters and the international managers have agreed to purchase all of the shares sold under the U.S. and international purchase agreements if any of these shares are purchased. If an underwriter defaults, the U.S. and international purchase agreements provide that the purchase commitments of the nondefaulting underwriters may be increased or the purchase agreements may be terminated. The closings for the sale of shares to be purchased by the U.S. underwriters and the international managers are conditioned upon one another.
We have agreed to indemnify the U.S. underwriters and the international managers against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the U.S. underwriters and international managers may be required to make in respect of those liabilities.
The underwriters are offering the shares, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel, including the validity of the shares, and other conditions contained in the purchase agreements, such as the receipt by the underwriters of officer's certificates and legal opinions. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.
Thomas Weisel Partners LLC, one of the representatives of the underwriters, was organized and registered as a broker-dealer in December 1998. Since December 1998, Thomas Weisel Partners has been named as a lead or co-manager on 146 completed transactions and has acted as a syndicate member in an additional 128 public offerings of equity securities. Thomas Weisel Partners does not have any material relationship with us or any of our officers, directors or other controlling persons, except with respect to its contractual relationship with us under the U.S. purchase agreement entered into in connection with this offering.
COMMISSIONS AND DISCOUNTS
The U.S. representatives have advised us that the U.S. underwriters propose initially to offer the shares to the public at the initial public offering price set forth on the cover page of this prospectus and to certain dealers at that price less a concession not in excess of $ per share of common stock. The U.S. underwriters may allow, and such dealers may reallow, a discount not in excess of $ per share of common stock on sales to certain other dealers. After the initial public offering, the public offering price, concession and discount may be changed.
The following table shows the public offering price, underwriting discount and proceeds before expenses to EXACT. The information assumes either no exercise or full exercise by the U.S. underwriters and the international managers of their over-allotment options.
PER SHARE WITHOUT OPTION WITH OPTION
--------- -------------- -----------
Public offering price............................ $ $ $
Underwriting discount............................ $ $ $
Proceeds, before expenses, to EXACT.............. $ $ $
|
The expenses of the offering, not including the underwriting discount, are estimated at $ and are payable by us.
OVER-ALLOTMENT OPTION
We have granted an option to the U.S. underwriters to purchase up to additional shares at the public offering price less the underwriting discount. The U.S. underwriters may exercise this option for 30 days from the date of this prospectus solely to cover any over-allotments. If the U.S. underwriters exercise this option, each will be obligated, subject to conditions contained in the purchase agreements, to purchase a number of additional shares proportionate to such U.S. underwriter's initial amount reflected in the table above.
We have also granted an option to the international managers, exercisable for 30 days from the date of this prospectus, to purchase up to an aggregate of additional shares to cover any over-allotments on terms similar to those granted to the U.S. underwriters.
INTERSYNDICATE AGREEMENT
The U.S. underwriters and the international managers have entered into an intersyndicate agreement that provides for the coordination of their activities. Under the intersyndicate agreement, the U.S. underwriters and the international managers may sell shares to each other for purposes of resale at the initial public offering price, less an amount not greater than the selling concession. Under the intersyndicate agreement, the U.S. underwriters and any dealer to whom they sell shares will not offer to sell or sell shares to persons who are non-U.S. or non-Canadian persons or to persons they believe intend to resell to persons who are non-U.S. or non-Canadian persons, except in the case of transactions under the intersyndicate agreement. Similarly, the international managers and any dealer to whom they sell shares will not offer to sell or sell shares to U.S. or Canadian persons or to persons they believe intend to resell to U.S. or Canadian persons, except in the case of transactions under the intersyndicate agreement.
RESERVED SHARES
At our request, the U.S. underwriters have reserved for sale, at the initial public offering price, up to shares offered by this prospectus for sale to some of our directors, officers, employees and business associates. If these persons purchase reserved shares, this will reduce the number of shares available for sale to the general public. Any reserved shares that are not orally confirmed for purchase
within one day of the pricing of this offering will be offered by the underwriters to the general public on the same terms as the other shares offered by this prospectus.
NO SALES OF SIMILAR SECURITIES
We and our executive officers and directors and most of our existing stockholders have agreed, with limited exceptions, not to sell or transfer any common stock for 180 days after the date of this prospectus without first obtaining the written consent of Merrill Lynch. Specifically, we and the above- named individuals have agreed not to directly or indirectly
- offer, pledge, sell or contract to sell any common stock;
- sell any option or contract to purchase any common stock;
- purchase any option or contract to sell any common stock;
- grant any option, right or warrant for the sale of any common stock;
- lend or otherwise dispose of or transfer any common stock;
- request or demand that we file a registration statement related to the common stock; or
- enter into any swap or other agreement that transfers, in whole or in part, the economic consequence of ownership of any common stock whether any such swap or transaction is to be settled by delivery of shares or other securities, in cash or otherwise.
This lock-up provision applies to common stock and to securities convertible into or exchangeable or exercisable for or repayable with common stock. It also applies to common stock owned now or acquired later by the person executing the agreement or for which the person executing the agreement later acquires the power of disposition.
QUOTATION ON THE NASDAQ NATIONAL MARKET
We expect the shares to be approved for quotation on the Nasdaq National Market, subject to notice of issuance, under the symbol EXAX.
Before this offering, there has been no public market for our common stock. The initial public offering price will be determined through negotiations among us, the U.S. representatives and lead managers. In addition to prevailing market conditions, the primary factors to be considered in determining the initial public offering price are
- the valuation multiples of publicly traded companies that the U.S. representatives and the lead managers believe to be comparable to us;
- our financial information;
- the history of, and the prospects for, our company and the industry in which we compete;
- an assessment of our management, its past and present operations, and the prospects for, and timing of, our future revenues;
- the present state of our development; and
- the above factors in relation to market values and various valuation measures of other companies engaged in activities similar to ours.
An active trading market for the shares may not develop. It is also possible that after the offering the shares will not trade in the public market at or above the initial public offering price.
The underwriters do not expect to sell more than 5% of the shares in the aggregate to accounts over which they exercise discretionary authority.
PRICE STABILIZATION, SHORT POSITIONS AND PENALTY BIDS
Until the distribution of the common stock is completed, SEC rules may limit the underwriters from bidding for or purchasing our common stock. However, the representatives may engage in transactions that stabilize the price of the common shares, such as bids or purchases that peg, fix or maintain that price.
The underwriters may purchase and sell the common shares in the open market. These transactions may include short sales, stabilizing transactions and purchases to cover positions created by short sales. Short sales involve the sale by the underwriters of a greater number of shares than they are required to purchase in the offering. "Covered" short sale are sales made in an amount not greater than the underwriters' option to purchase additional shares from the issuer in the offering. The underwriters may close out any covered short position by either exercising their option to purchase additional shares or purchasing shares in the open market. In determining the source of shares to close out the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option. "Naked" short sales are any sales in excess of such option. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common shares in the open market after pricing that could adversely affect investors who purchase in the offering. Stabilizing transactions consist of various bids for or purchases of common shares made by the underwriters in the open market prior to the completion of the offering.
The underwriters may also impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the representatives have repurchased shares sold by or for the account of such underwriter in stabilizing or short covering transactions.
Similar to other purchase transactions, the underwriters' purchases to cover the syndicate short sales may have the effect of raising or maintaining the market price of the common shares or preventing or retarding a decline in the market price of the common shares. As a result, the price of the common shares may be higher than the price that might otherwise exist in the open market.
Neither we nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the common shares. In addition, neither we nor any of the representatives make any representation that the representatives will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.
OTHER RELATIONSHIPS
Certain of the U.S. underwriters have from time to time provided investment banking financial advisory services to us and our affiliates, for which they have received customary compensation, and may continue to do so in the future.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for Exact by Testa, Hurwitz & Thibeault, LLP, Boston, Massachusetts. As of the date of this prospectus, Testa, Hurwitz & Thibeault, LLP beneficially owns 4,444 shares of our common stock under the name High Street Investors 2000. Edmund R. Pitcher, a partner at Testa, Hurwitz & Thibeault, LLP beneficially owns 6,459 shares of our common stock, and Thomas C. Meyers, also a partner at Testa, Hurwitz & Thibeault, LLP beneficially owns 1,000 shares of our common stock. Legal matters in connection with this offering will be passed upon for the underwriters by Shearman & Sterling, New York, New York.
EXPERTS
The financial statements included in this prospectus and elsewhere in the Registration Statement, to the extent and for the periods indicated in their reports, have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their reports with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said reports.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the common stock. This prospectus does not contain all of the information contained in the registration statement, and the exhibits and schedules to the registration statement. For further information with respect to us and our common stock, we refer you to the registration statement, and the exhibits and schedules filed as part of the registration statement. Statements in this prospectus concerning the contents of any contract or any other document are not necessarily complete. If a contract or document has been filed as an exhibit to the registration statement, we refer you to that exhibit. Each statement in this prospectus relating to a contract or document filed as an exhibit to the registration statement is qualified by the filed exhibits.
In addition, we file reports, proxy statements and other information with the SEC. You may read and copy any document we file, including the registration statement, at the SEC's public reference rooms in New York, New York. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. Our SEC filings are also available to the public on the SEC's website at http://www.sec.gov.
EXACT CORPORATION
INDEX TO FINANCIAL STATEMENTS
PAGE
--------
Report of Independent Public Accountants.................... F-2
Balance Sheets.............................................. F-3
Statements of Operations.................................... F-5
Statements of Stockholders' Equity.......................... F-6
Statements of Cash Flows.................................... F-8
Notes to Financial Statements............................... F-9
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To EXACT Corporation:
We have audited the accompanying balance sheets of EXACT Corporation (a Delaware corporation in the development stage) as of December 31, 1998 and 1999 and the related statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1999. These financial statements are the responsibility of management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of EXACT Corporation as of December 31, 1998 and 1999 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1999 in conformity with accounting principles generally accepted in the United States.
Boston, Massachusetts
March 14, 2000
EXACT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
DECEMBER 31, JUNE 30, 2000
------------------------ -------------------------
1998 1999 ACTUAL PRO FORMA
ASSETS ---------- ----------- ----------- -----------
(UNAUDITED)
Current Assets:
Cash and cash equivalents................................. $8,825,738 $ 3,553,257 $32,156,753 $32,156,753
Prepaid expenses.......................................... 5,270 26,843 72,569 72,569
---------- ----------- ----------- -----------
Total current assets.................................... 8,831,008 3,580,100 32,229,322 32,229,322
Property and Equipment, at cost:
Laboratory equipment...................................... 402,954 594,385 777,900 777,900
Office and computer equipment............................. 219,902 255,161 307,969 307,969
Leasehold improvements.................................... 90,955 125,688 158,056 158,056
Furniture and fixtures.................................... 83,858 114,618 114,618 114,618
---------- ----------- ----------- -----------
797,669 1,089,852 1,358,543 1,358,543
Less--Accumulated depreciation and amortization........... (321,835) (663,397) (797,338) (797,338)
---------- ----------- ----------- -----------
475,834 426,455 561,205 561,205
Intangible and Other Assets, net of accumulated amortization
of approximately $43,000, $126,000 and $171,000 at
December 31, 1998, 1999 and June 30, 2000, respectively
(Note 2).................................................. 400,686 747,348 847,033 847,033
---------- ----------- ----------- -----------
$9,707,528 $ 4,753,903 $33,637,560 $33,637,560
========== =========== =========== ===========
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EXACT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
DECEMBER 31, JUNE 30, 2000
------------------------ -------------------------
1998 1999 ACTUAL PRO FORMA
LIABILITIES AND STOCKHOLDERS' EQUITY ---------- ----------- ----------- -----------
(UNAUDITED)
Current Liabilities:
Capital lease obligations................................. $ 5,005 $ -- $ -- $ --
Accounts payable.......................................... 180,565 196,895 308,285 308,285
Accrued expenses.......................................... 223,487 146,993 218,965 218,965
---------- ----------- ----------- -----------
Total current liabilities............................... 409,057 343,888 527,250 527,250
---------- ----------- ----------- -----------
Commitments (Note 7)
Stockholders' Equity:
Series A convertible preferred stock,
$0.01 par value--Authorized--1,000,000 shares
Issued and outstanding--902,414 shares actual (liquidation
preference of $1,046,800), none pro forma............... 9,024 9,024 9,024 --
Series B convertible preferred stock,
$0.01 par value--Authorized--1,250,000 shares
Issued and outstanding--996,196 shares actual (liquidation
preference of $3,934,974), none pro forma............... 9,962 9,962 9,962 --
Series C convertible preferred stock,
$0.01 par value--Authorized--1,015,000 shares
Issued and outstanding--1,007,186 shares (liquidation
preference of $10,575,453), none pro forma.............. 10,072 10,072 10,072 --
Series D convertible preferred stock,
$0.01 par value--Authorized--1,435,373 shares
Issued and outstanding--1,417,534 shares actual at
June 30, 2000 (liquidation preference of $31,894,515),
none pro forma.......................................... -- -- 14,175 --
Common stock, $0.01 par value-
Authorized--7,500,000 shares
Issued--525,539, 575,581 and 950,809 shares at
December 31, 1998 and 1999 and June 30, 2000,
respectively, 5,274,139 shares pro forma................ 5,255 5,755 9,508 52,741
Treasury stock, 3,000 shares of common stock at
December 31, 1998, at cost................................ (1,200) -- -- --
Subscriptions receivable.................................... (43,778) (39,706) (693,234) (693,234)
Deferred compensation....................................... (15,991) (54,482) (3,896,212) (3,896,212)
Additional paid-in capital.................................. 15,576,763 15,684,951 52,762,188 52,762,188
Deficit accumulated during the development stage............ (6,251,636) (11,215,561) (15,115,173) (15,115,173)
---------- ----------- ----------- -----------
Total stockholders' equity.............................. 9,298,471 4,410,015 33,110,310 33,110,310
---------- ----------- ----------- -----------
$9,707,528 $ 4,753,903 $33,637,560 $33,637,560
========== =========== =========== ===========
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
EXACT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
PERIOD FROM
INCEPTION
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30, (FEBRUARY 10,
--------------------------------------- ------------------------- 1995) TO JUNE 30,
1997 1998 1999 1999 2000 2000
----------- ----------- ----------- ----------- ----------- -----------------
(UNAUDITED) (UNAUDITED)
Operating Expenses:
Research and
development......... $ 1,221,504 $ 2,848,763 $ 3,688,796 $ 1,814,386 $ 2,299,480 $ 10,424,347
General and
administrative...... 814,407 1,170,366 1,560,368 750,931 1,306,393 5,307,370
Stock-based
compensation(1)..... 845 1,902 13,780 1,645 785,525 802,052
----------- ----------- ----------- ----------- ----------- ------------
Loss from
operations........ (2,036,756) (4,021,031) (5,262,944) (2,566,962) (4,391,398) (16,533,769)
Interest Income......... 153,683 442,651 299,019 177,853 491,786 1,418,596
----------- ----------- ----------- ----------- ----------- ------------
Net loss............ $(1,883,073) $(3,578,380) $(4,963,925) $(2,389,109) $(3,899,612) $(15,115,173)
=========== =========== =========== =========== =========== ============
Net Loss per Share:
Basic and diluted..... $ (29.43) $ (16.73) $ (14.57) $ (8.27) $ (10.83)
=========== =========== =========== =========== ===========
Pro forma basic and
diluted
(unaudited)......... $ (1.53) $ (0.83)
=========== ===========
Weighted Average Common
Shares Outstanding:
Basic and diluted..... 63,983 213,870 340,763 289,020 360,075
=========== =========== =========== =========== ===========
Pro forma basic and
diluted
(unaudited)......... 3,246,559 4,683,405
=========== ===========
(1) The following summarizes the departmental allocation of stock-based compensation:
Research and
development........ $ 583 $ 1,427 $ 8,819 $ 1,151 $ 184,267 $ 195,096
General and
administrative..... 262 475 4,961 494 601,258 606,956
----------- ----------- ----------- ----------- ----------- ------------
Total.............. $ 845 $ 1,902 $ 13,780 $ 1,645 $ 785,525 $ 802,052
=========== =========== =========== =========== =========== ============
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
EXACT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY
SERIES A CONVERTIBLE SERIES B CONVERTIBLE SERIES C CONVERTIBLE SERIES D CONVERTIBLE
PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK
---------------------- ---------------------- ---------------------- ----------------------
NUMBER OF $0.01 PAR NUMBER OF $0.01 PAR NUMBER OF $0.01 PAR NUMBER OF $0.01 PAR
SHARES VALUE SHARES VALUE SHARES VALUE SHARES VALUE
---------- --------- ---------- --------- ---------- --------- ---------- ---------
Inception, February 10, 1995... -- $ -- -- $ -- -- $ -- -- $ --
Sale of Series A convertible
preferred stock, net of
issuance costs of $6,665... 159,308 1,593 -- -- -- -- -- --
Sale of common stock......... -- -- -- -- -- -- -- --
Net loss..................... -- -- -- -- -- -- -- --
-------- ------ -------- ------ ---------- ------- ---------- -------
Balance, December 31, 1995..... 159,308 1,593 -- -- -- -- -- --
Sale of Series A convertible
preferred stock, net of
issuance costs of
$12,321.................... 743,106 7,431 -- -- -- -- -- --
Sale of Series B convertible
preferred stock, net of
issuance costs of
$36,892.................... -- -- 964,551 9,646 -- -- -- --
Sale of common stock......... -- -- -- -- -- -- -- --
Net loss..................... -- -- -- -- -- -- -- --
-------- ------ -------- ------ ---------- ------- ---------- -------
Balance, December 31, 1996..... 902,414 9,024 964,551 9,646 -- -- -- --
Sale of Series B convertible
preferred stock, net of
issuance costs of $4,138... -- -- 31,645 316 -- -- -- --
Sale of common stock......... -- -- -- -- -- -- -- --
Exercise of common stock
options.................... -- -- -- -- -- -- -- --
Compensation expense related
to issuance of stock
options.................... -- -- -- -- -- -- -- --
Repayment of subscription
receivable................. -- -- -- -- -- -- -- --
Net loss..................... -- -- -- -- -- -- -- --
-------- ------ -------- ------ ---------- ------- ---------- -------
Balance, December 31, 1997..... 902,414 9,024 996,196 9,962 -- -- -- --
Sale of Series C convertible
preferred stock, net of
issuance costs of
$37,414.................... -- -- -- -- 1,007,186 10,072 -- --
Sale of common stock......... -- -- -- -- -- -- -- --
Exercise of common stock
options.................... -- -- -- -- -- -- -- --
Repayment of subscription
receivable................. -- -- -- -- -- -- -- --
Compensation expense related
to issuance of stock
options.................... -- -- -- -- -- -- -- --
Repurchase of common stock... -- -- -- -- -- -- -- --
Net loss..................... -- -- -- -- -- -- -- --
-------- ------ -------- ------ ---------- ------- ---------- -------
COMMON STOCK TREASURY STOCK
---------------------- ---------------------- ADDITIONAL
NUMBER OF $0.01 PAR NUMBER OF $0.01 PAR SUBSCRIPTION DEFERRED PAID-IN
SHARES VALUE SHARES VALUE RECEIVABLE COMPENSATION CAPITAL
---------- --------- ---------- --------- ------------ ------------- -----------
Inception, February 10, 1995... -- $ -- -- $ -- $ -- $ -- $ --
Sale of Series A convertible
preferred stock, net of
issuance costs of $6,665... -- -- -- -- -- -- 176,574
Sale of common stock......... 35,000 350 -- -- -- -- --
Net loss..................... -- -- -- -- -- -- --
--------- ------- ------- ------ --------- ----------- -----------
Balance, December 31, 1995..... 35,000 350 -- -- -- -- 176,574
Sale of Series A convertible
preferred stock, net of
issuance costs of
$12,321.................... -- -- -- -- (25,000) -- 842,617
Sale of Series B convertible
preferred stock, net of
issuance costs of
$36,892.................... -- -- -- -- -- -- 3,763,444
Sale of common stock......... 200,000 2,000 -- -- -- -- 22,000
Net loss..................... -- -- -- -- -- -- --
--------- ------- ------- ------ --------- ----------- -----------
Balance, December 31, 1996..... 235,000 2,350 -- -- (25,000) -- 4,804,635
Sale of Series B convertible
preferred stock, net of
issuance costs of $4,138... -- -- -- -- -- -- 120,500
Sale of common stock......... 74,039 740 -- -- -- -- 28,876
Exercise of common stock
options.................... 8,500 85 -- -- -- -- 935
Compensation expense related
to issuance of stock
options.................... -- -- -- -- -- (9,310) 10,155
Repayment of subscription
receivable................. -- -- -- -- 25,000 -- --
Net loss..................... -- -- -- -- -- -- --
--------- ------- ------- ------ --------- ----------- -----------
Balance, December 31, 1997..... 317,539 3,175 -- -- -- (9,310) 4,965,101
Sale of Series C convertible
preferred stock, net of
issuance costs of
$37,414.................... -- -- -- -- -- -- 10,527,979
Sale of common stock......... 20,000 200 -- -- -- -- 7,800
Exercise of common stock
options.................... 188,000 1,880 -- -- (47,580) -- 67,300
Repayment of subscription
receivable................. -- -- -- -- 3,802 -- --
Compensation expense related
to issuance of stock
options.................... -- -- -- -- -- (6,681) 8,583
Repurchase of common stock... -- -- 3,000 (1,200) -- -- --
Net loss..................... -- -- -- -- -- -- --
--------- ------- ------- ------ --------- ----------- -----------
DEFICIT
ACCUMULATED
DURING THE TOTAL
DEVELOPMENT STOCKHOLDERS'
STAGE EQUITY
------------ -------------
Inception, February 10, 1995... $ -- $ --
Sale of Series A convertible
preferred stock, net of
issuance costs of $6,665... -- 178,167
Sale of common stock......... -- 350
Net loss..................... (138,163) (138,163)
------------ -----------
Balance, December 31, 1995..... (138,163) 40,354
Sale of Series A convertible
preferred stock, net of
issuance costs of
$12,321.................... -- 825,048
Sale of Series B convertible
preferred stock, net of
issuance costs of
$36,892.................... -- 3,773,090
Sale of common stock......... -- 24,000
Net loss..................... (652,020) (652,020)
------------ -----------
Balance, December 31, 1996..... (790,183) 4,010,472
Sale of Series B convertible
preferred stock, net of
issuance costs of $4,138... -- 120,816
Sale of common stock......... -- 29,616
Exercise of common stock
options.................... -- 1,020
Compensation expense related
to issuance of stock
options.................... -- 845
Repayment of subscription
receivable................. -- 25,000
Net loss..................... (1,883,073) (1,883,073)
------------ -----------
Balance, December 31, 1997..... (2,673,256) 2,304,696
Sale of Series C convertible
preferred stock, net of
issuance costs of
$37,414.................... -- 10,538,051
Sale of common stock......... -- 8,000
Exercise of common stock
options.................... -- 21,600
Repayment of subscription
receivable................. -- 3,802
Compensation expense related
to issuance of stock
options.................... -- 1,902
Repurchase of common stock... -- (1,200)
Net loss..................... (3,578,380) (3,578,380)
------------ -----------
|
EXACT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY (CONTINUED)
SERIES A CONVERTIBLE SERIES B CONVERTIBLE SERIES C CONVERTIBLE SERIES D CONVERTIBLE
PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK
---------------------- ---------------------- ---------------------- ----------------------
NUMBER OF $0.01 PAR NUMBER OF $0.01 PAR NUMBER OF $0.01 PAR NUMBER OF $0.01 PAR
SHARES VALUE SHARES VALUE SHARES VALUE SHARES VALUE
---------- --------- ---------- --------- ---------- --------- ---------- ---------
Balance, December 31, 1998.... 902,414 9,024 996,196 9,962 1,007,186 10,072 -- --
Exercise of common stock
options................... -- -- -- -- -- -- -- --
Repayment of subscription
receivable................ -- -- -- -- -- -- -- --
Compensation expense related
to issuance of stock
options................... -- -- -- -- -- -- -- --
Repurchase of common stock.. -- -- -- -- -- -- -- --
Retirement of treasury
stock..................... -- -- -- -- -- -- -- --
Net loss.................... -- -- -- -- -- -- -- --
-------- ------ -------- ------ ---------- ------- ---------- -------
Balance, December 31, 1999.... 902,414 9,024 996,196 9,962 1,007,186 10,072 -- --
Sale of Series D convertible
preferred stock, net of
issuance costs of
$145,678.................. -- -- -- -- -- -- 1,417,534 14,175
Sale of common stock........ -- -- -- -- -- -- -- --
Repurchase of common stock.. -- -- -- -- -- -- -- --
Retirement of treasury
stock..................... -- -- -- -- -- -- -- --
Exercise of common stock
options................... -- -- -- -- -- -- -- --
Repayment of subscription
receivable................ -- -- -- -- -- -- -- --
Compensation expense related
to issuance of stock
options................... -- -- -- -- -- -- -- --
Net loss.................... -- -- -- -- -- -- -- --
-------- ------ -------- ------ ---------- ------- ---------- -------
Balance, June 30, 2000
(unaudited)................. 902,414 9,024 996,196 9,962 1,007,186 10,072 1,417,534 14,175
Conversion of convertible
preferred stock into
common stock.............. (902,414) (9,024) (996,196) (9,962) (1,007,186) (10,072) (1,417,534) (14,175)
-------- ------ -------- ------ ---------- ------- ---------- -------
Pro Forma Balance, June 30,
2000 (unaudited).......... -- $ -- -- $ -- -- $ -- -- $ --
======== ====== ======== ====== ========== ======= ========== =======
COMMON STOCK TREASURY STOCK
---------------------- ---------------------- ADDITIONAL
NUMBER OF $0.01 PAR NUMBER OF $0.01 PAR SUBSCRIPTION DEFERRED PAID-IN
SHARES VALUE SHARES VALUE RECEIVABLE COMPENSATION CAPITAL
---------- --------- ---------- --------- ------------ ------------- -----------
Balance, December 31, 1998.... 525,539 5,255 3,000 (1,200) (43,778) (15,991) 15,576,763
Exercise of common stock
options................... 56,542 565 -- -- -- -- 58,452
Repayment of subscription
receivable................ -- -- -- -- 4,072 -- --
Compensation expense related
to issuance of stock
options................... -- -- -- -- -- (38,491) 52,271
Repurchase of common stock.. -- -- 3,500 (1,400) -- -- --
Retirement of treasury
stock..................... (6,500) (65) (6,500) 2,600 -- -- (2,535)
Net loss.................... -- -- -- -- -- -- --
--------- ------- ------- ------ --------- ----------- -----------
Balance, December 31, 1999.... 575,581 5,755 -- -- (39,706) (54,482) 15,684,951
Sale of Series D convertible
preferred stock, net of
issuance costs of
$145,678.................. -- -- -- -- -- -- 31,734,662
Sale of common stock........ 17,500 175 -- -- -- -- 18,200
Repurchase of common stock.. -- -- 10,125 (5,215) -- -- --
Retirement of treasury
stock..................... (10,125) (101) (10,125) 5,215 -- -- (5,114)
Exercise of common stock
options................... 367,853 3,679 -- -- (662,080) -- 702,234
Repayment of subscription
receivable................ -- -- -- -- 8,552 -- --
Compensation expense related
to issuance of stock
options................... -- -- -- -- -- (3,841,730) 4,627,255
Net loss.................... -- -- -- -- -- -- --
--------- ------- ------- ------ --------- ----------- -----------
Balance, June 30, 2000
(unaudited)................. 950,809 9,508 -- -- (693,234) (3,896,212) 52,762,188
Conversion of convertible
preferred stock into
common stock.............. 4,323,330 43,233 -- -- -- -- --
--------- ------- ------- ------ --------- ----------- -----------
Pro Forma Balance, June 30,
2000 (unaudited).......... 5,274,139 $52,741 -- $ -- $(693,234) $(3,896,212) $52,762,188
========= ======= ======= ====== ========= =========== ===========
DEFICIT
ACCUMULATED
DURING THE TOTAL
DEVELOPMENT STOCKHOLDERS'
STAGE EQUITY
------------ -------------
Balance, December 31, 1998.... (6,251,636) 9,298,471
Exercise of common stock
options................... -- 59,017
Repayment of subscription
receivable................ -- 4,072
Compensation expense related
to issuance of stock
options................... -- 13,780
Repurchase of common stock.. -- (1,400)
Retirement of treasury
stock..................... -- --
Net loss.................... (4,963,925) (4,963,925)
------------ -----------
Balance, December 31, 1999.... (11,215,561) 4,410,015
Sale of Series D convertible
preferred stock, net of
issuance costs of
$145,678.................. -- 31,748,837
Sale of common stock........ -- 18,375
Repurchase of common stock.. -- (5,215)
Retirement of treasury
stock..................... -- --
Exercise of common stock
options................... -- 43,833
Repayment of subscription
receivable................ -- 8,552
Compensation expense related
to issuance of stock
options................... -- 785,525
Net loss.................... (3,899,612) (3,899,612)
------------ -----------
Balance, June 30, 2000
(unaudited)................. (15,115,173) 33,110,310
Conversion of convertible
preferred stock into
common stock.............. -- --
------------ -----------
Pro Forma Balance, June 30,
2000 (unaudited).......... $(15,115,173) $33,110,310
============ ===========
|
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
EXACT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
PERIOD FROM
SIX MONTHS ENDED INCEPTION
YEAR ENDED DECEMBER 31, JUNE 30, (FEBRUARY 10,
--------------------------------------- -------------------------- 1995) TO JUNE 30,
1997 1998 1999 1999 2000 2000
----------- ----------- ----------- ----------- ------------ -----------------
(UNAUDITED) (UNAUDITED)
Cash Flows from Operating Activities:
Net loss............................. $(1,883,073) $(3,578,380) $(4,963,925) $(2,389,109) $ (3,899,612) $(15,115,173)
Adjustments to reconcile net loss to
net cash used in operating
activities--
Depreciation and amortization...... 114,692 243,832 424,285 201,837 179,477 968,439
Non-cash stock-based compensation
expense.......................... 845 1,902 13,780 1,645 785,525 802,052
Changes in assets and liabilities--
Prepaid expenses................. -- (5,270) (21,573) (11,699) (45,726) (72,569)
Cash overdraft................... (17,293) -- -- -- -- --
Accounts payable................. (41,000) 137,106 16,330 33,062 111,390 308,285
Accrued expenses................. 49,972 166,515 (76,494) (38,545) 71,972 218,965
----------- ----------- ----------- ----------- ------------ ------------
Net cash used in operating
activities................... (1,775,857) (3,034,295) (4,607,597) (2,202,809) (2,796,974) (12,890,001)
----------- ----------- ----------- ----------- ------------ ------------
Cash Flows from Investing Activities:
Purchases of property and
equipment.......................... (340,142) (355,201) (292,183) (277,169) (268,691) (1,341,592)
Increase in intangible and other
assets............................. (159,059) (140,312) (429,385) (309,043) (145,221) (1,018,134)
----------- ----------- ----------- ----------- ------------ ------------
Net cash used in investing
activities................... (499,201) (495,513) (721,568) (586,212) (413,912) (2,359,726)
----------- ----------- ----------- ----------- ------------ ------------
Cash Flows from Financing Activities:
Payments on capital lease
obligations........................ (5,437) (6,509) (5,005) (2,306) -- (16,951)
Repurchase of common stock........... -- (1,200) (1,400) (5,215) (7,815)
Net proceeds from sale of convertible
preferred stock.................... 120,816 10,538,051 -- -- 31,748,837 47,184,010
Net proceeds from sale of common
stock.............................. 29,616 8,000 -- -- 18,375 80,341
Proceeds from exercise of common
stock options...................... 1,020 21,600 59,017 15,238 43,833 125,470
Collection of stock subscription
receivable......................... 25,000 3,802 4,072 4,072 8,552 41,425
----------- ----------- ----------- ----------- ------------ ------------
Net cash provided by financing
activities................... 171,015 10,563,744 56,684 17,004 31,814,382 47,406,480
----------- ----------- ----------- ----------- ------------ ------------
Net (Decrease) Increase in Cash and
Cash Equivalents..................... (2,104,043) 7,033,936 (5,272,481) (2,772,017) 28,603,496 32,156,753
Cash and Cash Equivalents, beginning of
period............................... 3,895,845 1,791,802 8,825,738 8,825,738 3,553,257 --
----------- ----------- ----------- ----------- ------------ ------------
Cash and Cash Equivalents, end of
period............................... $ 1,791,802 $ 8,825,738 $ 3,553,257 $ 6,053,721 $ 32,156,753 $ 32,156,753
=========== =========== =========== =========== ============ ============
Supplemental Disclosure of Noncash
Investing and Financing Activities:
Sale of restricted stock through
issuance of notes receivable....... $ -- $ 47,580 $ -- $ -- $ 662,079 $ 709,659
=========== =========== =========== =========== ============ ============
Purchase of treasury shares through
forgiveness of note receivable..... $ -- $ 1,200 $ 1,400 $ -- $ 5,215 $ 7,815
=========== =========== =========== =========== ============ ============
Equipment purchased through capital
lease obligations.................. $ 16,951 $ -- $ -- $ -- $ -- $ 16,951
=========== =========== =========== =========== ============ ============
|
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
EXACT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(1) ORGANIZATION
EXACT Corporation (the Company) was incorporated on February 10, 1995. The Company is in the development stage and applies proprietary genomics technologies to the early detection of several types of common cancers. The Company has selected colorectal cancer as the first application of its technology platform.
The Company is devoting substantially all of its efforts toward product research and development, raising capital and marketing products under development. The Company has not generated revenue to date and is subject to a number of risks similar to those of other development-stage companies, including dependence on key individuals, the need for the continued development of commercially usable products and the need to obtain adequate additional financing necessary to fund the development of its products. To date, the Company has raised capital principally through private placements of its preferred stock. The Company believes that proceeds from these financings will be adequate to fund operations through the next fiscal year.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
UNAUDITED INTERIM FINANCIAL STATEMENTS
The financial statements as of June 30, 2000 and for the six months ended June 30, 1999 and 2000 are unaudited. These unaudited financial statements have been prepared on the same basis as the audited financial statements and in the opinion of management include all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. The results of operations for the interim period ended June 30, 2000 are not necessarily indicative of the results to be expected for the entire fiscal year.
UNAUDITED PRO FORMA PRESENTATION
All outstanding shares of Series A, B, C and D convertible preferred stock will convert into 4,323,330 shares of common stock upon the closing of the Company's proposed initial public offering. The unaudited pro forma consolidated balance sheet as of June 30, 2000 reflects this conversion.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with maturities of three months or less at the time of acquisition to be cash equivalents. Cash equivalents consist primarily of money market funds at December 31, 1998 and 1999 and at June 30, 2000.
EXACT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) DEPRECIATION AND AMORTIZATION
Depreciation and amortization are computed using the straight-line method based on the estimated useful lives of the related assets, as follows:
ESTIMATED
ASSET CLASSIFICATION USEFUL LIFE
-------------------- -------------
Laboratory equipment........................................ 3 years
Office and computer equipment............................... 3 years
Leasehold improvements...................................... Life of lease
Furniture and fixtures...................................... 3 years
|
NET LOSS PER SHARE
Basic and diluted net loss per share is presented in conformity with Statement of Financial Accounting Standards (SFAS) No. 128, EARNINGS PER SHARE, for all periods presented. In accordance with SFAS No. 128, basic and diluted net loss per common share was determined by dividing net loss applicable to common stockholders by the weighted average common shares outstanding during the period, less shares subject to repurchase. Basic and diluted net loss per share are the same because all outstanding common stock equivalents have been excluded as they are antidilutive. All shares issuable upon conversion of outstanding preferred stock, unvested restricted common shares of options to purchase a total of 203,000, 418,211, 399,211, 422,961 and 399,556 common shares and 196,715, 291,116, 200,508, 245,811, and 421,165 have therefore been excluded from the computations of diluted weighted average shares outstanding for the years ended December 31, 1997, 1998 and 1999 and for the six months ended June 30, 1999 and 2000, respectively.
In accordance with the SEC Staff Accounting Bulletin (SAB) No. 98, EARNINGS PER SHARE IN AN INITIAL PUBLIC OFFERING, the Company has determined that there were no nominal issuances of the Company's common stock prior to the Company's initial public offering.
The Company's historical capital structure is not indicative of its capital structure after the proposed initial public offering due to the automatic conversion of all shares of preferred stock into common stock concurrent with the closing of the Company's proposed initial public offering. Accordingly, pro forma net loss per share is presented for the year ended December 31, 1999 and the six months ended June 30, 2000 assuming the conversion of all outstanding shares of preferred stock into common stock upon the closing of the Company's initial public offering using the if-converted method from the respective dates of issuance.
EXACT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The following table reconciles the weighted average common shares outstanding to the shares used in the computation of pro forma basic and diluted net loss per share:
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
1999 2000
------------ ----------------
Net loss........................................ $(4,963,925) $(3,899,612)
----------- -----------
Weighted average shares outstanding............. 340,763 360,075
Conversion of preferred stock to common stock... 2,905,796 4,323,330
----------- -----------
Pro forma weighted average shares
outstanding............................... 3,246,559 4,683,405
=========== ===========
Pro forma basic and diluted net loss per
share......................................... $ (1.53) $ (0.83)
=========== ===========
|
INTANGIBLE AND OTHER ASSETS
Other assets consist of patent costs and deposits. Patent costs are amortized beginning when patents are approved over an estimated useful life of five years.
The Company applies SFAS No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF. SFAS No. 121 requires the Company to continually evaluate whether events or circumstances have occurred that indicate that the estimated remaining useful life of long-lived assets and certain identifiable intangibles and goodwill may warrant revision or that the carrying value of these assets may be impaired. To compute whether assets have been impaired, the estimated gross cash flows for the estimated remaining useful life of the assets are compared to the carrying value. To the extent that the gross cash flows are less than the carrying value, the assets are written down to the estimated fair value of the asset. The Company does not believe that its long-lived assets have been impaired.
RESEARCH AND DEVELOPMENT EXPENSES
The Company charges research and development expenses to operations as incurred.
COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS No. 130, REPORTING COMPREHENSIVE INCOME. SFAS No. 130 requires disclosure of all components of comprehensive income on an annual and interim basis. Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from nonowner sources. Comprehensive net loss is the same as reported net loss for all periods presented.
FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS, requires disclosures about fair value of financial instruments. Financial instruments consist of cash equivalents, accounts payable and
EXACT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) capital lease obligations. The estimated fair value of these financial instruments approximates their carrying value.
CONCENTRATION OF CREDIT RISK
SFAS No. 105, DISCLOSURE OF INFORMATION ABOUT FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK AND FINANCIAL INSTRUMENTS WITH CONCENTRATIONS OF CREDIT RISK, requires disclosure of any significant off-balance-sheet and credit risk concentration. The Company has no significant concentrations of credit risk, such as foreign exchange contracts or other hedging arrangements. Financial instruments that subject the Company to credit risk consist of cash and cash equivalents.
SEGMENT INFORMATION
The Company has adopted SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION, which requires companies to report selected information about operating segments, as well as enterprise-wide disclosures about products, services, geographic areas and major customers. Operating segments are determined based on the way management organizes its business for making operating decisions and assessing performance. The Company's chief decision-maker, as defined under SFAS No. 131, is a combination of the chairman, vice president and chief financial officer and president. The Company has determined that it conducts its operations in one business segment. The Company conducts its business primarily in the United States.
As a result, the financial information disclosed herein represents all of the material financial information related to the Company's principal operating segment.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1999, the FASB issued SFAS No. 137, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES--DEFERRAL OF THE EFFECTIVE DATE OF FASB STATEMENT NO. 133, which defers the effective date of SFAS No. 133 to all fiscal quarters of all fiscal years beginning after June 15, 2000. SFAS No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, issued in June 1998, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and hedging activities. It requires an entity to recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. The Company does not expect adoption of this statement to have any impact on its financial position or results of operations.
In December 1999, the SEC issued SAB No. 101, REVENUE RECOGNITION. This bulletin establishes guidelines for revenue recognition and is effective for all fiscal years beginning after December 15, 1999. The Company does not expect that the adoption of this guidance will have a material impact on its financial condition or results of operations.
In March 2000, the FASB issued Interpretation No. 44, ACCOUNTING FOR CERTAIN TRANSACTIONS INVOLVING STOCK COMPENSATION--AN INTERPRETATION OF APB OPINION NO. 25. The interpretation clarifies the application of Accounting Principles Board (APB) Opinion No. 25 to accounting for stock issued to employees. The interpretation is effective July 1, 2000, but covers certain events occurring during the
EXACT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) period between December 15, 1998 and July 1, 2000. If events covered by the interpretation occur during this period, the effects of applying the interpretation to the events would be recognized on a prospective basis from July 1, 2000. As a result, the interpretation will not require that any adjustments be made to our financial statements for periods before July 1, 2000 and no expense would be recognized for any additional compensation cost measured that is attributable to periods before July 1, 2000. The Company believes the adoption of this interpretation will not have a significant impact on its financial position, results of operations or cash flows.
(3) INCOME TAXES
The Company accounts for income taxes under SFAS No. 109, ACCOUNTING FOR INCOME TAXES. Under SFAS No. 109, deferred tax assets or liabilities are computed based on the differences between the financial statement and income tax bases of assets and liabilities using the enacted tax rates. Deferred income tax expense or credits are based on changes in the asset or liability from period to period. At December 31, 1999, the Company had net operating loss and research tax credit carryforwards of approximately $10,654,000 and $389,000, respectively, for financial reporting purposes, which may be used to offset future taxable income.
The components of the net deferred tax asset with the approximate income tax effect of each type of carryforward, credit and temporary difference are as follows:
DECEMBER 31,
-----------------------
1998 1999
---------- ----------
Operating loss carryforwards......................... $2,325,000 $4,262,000
Tax credit carryforwards............................. 206,000 389,000
Temporary differences................................ (270,000) (127,000)
---------- ----------
2,261,000 4,524,000
Less--Valuation allowance............................ 2,261,000 4,524,000
---------- ----------
Net deferred tax asset............................... $ -- $ --
========== ==========
|
The Company has recorded a full valuation allowance against its deferred tax assets due to uncertainties surrounding the realization of these assets. The carryforwards expire from 2010 to 2019 and are subject to review and possible adjustment by the Internal Revenue Service. The Internal Revenue Code contains provisions that may limit the net operating loss and research tax credit carryforwards in the event of certain changes in the ownership interests of significant stockholders.
(4) SUBSCRIPTIONS RECEIVABLE
In February 1998, the Company issued full recourse notes receivable to several employees totaling $47,580 for the exercise of stock options. The notes bear interest at 8.5% with interest payments due monthly over a five-year period.
In March 2000, the Company issued full recourse notes receivable to several employees totaling $262,080 for the exercise of stock options. The notes bear interest at 9.0% with interest payments due
EXACT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(4) SUBSCRIPTIONS RECEIVABLE (CONTINUED) monthly over a five-year period and are collateralized by the underlying stock. In June 2000, the Company issued full recourse notes receivable to an executive totaling $299,999 to purchase restricted stock. The notes bear interest at 9.5% with interest payments due monthly over a five-year period.
(5) RELATED PARTY TRANSACTION
In February 1998, the Company entered into a research arrangement with one of its shareholders. The Company paid approximately $143,000 and $114,000 related to this arrangement during the years ended December 31, 1998 and 1999, respectively.
(6) STOCKHOLDERS' EQUITY
CONVERTIBLE PREFERRED STOCK
The Company has authorized 4,700,373 shares of $0.01 par value convertible preferred stock, of which 1,000,000 are designated as Series A convertible preferred stock (Series A preferred), 1,250,000 are designated as Series B convertible preferred stock (Series B preferred), 1,015,000 are designated as Series C convertible preferred stock (Series C preferred) and 1,435,373 are designated as Series D convertible preferred stock (Series D preferred).
DIVIDENDS
The holders of Series A, B, C and D preferred are entitled to receive dividends, as defined, if and when declared by the Company's Board of Directors. To date, no dividends have been declared.
VOTING RIGHTS
Each holder of outstanding shares of Series A, B, C and D preferred is entitled to a number of votes equal to the number of whole shares of common stock into which such preferred shares are then convertible. All outstanding holders of convertible preferred stock shall vote together with the holders of common stock as a single class.
LIQUIDATION
In the event of any voluntary or involuntary dissolution of the Company and before any distribution or other payment is made to any holders of any class or series of capital stock of the Company, the holders of each share of Series A, B, C and D preferred shall be entitled to receive $1.16, $3.95, $10.50 and $22.50, respectively, plus any dividends declared but unpaid.
CONVERSION
Each share of Series A, B, C and D preferred is convertible, at the option of the holder, into such number of shares of common stock as is determined by dividing $1.16, $3.95, $10.50 and $22.50 per share, respectively, by the conversion price, as defined. Series A, B, C and D preferred will automatically convert into common stock upon the closing of an underwritten public offering, as defined.
EXACT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(6) STOCKHOLDERS' EQUITY (CONTINUED) STOCK OPTION PLAN
The Company has a stock option plan (the Plan) under which the Board of Directors may grant incentive and nonqualified stock options to purchase an aggregate of 1,450,000 shares of common stock to employees and consultants of the Company. Nonqualified stock options may be granted to any employee or consultant of the Company. The exercise price of each option is determined by the Board of Directors. Incentive stock options may not be less than the fair market value of the stock on the date of grant, as defined by the Board of Directors.
Options granted under the Plan vest over a three-to-five-year period and expire 10 years from the grant date. At June 30, 2000, 196,174 shares were available for future grant under the Plan.
Information with respect to activity under the Plan is as follows:
NUMBER OF WEIGHTED AVERAGE
SHARES EXERCISE PRICE
--------- ----------------
Outstanding, December 31, 1997.............................. 203,000 $0.26
Granted................................................... 408,211 0.89
Exercised................................................. (188,000) 0.37
Canceled.................................................. (5,000) 0.40
--------
Outstanding, December 31, 1998.............................. 418,211 0.82
Granted................................................... 48,000 1.05
Exercised................................................. (56,542) 1.04
Canceled.................................................. (10,458) 0.40
--------
Outstanding, December 31, 1999.............................. 399,211 0.83
Granted................................................... 386,700 3.41
Exercised................................................. (367,853) 1.92
Canceled.................................................. (18,502) 1.05
--------
Outstanding, June 30, 2000.................................. 399,556 $2.30
======== =====
Exercisable, December 31, 1998.............................. 47,325 $0.21
======== =====
Exercisable, December 31, 1999.............................. 226,759 $0.53
======== =====
Exercisable, June 30, 2000.................................. 138,265 $0.41
======== =====
|
EXACT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(6) STOCKHOLDERS' EQUITY (CONTINUED)
The following table summarizes information relating to currently outstanding and exercisable stock options as of June 30, 2000:
OUTSTANDING EXERCISABLE
---------------------------------------------------- --------------------------
WEIGHTED
AVERAGE
REMAINING WEIGHTED WEIGHTED
EXERCISE NUMBER OF CONTRACTUAL AVERAGE NUMBER OF AVERAGE
PRICE SHARES LIFE (YEARS) EXERCISE PRICE SHARES EXERCISE PRICE
-------- --------- ------------ -------------- --------- --------------
$0.12 71,500 6.81 $0.12 71,500 $0.12
$0.40 35,000 7.74 0.40 34,250 0.40
$1.05 164,167 9.24 1.05 32,515 1.05
$5.63 128,889 10.0 5.63 -- 5.63
------- ----- ----- ------- -----
399,556 8.92 $2.30 138,265 $0.41
======= ===== ===== ======= =====
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ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company accounts for its stock-based compensation plan under APB Opinion No. 25. SFAS No. 123 ACCOUNTING FOR STOCK-BASED COMPENSATION establishes the fair-value-based method of accounting for stock-based compensation plans. The Company has adopted the disclosure-only alternative for options granted to employees and directors under SFAS No. 123, which requires disclosure of the pro forma effects on earnings as if SFAS No. 123 had been adopted, as well as certain other information. For options granted to advisory board members and other nonemployees, compensation expense, computed using the Black-Scholes option pricing model, of $1,902, $9,500 and $5,467 was recorded in the accompanying statements of operations for the years ended December 31, 1998 and 1999 and the six months ended June 30, 2000, respectively.
In connection with certain 1999 and 2000 stock option grants, the Company recorded deferred compensation of $52,271 and $4,627,255 during the year ended December 31, 1999 and the six months ended June 30, 2000, respectively. The deferred compensation represents the aggregate difference between the option exercise price and the deemed fair value of the common stock for accounting purposes and is being charged to operations over the related vesting period. All stock options granted and stock sold prior to 1999 were at fair market value and therefore did not result in a compensation charge.
The Company expects to recognize amortization expense of deferred compensation recorded through June 30, 2000 of approximately $1,553,000, $1,476,000, $878,000, $511,000, $218,000 and $39,000 during the years ending December 31, 2000, 2001, 2002, 2003, 2004 and 2005, respectively.
The Company has computed the pro forma disclosures required under SFAS No. 123 for all stock options granted as of December 31, 1997, 1998 and 1999 and June 30, 2000 using the Black-Scholes option pricing model prescribed by SFAS No. 123.
EXACT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(6) STOCKHOLDERS' EQUITY (CONTINUED) The assumptions used for the years ended December 31, 1997, 1998 and 1999 and for the six months ended June 30, 2000 are as follows:
SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
------------------------------------------ 2000
1997 1998 1999 (UNAUDITED)
------------ ------------ ------------ ----------------
Risk-free interest rates.......... 5.90%-6.65% 4.65%-5.62% 5.44%-5.97% 5.25%-5.50%
Expected lives.................... 7 years 7 years 7 years 7 years
Expected volatility............... 0% 0% 0% 100%
Dividend yield.................... 0% 0% 0% 0%
Weighted average remaining
contractual life of options
outstanding..................... 9.21 9.30 8.33 8.92
Weighted average fair value of
grants.......................... $ 0.15 $ 0.30 $ 0.35 $ 3.31
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The effect of applying SFAS No. 123 would be as follows:
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
--------------------------------------- 2000
1997 1998 1999 (UNAUDITED)
----------- ----------- ----------- ----------------
Net loss as reported.................... $(1,883,073) $(3,578,380) $(4,963,925) $(3,899,612)
Pro forma............................... $(1,884,473) $(3,581,433) $(4,993,586) $(3,937,232)
Basic and Diluted Net Loss per Share--
As reported........................... $ (29.43) $ (16.73) $ (14.57) $ (10.83)
Pro forma............................. $ (29.45) $ (16.75) $ (14.65) $ (10.93)
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RESTRICTED COMMON STOCK
On May 10, 1996, the Company sold 200,000 shares of restricted common stock to a key employee. In 1997, the Company sold 25,000 shares of restricted common stock to a key employee and 49,039 restricted common shares to another employee. In February 1998, the Company sold 179,000 shares of restricted common stock to employees of the Company pursuant to the exercise of options, 134,000 shares of which were purchased through issuance of notes receivable (see Note 4). During 2000, the Company sold 349,111 shares of restricted common stock to employees of the Company pursuant to the exercise of options, 323,111 shares of which were purchased through issuance of notes receivable (Note 4). The shares were sold at the then fair market value and vest over a five- to seven-year period. At June 30, 2000, 380,985 shares were vested.
EXACT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(7) COMMITMENTS
The Company leases certain equipment and conducts its operations in a leased facility under noncancelable operating leases expiring through June 2003. Future minimum rental payments under the operating leases as of June 30, 2000 are approximately as follows:
Year ending December 31,
2000...................................................... 118,000
2001...................................................... 236,000
2002...................................................... 236,000
2003...................................................... 118,000
--------
Total lease payments.................................... 708,000
========
|
Rent expense included in the accompanying statements of operations was approximately $65,000, $84,000 and $146,000 for the years ended December 31, 1997, 1998 and 1999, respectively. Rent expense for the six months ended June 30, 1999 and 2000 was approximately $80,000 and $71,000, respectively.
(8) ROYALTY AGREEMENTS
ROCHE LICENSE. The Company licenses, on a non-exclusive basis, technology for performing a step in its testing methods from Roche Molecular Systems, Inc. This license relates to a gene amplification process used in almost all genetic testing, and the patent that the Company utilizes expires in mid-2004. In exchange for the license, the Company agreed to pay Roche a royalty based on net revenues received from tests using the Company's technologies.
GENZYME LICENSE. The Company licenses, on a non-exclusive basis, technology for performing a step in its testing methods from Genzyme Corporation, the exclusive licensee of patents owned by Johns Hopkins University and of which Dr. Vogelstein is an inventor. This license relates to the use of the APC and P53 genes and methodologies related thereto in connection with its products and services and lasts for the life of the patent term of the last licensed Genzyme patent. In exchange for the license, the Company has agreed to pay Genzyme a royalty based on net revenues received from performing the Company's tests and the sale of its reagents and diagnostic test kits, as well as certain milestone payments and maintenance fees.
(9) EMPLOYEE BENEFIT PLAN
The Company maintains a qualified 401(k) retirement savings plan (the 401(k) Plan) covering all employees. Under the 401(k) Plan, the participants may elect to defer a portion of their compensation, subject to certain limitations. Company matching contributions may be made at the discretion of the Board of Directors. There have been no discretionary contributions made by the Company to the 401(k) Plan to date.
(10) 2000 STOCK OPTION AND INCENTIVE PLAN
The Company adopted the 2000 Stock Option and Incentive Plan (the 2000 Option Plan) on October 17, 2000. A total of 1,000,000 shares of common stock have been authorized and reserved for issuance under the 2000 Option Plan. The 2000 Option Plan provides that the number of shares
EXACT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(10) 2000 STOCK OPTION AND INCENTIVE PLAN (CONTINUED) authorized for issuance will automatically increase on each January 1 by the greater of 5% of the outstanding number of shares of common stock on the preceding December 31 or that number of shares underlying option awards issued during the one-year period prior to such January 1, or such lesser number as may be approved by the Board of Directors. Under the terms of the 2000 Option Plan, the Company is authorized to grant incentive stock options as defined under the Code, non-qualified options, stock awards or opportunities to make direct purchases of common stock to employees, officers, directors, consultants and advisors.
The 2000 Option Plan is administered by the compensation committee of the Board of Directors, which selects the individuals to whom equity-based awards will be granted and determines the option exercise price and other terms of each award, subject to the provisions of the 2000 Option Plan. The 2000 Option Plan provides that upon an acquisition, all options to purchase common stock will accelerate by a period of one year. In addition, upon the termination of an employee without cause or for good reason prior to the first anniversary of the completion of the acquisition, all options then outstanding under the 2000 Option Plan held by that employee will immediately become exercisable. To date, no options have been granted under the 2000 Option Plan.
(11) 2000 EMPLOYEE STOCK PURCHASE PLAN
The 2000 Employee Stock Purchase Plan (the 2000 Purchase Plan) was adopted on October 17, 2000. The 2000 Purchase Plan provides for the issuance of up to an aggregate of 300,000 shares of common stock to participating employees. The 2000 Purchase Plan provides that the number of shares authorized for issuance will automatically increase on each February 1 by the greater of 0.75% of the outstanding number of shares of common stock on the immediately preceding December 31 or that number of shares issued during the one-year period prior to such February 1, or such lesser number as may be approved by the Board of Directors.
The 2000 Purchase Plan is administered by the compensation committee of the Board of Directors. Generally, all employees who have completed three months of employment and whose customary employment is more than 20 hours per week and for more than five months in any calendar year are eligible to participate in the 2000 Purchase Plan. The right to purchase common stock under the 2000 Purchase Plan will be made available through a series of offerings. Participating employees will be required to authorize an amount, between 1% and 10% of the employee's compensation, to be deducted from the employee's pay during the offering period. On the last day of the offering period, the employee will be deemed to have exercised the option, at the option exercise price, to the extent of accumulated payroll deductions. Under the terms of the 2000 Purchase Plan, the option exercise price is an amount equal to 85% of the fair market value of one share of common stock on either the first or last day of the offering period, whichever is lower. No employee may be granted an option that would permit the employee's rights to purchase common stock to accrue in excess of $25,300 in any calendar year. The first offering period under the 2000 Purchase Plan will commence on the date the shares issued in connection with the Company's proposed initial public offering of its common stock are sold to the underwriters and continues through July 31, 2001. Thereafter, the offering periods will begin on each February 1 and August 1. Options granted under the 2000 Purchase Plan terminate upon an employee's voluntary withdrawal from the plan at any time or upon termination of employment.
EXACT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(12) ACCRUED EXPENSES
Accrued expenses at December 31, 1998 and 1999 and June 30, 2000 consisted of the following:
DECEMBER 31,
------------------- JUNE 30,
1998 1999 2000
-------- -------- --------
Payroll and payroll-related................... $ 83,000 $ 47,000 $ 17,000
Professional fees............................. 43,070 48,265 62,140
Consulting.................................... 30,000 20,000 45,000
Travel and entertainment...................... 25,000 6,800 6,800
Research...................................... 30,000 -- 40,000
Occupancy..................................... 1,000 19,500 45,000
Other......................................... 11,417 5,428 3,025
-------- -------- --------
$223,487 $146,993 $218,965
======== ======== ========
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Through and including (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
SHARES
[LOGO]
COMMON STOCK
MERRILL LYNCH & CO.
CIBC WORLD MARKETS
THOMAS WEISEL PARTNERS LLC
, 2000
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these securities and it is
not soliciting an offer to buy these securities in any state where the offer or
sale is not permitted.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED OCTOBER 27, 2000
P_R_O_S_P_E_C_T_U_S
SHARES
[LOGO]
COMMON STOCK
This is EXACT's initial public offering of common stock. EXACT is selling all of the shares of common stock. The international managers are offering shares outside the U.S. and Canada and the U.S. underwriters are offering shares in the U.S. and Canada.
We expect the public offering price to be between $ and $ per share. Currently, no public market exists for the shares. After pricing of the offering, we expect that the shares will be quoted on the Nasdaq National Market under the symbol "EXAX."
INVESTING IN OUR COMMON STOCK INVOLVES RISKS THAT ARE DESCRIBED IN THE
"RISK FACTORS" SECTION BEGINNING ON PAGE 4 OF THIS PROSPECTUS.
PER SHARE TOTAL
--------- -----
Public offering price....................................... $ $
Underwriting discount....................................... $ $
Proceeds, before expenses, to EXACT......................... $ $
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The international managers may also purchase up to an additional shares from EXACT at the public offering price, less the underwriting discount, within 30 days from the date of this prospectus to cover over-allotments. The U.S. underwriters may similarly purchase up to an additional shares from EXACT.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The shares will be ready for delivery on or about , 2000.
------------------
MERRILL LYNCH INTERNATIONAL
CIBC WORLD MARKETS
THOMAS WEISEL PARTNERS LLC
-----------
The date of this prospectus is , 2000.
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UNDERWRITING
We intend to offer the shares outside the U.S. and Canada through the international managers and in the U.S. and Canada through the U.S. underwriters. Merrill Lynch International, CIBC World Markets plc and Thomas Weisel Partners LLC are acting as lead managers for the international managers named below. Subject to the terms and conditions described in an international purchase agreement among us and the international managers, and concurrently with the sale of shares of common stock to the U.S. underwriters, we have agreed to sell to the international managers, and the international managers severally have agreed to purchase from us, the number of shares of common stock set forth opposite their names below.
