SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant toss.240.14a-11(c) orss.240.14a-12
Ribozyme Pharmaceuticals, Inc.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee previously paid with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
March _____, 2003
Dear fellow stockholders:
I am pleased to report that after many months of effort, your management and
directors have successfully negotiated a proposed $48 million dollar private
placement investment in RPI. The attached proxy statement and notice of special
meeting of stockholders describes in detail a number of proposals which require
your support to enable us to complete this vital financing before our existing
cash reserves are exhausted.
Receipt of these funds is essential if RPI is to continue as a viable company
and be able to focus our extensive skills and capabilities on our RNAi research
and development programs. We believe this proposed investment represents the
best opportunity available to enable existing common stockholders to have a
continuing financial interest in RPI's future.
THIS FINANCING WILL SIGNIFICANTLY DILUTE YOUR STOCKHOLDINGS. HOWEVER, IF
STOCKHOLDERS DO NOT APPROVE THOSE PROPOSALS NECESSARY TO SECURE THE PROPOSED
INVESTMENT, RPI WILL MOST LIKELY BE COMPELLED TO CEASE OPERATIONS. IN SUCH
CIRCUMSTANCES OUR COMPANY WOULD BE FORCED TO LIQUIDATE WITH ALL PROCEEDS GOING
TO THE PREFERRED STOCKHOLDERS. AS COMMON STOCKHOLDERS, YOU WOULD LIKELY RECEIVE
NO RECOVERY WHATSOEVER, AND YOUR EXISTING SHARES WOULD BECOME WORTHLESS.
As many of the items being considered require that two-thirds (66 2/3%) of all
common shares vote in favor of those proposals, it is essential that each and
every stockholder take the time to review the attached proxy statement and to
complete and return the enclosed proxy card. YOUR VOTE IS CRITICAL, NO MATTER
HOW MANY OR HOW FEW SHARES YOU OWN.
Please help us to reduce the expenses associated with this solicitation by
promptly returning the enclosed proxy. Any stockholder who does not return the
enclosed proxy card will receive additional solicitation mailings and phone
calls from our proxy solicitor.
Thank you very much for your prompt attention to this important matter.
PLEASE VOTE TODAY
HOWARD W. ROBIN
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President and Chief Executive Officer
RIBOZYME PHARMACEUTICALS, INC.
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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL __, 2003
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To our Stockholders:
A Special Meeting of Stockholders of RIBOZYME PHARMACEUTICALS, INC., a
Delaware corporation, will be held on ______, April __, 2003 at __:__, local
time, at our principal offices at 2950 Wilderness Place, Boulder, Colorado
80301. The purpose of the Special Meeting is to obtain approval for the
following proposals:
1. The terms of a private placement to investors of $48 million of
shares of our common stock at a purchase price of anywhere between $0.28
and $0.33 per share (subject to adjustment as described herein) and
warrants exercisable for shares of common stock at $0.42 per share (subject
to adjustment as described herein);
2. An amendment to our current amended and restated certificate of
incorporation to effect a reverse split of our common stock of not less
than 1-for-5 and not more than 1-for-15, with our board of directors having
the authority to determine which, if any, of these reverse stock splits to
effect within those parameters;
3. An amendment to our current amended and restated certificate of
incorporation to increase the number of authorized shares of capital stock;
4. An amendment to our current amended and restated certificate of
incorporation to change our name from Ribozyme Pharmaceuticals, Inc. to a
name that better reflects our new business focus;
5. An amendment to our current amended and restated certificate of
incorporation to permit stockholders to act by written consent in lieu of a
meeting;
6. An amendment to our 1996 Stock Option Plan and to our 2001 Stock
Option Plan as a result of which we will (a) terminate the 1996 Stock
Option Plan and have its outstanding options covered by the 2001 Stock
Option Plan, (b) increase the number of shares reserved for issuance
pursuant to our 2001 Stock Option Plan by a total of 34 million shares
(before giving effect to the proposed reverse stock split), and (c) provide
a maximum limit on options granted to any individual during any calendar
year, of 12 million shares;
7. An increase in the number of shares reserved for issuance pursuant
to our Employee Stock Purchase Plan by a total of 5 million shares (before
giving effect to the proposed reverse stock split); and
8. Such other business as may properly come before the meeting,
including any adjournment or postponement thereof.
Our board of directors recommends that you vote in favor of the foregoing
items of business all of which we describe more fully in the proxy statement
accompanying this notice.
Only stockholders of record at the close of business on Tuesday, February
25, 2003 are entitled to notice of and to vote at the meeting.
All stockholders are cordially invited to attend the meeting in person.
However, to ensure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the meeting may vote in person even if he or she has returned a proxy.
For the Board of Directors
Very truly yours,
Howard W. Robin
CHIEF EXECUTIVE OFFICER, PRESIDENT
AND DIRECTOR
Boulder, Colorado
March __, 2003
YOUR VOTE IS IMPORTANT
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IN ORDER TO ENSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE REQUESTED TO
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE AND RETURN IT
IN THE ENCLOSED ENVELOPE.
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QUESTIONS AND ANSWERS
Although we encourage you to read the enclosed proxy statement in its
entirety, we include this Question and Answer section to provide some background
information and brief answers to several questions you might have about the
enclosed proposals. In this proxy statement, we refer to Ribozyme
Pharmaceuticals, Inc. as "RPI," "we," "our," and "us."
Q. WHAT PROPOSALS ARE STOCKHOLDERS BEING ASKED TO CONSIDER AT THE UPCOMING
SPECIAL MEETING?
A. We are seeking approval of seven proposals:
o Proposals One through Six relate to actions that we have agreed to
take as conditions to consummating the Private Placement.
Specifically, we have agreed to seek stockholder approval:
o to consummate a private placement generating gross proceeds to us of
$48 million involving the issuance and sale by us to investors of
shares of our common stock at a per share purchase price of anywhere
between $0.28 and $0.33 and warrants exercisable for shares of common
stock at an exercise price of $0.42 (subject to adjustment as
described herein) in transactions referred to throughout this proxy
statement as the Private Placement;
o to approve an amendment to our current amended and restated
certificate of incorporation to effect a reverse split of our common
stock of not less than 1-for-5 and not more than 1-for-15, with our
board of directors having the authority to determine which, if any, of
these reverse stock splits to effect within those parameters;
o to approve an amendment to our current amended and restated
certificate of incorporation to increase the number of authorized
shares of capital stock;
o to approve an amendment to our current amended and restated
certificate of incorporation to change our name from Ribozyme
Pharmaceuticals, Inc. to a name that better reflects our new business
focus, with our board of directors having the authority to decide on
an appropriate name;
o to approve an amendment to our current amended and restated
certificate of incorporation to permit stockholders to act by written
consent in lieu of a meeting; and
o to approve an amendment to our 1996 Stock Option Plan and to our 2001
Stock Option Plan as a result of which we will (a) terminate the 1996
Stock Option Plan and merge it into the 2001 Stock Option Plan, (b)
increase the total number of shares reserved for issuance under the
2001 Stock Option Plan by 34 million shares (before giving effect to
the proposed reverse stock split), and (c) provide a maximum limit on
options granted to any individual during any calendar year, of 12
million shares.
o Proposal Seven relates to approval of an amendment to our Employee
Stock Purchase Plan to increase the total number of shares reserved
for issuance pursuant to the plan by 5 million shares (before giving
effect to the proposed reverse stock split).
We describe each of these proposals in greater detail below.
Q. HOW IS THE PRIVATE PLACEMENT STRUCTURED?
A. On February 11, 2003, we entered into a common stock and warrant purchase
agreement with the investors that provides for the issuance and sale by us
to the investors of shares of our common stock and warrants to purchase
shares of our common stock for aggregate proceeds of $48 million. Pursuant
to the purchase agreement, we agreed to sell to the investors, and they
agreed to purchase from us, 145,454,546 shares of common stock (before
giving effect to the proposed reverse stock split and assuming a per share
purchase price of $0.33), and five-year warrants exercisable immediately at
$0.42 per share (subject to adjustment as described herein) for 30,090,909
shares of common stock (before giving effect to the proposed reverse stock
split and assuming a per share purchase price of $0.33), if certain
conditions are met, including the following:
o Stockholder approval of Proposals One, Two, Three, Four and Six.
o Our new board of directors shall consist initially of seven members,
four of whom will be designated by certain of the investors, our CEO,
and two other persons not affiliated with the investors. Each of these
investors lose its right to board representation if its respective
percentage ownership interest in RPI drops below 10%.
o Each of our key employees will enter into a non-competition and
non-solicitation agreement with us.
o We adopt amendments to our by-laws.
o We retain an executive recruiting firm acceptable to the investors to
conduct a search for a senior vice president of development.
o We have not undergone a material adverse effect to our business,
properties, assets, liabilities, prospects or results of operation,
according to standards set forth in the purchase agreement.
The number of shares of common stock issued in the Private Placement (and
the number of shares of common stock that may be issued upon exercise of
the warrants issued as part of the Private Placement) will be subject to
proportional adjustment for any changes to our capital structure, including
the reverse stock split set forth in Proposal Two, but the aggregate
purchase price will remain $48 million. Also, if the per share purchase
price is reduced from $0.33 to $0.28, we will issue a greater number of
shares of common stock and warrants to the investors. We describe the terms
of the Private Placement more fully below under "Proposal One" beginning on
page 6.
Members of our management team holding in the aggregate approximately
98,000 shares of our common stock, or 0.48% of our outstanding common
stock, have entered into voting agreements with the investors pursuant to
which each has agreed, solely in its capacity as a stockholder, to vote its
shares of our common stock in favor of Proposals One through Six. We
describe the terms of the voting agreements below under "Proposal One"
beginning on page 6.
Q. WHY IS RPI SEEKING STOCKHOLDER APPROVAL FOR THE PRIVATE PLACEMENT?
A. We are subject to the Nasdaq National Market rules because our common stock
is listed on the Nasdaq National Market. These rules require stockholder
approval for any issuance of stock that either is deemed to involve a
change in control (based on certain criteria and presumptions established
by Nasdaq) or is deemed to be at a price that is less than the greater of
book or market value. The Private Placement will be considered a change of
control of RPI under Nasdaq National Market rules. Upon consummation of the
Private Placement, Oxford Bioscience Partners IV would beneficially own
approximately 14.2%, The Sprout Group would beneficially own 41.8%, Venrock
Associates would beneficially own 18.9%, TVM V Life Science Ventures GmbH &
Co. KG would beneficially own 9.2%, and Granite Global Ventures would
beneficially own 3.7%, respectively, assuming exercise in full of the
warrants issued to the investors as part of the Private Placement (based on
20,285,356 shares of common stock outstanding as of February 11, 2003). In
addition, certain of the new investors initially will have the right to
designate a total of four of seven Board members. The remaining three Board
seats will be filled by our CEO and by two persons not affiliated with the
investors. Following completion of the Private Placement, the investors
will hold the requisite percentage of our outstanding shares so as to
permit them, if they chose to act in concert, to take actions requiring
stockholder approval without obtaining the approval of our other
stockholders.
Q. WHY IS THE PRIVATE PLACEMENT BEING DONE?
A. Early in 2002, our management and board of directors recognized our need to
raise additional working capital in order to continue our clinical programs
and pursue research and development. Accordingly, in March 2002, we engaged
an investment bank, Raymond James & Associates ("Raymond James"), to help
us identify financing alternatives. Thereafter we also decided to
re-evaluate our research and clinical programs and announced our decision
to focus development efforts on ANGIOZYME and research and development
efforts on RNAi-based therapeutics. In line with these program changes, we
put in place a plan to consolidate staffing within the company from a high
of 127 in June 2002 to 70 at the present time. Nonetheless, due to the
economic downturn and the effect of the downturn on the stock prices of
technology-based companies, including biotech companies, we determined that
it would be extremely difficult to raise additional capital through a
public financing. Instead, we considered a private placement, structured as
a PIPE transaction, to selected accredited investors. During this period,
our market capitalization continued to decline significantly as general
market conditions, especially for biotechnology and technology companies,
also continued to worsen. In August 2002, we instructed Raymond James to
being initial efforts, our market capitalization was approximately $12
million. Raymond James advised us that they believed it was unlikely that
we would attract sufficient interest among public investors and that a
financing targeting private venture capital investors had a higher
likelihood of success. During this period, we also asked one of our
directors, Mr. Curnock Cook, and a consultant, Bioscience Managers Limited,
to explore strategic alternatives, including a potential sale of the
company or of some or all of our technology. Raymond James contacted over
120 potential investors on RPI's behalf, with assistance in select
instances from our consultant. Our director, our consultant and we
separately contacted over ten potential strategic partners or potential
acquirors regarding their interests in acquiring all or substantially all
of RPI.
In November 2002, after several months of exploring various financing and
strategic alternatives, we entered into negotiations with the investors,
led by Oxford Bioscience, The Sprout Group and Venrock Associates, with
respect to the proposed Private Placement. On December 27, 2002, we
received a term sheet from the investors regarding the proposed Private
Placement. Negotiations regarding the term sheet continued and on January
8, 2003 we agreed to negotiate exclusively with the investors. On January
26, 2003, our board of directors met to discuss our progress in the
negotiations and authorized management to continue to negotiate with the
investors. On February 4, 2003, our board of directors met to consider the
Private Placement. After extensive discussion of the terms and conditions,
a review of the absence of alternative funding prospects and the receipt of
a fairness opinion from RPI's financial advisor, Raymond James &
Associates, Inc., our board of directors unanimously approved the Private
Placement, subject to obtaining stockholder approval. From February 4, 2003
through February 11, 2003, we continued to negotiate with the investors. On
February 11, 2003, we entered into a common stock and warrant purchase
agreement with the investors. We agreed to sell to those investors, for
aggregate consideration of $48 million, 145,454,546 shares (before giving
effect to the proposed reverse stock split and assuming the $0.33 per share
purchase price) of our common stock at a per share purchase price of
anywhere between $0.28 and $0.33 and warrants exercisable at $0.42 per
share (subject to adjustment as described below) for 30,090,909 shares of
our common stock (before giving effect to the proposed reverse stock split
and assuming the $0.33 per share purchase price). We discuss the terms of
the Private Placement more fully below under "Proposal One" beginning on
page 6.
Q. WHY IS RPI SEEKING STOCKHOLDER APPROVAL FOR PROPOSALS ONE THROUGH SIX?
A. Pursuant to the purchase agreement, the investors will not be obligated to
consummate the Private Placement unless we receive stockholder approval for
Proposals One, Two, Three, Four and Six. The investors in the Private
Placement seek stockholder approval for Proposals One through Six for the
following reasons:
o The investors require us to seek stockholder approval of Proposal One
because the shares of common stock and the warrants (and the shares of
common stock underlying the warrants) would equal approximately 87.8%
of RPI's outstanding stock (based on 20,285,356 shares outstanding as
of February 11, 2003). Under applicable Nasdaq stock market rules, we
are required to obtain stockholder approval for an issuance of shares
in a private placement equal to or greater than 20% of an issuer's
outstanding shares if the shares are to be sold at a per share price
lower than the greater of the book or market price. Stockholder
approval also is required for a transaction that would result in a
change of control based on certain criteria and presumptions
established by Nasdaq. The Private Placement would be considered a
change of control under these criteria.
o The investors require us to seek stockholder approval of Proposal Two
because the reverse stock split is expected to have the effect, at
least in the short-term, of increasing the minimum bid price of our
common stock, which was at $0.29 per share as of February 11, 2003. If
we are unable to maintain a $1.00 minimum bid price on our common
stock, our common stock will be delisted from the Nasdaq National
Market and is not likely to qualify for listing on the Nasdaq SmallCap
Market. If our common stock were delisted from the Nasdaq National
Market or not listed for trading on the Nasdaq SmallCap Market,
trading in our common stock could decrease substantially, or cease
altogether, the market price of the common stock may decline further,
potentially to zero, and our stockholders could lose some or all of
their investment.
o The investors require us to seek stockholder approval of Proposal
Three because we will not have enough shares authorized under our
current amended and restated certificate of incorporation to issue the
necessary shares to the investors in the Private Placement and to Elan
International Services, Ltd. and, in the future, we will require
additional authorized shares in order to preserve our flexibility to
raise additional capital.
o The investors require us to seek stockholder approval of Proposal Four
amending our amended and restated certificate of incorporation in
order to effectuate a name change so that we may adopt a new name that
will better convey our business focus on RNAi-based therapeutics, as
we discuss below.
o The investors require us to seek stockholder approval of Proposal Five
amending our amended and restated certificate of incorporation because
our current amended and restated certificate of incorporation does not
permit stockholders to act by written consent in lieu of a meeting. As
a public company, convening stockholder meetings is an expensive and
time-consuming process. Since the investors in the Private Placement
will in the aggregate beneficially own or have holdings that will
total 87.8% of our outstanding common stock upon consummation of the
Private Placement, a small number of stockholders will be able to
approve matters requiring stockholder approval, if the investors
choose to act in concert. The investors believe that approving
corporate action by written consent may, at times, be preferable to
holding a special meeting. Under the terms of the purchase agreement,
however, obtaining stockholder approval of Proposal Five is not a
condition to closing of the Private Placement. As a result, if we fail
to obtain stockholder approval for Proposal Five we may, nevertheless,
proceed with the Private Placement.
o The investors require us to seek stockholder approval of Proposal Six
amending our 1996 Stock Option Plan and our 2001 Stock Option Plan in
order to terminate the 1996 Stock Option Plan and merge it into the
2001 Stock Option Plan, increase the number of shares reserved for
issuance pursuant to the 2001 Stock Option Plan by a total of 34
million shares and provide a maximum limit on options granted to any
individual during any calendar year of 12 million shares. Research and
development involving our RNA technology requires a unique and
specialized skill set which is difficult to find in the marketplace.
One of the means of providing incentives to retain such talented and
experienced employees is to grant them equity in RPI. The investors
believe, as do we, that having additional shares available for
issuance under our option plan will be important to permit us to
continue to attract and retain such talented employees and
consultants.
Q. WHY IS RPI SEEKING STOCKHOLDER APPROVAL FOR PROPOSAL SEVEN?
A. We have agreed to seek stockholder approval for Proposal Seven in order to
permit our employees to have more shares of our common stock available for
purchase by them through our Employee Stock Purchase Plan. This will permit
our employees to share in our future growth.
Q. WHAT IF PROPOSALS ONE, TWO, THREE, FOUR, FIVE, OR SIX ARE NOT APPROVED?
A. If any of Proposals One, Two, Three, Four or Six do not receive stockholder
approval, the investors will not be obligated to purchase the shares of
common stock and warrants in the Private Placement, and we will not be
obligated to sell them the shares of common stock or warrants. In that
case, we could request special relief from the Nasdaq National Market to
allow the investors to proceed with the purchase of the securities. The
Nasdaq National Market grants special relief based on an issuer's financial
circumstances only in limited instances. There is no guarantee, however,
that the Nasdaq National Market would grant such permission, or that the
investors would purchase any of our securities if we do not receive
stockholder approval for Proposals One, Two, Three, Four and Six.
Furthermore, due to our current low stock price and the limitations imposed
by the Nasdaq rules, it is unlikely that under such circumstances we will
be able to raise sufficient funds to continue our clinical and research and
development programs and function as a business.
You should consider the fact that our current liquidity and capital
resources are limited. If we do not receive the additional $48 million in
the Private Placement, it is likely that we will immediately cease our
clinical and research and development programs. We may be forced to
consider selling some or all of our technology. However, there can be no
assurance that we would be able to sell any of our technology, or that if
we were able to sell some or all of our technology, that we would be able
to do so on favorable terms. Ultimately, our inability to obtain additional
funding through the Private Placement may require us to cease operations
entirely and also would likely cause us to explore liquidation
alternatives, including the initiation of bankruptcy proceedings. If we
were to file for bankruptcy, then between the repayment of our debt, and
the liquidation preferences associated with our preferred shares, your
investment in us would decline to zero.
If Proposal Five is not approved, there will be no effect on any party's
obligation to consummate the Private Placement; however, we may, following
completion of the Private Placement seek approval for this amendment again.
If Proposal Seven is not approved, there will be no effect on any party's
obligation to consummate the Private Placement, but our employees will no
longer be able to purchase our shares of common stock through the Employee
Stock Purchase Plan.
RIBOZYME PHARMACEUTICALS, INC.
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PROXY STATEMENT FOR THE
SPECIAL MEETING OF STOCKHOLDERS
APRIL __, 2003
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INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the board of directors of
Ribozyme Pharmaceuticals, Inc. for use at a Special Meeting of Stockholders to
be held ______, April __, 2003 at __:__, local time, or at any postponement or
adjournment thereof, referred to throughout this proxy statement as the Special
Meeting, for the purposes set forth herein and in the accompanying Notice of
Special Meeting of Stockholders. The Special Meeting will be held at our
principal offices at 2950 Wilderness Place, Boulder, Colorado 80301. Our
telephone number at that location is (303) 449-6500.
These proxy solicitation materials were first mailed on or about March __,
2003 to all stockholders entitled to vote at the meeting.
RECORD DATE AND PRINCIPAL SHARE OWNERSHIP
Stockholders of record at the close of business on February 25, 2003, the
record date, are entitled to notice of and to vote at the Special Meeting. On
February 11, 2003, approximately 20,285,356 shares of our common stock were
issued and outstanding and held of record by approximately 226 stockholders. The
closing price of our common stock on February 11, 2003 as reported by The
National Association of Securities Dealers, Inc. Automated Quotation National
Market was $0.29 per share.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by:
o delivering to Marvin Tancer, Secretary (Attention: Inspector of
Elections for Ribozyme Pharmaceuticals, Inc.):
o a written notice of revocation, or
o a duly executed proxy bearing a later date; or
o attending the meeting and voting in person.
VOTING AND SOLICITATION
Each stockholder is entitled to one vote for each share held as of the
record date.
The cost of soliciting proxies will be borne by us. We expect to reimburse
brokerage firms and other persons representing beneficial owners of shares for
their expenses in forwarding solicitation material to such beneficial owners. We
have retained The Altman Group as proxy solicitors and expect to pay
approximately $55,000.00 for this service. Proxies also may be solicited by
certain of our directors, officers, and regular employees, without additional
compensation, personally or by telephone or facsimile.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
Votes cast by proxy or in person at the Special Meeting will be tabulated
by the Inspector of Elections appointed for the meeting and will determine
whether or not a quorum is present.
The required quorum for the transaction of business at the Special Meeting
is a majority of the votes eligible to be cast by holders of shares of common
stock issued and outstanding on the record date. Shares that are voted "FOR,"
"AGAINST" or "ABSTAIN" with respect to a matter are treated as being present at
the Special Meeting for purposes of establishing a quorum and also are treated
as shares entitled to vote at the Special Meeting with respect to such matter.
While there is no definitive statutory or case law authority in Delaware as
to the proper treatment of abstentions, we believe that abstentions should be
counted for purposes of determining both (1) the presence or absence of a quorum
for the transaction of business and (2) the total number of votes cast with
respect to a proposal. In the absence of controlling precedent to the contrary,
we intend to treat abstentions in this manner. Accordingly, abstentions will
have the same effect as a vote against the proposal.
The Delaware Supreme Court has held that, while broker non-votes (that is,
votes from shares held of record by brokers as to which the beneficial owners
have given no voting instructions) should be counted for purposes of determining
the presence or absence of a quorum for the transaction of business, broker
non-votes should not be counted for purposes of determining the number of votes
cast with respect to the particular proposal on which the broker has expressly
not voted. Accordingly, we intend to treat broker non-votes in this manner.
Thus, a broker non-vote will not affect the outcome of the voting on a proposal.
Any proxy which is returned using the form of proxy enclosed and which is
not marked as to a particular item will be voted "FOR" Proposals One, Two,
Three, Four, Five, Six, and Seven and as the proxy holders deem advisable on
other matters that may come before the meeting, as the case may be, with respect
to the items not marked.
INFORMATION IN THIS PROXY STATEMENT
Unless otherwise specifically noted, all of the share numbers in this proxy
statement are based on 20,285,356 shares of common stock outstanding as of
February 11, 2003, the date of execution of the common stock and warrant
purchase agreement. When referencing the number of shares of common stock that
will be owned by the investors following the Private Placement, we have taken
into account the shares of common stock we will issue to the investors in the
Private Placement, as well as the number of shares of common stock underlying
the warrants that we will issue to the investors.
Also, in our calculation of ownership percentages, we have included as
outstanding
o the shares of common stock that will be issued upon conversion by
Elan of all of our Series A and Series B Preferred Stock
currently held by Elan,
o the 657,406 shares of common stock that will be issued to Elan in
connection with the Private Placement,
o the shares underlying warrants that we have agreed to issue to
Elan in connection with the Private Placement, and
o the shares underlying warrants that we have agreed to issue to
Schering in connection with the Private Placement.
We have not included as outstanding derivative securities held by Elan and
Schering that were not issued in connection with the Private Placement.
None of the share numbers give effect to the proposed reverse stock split
described under Proposal Two.
The Board of Directors recommends a vote "For" approval of each of the
seven proposals. Delaware law contemplates that directors who have a personal
financial or other interest that is different from, or in conflict with, those
of the stockholders, regarding a proposal may abstain from voting to recommend
the proposal. Mr. Curnock Cook abstained from the vote as our Compensation
Committee previously had authorized payment of a success fee to Mr. Curnock Cook
in connection with the closing of the Private Placement. Mr. Curnock Cook would
have received a success fee in connection with the Private Placement because he
had assisted RPI in contacting and meeting with potential investors, strategic
partners and potential acquirors, as we discuss under "Proposal Number
One--Background of the Private Placement." Mr. Curnock Cook has since waived
this fee. Mr. Groom abstained from the vote as he represents Elan on the Board
of Directors and we, at the time, were negotiating with Elan, among other
things, for the conversion of preferred shares into our common stock. We discuss
the terms of our arrangement with Elan under "Proposal Number One--Elan
International Services, Ltd. ("Elan") Waiver." Mr. Robin abstained from voting
as his employment and compensation arrangements were required to be modified as
part of the Private Placement. As a result, Mr. Saks and Mr. Wiklund were the
only two directors who voted and both voted to recommend a vote "For" each of
the proposals. Each director who abstained stated at the time of the vote that
if he were to vote, he would vote to recommend a vote "For" each of the
proposals.
IN THIS PROXY, WHEN YOU SEE A REFERENCE TO THE BOARD'S RECOMMENDATION, IT
REFERS TO THE RECOMMENDATION OF MR. SAKS AND MR. WIKLUND.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
As of February 13, 2003, there were 20,285,356 shares of common stock
outstanding, par value $0.01, held of record by approximately 226 stockholders.
The following table summarizes information regarding the beneficial ownership of
our outstanding securities as of February 13, 2003 (which includes shares that
may be acquired on the exercise of stock options vested or warrants exercisable
through April 14, 2003), by:
o each of our directors,
o all individuals who have served as our chief executive officer during
our last completed fiscal year ended December 31, 2002,
o our four most highly compensated executives other than the chief
executive officer who were serving as executive officers as of
December 31, 2002,
o all of our directors and executive officers as a group, and
o each person or entity who is known by us to own beneficially more than
5% of the outstanding shares of common stock.
Beneficial ownership is determined in accordance with rules of the
Securities and Exchange Commission and includes shares over which the indicated
beneficial owner exercises voting and/or investment power. Shares of common
stock subject to options or warrants currently exercisable or exercisable within
60 days are deemed outstanding for computing the percentage ownership of the
person holding the options but are not deemed outstanding for computing the
percentage ownership of any other person. Except as otherwise indicated in the
footnotes to this table, we believe that each stockholder identified in the
table has sole voting and investment power with respect to all shares listed
opposite their names. Unless otherwise indicated, the following officers,
directors and shareholders can be reached at our principal offices.
NUMBER OF SHARES PERCENTAGE OF SHARES
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) OUTSTANDING(2)
Schering Berlin Venture Corporation
3400 Changebridge Road
Monteville, New Jersey 07045 (3).........................................8,045,455 28.4%
Elan Corporation plc
Lincoln House, Lincoln Place
Dublin 2, Ireland (4)....................................................4,920,674 21.9%
Chiron Corporation
4560 Horton Street
Emeryville, California 94608 (5).........................................1,102,788 5.3%
Howard W. Robin (6)........................................................208,427 1.0%
Jeremy L. Curnock Cook (7)................................................. 30,000 *
John Groom (4)(8)........................................................4,949,674 21.2%
Samuel R. Saks, M.D (8).....................................................15,000 *
Anders P. Wiklund (9).......................................................34,444 *
Lawrence E. Bullock (10)...................................................183,221 *
Bharat Chowrira, Ph.D. (11).................................................39,289 *
Marvin Tancer, CPA (12).....................................................72,662 *
Nassim Usman, Ph.D. (13)...................................................153,356 *
Executive officers and directors
as a group (9 persons) (14)..............................................5,686,073 23.7%
- -------------------
* Less than 1% of the outstanding shares of common stock.
(1) This table is based upon information supplied by officers, directors and
principal stockholders and Schedules 13D and 13G filed with the SEC. Unless
otherwise indicated in the footnotes to this table and subject to community
property laws where applicable, RPI believes that each of the stockholders
named in this table has sole voting and investment power with respect to
the shares indicated as beneficially owned.
(2) Applicable percentages are based on 20,285,356 shares of common stock
outstanding on February 13, 2003, adjusted as required by SEC rules.
(3) Total amount includes shares convertible from outstanding convertible debt
and accrued interest assuming a conversion price of $0.44 per share, which
was the closing price of our stock on February 13, 2003.
(4) Includes 641,026 shares of common stock owned and 300,000 shares issuable
upon exercise of warrants at $20.00 per share owned by Elan Pharmaceutical
Investments II, Ltd. ("EPIL II"). Also includes 1,250,500 shares of common
stock owned; 1,107,226 shares issuable upon conversion of our Series A
convertible preferred stock assuming a conversion price of $13.20 per
share; 1,546,922 shares issuable upon conversion of our Series B
convertible preferred stock assuming conversion price ranges from $1.36 to
$38.31, and 75,000 shares issuable upon exercise of warrants at $5.00 per
share held by Elan International Services Ltd. ("EIS"). EPIL II and EIS are
indirectly wholly-owned subsidiaries of Elan Corporation, plc, an Irish
public limited company. Mr. Groom is a director of Elan but disclaims
beneficial ownership of these shares.
(5) Includes 444,444 shares issuable upon exercise of warrants at $22.50 per
share.
(6) Includes options to purchase 193,750 shares.
(7) Includes options to purchase 30,000 shares.
(8) Includes options to purchase 15,000 shares.
(9) Includes options to purchase 34,444 shares.
(10) Includes options to purchase 139,764 shares and 3,762 shares held by Mr.
Bullock under our 401(k) Plan.
(11) Includes options to purchase 28,719 shares and 3,762 shares held by Dr.
Chowrira under our 401(k) Plan.
(12) Includes options to purchase 48,750 shares.
(13) Includes options to purchase 147,594 shares and 3,762 shares held by Dr.
Usman under our 401(k) Plan.
(14) Includes options to purchase 653,021 shares by all current directors and
officers as a group that are exercisable on or before April 14, 2003.
PROPOSAL NUMBER ONE
APPROVAL OF TERMS OF PRIVATE PLACEMENT
BACKGROUND OF THE PRIVATE PLACEMENT
Early in 2002, our management and board of directors recognized our need to
raise additional working capital in order to continue our clinical programs and
pursue research and development. Accordingly, in March 2002, we engaged an
investment bank, Raymond James & Associates ("Raymond James"), to help us
identify financing alternatives. Thereafter we also decided to re-evaluate our
research and clinical programs and announced our decision to focus development
efforts on ANGIOZYME and research and development efforts on RNAi-based
therapeutics. In line with these program changes, we put in place a plan to
consolidate staffing within the company from a high of 127 in June 2002 to 70 at
the present time. Nonetheless, due to the economic downturn and the effect of
the downturn on the stock prices of technology-based companies, including
biotech companies, we determined that it would be extremely difficult to raise
additional capital through a public financing. Instead, we considered a private
placement, structured as a PIPE transaction, to selected accredited investors.
During this period, our market capitalization continued to decline significantly
as general market conditions, especially for biotechnology and technology
companies, also continued to worsen. In August 2002, when we instructed Raymond
James to begin initial marketing efforts, our market capitalization was
approximately $12 million. Raymond James advised us that they believed it was
unlikely that we would attract sufficient interest among public investors and
that a financing targeting private venture capital investors had a higher
likelihood of success. During this period, we also asked one of our directors,
Mr. Curnock-Cook, and a consultant, Bioscience Managers Limited, to explore
strategic alternatives, including a potential sale of the company or of some or
all of our technology. Raymond James contacted over 120 potential investors on
RPI's behalf, with assistance in select instances from our consultant. Our
director, our consultant and we separately contacted over ten potential
strategic partners or potential acquirors regarding their interests in acquiring
all or substantially all of RPI.
In November 2002, after several months of exploring various financing and
strategic alternatives, we entered into negotiations with the investors, led by
Oxford Bioscience, The Sprout Group and Venrock Associates, with respect to the
proposed Private Placement. On December 27, 2002, we received a term sheet from
the investors regarding the proposed Private Placement. Negotiations regarding
the term sheet continued and, on January 8, 2003, we agreed to negotiate
exclusively with the investors. On January 26, 2003, our board of directors met
to discuss our progress in the negotiations and authorized management to
continue to negotiate with the investors. On February 4, 2003, our board of
directors met to consider the Private Placement. After extensive discussion of
the terms and conditions, a review of the absence of alternative funding
prospects and the receipt of a fairness opinion from RPI's financial advisor,
Raymond James & Associates, Inc., our board of directors unanimously approved
the Private Placement, subject to obtaining stockholder approval. From February
4, 2003 through February 11, 2003, we continued to negotiate with the investors.
On February 11, 2003, we entered into a common stock and warrant purchase
agreement with the investors. We agreed to sell to those investors, for
aggregate consideration of $48 million, 145,454,546 shares (before giving effect
to the proposed reverse stock split and assuming the $0.33 per share purchase
price) of our common stock at a per share purchase price of anywhere between
$0.28 and $0.33 and warrants exercisable at $0.42 per share (subject to
adjustment as described below) for 30,090,909 shares of our common stock (before
giving effect to the proposed reverse stock split and assuming the $0.33 per
share purchase price). We discuss the terms of the Private Placement below. We
also discuss below under "Advantages and Disadvantages of the Private Placement"
in this section the absence of other financing alternatives given our
experiences over the past year.
TERMS OF THE PRIVATE PLACEMENT
The stockholders are being asked to approve the private issuance and sale
by RPI of 145,454,546 shares (before giving effect to the proposed reverse stock
split) of its common stock at an assumed purchase price of $0.33 per share (or
171,428,571 shares of common stock at an assumed purchase price of $0.28 per
share) and warrants exercisable for 30,090,909 shares of common stock at an
assumed purchase price of $0.33 per share (before giving effect to the proposed
reverse stock split) at $0.42 per share (subject to adjustment as described
below) (or warrants exercisable for 35,285,714 shares of common stock at an
assumed purchase price of $0.28 per share) for aggregate consideration of $48
million subject to the terms and conditions outlined below. This sale of common
stock and warrants is intended to be exempt from the registration requirements
of the Securities Act of 1933, as amended, and we expect to rely upon the
Regulation D "safe harbor" provisions. This private placement, referred to as
the Private Placement throughout this proxy statement, is subject to the
fulfillment of conditions that we describe below. We have set forth below the
major terms of the Private Placement.