NUMBER
INTERNATIONAL MANAGER OF SHARES
--------------------- ---------
Merrill Lynch International..............................................
CIBC World Markets plc...................................................
Thomas Weisel Partners LLC...............................................
-------
Total.......................................................
=======
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We have also entered into a U.S. purchase agreement with the U.S. underwriters, for whom Merrill Lynch, Pierce, Fenner & Smith Incorporated, CIBC World Markets and Thomas Weisel Partners LLC are acting as U.S. representatives, for sale of the shares in the U.S. and Canada. Subject to the terms and conditions set forth in the U.S. purchase agreement, and concurrently with the sale of shares to the international managers pursuant to the international purchase agreement, we have agreed to sell to the U.S. underwriters, and the U.S. underwriters severally have agreed to purchase from us, an aggregate of shares. The initial public offering price per share and the underwriting discount per share are identical under the international purchase agreement and the U.S. purchase agreement.
The international managers and the U.S. underwriters have agreed to purchase all of the shares sold under the international and U.S. purchase agreements if any of these shares are purchased. If an underwriter defaults, the international and U.S. purchase agreements provide that the purchase commitments of the nondefaulting underwriters may be increased or the purchase agreements may be terminated. The closings for the sale of shares to be purchased by the international managers and the U.S. underwriters are conditioned on one another.
We have agreed to indemnify the international managers and the U.S. underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the international managers and U.S. underwriters may be required to make in respect of those liabilities.
The underwriters are offering the shares, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel, including the validity of the shares, and other conditions contained in the purchase agreements, such as the receipt by the underwriters of officer's certificates and legal opinions. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.
Thomas Weisel Partners LLC, one of the lead managers for the international managers, was organized and registered as a broker-dealer in December 1998. Since December 1998, Thomas Weisel Partners has been named as a lead or co-manager on 146 completed transactions and has acted as a syndicate member in an additional 128 public offering of equity securities. Thomas Weisel Partners does not have any material relationship with us or any of our officers, directors or other controlling persons, except with respect to its contractual relationship with us under the international purchase agreement entered into in connection with this offering.
COMMISSIONS AND DISCOUNTS
The lead managers have advised us that the international managers propose initially to offer the shares to the public at the initial public offering price on the cover page of this prospectus and to
dealers at that price less a concession not in excess of $ per share of common stock. The international managers may allow, and such dealers may reallow, a discount not in excess of $ per share of common stock on sales to certain other dealers. After the initial public offering, the public offering price, concession and discount may be changed.
The following table shows the public offering price, underwriting discount and proceeds before expenses to EXACT. The information assumes either no exercise or full exercise by the international managers and the U.S. underwriters of their over-allotment options.
PER SHARE WITHOUT OPTION WITH OPTION
--------- -------------- -----------
Public offering price............................. $ $ $
Underwriting discount............................. $ $ $
Proceeds, before expenses, to EXACT............... $ $ $
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The expenses of the offering, not including the underwriting discount, are estimated at $ and are payable by us.
OVER-ALLOTMENT OPTION
We have granted an option to the international managers to purchase up to additional shares at the public offering price less the underwriting discount. The international managers may exercise this option for 30 days from the date of this prospectus solely to cover any over-allotments. If the international managers exercise this option, each will be obligated, subject to conditions contained in the purchase agreements, to purchase a number of additional shares proportionate to such international manager's initial amount reflected in the table above.
We have also granted an option to the U.S. underwriters, exercisable for 30 days from the date of this prospectus, to purchase up to an aggregate of additional shares to cover any over-allotments on terms similar to that granted to the international managers.
INTERSYNDICATE AGREEMENT
The international managers and the U.S. underwriters have entered into an intersyndicate agreement that provides for the coordination of their activities. Under the intersyndicate agreement, the international managers and the U.S. underwriters may sell shares to each other for purposes of resale at the initial public offering price, less an amount not greater than the selling concession. Under the intersyndicate agreement, the international managers and any dealer to whom they sell shares will not offer to sell or sell shares to persons who are U.S. or Canadian persons or to persons they believe intend to resell to persons who are U.S. or Canadian persons, except in the case of transactions under the intersyndicate agreement. Similarly, the U.S. underwriters and any dealer to whom they sell shares will not offer to sell or sell shares to non-U.S. persons or non-Canadian persons or to persons they believe intend to resell to non-U.S. or non-Canadian persons, except in the case of transactions under the intersyndicate agreement.
RESERVED SHARES
At our request, the underwriters have reserved for sale, at the initial public offering price, up to shares offered by this prospectus for sale to some of our directors, officers, employees and business associates. If these persons purchase reserved shares, this will reduce the number of shares available for sale to the general public. Any reserved shares that are not orally confirmed for purchase within one day of the pricing of this offering will be offered by the underwriters to the general public on the same terms as the other shares offered by this prospectus.
NO SALES OF SIMILAR SECURITIES
We and our executive officers and directors and most of our existing stockholders have agreed, with limited exceptions, not to sell or transfer any common stock for 180 days after the date of this
prospectus without first obtaining the written consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated. Specifically, we and the above-named individuals have agreed not to directly or indirectly
- offer, pledge, sell or contract to sell any common stock;
- sell any option or contract to purchase any common stock;
- purchase any option or contract to sell any common stock;
- grant any option, right or warrant for the sale of any common stock;
- lend or otherwise dispose of or transfer any common stock;
- request or demand that we file a registration statement related to any common stock; or
- enter into any swap or other agreement that transfers, in whole or in part, the economic consequence of ownership of any common stock whether any such swap or transaction is to be settled by delivery of shares or other securities, in cash or otherwise.
This lock-up provision applies to common stock and to securities convertible into or exchangeable or exercisable for or repayable with common stock. It also applies to common stock owned now or acquired later by the person executing the agreement or for which the person executing the agreement later acquires the power of disposition.
QUOTATION ON THE NASDAQ NATIONAL MARKET
We expect the shares to be approved for quotation on The Nasdaq National Market, subject to notice of issuance, under the symbol EXAX.
Before this offering, there has been no public market for our common stock. The initial public offering price will be determined through negotiations among us, the U.S. representatives and lead managers. In addition to prevailing market conditions, the primary factors to be considered in determining the initial public offering price are
- the valuation multiples of publicly traded companies that the U.S. representatives and the lead managers believe to be comparable to us;
- our financial information;
- the history of, and the prospects for, our company and the industry in which we compete;
- an assessment of our management, its past and present operations, and the prospects for, and timing of, our future revenues;
- the present state of our development; and
- the above factors in relation to market values and various valuation measures of other companies engaged in activities similar to ours.
An active trading market for the shares may not develop. It is also possible that after the offering the shares will not trade in the public market at or above the initial public offering price.
The underwriters do not expect to sell more than 5% of the shares in the aggregate to accounts over which they exercise discretionary authority.
PRICE STABILIZATION, SHORT POSITIONS AND PENALTY BIDS
Until the distribution of the common stock is completed, SEC rules may limit the underwriters from bidding for or purchasing our common stock. However, the representatives may engage in transactions that stabilize the price of the common shares, such as bids or purchases that peg, fix or maintain that price.
The underwriters may purchase and sell the common shares in the open market. These transactions may include short sales, stabilizing transactions and purchases to cover positions created by short sales. Short sales involve the sale by the underwriters of a greater number of shares than they are required to purchase in the offering. "Covered" short sale are sales made in an amount not greater than the underwriters' option to purchase additional shares from the issuer in the offering. The underwriters may close out any covered short position by either exercising their option to purchase additional shares or purchasing shares in the open market. In determining the source of shares to close out the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option. "Naked" short sales are any sales in excess of such option. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common shares in the open market after pricing that could adversely affect investors who purchase in the offering. Stabilizing transactions consist of various bids for or purchases of common shares made by the underwriters in the open market prior to the completion of the offering.
The underwriters may also impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the representatives have repurchased shares sold by or for the account of such underwriter in stabilizing or short covering transactions.
Similar to other purchase transactions, the underwriters' purchases to cover the syndicate short sales may have the effect of raising or maintaining the market price of the common shares or preventing or retarding a decline in the market price of the common shares. As a result, the price of the common shares may be higher than the price that might otherwise exist in the open market.
Neither we nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the common shares. In addition, neither we nor any of the representatives make any representation that the representatives will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.
UK SELLING RESTRICTIONS
Each international manager has agreed that
- it has not offered or sold and will not offer or sell any shares of shares of our common stock to persons in the United Kingdom, except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which do not constitute an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995;
- it has complied and will comply with all applicable provisions of the Financial Services Act 1986 with respect to anything done by it in relation to the common stock in, from or otherwise involving the United Kingdom; and
- it has only issued or passed on and will only issue or pass on in the United Kingdom any document received by it in connection with the issuance of common stock to a person who is of
a kind described in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996 as amended by the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1997 or is a person to whom such document may otherwise lawfully be issued or passed on.
NO PUBLIC OFFERING OUTSIDE THE UNITED STATES
No action has been or will be taken in any jurisdiction (except in the United States) that would permit a public offering of the shares of common stock, or the possession, circulation or distribution of this prospectus or any other material relating to us or shares of our common stock in any jurisdiction where action for that purpose is required. Accordingly, the shares of our common stock may not be offered or sold, directly or indirectly, and neither this prospectus nor any other offering material or advertisements in connection with the shares of our common stock may be distributed or published, in or from any country or jurisdiction except in compliance with any applicable rules and regulations of that country or jurisdiction.
You may be required to pay stamp taxes and other charges in accordance with the laws and practices of the country of purchase in addition to the offering price on the cover of this prospectus.
OTHER RELATIONSHIPS
Certain of the U.S. underwriters have from time to time provided investment banking financial advisory services to us and our affiliates, for which they have received customary compensation, and may continue to do so in the future.
Through and including (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
SHARES
[LOGO]
COMMON STOCK
MERRILL LYNCH INTERNATIONAL
CIBC WORLD MARKETS
THOMAS WEISEL PARTNERS LLC
, 2000
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Estimated expenses (other than the underwriting discount and commissions) payable in connection with the sale of the common stock offered hereby are as follows:
SEC registration fee........................................ $ 18,216
NASD filing fee............................................. 7,400
Nasdaq National Market listing fee.......................... *
Printing and engraving expenses............................. 150,000
Legal fees and expenses..................................... 400,000
Accounting fees and expenses................................ 250,000
Blue Sky fees and expenses (including legal fees)........... 15,000
Transfer agent and registrar fees and expenses.............. 15,000
Miscellaneous............................................... 10,000
--------
Total..................................................... $ *
========
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* To be filed by amendment.
The Company will bear all expenses shown above.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Delaware General Corporation law and the Company's certificate of incorporation and by-laws provide for indemnification of the Company's directors and officers for liabilities and expenses that they may incur in such capacities. In general directors and officers are indemnified with respect to actions taken in good faith in a manner reasonably believed to be in, or not opposed to, the best interests of the Company and, with respect to any criminal action or proceeding, actions that the indemnitee had no reasonable cause to believe were unlawful. Reference is made to the Company's charter and by-laws filed as Exhibits 3.1, 3.2, 3.3 and 3.4 hereto, respectively.
The Purchase Agreement and the International Purchase Agreement provide that the Underwriters are obligated, under certain circumstances, to indemnify directors, officers and controlling persons of Exact against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the "Securities Act"). Reference is made to the forms of Purchase Agreement and International Purchase Agreement filed as Exhibits 1.1 and 1.2 hereto.
In addition, the Company has an existing directors and officers liability insurance policy.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In the three years preceding the filing of this registration statement, the Company has issued the following securities that were not registered under the Securities Act:
In November 1997, the Company sold an aggregate of 25,000 shares of common stock to one investor at a price of $.40 per share.
In February 1998, the Company sold an aggregate of 20,000 shares of common stock to one investor at a price of $.40 per share.
In March 1998, the Company sold an aggregate of 1,007,186 shares of Series C convertible preferred stock to 17 investors at a price of $10.50 per share.
II-1
In March 2000, the Company sold an aggregate of 17,500 shares of common stock to one investor at a price of $1.05 per share.
In April 2000, the Company sold an aggregate of 1,417,534 shares of Series D convertible preferred stock to 75 investors at a price of $22.50 per share.
As of September 30, 2000, the Company had granted options to purchase an aggregate of 1,118,076 shares of common stock under its 1995 stock option plan, of which 605,687 have been exercised at exercise prices ranging from $.12 to $5.625 for an aggregate purchase price of $828,423.33.
No underwriters were involved in the foregoing sales of securities. Such sales were made in reliance upon an exemption from the registration provisions of the Act set forth in Section 4(2) thereof relative to sales by an issuer not involving any public offering or the rules and regulations thereunder, or, in the case of options to purchase common stock, Rule 701 of the Act. All of the foregoing securities are deemed restricted securities for the purposes of the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS
(a) EXHIBITS:
EXHIBIT
NUMBER DESCRIPTION
------- -----------
1.1 Form of Purchase Agreement
1.2 Form of International Purchase Agreement
3.1* Fifth Amended and Restated Certificate of Incorporation, as
amended, of Registrant
3.2* By-Laws of Registrant
3.3* Form of Sixth Amended and Restated Certificate of
Incorporation of the Registrant to become effective upon the
closing of the offering under this Registration Statement
3.4* Form of Amended and Restated By-Laws of the Registrant to
become effective upon the closing of the offering under this
Registration Statement
4.1 Specimen certificate representing the Registrant's Common
Stock
5.1 Opinion of Testa, Hurwitz & Thibeault, LLP regarding the
legality of the securities being issued
10.1*+ 1995 Stock Option Plan
10.2*+ 2000 Stock Option and Incentive Plan
10.3*+ 2000 Employee Stock Purchase Plan
10.4* Sixth Amended and Restated Registration Rights Agreement
between the Registrant and the parties named therein dated
as of April 7, 2000
10.5*+ Restricted Stock Purchase Agreement between the Registrant
and Stanley N. Lapidus dated February 11, 1998
10.6*+ Restricted Stock Purchase Agreement between the Registrant
and Stanley N. Lapidus dated as of March 31, 2000
10.7*+ Restricted Stock Purchase Agreement between the Registrant
and Don M. Hardison dated as of June 23, 2000
10.8*+ Secured Promissory Note between the Registrant and Stanley
N. Lapidus dated as of March 31, 2000
10.9*+ Pledge Agreement between the Registrant and Stanley N.
Lapidus dated March 31, 2000
10.10*+ Secured Promissory Note between the Registrant and Don M.
Hardison dated as of June 23, 2000
|
II-2
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.11* Lease Agreement, dated December 10, 1996, between C.B.
Realty Limited Partnership and the Registrant, as amended
10.12@ License Agreement between the Registrant and Genzyme
Corporation dated as of March 25, 1999
10.13@ PCR Diagnostic Services Agreement between the Registrant and
Roche Molecular Systems, Inc.
23.1* Consent of Arthur Andersen LLP
23.2 Consent of Testa, Hurwitz & Thibeault, LLP (included in
Exhibit 5.1)
24.1* Power of Attorney (included on signature page of
Registration Statement)
27.1* Financial Data Schedule (EDGAR version only)
|
* Filed herewith.
+ Indicates a management contract or any compensatory plan, contract or arrangement.
@ Confidential Treatment requested for certain portions of this Agreement.
(b) FINANCIAL STATEMENTS SCHEDULES:
All schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Act may be permitted to directors, officers and controlling persons of the registrant pursuant to provisions described in Item 14 above, 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 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 a registration statement in reliance upon Rule 430A and contained in the form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(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-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Boston, Massachusetts, on the 27th day of October 2000.
EXACT CORPORATION
By: /s/ STANLEY N. LAPIDUS
-----------------------------------------
Stanley N. Lapidus
CHAIRMAN
|
We, the undersigned officers and directors of Exact Corporation, hereby severally constitute and appoint Stanley N. Lapidus, Don M. Hardison and John A. McCarthy Jr., and each of them singly, our true and lawful attorneys, with full power to them and each of them singly, to sign for us in our names in the capacities indicated below, all pre-effective and post-effective amendments to this registration statement and any related subsequent registration statement pursuant to Rule 462(b) of the Securities Act of 1933, as amended, and generally to do all things in our names and on our behalf in such capacities to enable Exact Corporation to comply with the provisions of the Securities Act of 1933, as amended, and all requirements of the Securities and Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons on behalf of the registrant in the capacities and on the dates indicated.
SIGNATURE TITLE(S) DATE
--------- -------- ----
/s/ STANLEY N. LAPIDUS
--------------------------------- Chairman of the Board and Director October 27, 2000
Stanley N. Lapidus (PRINCIPAL EXECUTIVE OFFICER)
/s/ DON M. HARDISON
--------------------------------- President and Director October 27, 2000
Don M. Hardison
/s/ JOHN A. MCCARTHY, JR. Vice President and Chief Financial
--------------------------------- Officer (PRINCIPAL FINANCIAL AND October 27, 2000
John A. McCarthy, Jr. ACCOUNTING OFFICER)
/s/ NOUBAR B. AFEYAN
--------------------------------- Director October 27, 2000
Noubar B. Afeyan
/s/ RICHARD W. BARKER
--------------------------------- Director October 27, 2000
Richard W. Barker
/s/ SALLY W. CRAWFORD
--------------------------------- Director October 27, 2000
Sally W. Crawford
/s/ WYCLIFFE K. GROUSBECK
--------------------------------- Director October 27, 2000
Wycliffe K. Grousbeck
/s/ WILLIAM W. HELMAN
--------------------------------- Director October 27, 2000
William W. Helman
/s/ EDWIN M. KANIA, JR.
--------------------------------- Director October 27, 2000
Edwin M. Kania, Jr.
/s/ LANCE WILLSEY
--------------------------------- Director October 27, 2000
Lance Willsey
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II-4
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- -----------
1.1 Form of Purchase Agreement
1.2 Form of International Purchase Agreement
3.1* Fifth Amended and Restated Certificate of Incorporation, as
amended, of Registrant
3.2* By-Laws of Registrant
3.3* Form of Sixth Amended and Restated Certificate of
Incorporation of the Registrant to become effective upon the
closing of the offering under this Registration Statement
3.4* Form of Amended and Restated By-Laws of the Registrant to
become effective upon the closing of the offering under this
Registration Statement
4.1 Specimen certificate representing the Registrant's Common
Stock
5.1 Opinion of Testa, Hurwitz & Thibeault, LLP regarding the
legality of the securities being issued
10.1*+ 1995 Stock Option Plan
10.2*+ 2000 Stock Option and Incentive Plan
10.3*+ 2000 Employee Stock Purchase Plan
10.4* Sixth Amended and Restated Registration Rights Agreement
between the Registrant and the parties named therein dated
as of April 7, 2000
10.5*+ Restricted Stock Purchase Agreement between the Registrant
and Stanley N. Lapidus dated February 11, 1998
10.6*+ Restricted Stock Purchase Agreement between the Registrant
and Stanley N. Lapidus dated as of March 31, 2000
10.7*+ Restricted Stock Purchase Agreement between the Registrant
and Don M. Hardison dated as of June 23, 2000
10.8*+ Secured Promissory Note between the Registrant and Stanley
N. Lapidus dated as of March 31, 2000
10.9*+ Pledge Agreement between the Registrant and Stanley N.
Lapidus dated March 31, 2000
10.10*+ Secured Promissory Note between the Registrant and Don M.
Hardison dated as of June 23, 2000
10.11* Lease Agreement, dated December 10, 1996, between C.B.
Realty Limited Partnership and the Registrant, as amended
10.12@ License Agreement between the Registrant and Genzyme
Corporation dated as of March 25, 1999
10.13@ PCR Diagnostic Services Agreement between the Registrant and
Roche Molecular Systems, Inc.
23.1* Consent of Arthur Andersen LLP
23.2 Consent of Testa, Hurwitz & Thibeault, LLP (included in
Exhibit 5.1)
24.1* Power of Attorney (included on signature page of
Registration Statement)
27.1* Financial Data Schedule (EDGAR version only)
|
* Filed herewith.
+ Indicates a management contract or any compensatory plan, contract or arrangement.
@ Confidential Treatment requested for certain portions of this Agreement
Exhibit 3.1
CERTIFICATE OF AMENDMENT
OF THE
FIFTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
EXACT CORPORATION
Exact Corporation, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the "Corporation") DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of Exact Corporation (the "Corporation") at a meeting of the Board of Directors, by at least a majority of its members, duly adopted resolutions in accordance with Section 242 of the General Corporation Law of the State of Delaware, (i) proposing an amendment to the Fifth Amended and Restated Certificate of Incorporation, as amended, (ii) declaring such amendment to be advisable and in the best interests of the Corporation, and (iii) directing that such amendment be submitted to the stockholders of the Corporation for approval thereby. The resolutions setting forth the amendment and directing that such amendment be submitted to the stockholders are as follows:
RESOLVED: That, subject to stockholder approval, the first paragraph
of Article FOURTH (the "CERTIFICATE OF INCORPORATION") of
the Corporation's Fifth Amended and Restated Certificate of
Incorporation, as amended, be further amended by deleting
such paragraph in its entirety and replacing it with the
following:
"FOURTH: The total number of shares of all classes
of capital stock which the Corporation shall have
authority to issue is 104,700,373 shares,
consisting of 100,000,000 shares of Common Stock
with a par value of $.01 per share (the "Common
Stock") and 4,700,373 shares of Preferred Stock
with a par value of $.01 per share, (the "Preferred
Stock"), of which 1,000,000 shares are designated
as Series A Convertible Preferred Stock, 1,250,000
shares are designated as Series B Convertible
Preferred Stock, 1,015,000 shares are designated as
Series C Convertible Preferred Stock and 1,435,373
shares are designate as Series D Convertible
Preferred Stock."
RESOLVED: That the proposal to amend the Certificate of
Incorporation, as set forth in the preceding resolution,
be submitted to the Stockholders of the Corporation
entitled to vote thereon for their approval in compliance
with Sections 228 and 242 of the General Corporation Law
of the State of Delaware.
|
RESOLVED: That, subject to the approval by the Stockholders of the
proposal to amend the Certificate of Incorporation as
described in the foregoing resolution, the Secretary
hereby is, authorized and directed to amend the
Certificate of Incorporation as set forth above and to
file such amendment with the Secretary of State of the
State of Delaware.
SECOND: That stockholders of the Corporation holding the necessary
|
number of shares of the outstanding capital stock of the Corporation as required by statute and the Certificate of Incorporation of the Corporation approved said amendment by written consent effective October __, 2000, in accordance with Sections 228 and 242 of the General Corporation Law of the State of Delaware and written notice of such action by written consent of stockholders has been given in accordance with said Section 228.
THIRD: That the aforesaid amendment was duly adopted in accordance with the applicable provisions of Section 242 of the General Corporation Law of the State of Delaware.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, said Exact Corporation has caused this certificate to be executed by Stanley N. Lapidus, its Secretary, on this 20th day of October 2000.
EXACT CORPORATION
By: /s/ Stanley N. Lapidus
----------------------
Stanley N. Lapidus
Secretary
|
Exhibit 3.2
BY-LAWS OF
EXACT LABORATORIES, INC.
(FORMERLY LAPIDUS MEDICAL SYSTEMS, INC.)
A DELAWARE CORPORATION
Dated: February 10, 1995
Table of Contents
PAGE
Article I. Meetings of Stockholders
Section 1. Place of Meetings 1
Section 2. Annual Meeting 1
Section 3. Special Meetings 1
Section 4. Notice of Meetings 1
Section 5. Voting List 1
Section 6. Quorum 2
Section 7. Adjournments 2
Section 8. Action at Meetings 2
Section 9. Voting and Proxies 3
Section 10. Action Without Meeting 3
Article II. Directors
Section 1. Number, Election, Tenure and
Qualification 3
Section 2. Enlargement 3
Section 3. Vacancies 3
Section 4. Resignation and Removal 4
Section 5. General Powers 4
Section 6. Chairman of the Board 4
Section 7. Place of Meetings 4
Section 8. Regular Meetings 4
Section 9. Special Meetings 4
Section 10. Quorum, Action at Meeting, Adjournment 4
Section 11. Action by Consent 5
Section 12. Telephonic Meetings 5
Section 13. Committees 5
Section 14. Compensation 5
Article III. Officers
Section 1. Enumeration 6
Section 2. Election 6
Section 3. Tenure 6
Section 4. President 6
Section 5. Vice-Presidents 6
Section 6. Secretary 7
Section 7. Assistant Secretaries 7
Section 8. Treasurer 7
Section 9. Assistant Treasurers 7
Section 10. Bond 8
|
Article IV. Notices
Section 1. Delivery 8
Section 2. Waiver of Notice 8
Article V. Indemnification
Section 1. Actions other than by or in the Right of
the Corporation 8
Section 2. Actions by or in the Right of the
Corporation 9
Section 3. Success on the Merits 9
Section 4. Specific Authorization 9
Section 5. Advance Payment 9
Section 6. Non-Exclusivity 10
Section 7. Insurance 10
Section 8. Continuation of Indemnification
and Advancement of Expenses 10
Section 9. Severability 10
Section 10. Intent of Article 10
Article VI. Capital Stock
Section 1. Certificates of Stock 10
Section 2. Lost Certificates 11
Section 3. Transfer of Stock 11
Section 4. Record Date 11
Section 5. Registered Stockholders 12
Article VII. Certain Transactions
Section 1. Transactions with Interested Parties 12
Section 2. Quorum 12
Article VIII. General Provisions
Section 1. Dividends 13
Section 2. Reserves 13
Section 3. Checks 13
Section 4. Fiscal Year 13
Section 5. Seal 13
Article IX. Amendments 13
Addendum
Register of Amendments to the By-laws
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LAPIDUS MEDICAL SYSTEMS, INC.
* * * * *
BY-LAWS
* * * * *
ARTICLE I
MEETINGS OF STOCKHOLDERS
Section 1. PLACE OF MEETINGS. All meetings of the stockholders shall be held at such place within or without the State of Delaware as may be fixed from time to time by the board of directors or the chief executive officer, or if not so designated, at the registered office of the corporation.
Section 2. ANNUAL MEETING. Annual meetings of stockholders shall be held on the Second Tuesday in May in each year if not a legal holiday, and if a legal holiday, then on the next secular day following, at 10:00 a.m., or at such other date and time as shall be designated from time to time by the board of directors or the chief executive officer, at which meeting the stockholders shall elect by a plurality vote a board of directors and shall transact such other business as may properly be brought before the meeting. If no annual meeting is held in accordance with the foregoing provisions, the board of directors shall cause the meeting to be held as soon thereafter as convenient, which meeting shall be designated a special meeting in lieu of annual meeting.
Section 3. SPECIAL MEETINGS. Special meetings of the stockholders, for any purpose or purposes, may, unless otherwise prescribed by statute or by the certificate of incorporation, be called by the board of directors or the chief executive officer and shall be called by the chief executive officer or secretary at the request in writing of a majority of the board of directors, or at the request in writing of stockholders owning a MAJORITY IN amount of the entire capital stock of the corporation issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting. Business transacted at any special meeting shall be limited to matters relating to the purpose or purposes stated in the notice of meeting.
Section 4. NOTICE OF MEETINGS. Except as otherwise provided by law, written notice of each meeting of stockholders, annual or special, stating the place, date and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be given not less than ten or more than sixty days before the date of the meeting, to each stockholder entitled to vote at such meeting.
Section 5. VOTING LIST. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city or
town where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.
Section 6. QUORUM. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business, except as otherwise provided by statute, the certificate of incorporation or these by-laws. Where a separate vote by a class or classes is required, a majority of the outstanding shares of such class or classes, present in person or represented by proxy, shall constitute a quorum entitled to take action with respect to that vote on that matter. If no quorum shall be present or represented at any meeting of stockholders, such meeting may be adjourned in accordance with Section 7 hereof, until a quorum shall be present or represented.
Section 7. ADJOURNMENTS. Any meeting of stockholders may be adjourned from time to time to any other time and to any other place at which a meeting of stockholders may be held under these by-laws, which time and place shall be announced at the meeting, by a majority of the stockholders present in person or represented by proxy at the meeting and entitled to vote, (whether or not a quorum is present), or, if no stockholder is present or represented by proxy, by any officer entitled to preside at or to act as secretary of such meeting, without notice other than announcement at the meeting. At such adjourned meeting, any business may be transacted which might have been transacted at the original meeting. If any meeting of stockholders at which a quorum is present or represented is adjourned, then, at such adjourned meeting, any business may be transacted that might have been transacted at the original meeting, whether or not a quorum shall be present or represented at such adjourned meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.
Section 8. ACTION AT MEETINGS. When a quorum is present at any meeting, the affirmative vote of the holders of a majority of the stock present in person or represented by proxy, entitled to vote and voting on the matter (or where a separate vote by a class or classes is required, the affirmative vote of the majority of shares of such class or classes present in person or represented by proxy at the meeting) shall decide any matter (other than the election of directors) brought before such meeting, unless the matter is one upon which by express provision of law, the certificate of incorporation or these by-laws, a different vote is required, in which case such express provision shall govern and control the decision of such matter. The stock of holders who abstain from voting on any matter shall be deemed not to have been voted on such matter. Directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting, entitled to vote and voting on the election of directors.
Section 9. VOTING AND PROXIES. Unless otherwise provided in the certificate of incorporation, each stockholder shall at every meeting of the stockholders be entitled to one vote for each share of capital stock having voting power held of record by such stockholder. Each stockholder entitled to vote at a meeting of stockholders, or to express consent or dissent to corporate action in writing without a meeting, may authorize another person or persons to act for him by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period.
Section 10. ACTION WITHOUT MEETING. Any action required to be taken at any annual or special meeting of stockholders, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent
or consents in writing, setting forth the action so taken, shall be (1) signed
and dated by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted and
(2) delivered to the corporation within sixty days of the earliest dated consent
by delivery to its registered office in the State of Delaware (in which case
delivery shall be by hand or by certified or registered mail, return receipt
requested), its principal place of business, or an officer or agent of the
corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
ARTICLE II
DIRECTORS
Section 1. NUMBER, ELECTION, TENURE AND QUALIFICATION. The number of
directors which shall constitute the whole board shall be not less than one.
Within such limit, the number of directors shall be determined by resolution of
the board of directors or by the stockholders at the annual meeting or at any
special meeting of stockholders. The directors shall be elected at the annual
meeting or at any special meeting of the stockholders, except as provided in
Section 3 of this Article, and each director elected shall hold office until his
successor is elected and qualified, unless sooner displaced. Directors need not
be stockholders.
Section 2. ENLARGEMENT. The number of the board of directors may be increased at any time by vote of a majority of the directors then in office.
Section 3. VACANCIES. Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and shall qualify, unless sooner displaced. If there are no directors in office, then an election of directors may be held in the manner provided by statute. In the event of a vacancy in the board of directors, the remaining directors, except as otherwise provided by law or these by-laws, may exercise the powers of the full board until the vacancy is filled.
Section 4. RESIGNATION AND REMOVAL. Any director may resign at any time upon written notice to the corporation at its principal place of business or to the chief executive officer or secretary. Such resignation shall be effective upon receipt unless it is specified to be effective at some other time or upon the happening of some other event. Any director or the entire board of directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors, unless otherwise specified by law or the certificate of incorporation.
Section 5. GENERAL POWERS. The business and affairs of the corporation shall be managed by its board of directors, which may exercise all powers of the corporation and do all such lawful acts and things as are not by statute or by the certificate of incorporation or by these by-laws directed or required to be exercised or done by the stockholders.
Section 6. CHAIRMAN OF THE BOARD. If the board of directors appoints a chairman of the board, he shall, when present, preside at all meetings of the stockholders and the board of directors. He
shall perform such duties and possess such powers as are customarily vested in the office of the chairman of the board or as may be vested in him by the board of directors.
Section 7. PLACE OF MEETINGS. The board of directors may hold meetings, both regular and special, either within or without the State of Delaware.
Section 8. REGULAR MEETINGS. Regular meetings of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by the board; provided that any director who is absent when such a determination is made shall be given prompt notice of such determination. A regular meeting of the board of directors may be held without notice immediately after and at the same place as the annual meeting of stockholders.
Section 9. SPECIAL MEETINGS. Special meetings of the board may be called by the chief executive officer, secretary, or on the written request of two or more directors, or by one director in the event that there is only one director in office. Two days' notice to each director, either personally or by telegram, cable, telecopy, commercial delivery service, telex or similar means sent to his business or home address, or three days' notice by written notice deposited in the mail, shall be given to each director by the secretary or by the officer or one of the directors calling the meeting. A notice or waiver of notice of a meeting of the board of directors need not specify the purposes of the meeting.
Section 10. QUORUM, ACTION AT MEETING, ADJOURNMENTS. At all meetings of the board a majority of directors then in office, but in no event less than one third of the entire board, shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board of directors, except as may be otherwise specifically provided by law or by the certificate of incorporation. For purposes of this section, the term "entire board" shall mean the number of directors last fixed by the stockholders or directors, as the case may be, in accordance with law and these by-laws; provided, however, that if less than all the number so fixed of directors were elected, the "entire board" shall mean the greatest number of directors so elected to hold office at any one time pursuant to such authorization. If a quorum shall not be present at any meeting of the board of directors, a majority of the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.
Section 11. ACTION BY CONSENT. Unless otherwise restricted by the certificate of incorporation or these by-laws, any action required or permitted to be taken at any meeting of the board of directors or of any committee thereof may be taken without a meeting, if all members of the board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the board or committee.
Section 12. TELEPHONIC MEETINGS. Unless otherwise restricted by the certificate of incorporation or these by-laws, members of the board of directors or of any committee thereof may participate in a meeting of the board of directors or of any committee, as the case may be, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.
Section 13. COMMITTEES. The board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, each committee to consist of one or more of the directors of the corporation. The board may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of the committee. Any such committee, to the extent provided in the resolution of the board of directors, shall have and may exercise all the powers and authority of the board of directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the certificate of incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, recommending to the stockholders a dissolution of the corporation or a revocation of a dissolution, or amending the by-laws of the corporation; and, unless the resolution designating such committee or the certificate of incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the board of directors. Each committee shall keep regular minutes of its meetings and make such reports to the board of directors as the board of directors may request. Except as the board of directors may otherwise determine, any committee may make rules for the conduct of its business, but unless otherwise provided by the directors or in such rules, its business shall be conducted as nearly as possible in the same manner as is provided in these by-laws for the conduct of its business by the board of directors.
Section 14. COMPENSATION. Unless otherwise restricted by the certificate of incorporation or these by-laws, the board of directors shall have the authority to fix from time to time the compensation of directors. The directors may be paid their expenses, if any, of attendance at each meeting of the board of directors and the performance of their responsibilities as directors and may be paid a fixed sum for attendance at each meeting of the board of directors and/or a stated salary as director. No such payment shall preclude any director from serving the corporation or its parent or subsidiary corporations in any other capacity and receiving compensation therefor. The board of directors may also allow compensation for members of special or standing committees for service on such committees.
ARTICLE III
OFFICERS
Section 1. ENUMERATION. The officers of the corporation shall be chosen by the board of directors and shall be a president, a secretary and a treasurer and such other officers with such titles, terms of office and duties as the board of directors may from time to time determine, including a chairman of the board, one or more vice-presidents, and one or more assistant secretaries and assistant treasurers. If authorized by resolution of the board of directors, the chief executive officer may be empowered to appoint from time to time assistant secretaries and assistant treasurers. Any number of offices may be held by the same person, unless the certificate of incorporation or these by-laws otherwise provide.
Section 2. ELECTION. The board of directors at its first meeting after each annual meeting of stockholders shall choose a president, a secretary and a treasurer. Other officers may be appointed by the board of directors at such meeting, at any other meeting, or by written consent.
Section 3. TENURE. The officers of the corporation shall hold office until their successors are chosen and qualify, unless a different term is specified in the vote choosing or appointing him, or until his earlier death, resignation or removal. Any officer elected or appointed by the board of directors or by the chief executive officer may be removed at any time, with or without cause, by the affirmative
vote of a majority of the board of directors or a committee duly authorized to do so, except that any officer appointed by the chief executive officer may also be removed at any time, with or without cause, by the chief executive officer. Any vacancy occurring in any office of the corporation may be filled by the board of directors, at its discretion. Any officer may resign by delivering his written resignation to the corporation at its principal place of business or to the chief executive officer or the secretary. Such resignation shall be effective upon receipt unless it is specified to be effective at some other time or upon the happening of some other event.
Section 4. PRESIDENT. The president shall be the chief operating officer of the corporation. He shall also be the chief executive officer unless the board of directors otherwise provides. If no chief executive officer shall have been appointed by the board of directors, all references herein to the "chief executive officer" shall be to the president. The president shall, unless the board of directors provides otherwise in a specific instance or generally, preside at all meetings of the stockholders and the board of directors, have general and active management of the business of the corporation and see that all orders and resolutions of the board of directors are carried into effect. The president shall execute bonds, mortgages, and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation.
Section 5. VICE-PRESIDENTS. In the absence of the president or in the event of his inability or refusal to act, the vice-president, or if there be more than one vice-president, the vice-presidents in the order designated by the board of directors or the chief executive officer (or in the absence of any designation, then in the order determined by their tenure in office) shall perform the duties of the president, and when so acting, shall have all the powers of and be subject to all the restrictions upon the president. The vice-presidents shall perform such other duties and have such other powers as the board of directors or the chief executive officer may from time to time prescribe.
Section 6. SECRETARY. The secretary shall have such powers and perform such duties as are incident to the office of secretary. He shall maintain a stock ledger and prepare lists of stockholders and their addresses as required and shall be the custodian of corporate records. The secretary shall attend all meetings of the board of directors and all meetings of the stockholders and record all the proceedings of the meetings of the corporation and of the board of directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the board of directors, and shall perform such other duties as may be from time to time prescribed by the board of directors or chief executive officer, under whose supervision he shall be. He shall have custody of the corporate seal of the corporation and he, or an assistant secretary, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by his signature or by the signature of such assistant secretary. The board of directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by his signature.
Section 7. ASSISTANT SECRETARIES. The assistant secretary, or if there be more than one, the assistant secretaries in the order determined by the board of directors, the chief executive officer or the secretary (or if there be no such determination, then in the order determined by their tenure in office), shall, in the absence of the secretary or in the event of his inability or refusal to act, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors, the chief executive officer or the secretary may from time to time prescribe. In the absence of the secretary or any assistant secretary at any meeting of stockholders or directors, the
person presiding at the meeting shall designate a temporary or acting secretary to keep a record of the meeting.
Section 8. TREASURER. The treasurer shall perform such duties and shall have such powers as may be assigned to him by the board of directors or the chief executive officer. In addition, the treasurer shall perform such duties and have such powers as are incident to the office of treasurer. The treasurer shall have the custody of the corporate funds and securities and 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 depositories as may be designated by the board of directors. He shall disburse the funds of the corporation as may be ordered by the board of directors, taking proper vouchers for such disbursements, and shall render to the chief executive officer and the board of directors, when the chief executive officer or board of directors so requires, an account of all his transactions as treasurer and of the financial condition of the corporation.
Section 9. ASSISTANT TREASURERS. The assistant treasurer, or if there shall be more than one, the assistant treasurers in the order determined by the board of directors, the chief executive officer or the treasurer (or if there be no such determination, then in the order determined by their tenure in office), shall, in the absence of the treasurer or in the event of his inability or refusal to act, perform the duties and exercise the powers of the treasurer and shall perform such other duties and have such other powers as the board of directors, the chief executive officer or the treasurer may from time to time prescribe.
Section 10. BOND. If required by the board of directors, any officer shall give the corporation a bond in such sum and with such surety or sureties and upon such terms and conditions as shall be satisfactory to the board of directors, including without limitation a bond for the faithful performance of the duties of his office and for the restoration to the corporation of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control and belonging to the corporation.
ARTICLE IV
NOTICES
Section 1. DELIVERY. Whenever, under the provisions of law, or of the certificate of incorporation or these by-laws, written notice is required to be given to any director or stockholder, such notice may be given by mail, addressed to such director or stockholder, at his address as it appears on the records of the corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Unless written notice by mail is required by law, written notice may also be given by telegram, cable, telecopy, commercial delivery service, telex or similar means, addressed to such director or stockholder at his address as it appears on the records of the corporation, in which case such notice shall be deemed to be given when delivered into the control of the persons charged with effecting such transmission, the transmission charge to be paid by the corporation or the person sending such notice and not by the addressee. Oral notice or other in-hand delivery (in person or by telephone) shall be deemed given at the time it is actually given.
Section 2. WAIVER OF NOTICE. Whenever any notice is required to be given under the provisions of law or of the certificate of incorporation or of these by-laws, a waiver thereof in writing,
signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto.
ARTICLE V
INDEMNIFICATION
Section 1. ACTIONS OTHER THAN BY OR IN THE RIGHT OF THE CORPORATION. The corporation shall 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, 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 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 proceedings, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of NOLO CONTENDERE or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 2. ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. The corporation shall 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 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 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 in good faith and in a manner he 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 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 of the State of Delaware or such other court shall deem proper.
Section 3. SUCCESS ON THE MERITS. To the extent that any person described in Section 1 or 2 of this Article V has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in said Sections, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith.
Section 4. SPECIFIC AUTHORIZATION. Any indemnification under Section 1 or 2 of this Article V (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of any person described in said Sections is proper in the circumstances because he has met the applicable standard of conduct set forth in said Sections. Such
determination shall be made (1) by the board of directors by a majority vote of
directors who were not parties to such action, suit or proceeding (even though
less than a quorum), or (2) if there are no disinterested directors or if a
majority of disinterested directors so directs, by independent legal counsel
(who may be regular legal counsel to the corporation) in a written opinion, or
(3) by the stockholders of the corporation.
Section 5. ADVANCE PAYMENT. Expenses incurred in defending a pending or threatened civil or criminal action, suit or proceeding may 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 any person described in said Section to repay such amount if it shall ultimately be determined that he is not entitled to indemnification by the corporation as authorized in this Article V.
Section 6. NON-EXCLUSIVITY. The indemnification and advancement of expenses provided by, or granted pursuant to, the other Sections of this Article V shall not be deemed exclusive of any other rights to which those provided indemnification or advancement of expenses may be entitled under any by-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office.
Section 7. INSURANCE. The board of directors may authorize, by a vote of the majority of the full board, 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 and 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 liability under the provisions of this Article V.
Section 8. CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article V 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.
SECTION 9. SEVERABILITY. If any word, clause or provision of this Article V or any award made hereunder shall for any reason be determined to be invalid, the provisions hereof shall not otherwise be affected thereby but shall remain in full force and effect.
Section 10. INTENT OF ARTICLE. The intent of this Article V is to provide for indemnification and advancement of expenses to the fullest extent permitted by Section 145 of the General Corporation Law of Delaware. To the extent that such Section or any successor section may be amended or supplemented from time to time, this Article V shall be amended automatically and construed so as to permit indemnification and advancement of expenses to the fullest extent from time to time permitted by law.
ARTICLE VI
CAPITAL STOCK
Section 1. CERTIFICATES OF STOCK. Every holder of stock in the corporation shall be entitled to have a certificate, signed by, or in the name of the corporation by, the chairman or vice-chairman of
the board of directors, or the president or a vice-president and the treasurer or an assistant treasurer, or the secretary or an assistant secretary of the corporation, certifying the number of shares owned by him in the corporation. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. Certificates may be issued for partly paid shares and in such case upon the face or back of the certificates issued to represent any such partly paid shares, the total amount of the consideration to be paid therefor, and the amount paid thereon shall be specified.
Section 2. LOST CERTIFICATES. The board of directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to give reasonable evidence of such loss, theft or destruction, to advertise the same in such manner as it shall require and/or to 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 or destroyed or the issuance of such new certificate.
Section 3. TRANSFER OF STOCK. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares, duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, and proper evidence of compliance with other conditions to rightful transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books.
Section 4. RECORD DATE. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the board of directors may fix a record date, which shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors, and which shall not be more than sixty days nor less then ten days before the date of such meeting. 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. If no record date is fixed, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day before the day on which notice is given, or, if notice is waived, at the close of business on the day before the day on which the meeting is held. 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 shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors, and which shall not be more than ten days after the date upon which the resolution fixing the record date is adopted by the board of directors. If no record date is fixed, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the board of directors is required by statute, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the corporation as provided in Section 10 of Article I. If no record date is fixed and prior action by the board of directors is required, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the date on which the board of directors adopts the resolution taking such prior action. In order that the corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect
of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the board of directors may fix a record date, which shall not precede the date upon which the resolution fixing the record date is adopted, and which shall be not more than sixty days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating to such purpose.
Section 5. REGISTERED STOCKHOLDERS. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VII
CERTAIN TRANSACTIONS
Section 1. TRANSACTIONS WITH INTERESTED PARTIES. No contract or transaction between the corporation and one or more of its directors or officers, or between the corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the board or committee thereof which authorizes the contract or transaction or solely because his or their votes are counted for such purpose, if:
(a) The material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the board of directors or the committee, and the board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or
(b) The material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or
(c) The contract or transaction is fair as to the corporation as of the time it is authorized, approved or ratified, by the board of directors, a committee thereof, or the stockholders.
Section 2. QUORUM. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the board of directors or of a committee which authorizes the contract or transaction.
ARTICLE VIII
GENERAL PROVISIONS
Section 1. DIVIDENDS. Dividends upon the capital stock of the corporation, if any, may be declared by the board of directors at any regular or special meeting or by written consent, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the certificate of incorporation.
Section 2. RESERVES. The directors may set apart out of any funds of the corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve.
Section 3. CHECKS. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the board of directors may from time to time designate.
Section 4. FISCAL YEAR. The fiscal year of the corporation shall be fixed by resolution of the board of directors.
Section 5. SEAL. The board of directors may, by resolution, adopt a corporate seal. The corporate seal shall have inscribed thereon the name of the corporation, the year of its organization and the word "Delaware." The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. The seal may be altered from time to time by the board of directors.
ARTICLE IX
AMENDMENTS
These by-laws may be altered, amended or repealed or new by-laws may be adopted by the stockholders or by the board of directors, when such power is conferred upon the board of directors by the certificate of incorporation, at any regular meeting of the stockholders or of the board of directors or at any special meeting of the stockholders or of the board of directors provided, however, that in the case of a regular or special meeting of stockholders, notice of such alteration, amendment, repeal or adoption of new by-laws be contained in the notice of such meeting.
Exhibit 3.3
SIXTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
EXACT CORPORATION
(INCORPORATED FEBRUARY 10, 1995)
* * * * * *
I, Don M. Hardison, President of EXACT Corporation (the "Corporation"), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, do hereby certify that the Certificate of Incorporation of EXACT Corporation, as amended, (originally incorporated under the name Lapidus Medical Systems, Inc.), has been further amended, and restated as amended, in accordance with provisions of Sections 242 and 245 of the General Corporation Law of the State of Delaware, and, as amended and restated, is set forth in its entirety as follows:
FIRST. The name of the Corporation is EXACT Corporation.
SECOND. The address of the registered office of the Corporation in the State of Delaware is 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. The name of its registered agent at such address is The Corporation Trust Company, Wilmington, County of New Castle, Delaware 19801.
THIRD. The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware.
FOURTH. The total number of shares of all classes of capital stock which the Corporation shall have authority to issue is 105,000,000 shares, consisting of 100,000,000 shares of Common Stock with a par value of $.01 per share (the "Common Stock") and 5,000,000 shares of Preferred Stock with a par value of $.01 per share (the "Preferred Stock").
A. COMMON STOCK
1. GENERAL. All shares of Common Stock will be identical and will entitle the holders thereof to the same rights, powers and privileges. The rights, powers and privileges of the holders of the Common Stock are subject to and qualified by the rights of holders of the Preferred Stock.
2. DIVIDENDS. Dividends may be declared and paid on the Common Stock from funds lawfully available therefor as and when determined by the Board of Directors and subject to any preferential dividend rights of any then outstanding Preferred Stock.
3. DISSOLUTION, LIQUIDATION OR WINDING UP. In the event of any dissolution, liquidation or winding up of the affairs of the Corporation, whether voluntary or involuntary, each issued and outstanding share of Common Stock shall entitle the holder thereof to receive an equal portion of the net assets of the Corporation available for distribution to the holders of Common Stock, subject to any preferential rights of any then outstanding Preferred Stock.
4. VOTING RIGHTS. Except as otherwise required by law or this Sixth Amended and Restated Certificate of Incorporation, each holder of Common Stock shall have one vote in respect of each share of stock held of record by such holder on the books of the Corporation for the election of directors and on all matters submitted to a vote of stockholders of the Corporation. Except as otherwise required by law or provided herein, holders of Common Stock shall vote together with holders of the Preferred Stock as a single class, subject to any special or preferential voting rights of any then outstanding Preferred Stock. There shall be no cumulative voting.
B. PREFERRED STOCK
The Preferred Stock may be issued in one or more series at such time or times and for such consideration or considerations as the Board of Directors of the Corporation may determine. Each series shall be so designated as to distinguish the shares thereof from the shares of all other series and classes. Except as otherwise provided in this Sixth Amended and Restated Certificate of Incorporation, different series of Preferred Stock shall not be construed to constitute different classes of shares for the purpose of voting by classes.
The Board of Directors is expressly authorized to provide for the issuance of all or any shares of the undesignated Preferred Stock in one or more series, each with such designations, preferences, voting powers (or special, preferential or no voting powers), relative, participating, optional or other special rights and privileges and such qualifications, limitations or restrictions thereof as shall be stated in the resolution or resolutions adopted by the Board of Directors to create such series, and a certificate of said resolution or resolutions (a "Certificate of Designation") shall be filed in accordance with the General Corporation Law of the State of Delaware. The authority of the Board of Directors with respect to each such series shall include, without limitation of the foregoing, the right to provide that the shares of each such series may be: (i) subject to redemption at such time or times and at such price or prices; (ii) entitled to receive dividends (which may be cumulative or non-cumulative) at such rates, on such conditions, and at such times, and payable in preference to, or in such relation to, the dividends payable on any other class or classes or any other series; (iii) entitled to such rights upon the dissolution of, or upon any distribution of the assets of, the Corporation; (iv) convertible into, or exchangeable for, shares of any other class or classes of stock, or of any other series of the same or any other class or classes of stock of the Corporation at such price or prices or at such rates of exchange and with such adjustments, if any; (v) entitled to the benefit of such limitations, if any,
on the issuance of additional shares of such series or shares of any other series of Preferred Stock; or (vi) entitled to such other preferences, powers, qualifications, rights and privileges, all as the Board of Directors may deem advisable and as are not inconsistent with law and the provisions of this Sixth Amended and Restated Certificate of Incorporation.
FIFTH. The Corporation is to have perpetual existence.
SIXTH. The following provisions are included for the management of the business and the conduct of the affairs of the Corporation, and for further definition, limitation and regulation of the powers of the Corporation and of its Board of Directors and stockholders:
1. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors of the Corporation.
2. The Board of Directors of the Corporation is expressly authorized to adopt, amend or repeal the by-laws of the Corporation, subject to any limitation thereof contained in the by-laws. The stockholders shall also have the power to adopt, amend or repeal the by-laws of the Corporation; PROVIDED, HOWEVER, that, in addition to any vote of the holders of any class or series of stock of the Corporation required by law or by this Sixth Amended and Restated Certificate of Incorporation, the affirmative vote of the holders of at least eighty percent (80%) of the voting power of all of the then outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to adopt, amend or repeal any provision of the by-laws of the Corporation.
3. Stockholders of the Corporation may not take any action by written consent in lieu of a meeting.
4. Special meetings of stockholders may be called at any time only by the Chairman, President, the Chairman of the Board of Directors (if any) or a majority of the Board of Directors. Business transacted at any special meeting of stockholders shall be limited to matters relating to the purpose or purposes stated in the notice of meeting.
5. The books of the Corporation may be kept at such place within or without the State of Delaware as the by-laws of the Corporation may provide or as may be designated from time to time by the Board of Directors of the Corporation.
SEVENTH.
1. NUMBER OF DIRECTORS. The number of directors which shall constitute the whole Board of Directors shall be determined by resolution of a majority of the Board of Directors, but in no event shall the number of directors be less than three. The number of directors may be decreased at any time and from time to time by a majority of the directors then in office, but only to eliminate vacancies existing by reason of the death, resignation, removal or expiration of the term of one or more directors. The directors shall be elected at the annual meeting of
stockholders by such stockholders as have the right to vote on such election. Directors need not be stockholders of the Corporation.
2. CLASSES OF DIRECTORS. The Board of Directors shall be and is divided into three classes: Class I, Class II and Class III. No one class shall have more than one director more than any other class.
3. ELECTION OF DIRECTORS. Elections of directors need not be by written ballot except as and to the extent provided in the by-laws of the Corporation.
4. TERMS OF OFFICE. Each director shall serve for a term ending on the date of the third annual meeting following the annual meeting at which such director was elected; provided, however, that each initial director in Class I shall serve for a term ending on the date of the annual meeting next following the end of the Corporation's fiscal year ending December 31, 2000; each initial director in Class II shall serve for a term ending on the date of the annual meeting next following the end of the Corporation's fiscal year ending December 31, 2001; and each initial director in Class III shall serve for a term ending on the date of the annual meeting next following the end of the Corporation's fiscal year ending December 31, 2002.
5. ALLOCATION OF DIRECTORS AMONG CLASSES IN THE EVENT OF INCREASES OR DECREASES IN THE NUMBER OF DIRECTORS. In the event of any increase or decrease in the authorized number of directors, (i) each director then serving as such shall nevertheless continue as director of the class of which he or she is a member until the expiration of such director's current term or his or her prior death, removal or resignation and (ii) the newly created or eliminated directorships resulting from such increase or decrease shall be apportioned by the Board of Directors among the three classes of directors so as to ensure that no one class has more than one director more than any other class. To the extent possible, consistent with the foregoing rule, any newly created directorships shall be added to those classes whose terms of office are to expire at the earliest dates following such allocation, unless otherwise provided for from time to time by resolution adopted by a majority of the directors then in office, though less than a quorum. No decrease in the number of directors constituting the whole Board of Directors shall shorten the term of an incumbent Director.
6. TENURE. Notwithstanding any provisions to the contrary contained herein, each director shall hold office until his or her successor is elected and qualified, or until his or her earlier death, resignation or removal.
7. VACANCIES. Unless and until filled by the stockholders, any vacancy in the Board of Directors, however occurring, including a vacancy resulting from an enlargement of the Board of Directors, may be filled only by vote of a majority of the directors then in office, even if less than a quorum, or by a sole remaining director. A director elected to fill a vacancy shall be elected for the unexpired term of his or her predecessor in office, if applicable, and a director chosen to fill a position resulting from an increase in the number of directors shall hold office until the next election of the class for which such director shall have been chosen and until his or her successor is elected and qualified, or until his or her earlier death, resignation or removal.
8. QUORUM. A majority of the total number of the whole Board of Directors shall constitute a quorum at all meetings of the Board of Directors. In the event one or more of the directors shall be disqualified to vote at any meeting, then the required quorum shall be reduced by one for each such director so disqualified; provided, however, that in no case shall less than one-third (1/3) of the number so fixed constitute a quorum. In the absence of a quorum at any such meeting, a majority of the directors present may adjourn the meeting from time to time without further notice other than announcement at the meeting, until a quorum shall be present.
9. ACTION AT MEETING. At any meeting of the Board of Directors at which a quorum is present, the vote of a majority of those present shall be sufficient to take any action, unless a different vote is specified by law or the Corporation's by-laws.
10. REMOVAL. Any one or more or all of the directors may be removed without cause only by the holders of at least seventy-five percent (75%) of the shares then entitled to vote at an election of directors. Any one or more or all of the directors may be removed with cause only by the holders of at least a majority of the shares then entitled to vote at an election of directors.
11. STOCKHOLDER NOMINATIONS AND INTRODUCTION OF BUSINESS, ETC. Advance notice of stockholder nominations for election of directors and other business to be brought by stockholders before a meeting of stockholders shall be given in the manner provided in the by-laws of the Corporation.
12. RIGHTS OF PREFERRED STOCK. The provisions of this Article are subject to the rights of the holders of any series of Preferred Stock from time to time outstanding.
EIGHTH. No director (including any advisory director) of the
Corporation shall be personally liable to the Corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director notwithstanding
any provision of law imposing such liability; provided, however, that, to the
extent provided by applicable law, this provision shall not eliminate 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. No amendment to or repeal of this provision shall apply to or have any
effect on the liability or alleged liability of any director for or with respect
to any acts or omissions of such director occurring prior to such amendment or
repeal.
NINTH. The Board of Directors of the Corporation, when evaluating any offer of another party (a) to make a tender or exchange offer for any equity security of the Corporation or (b) to effect a business combination, shall, in connection with the exercise of its judgment in determining what is in the best interests of the Corporation as whole, be authorized to give due consideration to any such factors as the Board of Directors determines to be relevant, including, without limitation:
(i) the interests of the Corporation's stockholders, including the possibility that these interests might be best served by the continued independence of the Corporation;
(ii) whether the proposed transaction might violate federal or state laws;
(iii) not only the consideration being offered in the proposed transaction, in relation to the then current market price for the outstanding capital stock of the Corporation, but also to the market price for the capital stock of the Corporation over a period of years, the estimated price that might be achieved in a negotiated sale of the Corporation as a whole or in part or through orderly liquidation, the premiums over market price for the securities of other corporations in similar transactions, current political, economic and other factors bearing on securities prices and the Corporation's financial condition and future prospects; and
(iv) the social, legal and economic effects upon employees, suppliers, customers, creditors and others having similar relationships with the Corporation, upon the communities in which the Corporation conducts its business and upon the economy of the state, region and nation.
In connection with any such evaluation, the Board of Directors is authorized to conduct such investigations and engage in such legal proceedings as the Board of Directors may determine.
TENTH.
1. ACTIONS, SUITS AND PROCEEDINGS OTHER THAN BY OR IN THE RIGHT OF THE CORPORATION. The Corporation shall indemnify each person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation), by reason of the fact that he is or was, or has agreed to become, a director or officer of the Corporation, or is or was serving, or has agreed to serve, at the request of the Corporation, as a director, officer or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise (including any employee benefit plan) (all such persons being referred to hereafter as an "Indemnitee"), or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with such action, suit or proceeding and any appeal therefrom, if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of NOLO CONTENDERE or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. Notwithstanding anything to the contrary in this Article, 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 in such capacity, against all expenses (including attorneys' fees) and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with such action, suit or proceeding and any appeal therefrom, if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of such liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses (including attorneys' fees) which the Court of Chancery of Delaware or such other court shall deem proper.
3. INDEMNIFICATION FOR EXPENSES OF SUCCESSFUL PARTY. Notwithstanding the other provisions of this Article, 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, or in defense of any claim, issue or matter therein, or on appeal from any such action, suit or proceeding, he shall be indemnified against all expenses (including attorneys' fees) actually and reasonably incurred by him or on his behalf in connection therewith. Without limiting the foregoing, if any action, suit or proceeding is disposed of, on the merits or otherwise (including a disposition without prejudice), without (i) the disposition being adverse to the Indemnitee, (ii) an adjudication that the Indemnitee was liable to the Corporation, (iii) a plea of guilty or NOLO CONTENDERE by the Indemnitee, (iv) an adjudication that the Indemnitee did not act in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and (v) with respect to any criminal proceeding, an adjudication that the Indemnitee had reasonable cause to believe his conduct was unlawful, the Indemnitee shall be considered for the purpose hereof to have been wholly successful with respect thereto.