THIS SUMMARY OF THE TERMS OF THE PRIVATE PLACEMENT IS INTENDED TO PROVIDE
YOU WITH BASIC INFORMATION CONCERNING THE TRANSACTION; HOWEVER, IT IS NOT A
SUBSTITUTE FOR REVIEWING THE COMMON STOCK AND WARRANT PURCHASE AGREEMENT IN ITS
ENTIRETY, WHICH WE HAVE INCLUDED AS ANNEX A TO THIS PROXY STATEMENT. YOU SHOULD
READ THIS SUMMARY IN CONJUNCTION WITH THE AGREEMENT.
NUMBER OF SHARES AND PURCHASE PRICE OF COMMON STOCK AND WARRANTS TO BE
ISSUED.
The amount of capital to be raised pursuant to the sale of common stock and
warrants in the Private Placement is $48 million. The total aggregate purchase
price to be paid by the investors for the securities is fixed at $48 million;
however, the per share purchase price payable by the investors for the shares of
common stock may vary from $0.28 per share to $0.33 per share. This means that
the actual number of shares of common stock and, consequently, the number of
warrants, that we will issue to the investors will vary depending upon the per
share purchase price as we describe below.
The investors have agreed to purchase shares of common stock at a purchase
price of $0.33 per share, subject to reduction to $0.28 per share as we describe
below. The number of shares of common stock to be purchased by each investor
shall be calculated by dividing the aggregate purchase price to be paid by each
investor by the per share purchase price. In addition, each investor will
receive five-year warrants exercisable immediately for 20% of the number of
shares of common stock purchased by such investor. Also, the investors will
receive their pro rata portion (pro rata based on the aggregate purchase price
paid by the investors) of additional five-year warrants for 1,000,000 shares of
common stock. The number of shares of common stock and the number of shares of
common stock underlying the warrants to be issued to the investors will be
proportionately adjusted to reflect changes in our capital structure, including
the reverse stock split set forth under Proposal Two.
REPRESENTATION AND WARRANTY PURCHASE PRICE ADJUSTMENT.
FAILURES IN EXCESS OF $500,000 BUT LESS THAN $1.5 MILLION. Pursuant to
Section 2.1(b)(ii) of the purchase agreement, if any of our representations and
warranties in the purchase agreement fail to be true and correct as of the date
of the purchase agreement or as of the closing and such failure or failures
alone, or in the aggregate, have an adverse effect on our net operating income,
net income, cash flow, or capitalization (including the incurrence of
indebtedness) in excess of $500,000 but less than $1.5 million (measured
separately), then the investors shall be required to close, but the per share
purchase price will be reduced by $0.05 per share to $0.28 per share.
FAILURES IN EXCESS OF $1.5 MILLION OR LITIGATION. By contrast, pursuant to
Section 2.1(b)(i) of the purchase agreement, if either (A) any of our
representations and warranties in the purchase agreement fail to be true and
correct as of the date of the purchase agreement or as of the closing and such
failure or failures alone, or in the aggregate, have an adverse effect on our
net operating income, net income, cash flow, or capitalization (including the
incurrence of indebtedness) in excess of $1.5 million (measured separately), or
(B) any of our representations and warranties in the purchase agreement with
respect to litigation, except for a few specified exceptions, fail to be true
and correct in all material respects as of the date of the purchase agreement or
as of the closing, then the investors shall have no obligation to close.
If, nonetheless, the investors choose to proceed to close, then the per
share purchase price will be reduced by $0.05 to $0.28 per share.
In the case of either adjustment we describe above, the purchase price
reduction is $0.05 (resulting in a $0.28 per share purchase price); however, if
failures are below $1.5 million, then the investors are obligated to close;
whereas, if the failures exceed $1.5 million, or material litigation arises, the
investors are no longer obligated to close.
ADDITIONAL REMEDIES AVAILABLE. The $0.05 purchase price reduction does not
function as a liquidated damages provision with respect to our breach of its
representations and warranties. This means that if the $0.05 purchase price
reduction is applied and the investors proceed to a closing at a purchase price
of $0.28 per share, they retain their rights to seek reparation from us for
damages in excess of $1.5 million suffered by the investors as a result of our
breach.
VOTING AGREEMENTS.
The investors in the Private Placement have entered into voting agreements
with certain members of our management, only in their capacity as stockholders,
owning an aggregate of approximately 98,000 shares of common stock, or 0.48% of
the shares outstanding as of February 11, 2003, the date of signing of the
purchase agreement. The voting agreements provide that these holders will vote
their shares in favor of the proposals set forth in this proxy statement. These
holders also have agreed to vote their shares against any alternative proposal
to acquire all or substantially all of our business, properties or other assets
or purchase or to acquire 20% or more of our business, properties or other
assets or capital stock or other equity interests in RPI. These holders also
have agreed to vote against another action or proposal which could impede,
delay, postpone or materially adversely affect any of the transactions
contemplated by the purchase agreement.
WARRANTS.
Each investor will receive two warrants. The first warrant is exercisable
immediately for 20% of the shares of common stock purchased by such investor at
a per share exercise price equal to $0.42. Each investor will also receive its
pro rata portion (pro rata based on the aggregate purchase price paid by the
investors) of additional five-year warrants exercisable immediately for
1,000,000 shares of common stock. If the purchase price is $0.33 per share, the
investors will receive warrants exercisable for a total of 30,090,909 shares of
common stock. If the purchase price is reduced to $0.28 per share, the investors
will receive warrants exercisable for a total of 35,285,714 shares of common
stock. In any case, the number of shares of common stock underlying the warrants
to be issued to the investors will be proportionately adjusted to reflect
changes in our capital structure, including the reverse stock split set forth
under Proposal Two.
LOCK-UP AGREEMENTS.
We have agreed to enter into agreements with each of our officers,
continuing directors, and certain key employees, so that those stockholders will
not sell or otherwise transfer or dispose of their ownership interests in RPI
for a period of 180 days after the consummation of the Private Placement, other
than for transfers to certain permitted transferees or in private resales. The
investors also have agreed to enter into similar lock-up agreements. However,
these agreements may be waived at any time by our board of directors, which,
following consummation of the Private Placement, will have a majority of the
directors designated by certain of the investors.
REGISTRATION OBLIGATIONS.
Pursuant to Section 7.1(a) of the purchase agreement, no later than five
days after closing, we will prepare and file a shelf registration statement
registering the resale from time to time by the investors of the common stock
(including the shares of common stock received upon the exercise of the
warrants) purchased from us pursuant to the agreement. The registration
statement must be kept effective for at least 2 1/2 years, unless the investors
re-sell all the securities registered under such registration statement prior to
the expiration of such period. If the investors re-sell all of their common
stock registered under the registration statement, we may discontinue the
registration statement. We will bear all expenses related to the filing and
maintenance of the registration statement. The investors will be responsible for
underwriting discounts and selling commissions applicable to a sale of the
securities registered under the registration statement. Given that we are not
currently eligible to use a registration statement on Form S-3, we will be
required to use a registration statement on Form S-1.
REGISTRATION STATEMENT: INVESTOR INDEMNIFICATION. Pursuant to Section
7.1(d)(i) of the purchase agreement, we will indemnify each investor and certain
related entities against all claims, losses, damages and liabilities arising out
of (i) any untrue statement of, or any omission of, material fact in any
prospectus or related document (including any related registration statement),
(ii) the violation by us of any federal, state or common law rule or regulation
applicable to us in connection with the shelf registration statement or any
prospectus or related document, or (iii) the failure by us to fulfill any
undertaking made in any such registration statement or any amendments or
supplements to any such registration statement. There is no dollar cap on our
potential indemnity obligation.
REGISTRATION STATEMENT: COMPANY INDEMNIFICATION. Pursuant to Section
7.1(d)(ii) of the purchase agreement, the investors will indemnify us and our
related entities against all claims, losses, damages and liabilities arising out
of any untrue statement of, or any omission of, a material fact in any
prospectus or related document (including any related registration statement) if
such untrue statement or omission is made in reliance upon information provided
by an investor in certain limited circumstances. Each investor's potential
indemnity obligation will not exceed the net proceeds received from its sale of
securities.
PIGGY BACK REGISTRATION RIGHTS. Pursuant to Section 7.1(f) of the purchase
agreement, during the period from the 180th day after closing until the fifth
anniversary of the closing, we will provide the investors unlimited "piggy-back"
registration rights with respect to any other registration statement we file
with respect to our common stock. The piggy-back registration rights will be
subject to normal underwriters cut-backs not to exceed 30% of the number of
shares proposed to be registered by the investor.
DEMAND REGISTRATION RIGHTS. Pursuant to Section 7.1(g) of the purchase
agreement and in addition to the shelf registration and piggy-back registration
rights, we will grant to the investors a demand registration right. The demand
registration right will be effective immediately upon the withdrawal of the
shelf registration statement discussed above and will be of unlimited duration.
ADDITIONAL REGISTRATION RIGHTS. Pursuant to Section 7.1(h) of the purchase
agreement, so long as the investors hold 15% of our outstanding common stock, we
will be prohibited from granting new registration rights unless we have the
consent of investors holding 66 2/3% of all common stock held by the investors.
RIGHT TO APPOINT DIRECTORS.
The new Board of Directors shall consist of seven members, four of whom
will be designated by certain of the investors; our CEO; and two persons who
must not be affiliated with the new investors. The Sprout Group will have the
right to designate two directors, Oxford will have the right to designate one
director, and Venrock will have the right to designate one director. Four of our
five directors, Jeremy L. Curnock Cook, John Groom, Samuel R. Saks, and Anders
P. Wiklund, have submitted their resignations to the board to become effective
immediately upon consummation of the Private Placement. At closing, the board
will then fill the four vacancies with the designees of the investors. The
Sprout Group will lose its right to designate one member of the Board of
Director at such time it holds less than 20% of our outstanding common stock.
Each of The Sprout Group, Oxford and Venrock will continue to have the right to
designate one member to the board of directors if they hold at least 10% of our
outstanding common stock.
INDEMNIFICATION OF INVESTORS AND OTHERS.
We have agreed to enter into indemnification agreements with the investors'
designees to the board of directors for the benefit of the investors and the
investors' venture funds and affiliates. We also have agreed to add the
investors' designees to the board of directors to our current directors' and
officers' liability insurance policy, which shall provide at least $25 million
of coverage. To the extent it is available on commercially reasonable terms, we
also have agreed to extend our current directors' and officers' liability to
cover any venture funds affiliated with any director.
STOCKHOLDERS' MEETING.
We have agreed to convene the Special Meeting, and our board of directors
has agreed, subject to its fiduciary obligations under applicable law, to
recommend that the stockholders approve Proposals One, Two, Three, Four, Five
and Six.
PARTICIPATION RIGHTS.
Pursuant to Section 7.16 of the purchase agreement, with certain
exceptions, each investor, as long as it holds 10% of the outstanding shares of
our common stock or all of the shares it purchased in this transaction, will
have the right to purchase its pro-rata share of any common or preferred stock
or company options issued by us in the future in offerings except for public
offerings and certain common or preferred stock issuances. This provision is
unusual in the context of a public company.
From and after the execution of the agreement, we will be prohibited from
offering participation rights, rights of first refusal, or rights of first offer
or similar rights to any holder or prospective holder of our securities on terms
more favorable than, or in preference to, the participation rights granted to
the investors.
BOARD OBSERVERS.
Pursuant to Section 7.20 of the purchase agreement, from execution of the
agreement until closing or termination of the agreement, we will allow each of
the Sprout Group, Oxford and Venrock to have a representative attend all
meetings of the Board of Directors in a nonvoting observer capacity.
THIRD PARTY OFFERS.
Pursuant to Section 7.21 of the purchase agreement, from execution of the
agreement until closing or termination of the agreement, with respect to any
third-party financing or transaction that would not be considered an alternative
proposal to the transactions contemplated by the agreement, we must negotiate
with the investors, for a 15-day period, to allow the investors to prepare a
similar financing or transaction offer. If the investors offer a similar
financing or transaction, we must accept the investors' proposed transaction, if
we accept any transaction.
NO-SOLICITATION
Pursuant to Section 7.14 of the purchase agreement, subject to the
director's fiduciary obligation to consider superior proposals, RPI shall not
solicit alternative proposals to the transactions contemplated by the agreement.
GENERAL INDEMNIFICATION
Pursuant to Section 7.12 of the purchase agreement, we will indemnify each
investor and certain related entities from and against losses, claims, damages,
costs and expenses ("Losses") arising out of any breach by us relating to our
representations, warranties, agreements or covenants. We will have no obligation
to indemnify until the investors' aggregate Losses exceed $250,000, but once
this level is exceeded, investors can recover all Losses, including the
$250,000.
BREAK-UP FEES
If we or the investors terminate the purchase agreement pursuant to Section
8.1 of the purchase agreement, all rights and obligations of the parties
terminate without any liability; provided, however, that the termination will
not relieve us or any investor of any liability for any breach, non-fulfillment
or non-compliance with the agreement. Additionally, if we terminate the
agreement to pursue an alternative transaction (or if the agreement expires on
June 30, 2003, the investors are not in breach and we enter into an alternative
transaction within six months) we will be required to pay a break-up fee of
$250,000, plus reimburse the investors' expenses. We also must pay the
investors' expenses if the agreement is terminated because stockholder approval
could not be obtained.
CONDITIONS TO CONSUMMATING THE PRIVATE PLACEMENT
In addition to certain standard closing conditions, such as our obtaining
third-party consents which must be in effect at closing, causing our counsel to
deliver legal opinions, and delivering officers' certificates, the obligations
of the investors to consummate the Private Placement remains subject to our
fulfillment, on or before the closing, of several other closing conditions which
we summarize below. You should read this summary in conjunction with the common
stock and warrant purchase agreement, which is attached as Annex A to this proxy
statement.
ACCURACY OF OUR REPRESENTATIONS AND WARRANTIES.
Pursuant to Section 5.1(a) of the purchase agreement, our representations
and warranties must be true and correct as of the date of the agreement and as
of the date of the closing. The failure of one or more representations and
warranties to be true and correct will not breach this condition unless the
failure or failures, would, or would reasonably be expected to, (i) constitute a
Company Material Adverse Effect (as defined below), (ii) have an adverse effect
on our net operating income or net income in excess of $1.5 million, (iii) have
an adverse effect on our cash flow in excess of $1.5 million, (iv) have an
adverse effect on our capitalization (including incurred indebtedness) in excess
of $1.5 million (each of (i)-(iv) an "Adverse Event").
An Adverse Event does not have to occur for this condition to be breached,
it is enough that an Adverse Event would reasonably be expected to occur as a
result of the untrue representations and warranties. Additionally, if an untrue
representation and warranty does not cause a breach of this condition, it may,
nevertheless, trigger a purchase price reduction and, in any event, we will
remain liable to the investors with respect to any damages resulting from or
arising in connection with our breach of its representations and warranties
above certain thresholds.
BOARD OF DIRECTORS DESIGNEES.
A total of four designees of certain of the investors will be appointed to
the board of directors, effective as of the consummation of the Private
Placement, such that when the Private Placement is consummated, the new board of
directors is composed of four designees of those investors, two designees that
are not affiliated with the investors, and our CEO. Similarly, the designees of
those investors shall participate in our compensation committee and in our
nominating committee.
STOCKHOLDER APPROVAL.
Our stockholders must have approved Proposals One, Two, Three, Four and Six
as a condition to consummating the Private Placement. Obtaining stockholder
approval of Proposal Five is not a condition to consummating the Private
Placement.
AMENDMENT TO OUR AMENDED AND RESTATED CERTIFICATE OF INCORPORATION.
As a condition of closing, we shall have filed with the Secretary of State
of the State of Delaware an amended and restated certificate of incorporation in
substantially the form included as Annex B to this proxy statement.
NON-COMPETITION AND NON-SOLICITATION AGREEMENT.
As a condition to closing, each of our key employees and consultants must
execute and deliver to us a non-competition and non-solicitation agreement. The
agreement provides that, for a period of two and one-half years after the
effective date of the common stock and warrant purchase agreement, the employee
signing the agreement shall not anywhere in the United States, Colorado, or any
counties in Colorado, engage, without our express prior written consent, in any
business or activity in direct competition with us in one of our current fields
of interest or render any services or provide any advice to a competing
business. Following termination of such employee's employment with us, the
employee can engage in any business or activity with a person or entity engaged
in one of our current fields of interest so long as that person's or entity's
principal business is not in that field of interest and the employee does not
personally engage in activities in that field of interest.
The agreement also provides that, for the two and one-half year period
described above, each employee signing the agreement will not
o with respect to our business or any activity in direct competition
with us in one of our current fields of interest, solicit or divert
any business, clients, customers, or partners made known to the
employee during his employment with us away from us,
o induce customers, clients, partners, suppliers, agents or other
persons under contract or otherwise associated or doing business with
us who are made known to the employee during his employment with us to
reduce or alter any such association or business with us, and/or
o solicit any person in our employment to terminate such employment
and/or accept employment or enter into any consulting arrangement with
any person or entity other than us.
NO COMPANY MATERIAL ADVERSE EFFECT.
Pursuant to Section 5.1(k) of the purchase agreement, no Company Material
Adverse Effect (as we define below) will have occurred and no event or
circumstances will have occurred or arisen that would reasonably be expected to
result in a Company Material Adverse Effect. A Company Material Adverse Effect
does not have to occur for there to be a failure under this condition. There
will be a failure under this condition if an event occurs that would reasonably
be expected to result in a Company Material Adverse Effect.
A "Company Material Adverse Effect" means any effect on us that is
materially adverse to our business, properties, assets, liabilities, results of
operation, or prospects, including a Qualifying Restatement (as we define
below), provided, that none of the following shall be deemed, either alone or in
aggregate, to constitute a Company Material Adverse Effect, and none of the
following shall be taken into account in determining whether there has been or
would reasonably be expected to be a Company Material Adverse Effect:
(a) any change in the market price or trading volume of our common
stock after the date of the stock and warrant purchase agreement;
(b) any adverse circumstance, change or effect resulting directly from
conditions affecting the industries in which we participate in their
entirety, the U.S. economy as a whole, or foreign economies as a whole in
any countries where we have material operations or is conducting clinical
trials;
(c) any adverse circumstance, change or effect resulting directly from
the announcement or pendency of the common stock and warrant purchase
agreement, the disclosure or filing of the common stock and warrant
purchase agreement or any other transaction documents with the SEC, the
Special Meeting, any announcement or disclosure after the date hereof of
our new business model or the closing (including (i) any Transaction
Accounting Charge (as we define below) or (ii) any termination or breach of
any partner or similar strategic relationship with the entities listed on
Schedule A to the agreement and, except as provided in sub-clause (d)
below, the entity listed on Schedule B to the agreement);
(d) our failure, in any amounts less than the Cash Flow Trigger or the
Income Statement Trigger (as we define below), to meet our internal cash
flow calculations and net operating income budget (on an accrual basis)
covering the period from January 1, 2003 to the closing which were made
available to the investors (provided, that, for purposes of determining
such change, any Transaction Accounting Charge(s) will not be taken into
account, but, notwithstanding the provisions of sub-clause (c) above, the
effects of any termination or breach of the relationship with the entity
listed on Schedule B to the purchase agreement will be taken into account);
(e) our actual reasonable investment banking and legal fees in respect
of the stock and warrant purchase agreement and the other agreements and
transactions contemplated hereby and thereby;
(f) any adverse circumstance, change or effect resulting directly from
the taking of any action by the use which the stock and warrant purchase
agreement requires us to take;
(g) any adverse circumstance, change or effect resulting directly from
action by any regulatory authority, including the Food and Drug
Administration, other than any adverse circumstance, change or effect
resulting directly from the refusal of the Food and Drug Administration to
file our submissions for clinical or safety issues;
(h) any delisting of our common stock from Nasdaq; or
(i) any adverse circumstance, change or effect resulting, directly or
indirectly, from the announcement, suspension or withdrawal of the rights
offering being considered by us (as discussed with the investors) if such
rights offering does not exceed $5,000,000.
For purposes of the definition of Company Material Adverse Effect, a
"Qualifying Restatement" is any restatement of any Form 10-Q filed by us with
respect to any quarterly period in 2002 or 2003 or the Form 10-K filed by us for
the year ending December 31, 2002 other than any restatement (1) disclosed in
the disclosure schedule to the stock and warrant purchase agreement or made
prior to the date of the stock and warrant purchase agreement, (2) not resulting
primarily from our failure to comply with Regulation S-X of the Rules and
Regulations of the SEC, or (3) primarily resulting from our new business model
or any Transaction Accounting Charges.
For purposes of the definitions of Company Material Adverse Effect and
Qualifying Restatement, "Transaction Accounting Charge" means any mandated or
recommended accounting change or charge that is non-cash and that we demonstrate
relates directly and primarily from a change in RPI's business plan, which plan
was discussed and contemplated by the investors and RPI, arising from the
transactions contemplated by the purchase agreement.
For purposes of the definition of Company Material Adverse Effect, a "Cash
Flow Trigger" means any negative effects, that either individually or when
considered in the aggregate together with other such effects, exceed $500,000 on
our cash flow, excluding any Transaction Accounting Charge, as determined by
comparing (i) our audited financial statements for the year ended December 31,
2002 against our unaudited financial statements for the same period (including
any related notes and schedules) or (ii) our actual cash flow for the period
from January 1, 2003 through the closing to our projected cash flow for the same
period (pursuant to projections furnished to the investors on February 11, 2003)
(including any related notes and schedules).
For purposes of the definition of Company Material Adverse Effect, an
"Income Statement Trigger" means any negative effect, that either individually
or when considered in the aggregate together with other such effects, exceed
$500,000 on our net operating income or net income, excluding any Transaction
Accounting Charge, as determined by comparing (i) our audited financial
statements for the year ended December 31, 2002 against our unaudited financial
statements for the same period (including any related notes and schedules) or
(ii) our actual net operating income or net income for the period from January
1, 2003 through the closing to our projected net operating income or net income
for the same period (on an accrual basis and pursuant to projections furnished
to the investors on February 11, 2003) (including any related notes and
schedules).
EXECUTIVE RECRUITING FIRM.
As a condition to closing, we have agreed to retain an executive recruiting
firm acceptable to the investors to conduct a search for a senior vice president
of development.
AMENDMENT TO OUR BYLAWS.
We have agreed to amend our current amended bylaws to require a nominating
and governance committee, compensation committee, and audit committee, and to
limit our ability to undertake certain enumerated corporate actions without the
approval of a majority of the total number of directors then in office.
Following the transaction contemplated by the purchase agreement, we will be
required to obtain the vote of a majority of our board of directors in order to
take certain actions, including:
o Authorizing, offering, selling or issuing any equity or debt
securities;
o Incurring indebtedness for borrowed money in excess of $500,000;
o Granting a security interest in RPI assets, which individually or in
the aggregate have value in excess of $500,000;
o Selling, leasing, sublicensing or otherwise transferring any of our
rights in any material intellectual property;
o Purchasing, licensing or acquiring rights in any material intellectual
property relating to pharmaceuticals or biologics;
o Approving any annual business plan or budget or any material revisions
thereto; and
o Hiring or terminating any executive officer.
STOCKHOLDER APPROVAL AND POTENTIAL CHANGE OF CONTROL
We are required to seek stockholder approval for this Proposal One because
our common stock is listed on the Nasdaq National Market, and as a result, we
are subject to the Nasdaq stock market rules. These rules require stockholder
approval for any issuance of stock which either is deemed to involve a change in
control (based on certain criteria and presumptions established by Nasdaq) or is
deemed to be at a price per share that is less than the greater of book or
market value. The Private Placement would be considered a change of control of
RPI as defined under the Nasdaq stock market rules. Upon consummation of the
Private Placement and assuming exercise in full of the warrants issued to the
investors in the Private Placement, Oxford Bioscience Partners IV would
beneficially own approximately 14.2%, The Sprout Group would beneficially own
approximately 41.8%, Venrock Associates would beneficially own approximately
18.9%, TVM V Life Science Ventures GmbH & Co. KG would beneficially own
approximately 9.2%, and Granite Ventures would beneficially own approximately
3.7% of the shares outstanding after consummation of the Private Placement
(based on 20,285,356 shares of common stock outstanding as of February 11,
2003). In addition, The Sprout Group, Oxford and Venrock will have the right to
nominate a total of four of seven members of the new board of directors.
ELAN INTERNATIONAL SERVICES, LTD. ("ELAN") WAIVER
In connection with the common stock and warrant purchase agreement, Elan
has agreed (i) to convert its Series A Preferred Stock and Series B Preferred
Stock, including any accrued and unpaid dividends, into an aggregate of
2,594,168 shares of our common stock; (ii) to waive certain pre-emptive rights
with respect to the Private Placement; and (iii) to waive its contractual right
to nominate a director for election to our Board.
As consideration for Elan's agreement, we agreed, among other things, (i)
to issue to Elan an additional 657,406 shares of our common stock and five-year
warrants exercisable for 514,310 shares of our common stock at a price of $0.42
per share; (ii) that the number of shares of common stock and warrants issued to
Elan and the exercise price of the warrants would be adjusted to account for any
forward or reverse stock split or other reclassification or recapitalization of
our securities; (iii) to grant Elan the same participation rights (on a pro rata
basis) granted to the investors pursuant to the common stock and warrant
purchase agreement; (iv) to use our reasonable efforts to cause all shares of
our common stock held by Elan to be registered under the shelf registration
statement contemplated by the common stock and warrant purchase agreement; (v)
to grant Elan piggy-back registration rights with respect to any shares of
common stock not registered on, or sold pursuant to, such shelf registration
statement; and (vi) to maintain the effectiveness of our current registration
statement with respect to Elan's current securities holdings and to register the
657,406 shares of common stock issued pursuant to clause (i) under such
registration statement.
The Elan waiver will be void and of no effect if the Private Placement does
not close on or prior to June 30, 2003, or if the terms of the Private Placement
are materially different than those provided by RPI to Elan in connection with
negotiating the waiver, or if, Elan's reasonable and good faith determination, a
change in the terms of the Private Placement has a material adverse effect on
Elan's interests, including a decrease in the amount of new money being invested
in us to below $40,000,000.
SCHERING AG WAIVER
We have received a waiver from Schering AG, waiving its right to declare
our outstanding indebtedness to Schering AG to be in default and immediately due
and payable as a result of the change in control contemplated by the common
stock and warrant purchase agreement. As consideration for granting us such
waiver, we agreed (i) to pay to Schering AG, within five days of the closing of
the Private Placement, all accrued interest on our indebtedness as of the
closing date; and (ii) to pay accrued interest on a quarterly basis after the
closing date. We also agreed as follows:
1. If we receive less than $45,000,000 in net proceeds from the Private
Placement, we will pay off our indebtedness to Schering AG on April 9, 2004; or
2. If we receive more than $45,000,000 in net proceeds from the Private
Placement, we will issue five-year warrants to Schering AG exercisable for the
purchase of 250,000 shares of our common stock at $0.42 a share (adjustable to
reflect any reverse stock split) and we will pay off our indebtedness to
Schering AG on January 31, 2005.
Schering AG's waiver will be void and of no effect if the Private Placement
is abandoned, or does not close by June 30, 2003, or if the terms of the
transaction are materially different from those provided to Schering AG in
connection with negotiating the waiver.
As a condition to closing, the Elan and Schering AG waivers, and other
consents, must be in effect at closing.
USE OF PROCEEDS
We will receive $48 million in gross proceeds from the Private Placement
transaction. We intend to use proceeds from this transaction to fund research
and development, preclinical studies and clinical trials of our product
candidates. In addition, upon closing of the transaction, we will pay
approximately $600,000 of accrued interest on our outstanding borrowings from
Schering AG. Funds also will be used for working capital and other general
corporate purposes.
DILUTIVE EFFECT
The Private Placement will have a highly dilutive effect on current
stockholders in that the percentage ownership of current stockholders will
significantly decline as a result of the Private Placement. The number of shares
issued pursuant to the Private Placement will increase substantially the number
of shares of common stock currently outstanding. This means that our current
stockholders will own a much smaller interest in RPI as a result of the Private
Placement.
For purposes of example only, a stockholder who owned 10% of our
outstanding stock as of February 11, 2003, would own just 1.0% of the shares
outstanding immediately after the Private Placement, assuming the issuance of
the following securities:
o 145,454,546 shares of common stock and warrants to purchase 30,090,909
shares of common stock to the investors (assuming a per share purchase
price of $0.33);
o 657,406 shares of common stock and warrants exercisable for 514,310
shares of common stock to Elan;
o conversion by Elan of its Series A and Series B Preferred Stock into
an aggregate of 2,594,168 shares of common stock; and
o warrants exercisable for 250,000 shares of common stock to Schering
AG.
INTEREST OF CERTAIN PERSONS IN THE PRIVATE PLACEMENT
You should be aware of the interest of our executive officers who
negotiated the terms of the Private Placement on our behalf. Concurrent with the
execution of the purchase agreement, our President and C.E.O., Howard W. Robin,
entered into a new employment agreement with RPI. The employment agreement
becomes effective only upon the consummation of the Private Placement. Pursuant
to the employment agreement:
o he will receive an annual base salary of $345,000 subject to increase
at the discretion of the Board of Directors;
o he will be eligible for annual bonuses of up to 30% of his then
current base salary;
o he will be entitled to receive employee benefits, including term life
insurance in the amount of $500,000;
o the $400,000 interest-free loan he previously received from RPI will
be forgiven over a specified period of time (40% of the loan already
has been forgiven by RPI) and RPI also shall make a "gross-up" payment
to Mr. Robin equal to his tax liability associated with such
forgiveness;
o upon a termination "without cause" or "for good reason," 50% of his
unvested stock options shall vest, the outstanding balance of the
interest-free loan shall be forgiven and RPI shall pay him the
"gross-up" payment; he shall receive his base salary plus a bonus for
twelve (12) months after termination, subject to (a) increase if there
is a change of control of RPI within twelve (12) months of
termination, or (b) decrease if he obtains other employment during the
severance period;
o upon a change of control of RPI, all of his unvested stock options
shall vest one (1) year after the change of control, the interest-free
loan will be forgiven and the "gross-up" payment will be made; and, if
the change of control results in his termination, he will receive his
severance payment as described above and all of his unvested stock
options will vest immediately.
In anticipation of the Private Placement, RPI granted Mr. Robin options to
purchase 8,605,000 shares of common stock at an exercise price of $0.35. The
grant of these options is contingent on the consummation of the Private
Placement.
Given that Mr. Robin may have interests in the Private Placement that are
different from, or in conflict with, those of the RPI stockholders, Mr. Robin
abstained from voting on the transaction. Mr. Robin was counted for purposes of
convening a quorum of the Board of Directors; however, he did not vote on the
Private Placement and related transactions.
Concurrent with the execution of the purchase agreement, our Chief
Financial Officer, Marvin Tancer, entered into a new employment agreement with
RPI. The employment agreement becomes effective only upon the consummation of
the Private Placement. Pursuant to the employment agreement:
o he will receive an annual base salary of $266,000 subject to increase
at the discretion of the Board of Directors;
o he will be eligible for annual bonuses of up to 20% of his then
current base salary;
o he will be entitled to receive employee benefits, including term life
insurance in the amount of $500,000;
o the $200,000 interest-free loan he previously received from RPI will
be forgiven over a specified period of time (20% of the loan already
has been forgiven by RPI) and RPI also shall make a "gross-up" payment
to Mr. Tancer equal to his tax liability associated with such
forgiveness;
o upon a termination "without cause" or "for good reason," his unvested
stock options shall continue to vest on a monthly basis during an
applicable nine (9) or twelve (12) month severance period; the
outstanding balance of the interest-free loan shall be forgiven and
RPI shall pay him the "gross-up" payment; he shall receive his base
salary plus a bonus for nine (9) months after termination, subject to
(a) increase if there is a change of control of RPI within twelve (12)
months of termination, or (b) decrease if he obtains other employment
during the severance period; and RPI shall continue to pay for all
costs related to maintain health care coverage for him and his
dependents for a period no longer than eighteen (18) months; and
o upon a change of control of RPI, all of his unvested stock options
shall vest immediately if he terminates his employment "for good
reason" within six (6) months after the change of control or if, under
some circumstances, RPI terminates his employment other than "for
cause", the interest-free loan will be forgiven and the "gross-up"
payment will be made, and, if the change of control results in his
termination, he will receive his severance payment as described above
and all of his unvested stock options will vest immediately.
In anticipation of the Private Placement, RPI granted Mr. Tancer options to
purchase 2,790,000 shares of common stock at an exercise price of $0.35. The
grant of these options is contingent on the consummation of the Private
Placement.
Concurrent with the execution of the purchase agreement, our Chief
Scientific Officer, Nassim Usman, entered into a new employment agreement with
RPI. The employment agreement becomes effective only upon the consummation of
the Private Placement. Pursuant to the employment agreement:
o he will receive an annual base salary of $254,000 subject to increase
at the discretion of the Board of Directors;
o he will be eligible for annual bonuses of up to 20% of his then
current base salary;
o he will be entitled to receive employee benefits, including term life
insurance in the amount of $500,000;
o upon a termination "without cause" or "for good reason," his unvested
stock options shall continue to vest on a monthly basis during an
applicable nine (9) or twelve (12) month severance period; he shall
receive his base salary plus a bonus for nine (9) months after
termination, subject to (a) increase if there is a change of control
of RPI within twelve (12) months of termination, or (b) decrease if he
obtains other employment during the severance period; and RPI shall
continue to pay for all costs related to maintain health care coverage
for him and his dependents for a period no longer than eighteen (18)
months; and
o upon a change of control of RPI, all of his unvested stock options
shall vest immediately if he terminates his employment "for good
reason" within six (6) months after the change of control or if, under
some circumstances, RPI terminates his employment other than "for
cause", and, if the change of control results in his termination, he
will receive his severance payment as described above and all of his
unvested stock options will vest immediately.
In anticipation of the Private Placement, RPI granted Mr. Usman options to
purchase 2,825,000 shares of common stock at an exercise price of $0.35. The
grant of these options is contingent on the consummation of the Private
Placement.
Of our remaining four directors (other than Mr. Robin), Mr. Jeremy Curnock
Cook and Mr. John Groom both abstained from voting on the Private Placement and
related matters brought before the board.
Mr. Curnock Cook abstained from the vote as our Compensation Committee
previously had authorized payment of a success fee to Mr. Curnock Cook in
connection with the closing of the Private Placement. Mr. Curnock Cook would
have received a success fee in connection with the Private Placement because he
had assisted RPI in contacting and meeting with potential investors, strategic
partners and potential acquirors, as we discuss above under "--Background of the
Private Placement." Mr. Curnock Cook has since waived this fee.
Mr. Groom abstained from the vote as he represents Elan on the Board of
Directors and we, at the time, were negotiating with Elan, among other things,
for the conversion of the Series A and Series B preferred shares held by Elan
into shares of our common stock . We discuss the terms of our arrangement with
Elan above under "--Elan International Services, Ltd. ("Elan") Waiver."
ADVANTAGES AND DISADVANTAGES OF THE PRIVATE PLACEMENT
ADVANTAGES
Before voting, each stockholder should consider the fact that the Private
Placement will provide additional funding, which will be critically important to
our efforts to continue operations. We have never generated positive cash flows
from operations. Our current liquidity and capital resources are limited. If we
do not receive the additional $48 million in the Private Placement, it is likely
that we will immediately cease our research and development programs. Our
inability to obtain additional funding through the Private Placement ultimately
may require us to cease operations and also would likely cause us to explore
liquidation alternatives, including the initiation of bankruptcy proceedings. If
this were to occur, between the repayment of our debt obligations, and the
liquidation preferences associated with our preferred shares, your investment in
us would decline to zero.
DISADVANTAGES
Before voting, each stockholder also should consider the following
disadvantages of the Private Placement:
o The investors in the Private Placement, in the aggregate, will control
a total of up to approximately 87.8% of the voting power of our
capital stock, and certain of the investors, in the aggregate, will
have the right to nominate a total of four directors to our new board
of directors. Oxford Bioscience Partners IV, The Sprout Group, Venrock
Associates, TVM V Life Science Ventures GmbH & Co., KG and Granite
Global Ventures would beneficially own approximately 14.2%, 41.8%,
18.9%, 9.2% and 3.7% of our shares then outstanding, respectively.
o The percentage ownership of our common stock by existing stockholders
will decline drastically, and the investors, if they chose to act in
concert, would be able to direct our actions after the Private
Placement.
o We will face restrictions on certain types of corporate actions that
we can take without the approval of a majority of our directors then
in office.
o After consummation of the Private Placement, the investors will be
able to take any action, even those actions that, under Delaware law,
require the affirmative vote of a supermajority of the stockholders,
by written consent, without the need for a stockholders' meeting. For
example, if the investors were to act in concert, although they have
not indicated any present intent to do any of the following, they
could decide to take us private, to sell some or all of our assets, or
to effect a merger without holding a stockholder's meeting whereby the
investors could force all stockholders other than the investors to
take cash in exchange for their shares in RPI because the investors
and their respective affiliates would beneficially own or have
holdings totaling approximately 87.8% of our outstanding shares after
consummation of the Private Placement.
o The investors will have participation rights that will permit them to
maintain their ownership interest in RPI in the future.
o The existence of the investors with their significant rights may make
it more difficult for us to enter into other transactions, including
mergers, acquisitions or change of control transactions.
o Although our common stock will continue to be quoted on a securities
exchange we will differ in important respects from a publicly owned
corporation in that our activities could potentially be controlled by
a few investors.
We are requesting in this Proposal One that the stockholders approve the
terms of the Private Placement as described above, including the issuance of
shares of common stock for an aggregate purchase price of $48 million at a per
share purchase price of anywhere between $0.28 and $0.33 and warrants
exercisable for shares of common stock at an exercise price of $0.42 per share.
OPINION OF OUR FINANCIAL ADVISOR
Our management retained Raymond James on March 11, 2002 to act as our
financial advisor in connection with our effort to secure additional financing.
We hired Raymond James based on the firm's qualifications, expertise, and
reputation. On January 27, 2003, our board of directors engaged Raymond James to
deliver an opinion as to the fairness, from a financial point of view, of the
financing being contemplated.
On February 4, 2003, Raymond James delivered to our board of directors its
opinion that, as of that date, the consideration to be received by RPI pursuant
to the draft stock and warrant purchase agreement dated February 1, 2003 was
fair to the RPI common stockholders from a financial point of view. A copy of
the Raymond James opinion is attached as Exhibit 1 to this proxy statement.
While a summary of the Raymond James opinion is included below, you are urged to
read the Raymond James opinion carefully in its entirety for the assumptions
made, the procedures followed, the matters considered and the limits of the
review made by Raymond James in connection with its opinion.
Our board of directors did not impose any limitations on Raymond James with
respect to the investigations made or procedures followed in rendering its
opinion. Raymond James was not instructed by us to solicit, nor did it solicit
or assist us in soliciting, third parties that might be interested in acquiring
all or any part of us.
Raymond James directed its opinion to our board of directors. The opinion
does not constitute a recommendation to you as to how you should vote with
respect to the financing. The opinion addresses only the fairness of the
consideration to be received by RPI from a financial point of view. It does not
address the merits of any alternatives to the financing. Further, it does not
address our underlying decision to proceed with or affect the financing or any
other aspect of the financing. In furnishing its opinion, Raymond James did not
admit that it is an expert within the meaning of the term "expert" as used in
the Securities Act, nor did it admit that its opinion constitutes a report or
valuation within the meaning of the Securities Act and the rules and regulations
promulgated under the Securities Act. The Raymond James opinion includes
statements to these effects.
In connection with its opinion, Raymond James, among other things, reviewed:
o the financial terms and conditions of a draft of the stock and warrant
purchase agreement dated February 1, 2003;
o the audited financial statements of RPI as of and for the years ended
December 31, 2001 and 2000;
o the Annual Reports of RPI filed on Form 10-K for the year ending
December 31, 2001 and the Quarterly Reports filed on Form 10-Q for the
quarters ended March 31, 2002, June 30, 2002, and September 30, 2002;
o the current and projected financial position, results of operations,
and capital resources of RPI;
o the historical market prices and trading activity of the common stock
of RPI;
o other financial and operating information, including projections
provided by RPI management in writing;
o certain other publicly available information on RPI;
o historical and projected revenues, operating earnings, net income, and
capitalization of RPI and certain other publicly-held biotechnology
companies that Raymond James deemed to be similar to RPI;
o financial and operating information for selected biotechnology company
financings that Raymond James deemed to be similar, in whole or in
part, to the proposed financing;
o the condition of the securities markets generally and the
biotechnology financing market specifically; and
o the financial prospects for RPI absent the proposed financing.
Raymond James also discussed with members of the senior management of RPI
certain information relating to the above and other matters that it deemed
relevant to its inquiry.
Raymond James assumed and relied upon the accuracy and completeness of all
information supplied or otherwise made available to it by RPI or any other party
and did not attempt to verify independently any of such information. Raymond
James did not make or obtain an independent appraisal of any of RPI's assets or
liabilities (contingent or otherwise). With respect to financial projections and
other information and data provided to or otherwise reviewed by or discussed
with Raymond James, Raymond James assumed that such projections and other
information and data had been reasonably prepared in good faith on bases
reflecting the best currently available estimates and judgments of management,
and Raymond James has relied upon management to advise it promptly if any
information previously provided became inaccurate or was required to be updated
during the period of its review.
The Raymond James opinion was based on market, economic, financial, and
other circumstances and conditions existing and disclosed to Raymond James as of
February 4, 2003. Raymond James has not assumed any obligation to update,
revise, or reaffirm its opinion.
Raymond James expressed no opinion as to the underlying business decision
to complete the financing, the structure or tax consequences of the transactions
contemplated by the financing, or the availability or advisability of any
alternatives to the financing. The Raymond James opinion did not express any
opinion as to the likely trading range of RPI's common stock following the
financing, which may vary depending on numerous factors that generally impact
the price of securities or on the financial condition of RPI at that time. The
Raymond James opinion is limited to the fairness, from a financial point of
view, of the financing to the common stockholders of RPI. Raymond James
expressed no opinion with respect to any other reasons, legal, business, or
otherwise, that may support the decision of the RPI Board of Directors to
approve or consummate the financing.
The following represents a brief summary of the material financial analyses
performed by Raymond James in connection with providing its opinion to our board
of directors. Some of the summaries of financial analyses performed by Raymond
James include information presented in tabular format. In order to understand
fully the financial analyses performed by Raymond James, you should read the
tables together with the text of each summary. The tables alone do not
constitute a complete description of the financial analyses. Considering the
data in the tables without considering the full narrative description of the
financial analyses, including the methodologies and assumptions underlying the
analyses, could create a misleading or incomplete view of the financial analyses
performed by Raymond James.
LIQUIDATION ANALYSIS
Raymond James performed a liquidation analysis based information provided
by our management that without a significant infusion of capital RPI would be
forced to begin a liquidation process in the first quarter of calendar year 2003
and that the company would run out of cash during the second quarter of calendar
year 2003. The liquidation analysis consisted of calculating the excess cash, if
any, available for distribution to RPI common stockholders in a liquidation
scenario by (i) deducting RPI management's estimates of the `best case' and
`worst case' value of the company's assets from (ii) the value of the company's
liabilities in a liquidation scenario.
RPI's liabilities in a liquidation scenario were calculated to approximate
$33.3 million based upon their values as of December 31, 2002. That total
consisted of amounts necessary to satisfy or repay the company's: (i) Elan plc
liquidation preference; (ii) Schering AG debt; (iii) Avecia Inc. debt; and (iv)
lease obligation with GE Capital Corporation.
RPI management also provided Raymond James with estimates of the `best
case' and `worst case' liquidation value of the company's: (i) net working
capital (less amounts necessary to: (a) satisfy RPI's current liabilities; (b)
fund the company's operations through a liquidation process; and (c) pay
severance and related expenses); (ii) property, plant and equipment; (iii)
ownership interest in atugen AG; (iv) ownership interest in Archemix Corp.; (v)
ANGIOZYME program; (vi) Heptazyme program; and (vii) intellectual property.
Raymond James calculated a `best case' net deficit of $19.8 million and net
deficit per common share of $0.97 and a worst case net deficit of $31.1 million
and net deficit per common share of $1.53 as detailed in the following table ($
in millions):
VALUES IN LIQUIDATION SCENARIO BEST CASE WORST CASE
------------------------------ --------- ----------
Total liabilities $33.3 $33.3
Total assets 13.5 2.2
------- --------
Net excess / (deficit) ($19.8) ($31.1)
======= =======
Net excess / (deficit) per share ($0.97) ($1.53)
PREMIUM/DISCOUNT ANALYSIS
Raymond James also performed: (i) a historical stock price analysis; (ii)
an analysis comparing the gross financing price in the financing to the gross
financing price in other selected financings; (iii) an analysis comparing the
gross financing price in the financing to the gross financing price for a
smaller subset of selected financings; and (iv) an analysis comparing the net
financing price in the financing to the net financing price in other selected
illustrative financings.
The gross and net financing prices referenced in the following analyses
assume no adjustment to the financing price due to a Company Material Adverse
Effect as defined by the purchase agreement.
A. HISTORICAL STOCK PRICE ANALYSIS
Raymond James compared both the gross and net financing price in the
proposed financing to recent market prices for RPI common stock. Raymond James
determined the net financing price by deducting the pro rata value of the
warrants issued in the financing from the gross financing price. Raymond James
used the Black-Scholes Option Pricing Model to value the warrants being issued
in the financing. Based upon a gross and net financing price of $0.33 and $0.29,
respectively, Raymond James determined that the gross and net financing prices
in the proposed financing implied the following premiums and discounts to
historical RPI market prices:
GROSS NET
FINANCING FINANCING
PRICE $0.330 PRICE
PREMIUM/(DISCOUNT) TO: $0.290
Closing Stock Price
January 31, 2003 $0.250 32.0% 15.9%
Average Stock Price
Last 5 days $0.267 23.6% 8.5%
Last 10 days $0.279 18.4% 4.0%
Last 15 days $0.286 15.4% 1.3%
Last 30 days $0.288 14.4% 0.5%
Last 60 days $0.364 (9.4%) (20.4%)
Last 90 days $0.356 (7.2%) (18.5%)
B. SELECTED FINANCINGS - GROSS FINANCING PRICE COMPARISON
Raymond James compared the premium/(discount) of the proposed financing to
the premium/(discount) paid by investors in selected biotechnology equity
financings (the "Selected Financings"). In each case, Raymond James compared the
gross financing price to the historical market prices one day prior and the
average market prices over the 30-, 60-, and 90-day periods prior to the date
each Selected Financing was announced. The financings chosen by Raymond James
were public biotechnology financings that raised aggregate proceeds of $75.0
million or less and closed within the last 18 months. For comparison purposes
within this broader universe of Selected Financings, the potential RPI gross
financing price of $0.33 per share was used.
PREMIUM / (DISCOUNT) TO ONE 30 60 90
HISTORICAL PRICES DAY DAYS DAYS DAYS
----------------- --- ---- ---- ----
RPI Financing 32.0% 14.4% (9.4%) (7.2%)
Selected Financings
Mean (10.2%) (13.3%) (17.0%) (17.7%)
Median (9.5%) (12.4%) (19.4%) (22.2%)
Maximum 31.0% 6.1% 22.7% 29.9%
Minimum (45.7%) (33.5%) (49.2%) (59.0%)
C. SELECTED ILLUSTRATIVE FINANCINGS - GROSS FINANCING PRICE COMPARISON
Virtually all of the Selected Financings reviewed by Raymond James involved
the issuance of both common stock and warrants, which Raymond James analyzed in
the context of a smaller universe of seven illustrative financings (the
"Selected Illustrative Financings") that it determined to be more similar to the
RPI financing. Raymond James compared the premium/(discount) of the proposed RPI
financing to the premium/(discount) paid by investors in the Selected
Illustrative Financings. Factors cited when selecting these illustrative
financings from the larger universe of selected financings included: (i)
percentage of common stock sold in the financing; (ii) financing price relative
to 52-week high; and (iii) pre-financing cash relative to annual `burn-rate'.
Raymond James compared the gross financing price in the proposed RPI
financing to the historical market prices one day prior and the average market
prices over the 30-, 60-, and 90-day periods prior to the date each of the
Selected Illustrative Financings was announced.
PREMIUM / (DISCOUNT) TO ONE 30 60 90
HISTORICAL PRICES DAY DAYS DAYS DAYS
----------------- --- ---- ---- ----
RPI Financing 32.0% 14.4% (9.4%) (7.2%)
Selected Financings
Mean (5.2%) (16.3%) (25.1%) (29.1%)
Median (11.0%) (20.8%) (32.6%) (39.5%)
Maximum 31.0% 0.5% 16.2% 29.9%
Minimum (23.6%) (26.0%) (49.2%) (59.0%)
D. SELECTED ILLUSTRATIVE FINANCINGS - NET FINANCING PRICE COMPARISON
Raymond James compared the premium/(discount), on a net financing price
basis, of the proposed RPI financing to the premium/(discount), on a net
financing price basis, paid by investors in the Selected Illustrative
Financings. In both instances, the net financing price was computed by deducting
the pro rata value of the warrants issued in the financing from the gross
financing price of the common stock sold.
Raymond James compared the net financing price in the proposed RPI
financing to the historical market prices one day prior to the date each of the
Selected Illustrative Financings was announced.
GROSS NET
FINANCING FINANCING
PREMIUM / (DISCOUNT) TO CLOSING PRICE PRICE
PRICE DAY PRIOR TO ANNOUNCEMENT $0.33 $0.29
------------------------------- ----- -----
RPI Financing 32.0% 16.4%
Selected Illustrative Financings
Mean (6.3%) (47.5%)
Median (15.1%) (53.9%)
The foregoing description is only a summary of the analyses and
examinations that Raymond James considered in connection with its opinion. It is
not a comprehensive description of all analyses and examinations actually
conducted by Raymond James. The preparation of a fairness opinion necessarily is
not susceptible to partial analysis or summary description. Raymond James
believes that its analyses and the summary set forth above must be considered as
a whole and that selecting portions of its analyses, without considering all
analyses, would create an incomplete view of the process underlying its opinion
and the analyses set forth in its presentation to our board. Raymond James did
not attribute any particular weight to any analysis or factor considered by it,
but rather made qualitative judgments as to the significance and relevance, if
any, of each analysis and factor. The fact that any specific analysis has been
referred to in the summary above is not meant to indicate that this analysis was
given greater weight than any other analysis. Accordingly, the ranges of
valuations resulting from any particular analysis described above should not be
taken to be the view of Raymond James with respect to the actual value of RPI.
In performing its analyses, Raymond James made numerous assumptions with
respect to industry performance, general business and economic conditions, and
other matters, many of which are beyond our control. The analyses performed by
Raymond James are not necessarily indicative of actual values or actual future
results, which may be significantly more or less favorable than those suggested
by these analyses. These analyses were prepared solely as part of the analysis
performed by Raymond James with respect to the financial fairness of the
financing, and were provided to our board in connection with the delivery of the
Raymond James opinion. The analyses do not purport to be appraisals or to
reflect the prices at which a company might actually be sold or the prices at
which any securities may trade at any time in the future.
Raymond James is actively engaged in the health care investment banking
business and regularly undertakes the valuation of investment securities in
connection with public offerings, private placements, business combinations, and
similar transactions. We have agreed to pay Raymond James a fee for its
financial advisory services, including $250,000 for delivery of its fairness
opinion and an advisory fee contingent upon the consummation of the financing.
Further, we have agreed to indemnify Raymond James, its affiliates, and their
respective directors, officers, agents, consultants, employees, and controlling
persons against specific liabilities, including liabilities under the federal
securities laws.
In the ordinary course of its business, Raymond James may trade in the
securities of RPI for its own account or for the accounts of its customers and,
accordingly, may at any time hold a long or short position in such securities.
NEW BUSINESS MODEL
Since inception in 1992, we have focused on engineering RNA-based
molecules. Until recently, we focused on developing ribozyme-based therapeutics
and diagnostics. As a result, we advanced three product candidates into clinical
development. We continue to have a joint development program with Chiron
Corporation for one of these products, ANGIOZYME(R). We own, or have exclusive
licenses to use, over 180 issued or allowed patents relating to nucleic acid
technology.
In connection with our negotiations with the investors we have presented to
our board, and our board has approved, a revised business model. With our
expertise in nucleic acid technology, we will now focus on the development of a
new type of nucleic acid based therapeutic based on RNA interference (RNAi). We
have redirected our research to RNAi because we believe it will have the best
prospects for commercial success. We are using our expertise to design,
stabilize, manufacture and deliver small interfering nucleic acids (siNAs) that
facilitate the process of RNAi. We believe siNA-based drugs may become important
therapeutics in the future.
For a complete description of our new business plan please see our Current
Report on Form 8-K, filed on February 14, 2003, which is incorporated herein by
reference.
RIGHTS OFFERING
Promptly after the closing of the Private Placement, we intend to offer to
our stockholders of record on the date of mailing of this proxy statement,
non-transferable rights to purchase an aggregate of $5 million of shares of
newly issued common stock at a price of either $0.28 per share or $0.33 per
share (depending upon the per share purchase price at which the Private
Placement is completed). Each stockholder of record will receive one
non-transferable right to purchase one share of our common stock for each ______
shares of common stock held by the stockholder on the rights offering record
date. If a stockholder wishes to purchase additional shares in the rights
offering, the stockholder may have the opportunity to do so if other
stockholders do not subscribe for their rights.
We believe that this rights offering will give our existing stockholders
the opportunity to purchase shares of our common stock at the same price at
which the investors are purchasing shares in the Private Placement. The rights
offering will not include warrants.
THE RIGHTS OFFERING WILL BE MADE ONLY BY MEANS OF A PROSPECTUS FILED AS
PART OF A REGISTRATION STATEMENT WITH THE SECURITIES AND EXCHANGE COMMISSION.
A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS NOT YET BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THE SECURITIES MAY NOT BE
SOLD NOR MAY ANY OFFER TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT HAS BEEN FILED AND BECOME EFFECTIVE. THIS DESCRIPTION SHALL NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY, NOR SHALL
THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION
UNDER THE SECURITIES LAWS OF SUCH STATE OR JURISDICTION.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the common stock
present in person or represented by proxy and entitled to vote at the Special
Meeting will be required to approve the terms of the Private Placement,
including the issuance of shares of common stock for an aggregate purchase price
of $48 million at a per share purchase price of either $0.28 or $0.33 and
warrants exercisable for shares of common stock at an exercise price of $0.42
per share.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF RPI RECOMMENDS A VOTE "FOR" APPROVAL OF THE TERMS
OF THE PRIVATE PLACEMENT, INCLUDING THE ISSUANCE OF SHARES OF COMMON STOCK AND
WARRANTS EXERCISABLE FOR SHARES OF COMMON STOCK AT AN EXERCISE PRICE OF $0.42
PER SHARE, FOR AGGREGATE CONSIDERATION OF $48 MILLION. ASSUMING A PER SHARE
PURCHASE PRICE OF $0.28, WE WILL ISSUE TO THE INVESTORS 171,428,571 SHARES OF
COMMON STOCK AND WARRANTS EXERCISABLE FOR 35,285,714 SHARES OF COMMON STOCK.
ASSUMING A PER SHARE PURCHASE PRICE OF $0.33, WE WILL ISSUE TO THE INVESTORS
145,454,546 SHARES OF COMMON STOCK AND WARRANTS EXERCISABLE FOR 30,090,909
SHARES OF COMMON STOCK.
PROPOSAL NUMBER TWO
APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATION TO EFFECT A REVERSE
SPLIT OF OUR COMMON STOCK
This proposal, if ratified, will approve an amendment to our current
amended and restated certificate of incorporation for the purpose of effecting a
reverse stock split of our outstanding common stock of not less than 1-for-5 and
not more than 1-for-15, with our board of directors having the authority to
determine which, if any, of these reverse stock splits to effectuate within the
foregoing parameters.
INTRODUCTION AND BOARD RECOMMENDATION
Our board of directors has determined that it would be advisable to obtain
the approval of the stockholders for a reverse stock split that would reduce the
number of shares of our outstanding common stock in order to increase the
trading price of our common stock on the Nasdaq National Market. The board of
directors proposes this action because the trading price of shares of our common
stock has declined below $1.00 and our failure to increase the trading price
above $1.00 will result in delisting of our common stock from the Nasdaq
National Market, which our board of directors believes could harm our
stockholders by reducing the marketability and the liquidity of their shares. If
a reverse stock split were to be implemented, the number of shares of our common
stock owned by each stockholder would be reduced in the same proportion as the
reduction in the total number of shares outstanding, so that the percentage of
the outstanding shares owned by each stockholder would remain unchanged.
However, the Private Placement, as well as with the restructuring of our
relationship with Elan and with Schering AG, will cause your ownership
percentage in RPI to decline substantially.
Our board of directors also believes that it would be advisable to obtain
the approval of stockholders for a reverse stock split because without a reverse
stock split, we will not have enough shares of common stock authorized under our
current amended and restated certificate of incorporation to issue to the
investors in the Private Placement. If a reverse stock split were to be
implemented, the number of shares of stock issuable upon consummation of the
Private Placement, the number of shares of stock issuable by us to Elan, the
number of warrants issuable to Schering AG and the number of shares issuable
upon exercise of the warrants issued in the Private Placement, to Elan and to
Schering, would be proportionately reduced to a number that would be within the
number of shares of common stock currently authorized under our amended and
restated certificate of incorporation.
By obtaining stockholder approval of a reverse stock split at the Special
Meeting, we will also have met one of the conditions to consummating the Private
Placement, discussed under Proposal One of this proxy statement. The reverse
stock split would be effected by filing an amended and restated certificate of
incorporation, substantially in the form attached as Annex B to this proxy
statement, prior to the consummation of the Private Placement. Our board of
directors will decide on the exact ratio of the reverse stock split based on
factors such as prevailing market conditions, prevailing trading prices of our
common stock on the Nasdaq National Market and the steps that we will need to
take in order to achieve compliance with the trading price requirements and
other listing regulations of the Nasdaq National Market.
Accordingly, the board of directors is asking that the stockholders approve
a range of reverse stock splits of not less than 1-for-5 and not more than
1-for-15; and further, that the board of directors be authorized to determine
which of the reverse stock splits in the specified range, if any, to implement.
In determining the ratio of the reverse stock split to implement, the board will
consider the trading price of our common stock and the number of round lot
holders of our common stock. Based on the price of our common stock on the days
leading up to the filing of the amended and restated certificate of
incorporation effecting the reverse stock split, the board will select the ratio
which it believes will, in accordance with Nasdaq maintenance requirements, (i)
increase the trading price of our common stock sufficiently to maintain a
minimum bid price of $1.00 and (ii) result in the continued existence of at
least 400 stockholders of round lots.
Even after we complete the Private Placement and the reverse stock split we
may not be able to meet the continuing listing standards of the Nasdaq National
Market. If we are delisted, we intend to apply for listing on the Nasdaq
SmallCap Market. We may not meet the standards for listing on the Nasdaq
SmallCap Market.
A vote in favor of this Proposal Two will be a vote for approval of each of
the reverse split ratios in the specified range and for the granting of
authority to the board of directors to effectuate one of the reverse stock
splits in the range as it deems advisable at the time the reverse stock split is
to be effectuated. This Proposal Two gives the board of directors the discretion
to abandon the reverse stock split if the trading price of shares of our common
stock increases above the Nasdaq National Market's minimum trading price
requirements prior to its implementation, or if market or other conditions make
implementation of the reverse stock split inadvisable.
REASONS FOR THE REVERSE STOCK SPLIT
The primary purpose of the reverse stock split is to combine the
outstanding shares of our common stock into a smaller number of shares so that
the shares will trade at a significantly higher price per share than their
recent trading prices. Since August 1, 2002, the closing bid price of shares of
our common stock on the Nasdaq National Market has been below $1.00 per share.
Pursuant to the Nasdaq National Market's listing requirements, the minimum bid
price of shares of our common stock must be at least $1.00 per share in order to
maintain listing on the Nasdaq National Market.
We believe, although we cannot assure you, that the reverse stock split
will enable shares of our common stock to trade, in the short term, above the
$1.00 minimum bid price which is one of the requirements to maintain listing on
the Nasdaq National Market. We believe that maintaining the listing of our
common stock on the Nasdaq National Market is in the best interests of RPI and
its stockholders. Listing on the Nasdaq National Market increases liquidity and
may minimize the spread between the "bid" and "asked" prices quoted by market
makers. Further, maintaining Nasdaq listing may enhance our access to capital
and increase our flexibility in responding to anticipated capital requirements.
As a result, the investors in the Private Placement have made receipt of
stockholder approval for the reverse stock split a condition to consummating the
Private Placement, as discussed under Proposal One.
For the above reasons, we believe that having the ability to effectuate the
reverse stock split in an effort to regain compliance with the Nasdaq listing
requirements is in the best interests of RPI and its stockholders. We anticipate
that, following the consummation of the reverse stock split, our common stock
will trade, in the short term, at a price per share that is proportionately
higher than current market prices. However, there can be no assurance that the
reverse stock split, if implemented, will have the desired effect of
proportionately raising our common stock price over the long term or at all.
If the reverse stock split proposal is approved by the stockholders at the
Special Meeting, we expect to implement it only if we believe we can comply with
the listing requirements of the Nasdaq National Market or the Nasdaq SmallCap
Market. Accordingly, notwithstanding approval of the reverse stock split
proposal by the stockholders, the board of directors may elect to delay or even
abandon entirely the reverse stock split.
IMPLEMENTATION AND EFFECTS OF THE REVERSE STOCK SPLIT
If the stockholders approve the reverse stock split proposal and the board
of directors determines it is necessary to effectuate a reverse stock split, the
board of directors would:
(i) Determine which, if any, of the reverse stock splits of not less
than 1-for-5 and not more than 1-for-15 is advisable, based on market and
other relevant conditions and the trading prices of our common stock at
that time; and
(ii) Direct management to file the amended and restated certificate of
incorporation with the Delaware Secretary of State that would specify that,
as of the date of the filing, every five to fifteen shares (depending on
the reverse stock split selected by the board of directors) of our common
stock outstanding would automatically be combined and converted into one
share. For example, if the board of directors selected a 1-for-5 reverse
stock split, the amendment would specify that every five shares of our
common stock outstanding be combined and converted into a single share.
We estimate that, following the reverse stock split, we would have
approximately the same number of stockholders and, except for the effect of cash
payments for fractional shares as described below, the completion of the reverse
stock split alone would not affect any stockholder's proportionate equity
interest in RPI. Therefore, by way of example, a stockholder who owns a number
of shares that, prior to the reverse stock split, represented 1% of our
outstanding shares, would continue to own 1% of our outstanding shares after the
reverse stock split. However, you should take into account that we will be
effecting the reverse stock split in conjunction with the Private Placement and
the restructuring of our Elan and Schering obligations. The combined effect of
these transactions will be to reduce your ownership interest in RPI
significantly. Also, the combined effect of these transactions will be to
concentrate ownership of our stock in the hands of a few holders who will
collectively own approximately 87.8% of our outstanding stock (based on
20,285,356 shares outstanding as of February 11, 2003).
The reverse stock split alone will not affect the number of shares of
common stock that the board of directors is authorized to issue by our amended
and restated certificate of incorporation. However, it will have the effect of
increasing the number of shares available for future issuance, because of the
reduction in the number of shares that will be outstanding after giving effect
to the reverse stock split. Except as disclosed in this proxy statement, we
currently have no plans related to the authorized but unissued common stock.
Based on the 20,285,356 shares of common stock outstanding as of February
11, 2003, the following table reflects the approximate percentage reduction in
the outstanding shares of common stock and the approximate number of shares of
common stock that would be outstanding as a result of the reverse stock split:
AUTHORIZED BUT
PROPOSED REVERSE PERCENTAGE SHARES TO BE UNISSUED SHARES OF
STOCK SPLIT REDUCTION OUTSTANDING COMMON STOCK
1 for 5 80.0% 4,057,071 55,942,929
1 for 6 83.3% 3,380,893 56,619,107
1 for 7 85.7% 2,897,908 57,102,092
1 for 8 87.5% 2,535,670 57,464,330
1 for 9 88.9% 2,253,928 57,746,072
1 for 10 90.0% 2,028,536 57,971,464
1 for 11 90.9% 1,844,123 58,155,877
1 for 12 91.7% 1,690,446 58,309,554
1 for 13 92.3% 1,560,412 58,439,588
1 for 14 92.9% 1,448,954 58,551,046
1 for 15 93.3% 1,352,357 58,647,643
Even though there will not be a dilution in the percentage ownership of
current stockholders solely as a result of the reverse stock split, there will
be substantial dilution of such percentage ownership if the Private Placement
and the restructuring of our Elan and Schering obligations are consummated
shortly after effectuating the reverse stock split, with the dilutive effects
more fully discussed in Proposal One. The table above does not take into account
any such effects.
CASH TO BE PAID FOR FRACTIONAL SHARES
Whichever reverse stock split ratio is selected, implementation of a
reverse stock split will result in some stockholders owning a fractional share
of common stock. For example, if a 1-for-5 reverse stock split were to be
implemented, the shares owned by a stockholder with 106 shares would be
converted into 21 ? shares. To avoid such a result, stockholders that otherwise
would be entitled to receive a fractional share of our common stock as a
consequence of the reverse stock split will, instead, receive from RPI a cash
payment in U.S. dollars equal to the value of that fractional share, determined
on the basis of the average bid prices of our common stock on the Nasdaq
National Market for the five trading days immediately preceding the effective
date of the reverse stock split (as adjusted for that reverse stock split). If
any stockholder owns, in total, fewer than the number of our shares to be
converted into one share as a result of the reverse stock split, that
stockholder's shares would be converted into a fractional share of stock and,
therefore, that stockholder would receive only cash in place of the fractional
share as a result of the implementation of the reverse stock split. For example,
if a 1-for-5 reverse stock split is implemented then stockholders with fewer
than five shares would receive only cash. See "Exchange of Stock Certificates
and Payment for Fractional Shares" below. The interest of such stockholders in
RPI would, therefore, be terminated, and such stockholders would have no right
to share in the assets or future growth of RPI. Based on the foregoing example,
each stockholder that owns five shares or more of our common stock prior to the
reverse stock split will continue to own one or more shares after the reverse
stock split and would continue to share in the assets and future growth of RPI
as a stockholder, and any stockholder that owns fewer than five shares would
receive only cash in place of the fractional share resulting from the reverse
stock split. Because the maximum reverse split under this proposal would be a
1-for-15 reverse stock split, a stockholder could assure his or her continued
ownership of shares of stock of RPI after the reverse split by purchasing a
number of shares sufficient to increase the total number of shares that he or
she owns to 15 or more. The reverse stock split will result in some stockholders
owning "odd lots" of fewer than 100 shares of our common stock as a result of
the reverse stock split. Brokerage commissions and other costs of transactions
in odd lot shares may be higher, particularly on a per-share basis, than the
cost of transactions in even multiples of 100 shares.
EFFECT OF REVERSE STOCK SPLIT ON OPTIONS
The number of shares subject to our outstanding common stock options also
will automatically be reduced in the same ratio as the reduction in the
outstanding shares. Correspondingly, the per share exercise price of those
options will be increased in direct proportion to the reverse stock split ratio,
so that the aggregate dollar amount payable for the purchase of the shares
subject to the options will remain unchanged. For example, assume that a 1-for-5
reverse stock split is implemented and that an optionee holds options to
purchase 1,000 shares at an exercise price of $1.00 per share. On the
effectiveness of the 1-for-5 reverse stock split, the number of shares subject
to that option would be reduced to 200 shares and the exercise price would be
proportionately increased to $5.00 per share.
EXCHANGE OF STOCK CERTIFICATES AND PAYMENT FOR FRACTIONAL SHARES
The combination of, and reduction in, the number of our outstanding shares
as a result of the reverse stock split will occur automatically on the date that
the amended and restated certificate of incorporation effectuating the reverse
stock split is filed with the Secretary of State of the State of Delaware
referred to as the effective date, without any action on the part of our
stockholders and without regard to the date that stock certificates representing
the shares prior to the reverse stock split are physically surrendered for new
stock certificates.
EXCHANGE OF STOCK CERTIFICATES. As soon as practicable after the effective
date, transmittal forms will be mailed to each holder of record of certificates
for shares of our common stock to be used in forwarding such certificates for
surrender and exchange for certificates representing the number of shares of our
common stock such stockholder is entitled to receive as a result of the reverse
stock split. The transmittal forms will be accompanied by instructions
specifying other details of the exchange. Upon receipt of such transmittal form,
each stockholder should surrender the certificates representing shares of our
common stock prior to the reverse stock split in accordance with the applicable
instructions. Each holder who surrenders certificates will receive new
certificates representing the whole number of shares of our common stock that he
or she holds as a result of the reverse stock split and any cash payable in lieu
of a fractional share.
STOCKHOLDERS SHOULD NOT SEND IN THEIR STOCK CERTIFICATES UNTIL THEY RECEIVE A
TRANSMITTAL FORM FROM OUR TRANSFER AGENT.
EFFECT OF FAILURE TO EXCHANGE STOCK CERTIFICATES. After the effective date,
each certificate representing shares of our common stock outstanding prior to
the effective date, referred to as an old certificate, will, until surrendered
and exchanged as described above, be deemed, for all corporate purposes, to
evidence ownership of the whole number of shares of our common stock, and the
right to receive from us the amount of cash for any fractional shares, into
which the shares of our common stock evidenced by such certificate have been
converted by the reverse stock split. However, the holder of such unexchanged
certificates will not be entitled to receive any dividends or other
distributions payable by us after the effective date, until the old certificates
have been surrendered. Such dividends and distributions, if any, will be
accumulated, and at the time of surrender of the old certificates, all such
unpaid dividends or distributions will be paid without interest.