4. NOTIFICATION AND DEFENSE OF CLAIM. As a condition precedent to his right to be indemnified, the Indemnitee must notify the Corporation in writing as soon as practicable of any action, suit, proceeding or investigation involving him for which indemnity will or could be sought. With respect to any action, suit, proceeding or investigation of which the Corporation is so notified, the Corporation will be entitled to participate therein at its own expense and/or to assume the defense thereof at its own expense, with legal counsel reasonably acceptable to the Indemnitee. After notice from the Corporation to the Indemnitee of its election so to assume such defense, the Corporation shall not be liable to the Indemnitee for any legal or other expenses
subsequently incurred by the Indemnitee in connection with such claim, other
than as provided below in this Section 4. The Indemnitee shall have the right to
employ his own counsel in connection with such claim, but the fees and expenses
of such counsel incurred after notice from the Corporation of its assumption of
the defense thereof shall be at the expense of the Indemnitee unless (i) the
employment of counsel by the Indemnitee has been authorized by the Corporation,
(ii) counsel to the Indemnitee shall have reasonably concluded that there may be
a conflict of interest or position on any significant issue between the
Corporation and the Indemnitee in the conduct of the defense of such action or
(iii) the Corporation shall not in fact have employed counsel to assume the
defense of such action, in each of which cases the fees and expenses of counsel
for the Indemnitee shall be at the expense of the Corporation, except as
otherwise expressly provided by this Article. The Corporation shall not be
entitled, without the consent of the Indemnitee, to assume the defense of any
claim brought by or in the right of the Corporation or as to which counsel for
the Indemnitee shall have reasonably made the conclusion provided for in clause
(ii) above.
5. ADVANCE OF EXPENSES. Subject to the provisions of Section 6 below,
in the event that the Corporation does not assume the defense pursuant to
Section 4 of this Article of any action, suit, proceeding or investigation of
which the Corporation receives notice under this Article, any expenses
(including attorneys' fees) incurred by an Indemnitee in defending a civil or
criminal action, suit, proceeding or investigation or any appeal therefrom shall
be paid by the Corporation in advance of the final disposition of such matter,
PROVIDED, HOWEVER, that the payment of such expenses incurred by an Indemnitee
in advance of the final disposition of such matter shall be made only upon
receipt of an undertaking by or on behalf of the Indemnitee to repay all amounts
so advanced in the event that it shall ultimately be determined that the
indemnitee is not entitled to be indemnified by the Corporation as authorized in
this Article. 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, 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 the directors of the Corporation who are not at that time parties to the action, suit or proceeding in question ("disinterested directors"), even though less than a quorum, (b) if there are no such disinterested directors, or if such disinterested directors so direct, by independent legal counsel (who may be regular legal counsel to the corporation) in a written opinion, (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, or (d) a court of competent jurisdiction.
7. REMEDIES. The right to indemnification or advances as granted by
this Article 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 shall be on the Corporation. Neither the failure of the Corporation
to have made a determination prior to the commencement of such action that
indemnification is proper in the circumstances because the Indemnitee has met
the applicable standard of conduct, nor an actual determination by the
Corporation pursuant to Section 6 that the Indemnitee has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that the Indemnitee has not met the applicable standard of conduct.
The Indemnitee's expenses (including attorneys' fees) incurred in connection
with successfully establishing his right to indemnification, in whole or in
part, in any such proceeding shall also be indemnified by the Corporation.
8. SUBSEQUENT AMENDMENT. No amendment, termination or repeal of this Article or of the relevant provisions of the General Corporation Law of the State of Delaware or any other applicable laws shall affect or diminish in any way the rights of any Indemnitee to indemnification under the provisions hereof with respect to any action, suit, proceeding or investigation arising out of or relating to any 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 shall not be deemed exclusive of any other rights to which an Indemnitee seeking indemnification or advancement of expenses may be entitled under any law (common or statutory), agreement or vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in any other capacity while holding office for the Corporation, and shall continue as to an Indemnitee who has ceased to be a director or officer, and shall inure to the benefit of the estate, heirs, executors and administrators of the Indemnitee. Nothing contained in this Article shall be deemed to prohibit, and the Corporation is specifically authorized to enter into, agreements with officers and directors providing indemnification rights and procedures different from those set forth in this Article. 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.
10. PARTIAL INDEMNIFICATION. If an Indemnitee is entitled under any provision of this Article to indemnification by the Corporation for some or a portion of the expenses (including attorneys' fees), judgments, fines or amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with any action, suit, proceeding or investigation and any appeal therefrom but not, however, for the total amount thereof, the Corporation shall
nevertheless indemnify the Indemnitee for the portion of such expenses (including attorneys' fees), judgments, fines or amounts paid in settlement to which the Indemnitee is entitled.
11. INSURANCE. The Corporation may purchase and maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise (including any employee benefit plan) against any expense, liability or loss incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the General Corporation Law of the State of Delaware.
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 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 or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each Indemnitee as to any expenses (including attorneys' fees), judgments, fines and amounts paid in settlement in connection with any action, suit, proceeding or investigation, whether civil, criminal or administrative, including an action by or in the right of the Corporation, to the fullest extent permitted by an applicable portion of this Article that shall not have been invalidated and to the fullest extent permitted by applicable law.
14. DEFINITIONS. Terms used herein and defined in Section 145(h) and
Section 145(i) of the General Corporation Law of the State of Delaware shall
have the respective meanings assigned to such terms in such Section 145(h) and
Section 145(i).
15. SUBSEQUENT LEGISLATION. If the General Corporation Law of the State of Delaware is amended after adoption of this Article to expand further the indemnification permitted to Indemnitees, then the Corporation shall indemnify such persons to the fullest extent permitted by the General Corporation Law of the State of Delaware, as so amended.
ELEVENTH. The Corporation reserves the right to amend or repeal any provision contained in this Sixth Amended and Restated Certificate of Incorporation in the manner prescribed by the laws of the State of Delaware and all rights conferred upon stockholders are granted subject to this reservation, PROVIDED, HOWEVER, that in addition to any vote of the holders of any class or series of stock of the Corporation required by law, this Sixth Amended and Restated Certificate of Incorporation or a Certificate of Designation with respect to a series of Preferred Stock, the affirmative vote of the holders of shares of voting stock of the Corporation representing at least seventy-five percent (75%) of the voting power of all of the then outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to (i) reduce or eliminate the number of authorized shares of Common Stock or the number of authorized shares of Preferred Stock set
forth in Article FOURTH or (ii) amend or repeal, or adopt any provision inconsistent with, Parts A and B of Article FOURTH and Articles FIFTH, SIXTH, SEVENTH, EIGHTH, NINTH, TENTH and this Article ELEVENTH of this Sixth Amended and Restated Certificate of Incorporation.
IN WITNESS WHEREOF, the undersigned has hereunto signed his name and affirms that the statements made in this Sixth Amended and Restated Certificate of Incorporation are true under the penalties of perjury this ____ day of ____, 2000.
/s/ Don M. Hardison ------------------------------ Don M. Hardison President |
Exhibit 3.4
AMENDED AND RESTATED
BY-LAWS
OF
EXACT CORPORATION
BY-LAWS
TABLE OF CONTENTS
PAGE
ARTICLE 1 - STOCKHOLDERS.................................................................................1
1.1 PLACE OF MEETINGS.............................................................................1
1.2 ANNUAL MEETING................................................................................1
1.3 SPECIAL MEETINGS..............................................................................1
1.4 NOTICE OF MEETINGS............................................................................1
1.5 VOTING LIST...................................................................................1
1.6 QUORUM........................................................................................2
1.7 ADJOURNMENTS..................................................................................2
1.8 VOTING AND PROXIES............................................................................2
1.9 ACTION AT MEETING.............................................................................3
1.10 INTRODUCTION OF BUSINESS AT MEETINGS..........................................................3
1.11 ACTION WITHOUT MEETING........................................................................5
ARTICLE 2 - DIRECTORS....................................................................................6
2.1 GENERAL POWERS................................................................................6
2.2 NUMBER; ELECTION AND QUALIFICATION............................................................6
2.3 CLASSES OF DIRECTORS..........................................................................7
2.4 TERMS IN OFFICE...............................................................................7
2.5 ALLOCATION OF DIRECTORS AMONG CLASSES IN THE EVENT OF INCREASES OR
DECREASES IN THE NUMBER OF DIRECTORS..........................................................7
2.6 TENURE........................................................................................7
2.7 VACANCIES.....................................................................................7
2.8 RESIGNATION...................................................................................8
2.9 REGULAR MEETINGS..............................................................................8
2.10 SPECIAL MEETINGS..............................................................................8
2.11 NOTICE OF SPECIAL MEETINGS....................................................................8
2.12 MEETINGS BY TELEPHONE CONFERENCE CALLS........................................................8
2.13 QUORUM........................................................................................8
2.14 ACTION AT MEETING.............................................................................9
2.15 ACTION BY WRITTEN CONSENT.....................................................................9
2.16 REMOVAL.......................................................................................9
2.17 COMMITTEES....................................................................................9
2.18 COMPENSATION OF DIRECTORS.....................................................................9
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ARTICLE 3 - OFFICERS....................................................................................10
3.1 ENUMERATION..................................................................................10
3.2 ELECTION.....................................................................................10
3.3 QUALIFICATION................................................................................10
3.4 TENURE.......................................................................................10
3.5 RESIGNATION AND REMOVAL......................................................................10
3.6 VACANCIES....................................................................................10
3.7 CHAIRMAN OF THE BOARD AND VICE-CHAIRMAN OF THE BOARD.........................................11
3.8 PRESIDENT....................................................................................11
3.9 VICE PRESIDENTS..............................................................................11
3.10 SECRETARY AND ASSISTANT SECRETARIES..........................................................11
3.11 TREASURER AND ASSISTANT TREASURERS...........................................................12
3.12 SALARIES.....................................................................................12
3.13 ACTION WITH RESPECT TO SECURITIES OF OTHER CORPORATIONS......................................12
ARTICLE 4 - CAPITAL STOCK...............................................................................12
4.1 ISSUANCE OF STOCK............................................................................12
4.2 CERTIFICATES OF STOCK........................................................................12
4.3 TRANSFERS....................................................................................13
4.4 LOST, STOLEN OR DESTROYED CERTIFICATES.......................................................13
4.5 RECORD DATE..................................................................................13
ARTICLE 5 - GENERAL PROVISIONS..........................................................................14
5.1 FISCAL YEAR..................................................................................14
5.2 CORPORATE SEAL...............................................................................14
5.3 NOTICES......................................................................................14
5.4 WAIVER OF NOTICE.............................................................................14
5.5 EVIDENCE OF AUTHORITY........................................................................14
5.6 FACSIMILE SIGNATURES.........................................................................14
5.7 RELIANCE UPON BOOKS, REPORTS AND RECORDS.....................................................15
5.8 TIME PERIODS.................................................................................15
5.9 CERTIFICATE OF INCORPORATION.................................................................15
5.10 TRANSACTIONS WITH INTERESTED PARTIES.........................................................15
5.11 SEVERABILITY.................................................................................16
5.12 PRONOUNS.....................................................................................16
ARTICLE 6 - AMENDMENTS..................................................................................16
6.1 BY THE BOARD OF DIRECTORS....................................................................16
6.2 BY THE STOCKHOLDERS..........................................................................16
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AMENDED AND RESTATED
BY-LAWS
OF
EXACT CORPORATION (the "Corporation")
ARTICLE 1 - STOCKHOLDERS
1.1 PLACE OF MEETINGS. All meetings of stockholders shall be held at such place within or without the State of Delaware as may be designated from time to time by the Chairman of the Board (if any), the board of directors of the Corporation (the "Board of Directors") or the President or, if not so designated, at the registered office of the Corporation.
1.2 ANNUAL MEETING. The annual meeting of stockholders for the election of directors and for the transaction of such other business as may properly be brought before the meeting shall be held on a date to be fixed by the Chairman of the Board (if any), Board of Directors or the President (which date shall not be a legal holiday in the place where the meeting is to be held) at the time and place to be fixed by the Chairman of the Board, the Board of Directors or the President and stated in the notice of the meeting.
1.3 SPECIAL MEETINGS. Special meetings of stockholders may be called at any time by the Chairman of the Board (if any), a majority of the Board of Directors or the President and shall be held at such place, on such date and at such time as shall be fixed by the Board of Directors or the person calling the meeting. Business transacted at any special meeting of stockholders shall be limited to matters relating to the purpose or purposes stated in the notice of meeting.
1.4 NOTICE OF MEETINGS. Except as otherwise provided by law, written notice of each meeting of stockholders, whether annual or special, shall be given not less than 10 nor more than 60 days before the date of the meeting to each stockholder entitled to vote at such meeting. The notices of all meetings shall state the place, date and hour of the meeting. The notice of a special meeting shall state, in addition, the purpose or purposes for which the meeting is called. If mailed, notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his or her address as it appears on the records of the Corporation.
1.5 VOTING LIST. The officer who has charge of the stock ledger of the Corporation shall prepare, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least 10 days prior to the meeting, either at a place within the metropolitan area of the city where the meeting is to be held, which
place shall be specified in the notice of the meeting, or if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time of the meeting, and may be inspected by any stockholder who is present. This list shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them.
1.6 QUORUM. Except as otherwise provided by law, the Certificate of Incorporation or these By-Laws, the holders of a majority of the shares of the capital stock of the Corporation issued and outstanding and entitled to vote at the meeting, present in person or represented by proxy, shall constitute a quorum for the transaction of business. Shares held by brokers which such brokers are prohibited from voting (pursuant to their discretionary authority on behalf of beneficial owners of such shares who have not submitted a proxy with respect to such shares) on some or all of the matters before the stockholders, but which shares would otherwise be entitled to vote at the meeting ("Broker Non-Votes") shall be counted, for the purpose of determining the presence or absence of a quorum, both (a) toward the total voting power of the shares of capital stock of the Corporation and (b) as being represented by proxy. If a quorum has been established for the purpose of conducting the meeting, a quorum shall be deemed to be present for the purpose of all votes to be conducted at such meeting, provided that where a separate vote by a class or classes, or series thereof, is required, a majority of the voting power of the shares of such class or classes, or series, present in person or represented by proxy shall constitute a quorum entitled to take action with respect to that vote on that matter. If a quorum shall fail to attend any meeting, the chairman of the meeting or the holders of a majority of the voting power of the shares of stock entitled to vote who are present, in person or by proxy, may adjourn the meeting to another place, date, or time.
1.7 ADJOURNMENTS. Any meeting of stockholders may be adjourned to any other time and to any other place at which a meeting of stockholders may be held under these By-Laws by the stockholders present or represented at the meeting and entitled to vote, although less than a quorum, or, if no stockholder is present, by any officer entitled to preside at or to act as Secretary of such meeting. It shall not be necessary to notify any stockholder of any adjournment of less than 30 days if the time and place of the adjourned meeting are announced at the meeting at which adjournment is taken, unless after the adjournment a new record date is fixed for the adjourned meeting. At the adjourned meeting, the Corporation may transact any business which might have been transacted at the original meeting.
1.8 VOTING AND PROXIES. At any meeting of the stockholders, each stockholder shall have one vote for each share of stock entitled to vote at such meeting held of record by such stockholder and a proportionate vote for each fractional share so held, unless otherwise provided in the Certificate of Incorporation. Each stockholder of record entitled to vote at a meeting of stockholders, or to express consent or dissent to corporate action in writing without a meeting (to the extent not otherwise prohibited by the Certificate of Incorporation or these By-laws), may vote or express such consent or dissent in person or may authorize another person or persons to vote or act for such stockholder by written proxy executed by such stockholder or his or her authorized agent or by a transmission permitted by law and delivered to the Secretary of the Corporation. No such proxy shall be voted or acted upon after three years from the date of its
execution, unless the proxy expressly provides for a longer period. Any copy, facsimile telecommunication or other reliable reproduction of the writing or transmission created pursuant to this Section 1.8 may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used, provided that such copy, facsimile telecommunication or reproduction shall be a complete reproduction of the entire original writing or transmission.
In the election of directors, voting shall be by written ballot, and for any other action, voting need not be by ballot.
1.9 ACTION AT MEETING. When a quorum is present at any meeting of stockholders, the holders of a majority of the stock present or represented and voting on a matter (or if there are two or more classes of stock entitled to vote as separate classes, then in the case of each such class, the holders of a majority of the stock of that class present or represented and voting on such matter) shall decide any matter to be voted upon by the stockholders at such meeting (other than the election of directors), except when a different vote is required by express provision of law, the Certificate of Incorporation or these By-Laws. Any election of directors by the stockholders shall be determined by a plurality of the votes cast by the stockholders entitled to vote at such election, except as otherwise provided by the Certificate of Incorporation. For the purposes of this paragraph, Broker Non-Votes represented at the meeting but not permitted to vote on a particular matter shall not be counted, with respect to the vote on such matter, in the number of (a) votes cast, (b) votes cast affirmatively, or (c) votes cast negatively.
1.10 INTRODUCTION OF BUSINESS AT MEETINGS.
A. ANNUAL MEETINGS OF STOCKHOLDERS.
(1) Nominations of persons for election to the Board of Directors and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders (a) pursuant to the Corporation's notice of meeting, (b) by or at the direction of the Board of Directors or (c) by any stockholder of the Corporation who was a stockholder of record at the time of giving of notice provided for in this Section 1.10, who is entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 1.10.
(2) For nominations or other business to be properly
brought before an annual meeting by a stockholder pursuant to
clause (c) of paragraph (A)(1) of this Section 1.10, the
stockholder must have given timely notice thereof in writing to
the Secretary of the Corporation and such other business must
otherwise be a proper matter for stockholder action. To be timely,
a stockholder's notice shall be delivered to the Secretary at the
principal executive offices of the Corporation not later than the
close of business on the one hundred twentieth (120th) day nor
earlier than the close of business on the one hundred fiftieth
(150th) day prior to the first anniversary of the date of the
proxy statement delivered to stockholders in connection with the
preceding year's annual meeting, provided, however, that if either
(i) the date of the annual
meeting is more than thirty (30) days before or more than sixty
(60) days after the first anniversary date of the preceding year's
annual meeting or (ii) no proxy statement was delivered to
stockholders in connection with the preceding year's annual
meeting, notice by the stockholder to be timely must be so
delivered not earlier than the close of business on the ninetieth
(90th) day prior to such annual meeting and not later than the
close of business on the later of the sixtieth (60th) day prior to
such annual meeting or the close of business on the tenth (10th)
day following the day on which public announcement of the date of
such meeting is first made by the Corporation. 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 (the
"Exchange Act") (including such person's written consent to being
named in the proxy statement as a nominee and to serving as a
director if elected); (b) as to any other business that the
stockholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the
meeting, the reasons for conducting such business at the meeting
and any material interest in such business of such stockholder and
the beneficial owner, if any, on whose behalf the proposal is
made; and (c) as to the stockholder giving the notice and the
beneficial owner, if any, on whose behalf the nomination or
proposal is made (i) the name and address of such stockholder, as
they appear on the Corporation's books, and of such beneficial
owner and (ii) the class and number of shares of capital stock of
the Corporation that are owned beneficially and held of record by
such stockholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence
of paragraph (A)(2) of this Section 1.10 to the contrary, in the
event that the number of directors to be elected to the Board of
Directors of the Corporation is increased and there is no public
announcement by the Corporation naming all of the nominees for
director or specifying the size of the increased Board of
Directors at least seventy (70) days prior to the first
anniversary of the preceding year's annual meeting (or, if the
annual meeting is held more than thirty (30) days before or sixty
(60) days after such anniversary date, at least seventy (70) days
prior to such annual meeting), a stockholder's notice required by
this Section 1.10 shall also be considered timely, but only with
respect to nominees for any new positions created by such
increase, if it shall be delivered to the Secretary at the
principal executive office of the Corporation not later than the
close of business on the tenth (10th) day following the day on
which such public announcement is first made by the Corporation.
B. SPECIAL MEETINGS OF STOCKHOLDERS. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation's notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation's notice of meeting (a) by or at the direction of the Board of Directors or (b) provided that the Board of
Directors has determined that directors shall be elected at such
meeting, by any stockholder of the Corporation who is a
stockholder of record at the time of giving of notice of the
special meeting, who shall be entitled to vote at the meeting and
who complies with the notice procedures set forth in this Section
1.10. If the Corporation calls a special meeting of stockholders
for the purpose of electing one or more directors to the Board of
Directors, any such stockholder may nominate a person or persons
(as the case may be), for election to such position(s) as
specified in the Corporation's notice of meeting, if the
stockholder's notice required by paragraph (A)(2) of this Section
1.10 shall be delivered to the Secretary at the principal
executive offices of the Corporation not earlier than the
ninetieth (90th) day prior to such special meeting nor later than
the later of (x) the close of business on the sixtieth (60th) day
prior to such special meeting or (y) the close of business on the
tenth (10th) day following the day on which public announcement is
first made of the date of such special meeting and of the nominees
proposed by the Board of Directors to be elected at such meeting.
C. GENERAL.
(1) Only such persons who are nominated in accordance with the procedures set forth in this Section 1.10 shall be eligible to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 1.10. Except as otherwise provided by law, the Certificate of Incorporation or these By-Laws, the chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this Section 1.10 and, if any proposed nomination or business is not in compliance herewith, to declare that such defective proposal or nomination shall be disregarded.
(2) For purposes of this Section 1.10, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press, PR Newswire, Reuters or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this
Section 1.10, a stockholder shall also comply with all applicable
requirements of the Exchange Act and the rules and regulations
thereunder with respect to the matters set forth herein. Nothing
in this Section 1.10 shall be deemed to affect any rights of the
holders of any series of Preferred Stock to elect directors under
specified circumstances.
1.11 ACTION WITHOUT MEETING. Stockholders of the Corporation may not take any action by written consent in lieu of a meeting. Notwithstanding any other provision of law, the Certificate of Incorporation or these By-Laws, and notwithstanding the fact that a lesser
percentage may be specified by law, the affirmative vote of the holders of at least seventy-five percent (75%) of the votes which all the stockholders would be entitled to cast at any annual election of directors or class of directors shall be required to amend or repeal, or to adopt any provision inconsistent with, this Section 1.11.
ARTICLE 2 - DIRECTORS
2.1 GENERAL POWERS. The business and affairs of the Corporation shall be managed by or under the direction of a Board of Directors, who may exercise all of the powers of the Corporation except as otherwise provided by law or the Certificate of Incorporation. In the event of a vacancy in the Board of Directors, the remaining directors, except as otherwise provided by law or the Certificate of Incorporation, may exercise the powers of the full Board of Directors until the vacancy is filled. Without limiting the foregoing, the Board of Directors may:
(a) declare dividends from time to time in accordance with law;
(b) purchase or otherwise acquire any property, rights or privileges on such terms as it shall determine;
(c) authorize the creation, making and issuance, in such form as it may determine, of written obligations of every kind, negotiable or non-negotiable, secured or unsecured, to borrow funds and guarantee obligations, and to do all things necessary in connection therewith;
(d) remove any officer of the Corporation with or without cause, and from time to time to devolve the powers and duties of any officer upon any other person for the time being;
(e) confer upon any officer of the Corporation the power to appoint, remove and suspend subordinate officers, employees and agents;
(f) adopt from time to time such stock option, stock purchase, bonus or other compensation plans for directors, officers, employees, consultants and agents of the Corporation and its subsidiaries as it may determine;
(g) adopt from time to time such insurance, retirement, and other benefit plans for directors, officers, employees, consultants and agents of the Corporation and its subsidiaries as it may determine; and
(h) adopt from time to time regulations, not inconsistent herewith, for the management of the Corporation's business and affairs.
2.2 NUMBER; ELECTION AND QUALIFICATION. The number of directors which shall constitute the whole Board of Directors shall be determined by resolution of the Board of
Directors, but in no event shall be less than three. The number of directors may be decreased at any time and from time to time by a majority of the directors then in office, but only to eliminate vacancies existing by reason of the death, resignation, removal or expiration of the term of one or more directors. The directors shall be elected at the annual meeting of stockholders (or, if so determined by the Board of Directors pursuant to Section 10 hereof, at a special meeting of stockholders), by such stockholders as have the right to vote on such election. Directors need not be stockholders of the Corporation.
2.3 CLASSES OF DIRECTORS. The Board of Directors shall be and is divided into three classes: Class I, Class II and Class III. No one class shall have more than one director more than any other class.
2.4 TERMS IN OFFICE. Each director shall serve for a term ending on the date of the third annual meeting following the annual meeting at which such director was elected; provided, however, that each initial director in Class I shall serve for a term ending on the date of the annual meeting next following the end of the Corporation's fiscal year ending December 31, 2000 each initial director in Class II shall serve for a term ending on the date of the annual meeting next following the end of the Corporation's fiscal year ending December 31, 2001; and each initial director in Class III shall serve for a term ending on the date of the annual meeting next following the end of the Corporation's fiscal year ending December 31, 2002.
2.5 ALLOCATION OF DIRECTORS AMONG CLASSES IN THE EVENT OF INCREASES OR DECREASES IN THE NUMBER OF DIRECTORS. In the event of any increase or decrease in the authorized number of directors, (i) each director then serving as such shall nevertheless continue as a director of the class of which he or she is a member until the expiration of such director's current term or his or her prior death, removal or resignation and (ii) the newly created or eliminated directorships resulting from such increase or decrease shall be apportioned by the Board of Directors among the three classes of directors, subject to the second sentence of Section 2.3. To the extent possible, consistent with the foregoing rule, any newly created directorships shall be added to those classes whose terms of office are to expire at the earliest dates following such allocation, unless otherwise provided for from time to time by resolution adopted by a majority of the directors then in office, although less than a quorum. No decrease in the number of directors constituting the whole Board of Directors shall shorten the term of an incumbent Director.
2.6 TENURE. Notwithstanding any provisions to the contrary contained herein, each director shall hold office until his or her successor is elected and qualified, or until his or her earlier death, resignation or removal.
2.7 VACANCIES. Unless and until filled by the stockholders, any vacancy in the Board of Directors, however occurring, including a vacancy resulting from an enlargement thereof, may be filled by vote of a majority of the directors then in office, although less than a quorum, or by a sole remaining director. A director elected to fill a vacancy shall be elected for the unexpired term of his or her predecessor in office, if any, and a director chosen to fill a position resulting from an increase in the number of directors shall hold office until the next election of directors of
the class for which such director was chosen and until his or her successor is elected and qualified, or until his or her earlier death, resignation or removal.
2.8 RESIGNATION. Any director may resign by delivering his or her written resignation to the Corporation at its principal office or to the President or Secretary. Such resignation shall be effective upon receipt unless it is specified to be effective at some other time or upon the happening of some other event.
2.9 REGULAR MEETINGS. Regular meetings of the Board of Directors may be held without notice at such time and place, either within or without the State of Delaware, as shall be determined from time to time by the Board of Directors; provided that any director who is absent when such a determination is made shall be given notice of the determination. Regular meetings of the Board of Directors shall be held at such place or places, on such date or dates, and at such time or times as shall have been established by the Board of Directors and publicized among all directors. A notice of each regular meeting shall not be required.
2.10 SPECIAL MEETINGS. Special meetings of the Board of Directors may be held at any time and place, within or without the State of Delaware, designated in a call by the Chairman of the Board (if any), the President, two or more directors, or by one director in the event that there is only a single director in office.
2.11 NOTICE OF SPECIAL MEETINGS. Notice of any special meeting of directors shall be given to each director by the Secretary or by the officer or one of the directors calling the meeting. Notice shall be duly given to each director (i) by giving notice to such director in person or by telephone at least 48 hours in advance of the meeting, (ii) by sending a telegram or delivering written notice by facsimile transmission or by hand, to his or her last known business or home address at least 48 hours in advance of the meeting, or (iii) by mailing written notice to his or her last known business or home address at least 72 hours in advance of the meeting. A notice or waiver of notice of a meeting of the Board of Directors need not specify the purposes of the meeting.
2.12 MEETINGS BY TELEPHONE CONFERENCE CALLS. Directors or any members of any committee designated by the Board of Directors may participate in a meeting of the Board of Directors or such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation by such means shall be deemed to constitute presence in person at such meeting.
2.13 QUORUM. A majority of the total number of the whole Board of Directors shall constitute a quorum at all meetings of the Board of Directors. In the event one or more of the directors shall be disqualified to vote at any meeting, then the required quorum shall be reduced by one for each such director so disqualified; provided, however, that in no case shall less than one-third (1/3) of the total number of the whole Board of Directors constitute a quorum. In the absence of a quorum at any such meeting, a majority of the directors present may adjourn the meeting from time to time without further notice other than announcement at the meeting, until a quorum shall be present.
2.14 ACTION AT MEETING. At any meeting of the Board of Directors at which a quorum is present, the vote of a majority of those present shall be sufficient to take any action, unless a different vote is specified by law, the Certificate of Incorporation or these By-Laws.
2.15 ACTION BY WRITTEN CONSENT. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee of the Board of Directors may be taken without a meeting, if all members of the Board of Directors or committee, as the case may be, consent to such action in writing, and the written consents are filed with the minutes of proceedings of the Board of Directors or committee.
2.16 REMOVAL. Unless otherwise provided in the Certificate of Incorporation, any one or more or all of the directors may be removed, without cause only by the holders of at least seventy-five percent (75%) of the shares then entitled to vote at an election of directors. Any one or more or all of the directors may be removed with cause only by the holders of at least a majority of the shares then entitled to vote at an election of directors.
2.17 COMMITTEES. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of such committee. In the absence or disqualification of a member of a committee, the member or members of such committee present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at such meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors and subject to the provisions of the General Corporation Law of the State of Delaware, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation and may authorize the seal of the Corporation to be affixed to all papers which may require it. Each such committee shall keep minutes and make such reports as the Board of Directors may from time to time request. Except as the Board of Directors may otherwise determine or as provided herein, any committee may make rules for the conduct of its business, but unless otherwise provided by the directors or in such rules, its business shall be conducted as nearly as possible in the same manner as is provided in these By-Laws for the Board of Directors. Adequate provisions shall be made for notice to members of all meeting of committees. One-third (1/3) of the members of any committee shall constitute a quorum unless the committee shall consist of one (1) or two (2) members, in which event one (1) member shall constitute a quorum; and all matters shall be determined by a majority vote of the members present. Action may be taken by any committee without a meeting if all members thereof consent thereto in writing, and the writing or writings are filed with the minutes of the proceedings of such committee.
2.18 COMPENSATION OF DIRECTORS. Directors may be paid such compensation for their services and such reimbursement for expenses of attendance at meetings as the Board of Directors may from time to time determine. No such payment shall preclude any director from
serving the Corporation or any of its parent or subsidiary corporations in any other capacity and receiving compensation for such service.
ARTICLE 3 - OFFICERS
3.1 ENUMERATION. The officers of the Corporation shall consist of a President, a Secretary, a Treasurer and such other officers with such other titles as the Board of Directors shall determine, including, but not limited to, a Chairman of the Board, a Vice-Chairman of the Board, and one or more Vice Presidents, Assistant Treasurers and Assistant Secretaries. The Board of Directors may appoint such other officers as it may deem appropriate.
3.2 ELECTION. The President, Treasurer and Secretary shall be elected annually by the Board of Directors at its first meeting following the annual meeting of stockholders. Other officers may be appointed by the Board of Directors at such meeting or at any other meeting.
3.3 QUALIFICATION. No officer need be a stockholder. Any two or more offices may be held by the same person.
3.4 TENURE. Except as otherwise provided by law, by the Certificate of Incorporation or by these By-Laws, each officer shall hold office until his or her successor is elected and qualified, unless a different term is specified in the vote choosing or appointing such officer, or until his or her earlier death, resignation or removal.
3.5 RESIGNATION AND REMOVAL. Any officer may resign by delivering his or her written resignation to the Chairman of the Board (if any), to the Board of Directors at a meeting thereof, to the Corporation at its principal office or to the President or Secretary. Such resignation shall be effective upon receipt unless it is specified to be effective at some other time or upon the happening of some other event.
Any officer may be removed at any time, with or without cause, by vote of a majority of the entire number of directors then in office.
Except as the Board of Directors may otherwise determine, no officer who resigns or is removed shall have any right to any compensation as an officer for any period following his or her resignation or removal, or any right to damages on account of such removal, whether his or her compensation be by the month or by the year or otherwise, unless such compensation is expressly provided in a duly authorized written agreement with the Corporation.
3.6 VACANCIES. The Board of Directors may fill any vacancy occurring in any office for any reason and may, in its discretion, leave unfilled for such period as it may determine any offices other than those of President, Treasurer and Secretary. Each such successor shall hold office for the unexpired term of his predecessor and until his or her successor is elected and qualified, or until his or her earlier death, resignation or removal.
3.7 CHAIRMAN OF THE BOARD AND VICE-CHAIRMAN OF THE BOARD. The Chairman of the Board, if any, shall preside at all meetings of the Board of Directors and stockholders at which he or she is present and shall perform such duties and possess such powers as are designated by the Board of Directors. If the Board of Directors appoints a Vice-Chairman of the Board, he or she shall, in the absence or disability of the Chairman of the Board, perform the duties and exercise the powers of the Chairman of the Board and shall perform such other duties and possess such other powers as may from time to time be designated by the Board of Directors.
3.8 PRESIDENT. The President shall, subject to the direction of the Board of Directors, have general charge and supervision of the business of the Corporation. Unless otherwise provided by the Board of Directors, and provided that there is no Chairman of the Board or that the Chairman and Vice-Chairman, if any, are not available, the President shall preside at all meetings of the stockholders, and, if a director, at all meetings of the Board of Directors. The Board of Directors shall designate the Chief Executive Officer of the Corporation. The President shall perform such other duties and shall have such other powers as the Board of Directors may from time to time prescribe. The President shall have the power to enter into contracts and otherwise bind the Corporation in matters arising in the ordinary course of the Corporation's business.
3.9 VICE PRESIDENTS. Any Vice President shall perform such duties and possess such powers as the Board of Directors or the President may from time to time prescribe. In the event of the absence, inability or refusal to act of the President, the Vice President (or if there shall be more than one, the Vice Presidents in the order determined by the Board of Directors) shall perform the duties of the President and, when so performing, shall have all the powers of and be subject to all the restrictions upon the President. The Board of Directors may assign to any Vice President the title of Executive Vice President, Senior Vice President or any other title selected by the Board of Directors. Unless otherwise determined by the Board of Directors, any Vice President shall have the power to enter into contracts and otherwise bind the Corporation in matters arising in the ordinary course of the Corporation's business.
3.10 SECRETARY AND ASSISTANT SECRETARIES. The Secretary shall perform such duties and shall have such powers as the Board of Directors or the President may from time to time prescribe. In addition, the Secretary shall perform such duties and have such powers as are incident to the office of secretary, including without limitation the duty and power to give notices of all meetings of stockholders and special meetings of the Board of Directors, to attend all meetings of stockholders and the Board of Directors and keep a record of the proceedings, to maintain a stock ledger and prepare lists of stockholders and their addresses as required, to be custodian of corporate records and the corporate seal and to affix and attest to the same on documents.
Any Assistant Secretary shall perform such duties and possess such powers as the Board of Directors, the President or the Secretary may from time to time prescribe. In the event of the absence, inability or refusal to act of the Secretary, the Assistant Secretary (or if there shall be more than one, the Assistant Secretaries in the order determined by the Board of Directors) shall perform the duties and exercise the powers of the Secretary.
In the absence of the Secretary or any Assistant Secretary at any meeting of stockholders or directors, the person presiding at the meeting shall designate a temporary secretary to keep a record of the meeting.
3.11 TREASURER AND ASSISTANT TREASURERS. The Treasurer shall perform such duties and shall have such powers as the Board of Directors or the President may from time to time prescribe. In addition, the Treasurer shall perform such duties and have such powers as are incident to the office of treasurer, including without limitation the duty and power to keep and be responsible for all funds and securities of the Corporation, to deposit funds of the Corporation in depositories selected in accordance with these By-Laws, to disburse such funds as ordered by the Board of Directors, to make proper accounts for such funds, and to render as required by the Board of Directors statements of all such transactions and of the financial condition of the Corporation.
The Assistant Treasurers shall perform such duties and possess such powers as the Board of Directors, the President or the Treasurer may from time to time prescribe. In the event of the absence, inability or refusal to act of the Treasurer, the Assistant Treasurer (or if there shall be more than one, the Assistant Treasurers in the order determined by the Board of Directors) shall perform the duties and exercise the powers of the Treasurer.
3.12 SALARIES. Officers of the Corporation shall be entitled to such salaries, compensation or reimbursement as shall be fixed or allowed from time to time by the Board of Directors.
3.13 ACTION WITH RESPECT TO SECURITIES OF OTHER CORPORATIONS. Unless otherwise directed by the Board of Directors, the President or any officer of the Corporation authorized by the President shall have power to vote and otherwise act on behalf of the Corporation, in person or by proxy, at any meeting of stockholders of or with respect to any action of stockholders of any other corporation in which the Corporation may hold securities and otherwise to exercise any and all rights and powers which this Corporation may possess by reason of its ownership of securities in such other corporation.
ARTICLE 4 - CAPITAL STOCK
4.1 ISSUANCE OF STOCK. Unless otherwise voted by the stockholders and subject to the provisions of the Certificate of Incorporation, the whole or any part of any unissued balance of the authorized capital stock of the Corporation or the whole or any part of any issued, authorized capital stock of the Corporation held in its treasury may be issued, sold, transferred or otherwise disposed of by vote of the Board of Directors in such manner, for such consideration and on such terms as the Board of Directors may determine.
4.2 CERTIFICATES OF STOCK. Every holder of stock of the Corporation shall be entitled to have a certificate, in such form as may be prescribed by law and by the Board of Directors,
certifying the number and class of shares owned by such stockholder in the Corporation. Each such certificate shall be signed by, or in the name of the Corporation by, the Chairman or Vice-Chairman, if any, of the Board of Directors, or the President or a Vice President, and the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation. Any or all of the signatures on such certificate may be a facsimile.
Each certificate for shares of stock which are subject to any restriction on transfer pursuant to the Certificate of Incorporation, the By-Laws, applicable securities laws or any agreement among any number of shareholders or among such holders and the Corporation shall have conspicuously noted on the face or back of such certificate either the full text of such restriction or a statement of the existence of such restriction.
4.3 TRANSFERS. Except as otherwise established by rules and regulations adopted by the Board of Directors, and subject to applicable law, shares of stock may be transferred on the books of the Corporation by the surrender to the Corporation or its transfer agent of the certificate representing such shares, properly endorsed or accompanied by a written assignment or power of attorney properly executed, and with such proof of authority or the authenticity of signature as the Corporation or its transfer agent may reasonably require. Except as may be otherwise required by law, by the Certificate of Incorporation or by these By-Laws, the Corporation shall be entitled to treat the record holder of stock as shown on its books as the owner of such stock for all purposes, including the payment of dividends and the right to vote with respect to such stock, regardless of any transfer, pledge or other disposition of such stock, until the shares have been transferred on the books of the Corporation in accordance with the requirements of these By-Laws.
4.4 LOST, STOLEN OR DESTROYED CERTIFICATES. The Corporation may issue a new certificate of stock in place of any previously issued certificate alleged to have been lost, stolen, or destroyed, upon such terms and conditions as the President may prescribe, including the presentation of reasonable evidence of such loss, theft or destruction and the giving of such indemnity as the President may require for the protection of the Corporation or any transfer agent or registrar.
4.5 RECORD DATE. The Board of Directors may fix in advance a date as a record date for the determination of the stockholders entitled to notice of or to vote at any meeting of stockholders or, to the extent permitted by the Certificate of Incorporation and these By-laws, to express consent (or dissent) to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action. Such record date shall not be more than 60 nor less than 10 days before the date of such meeting, nor more than 60 days prior to any other action to which such record date relates.
If no record date is fixed, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day before the day on which notice is given, or, if notice is waived, at the close of business on the day before the day on which the meeting is held. The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting (to the extent permitted by the Certificate of Incorporation and these By-laws) when no prior action by the Board of Directors is necessary, shall be the day on which the first written consent is expressed. The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating to such purpose.
A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.
ARTICLE 5 - GENERAL PROVISIONS
5.1 FISCAL YEAR. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors.
5.2 CORPORATE SEAL. The corporate seal shall be in such form as shall be approved by the Board of Directors.
5.3 NOTICES. Except as otherwise specifically provided herein or required by law or the Certificate of Incorporation, all notices required to be given to any person pursuant to these by-laws shall be in writing and may in every instance be effectively given by hand delivery to the recipient thereof, by depositing such notice in the mails, postage paid, or by sending such notice by prepaid telegram or facsimile transmission. Any such notice shall be addressed to such person at his or her last known address as the same appears on the books of the Corporation. The time when such notice is received shall be deemed to be the time of the giving of the notice.
5.4 WAIVER OF NOTICE. Whenever any notice whatsoever is required to be given by law, by the Certificate of Incorporation or by these By-Laws, a waiver of such notice either in writing signed by the person entitled to such notice or such person's duly authorized attorney, or by telegraph, facsimile transmission or any other available method, whether before, at or after the time stated in such waiver, or the appearance of such person or persons at such meeting in person or by proxy, shall be deemed equivalent to such notice.
5.5 EVIDENCE OF AUTHORITY. A certificate by the Secretary, or an Assistant Secretary, or a temporary Secretary, as to any action taken by the stockholders, directors, a committee or any officer or representative of the Corporation shall, as to all persons who rely on the certificate in good faith, be conclusive evidence of such action.
5.6 FACSIMILE SIGNATURES. In addition to the provisions for use of facsimile signatures elsewhere specifically authorized in these By-Laws, facsimile signatures of any officer or officers of the Corporation may be used whenever and as authorized by the Board of Directors or a committee thereof.
5.7 RELIANCE UPON BOOKS, REPORTS AND RECORDS. Each director, each member of any committee designated by the Board of Directors, and each officer of the Corporation shall, in the performance of his or her duties, be fully protected in relying in good faith upon the books of account or other records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of its officers or employees or committees of the Board of Directors so designated, or by any other person as to matters which such director or committee member reasonably believes are within such other person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation.
5.8 TIME PERIODS. In applying any provision of these By-Laws that requires that an act be done or not be done a specified number of days prior to an event or that an act be done during a period of a specified number of days prior to an event, calendar days shall be used, the day of the doing of the act shall be excluded, and the day of the event shall be included.
5.9 CERTIFICATE OF INCORPORATION. All references in these By-Laws to the Certificate of Incorporation shall be deemed to refer to the Certificate of Incorporation of the Corporation, as amended and in effect from time to time.
5.10 TRANSACTIONS WITH INTERESTED PARTIES. No contract or transaction between the Corporation and one or more of the directors or officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of the directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because such director or officer is present at or participates in the meeting of the Board of Directors or a committee of the Board of Directors which authorizes the contract or transaction or solely because his, her or their votes are counted for such purpose, if:
(1) The material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative vote of a majority of the disinterested directors, even though the disinterested directors be less than a quorum;
(2) The material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee of the Board of Directors, or the stockholders.
Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction.
5.11 SEVERABILITY. Any determination that any provision of these By-Laws is for any reason inapplicable, illegal or ineffective shall not affect or invalidate any other provision of these By-Laws.
5.12 PRONOUNS. All pronouns used in these By-Laws shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identity of the persons or persons so designated may require.
ARTICLE 6 - AMENDMENTS
6.1 BY THE BOARD OF DIRECTORS. Except as is otherwise set forth in these By-Laws, these By-Laws may be altered, amended or repealed, or new by-laws may be adopted, by the affirmative vote of a majority of the directors present at any regular or special meeting of the Board of Directors at which a quorum is present.
6.2 BY THE STOCKHOLDERS. Except as otherwise set forth in these By-Laws, these By-Laws may be altered, amended or repealed or new by-laws may be adopted by the affirmative vote of the holders of eighty percent (80%) of the shares of the capital stock of the Corporation issued and outstanding and entitled to vote at any regular meeting of stockholders, or at any special meeting of stockholders, provided notice of such alteration, amendment, repeal or adoption of new by-laws shall have been stated in the notice of such special meeting.
Exhibit 10.1
LAPIDUS MEDICAL SYSTEMS, INC.
1995 STOCK OPTION PLAN
1. PURPOSE. The purpose of this 1995 Stock Option Plan (the "Plan") is to encourage employees of Lapidus Medical Systems, Inc. (the "Company") and of any present or future parent or subsidiary of the Company (collectively, "Related Corporations"), and other individuals who render services to the Company or a Related Corporation, by providing opportunities to purchase stock in the Company pursuant to options granted hereunder which qualify as "incentive stock options" ("ISOs") under Section 422(b) of the Internal Revenue Code of 1986, as amended (the "Code") and options which do not qualify as ISOs ("Non-Qualified Options"). Both ISOs and Non-Qualified Options are referred to hereafter individually as an "Option" and collectively as "Options." As used herein, the terms "parent" and "subsidiary" mean "parent corporation" and "subsidiary corporation," respectively, as those terms are defined in Section 424 of the Code.
2. ADMINISTRATION OF THE PLAN.
A. BOARD OR COMMITTEE ADMINISTRATION. The Plan shall be
administered by the Board of Directors of the Company (the "Board") or by
a committee appointed by the Board (the "Committee"); provided that the
Plan shall be administered to the extent required by Rule 16b-3
promulgated under the Securities Exchange Act of 1934 or any successor
provision ("Rule 16b-3"), with respect to specific grants of Options, by a
disinterested administrator or administrators within the meaning of Rule
16b-3. Hereinafter, all references in this Plan to the "Committee" shall
mean the Board if no Committee has been appointed. Subject to ratification
of the grant or authorization of each Option by the Board (if so required
by applicable state law), and subject to the terms of the Plan, the
Committee shall have the authority to (i) determine to whom (from among
the class of employees eligible under paragraph 3 to receive ISOs) ISOs
shall be granted, and to whom (from among the class of individuals and
entities eligible under paragraph 3 to receive Non-Qualified Options)
Non-Qualified Options may be granted; (ii) determine the time or times at
which Options shall be granted; (iii) determine the exercise price of
shares subject to each Option, which price shall not be less than the
minimum price specified in paragraph 6; (iv) determine whether each Option
granted shall be an ISO or a Non-Qualified Option; (v) determine (subject
to paragraph 7) the time or times when each Option shall become
exercisable and the duration of the exercise period; (vi) extend the
period during which outstanding Options may be exercised; (vii) determine
whether restrictions such as repurchase options are to be imposed on
shares subject to Options and the nature of such restrictions, if any; and
(viii) interpret the Plan and prescribe and rescind rules and regulations
relating to it. If the Committee determines to issue a Non-Qualified
Option, it shall take whatever actions it deems necessary, under Section
422 of the Code and the regulations promulgated thereunder, to ensure that
such Option is not treated as an ISO. The interpretation and construction
by the Committee of any provisions of the Plan or of
any Option granted under it shall be final unless otherwise determined by the Board. The Committee may from time to time adopt such rules and regulations for carrying out the Plan as it may deem advisable. No member of the Board or the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any Option granted under it.
B. COMMITTEE ACTIONS. The Committee may select one of its members as its chairman, and shall hold meetings at such time and places as it may determine. A majority of the Committee shall constitute a quorum and acts by a majority of the members of the Committee at a meeting at which a quorum is present, or acts reduced to or approved in writing by a majority of the members of the Committee (if consistent with applicable state law), shall constitute the valid acts of the Committee. From time to time the Board may increase the size of the Committee and appoint additional members thereof, remove members (with or without cause) and appoint new members in substitution therefor, fill vacancies however caused, or remove all members of the Committee and thereafter directly administer the Plan.
C. GRANT OF OPTIONS TO BOARD MEMBERS. Subject to the provisions of the first sentence of paragraph 2(A) above, if applicable, Options may be granted to members of the Board. All grants of Options to members of the Board shall in all other respects be made in accordance with the provisions of this Plan applicable to other eligible persons. Consistent with the provisions of the first sentence of paragraph 2(A) above, members of the Board who either (i) are eligible to receive grants of Options pursuant to the Plan or (ii) have been granted Options may vote on any matters affecting the administration of the Plan or the grant of any Options pursuant to the Plan, except that no such member shall act upon the granting to himself or herself of Options, but any such member may be counted in determining the existence of a quorum at any meeting of the Board during which action is taken with respect to the granting to such member of Options.
3. ELIGIBLE EMPLOYEES AND OTHERS. ISOs may be granted only to employees of the Company or any Related Corporation. Non-Qualified Options may be granted to any employee, officer or director (whether or not also an employee) or consultant of the Company or any Related Corporation. The Committee may take into consideration a recipient's individual circumstances in determining whether to grant an ISO or a Non-Qualified Option. The granting of any Option to any individual or entity shall neither entitle that individual or entity to, nor disqualify such individual or entity from, participation in any other grant of Options.
4. STOCK. The stock subject to Options shall be authorized but unissued shares of Common Stock of the Company, par value $.01 per share (the "Common Stock"), or shares of Common Stock reacquired by the Company in any manner. The aggregate number of shares which may be issued pursuant to the Plan is 1,530,000, subject to adjustment as provided in paragraph 13. If any Option granted under the Plan shall expire or terminate for any reason without having been exercised in full or shall cease for any reason to be exercisable in whole or in part or shall be repurchased by the Company, the shares subject to such Option shall again be available for grants of Options under the Plan.
5. GRANTING OF OPTIONS. Options may be granted under the Plan at any time after February 10, 1995 and prior to February 10, 2005. The date of grant of an Option under the Plan will be the date specified by the Committee at the time it grants the Option; provided, however, that such date shall not be prior to the date on which the Committee acts to approve the grant.
6. MINIMUM OPTION PRICE; ISO LIMITATIONS.
A. PRICE FOR NON-QUALIFIED OPTIONS. The exercise price per share specified in the agreement relating to each Non-Qualified Option granted under the Plan shall in no event be less than the minimum legal consideration required therefor under the laws of any jurisdiction in which the Company or its successors in interest may be organized.
B. PRICE FOR ISOS. The exercise price per share specified in the agreement relating to each ISO granted under the Plan shall not be less than the fair market value per share of Common Stock on the date of such grant. In the case of an ISO to be granted to an employee owning stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Related Corporation, the price per share specified in the agreement relating to such ISO shall not be less than one hundred ten percent (110%) of the fair market value per share of Common Stock on the date of grant. For purposes of determining stock ownership under this paragraph, the rules of Section 424(d) of the Code shall apply.
C. $100,000 ANNUAL LIMITATION ON ISO VESTING. Each eligible employee may be granted Options treated as ISOs only to the extent that, in the aggregate under this Plan and all incentive stock option plans of the Company and any Related Corporation, ISOs do not become exercisable for the first time by such employee during any calendar year with respect to stock having a fair market value (determined at the time the ISOs were granted) in excess of $100,000. The Company intends to designate any Options granted in excess of such limitation as Non-Qualified Options.
D. DETERMINATION OF FAIR MARKET VALUE. If, at the time an Option is granted under the Plan, the Company's Common Stock is publicly traded, "fair market value" shall be determined as of the last business day for which the prices or quotes discussed in this sentence are available prior to the date such Option is granted and shall mean (i) the average (on that date) of the high and low prices of the Common Stock on the principal national securities exchange on which the Common Stock is traded, if the Common Stock is then traded on a national securities exchange; or (ii) the last reported sale price (on that date) of the Common Stock on the Nasdaq National Market, if the Common Stock is not then traded on a national securities exchange; or (iii) the closing bid price (or average of bid prices) last quoted (on that date) by an established quotation service for over-the-counter securities, if the Common Stock is not reported on the Nasdaq National Market. If the Common Stock is not publicly traded at the time an Option is granted under the Plan, "fair market value" shall be deemed to be the fair value of the Common Stock as determined by the Committee after taking into consideration all factors which it deems appropriate, including, without limitation, recent sale and offer prices of the Common Stock in private transactions negotiated at arm's length.
7. OPTION DURATION. Subject to earlier termination as provided in paragraphs 9 and 10 or in the agreement relating to such Option, each Option shall expire on the date specified by the Committee, but not more than (i) ten years from the date of grant in the case of Options generally and (ii) five years from the date of grant in the case of ISOs granted to an employee owning stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Related Corporation, as determined under paragraph 6(B). Subject to earlier termination as provided in paragraphs 9 and 10, the term of each ISO shall be the term set forth in the original instrument granting such ISO, except with respect to any part of such ISO that is converted into a Non-Qualified Option pursuant to paragraph 16.
8. EXERCISE OF OPTION. Subject to the provisions ofparagraphs 9 through 12, each Option granted under the Planshall be exercisable as follows:
A. VESTING. The Option shall either be fully exercisable on the date of grant or shall become exercisable thereafter in such installments as the Committee may specify.
B. FULL VESTING OF INSTALLMENTS. Once an installment becomes exercisable it shall remain exercisable until expiration or termination of the Option, unless otherwise specified by the Committee.
C. PARTIAL EXERCISE. Each Option or installment may be exercised at any time or from time to time, in whole or in part, for up to the total number of shares with respect to which it is then exercisable.
D. ACCELERATION OF VESTING. The Committee shall have the right to accelerate the date on which any installment of any Option becomes exercisable; provided that the Committee shall not, without the consent of an optionee, accelerate the permitted exercise date of any installment of any Option granted to any employee as an ISO (and not previously converted into a Non-Qualified Option pursuant to paragraph 16) if such acceleration would violate the annual vesting limitation contained in Section 422(d) of the Code, as described in paragraph 6(C).
9. TERMINATION OF EMPLOYMENT. Unless otherwise specified in the agreement relating to such ISO, if an ISO optionee ceases to be employed by the Company and all Related Corporations other than by reason of death or disability as defined in paragraph 10, no further installments of his or her ISOs shall become exercisable, and his or her ISOs shall terminate after the passage of three months from the date of termination of his or her employment, but in no event later than on their specified expiration dates, except to the extent that such ISOs (or unexercised installments thereof) have been converted into Non-Qualified Options pursuant to paragraph 16. For purposes of this paragraph 9, employment shall be considered as continuing uninterrupted during any bona fide leave of absence (such as those attributable to illness, military obligations or governmental service) provided that the period of such leave does not exceed 90 days or, if longer, any period during which such optionee's right to reemployment is
guaranteed by statute. A bona fide leave of absence with the written approval of the Committee shall not be considered an interruption of employment under this paragraph 9, provided that such written approval contractually obligates the Company or any Related Corporation to continue the employment of the optionee after the approved period of absence. ISOs granted under the Plan shall not be affected by any change of employment within or among the Company and Related Corporations, so long as the optionee continues to be an employee of the Company or any Related Corporation. Nothing in the Plan shall be deemed to give any optionee the right to be retained in employment or other service by the Company or any Related Corporation for any period of time.
10. DEATH; DISABILITY.
A. DEATH. If an ISO optionee ceases to be employed by the Company and all Related Corporations by reason of his or her death, any ISO owned by such optionee may be exercised, to the extent permitted under the terms of the applicable stock option agreement, by the estate, personal representative or beneficiary who has acquired the ISO by will or by the laws of descent and distribution.
B. DISABILITY. If an ISO optionee ceases to be employed by the Company and all Related Corporations by reason of his or her disability, such optionee shall have the right to exercise any ISO held by him or her on the date of termination of employment, to the extent permitted under the terms of the applicable stock option agreement. For the purposes of the Plan, the term "disability" shall mean "permanent and total disability" as defined in Section 22(e)(3) of the Code or any successor statute.
11. ASSIGNABILITY. No Option shall be assignable or transferable by the optionee except by will or by the laws of descent and distribution. Except as set forth in the preceding sentence, during the lifetime of an optionee each Option shall be exercisable only by such optionee.
12. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by instruments (which need not be identical) in such forms as the Committee may from time to time approve. Such instruments shall conform to the terms and conditions set forth in paragraphs 6 through 11 hereof and may contain such other provisions as the Committee deems advisable which are not inconsistent with the Plan, including restrictions applicable to shares of Common Stock issuable upon exercise of Options. The Committee may specify that any Non-Qualified Option shall be subject to the restrictions set forth herein with respect to ISOs, or to such other termination and cancellation provisions as the Committee may determine. The Committee may from time to time confer authority and responsibility on one or more of its own members and/or one or more officers of the Company to execute and deliver such instruments. The proper officers of the Company are authorized and directed to take any and all action necessary or advisable from time to time to carry out the terms of such instruments.
13. ADJUSTMENTS. Upon the occurrence of any of the following events, an optionee's rights with respect to Options granted to such optionee hereunder shall be adjusted as hereinafter
provided, unless otherwise specifically provided in the written agreement between the optionee and the Company relating to such Option:
A. STOCK DIVIDENDS AND STOCK SPLITS. If the shares of Common Stock shall be subdivided or combined into a greater or smaller number of shares or if the Company shall issue any shares of Common Stock as a stock dividend on its outstanding Common Stock (other than in connection with the common stock dividend of 115-2/3 shares of Common Stock for each share of Common Stock declared by the Company's board of directors in February 1995), the number of shares of Common Stock deliverable upon the exercise of Options shall be appropriately increased or decreased proportionately, and appropriate adjustments shall be made in the purchase price per share to reflect such subdivision, combination or stock dividend.
B. CONSOLIDATIONS OR MERGERS. If the Company is to be
consolidated with or acquired by another entity in a merger, sale of all
or substantially all of the Company's assets or otherwise (an
"Acquisition"), the Committee or the board of directors of any entity
assuming the obligations of the Company hereunder (the "Successor Board"),
shall, as to outstanding Options, either (i) make appropriate provision
for the continuation of such Options by substituting on an equitable basis
for the shares then subject to such Options either (a) the consideration
payable with respect to the outstanding shares of Common Stock in
connection with the Acquisition, (b) shares of stock of the surviving
corporation or (c) such other securities as the Successor Board deems
appropriate, the fair market value of which shall not materially exceed
the fair market value of the shares of Common Stock subject to such
Options immediately prior to the Acquisition; or (ii) upon written notice
to the optionees, provide that all Options must be exercised, to the
extent then exercisable, within a specified number of days of the date of
such notice, at the end of which period the Options shall terminate; or
(iii) terminate all Options in exchange for a cash payment equal to the
excess of the fair market value of the shares subject to such Options (to
the extent then exercisable) over the exercise price thereof.
C. RECAPITALIZATION OR REORGANIZATION. In the event of a recapitalization or reorganization of the Company (other than a transaction described in subparagraph B above) pursuant to which securities of the Company or of another corporation are issued with respect to the outstanding shares of Common Stock, an optionee upon exercising an Option shall be entitled to receive for the purchase price paid upon such exercise the securities he or she would have received if he or she had exercised such Option prior to such recapitalization or reorganization.