DETERMINATION OF AMOUNT OF CASH PAYABLE FOR FRACTIONAL SHARES. If the
number of shares of our common stock to which a holder is entitled as a result
of the reverse stock split would otherwise include a fraction, we will pay to
that stockholder, in lieu of issuing fractional shares of stock, cash in an
amount equal to the same fraction multiplied by the average closing price of our
shares on the Nasdaq National Market for the five days immediately preceding the
effective date (as adjusted for the reverse stock split). For example, if the
board of directors determined to implement a 1-for-5 reverse stock split, the
shares of a stockholder that owned 106 shares prior to the reverse stock split
would be converted into 21 1/5 shares as a result of the reverse stock split. If
the average of the pre-split closing bid prices of shares of our common stock
for that five-day period was $1.00 per share, that stockholder would receive, in
exchange for his stock certificates evidencing his 21 1/5 shares, a stock
certificate for 21 whole shares and a check in the amount of $0.20 for his 0.2
fractional share.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion describes certain federal income tax
considerations relating to the reverse stock split. This discussion is based
upon the Internal Revenue Code of 1986, referred to as the Code, existing and
proposed regulations thereunder, legislative history, judicial decisions, and
current administrative rulings and practices, all as amended and in effect on
the date of this proxy statement. Any of these authorities could be repealed,
overruled, or modified at any time, possibly retroactively and, accordingly,
could cause the tax consequences to vary substantially from the consequences
described herein. No ruling from the Internal Revenue Service with respect to
the matters discussed herein has been requested, and there is no assurance that
the IRS would agree with the conclusions set forth in this discussion. All
stockholders should consult with their own tax advisors. This discussion may not
address certain federal income tax consequences that may be relevant to
particular stockholders in light of their personal circumstances (such as
persons subject to the alternative minimum tax) or to certain types of
stockholders (such as dealers in securities, insurance companies, foreign
individuals and entities, financial institutions, and tax-exempt entities) who
may be subject to special treatment under the federal income tax laws. This
discussion also does not address any tax consequences under state, local, or
foreign laws. STOCKHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISERS AS TO THE
PARTICULAR TAX CONSEQUENCES TO THEM OF THE REVERSE STOCK SPLIT, INCLUDING THE
APPLICABILITY OF ANY STATE, LOCAL, OR FOREIGN TAX LAWS, CHANGES IN APPLICABLE
TAX LAWS, AND ANY PENDING OR PROPOSED LEGISLATION.
TAX CONSEQUENCES TO RPI. We should not recognize any gain or loss as a
result of the reverse stock split.
TAX CONSEQUENCE TO STOCKHOLDERS
GENERALLY. No gain or loss should be recognized by a stockholder who
receives only shares of our common stock as a result of the reverse stock split.
A stockholder who receives cash in lieu of a fractional share of our common
stock generally should recognize capital gain or loss on an amount equal to the
difference between the cash received and the stockholder's tax basis in such
fractional share of our common stock. For this purpose, a stockholder's tax
basis in such fractional share of our common stock will be determined as if the
stockholder had actually received such fractional share and its tax basis in the
pre-split common stock had been allocated as described below.
A STOCKHOLDER'S TAX BASIS IN SHARES RECEIVED UPON THE REVERSE STOCK SPLIT
AND HOLDING PERIOD. Except as provided above with respect to fractional shares,
the aggregate tax basis of the shares of our common stock held by a stockholder
following the reverse stock split will equal the stockholder's aggregate basis
in the shares of our common stock held immediately prior to the reverse stock
split and generally will be allocated among the shares of our common stock held
following the reverse stock split on a pro rata basis. Stockholders who have
used the specific identification method to identify their basis in shares of our
common stock combined in the reverse stock split should consult their own tax
advisors to determine their basis in the post-reverse stock split shares that
they will receive in exchange therefor. The holding period of post-reverse split
common sock received will include the holding period for the pre-reverse split
common stock exchanged therefor.
VOTE REQUIRED
The affirmative vote of the holders of sixty six and two-thirds percent (66
2/3%) of the outstanding shares of common stock (approximately 13,524,000
shares, based on 20,285,356 shares of common stock outstanding on February 11,
2003) will be required to approve the reverse stock split and amendment to our
current amended and restated certificate of incorporation.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF RPI RECOMMENDS A VOTE "FOR" APPROVAL OF THE
REVERSE STOCK SPLIT PROPOSAL AND THE AMENDMENT TO OUR AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION.
PROPOSAL NUMBER THREE
APPROVAL OF AMENDMENT TO OUR AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES
Our current amended and restated certificate of incorporation authorizes us
to issue 65 million shares. The total number of shares we are authorized to
issue is 60 million shares of common stock and 5 million shares of preferred
stock. The board of directors has approved, subject to stockholder approval, an
amendment to Article IV of our current amended and restated certificate of
incorporation to increase the number of authorized shares of stock from 65
million shares to 125 million shares (depending on the ratio of the reverse
stock split) of which 120 million (depending on the ratio of the reverse stock
split) shall be common stock and 5 million shall be preferred stock.
The proposed increase in the number of authorized shares will ensure that
we have enough authorized shares to issue the necessary shares of common stock
to the investors in the Private Placement, issue shares of common stock to Elan
in connection with restructuring our Elan obligations, reserve an appropriate
number of shares of common stock for issuance pursuant to the warrants that we
have committed to issue in the Private Placement and to Elan and Schering,
increase the number of shares of common stock reserved for issuance pursuant to
the 2001 Stock Option Plan, increase the number of shares of common stock
available under the Employee Stock Purchase Plan and retain flexibility to issue
additional shares of stock in the future in connection with equity offerings or
strategic alliances. We have no immediate plans, arrangements, commitments, or
understandings with respect to the issuance of any of the additional shares of
common stock which would be authorized by the proposed amendment other than
those described in this proxy.
VOTE REQUIRED
The affirmative vote of the holders of sixty six and two-thirds percent (66
2/3%) of the outstanding shares of common stock (approximately 13,524,000
shares, based on 20,285,356 shares of common stock outstanding on February 11,
2003) will be required to approve the reverse stock split and amendment to our
current amended and restated certificate of incorporation.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF RPI RECOMMENDS A VOTE "FOR" APPROVAL OF THE
AMENDMENT TO OUR AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO INCREASE
THE NUMBER OF AUTHORIZED SHARES.
PROPOSAL NUMBER FOUR
APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATION TO CHANGE OUR NAME TO
A NAME THAT BETTER REFLECTS OUR NEW BUSINESS STRATEGY.
The board of directors is seeking stockholder approval to amend our current
amended and restated certificate of incorporation to change our name from
"Ribozyme Pharmaceuticals, Inc." to a name that better reflects our new business
focus. We sought additional financing in order to continue our work in the field
of nucleic acid technology. We intend to use the proceeds of the Private
Placement to continue work on our existing product, ANGIOZYME, and to focus on
the development of a new type of nucleic acid based therapeutic using RNA
interference (RNAi). We have redirected our research to RNAi because we believe
it will have the best prospects for commercial success. We are using our
expertise to design, stabilize, manufacture and deliver small interfering
nucleic acids (siNAs) that facilitate the process of RNAi.
On February 14, 2003, we filed a Current Report on Form 8-K announcing,
among other things, the execution of the purchase agreement for the Private
Placement and explaining our new business strategy, as well as the associated
risks. Please review Exhibit 99.2 to our Form 8-K for a detailed discussion of
our new business strategy.
Given our shift in focus to nucleic acid based therapeutics based on RNAi,
our board has approved, subject to stockholder approval, an amendment to our
amended and restated certificate of incorporation to change our name from
Ribozyme Pharmaceuticals, Inc. to a name that better reflects our focus on RNAi.
However, we have not yet identified a new name. By approving this proposal you
will be authorizing the Board to exercise its discretion to amend Article I of
the current amended and restated certification of incorporation to include the
new name once the new name has been identified. The board of directors
unanimously adopted and approved the change of our name from "Ribozyme
Pharmaceuticals, Inc." to a name that better reflects our focus on RNAi at a
special meeting of the board of directors held on February 4, 2003. If the
amendment is approved, RPI's management and board of directors will retain
discretion over the final name change.
To accomplish the name change, the Board of Directors proposes that Article
I of the current amended and restated certificate of incorporation be amended to
read as follows:
"The name of the corporation is: [new name will be substituted]"
If the amendment to our certificate of incorporation is approved, the
corporate name change will become effective upon our filing of a certificate of
amendment with the Delaware Secretary of State, which filing will be made
promptly after the special meeting of stockholders.
VOTE REQUIRED
The affirmative vote of the holders of sixty-six and two-thirds percent (66
2/3%) of the outstanding shares of common stock (approximately 13,524,000
shares, based on 20,285,356 shares of common stock outstanding on February 11,
2003) will be required to approve the name change and amendment to our current
amended and restated certificate of incorporation.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF RPI RECOMMENDS A VOTE "FOR" APPROVAL OF THE NAME
CHANGE AND THE AMENDMENT TO OUR AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION.
PROPOSAL NUMBER FIVE
APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATION TO PERMIT
STOCKHOLDERS TO ACT BY WRITTEN CONSENT
INTRODUCTION AND BOARD RECOMMENDATION
Under our amended and restated certificate of incorporation as currently in
effect, stockholders are not permitted to act by written consent in lieu of a
meeting. On February 4, 2003, our board of directors approved an amendment to
the amended and restated certificate of incorporation, subject to stockholder
approval, to permit any action required or allowed to be taken by our
stockholders at any annual or special meeting to be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, is approved by the number of stockholders necessary to
authorize or take such action at a meeting at which all shares entitled to vote
on such action were present and voted.
The investors in the Private Placement are requiring us to solicit the
approval of the stockholders for this amendment to our amended and restated
certificate of incorporation because RPI is a public company, and convening
stockholder meetings is, therefore, an expensive and time-consuming process
under applicable laws and regulations. Since the investors in the Private
Placement will beneficially own or have holdings totaling approximately 87.8% of
our outstanding common stock upon consummation of the Private Placement and a
small number of stockholders will, therefore, be able to approve matters
requiring stockholder approval, the investors believe that approving corporate
action by written consent may, at times, be preferable to holding a special
meeting.
Although the investors in the Private Placement are requiring us to solicit
approval of Proposal Five, obtaining approval of Proposal Five is not a
condition to consummating the Private Placement. If we do not receive approval
for Proposal Five, we will nevertheless proceed with the Private Placement,
assuming all conditions to the Private Placement have either been satisfied or
waived. This is in contrast to our requirement to obtain approval for Proposal
One, Proposal Two, Proposal Three, Proposal Four and Proposal Six in order to
proceed with the Private Placement.
If we fail to receive approval for Proposal Five, we intend to seek
approval for the proposal at our annual meeting.
You should be aware that once we have amended our amended and restated
certificate of incorporation for this purpose, actions requiring stockholder
vote under applicable Delaware law may be taken without an actual meeting of
stockholders. Most actions that require stockholder approval under Delaware law
require either the affirmative vote of a majority of a corporation's
stockholders or the affirmative vote of 66 2/3% of a corporation's stockholders.
As a result, because the investors will own in aggregate 87.8% of our
outstanding common stock, if they choose to act together, they will be able to
effect most corporate actions requiring stockholder approval.
The amendment would be effected by filing an amended and restated
certificate of incorporation, substantially in the form attached as Annex B,
prior to the consummation of the Private Placement.
VOTE REQUIRED
The affirmative vote of the holders of 66 2/3% of the outstanding shares of
common stock (approximately 13,524,000 shares, based on 20,285,356 shares of
common stock outstanding on February 11, 2003) will be required to approve this
amendment to our current amended and restated certificate of incorporation to
permit stockholders to act by written consent in lieu of a meeting.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF RPI RECOMMENDS A VOTE "FOR" APPROVAL OF THE
AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO PERMIT STOCKHOLDERS TO ACT BY
WRITTEN CONSENT IN LIEU OF A MEETING.
PROPOSAL NUMBER SIX
APPROVAL OF AN AMENDMENT AND RESTATEMENT OF
THE COMPANY'S 2001 STOCK OPTION PLAN
Our board of directors and stockholders have previously adopted and
approved our 2001 Stock Option Plan. Under the terms of the 2001 Stock Option
Plan, 3,767,154 shares of common stock had been reserved for issuance. That
number includes the shares that were reserved for issuance under the 1996 Stock
Option Plan. Subsequently, our stockholders approved an additional 2,000,000
shares of common stock to be reserved for issuance at our 2002 annual meeting
held in May 2002. As of February 13, 2003, options to purchase 3,675,560 shares
of our common stock were outstanding under our 2001 Stock Option Plan and 1996
Stock Option Plan and 1,633,664 shares remained available for future option
grants and awards.
On February 4, 2003, our board of directors approved an amendment and
restatement of the 2001 Stock Option Plan, a copy of which is attached to this
proxy statement as Annex C, subject to stockholder approval. The amended and
restated 2001 Stock Option Plan provides, among other things, an increase in the
shares reserved for issuance thereunder by 34 million shares, bringing the total
number of shares currently issuable under the 2001 Stock Option Plan to a total
of 39,309,224 shares, including shares reserved under our 1996 Stock Option Plan
that are issuable under the 2001 Stock Option Plan, and a maximum limit, on the
number of shares that can underlie options granted to any individual during any
calendar year, of 12,000,000 shares. At this Special Meeting, stockholders are
being asked to approve the amendment and restatement of the 2001 Stock Option
Plan. If approved, this increase to the number of shares reserved for issuance
by 34 million shares, and the maximum individual limit of 12,000,000 shares,
would be proportionately adjusted for any changes to our capital structure,
including the reverse stock split described under Proposal Two of this proxy
statement.
Our board of directors also approved terminating our 1996 Stock Option Plan
and having its options covered under the 2001 Stock Option Plan. The amendment
and restatement of the 2001 Stock Option Plan accomplishes this purpose. As a
result, options that were issued to our employees pursuant to the 1996 Stock
Option Plan will remain subject to the terms and conditions of that Plan, but
will be covered by the 2001 Stock Option Plan. No new options may be granted
under the 1996 Stock Option Plan. We have decided to terminate our 1996 Stock
Option Plan in order to streamline and simplify the administration of our stock
option program.
With respect to the amendment and restatement of the 2001 Stock Option
Plan, we believe that grants of stock options motivate high levels of
performance and provide an effective means of recognizing employee contributions
to our success. At present, all newly hired full-time employees are granted
options. We believe that this policy will continue to be of great value in
recruiting and retaining highly qualified technical and other key personnel. Our
board of directors believes that the ability to grant options will be important
to our future success by helping us to remain competitive in attracting and
retaining such key personnel.
DESCRIPTION OF 2001 STOCK OPTION PLAN
The essential terms of the 2001 Stock Option Plan, as proposed to be
amended, are as follows:
PURPOSE
The purpose of the 2001 Stock Option Plan, among other things, is to (1)
attract and retain key officers, employees, directors and consultants, (2)
motivate such individuals by means of performance-related incentives to achieve
long-range performance goals, and (3) link their compensation to the long-term
interests of RPI and our stockholders. The 2001 Stock Option Plan will continue
in effect for its original term of ten years until 2011 unless terminated
earlier pursuant to the terms of the 2001 Stock Option Plan.
STOCK SUBJECT TO THE 2001 STOCK OPTION PLAN
The maximum aggregate number of shares of common stock that are reserved
under the 2001 Stock Option Plan is currently 5,309,224 shares, which includes
2,309,224 shares that had been reserved and are available for issuance under our
1996 Stock Option Plan. If this Proposal Six is approved by the stockholders,
the aggregate number of shares of common stock that may be granted under the
2001 Stock Option Plan will be 39,309,224 million shares. Since January 1, 2003,
we have granted a total of 30,710,000 options to our officers, employees and
consultants. This means that even after we increase the number of shares
available for option grants under the 2001 Stock Option Plan to 39,309,224
shares as part of this Proposal Six, we will have only 4,923,664 shares
remaining for future option grants. In addition to the foregoing aggregate Plan
limitation, the maximum number of shares that can be the subject of options
granted to any individual during any calendar year may not exceed 12,000,000
shares. The shares reserved under our 2001 Stock Option Plan may be authorized,
but unissued, or reacquired common stock. If an option expires or becomes
unexercisable without having been exercised in full, the unexercised shares that
were subject thereto will become available for future grant or sale under the
2001 Stock Option Plan. The closing price of our common stock on February 11,
2003 as reported by the Nasdaq National Market was $0.29 per share.
ADMINISTRATION
The 2001 Stock Option Plan is administered by a committee of the board of
directors. Subject to the provisions of the 2001 Stock Option Plan, the
committee has the authority, in its discretion:
o to accelerate the time at which all or any part of an option may be
settled or exercised;
o to determine the type or types of options to be granted;
o to select the employees, directors or consultants to whom options may
be granted under the 2001 Stock Option Plan;
o to determine the number of shares of common stock to be covered by or
with respect to which payments, rights, or other matters are to be
calculated in connection with each option granted under the 2001 Stock
Option Plan;
o to determine the terms and conditions of any option granted under the
2001 Stock Option Plan such as the exercise price, the time or times
when options or stock purchase rights may be exercised (which may be
based on performance criteria), any vesting acceleration or waiver of
forfeiture restrictions;
o to administer and interpret the terms of the 2001 Stock Option Plan
and options granted pursuant to the 2001 Stock Option Plan;
o to establish, amend, suspend or waive rules and regulations and
appoint such agents as deemed appropriate for the proper
administration of the 2001 Stock Option Plan;
o to modify or amend each option;
o to allow optionees to satisfy withholding tax obligations by electing
to have RPI withhold from the shares to be issued upon exercise of an
option that number of shares having a fair market value equal to the
amount required to be withheld;
o to authorize any person to execute on behalf of RPI any instrument
required to effect the grant of an option previously granted by the
administrator;
o to determine whether, or to what extent, and under what circumstances
options may be settled or exercised in cash, common stock, other
securities, other options or other property, or canceled, forfeited,
or suspended;
o to determine whether, to what extent, and under what circumstances
cash, common stock, other securities, other options or other property,
and other amounts payable with respect to an option shall be deferred
either automatically or at the election of the holder or of the
committee; and
o to make all other determinations and take any other action deemed
necessary or advisable for administering the 2001 Stock Option Plan.
ELIGIBILITY
All employees, directors and consultants are eligible to participate in the
2001 Stock Option Plan. Stock options intended to qualify as incentive stock
options within the meaning of Section 422 of the Internal Revenue Code may be
granted only to employees. Non-qualified stock options, which are options not
intended to qualify as incentive stock options, may be granted to employees,
directors and consultants of RPI. As of February 11, 2003, there were
approximately 70 employees, 4 directors, and 5 consultants.
TERMS AND CONDITIONS OF OPTIONS
Each option granted under the 1996 Stock Option Plan which becomes covered
under the 2001 Stock Option Plan will continue to be subject to its existing
terms and conditions. Each option granted pursuant to the 2001 Stock Option Plan
is evidenced by a written stock option agreement between the optionee and RPI
and is subject to the following terms and conditions:
TERM OF OPTION. The term of each option is stated in each option agreement.
In the case of an incentive stock option, the term is ten years from the date of
grant or such shorter terms as may be provided in the option agreement. In the
case of an incentive stock option granted to an optionee who, at the time the
incentive stock option is granted, owns stock representing more than ten percent
of the total combined voting power of all classes of stock of RPI or any parent
or subsidiary, the term of the incentive stock option is five years from the
date of grant or such shorter term as may be provided in the option agreement.
EXERCISE PRICE. The per share exercise price for the shares to be issued
pursuant to the exercise of an option is determined by the committee, subject to
the following: (i) in the case of an incentive stock option (A) granted to an
employee who, at the time the incentive stock option is granted, owns stock
representing more than ten percent of the voting power of all classes of stock
of RPI or any parent or subsidiary, the per share exercise price may be no less
than 110% of the fair market value per share on the date of grant and (B)
granted to any employee other than an employee described in (A) immediately
preceding, the per share exercise price may be no less than 100% of the fair
market value per share on the date of grant; (ii) in the case of a non-qualified
stock option, the per share exercise price may be determined by the committee;
and (iii) in the case of a non-qualified stock option intended to qualify as
"performance-based compensation" within the meaning of Section 162(m) of the
Internal Revenue Code, the per share exercise price may be no less than 100% of
the fair market value per share on the date of grant. Notwithstanding the
foregoing, any option may be granted with a per share exercise price of less
than 100% of the fair market value per share on the date of grant pursuant to a
merger or other corporate transaction.
FORM OF PAYMENT. The committee determines the acceptable form of payment of
the purchase price upon exercising an option, including the method of payment.
The 2001 Stock Option Plan provides that such payment may be made in:
o cash,
o cash equivalents,
o other shares of common stock owned for at least six months and having
a fair market value on the date of surrender equal to the aggregate
exercise price of the shares as to which such option is exercised,
together with any applicable withholding taxes,
o subject to applicable securities laws, a "cashless" exercise method
through a registered broker-dealer, or
o any combination of the foregoing methods of payment.
EXERCISE OF OPTION. Any option granted under the 2001 Stock Option Plan is
exercisable according to the terms of the 2001 Stock Option Plan and at such
times and under such conditions as determined by the committee and set forth in
the option agreement.
TERMINATION OF RELATIONSHIP AS A SERVICE PROVIDER. The committee has full
power and authority to determine the terms and conditions that apply to any
option upon the termination of employment of a participant in the Plan,
including a termination by us with or without cause, by a Plan participant
voluntarily or by reason of death, disability or retirement and may provide such
terms and conditions in the option agreement or in rules or regulations
prescribed by the committee. Unless the committee determines otherwise at the
time of grant, in the case of an option granted to an employee, if the
employee's status changes to a consultancy status, such change would be treated
as a termination for purposes of such option, except that the committee may, in
its sole discretion, determine the extent (if any) to which the option will
continue to vest and remain exercisable following such termination.
NON-TRANSFERABILITY OF OPTIONS
An option may not be sold, pledged, assigned, hypothecated, transferred, or
disposed of in any manner other than by will or by the laws of descent or
distribution or, with respect to a non-qualified stock option, as may be
provided by the committee in the option agreement.
GRANTS TO OUTSIDE DIRECTORS
The board of directors may provide that all or a portion of one or more
non-employee director's compensation (including members of the committee) be
payable in the form of non-qualified stock options. The board of directors shall
determine the terms and conditions of such options. The board of directors, not
the committee administers options granted to non-employee directors.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, MERGER OR ASSET
SALE
If there shall be declared and paid a stock dividend, or if the shares
shall be split-up, converted, exchanged, reclassified or in any way substituted
for, an appropriate and proportionate adjustment will be made in the price,
number and/or kind of security that is the subject of an outstanding option,
without changing the aggregate purchase price or value of the outstanding
options, and the shares available for grants under the 2001 Stock Option Plan
will be similarly adjusted. In other events involving a change in our corporate
structure, the committee may make such equitable adjustments as may be necessary
to prevent dilution or enlargement of the rights of the holders of outstanding
options. The committee, if it deems it appropriate, may adjust options granted
under the 2001 Stock Option Plan to prevent dilution or enlargement of benefits
or potential benefits intended to be made available under the 2001 Stock Option
Plan.
In the event of a change in control, if the surviving or acquiring entity
refuses to assume all options outstanding under the 2001 Stock Option Plan or
substitute similar options for those outstanding under the 2001 Stock Option
Plan, then the exercise period for all options held by employees, directors or
consultants will be accelerated prior to the change in control event. If the
accelerated options are not exercised at or before the change in control event,
the options will terminate upon the change of control event.
AMENDMENT AND TERMINATION OF THE STOCK OPTION PLAN
The board of directors may amend, alter, suspend, discontinue or terminate
the 2001 Stock Option Plan or any portion of the 2001 Stock Option Plan at any
time, except that stockholder approval must be obtained for any such action if
such approval is necessary to comply with any tax or regulatory requirement with
which the board of directors deems it desirable or necessary to comply. The
committee may waive any conditions or rights under, amend any terms of, or
alter, suspend, discontinue, cancel or terminate any option, either
prospectively or retroactively. The committee may not adversely affect the
rights of any option holder without the option holder's consent.
FEDERAL INCOME TAX CONSEQUENCES
INCENTIVE STOCK OPTIONS. An optionee who is granted an incentive stock
option does not recognize taxable income at the time the option is granted or
upon its exercise, although the exercise may subject the optionee to the
alternative minimum tax. Upon a disposition of the shares more than two years
after grant of the option and one year after exercise of the option, any gain or
loss is treated as long-term capital gain or loss. If these holding periods are
not satisfied, the optionee recognizes ordinary income at the time of
disposition equal to the difference between the exercise price and the lower of
(i) the fair market value of the shares at the date of the option exercise or
(ii) the sale price of the shares. Any gain or loss recognized on such a
premature disposition of the shares in excess of the amount treated as ordinary
income is treated as long-term or short-term capital gain or loss, depending on
the holding period. A different rule for measuring ordinary income upon such a
premature disposition may apply if the optionee is also an officer, director, or
10% stockholder of RPI. RPI is entitled to a deduction in the same amount as the
ordinary income recognized by the optionee.
NON-QUALIFIED STOCK OPTIONS. An optionee does not recognize any taxable
income at the time he or she is granted a non-qualified stock option. Upon
exercise, the optionee recognizes taxable income generally measured by the
excess of the then fair market value of the shares over the exercise price. Any
taxable income recognized in connection with an option exercise by an employee
of RPI is subject to tax withholding by RPI. RPI is entitled to a deduction in
the same amount as the ordinary income recognized by the optionee. Upon a
disposition of such shares by the optionee, any difference between the sale
price and the optionee's exercise price, to the extent not recognized as taxable
income as provided above, is treated as long-term or short-term capital gain or
loss, depending on the holding period.
The foregoing is only a summary of the effect of federal income taxation
upon optionees and RPI with respect to the grant and exercise of options under
the 2001 Stock Option Plan. It does not purport to be complete, and does not
discuss the tax consequences of the employee, director or consultant's death or
the provisions of the income tax laws of any municipality, state or foreign
country in which the employee, director or consultant may reside.
2001 STOCK OPTION PLAN BENEFITS TABLE
The grant of options under the 2001 Stock Option Plan to executive officers
is subject to the discretion of the compensation committee.
The following table sets forth certain information regarding stock options
granted (share numbers have not been adjusted to reflect the reverse stock
split) during the fiscal year ended December 31, 2002 to each of our executive
officers, all current executive officers as a group, all current directors (who
are not executive officers) as a group, and all other employees who participated
in the 2001 Stock Option Plan as a group:
NUMBER OF SECURITIES
NAME OF INDIVIDUAL AND POSITION UNDERLYING OPTION(#) DOLLAR VALUE($)(1)
Howard Robin
President and Chief Executive Officer 377,000 $ 0
Marvin Tancer
Vice President of Operations & Chief Financial Officer 197,500 $ 0
Nassim Usman
Vice President of Research & Development & Chief Scientific Officer
161,900 $ 0
Lawrence E. Bullock
Vice President of Finance & Administration 53,000 $ 0
All current executive officers as a group (4 persons) 789,400 $ 0
All current directors (who are not executive officers)
as a group (4 persons) 40,000 $ 0
All other employees as a group (not including consultants) 704,005 $ 0
- -----------------
(1) Calculated by determining the difference between the fair market value of
the securities underlying the option at January 31, 2003 ($0.25 per share) and
the exercise price of the option. None of the options granted during the fiscal
year ended December 31, 2002 have exercise prices below $0.25 per share.
Since January 1, 2003, we have granted a total of 30,710,000 options to our
officers, employees and consultants. This means that even after we increase the
number of shares available for option grants under the 2001 Stock Option Plan to
39,309,224 shares as part of this Proposal Six, we will have only 4,923,664
shares remaining for future option grants.
OPTIONS GRANTED IN CONNECTION WITH THE PRIVATE PLACEMENT
In connection with the Private Placement, the board of directors and the
compensation committee considered and approved, subject to stockholder approval,
contingent option grants to a number of our executive officers and employees.
All of these options were granted on February 11, 2003, the date on which we
entered into the purchase agreement. However, the options are contingent upon
the consummation of the Private Placement. All of the options are exercisable at
$0.35 per share.
The following table sets forth information regarding these stock options.
The share numbers have not been adjusted to reflect the reverse stock split.
NUMBER OF SECURITIES
NAME OF INDIVIDUAL AND POSITION UNDERLYING OPTION(#) DOLLAR VALUE($)(1)
Howard Robin
President and Chief Executive Officer 8,605,000 $0
Marvin Tancer
Vice President of Operations and Chief Financial Officer 2,790,000 $0
Nassim Usman
Vice President of Research and Development and Chief Scientific
Officer 2,825,000 $0
All current officers as a group (3 persons) 14,220,000 $0
All other employees as a group (not including consultants) 16,240,000 $0
- -----------------
(1) Calculated by determining the difference between the fair market value of
the securities underlying the options at February 11, 2003 and the exercise
price of the options, which is $0.35 per share.
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information as of December 31, 2002, the end
of our last fiscal year, about our common stock that may be issued upon the
exercise of options, warrants and rights under all of our existing equity
compensation plans and individual compensation arrangements, including our 1996
Stock Option Plan, 2001 Stock Option Plan, and 1996 Employee Stock Purchase
Plan.
NUMBER OF SECURITIES
REMAINING AVAILABLE FOR
NUMBER OF SECURITIES TO BE FUTURE ISSUANCE UNDER EQUITY
ISSUED UPON EXERCISE OF WEIGHTED-AVERAGE EXERCISE COMPENSATION PLANS
OUTSTANDING OPTIONS, PRICE OF OUTSTANDING OPTIONS, (EXCLUDING SECURITIES
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS(2) REFLECTED IN THE FIRST COLUMN)
Equity compensation
plans approved by
security
holders(1) 3,794,532 $4.55 1,542,139
(1) Number of securities to be issued and available for issuance under our 1996
Stock Plan, 2001 Stock Option Plan, and 1996 Employee Stock Purchase Plan.
(2) This number includes 27,447 shares of common stock available for future
issuance under our Employee Stock Purchase Plan.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the common stock votes
cast at the Special Meeting will be required to approve the amendment and
restatement of the 2001 Stock Option Plan.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF RPI RECOMMENDS A VOTE "FOR" APPROVAL OF THE
AMENDMENT AND RESTATEMENT OF OUR 2001 STOCK OPTION PLAN.
PROPOSAL NUMBER SEVEN
APPROVAL OF RESERVATION OF AN ADDITIONAL 5,000,000 SHARES OF COMMON STOCK
UNDER OUR EMPLOYEE STOCK PURCHASE PLAN
Our board of directors have previously approved our Employee Stock Purchase
Plan, a copy of which is attached to this proxy statement as Annex D . Under the
terms of the Employee Stock Purchase Plan, 600,000 shares of common stock were
reserved for issuance. The Employee Stock Purchase Plan provides our employees
with another means of participating in our growth.
In March 1996 we adopted an Employee Stock Purchase Plan, which authorizes
the issuance of up to 600,000 shares of our common stock to eligible employees.
Generally, each offering lasts for twenty-four months, and purchases are made on
each October 31 and April 30 during each offering. For example, the initial
offering began on April 11, 1996, and terminated on April 30, 1999. Common stock
is purchased for accounts of employees participating in the Employee Stock
Purchase Plan at a price per share equal to the lower of:
* 85% of the fair market value of a share of common stock on the date of
commencement of participation in the offering, or
* 85% of the fair market value of a share of common stock on the date of
purchase.
Generally, all regular employees, including executive officers, may participate
in the Employee Stock Purchase Plan and may authorize payroll deductions of up
to 15% of their base compensation for the purchase of common stock under the
Employee Stock Purchase Plan. Our board of directors has the authority to
terminate the Employee Stock Purchase Plan at its discretion. As of January 31,
2003, 572,553 shares had been issued pursuant to the Employee Stock Purchase
Plan.
On February 4, 2003 our board of directors approved an amendment to our
Employee Stock Purchase Plan, subject to stockholder approval, to increase the
number of shares reserved for issuance thereunder by a total of 5 million
shares. At this Special Meeting, stockholders are being asked to approve the
increase in the number of shares reserved for issuance under the Employee Stock
Purchase Plan by a total of 5,000,000 shares. If approved, this increase to the
number of shares reserved for issuance by 5,000,000 shares would be
proportionately adjusted for any changes to our capital structure, including the
reverse stock split described under Proposal Two of this proxy statement.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the common stock votes
cast at the Special Meeting will be required to approve the reservation of an
additional 5,000,000 shares of common stock under the Employee Stock Purchase
Plan.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF RPI RECOMMENDS A VOTE "FOR" APPROVAL OF THE
RESERVATION OF AN ADDITIONAL 5,000,000 SHARES OF COMMON STOCK UNDER THE EMPLOYEE
STOCK PURCHASE PLAN.
OTHER MATTERS
We know of no other matters to be submitted to the meeting. If any other
matters properly come before the meeting, it is the intention of the persons
named in the accompanying form of proxy to vote the shares they represent as the
board of directors may recommend.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
The SEC allows us to "incorporate by reference" information into this Proxy
Statement, which means that we can disclose important information to you by
referring you to another document that we filed separately with the SEC. The
information incorporated by reference is considered a part of this Proxy
Statement. Information in this Proxy Statement updates and, in some cases,
supersedes information incorporated by reference from documents that RPI has
filed with the SEC prior to the date of this Proxy Statement, while information
that we file later with the SEC will automatically update and, in some cases,
supersede the information in this Proxy Statement.
The following documents and information we previously filed with the SEC
are incorporated by reference into this Proxy Statement:
o RPI's Annual Report filed on Form 10-K/A for the fiscal year ended
December 31, 2001;
o RPI's Quarterly Report filed on Form 10-Q/A for the quarterly period
ended March 31, 2002;
o RPI's Quarterly Report filed on Form 10-Q/A for the quarterly period
ended June 30, 2002;
o RPI's Quarterly Report filed on Form 10-Q/A for the quarterly period
ended September 30, 2002;
o RPI's Current Report on Form 8-K filed on February 14, 2003.
In addition, all documents we file under Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act after the date of this Proxy Statement and before the date
of the special meeting are incorporated by reference into and deemed a part of
this Proxy Statement from the date of filing of those documents.
Documents incorporated by reference are available from us without charge,
excluding all exhibits unless we have specifically incorporated by reference an
exhibit in this Proxy Statement. You may obtain documents that we have filed
with the SEC and incorporated by reference in this document, without charge, by
making an oral or written request to RPI as follows:
Ribozyme Pharmaceuticals, Inc.
2950 Wilderness Place
Boulder, Colorado 80301
Telephone: (303) 449-6500
Facsimile: (305) 449-6995
Attention: Bharat Chowrira
THE BOARD OF DIRECTORS
Boulder, Colorado
March __, 2003
ANNEX A
RIBOZYME PHARMACEUTICALS, INC.
COMMON STOCK AND WARRANT PURCHASE AGREEMENT
FEBRUARY 11, 2003
TABLE OF CONTENTS
SECTION 1 Definitions.....................................................................................1
SECTION 2 Purchase and Sale of the Common Shares and Warrants at the Closing.............................11
2.1 Purchase and Sale of the Common Shares and Warrants at the Closing.............................11
2.2 Legends; Stop Transfer Orders..................................................................13
2.3 Voting Agreements..............................................................................13
SECTION 3 Representations and Warranties of the Company..................................................14
3.1 Organization; Qualification....................................................................14
3.2 Subsidiaries...................................................................................14
3.3 Capitalization.................................................................................14
3.4 Authorization; Validity of Agreement; Company Action...........................................15
3.5 Vote Required..................................................................................15
3.6 Consents and Approvals; No Violations..........................................................15
3.7 Reports and Financial Statements...............................................................16
3.8 Books and Records..............................................................................17
3.9 No Undisclosed Liabilities.....................................................................17
3.10 Interim Operations.............................................................................17
3.11 Absence of Certain Changes.....................................................................17
3.12 Litigation.....................................................................................19
3.13 Employee Benefit Plans.........................................................................19
3.14 Tax Matters....................................................................................21
3.15 Title to Properties; Encumbrances..............................................................22
3.16 Leases.........................................................................................23
3.17 Environmental Laws.............................................................................23
3.18 Intellectual Property..........................................................................23
3.19 Employment Matters.............................................................................26
3.20 Compliance with Laws and Agreements............................................................27
3.21 Contracts and Commitments......................................................................27
3.22 Regulatory Compliance..........................................................................28
3.23 Studies........................................................................................29
3.24 Rights Agreement; Delaware 203 Approval........................................................29
3.25 Absence of Questionable Payments...............................................................30
3.26 Insider Interests; Related-Party Transactions..................................................30
3.27 Brokers or Finders.............................................................................31
3.28 Not an Investment Company......................................................................31
3.29 Insurance......................................................................................31
3.30 Compliance With Securities Laws................................................................31
3.31 No Manipulation of Stock.......................................................................32
3.32 Offering Materials.............................................................................32
3.33 Registration Rights............................................................................32
3.34 Disclosure.....................................................................................32
SECTION 4 Representations, Warranties and Covenants of the Investors.....................................32
4.1 Authorization..................................................................................32
4.2 Investment Experience..........................................................................33
4.3 Investment Intent..............................................................................33
4.4 Registration or Exemption Requirements.........................................................33
4.5 No Legal, Tax or Investment Advice; No Reliance on Fairness Opinion............................33
SECTION 5 Conditions to Closing of the Investors.........................................................34
5.1 Conditions to Investors' Obligations at the Closing............................................34
SECTION 6 Conditions to Company's Obligations............................................................36
6.1 Conditions to Company's Obligations at the Closing.............................................36
SECTION 7 Covenants of the Company.......................................................................37
7.1 Registration Rights............................................................................37
7.2 Reports Under Exchange Act.....................................................................43
7.3 Assignment of Rights...........................................................................43
7.4 Stockholders' Meeting..........................................................................44
7.5 Proxy Statement................................................................................44
7.6 Election of Directors..........................................................................44
7.7 Nasdaq Listing.................................................................................46
7.8 Lock-Up........................................................................................46
7.9 D&O Insurance..................................................................................46
7.10 Indemnification Agreements; Charter Documents..................................................46
7.11 Board of Directors; Powers; Committees.........................................................47
7.12 Indemnification................................................................................48
7.13 Operation of Business..........................................................................49
7.14 No-Solicitation................................................................................49
7.15 Reasonable Efforts; Notification; Representations..............................................50
7.16 Participation Rights...........................................................................50
7.17 Executive Recruiting Firm......................................................................53
7.18 Management Compensation Plan...................................................................53
7.19 Waivers........................................................................................53
7.20 Board Observers................................................................................53
7.21 Third Party Offer..............................................................................54
SECTION 8 Termination....................................................................................55
8.1 Termination Events.............................................................................55
8.2 Effect of Termination..........................................................................55
SECTION 9 Miscellaneous..................................................................................56
9.1 Waivers and Amendments.........................................................................56
9.2 Governing Law..................................................................................56
9.3 Waiver of Jury Trial; Trial Costs..............................................................56
9.4 Survival.......................................................................................56
9.5 Successors and Assigns.........................................................................56
9.6 Entire Agreement...............................................................................57
9.7 Notices, etc...................................................................................57
9.8 Interpretation.................................................................................57
9.9 Severability of this Agreement.................................................................58
9.10 Counterparts...................................................................................58
9.11 Further Assurances.............................................................................58
9.12 Public Announcements...........................................................................58
9.13 Expenses.......................................................................................58
9.14 Company Disclosure Schedule....................................................................59
Exhibit A Schedule of Investors
Exhibit B Form of Warrant
Exhibit C Form of Opinion of Company Counsel
Exhibit D Form of Opinion of Intellectual Property Counsel
Exhibit E Form of Non-Competition and Non-Solicitation Agreement
Exhibit F-1 Officer's Certificate
Exhibit F-2 Secretary's Certificate
Exhibit G Form of Indemnification Agreement
Exhibit H-1 Form of Employment Agreement - C.E.O.
Exhibit H-2 Form of Employment Agreement - C.F.O.
Exhibit H-3 Form of Employment Agreement - Chief Scientific Officer
Schedules
Company Disclosure Schedule
Schedule A - Certain Strategic Partners
Schedule B - Identified Strategic Partner
Schedule 5.1(j) - List of Persons Executing Non-Competition Agreements
RIBOZYME PHARMACEUTICALS, INC.
COMMON STOCK AND WARRANT PURCHASE AGREEMENT
This Agreement (the "Agreement") is made as of February 11, 2003 by and
among Ribozyme Pharmaceuticals, Inc., a Delaware corporation (the "Company"),
and those investors listed on Exhibit A hereto (the "Investors").
SECTION 1
DEFINITIONS
"Accredited Investor" has the meaning set forth in Section 4.2.
"Action or Proceeding" has the meaning set forth in Section 7.12.
"Affiliate" shall have the meaning set forth in Rule 12b-2 of the rules and
regulations promulgated under the Exchange Act; provided, however, that for
purposes of this Agreement, the Investors and their respective Affiliates, on
the one hand, and the Company and its Affiliates, on the other, shall not be
deemed to be Affiliates of one another.
"Aggregate Purchase Price" has the meaning ascribed to it in Section
2.1(a)(i).
"Agreement" has the meaning ascribed to it in the forepart of this
Agreement.
"Alternative Proposal" has the meaning set forth in Section 7.14.
"Appointment Time" means the time any director is appointed or elected to
the Company's board of directors pursuant to Section 7.6.
"Associate" has the meaning set forth in Rule 12b-2 of the Exchange Act.
"Balance Sheet" means the most recent unaudited balance sheet of the
Company included in the Financial Statements, dated as of September 30, 2002.
"Balance Sheet Date" means the date of the Balance Sheet.
"Beneficially Own" or "Beneficial Ownership" shall have the meaning set
forth in Rules 13d-3 and 13d-5 of the rules and regulations promulgated under
the Exchange Act.
"Board Consent" has the meaning ascribed to it in Section 3.24.
"Business Day" means any day other than a Saturday, a Sunday or a day on
which commercial banks in The City of New York are (or are permitted or required
by law, rule, regulation, order or state of emergency to be) closed.
"Capitalization Threshold" means any negative effect, that either
individually or when considered in the aggregate together with other such
effects, exceed One Million Five Hundred Thousand Dollars ($1,500,000) on the
Company's capitalization, including the incurrence of additional indebtedness
but excluding any Transaction Accounting Charge, determined by comparing (i) the
Company's audited consolidated balance sheet as of December 31, 2002 against the
Company's unaudited balance sheet as of December 31, 2002 (including any related
notes and schedules) or (ii) the Company's actual capitalization as of the
Closing against the Company's projected capitalization at Closing (pursuant to
projections furnished to the Investors on the date hereof) (including any
related notes and schedules).
"Capitalization Trigger" means any negative effects, that either
individually or when considered in the aggregate together with other such
effects, exceed Five Hundred Thousand Dollars ($500,000) on the Company's
capitalization, including the incurrence of additional indebtedness but
excluding any Transaction Accounting Charge, as determined by comparing (i) the
Company's audited consolidated balance sheet at December 31, 2002 against the
Company's unaudited balance sheet at December 31, 2002 (including any related
notes and schedules) or (ii) the Company's actual capitalization at the Closing
against the Company's projected capitalization at the Closing (pursuant to
projections furnished to the Investors on the date hereof) (including any
related notes and schedules).
"Cash Flow Threshold" means any negative effects, that either individually
or when considered in the aggregate together with other such effects, exceed One
Million Five Hundred Thousand Dollars ($1,500,000) on the Company's cash flow,
excluding any Transaction Accounting Charge, as determined by comparing (i) the
Company's audited Financial Statements for the year ended December 31, 2002
against the Company's unaudited financial statements for the same period
(including any related notes and schedules) or (ii) the Company's actual cash
flow for the period from January 1, 2003 through the Closing to the Company's
projected cash flow for the same period (pursuant to projections furnished to
the Investors on the date hereof) (including any related notes and schedules).
"Cash Flow Trigger" means any negative effects, that either individually or
when considered in the aggregate together with other such effects, exceed Five
Hundred Thousand Dollars ($500,000) on the Company's cash flow, excluding any
Transaction Accounting Charge, as determined by comparing (i) the Company's
audited Financial Statements for the year ended December 31, 2002 against the
Company's unaudited financial statements for the same period (including any
related notes and schedules) or (ii) the Company's actual cash flow for the
period from January 1, 2003 through the Closing to the Company's projected cash
flow for the same period (pursuant to projections furnished to the Investors on
the date hereof) (including any related notes and schedules).
"Change in the Company Recommendation" has the meaning ascribed to it in
Section 7.4.
"Closing" means the closing referred to in Section 2.1(c).
"Closing Date" has the meaning ascribed to it in Section 2.1(c).
"Common Shares" has the meaning ascribed to it in Section 2.1(a)(i).
"Common Stock" means shares of the common stock, par value $0.01 per share,
of the Company.
"Company" has the meaning ascribed to it in the forepart of this Agreement.
"Company Agreement" means any note, bond, mortgage, indenture, lease,
license, contract, agreement, arrangement, or other instrument or obligation to
which the Company is a party or by which it or its properties or assets may be
bound.
"Company Benefit Plan" means any employee benefit fund, plan, program,
arrangement or contract (including any "pension" plan, fund or program, as
defined in Section 3(2) of ERISA, and any "employee benefit plan", as defined in
Section 3(3) of ERISA, and any plan, program, arrangement or contract providing
for severance; medical, dental or vision benefits; life insurance or death
benefits; disability benefits, sick pay or other wage replacement; vacation,
holiday or sabbatical; pension or profit-sharing benefits; stock options or
other equity compensation; bonus or incentive pay or other material fringe
benefits) of the Company, whether written or not.
"Company Copyrights" means all Copyrights owned by the Company as of the
date of this Agreement.
"Company Disclosure Schedule" means the disclosure letter, dated the date
of this Agreement, prepared and signed by the Company and delivered to the
Investors simultaneously with the execution of this Agreement.
"Company ERISA Affiliate" means any other person or entity under common
control with the Company within the meaning of Sections 414(b) or (c) of the
Code.
"Company Intellectual Property" means all Intellectual Property owned by
the Company as of the date of this Agreement.
"Company Material Adverse Effect" means any effect on the Company that is
materially adverse to the business, properties, assets, liabilities, results of
operation, or prospects of the Company, including a Qualifying Restatement,
provided, that none of the following shall be deemed, either alone or in
aggregate, to constitute a Company Material Adverse Effect, and none of the
following shall be taken into account in determining whether there has been or
would reasonably be expected to be a Company Material Adverse Effect: (a) any
change in the market price or trading volume of the Common Stock after the date
of this Agreement; (b) any adverse circumstance, change or effect resulting
directly from conditions affecting the industries in which the Company
participates in their entirety, the U.S. economy as a whole, or foreign
economies as a whole in any countries where the Company has material operations
or is conducting clinical trials; (c) any adverse circumstance, change or effect
resulting directly from the announcement or pendency of this Agreement, the
disclosure or filing of this Agreement or any other Transaction Documents with
the SEC, the Stockholders' Meeting, any announcement or disclosure after the
date hereof of the New Business Model or the Closing (including (i) any
Transaction Accounting Charge or (ii) any termination or breach of any partner
or similar strategic relationship with the entities listed on Schedule A and,
except as provided in sub-clause (d) below, the entity listed on Schedule B);
(d) failure, in any amounts less than the Cash Flow Trigger or the Income
Statement Trigger, by the Company to meet its internal cash flow calculations
and net operating income budget (on an accrual basis) covering the period from
January 1, 2003 to the Closing which were made available to the Investors
(provided, that, for purposes of determining such change, any Transaction
Accounting Charge(s) will not be taken into account, but, notwithstanding the
provisions of sub-clause (c) above, the effects of any termination or breach of
the relationship with the entity listed on Schedule B will be taken into
account); (e) the Company's actual reasonable investment banking and legal fees
in respect of this Agreement and the other agreements and transactions
contemplated hereby and thereby; (f) any adverse circumstance, change or effect
resulting directly from the taking of any action by the Company which this
Agreement requires the Company to take; (g) any adverse circumstance, change or
effect resulting directly from action by any Regulatory Authority, including the
FDA, other than any adverse circumstance, change or effect resulting directly
from the refusal of the FDA to file the Company's submissions for clinical or
safety issues; (h) any delisting of the Common Stock from Nasdaq; or (i) any
adverse circumstance, change or effect resulting, directly or indirectly, from
the announcement, suspension or withdrawal of the rights offering being
considered by the Company (as discussed with the Investors) if such rights
offering does not exceed $5,000,000.
"Company Notice" has the meaning ascribed to it in Section 7.16(c)(i).
"Company Option" means any security, right, subscription, warrant, option,
"phantom" stock right or other contract (other than the Company's Series A
Convertible Exchangeable Preferred Stock or Series B Convertible Exchangeable
Preferred Stock) that gives the right to (a) purchase or otherwise receive or be
issued any shares of capital stock or other equity interests of the Company or
any security of any kind convertible into or exchangeable or exercisable for any
shares of capital stock or other equity interests of the Company or (b) receive
any benefits or rights similar to any rights enjoyed by or accruing to the
holder of shares of capital stock or other equity interests of the Company,
including any rights to participate in the equity, income or election of
directors or officers of the Company.
"Company Patents" means all Patents owned by the Company as of the date of
this Agreement.
"Company Recommendation" has the meaning ascribed to it in Section 7.4.
"Company SEC Documents" means each form, report, schedule, statement and
other document filed or required to be filed by the Company since December 31,
1999 under the Exchange Act or the Securities Act, including any filed amendment
to such document, whether or not such amendment is required to be so filed, and,
solely with respect to "bringing down" the representations and warranties in
Section 3.7(a) and 3.21(a) pursuant to Section 5.1(a), any amendments to such
documents filed after the date of this Agreement, the Company's Annual Report on
Form 10-K for the year ended December 31, 2002, and each form, report, schedule,
statement or other document filed or required to be filed by the Company after
the date of this Agreement.
"Company's knowledge," "the knowledge of the Company" and similar phrases
incorporating the word "know" or "known" mean, with respect to any matter in
question, actual knowledge of such matter held by any member of the board of
directors or any member of the Management Team.
"Company Trademarks" means all Trademarks owned or licensed by the Company
as of the date of this Agreement.
"Company Trade Secrets" means all Trade Secrets owned by the Company as of
the date of this Agreement.
"Consent of the Investors" means the written consent of each of Oxford,
Sprout, and Venrock, as provided to the Company.
"Copyrights" means U.S. and foreign registered and unregistered copyrights
(including those in computer software and databases), moral rights, rights of
publicity and all registrations and applications to register the same.
"Delaying Party" has the meaning ascribed to it in Section 8.1(b).
"DGCL" means the General Corporation Law of the State of Delaware.
"Effectiveness Termination Date" has the meaning ascribed to it in Section
7.1(a)(i).
"Electing Party" has the meaning ascribed to it in Section 7.16(c)(i).
"Environmental Claim" means any claim, action, investigation or notice by
any Person or entity alleging potential liability for investigatory, cleanup or
governmental response costs, or natural resources or property damages, or
personal injuries, attorney's fees or penalties relating to (i) the presence, or
release into the environment, of any Materials of Environmental Concern at any
location owned or operated by the Company, now or in the past, or (ii) any
violation, or alleged violation, of any Environmental Law.
"Environmental Law" means each federal, state, local and foreign law and
regulation relating to pollution, protection or preservation of the environment,
human health or occupational health and safety, including ambient air, surface
water, groundwater, land surface or subsurface strata, and natural resources,
and including each law and regulation relating to emissions, discharges,
releases or threatened releases of Materials of Environmental Concern, or
otherwise relating to the generation, storage, containment (whether above ground
or underground), disposal, transport or handling of Materials of Environmental
Concern, and each law and regulation with regard to record keeping,
notification, disclosure and reporting requirements respecting Materials of
Environmental Concern, except to the extent relating to laws enforced by the
FDA.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the applicable rules and regulations of the SEC promulgated thereunder.
"FDA" means the United States Food and Drug Administration or any successor
agency.
"Financial Advisor" means Raymond James & Associates, Inc.
"Financial Statements" means each of the audited consolidated financial
statements and unaudited condensed interim financial statements of the Company
(including any related notes and schedules) included (or incorporated by
reference) in the Company SEC Documents.
"Force Majeure Event" means any of Sprout's, Venrock's or Oxford's failure
to fulfill its obligation to deliver its applicable Aggregate Purchase Price to
the Company at Closing either due to acts of God, terrorism, enemy or hostile
governmental action, civil commotion, fire or other casualty, or due to the
determination on the part of such Investor and its Affiliates not to continue
making investments and to cease operations.
"GAAP" means United States generally accepted accounting principles.
"Governmental Entity" means a court, arbitral tribunal, Regulatory
Authority, administrative agency, commission or other governmental or other
regulatory authority or agency, or any Person exercising the authority of any of
the foregoing.
"Holder" has the meaning ascribed to it in Section 7.8.
"Inbound License Agreement" has the meaning ascribed to it in Section
3.18(e).
"Income Statement Threshold" means any negative effects, that either
individually or when considered in the aggregate together with other such
effects, exceed One Million Five Hundred Thousand Dollars ($1,500,000) on the
Company's net operating income or net income, excluding any Transaction
Accounting Charge, as determined by comparing (i) the Company's audited
Financial Statements for the year ended December 31, 2002 against the Company's
unaudited financial statements for the same period (including any related notes
and schedules) or (ii) the Company's actual net operating income or net income
for the period from January 1, 2003 through the Closing to the Company's
projected net operating income or net income for the same period (on an accrual
basis and pursuant to projections furnished to the Investors on the date hereof)
(including any related notes and schedules).
"Income Statement Trigger" means any negative effect, that either
individually or when considered in the aggregate together with other such
effects, exceed Five Hundred Thousand Dollars ($500,000) on the Company's net
operating income or net income, excluding any Transaction Accounting Charge, as
determined by comparing (i) the Company's audited Financial Statements for the
year ended December 31, 2002 against the Company's unaudited financial
statements for the same period (including any related notes and schedules) or
(ii) the Company's actual net operating income or net income for the period from
January 1, 2003 through the Closing to the Company's projected net operating
income or net income for the same period (on an accrual basis and pursuant to
projections furnished to the Investors on the date hereof) (including any
related notes and schedules)
"IND" has the meaning ascribed to it in Section 3.22(c).
"Indemnification Agreement" has the meaning ascribed to it in Section 7.10.
"Indemnified Party" has the meaning ascribed to it in Section 7.1(d)(iii).
"Indemnifying Party" has the meaning ascribed to it in Section 7.1(d)(iii).
"Initiating Request" has the meaning ascribed to it in Section 7.1(g).
"Intellectual Property" means all of the following: Trademarks, Patents,
Copyrights, Trade Secrets and all Internet domain names.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended.
"Investor Counsel" has the meaning ascribed to it in Section 7.1(c)(ix).
"Investor Indemnitees" has the meaning ascribed to it in Section 7.12.
"Investors" has the meaning ascribed to it in the forepart of the
Agreement.
"Investors' Agents" has the meaning ascribed to it in Section 7.1(d)(i).
"IRS" means the United States Internal Revenue Service and any successor
agency performing similar functions under the Internal Revenue Code.
"Licenses" means all licenses and agreements pursuant to which the Company
has acquired rights in or to any Trademarks, Patents, or Copyrights, or licenses
and agreements pursuant to which the Company has licensed or transferred rights
to use any of the foregoing.
"Lock-Up Period" has the meaning ascribed to it in Section 7.8.
"Management Team" shall mean Howard Robin, Marvin Tancer, Nassim Usman,
Barry Polisky, Bharat Chowrira and Patti Ketchner.
"Materials of Environmental Concern" means any material or substance that
is designated by a governmental authority to be radioactive, toxic or hazardous
including petroleum products, asbestos and asbestos-containing materials,
polychlorinated biphenyls, radon and lead or lead-based paints and materials.
"Nasdaq" shall mean the Nasdaq National Market.
"Nasdaq Rules" means the rules and regulations adopted by the National
Association of Securities Dealers, Inc. concerning Nasdaq listed companies.
"NDA" has the meaning ascribed to it in Section 3.22(c).
"New Business Model" has the meaning ascribed to it in the definition to
Transaction Accounting Change.
"New Securities" has the meaning ascribed to it in Section 7.16(b).
"Nonpurchasing Investor" has the meaning ascribed to it in Section
7.16(c)(ii).
"Observer" has the meaning ascribed to it in Section 7.20.
"Outbound License Agreements" has the meaning ascribed to it in Section
3.18(e).
"Oxford" has the meaning ascribed to it in Section 7.6(b).
"Oxford Designee" has the meaning ascribed to it in Section 7.6(b).
"Participation Notice" has the meaning ascribed to it in Section
7.16(c)(i).
"Participation Right" has the meaning ascribed to it in Section 7.16(a).
"Patents" means issued U.S. and foreign patents and pending patent
applications, and any and all divisions, continuations, continuations-in-part,
reissues, reexaminations, and extension thereof, any counterparts claiming
priority therefrom, utility models, certificates of invention and like statutory
rights.
"Person" means any natural person, corporation, limited liability company,
partnership (general or limited), business trust, joint stock company, trust,
unincorporated association, joint venture, Governmental Entity or other entity
or organization.
"Pro Rata Share" has the meaning ascribed to it in Section 7.16(a).
"Proxy Statement" has the meaning ascribed to it in Section 7.5(a).
"Purchase Price" has the meaning ascribed to it in Section 2.1(a)(i).
"Qualifying Restatement" means any restatement of any Form 10-Q filed by
the Company with respect to any quarterly period in 2002 or 2003 or the Form
10-K filed by the Company for the year ending December 31, 2002 other than any
restatement (i) disclosed in the Disclosure Schedule or made prior to the date
hereof, (ii) not resulting primarily from the Company's failure to comply with
Regulation S-X of the Rules and Regulations of the SEC, or (iii) primarily
resulting from the New Business Model or any Transaction Accounting Charges.
"Registrable Securities" means the Common Shares, and any other shares of
Common Stock issued or issuable upon exercise of the Warrants (including the
additional warrants to be issued pursuant to Section 2.1(a)(ii)), and any other
shares of Common Stock issued as (or issuable upon the conversion or exercise of
any warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of such
shares.
"Registration Expenses" has the meaning ascribed to it in Section 7.1(b).
"Registration Statement" has the meaning ascribed to it in Section
7.1(a)(i).
"Regulatory Authority" means the FDA and any counterpart of the FDA outside
of the United States and other national, supra-national, regional, state and
local regulatory agency, department, bureau, commission, council and other
governmental entity with authority over the clinical testing, manufacture,
storage, distribution, sale and use of drug products.
"Representative" has the meaning set forth in Section 7.14.
"Resigning Director" has the meaning ascribed to it in Section 5.1(e).
"Restated Certificate" has the meaning ascribed to it in Section 5.1(i).
"Reverse Stock Split" means an amendment to the Company's certificate of
incorporation to effect a reverse stock split of the Common Stock whereby the
Company shall issue one new share of Common Stock in exchange for not less than
5 shares nor more than 15 shares of its outstanding Common Stock, or such other
number of shares of outstanding Common Stock as is mutually agreed upon by the
Company and the Investors.
"Rights Agreement" means the Rights Agreement between the Company and
American Stock Transfer & Trust Company, dated as of November 22, 2000.
"SEC" shall mean the U.S. Securities and Exchange Commission (or any
successor thereto).
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
applicable rules and regulations of the SEC promulgated thereunder.
"Selling Expenses" has the meaning ascribed to it in Section 7.1(b).
"Sprout" has the meaning ascribed to it in Section 7.6(a).
"Sprout Designee" has the meaning ascribed to it in Section 7.6(a).
"Stockholder Approval" means approval by stockholders holding a majority
(or other higher percentage that may be required by law or the Company's
certificate of incorporation, as amended, or certificates of designation, as
amended, or otherwise) of the outstanding Voting Stock, and of any other series
of stock having the right to a separate series vote, present, in person or by
proxy, at the Stockholders' Meeting or any other meeting of the Company's
stockholders duly convened, of: (i) the Transactions, including the sale and
issuance of the Common Shares and the Warrants (including the additional
warrants to be issued pursuant to Section 2.1(a)(ii)) to the Investors in
accordance with the terms of this Agreement, (ii) the Reverse Stock Split, (iii)
an amendment to the Company's certificate of incorporation providing for action
by written consent of the stockholders in lieu of a meeting, (iv) changing the
name of the Company to a name to be mutually agreed upon by the Company and the
Investors, and (v) amendments to the Company's 2001 Stock Option Plan and the
Company's 1996 Employee Stock Purchase Plan to merge the 1996 Stock Option Plan
into the 2001 Stock Option Plan and to increase the number of shares reserved
for issuance thereunder to a number of shares mutually determined by the Company
and the Investors; provided, however, that subclauses (iii) and (iv) above shall
be excluded from the definition of "Stockholder Approval" for purposes of
Section 5.1(g) and 6.1(b) herein.
"Stockholders' Meeting" has the meaning ascribed to it in Section 7.4.
"Subsidiary" means, with respect to any Person, any corporation or other
organization, whether incorporated or unincorporated, of which (a) at least a
majority of the securities or other interests having by their terms ordinary
voting power to elect a majority of the board of directors or others performing
similar functions with respect to such corporation or other organization is,
directly or indirectly, owned or controlled by such Person or by any one or more
of its Subsidiaries, or by such Person and one or more of its Subsidiaries or
(b) such Person or any other Subsidiary of such Person is a general partner or
managing member (excluding any such partnership or limited liability company
where such Person or any Subsidiary of such Person does not have a majority of
the voting interest in such partnership or limited liability company).
"Tax" and "Taxes" mean all taxes, charges, fees, duties, levies, penalties
or other assessments imposed by any federal, state, local or foreign
governmental authority, including income, gross receipts, excise, property,
sales, gain, use, license, custom duty, unemployment, capital stock, transfer,
franchise, payroll, withholding, social security, minimum estimated, and other
taxes, and shall include interest, penalties or additions attributable thereto.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Third Party Offer" has the meaning ascribed to it in Section 7.21.
"Title IV Plan" means a Plan that is subject to Section 302 or Title IV of
ERISA or Section 412 of the Internal Revenue Code.
"Trademarks" means U.S. and foreign registered and unregistered trademarks,
trade dress, service marks, logos, trade names, corporate names and all
registrations and applications to register the same.
"Trade Secrets" means all trade secrets, and, to the extent actually
protected as a trade secret under the law, computer software, databases, other
confidential information, technology, know-how, proprietary processes, systems,
or procedures, formulae, algorithms, models, user interfaces, customer lists,
inventions, discoveries, concepts, ideas, techniques, methods, source codes,
object codes, methodologies and, with respect to all of the foregoing, related
confidential data or information.
"Transaction Accounting Charge" means any mandated or recommended
accounting change or charge that is non-cash and that the Company demonstrates
relates directly and primarily from a change in the Company's business plan
discussed and contemplated by the parties hereto arising from the Transactions
("New Business Model").
"Transaction Documents" means this Agreement, the Warrant (including the
additional warrants to be issued pursuant to Section 2.1(a)(ii)) and the other
agreements and instruments to be executed pursuant to the terms of each such
agreements, each as amended, modified or restated from time to time.
"Transactions" means the transactions contemplated by this Agreement.
"Venrock" has the meaning ascribed to it in Section 7.6(c).
"Venrock Designee" has the meaning ascribed to it in Section 7.6(c).
"Venture Investors" has the meaning ascribed to it in Section 7.20.
"Voting Debt" shall mean any indebtedness of the Company having general
voting rights or any debt convertible into securities having such rights.
"Voting Stock" shall mean shares of Common Stock and any other securities
of the Company having the ordinary power to vote generally in the election of
members of the Company's board of directors.
"Warrant" has the meaning ascribed to it in Section 2.1(a)(ii).
SECTION 2
PURCHASE AND SALE OF THE COMMON SHARES AND WARRANTS AT THE CLOSING.
2.1 PURCHASE AND SALE OF THE COMMON SHARES AND WARRANTS AT THE CLOSING.
(a) Subject to the terms and conditions hereof, each Investor agrees,
severally and not jointly, to purchase at the Closing, and the Company agrees to
sell and issue to each Investor, severally and not jointly, at the Closing:
(i) that number of shares of Common Stock determined by dividing (aa)
the dollar amount set forth opposite such Investor's name on Exhibit A
hereto (the "Aggregate Purchase Price") by (bb) the per share purchase
price of $0.33 (the "Purchase Price"), rounded down to the nearest whole
number of shares (the shares of Common Stock so purchased, the "Common
Shares").
(ii) a warrant, in the form attached hereto as Exhibit B, exercisable
for that number of shares of Common Stock equal to 20% of the Common Shares
purchased by such Investor pursuant to Section 2.1(a)(i) above, at a per
share exercise price equal to $0.42 (each, a "Warrant"); provided, however,
the Company shall issue additional warrants to purchase an aggregate of
1,000,000 shares of Common Stock to the Investors on a pro rata basis based
on the original dollar amounts set forth on Exhibit A. All additional
warrants to be issued pursuant to the preceding proviso shall have the same
terms as the Warrants.
The number of Common Shares to be purchased by the Investors at the Closing
pursuant to Section 2.1(a)(i), and the Purchase Price applicable to such Common
Shares and per share exercise price and number of underlying shares of Common
Stock attributable to the Warrants (or the additional warrants to be issued
pursuant to Section 2.1(a)(ii)), shall be proportionately adjusted for any
subdivision or combination of Common Stock (by stock split, reverse stock split,
dividend, reorganization, recapitalization or otherwise, including the Reverse
Stock Split).
(b) In addition, the parties hereto agree as follows:
(i) if the Company is unable to satisfy the condition set forth in (1)
Section 5.1(a) because breaches of its representations and warranties
exceed the Income Statement Threshold, the Cash Flow Threshold or the
Capitalization Threshold or (2) Section 5.1(p), the applicable condition
will be deemed not to have been satisfied; provided, however, that if the
Investors waive either or both such conditions, the parties shall proceed
with the Closing, but the Purchase Price shall be adjusted downward by a
total of $0.05 per share (resulting in a Purchase Price of $0.28), and the
Company shall have no further liability to any Investor Indemnitee arising
out of, or in connection with, the failure of either or both of such
conditions except to the extent that any Losses of any Investor Indemnitee
arising out of or in connection with, directly or indirectly, any such
failure exceed, individually, or in the aggregate, $1,500,000;
(ii) if the Company is able to satisfy the condition set forth in
Section 5.1(a) because breaches of its representations and warranties do
not exceed the Income Statement Threshold, the Cash Flow Threshold or the
Capitalization Threshold, but any of the Income Statement Trigger, the Cash
Flow Trigger or the Capitalization Trigger has been exceeded, the condition
set forth in Section 5.1(a) will be deemed to have been satisfied, and the
parties shall proceed with the Closing, but the Purchase Price shall be
adjusted downward by $0.05 per share (resulting in a Purchase Price of
$0.28), and the Company shall have no further liability to any Investor
Indemnitee arising out of, or in connection with, the failure of such
condition except to the extent that any Losses of any Investor Indemnitee
arising out of, or in connection with, directly or indirectly, any such
failure exceed individually, or in the aggregate, $1,500,000;
(iii) if the Company is able to satisfy the condition set forth in
Section 5.1(a) because breaches of its representations and warranties do
not exceed the Income Statement Threshold, the Cash Flow Threshold or the
Capitalization Threshold, and none of the Income Statement Trigger, the
Cash Flow Trigger or the Capitalization Trigger has been exceeded, the
condition set forth in Section 5.1(a) will be deemed to have been
satisfied, and the parties shall proceed with the Closing, there shall be
no adjustment to the Purchase Price pursuant to this Section 2.1(b); and
(iv) the parties agree that the Purchase Price is subject to one of
the potential Purchase Price adjustments set forth in Sections 2.1(b)(i)
and 2.1(b)(ii) but shall not be subject to both potential Purchase Price
Adjustments.
(c) The closing of the purchase and sale of the Common Shares and the
Warrants (including the additional warrants to be issued pursuant to Section
2.1(a)(ii)) pursuant to this Agreement (the "Closing") shall take place at 10:00
a.m. at the offices of Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York,
New York 10038 or at such other place as shall be mutually agreed by the parties
on the second Business Day (the "Closing Date") after satisfaction in full of
the closing conditions set forth in Sections 5 and 6 herein, or waiver of any
such closing conditions pursuant to the terms therein, or at such other time and
place as may be agreed to by the Company and the Investors.
(d) At the Closing, subject to the terms and conditions hereof, the Company
shall deliver to each Investor a Warrant (including the additional warrants to
be issued pursuant to Section 2.1(a)(ii)) and a certificate representing the
Common Shares purchased by such Investor from the Company, dated as of the
Closing Date, against payment of the full amount of such Investor's Aggregate
Purchase Price by wire transfer of immediately available funds to the Company's
bank account, and the Company shall register the issuance and ownership of the
Common Shares and Warrants (including the additional warrants to be issued
pursuant to Section 2.1(a)(ii)) so purchased in the stockholders' registry and
books of the Company.
2.2 LEGENDS; STOP TRANSFER ORDERS.
(a) All certificates representing the Common Shares and shares of Common
Stock issued or issuable upon exercise of the Warrants (including the additional
warrants to be issued pursuant to Section 2.1(a)(ii)) shall bear the following
legends:
(i) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). SUCH SHARES MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF REGISTRATION OR AN EXEMPTION
THEREFROM. RIBOZYME PHARMACEUTICALS, INC. MAY REQUIRE AN OPINION OF
COUNSEL REASONABLY ACCEPTABLE TO IT THAT A PROPOSED TRANSFER OR SALE
IS IN COMPLIANCE WITH THE ACT."