D. MODIFICATION OF ISOS. Notwithstanding the foregoing, any adjustments made pursuant to subparagraphs A, B or C with respect to ISOs shall be made only after the Committee, after consulting with counsel for the Company, determines whether such adjustments would constitute a "modification" of such ISOs (as that term is defined in Section 424 of the Code) or would cause any adverse tax consequences for the holders of such ISOs. If the Committee determines that such adjustments made with respect to ISOs
would constitute a modification of such ISOs or would cause adverse tax consequences to the holders, it may refrain from making such adjustments.
E. DISSOLUTION OR LIQUIDATION. Subject to subparagraph B above if such dissolution or liquidation follows a sale of all or substantially of the Company's assets, in the event of the proposed dissolution or liquidation of the Company, each Option will terminate immediately prior to the consummation of such proposed action or at such other time and subject to such other conditions as shall be determined by the Committee.
F. ISSUANCES OF SECURITIES. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares subject to Options. No adjustments shall be made for dividends paid in cash or in property other than securities of the Company.
G. FRACTIONAL SHARES. No fractional shares shall be issued under the Plan and the optionee shall receive from the Company cash in lieu of such fractional shares.
H. ADJUSTMENTS. Upon the happening of any of the events described in subparagraphs A, B or C above, the class and aggregate number of shares set forth in paragraph 4 hereof that are subject to Options which previously have been or subsequently may be granted under the Plan shall also be appropriately adjusted to reflect the events described in such subparagraphs. The Committee or the Successor Board shall determine the specific adjustments to be made under this paragraph 13 and, subject to paragraph 2, its determination shall be conclusive.
14. MEANS OF EXERCISING OPTIONS. An Option (or any part or installment
thereof) shall be exercised by giving written notice to the Company at its
principal office address, or to such transfer agent as the Company shall
designate. Such notice shall identify the Option being exercised and specify the
number of shares as to which such Option is being exercised, accompanied by full
payment of the purchase price therefor either (a) in United States dollars in
cash or by check, (b) at the discretion of the Committee, through delivery of
shares of Common Stock having a fair market value equal as of the date of the
exercise to the cash exercise price of the Option, (c) at the discretion of the
Committee, by delivery of the optionee's personal recourse note bearing interest
payable not less than annually at no less than 100% of the lowest applicable
Federal rate, as defined in Section 1274(d) of the Code, (d) at the discretion
of the Committee and consistent with applicable law, through the delivery of an
assignment to the Company of a sufficient amount of the proceeds from the sale
of the Common Stock acquired upon exercise of the Option and an authorization to
the broker or selling agent to pay that amount to the Company, which sale shall
be at the participant's direction at the time of exercise, or (e) at the
discretion of the Committee, by any combination of (a), (b), (c) and (d) above.
If the Committee exercises its discretion to permit payment of the exercise
price of an ISO by means of the methods set forth in clauses (b), (c), (d) or
(e) of the preceding sentence, such discretion shall be exercised in writing at
the time of the grant of the ISO in question. The holder of a Option shall not
have the rights of a shareholder with respect to the shares covered by his
Option until the date of issuance of a
stock certificate to such holder for such shares. Except as expressly provided above in paragraph 13 with respect to changes in capitalization and stock dividends, no adjustment shall be made for dividends or similar rights for which the record date is before the date such stock certificate is issued.
15. TERM AND AMENDMENT OF PLAN. This Plan was adopted by the Board on
February 24, 1995, subject, with respect to the validation of ISOs granted under
the Plan, to approval of the Plan by the stockholders of the Company at the next
Meeting of Stockholders or, in lieu thereof, by written consent. If the approval
of stockholders is not obtained prior to February 24, 1996, any grants of ISOs
under the Plan made prior to that date will be rescinded. The Plan shall expire
at the end of the day on February 24, 2005 (except as to Options outstanding on
that date). Subject to the provisions of paragraph 5 above, Options may be
granted under the Plan prior to the date of stockholder approval of the Plan.
The Board may terminate or amend the Plan in any respect at any time, except
that, without the approval of the stockholders obtained within 12 months before
or after the Board adopts a resolution authorizing any of the following actions:
(a) the total number of shares that may be issued under the Plan may not be
increased (except by adjustment pursuant to paragraph 13); (b) the benefits
accruing to participants under the Plan may not be materially increased; (c) the
requirements as to eligibility for participation in the Plan may not be
materially modified; (d) the provisions of paragraph 3 regarding eligibility for
grants of ISOs may not be modified; (e) the provisions of paragraph 6(B)
regarding the exercise price at which shares may be offered pursuant to ISOs may
not be modified (except by adjustment pursuant to paragraph 13); (f) the
expiration date of the Plan may not be extended; and (g) the Board may not take
any action which would cause the Plan to fail to comply with Rule 16b-3. Except
as otherwise provided in this paragraph 15, in no event may action of the Board
or stockholders alter or impair the rights of an optionee, without such
optionee's consent, under any Option previously granted to such optionee.
16. CONVERSION OF ISOS INTO NON-QUALIFIED OPTIONS. The Committee, at the written request or with the written consent of any optionee, may in its discretion take such actions as may be necessary to convert such optionee's ISOs (or any installments or portions of installments thereof) that have not been exercised on the date of conversion into Non-Qualified Options at any time prior to the expiration of such ISOs, regardless of whether the optionee is an employee of the Company or a Related Corporation at the time of such conversion. Such actions may include, but shall not be limited to, extending the exercise period or reducing the exercise price of the appropriate installments of such ISOs. At the time of such conversion, the Committee (with the consent of the optionee) may impose such conditions on the exercise of the resulting Non-Qualified Options as the Committee in its discretion may determine, provided that such conditions shall not be inconsistent with this Plan. Nothing in the Plan shall be deemed to give any optionee the right to have such optionee's ISOs converted into Non-Qualified Options, and no such conversion shall occur until and unless the Committee takes appropriate action.
17. APPLICATION OF FUNDS. The proceeds received by the Company from the sale of shares pursuant to Options granted under the Plan shall be used for general corporate purposes.
18. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. By accepting an ISO
granted under the Plan, each optionee agrees to notify the Company in writing
immediately after such optionee makes a Disqualifying Disposition (as described
in Sections 421, 422 and 424 of the Code and regulations thereunder) of any
stock acquired pursuant to the exercise of ISOs granted under the Plan. A
Disqualifying Disposition is generally any disposition occurring on or before
the later of (a) the date two years following the date the ISO was granted or
(b) the date one year following the date the ISO was exercised.
19. WITHHOLDING OF ADDITIONAL INCOME TAXES. Upon the exercise of a Non-Qualified Option, the making of a Disqualifying Disposition (as defined in paragraph 18), the vesting or transfer of restricted stock or securities acquired on the exercise of a Option hereunder, or the making of a distribution or other payment with respect to such stock or securities, the Company may withhold taxes in respect of amounts that constitute compensation includible in gross income. The Committee in its discretion may condition (i) the exercise of an Option, or (ii) the vesting or transferability of restricted stock or securities acquired by exercising an Option, on the optionee's making satisfactory arrangement for such withholding. Such arrangement may include payment by the optionee in cash or by check of the amount of the withholding taxes or, at the discretion of the Committee, by the optionee's delivery of previously held shares of Common Stock or the withholding from the shares of Common Stock otherwise deliverable upon exercise of a Option shares having an aggregate fair market value equal to the amount of such withholding taxes.
20. GOVERNMENTAL REGULATION. The Company's obligation to sell and deliver shares of the Common Stock under this Plan is subject to the approval of any governmental authority required in connection with the authorization, issuance or sale of such shares.
Government regulations may impose reporting or other obligations on the Company with respect to the Plan. For example, the Company may be required to send tax information statements to employees and former employees that exercise ISOs under the Plan, and the Company may be required to file tax information returns reporting the income received by optionees in connection with the Plan.
21. GOVERNING LAW. The validity and construction of the Plan and the instruments evidencing Options shall be governed by the laws of Delaware, or the laws of any jurisdiction in which the Company or its successors in interest may be organized.
Exhibit 10.2
EXACT CORPORATION
2000 STOCK OPTION AND INCENTIVE PLAN
1. PURPOSE AND ELIGIBILITY
The purpose of this 2000 Stock Option and Incentive Plan (the "PLAN") of Exact Corporation (the "COMPANY") is to provide stock options and other equity interests in the Company (each an "AWARD") to employees, officers, directors, consultants and advisors of the Company and its Subsidiaries, all of whom are eligible to receive Awards under the Plan. Any person to whom an Award has been granted under the Plan is called a "PARTICIPANT". Additional definitions are contained in Section 8.
2. ADMINISTRATION
a. ADMINISTRATION BY BOARD OF DIRECTORS. The Plan will be administered by the Board of Directors of the Company (the "BOARD"). The Board, in its sole discretion, shall have the authority to grant and amend Awards, to adopt, amend and repeal rules relating to the Plan and to interpret and correct the provisions of the Plan and any Award. All decisions by the Board shall be final and binding on all interested persons. Neither the Company nor any member of the Board shall be liable for any action or determination relating to the Plan.
b. APPOINTMENT OF COMMITTEES. To the extent permitted by applicable law, the Board may delegate any or all of its powers under the Plan to one or more committees or subcommittees of the Board (a "COMMITTEE"). All references in the Plan to the "BOARD" shall mean such Committee or the Board.
c. DELEGATION TO EXECUTIVE OFFICERS. To the extent permitted by applicable law, the Board may delegate to one or more executive officers of the Company the power to grant Awards and exercise such other powers under the Plan as the Board may determine, PROVIDED THAT the Board shall fix the maximum number of Awards to be granted and the maximum number of shares issuable to any one Participant pursuant to Awards granted by such executive officers.
3. STOCK AVAILABLE FOR AWARDS
a. NUMBER OF SHARES. Subject to adjustment under Section 3(c), the aggregate number of shares of Common Stock, par value $.01 per share, of the Company (the "COMMON STOCK") that may be issued pursuant to the Plan is 1,000,000 shares, which number shall automatically increase on January 1, 2002 and each January 1 thereafter (each, an "Adjustment Date") by such number of shares as is equal to the greater of (i) 5% of the number of shares of Common Stock outstanding on the immediately preceding December 31, and (ii) the number of shares of Common Stock that has been made subject to Awards made under the Plan during the year immediately prior to such Adjustment Date; PROVIDED, HOWEVER, that the Board may provide for a lesser number of shares on any Adjustment Date by designating such lesser number by resolution adopted on or before such Adjustment Date; and PROVIDED FURTHER, HOWEVER, that the
cumulative number of additional shares that may be issued pursuant to the Plan
as a result of increases on all Adjustment Dates taken together may not exceed
20,000,000 shares (such number to be subject to adjustment in accordance with
Section 3(c) below). If any Award expires, or is terminated, surrendered or
forfeited, in whole or in part, the unissued Common Stock covered by such Award
shall again be available for the grant of Awards under the Plan. If shares of
Common Stock issued pursuant to the Plan are repurchased by, or are surrendered
or forfeited to, the Company at no more than cost, such shares of Common Stock
shall again be available for the grant of Awards under the Plan; PROVIDED,
HOWEVER, that the cumulative number of such shares that may be so reissued under
the Plan will not exceed the total of 1,000,000 shares plus the number of
additional shares resulting from Adjustment Date increases effected in
accordance with this Section 3(a) (such number to be subject to adjustment in
accordance with Section 3(c) below). Shares issued under the Plan may consist in
whole or in part of authorized but unissued shares or treasury shares.
b. PER-PARTICIPANT LIMIT. Subject to adjustment under Section 3(c), no Participant may be granted Awards during any one fiscal year to purchase more than 500,000 shares of Common Stock.
c. ADJUSTMENT TO COMMON STOCK. In the event of any stock split, stock dividend, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, combination, exchange of shares, liquidation, spin-off, split-up, or other similar change in capitalization or event, (i) the number and class of securities available for Awards under the Plan and the per-Participant share limit, (ii) the number and class of securities, vesting schedule and exercise price per share subject to each outstanding Option, (iii) the repurchase price per security subject to repurchase, and (iv) the terms of each other outstanding stock-based Award shall be adjusted by the Company (or substituted Awards may be made) to the extent the Board shall determine, in good faith, that such an adjustment (or substitution) is appropriate. If Section 7(e)(i) applies for any event, this Section 3(c) shall not be applicable.
4. STOCK OPTIONS
a. GENERAL. The Board may grant options to purchase Common Stock (each, an "OPTION") and determine the number of shares of Common Stock to be covered by each Option, the exercise price of each Option and the conditions and limitations applicable to the exercise of each Option and the Common Stock issued upon the exercise of each Option, including vesting provisions, repurchase provisions and restrictions relating to applicable federal or state securities laws, as it considers advisable.
b. INCENTIVE STOCK OPTIONS. An Option that the Board intends to be an "incentive stock option" as defined in Section 422 of the Code (an "INCENTIVE STOCK OPTION") shall be granted only to employees of the Company and shall be subject to and shall be construed consistently with the requirements of Section 422 of the Code. The Board and the Company shall have no liability if an Option or any part thereof that is intended to be an Incentive Stock Option does not qualify as such. An Option or any part thereof that does not qualify as an Incentive Stock Option is referred to herein as a "NONSTATUTORY STOCK OPTION."
c. EXERCISE PRICE. The Board shall establish the exercise price (or determine the method by which the exercise price shall be determined) at the time each Option is granted and specify it in the applicable option agreement.
d. DURATION OF OPTIONS. Each Option shall be exercisable at such times and subject to such terms and conditions as the Board may specify in the applicable option agreement.
e. EXERCISE OF OPTION. Options may be exercised only by delivery to the Company of a written notice of exercise signed by the proper person together with payment in full as specified in Section 4(f) for the number of shares for which the Option is exercised.
f. PAYMENT UPON EXERCISE. Common Stock purchased upon the exercise of an Option shall be paid for by one or any combination of the following forms of payment:
(i) by check payable to the order of the Company;
(ii) except as otherwise explicitly provided in the applicable option agreement, and only if the Common Stock is then publicly traded, delivery of an irrevocable and unconditional undertaking by a creditworthy broker to deliver promptly to the Company sufficient funds to pay the exercise price, or delivery by the Participant to the Company of a copy of irrevocable and unconditional instructions to a creditworthy broker to deliver promptly to the Company cash or a check sufficient to pay the exercise price; or
(iii) to the extent explicitly provided in the applicable option agreement, by (x) delivery of shares of Common Stock owned by the Participant valued at fair market value (as determined by the Board or as determined pursuant to the applicable option agreement), (y) delivery of a promissory note of the Participant to the Company (and delivery to the Company by the Participant of a check in an amount equal to the par value of the shares purchased), or (z) payment of such other lawful consideration as the Board may determine.
5. RESTRICTED STOCK
a. GRANTS. The Board may grant Awards entitling recipients to acquire shares of Common Stock, subject to (i) delivery to the Company by the Participant of a check in an amount at least equal to the par value of the shares purchased, and (ii) the right of the Company to repurchase all or part of such shares at their issue price or other stated or formula price from the Participant in the event that conditions specified by the Board in the applicable Award are not satisfied prior to the end of the applicable restriction period or periods established by the Board for such Award (each, a "RESTRICTED STOCK AWARD").
b. TERMS AND CONDITIONS. The Board shall determine the terms and conditions of any such Restricted Stock Award. Any stock certificates issued in respect of a Restricted Stock Award 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 (or its designee). After the expiration of the applicable restriction periods, the Company (or such designee) shall deliver the certificates no longer subject to such restrictions to the Participant or, if the Participant has died, to the beneficiary designated by a Participant, in a manner determined by the Board, to receive amounts due or exercise rights of the Participant in the event of the Participant's death (the "DESIGNATED BENEFICIARY"). In the absence of an effective designation by a Participant, Designated Beneficiary shall mean the Participant's estate.
6. OTHER STOCK-BASED AWARDS
The Board shall have the right to grant other Awards based upon the Common Stock having such terms and conditions as the Board may determine, including, without limitation, the grant of shares based upon certain conditions, the grant of securities convertible into Common Stock and the grant of stock appreciation rights, phantom stock awards or stock units.
7. GENERAL PROVISIONS APPLICABLE TO AWARDS
a. TRANSFERABILITY OF AWARDS. Except as the Board may otherwise determine or provide in an Award, Awards shall not be sold, assigned, transferred, pledged or otherwise encumbered by the person to whom they are granted, either voluntarily or by operation of law, except by will or the laws of descent and distribution, and, during the life of the Participant, shall be exercisable only by the Participant. References to a Participant, to the extent relevant in the context, shall include references to authorized transferees.
b. DOCUMENTATION. Each Award under the Plan shall be evidenced by a written instrument in such form as the Board shall determine or as executed by an officer of the Company pursuant to authority delegated by the Board. Each Award may contain terms and conditions in addition to those set forth in the Plan PROVIDED THAT such terms and conditions do not contravene the provisions of the Plan.
c. BOARD DISCRETION. The terms of each type of Award need not be identical, and the Board need not treat Participants uniformly.
d. TERMINATION OF STATUS. The Board shall determine the effect on an Award of the disability, death, retirement, authorized leave of absence or other change in the employment or other status of a Participant and the extent to which, and the period during which, the Participant, or the Participant's legal representative, conservator, guardian or Designated Beneficiary, may exercise rights under the Award.
e. ACQUISITION OF THE COMPANY
(i) CONSEQUENCES OF AN ACQUISITION.
(A) ACQUISITION. Upon the consummation of an Acquisition: (x) all outstanding Awards shall remain the obligation of the Company or be assumed by the surviving or acquiring entity, and there shall be automatically substituted for the shares of Common Stock then subject to such Awards the consideration payable with respect to the outstanding shares of Common Stock in connection with the Acquisition and (y) all outstanding Awards shall vest as if the vesting start date with respect to such Award was one year prior to the vesting start date set forth in the agreement relating to such Award. In addition to the foregoing, with respect to Awards granted prior to the consummation of the Acquisition, in the event that any such Participant who remains an employee of the Company or the acquiring or surviving entity immediately following the consummation of the Acquisition is terminated without "CAUSE" (as defined in the applicable option agreement) or terminates his or her own employment "FOR GOOD REASON" (as defined below) prior to the first anniversary of the consummation of the Acquisition: (1) all Options outstanding on the date such Participant's employment is terminated, shall become immediately exercisable in full and will terminate, to the extent unexercised, on their scheduled expiration date, and if the shares of Common Stock subject to such Options are subject to repurchase provisions then such repurchase restrictions shall immediately lapse; (2) all Restricted Stock Awards outstanding on the date such Participant's employment is terminated, shall become free of all repurchase provisions; and (3) all other stock-based Awards shall become exercisable, realizable or vested in full, or shall be free of all repurchase provisions, as the case may be.
"GOOD REASON" means, with respect to any Employee, any of the following actions taken without the employee's consent: (i) a reduction by the Company in the employee's annual base salary as in effect on the date of the consummation of the Acquisition or as the same may be increased from time to time; or (ii) the failure by the Company to pay to the employee any portion of the employee's current compensation within seven (7) days of the date such compensation is due; or (iii) a substantial reduction in the value of the employee's benefit package from the value of the employee's benefit package on the date of the consummation of the Acquisition.
(B) ACQUISITION DEFINED. An "ACQUISITION" shall mean:
(x) any merger, consolidation or purchase of outstanding capital stock of the
Company after which the voting securities of the Company outstanding immediately
prior thereto represent (either by remaining outstanding or by being converted
into voting securities of the surviving or acquiring entity) less than 50% of
the combined voting power of the voting securities of the Company or such
surviving or acquiring entity outstanding immediately after such event (other
than as a result of a financing transaction); (y) any sale of all or
substantially all of the assets or capital stock of the Company (other than in a
spin-off or similar transaction) or (z) any other acquisition of the business of
the Company, as determined by the Board.
(ii) ASSUMPTION OF OPTIONS UPON CERTAIN EVENTS. In connection with a merger or consolidation of an entity with the Company or the acquisition by the Company of property or
stock of an entity, the Board may grant Awards under the Plan in substitution for stock and stock-based awards issued by such entity or an affiliate thereof. The substitute Awards shall be granted on such terms and conditions as the Board considers appropriate in the circumstances.
(iii) POOLING-OF INTERESTS-ACCOUNTING. If the Company proposes to engage in an Acquisition intended to be accounted for as a pooling-of-interests, and in the event that the provisions of this Plan or of any Award hereunder, or any actions of the Board taken in connection with such Acquisition, are determined by the Company's or the acquiring company's independent public accountants to cause such Acquisition to fail to be accounted for as a pooling-of-interests, then such provisions or actions shall be amended or rescinded by the Board, without the consent of any Participant, to be consistent with pooling-of-interests accounting treatment for such Acquisition.
(iv) PARACHUTE AWARDS. Notwithstanding the provisions of
Section 7(e)(i)(A), if, in connection with an Acquisition described therein, a
tax under Section 4999 of the Code would be imposed on the Participant (after
taking into account the exceptions set forth in Sections 280G(b)(4) and
280G(b)(5) of the Code), then the number of Awards which shall become
exercisable, realizable or vested as provided in such section shall be reduced
(or delayed), to the minimum extent necessary, so that no such tax would be
imposed on the Participant (the Awards not becoming so accelerated, realizable
or vested, the "PARACHUTE AWARDS"); PROVIDED, HOWEVER, that if the "aggregate
present value" of the Parachute Awards would exceed the tax that, but for this
sentence, would be imposed on the Participant under Section 4999 of the Code in
connection with the Acquisition, then the Awards shall become immediately
exercisable, realizable and vested without regard to the provisions of this
sentence. For purposes of the preceding sentence, the "AGGREGATE PRESENT VALUE"
of an Award shall be calculated on an after-tax basis (other than taxes imposed
by Section 4999 of the Code) and shall be based on economic principles rather
than the principles set forth under Section 280G of the Code and the regulations
promulgated thereunder. All determinations required to be made under this
Section 7(e)(iv) shall be made by the Company.
f. WITHHOLDING. Each Participant shall pay to the Company, or make provisions satisfactory to the Company for payment of, any taxes required by law to be withheld in connection with Awards to such Participant no later than the date of the event creating the tax liability. The Board may allow Participants to satisfy such tax obligations in whole or in part by transferring shares of Common Stock, including shares retained from the Award creating the tax obligation, valued at their fair market value (as determined by the Board or as determined pursuant to the applicable option agreement). The Company may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to a Participant.
g. AMENDMENT OF AWARDS. The Board may amend, modify or terminate any outstanding Award including, but not limited to, substituting therefor another Award of the same or a different type, changing the date of exercise or realization, and converting an Incentive Stock Option to a Nonstatutory Stock Option, PROVIDED THAT, except as otherwise provided in Section 7(e)(iii), 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.
h. CONDITIONS ON DELIVERY OF STOCK. The Company will not be obligated to deliver any shares of Common Stock pursuant to the Plan or to remove restrictions from shares previously delivered under the Plan until (i) all conditions of the Award have been met or removed to the satisfaction of the Company, (ii) in the opinion of the Company's counsel, all other legal matters in connection with the issuance and delivery of such shares have been satisfied, including any applicable securities laws and any applicable stock exchange or stock market rules and regulations, and (iii) the Participant has executed and delivered to the Company such representations or agreements as the Company may consider appropriate to satisfy the requirements of any applicable laws, rules or regulations.
i. ACCELERATION. The Board may at any time provide that any Options shall become immediately exercisable in full or in part, that any Restricted Stock Awards shall be free of some or all restrictions, or that any other stock-based Awards may become exercisable in full or in part or free of some or all restrictions or conditions, or otherwise realizable in full or in part, as the case may be, despite the fact that the foregoing actions may (i) cause the application of Sections 280G and 4999 of the Code if a change in control of the Company occurs, or (ii) disqualify all or part of the Option as an Incentive Stock Option.
8. MISCELLANEOUS
a. DEFINITIONS.
(i) "COMPANY," for purposes of eligibility under the Plan, shall include any present or future subsidiary corporations of Exact Corporation, as defined in Section 424(f) of the Code (a "SUBSIDIARY"), and any present or future parent corporation of Exact Corporation, as defined in Section 424(e) of the Code. For purposes of Awards other than Incentive Stock Options, the term "COMPANY" shall include any other business venture in which the Company has a direct or indirect significant interest, as determined by the Board in its sole discretion.
(ii) "CODE" means the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder.
(iii) "EMPLOYEE" for purposes of eligibility under the Plan (but not for purposes of Section 4(b)) shall include a person to whom an offer of employment has been extended by the Company.
b. NO RIGHT TO EMPLOYMENT OR OTHER STATUS. No person shall have any claim or right to be granted an Award, and the grant of an Award shall not be construed as giving a Participant the right to continued employment or any other relationship with the Company. The Company expressly reserves the right at any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or claim under the Plan.
c. NO RIGHTS AS STOCKHOLDER. Subject to the provisions of the applicable Award, no Participant or Designated Beneficiary shall have any rights as a stockholder with respect to any shares of Common Stock to be distributed with respect to an Award until becoming the record holder thereof.
d. EFFECTIVE DATE AND TERM OF PLAN. The Plan shall become effective on the date on which it is adopted by the Board. No Awards shall be granted under the Plan after the completion of ten years from the date on which the Plan was adopted by the Board, but Awards previously granted may extend beyond that date.
e. AMENDMENT OF PLAN. The Board may amend, suspend or terminate the Plan or any portion thereof at any time.
f. GOVERNING LAW. The provisions of the Plan and all Awards made hereunder shall be governed by and interpreted in accordance with the laws of Delaware, without regard to any applicable conflicts of law.
Adopted by the Board of Directors on
Approved by the stockholders on
Exhibit 10.3
EXACT CORPORATION
2000 EMPLOYEE STOCK PURCHASE PLAN
ARTICLE 1 - PURPOSE.
This 2000 Employee Stock Purchase Plan (the "Plan") is intended to encourage stock ownership by all eligible employees of Exact Corporation (the "Company"), a Delaware corporation, and its participating subsidiaries (as defined in Article 17) so that they may share in the growth of the Company by acquiring or increasing their proprietary interest in the Company. The Plan is designed to encourage eligible employees to remain in the employ of the Company and its participating subsidiaries. The Plan is intended to constitute an "employee stock purchase plan" within the meaning of Section 423(b) of the Internal Revenue Code of 1986, as amended (the "Code").
ARTICLE 2 - ADMINISTRATION OF THE PLAN.
The Plan may be administered by a committee appointed by the Board of Directors of the Company (the "Committee"). The Committee shall consist of not less than two members of the Company's Board of Directors. The Board of Directors may from time to time remove members from, or add members to, the Committee. Vacancies on the Committee, howsoever caused, shall be filled by the Board of Directors. The Committee may select one of its members as Chairman, and shall hold meetings at such times and places as it may determine. Acts by a majority of the Committee, or acts reduced to or approved in writing by a majority of the members of the Committee, shall be the valid acts of the Committee.
The interpretation and construction by the Committee of any provisions of the Plan or of any option granted under it shall be final, unless otherwise determined by the Board of Directors. The Committee may from time to time adopt such rules and regulations for carrying out the Plan as it may deem best, provided that any such rules and regulations shall be applied on a uniform basis to all employees under the Plan. No member of the Board of Directors or the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any option granted under it.
In the event the Board of Directors fails to appoint or refrains from appointing a Committee, the Board of Directors shall have all power and authority to administer the Plan. In such event, the word "Committee" wherever used herein shall be deemed to mean the Board of Directors.
ARTICLE 3 - ELIGIBLE EMPLOYEES.
All employees of the Company or any of its participating subsidiaries whose customary employment is more than 20 hours per week and for more than five months in any calendar year and who have completed three months of service shall be eligible to receive options under
the Plan to purchase common stock of the Company, and all eligible employees shall have the same rights and privileges hereunder; provided, however, that with respect to the First Payment Period (as defined below), all employees of the Company or any of its participating subsidiaries employed on the first day of the First Payment Period and whose customary employment is more than 20 hours per week and for more than five months in any calendar year shall be eligible to receive options under the Plan to purchase common stock of the Company. Persons who are eligible employees on the first business day of any Payment Period (as defined in Article 5) shall receive their options as of such day. Persons who become eligible employees after any date on which options are granted under the Plan shall be granted options on the first day of the next succeeding Payment Period on which options are granted to eligible employees under the Plan. In no event, however, may an employee be granted an option if such employee, immediately after the option was granted, would be treated as owning stock possessing five percent or more of the total combined voting power or value of all classes of stock of the Company or of any parent corporation or subsidiary corporation, as the terms "parent corporation" and "subsidiary corporation" are defined in Section 424(e) and (f) of the Code. For purposes of determining stock ownership under this paragraph, the rules of Section 424(d) of the Code shall apply, and stock which the employee may purchase under outstanding options shall be treated as stock owned by the employee.
ARTICLE 4 - STOCK SUBJECT TO THE PLAN.
The stock subject to the options under the Plan shall be shares of the Company's authorized but unissued common stock, par value $.01 per share (the "Common Stock"), or shares of Common Stock reacquired by the Company, including shares purchased in the open market. The aggregate number of shares which may be issued pursuant to the Plan is 300,000, subject to adjustment as provided in Article 12. If any option granted under the Plan shall expire or terminate for any reason without having been exercised in full or shall cease for any reason to be exercisable in whole or in part, the unpurchased shares subject thereto shall again be available under the Plan.
Beginning February 1, 2002 and each February 1 thereafter (each, an "Adjustment Date"), the number of shares which may be issued pursuant to the Plan shall automatically increase by such number of shares as is equal to the greater of (i) 0.75% of the number of shares of Common Stock outstanding on the immediately preceding December 31, and (ii) the number of shares of Common Stock that has been made subject to options under the Plan during the year immediately preceding such Adjustment Date; provided, however, that the Board may provide for a lesser number of shares on any Adjustment Date by designating such lesser number by resolution adopted on or before such Adjustment Date; and provided further, however that the cumulative number of additional shares that may be issued pursuant to the Plan as a result of increases on all Adjustment Dates taken together may not exceed 1,000,000 shares (such number to be subject to adjustment in accordance with Article 12 below).
ARTICLE 5 - PAYMENT PERIOD AND STOCK OPTIONS.
The first Payment Period during which payroll deductions will be accumulated under the Plan shall commence on the effective date of the registration statement on Form S-1 registering
the shares to be offered in the initial public offering of the Common Stock (the "Offering") and shall end on July 31, 2001 (the "First Payment Period"). For the remainder of the duration of the Plan, Payment Periods shall consist of six-month periods commencing on February 1 and August 1 and ending on July 31 and January 31 of each calendar year.
Twice each year, on the first business day of each Payment Period, the Company will grant to each eligible employee who is then a participant in the Plan an option to purchase on the last day of such Payment Period, at the Option Price hereinafter provided for, a maximum of 1,000 shares, on condition that such employee remains eligible to participate in the Plan throughout the remainder of such Payment Period. The participant shall be entitled to exercise the option so granted only to the extent of the participant's accumulated payroll deductions on the last day of such Payment Period. If the participant's accumulated payroll deductions on the last day of the Payment Period would enable the participant to purchase more than the maximum number of shares provided herein except for the share limitation set forth herein, the excess of the amount of the accumulated payroll deductions over the aggregate purchase price of the maximum number of shares which many be purchased in accordance with this Article 5 shall be promptly refunded to the participant by the Company, without interest. The Option Price per share for each Payment Period shall be the lesser of (i) 85% of the average market price of the Common Stock on the first business day of the Payment Period and (ii) 85% of the average market price of the Common Stock on the last business day of the Payment Period, in either event rounded up to the nearest cent. Notwithstanding the foregoing, with respect to the First Payment Period, the Option Price shall be calculated as the lesser of (i) 85% of the price per share at which the Common Stock is sold to the underwriters in the Offering, without regard to any applicable discounts or commissions provided to such underwriters, and (ii) 85% of the average market price of the Common Stock on the last business day of the First Payment Period. The foregoing limitation on the number of shares subject to option and the Option Price shall be subject to adjustment as provided in Article 12.
For purposes of the Plan, the term "average market price" on any date
means (i) the average (on that date) of the high and low prices of the Common
Stock on the principal national securities exchange on which the Common Stock is
traded, if the Common Stock is then traded on a national securities exchange; or
(ii) the last reported sale price (on that date) of the Common Stock on the
NASDAQ National Market, if the Common Stock is not then traded on a national
securities exchange; or (iii) the average of the closing bid and asked prices
last quoted (on that date) by an established quotation service for
over-the-counter securities, if the Common Stock is not reported on the NASDAQ
National Market; or (iv) if the Common Stock is not publicly traded, the fair
market value of the Common Stock as determined by the Committee after taking
into consideration all factors which it deems appropriate, including, without
limitation, recent sale and offer prices of the Common Stock in private
transactions negotiated at arm's length.
For purposes of the Plan, the term "business day" means a day on which there is trading on the NASDAQ National Market or the aforementioned national securities exchange, whichever is applicable pursuant to the preceding paragraph; and if neither is applicable, a day that is not a Saturday, Sunday or legal holiday in State of Massachusetts.
No employee shall be granted an option which permits the employee's
right to purchase stock under the Plan, and under all other Section 423(b)
employee stock purchase plans of the Company and any parent or subsidiary
corporations, to accrue at a rate which exceeds $25,000 of fair market value of
such stock (determined on the date or dates that options on such stock were
granted) for each calendar year in which such option is outstanding at any time.
The purpose of the limitation in the preceding sentence is to comply with
Section 423(b)(8) of the Code. If the participant's accumulated payroll
deductions on the last day of the Payment Period would otherwise enable the
participant to purchase Common Stock in excess of the Section 423(b)(8)
limitation described in this paragraph, the excess of the amount of the
accumulated payroll deductions over the aggregate purchase price of the shares
actually purchased shall be promptly refunded to the participant by the Company,
without interest.
ARTICLE 6 - EXERCISE OF OPTION.
Each eligible employee who continues to be a participant in the Plan on
the last day of a Payment Period shall be deemed to have exercised his or her
option on such date and shall be deemed to have purchased from the Company such
number of full shares of Common Stock reserved for the purpose of the Plan as
the participant's accumulated payroll deductions on such date will pay for at
the Option Price, subject to the maximum share limit of the option and the
Section 423(b)(8) limitation described in Article 5. If the individual is not a
participant on the last day of a Payment Period, the he or she shall not be
entitled to exercise his or her option. Only full shares of Common Stock may be
purchased under the Plan. Unused payroll deductions remaining in a participant's
account at the end of a Payment Period by reason of the inability to purchase a
fractional share shall be carried forward to the next Payment Period.
ARTICLE 7 - AUTHORIZATION FOR ENTERING THE PLAN.
An employee may elect to enter the Plan by filling out, signing and delivering to the Company an authorization:
A. Stating the percentage to be deducted regularly from the employee's pay;
B. Authorizing the purchase of stock for the employee in each Payment Period in accordance with the terms of the Plan; and
C. Specifying the exact name or names in which stock purchased for the employee is to be issued as provided under Article 11 hereof.
Such authorization must be received by the Company at least ten days before the first day of the next succeeding Payment Period and shall take effect only if the employee is an eligible employee on the first business day of such Payment Period; provided, however, that with respect to the First Payment Period, an option shall be granted to each eligible employee and such authorization to participate in the plan must be received no more than three weeks following the first day of the First Payment Period.
Unless a participant files a new authorization or withdraws from the Plan, the deductions and purchases under the authorization the participant has on file under the Plan will continue from one Payment Period to succeeding Payment Periods as long as the Plan remains in effect.
The Company will accumulate and hold for each participant's account the amounts deducted from his or her pay. No interest will be paid on these amounts.
ARTICLE 8 - MAXIMUM AMOUNT OF PAYROLL DEDUCTIONS.
An employee may authorize payroll deductions in an amount (expressed as a whole percentage) not less than one percent (1%) but not more than ten percent (10%) of the employee's total compensation, including base pay or salary and any overtime, bonuses or commissions.
ARTICLE 9 - CHANGE IN PAYROLL DEDUCTIONS.
Deductions may not be increased or decreased during a Payment Period. However, a participant may withdraw in full from the Plan.
ARTICLE 10 - WITHDRAWAL FROM THE PLAN.
A participant may withdraw from the Plan (in whole but not in part) at any time prior to the last day of a Payment Period by delivering a withdrawal notice to the Company.
To re-enter the Plan, an employee who has previously withdrawn must file a new authorization at least ten days before the first day of the next Payment Period in which he or she wishes to participate. The employee's re-entry into the Plan becomes effective at the beginning of such Payment Period, provided that he or she is an eligible employee on the first business day of the Payment Period.
ARTICLE 11 - ISSUANCE OF STOCK.
Certificates for stock issued to participants shall be delivered as soon as practicable after each Payment Period by the Company's transfer agent.
Stock purchased under the Plan shall be issued only in the name of the participant, or if the participant's authorization so specifies, in the name of the participant and another person of legal age as joint tenants with rights of survivorship.
ARTICLE 12 - ADJUSTMENTS.
Upon the happening of any of the following described events, a participant's rights under options granted under the Plan shall be adjusted as hereinafter provided:
A. In the event that the shares of Common Stock shall be subdivided or combined into a greater or smaller number of shares or if, upon a reorganization, split-up,
liquidation, recapitalization or the like of the Company, the shares of Common Stock shall be exchanged for other securities of the Company, each participant shall be entitled, subject to the conditions herein stated, to purchase such number of shares of Common Stock or amount of other securities of the Company as were exchangeable for the number of shares of Common Stock that such participant would have been entitled to purchase except for such action, and appropriate adjustments shall be made in the purchase price per share to reflect such subdivision, combination or exchange; and
B. In the event the Company shall issue any of its shares as a stock dividend upon or with respect to the shares of stock of the class which shall at the time be subject to option hereunder, each participant upon exercising such an option shall be entitled to receive (for the purchase price paid upon such exercise) the shares as to which the participant is exercising his or her option and, in addition thereto (at no additional cost), such number of shares of the class or classes in which such stock dividend or dividends were declared or paid, and such amount of cash in lieu of fractional shares, as is equal to the number of shares thereof and the amount of cash in lieu of fractional shares, respectively, which the participant would have received if the participant had been the holder of the shares as to which the participant is exercising his or her option at all times between the date of the granting of such option and the date of its exercise.
Upon the happening of any of the foregoing events, the class and aggregate number of shares set forth in Article 4 hereof which are subject to options which have been or may be granted under the Plan and the limitations set forth in the second paragraph of Article 5 shall also be appropriately adjusted to reflect the events specified in paragraphs A and B above. Notwithstanding the foregoing, any adjustments made pursuant to paragraphs A or B shall be made only after the Committee, based on advice of counsel for the Company, determines whether such adjustments would constitute a "modification" (as that term is defined in Section 424 of the Code). If the Committee determines that such adjustments would constitute a modification, it may refrain from making such adjustments.
If the Company is to be consolidated with or acquired by another entity in a merger, a sale of all or substantially all of the Company's assets or otherwise (an "Acquisition"), the Committee or the board of directors of any entity assuming the obligations of the Company hereunder (the "Successor Board") shall, with respect to options then outstanding under the Plan, either (i) make appropriate provision for the continuation of such options by arranging for the substitution on an equitable basis for the shares then subject to such options either (a) the consideration payable with respect to the outstanding shares of the Common Stock in connection with the Acquisition, (b) shares of stock of the successor corporation, or a parent or subsidiary of such corporation, or (c) such other securities as the Successor Board deems appropriate, the fair market value of which shall not materially exceed the fair market value of the shares of Common Stock subject to such options immediately preceding the Acquisition; or (ii) terminate each participant's options in exchange for a cash payment equal to the excess of (a) the fair market value on the date of the Acquisition, of the number of shares of Common Stock that the participant's accumulated payroll deductions as of the date of the Acquisition could purchase, at an option price determined with reference only to the first business day of the applicable Payment Period and subject to the maximum share limitation set forth in Article 5 hereof, Code
Section 423(b)(8) and fractional-share limitations on the amount of stock a participant would be entitled to purchase, over (b) the result of multiplying such number of shares by such option price.
The Committee or Successor Board shall determine the adjustments to be made under this Article 12, and its determination shall be conclusive.
ARTICLE 13 - NO TRANSFER OR ASSIGNMENT OF EMPLOYEE'S RIGHTS.
An option granted under the Plan may not be transferred or assigned, except by will or the laws of descent and distribution, and shall be exercised, during the particpant's lifetime, only by the participant.
ARTICLE 14 - TERMINATION OF EMPLOYEE'S RIGHTS.
Whenever a participant ceases to be an eligible employee because of retirement, voluntary or involuntary termination, resignation, layoff, discharge, death or for any other reason, his or her rights under the Plan shall immediately terminate, and the Company shall promptly refund, without interest, the entire balance of his or her payroll deduction account under the Plan. Notwithstanding the foregoing, eligible employment shall be treated as continuing intact while a participant is on military leave, sick leave or other bona fide leave of absence, for up to 90 days, or for so long as the participant's right to re-employment is guaranteed either by statute or by contract, if longer than 90 days.
ARTICLE 15 - TERMINATION AND AMENDMENTS TO PLAN.
Unless terminated sooner as provided below, the Plan shall terminate on January 31, 2011. The Plan may be terminated at any time by the Company's Board of Directors but such termination shall not affect options then outstanding under the Plan. It will terminate in any case when all or substantially all of the unissued shares of stock reserved for the purposes of the Plan have been purchased. If at any time shares of stock reserved for the purpose of the Plan remain available for purchase but not in sufficient number to satisfy all then unfilled purchase requirements, the available shares shall be apportioned among participants in proportion to the amount of payroll deductions accumulated on behalf of each participant that would otherwise be used to purchase stock, and the Plan shall terminate. Upon such termination or any other termination of the Plan, all payroll deductions not used to purchase stock will be refunded, without interest.
The Committee or the Board of Directors may from time to time adopt amendments to the Plan provided that, without the approval of the stockholders of the Company, no amendment may (i) increase the number of shares that may be issued under the Plan; (ii) change the class of employees eligible to receive options under the Plan, if such action would be treated as the adoption of a new plan for purposes of Section 423(b) of the Code; or (iii) cause Rule 16b-3 under the Securities Exchange Act of 1934 to become inapplicable to the Plan.
ARTICLE 16 - LIMITS ON SALE OF STOCK PURCHASED UNDER THE PLAN.
The Plan is intended to provide shares of Common Stock for investment and not for resale. The Company does not, however, intend to restrict or influence any employee in the conduct of his or her own affairs. An employee may, therefore, sell stock purchased under the Plan at any time the employee chooses, subject to compliance with any applicable federal or state securities laws and subject to any restrictions imposed under Article 21 to ensure that tax withholding obligations are satisfied. THE EMPLOYEE ASSUMES THE RISK OF ANY MARKET FLUCTUATIONS IN THE PRICE OF THE STOCK.
ARTICLE 17 - PARTICIPATING SUBSIDIARIES.
The term "participating subsidiary" shall mean any present or future subsidiary of the Company, as that term is defined in Section 424(f) of the Code, which is designated from time to time by the Board of Directors to participate in the Plan. The Board of Directors shall have the power to make such designation before or after the Plan is approved by the stockholders.
ARTICLE 18 - OPTIONEES NOT STOCKHOLDERS.
Neither the granting of an option to an employee nor the deductions from his or her pay shall constitute such employee a stockholder of the shares covered by an option until such shares have been actually purchased by the employee.
ARTICLE 19 - APPLICATION OF FUNDS.
The proceeds received by the Company from the sale of Common Stock pursuant to options granted under the Plan will be used for general corporate purposes.
ARTICLE 20 - NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION.
By electing to participate in the Plan, each participant agrees to notify the Company in writing immediately after the participant transfers Common Stock acquired under the Plan, if such transfer occurs within two years after the first business day of the Payment Period in which such Common Stock was acquired. Each participant further agrees to provide any information about such a transfer as may be requested by the Company or any subsidiary corporation in order to assist it in complying with the tax laws. Such dispositions generally are treated as "disqualifying dispositions" under Sections 421 and 424 of the Code, which have certain tax consequences to participants and to the Company and its participating subsidiaries.
ARTICLE 21 - WITHHOLDING OF ADDITIONAL INCOME TAXES.
By electing to participate in the Plan, each participant acknowledges that the Company and its participating subsidiaries are required to withhold taxes with respect to the amounts deducted from the participant's compensation and accumulated for the benefit of the participant under the Plan, and each participant agrees that the Company and its participating subsidiaries may deduct additional amounts from the participant's compensation, when amounts are added to
the participant's account, used to purchase Common Stock or refunded, in order to satisfy such withholding obligations. Each participant further acknowledges that when Common Stock is purchased under the Plan the Company and its participating subsidiaries may be required to withhold taxes with respect to all or a portion of the difference between the fair market value of the Common Stock purchased and its purchase price, and each participant agrees that such taxes may be withheld from compensation otherwise payable to such participant. It is intended that tax withholding will be accomplished in such a manner that the full amount of payroll deductions elected by the participant under Article 7 will be used to purchase Common Stock. However, if amounts sufficient to satisfy applicable tax withholding obligations have not been withheld from compensation otherwise payable to any participant, then, notwithstanding any other provision of the Plan, the Company may withhold such taxes from the participant's accumulated payroll deductions and apply the net amount to the purchase of Common Stock, unless the participant pays to the Company, prior to the exercise date, an amount sufficient to satisfy such withholding obligations. Each participant further acknowledges that the Company and its participating subsidiaries may be required to withhold taxes in connection with the disposition of stock acquired under the Plan and agrees that the Company or any participating subsidiary may take whatever action it considers appropriate to satisfy such withholding requirements, including deducting from compensation otherwise payable to such participant an amount sufficient to satisfy such withholding requirements or conditioning any disposition of Common Stock by the participant upon the payment to the Company or such subsidiary of an amount sufficient to satisfy such withholding requirements.
ARTICLE 22 - GOVERNMENTAL REGULATIONS.
The Company's obligation to sell and deliver shares of Common Stock under the Plan is subject to the approval of any governmental authority required in connection with the authorization, issuance or sale of such shares.
Government regulations may impose reporting or other obligations on the Company with respect to the Plan. For example, the Company may be required to identify shares of Common Stock issued under the Plan on its stock ownership records and send tax information statements to employees and former employees who transfer title to such shares.
ARTICLE 23 - GOVERNING LAW.
The validity and construction of the Plan shall be governed by the laws of Delaware, without giving effect to the principles of conflicts of law thereof.
ARTICLE 24 - APPROVAL OF BOARD OF DIRECTORS AND STOCKHOLDERS OF THE COMPANY.
The Plan was adopted by the Board of Directors on October __, 2000 and was approved by the stockholders of the Company on October __, 2000.
Exhibit 10.4
SIXTH AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
AGREEMENT, made as of the 7th day of April, 2000, by and among Exact Laboratories, Inc. (the "Company"), Stanley N. Lapidus (the "Founder"), and the persons listed as Investors on the attached SCHEDULE I (collectively, the "Investors" and individually, the "Investor").
WHEREAS, the Founder is the beneficial holder of an aggregate of 435,000 shares (the "Founder's Shares") of Common Stock, $.01 par value per share, of the Company (the "Common Stock"); and certain of the Investors are the holders of an aggregate of 902,414 shares of Series A Convertible Preferred Stock, $.01 par value per share (the "Series A Preferred Stock"), 996,196 shares of Series B Convertible Preferred Stock (the "Series B Preferred Stock") of the Company, and 1,007,186 shares of Series C Convertible Preferred Stock (the "Series C Preferred Stock").
WHEREAS, certain of the Investors are acquiring shares of Series D Convertible Preferred Stock (the "Series D Preferred Stock") (such shares, together with the 902,414 shares of Series A Preferred Stock and 996,196 shares of Series B Preferred Stock, 1,007,186 shares of Series C Preferred Stock, previously referred to, being referred to collectively as the "Preferred Shares") pursuant to the Series D Convertible Preferred Stock Purchase Agreement (the "Stock Purchase Agreement") between the Company and certain of the Investors of even date herewith, with the result that each Investor will own the number of shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and/or Series D Preferred Stock set forth in SCHEDULE I attached; and
WHEREAS, pursuant to Section 13(d) of the Fifth Amended and Restated Registration Rights Agreement dated as of March 17, 1998 among the Company, the Founder, and certain of the Investors (the "Registration Rights Agreement") the parties thereto desire to amend and restate the Registration Rights Agreement in its entirety by entering into this Sixth Amended and Restated Registration Rights Agreement.
NOW THEREFORE, in consideration of the foregoing, and the agreements set forth below, the parties hereby agree with each other as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms shall have the following respective meanings:
"COMMISSION" shall mean the Securities and Exchange Commission, or any other federal agency at the time administering the Securities Act.
"COMMON STOCK" shall mean the Common Stock, $ .01 par value, of the Company, as constituted as of the date of this Agreement.
"CONVERSION SHARES" shall mean shares of Common Stock issued or issuable upon conversion of the Preferred Shares.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.
"REGISTRATION EXPENSES" shall mean the expenses so described in
Section 8.
"RESTRICTED STOCK" shall mean the Conversion Shares and the Founder's
Shares, excluding Conversion Shares and Founder's Shares which have been
(a) registered under the Securities Act pursuant to an effective
registration statement filed thereunder and disposed of in accordance with
the registration statement covering them or (b) publicly sold pursuant to
Rule 144 under the Securities Act.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.
"SELLING EXPENSES" shall mean the expenses so described in Section 8.
2. RESTRICTIVE LEGEND. Each certificate representing Preferred Shares or Conversion Shares shall, except as otherwise provided in this Section 2 or in Section 3, be stamped or otherwise imprinted with a legend substantially in the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS IT HAS BEEN REGISTERED UNDER SUCH ACT AND ALL SUCH APPLICABLE LAWS OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE."
A certificate shall not bear such legend if in the opinion of counsel satisfactory to the Company (it being agreed that Testa, Hurwitz & Thibeault, LLP or Schulte Roth & Zabel LLP shall be satisfactory) the securities represented thereby may be publicly sold without registration under the Securities Act and any applicable state securities laws.
3. NOTICE OF PROPOSED TRANSFER. Prior to any proposed transfer of any Preferred Shares or Conversion Shares (other than under the circumstances described in Sections 4, 5 or 6), the holder thereof shall give written notice to the Company of its intention to effect such transfer. Each such notice shall describe the manner of the proposed transfer and, if requested by the Company, shall be accompanied by an opinion of counsel satisfactory to the Company (it being agreed that Testa, Hurwitz & Thibeault, LLP shall be satisfactory) to the effect that the proposed transfer may be effected without registration under the Securities Act and any applicable state securities laws, whereupon the holder of such stock shall be entitled to transfer such stock in accordance with the terms of its notice; PROVIDED, HOWEVER, that no such opinion of counsel shall be required for a transfer to one or more members or partners of the
transferor (in the case of a transferor that is a limited liability company or partnership) or to an affiliate, entity controlled by an affiliate (as such term is defined in Rule 405 promulgated under the Securities Act of 1933, as amended) or subsidiary of such holder or to a successor by operation of law. Each certificate for Preferred Shares or Conversion Shares transferred as above provided shall bear the legend set forth in Section 2, except that such certificate shall not bear such legend if (i) such transfer is in accordance with the provisions of Rule 144 (or any other rule permitting public sale without registration under the Securities Act) or (ii) the opinion of counsel referred to above is to the further effect that the transferee and any subsequent transferee (other than an affiliate of the Company) would be entitled to transfer such securities in a public sale without registration under the Securities Act. The restrictions provided for in this Section 3 shall not apply to securities which are not required to bear the legend prescribed by Section 2 in accordance with the provisions of that Section.
4. REQUIRED REGISTRATION. (a) At any time after the earliest of
(i) six months after any registration statement covering an initial public
offering of securities of the Company under the Securities Act shall have become
effective or (ii) six months after the Company shall have become a reporting
company under Section 12 of the Exchange Act, the holders of Conversion Shares
constituting at least 30% of the total shares of Conversion Shares then
outstanding may request the Company to register under the Securities Act all or
any portion of the shares of Conversion Shares held by such requesting holder or
holders for sale in the manner specified in such notice, PROVIDED that the
shares of Conversion Shares for which registration has been requested shall
constitute at least 20% of the total shares of Conversion Shares originally
issued if such holder or holders shall request the registration of less than all
shares of Conversion Shares then held by such holder or holders (or any lesser
percentage if the reasonably anticipated aggregate price to the public of such
public offering would exceed $10,000,000). For purposes of this Section 4 and
Sections 5 and 6, the term "Conversion Shares" shall be deemed to include the
number of Conversion Shares which would be issuable to a holder of Preferred
Shares upon the conversion of all Preferred Shares held by such holder at such
time, and for purposes of Section 13(a), the term "Restricted Stock" shall be
deemed to include the number of shares of Conversion Shares which would be
issuable to a holder of Preferred Shares upon conversion of all Preferred Shares
held by such holder at such time, PROVIDED, HOWEVER, that the only securities
which the Company shall be required to register pursuant to Sections 4, 5 or 6
shall be shares of Common Stock, and PROVIDED, FURTHER, HOWEVER, that, in any
underwritten public offering contemplated by this Section 4 or Sections 5 and 6,
the holders of Preferred Shares shall be entitled to sell such Preferred Shares
to the underwriters for conversion and sale of the shares of Common Stock issued
upon conversion thereof. Notwithstanding anything to the contrary contained
herein, no request may be made under this Section 4 within 120 days after the
effective date of a registration statement filed by the Company covering a firm
commitment underwritten public offering in which the holders of Conversion
Shares shall have been entitled to join pursuant to Sections 5 or 6 and in which
there shall have been effectively registered all shares of Restricted Stock as
to which registration shall have been requested.
(b) Following receipt of any notice under this Section 4, the Company shall immediately notify all holders of Conversion Shares from whom notice has not been received and shall use its best efforts to register within 30 days of such notice (unless the Company is
required to conduct an audit of its financial statements, in which case the Company shall use its best efforts to effect such registration as promptly as is practical after such 30-day period) under the Securities Act, for public sale in accordance with the method of disposition specified in such notice from requesting holders, the number of shares of Conversion Shares specified in such notice (and in all notices received by the Company from other holders within 30 days after the giving of such notice by the Company). If such method of disposition shall be an underwritten public offering, the holders of a majority of Conversion Shares to be sold in such offering may designate the managing underwriter of such offering, subject to the approval of the Company, which approval shall not be unreasonably withheld or delayed. The Company shall be obligated to register Conversion Shares pursuant to this Section 4 on four occasions only, PROVIDED, HOWEVER, that such obligation shall be deemed satisfied only when a registration statement covering all Conversion Shares specified in notices received as aforesaid, for sale in accordance with the method of disposition specified by the requesting holders, shall have become effective and, if such method of disposition is a firm commitment underwritten public offering, all such shares shall have been sold pursuant thereto. If a registration pursuant to this Section 4 is an underwritten public offering and the managing underwriter advises the Company in writing that in its opinion the inclusion of the number of Conversion Shares creates a substantial risk that the price per share of Common Stock will be reduced, the number of shares of Conversion Shares to be included in such an underwriting may be reduced (pro rata among the requesting holders based upon the number of shares requested to be included therein).
(c) The Company shall be entitled to include in any registration statement referred to in this Section 4, for sale in accordance with the method of disposition specified by the requesting holders, shares of Common Stock to be sold by the Company for its own account, except as and to the extent that, in the opinion of the managing underwriter (if such method of disposition shall be an underwritten public offering), such inclusion would adversely affect the marketing of the Restricted Stock to be sold. Except for registration statements on Forms S-4, S-8 or any successor thereto, the Company will not file with the Commission any other registration statement with respect to its Common Stock, whether for its own account or that of other stockholders, from the date of receipt of a notice from requesting holders pursuant to this Section 4 until the completion of the period of distribution of the registration contemplated thereby.
5. INCIDENTAL REGISTRATION. If the Company at any time (other than pursuant to Section 4 or Section 6) proposes to register any of its securities under the Securities Act for sale to the public, whether for its own account or for the account of other security holders or both (except with respect to registration statements on Forms S-4, S-8 or another form not available for registering the Restricted Stock for sale to the public), each such time it will give written notice to all holders of outstanding Restricted Stock of its intention so to do. Upon the written request of any such holder, received by the Company within 30 days after the giving of any such notice by the Company, to register any of its Restricted Stock, the Company will use its best efforts to cause the Restricted Stock as to which registration shall have been so requested to be included in the securities to be covered by the registration statement proposed to be filed by the Company, all to the extent requisite to permit the sale or other disposition by the holder of such Restricted Stock so registered. In the event that any registration pursuant to this Section 5 shall be,
in whole or in part, an underwritten public offering of Common Stock, the number of shares of Restricted Stock to be included in such an underwriting may be reduced (pro rata among the requesting holders based upon the number of shares of Restricted Stock owned by such holders) if and to the extent that the managing underwriter shall be of the opinion that such inclusion would adversely affect the marketing of the securities to be sold by the Company therein, PROVIDED, HOWEVER, that such number of shares of Restricted Stock shall not be reduced if any shares are to be included in such underwriting for the account of any person other than the Company or requesting holders of Restricted Stock, and PROVIDED, FURTHER, HOWEVER, that in no event may less than one-third of the total number of shares of Common Stock to be included in such underwriting be made available for shares of Restricted Stock. Notwithstanding the foregoing provisions, the Company may withdraw any registration statement referred to in this Section 5 without thereby incurring any liability to the holders of Restricted Stock.
6. REGISTRATION ON FORM S-3. If at any time (i) a holder or holders of Preferred Shares or Restricted Stock request that the Company file a registration statement on Form S-3 or any successor thereto for a public offering of all or any portion of the shares of Restricted Stock held by such requesting holder or holders, the reasonably anticipated aggregate price to the public of which would exceed $5,000,000, and (ii) the Company is a registrant entitled to use Form S-3 or any successor thereto to register such shares, then the Company shall use its best efforts to register within 30 days of such notice (unless the Company is required to conduct an audit of its financial statements, in which case the Company shall use its best efforts to effect such registration as promptly as is practical after such 30-day period) under the Securities Act on Form S-3 or any successor thereto, for public sale in accordance with the method of disposition specified in such notice, the number of shares of Restricted Stock specified in such notice. Whenever the Company is required by this Section 6 to use its best efforts to effect the registration of Restricted Stock, each of the procedures and requirements of Section 4 (including but not limited to the requirement that the Company notify all holders of Restricted Stock from whom notice has not been received and provide them with the opportunity to participate in the offering) shall apply to such registration, PROVIDED, HOWEVER, that there shall be no limitation on the number of registrations on Form S-3 which may be requested and obtained under this Section 6, and PROVIDED, FURTHER, HOWEVER, that the requirements contained in the first sentence of Section 4(a) shall not apply to any registration on Form S-3 which may be requested and obtained under this Section 6.
7. REGISTRATION PROCEDURES. If and whenever the Company is required by the provisions of Sections 4, 5 or 6 to use its best efforts to effect the registration of any shares of Restricted Stock under the Securities Act, the Company will, as expeditiously as possible:
(a) prepare and file with the Commission a registration statement (which, in the case of an underwritten public offering pursuant to Section 4, shall be on Form S-1 or other form of general applicability satisfactory to the managing underwriter selected as therein provided) with respect to such securities and use its best efforts to cause such registration statement to become and remain effective for the period of the distribution contemplated thereby (determined as hereinafter provided);
(b) prepare and file with the 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 the period specified in paragraph (a) above and comply with the provisions of the Securities Act with respect to the disposition of all Restricted Stock covered by such registration statement in accordance with the sellers' intended method of disposition set forth in such registration statement for such period;
(c) furnish to each seller of Restricted Stock and to each underwriter such number of copies of the registration statement and the prospectus included therein (including each preliminary prospectus) as such persons reasonably may request in order to facilitate the public sale or other disposition of the Restricted Stock covered by such registration statement;
(d) use its best efforts to register or qualify the Restricted Stock covered by such registration statement under the securities or "blue sky" laws of such jurisdictions as the sellers of Restricted Stock or, in the case of an underwritten public offering, the managing underwriter reasonably shall request, PROVIDED, HOWEVER, that the Company shall not for any such purpose be required to qualify generally to transact business as a foreign corporation in any jurisdiction where it is not so qualified or to consent to general service of process in any such jurisdiction;
(e) use its best efforts to list the Restricted Stock covered by such registration statement with any securities exchange on which the Common Stock of the Company is then listed;
(f) immediately notify each seller of Restricted Stock and each underwriter under such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event of which the Company has knowledge as a result of which the prospectus contained in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing;
(g) if the offering is underwritten and at the request of any seller of Restricted Stock, use its best efforts to furnish on the date that Restricted Stock is delivered to the underwriters for sale pursuant to such registration: (i) an opinion dated such date of counsel representing the Company for the purposes of such registration, addressed to the underwriters and to such seller, stating that such registration statement has become effective under the Securities Act and that (A) to the best knowledge of such counsel, no stop order suspending the effectiveness thereof has been issued and no proceedings for that purpose have been instituted or are pending or contemplated under the Securities Act, (B) the registration statement, the related prospectus and each amendment or supplement thereof comply as to form in all material respects with the requirements of the Securities Act (except that such counsel need not express any opinion as to financial statements contained therein) and (C) to such other effects as reasonably may be requested by counsel for the underwriters or by such seller or its counsel and (ii) a letter dated such date from the independent public accountants retained by the Company, addressed to
the underwriters and to such seller, stating that they are independent public accountants within the meaning of the Securities Act and that, in the opinion of such accountants, the financial statements of the Company included in the registration statement or the prospectus, or any amendment or supplement thereof, comply as to form in all material respects with the applicable accounting requirements of the Securities Act, and such letter shall additionally cover such other financial matters (including information as to the period ending no more than five business days prior to the date of such letter) with respect to such registration as such underwriters reasonably may request; and
(h) make available for inspection by each seller of Restricted Stock, any underwriter participating in any distribution pursuant to such registration statement, and any attorney, accountant or other agent retained by such seller or underwriter, all financial and other records, pertinent corporate documents and properties of the Company, and cause the Company's officers, directors and employees to supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with such registration statement.
For purposes of Section 7(a) and 7(b) and of Section 4(c), the period of distribution of Restricted Stock in a firm commitment underwritten public offering shall be deemed to extend until each underwriter has completed the distribution of all securities purchased by it, and the period of distribution of Restricted Stock in any other registration shall be deemed to extend until the earlier of the sale of all Restricted Stock covered thereby and 120 days after the effective date thereof.
In connection with each registration hereunder, the sellers of Restricted Stock will furnish to the Company in writing such information with respect to themselves and the proposed distribution by them as reasonably shall be necessary in order to assure compliance with federal and applicable state securities laws.
In connection with each registration pursuant to Sections 4, 5 or 6 covering an underwritten public offering, the Company and each seller agree to enter into a written agreement with the managing underwriter selected in the manner herein provided in such form and containing such provisions as are customary in the securities business for such an arrangement between such underwriter and companies of the Company's size and investment stature.
8. EXPENSES. All expenses incurred by the Company in complying with Sections 4, 5 and 6, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel and independent public accountants for the Company, fees and expenses (including counsel fees) incurred in connection with complying with state securities or "blue sky" laws, fees of the National Association of Securities Dealers, Inc., transfer taxes, fees of transfer agents and registrars, costs of insurance and fees and disbursements of one counsel for the sellers of Restricted Stock selected by the holders of a majority of the Restricted Stock to be sold in any related offering, but excluding any Selling Expenses, are called "Registration Expenses". All underwriting discounts and selling commissions applicable to the sale of Restricted Stock are called "Selling Expenses".
The Company will pay all Registration Expenses in connection with each registration statement under Sections 4, 5 or 6. All Selling Expenses in connection with each registration statement under Sections 4, 5 or 6 shall be borne by the participating sellers in proportion to the number of shares sold by each, or by such participating sellers other than the Company (except to the extent the Company shall be a seller) as they may agree.
9. INDEMNIFICATION AND CONTRIBUTION. (a) In the event of a registration of any of the Restricted Stock under the Securities Act pursuant to Sections 4, 5 or 6, the Company will indemnify and hold harmless each seller of such Restricted Stock thereunder, each underwriter of such Restricted Stock thereunder and each other person, if any, who controls such seller or underwriter within the meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which such seller, underwriter or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such Restricted Stock was registered under the Securities Act pursuant to Sections 4, 5 or 6, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each such seller, each such underwriter and each such controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action, PROVIDED, HOWEVER, that the Company will not be liable in any such case if and to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by any such seller, any such underwriter or any such controlling person in writing specifically for use in such registration statement or prospectus.
(b) In the event of a registration of any of the Restricted Stock under the Securities Act pursuant to Sections 4, 5 or 6, each seller of such Restricted Stock thereunder, severally and not jointly, will indemnify and hold harmless the Company, each person, if any, who controls the Company within the meaning of the Securities Act, each officer of the Company who signs the registration statement, each director of the Company, each underwriter and each person who controls any underwriter within the meaning of the Securities Act, against all losses, claims, damages or liabilities, joint or several, to which the Company or such officer, director, underwriter or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement under which such Restricted Stock was registered under the Securities Act pursuant to Sections 4, 5 or 6, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company and each such officer, director, underwriter and controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action, PROVIDED, HOWEVER, that such
seller will be liable hereunder in any such case if and only to the extent that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with information pertaining to such
seller, as such, furnished in writing to the Company by such seller specifically
for use in such registration statement or prospectus, and PROVIDED, FURTHER,
HOWEVER, that the liability of each seller hereunder shall be limited to the
proportion of any such loss, claim, damage, liability or expense which is equal
to the proportion that the public offering price of the shares sold by such
seller under such registration statement bears to the total public offering
price of all securities sold thereunder, but not in any event to exceed the
proceeds received by such seller from the sale of Restricted Stock covered by
such registration statement and (ii) that the Seller will not be liable in any
such case to the extent that any such loss, claim, damage, liability or action
arises out of or is based upon an untrue or alleged untrue statement or omission
or an alleged omission made in any preliminary prospectus of final prospectus if
(1) the Company, underwriter, or controlling a person failed to send or deliver
a copy of the final prospectus or prospectus supplement with or prior to the
delivery of written confirmation of the sale of the Restricted Stock, and (2)
the final prospectus or prospectus supplement would have corrected such untrue
statement or omission.
(c) Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to such indemnified party other than under this Section 9 and shall only relieve
it from any liability which it may have to such indemnified party under this
Section 9 if and to the extent the indemnifying party is prejudiced by such
omission. In case any such action shall be brought against any indemnified party
and it shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 9 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected, PROVIDED,
HOWEVER, that, if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be reasonable defenses available to it which are
different from or additional to those available to the indemnifying party or if
the interests of the indemnified party reasonably may be deemed to conflict with
the interests of the indemnifying party, the indemnified party shall have the
right to select a separate counsel and to assume such legal defenses and
otherwise to participate in the defense of such action, with the expenses and
fees of such separate counsel and other expenses related to such participation
to be reimbursed by the indemnifying party as incurred.
(d) In order to provide for just and equitable contribution to joint liability under the Securities Act in any case in which either (i) any holder of Restricted Stock exercising rights under this Agreement, or any controlling person of any such holder, makes a claim for indemnification pursuant to this Section 9 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section 9 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any such selling holder or any such controlling person in circumstances for which indemnification is provided under this Section 9; then, and in each such case, the Company and such holder will contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (after contribution from others) in such proportion so that such holder is responsible for the portion represented by the percentage that the public offering price of its Restricted Stock offered by the registration statement bears to the public offering price of all securities offered by such registration statement, and the Company is responsible for the remaining portion; PROVIDED, HOWEVER, that, in any such case, (A) no such holder will be required to contribute any amount in excess of the public offering price of all such Restricted Stock offered by it pursuant to such registration statement; and (B) no person or entity guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation.
10. CHANGES IN COMMON STOCK OR PREFERRED SHARES. If, and as often as, there is any change in the Common Stock or the Preferred Shares by way of a stock split, stock dividend, combination or reclassification, or through a merger, consolidation, reorganization or recapitalization, or by any other means, appropriate adjustment shall be made in the provisions hereof so that the rights and privileges granted hereby shall continue with respect to the Common Stock or the Preferred Shares as so changed.
11. RULE 144 REPORTING. With a view to making available the benefits of certain rules and regulations of the Commission which may at any time permit the sale of the Restricted Stock to the public without registration, at all times after 90 days after any registration statement covering a public offering of securities of the Company under the Securities Act shall have become effective, the Company agrees to:
(a) make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act;
(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; and
(c) furnish to each holder of Restricted Stock forthwith upon request a written statement by the Company as to its compliance with the reporting requirements of such Rule 144 and of the Securities Act and the Exchange Act, a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed by the Company as such holder may reasonably request in availing itself of any rule or regulation of the Commission allowing such holder to sell any Restricted Stock without registration.
12. Form S-3 Qualification. The Company will use its best efforts to comply with the reporting and filing provisions that are prerequisites to is se of a Form S-3 under the Securities Act.
13. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to you as follows:
(a) The execution, delivery and performance of this Agreement by the Company have been duly authorized by all requisite corporate action and will not violate any provision of law, any order of any court or other agency of government, the charter or by-laws of the Company or any provision of any indenture, agreement or other instrument to which it or any or its properties or assets is bound, conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any such indenture, agreement or other instrument or result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of the Company.
(b) This Agreement has been duly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable in accordance with its terms.
14. MISCELLANEOUS.
(a) All covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and assigns of the parties hereto (including without limitation transferees of any Preferred Shares or Restricted Stock), whether so expressed or not, PROVIDED, HOWEVER, that registration rights conferred herein on the holders of Preferred Shares or Restricted Stock shall only inure to the benefit of a transferee of Preferred Shares or Restricted Stock if (i) there is transferred to such transferee by the transferor at least 20% of the total shares of Founders Shares, Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock originally issued to such Investor(pursuant to a subscription agreement or pursuant to the Series B Convertible Preferred Stock Purchase Agreement, the Series C Preferred Stock Purchase Agreement or the Series D Convertible Stock Purchase Agreement) (ii) such transferee is a partner, shareholder, affiliate or an entity which is controlled by an affiliate of a party hereto.
(b) All notices, requests, consents and other communications hereunder shall be in writing and shall be delivered in person, mailed by certified or registered mail, return receipt requested, or sent by telecopier or telex, addressed as follows:
if to the Company or any other party hereto, at the address of such party set forth in the applicable Purchase Agreement;
if to any subsequent holder of Preferred Shares or Restricted Stock, to it at such address as may have been furnished to the Company in writing by such holder;
or, in any case, at such other address or addresses as shall have been furnished in writing to the Company (in the case of a holder of Preferred Shares or Restricted Stock) or to the holders of Preferred Shares or Restricted Stock (in the case of the Company) in accordance with the provisions of this paragraph.
(c) This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware.
(d) This Agreement may not be amended or modified, and no provision hereof may be waived, without the written consent of the Company and the holders of at least two-thirds of the number of shares of Common Stock issued or issuable upon conversion of all Preferred Shares at the time of such amendment, modification or waiver.
(e) This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
(f) The obligations of the Company to register shares of Restricted Stock under Sections 4, 5 or 6 shall terminate on the fifteenth anniversary of the date of this Agreement.
(g) If requested in writing by the underwriters for the initial
underwritten public offering of securities of the Company, each holder of
Restricted Stock who is a party to this Agreement shall agree not to sell
publicly any shares of Restricted Stock or any other shares of Common Stock
(other than shares of Restricted Stock or other shares of Common Stock being
registered in such offering), without the consent of such underwriters, for a
period of not more than 180 days following the effective date of the
registration statement relating to such offering; PROVIDED, HOWEVER, that all
persons entitled to registration rights with respect to shares of Common Stock
who are not parties to this Agreement, all other persons selling shares of
Common Stock in such offering, all persons holding in excess of 1% of the
capital stock of the Company on a fully diluted basis and all executive officers
and directors of the Company shall also have agreed not to sell publicly their
Common Stock under the circumstances and pursuant to the terms set forth in this
Section 13(g).
(h) Notwithstanding the provisions of Section 7(a), the Company's obligation to file a registration statement, or cause such registration statement to become and remain effective, shall be suspended for a period not to exceed 90 days in any 24-month period (or until the material nonpublic information is made public) if there exists at the time material non-public information relating to the Company which the Board of Directors of the Company determines in good faith is not in the best interests of the Company to be disclose (the "Blackout Period"). The Company shall promptly notify (but in no event later than two business days following the determination of the Board of Directors) those holders of Restricted Stock who have requested registration pursuant to this Agreement of any Blackout Period and shall include in such Blackout Notice an undertaking by the Company to promptly notify such holders of Restricted
Stock as soon as a registration statement may be effected or sales
may resume; provided, however, that the Company may only suspend its obligation
to file a registration statement pursuant to this Section 14(h) within thirty
(30) days of the delivery of the notice requesting a registration statement. In
making any such determination to suspend or terminate a Blackout Period, the
Company shall not be required to consult with or obtain the consent of any
holder of Restricted Stock, and any such determination shall be made solely by
the Board of Directors of the Company. Each holder of Restricted Stock shall
treat all notices received from the Company pursuant to this Section 14(h) in
the strictest confidence and shall not disseminate such information.
(i) The Company shall not grant to any third party any registration rights more favorable than or inconsistent with any of those contained herein, so long as any of the registration rights under this Agreement remains in effect.
(j) If any provision of this Agreement shall be held to be illegal, invalid or unenforceable, such illegality, invalidity or unenforceability shall attach only to such provision and shall not in any manner affect or render illegal, invalid or unenforceable any other provision of this Agreement, and this Agreement shall be carried out as if any such illegal, invalid or unenforceable provision were not contained herein.
(k) In the event shares of Preferred Stock or Restricted Stock are transferred pursuant to Section 14(a) hereof, such transferee shall become entitled to the benefits conferred by this Agreement. Additional transfers shall become parties to this Agreement by executing and delivering a Signature Page, and at such time the Company shall amend Schedule I attached hereto to include such Additional Investor and send notice of the amendment to all other Investors.
IN WITNESS WHEREOF, this Agreement has been executed as of the date and year first above written.
COMPANY:
EXACT LABORATORIES, INC.
By: /s/ Stanley N. Lapidus
------------------------
Stanley N. Lapidus
President
|
SIXTH AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
INVESTOR SIGNATURE PAGE
By executing this counterpart signature page, the undersigned agrees to and accepts the Sixth Amended and Restated Registration Rights Agreement between the undersigned and Exact Laboratories, Inc. and hereby authorizes this counterpart signature page to be attached to such Agreement.
FOUNDER:
/s/ Stanley N. Lapidus -------------------------- Stanley N. Lapidus |
SCHEDULE I
INVESTORS IN SERIES A PREFERRED STOCK
INVESTORS SHARES
One Liberty Fund III, L.P. 403,821
Stanley N. Lapidus 126,295
Gilde International BV 4,079
Greylock Equity Limited Partnership 279,858
Frederick R. Blume 8,620
David Shaw 43,103
Noubar Afeyan, PhD. 21,552
Erwin Workman 15,086
==================================================================
TOTAL 902,414
INVESTORS IN SERIES B PREFERRED STOCK
INVESTORS SHARES
One Liberty Fund III, L.P. 278,481
Greylock Equity Limited Partnership 278,481
Highland Capital Partners III Limited Partnership 267,341
Highland Entrepreneurs' Fund Limited Partnership 11,139
RS & Co., Limited Partners 86,075
Bayview Investors, Ltd. 15,189
Stanley N. Lapidus 5,063
Charles Schwab & Co., Inc. 7,594
FBO: Stanley N. Lapidus
David Shaw 2,531
Frederick R. Blume 2,531
Edmund R. Pitcher 5,063
Thomas F. Farb 5,063
Theodore H. Ashford 6,329
Stephen F. Wiggins 25,316
==================================================================
TOTAL 996,196
|
INVESTORS IN SERIES C PREFERRED STOCK
INVESTORS SHARES
Highland Capital Partners III Limited Partnership 256,000
Highland Entrepeneurs' Fund III Limited Partnership 10,666
One Liberty Fund III, L.P. 95,238
One Liberty Fund IV, L.P. 95,238
Greylock Equity Limited Partnership 190,476
CB Healthcare Fund, L.P. 119,047
Mayo Foundation for Medical Education and Research 80,952
B.U.N.P. 38,095
HLM Partners VII, LP 71,428
RS & Co., Limited Partners 36,428
Bayview Investors, Ltd. 6,429
Patrick J. Sullivan 952
William R. Liebke 952
James Klingenstein 952
Stanley N. Lapidus 2,381
Terral Jordan 1,000
Edmund R. Pitcher 952
==================================================================
TOTAL 1,007,186
|
SIXTH AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
ADDITIONAL INVESTOR SIGNATURE PAGE
By executing this counterpart signature page, the undersigned agrees to and accepts the Sixth Amended and Restated Registration Rights Agreement between the undersigned and Exact Laboratories, Inc. and the persons listed as Investors on SCHEDULE I thereto, and hereby authorizes this counterpart signature page to be attached to such Agreement.
INVESTOR:
Exhibit 10.5
EXACT LABORATORIES, INC.
Restricted Stock Purchase Agreement
AGREEMENT, dated as of this 11th day of February, 1998 by and between Stanley N. Lapidus (the "Purchaser") and Exact Laboratories, Inc. (the "Company"), a Delaware corporation.
1. SALE. The Company hereby sells and issues to the Purchaser 35,000 shares (the "Shares") of Common Stock, $.01 par value, of the Company, for a purchase price of $0.40 per share (the "Purchase Price"), to be paid in cash or by check payable to the order of the Company. This sale is made pursuant and subject to the following terms and conditions.
2. RECEIPT OF PURCHASE PRICE AND SHARES. The Company hereby acknowledges receipt of $14,000.00, the aggregate purchase price for the Shares, in accordance with Section 1. The Purchaser hereby acknowledges receipt of a stock certificate representing the Shares.
3. COMPANY PURCHASE OPTION.
3.1 OPTION TO THE COMPANY TO PURCHASE THE SHARES. The Purchaser hereby grants to the Company an irrevocable right and option (the "Purchase Option") to purchase all or any portion of the Shares on the terms and conditions set forth in this Agreement.
At any time within (90) ninety days after the Purchaser ceases to be an employee of the Company or a subsidiary of the Company, subject to the provisions of Section 3.2 in the event of a Termination Without Cause (as defined in Section 3.2.2) or a Business Event (as defined in Section 3.2.1(iii)), the Company shall have the right to exercise the Purchase Option and to purchase from the Purchaser (or her estate, it being understood that Shares released from the Purchase Option under this Agreement shall pass upon the Purchaser's death to the Purchaser's estate), for an amount per Share equal to the Purchase Price (the "Option Price"), up to the number of Shares specified in the following table:
IF CESSATION OF EMPLOYMENT OCCURS % OF SHARES SUBJECT TO PURCHASE OPTION Before January 6, 1999 100% On January 6, 1999 80% On the 6th day of each calendar month beginning February 6, 1999 an additional 583.33 Shares shall be released from the Purchase Option. On or after January 6, 2003. None |
3.2.1 EARLY TERMINATION OF PURCHASE OPTION.
Notwithstanding the foregoing, in the event the Purchaser continues to be employed by the Company on the earlier to occur of the following events prior to January 6, 2003, the Purchase Option shall immediately expire and the Company shall have no further right and option to repurchase all or any portion of the Shares:
(i) the Termination Without Cause (as defined below) of the Purchaser;
(ii) the Purchaser suffers a substantial diminution in job responsibility following a Business Event;
(iii) the Company moves the Purchaser's place of employment more than 60 miles from the Company's office location (immediately prior to the Business Event) following a Business Event. For purposes of this Agreement, each of the following shall be referred to as a "Business Event": the closing of (A) the sale by the Company of all or substantially all of its assets, (B) the sale or exchange in a single transaction, or a series of related transactions, of shares of capital stock of the Company representing at least a majority of the issued and outstanding shares of capital stock of the Company (measured on the basis of voting power), or (C) the merger or consolidation of the Company with or into another entity in a transaction where the shares of the Company's capital stock outstanding immediately prior to the closing of such merger or consolidation represent or are converted into or exchanged for shares that represent less than a majority of the shares of capital stock of the resulting or surviving entity outstanding immediately after the closing of such merger or consolidation.
3.2.2 For purposes of this Agreement, "Termination Without Cause" shall mean any termination of the Purchaser's employment by the Company without cause or for cause other than (A) the Employee's gross negligence in the performance of her duties as an employee and officer of the Company (as determined by a majority of the directors of the Company) or (B) criminal misconduct by the Purchaser in connection with the performance of her duties as an employee and officer of the Company.
3.3 EXERCISE OF OPTION. The Purchase Option shall be exercised by written notice delivered or mailed by the Company to the Purchaser (or her estate), accompanied by payment by check for the Option Price for the Shares being repurchased.
3.4 DELIVERY OF REPURCHASED SHARES. The Purchaser agrees that she (or her executors or administrators or other legal representative, as the case may be) shall promptly deliver to the Company, at the Company's principal office, certificates for any Shares which are repurchased by the Company pursuant to this Section 3, and that such certificates shall be duly endorsed in blank for transfer to the Company; provided, however, that if the Purchaser fails to deliver such certificates to the Company on or before the fifth day following delivery to the Purchaser by the Company of the notice and payment required by subsection 3.3, the Shares repurchased shall be deemed to be transferred to the Company on such date, and all rights of the Purchaser with respect to such Shares shall thereupon cease.
3.5 SHARES NOT REPURCHASED. In the event the Company declines in writing to repurchase any or all of the Shares or does not exercise its option for repurchase as provided herein, the Shares shall remain the property of the Purchaser.
4. ADDITIONAL SHARES. If, from time to time during the term of the Purchase Option, there is any stock dividend or liquidating dividend of cash and/or property, stock split, subdivision, or other change in the character or amount of any of the outstanding Common Stock of the Company, then in such event any and all new, substituted or additional securities or other property to which the Purchaser is entitled by reason of her ownership of the Shares shall be immediately subject to the Purchase Option and be included in the term "Shares" for all purposes of the Purchase Option with the same force and effect as the Shares presently subject thereto. After each such event, the Option Price per share upon exercise of the Purchase Option shall be appropriately adjusted and the number of shares which are released periodically from the Purchase Option shall be appropriately adjusted.
5. INVESTMENT REPRESENTATIONS. The Purchaser represents, warrants and covenants that:
(i) The Purchaser is repurchasing the Shares for her own account for investment only, and not with a view to, or for sale in connection with, any distribution of the Shares in violation of the Securities Act of 1933 (the "Securities Act"), or any rule or regulation under the Securities Act.
(ii) The Purchaser is aware of the Company's business affairs and financial condition, and has had such opportunity as she has deemed adequate to obtain from representatives of the Company such information as is necessary to permit the Purchaser to evaluate the merits and risks of her investment in the Company.
(iii) The Purchaser can afford a complete loss of the value of the Shares and is able to bear the economic risk of holding the Shares for an indefinite period.
(iv) The Purchaser has sufficient experience in business, financial and investment matters to be able to evaluate the risks involved in the purchase of the Shares and to make an informed investment decision with respect to such purchase.
(v) The Purchaser understands that: (A) the Shares will not be registered under the Securities Act and are "restricted securities" within the meaning of Rule 144 and/or Rule 701 under the Securities Act; (B) the Shares cannot be sold, transferred or otherwise disposed of unless they are subsequently registered under
the Securities Act or an exemption from registration is then available; (C) in any event, the exemption from registration under Rule 144 or otherwise will not be available for at least two years and even then may not be available unless a public market then exists for the Common Stock, adequate information concerning the Company is available to the public, and other terms and conditions of Rule 144 are complied with, and (D) there is now no registration statement on file with the Securities and Exchange Commission with respect to any stock of the Company and the Company has no obligation or current intention to register the Shares under the Securities Act.
6. LEGENDS.
6.1 RESTRICTED STOCK AGREEMENT LEGEND. All certificates representing shares which are subject to the Purchase Option shall have affixed thereto a legend substantially in the following form:
"The securities represented by this certificate are subject to certain restrictions on transfer and to certain rights of the Company to purchase such securities as set forth in a Restricted Stock Purchase Agreement between the corporation and the registered holder (or his/her predecessor in interest), a copy of which is available for inspection without charge at the principal office of the corporation."
7. RESTRICTIONS ON TRANSFER. Except as otherwise provided in this
Section 7, the Purchaser shall not sell, assign, transfer, pledge, hypothecate
or otherwise dispose of, by operation of law or otherwise (collectively
"transfer") any of the Shares, or any interest therein, unless and until such
Shares are no longer subject to the Company's Purchase Option. Notwithstanding
the foregoing the Purchaser may transfer Shares by gift, provided that such
Shares shall remain subject to this Agreement (including without limitation the
Purchase Option and the restrictions on transfer set forth herein), and such
permitted transferee shall, as a condition to such transfer, deliver to the
company a written instrument confirming that such transferee shall be bounded by
all of the terms and conditions of this Agreement.
8. EFFECT OF PROHIBITED TRANSFER. The Company shall not be required (a) to transfer on its books any of the Shares which shall have been sold or transferred in violation of any of the provisions set forth in this Agreement, or (b) to treat as owner of such Shares or to pay dividends to any transferee to whom any such Shares shall have been so transferred.
9. RIGHT OF STOCKHOLDER. Subject to the provision of Sections 7 and 8 above, the Purchaser shall, during the term of this Agreement, exercise all rights and privileges of a stockholder of the Company with respect to the Shares.
10. LOCK-UP AGREEMENT. The Purchaser agrees that in connection with any underwritten public offering of Common Stock, commencing upon notice from the Company or the principal underwriter managing such public offering, the Shares may not be sold, offered for sale or otherwise disposed of without the prior written consent of the Company or such
underwriter, as the case may be, for at least 270 days after the effectiveness of the Registration Statement filed in connection with such offering or such longer period of time as the Board of Directors may determine if all of the Company's directors and officers agree to be similarly bound. The obligation contained in this paragraph 10 shall survive the termination of this Agreement and shall remain in full force and effect for such time as the Board of Directors, in their discretion, may determine.
11. REFUSAL RIGHTS.
11.1 EXERCISE OF RIGHT. If the Purchaser desires to sell all or any part of the shares acquired under this Agreement (including any securities received in respect thereof pursuant to recapitalizations and the like), and an offeror (the "Offeror") has made an offer therefor, which offer the Purchaser desires to accept, the Purchaser shall: (i) obtain in writing an irrevocable and unconditional bona fide offer (the "Bona Fide Offer") for the purchase thereof from the Offeror; and (ii) give written notice (the "Option Notice") to the Company setting forth his/her desire to sell such shares, which Option Notice shall be accompanied by a photocopy of the original executed Bona Fide Offer and shall set forth at least the name and address of the Offeror and the price and terms of the Bona Fide Offer. Upon receipt of the Option Notice, the Company shall have an option to purchase any or all of such shares specified in the Option Notice, such option to be exercisable by giving, within 30 days after receipt of the Option Notice, a written counter-notice to the Purchaser. If the Company elects to purchase any or all of such shares, it shall be obligated to purchase, and the Purchaser shall be obligated to sell to the Company, such shares at the price and terms indicated in the Bona Fide Offer within 60 days from the date of receipt by the Company of the Option Notice.
11.2 SALE OF OPTION SHARES TO OFFEROR. The Purchaser may sell,
pursuant to the terms of the Bona Fide Offer, any or all of such shares not
purchased or agreed to be purchased by the Company for 60 days after the
expiration of the 30-day period during which the Company may give the aforesaid
counter-notice; PROVIDED, HOWEVER, that the Purchaser shall not sell such shares
to the Offeror if the Offeror is a competitor of the Company and the Company
gives written notice to the Purchaser, within 30 days of its receipt of the
Option Notice, stating that the Purchaser shall not sell his shares to the
Offeror; and provided, further, that prior to the sale of such shares to the
Offeror, the Offeror shall execute an agreement with the Company pursuant to
which the Offeror agrees not to become a competitor of the Company and further
agrees to be subject to the restriction set forth in this Section 11. If any or
all of such shares are not sold pursuant to a Bona Fide Offer within the time
permitted above, the unsold shares shall remain subject to the terms of this
Section 11.
11.3 ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE: If there shall be any change in the Common Stock of the Company through merger, consolidation, reorganization, recapitalization, stock dividend, split-up, combination or exchange of shares, or the like, the restrictions contained in this Section 11 shall apply with equal force to additional and/or substitute securities, if any, received by the Purchaser in exchange for, or by virtue of his or her ownership of, Shares.
11.4 FAILURE TO DELIVER OPTION SHARES: In the event the Purchaser fails or refuses to deliver on a timely basis duly endorsed certificates representing Option Shares to be sold to the Company pursuant to this Section 11, the Company shall have the right to deposit the purchase price for the Option Shares in a special account with any bank or trust company in the Commonwealth of Massachusetts, giving notice of such deposit to the Purchaser, whereupon such Option Shares shall be deemed to have been purchased by the Company. All such monies shall be held by the bank or trust company for the benefit of the Purchaser. All monies deposited with the bank or trust company but remaining unclaimed for two (2) years after the date of deposit shall be repaid by the bank or trust company to the Company on demand, and the Purchaser shall thereafter look only to the Company for payment. The Company may place a legend on any stock certificate delivered to the Purchaser reflecting the restrictions on transfer provided in this Section 11.
11.5 EXPIRATION OF COMPANY'S RIGHT OF FIRST REFUSAL: The refusal rights of the Company set forth above shall remain in effect until such time, if ever, as a distribution to the public is made of shares of the Company's Common Stock for an aggregate public offering price of at least $5 million or more pursuant to a registration statement filed under the Securities Act of 1933, as amended, or a successor statute, at which time the refusal rights set forth herein will automatically expire.
12. FURTHER INSTRUMENTS AND ACTIONS. The parties agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Agreement.
13. NOTICES. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit with the United States Post Office, by registered or certified mail, addressed to each other party hereto at his/her address hereinafter shown below her signature or at such other address as such party may designate by ten (10) days advance written notice to all other parties hereto.
14. EMPLOYMENT STATUS. Nothing contained in this Agreement shall be construed as giving the Purchaser any right to continue employment with the Company.
15. WITHHOLDING TAXES. The Purchaser acknowledges and agrees that any tax consequences of the purchase, exercise and sale of Shares will be borne by Purchaser and not by the Company and that the Company has the right to deduct from payments of any kind otherwise due to the Purchaser any federal, state or local taxes of any kind required by law to be withheld with respect to the Shares.
16. MISCELLANEOUS
16.1 ENTIRE AGREEMENT. This Agreement constitutes the entire contract between the parties hereto with regard to the subject matter hereof.
16.2 GOVERNING LAW. This Agreement shall be governed by and construed under the laws of the State of Delaware as such laws are applied to contracts entered into and performed in such state.
16.3 SUCCESSOR AND ASSIGNS. Except as otherwise expressly provided in this Agreement, the provisions hereto shall inure to the benefit of, and be binding upon, the successors and assigns of the parties hereto.
16.4 AMENDMENTS. The terms and provisions of this Agreement may not be modified or amended except in a writing executed by the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.
EXACT LABORATORIES, INC. PURCHASER
By: /s/ Stanley N. Lapidus By: /s/ Stanley N. Lapidus
---------------------------- ------------------------------
Stanley N. Lapidus Stanley N. Lapidus
President
Address: 63 Great Road Address: 12 Old Evergreen Road
Maynard, MA 01754 Beford, NH 03110
|
Exhibit 10.6
RESTRICTED STOCK PURCHASE AGREEMENT
AGREEMENT, dated as of this 31st day of March, 2000 by and between Stanley N. Lapidus (the "Purchaser") and Exact Laboratories, Inc. (the "Company"), a Delaware corporation.
WHEREAS, the Purchaser has been granted a Non-Qualified Stock Option (the "Option") to purchase 75,000 shares of common stock, $0.01 par value per share, by the Company (the "Common Stock") pursuant to the Nonqualified Stock Option Agreement (the "Option Agreement") attached hereto as ANNEX I.
WHEREAS, a condition of the exercise of the Option is the execution of this Agreement.
1. SALE. Pursuant to the exercise of the Option as set forth in the Option Agreement, the Company hereby issues to the Purchaser 75,000 shares (the "Shares") of Common Stock for an exercise price of $1.05 per share (the "Exercise Price"), to be paid in cash or by check payable to the order of the Company.
2. RECEIPT OF EXERCISE PRICE AND SHARES. The Company hereby acknowledges receipt of $78,750.00, the aggregate exercise price for the Shares, in accordance with Section 1. The Purchaser hereby acknowledges receipt of a stock certificate representing the Shares.
3. COMPANY PURCHASE OPTION.
3.1 OPTION TO THE COMPANY TO PURCHASE THE SHARES. The Purchaser hereby grants to the Company an irrevocable right and option (the "Purchase Option") to purchase all or any portion of the Shares on the terms and conditions set forth in this Agreement.
At any time within (90) ninety days after the Purchaser ceases to have a Business Relationship (as defined in the Option Agreement) with the Company or a subsidiary of the Company, subject to the provisions of Section 3.2 in the event of a Termination Without Cause (as defined in Section 3.2 (ii)) or a Business Event (as defined in Section 3.2 (i)), the Company shall have the right to exercise the Purchase Option and to purchase from the Purchaser (or his estate, it being understood that Shares released from the Purchase Option under this Agreement shall pass upon the Purchaser's death to the Purchaser's estate), for an amount per Share equal to the Exercise Price (the "Option Price"), up to that fraction of the Shares specified in the following table:
IF CESSATION OF EMPLOYMENT OCCURS: SHARES SUBJECT TO PURCHASE OPTION Before MARCH 31, 2000 100% On the 14th day of each calendar month Less an additional 1,666.67 SHARES thereafter On or after DECEMBER 14, 2003 None |
3.2 EARLY TERMINATION OF PURCHASE OPTION. Notwithstanding the foregoing, in the event the Purchaser continues to have a Business Relationship with the Company on the earlier to occur of the following events prior to five years from the date of this Agreement, the Purchase Option shall immediately expire and the Company shall have no further right and option to repurchase all or any portion of the Shares:
(i) the closing of (A) the sale by the Company of all or substantially all of its assets, (B) the sale or exchange in a single transaction, or a series of related transactions, of shares of capital stock of the Company representing at least a majority of the issued and outstanding shares of capital stock of the Company (measured on the basis of voting power), or (C) the merger or consolidation of the Company with or into another entity in a transaction where the shares of the Company's capital stock outstanding immediately prior to the closing of such merger or consolidation represent or are converted into or exchanged for shares that represent less than a majority of the shares of capital stock of the resulting or surviving entity outstanding immediately after the closing of such merger or consolidation (each of the foregoing being referred to as "Business Event"); or
(ii) the termination by the Company of the Purchaser's employment with the Company without cause or for cause other than (A) the Purchaser's gross negligence in the performance of his duties as an employee and officer of the Company (as determined by a majority of the directors of the Company other than the Purchaser) or (B) criminal misconduct by the Purchaser in connection with the performance of his duties as an employee and officer of the Company (termination of the type described in this Section 3.2(ii) being referred to as a "Termination Without Case"); or
(iii) the Purchaser suffers a substantial diminution in job responsibility or a substantial reduction in compensation; or
(iv) the Company moves the Purchaser's place of employment more than 60 miles from Company's current office location in Maynard, Massachusetts.
3.3 EXERCISE OF OPTION. The Purchase Option shall be exercised by written notice delivered or mailed by the Company to the Purchaser (or his estate), accompanied by payment by check for the Option Price for the Shares being repurchased.
3.4 DELIVERY OF REPURCHASED SHARES. The Purchaser agrees that he (or his executors or administrators or other legal representative, as the case may be) shall promptly deliver to the Company, at the Company's principal office, certificates for any Shares which are repurchased by the Company pursuant to this Section 3, and that such certificates shall be duly endorsed in blank for transfer to the Company; provided, however, that if the Purchaser fails to deliver such certificates to the Company on or before the fifth day following delivery to the Purchaser by the Company of the notice and payment required by subsection 3.3, the Shares
repurchased shall be deemed to be transferred to the Company on such date, and all rights of the Purchaser with respect to such Shares shall thereupon cease.
3.5 SHARES NOT REPURCHASED. In the event the Company declines in writing to repurchase any or all of the Shares or does not exercise its option for repurchase as provided herein, the Shares shall remain the property of the Purchaser.
4. ADDITIONAL SHARES. If, from time to time during the term of the Purchase Option, there is any stock dividend or liquidating dividend of cash and/or property, stock split, subdivision, or other change in the character or amount of any of the outstanding Common Stock of the Company, then in such event any and all new, substituted or additional securities or other property to which the Purchaser is entitled by reason of his ownership of the Shares shall be immediately subject to the Purchase Option and be included in the term "Shares" for all purposes of the Purchase Option with the same force and effect as the Shares presently subject thereto. After each such event, the Option Price per share upon exercise of the Purchase Option shall be appropriately adjusted.
5. INVESTMENT REPRESENTATIONS AND ACKNOWLEDGEMENTS.
5.1 INVESTMENT REPRESENTATIONS. The Purchaser represents, warrants and covenants that:
(i) The Purchaser is repurchasing the Shares for his own account for investment only, and not with a view to, or for sale in connection with, any distribution of the Shares in violation of the Securities Act of 1933 (the "Securities Act"), or any rule or regulation under the Securities Act.
(ii) The Purchaser is aware of the Company's business affairs and financial condition, and has had such opportunity as he has deemed adequate to obtain from representatives of the Company such information as is necessary to permit the Purchaser to evaluate the merits and risks of his investment in the Company.
(iii) The Purchaser can afford a complete loss of the value of the Shares and is able to bear the economic risk of holding the Shares for an indefinite period.
(iv) The Purchaser has sufficient experience in business, financial and investment matters to be able to evaluate the risks involved in the purchase of the Shares and to make an informed investment decision with respect to such purchase.
(v) The Purchaser understands that: (A) the Shares will not be registered under the Securities Act and are "restricted securities" within the meaning of Rule 144 and/or Rule 701 under the Securities Act; (B) the Shares cannot be sold,
transferred or otherwise disposed of unless they are subsequently registered under the Securities Act or an exemption from registration is then available; (C) in any event, the exemption from registration under Rule 144 or otherwise will not be available for at least one year and even then may not be available unless a public market then exists for the Common Stock, adequate information concerning the Company is available to the public, and other terms and conditions of Rule 144 are complied with, and (D) there is now no registration statement on file with the Securities and Exchange Commission with respect to any stock of the Company and the Company has no obligation or current intention to register the Shares under the Securities Act.
5.2 SECTION 83(b) ELECTION. Purchaser acknowledges that the Shares acquired upon exercise of this option may be treated as subject to a substantial risk of forfeiture within the meaning of Section 83 of the Code. Accordingly, as a condition precedent to the issuance of any Shares in connection with the exercise of this option, Purchaser agrees to timely file an election under Section 83(b) of the Code to include in income currently, the difference between the fair market value of the Shares received upon exercise of this option and the Exercise Price.
6. LEGENDS.
6.1 RESTRICTED STOCK AGREEMENT LEGEND. All certificates representing shares which are subject to the Purchase Option shall have affixed thereto a legend substantially in the following form:
"The securities represented by this certificate are subject to certain restrictions on transfer and to certain rights of the Company to purchase such securities as set forth in a Restricted Stock Purchase Agreement between the corporation and the registered holder (or his predecessor in interest), a copy of which is available for inspection without charge at the principal office of the corporation."
7. RESTRICTIONS ON TRANSFER. Except as otherwise provided in this
Section 7, the Purchaser shall not sell, assign, transfer, pledge, hypothecate
or otherwise dispose of, by operation of law or otherwise (collectively
"transfer") any of the Shares, or any interest therein, unless and until such
Shares are no longer subject to the Company's Purchase Option. Notwithstanding
the foregoing the Purchaser may transfer Shares by gift, provided that such
Shares shall remain subject to this Agreement (including without limitation the
Purchase Option and the restrictions on transfer set forth herein), and such
permitted transferee shall, as a condition to such transfer, deliver to the
company a written instrument confirming that such transferee shall be bounded by
all of the terms and conditions of this Agreement.
8. EFFECT OF PROHIBITED TRANSFER. The Company shall not be required (a) to transfer on its books any of the Shares which shall have been sold or transferred in violation of any of the provisions set forth in this Agreement, or (b) to treat as owner of such Shares or to pay dividends to any transferee to whom any such Shares shall have been so transferred.
9. RIGHT OF STOCKHOLDER. Subject to the provision of Sections 7 and 8 above, the Purchaser shall, during the term of this Agreement, exercise all rights and privileges of a stockholder of the Company with respect to the Shares.
10. FURTHER INSTRUMENTS AND ACTIONS. The parties agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Agreement.
11. NOTICES. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit with the United States Post Office, by registered or certified mail, addressed to each other party hereto at his address hereinafter shown below his signature or at such other address as such party may designate by ten (10) days advance written notice to all other parties hereto.
12. NO OBLIGATION TO CONTINUE BUSINESS RELATIONSHIP. Nothing contained in this Agreement shall be construed as giving the Purchaser any right to continue a Business Relationship with the Company.
13. WITHHOLDING TAXES. The Purchaser acknowledges and agrees that any tax consequences of the purchase, exercise and sale of Shares will be borne by Purchaser and not by the Company and that the Company has the right to deduct from payments of any kind otherwise due to the Purchaser any federal, state or local taxes of any kind required by law to be withheld with respect to the Shares.
14. The Purchaser agrees that in connection with an underwritten public offering of Common Stock, upon the request of the Company or the principal underwriter managing such public offering, the Shares may not be sold, offered for sale or otherwise disposed of without the prior written consent of the Company or such underwriter, as the case may be, for at least 180 days after the effectiveness of the registration statement filed in connection with such offering, or such longer period of time as the Board of Directors may determine if all of the Company's directors and officers agree to be similarly bound. The obligations under this Section 14 shall remain effective for all underwritten public offerings with respect to which the Company has filed a registration statement on or before the date five (5) years after the closing of the Company's initial public offering, provided, however, that this Section 14 shall cease to apply to any Shares sold to the public pursuant to an effective registration statement or an exemption from the registration requirements of the Securities Act in a transaction that complied with the terms of this Agreement.
15. MISCELLANEOUS
15.1 ENTIRE AGREEMENT. This Agreement constitutes the entire contract between the parties hereto with regard to the subject matter hereof.
15.2 GOVERNING LAW. This Agreement shall be governed by and construed under the laws of the State of Delaware as such laws are applied to contracts entered into and performed in such state.
15.3 SUCCESSOR AND ASSIGNS. Except as otherwise expressly provided in this Agreement, the provisions hereto shall inure to the benefit of, and be binding upon, the successors and assigns of the parties hereto.
15.4 AMENDMENTS. The terms and provisions of this Agreement may not be modified or amended except in a writing executed by the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.
EXACT LABORATORIES, INC. PURCHASER
By: /s/ Stanley N. Lapidus By: /s/ Stanley N. Lapidus
---------------------------- --------------------------------
Name: Stanley N. Lapidus Name: Stanley N. Lapidus
Title: President
Address: 12 Old Evergreen Road
Bedford, NH 03310
|
Exhibit 10.7
RESTRICTED STOCK PURCHASE AGREEMENT
AGREEMENT, dated as of this 23rd day of June, 2000 by and between Don M. Hardison (the "Purchaser") and Exact Laboratories, Inc. (the "Company"), a Delaware corporation.
1. SALE. The Company hereby sells and issues to the Purchaser 71,111 shares (the "Shares") of Common Stock, $.01 par value, of the Company, for a purchase price of $399,999.38 (the "Purchase Price"), to be paid in cash or by check payable to the order of the Company. This sale is made pursuant and subject to the following terms and conditions.
2. RECEIPT OF PURCHASE PRICE AND SHARES. The Company hereby
acknowledges receipt of (i) cash in the amount of $100,000 and (ii) a promissory
note dated as of the date hereof in the principal amount of $299,999.38, as
payment in full of the Purchase Price of the Shares, in accordance with Section
1. The Purchaser hereby acknowledges receipt of a stock certificate representing
the Shares.
3. COMPANY PURCHASE OPTION.
3.1 OPTION TO THE COMPANY TO PURCHASE THE SHARES. The Purchaser hereby grants to the Company an irrevocable right and option (the "Purchase Option") to purchase all or any portion of the Shares on the terms and conditions set forth in this Agreement.
At any time within (90) ninety days after the Purchaser ceases to be an
employee of the Company or a subsidiary of the Company, subject to the
provisions of Section 3.2 in the event of a Termination Without Cause (as
defined in Section 3.2 (ii)) or a Business Event (as defined in Section 3.2
(i)), the Company shall have the right to exercise the Purchase Option and to
purchase from the Purchaser (or his estate, it being understood that Shares
released from the Purchase Option under this Agreement shall pass upon the
Purchaser's death to the Purchaser's estate), for an amount per Share equal to
the Purchase Price (the "Option Price"), up to that fraction of the Shares
specified in the following table:
IF CESSATION OF EMPLOYMENT OCCURS % OF SHARES SUBJECT TO PURCHASE OPTION Before May 1, 2001 100% On or after May 1, 2001 80% On the 1st day of each calendar month Percentage of shares subject to thereafter 1,185.18 Shares shall be Purchase Option on the 1st day of the released from the Purchase Option. prior calendar month less 1.666% On or after May 1, 2005 None |
3.2 EARLY TERMINATION OF PURCHASE OPTION. Notwithstanding the foregoing, in the event the Purchaser continues to be employed by the Company on the earlier to occur of the following events prior to five years from the date of this Agreement, the Purchase Option shall immediately expire and the Company shall have no further right and option to repurchase all or any portion of the Shares:
(i) the closing of (A) the sale by the Company of all or substantially all of its assets, or (B) the merger or consolidation of the Company with or into another entity in a transaction where the shares of the Company's capital stock outstanding immediately prior to the closing of such merger or consolidation represent or are converted into or exchanged for shares that represent less than a majority of the shares of capital stock of the resulting or surviving entity outstanding immediately after the closing of such merger or consolidation (each of the foregoing being referred to as "Business Event"); and
(ii) the termination by the Company of the Purchaser's employment with the Company without cause or for cause other than (A) the Purchaser's negligence in the performance of his duties as an employee and officer of the Company (as determined by a majority of the directors of the Company other than the Purchaser) or (B) criminal misconduct by the Purchaser in connection with the performance of his duties as an employee and officer of the Company (termination of the type described in this Section 3.2(ii) being referred to as a "Termination Without Cause"); or
(iii) the Purchaser suffers a substantial diminution in job responsibility or a substantial reduction in compensation; or
(iv) the Company moves the Purchaser's place of employment more than 60 miles from Company's current office location in Maynard, Massachusetts.
3.3 EXERCISE OF OPTION. The Purchase Option shall be exercised by written notice delivered or mailed by the Company to the Purchaser (or his estate), accompanied by payment by check for the Option Price for the Shares being repurchased.
3.4 DELIVERY OF REPURCHASED SHARES. The Purchaser agrees that he (or his executors or administrators or other legal representative, as the case may be) shall promptly deliver to the Company, at the Company's principal office, certificates for any Shares which are repurchased by the Company pursuant to this Section 3, and that such certificates shall be duly endorsed in blank for transfer to the Company; provided, however, that if the Purchaser fails to deliver such certificates to the Company on or before the fifth day following delivery to the Purchaser by the Company of the notice and payment required by subsection 3.3, the Shares repurchased shall be deemed to be transferred to the Company on such date, and all rights of the Purchaser with respect to such Shares shall thereupon cease.
3.5 SHARES NOT REPURCHASED. In the event the Company declines in writing to repurchase any or all of the Shares or does not exercise its option for repurchase as provided herein, the Shares shall remain the property of the Purchaser.
4. ADDITIONAL SHARES. If, from time to time during the term of the Purchase Option, there is any stock dividend or liquidating dividend of cash and/or property, stock split, subdivision, or other change in the character or amount of any of the outstanding Common Stock of the Company, then in such event any and all new, substituted or additional securities or other property to which the Purchaser is entitled by reason of his ownership of the Shares shall be immediately subject to the Purchase Option and be included in the term "Shares" for all purposes of the Purchase Option with the same force and effect as the Shares presently subject thereto. After each such event, the Option Price per share upon exercise of the Purchase Option shall be appropriately adjusted.
5. INVESTMENT REPRESENTATIONS. The Purchaser represents, warrants and covenants that:
(i) The Purchaser is repurchasing the Shares for his own account for investment only, and not with a view to, or for sale in connection with, any distribution of the Shares in violation of the Securities Act of 1933 (the "Securities Act"), or any rule or regulation under the Securities Act.
(ii) The Purchaser is aware of the Company's business affairs and financial condition, and has had such opportunity as he has deemed adequate to obtain from representatives of the Company such information as is necessary to permit the Purchaser to evaluate the merits and risks of his investment in the Company.
(iii) The Purchaser can afford a complete loss of the value of the Shares and is able to bear the economic risk of holding the Shares for an indefinite period.
(iv) The Purchaser has sufficient experience in business, financial and investment matters to be able to evaluate the risks involved in the purchase of the Shares and to make an informed investment decision with respect to such purchase.
(v) The Purchaser understands that: (A) the Shares will not be registered under the Securities Act and are "restricted securities" within the meaning of Rule 144 and/or Rule 701 under the Securities Act; (B) the Shares cannot be sold, transferred or otherwise disposed of unless they are subsequently registered under the Securities Act or an exemption from registration is then available; (C) in any event, the exemption from registration under Rule 144 or otherwise will not be available for at least two years and even then may not be available unless a public market then exists for the Common Stock, adequate information concerning the Company is available to the public, and other terms and conditions of Rule 144 are complied with, and (D) there is now no registration statement on file with the Securities and Exchange Commission with respect to any stock of the Company and the Company has no obligation or current intention to register the Shares under the Securities Act.
6. LEGENDS.
6.1 RESTRICTED STOCK AGREEMENT LEGEND. All certificates representing shares which are subject to the Purchase Option shall have affixed thereto a legend substantially in the following form:
"The securities represented by this certificate are subject to certain restrictions on transfer and to certain rights of the Company to purchase such securities as set forth in a Restricted Stock Purchase Agreement between the corporation and the registered holder (or his predecessor in interest), a copy of which is available for inspection without charge at the principal office of the corporation."
7. RESTRICTIONS ON TRANSFER. Except as otherwise provided in this
Section 7, the Purchaser shall not sell, assign, transfer, pledge, hypothecate
or otherwise dispose of, by operation of law or otherwise (collectively
"transfer") any of the Shares, or any interest therein, unless and until such
Shares are no longer subject to the Company's Purchase Option. Notwithstanding
the foregoing the Purchaser may transfer Shares by gift, provided that such
Shares shall remain subject to this Agreement (including without limitation the
Purchase Option and the restrictions on transfer set forth herein), and such
permitted transferee shall, as a condition to such transfer, deliver to the
Company a written instrument confirming that such transferee shall be bounded by
all of the terms and conditions of this Agreement.
8. EFFECT OF PROHIBITED TRANSFER. The Company shall not be required (a) to transfer on its books any of the Shares which shall have been sold or transferred in violation of any of the provisions set forth in this Agreement, or (b) to treat as owner of such Shares or to pay dividends to any transferee to whom any such Shares shall have been so transferred.
9. RIGHT OF STOCKHOLDER. Subject to the provision of Sections 7 and 8 above, the Purchaser shall, during the term of this Agreement, exercise all rights and privileges of a stockholder of the Company with respect to the Shares.
10. FURTHER INSTRUMENTS AND ACTIONS. The parties agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Agreement.
11. NOTICES. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit with the United States Post Office, by registered or certified mail, addressed to each other party hereto at his address hereinafter shown below his signature or at such other address as such party may designate by ten (10) days advance written notice to all other parties hereto.
12. EMPLOYMENT STATUS. Nothing contained in this Agreement shall be construed as giving the Purchaser any right to continue employment with the Company.
13. WITHHOLDING TAXES. The Purchaser acknowledges and agrees that any tax consequences of the purchase, exercise and sale of Shares will be borne by Purchaser and not by the Company and that the Company has the right to deduct from payments of any kind otherwise due to the Purchaser any federal, state or local taxes of any kind required by law to be withheld with respect to the Shares.
14. MISCELLANEOUS
14.1 ENTIRE AGREEMENT. This Agreement constitutes the entire contract between the parties hereto with regard to the subject matter hereof.
14.2 GOVERNING LAW. This Agreement shall be governed by and construed under the laws of the State of Delaware as such laws are applied to contracts entered into and performed in such state.
14.3 SUCCESSOR AND ASSIGNS. Except as otherwise expressly provided in this Agreement, the provisions hereto shall inure to the benefit of, and be binding upon, the successors and assigns of the parties hereto.
14.4 AMENDMENTS. The terms and provisions of this Agreement may not be modified or amended except in a writing executed by the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.
EXACT LABORATORIES, INC. PURCHASER
By: /s/ Stanley N. Lapidus By: /s/ Don M. Hardison
-------------------------- ------------------------------
Stanley N. Lapidus Don M. Hardison
Chairman
|
Exhibit 10.8
SECURED PROMISSORY NOTE
March 31, 2000
$104,000.00
For value received, the undersigned, Stanley N. Lapidus, (the
"OBLIGOR"), hereby promises to pay to the order of Exact Laboratories, Inc., a
Delaware corporation (the "COMPANY") or its registered assigns, at the Company's
principal office at 63 Great Road, Maynard, Massachusetts 01754 or at such other
place as may be designated from time to time in writing by Company, the
principal sum of One Hundred Four Thousand Dollars and No Cents ($104,000.00)
together with interest in arrears from and including the date hereof on the
unpaid principal balance hereunder, computed daily, at the rate of 9% per annum,
payable as set forth below. At the option of Company and to the extent permitted
by applicable law, the rate of interest on any unpaid principal or interest not
paid when due and payable hereunder shall be two percent (2%) per annum above
the rate of interest set forth in the immediately preceding sentence. Interest
shall be calculated on the basis of actual number of days elapsed over a year of
360 days. Notwithstanding any other provision of this Promissory Note, the
Company does not intend to charge and Obligor shall not be required to pay any
interest or other fees or charges in excess of the maximum permitted by
applicable law; any payments in excess of such maximum shall be refunded to
Obligor or credited to reduce principal hereunder. All payments received by
Company hereunder will be applied first to costs of collection, if any, then to
interest and the balance to principal. Principal and interest shall be payable
in lawful money of the United States of America.
120 payments of $780.00 accrued interest only shall be paid on the last
Thursday of each month beginning in April, 2000, until March 31, 2010 at which
time the final payment of outstanding principal and accrued interest thereon
shall be due and payable in full, if not sooner paid; PROVIDED, HOWEVER, (i) if
Obligor's employment with the Company is terminated at any time for any or no
reason, the principal (plus accrued interest) shall be immediately due and
payable upon the effective date of such termination, or (ii) if the Company
effects a registration of it's capital stock in an initial public offering under
the Securities Act of 1933, as amended (an "IPO"),
then the principal (plus accrued interest) shall be due and payable within 2
years following the effective date of the Registration Statement filed with the
Securities and Exchange Commission effecting the IPO. Payments of principal plus
interest shall be paid through payroll deductions from Obligor's wages from the
Company.
If any day on which a payment is due pursuant to the terms of this
Promissory Note is not a day on which banks in the Commonwealth of Massachusetts
are generally open (a "BUSINESS DAY"), such payment shall be due on the next
Business Day following.
This Promissory Note may be prepaid at any time, without premium or
penalty, in whole or in part, all such prepayments to be applied upon
installments of most remote maturity. Any prepayment of principal shall be
accompanied by a payment of accrued interest in respect of the principal being
prepaid.
This Promissory Note is secured by and entitled to the benefits of a
Pledge Agreement between Obligor and Company of even date herewith (the "PLEDGE
AGREEMENT"). Upon the occurrence of any Event of Default, as defined below,
Company may declare any or all obligations or liabilities of Obligor to Company
(including the unpaid principal hereunder and any interest due thereon),
immediately due and payable without presentment, demand, protest or notice.
This Promissory Note shall, at the option of the holder hereof, become
due and payable without notice or demand, upon the happening of any one of the
following specified events by or with respect to the Obligor or any guarantor
of this Promissory Note (each an "EVENT OF DEFAULT"): (1) failure to pay any
amount as herein set forth; (2) default in the performance of any other
obligation to Company, which default is not cured within thirty (30) days after
written notice of such default from Company; (3) insolvency (however evidenced)
or the commission of any act of insolvency; (4) the making of a general
assignment for the benefit of creditors; (5) the filing of any petition or the
commencement of any proceeding for any relief under any bankruptcy or insolvency
laws, or any laws relating to the relief of debtors, readjustment of
indebtedness, reorganizations, compositions, or extensions; (6) the filing of
any petition or the commencement of any proceeding for any relief under any
bankruptcy or insolvency laws, or any laws relating to the relief of debtors,
readjustment of indebtedness, reorganizations, compositions, or extensions,
which proceeding is not dismissed within sixty (60) days; (7) suspension of the
transaction of the usual business of Obligor; or (8) the past or future making
of a false representation or warranty by Obligor in connection with any loan or
loans by Company.
Any deposits or other sums at any time credited by or due from Company
to or for Obligor and any securities or other property of Obligor in the
possession of Company shall at all times be held and treated as collateral
security for the payment of this Promissory Note and any other liability now
existing or hereafter arising of Obligor to Company and Company may apply or set
off any such deposits and sums against said liabilities.
If this Promissory Note is not paid in accordance with its terms,
Obligor shall pay to Company, in addition to principal and accrued interest
thereon, all costs of collection of the principal and accrued interest,
including, but not limited to, reasonable attorneys' fees, court costs and
other costs for the enforcement of payment of this Promissory Note.
No waiver of any obligation of Obligor under this
Promissory Note shall be effective unless it is in a writing signed by Company.
A waiver by Company of any right or remedy under this Promissory Note on any
occasion shall not be a bar to exercise of the same right or remedy on any
subsequent occasion or of any other right or remedy at any time.
Any notice required or permitted under this Promissory Note shall be in
writing and shall be deemed to have been given on the date of delivery, if
personally delivered to the party to whom notice is to be given, or on the fifth
business day after mailing, if mailed to the party to whom notice is to be
given, by certified mail, return receipt requested, postage prepaid, and
addressed to the addressee at the address of the addressee set forth herein, or
to the most recent address, specified by written notice, given to the sender
pursuant to this paragraph.