(ii) "THE SALE, TRANSFER OR VOTING OF THE SHARES REPRESENTED BY
THIS CERTIFICATE IS RESTRICTED BY THE TERMS OF A STOCK PURCHASE
AGREEMENT BY AND AMONG RIBOZYME PHARMACEUTICALS, INC. AND THE
INVESTORS NAMED THEREIN. COPIES OF THE AGREEMENT MAY BE OBTAINED AT NO
COST BY WRITTEN REQUEST MADE BY THE HOLDERS OF RECORD OF THIS
CERTIFICATE TO THE SECRETARY OF RIBOZYME PHARMACEUTICALS, INC. AT THE
PRINCIPAL EXECUTIVE OFFICES OF RIBOZYME PHARMACEUTICALS, INC."
(iii) Any legend required by the blue sky or securities laws of
any State or jurisdiction to the extent such laws are applicable to
the shares represented by the certificate so legended.
(b) The certificates representing the Common Shares will be subject to a
stop transfer order with the Company's transfer agent that restricts the
transfer of such shares except in compliance with this Agreement.
(c) The Company acknowledges and agrees that an opinion of counsel shall
not be required upon the transfer by an Investor of any securities to an
Affiliate of said Investor.
2.3 VOTING AGREEMENTS. In order to induce the Investors to enter into this
Agreement and to consummate the Transactions, concurrently with the execution
and delivery of this Agreement, the members of the Management Team are executing
and delivering voting agreements in favor of the Investors.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Company Disclosure Schedule, and except as
expressly contemplated herein or hereby, the Company represents and warrants to
each Investor that:
3.1 ORGANIZATION; QUALIFICATION. The Company (a) is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation; (b) has all requisite corporate power and authority to carry on
its business as it is now being conducted and to own the properties and assets
it now owns; and (c) is duly qualified or licensed to do business as a foreign
corporation in good standing in every jurisdiction in which such qualification
is required except where failure to be so qualified or licensed or in good
standing would not reasonably be expected to have a Company Material Adverse
Effect. No proceeding has been instituted to revoke, limit or curtail such
power, authority, or qualification in any jurisdiction.
3.2 SUBSIDIARIES.
(a) The Company does not have any Subsidiaries.
(b) The Company does not own, directly or indirectly, any capital stock or
other equity securities of any corporation or have any direct or indirect equity
or ownership interest in any business or other Person, other than publicly
traded securities constituting less than five percent (5%) of the outstanding
equity of the issuing entity.
3.3 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of 60,000,000
shares of Common Stock and 5,000,000 shares of preferred stock, par value $0.01
per share. As of the date of this Agreement, (i) 20,285,356 shares of Common
Stock are issued and outstanding, (ii) no shares of Common Stock are issued and
held in the treasury of the Company, (iii) 25,000 shares of preferred stock are
designated as Series A Convertible Exchangeable Preferred Stock, 12,015 of which
are issued and outstanding, (iv) 25,000 shares of preferred stock are designated
as Series B Convertible Exchangeable Preferred Stock, 9,905 of which are issued
and outstanding, and (v) 5,309,224 shares of Common Stock are reserved for
issuance upon exercise of Company Options under the Company's stock option
plans. Section 3.3(a) of the Company Disclosure Schedule lists, as of the date
hereof, the holder of each outstanding Company Option, the number of shares of
Common Stock (or, if applicable, other capital stock) for which such Company
Option is exercisable, the exercise price of such Company Option, the extent to
which such Company Option will vest upon consummation of any of the Transactions
and the vesting schedule of such Company Option. All the outstanding shares of
the Company's capital stock are, and all shares of Common Stock which may be
issued pursuant to the exercise of outstanding Company Options will be, when
issued in accordance with the respective terms thereof, duly authorized, validly
issued, fully paid and nonassessable and have been issued in compliance with all
applicable federal, state and foreign securities laws. There is no Voting Debt
of the Company issued and outstanding. As of the date hereof, (x) there is no
capital stock of the Company authorized, issued or outstanding; (y) there is no
existing option, warrant, call, pre-emptive right, subscription or other right,
agreement, arrangement, understanding or commitment of any character, relating
to the issued or unissued capital stock of the Company, obligating the Company
to issue, transfer or sell or cause to be issued, transferred or sold any shares
of capital stock or Voting Debt of, or other equity interest in, the Company or
securities convertible into or exchangeable for such shares, equity interests or
Voting Debt, or obligating the Company to grant, extend or enter into any such
option, warrant, call, subscription or other right, agreement, arrangement or
commitment; and (z) there is no outstanding contractual obligation of the
Company to repurchase, redeem or otherwise acquire any shares of Common Stock,
or the capital stock of the Company, or to provide funds to make any investment
(in the form of a loan, capital contribution or otherwise) in any other Person.
(b) Other than the Voting Agreements, there is no voting trust or other
agreement or understanding to which the Company is a party with respect to the
voting of the capital stock of the Company.
(c) No indebtedness of the Company contains any restriction upon (i) the
prepayment of any indebtedness of the Company, (ii) the incurrence of
indebtedness by the Company, or (iii) the ability of the Company to grant any
lien on the properties or assets of the Company.
3.4 AUTHORIZATION; VALIDITY OF AGREEMENT; COMPANY ACTION. The Company has
all requisite corporate power and authority to execute and deliver this
Agreement and the Warrants (and the additional warrants to be issued pursuant to
Section 2.1(a)(ii)), to perform its obligations under this Agreement and the
Warrants (and the additional warrants to be issued pursuant to Section
2.1(a)(ii)) and to consummate the Transactions. The execution and delivery of
this Agreement by the Company and the performance by the Company of its
obligations under this Agreement and the consummation by the Company of the
Transactions, have been duly authorized by the Company's board of directors and,
except for obtaining Stockholder Approval as contemplated by Section 7.4, no
other corporate action on the part of the Company or its stockholders is
necessary to authorize the execution and delivery by the Company of this
Agreement or the Warrants (or the additional warrants to be issued pursuant to
Section 2.1(a)(ii)) or the consummation by it of the Transactions. This
Agreement and, as of the Closing, the Warrants (and the additional warrants to
be issued pursuant to Section 2.1(a)(ii)), have been duly executed and delivered
by the Company and, this Agreement, assuming due and valid authorization,
execution and delivery hereof by the Investors, is and, as of the Closing, the
Warrants (including the additional warrants to be issued pursuant to Section
2.1(a)(ii)) will be valid and binding obligations of the Company enforceable
against the Company in accordance with its and their respective terms.
3.5 VOTE REQUIRED. The affirmative vote of the holders of a 66 2/3% of the
outstanding shares of Common Stock present in person or by proxy at a meeting of
the Company's stockholders duly convened is the only vote of the holders of any
class or series of the Company's capital stock necessary to approve the
Transactions. No separate vote of any class or series of the Company's capital
stock is necessary to approve the Transactions.
3.6 CONSENTS AND APPROVALS; NO VIOLATIONS. None of the execution, delivery
or performance of this Agreement by the Company, the consummation by the Company
of the Transactions or compliance by the Company with any of the provisions of
this Agreement will (a) conflict with or result in any breach of any provision
of the certificate of incorporation, certificates of designation, the by-laws or
similar organizational documents of the Company, each as amended, (b) require
any material filing with, or permit, authorization, consent or approval of, any
Governmental Entity, (c) result in a material violation or breach of, or
constitute (with or without due notice or the passage of time or both) a default
(or give rise to any right of termination, amendment, cancellation or
acceleration or loss of any rights) under, any of the terms, conditions or
provisions of any Company Agreement, (d) violate any order, writ, injunction,
decree, or any material law, statute, rule or regulation applicable to the
Company, or any of its material properties or assets, or (e) except for any
restrictions on transfer generally arising under any applicable federal or state
securities law, result in the creation or imposition of (or the obligation to
create or impose) any mortgage, pledge, claim, lien, security interest,
encumbrance, restriction or charge of any kind upon the Company or any of its
properties or other assets.
3.7 REPORTS AND FINANCIAL STATEMENTS.
(a) The Company has filed in a timely manner with the SEC or Nasdaq,
as applicable, the Company SEC Documents. As of their respective dates (or, if
amended or superseded, as of the date of the last such amendment or superseding
report filed prior to the date of this Agreement), the Company SEC Documents,
including any financial statements or schedules included therein (i) did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading and (ii) complied in all material respects with the applicable
requirements of the Exchange Act and the Securities Act, as the case may be, and
the applicable rules and regulations of the SEC thereunder and of Nasdaq. The
Chief Executive Officer and the Chief Financial Officer of the Company have
signed, and the Company has furnished to the SEC, all certifications required by
Section 906 of the Sarbanes-Oxley Act of 2002; such certifications contain no
qualifications or exceptions to the matters certified therein and have not been
modified or withdrawn; and neither the Company nor any of it officers has
received notice from any Governmental Entity questioning or challenging the
accuracy, completeness, content, form or manner of filing or submission of such
certifications. Ernst & Young LLP, who have expressed its opinion and certified
the audited Financial Statements, are independent public accountants as required
by the Securities Act.
(b) Each of the Financial Statements has been prepared from, and is in
accordance with, the books and records of the Company. The Financial Statements
complied, as of their respective dates, in all material respects with applicable
accounting requirements and rules and regulations of the SEC. The Financial
Statements have been prepared in accordance with GAAP applied on a consistent
basis (except as may be indicated in the notes thereto and subject, in the case
of interim condensed financial statements, to normal, recurring and year-end
adjustments which were not and are not expected to be material in amount and the
absence of certain notes) and fairly present in all material respects as of
their respective dates (i) the financial position of the Company as of the dates
thereof and (ii) the results of operations, changes in stockholders equity and
cash flows of the Company for the periods presented therein.
3.8 BOOKS AND RECORDS. The books of account, minute books, stock record
books and other records of the Company are complete and correct in all material
respects and have been maintained in accordance with sound business practices
and the requirements of Section 13(b)(2) of the Exchange Act, including an
adequate system of internal controls. The minute books of the Company contain
accurate and complete records of all meetings held of, and corporate action
taken by, the stockholders, the Company's board of directors and committees of
the Company's board of directors, and no meeting of any of such stockholders,
the Company's board of directors or such committees has been held for which
minutes have not been prepared and are not contained in such minute books.
3.9 NO UNDISCLOSED LIABILITIES. Except (a) as disclosed in the Financial
Statements, and (b) for liabilities and obligations (absolute, accrued,
contingent or otherwise) incurred in the ordinary course of business and
consistent with past practice since the Balance Sheet Date, the Company does not
have any material liability or obligation of any nature, whether or not accrued,
contingent or otherwise that would be required by GAAP to be disclosed on a
balance sheet of the Company or in the notes thereto. The Company has not
created any entities or entered into any transactions or created any liabilities
or obligations of any nature, whether or not accrued, contingent or otherwise,
for the purpose of avoiding disclosure required by GAAP.
3.10 INTERIM OPERATIONS. Since the Balance Sheet Date, the business of the
Company has been conducted only in the ordinary and usual course consistent with
past practice. Since the date of the Balance Sheet, there has not been any
Company Material Adverse Effect.
3.11 ABSENCE OF CERTAIN CHANGES. Since the Balance Sheet Date, the Company
has not:
(a) suffered any Company Material Adverse Effect;
(b) incurred any liabilities or obligations (absolute, accrued,
contingent or otherwise) except non-material items incurred in the ordinary
course of business and consistent with past practice, none of which exceeds one
hundred thousand dollars ($100,000) (counting obligations or liabilities arising
from one transaction or a series of similar transactions, and all periodic
installments or payments under any lease or other agreement providing for
periodic installments or payments, as a single obligation or liability), or
increased, or experienced any change in any assumptions underlying or methods of
calculating, any bad debt, contingency or other reserves or allowances;
(c) paid, discharged or satisfied any claim, liability or obligation
(whether absolute, accrued, contingent or otherwise) other than the payment,
discharge or satisfaction in the ordinary course of business and consistent with
past practice of liabilities and obligations reflected or reserved against in
the Balance Sheet or incurred in the ordinary course of business and consistent
with past practice since the Balance Sheet Date;
(d) permitted or allowed any of its material properties or assets
(real, personal or mixed, tangible or intangible) to be subjected to any
mortgage, pledge, claim, lien, security interest, encumbrance, restriction or
charge of any kind, except for liens for current Taxes not yet due;
(e) cancelled any debt or waived any claim or right of substantial
value;
(f) sold, transferred, licensed, leased, pledged, mortgaged or
otherwise disposed of any of its material properties or assets (real, personal
or mixed, tangible or intangible) or any material amount of property or assets,
except in the ordinary course of business;
(g) disposed of or permitted to lapse any right to the use of any
Intellectual Property, or disclosed (other than to representatives of the
Investors and Persons subject to a nondisclosure agreement) any Intellectual
Property not yet a matter of public knowledge;
(h) granted any material increase or accrual in or accelerated, any
benefit or compensation payable or to become payable to any officer, director,
employee or consultant, including any such increase, accrual or acceleration
pursuant to any Company Benefit Plan except in connection with a promotion or
job change or any general increase in the compensation payable or to become
payable to officers, employees or directors in the ordinary course of business,
or entered into or amended in any material way any employment, material
consulting, severance, termination or material Company Benefit Plan agreement or
arrangement;
(i) made any single capital expenditure or commitment in excess of one
hundred thousand dollars ($100,000) for additions to property, plant, equipment
or intangible capital assets or made aggregate capital expenditures and
commitments in excess of one hundred thousand dollars ($100,000) for additions
to property, plant, equipment or intangible capital assets;
(j) declared, paid or set aside for payment any dividend or other
distribution in respect of its capital stock or redeemed, purchased or otherwise
acquired, directly or indirectly, any shares of capital stock or other
securities of the Company;
(k) made any change in any method of Tax or GAAP accounting or
accounting practice that would or would reasonably be expected to result in any
material change in the Financial Statements;
(l) paid, loaned or advanced any amount to, or sold, transferred or
leased any material properties or assets (real, personal or mixed, tangible or
intangible) to, or entered into any agreement or arrangement with, any member of
the Management Team or directors or employees, except for directors' fees, and
compensation to officers at rates not exceeding the rates of compensation set as
of January 1, 2003, which rates, if in excess of the rates of compensation paid
during the year ended December 31, 2002, are set forth in Section 3.11(l) of the
Company Disclosure Schedule;
(m) except as expressly required by this Agreement, (i) amended its
certificate of incorporation, certificates of designation, or by-laws or similar
organizational documents, (ii) issued, sold, transferred, pledged, disposed of
or encumbered any shares of any class or series of its capital stock or Voting
Debt, or securities convertible into or exchangeable for, or options, warrants,
calls, commitments or rights of any kind to acquire, any shares of any class or
series of its capital stock or any Voting Debt, other than shares of Common
Stock reserved for issuance on the date of this Agreement pursuant to the
Company's stock option plans, the exercise of any options to purchase Common
Stock outstanding on the date of this Agreement or existing agreements that
require the Company to issue shares of Common Stock, or (iii) redeemed,
purchased or otherwise acquired directly or indirectly any shares of any class
or series of its capital stock, or any instrument or security which consists of
or includes a right to acquire such shares (other than repurchases of restricted
stock at the original purchase price pursuant to agreements outstanding on the
date of this Agreement or entered into after the date of this Agreement in
compliance with the provisions hereof);
(n) terminated or modified or amended any of its material contracts or
waived, released or assigned any material rights under any material contract or
claims, except in the ordinary course of business and consistent with past
practice;
(o) revalued in any material respect any of its assets, including
writing down the value of inventory or writing-off notes or accounts receivable,
other than in the ordinary course of business consistent with past practice or
as required by GAAP;
(p) permitted any insurance policy naming it as a beneficiary or a
loss payable payee to be cancelled or terminated without notice to and the prior
Consent of the Investors, except policies providing coverage for losses not in
excess of fifty thousand dollars ($50,000);
(q) settled or compromised any pending or threatened suit, action or
claim that (i) relates to the Transactions or (ii) the settlement or compromise
of which would involve more than twenty-five thousand dollars ($25,000) or that
would otherwise be material to the Company, or that primarily relates to any
material Intellectual Property matter;
(r) adopted a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
of the Company; or (s) agreed, whether in writing or otherwise, to take any
action described in this section.
3.12 LITIGATION. There is no action, suit, proceeding or Government Entity
inquiry or investigation pending or, to the knowledge of the Company, threatened
against or involving, the Company or any of its properties or other assets, or
which questions or challenges the validity of this Agreement or any action taken
or to be taken by the Company pursuant to this Agreement or in connection with
the Transactions. There is no fact or circumstance known to the Company that
would reasonably be expected to give rise to any action, suit, proceeding,
inquiry, or investigation against, relating to or affecting the Company or any
of its properties or other assets. The Company is not subject to any judgment,
order or decree that materially restricts its business practices or its ability
to acquire any property or conduct its business in any area.
3.13 EMPLOYEE BENEFIT PLANS.
(a) Section 3.13 of the Company Disclosure Schedule lists each Company
Benefit Plan.
(b) With respect to each Company Benefit Plan, the Company has made
available to the Investors a true, complete and correct copy of (i) such Company
Benefit Plan (or, if not written, a written summary of its material terms) and
the most recent summary plan description and summary of material modifications,
if any, related to such Company Benefit Plan, (ii) each trust agreement or other
funding arrangement, (iii) the most recent annual report (Form 5500) filed with
the IRS) (and, if the most recent annual report is a Form 5500R, the most recent
Form 5500C filed with respect to such Company Benefit Plan), (iv) the most
recent actuarial report or financial statement, if applicable, (v) the most
recent determination letter, if any, issued by the IRS and any pending request
for a determination letter, if any, and (vi) each registration statement, permit
application and prospectus. Neither the Company nor, to the knowledge of the
Company, any other Person or entity, has any express or implied commitment,
whether legally enforceable or not, to continue (for any period), modify, change
or terminate any Company Benefit Plan, other than with respect to a
modification, change or termination required by ERISA or the Internal Revenue
Code.
(c) Each Company Benefit Plan has been administered in all material
respects in accordance with its terms and all applicable laws, including ERISA
and the Internal Revenue Code (including the prohibited transaction rules
thereunder), and contributions required to be made under the terms of any of the
Company Benefit Plans as of the date of this Agreement have been timely made or,
if not yet due, have been properly reflected on the Balance Sheet. No suit,
administrative proceeding, action or other adverse proceeding or claim is
currently pending or, to the Company's knowledge, threatened in writing against
or with respect to any such Company Benefit Plan (other than routine benefits
claims) and there is no pending audit or inquiry by the Internal Revenue Service
or United States Department of Labor with respect to any Company Benefit Plan.
To the knowledge of the Company, there exists no condition or set of
circumstances that could subject the Company to any material liability (other
than for routine benefit liabilities) relating in any way to any Company Benefit
Plan.
(d) Each Company Benefit Plan can be amended, discontinued or
terminated at any time in accordance with its terms, without liability (other
than (A) liability for ordinary administrative expenses typically incurred in a
termination event or (B) liabilities for which sufficient assets are set aside
in a trust or insurance contract to satisfy such liability or which are
reflected on the Balance Sheet).
(e) Each Company Benefit Plan and its related trust that is intended
to qualify under Section 401(a) or 4975(e)(7) and Section 501(a), respectively,
of the Internal Revenue Code has received a favorable determination letter from
the IRS as to such qualified status or has been established under a standardized
prototype plan for which an Internal Revenue Service opinion letter has been
obtained by the plan sponsor and was valid when issued as to the adopting
employer.
(f) No Company Benefit Plan is a multiemployer pension plan (as
defined in Section 3(37) of ERISA) or other pension plan subject to Title IV of
ERISA or the minimum funding rules of ERISA or the Internal Revenue Code and no
Company ERISA Affiliate has sponsored or contributed to or been required to
contribute to any such pension plan.
(g) With respect to each Company Benefit Plan required to be set forth
in the Company Disclosure Schedule that is subject to Title IV of ERISA or the
minimum funding rules of ERISA or the Internal Revenue Code, (i) no reportable
event (within the meaning of Section 4043 of ERISA, other than an event that is
not required to be reported before or within thirty (30) days of such event) has
occurred or is expected to occur, (ii) there was not an accumulated funding
deficiency (within the meaning of Section 302 of ERISA or Section 412 of the
Internal Revenue Code), whether or not waived, as of the most recently ended
plan year of such Company Benefit Plan; and (iii) there is no "unfunded benefit
liability" (within the meaning of Section 4001 (a) (18) of ERISA). No material
liability under Title IV of ERISA has been incurred by the Company or any other
Company ERISA Affiliate that has not been satisfied in full, and no condition
exists that presents a material risk to Company of incurring or being subject
(whether primarily, jointly or secondarily) to a material liability thereunder.
The assets of the Company are not the subject of any lien arising under ERISA or
Section 412(n) of the Internal Revenue Code.
(h) Except as required by law, no Company Benefit Plan provides any of
the following retiree or post-employment benefits to any person: medical,
disability or life insurance benefits. To the knowledge of the Company, the
Company is in compliance with (i) the requirements of the applicable health care
continuation and notice provisions of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, and (ii) the applicable requirements of
the Health Insurance Portability and Accountability Act of 1996, as amended.
(i) The Company has made available to the Investors true, complete and
correct copies of (i) all consulting agreements of the Company providing for
total annual compensation (including all salary and bonuses) in excess of one
hundred thousand dollars ($100,000) and all employment agreements with officers,
(ii) all severance plans, agreements, programs and policies of the Company with
or relating to their respective employees, directors or consultants, and (iii)
all plans, programs, agreements and other arrangements of the Company with or
relating to its employees, directors or consultants which contain "change of
control" provisions. The consummation of the Transactions will not, alone or in
conjunction with any other possible event (including termination of employment)
(i) entitle any current or former employee or other service provider of the
Company to severance benefits or any other payment, compensation or benefit
(including forgiveness of indebtedness), except as expressly provided by this
Agreement, or (ii) accelerate the time of payment or vesting, or increase the
amount of compensation or benefit due any such employee or service provider,
alone or in conjunction with any other possible event (including termination of
employment).
(j) The execution of this Agreement, and performance of the
Transactions, will not (either along with or upon the occurrence of any
additional or subsequent events) constitute an event under any Company Benefit
Plan or agreement that would reasonably be expected to result in any payment
(whether severance pay or otherwise), acceleration, vesting or increase in
benefits with respect to any employee, former employee or director of the
Company whether or not any such payment would be an "excess parachute payment"
(within the meaning of Section 280G of the Internal Revenue Code).
3.14 TAX MATTERS.
(a) The Company has duly and timely filed all Tax Returns that are
required to be filed, and has duly and timely paid or caused to be duly paid in
full all Taxes reflected on such Tax Returns. All such Tax Returns are correct
and complete in all material respects and accurately reflect all liability for
Taxes for the periods covered thereby. All material unpaid Taxes owed by the
Company relating to periods or portions of periods through the Balance Sheet
Date (whether or not shown on any Tax Return) are reflected on the Financial
Statements. Since the Balance Sheet Date, the Company has not incurred any
liability for any Taxes other than in the ordinary course of business. The
Company has not received written notice of any claim made by an authority in a
jurisdiction where the Company, does not file Tax Returns, that the Company is
or may be subject to taxation by that jurisdiction.
(b) The federal income Tax Returns of the Company have never been
audited by the Internal Revenue Service. The Company has not waived any statute
of limitations in any jurisdiction in respect of Taxes or Tax Returns or agreed
to any extension of time with respect to a Tax assessment or deficiency.
(c) No federal, state, local or foreign audit, examination or other
administrative proceeding is pending or, to the knowledge of the Company,
threatened in writing with regard to any Taxes or Tax Returns of the Company.
There is no dispute or claim concerning any Tax liability of the Company either
claimed or raised by any taxing authority in writing.
(d) The Company is not a party to any agreement, plan, contract or
arrangement that could result, separately or in the aggregate, in a payment of
any "excess parachute payments" within the meaning of Section 280G of the
Internal Revenue Code.
(e) The Company has not filed a consent pursuant to Section 341(f) of
the Internal Revenue Code (or any predecessor provision) concerning collapsible
corporations, or agreed to have Section 341(f)(2) of the Internal Revenue Code
apply to any disposition of a "subsection (f) asset" (as such term is defined in
Section 341(f)(4) of the Internal Revenue Code) owned by the Company.
(f) The Company has at no time been a "United States real property
holding corporation" within the meaning of Section 897(c) of the Internal
Revenue Code.
(g) The Company is not a party to any material Tax sharing, Tax
indemnity or other agreement or arrangement with any entity not included in the
Company's financial statements most recently filed by the Company with the SEC.
(h) The Company has not been a member of any affiliated group within
the meaning of Section 1504(a) of the Internal Revenue Code, or any similar
affiliated or group for Tax purposes under state, local or foreign law (other
than a group the common parent of which is the Company), or has any liability
for Taxes of any Person (other than the Company) under Treasury Regulation
Section 1.1502-6 (or any similar provision of state, local or foreign law), as a
transferee or successor, by contract or otherwise.
3.15 TITLE TO PROPERTIES; ENCUMBRANCES. The Company has good, valid and
marketable title to all the material properties and assets which it purports to
own (real, personal and mixed, tangible and intangible) and which are reflected
in the Balance Sheet, and all the material properties and assets purchased by
the Company since the date of the Balance Sheet, in each case free and clear of
all mortgages, title defects or objections, liens, claims, charges, security
interests or other encumbrances of any nature whatsoever including, leases,
chattel mortgages, conditional sales contracts, collateral security arrangements
and other title or interest retention arrangements, except, with respect to all
such properties and assets: (a) liens shown on the Balance Sheet as securing
specified liabilities or obligations, with respect to which no default exists;
(b) minor imperfections of title, if any, none of which are substantial in
amount, materially detract from the value or impair the use of the property
subject thereto, or impair the operations of the Company and which have arisen
only in the ordinary course of business and consistent with past practice since
the date of the Balance Sheet; and (c) liens for current Taxes not yet due. The
rights, properties and other assets presently owned, leased or licensed by the
Company and described elsewhere in this Agreement include all rights, properties
and other assets necessary to permit the Company to conduct its businesses in
all material respects in the same manner as its businesses have been conducted
prior to the date hereof.
3.16 LEASES. Section 3.16 of the Company Disclosure Schedule contains an
accurate and complete description of the terms of all material leases pursuant
to which the Company leases real or personal property. All such leases are
valid, binding and enforceable in accordance with their terms, and are in full
force and effect. To the Company's knowledge, there is no existing material
default by the Company thereunder, and no event has occurred which (whether with
or without notice, lapse of time or the happening or occurrence of any other
event) would constitute a material default thereunder.
3.17 ENVIRONMENTAL LAWS. (a) The Company is in compliance in all material
respects with all Environmental Laws, including compliance with any permits or
other governmental authorizations or the terms and conditions thereof, (b) the
Company has not received any written communication or notice (or, to the
knowledge of the Company, any verbal communication or notice), whether from a
governmental authority or otherwise, alleging any material violation of or
material noncompliance with any Environmental Laws by the Company, and there is
no pending or, to the knowledge of the Company, threatened material
Environmental Claim against the Company; and (c) to the knowledge of the
Company, there is no past or present fact or circumstance that could reasonably
be expected to result in any Environmental Claim against the Company or any
environmental liability of the Company which could reasonably be expected to
result in a Company Material Adverse Effect.
3.18 INTELLECTUAL PROPERTY.
(a) Section 3.18(a) of the Company Disclosure Schedule contains a true
and complete list of all of the Company Patents, registered Company Copyrights,
Company Trademarks, and the Company's Internet domain names.
(b) TRADEMARKS. To the Company's knowledge, all Company Trademark
registrations and any Trademarks that are the subject of an Inbound License
Agreement are currently in compliance in all material respects with all legal
requirements (including the timely post-registration filing of affidavits of use
and incontestability and renewal applications) other than any requirement that,
if not satisfied, would not result in a cancellation of any such registration or
otherwise materially affect the priority and enforceability of the Company
Trademark in question. To the Company's knowledge, no registered Company
Trademark or any Trademark that is the subject of an Inbound License Agreement
is now involved in any opposition or cancellation proceeding in the United
States Patent and Trademark Office. To the knowledge of the Company, no such
action has been threatened in writing within the one (1)-year period prior to
the date of this Agreement. To the knowledge of the Company, there has been no
prior use of any material Company Trademark or any Trademark that is the subject
of an Inbound License Agreement by any third party that confers upon said third
party superior priority to register such Company Trademark or Trademark that is
the subject of an Inbound License Agreement.
(c) PATENTS. To the Company's knowledge, all issued Company Patents
and any Patents that are the subject of an Inbound License Agreement are
currently in compliance with legal requirements (including payment of filing,
examination, and maintenance fees and proofs of working or use, if required by
law) other than any requirement that, if not satisfied, would not result in a
revocation or otherwise materially affect the enforceability of the Company
Patent or Patent that is the subject of an Inbound License Agreement in
question. To the Company's knowledge, no Company Patent or Patent that is the
subject of an Inbound License Agreement is now involved in any interference,
reissue or reexamination proceeding in the United States Patent and Trademark
Office. To the knowledge of the Company, no such action has been threatened
within the one (1)-year period prior to the date of this Agreement. To the
knowledge of the Company, there is no issued patent or patent application of any
third party that invalidates any claim of any issued Company Patent or Patent
that is the subject of an Inbound License Agreement.
(d) TRADE SECRETS. The Company has taken reasonable steps in
accordance with normal industry practice to protect its rights in the Company's
confidential information and its Trade Secrets, the secrecy of which is material
to the currently conducted and currently contemplated business of the Company.
Without limiting the generality of the foregoing, the Company generally enforces
a policy of requiring each relevant employee, consultant and contractor to
execute agreements that contain provisions designed to prevent unauthorized
disclosure of the Trade Secrets and all other confidential Intellectual Property
of the Company. With respect to employees, such agreements assign to the Company
all rights to any Intellectual Property relating to the Company's business that
is developed by the employee in the course of his or her activities as an
employee of the Company. With respect to contractors and consultants, the
agreements either assign all Intellectual Property rights developed pursuant to
the agreement, which the Company determined at the time was material to its
business or license such rights on agreed upon terms. Except under
confidentiality obligations, to the Company's knowledge, there has been no
disclosure by the Company, or any of its employees, consultants, or contractors
of any material Trade Secrets or other confidential Intellectual Property of the
Company.
(e) LICENSE AGREEMENTS. Section 3.18(e)(i) of the Company Disclosure
Schedule sets forth a complete and accurate list of all license agreements
granting to the Company any material right to incorporate any Intellectual
Property into any commercial product of the Company other than software
commercially available on reasonable terms to any person for a license fee of no
more than one hundred thousand dollars ($100,000) (collectively, the "Inbound
License Agreements"). Section 3.18(e)(ii) of the Company Disclosure Schedule
sets forth a complete and accurate list of all license agreements under which
the Company licenses or grants a third party material rights to incorporate any
rights under any Company Intellectual Property into any commercial product of
such third party (collectively, the "Outbound License Agreements"). To the
Company's knowledge, there is no material outstanding or, to the Company's
knowledge, threatened dispute or disagreement with respect to any Inbound
License Agreement or any Outbound License Agreement.
(f) OWNERSHIP. The Company owns or possesses adequate licenses or
other rights to use, free and clear of Liens, orders and arbitration awards, all
its material Intellectual Property used in its business, as it is currently
conducted and currently contemplated in the field of ribozymes, ribozyme
diagnostics, RNA interference (RNAi) involving small interfering nucleic acid
(siNA, including siRNA) molecules, and process development/cGMP manufacturing of
RNA and siNA, including siRNA. The Intellectual Property identified in Section
3.18(a) of the Company Disclosure Schedule, together with the Company's Trade
Secrets, unregistered copyrights, and the Company's rights under the licenses
granted to the Company under the Inbound License Agreements and any other
Intellectual Property owned by the Company or to which the Company has a license
or other right to use, constitute all the material Intellectual Property rights
used in the operation of the Company's business as it is currently conducted and
currently contemplated in the field of ribozymes, ribozyme diagnostics, RNAi
involving small interfering nucleic acid (siNA, including siRNA) and process
development/cGMP manufacturing of RNA and siNA, including siRNA and, to the
Company's knowledge, are all the Intellectual Property rights the Company is
likely to utilize to operate such business after the Closing in substantially
the same manner as such business (in the field of ribozymes, ribozyme
diagnostics, RNAi involving small interfering nucleic acid (siNA, including
siRNA) and process development/cGMP manufacturing of RNA and siNA, including
siRNA) has been operated by the Company prior thereto.
(g) PROTECTION OF IP. The Company has taken reasonable steps to
protect the material Intellectual Property of the Company.
(h) NO INFRINGEMENT BY THE COMPANY. To the Company's knowledge, none
of the products manufactured, marketed, used, sold or licensed by the Company
involving ribozymes, ribozyme diagnostics, RNAi involving small interfering
nucleic acid (siNA, including siRNA) and process development/cGMP manufacturing
of RNA and siNA, including siRNA and none of the Intellectual Property used by
the Company in the conduct of the Company's businesses as currently conducted
and currently contemplated in the field of ribozymes, ribozyme diagnostics, RNAi
involving small interfering nucleic acid (siNA, including siRNA) and process
development/cGMP manufacturing of RNA and siNA, including siRNA infringes upon,
violates or constitutes the unauthorized use of any valid and enforceable rights
owned or controlled by any third party.
(i) NO PENDING OR THREATENED INFRINGEMENT CLAIMS. No litigation to
which the Company is a party is now pending and, to the Company's knowledge, no
notice or other claim in writing has been received by the Company within the one
(1) year prior to the date of this Agreement, (i) alleging that the Company has
engaged in any activity or conduct that infringes upon, violates or constitutes
the unauthorized use of the Intellectual Property rights of any third party or
(ii) challenging the ownership, use, validity or enforceability of any
Intellectual Property owned by or exclusively licensed to or by the Company. To
the Company's knowledge, no Intellectual Property (y) that is owned by the
Company is subject to any outstanding order, judgment, decree, stipulation or
agreement materially restricting the use, sale, transfer, assignment or
licensing thereof by the Company, except as may be specifically provided in any
such Outbound License Agreement or other Licenses, or (z) that is the subject of
an Inbound License Agreement is, to the knowledge of the Company, subject to any
outstanding judgment, decree, stipulation or agreement materially restricting
the use, sale, transfer, assignment or licensing thereof by the Company, except
as provided in the Inbound License Agreements or other Licenses.
(j) NO INFRINGEMENT BY THIRD PARTIES. To the Company's knowledge, no
third party is misappropriating, infringing, diluting or violating any
Intellectual Property owned or licensed by the Company. No such claims have been
brought against any third party by the Company
(k) ASSIGNMENT; CHANGE OF CONTROL. The execution, delivery and
performance by the Company of this Agreement, and the consummation of the
Transactions, will not result in the loss or impairment of, or give rise to any
right of any third party to terminate or materially alter, any of the Company's
material rights to own any of its Intellectual Property or its material rights
under any Inbound License Agreement or Outbound License Agreement, nor require
the consent of any Governmental Authority or third party in respect of any such
Intellectual Property.
3.19 EMPLOYMENT MATTERS.
(a) The Company is in compliance in all material respects with all
currently applicable laws and regulations respecting employment, discrimination
in employment, terms and conditions of employment, wages, hours and occupational
safety and health and employment practices, and is not engaged in any unfair
labor practice. The Company has withheld all amounts required by law or by
agreement to be withheld from the wages, salaries, and other payments to
employees, and the Company is not liable for any arrears of wages or any Taxes
or any penalty for failure to comply with any of the foregoing. The Company is
not liable for any payment to any trust or other fund or to any governmental or
administrative authority, with respect to unemployment compensation benefits,
social security or other benefits or obligations for employees (other than
routine payments to be made in the normal course of business and consistent with
past practice). There is no pending claim against the Company under (i) any
workers compensation plan or policy or (ii) for long-term disability benefits.
There is no controversy pending or, to the knowledge of the Company, threatened,
between the Company and any of its employees which controversies have resulted,
or would result, in an action, suit, proceeding, claim, arbitration or
investigation before any agency, court or tribunal, foreign or domestic. The
Company is not a party to any collective bargaining agreement or other labor
union contract. To the Company's knowledge, no employees of the Company are in
violation of any term of any material employment contract, patent disclosure
agreement, noncompetition agreement, or any restrictive covenant to a former
employer relating to the right of any such employee to be employed by the
Company because of the nature of the business conducted or presently proposed to
be conducted by the Company or to the use of trade secrets or proprietary
information of others. No employee of the Company has given written notice to
the Company, and the Company is not otherwise aware, that any such employee
intends to terminate his or her employment with the Company.
(b) Section 3.19(b) of the Company Disclosure Schedule lists the name,
place of employment, the current annual salary rates, bonuses, deferred or
contingent compensation, pension, accrued vacation, "golden parachute" and other
like benefits paid or payable (in cash or otherwise), the date of employment and
a description of position and job function of each current salaried employee,
director, consultant of the Company, member of the Management Team, or Vice
President of the Company whose annual compensation exceeded (or, in 2003, is
expected to exceed) one hundred thousand dollars ($100,000).
(c) All officers, employees and consultants of the Company have signed
proprietary rights and confidentiality agreements in substantially the forms set
forth in Section 3.19(c) of the Company Disclosure Schedule.
3.20 COMPLIANCE WITH LAWS AND AGREEMENTS. The Company is in compliance in
all material respects with, and has not violated in any material respect any
applicable material law, rule or regulation of any United States federal, state,
local, or foreign Governmental Entity applicable to the Company, and no notice,
charge, claim, action or assertion has been received by the Company or has been
filed, commenced or, to the Company's knowledge, threatened against the Company
alleging any such violation. The Company has all licenses, permits and approvals
required under such laws, rules and regulations and such licenses, permits and
approvals are in full force and effect except where the failure to be in full
force and effect would not reasonably be expected to result in a Company
Material Adverse Effect.
3.21 CONTRACTS AND COMMITMENTS.
(a) Except for agreements, contracts and commitments filed as exhibits
to the Company SEC Documents, the Company does not have any agreements,
contracts and commitments which are material to the Company.
(b) No purchase contract or commitment of the Company continues for a
period of more than twelve (12) months or is in excess of the normal, ordinary
and usual requirements of business.
(c) The Company has no outstanding contracts with any officer,
employee, agent, consultant, advisor, salesperson, sales representative,
distributor or dealer that is not cancelable by it on notice of not longer than
thirty (30) days and without liability, penalty or premium or any agreement or
arrangement providing for the payment of any material bonus or commission based
on sales or earnings.
(d) The Company has no employment agreement, or any other similar
agreement that contains any severance or termination pay liabilities or
obligations.
(e) The Company is not in default under or in violation of, nor to the
Company's knowledge, is there any valid basis for any claim of default, under or
in violation of, any material Company Agreement.
(f) The Company is not restricted by agreement from carrying on its
business anywhere in the world.
(g) The Company does not have any debt obligations for borrowed money,
including any guarantee of or agreement to acquire any such debt obligation of
others, or any power of attorney outstanding or any obligation or liability
(whether absolute, accrued, contingent or otherwise) as guarantor, surety,
co-signer, endorser, co-maker, indemnitor or otherwise with respect to the
obligation of any Person, corporation, partnership, joint venture, association,
organization or other entity.
(h) All agreements, contracts, and commitments required to be filed by
the Company under the Exchange Act or the Securities Act have been filed in a
timely manner with the SEC.
3.22 REGULATORY COMPLIANCE.
(a) The Company is in material compliance with all statutes, rules and
regulations of any Regulatory Authority with respect to the evaluation, testing,
manufacturing, distributing and marketing of each of their products, in whatever
stage of development, to the extent that the same are applicable to the
Company's business as it is currently conducted and proposed to be conducted in
applications heretofore filed with Regulatory Authorities, including those
relating to investigational use, premarket clearance, current "Good
Manufacturing Practices", current "Good Laboratory Practices", current "Good
Clinical Practices" labeling, advertising, record keeping, reporting of adverse
events, filing of reports and security.
(b) Section 3.22(b) of the Company Disclosure Schedule sets forth a
true, complete and accurate list of the products that are currently being
developed, tested, manufactured, marketed, distributed, sold or licensed in or
out by the Company as of the date of this Agreement.
(c) Section 3.22(c) of the Company Disclosure Schedule sets forth a
true, complete and accurate list of each of the Company's pending and approved
New Drug Applications ("NDAs"), Investigational New Drug Applications ("INDs")
and similar state and foreign regulatory filings as of the date of this
Agreement. True and complete copies of such NDAs, INDs and similar regulatory
filings, including all supplements, amendments, and annual reports, have
heretofore been made available to the Investors. True and complete copies of all
correspondence from the FDA, and similar state and foreign Regulatory
Authorities, and the Company's responses have heretofore been made available to
the Investors. As to each drug for which such an application has been approved
or become effective, the Company is in substantial compliance with 21 U.S.C.
Section 355 or 21 C.F.R. Parts 312, and 314 et seq., respectively, and similar
state and foreign laws and regulations and all terms and conditions of such
applications. As to each such drug, the Company, and its officers, employees,
agents and representatives have included in the application for such drug, where
required, the certification described in 21 U.S.C. Section 335a(k)(1) and any
similar state and foreign law and regulation and the list described in 21 U.S.C.
Section 335a(k) (2) and any similar state and foreign law and regulation, and
such certification and such list was in each case true and accurate when made
and remained true, complete and accurate thereafter. In addition, the Company is
in substantial compliance with all applicable registration and listing
requirements set forth in 21 U.S.C. Section 360 and 21 C.F.R. Part 207 and all
similar state and foreign laws and regulations.
(d) Section 3.22(d)(i) of the Company Disclosure Schedule sets forth a
true, complete and accurate list of (A) Form 483s, (B) Notices of Adverse
Findings and (C) warning letters or other correspondence from the FDA and other
Regulatory Authorities in which the FDA or any such authority asserted that the
operations of the Company may not be in compliance with applicable laws,
regulations, orders, judgments or decrees, in each case received by the Company
from the FDA or any such authority and the response of the Company to the FDA
and/or any such authority to such notices from the FDA and/or any such
authority. True and complete copies of such Form 483s, Notices of Adverse
Findings, warning letters and other correspondence and the Company's responses
have heretofore been made available to the Investors. All operations of the
Company have been and are being conducted in substantial compliance with all FDA
requirements as summarized in Section 3.22(a) above.
(e) The Company has made available to the Investors all Adverse
Reaction Reports filed by the Company with all Regulatory Authorities with
respect to its Phase I and Phase II studies.
(f) Neither the Company nor any officer, employee or agent of the
Company has made an untrue statement of a material fact or fraudulent statement
to the FDA or any other Regulatory Authority or other Governmental Entity,
failed to disclose a material fact required to be disclosed to the FDA or any
other Regulatory Authority or other Governmental Entity, or committed an act,
made a statement, or failed to make a statement that, at the time such
disclosure was made, could reasonably be expected to provide a basis for the FDA
or any other Regulatory Authority or other Governmental Entity to invoke its
policy respecting Fraud, Untrue Statements of Material Facts, Bribery, and
Illegal Gratuities, set forth in 56 Fed. Reg. 46191 (September 10, 1991) or any
similar policy. Neither the Company nor, to the knowledge of the Company, any
officer, any employee or agent, acting on behalf of the Company, has been
convicted of any crime or engaged in any conduct for which debarment is mandated
by 21 U.S.C. Section 335a(a) or any similar state or foreign law or regulation
or for which debarment is authorized by 21 U.S.C. Section 335a(b) or any similar
state or foreign law or regulation.
3.23 STUDIES. The clinical, preclinical, safety and other studies and tests
conducted by or on behalf of or sponsored by the Company or in which the Company
or the Company's products or product candidates under development have
participated, were and, if still pending, are being conducted in material
compliance with, and the Company has operated within and is in material
compliance with, all applicable rules, regulations and policies of the FDA and
other Regulatory Authorities. The Company has not received any notices or other
correspondence from the FDA, other Regulatory Authorities, or any other
Governmental Entity requiring the termination, suspension, modification, or
withdrawal of any clinical, pre-clinical, safety or other studies or tests.
3.24 RIGHTS AGREEMENT; DELAWARE 203 APPROVAL. The Company has taken all
action necessary under the Rights Agreement, so that the execution of this
Agreement and any amendments thereto by the parties hereto and the consummation
of each of the Transactions shall not cause a Distribution Date, a Stock
Acquisition Date or a Flip-in Event or Flip-over Event (as such terms are
defined in the Rights Agreement) to occur. Prior to the date of this Agreement,
the Company's board of directors, at a meeting duly called and held, has (a)
determined that the Agreement and the Transactions are fair to, advisable and in
the best interests of the Company and the stockholders of the Company, (b)
approved the Transactions, and (c) resolved to recommend that the stockholders
of the Company approve the Transactions. The action taken by the Company's board
of directors constitutes approval of the Transactions under the provisions of
Section 203 of the DGCL such that Section 203 of the DGCL does not apply to this
Agreement or the Transactions, and such approval has not been amended, rescinded
or modified. No other state takeover, antitakeover, moratorium, fair price,
interested stockholder, business combination or similar statute or rule is
applicable to the Transactions. If any state takeover statute other than Section
203 of the DGCL becomes or is deemed to become applicable to this Agreement or
the Transactions, the Company shall take all reasonable action necessary to
render such statute inapplicable to all of the foregoing. On or prior to the
date of this Agreement, (i) each of the Resigning Directors has submitted
written resignations from the boards of directors of the Company and all
committees thereof, effective as of, and subject only to the occurrence of, the
Closing, and (ii) the Company's board of directors has appointed to the
Company's board of directors the Oxford Designee, the Sprout Designees and the
Venrock Designee, effective immediately following, and subject only to the
occurrence of, the Closing and the effectiveness of the resignations of their
respective predecessors (the "Board Consent"), a copy of each such resignation
and the Board Consent having been delivered to the Investors and their counsel.
3.25 ABSENCE OF QUESTIONABLE PAYMENTS. Neither the Company, nor to the
Company's knowledge, any director, officer, agent, employee or other Person
acting on behalf of the Company has used any corporate or other funds for any
unlawful contribution, payment, gift, or entertainment, or made any unlawful
expenditure relating to political activity to government officials or others or
established or maintained any unlawful or unrecorded funds in violation of
Section 30A of the Exchange Act. Neither the Company, nor to the Company's
knowledge, any current director, officer, agent, employee or other Person acting
on behalf of the Company, has accepted or received any unlawful contribution,
payment, gift or expenditure. The Company is in compliance with the provisions
of Section 13(b) of the Exchange Act.
3.26 INSIDER INTERESTS; RELATED-PARTY TRANSACTIONS. Except for inventors
who have assigned their patent rights to the Company and which assignments have
been filed with the United States Patent and Trademark Office, to the Company's
knowledge no executive officer or director of the Company has any material
interest in any material property, real or personal, tangible or intangible,
including any invention, patent, trademark or trade name, used in or pertaining
to the business of the Company. Section 3.26 of the Company Disclosure Schedule
sets forth a true, complete and correct list, as of the date hereof, of any
transaction, arrangement or relationship involving an amount of $50,000 or more
that any director, officer or other affiliate of the Company has or has had in
the last three (3) years, directly or indirectly relating to, (i) an economic
interest in, or the right to receive an economic benefit from, any person that
has furnished or sold, or furnishes or sells, services or products that the
Company furnishes or sells, or proposes to furnish or sell, or (ii) an economic
interest in, or the right to receive an economic benefit from, any person that
purchases from or sells or furnishes to, the Company, any goods or services;
provided, however, that ownership of no more than one percent (1%) of the
outstanding voting stock of a publicly traded corporation shall not be deemed an
"economic interest in, or the right to receive an economic benefit from, any
person" for purposes of this Section 3.26.
3.27 BROKERS OR FINDERS. No agent, broker, investment banker, financial
advisor or other firm or Person is or will be entitled to any brokers' or
finder's fee or any other commission or similar fee payable by the Company in
connection with any of the Transactions except for amounts paid or payable to
the Financial Advisor. The Company has no liabilities or obligations (absolute,
accrued, contingent or otherwise) to the Financial Advisor except as set forth
in the amended and restated engagement letter between the Company and the
Financial Advisor, which letter is included in Section 3.27 of the Company
Disclosure Schedule.
3.28 NOT AN INVESTMENT COMPANY. The Company is not, and after giving effect
to, but only giving effect to, the offering and sale of the Common Shares and
Warrants (including the additional warrants to be issued pursuant to Section
2.1(a)(ii)) (without consideration to the application of the proceeds, other
than to the extent such proceeds are used for internal research and development,
working capital or operating expenses) will not be required to register as an
"investment company" as such term is defined in the Investment Company Act of
1940, as amended.
3.29 INSURANCE. The Company is insured by insurance providers that, to the
Company's knowledge, are financially sound and reputable. The Company is insured
by such providers with policies in such amounts and with such deductibles and
covering such risks as are generally deemed adequate and customary for the
business of the Company, including worker's compensation insurance, directors'
and officers' liability insurance and policies covering real and personal
property owned or leased by the Company against loss, theft, damage,
destruction, acts of vandalism fire and earthquakes and general liability. The
Company believes that it will be able to renew its existing insurance coverage
as and when such policies expire or to obtain comparable coverage from similar
institutions as may be necessary or appropriate to conduct its business as now
conducted and at a cost that would not result in a Company Material Adverse
Effect. The Company has not been denied any insurance coverage which it has
sought or for which it has applied. The Company does not have any liability for
which any claim may be made against the Company's insurance policies and, to the
Company's knowledge, no event or circumstance has occurred which is likely to
result in such claim.
3.30 COMPLIANCE WITH SECURITIES LAWS. Assuming the accuracy of the
representations and warranties of the Investors set forth in Section 4 hereof,
the offer and sale by the Company of the Common Shares and any Warrants
(including the additional warrants to be issued pursuant to Section 2.1(a)(ii))
contemplated hereunder is exempt from (i) the registration and prospectus
delivery requirements of the Securities Act and (ii) the registration
requirements of all applicable state securities and "blue sky" laws. The Company
has not issued, offered or sold any shares of Common Stock (including for this
purpose any securities of the same or a similar class as the Common Stock or any
securities convertible into or exchangeable or exercisable for the Common Stock)
within the six (6) month period preceding the date hereof or taken any other
action, or failed to take any action, that, in any such case, would (i)
eliminate the availability of the exemption from registration under Regulation D
under the Securities Act in connection with the offer and sale of the Common
Shares as contemplated hereby or (ii) cause the offering of the Common Shares
pursuant to this Agreement to be integrated with prior offerings by the Company
for purposes of the Securities Act. The Company shall not directly or indirectly
take, and shall not permit any of its directors, or officers indirectly to take,
any action (including any offering or sale to any person or entity of the Common
Shares or any Common Stock) that will make unavailable the exemption from
registration under the Securities Act being relied upon by the Company for the
offer and sale to the Investors of the Common Shares as contemplated by this
Agreement, including the filing of a registration statement under the Securities
Act. No form of general solicitation or advertising within the meaning of Rule
502(c) under the Securities Act has been used or authorized by the Company or
any of its officers or directors in connection with the offer or sale of the
Common Shares or the Warrants (including the additional warrants to be issued
pursuant to Section 2.1(a)(ii)) as contemplated by this Agreement or any other
agreement to which the Company is a party.
3.31 NO MANIPULATION OF STOCK. The Company has not taken, nor will take, in
violation of applicable law, any action designed to or that might reasonably be
expected to cause or result in unlawful manipulation of the price of the Common
Stock, including to facilitate the sale or resale of the Common Shares.
3.32 OFFERING MATERIALS. The Company has not distributed and the Company
will not distribute prior to the Closing Date any offering material in
connection with the offering and sale of the Common Shares.
3.33 REGISTRATION RIGHTS. There are no registration or other similar rights
to have any securities registered under the Registration Statement and no other
registration rights exist with respect to the issuance or registration of the
Common Shares by the Company under the Securities Act which have not been
satisfied.
3.34 DISCLOSURE. To the Company's knowledge, after due and reasonable
investigation, no representation or warranty made by the Company contained in
this Agreement and no statement contained in the Company Disclosure Schedule or
in or any exhibit or schedule to this Agreement contains any untrue statement of
a material fact or omits to state a material fact necessary in order to make the
statements herein or therein, in the light of the circumstances under which they
were made, not misleading.
SECTION 4
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTORS
Each Investor, severally and not jointly, hereby represents and warrants to
the Company as follows:
4.1 AUTHORIZATION. (i) Such Investor has all requisite legal and corporate
or other power and capacity and has taken all requisite corporate or other
action to execute and deliver this Agreement, to purchase the Common Shares and
Warrant (including the additional warrants to be issued pursuant to Section
2.1(a)(ii)) to be purchased by it and to carry out and perform all of its
obligations under this Agreement; and (ii) this Agreement constitutes the legal,
valid and binding obligation of such Investor, enforceable in accordance with
its terms, except (A) as limited by applicable bankruptcy, insolvency,
reorganization, or similar laws relating to or affecting the enforcement of
creditors' rights generally and (B) as limited by equitable principles
generally.
4.2 INVESTMENT EXPERIENCE. Such Investor is an "Accredited Investor" as
defined in Rule 501(A) under the Securities Act. Such Investor is aware of the
Company's business affairs and financial condition and has had access to due
diligence information, and the opportunity to ask questions of, and receive
answers from, representatives of the Company, in each case concerning the
finances, operations, and business of the Company, and has acquired sufficient
information about the Company to reach an informed and knowledgeable decision to
acquire the Common Shares and Warrant (including the additional warrants to be
issued pursuant to Section 2.1(a)(ii)). Such Investor has such sophistication,
knowledge and experience in financial and business matters so as to be capable
of evaluating the merits and risks of investing in the Company, and has the
ability to bear the economic risks of investing in the Company, including a
complete loss of such investment.
4.3 INVESTMENT INTENT. Such Investor is purchasing the Common Shares and
the Warrant (including the additional warrants to be issued pursuant to Section
2.1(a)(ii)) for its own account as principal, for investment purposes only, and
not with a present view to, or for, resale, distribution or fractionalization
thereof, in whole or in part, within the meaning of the Securities Act. Such
Investor understands that its acquisition of the Common Shares and the Warrant
(including the additional warrants to be issued pursuant to Section 2.1(a)(ii))
has not been registered under the Securities Act or registered or qualified
under any state securities law in reliance on specific exemptions therefrom,
which exemptions may depend upon, among other things, the bona fide nature of
such Investor's investment intent as expressed herein. Such Investor will not,
directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of
(or solicit any offers to buy, purchase or otherwise acquire or take a pledge
of) any of the Common Shares and the Warrant (including the additional warrants
to be issued pursuant to Section 2.1(a)(ii)), except in compliance with the
terms of this Agreement and the registration requirements of the Securities Act,
and the rules and regulations promulgated thereunder, or an exemption
thereunder.
4.4 REGISTRATION OR EXEMPTION REQUIREMENTS. Such Investor further
acknowledges and understands that the Common Shares and the Warrant (including
the additional warrants to be issued pursuant to Section 2.1(a)(ii)) may not be
resold or otherwise transferred except in a transaction registered under the
Securities Act or unless an exemption from such registration is available. Such
Investor understands that the Warrant (including the additional warrants to be
issued pursuant to Section 2.1(a)(ii)) and the certificate(s) evidencing the
Common Shares will be imprinted with a legend that prohibits the transfer of
such securities unless (i) they are registered or such registration is not
required, and (ii) except as otherwise provided in Section 2.3(c), if the
transfer is pursuant to an exemption from registration under the Securities Act
and, if the Company shall so request in writing, an opinion of counsel
reasonably satisfactory to the Company is obtained to the effect that the
transaction is so exempt.
4.5 NO LEGAL, TAX OR INVESTMENT ADVICE; NO RELIANCE ON FAIRNESS OPINION.
Such Investor understands that nothing in this Agreement or any other materials
presented to such Investor in connection with the purchase of the Common Shares
or the Warrant (including the additional warrants to be issued pursuant to
Section 2.1(a)(ii)) constitutes legal, tax or investment advice. Such Investor
has consulted such legal, tax and investment advisors as it, in its sole
discretion, has deemed necessary or appropriate in connection with its purchase
of the Common Shares and the Warrant (including the additional warrants to be
issued pursuant to Section 2.1(a)(ii)). Such Investor has not, and will not,
rely on the fairness opinion, if any, that the Financial Advisor may deliver to
the Company's board of directors with respect to the Transactions.
SECTION 5
CONDITIONS TO CLOSING OF THE INVESTORS
5.1 CONDITIONS TO INVESTORS' OBLIGATIONS AT THE CLOSING. The obligation of
each Investor to purchase the Common Shares and Warrant (including the
additional warrants to be issued pursuant to Section 2.1(a)(ii)) at the Closing
under this Agreement is subject to the fulfillment on or prior to the Closing of
the following conditions, any of which may be waived, subject to Section 9.1
herein, in whole or in part by Consent of the Investors:
(a) REPRESENTATIONS AND WARRANTIES TRUE AND CORRECT. The
representations and warranties made by the Company in Section 3 hereof shall be
true and correct in all respects as of the date hereof and at and as of the
Closing with the same force and effect as if they had been made on and as of
said date (other than representations and warranties made specifically with
reference to a particular date, which shall have been true and correct in all
respects as of such date), except in each case, or in the aggregate, breaches of
any one or more representations and warranties will not be considered a failure
to satisfy this condition unless such breaches, would, or would reasonably be
expected to, (i) constitute a Company Material Adverse Effect, (ii) exceed the
Income Statement Threshold, (iii) exceed the Cash Flow Threshold, or (iv) exceed
the Capitalization Threshold (with each of (i), (ii), (iii) and (iv) measured
independently).
(b) COVENANTS. Each covenant, agreement and condition contained in
this Agreement to be performed by the Company on or prior to the Closing shall
have been performed or complied with in all material respects.
(c) COMPLIANCE WITH LAWS. The purchase of the Common Shares and
Warrant (including the additional warrants to be issued pursuant to Section
2.1(a)(ii)) by each Investor hereunder shall be legally permitted by all laws
and regulations to which each Investor or the Company is subject (including all
applicable federal, state and foreign securities laws).
(d) NO INJUNCTIONS OR REGULATORY RESTRAINTS; ILLEGALITY. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or Governmental Entity or other legal or
regulatory restraint or prohibition preventing the consummation of the
transactions contemplated hereby shall be in effect; nor shall there be any
action taken, or any law or order enacted, entered, enforced or deemed
applicable to the transactions contemplated hereby that would prohibit their
consummation.
(e) DIRECTOR RESIGNATIONS. Such incumbent directors shall have
submitted written resignations from the board of directors and all committees
thereof, effective as of the Closing (the "Resigning Directors"), as are
necessary to (i) result in four vacancies on the Company's board of directors
immediately after the Closing and (ii) permit the following designees to the
Company's board of directors to take or hold office pursuant to Section 7.6: the
Sprout Designees, the Oxford Designee and the Venrock Designee.
(f) BOARD OF DIRECTORS DESIGNEES. The Company's board of directors
(which shall have seven directors as of the Closing) shall have appointed,
effective as of the Closing and subject to the resignations set forth in Section
5.1(d) above, the Sprout Designees, the Oxford Designee, and the Venrock
Designee as members of the Company's board of directors. In addition, (i) one
Sprout Designee, the Venrock Designee or the Oxford Designee (initially, it
shall be the Venrock Designee) and one outside director not affiliated with the
Investors will be appointed to the compensation committee (which shall have a
total of three members), and (ii) one Sprout Designee, the Oxford Designee, the
Venrock Designee and one outside director not affiliated with the Investors will
be appointed to the nominating committee (which shall have a total of four
members), and each of such appointments shall be in full force and effect and
shall not have been amended, modified or rescinded, either directly or
indirectly.
(g) STOCKHOLDER APPROVAL. Stockholder Approval shall have been
obtained.
(h) OPINION OF THE COMPANY'S' COUNSEL. Each Investor shall have
received from Stroock & Stroock & Lavan LLP, counsel to the Company, an opinion
letter addressed to such Investor in the form attached as Exhibit C dated as of
the Closing Date. Each Investor shall have received from McDonnell Boehnen
Hulbert & Berghoff, intellectual property counsel to the Company, an opinion
letter addressed to such Investor in the form attached as Exhibit D dated as of
the Closing Date.
(i) AMENDED CERTIFICATE OF INCORPORATION. The Company shall have filed
with the Secretary of State of the State of Delaware the amendment and
restatement of its amended and restated certificate of incorporation in effect
as of the date of this Agreement in form and substance to be agreed upon among
the Company and the Investors and shall include all appropriate applicable
provisions set forth in the definition of Stockholder Approval (the "Restated
Certificate"); provided, however, the Company and each Investor agree and
acknowledge that the Restated Certificate will not include (and this closing
condition shall not apply to) the amendment providing for action by written
consent of the stockholders in lieu of a meeting if Stockholder Approval is not
obtained with respect to such provision.
(j) NON-COMPETITION AGREEMENTS. Each of the key employees and
consultants of the Company identified on Schedule 5.1(j) shall have entered into
a Non-Competition and Non-Solicitation Agreement substantially in the form of
Exhibit E hereto.
(k) NO COMPANY MATERIAL ADVERSE EFFECT. No Company Material Adverse
Effect shall have occurred, and no event or circumstance shall have occurred or
arisen that would reasonably be expected to result in any Company Material
Adverse Effect.
(l) EXECUTIVE RECRUITING FIRM. The Company shall have retained an
executive recruiting firm, reasonably acceptable to the Investors, to conduct a
search for a Senior Vice President of Development.
(m) THIRD PARTY CONSENTS AND AGREEMENTS. The Company shall have
received the consents, approvals, waivers, and assignments listed (or required
to be listed) in Section 5.1(m) of the Company Disclosure Schedule and all such
consents, approvals, waivers and assignments shall be in full force and effect.
The agreements listed in Sections 3.11(n)(7) and 3.11(n)(8) of the Company
Disclosure Schedule shall be in full force and effect.
(n) BYLAWS. The bylaws of the Company shall have been amended to give
effect to the agreements contemplated herein.
(o) OFFICERS' CERTIFICATES. The Company shall have delivered to the
Investors a certificate, dated the Closing Date and executed by the President
and Chief Executive Officer of the Company, substantially in the form set forth
in Exhibit F-1 hereto, and a certificate, dated the Closing Date and executed by
the Secretary of the Company, substantially in the form set forth in Exhibit F-2
hereto.
(p) LITIGATION REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by the Company in Section 3.12 hereof shall be true and correct
in all material respects as of the date hereof and at and as of the Closing with
the same force and effect as if they had been made on and as of said date except
breaches with respect to (i) litigation resulting directly from the announcement
or pendency of this Agreement, the disclosure or filing of this Agreement or any
other Transaction Documents with the SEC, the Stockholders' Meeting, any
announcement or disclosure after the date hereof of the New Business Model or
the Closing, or (ii) the failure of the Company to obtain approval of the
settlement of the stockholder class action lawsuit set forth in Section 3.12 of
the Company Disclosure Schedule, none of which shall constitute a failure of
this condition.
(q) CLOSING PROCEEDS. Each of Sprout, Venrock and Oxford shall have
delivered its applicable Aggregate Purchase Price to the Company; provided,
however, this condition shall only be deemed to have failed if the reason any
such Investor fails to deliver its applicable Aggregate Purchase Price is due
solely to a Force Majeure Event.
SECTION 6
CONDITIONS TO COMPANY'S OBLIGATIONS.
6.1 CONDITIONS TO COMPANY'S OBLIGATIONS AT THE CLOSING. The Company's
obligation to sell and issue the Common Shares and Warrants (including the
additional warrants to be issued pursuant to Section 2.1(a)(ii)) at the Closing
is subject to the fulfillment on or prior to the Closing of the following
conditions, any of which may be waived in whole or in part by the Company:
(a) REPRESENTATIONS AND WARRANTIES TRUE AND CORRECT. The
representations and warranties made by each Investor in Section 4 hereof shall
be true and correct in all material respects at and as of the Closing with the
same force and effect as if they had been made on and as of the same date.
(b) STOCKHOLDER APPROVAL. Stockholder Approval shall have been
obtained.
(c) COMPLIANCE WITH LAWS. At the Closing, the Investors shall be in
compliance with all laws and regulations (including all applicable federal,
state and foreign securities laws) applicable to the purchase of the Common
Shares and the Warrants (including the additional warrants to be issued pursuant
to Section 2.1(a)(ii)) by the Investors hereunder shall.
(d) NO INJUNCTIONS OR REGULATORY RESTRAINTS; ILLEGALITY. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or Governmental Entity or other legal or
regulatory restraint or prohibition preventing the consummation of the
transactions contemplated hereby shall be in effect; nor shall there be any
action taken, or any law or order enacted, entered, enforced or deemed
applicable to the transactions contemplated hereby that would prohibit their
consummation.
(e) CLOSING PROCEEDS. Each of Oxford, Sprout and Venrock shall have
delivered its applicable Purchase Price to the Company.
SECTION 7
COVENANTS OF THE COMPANY
7.1 REGISTRATION RIGHTS. The Investors shall have the following
registration rights:
(a) Shelf Registration.
(i) REGISTRATION. The Company shall prepare and file or cause to
be prepared and filed with the SEC, as soon as practicable but in any
event no later than five (5) days after the Closing, a registration
statement including the prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all
exhibits and all materials incorporated by reference or explicitly
deemed to be incorporated by reference in such registration statement,
for an offering to be made on a delayed or continuous basis pursuant
to Rule 415 of the Securities Act registering the resale from time to
time by the Investors of the Registrable Securities (the "Registration
Statement"). The Registration Statement shall be on an appropriate
form permitting registration of such securities for resale by such
Investors in accordance with the methods of distribution elected by
the Investors and set forth in the Registration Statement. The Company
shall use its best efforts to cause the Registration Statement to be
declared effective under the Securities Act no later than five (5)
Business Days after receipt of notice of "no review" by the SEC or
ninety (90) days from the initial filing of such Registration
Statement in the event of SEC review, and to keep such Registration
Statement continuously effective under the Securities Act until the
earlier of (i) the second anniversary of the expiration of the Lock Up
Period and (ii) such date as all securities registered on such
Registration Statement have been resold (the earlier to occur of (i)
and (ii) is the "Effectiveness Termination Date"); provided, however,
that the Company may suspend sales of Common Stock pursuant to such
Registration Statement for a period of not more than forty-five (45)
days in the aggregate for all cases in which it determines in good
faith that such Registration Statement contains or may contain an
untrue statement of material fact or omits or may omit to state a
material fact required to be stated therein or necessary to make the
statement therein not misleading; provided further and subject to the
provisions of this Section 7.1(a)(i), the Company shall promptly amend
such Registration Statement in order to correct any untrue statement
and/or ensure that such Registration Statement is not misleading. At
the time the Registration Statement is declared effective, each
Investor shall be named as a selling securityholder in the
Registration Statement and the related prospectus in such a manner as
to permit such Investor to deliver such prospectus to purchasers of
registered securities in accordance with applicable law.
(ii) If the Registration Statement ceases to be effective for any
reason at any time prior to the applicable Effectiveness Termination
Date (other than because all securities registered thereunder have
been resold pursuant thereto), the Company shall use its best efforts
to obtain the prompt withdrawal of any order suspending the
effectiveness thereof.
(iii) The Company shall supplement and amend the Registration
Statement if required by the rules, regulations or instructions
applicable to the registration form used by the Company for such
Registration Statement, if required by the Securities Act or, to the
extent to which the Company does not reasonably object, as reasonably
requested by Consent of the Investors.
(iv) Each Investor agrees that if such Investor wishes to sell
securities pursuant to the Registration Statement, it will do so only
in accordance with Section 7.1 of this Agreement.
(b) EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with the registrations pursuant to Section 7.1(a) shall be borne by
the Company. "Registration Expenses" shall mean all expenses incurred by the
Company in complying with Sections 7.1(a) hereof, including all registration and
filing fees, printing expenses, fees and disbursements of one counsel for the
Company and reasonable fees and disbursements of Investor Counsel up to $5,000,
blue sky fees and expenses, and the expense of any special audits incident to or
required by any such registration (but excluding the compensation of regular
employees of the Company which shall be paid in any event by the Company and
Selling Expenses (as defined hereinafter)). All Selling Expenses incurred in
connection with any registrations hereunder, shall be borne by the Investors.
"Selling Expenses" shall mean all underwriting discounts and selling commissions
applicable to a sale of the Registrable Securities.
(c) REGISTRATION PROCEDURES. In the case of a registration, and any
qualification, compliance, or effectiveness effected by the Company pursuant to
this Section 7.1, the Company will keep the Investors advised in writing as to
the initiation of such registration, qualification, compliance and effectiveness
and as to the completion thereof. At its expense the Company will:
(i) Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with
the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement;
(ii) Furnish to the Investors such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they
may reasonably request in order to facilitate the disposition of
Registrable Securities owned by them;
(iii) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested
by the Investors, provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any
such states or jurisdictions;
(iv) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter of such offering.
Each Investor participating in such underwriting shall also enter into
and perform its obligations under such an agreement;
(v) Notify immediately each Investor holding Registrable
Securities covered by 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 as a result of which the
prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances
then existing; provided, however, that the Company shall promptly
amend such Registration Statement in order to correct any untrue
statement and/or ensure that such Registration Statement is not
misleading;
(vi) Cause all such Registrable Securities registered hereunder
to be listed or included on each securities exchange or automated
quotation system on which similar securities issued by the Company are
then listed or included;
(vii) Provide a transfer agent and registrar for all Registrable
Securities registered hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date
of such registration; and
(viii) Use its best efforts to furnish, at the request of any
Investor requesting registration of Registrable Securities pursuant to
this Section 7.1, on the date that such Registrable Securities are
delivered to the underwriters for sale in connection with a
registration pursuant to this Section 7.1, if such securities are
being sold through underwriters, or, if such securities are not being
sold through underwriters, on the date that the registration statement
with respect to such securities becomes effective, (i) an opinion,
dated such date, of counsel representing the Company for the purposes
of such registration, in form and substance as is customarily given in
an underwritten public offering (and reasonably acceptable to the
counsel for the Investors), addressed to the underwriters, if any, and
to the Investors, and (ii) a letter dated such date, from the
independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public
accountants in an underwritten public offering (and reasonably
acceptable to the counsel for the Investors), addressed to the
underwriters, to the extent such letter is permitted under generally
recognized accounting practice.