This Promissory Note is delivered in and shall be enforceable in
accordance with the laws of the Commonwealth of Massachusetts, and shall be
construed in accordance therewith, and shall have the effect of a sealed
instrument.
Obligor hereby expressly waives presentment, demand, and protest,
notice of demand, dishonor and nonpayment of this Promissory Note, and all other
notices or demands of any kind in connection with the delivery, acceptance,
performance, default or enforcement hereof, and hereby consents to any delays,
extensions of time, renewals, waivers or modifications that may be granted or
consented to by the holder hereof with respect to the time of payment or any
other provision hereof or of the Pledge Agreement.
In the event any one or more of the provisions of this Promissory Note shall for any reason be held to be invalid, illegal or unenforceable, in whole or in part or in any respect, or in the event that any one or more of the provisions of this Promissory Note operate or would prospectively operate to invalidate this Promissory Note, then and in any such event, such provision(s) only shall be deemed null and void and shall not affect any other provision of this Promissory Note and the remaining provisions of this Promissory Note shall remain operative and in full force and effect and in no way shall be affected, prejudiced, or disturbed thereby.
OBLIGOR:
/s/ Stanley N. Lapidus ------------------------ Signature |
Exhibit 10.9
PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of March 31, 2000, made by the undersigned (the "BORROWER"), in favor of Exact Laboratories, Inc., a Delaware corporation with its Principal Office at 63 Great Road, Maynard, Massachusetts 01754 (the "COMPANY").
RECITALS
WHEREAS, pursuant to the Company's 1995 Stock Plan the Company has granted to Borrower options to purchase an aggregate 100,000 shares of the Company's Common Stock, $0.01 par value per share, (the "SHARES"), of which 75,000 shares are subject to restrictions on transfer pursuant to a Stock Restriction Agreement by and between the Borrower and the Company dated March 31, 2000 (the "STOCK RESTRICTION AGREEMENT");
WHEREAS, the Company has agreed to make a loan to the Borrower upon the terms and subject to the conditions set forth therein, to be evidenced by the promissory note (the "NOTE") issued by the Borrower thereunder; and
WHEREAS, the Borrower is the legal and beneficial owner of the Pledged Securities (as hereinafter defined) and it is a requirement of the Borrower under the Stock Restriction Agreement that the Borrower shall execute and deliver this Pledge Agreement to the Company.
NOW, THEREFORE, in consideration of the premises, the Borrower hereby agrees with the Company as follows:
1. DEFINED TERMS. Unless otherwise defined herein, terms which are defined in the Credit Agreement and used herein are so used as so defined, and the following terms shall have the following meanings:
"CODE" means the Uniform Commercial Code from time to time in effect in the Commonwealth of Massachusetts.
"COLLATERAL" means the Pledged Securities and all Proceeds.
"EVENT OF DEFAULT" means those events set forth in the Note.
"OBLIGATIONS" means the unpaid principal of and interest on the Note and all other obligations and liabilities of the Borrower to the Company, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, the Stock Restriction Agreement, the Note or this Pledge Agreement and any other document made, delivered or given in connection therewith or herewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including, without limitation, all reasonable fees and disbursements of counsel to the Company) or otherwise.
"PERMITTED LIENS" means the right of the Company to repurchase the Pledged Securities under certain circumstances pursuant to the Restricted Stock Purchase Agreement between the Company and the Borrower dated March 31, 2000.
"PLEDGE AGREEMENT" means this Pledge Agreement, as amended, supplemented or otherwise modified from time to time.
"PLEDGED SECURITIES" means the Shares, together with all stock certificates, instruments, options or rights of any nature whatsoever which may be issued or granted to the Borrower in respect of the Pledged Securities, while this Pledge Agreement in effect.
"PROCEEDS" means all "proceeds" as such term is defined in Section 9-306(1) of the Code and, in any event, shall include, without limitation, all dividends or other income from the Pledged Securities, collections thereon or distributions with respect thereto.
2. PLEDGE; GRANT OF SECURITY INTEREST. The Borrower hereby delivers to the Company all the Pledged Securities and hereby grants to the Company a first security interest in the Collateral, as collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations.
3. STOCK POWERS. Concurrently with the delivery to the Company of each certificate or instrument representing the Pledged Securities, the Borrower shall deliver an undated stock power or other transfer document covering such certificate or instrument, duly executed in blank with, if the Company so requests, signature guaranteed.
4. REPRESENTATIONS AND WARRANTIES. The Borrower represents and warrants to the Company that:
(a) the Borrower is the record and beneficial owner of, and has good and marketable title to, the Pledged Securities, free of any and all security interests, liens or options in favor of, or claims of, any other person or entity, except for Permitted Liens; and
(b) upon delivery to the Company of the certificates and instruments evidencing the Pledged Securities, the lien granted pursuant to this Pledge Agreement will constitute a valid, perfected first priority lien on the Pledged Securities enforceable as such against all creditors of the Borrower and any person or entities purporting to purchase any Collateral from the Borrower.
5. COVENANTS. The Borrower covenants and agrees with the Company that, from and after the date of this Pledge Agreement until the Obligations are paid in full:
(a) If the Borrower shall, as a result of its ownership of the Pledged Securities, become entitled to receive or shall receive any stock certificate or other certificate or instrument (including, without limitation, any certificate representing a stock dividend or a distribution in connection with any reclassification, increase or reduction of capital or any certificate or
instrument issued in connection with any reorganization), option or rights, whether in addition to, in substitution of, as a conversion of, or in exchange for any of the Pledged Securities or otherwise in respect thereof, the Borrower shall accept the same as the Company's agent, hold the same in trust for the Company and deliver the same forthwith to the Company in the exact form received, together with an undated stock power or other transfer document covering such certificate or instrument duly executed in blank and with, if the Company so requests, signature guaranteed, to be held by the Company hereunder as additional collateral security for the Obligations. Any sums paid upon or in respect of the Pledged Securities upon the liquidation or dissolution of the issuer thereof shall be paid over to the Company to be held by it hereunder as additional collateral security for the Obligations, and in case any distribution of capital shall be made on or in respect of the Pledged Securities or any property shall be distributed upon or with respect to the Pledged Securities pursuant to the recapitalization or reclassification of the capital of the issuer thereof or pursuant to the reorganization thereof, the property so distributed shall be delivered to the Company to be held by it, subject to the terms hereof, as additional collateral security for the Obligations. If any sums of money or property so paid or distributed in respect of the Pledged Securities shall be received by the Borrower, the Borrower shall, until such money or property is paid or delivered to the Company, hold such money or property in trust for the Company, segregated from other funds of the Borrower, as additional collateral security for the Obligations.
(b) Without the prior written consent of the Company, the
Borrower will not (i) sell, assign, transfer, exchange or otherwise dispose of,
or grant any option with respect to, the Collateral except in compliance with
the provisions of Sections 6, 8 and 9 of the Stock Restriction Agreement, or
(ii) create, incur or permit to exist any lien or option in favor of, or any
claim of any person or entity with respect to, any of the Collateral, or any
interest therein, except for Permitted Liens. The Borrower will defend the
right, title and interest of the Company in and to the Collateral against the
claims and demands of all person or entities whomsoever.
(c) At any time and from time to time, upon the written request of the Company, and at the sole expense of the Borrower, the Borrower will promptly and duly execute and deliver such further instruments and documents and take such further actions as the Company may reasonably request for the purposes of obtaining or preserving the full benefits of this Pledge Agreement and of the rights and powers herein granted. If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any promissory note, other instrument or chattel paper, such note, instrument or chattel paper shall be promptly delivered to the Company, duly endorsed in a manner satisfactory to the Company, to be held as Collateral pursuant to this Pledge Agreement.
(d) The Borrower agrees to pay, and to save the Company harmless from, any and all liabilities with respect to, or resulting from any delay in paying any and all stamp, excise, sales or other taxes (exclusive of taxes based on income, gross receipts, franchise rights and related items) which may be payable or determined to be payable with respect to any of the Collateral or in connection with any of the transactions contemplated by this Pledge Agreement.
6. CASH DIVIDENDS; VOTING RIGHTS. Notwithstanding the provisions of
Section 5(a) hereof, unless an Event of Default shall have occurred, the
Borrower shall be permitted to receive all cash dividends and other cash
distributions paid by the issuer of any of the Pledged Securities in respect of
the Pledged Securities and to exercise all voting and corporate rights with
respect to the Pledged Securities, PROVIDED, HOWEVER, that after written notice
from the Company to the Borrower, no stockholder vote shall be cast or corporate
right exercised or other action taken by the Borrower which, in the Company's
reasonable judgment, would impair the Collateral or which would be inconsistent
with or result in any violation of any provision of the Credit Agreement, the
Note or this Pledge Agreement, except if and to the extent that the Borrower is
obligated to effect such vote, exercise or action pursuant to an agreement
between the Borrower and one or more third parties.
7. RIGHTS OF THE COMPANY. (a) If an Event of Default shall occur and be continuing: (i) the Company shall have the right to receive any and all cash dividends paid in respect of the Pledged Securities and make application thereof to the Obligations in such order as it may determine, and (ii) all of the Pledged Securities shall be registered in the name of the Company or its nominee, and the Company or its nominee may thereafter exercise (A) all voting, corporate, and other rights pertaining to the Pledged Securities at any meeting or otherwise and (B) any and all rights of conversion, exchange, subscription and any other rights, privileges or options pertaining to such Pledged Securities as if it were the absolute owner thereof (including, without limitation, the right to exchange at its discretion any and all of the Pledged Securities upon the merger, consolidation, reorganization, recapitalization of other fundamental change in the corporate or partnership structure of the issuer thereof or upon the exercise by the Borrower or the Company of any right, privilege or option pertaining to such Pledged Securities and in connection therewith, the right to deposit and deliver any and all of the Pledged Securities with any committee, depository, transfer agent, registrar or other designated agency upon such terms and conditions as it may determine), all without liability except to account for property actually received by it, but the Company shall have no duty to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing.
(b) The rights of the Company hereunder shall not be conditioned or contingent upon the pursuit by the Company of any right or remedy against the Borrower or against any other person or entity which may be or become liable in respect of all or any part of the Obligations or against any other collateral security therefor, guarantee thereof or right of offset with respect thereto. The Company shall not be liable for any failure to demand, collect or realize upon all or any part of the Collateral or for any delay in doing so, nor shall it be under any obligation to sell or otherwise dispose of any Collateral upon the request of the Borrower or any other person or entity or to take any other action whatsoever with regard to the Collateral or any part thereof.
8. REMEDIES. If an Event of Default shall occur and be continuing, the Company may exercise, in addition to all other rights and remedies granted in this Pledge Agreement and in any other instrument or agreement securing, evidencing or relating to the Obligations, all rights and remedies of a secured party under the Code. Without limiting the generality of the foregoing, the Company, without demand of performance or other demand, presentment, protest,
advertisement or notice of any kind (except any notice required by law referred
to below) to or upon the Borrower, any guarantor or any other person or entity
(all and each of which demands, defenses, advertisements and notices are hereby
expressly waived), may in such circumstances forthwith collect, receive,
appropriate and realize upon the Collateral, or any part thereof, and/or may
forthwith sell, assign, give option or options to purchase or otherwise dispose
of and deliver the Collateral or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, in the
over-the-counter market, at any exchange, broker's board or office of the
Company or elsewhere upon such terms and conditions as it may deem advisable and
at such prices as it may deem best, for cash or on credit or for future delivery
without assumption of any credit risk. The Company shall have the right upon any
such public sale or sales, and, to the extent permitted by law, upon any such
private sale or sales, to purchase the whole or any part of the Collateral so
sold, free of any right or equity of redemption in the Borrower, which right or
equity is hereby expressly waived and released. The Company shall apply any
Proceeds from time to time held by it and the net proceeds of any such
collection, recovery, receipt, appropriation, realization or sale, after
deducting all reasonable costs and expenses of every kind incurred therein or
incidental to the care or safekeeping of any of the Collateral or in any way
relating to the Collateral or the rights of the Company hereunder, including,
without limitation, reasonable attorneys' fees and disbursements, to the payment
in whole or in part of the Obligations, in such order as the Company may elect,
and only after such application and after the payment by the Company of any
other amount required by any provision of law, including, without limitation,
Section 9-504(1)(c) of the Code, need the Company account for the surplus, if
any, to the Borrower. To the extent permitted by applicable law, the Borrower
waives all claims, damages and demands it may acquire against the Company
arising out of the exercise by the Company of any of its rights hereunder. If
any notice of a proposed sale or other disposition of Collateral shall be
required by law, such notice shall be deemed reasonable and proper if given at
least ten (10) days before such sale or other disposition.
9. AMENDMENTS WITH RESPECT TO THE OBLIGATIONS. The Borrower shall remain obligated hereunder, and the Collateral shall remain subject to the lien granted hereby, notwithstanding that, without any reservation of rights against the Borrower, and without notice to or further assent by the Borrower, any demand for payment of any of the Obligations made by the Company may be rescinded by the Company, and any of the Obligations continued, and the Obligations, or the liability of the Borrower upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by the Company, and the Credit Agreement, Note and any other document in connection therewith may be amended, modified, supplemented or terminated, in whole or in part, as the Company may deem advisable from time to time, and any right of offset or other collateral at any time held by the Company for the payment of the Obligations may be sold, exchanged, waived, surrendered or released. The Company shall have no obligation to protect, secure, perfect or insure any other lien at any time held by it as security for the Obligations or any property subject thereto. The Borrower hereby expressly waives any and all notice of the creation, renewal, extension or accrual of any of the Obligations and notice of or proof of reliance by the Company upon this Pledge Agreement; the Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred in reliance upon this
Pledge Agreement; and all dealings between the Borrower and the Company shall likewise be conclusively presumed to have been created or consummated in reliance upon this Pledge Agreement. The Borrower hereby expressly waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon the Borrower with respect to the Obligations.
10. LIMITATION ON DUTIES REGARDING COLLATERAL. The Company's sole duty with respect to the custody, safekeeping and physical preservation of the Collateral in its possession, under Section 9-207 of the Code or otherwise, shall be to deal with it in the same manner as the Company deals with similar securities, instruments and property for its own account. Neither the Company nor any of its directors, officers, employees or agents shall be liable for failure to demand, collect or realize upon any of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of the Borrower or otherwise.
11. POWERS COUPLED WITH AN INTEREST. All authorizations and agencies herein contained with respect to the Collateral are irrevocable and powers coupled with an interest.
12. SEVERABILITY. Any provision of this Pledge Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
13. SECTION HEADINGS. The paragraph headings used in this Pledge Agreement are for convenience of reference only and are not to affect the construction hereof or to be taken into consideration in the interpretation hereof.
14. NO WAIVER; CUMULATIVE REMEDIES. The Company shall not by any act (except by a written instrument pursuant to paragraph 15 hereof), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any default or Event of Default or in any breach of any of the terms and conditions hereof. No failure to exercise, nor any delay in exercising, on the part of the Company, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Company of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Company would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any rights or remedies provided by law.
15. WAIVERS AND AMENDMENTS; SUCCESSORS AND ASSIGNS; GOVERNING LAW. None of the terms or provisions of this Pledge Agreement, may be waived, amended, supplemented or otherwise modified except by a written instrument executed by the Borrower and the Company, PROVIDED that any provision of this Pledge Agreement may be waived in writing by the Company
in a letter or agreement executed by the Company or by telex or facsimile transmission from the Company. This Pledge Agreement shall be binding upon the successors and assigns of the Borrower and shall inure to the benefit of the Company and its successors and assigns. This Pledge Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the Commonwealth of Massachusetts.
16. NOTICES. Notices by either party hereto to the other shall be given as provided in the Credit Agreement.
17. COUNTERPARTS. This Pledge Agreement may be executed in several counterparts, each of which shall constitute an original, but all of which, when taken together, shall constitute but one agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the undersigned has caused this Pledge Agreement to be duly executed and delivered as of the date first above.
BORROWER:
/s/ Stanley N. Lapidus ---------------------------- Signature |
COMPANY:
EXACT LABORATORIES, INC.
By: /s/ Stanley N. Lapidus
------------------------
Title: President
---------------------
|
Exhibit 10.10
FULL RECOURSE PROMISSORY NOTE
June 23, 2000
$299,999.38
FOR VALUE RECEIVED, Don M. Hardison (the "Maker") promises to pay to the order of Exact Laboratories a Delaware corporation (the "Holder"), having an address at 63 Great Road, Maynard, Massachusetts 01754, or its assigns, the principal sum of $299,999.38, together with interest on the principal of this Note outstanding at the rate of 9.5% per year. All principal and accrued interest shall be paid on, or prior to, ten years from the date hereof.
Interest on this Note shall be computed on the basis of a year of 365 days for the actual number of days elapsed. All payments by the Maker under this Note shall be in immediately available funds.
Every amount overdue under this Note shall bear interest from and after the date on which such amount first became overdue at an annual rate which is two (2) percentage points above the rate per year specified in the first paragraph of this Note. Such interest on overdue amounts under this Note shall be payable on demand and shall accrue and be compounded monthly until the obligation of the Maker with respect to the payment of such interest has been discharged (whether before or after judgment).
In no event shall any interest charged, collected or reserved under this Note exceed the maximum rate then permitted by applicable law.
All payments by the Maker under this Note shall be made without set-off, defense or counterclaim and be free and clear and without any deduction or withholding for any taxes or fees of any nature whatever, unless the obligation to make such deduction or withholding is imposed by law.
Maker agrees that: (i) upon the failure to pay when due the principal balance and accrued interest hereunder; (ii) if Maker (1) commences any voluntary proceeding under any provision of Title 11 of the United States Code, as now or hereafter amended, or commences any other proceeding, under any law, now or hereafter in force, relating to bankruptcy, insolvency, reorganization, liquidation, or otherwise to the relief of debtors or the readjustment of indebtedness, (2) makes any assignment for the benefit of creditors or a composition or similar arrangement with such creditors, or (3) appoints a receiver, trustee or similar judicial officer or agent to take charge of or liquidate any of its property or assets; or (iii) upon the commencement against Maker of any involuntary proceeding of the kind described in paragraph (ii), principal and accrued interest under this Note shall become immediately due and payable without presentment, demand, protest or notice of any kind.
The Maker shall remain personally liable to the Holder with respect to all of the obligations under this Note and the Holder shall have full recourse against Maker.
No delay or omission on the part of the Holder in exercising any right under this Note shall operate as a waiver of such right or of any other right of the Holder, nor shall any delay, omission or waiver on any one occasion be deemed a bar to or waiver of the same or any other right on any future occasion.
None of the terms or provisions of this Note may be excluded, modified or amended except by a written instrument duly executed by the Holder and the Maker expressly referring to this Note and setting forth the provision so excluded, modified or amended.
Maker hereby forever waives presentment, demand, presentment for payment, protest, notice of protest, notice of dishonor of this Note and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this Note.
This Note shall be governed and construed in accordance with the laws of the Commonwealth of Massachusetts applicable to agreements made and performed entirely in such State, without regard to conflict of laws principles thereof, and shall be binding upon the successors or assigns of the Maker and shall inure to the benefit of the successors and assigns of the Holder.
/s/ Don M. Hardison ---------------------- Don M. Hardison |
Exhibit 10.11
C. B. REALTY LIMITED PARTNERSHIP
26 WINDSONG LANDING
CHATHAM, MA 02633
LEASE AMENDMENT AND EXTENSION
This is an amendment and an extension to a lease dated December 10, 1996 between C. B. Realty Limited Partnership and Exact Labs, Inc. That lease, including all conditions, terms amendments and extensions, remains intact except as amended below.
DEMISED PREMISES: That space presently occupied by Exact Labs, Inc. at 63 Great Road, Maynard, Massachusetts. To the presently occupied space is added 1, 539 square feet of second floor space, presently occupied by Anro Engineering. This will take effect June 9, 2000 and the rent will be $11.00NNN per rentable square foot. Also added will be 4,540 square feet of second floor space, presently occupied by Environmental Project Control at $11.00NNN per rentable square foot. The term for all space under this lease will run until June 30, 2003.
ANNUAL FIXED RENT: The annual fixed rent for the presently occupied space per rentable square foot, plus common area charges, will be as follows. Utility expense to be paid by the LESSEE.
First Floor space.................................... $11.00NNN Second Floor space................................... $10.50NNN |
LANDLORD IMPROVEMENTS/REPAIRS: Landlord agrees to replace leaking skylight and if other skylights fail or other roof problems occur to take immediate action to remedy. Landlord agrees to repaint and recarpet the first floor common areas.
RIGHT OF FIRST REFUSAL: Landlord hereby grants a right of first refusal on space as it becomes available in the building.
OPTION TO RENEW: Exact Labs, Inc. shall have one (1) option to renew for three
(3) years at fair market value. Notice to exercise shall be given no less than
six (6) months prior to termination of existing leases. If LESSEE decides not to
renew for an additional three (3) years it guarantees to renew either (A) the
new 6,079 square feet second floor space added under this amendment or (B) the
presently occupied 6,453 square feet of first floor space for one (1) additional
year if requested by the LANDLORD.
It is agree that this is a binding contract between the parties.
EXACT LABS, INC. C. B. REALTY LIMITED
PARTNERSHIP
/s/ Stanley Lapidus /s/ Thomas R. Patton III
--------------------------- --------------------------
STANLEY LAPIDUS THOMAS R. PATTON III
ITS: PRESIDENT ITS: GENERAL PARTNER
DATE: 4/25/2000 DATE: 4/25/00
|
C. B. REALTY LIMITED PARTNERSHIP
26 WINDSONG LANDING
CHATHAM, MA 02633
LEASE AMENDMENT AND EXTENSION
This is an amendment and an extension to a lease date December 10, 1996 between C.B. Realty Limited Partnership and Exact Labs, Inc. That lease, including all conditions, terms, amendments and extensions, remains intact except as amended below.
DEMISED PREMISES: That space presently occupied by Exact Labs, Inc. at 63 Great Road, Maynard, Massachusetts.
TERM: July 1, 2000 to June 30, 2003
ANNUAL FIXED RENT: The annual fixed rent per rentable square foot, plus common area charges, will be as follows. Utility expense to be paid by the LESSEE.
First Floor space........................... $11.00NNN Second Floor space.......................... $10.50NNN |
LANDLORD IMPROVEMENTS/REPAIRS: Landlord agrees to replace leaking skylight and if other skylights fail or other roof problems occur to take immediate action to remedy. Landlord agrees to repaint and recarpet the first floor common areas.
RIGHT OF FIRST REFUSAL: Landlord hereby grants a right of first refusal on space as it becomes available in the building with the exception of 1,539 feet on the second floor which is a right of first refusal with another tenant.
OPTION TO RENEW: Exact Labs, Inc. shall have one (1) option to renew for three
(3) years at fair market value. Notice to exercise shall be given no less than
six (6) months prior to termination of existing lease.
It is agree that this is a binding contract between the parties.
EXACT LABS, INC. C. B. REALTY LIMITED
PARTNERSHIP
/s/ Stanley Lapidus /s/ Thomas R. Patton III
-------------------------------- --------------------------
Stanley Lapidus Thomas R. Patton III
Its: President Date: Its: General Partner Date:
------------
|
C. B. REALTY LIMITED PARTNERSHIP
27 WINDSONG LANDING
CHATHAM, MA 02633
LEASE AMENDMENT
This is an amendment to a lease dated December 10, 1996 between C.B. Realty Limited Partnership and Exact Laboratories, Inc. That lease, including all conditions, terms and amendments thereto, remains intact except as amended below.
DEMISED PREMISES: To the present occupied space will be added 1,578 rentable square feet on the first floor of the building at 63 Great Road, Maynard, Massachusetts as outlined on the attached Addendum "A".
TERM: February 1, 1999 to June 30, 2000.
ANNUAL FIXED RENT: The annual fixed rent per rentable square foot of said space will be $12.00, including common area charges (1998-$3.07) which common area charges may be adjusted annually. Utility expenses to be paid by LESSEE.
SUBLEASE: Paragraph 16 of the lease dated December 10, 1996 between the parties requires permission to sublease and C. B. Realty Limited Partnership hereby grants such permission.
TENANT IMPROVEMENTS: Landlord agrees to deliver space with the walls and ceiling in good condition and repainted and the floors in good condition. Landlord agrees to provide hot and cold water to the space and a method to remove the same.
It is agree that this is a binding contract between the parties.
EXACT LABORATORIES, INC. C. B. REALTY LIMITED
PARTNERSHIP
/s/ Stanley Lapidus /s/ Thomas R. Patton III
------------------------------- -----------------------------------
Stanley Lapidus Thomas R. Patton III
Its: President Date: 1/21/99 Its: General Partner Date: 12/30/98
---------- --------
|
LEASE AMENDMENT
This is an amendment to a lease dated December 10, 1996 between C. B. Realty Limited Partnership and Exact Laboratories, Inc. That lease, including all conditions and terms, remains intact except as amended below.
DEMISED PREMISES: To the present occupied space will be added 4,653 rentable square feet on the second floor of the building at 63 Great Road, Maynard, Massachusetts as shown as Space "A" on the attached plan.
DATE OF OCCUPANCY: September 1, 1997
TERM: September 1, 1997 to June 30, 2000.
ANNUAL FIXED RENT: The annual fixed rent rentable square foot of said space will be as follows, plus the common area charges. Utility expenses to be paid by the LESSEE. per
September 1, 1997 - December 31, 1998................. $7.25 [$33,734.25/12 = $2,811.19/MO] January 1, 1999 - December 31, 1999................... $8.00 [$37,224/12 = $3,102.00/MO] January 1, 2000 - June 30, 2000....................... $8.50 |
SUBLEASE: Paragraph 16 of the lease dated December 10, 1996 between the parties requires permission to sublease and C. B. Realty Limited Partnership hereby grants such permission.
TENANT IMPROVEMENTS: Landlord agrees to deliver space with walls in good condition and repainted and recarpeted. Exact Laboratories agrees to contribute $4,500.00 toward the installation of new carpet with color to be chosen by them.
LEASE EXTENSION
This is an extension of a lease dated December 10, 1996 between C. B. Realty Limited Partnership and Exact Laboratories, Inc. as amended above. That lease including all amendments, all conditions and all terms remain intact excepted as amended below.
TERM: To continue in effect until June 30, 2000.
It is agree that this is a binding contract between the parties.
EXACT LABORATORIES, INC. C. B. REALTY LIMITED
PARTNERSHIP
/s/ Stanley Lapidus /s/ Thomas R. Patton III
----------------------------- ---------------------------------------
Stanley Lapidus Thomas R. Patton III
Its: President Date: 7/22/97 Its: General Partner Date: 7/7, 1997
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|
LEASE
THIS INSTRUMENT IS A LEASE between LANDLORD and TENANT as the parties hereinafter named and which relates to space in the building (the "Building") at 63 Great Road, Maynard, Massachusetts 01754.
The parties to this instrument hereby agree with each other as follows:
1. DEFINITIONS: The following constitute the definitions of the terms hereinafter employed.
Date: December 10, 1996
LANDLORD: C. B. Realty Limited Partnership
LANDLORD Office: 407 Old Harbor Road, Chatham, Massachusetts 02633
TENANT: Exact Laboratories, Inc.
TENANT'S Mailing Address: 12 Old Evergreen Road, Bedford, N.H. 03116
Lease Term: Three (3) Years
Planned Commencement Date: January 1, 1997
Expiration Date: December 31, 1999
Base Rent: Annual Rate: $12.00 (which includes common area charges) plus utilities
Common Area Charges: $3.07 for the first year and to be adjusted annually
Option to Renew: TENANT shall have one (1) option to renew for three (3) years at fair market value. TENANT shall give six (6) months notice to exercise the option.
Permitted Uses: Office space, laboratory and light manufacturing space
Premises: 4,875 rentable square feet on the first floor at 63 Great Road, Maynard, Massachusetts, as further shown on the attached plan indicated as Exhibit "A."
Guarantors: None
Security Deposit: $4,875
2. PREMISES - DEMISE. LANDLORD hereby leases to TENANT and TENANT hereby takes from LANDLORD, the Premises, upon and subject to the terms, provisions and conditions of this Lease, and subject to all easements, restrictions, and conditions of record and laws and ordinances applicable thereto. The premises are conveyed together with the right to use in common with others entitled thereto, as long as they do not interfere with TENANT'S quiet enjoyment and use of the Premises as office space, laboratory and light manufacturing space, the hallways, stairways and elevators necessary for access to the Premises and lavatories nearest thereto along with the right to use in common with others entitled thereto, parking area and sidewalks serving the Premises but reserving and excepting to the LANDLORD the use of the demising walls, the area above the ceilings of the Premises and the right to install, maintain, use, repair and replace pipes, ducts, conduits, wires and appurtenant fixtures leading through the Premises in locations which will not interfere with TENANT'S use thereof. LANDLORD agrees not to lease to tenants that will occupy their Premises with a density of employees so as to create an overburdened or intolerable parking situation. LANDLORD will use its best efforts to maintain a "Normal" parking ratio.
3. TERM. (a) The Term of this Lease shall be for three (3) years, commencing upon the later of the Planned Commencement Date as set forth herein and the date on which the LANDLORD has completed the agreed upon improvements of the Premises and expiring on the Expiration Date provided.
(b) By taking occupancy of the Premises, TENANT shall be deemed to have accepted the Premises, to have acknowledged that the same are in the condition called for hereunder and to have agreed that as of that time, all of the obligations of the LANDLORD imposed under this Lease shall have been performed.
4. RENT. (a) TENANT will pay the Base Rent plus common area charges and at the rate set forth in Section 1, Definitions, in equal monthly payments, in advance, without setoff, deduction or demand, in lawful money of the United States, on the first day of each and every month during the Term, at LANDLORD'S Office or to such other payee and/or at such other place as the LANDLORD may from time to time designate in writing. TENANT shall, in addition thereto, pay such additional rent ("Additional Rent") as is elsewhere required in this Lease. Common area charges for the first year of this lease are $3.07 per rentable square foot and may be adjusted up or down in succeeding years. The LANDLORD agrees to make available upon reasonable notice access to books and records if TENANT request to review the common area charges.
(b) TENANT agrees to pay to LANDLORD as Additional Rent, an amount equal to five percent (5%) of any amount due as Base or Additional Rent (or other payments due hereunder) if said payments are not paid within five (5) business days after their due date upon written notification to LESSEE by LESSOR; or, if there shall be no due date, within five (5) days after demand; provided, however, that nothing herein contained shall be construed or implemented in such a manner as to allow the LANDLORD to charge or receive interest in excess of the maximum lawful rate then allowed by law. Said sum shall be payable in addition to and not in exclusion of other remedies herein provided or otherwise allowed to the LANDLORD.
5. TENANT'S ACCEPTANCE, USE AND OCCUPANCY, LANDLORD'S WORK.
(a) The TENANT agrees that on the Commencement Date, TENANT shall accept, take and hold the Premises at the Base Rate hereinabove specifically reserved and payable as aforesaid and upon and subject to the terms and conditions herein contained and shall use and occupy the Premises throughout the term hereof only for the Permitted Uses and for no other purpose whatsoever without the prior written consent of the LANDLORD.
(b) TENANT hereby acknowledges that it is not relying on any warranty or representation of the LANDLORD except as expressly set forth herein, including, without limitation, any warranty or representations as to applicable laws or requirements of public agencies as to the uses to which the Premises may be put, the availability of permits or the like or the condition of the Premises. TENANT agrees that TENANT'S Work shall be completed, at its own expense, in full compliance with all laws, ordinances, rules and regulations applicable thereto. LANDLORD represents that, to the best of its knowledge, the Premises and the property at which it is located are in compliance with all applicable laws and requirements and that the LANDLORD has not received and has no knowledge of any citation or notice for any such failure to comply.
(c) TENANT agrees that it shall at all times conduct its business in a manner consistent with other businesses in the building and in accordance with applicable laws.
6. TENANT'S COVENANTS. TENANT further agrees to perform, cause to be performed or to observe, as the case may be, the following provisions during the entire Lease Term.
(a) The outside walls, roof, doors, sidewalks, entries, passages, public corridors and staircases and other parts of the Building which are not occupied by the TENANT shall not be obstructed or used for any other purpose than ingress or egress.
(b) The TENANT shall not install or permit the painting, inscription or installation of any signs, advertisements, displays, lights, awnings, shades, draperies or any other matter on or visible from the outside of the Premises or Building other than those approved by the LANDLORD in writing for the purpose of identifying and locating the Premises with LANDLORD'S approval not to unreasonably be withheld and subject to any need of LANDLORD to replace the same for reasonable periods from time to time for LANDLORD'S paramount needs. Such of the foregoing as may be permitted to be placed by TENANT shall be maintained in a first-class condition by TENANT at TENANT'S sole cost. LANDLORD hereby permits the TENANT to locate signs identifying and locating the TENANT'S Premises on the front of the building where the Premises is located and on all doors leading into the Premises, however, LANDLORD retains the right of approval of all such signs and locations thereof.
(c) The TENANT shall not construct, maintain, use or operate within the Premises or elsewhere in the Building (or on the outside of the Building) any facility, equipment or machinery which produces sound, noise, odor or vibration which is audible, visible or discernible, beyond the interior of the Premises; nor shall TENANT permit any act or thing upon the Premises the effect of which shall be to disturb the normal sensibilities and peaceful occupancy of other TENANTS of the Premises. LANDLORD agrees to enforce these provisions upon all tenants in the building.
(d) TENANT shall not, except in the ordinary course of its business, bring or keep inflammable, combustible or explosive fluids or other chemical or similar substances into or within the Building or otherwise use the Premises for any dangerous, or extra hazardous use or use which will increase the cost of LANDLORD'S insurance.
(e) TENANT shall not permit the Premises to be used for lodging or dwelling purposes.
(f) TENANT shall conduct TENANT'S business in the Premises in such a manner that TENANT'S invitees shall not collect, line up or congregate on or about the Building or its common areas, but shall be entirely accommodated within the Premises.
(g) TENANT will not install in the Premises any fixtures, equipment or machinery that will place a load on any floor exceeding the floor load per square foot of area which such floor was designed to carry as prescribed by LANDLORD. TENANT agrees to pay for all costs required to properly distribute the weight of any such items as required by LANDLORD, and that all damage caused to the building resulting from the delivery or removal of any safe, heavy articles, or any other article of TENANT'S property shall be repaired at the expense of the TENANT. All moving of furniture, materials and equipment outside of the Premises (and inside of the Premises, if constituting a major renovation or change) shall be under the direct control and supervision of the LANDLORD, who shall, however, not be responsible for the damage to or charges for moving same. TENANT agrees to promptly remove from the public areas adjacent to and/or within the Building any of TENANT'S property there delivered or deposited.
(h) The TENANT will not install or operate in the Premises any electrically operated equipment or other machinery except ordinary and customary equipment for the operation of its business without first obtaining the prier written consent of the LANDLORD. No such equipment or machinery shall cause an overload for the Building or any of its systems. Without limitation, TENANT shall not install any other equipment of any kind or nature whatsoever which will or may overload the floor or necessitate any changes, replacements or additions to the Premises or the Building without the prior written consent of the LANDLORD, which LANDLORD may condition upon TENANT paying for any such change, replacement or addition.
(i) TENANT will not do or permit anything to be done on the Premises or the Building or bring or keep anything therein which shall in any way increase the rate of fire or other insurance on said Building nor on the property kept therein or obstruct or interfere with the rights of other TENANTS or in any way injure or annoy them or those having business with them or conflict with them or conflict with the fire laws or regulations or with any insurance policy upon said Building or any part thereof (or recommendations of any casualty insurance rating bureau) or with any statutes, rules or regulations enacted or established by the state or local jurisdiction in which the Premises are located or the Federal Government.
(j) LANDLORD and TENANT shall comply with all present and future laws, rules, regulations, ordinances, requirements and orders of public authorities, including, without limitation, building and zoning laws, requirements of The Board of Health and requirements of any other federal, state or local agencies having jurisdiction of the Premises, including, without
limitation, any structural change required by any of the same, but shall not be responsible for any violation of law presently existing by reason of the construct; of Premises unless the same can practicably be corrected as part of TENANT'S Work and TENANT fails to do so. TENANT shall furthermore comply with all recommendations and requirements, within reason, of LANDLORD'S insurance carrier, and any casualty insurance rating bureau or similar bodies as long as it does not materially restrict the use of the Premises for office purposes. All tenants shall have provisions similar to this in their leases.
(k) TENANT shall maintain the Premises in good and safe condition and repair, free from rubbish, dirt, refuse and garbage; store all trash and garbage in approved receptacles within the Premises and empty into dumpster provided by LANDLORD; notify LANDLORD promptly after the same shall come to the attention of TENANT of the need of any repairs or replacements to the Premises.
(1) TENANT shall pay all taxes assessed by any taxing authority upon its equipment, goods and effects whether or not the same are affixed to the real estate, including stock in trade and signs or any taxes or the like due to use of the Premises. LANDLORD shall pay all real estate taxes and all other assessments and charges assessed by any taxing authority relating to its ownership of the property and buildings where the Premises is located.
(m) TENANT shall cause the Premises to remain heated so as to prevent damage to the Building and not place a burden on other heating systems and keep windows and doors closed to the extent feasible to retain heat and prevent damage and to keep water out.
7. RULES AND REGULATIONS. TENANT covenants and agrees that such reasonable rules and regulations as the LANDLORD may from time to time make, shall be faithfully kept, observed and performed by the TENANT and by its agents, servants, employees, and invitees unless waived in writing by the LANDLORD. The Rules and Regulations of The Mill Pond Building, 63 Great Road, Maynard, Massachusetts are hereby attached and incorporated as part of this lease. See Exhibit "C" attached hereto and incorporated as part of this Lease.
8. ACCESS TO THE PREMISES AND BUILDING BY TENANT. In all events, TENANT is responsible for providing security to the Premises and its own personnel, and TENANT shall indemnify, defend with counsel of LANDLORD'S approval, not to be unreasonably withheld, and save LANDLORD harmless from any claim for injury to person or damage to property asserted by any personnel, employee, guest, invitee or agent of TENANT which is suffered or occurs in or about the Premises or in or about the Building by reason of the act of any person affiliated with TENANT including its personnel, employees, guests, invitees or agents. LANDLORD shall have the right to exclude any disorderly persons from the Building at any time.
9. ACCESS TO THE PREMISES BY LANDLORD. After reasonable notice, except in the case of an emergency, LANDLORD, its agents and invitees may enter the Premises at all reasonable times to examine, inspect or to protect the same or prevent damage or injury to the same or to make such repairs, alterations or improvements to the Building or the Premises, or any part thereof as the LANDLORD may deem necessary or desirable or which may be required by law, whether or not attributable to any use, act or omission of TENANT; or to exhibit the same to prospective
purchasers, mortgagees, governmental authorities, and other parties having an interest therein, and during the last six (6) months of the term of this Lease to prospective TENANTS. Should any locks be changed, TENANT will furnish LANDLORD with a current set of keys on a continuing basis. LANDLORD will honor and accommodate the confidential nature of TENANT'S business in exercising the aforesaid right of access.
The LANDLORD further reserves the right, in its sole discretion, to modify, supplement, or make additions to the Building or to build separate buildings on the parcel upon which the Building is now located and in connection therewith, to alter, modify, or supplement any or all of the common areas serving the Building as long as the exercise of this right will not interfere with TENANT'S quiet use and enjoyment of the Premises.
10. ALTERATIONS - REMOVAL - TRADE FIXTURES. TENANT shall not make any alterations, installations, changes, additions or improvements in or to the Premises or any part thereof or in or to the Building except as expressly provided in this Section 10 or as set forth in Exhibits "A" or "B". All such alterations and other improvements shall be made at TENANT'S sole expense and shall become the property of LANDLORD and be surrendered with the Premises upon the expiration of this Lease, unless and to the extent that LANDLORD shall specify to the contrary. TENANT hereby agrees to indemnify and hold LANDLORD harmless from any and all claims, costs, demands and expenses resulting from such work performed in the Premises by TENANT. TENANT'S furniture, equipment and supplies provided by TENANT shall remain the property of the TENANT and so long as TENANT is not in default hereunder, such furniture, equipment and supplies may be removed by TENANT (and shall be removed by TENANT if so directed by LANDLORD) at the expiration or prior termination of this Lease and TENANT shall repair any damage to Premises resulting from such removal. All alterations, installations, changes, replacements, additions to or improvements upon the Premises made without LANDLORD'S consent shall likewise at the election of the LANDLORD remain upon the Premises and be surrendered, or removed, as aforesaid. If TENANT shall fail to remove, after notice has been given, any property or other item as aforesaid then at the election of LANDLORD, TENANT shall continue to pay a sum equal to the Base Rent and Additional Rent provided for hereunder on account of use and occupancy for a period ending five (5) days after such removal. TENANT may, from time to time, at its sole cost and expense, pursuant to the plans approved in advance in writing by LANDLORD, redecorate the Premises and make nonstructural alterations to the Premises, provided that such alterations shall not injure the safety of the structure of the Premises or the Building and shall be done in a good and workmanlike manner and in conformity with applicable Governmental regulations and plans and specifications approved in writing by LANDLORD, which approval shall not unreasonably be withheld. TENANT shall not make any other alteration, improvement or addition to the Premises, including, without limitation, any structural change in the Premises, without first having obtained LANDLORD'S written consent thereto, which consent LANDLORD may withhold in its absolute discretion. LANDLORD may condition any such approval or consent by reserving the right to require the Premises to be restored to the same condition they were in prior to the making of the same, and by requiring TENANT to give satisfactory evidence of its financial capacity to pay for the work to be done. All such work shall be done by a contractor approved by LANDLORD, which consent may not be unreasonably withheld, in accordance with all applicable laws and ordinances and the requirements of LANDLORD'S insurers.
All salvage from any such work shall belong to TENANT but all such installations, erections, alterations and changes, except for trade fixtures, shall belong to LANDLORD and become part of the realty except TENANT is allowed to retain ownership of all computer related wiring, blackboards and chalkboards and the telephone system master panel as installed in the Premises by TENANT, however any damage caused by the removal of the same shall be repaired in a professional manner immediately upon removal of said items and should TENANT not do so within five (5) days LANDLORD has the right to remedy the same and charge the TENANT for said work.
LANDLORD, upon request of TENANT, and at the expense of TENANT, after it shall have given approval to any such plans, alterations, installations, erections or changes, shall execute and deliver such instrument as may be necessary to obtain any permit or license for the same. TENANT agrees to obtain and pay for any such required permit or license.
Without limitation at the expiration or sooner termination of the term hereof, TENANT shall yield up the Premises in accordance with the provisions of this paragraph, and in such condition as the same is required to be maintained hereunder and otherwise in accordance with the provisions of this Lease.
Notwithstanding the above it is understood and agreed that the LANDLORD shall obtain and pay for any required permits or licenses needed to complete the work outlined in Exhibits "A" and "B".
11. TENANT'S BUSINESS OPPORTUNITIES. LANDLORD assumes no liability or responsibility whatsoever with respect to the conduct and operation of the business to be conducted in the Premises or the activities therefrom of TENANT and its Agents. The LANDLORD shall not be liable for any damage, accident or injury to any person or persons or property resulting from the activities of TENANT conducted on or from the Premises, and TENANT shall defend, indemnify and hold LANDLORD harmless of and from any claims or liabilities resulting from the activities of TENANT conducted on the Premises.
12. LANDLORD'S SERVICES. The LANDLORD shall maintain the outside common areas in a reasonably neat manner; provided, however, that the LANDLORD shall not be liable for failure to furnish, or for suspension or delays in furnishing, any of such services caused by causes beyond the reasonable control of LANDLORD.
13. REPAIRS AND CARE OF THE PREMISES. (a) LANDLORD shall, after reasonable written notice of the need therefore, make all necessary repairs and replacements to the exterior walls, roofs, foundation, common areas and facilities of the Building and to the heating, interior structural elements, ventilating and air conditioning systems serving the Premises, and to all wires, ducts, pipes and conduits to the point where the same are properly connected to the Premises, all as necessary to keep them in the same condition they were in upon the Commencement Date subject to the provisions of Sections 19 and 20 hereof and except for repairs and replacements necessitated by the act or neglect of TENANT or its Agents, which shall be made by TENANT. LANDLORD shall be responsible for all repairs and replacements not necessitated by the act or
neglect of TENANT or its Agents. LANDLORD agrees to make all necessary repairs required to maintain a HVAC system on the premises capable of providing an office environment with a temperature range between 65-78 degrees F in compliance with the Commonwealth of Massachusetts Energy Code. Upon notification of failure of HVAC system by TENANT, the LANDLORD agrees to make necessary repairs within 24 hours except as delayed by the procurement of necessary repair or replacement parts.
(b) TENANT shall make all repairs, replacements, alterations, and improvements to the Premises including without limitation, wiring, plumbing, pipes, conduits and other utilities and sprinklers, fixtures and equipment and all glass, including that in windows and all casings and framework of doors and windows for any act, omission or neglect of TENANT or anyone for whom TENANT shall be responsible. TENANT'S all also comply with any board of insurance underwriters to the extent attributable to TENANT'S particularized use of the Premises. TENANT shall at all times keep and maintain the Premises in a neat and clean condition.
14. TENANT'S PROPERTY. To the fullest extent permitted by law, all personal property of the TENANT or its agents in the Premise or in the Buildings, shall be a the sole risk of the TENANT or its agents, as the case may be. The LANDLORD shall not be liable for any injury or damage to the TENANT or its Agents in or on the Premises or to the property of TENANT resulting from the use of the heating, air-conditioning, electrical or plumbing apparatus or any other cause; nor shall LANDLORD in any event, be liable for damages or injury resulting from water, steam or other causes. TENANT hereby expressly releases LANDLORD from any liability incurred or claimed by reason of such damage or injury. LANDLORD shall not be liable in damages nor shall this Lease be affected for conditions arising or resulting (and which may affect the Building of which the Premises are a part) due to construction of contiguous premises. Notwithstanding the above, TENANT will be responsible for own Premises unless damages or injury is caused by negligence or fault of LANDLORD or any other tenant.
15. UTILITIES. TENANT shall, during the term hereof, pay directly to the proper authorities charged with the collection of all charges for electricity and gas consumed on or in connection with the use and occupancy of the Premises. TENANT shall be responsible for all of its telephone charges. LANDLORD shall be responsible for all charges relating to water and sewer use in connection with the use and occupancy of the Premises. LANDLORD shall be responsible for all of the costs associated with the remetering of all the utilities into the Premises.
LANDLORD shall not be liable for any interruption or failure in the supply of any such utilities to the Premises except where caused by the acts or failures of the LANDLORD. TENANT agrees that it will at all times keep sufficient heat in the Building to prevent existing pipes therein from freezing.
16. ASSIGNMENT OR SUBLETTING. TENANT agrees that it shall not, without the prior written consent of the LANDLORD, which LANDLORD may not unreasonably withhold, hypothecate, pledge or otherwise encumber this Lease, assign its interest herein, or make any sublease or permit occupancy of the Premises or any part thereof by anyone other than the TENANT, voluntarily or by operation of law. If TENANT shall be a corporation, any transfer of a majority
of the capital stock of said corporation shall be deemed to be an assignment of this Lease. If TENANT shall be a partnership or limited partnership a transfer of any partnership interest therein shall be deemed such an assignment and if TENANT shall be a Trust, any transfer of beneficial interest therein shall be such an assignment. Notwithstanding any assignment or subletting by TENANT, TENANT shall remain primarily liable for the performance and observance of the covenants and agreements herein contained on the part of TENANT to be performed and observed, such liability to be joint and several with that of any assignee or sublessee, as the cage may be, any such assignee or sublessee by its acceptance of an interest in or under this Lease thereby agreeing so to be bound. Without limitation, it is expressly understood and agreed that no assignment of TENANT'S interest in this Lease or sublease shall be effective until such time as TENANT shall deliver to LANDLORD an agreement from the assignee to sublessee, which agreement shall be reasonably satisfactory to LANDLORD in form and substance and shall provide that the assignee agrees with LANDLORD to be liable as aforesaid.
If TENANT shall request permission to sublet or assign, LANDLORD may condition its consent upon an agreement by TENANT to pay to the LANDLORD, as Addition Rent, an amount equal to one half of all payments received by TENANT in consideration thereof, whether as rent or otherwise, in excess of the Base and Additional Rent reserved hereunder after allowing TENANT to recover the costs of subletting. LANDLORD furthermore shall have the right in such case to notify TENANT that LANDLORD elects to terminate this Lease and to deal with TENANT'S proposed sublessee or assignee for a direct lease, such termination to be effective upon the execution by LANDLORD of a direct Lease with such sublessee or assignee in which case TENANT is released from this Lease with respect to the area at issue. Alternatively, LANDLORD shall have the right in such case to terminate this Lease with the same force and effect as if the term of the Lease had expired on the date fixed herein for such expiration but only as to the area to be sublet. TENANT does hereby release LANDLORD of and from any claim which TENANT may have by reason of LANDLORD'S activity in dealing with such assignee or sublessee to the extent permitted by law.
The above shall not apply to any assignment or sublease between TENANT and any of its affiliates, subsidiaries, partners, parent corporations, joint ventures or sister corporations.
17. DEFAULT. (a) If TENANT or any guarantor of TENANT ("Guarantor") shall make an assignment of its assets for the benefit of creditors by trust mortgage or otherwise, or if TENANT or Guarantor shall file a voluntary petition in bankruptcy for reorganization or liquidation or otherwise seek relief for the payment of its debts, or if any involuntary petition in bankruptcy or for receivership be instituted against the TENANT or Guarantor, or if TENANT or any Guarantor shall make a composition with the creditors and the same be not dismissed within sixty (60) days of the filing thereof or if the TENANT or Guarantor be adjudged bankrupt or insolvent or, if TENANT or Guarantor shall fail to pay its monetary obligations in due course as they mature, then and in any of said events this Lease shall immediately cease and terminate, at the option of the LANDLORD, with the same force and effect as though the date of said event were the day herein fixed for the expiration of the term of this Lease.
(b) If TENANT shall fail to pay the Base Rent, or any installment thereof as aforesaid and/or any Additional Rent or other payment or any installment thereof as herein provided, and such default shall continue for five (5) business days after written notice thereof by LANDLORD; or if TENANT shall violate or fail or neglect to keep and perform any of the covenants, conditions and agreements herein contained on the part of TENANT to be kept and performed, and such default shall continue for twenty (20) business days after TENANT shall receive Notice of such default (which period shall be extended for a reasonable time in case of a default which cannot reasonably be cured within said twenty (20) days period, if TENANT shall promptly commence to cure such default and thereafter diligently prosecute such cure to completion), then and in each and every such event from thenceforth, and at all times thereafter, at the option of LANDLORD, TENANT'S right of possession shall thereupon: cease and terminate and LANDLORD shall be entitled to the possession of the Premises, any process of law, any notice to quit, or of intention to re-enter being hereby expressly waived by TENANT. LANDLORD'S right and option may be exercised by entry, or in lieu thereof, of written notice to TENANT terminating this Lease and TENANT'S right to possession. TENANT hereby expressly waives any and all rights of redemption granted by or under any present or future laws in the event of TENANT being evicted or dispossessed for any cause or in the event LANDLORD terminates this Lease or in the event of such re-entry, by process of law or otherwise, TENANT nevertheless shall remain liable for any and all damage, deficiency or loss of value or Rent, however, designated which the LANDLORD may sustain. LANDLORD shall have full power, which is hereby acceded to by TENANT, to re-let the Premises, and whether or not there has been such re-letting, LANDLORD shall have the right each month to sue for and recover all sums previously due and not previously paid as well as all sums thereafter due and payable including, without limitation, any loss of Rents (or monthly deficit) with the right reserved to LANDLORD to bring any action(s) or proceedings(s) for the recovery of any deficit(s) remaining unpaid without being obligated to await the expiration of the term of this Lease for a final determination of TENANT'S account. Additionally, LANDLORD may elect at any time, upon notice to TENANT, to accelerate the payment of Base Rent, Additional Rent and all other sums due or to become due under the Lease, as reasonably estimated by LANDLORD, in which case TENANT shall forthwith pay such sum to LANDLORD after receiving a credit for (i) such sums as may previously have been paid under this Section 17 net of such expenses as may be deducted under clause (c) of this Section 17; and (ii) the reasonable value of TENANT'S leasehold estate for the balance of the term fixed herein at which time TENANT is released from the terms of this Lease. The commencement or maintenance of any one or more actions shall not bar LANDLORD from bringing other or subsequent actions for further accruals pursuant to provisions of this Section 17. It is further understood that no waiver of any breach of any covenant, condition or agreement herein contained shall operate as a waiver of the covenant, condition or agreement itself or of any subsequent breach thereof. No provision of this Lease shall be deemed to have been waived by LANDLORD unless such waiver shall be in writing signed by the LANDLORD. No payment by TENANT or receipt by LANDLORD of a lesser amount than the monthly installment of Base Rent herein stipulated or otherwise payable under the Lease shall be deemed to be other than on account of the oldest overdue Base Rent nor shall any enforcement or statement on any check or any letter accompanying any check or payment as rent be deemed an accord and satisfaction. The LANDLORD may accept such check or payment without prejudice to the LANDLORD'S right to recover the balance of such Rent or pursue any other remedy in this Lease.
(c) The net proceeds of any such re-letting shall first be applied to the expenses thereof, including any costs in refitting and redecorating the Premises, leasing commissions and other costs any expenses incurred therein. The net proceeds resulting therefrom shall be applied to TENANT'S liability under this Lease. LANDLORD'S re-letting of the Premises following a default by TENANT under this Lease may be on such terms, provisions and conditions as LANDLORD shall reasonably deem appropriate and may be for such terms (or terms) as the LANDLORD may select whether longer or shorter than the remaining term of this Lease.
(d) TENANT shall, following default under this Lease, reimburse LANDLORD for interest upon all sums due to the LANDLORD (from the date such sums shall have been due to the date of payment thereof) at a rate equal to the so-called "prime" rate of the Bank of Boston, (or similar major money center or national bank selected by LANDLORD should said bank not be in existence at any relevant time) plus two and one-half percent (2 1/2%); provided, however, that nothing herein contained shall be construed or implemented in such manner as to allow LANDLORD to charge or receive interest in excess of the maximum lawful rate then allowed by law.
18. TENANT'S INSURANCE. (a) TENANT shall maintain with respect to the Premises and its activities thereof or therefrom, broad form comprehensive general liability insurance, with a minimum limit of coverage of One Million Dollars ($1,000,000.00), which names LANDLORD as well as TENANT as parties insured. TENANT shall deliver a certificate of such insurance to LANDLORD upon the commencement of this Lease and continuing evidence of such coverage annually. Such insurance policy shall be in a form reasonably satisfactory to LANDLORD and shall be placed with a company qualified to do business in the location of the Premises and which is acceptable to LANDLORD and shall provide the same cannot be cancelled without at least thirty (30) days prior written notice to LANDLORD.
Renewal insurance certificates shall be provided to LANDLORD not less than thirty (30) days preceding the expiration of the prior policy.
(b) TENANT shall carry, with respect to its personal property, fixtures and equipment upon and its leasehold improvements to the Premises, insurance against fire and the so-called extended equal to the full replacement value thereof, and such other insurance and coverages as may be required by law or be dictated by prudent business practices.
(c) TENANT shall carry workmen's compensation insurance covering all employees, and if TENANT shall contract with any independent contractor for the furnishing of labor, materials or services to TENANT with regard to the Premises, TENANT shall require such independent contractor to maintain workmen's compensation insurance covering all its employees and all the employees of any subcontractors.
(d) The limits and nature of insurance hereinabove provided may, from time to time, be increased and expanded consistent with reasonable amounts required for comparable space in the market so as to provide comparable protection subject to conditions existing from time to time.
(e) Subject to the provisions of Paragraph 14, the TENANT hereby releases the LANDLORD to the extent of LANDLORD'S insurance coverage form any and all liability for any loss or damage to the Premises caused by fire or any of the said extended coverage casualties or any other casualty insured against, even if such fire or other casualty shall be brought about by the fault or negligence of the LANDLORD or its agents; provided, however, this release shall be in force and effect only with respect to loss or damage occurring during such time as the TENANT'S policies covering such loss or damage shall contain a clause to the effect that this release shall not affect said policies or the right of TENANT to recover thereunder. The TENANT agrees that its fire and other casualty insurance policies will include such a clause so long as same is available at no extra cost to TENANT.
(f) The LANDLORD hereby releases the TENANT to the extent of the LANDLORD'S insurance coverage, from any and all liability for any loss or damage to the Building caused by fire or any of the extended coverage casualties or any other casualty insured against, even if such fire or other casualty shall be brought about by the fault or negligence of the TENANT or its Agents; provided, however, this release shall be in full force and effect only with respect to loss or damage occurring during such time as the LANDLORD'S policies covering such loss or damage shall contain a clause to the effect that this release shall not affect said policies or the right of the LANDLORD to recover thereunder.
The LANDLORD agrees that its fire and other casualty insurance policies will include such a clause so long as the same is includable without extra cost, or if extra cost is chargeable therefor, so long as the TENANT pays such allocable share of extra cost. If extra cost is chargeable therefore, the LANDLORD will advise the TENANT thereof and of the amount thereof. The TENANT at its election may pay the same, but shall not be obligated to do so.
The LANDLORD presently insures the property for fire and casualty in excess of $1,500,000 and for liability in excess of $2,000,000 and agrees to maintain at least this coverage.
If requested in writing the LANDLORD shall deliver a certificate of such insurance to TENANT upon the commencement of this Lease and annually.
19. CASUALTY. (a) In case of damage by fire or other casualty to the Premises, the Building or any part thereof, unless this Lease shall be terminated pursuant to this Section 19, LANDLORD shall, as soon as is reasonably possible thereafter, having due regard to the collection of proceeds of any insurance policies or delays in obtaining funds, and the necessity of obtaining permits, approvals or the like, repair and restore the damaged portion of the Premises (but not including TENANT'S leasehold improvements therein) and the common areas of the Building, and during any period that TENANT is deprived of the use of such damaged portion of the Premises TENANT shall be required to pay Base Rent only with respect to that portion of the Premise which it is able to occupy-Base rent payable hereunder by TENANT for such space shall be that portion of the total Base Rent which the amount of rentable floor area remaining that can be occupied, bears to the Premise's Gross Rentable Area. All proceeds of insurance shall belong to LANDLORD and no compensation, or claim, or diminution of rent will be allowed, or paid, by landlord, or be payable to TENANT by reason of inconvenience, annoyance, or injury to
business arising from such damage or the necessity of repairing the Premises or any portion of the Building of which they are a part, however the necessity may occur. In the event that any such damage by fire or other casualty to the Premises shall be material or untenantable to the extent of fifty (50%) percent of more in any respect, LANDLORD or TENANT shall have the right to terminate this Lease and the term hereof by giving written notice of that effect to TENANT within thirty (30) days after any such occurrence.
(b) Without limitation, in no event, however, need LANDLORD restore any portion of the Building which is not necessary for access to the Premises and not necessary for the use and enjoyment of the Premises by the TENANT.
(c) Upon notification from LANDLORD and if Lease has not been
terminated and there is at lease a year left on the lease, TENANT shall complete
the work of restoration by repairing and/or restoring any portion of the
Premises so damaged which were initially constructed by TENANT pursuant to
Section 5(b) and any additions and alternations previously made by TENANT.
Unless otherwise agreed by LANDLORD, all work shall be done pursuant to plans
and specifications approved by LANDLORD. Regardless of the time remaining on the
lease the TENANT agrees to return the Premises to the condition in which it was
received if LANDLORD repairs the Building reasonable wear and tear excepted.
20. CONDEMNATION. (a) if the whole or any part of the Premises or Building shall be taken or condemned for public or quasi-public use or purpose by any competent authority, or conveyed in lieu thereof (a "Taking"), TENANT shall have no claim against the LANDLORD and shall not have any claim or right to any portion of such taking; and all rights of the TENANT to damages therefor, if any, are hereby assigned by the TENANT to the LANDLORD. Upon such Taking, if the term of this Lease shall terminate, TENANT shall have no claim against the LANDLORD for the value of any unexpired term of this lease. TENANT, however, shall be entitled to claim, prove and receive in a condemnation proceeding such awards as may be allowed for damages to or the taking of fixtures, equipment and other property installed by it and which it is herein permitted to remove from the Premises at the end of the term and any moving expenses but only if such awards shall be separately awarded in addition to (and not out of or in diminishment of ) the award made to LANDLORD.
(b) If after the execution of this Lease and prior to the expiration of the term of this Lease, the whole or any material part of the Building, any material part of the land upon which the Building is located shall be taken, then the term of this Lease shall cease as of the time when Landlord shall give Notice to TENANT of its election to terminate this Lease. Notice of such terminations shall be given by LANDLORD to TENANT within thirty (30) days after LANDLORD shall receive notice of such Taking, and the termination shall be effective as of the time that possession of the part so taken shall be required for public use, and any apportionment or adjustment of rent shall be as of the time of termination.
(c) In the event of a temporary taking, TENANT shall continue to pay the Base and Additional Rent and other sums due hereunder if TENANT can use the Premises for their general office, laboratory and light manufacturing uses, but shall receive a credit for all sums
actually received by LANDLORD on account of this Lease, up to the amount of TENANT'S obligation during the period of such temporary taking hereunder.
(d) If the Lease shall not be terminated as aforesaid, LANDLORD shall have such obligation as to reconstruction as is provided in Section 19 hereof treating any awards received by LANDLORD as if they were proceeds of insurance in the application of such Section 19.
(e) TENANT shall, upon notice from LANDLORD, begin to work of completing the Premises insofar as TENANT was obliged to complete the same pursuant to section 5(b) and 19(c). All work done pursuant to this Section 20 shall be done and in the same manner and of the same quality as the original construction or any alterations or additions. All of TENANT'S work shall be done pursuant to TENANT'S plans and specifications prepared by LANDLORD'S construction representative for the restoration, but at TENANT'S expense, and all work which TENANT is obliged to do shall be done at TENANT'S expense. TENANT'S contractor shall coordinate with LANDLORD and LANDLORD'S contractor shall not interfere with the operation of the business, and shall observe such rules and regulations, not inconsistent herewith, as LANDLORD shall promulgate from time to time.
(f) During the period of restoration, the Base Rent reserved hereunder shall be suspended or abated according to that proportion of the area of the Premises rendered unusable. There shall be no abatement or suspension of Base Rent hereunder if there shall be no actual physical damage to the area of the Premises and no impairment of access or of TENANT'S ability to use the space, nor, in any case shall there be an abatement of TENANT'S obligation to pay Additional Rent, or other charges due under this Lease. If TENANT shall be permanently deprived of any portion of the area of the Premises, the Base Rent shall be proportionally abated for the balance of the term.
21. MECHANIC'S LIEN. TENANT will not permit any mechanic's lien or liens to be placed upon the Premises or any improvements thereon and if any such lien is filed on account of the act of TENANT, TENANT shall promptly and continuously contest it and post a bond (in form reasonably satisfactory to LANDLORD and any Holder) to secure payment of such sum or pay same. In the event of any proposed work by TENANT with respect to which such a lien might arise, LANDLORD may require TENANT to provide it in advance with so-called waivers of liens or a bond against liens or other assurances that no such liens will arise. In the event TENANT fails to post bond against or pay any such lien, the same shall be deemed a substantial default under this lease.
22. HOLDING OVER. If the TENANT shall, with the knowledge and consent of the
LANDLORD, continue to remain in the Premises after the expiration or prior
termination of the term of this Lease, then and in such event, TENANT shall by
virtue of this agreement, become a TENANT from month to month, at a rent to be
agreed upon by the parties. Said monthly tenancy shall commence on Th first
(1st) day next after the end of the term herein demised; the TENANT shall give
to the LANDLORD at least thirty (30) days Notice of any intention to quit the
Premises; and TENANT shall be entitled to thirty (30) days Notice to quit said
Premises, except in the event of nonpayment of Rent in which case Notice to quit
being expressly waived; provided, however, that in the event that the TENANT
shall hold over after the expiration of the
term without LANDLORD's consent, then at any time prior to LANDLORD's acceptance of rent, however designated from TENANT, as a monthly TENANT hereunder, the LANDLORD at its option, any forthwith re-enter and take possession of said Premises without process or by any legal process in the force in the Commonwealth of Massachusetts applicable to TENANTS-at-sufferance. Nothing in this Section 22 shall be deemed to consent to any occupation of the Premises after the term.
23. SUBORDINATION. (a) The rights and interest of the TENANT under this Lease shall at the election of the holder of any present or future mortgage be (i) subject and subordinate to the lien of any present or future mortgage upon the Premises or any Property of which the Premises are a part and any modification, amendment, consolidation or extension thereof and to any and all advances to be made thereunder, and to the interest thereon and any sums due to the mortgage thereunder; or (ii) prior to the lien of any such present or future mortgage. The holder of any such mortgage ("Holder") may from time to time make and/or change the foregoing elections and shall give written notice thereof to the TENANT each such time. Failure to give such notice shall not, however, affect the rights of such Holder. Without limitation, the Holder may also elect, by like notice to TENANT, to make some provisions hereof subject and subordinate to the lien of its mortgage while granting other provisions hereof priority to the lien of its mortgage. In the event of any such elections (and upon notification by the Holder to that effect) the rights and interest of the TENANT under this Lease shall be deemed to be subordinate to, or to have priority over, as the case may be, the lien of such mortgage, irrespective of the time of execution or time of recording of any such mortgage. TENANT's agreement to subordinate this lease may be conditioned on the grant of a non-disturbance agreement as long as TENANT is not in default.
(b) Whether the lien of any mortgage upon the Premises or any property of which the Premises are a part shall be superior to subordinate to this Lease and the lien hereof, the TENANT agrees that it will, upon request, attorn to the Holder or anyone claiming under such Holder and their respective successors and assigns in the event of foreclosure of or similar action taken under such mortgage.
(c) TENANT agrees that it will, upon request of LANDLORD from time to time, execute, acknowledge and deliver any and all instruments deemed by the LANDLORD or the Holder necessary or desirable to evidence or to give notice of such subordination or priority as long as it is consistent with the terms of this Lease. TENANT also agrees that if it shall fail at any time to execute, acknowledge and deliver any such instrument requested by LANDLORD, LANDLORD may, in addition to any other revenues available to it, execute, acknowledge and deliver such instrument as the attorney-in-fact of TENANT and in TENANT's name; and TENANT does hereby make, constitute and irrevocably appoint the LANDLORD as its attorney-in-fact and in its name, place and stead so to do. The word "mortgage" as used herein includes mortgages, deeds of trust or other similar instruments and modifications, consolidation, extension, renewals, replacements and substitutions thereof.
(d) Upon entry and taking possession of the Building for any purpose, Holder shall have all rights of LANDLORD, but during the period of such possession LANDLORD, not Holder, shall have the duty to perform all of LANDLORD'S obligations hereunder. No Holder shall be liable, either as a mortgagee or as holder of a collateral assignment of this Lease, to
perform, or be liable tin damages for failure to perform, any of the obligations of LANDLORD unless and until Holder shall succeed to LANDLORD'S interest herein through foreclosure, deed-in-lieu or in other fashion, and thereafter Holder shall not be liable for the performance of those obligations which arise during the period and interest in this Lease; such liability to be limited to the same extent at LANDLORD'S liability it limited pursuant to Section 26 hereof.
(e) So long as any present or future mortgage shall remain in effect and if TENANT has been informed thereof by written notice, TENANT shall not alter, modify, amend, change, surrender or cancel this Lease nor pay the Rent due hereunder in advance for more than thirty (30) days, except as may be required herein, without the prior written consent of the Holder and TENANT will not seek to be made an adverse or defendant party in action or proceeding brought to enforce or foreclose such mortgage.
(f) In the event that LANDLORD shall utilize a so-called "sale-leaseback" form of financing either in lieu of, or in conjunction with, mortgage financing, then the rights and benefits hereinabove conferred upon a Holder shall be conferred upon the Ground Lessor under such sale-leaseback arrangement, and the foregoing provisions of this Section 23 shall be deemed to be modified to the extent reasonably required so as to be applicable to such sale-leaseback arrangement as long as TENANT has a non-disturbance agreement.
24. NOTICES. (a) All Notices required or desired to be given hereunder by either party to the other shall be in writing handcarried or given by Certified Mail or Registered Mail, and Return Receipt Requested with sufficient postage prepaid. Notices to the respective parties shall be addressed to LANDLORD at LANDLORD'S Office, and if to the TENANT at the Mailing Address of TENANT. Either party may, by like Notice, designate a new address to which said Notices shall be directed.
(b) If the Premises or any part thereof of the Building are at any time subject to a Mortgage of LANDLORD's interest in this Lease or the Rent therefrom are assigned, and the TENANT is given Notice thereof, including the post office address of such assignee, then notwithstanding any contrary rule of law, the TENANT shall not terminate this Lease or abate Rent for any default or take any other action on the part of the LANDLORD without first giving Notice by handcarrying or by Certified or Registered Mail, Return Receipt Requested, to such assignee or such other recipient as may be so designated, specifying the default in reasonable detail and affording such assignee or other recipient a reasonable opportunity to make performance, at its election, for and on behalf of the LANDLORD.
25. SUCCESSORS - ASSIGNS. All rights, remedies and liabilities of either of the parties hereto, shall extend to its respective heirs, successors, executors, administrators and assigns, except that the LANDLORD named herein and any owner of LANDLORD'S interest in this Lease shall be liable only for the obligations of the LANDLORD hereunder accruing during the period of its ownership. No owner, partnership, joint venture, Trustee, beneficiary, partner, officer, director or shareholder thereof shall be personally responsible or liable with respect to any of the covenants, conditions or provisions of this Lease to be performed by the LANDLORD. In the event of a default by LANDLORD under this Lease, TENANT agrees that in all events LANDLORD'S liability shall be limited to the actual equity interest of LANDLORD in the Building for the satisfaction of TENANT'S remedies under this Lease. In the event that two or
more individuals, corporation, partnerships or their business associations shall be named as TENANT, their obligations to pay rent and perform all other obligations hereunder shall be joint and several. In the event that the TENANT named in this Lease shall be a partnership or other business association shall not be subject to personal liability hereunder, but such Partnership or association shall be liable hereunder in its capacity as partnership or association. Nothing in this Section shall constitute consent to any transfer of TENANT'S interest in the Lease.
26. SECURITY DEPOSIT. TENANT has deposited with the LANDLORD herewith the sum set forth in Section 1 hereof, representing a Security Deposit. At the expiration or earlier termination of this Lease, whichever shall first occur, LANDLORD shall return said Security Deposit or what may remain thereof to TENANT after during any default of TENANT. LANDLORD need not segregate said sum nor pay interest thereon.
If at any time during the term of this Lease LANDLORD shall use all or any part of the Security Deposit to cure TENANT'S default, which LANDLORD is obligated to do, TENANT shall upon demand, deposit with LANDLORD such part of said Security Deposit as shall have been used.
27. COMPLETE AGREEMENT. This Lease contains the entire and only agreement between the parties, and no oral statements or representations or prior written matter not contained or referred to in this instrument shall have any force or effect. This Lese shall not be modified in any way except by a writing subscribed by the parties hereto.
28. SELF-HELP. If TENANT shall default in the performance or observance of any agreement, condition or other provisions in this Lease contained on this part to be performed or observed, and shall not cure such default within twenty (20) days after notice in writing from the LANDLORD specifying the default (or, in the event such default shall require more than twenty (20) days to be cured, if the TENANT shall not, within said period, commence to cure such default and thereafter, with due diligence, prosecute the curing of such default to completion), LANDLORD may, at is option, without waiving any claim for breach of agreement, at any time thereafter cure such default for the account of the TENANT, and the TENANT shall reimburse a landlord for any amount paid and any expense or contractual liability so incurred including reasonable attorneys' fees whereupon the default will be deemed cured. LANDLORD may cure the default of the TENANT prior to the expiration of such waiting period, but after Notice, which Notice need not be in writing if confirmed forthwith by Notice in writing to the TENANT, if it is necessary to protect the real estate or the interest of LANDLORD therein, or to prevent injury or damage to person or property. Any amount payable by TENANT to LANDLORD pursuant to the provision of this Section 29 shall be paid as part of and at the time for payment of the next installment of Base Rent thereafter coming due.
29. DELAYS. In any case where either party hereto is required to do any act, other than the making of any payment of Rent or delivering the Premises for Occupancy, however, designated or other monetary sum due LANDLORD hereunder, the time for performance thereof shall be extended for a period equal to any delay caused by or resulting from any act of God, war, civil commotion, fire, casualty, labor difficulties, shortages of labor, materials or equipment, governmental regulations or other causes beyond such party's reasonable control (herein
"Outside Circumstances"), whether such time be designed by a fixed date, a fixed time, or a "reasonable time."
30. WAIVER. Failure of either party to complain of any act or omission on the part of the other party, no matter how long the same may continue, shall not be deemed to be a waiver by said party of any of this right hereunder. No waiver by either party at any time shall be effective unless in writing and signed by the party adversely affected by the breach with respect to which waiver is asserted to have been made. No waiver of any breach of any provision of this Lease shall be deemed a waiver of a breach of any other provision of this Lease or a consent to any subsequent breach of the same or any other provision. If any action by either party shall require the consent or approval of the other party, the other party's consent to or approval of such action on any one occasion shall not be deemed a consent or approval of any other action on the same or any subsequent occasion. Each and every right and remedy which either party may have under this Lease or by operation of law, either at law or in equity, with respect to any breach, shall be distinct and separate from every other such right and remedy; all such rights and remedies shall be cumulative, and none of them shall be deemed inconsistent with the other, not such right or remedy whether or not exercised, shall be deemed to be in exclusion of any other, and any two or more or call of such rights and remedies may be exercised at the same time or successively, except where in this Lese otherwise expressly provided. LANDLORD and TENANT hereby waive all rights to claim a trial by jury.
31. DELAYED POSSESSION. If LANDLORD shall be unable to give possession of the Premises on the date set forth in Section 3 hereof for reason, LANDLORD shall not be subject to any liability for such failure to give possession on said date. No such failure to give possession on said date shall in any other respect affect the validity of this Lease or the obligations of TENANT hereunder. If permission is given to TENANT to enter into the possession of the Premises (or to occupy premises other than the Premises) prior to the date specified as the Commencement Date of the term of this Lese, TENANT covenants and agrees that such occupancy shall be deemed to be under all the terms, covenants, conditions and provisions of this Lease except for monetary obligations.
32. QUIET ENJOYMENT. LANDLORD covenants and agrees that upon TENANT'S paying the Rent payable hereunder and performing and observing the covenant sand provisions of this Lease on its party to be performed and observed, TENANT shall peaceably and quietly enjoy the Premises, subject, however to the terms, covenants and conditions of this Lease.
33. ADDITIONAL AGREEMENTS. (a) Feminine and neuter pronouns shall be substituted for those of the masculine form and the plural shall be substituted for the singular number in any place places herein in which the context may require such substitution or substitutions. The LANDLORD herein for convenience has been referred to in neuter form.
(b) After the commencement of the term of this Lease and whenever, from time to time, requested during the term of this Lease, TENANT agrees to deliver to LANDLORD or to any mortgagee, holder of a deed or trust or Ground Lessor or such other person designated by LANDLORD within fifteen (15) days after written request therefore a certificate stating, if the same be true, that TENANT has entered into occupancy of the Premises in accordance with the provisions of this Lease, that this Lease is in full force and effect, that LANDLORD has
performed the construction required of LANDLORD and any other information reasonably requested. LANDLORD agrees to provide a similar certificate should the TENANT's bank request the same.
(c) TENANT shall not record this Lease. Any such recording by TENANT shall constitute a material breach of this Lease and shall entitle LANDLORD, at its election, to immediately terminate this Lease. Either party may record a Notice of Lease with respect hereto which the other agrees to execute in form suitable for recording.
(d) If any term, covenant, condition or provision of this Lease (or the application thereof to any person or circumstance) be determined to be invalid or unenforceable of the remainder of this Lease (or the application of such term or provision to other persons and circumstances) shall not be affected thereby. Each term, covenant, condition and provision of this Lease shall be valid and be enforced to the fullest extent permitted by law.
(e) All heading used herein are for convenience only and do not constitute a part of this Lease or affect its meaning.
(f) This Lease shall be construed in accordance with the laws of the commonwealth of Massachusetts.
(g) Time shall be construed to be of the essence hereof whenever any act hereunder is required to be done at a certain time or within a prescribed period of time, subject always to the provisions of Section 30 hereof.
(h) If landlord shall require the services of an attorney to enforce TENANT'S obligations under this Lease, or an architect, engineer or other professional person to any way deal with TENANT under this Lease, then if LANDLORD prevails in Court, Arbitration or Mediation proceedings TENANT shall pay to LANDLORD upon demand all reasonable costs thereby incurred by LANDLORD.
If TENANT shall require the services of an attorney to enforce LANDLORD's obligations under this Lease, or an architect, engineer to other professional person to any way deal with LANDLORD under this Lease, then if TENANT prevails in COURT, Arbitration or Mediation proceedings LANDLORD shall pay to TENANT upon demand all reasonable costs thereby incurred by TENANT.
(i) In no case shall LANDLORD be deemed to be in default under this Lease unless TENANT shall have first given LANDLORD notice in writing specifying the nature of the default complained of and LANDLORD shall have failed to cure said default within a reasonable period of time after receipt of such notice.
Unless specifically set forth elsewhere in this LEASE in no case shall TENANT be deemed to be in default under this Lease unless LANDLORD shall have first given TENANT notice in writing specifying the nature of the default complained of and TENANT shall have failed to cure said default within a reasonable period of time after receipt of such notice.
(j) LANDLORD agrees to complete the work shown on the attached plan which shall include the demolition of office partitions and patching floors where partitions have been removed. Building new partitions as shown on the plan. Add sidelight at doors. Recarpet the entire space except in tiled areas including upgraded carpet. Add quarry tile floor at vestibule. Installation of 44 linear feet of cabinets and 22 linear feet of countertop. Necessary plumbing for two benches. Upgrade electric fixtures in President's Office and conference room and the installation of new lenses. TENANT agrees to contribute $17,850.00 toward completion of said work. Fifty percent (50%) $8,925 will be paid with the execution of this lease and the remaining $8,925 will be paid upon occupancy of the space.
IN WITNESS WHEREOF, LANDLORD and TENANT have caused this Lease to be signed sealed and delivered as of the day first above written.
LANDLORD: TENANT: C.F. REALTY LIMITED PARTNERSHIP EXACT LABORATORIES, INC. By: By: ------------------------------ ------------------------ Thomas R. Patton III Stanley Lapidus Its: General Partner Its: President |
Exhibit 10.12
LICENSE AGREEMENT
THIS LICENSE AGREEMENT (the "Agreement") effective as of March 25, 1999 (the "Effective Date") is by and between Genzyme Corporation, a Massachusetts corporation having its principal offices at One Kendall Square, Cambridge, MA 02139 ("Genzyme"), through Genzyme's Molecular Oncology Division, and EXACT Laboratories, Inc., a Delaware corporation having its principal offices at 63 Great Road, Maynard, MA 01754 ("EXACT").
WITNESSETH:
WHEREAS, Genzyme is the licensee of certain patent rights relating to the Field (as defined herein) under the JHU License Agreement (as defined herein) and is willing to grant to EXACT a worldwide, nonexclusive, royalty-bearing sublicense to use such patent rights for the development and commercialization of Diagnostic Services, Licensed Reagents and Kits (each as defined herein) in the Field upon the terms and conditions set forth herein; and
WHEREAS, EXACT desires to obtain a worldwide, nonexclusive, royalty-bearing sublicense to use such patent rights for the development and commercialization of Diagnostic Services, Licensed Reagents and Kits in the Field on the terms and conditions set forth herein; and
WHEREAS, Genzyme is willing to grant EXACT such a sublicense on the terms and conditions set forth herein in light of the relationship between EXACT and JHU (as defined herein) and the relationship between Genzyme and JHU;
NOW THEREFORE, in consideration of the mutual covenants herein contained and intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE 1. DEFINITIONS
1.1 "Affiliate" shall mean any corporation or other entity which controls, is controlled by, or is under common control with EXACT. A corporation or other entity shall be regarded as in control of another corporation or entity if it owns or directly or indirectly controls more than fifty percent (50%) of the voting stock or other ownership interest of the other corporation or entity, or if it possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the corporation or other entity or the power to elect or appoint more than fifty percent (50%) of the members of the governing body of the corporation or other entity.
1.2 "Diagnostic Service(s)" shall mean the performance of laboratory-based assays covered in whole or in part by a Valid Claim of the Patent Rights.
1.3 "Field" shall mean the determination, in stool or samples prepared from stool, of the presence of, absence of or variation(s) within a nucleic acid of interest, or differences between a nucleic acid of interest and a reference standard or sample, including but not limited to screening, diagnosis, prognosis and monitoring tests, for the purpose of detecting changes associated with colorectal cancer.
1.4 "First Commercial Sale" shall mean (a) the first performance for
consideration of a Diagnostic Service in the Field or (b) the first
sale for consideration of a Licensed Reagent or Kit for use in the
Field, as applicable. Any performance of a Diagnostic Service or
transfer of Licensed Reagents or Kits by EXACT solely for purposes of
performing Research shall not be deemed to constitute a First
Commercial Sale.
1.5 "Gene Patent Rights" shall mean the United States and foreign patents
and patent applications relating to the APC gene and/or the p53 gene
and licensed (with the right to grant sublicenses) to Genzyme pursuant
to the JHU License Agreement together with patents arising therefrom
and any extensions, registrations, confirmations, reissues, divisions,
continuations or continuations-in-part, re-examinations or renewals
thereof, including without limitation the patents and patent
applications listed in Appendix A hereto (which may be updated from
time to time to include such additional patents and patent application
that may arise therefrom); PROVIDED, HOWEVER, that Gene Patent Rights
expressly excludes any claims of such patents and patent applications
that fall outside of the Field, including, without limitation, claims
to antibodies, to the treatment, prevention or remedying of a gene
deficiency, to purified proteins, or to DNA sequences other than those
sequences that correspond to the p53 gene and the APC gene; PROVIDED
FURTHER that DNA sequences which are (i) immediately adjacent to the
p53 or APC genes and (ii) necessary to the use of the p53 or APC genes,
respectively, in the Field shall be considered within the Gene Patent
Rights.
1.6 "Instrument" shall mean any instrument, apparatus, appliance, automated
system or computer software that is covered in whole or in part by a
Valid Claim of the Patent Rights and is useful or necessary for
performing laboratory-based assays.
1.7 "JHU License Agreement" shall mean the License Agreement dated as of
February 5, 1992 by and between Genzyme (as successor to PharmaGenics,
Inc.), The Johns Hopkins University ("JHU") and Hoffman-La Roche Inc.
("Roche"), as amended from time to time.
1.8 "Kit" shall mean a collection of one or more Reagents, including at
least one Licensed Reagent, packaged in the form of a kit.
1.9 "Licensed Reagent" shall mean any Reagent covered in whole or in part
by a Valid Claim of the Patent Rights.
1.10 "Methodology Patent Rights" shall mean the United States and foreign
patents and patent applications relating to methods of detecting
mammalian nucleic acids isolated from stool specimens and reagents
therefor and licensed (with the right to grant sublicenses) to Genzyme
pursuant to the JHU License Agreement together with patents resulting
therefrom and any extensions, registrations, confirmations, reissues,
divisions, continuations or continuations-in-part, re-examinations or
renewals thereof, including without limitation the patents and patent
application listed in Appendix B hereto (which may be updated from time
to time to include such additional patents and patent applications that
may arise therefrom).
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1.11 (a) "Net Sales" shall mean the adjusted gross sales of Licensed
Reagents and Kits by EXACT LESS [CONFIDENTIAL TREATMENT REQUESTED]/*/
of adjusted gross sales in lieu of items such as custom duties, inbound
transportation, insurance costs, agent's commission, bad debts, etc.
The adjusted gross sales shall mean the actual gross sales price of a
Licensed Reagent or Kit billed by EXACT (not including miscellaneous
items on the invoice such as taxes, etc.) LESS chargebacks, cash
discounts, credits or allowances (not including miscellaneous items
credited such as taxes, etc.) including those incurred or granted on
account of price adjustments, rejections, returns, rebates or recalls
of Licensed Reagents or Kits previously sold. "Net Sales" does not
include "no charge" samples to the extent customary in the trade.
(b) In the event that EXACT decides to sell a Kit which combines
Licensed Reagents with ingredients or components which are not Licensed
Reagents (such other ingredients or components being "Other Items"),
then (i) EXACT shall notify Genzyme in writing of its intent to offer
such combination, (ii) Genzyme and EXACT shall, within thirty (30) days
after Genzyme's receipt of such notification, initiate good-faith
negotiations on the value of the Licensed Reagents which shall be used
as the basis to calculate Net Sales pursuant to this clause (b) and
(iii) if the parties can not reach agreement within thirty (30) days
after the commencement of such negotiations, such dispute shall be
referred to arbitration pursuant to Article 11 hereof. However, in no
event shall the royalty rates on Net Sales be reduced by more than
[CONFIDENTIAL TREATMENT REQUESTED]/*/. The term "Other Items" does not
include solvents, diluents, carriers, excipients, enzymes used in
amplification for diagnostic use, or the like used in formulating a
product.
(c) In the event that a Licensed Reagent or Kit is sold for
non-monetary consideration in addition to or in lieu of money, the
value of such consideration to the extent that it can be reasonably
determined by EXACT shall be added to Net Sales in accordance with
Sections 1.11 (a) and (b) hereof.
(d) No deductions shall be made for commissions paid to individuals
whether they be with independent sales agencies or regularly employed
by EXACT and on its payroll, or for cost of collections.
(e) Net Sales expressly excludes transfers or dispositions of Licensed
Reagents or Kits at cost or less than cost for the sole purpose of
conducting Research.
1.12 (a) "Net Service Revenues" shall mean actual billings by EXACT for the
performance of Diagnostic Services less the following deductions to the
extent that they are applicable and are not already deducted in the
actual billings: (i) discounts allowed and taken, in amounts customary
in the trade; (ii) sales and/or use taxes and/or duties imposed upon
and with specific reference to particular sales.
(b) If a Diagnostic Service(s) is offered in combination with another
diagnostic or other service(s) (such as patient counseling) provided by
EXACT (such other services being referred to as "Other Services" and
such Diagnostic Service(s) and Other Services collectively being
referred to as "Combination Services"), Net Service Revenues for
/*/ [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN
OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL
SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF
1933, AS AMENDED.
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purposes of determining royalties on the Diagnostic Service(s) shall be
calculated as provided below:
(i) If the Diagnostic Service(s) and the Other Services are
sold or provided separately, Net Service Revenues shall
be calculated by multiplying the Net Service Revenues of
the Combination Service (as determined in accordance
with Section 1.12(a) above but applied to the
Combination Service), by the fraction A/(A+B), where "A"
is the invoice price of the Diagnostic Service(s) and
"B" is the invoice price of the Other Services in the
Combination Service if sold or provided separately.
(ii) If the Diagnostic Service(s) are sold or provided
separately but the Other Services are not, Net Service
Revenues shall be calculated by multiplying the Net
Service Revenues of the Combination Service (as
determined in accordance with Section 1.12(a) above but
applied to the Combination Service), by the fraction
A/C, where "A" is the invoice price of the Diagnostic
Service(s) and "C" is the invoice price of the
Combination Service.
(iii) If the Diagnostic Service(s) and the Other Services in
the combination are not sold or provided separately, Net
Service Revenues for purpose of determining royalties on
the Diagnostic Service(s) shall be calculated by
multiplying Net Service Revenues of the Combination
Service (as determined in accordance with Section
1.12(a) above but applied to the Combination Service) by
the fraction E/(E+D), where "E" is the value of the
Diagnostic Service(s) and "D" is the reasonably
estimated value (using accepted diagnostic industry
standards) of the Other Services based at least in part
on the value of the other active component or components
used in the Combination Service; provided, that (A)
EXACT shall notify Genzyme in writing of its intent to
offer such Combination Services, (B) Genzyme and EXACT
shall, within thirty (30) days after Genzyme's receipt
of such notification, initiate good-faith negotiations
on the value of the Diagnostic Service(s) and Other
Services which shall be used as the basis to calculate
Net Service Revenues pursuant to this clause (iii) and
(C) if the parties can not reach agreement within thirty
(30) days after the commencement of such negotiations,
such dispute shall be referred to arbitration pursuant
to Article 11 hereof.
(c) In the event that a Diagnostic Service is provided for non-monetary
consideration in addition to or in lieu of money, the value of such
non-monetary consideration to the extent that it can be reasonably
determined by EXACT shall be added to Net Service Revenues in
accordance with Sections 1.12(a) and (b) hereof.
(d) Net Service Revenues expressly excludes the use or performance of
Diagnostic Services at cost or less than cost for the sole purpose of
conducting Research.
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1.13 "Patent Rights" shall mean collectively the Gene Patent Rights and the
Methodology Patent Rights.
1.14 "Reagents" shall mean reagents useful in or necessary to the
performance of laboratory-based assays, whether used individually or
sold or used as one or more component(s) of a kit.
1.15 "Research" shall mean pre-clinical, clinical and regulatory activities
conducted by or on behalf of EXACT to develop and obtain regulatory
approvals of products or services utilizing the Patent Rights licensed
to EXACT hereunder.
1.16 "Valid Claim" shall mean an issued claim of an unexpired patent, or a
claim of a pending patent application, which shall not have been
withdrawn, canceled or disclaimed, or held invalid or unenforceable by
a court of competent jurisdiction in an unappealed or unappealable
decision. Notwithstanding the foregoing to the contrary, a claim of a
pending patent application, divisional application, or
continuation-in-part application, or the foreign equivalents thereof,
shall cease to be a Valid Claim if no patent has issued on such claim
on or prior to the fifth (5th) anniversary of the date of filing such
patent application (or, in the case of a continuation application or
foreign equivalent thereof, the date of filing of the earliest parent
application), provided that such claim shall once again become a Valid
Claim on the issue date of a patent that subsequently issues and
includes such claim.
ARTICLE 2. LICENSE GRANT
2.1 Genzyme hereby grants to EXACT, subject to all the terms and conditions
of this Agreement, a worldwide, nonexclusive right and license (without
the right to grant sublicenses) under the Patent Rights to: (a) use,
offer to sell, sell and practice Diagnostic Services in the Field; (b)
make, have made, use, offer to sell, sell and import Licensed Reagents
in the Field; and (c) make, have made, use, offer to sell, sell and
import Kits in the Field.
2.2 The license granted hereunder shall not extend to Instruments. In the
event that Genzyme becomes aware of any Instruments, Genzyme shall
deliver written notice thereof to EXACT. In the event that after the
Effective Date EXACT decides in good faith to develop Instruments for
use in the Field and delivers written notice of such decision to
Genzyme, Genzyme and EXACT shall, within thirty (30) days after
Genzyme's receipt of such notification from EXACT, enter into good
faith negotiations for a worldwide, non-exclusive license (without the
right to grant sublicenses) to be granted by Genzyme to EXACT under the
Patent Rights to make, use, offer to sell, sell and import Instruments
in the Field. Any such license shall include commercially reasonable
terms and conditions. In the event that Genzyme and EXACT are unable to
reach agreement on the terms of any such license within ninety (90)
days after the date Genzyme and EXACT commence negotiations for such
license, then the dispute shall be immediately referred to one (1)
executive officer of each party, chosen at the sole discretion of that
party, who shall negotiate in good faith with each other to resolve the
dispute during the period ending thirty (30) days after the date of
such referral. If the designated officers of the parties are
|
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unable to resolve the dispute within such thirty (30) day period, the
dispute shall be referred to arbitration pursuant to Article 11 hereof.
ARTICLE 3. DUE DILIGENCE
3.1 EXACT agrees to use commercially reasonable efforts to make (i)
Diagnostic Services,(ii) Licensed Reagents and (iii) Kits available for
the benefit of the general public consistent with regulatory compliance
and public safety.
3.2 EXACT's material failure to perform in accordance with any subsection
of Section 3.1 above shall be grounds for Genzyme to terminate the
license under Section 2.1. above with respect to Diagnostic Services,
Licensed Reagents or Kits, as applicable, pursuant to Section 7.8
hereof by delivering written notice of its intention to terminate to
EXACT. If EXACT disputes Genzyme's determination, (i) EXACT shall
deliver written notice of such dispute within ten (10) business days
after its receipt of notice from Genzyme of its intent to terminate,
(ii) the matter shall be referred to arbitration pursuant to Article
11hereof and (iii) EXACT's license under Section 2.1 above to the
Diagnostic Services, Licensed Reagents or Kits, as applicable, and
EXACT's obligations with respect thereto shall continue in full force
and effect until the resolution of such arbitration.
3.3 Within thirty (30) days after the date this Agreement is signed on
behalf of EXACT and subsequently no later than May 1 and November 1 of
each year, commencing on November 1, 1999, EXACT shall provide a
written report to Genzyme on its research, development and
commercialization efforts with respect to (i) Diagnostic Services,
(ii)Licensed Reagents and (iii) Kits (each individually), which report
shall cite specific goals and objectives in researching, developing and
commercializing the licensed technology and methodology and progress in
meeting these goals and objectives. If Genzyme does not receive any
such report(s) in a timely manner, it shall notify EXACT of such
delinquency in writing. EXACT shall have thirty (30) days from its
receipt of such notice to provide Genzyme with any and all overdue
report(s). Failure by EXACT to provide such overdue report(s) within
said thirty (30) day period may constitute grounds for termination of
this Agreement by Genzyme as provided for in Section 7.5 hereof;
PROVIDED, HOWEVER, that the number of days elapsed since EXACT first
received notice from Genzyme of the delinquent reports shall be counted
for purposes of determining the sixty (60) day period described in
Section 7.5 hereof.
ARTICLE 4. PAYMENTS
4.1 In partial consideration for the license granted hereunder, and upon
execution of this Agreement, EXACT agrees to pay Genzyme [CONFIDENTIAL
TREATMENT REQUESTED]/*/, which amount shall not be creditable against
any other amounts payable by EXACT to Genzyme hereunder.
4.2 EXACT shall pay to Genzyme during the term of this Agreement a royalty
amounting to (a) [CONFIDENTIAL TREATMENT REQUESTED]/*/of Net Service
Revenues worldwide and (b) [CONFIDENTIAL TREATMENT REQUESTED]/*/of Net
Sales worldwide.
/*/ [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN
OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL
SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF
1933, AS AMENDED.
|
4.3 (a) EXACT shall pay Genzyme a minimum royalty of [CONFIDENTIAL TREATMENT REQUESTED]/*/ payable within thirty (30) days of the date this Agreement is signed on behalf of EXACT for 1999 and on January 1 of each year thereafter with respect to the licenses granted for Diagnostic Services; PROVIDED, HOWEVER, that the minimum royalty for a given year shall be creditable against any royalties subsequently due during said year under Section 4.2.
(b) EXACT shall pay Genzyme a minimum royalty of [CONFIDENTIAL TREATMENT REQUESTED]/*/ payable on January 1, 2004 and on January 1 of each year thereafter with respect to the licenses granted for Licensed Reagents and Kits; PROVIDED, HOWEVER, that the minimum royalty for a given year shall be creditable against any royalties subsequently due during said year under Section 4.2.
(c) Waiver or deferral of any minimum royalty payment by Genzyme shall not be construed as waiver or deferral of any such subsequent payment.
4.4 (a) In the event that the First Commercial Sale of a Diagnostic Service
by EXACT has not occurred within [CONFIDENTIAL TREATMENT
REQUESTED]/*/after the Effective Date, EXACT shall pay Genzyme an
annual maintenance fee of [CONFIDENTIAL TREATMENT REQUESTED]/*/ payable
on each anniversary of the Effective Date commencing with the
[CONFIDENTIAL TREATMENT REQUESTED]/*/ anniversary of the Effective
Date; PROVIDED, HOWEVER, that if EXACT has submitted a BONA FIDE
application to the U.S. Food and Drug Administration or the equivalent
authority at that time ("FDA") to obtain final marketing approval for a
Diagnostic Service within said [CONFIDENTIAL TREATMENT REQUESTED]/*/
period and EXACT's failure to make such First Commercial Sale is due to
delays in obtaining such approval that are caused by the FDA and are
not related to a substantial deficit in said application, then Genzyme
may elect, in its sole discretion, to extend said [CONFIDENTIAL
TREATMENT REQUESTED]/*/ period and shall notify EXACT in writing of any
such determination and election and of the amount of time by which such
period has been extended; PROVIDED FURTHER that if the parties disagree
as to whether said application contained a substantial deficit and the
time for resolution of such deficit, the dispute shall be referred to
arbitration pursuant to Article 11 hereof and, until final resolution
of the dispute, EXACT shall deposit any amounts otherwise due and
payable to Genzyme under this Section 4.4(a) into an escrow account
established by EXACT exclusively for such purpose in a recognized
commercial banking institution reasonably selected by EXACT and
promptly identified by written notice from EXACT to Genzyme. If the
arbitrator resolves the dispute in favor of Genzyme, then the amounts
held in escrow plus all interest accrued thereon shall be promptly paid
to Genzyme in same day funds. Amount payable under this Section 4.4(a)
shall not be creditable against any royalties or other payments due
during said year under this Article 4. Waiver or deferral of any
maintenance fee by Genzyme shall not be construed as waiver or deferral
of any such subsequent payment.
(b) In the event that the First Commercial Sale of a Kit by EXACT has not occurred within [CONFIDENTIAL TREATMENT REQUESTED]/*/ after the Effective Date and the license granted pursuant to Section 2.1 (c) hereof has not been terminated by
/*/ [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
Genzyme pursuant to Section 7.7 hereof, EXACT shall pay Genzyme an
annual maintenance fee of [CONFIDENTIAL TREATMENT REQUESTED]/*/ payable
on each anniversary of the Effective Date commencing with the
[CONFIDENTIAL TREATMENT REQUESTED]/*/ anniversary of the Effective
Date; PROVIDED, HOWEVER, that if EXACT has submitted a BONA FIDE
application to the FDA to obtain final marketing approval for a Kit
within said [CONFIDENTIAL TREATMENT REQUESTED]/*/ period and EXACT's
failure to make such First Commercial Sale is due to delays in
obtaining such approval that are caused by the FDA and are not related
to a substantial deficit in said application, then Genzyme may elect,
in its sole discretion, to extend said [CONFIDENTIAL TREATMENT
REQUESTED]/*/ period and shall notify EXACT in writing of any such
determination and election and of the amount of time by which such
period has been extended; PROVIDED FURTHER that if the parties disagree
as to whether said application contained a substantial deficit and the
time for resolution of such deficit, the dispute shall be referred to
arbitration pursuant to Article 11 hereof and, until final resolution
of the dispute, EXACT shall deposit any amounts otherwise due and
payable to Genzyme under this Section 4.4(b) into an escrow account
established by EXACT exclusively for such purpose in a recognized
commercial banking institution reasonably selected by EXACT and
promptly identified by written notice from EXACT to Genzyme. If the
arbitrator resolves the dispute in favor of Genzyme, then the amounts
held in escrow PLUS all interest accrued thereon shall be promptly paid
to Genzyme in same day funds. Amount payable under this Section 4.4(b)
shall not be creditable against any royalties or other payments due
during said year under this Article 4. Waiver or deferral of any
maintenance fee by Genzyme shall not be construed as waiver or deferral
of any such subsequent payment.
4.5 EXACT shall pay Genzyme a milestone payment in the amount of
[CONFIDENTIAL TREATMENT REQUESTED]/*/ within [CONFIDENTIAL TREATMENT
REQUESTED]/*/ after the first receipt by EXACT of either 510(k)
clearance or approval of a Pre-Marketing Authorization application
("PMA") (or the equivalent of such submissions required at such time)
for a Kit from the FDA. Such amount shall not be creditable against any
royalties or other payments due under this Article 4.
4.6 Payment of royalties specified in Section 4.2 shall be made by EXACT to Genzyme within forty-five (45) days after March 31, June 30, September 30 and December 31 each year during the term of this Agreement covering Net Sales and Net Service Revenues during the preceding calendar quarter. The last such payment shall be made within forty-five (45) days after the expiration or earlier termination of this Agreement.
4.7 No multiple royalties shall be payable on any Diagnostic Service, Licensed Reagent or Kit because such Diagnostic Service, Licensed Reagent or Kit or its practice, manufacture, use, importation or sale is or shall be covered by more than one of the Patent Rights.
4.8 All payments to be made under this Article 4 shall be paid in United States dollars, in Boston, Massachusetts or at such other place and in such other way as Genzyme may reasonably designate in writing, without deduction of exchange, collection or other charges. Conversion of foreign currency into United States dollars shall be calculated
/*/ [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
using the applicable exchange rate as published in The Wall Street
Journal on the date that the payment is first due and payable. If by
law, regulation or fiscal policy of a particular country, conversion
into United States dollars or transfers of funds of a convertible
currency to the Untied States is restricted or forbidden, EXACT shall
give Genzyme prompt written notice of such restriction or prohibition,
which notice shall satisfy the forty-five (45) day payment deadline set
forth in Section 4.6. EXACT shall pay any amounts due to Genzyme
through whatever lawful methods Genzyme reasonably designates in
writing; PROVIDED, HOWEVER, that if Genzyme fails to designate such
payment method within thirty (30) days after Genzyme is notified of the
restriction, EXACT may deposit such payment in local currency to the
credit of Genzyme in a recognized commercial banking institution
reasonably selected by EXACT and promptly identified by written notice
from EXACT to Genzyme, and such deposit shall fulfill all obligations
of EXACT to Genzyme with respect to such payment.
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) two percent (2%) PLUS (b) the prime interest rate quoted by
BankBoston N.A. 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
Genzyme from exercising any other rights it may have as a consequence
of the lateness of any payment.
4.10 Royalty payments and other payments due to Genzyme under this Agreement
shall not be reduced by reason of any withholding or similar taxes
applicable to such payments to Genzyme.
4.11 [CONFIDENTIAL TREATMENT REQUESTED]/*/
ARTICLE 5. REPORTS AND RECORDS
5.1 EXACT shall maintain true, accurate and complete books of account,
records and files containing an accurate record of all data reasonably
necessary for the full computation and verification of sales and the
determination of the amounts payable under Article 4 hereof for a
period of at least four (4) years following the period of each report
required by Section 5.2 below. Said books and records shall be kept at
EXACT's principal place of business and shall be in accordance with
generally accepted accounting principles, consistently applied. Said
books and records, to the extent not previously audited, shall be
available for inspection by an independent certified public accountant
selected by Genzyme (or its licensor of the Patent Rights) and
reasonably acceptable to EXACT, upon ten (10) business days advance
written notice and during regular business hours, for three (3) years
following the end of the calendar year to which they pertain in order
to enable Genzyme (or its licensor of the Patent Rights) to ascertain
the correctness of any report and/or payment made under this Agreement.
Such inspections may be conducted no more than once in any twelve (12)
month period and, except as provided below, shall be conducted at the
expense of Genzyme (or its licensor, as the case may be). If such
examination reveals that royalties have been misstated, any adjustment
shall be promptly
/*/ [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN
OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL
SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF
1933, AS AMENDED.
|
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refunded or paid, as appropriate. Genzyme (or its licensor, as the case
may be) shall pay the fees and expenses of the accountant engaged to
perform the audit, unless such audit reveals an underpayment of five
percent (5%) or more for the period examined, in which case EXACT shall
pay all reasonable costs and expenses incurred by Genzyme (or its
licensor, as the case may be) in the course of making such
determination, including without limitation the fees and expenses of
the accountant.
|
5.2 Within forty-five (45) days after March 31, June 30, September 30 and December 31, of each year in which this Agreement is in effect, EXACT shall deliver to Genzyme full, true and accurate reports of its activities relating to this Agreement during the preceding three month period. These reports shall include at least the following:
(a) the total actual billings for Diagnostic Services on a country-by-country basis during the applicable period;
(b) the total gross sales of Licensed Reagents and Kits, each individually, on a country-by-country basis during the applicable period;
(c) the calculation of Net Service Revenues and Net Sales on a country-by-country basis for the applicable period, including a detailed listing of the applicable deductions permitted under Sections 1.11 and 1.12 hereof on an item-by-item basis and a detailed explanation of the calculation of Net Service Revenues and Net Sales of any Combination Services or combination products; and
(d) the calculation of total royalties due in U.S. dollars, together with the exchange rates used for conversion, to the extent applicable.
5.3 With each such report, EXACT shall pay to Genzyme the royalties due and payable as provided for in Section 4.2. To the extent that royalties for the applicable period are creditable against minimum royalties paid pursuant to Section 4.3 hereof, EXACT shall so report. If no royalties are due, EXACT shall so report.
ARTICLE 6. PATENT PROSECUTION; INFRINGEMENT
6.1 The prosecution, filing and maintenance of all patents and the expense thereof shall be the responsibility of Genzyme (and/or its licensor of the Patent Rights).
6.2 (a) EXACT agrees to provide Genzyme with prompt written notice after becoming aware of any infringement of any of the Patent Rights.
(b) Genzyme (or its licensor, as the case may be) shall have the right, under its control and at its expense, to prosecute any third party infringement of the Patent Rights or to defend the Patent Rights in any declaratory judgment action brought by a third party which alleges the invalidity, unenforceability or non-infringement of any Patent Right. EXACT agrees to cooperate fully in any action under this Section 6.2, provided that Genzyme (or its licensor, as the case may be) reimburses EXACT for its reasonable costs and expenses incurred in connection with providing such assistance.
(c) In the event that
(i) EXACT notifies Genzyme that a third party is conducting activities in the Field that infringe the Patent Rights in any country,
(ii) said third party continues to infringe for [CONFIDENTIAL TREATMENT REQUESTED]/*/ after receipt by Genzyme of such notice and does not obtain a license from Genzyme under the applicable Patent Rights within such period, and
(iii) EXACT can demonstrate to Genzyme's reasonable
satisfaction through written documentation that (A)
EXACT has Net Sales or Net Service Revenues in one or
more countries in which there is any Valid Claim within
the Patent Rights, and (B) the infringing activities of
said third party have resulted in annualized income to
said third party equal to or greater than (x)
[CONFIDENTIAL TREATMENT REQUESTED]/*/ worldwide in
countries in which there is any Valid Claim within the
Patent Rights (determined based on Net Sales or Net
Service Revenues of the [CONFIDENTIAL TREATMENT
REQUESTED]/*/ or (y) [CONFIDENTIAL TREATMENT
REQUESTED]/*/ of EXACT's annualized Net Sales or Net
Service Revenues (as applicable) worldwide in countries
in which there is any Valid Claim within the Patent
Rights (determined based on Net Sales or Net Service
Revenues of the[CONFIDENTIAL TREATMENT REQUESTED]/*/),
whichever is greater,
then, after making such a demonstration, EXACT may withhold up to
[CONFIDENTIAL TREATMENT REQUESTED]/*/ of the royalty payments that
would otherwise be payable to Genzyme on Net Services Revenues from
Diagnostic Services covered in whole or in part by the infringed Patent
Rights or on Net Sales of Licensed Reagents or Kits covered in whole or
in part by the infringed Patent Rights, as applicable, in such
countries until such time as the infringement is abated; PROVIDED,
HOWEVER, that in the event that Genzyme (or its licensor, as the case
may be) either (A) fails to use good faith efforts to undertake the
prosecution of such third party infringement or otherwise Resolve such
infringement within two hundred and forty (240) days after receipt by
Genzyme of the notice delivered by EXACT pursuant to clause (c)(i)
above or (B) delivers written notice to EXACT that Genzyme (or its
licensor, as the case may be) does not intend to undertake the
prosecution of such third party infringement, then EXACT may withhold
one hundred percent (100%) of the aforementioned royalty payments;
PROVIDED FURTHER that, if EXACT withholds such royalty payments and
Genzyme (or its licensor, as the case may be) either successfully
Resolves such infringement or undertakes the prosecution of such third
party infringement and obtains a favorable judgment, settlement,
consent judgment or other final disposition of the suit, EXACT shall
resume full payment of the aforementioned royalties due under this
Agreement on Net Service Revenues and Net Sales in such countries upon
receipt of either written notice of the successful abatement of such
infringement by prosecution or Resolution signed by an officer of
Genzyme or a copy of an official, written evidence of such favorable
judgment,
/*/ [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
settlement, consent judgment or other final disposition; PROVIDED FURTHER that in the event that Genzyme (or its licensor, as the case may be) undertakes the prosecution of such infringement and obtains a favorable settlement, an order to dismiss shall constitute adequate official written evidence for purposes of this sentence. For purposes of this clause (c), "Resolve(s)" or "Resolution" means the cessation of such third party infringement other than as a result of prosecution, including without limitation the grant of a nonexclusive license under the Patent Rights or the discontinuance by such third party of the infringing activities.
(d) If Genzyme notifies EXACT in writing within ten (10) days of
receiving written documentation pursuant to Section 6.2(c)(iii) above
that Genzyme is not reasonably satisfied that EXACT has demonstrated
conditions sufficient to justify the withholding of royalty payments
under Section 6.2(c) above, then, until final resolution of the
dispute, EXACT shall deposit all withheld royalty payments otherwise
due and payable to Genzyme into an escrow account established by EXACT
exclusively for such purpose in a recognized commercial banking
institution reasonably selected by EXACT and promptly identified by
written notice from EXACT to Genzyme. If the parties are unable to
resolve the dispute within thirty (30) days after EXACT's receipt of
Genzyme's notice, then the dispute shall immediately be referred to one
(1) executive officer of each party, chosen in the sole discretion of
that party, who shall negotiate with each other in good faith to
resolve the dispute during the period ending thirty (30) days after the
date of such referral. If the designated officers of the parties are
unable to resolve the dispute within such thirty (30) day period, the
dispute shall be referred to arbitration pursuant to Article 11 hereof.
If such officers or the arbitrator, as applicable, resolves the dispute
in favor of Genzyme, then the amounts held in escrow plus all interest
accrued thereon shall be promptly paid to Genzyme in same day funds and
EXACT shall resume full payment of royalties under this Agreement.
(e) In the event that EXACT withholds royalty payments pursuant to
Section 6.2(c), EXACT shall include the amount of such withheld
royalties and the basis for the calculation thereof on a
country-by-country basis in the reports deliverable by EXACT to Genzyme
pursuant to Section 5.2 hereof as distinct line items.
(f) EXACT hereby acknowledges and agrees that Roche has rights under the Patent Rights under an agreement with JHU and, therefore, activities by Roche in accordance with such agreement with JHU will not be subject to this Section 6.2.
ARTICLE 7. TERM AND TERMINATION
7.1 Unless earlier terminated as hereinafter provided, this Agreement shall remain in full force and effect until the expiration of the last to expire Patent Rights. Royalties on Net Service Revenues from Diagnostic Services and on Net Sales of Licensed Reagents and Kits covered by the Gene Patent Rights shall cease upon the expiration of the last to expire Gene Patent Right. Royalties on Net Service Revenues of Diagnostic Services and on Net Sales of Licensed Reagents and Kits covered by the Methodology Patent Rights shall cease upon the expiration of the last to expire Methodology Patent Right.
7.2 If (a) Genzyme, acting reasonably, determines that EXACT has ceased to
carry on its business with respect to the performance of Diagnostic
Services in the Field and/or the provision of Licensed Reagents and/or
Kits in the Field in any country in North America or Europe for a
period of more than [CONFIDENTIAL TREATMENT REQUESTED]/*/ with no plan
to resume such business within the following [CONFIDENTIAL TREATMENT
REQUESTED]/*/, then (b) Genzyme shall have the right to terminate this
Agreement and all rights, privileges and license hereunder granted with
respect to such Diagnostic Services and/or Licensed Reagents and/or
Kits, as applicable, upon six (6) months prior written notice to EXACT;
PROVIDED, HOWEVER, that if EXACT is temporarily unable to carry on such
business due to a corporate reorganization or restructuring of EXACT,
then the [CONFIDENTIAL TREATMENT REQUESTED]/*/ time period set forth in
clause (a) of this Section 7.2 shall be reasonably extended to
accommodate such corporate circumstance by a period to be mutually
agreed upon by the parties, which extension period shall not exceed
[CONFIDENTIAL TREATMENT REQUESTED]/*/. Such termination shall become
effective immediately upon the conclusion of such notice period unless
EXACT shall have resumed such business in good faith prior to the
expiration of such notice period.
7.3 Should EXACT fail to pay Genzyme any amounts as are due and payable hereunder, Genzyme shall have the right to terminate this Agreement upon forty-five (45) days prior written notice, unless EXACT shall pay Genzyme within said forty-five (45) day period such delinquent amounts and all interest due and payable thereon. If EXACT shall not have paid all such delinquent amounts and interest due and payable thereon within said period, Genzyme, at its sole option, may immediately terminate this Agreement and all rights, privileges and license hereunder granted.
7.4 EXACT shall have the right to terminate this Agreement and all rights, privileges and license hereunder granted at any time upon sixty (60) days prior written notice to Genzyme.
7.5 Upon any material breach or default of this Agreement by EXACT, other than those delineated in Sections 7.2 and 7.3, which shall always take precedence in that order over any material breach or default referred to in this Section 7.5, Genzyme shall have the right to terminate this Agreement and the rights, privileges and license hereunder granted upon sixty (60) days prior written notice to EXACT. Such termination shall become effective immediately at the conclusion of such notice period unless EXACT shall have cured any such breach or default prior to the expiration of said sixty (60) day period.
7.6 (a) If no royalties have been paid by EXACT with respect to any
Diagnostic Service within [CONFIDENTIAL TREATMENT REQUESTED]/*/ after
the First Commercial Sale by EXACT of a Diagnostic Service, the rights,
privileges and license granted under this Agreement to EXACT under
Section 2.1 (a) hereof shall automatically terminate.
(b) If no royalties have been paid by EXACT with respect to any Licensed Reagent within [CONFIDENTIAL TREATMENT REQUESTED]/*/ after the First Commercial Sale of a Licensed Reagent, the rights, privileges and license granted under this Agreement to EXACT under Section 2.1 (b) hereof shall automatically terminate.
/*/ [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
7.7 (a) If EXACT fails to make a 510(k) or PMA submission for a Kit to the
FDA (or the equivalent of such submissions as may be required by the
FDA at such time) within [CONFIDENTIAL TREATMENT REQUESTED]/*/ after
the Effective Date, Genzyme may, in its sole discretion, elect to
terminate the rights, privileges and license granted under Section 2.1
(c) hereof in any or each country in which Genzyme has Patent Rights
unless such license grant is sooner terminated according to the terms
of this Agreement.
(b) If EXACT fails to achieve annual Net Sales of Licensed Reagents and
Kits for use in the Field of [CONFIDENTIAL TREATMENT REQUESTED]/*/ or
more within [CONFIDENTIAL TREATMENT REQUESTED]/*/ after the First
Commercial Sale of a Kit, Genzyme may, in its sole discretion, elect to
terminate the rights, privileges and license granted under Section 2.1
(c) hereof in any and each country in which Genzyme has Patent Rights
unless such license grant is sooner terminated according to the terms
of this Agreement.
7.8 If EXACT materially fails to perform in accordance with clauses (i),
(ii) or (iii) of Section 3.1 hereof, Genzyme may elect to terminate the
rights, privileges and license granted under Section 2.1 with respect
to the subject matter of the clause or clauses of Section 3.1 under
which EXACT has materially failed to perform, as set forth in Section
3.2, hereof upon thirty (30) days prior written notice to EXACT.
Notwithstanding the foregoing, any termination of the license granted
under any one clause of Section 2.1 pursuant to this Section 7.8 will
be effective only with respect to the subject matter of the clause of
Section 3.1 under which EXACT has materially failed to perform, and the
remaining clauses of Section 3.1 and the remaining rights granted under
2.1 shall be unaffected by such termination.
7.9 Upon any termination of this Agreement in its entirety or any of the
rights, privileges and licenses granted under Section 2.1 hereof, EXACT
shall be entitled to finish any work-in-progress and to sell any
completed inventory of Licensed Reagents or Kits, as applicable, which
remain on hand as of the date of the termination provided that EXACT
pays Genzyme the royalties applicable to said subsequent sales in
accordance with the terms and conditions set forth in this Agreement.
7.10 (a) In the event that Genzyme terminates this Agreement and the rights,
privileges and licenses hereunder granted pursuant to Section 7.2
above, then Genzyme shall refund to EXACT the PRO RATA share of the
amount equal to the sum of (i) any payment made by EXACT pursuant to
Section 4.3 hereof on January 1 of the calendar year in which the
effective date of such termination falls PLUS (ii) any payment made by
EXACT pursuant to Section 4.4 hereof on the anniversary of the
Effective Date immediately preceding the effective date of such
termination PLUS (iii) one-half of any payment made by EXACT pursuant
to Section 4.5 hereof if the license granted under Section 2.1 (c) is
being terminated and if such payment was made by EXACT within the six
(6) month period immediately preceding the effective date of such
termination less (iv) the aggregate amount of any payments made by
Genzyme to JHU in that Year under the JHU License Agreement based on
the payments described in clauses (i), (ii) and (iii) above.
/*/ [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN
OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL
SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF
1933, AS AMENDED.
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-15-
(b) In the event that Genzyme terminates the license granted under
Section 2.1 (a) hereof with respect to Diagnostic Services pursuant to
Section 7.6 or 7.8 hereof, then Genzyme shall refund to EXACT the pro
rata share of the amount equal to the sum of (i) any payment made by
EXACT pursuant to Section 4.3(a) hereof on January 1 of the calendar
year in which the effective date of such termination falls PLUS (ii)
any payment made by EXACT pursuant to Section 4.4(a) hereof on the
anniversary of the Effective Date immediately preceding the effective
date of such termination less (iii) the amount of any payment made by
Genzyme to JHU in that Year based on the payments described in clauses
(i) and (ii) above.
(c) In the event that Genzyme terminates the rights, privileges and
license granted under Section 2.1 (b) or (c) hereof with respect to
Licensed Reagents and Kits pursuant to Sections 7.7 or 7.8 hereof, then
Genzyme shall refund to EXACT the PRO RATA share of the amount equal to
the sum of (i) any payment by EXACT to Genzyme pursuant to Section
4.3(b) hereof on January 1 in which the calendar year of the effective
date of such termination falls PLUS (ii) any payment made by EXACT
pursuant to Section 4.4(b) hereof on the anniversary of the Effective
Date immediately preceding the effective date of such termination PLUS
(iii) one-half of any payment made by EXACT pursuant Section 4.5 hereof
to if the license granted under Section 2.1 (c) is being terminated and
if such payment was made to Genzyme within six (6) months immediately
preceding the effective date of such termination less (iv) the
aggregate amount of any payments made by Genzyme to JHU in that Year
based on the payments described in clauses (i), (ii) and (iii) above.
(d) The PRO RATA share of any amounts to be refunded by Genzyme
pursuant to this Section 7.10 shall be determined based on either (i)
the portion of the twelve (12) month period after said anniversary of
the Effective Date or (ii) the portion of said calendar year, as
applicable, during which this Agreement shall not be in effect. In no
event shall any amounts be refundable by Genzyme to the extent they
have been credited by Genzyme against royalties payable by EXACT in
accordance with Sections 4.3 and/or 4.4 hereof. Interest paid to
Genzyme pursuant to Section 4.9 hereof or on any amounts held in escrow
during the pendency of a dispute shall not be included in the
calculation of any amounts refundable by Genzyme.
(e) Any and all amounts refundable by Genzyme to EXACT pursuant to this
Section 7.10 shall be paid to EXACT within thirty (30) days after the
applicable effective date of the termination.
7.11 Upon the expiration or the earlier termination of this Agreement for
any reason, nothing herein shall be construed to release either party
from any obligation that matured prior to the effective date of such
expiration or the termination. The provisions of Articles 5, 8, 10, 11,
13, 18 and 21, Section 4.6, 7.9, 7.10 and this Section 7.11 shall
survive the expiration or earlier termination of this Agreement.
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ARTICLE 8. INDEMNIFICATION AND INSURANCE
8.1 (a) Subject to the provisions of Section 8.3 hereof, EXACT shall indemnify, defend and hold harmless Genzyme, JHU, The John Hopkins Health System ("JHHS") and their respective present and former officers, directors, trustees, employees, consultants, agents, students, faculty, treating and consulting physicians, inventors of the Patent Rights, subsidiaries, successors, heirs and assigns (collectively, the "Genzyme Indemnitees") against any liability, damage, loss or expense (including reasonable attorneys' fees and expenses of litigation) incurred by or imposed upon the Genzyme Indemnitees, or any one of them, in connection with any claims, suits, actions, demands or judgments arising out of (i) the design, sale, use, manufacture or promotion by EXACT and its officers, directors, employees, representatives and agents, of any process, service or product relating to, or developed, manufactured, used or commercialized pursuant to, this Agreement and (ii) the practice and use of the Patent Rights by EXACT and its officers, directors, employees, representatives and agents.
(b) EXACT's indemnification under this Section 8.1 shall not apply to any liability, damage, loss or expense to the extent that it is directly attributable to the negligence, reckless misconduct or intentional misconduct of the Genzyme Indemnitees.
(c) EXACT agrees, at its own expense, to provide attorneys to defend against any actions brought or filed against any Genzyme Indemnitee with respect to the subject of indemnity contained herein, whether or not such actions are rightfully brought, such attorneys to be reasonably acceptable to Genzyme and not to be subject to any conflict of interest in representing any of the Genzyme Indemnitees nor to have been deemed within the preceding ten (10) years by any Genzyme Indemnitee to have provided unsatisfactory legal representation of such Genzyme Indemnitee.
8.2 (a) Subject to the provisions of Section 8.3 hereof Genzyme shall indemnify, defend and hold harmless EXACT and its present and former officers, directors, employees, agents, consultants, successors, heirs and assigns (collectively, the "EXACT Indemnitees") against any liability, damage, loss or expense (including reasonable attorney's fees and expenses of litigation) incurred by or imposed upon the EXACT Indemnitees, or anyone of them, in connection with any claims, suits, actions, demands or judgments arising out of (i) the design, sale, use, manufacture or promotion by Genzyme and its officers, directors, employees, representatives and agents, of any process, service or product utilizing the Patent Rights in the Field and (ii) the practice and use of the Patent Rights in the Field by Genzyme and its officers, directors, employees, representatives and agents.
(b) Genzyme's indemnification under this Section 8.2 shall not apply to any liability, damage, loss or expense to the extent it is directly attributable to the negligence, reckless misconduct or intentional misconduct of the EXACT Indemnitees.
(c) Genzyme agrees, at its own expenses to provide attorneys to defend against any actions brought or filed against any EXACT Indemnitee with respect to the subject of indemnity contained herein, whether or not such actions are rightfully brought, such
attorneys to be reasonably acceptable to EXACT and not to be subject to any conflict of interest in representing any of the EXACT Indemnitees not to have been deemed within the preceding ten (10) years by any EXACT Indemnitee to have provided unsatisfactory legal representation of such EXACT Indemnitee.
8.3 In the event any such action is commenced or claim made or threatened against an indemnified party covered by Section 8.1 or 8.2 hereof, the indemnified party shall promptly notify the indemnifying party in writing of such event. The failure of indemnified party to deliver notice to the indemnifying party within a reasonable time after the commencement of any such action, if materially prejudicial to the ability of the indemnifying party to defend such action, shall relieve the indemnifying party of any liability to the indemnified party under this Article 8 solely with respect to such action, but the failure to deliver notice to the indemnifying party will not relieve it of any liability with respect to such action that it may have to the indemnified party otherwise than under this Article 8. The indemnifying party shall assume, with the reasonable cooperation of the indemnified party, the investigation and defense of, and may settle that part of, any such claim or action commenced or made against the indemnified party which relates to the indemnifying party's indemnification and the indemnifying party may take such other steps as may be necessary to protect itself. The indemnifying party shall not be liable to indemnified party on account of any settlement of any such claim or litigation affected without the indemnifying party's express written consent, which consent shall not be unreasonably withheld or delayed. The right of the indemnifying party to assume the defense of any action shall be limited to that part of the action commenced against an indemnified party which relates to the indemnifying party's obligation of indemnification and holding harmless.
8.4 (a) Beginning at such time as any Diagnostic Service, Licensed Reagent or Kit relating to, or developed pursuant to, this Agreement is being made available (other than for the purpose of obtaining regulatory approvals) by EXACT, EXACT shall, at its sole cost and expense, procure and maintain commercial general liability insurance, applicable worldwide, in amounts not less than [CONFIDENTIAL TREATMENT REQUESTED]/*/ per incident and [CONFIDENTIAL TREATMENT REQUESTED]/*/ annual aggregate and naming Indemnitees as additional insureds. Such commercial general liability insurance shall provide (i) product liability coverage and (ii) contractual liability coverage for EXACT's indemnification under Section 8.1 of this Agreement. If EXACT elects to self-insure all or part of the limits described above (including deductibles or retentions that are in excess of [CONFIDENTIAL TREATMENT REQUESTED]/*/ annual aggregate) such self-insurance program must be acceptable to Genzyme. The minimum amounts of insurance coverage required under this Section 8.4(a) shall not be construed to create a limit of EXACT's liability with respect to its indemnification obligation under Section 8.1 of this Agreement.
(b) Genzyme shall, at its sole cost and expense, procure and maintain commercial general liability insurance, applicable worldwide, in amounts not less than [CONFIDENTIAL TREATMENT REQUESTED]/*/ per incident and [CONFIDENTIAL TREATMENT REQUESTED]/*/ annual aggregate and naming the EXACT Indemnitees as additional insureds. Such commercial general liability insurance
/*/ [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
shall provide (i) product liability coverage and (ii) contractual liability coverage for Genzyme's indemnification under Section 8.2 of this Agreement. If Genzyme elects to self-insure all or part of the limits described above (including deductibles or retentions that are in excess of [CONFIDENTIAL TREATMENT REQUESTED]/*/ annual aggregate) such self-insurance program must be acceptable to EXACT. The minimum amounts of insurance coverage required under this Section 8.4(a) shall not be construed to create a limit of Genzyme's liability with respect to its indemnification obligation under Section 8.2 of this Agreement.
(c) Each party shall provide the other with written evidence of such insurance upon request of the other party. Each party shall provide the other with written notice at least thirty (30) days prior to the cancellation, non-renewal or material change in such insurance. If such party does not obtain replacement insurance providing comparable coverage within such thirty (30) day period, the other party shall have the right to terminate this Agreement and the rights, privileges and license granted hereunder effective at the end of such thirty (30) day period without any notice or additional waiting periods.
(d) Each party shall maintain such comprehensive general liability
insurance beyond the expiration or termination of this Agreement during
(a) the period that any process, service or product relating to, or
developed pursuant to, this Agreement is being made available (other
than for the purpose of obtaining regulatory approvals) by EXACT and
(b) a reasonable period after the period referred to in clause (a)
above which in no event shall be less than fifteen (15) years.
ARTICLE 9. REPRESENTATIONS, WARRANTIES AND DISCLAIMERS
9.1 (a) Genzyme hereby represents and warrants to EXACT that it has the right and power to enter into this Agreement, to extend the rights and licenses granted herein and to perform its obligations hereunder, and that this Agreement is a valid and binding agreement, enforceable in accordance with its terms.
(b) Genzyme further represents and warrants to EXACT that Genzyme is not in material breach of the JHU License Agreement as of the Effective Date, and that Genzyme will use commercially reasonable and diligent efforts to comply with all of its material obligations and duties with regard to the Patent Rights under the JHU License Agreement, including without limitation any provisions of the JHU Agreement as may be reasonably necessary to maintain in effect this Agreement or preserve EXACT's rights under this Agreement, including without limitation the preservation of EXACT's rights hereunder in the event that Genzyme shall breach or default on its obligations under the JHU License Agreement.
(b) EXACT hereby represents and warrants to Genzyme that it has the right and power to enter into this Agreement and to perform its obligations hereunder, and that this Agreement is a valid and binding agreement, enforceable in accordance with its terms. EXACT agrees that it shall comply with all applicable local, state, Federal and
/*/ [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
international laws and regulations relating to the development, design, manufacture, sale, use in commerce and promotion of Diagnostic Services, Licensed Reagents and Kits.
9.2 EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN SECTION 9.1, GENZYME MAKES NO WARRANTY, EXPRESS OR IMPLIED, 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 EXACT HEREUNDER AND HEREBY DISCLAIMS THE SAME.
9.3 GENZYME DOES NOT WARRANT THE VALIDITY OF THE PATENT RIGHTS LICENSED HEREUNDER AND MAKES NO REPRESENTATION WHATSOEVER WITH REGARD TO THE SCOPE OF THE LICENSED PATENT RIGHTS OR THAT SUCH PATENT RIGHTS MAY BE EXPLOITED BY EXACT WITHOUT INFRINGING OTHER PATENTS.
9.4 NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, EACH OF THE PARTIES HERETO DISCLAIMS ALL OBLIGATIONS ON THE PART OF SUCH PARTY FOR DAMAGES, INCLUDING BUT NOT LIMITED TO DIRECT, INDIRECT, SPECIAL AND CONSEQUENTIAL DAMAGES, ATTORNEYS' AND EXPERTS' FEES AND EXPENSES, AND COURT COSTS (EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE PROBABILITY OF SUCH DAMAGES, FEES, EXPENSES AND COSTS) ARISING OUT OF OR IN CONNECTION WITH THE MANUFACTURE, USE, SALE OR PROVISION OF THE LICENSED REAGENTS, DIAGNOSTIC SERVICES UTILIZING THE LICENSED PROCESSES AND KITS BY THE OTHER PARTY. EXACT ASSUMES ALL RESPONSIBILITY AND LIABILITY FOR ANY LOSS OR DAMAGES CAUSED BY A LICENSED REAGENT, DIAGNOSTIC SERVICE OR KIT MANUFACTURED, USED, SOLD OR PROVIDED BY EXACT. GENZYME ASSUMES ALL RESPONSIBILITY AND LIABILITY FOR ANY LOSS OR DAMAGES CAUSED BY A LICENSED REAGENT, DIAGNOSTIC SERVICE OR KIT MANUFACTURED, USED, SOLD OR PROVIDED BY GENZYME.
ARTICLE 10. NOTICES
10.1 Any consent, notice or report required or permitted to be given or made
under this Agreement shall be in writing, delivered (i) by certified or
registered mail (postage prepaid, return receipt requested), (ii) by
facsimile (and promptly confirmed by personal delivery, courier or next
business day service of a nationally recognized courier service of good
repute), (iii) by a next business day service of a nationally
recognized courier service of good repute (with evidence of delivery)
or (iv) by courier (postage prepaid and signature required), and in any
case addressed to the other party at its address set forth in this
Article 10, and shall be effective upon receipt by the addressee.
10.2 Reports, notices and other communications from EXACT to Genzyme as
provided hereunder shall be sent to:
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President, Molecular Oncology Division
Genzyme Corporation
One Mountain Road
P.O. Box 9322
Framingham, MA 01701-9322
Facsimile: (508) 271-2604
with a copy to
Chief Legal Officer
Genzyme Corporation
One Kendall Square
Cambridge, MA 02139
Facsimile: (617) 252-7553
or to such other individual or address as shall hereafter be furnished
by written notice to EXACT in accordance with this Article 10.
10.3 Reports, notices and other communications from Genzyme to EXACT as
provided hereunder shall be sent to:
President
EXACT Laboratories, Inc.
63 Great Road
Maynard, MA 01754
Facsimile: (978) 897-3481
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or to such other individual or address as shall hereafter be furnished by written notice to Genzyme in accordance with this Article 10.
ARTICLE 11. ARBITRATION
11.1 Any controversy or claim arising out of, or relating to any provisions
of this Agreement or the breach thereof which cannot otherwise be
resolved by good faith negotiations between the parties, or by any form
of Alternate Dispute Resolution other than arbitration which may be
mutually acceptable to the parties, shall be resolved by final and
binding arbitration in Boston, Massachusetts under the rules of the
American Arbitration Association, or the Patent Arbitration Rules if
applicable, then obtaining.
The arbitration shall be subject to the following terms:
(a) The number of arbitrators shall be one (1).
(b) The arbitrator shall be an independent, impartial third party
having no direct or indirect personal or financial relationship to any
of the parties to the dispute, who has agreed to accept the appointment
as arbitrator on the terms set out in this Section 11.1.
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(c) The arbitrator shall be an active or retired attorney, law
professor, or judicial officer with at least five (5) years experience
in the biotechnology or pharmaceuticals industries and a familiarity
with the laws governing proprietary rights in intellectual property.
(d) The arbitrator shall be selected as follows:
(i) Each party shall submit a description of the matter to be
arbitrated to the American Arbitration Association at its
Regional Office in Boston, Massachusetts. Said
Association shall submit to the parties a list of the
arbitrators available to arbitrate any dispute between
them. Thereafter, each party shall select, in numerical
order, those persons on said list acceptable as
arbitrators and return the same to the Association. 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 Association shall be requested to submit as many
subsequent lists of arbitrators as shall be necessary to
effect a mutual selection.
(ii) If the method of selection set out in paragraph (d)(i)
above fails for any reason, then either party may
petition any state or federal court in Massachusetts
having jurisdiction for appointment of the arbitrator in
accordance with applicable law, provided that the
arbitrator must satisfy the requirements of paragraphs
(b) and (c) above.
(e) The arbitrator shall announce the decision and/or award in writing
accompanied by written findings explaining the facts determined in
support of the decision and/or award, and any relevant conclusions of
law.
(f) Unless otherwise provided in this Section 11.1 or extended by
agreement of the parties, each party shall submit an initial request
for designation of an arbitrator within thirty (30) days after receipt
of the first list of available arbitrators pursuant to Section 11.1 (d)
of this Agreement, the dispute shall be submitted to the arbitrator
within ninety (90) days after the arbitrator is selected, and a
decision shall be rendered within thirty (30) days after the dispute is
submitted.
(g) The fees of the arbitrator and any other costs and fees associated
with the arbitration shall be paid in accordance with the decision of
the arbitrator.
(h) The arbitrator shall have no power to add to, subtract from, or
modify any of the terms or conditions of this Agreement. Any award
rendered in such arbitration may be enforced by either party in either
the courts of the Commonwealth of Massachusetts, or in the United
States District Court for the District of Massachusetts, to whose
jurisdiction for such purposes Genzyme and EXACT each hereby
irrevocably consents and submits.
11.2 Notwithstanding the foregoing, nothing in this Article shall be
construed to waive any rights or timely performance of any obligations
existing under this Agreement.
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ARTICLE 12. RESTRICTIONS ON USE OF NAMES
12.1 EXACT shall not use the name of Genzyme or its divisions, JHU, JHHS or
their respective directors, officers, trustees, affiliates, employees,
faculty, students and the inventor(s) of the Patent Rights or any
adaptations or contractions thereof in any advertising, promotional or
sales literature without the prior written consent of Genzyme or JHU in
each case, as applicable; PROVIDED, HOWEVER, that EXACT (a) may refer
to publications by employees of Genzyme in the scientific literature
and (b) may state that a license from Genzyme has been granted as
herein provided. With respect to reports to public agencies that are
required by law, EXACT shall provide Genzyme with a reasonable
opportunity to review the use of its name in each such report
reasonably in advance of its submission.
12.2 EXACT shall not disclose this Agreement or any of the terms or
conditions of this Agreement to any third party without the prior
written consent of Genzyme except and to the extent required to comply
with applicable laws or regulations; provided, that EXACT delivers
prior written notice to Genzyme of any disclosure required by
applicable laws or regulations and takes all reasonable and lawful
actions to obtain confidential treatment for such disclosure and, if
possible, to minimize the extent of such disclosure.
13. CONFIDENTIALITY
13.1 During the term of this Agreement, each party (the "disclosing party")
may communicate to the other party (the "receiving party") information
which it considers to be confidential ("Confidential Information"). All
Confidential Information shall be specifically designated as
confidential. Such Confidential Information may include, without
limitation, trade secrets, know-how, inventions, technical data or
specifications, testing methods, business or financial information,
research and development activities, product and marketing plans, and
customer and supplier information. Confidential Information that is
disclosed in writing shall be marked with a legend indicating its
confidential status. Confidential Information that is disclosed orally
or visually shall be documented in a written notice prepared by the
disclosing party and delivered to the receiving party within thirty
(30) days of the date of disclosure; such notice shall summarize the
Confidential Information disclosed to the receiving party and reference
the time and place of disclosure.
13.2 The receiving party agrees that it shall: (a) maintain all Confidential
Information in strict confidence, except that the receiving party may
disclose or permit the disclosure of any Confidential Information to
its directors, officers, employees, consultants, and advisors who are
obligated to maintain the confidential nature of such Confidential
Information and who need to know such Confidential Information for the
purposes set forth in this Agreement; (b) use all Confidential
Information solely for the purposes set forth in this Agreement; and
(c) allow its directors, officers, employees, consultants, and advisors
to reproduce the Confidential Information only to the extent necessary
to effect the purposes set forth in this Agreement, with all such
reproductions being considered Confidential Information.
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13.3 The obligations of the receiving party under Section 13.2 above shall
not apply to the extent that the receiving party can demonstrate that
certain Confidential Information: (a) was in the public domain prior to
the time of its disclosure under this Agreement; (b) entered the public
domain after the time of its disclosure under this Agreement through
means other than an unauthorized disclosure resulting from an act or
omission by the receiving party; (c) was independently developed or
discovered by the receiving party without use of the Confidential
Information; (d) is or was disclosed to the receiving party at any
time, whether prior to or after the time of its disclosure under this
Agreement, by a third party having no fiduciary relationship with the
disclosing party and having no obligation of confidentiality with
respect to such Confidential Information; or (e) is required to be
disclosed to comply with applicable laws or regulations, or with a
court or administrative order, provided, that the disclosing party
receives prior written notice of such disclosure and that the receiving
party takes all reasonable and lawful actions to obtain confidential
treatment for such disclosure and, if possible, to minimize the extent
of such disclosure.
13.4. The obligations set forth in this Article 13 shall remain in effect for
a period of five (5) years after the expiration or the earlier
termination of this Agreement.
ARTICLE 14. PATENT MARKING
14. EXACT agrees to mark any Kits, Licensed Reagents or promotional
materials, technical literature and the like that describe Kits,
Licensed Reagents or Diagnostic Services with all applicable patent
numbers, and to indicate "Patent Pending" status in accordance with
each applicable country's patent laws.
ARTICLE 15. INDEPENDENT CONTRACTOR
15. 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.
ARTICLE 16. SEVERABILITY
16. If any one or more of the provisions of this Agreement shall be held to
be invalid, illegal or unenforceable, the validity, legality or
enforceability of the remaining provisions of this Agreement shall not
in any way be affected or impaired thereby unless the invalid
provisions are of such essential importance to this Agreement that it
is to be reasonably assumed that the parties would not have entered
into this Agreement without the invalid provisions.
ARTICLE 17. NON-ASSIGNABILITY
17. Neither this Agreement nor any part hereof shall be assignable by
either party without the express prior written consent of the other,
which shall not be unreasonably withheld. Any attempted assignment
without such consent shall be void. Notwithstanding the foregoing, such
consent shall not be required for the assignment of this Agreement (i)
by
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EXACT in connection with the sale or transfer of all or substantially all of the business or assets of EXACT however structured, or (ii) by Genzyme in conjunction with the transfer of all or substantially all of the business or assets of Genzyme or all or substantially all of the business or assets allocated to its Molecular Oncology Division however structured; PROVIDED, in any such case, that the assignor promptly notifies the other party hereto of such assignment and the assignee assumes all of the assignor's obligations hereunder in writing, with a copy of such written assumption (which may be redacted to the extent reasonably necessary to protect confidential information) to be promptly delivered to the other party hereto.
ARTICLE 18. NON-SOLICITATION
18. During the term of this Agreement and during the period ending two (2) years after the expiration or earlier termination of this Agreement, neither party shall, without the prior written consent of the other, solicit the employment of, or employ, any person in any capacity who, at any time during the term of this Agreement, shall have been an employee of the other party.
ARTICLE 19. ENTIRE AGREEMENT
19. This Agreement constitutes the entire agreement between the parties with respect to the subject matter and supersedes any prior agreements and understandings between the parties relating to the subject matter hereof. No oral agreement, conversation or representation between any officers, agents or employees of the parties hereto either before or after the execution of this Agreement shall affect or modify any of the terms or obligations herein contained.
ARTICLE 20. MODIFICATIONS IN WRITING
20. No change, modification, extension, termination or waiver of this Agreement, or any of the provisions herein contained, shall be valid unless made in writing and signed by a duly authorized representative of each party.
ARTICLE 21. GOVERNING LAW
21. The validity and interpretation of this Agreement and the legal relations of the parties to it shall be governed by the laws of the Commonwealth of Massachusetts without regard to the conflict of laws provisions thereunder.
ARTICLE 22. CAPTIONS
22. The captions are provided for convenience and are not to be used in construing this Agreement.
ARTICLE 23. CONSTRUCTION
23. Each of the parties agree that this Agreement is the result of mutual negotiation and therefore the language herein shall not be presumptively construed against either of them.
ARTICLE 24. COUNTERPARTS
24. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, and all of which together shall be deemed to be one and the same instrument.
ARTICLE 25. BINDING EFFECT
25. This Agreement shall be binding upon and inure to the benefit of the parties and their respective permitted successors and permitted assigns.
ARTICLE 26. FORCE MAJEURE
26. Neither party shall be deemed to be in breach of this Agreement due to, or liable to the other party for damages or loss occasioned by failure of performance by the defaulting party if the failure is occasioned by war, fire, explosion, flood, acts of God, strike or lockout, embargo, or any similar cause beyond the control of the defaulting party; provided that the party claiming this exception has exerted all commercially reasonable and diligent efforts to avoid or remedy such event and that such event does not extend for more than nine (9) months; provided further that such party provides the other party with prompt written notice of any delay or failure to perform that occurs by reason of force majeure and continues performance hereunder with reasonable dispatch whenever such causes are removed. The parties shall mutually seek a resolution of the delay or failure to perform in good faith if a force majeure event extends for more than nine (9) months, which resolution may be termination of this Agreement.
ARTICLE 27. JHU LICENSE AGREEMENT
27. In the event that Genzyme's license to the Patent Rights under the JHU License Agreement is terminated, this Agreement shall remain in effect pursuant to the terms of the JHU License Agreement provided that at such time EXACT is not in material breach of the provisions of this Agreement and agrees to be bound to JHU as a licensor under the terms and conditions of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective duly authorized representatives as of the date first above written.
GENZYME CORPORATION
By: /s/ Peter Wirth
-----------------------------------
Name: Peter Wirth
--------------------------------
Title: Executive Vice President
--------------------------------
Date: March 25, 1999
--------------------------------
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EXACT LABORATORIES, INC.
By: /s/ Donna K. Hazad
-----------------------------------
Name: Donna K. Hazad
---------------------------------
Title: V.P. Business Development
--------------------------------
Date: March 23, 1999
---------------------------------
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Appendix A
Gene Patent Rights
U.S. Patent No. 5,352,775
AU9213669 Patent Application No. W092/13103
GB 91000962 US Patent No. 5,648,212 (Div. of '775)
GB 91000963 US Patent No. 5,691,454 (Div. of '775)
GB 91000974 US Patent No. 5,783,666 (Div. of '775)
GB 9100975
EP 569527
JP 7500241
U.S. Patent No. 5,527,676
EP 390323
JP 4004898
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Appendix B
Methodology Patent Rights
Patent Application No. W093/20235 (detecting mammalian nucleic acids from stool)
EP 672181
JP 8504081
U.S. Patent Application No. 08/861,910
EXHIBIT 10.13
TABLE OF CONTENTS
PAGE
BACKGROUND.....................................................................1
Section 1 DEFINITIONS.......................................................1
Section 2 GRANT.............................................................3
Section 3 ACKNOWLEDGMENT AND AGREEMENT ON DIAGNOSTIC PRODUCTS...............5
Section 4 ROYALTIES, RECORDS AND REPORTS....................................5
Section 5 PERFORMANCE OF LICENSED SERVICES..................................6
Section 6 TECHNOLOGY NOTIFICATION...........................................6
Section 7 DILIGENCE.........................................................7
Section 8 TERM AND TERMINATION..............................................7
Section 9 CONFIDENTIALITY-PUBLICITY.........................................8
Section 10 COMPLIANCE.......................................................10
Section 11 ASSIGNMENT.......................................................10
Section 12 NATION OF WARRANTIES AND INDEMNITY...............................10
Section 13 GENERAL..........................................................11
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ATTACHMENTS:
Attachment I COMBINATION SERVICES
Attachment II Summary Royalty Report form
Rider
Appendix A to Rider
PCR DIAGNOSTIC SERVICES AGREEMENT
This Agreement is made by and between Roche Molecular Systems, Inc. ("RMS"), having an office at 4300 Hacienda Drive, Pleasanton, California 94588 and Exact Laboratories, Inc. ("ELI"), Maynard, Massachusetts, hereafter collectively referred to as "The Parties".
BACKGROUND
A. RMS owns and has the right to grant immunities from suit to practice under certain United States Patents describing and claiming, INTER ALIA, a nucleic acid amplification process known as the polymerise chain reaction ("PCR") technology.
B. ELI has attained substantial expertise in validating, documenting and performing sophisticated diagnostic procedures.
C. ELI desires to obtain an immunity from suit from RMS to practice PCR TECHNOLOGY to perform human IN VITRO clinical laboratory services, and RMS is willing to grant such an immunity, on the terms and subject to the conditions provided exclusively in this Agreement.
NOW, THEREFORE, for and in consideration of the mutual covenants contained herein, RMS and ELI agree as follows:
1. DEFINITIONS
For the purpose of this Agreement, and solely for that purpose, the terms set forth hereinafter shall be defined as follows:
1.1 The term "AFFILIATE" of a designated Party to this Agreement shall mean:
a) an organization of which fifty percent (50%) or more of the voting stock is controlled or owned directly or indirectly by either Party to this Agreement;
b) an organization which directly or indirectly owns or controls fifty percent (50%) or more of the voting stock of either Party to this Agreement;
c) an organization, the majority ownership of which is directly or indirectly common to the majority ownership of either Party to this Agreement; and
d) an organization under (a), (b), or (c) above in which the amount of said ownership is less than fifty percent (50%) and that amount is
the maximum amount permitted pursuant to the law governing the ownership of said organization.
It is understood and agreed, however, that the term "AFFILIATE" shall not include Genentech Inc., a Delaware Corporation.
1.2 "COMBINATION SERVICES" shall mean a LICENSED SERVICE offered in combination with [CONFIDENTIAL TREATMENT REQUESTED]/*/ as part of a package, where the LICENSED SERVICE is not separately billed.
1.3 "DIAGNOSTIC PRODUCT" shall mean an assemblage of reagents, including but not limited to reagents packaged in the form of a kit, useful in performing a Licensed Service.
1.4 "EFFECTIVE DATE" shall mean the date on which the last signatory to this Agreement signs the Agreement.
1.5 "LICENSED FIELD" shall mean the field of human IN VITRO diagnostics solely for the detection of genetic diseases, genetic predisposition to disease, agents associated with infectious diseases, cancer; and for tissue transplant typing, including testing performed on animal tissue intended for use in xenotransplantation; PARENTAGE DETERMINATION; disease management; and clinical trials.
1.6 "LICENSED SERVICES" shall mean the performance by ELI of an IN VITRO diagnostic procedure utilizing PCR TECHNOLOGY to detect' the presence, absence or quantity of a nucleic acid sequence associated with a human disease or condition within the LICENSED FIELD. LICENSED SERVICES include but are not limited to, any combination of the steps of collecting a sample for analysis, isolating nucleic acid sequences therein, amplifying one or more desired sequences, analyzing the amplified material and reporting the results.
1.7 "NET SERVICE REVENUES" shall mean gross invoice price for the LICENSED SERVICES performed by ELI (or the fair market value for any nonmonetary consideration which ELI agrees to receive in exchange for LICENSED SERVICES), less the following deductions where they are factually applicable and are not already reflected in the gross invoice price:
a) discounts allowed and taken, in amounts customary in the trade (which shall include the difference between the dollar amount charged by ELI for a LICENSED SERVICE and the Medicare and/or Medicaid Limits of Allowance and/or reimbursement limitations of a THIRD PARTY insurance program); and
b) government imposed sales taxes and other taxes to the extent they are separately identified on the invoice; and
/*/ [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
c) actual bad debt, up to 2% of gross invoice price for LICENSED SERVICES, which bad debt ELI can prove and document that it was reasonable and diligent in its efforts to collect payment.
No allowance or deduction shall be made for commissions or collections, by whatever name known.
It is hereby understood and agreed that, to the extent feasible,
LICENSED SERVICES and COMBINATION SERVICES shall at all times be invoiced,
listed and billed by ELI as a separate item in ELI's invoices, bills and reports
to customers. NET SERVICE REVENUES for determining royalties on a LICENSED
SERVICE which is part of a COMBINATION SERVICES shall be determined by
[CONFIDENTIAL TREATMENT REQUESTED]/*/ in Attachment I hereto. The [CONFIDENTIAL
TREATMENT REQUESTED]/*/ specified in Attachment I for a particular LICENSED
SERVICE shall be set by RMS after consultation with ELI, [CONFIDENTIAL TREATMENT
REQUESTED]/*/ by the LICENSED SERVICE to the [CONFIDENTIAL TREATMENT
REQUESTED]/*/ of the COMBINATION SERVICES as offered by ELI. Attachment I hereto
shall be modified as new COMBINATION SERVICES are identified and new
royalty-bearing fractions set.
The NET SERVICE REVENUES of the LICENSED SERVICES that are performed by ELI for any person, firm or corporation controlling, controlled by, or under common control with ELI, or enjoying a special course of dealing with ELI, shall be determined based on the average selling price to all THIRD PARTIES during the period on a test by test basis.
1.8 "PARENTAGE DETERMINATION" shall mean analysis of human genetic material to ascertain whether two or more individuals are biologically related, but specifically excludes analysis of forensic evidence for a sexual assault investigation.
1.9 "PCR TECHNOLOGY" shall mean polymerase chain reaction technology covered by United States Patent Nos. B1 4,683,195 and B1 4,683,202 and any reissue or reexamination patents thereof.
1.10 "THIRD PARTY" shall mean a party other than an AFFILIATE of The Parties to this Agreement.
2. GRANT
2.1 Upon the terms and subject to the conditions of this Agreement, RMS hereby grants to ELI, and ELI hereby accepts from RMS, a royalty-bearing, nonexclusive immunity from suit under PCR TECHNOLOGY solely to perform LICENSED SERVICES within the United States and its possessions and the Commonwealth of Puerto Rico. [CONFIDENTIAL TREATMENT REQUESTED]/*/.
2.2 The PCR TECHNOLOGY hereunder may be practiced solely for the performance of LICENSED SERVICES and for no other purpose whatsoever, and no other right, immunity or license is granted expressly, impliedly or by estoppel.
/*/ [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
2.3 ELI expressly acknowledges and agrees that the immunity from suit pursuant to this Agreement is personal to ELI alone and ELI shall have no right to sublicense, assign or otherwise transfer or share its rights under the foregoing immunity from suit. ELI further agrees that LICENSED SERVICES will be performed, offered, marketed and sold only by ELI except as provided in Section 2.3(a) and ELI shall not authorize any other party, including AFFILIATES, to practice the PCR TECHNOLOGY, nor shall it practice the PCR TECHNOLOGY in conjunction with any other party. The foregoing notwithstanding, it is understood that ELI may market services through its authorized sales representatives.
a) ELI may offer, market and sell LICENSED SERVICES that are performed by other laboratories subject to the following conditions:
i) Each laboratory performing LICENSED SERVICES for ELI must be separately licensed under RMS's diagnostic services program.
ii) ELI's report forms must list all LICENSED SERVICES marketed and sold by ELI which are performed by another laboratory even though ELI will not be obligated to pay royalties on those LICENSED SERVICES.
iii) ELI must contact RMS to verify that a new laboratory to which it seeks to send samples for performance of LICENSED SERVICES is properly licensed by RMS before sending samples to that laboratory.
iv) Each laboratory performing LICENSED SERVICES for ELI must report and pay royalties on LICENSED SERVICES performed for ELI.
2.4 For each COMBINATION SERVICES that ELI offers pursuant to this immunity from suit, ELI agrees that it will notify RMS at least sixty (60) days before it commences offering said COMBINATION SERVICES. COMBINATION SERVICES claimed by ELI on royalty reports which have not met the sixty (60) day notice requirement and for which RMS has not set an appropriate royalty bearing fraction, shall be royalty bearing at 100% of the package price, less applicable deductions. As to all other LICENSED SERVICES offered by ELI which are not part of a COMBINATION SERVICES, ELI agrees to inform RMS of the availability from ELI of each such LICENSED SERVICE within thirty (30) days after ELI commences offering the Licensed Service.
2.5 RMS hereby grants to ELI the right and ELI accepts and agrees to credit RMS as the source of PCR TECHNOLOGY rights in ELI's, promotional materials and any other materials intended for distribution to THIRD PARTIES as follows:
"This test is performed pursuant to a license agreement with Roche Molecular Systems, Inc."
3. ACKNOWLEDGMENT AND AGREEMENT ON DIAGNOSTIC PRODUCTS
ELI acknowledges and agrees that the immunity from suit granted hereunder is for the performance of LICENSED SERVICES only and does not include any right to make, have made, import, offer or sell any products, including devices, PCR reagents, kits or DIAGNOSTIC PRODUCTS. ELI further acknowledges and agrees that RMS Affiliates are in the business of providing clinical laboratory testing services and the commercial sale of diagnostic testing systems and therefore may compete directly with ELI's business.
4. ROYALTIES, RECORDS AND REPORTS
4.1 ROYALTIES. For the rights and privileges granted under this Agreement, ELI shall pay to RMS earned royalties equal to [CONFIDENTIAL TREATMENT REQUESTED]/*/ percent [CONFIDENTIAL TREATMENT REQUESTED]/*/ of ELI's NET SERVICE REVENUES for each LICENSED SERVICE performed.
4.2 ELI shall keep full, true and accurate books of account containing all particulars which may be necessary for the purpose of showing the amount payable to RMS by way of royalty or by way of any other provision. under this Agreement. Such books and the supporting data shall be open at all reasonable times, for three (3) years following the end of the calendar year to which they pertain (and access shall not be denied thereafter, if reasonably available), to the inspection of RMS or an independent certified public accountant retained by RMS for the purpose of verifying ELI's royalty statements or ELI's compliance in other respects with this Agreement. It is understood that RMS's inspection of ELI's records does not require access to actual patient results. If in dispute, such records shall be kept until the dispute is settled. The inspection of records shall be at RMS's sole cost and expense, unless the inspector concludes that royalties reported by ELI for the period being audited are understated by five percent (5%) or more from actual royalties, in which case the costs and expenses of such inspection shall be paid by ELI.
4.3 ELI shall within sixty (60) days after the first day of January and July of each year deliver to RMS a true and accurate royalty report. Such report shall cover the preceding six (6) calendar months; and shall be submitted either i) on the "Summary Royalty Report", a copy of which is attached hereto as Attachment II, or ii) on a form generated by ELI which duplicates the format of the Summary Royalty Report; and shall include at least the following:
a) the name of each LICENSED SERVICE and COMBINATION SERVICES and the number performed during those six (6) months;
b) compilation of billings thereon and the allowable deductions therefrom;
c) NET SERVICE REVENUES and the calculation of total royalties thereon; and
/*/ [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
d) the calculation of the net royalty payable to RMS. If no royalties are due, it shall be so reported.
The correctness and completeness of each such report shall be attested to in writing by a responsible financial officer of ELI's organization or by ELI's external auditor or by the chair or other head of ELI's internal audit committee.
Simultaneously with the delivery of each such report, ELI shall pay to RMS the royalty due under this Agreement for the period covered by such report. All payments due RMS hereunder shall be payable in United States currency and sent together with the royalty report by the due date to the following address:
Roche Molecular Systems, Inc. P.O. Box 18139 Newark, NJ 07191
or to any address that RMS may advise in writing.
4.4 Licensed Clinical Services performed by ELI prior to execution of this Agreement shall be royalty bearing and reported to RMS together with the first royalty report due hereunder.
4.5 ELI's obligation to pay royalties pursuant to this Agreement shall terminate upon a final holding of invalidity or unenforceability of all of the patents identified in Section 1.9, SUPRA, by a court of appellate jurisdiction or by a trial court from which no appeal is or can be taken.
4.6 If ELI shall fail to pay any amount specified under this Agreement after the due date thereof, the amount owed shall bear interest at the Citibank NA base lending rate ("prime rate") plus [CONFIDENTIAL TREATMENT REQUESTED]/*/% from the due date until paid, provided, however, that if this interest rate is held to be unenforceable for any reason, the interest rate shall be the maximum rate allowed by law at the time the payment is due.
5. PERFORMANCE OF LICENSED SERVICES
The Parties agree that quality assurance is of utmost importance in the performance of LICENSED SERVICES. To that end, ELI agrees that it will participate in at least one independent proficiency testing program for each LICENSED SERVICE when such program(s) becomes available.
6. TECHNOLOGY NOTIFICATION
6.1 With respect to any invention, improvement or discovery (hereinafter referred to as "Discoveries" in this Article) of ELI made after entering into this Agreement, resulting from work conducted under this Agreement and being applicable to PCR, if ELI
/*/ [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
decides to license said Discoveries to THIRD PARTIES, then ELI agrees to provide to RMS, unless not possible due to ELI's preexisting commitments to THIRD PARTIES relating to said Discoveries, a reasonable opportunity to negotiate a license to use said Discoveries in PCR-based DIAGNOSTIC PRODUCTS and services. Such Discoveries include, but are not limited to, improvements of the PCR process or in the performance of LICENSED SERVICES, modifications to or new methods of performing the LICENSED SERVICES, including the automation of the PCR process or of the LICENSED SERVICES.
6.2 Any agreement reached between The Parties as a result of ELI's notification to RMS of a Discovery pursuant to Section 6.1 hereto shall be upon terms and conditions negotiated in good faith by The Parties.
7. DILIGENCE
ELI shall exercise reasonable diligence in developing, testing, validating, documenting, promoting and selling the LICENSED SERVICES. In the course of such diligence, ELI shall take appropriate steps including, upon reasonable written request of RMS, furnishing RMS with representative copies of all promotional material relating to the LICENSED SERVICES.
8. TERM AND TERMINATION
8.1 The immunity from suit granted to ELI herein shall commence on the EFFECTIVE DATE and terminate on the date of expiration of the last to expire of the patents included within the PCR TECHNOLOGY, which patent contains at least one claim covering the performance of LICENSED SERVICES.
8.2 If in the course of performing and offering LICENSED SERVICES, ELI fails to comply with the quality assurance provision of Article 5, ELI shall so notify RMS immediately upon such failure and shall have thirty (30) days from receipt of such notice to cure all defects of which it is notified. If ELI does not cure all such defects within the designated thirty (30) days, RMS may then in its sole discretion terminate this Agreement in its entirety, or any portion thereof immediately. For the purposes of this Section and this Agreement, ELI's failure to provide an accurate and correct test result when participating in an independent proficiency testing program pursuant to Article 5, on two consecutive evaluations, shall automatically be deemed a failure to comply with Article 5 and shall be a material breach of this Agreement.
8.3 Notwithstanding any other Section of this Agreement, ELI may terminate this Agreement for any reason on thirty (30) days' written notice to RMS.
8.4 The decision of a Court or Administrative body finding RMS liable or culpable due to ELI's performance of LICENSED SERVICES shall give RMS the right to terminate this Agreement immediately upon notification to RMS of said decision.
8.5 The immunity from suit granted hereunder to ELI shall automatically terminate upon (a) an adjudication of ELI as bankrupt or insolvent, or ELI's admission in writing of its inability to pay its obligations as they mature; or (b) an assignment by ELI for the benefit
of creditors; or (c) ELI's applying for or consenting to the appointment of a receiver, trustee or similar officer for any substantial part of its property; or such receiver, trustee or similar officer's appointment without the application or consent of ELI, if such appointment shall continue undischarged for a period of ninety (90) days; or (d) ELI's instituting (by petition, application, answer, consent or otherwise) any bankruptcy, insolvency arrangement, or similar proceeding relating to ELI under the laws of any jurisdiction; or (e) the institution of any such proceeding (by petition, application or otherwise) against ELI, if such proceeding shall remain undismissed for a period of ninety (90) days or the issuance or levy of any judgment, writ, warrant of attachment or execution or similar process against a substantial part of the property of ELI, if such judgment, writ, or similar process shall not be released, vacated or fully bonded within ninety (90) days after its issue or levy; or (f) loss of ELI's federal or state licenses permits or accreditation necessary for operation of ELI as a health care institution.
8.6 RMS shall have the right to terminate this Agreement by written notice to ELI upon any change in the ownership or control of ELI or of its assets. Termination under this Section shall be effective immediately upon receipt by ELI of RMS's notice of termination. For such purposes, a "change in ownership or control" shall mean that 30% or more of the voting stock of ELI become subject to the control of a person or entity, or any related group of persons or entities acting in concert, which person(s) or entity(ies) did not control such proportion of voting stock as of the EFFECTIVE DATE of the Agreement. Analogously, RMS shall have the right to terminate this Agreement upon any transfer or sale of 30% or more of the assets of ELI to another panty.
8.7 BREACH. Upon any breach of or default of a material term under this Agreement by ELI, RMS may terminate this Agreement upon thirty (30) days' written notice to ELI. Said notice shall become effective at the end of the thirty-day period, unless during said period ELI fully cures such breach or default and notifies RMS of such a cure.
8.8 Upon termination of this Agreement as provided herein, all immunities and rights granted to ELI hereunder shall revert to or be retained by RMS.
8.9 ELI's obligations to report to RMS and to pay royalties to RMS as to the LICENSED SERVICES performed under the Agreement prior to termination or expiration of the Agreement shall survive such termination or expiration.
9. CONFIDENTIALITY-PUBLICITY
9.1 Except as otherwise specifically provided in Section 2.5, ELI agrees to obtain RMS's approval before distributing any written information, such as Press Releases, to THIRD PARTIES which contains references to RMS or this Agreement. RMS's approval shall not be unreasonably withheld or delayed and, in any event, RMS's decision shall be rendered within three (3) weeks of receipt of the written information. Once approved, such materials, or abstracts of such materials, which do not materially alter the context of the material originally approved may be reprinted during the term of the Agreement without further approval by RMS unless RMS has notified ELI in writing of its decision to withdraw permission for such use.
9.2 Each Party agrees that any financial, legal or business information or any technical information disclosed to it (the "Receiving Party") by the other (the "Disclosing Party") in connection with this Agreement shall be considered confidential and proprietary and the Receiving Party shall not disclose same to any THIRD PARTY and shall hold it in confidence for a period of five (5) years and will not use it other than as permitted under this Agreement provided, however, that any information, know-how or data which is orally disclosed to the Receiving Party shall not be considered confidential and proprietary unless such oral disclosure is reduced to writing and given to the Receiving Party in written form within thirty (30) days after oral disclosure thereof. Such confidential and proprietary information shall include, without limitation, marketing and sales information, commercialization plans and strategies, research and development work plans, and technical information such as patent applications, inventions, trade secrets, systems, methods, apparatus, designs, tangible material, organisms and products and derivatives thereof.
9.3 The above obligations of confidentiality shall not be applicable to the extent:
a) such information is general public knowledge or, after disclosure hereunder, becomes general or public knowledge through no fault of the Receiving Party; or
b) such information can be shown by the Receiving Party by its written records to have been in its possession prior to receipt thereof hereunder; or
c) such information is received by the Receiving Party from any THIRD PARTY for use or disclosure by the Receiving Party without any obligation to the Disclosing Party provided, however, that information received by the Receiving Party from any THIRD PARTY funded by the Disclosing Party (e.g. consultants, subcontractors, etc.) shall not be released from confidentiality under this exception; or
d) the disclosure of such information is required or desirable to comply with or fulfill governmental requirements, submissions to governmental bodies, or the securing of regulatory approvals.
9.4 Each Party shall, to the extent reasonably practicable, maintain the confidentiality of the provisions of this Agreement and shall refrain from making any public announcement or disclosure of the terms of this Agreement without the prior consent of the other Party, except to the extent a Party concludes in good faith that such disclosure is required under applicable law or regulations, in which case the other Party shall be notified in advance.
10. COMPLIANCE
In exercising any and all rights and in performing its obligations hereunder, ELI shall comply fully with any and All applicable laws, regulations and ordinances and shall obtain and keep in effect licenses, permits and other governmental approvals, whether at the federal, state or local levels, necessary or appropriate to carry on its activities hereunder. ELI further agrees to refrain from any activities that would have an adverse effect on the business reputation of RMS. RMS will advise ELI of any such activities and ELI will have thirty (30) days to correct such activity.
11. ASSIGNMENT
This Agreement shall not be assigned or transferred by ELI (including without limitation any purported assignment or transfer that would arise from a sale or transfer of ELI's business) without the express written consent of RMS. RMS may assign all or any part of its rights and obligations under this Agreement at any time without the consent of ELI. ELI agrees to execute such further acknowledgments or other instruments as RMS may reasonably request in connection with such assignment.
12. NEGATION OF WARRANTIES AND INDEMNITY
12.1 Nothing in this Agreement shall be construed as:
a) a warranty or representation by RMS as to the validity or scope of any patent included within PCR TECHNOLOGY;
b) a warranty or representation that the practice of the PCR TECHNOLOGY and/or the performance of LICENSED SERVICES are or will be free from infringement of patents of THIRD PARTIES;
c) an obligation to bring or prosecute actions or suits against THIRD PARTIES for infringement;
d) except as expressly set forth herein, conferring the right to use in advertising, publicity or otherwise any trademark, trade name, or names, or any contraction, abbreviation, simulation or adaptation thereof, of RMS;
e) conferring by implication, estoppel or otherwise any license, right or immunity under any patents or patent applications of RMS other than those specified in PCR TECHNOLOGY, regardless of whether such other patents and patent applications are dominant or subordinate to those in PCR TECHNOLOGY;
f) an obligation to furnish any know-how not provided in PCR TECHNOLOGY; or
g) creating any agency, partnership, joint venture or similar relationship between RMS and ELI.
12.2 RMS MAKES NO EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
12.3 ELI shall assume full responsibility for its use of the PCR TECHNOLOGY and shall defend, indemnify and hold RMS harmless from and against all liability, demands, damages, expenses (including attorneys' fees) and losses for death, personal injury, illness, property damage or any other injury or damage, including any damages or expenses arising in connection with state or federal regulatory action (collectively "Damages"), resulting from the use by ELI, including its officers, directors, agents and employees, of the PCR TECHNOLOGY except, and to the extent that such Damages are caused by the negligence or willful misconduct of RMS.
13. GENERAL
13.1 This Agreement constitutes the entire agreement between The Parties as to the subject matter hereof, and all prior negotiations, representations, agreements and understandings are merged into, extinguished by and completely expressed by it. This Agreement may be modified or amended only by a writing executed by authorized officers of each of The Parties.
13.2 Any notice required or permitted to be given by this Agreement shall be given by postpaid, first class, registered or certified mail, or by courier, properly addressed to the other Party at the respective address as shown below:
If to RMS: Roche Molecular Systems, Inc. 1145 Atlantic Avenue Alameda, California 94501 Attn: General Counsel
If to ELI: Exact Laboratories, Inc.
63 Great Road
Maynard, Massachusetts 01754
Attn: President
Either Party may change its address by providing notice to the other Party. Unless otherwise specified herein, any notice given in accordance with the foregoing shall be deemed given within four (4) full business days after the day of mailing, or one full day after the date of delivery to the courier, as the case will be.
13.3 GOVERNING LAW AND VENUE. This Agreement and its effect are subject to and shall be construed and enforced in accordance with the law of the State of California, U.S.A., except as to any issue which by the law of California depends upon the validity, scope or
enforceability of any patent within the PCR TECHNOLOGY, which issue shall be determined in accordance with the applicable patent laws of the United States. The Parties agree that the exclusive jurisdiction and venue for any dispute or controversy arising from this Agreement shall be in the United States District Court for the Northern District of California if federal jurisdiction exists, and if no federal jurisdiction exists, then in the Superior Court of the County of Alameda, California.
13.4 ARBITRATION. Notwithstanding the provisions of Section 13.3 above, any dispute concerning solely the determination of facts such as, but not limited to, (a) the value of a COMBINATION SERVICES and a LICENSED SERVICE pursuant to Section 1.7; (b) a determination of royalty rate payments owed pursuant to Section 4.1; (c) compliance with quality assurance pursuant to Article 5; or (d) good faith compliance with Section 6.1; and which dispute does not involve a question of law, shall be settled by final and binding arbitration at a mutually convenient location in the State of California pursuant to the commercial arbitration rules of the American Arbitration Association, in accordance with the following procedural process:
i) The arbitration tribunal shall consist of three arbitrators. In the request for arbitration and the answer thereto, each Party shall nominate one arbitrator and the two arbitrators so named will then jointly appoint the third arbitrator as chairman of the arbitration tribunal.
ii) The decision of the arbitration tribunal shall be final and judgment upon such decision may be entered in any competent court for juridical acceptance of such an award and order of enforcement. Each Party hereby submits itself to the jurisdiction of the courts of the place of arbitration, but only for the entry of judgment with respect to the decision of the arbitrators hereunder.
13.5 Nothing in this Agreement shall be construed so as to require the commission of any act contrary to law, and wherever there is any conflict between any provision of this Agreement or concerning the legal right of The Parties to enter into this contract and any statute, law, ordinance or treaty, the latter shall prevail, but in such event the affected provisions of the Agreement shall be curtailed and limited only to the extent necessary to bring it within the applicable legal requirements.
13.6 If any provision of this Agreement is held to be unenforceable for any reason, it shall be adjusted rather than voided, if possible, in order to achieve the intent of RMS's to the extent possible. In any event, all other provisions of this Agreement shall be deemed valid and enforceable to the full extent possible.
IN WITNESS WHEREOF, The Parties hereto have set their hands and seals and duly executed this Agreement on the date(s) indicated below, to be effective on Effective Date as defined herein.
ROCHE MOLECULAR SYSTEMS, INC. EXACT LABORATORIES, INC.
By: /s/ Thomas White By: /s/ Donna K. Hazard
------------------------------ --------------------------
Thomas White, Ph.D Donna K. Hazard
Title: Vice President, R&D Title: Vice President, Business
Development
Date: May 6, 1999 Date: June 3, 1999
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ATTACHMENT I
COMBINATION SERVICES
PERCENT OF NET SERVICE
REVENUES FOR COMBINATION
SERVICES WHICH IS
ATTRIBUTABLE TO LICENSED
LICENSED SERVICES SERVICES
[TO BE DETERMINED]
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ATTACHMENT II
SUMMARY ROYALTY REPORT
for the Period _______ to _______
Licensee: Exact Laboratories, Inc. Field of Use: In Vitro Human Diagnostic
Effective Date: Services
Royalty Rate: [CONFIDENTIAL TREATMENT
REQUESTED]/*/%
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LICENSED SERVICE AMOUNT NUMBER OF COMPILATION DEDUCTIONS COMBINATION
BILLED PER LIC. SERVICE OF ALLOWED* SERVICE %
LIC. SERVICE PERFORMED BILLINGS (FROM ATT.I)
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Royalty Payment Due
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NET SERVICE EARNED
REVENUE ROYALTY
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* PLEASE ATTACH, TO THIS FORM, DOCUMENTATION OR SUPPLEMENTAL DATA FOR
"DEDUCTIONS ALLOWED".
** COMBINATION SERVICES %'S MUST BE PREVIOUSLY AGREED UPON. TO CONFIRM THAT A
COMBINATION SERVICES % HAS BEEN ESTABLISHED OR TO PROPOSE THIS STATUS,
PLEASE CONTACT RMS LICENSING DEPT. @(510)814-2984.
CHECK HERE IF THERE WERE NO LICENSED SERVICES PERFORMED FOR THIS REPORT
PERIOD: _____
I hereby certify the information set forth above is correct and complete with respect to the amounts due under the applicable license agreement.
By:_____________________________ Title:______________ Date:__________________
(authorized signature)
Name (please print):_________________________________________
/*/ [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
RIDER CONCERNING SUPPLEMENTAL PATENT RIGHTS TO
PCR DIAGNOSTIC SERVICES AGREEMENT
The purpose of this rider is to set forth the agreement of Exact Laboratories, Inc. ("ELI") and Roche Molecular Systems, Inc. ("RMS") concerning the supplemental rights to additional patents relating to PCR TECHNOLOGY which RMS offers and The Parties agree to add to the rights granted to ELI by the Agreement between The Parties, executed on even date herewith (the "PCR Diagnostic Services Agreement").
1. It is understood by The Parties that RMS may, from time to time, come into possession or control of additional patents or claims of patents relating to PCR TECHNOLOGY rights to which RMS may decide to offer to add to the PCR Diagnostic Services Agreement and which ELI may desire to accept. Accordingly, appended hereto as APPENDIX A is a list of such additional patents or claims of patents as RMS is currently offering to which ELI, by its authorized representative, has indicated its acceptance thereof in accordance with the rights of use and all other pertinent obligations, restrictions and limitations as set forth in the PCR Diagnostic Services Agreement.
2. APPENDIX A may be amended by mutual agreement of The Parties in writing so as to add additional patent rights being offered by RMS. Accordingly, a new APPENDIX A signed and dated by both parties shall supersede any prior APPENDIX A and shall become a part of this rider.
3. It is expressly understood and agreed by The Parties that the grant of additional patent rights herein does not in any way otherwise modify the PCR Diagnostic Services Agreement and that all provisions of that Agreement shall remain in full force and effect as originally set forth therein. The term of the PCR Diagnostic Services Agreement shall control the enjoyment of rights hereunder and is not extended by the rights granted hereby nor shall there be any additional royalty obligation to RMS beyond that set forth in said Agreement.
4. In consideration of the further rights being granted it hereunder, ELI agrees to remain in good faith compliance with the applicable terms of the PCR Diagnostic Services Agreement, including reporting and payment of royalties and the limitation on use of PCR TECHNOLOGY strictly for the performance of LICENSED SERVICES and not to make products.
5. In the event that ELI's obligation to pay royalties under the PCR Diagnostic Services Agreement for its rights to use the PCR TECHNOLOGY shall cease for any reason, whether by termination, expiry, invalidation or otherwise, then The Parties agree that this rider shall become null and void and the rights granted hereunder terminated without notice and The Parties shall be free to negotiate a new agreement with respect to the patent rights listed on APPENDIX A.
Accepted and Agreed
Roche Molecular Systems, Inc. Exact Laboratories, Inc.
By: /s/ Thomas White By: /s/ Donna K. Hazard
------------------------------ -----------------------------
Thomas White Donna Hazard
Title: Vice President, R&D Title: Vice President, Business
Development
Date: May 6, 1999 Date: June 3, 1999
---------------------------- ---------------------------
|
APPENDIX A TO RIDER
ADDITIONAL PATENTS
U.S. Patent Number 5,008,182
U.S. Patent Number 5,176,995
U.S. Patent Number 5,219,727
U.S. Patent Number 5,110,920
ROCHE MOLECULAR SYSTEMS, INC. EXACT LABORATORIES, INC.
By: /s/ Thomas White By: /s/ Donna K. Hazard
------------------------- --------------------------
Thomas White, Ph.D Donna Hazard
Title: Vice President, R&D Title: Vice President, Business
Development
Date: May 6, 1999 Date: June 3, 1999
--------------------------- ------------------------
|
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report and to all references to our Firm included in or made a part of this Registration Statement.
Boston, Massachusetts
October 27, 2000
| ARTICLE 5 |
| THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNAUDITED FINANCIAL STATEMENTS AS OF AND FOR THE SIX MONTHS ENDING JUNE 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. |
| PERIOD TYPE | 6 MOS |
| FISCAL YEAR END | DEC 31 1999 |
| PERIOD START | JAN 01 2000 |
| PERIOD END | JUN 30 2000 |
| CASH | 32,156,753 |
| SECURITIES | 0 |
| RECEIVABLES | 0 |
| ALLOWANCES | 0 |
| INVENTORY | 0 |
| CURRENT ASSETS | 32,229,322 |
| PP&E | 1,358,543 |
| DEPRECIATION | 797,338 |
| TOTAL ASSETS | 33,637,560 |
| CURRENT LIABILITIES | 527,250 |
| BONDS | 0 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 43,233 |
| COMMON | 9,508 |
| OTHER SE | 33,057,569 |
| TOTAL LIABILITY AND EQUITY | 33,637,560 |
| SALES | 0 |
| TOTAL REVENUES | 0 |
| CGS | 0 |
| TOTAL COSTS | 4,391,398 |
| OTHER EXPENSES | 0 |
| LOSS PROVISION | 0 |
| INTEREST EXPENSE | (491,786) |
| INCOME PRETAX | (3,899,612) |
| INCOME TAX | 0 |
| INCOME CONTINUING | (3,899,612) |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | (3,899,612) |
| EPS BASIC | (10.83) |
| EPS DILUTED | (10.83) |