(ix) The Company shall reasonably cooperate with legal counsel
selected by Consent of the Investors ("Investor Counsel") in
performing the Company's obligations under this Section 7.1 and shall:
(A) permit Investor Counsel to review and comment upon any offering
pursuant to this Section 7.1 and to review and comment upon (1) the
Registration Statement prior to its filing with the SEC and (2) all
amendments and supplements thereto (except for Annual Reports on Form
10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K
and any similar or successor reports) prior to their filing with the
SEC; and (B) furnish to Investor Counsel, without charge, (1) any
correspondence from the SEC or the staff of the SEC to the Company or
its representatives relating to any Registration Statement, (2)
promptly after the same is prepared and filed with the SEC, one copy
of any Registration Statement and any amendment(s) thereto, including
financial statements and schedules, all documents incorporated therein
by reference and all exhibits, and (3) upon the effectiveness of any
Registration Statement, one copy of the prospectus included in such
Registration Statement and all amendments and supplements thereto;
provided that the Company will only be responsible for reasonable fees
and expenses pursuant to this Section 7.1(c) (ix).
(d) INDEMNIFICATION.
(i) The Company will indemnify each Investor, its officers,
directors, employees, partners, affiliates, agents, representatives
and legal counsel, and each person controlling (or deemed controlling)
such Investor within the meaning of the Securities Act (collectively,
the "Investors' Agents"), with respect to which registration,
qualification or compliance has been effected pursuant to this Section
7.1, against all claims, losses, damages and liabilities (or actions
in respect thereof), joint or several, arising out of or based on (i)
any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering circular or other similar
document or any amendments or supplements thereto (including any
related registration statement and amendments or supplements thereto,
notification or the like) incident to any such registration,
qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading in
the light of the circumstances under which they were made, or (ii) any
violation by the Company of any federal, state or common law rule or
regulation applicable to the Company in connection with any such
registration, qualification or compliance or the failure of the
Company to fulfill any undertaking made in any registration statement
or any amendments or supplements thereto, and will reimburse each
Investor, and each Investors' Agent, for any legal and any other
expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, as
incurred, provided that the Company will not be liable in any such
case to the extent that any such claim, loss, damage, liability or
expense arises out of or is based on any untrue statement or omission
based upon written information furnished to the Company by an
instrument duly executed by such Investor and stated to be
specifically for use therein or furnished in writing by such Investor
to the Company in response to a request by the Company stating
specifically that such information will be used by the Company
therein.
(ii) Each Investor will indemnify, severally and not jointly, the
Company, each of its directors and officers, each legal counsel and
independent accountant of the Company, each person who controls the
Company within the meaning of the Securities Act, any underwriter, and
each other Investor, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on
any untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement, prospectus, offering
circular or other similar document, or any omission (or alleged
omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading in
the light of the circumstances under which they were made, and will
reimburse the Company, such directors, and officers, control persons,
underwriter and each other Investor for any legal or any other
expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, as
incurred, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or
alleged omission) is made in such registration statement, prospectus,
offering circular or other document in reliance upon and in conformity
with written information furnished in writing to the Company by an
instrument duly executed by such Investor and stated to be
specifically for use therein or furnished by such Investor to the
Company in response to a request by the Company stating specifically
that such information will be used by the Company therein; provided,
however, that the indemnity agreement provided in this Section 7.1(d)
(ii) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected
without the written consent of the Investor, which consent shall not
be unreasonably withheld. In no event shall an Investor's
indemnification obligation exceed the net proceeds received from its
sale of Registrable Securities in such offering.
(iii) Each party entitled to indemnification under this Section
7.1(d) (the "Indemnified Party") shall give notice to the party
required to provide indemnification (the "Indemnifying Party")
promptly after such Indemnified Party has received written notice of
any claim as to which indemnity may be sought, and shall permit the
Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party (whose approval
shall not be unreasonably withheld). The Indemnified Party may
participate in such defense at such party's expense; provided,
however, that the Indemnifying Party shall bear the expense of such
defense of the Indemnified Party if representation of both parties by
the same counsel would be inappropriate due to actual or potential
conflicts of interest. The failure of any Indemnified Party to give
notice within a reasonable period of time as provided herein shall
relieve the Indemnifying Party of its obligations under this Section
7.1(d), but only to the extent that such failure to give notice shall
materially adversely prejudice the Indemnifying Party in the defense
of any such claim or any such litigation. No Indemnifying Party, in
the defense of any such claim or litigation, shall, except with the
consent of each Indemnified Party, consent to entry of any judgment or
enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such
claim or litigation.
(iv) If the indemnification provided for in this Section 7.1(d)
is held to be unavailable to an Indemnified Party with respect to any
loss, liability, claim, damage or expense referred to therein, then
the Indemnifying Party, in lieu of indemnifying such Indemnified Party
hereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage,
or expense in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party on the one hand and of the
Indemnified Party on the other in connection with the statements or
omissions that resulted in such loss, liability, claim, damage or
expense as well as any other relevant equitable considerations;
provided, that in no event shall any contribution by an Investor under
this Section 7.1(d) exceed the net proceeds from the offering received
by such Investor. The relative fault of the Indemnifying Party and of
the Indemnified Party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material
fact or the omission to state a material fact relates to information
supplied by the Indemnifying Party or by the Indemnified Party and the
parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.
(v) The obligations of the Company and each Investor under this
Section 7.1 shall survive the completion of any offering of the
Registrable Securities in a Registration Statement under this Section
7.1, any investigation made by or on behalf of the Indemnified Party
or any officer, director or controlling Person of such Indemnified
Party and will survive the transfer of securities.
(e) INFORMATION BY THE INVESTOR. Each Investor shall furnish to the
Company such information regarding such Investor and the distribution proposed
by such Investor as the Company may reasonably request in writing and as shall
be reasonably required in connection with any registration, qualification or
compliance referred to in this Section 7.1.
(f) PIGGY-BACK REGISTRATION. In addition to the registration rights
granted above, but subject to any normal underwriter's "cut-back," which shall
not exceed 30% of the number of shares proposed by each such Investor to be
registered, during the period from the 180th day after the Closing until the
fifth anniversary of the Closing Date, the Company shall grant the Investors
unlimited "piggy-back" registration rights with respect to any other
registration statement filed by the Company with respect to its Common Stock,
but only to the extent that the grant or exercise of such "piggy-back"
registration rights will not violate any agreement to which the Company is now a
party.
(g) DEMAND REGISTRATION. In addition to the registration rights
granted to the Investors pursuant to Section 7.1(a) above, at any time after the
Effectiveness Termination Date, one or more Investors, holding in aggregate
together with its or their Affiliates at least 5% of all of the outstanding
shares of the Company's Common Stock, may make one written request (the
"Initiating Request") to the Company for the registration under the Securities
Act of all such Investor's Registrable Securities, which request shall specify
the number of shares of Common Stock to be disposed of and the proposed plan of
distribution therefor. Upon the receipt of any Initiating Request for
registration pursuant to this Section 7.1(g), the Company will use its best
efforts to effect, at the earliest possible date (taking into account any delay
that may result from any special audit required by applicable law), such
registration under the Securities Act. The applicable provisions of Sections
7.1(b), (c), (d) and (e) with respect to expenses, registration procedures,
indemnification and information shall apply to any registration statement filed
pursuant to this Section 7.1(g).
(h) PRIORITY. After the Closing and for so long as the Investors and
their respective Affiliates hold at least 15% of all of the outstanding shares
of the Company's Common Stock, the Company shall not grant any new registration
rights unless the Company receives the consent of Investors holding at least 66
2/3% of all the Common Shares then held by the Investors.
7.2 REPORTS UNDER EXCHANGE ACT. With a view to making available to the
Investors the benefits of Rule 144 promulgated under the Securities Act ("SEC
Rule 144") and any other rule or regulation of the SEC that may at any time
permit Investors to sell securities of the Company to the public without
registration or pursuant to a resale registration statement, the Company, so
long as the Investors and their respective Affiliates in the aggregate hold at
least 5% of all of the outstanding shares of the Company's Common Stock, agrees
to:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times so long as the Company
remains subject to the periodic reporting requirements under Sections 13 or
15(d) of the Exchange Act;
(b) use its best efforts to take such action as is necessary to enable
the Investors to utilize Form S-3, or if Form S-3 is unavailable an appropriate
resale registration statement, for the sale of their Registrable Securities;
provided, that, the parties hereto acknowledge that certain requirements to use
Form S-3 are by their express terms beyond the Company's control, namely, the
Company's market capitalization requirements and that as of the date hereof the
Company is not eligible to use Form S-3;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(d) furnish to any Investor, so long as the Investor owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of the Securities
Act and the Exchange Act, or that it qualifies as a registrant whose securities
may be resold pursuant to Form S-3, or if Form S-3 is unavailable an appropriate
resale registration statement, (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested in
availing any Investor of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
7.3 ASSIGNMENT OF RIGHTS. The rights to cause the Company to register
Registrable Securities pursuant to Section 7.1 may be assigned by an Investor
only to an Affiliate of such Investor or a permitted transferee of such Investor
pursuant to Section 7.8 or, with the written consent of the Company, which shall
not be unreasonably withheld. In the event of such assignment, the transferee
shall furnish the Company written notice of such assignment, and the assignee
shall agree in writing to be bound by the obligations of such Investor under
this Agreement.
7.4 STOCKHOLDERS' MEETING. The Company shall, in accordance with the laws
of the State of Delaware and the Company's certificate of incorporation,
certificates of designation, and bylaws, as each may be amended, use its best
efforts to convene a meeting of holders of Common Stock (the "Stockholders'
Meeting") within 30 days (or such other time period that is mutually agreed to
by the Company and the Investors) after the date of the Proxy Statement, to
consider and vote upon giving Stockholder Approval. The board of directors of
the Company shall recommend such approval by the stockholders (the "Company
Recommendation") and shall not (i) withdraw, modify or qualify (or propose to
withdraw, modify or qualify) in any manner adverse to Investors such
recommendation or (ii) take any action or make any statement in connection with
the Stockholders' Meeting inconsistent with such recommendation (collectively, a
"Change in the Company Recommendation"); provided, however, that the board of
directors of the Company may make a Change in the Company Recommendation
pursuant to Section 7.14 hereof and to effect any action permitted by Section
8.1 hereof. Notwithstanding any Change in the Company Recommendation, the
Company shall nonetheless cause the Stockholders' Meeting to be convened and a
vote to be taken, and nothing contained herein shall be deemed to relieve the
Company of such obligation unless this Agreement is terminated pursuant to
Section 8.1.
7.5 PROXY STATEMENT.
(a) Not later than February 22, 2003, the Company shall prepare and
file with the SEC a proxy statement meeting the requirements of Section 14 of
the Exchange Act and the related rules and regulations thereunder promulgated by
the SEC (the "Proxy Statement") to solicit Stockholder Approval. The Company
shall use its best efforts to have the Proxy Statement declared effective under
the Exchange Act as promptly as reasonably practicable after such filing, and
promptly mail the Proxy Statement to the stockholders of the Company.
(b) The Company shall keep the Investors apprised of the status of
matters relating to the Proxy Statement and the Stockholders' Meeting, including
promptly furnishing the Investors and their counsel with copies of notices or
other communications related to the Proxy Statement, the Stockholders' Meeting
or the Transactions received by the Company from the SEC or Nasdaq.
7.6 ELECTION OF DIRECTORS.
(a) The Company will use its best efforts to cause, at the Closing,
(i) two (2) persons designated by Sprout, one of whom must be reasonably
acceptable to Venrock and Oxford (each a "Sprout Designee"), to be appointed
members of the board of directors of the Company, and (ii) each of the
compensation committee and the nominating committee to have one (1) of the
Sprout Designees as a member. For so long as the funds managed or advised by
Sprout Group (collectively, "Sprout") hold at least 20% of all the outstanding
shares of Common Stock, the Company shall use its best efforts to cause (i) both
of the Sprout Designees to be nominated and elected to the board of directors of
the Company in any election of directors, and (ii) if any Sprout Designee
elected to the board of directors of the Company ceases for any reason to be a
member of the board of directors of the Company during such person's term as a
director, then the Company shall use its best efforts, subject to applicable
laws and regulations, to cause such vacancy to be filled by a replacement
designated by Sprout, and such designee shall be a Sprout Designee for purposes
of this Agreement. For so long as Sprout holds at least 10% of all the
outstanding shares of Common Stock (as adjusted by stock split, reverse stock
split, dividend, reorganization, recapitalization or otherwise, including the
Reverse Stock Split), the Company shall use its best efforts to cause (i) one of
the Sprout Designees to be nominated and elected to the board of directors of
the Company in any election of directors, and (ii) if the Sprout Designee
elected to the board of directors of the Company ceases for any reason to be a
member of the board of directors of the Company during such person's term as a
director, then the Company shall use its best efforts, subject to applicable
laws and regulations, to cause such vacancy to be filled by a replacement
designated by Sprout, and such designee shall be the Sprout Designee for
purposes of this Agreement. For so long as any Sprout Designee remains a member
of the board of directors and as permitted by applicable law, then the
compensation committee and the nominating committee (or any committees that have
substantially similar authorities) will include a Sprout Designee.
(b) The Company shall use its best efforts to cause, at the Closing,
(i) one (1) person designated by Oxford (the "Oxford Designee") to be appointed
a member of the board of directors, and (ii) such Oxford Designee to be a member
of the nominating committee. For so long as the funds managed or advised by
Oxford Bioscience Partners IV (collectively, "Oxford") hold at least 10% of all
the outstanding shares of Common Stock, the Company shall use its best efforts
to cause (i) an Oxford Designee to be nominated and elected to the board of
directors of the Company in any election of directors, and (ii) if an Oxford
Designee elected to the board of directors of the Company ceases for any reason
to be a member of the board of directors of the Company during such person's
term as a director, then the Company shall use its best efforts, subject to
applicable laws and regulations, to cause such vacancy to be filled by a
replacement designated by Oxford, and such designee shall be the Oxford Designee
for purposes of this Agreement. For so long as any Oxford Designee remains a
member of the board of directors and as permitted by applicable law, then the
compensation committee (except during periods in which the compensation
committee contains a Venrock Designee) the nominating committee (or any
committees that have substantially similar authorities) will include an Oxford
Designee.
(c) The Company will use its best efforts to cause, at the Closing,
(i) one (1) person designated by Venrock (the "Venrock Designee") to be
appointed a member of the board of directors of the Company and (ii) such
Venrock Designee to be a member of the nominating committee and the compensation
committee. For so long as the funds managed or advised by Venrock Associates
(collectively, "Venrock") hold at least 10% of all the outstanding shares of
Common Stock, (i) the Company shall use its best efforts to cause the Venrock
Designee to be nominated and elected to the board of directors of the Company in
any election of directors, and (ii) if a Venrock Designee elected to the board
of directors of the Company ceases for any reason to be a member of the board of
directors of the Company during such person's term as a director, then the
Company shall use its best efforts, subject to applicable laws and regulations,
to cause such vacancy to be filled by a replacement designated by Venrock, and
such designee shall be the Venrock Designee for purposes of this Agreement. For
so long as any Venrock Designee remains a member of the board of directors and
as permitted by applicable law, then the compensation committee (except during
periods in which the compensation committee contains an Oxford Designee) and the
nominating committee (or any committees that have substantially similar
authorities) will include a Venrock Designee.
(d) The board of directors of the Company immediately following the
Closing shall consist of the Sprout Designees, the Venrock Designee, the Oxford
Designee, the chief executive officer of the Company and two additional members
for a total of seven authorized directors.
(e) In accordance with the Company's normal reimbursement policies for
directors, the Sprout Designees, the Venrock Designee, and the Oxford Designee
shall be reimbursed for all reasonable expenses associated with attending
meetings of the Company's board of directors.
7.7 NASDAQ LISTING. For so long as one or more Investors holds in the
aggregate together with its or their Affiliates at least 5% of all of the
outstanding shares of the Company's Common Stock, the Company shall file a
listing application with Nasdaq for the Registrable Securities held by the
Investors and use its best efforts to maintain the listing of its Common Stock
on Nasdaq (or a comparable system then in use).
7.8 LOCK-UP. The Company shall enter into an agreement with each member of
the Management Team, each Investor, and each current director who shall continue
serving as a director after the Closing (each such Investor, director, or member
of the Management Team being a "Holder"), prior to the Closing Date, which
agreement shall provide that each such Holder shall not, directly or indirectly
sell, offer to sell, contract to sell (including any short sale), grant any
option to purchase or otherwise transfer, dispose of or decrease its beneficial
interest in (other than to buyers in private resales, donees, distributees and
Affiliates who agree to be similarly bound) any securities of the Company held
by it for a period of 180 days following the Closing Date (the "Lock-Up
Period"). The Company's board of directors, in its sole discretion, may waive
the Lock-Up Period with respect to any Holder.
7.9 D&O INSURANCE. Promptly following the date hereof and prior to the
Closing, the Company shall cause each director to be appointed or to be elected
to the Company's board of directors pursuant to Section 7.6 to be fully covered
by the Company's existing directors' and officers' liability insurance, in an
amount of at least $25 million, which insurance shall include coverage for the
venture funds affiliated with any director to the extent coverage for such funds
is available on commercially acceptable terms.
7.10 INDEMNIFICATION AGREEMENTS; CHARTER DOCUMENTS.
(a) Promptly following the date hereof and prior to the Appointment
Time, the Company shall execute indemnification agreements in substantially the
form of Exhibit G attached hereto (the "Indemnification Agreements") with each
Investor, each director appointed or elected to the Company's board of directors
pursuant to Section 7.6, and each incumbent director in office as of the
Appointment Time.
(b) The Company shall use its best efforts to maintain the certificate
of incorporation and bylaws of the Company, as amended, to permit the Company to
indemnify its directors and officers to the fullest extent permitted by law
(including to seek to amend such certificate and bylaws to the extent the law
permits greater indemnification than then permitted by such certificate and
bylaws).
7.11 BOARD OF DIRECTORS; POWERS; COMMITTEES. As of the Closing Date, for so
long as one of the Sprout Designees, Oxford Designee, or Venrock Designee is a
member of the Company's board of directors pursuant to this Agreement, the
bylaws of the Company will have been amended in accordance with its terms, to
provide the following:
(a) Initially, the board of directors will have seven (7) members.
(b) The board of directors shall have an audit committee, the
composition and duties of which shall be in compliance with all applicable
federal and state securities laws and Nasdaq Rules, and which shall consist of
at least three (3) members of the board of directors.
(c) The board of directors shall have a nominating committee, the
composition and duties of which shall be in compliance with all applicable
federal and state securities laws and Nasdaq Rules, and which shall consist of
three (3) members of the board of directors, at least one of which must not be
an Affiliate of any Investor. The duties of the nominating committee will
include (i) recommending to the board of directors for approval pursuant to
Section 7.11(e) (vii) herein, the hiring and termination of any executive
officer of the Company, including the Chief Executive Officer and Chief
Financial Officer, and (ii) nominating any new member of the board of directors.
(d) The board of directors shall have a compensation committee, the
composition and duties of which shall be in compliance with all applicable
federal and state securities laws and Nasdaq Rules, and which shall consist of
three (3) members of the board of directors, at least one of which must not be
an Affiliate of any Investor. The duties of the compensation committee will
include (i) authorizing the compensation of any executive officer, (ii) setting
number of shares reserved under the Company's option pool, and (iii) setting
employee compensation guidelines.
(e) After the Closing, the Company will not, without the approval of,
or the removal or modification of these approval requirement by, a majority of
the whole board of directors (i.e., a majority of the total number of directors
then in office):
(i) Authorize, offer, sell, or issue any equity or debt
securities of the Company.
(ii) Incur indebtedness for borrowed money or guarantee or act as
a surety for any debt which individually or in the aggregate is in
excess of Five Hundred Thousand Dollars ($500,000).
(iii) Grant a security interest in assets of the Company which
individually or in the aggregate have a value in excess of Five
Hundred Thousand Dollars ($500,000).
(iv) Sell, lease, sublease, license or otherwise transfer any of
the rights, title and interest in any material Company Intellectual
Property.
(v) Purchase, license or otherwise acquire any of the rights,
title or interest in any material Intellectual Property of any third
party relating to pharmaceuticals or biologics.
(vi) Approve any annual business plan or budget or any material
revisions thereto.
(vii) Hire or terminate any executive officer of the Company,
including the Chief Executive Officer and Chief Financial Officer.
7.12 INDEMNIFICATION. The Company will, to the fullest extent permitted by
law, indemnify and hold harmless each Investor, and each of its Affiliates,
directors, officers, agents and employees (the "Investor Indemnitees") from and
against any losses, claims, damages, costs, expenses (including reasonable fees
of counsel and any amounts paid in settlement effected with the Company's prior
written consent) or liabilities (each a "Loss," collectively "Losses") to which
the Investor Indemnitees may become subject insofar as such Losses (or Actions
or Proceedings, as defined below) arise out of or in connection with, directly
or indirectly, any breach or non-fulfillment of, or non-compliance with, any
representations, warranties, agreements, or covenants of the Company in this
Agreement or any exhibit or schedule to this Agreement. The Company will
indemnify and hold harmless the Investor Indemnitees from and against any and
all Losses and from and against any and all damages, costs, liabilities and
attorneys' fees, incurred in defending and/or resolving such Losses, Action or
Proceeding; provided, that (i) the Company is promptly notified in writing of
such Action or Proceeding (provided that any failure to deliver such notice will
not relieve the Company of liability under this Section 7.12 except to the
extent such failure is materially prejudicial to the Company's ability to defend
such Action or Proceeding), (ii) the Company will have the sole control of the
defense and/or settlement of such Action or Proceeding (provided that, if
representation of the Investor Indemnitees by counsel retained by the Company
would be inappropriate due to any actual or potential differing interest between
the Investor Indemnitee and the Company or any third party represented by such
counsel, the Investor Indemnitees will have the right to retain one separate
counsel, with reasonable fees and expenses to be paid by the Company), (iii) the
Investor Indemnitees furnish to the Company, on reasonable request, information
available to the Investor Indemnitees for such defense, (iv) the Investor
Indemnitees reasonably cooperate in any defense and/or settlement thereof as
long as the Company pays all of the Investor Indemnitees' reasonable out of
pocket expenses and attorneys' fees, and (v) the Company shall have no
indemnification obligations pursuant to this section until the aggregate amount
of such Losses with respect to all Investor Indemnitees exceeds $250,000 in the
aggregate, in which case such Investor Indemnitee shall be entitled to recover
the full amount of all Losses. The Investor Indemnitees will not admit any such
Action or Proceeding or any allegations made in such Action or Proceeding
without the prior written consent of the Company (which will not be unreasonably
withheld). For purposes of this Agreement, an "Action or Proceeding" means any
action, suit, litigation, proceeding, mediation, arbitration or investigation or
audit by any Person.
7.13 OPERATION OF BUSINESS. The Company's budget and planning for 2003 has
been presented to the Investors. The Company agrees that, between the date of
this Agreement and the earlier of the termination of this Agreement and the
Closing Date, except as expressly contemplated by any provision of this
Agreement, (i) the business of the Company shall be conducted only in, and the
Company shall not take any action except in, the ordinary course of business,
(ii) other than with respect to any compensation arrangement disclosed in the
Company Disclosure Schedule, the Company shall not increase the compensation
payable, or to become payable, to any officer or director of the Company or to
enter into or amend in any material way any employment, consulting, severance or
termination agreement or arrangement with any such officer or director, and
(iii) the Company shall use its best efforts to preserve its business
organization intact, to keep available the services of its current officers and
employees, consistent with the budget and planning presented to the Investors,
and to maintain its existing relations with suppliers, creditors, business
partners and others having business dealings with the Company, to the end that
the Company's goodwill and ongoing business shall be unimpaired at the Closing
Date.
7.14 NO-SOLICITATION.
(a) The Company and its directors, officers, employees,
representatives and agents, including investment bankers, attorneys and
accountants of the Company (the "Representatives") shall not, directly or
indirectly, (i) solicit, initiate or encourage or facilitate (including by way
of furnishing or disclosing nonpublic information), any inquiries or the making
of any proposal or offer that constitutes, or may reasonably be expected to lead
to, or a transaction to effect, any Alternative Proposal; (ii) have any
discussions with or provide any confidential information or data to any Person
relating to any Alternative Proposal, or negotiate with any Person concerning an
Alternative Proposal, or facilitate any effort or attempt to make or implement
any Alternative Proposal; (iii) agree to or endorse, or propose publicly to
agree to or endorse, any Alternative Proposal, or authorize or permit any of the
Company's Representatives to take any such action; or (iv) agree to or endorse,
or propose to agree to or endorse, or execute or enter into, any letter of
intent, agreement in principle, financing agreement, merger agreement,
acquisition agreement, option agreement or other similar agreement or propose
publicly to agree to do any of the foregoing relating to any Alternative
Proposal.
(b) Notwithstanding the foregoing or anything else in this Agreement
to the contrary, the Company (and its board of directors) shall be permitted to
(i) comply with applicable law with regard to an Alternative Proposal, (ii)
effect a Change in the Company Recommendation or (iii) provide information in
connection with, and negotiate, an unsolicited, bona fide written proposal
regarding an Alternative Proposal, if and only to the extent that, in any such
case referred to in clause (ii) or (iii):
(i) the Stockholders' Meeting shall not have occurred;
(ii) the Company's board of directors shall have determined in
good faith, after considering applicable law, and acting upon the
written advice of independent outside counsel, that such Alternative
Proposal is superior from a financial point of view to the
Transactions and effecting a Change in the Company Recommendation is
required in order for the board of directors of the Company to comply
with its fiduciary duties to the Company's stockholders under
applicable law; and
(iii) prior to providing any information or data to any Person or
entering into discussions or negotiations with any Person, the Company
notifies the Investors within 24 hours of receipt of any proposal or
offer regarding an Alternative Proposal, or any inquiry or contact
with any Person with respect thereto, such notice to include the
identity of the Person making such proposal, offer, inquiry or
contact, and the terms of such Alternative Proposal.
(c) Subject to Section 7.21, "Alternative Proposal" means any proposal
or offer from any Person other than the Investors or their Affiliates to (i)
acquire all or substantially all of the business, properties, or other assets of
the Company, or (ii) purchase or acquire twenty percent (20%) or more of the
business, properties or other assets or capital stock or other equity interests
in the Company, whether by share issuance, equity or convertible debt financing,
sale of stock or assets, merger, consolidation, other business combination,
tender offer or exchange offer, recapitalization, reorganization, liquidation,
dissolution, license agreement, mortgage, lease or other transaction involving
the Company, any division or operating or principal business unit or the
Intellectual Property of the Company, on the one hand, and any other Person, on
the other hand; or (iii) enter into any transaction, that if consummated, would
result in any Person (or the stockholders of such Person) beneficially owning
securities representing 20% or more of the total voting power of the Company (or
of the surviving parent entity in such transaction).
7.15 REASONABLE EFFORTS; NOTIFICATION; REPRESENTATIONS. Subject to the
other terms and conditions of this Agreement, each of the parties to this
Agreement shall use reasonable efforts to take promptly, or cause to be taken,
all actions, and to do promptly, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective the Transactions contemplated by this Agreement. Each party to this
Agreement shall give prompt notice to each other party to this Agreement upon
becoming aware that any representation or warranty made by such party in this
Agreement has become untrue or inaccurate or that such party has failed to
comply with or satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by such party under this Agreement,
in each case such that the conditions set forth in Section 5.1 or Section 6.1,
as the case may be, would not be satisfied. No party to this Agreement shall
take any action that would cause any representation or warranty made by such
party in this Agreement to be untrue if made at Closing.
7.16 PARTICIPATION RIGHTS.
(a) PARTICIPATION RIGHTS. The parties hereby agree that each Investor,
so long as such Investor and its respective Affiliates hold at least 10% of all
of the outstanding shares of the Company's Common Stock or holds all of the
Common Shares purchased by such Investor hereunder, shall have the right (the
"Participation Right"), but not the obligation, to purchase its Pro Rata Share
(as defined below) of all (or any part) of any New Securities (as defined
below). "Pro Rata Share" equals a fraction, (x) the numerator of which shall be
the number of shares of Common Stock then owned by such Investor (or receivable
by such Investor upon conversion or exchange of all then outstanding Company
Options held by such investor) and (y) the denominator of which shall be the sum
of (i) the total number of shares of Common Stock then outstanding plus (ii) the
total number of shares of Common Stock into which all then outstanding Company
Options are then convertible or are exchangeable.
(b) NEW SECURITIES. For purposes of this Agreement, "New Securities"
shall mean any Common Stock or preferred stock of the Company, whether now
authorized or not, and Company Options; provided, however, that the term "New
Securities" does not include:
(i) any securities, including shares of Common Stock, to be
issued pursuant to a "public offering" (as such term is determined by
the rules, regulations and guidelines of the National Association of
Securities Dealers) of such securities, or issued pursuant to a
registration statement on a Form S-4 or S-8 or substantially
equivalent successor form, or, upon the approval of a majority of the
entire board of directors of the Company (i.e., a majority of the
total number of directors then in office), any shares issued pursuant
to registration statement and offered publicly (the parties hereto
agree that merely because an offering is to be undertaken as a
"take-down" from a shelf registration statement, that factor will not
be the sole determinative factor as to whether such offering is a
"public offering");
(ii) shares of the Common Stock (or options therefor) issued or
issuable to employees, officers, directors, consultants or other
service providers of the Company pursuant to stock options or other
stock incentive agreements or plans approved by a majority of the
Company's board of directors and not for capital-raising transactions;
(iii) any securities issued upon the conversion or exercise of
Company Options;
(iv) any shares of Common Stock (or any other security) issued in
connection with any stock split, stock dividend, combination,
recapitalization or similar corporate action for which no
consideration is paid or payable;
(v) any shares of Common Stock (or any other security) issued in
connection with (A) any corporate collaboration agreement, (B) any
licensing agreement, (C) any payment or settlement of any obligation
under a Company Agreement, and (D) as compensation for any services
rendered to the Company;
(vi) any securities issued pursuant to an acquisition of the
Company approved by its board of directors by means of (A) merger or
other form of corporate reorganization in which outstanding shares of
the Company are exchanged for securities or other consideration
issued, or caused to be issued, by the acquiring corporation or its
subsidiary and pursuant to which the holders of the outstanding voting
securities of the Company immediately prior to such merger or other
form of corporate reorganization fail to hold equity securities
representing a majority of the voting power of the Company or
surviving entity immediately following such merger or other form of
corporate reorganization, or (B) a sale of all or substantially all
the assets of the Company approved by the Company's board of
directors;
(vii) any securities issued in connection with bona fide
equipment financings or bona fide lease agreements; or
(viii) any securities issued in transactions approved by the
board of directors (i.e., a majority of the total number of directors
then in office) as being excluded from the provisions of this Section
7.16.
(c) PROCEDURES.
(i) If the Company proposes to undertake any issuance of New
Securities, it shall, prior to any such issuance, give written notice
to the Investors of its bona fide intention to issue New Securities
(the "Company Notice"), describing the type of New Securities proposed
to be issued, the total number or quantity of New Securities proposed
to be issued, and the price and the general terms upon which the
Company proposes to issue such New Securities. Each Investor may elect
to purchase or acquire its Pro Rata Share of such New Securities (an
"Electing Party") by delivering written notice (the "Participation
Notice") of its election to so purchase or acquire such New Securities
at the price and upon the general terms specified in the Company
Notice and stating the quantity of New Securities to be purchased (not
to exceed its Pro Rata Share). The Participation Notice shall be
delivered to the Company within five (5) Business Days after the date
of delivery of the Company Notice, and the obligations of the Electing
Party thereunder to purchase the elected number or percentage of New
Securities, and the obligations of the Company to sell such New
Securities to the Electing Party, shall be contingent upon the
consummation of the sale or other transaction pursuant to which the
New Securities are proposed to be issued. The number or amount of New
Securities specified in the Participation Notice shall be subject to
automatic and proportionate reduction in the event that the total
number or quantity of New Securities sold by the Company is reduced
below the number or quantity specified in the Company Notice.
(ii) If any Investor fails to give the Participation Notice to
the Company within such five (5) Business Day period, or specifies in
the Participation Notice that such Investor will only purchase part,
but not all, of such Investor's Pro Rata Share (a "Nonpurchasing
Investor"), then such Nonpurchasing Investor shall forfeit the right
hereunder to purchase that part of its Pro Rata Share of such New
Securities that it did not so agree to purchase and the Company shall
promptly give each Investor (if any) who has timely agreed to purchase
its full Pro Rata Share of such offering of New Securities (a
"Purchasing Investor") written notice of the failure of any
Nonpurchasing Investor to purchase such Nonpurchasing Investor's full
Pro Rata Share of such offering of New Securities (the "Overallotment
Notice.") Such Overallotment Notice shall be given to each Purchasing
Investor within three (3) Business Days of the expiration of the five
(5) Business Day period. Each Purchasing Investor shall have a right
of overallotment such that such Purchasing Investor may agree to
purchase a portion of the Nonpurchasing Investor's unpurchased Pro
Rata Share of such offering on a pro rata basis according to the
relative Pro Rata Shares of the Purchasing Investor at any time within
three (3) Business Days after receiving the Overallotment Notice.
(d) FAILURE TO EXERCISE. If the Investors fail to exercise in full the
Participation Right within such five (5) plus three (3) plus three (3) Business
Day period, then the Company shall have One Hundred Eighty (180) calendar days
thereafter to sell the New Securities with respect to which the Investors'
Participation Rights hereunder were not exercised, at a price not less than, and
upon general terms not more favorable than those specified in the Company
Notice. If the Company has not issued and sold the New Securities within such
One Hundred Eighty (180) calendar day period, then the Company shall not
thereafter issue or sell any New Securities without again first offering such
New Securities to the Investors pursuant to this Section 7.16.
(e) SUBSEQUENT PARTICIPATION RIGHT. From and after the date of this
Agreement, the Company shall not enter into any agreement with any holder or
prospective holder of any securities which would allow such holder or
prospective holder a participation right, right of first refusal, right of first
offer or other similar right which is on terms materially more favorable to such
holder or prospective holder than, or in preference to, the Participation Right
granted to the Investors hereunder.
7.17 EXECUTIVE RECRUITING FIRM. The Company shall retain an executive
recruiting firm, reasonably acceptable to the Investors, to conduct a search for
a Senior Vice President of Development until such time as a Senior Vice
President of Development is hired by the Company or a majority of the board of
directors (i.e., a majority of the total number of directors then in office)
approves a termination of such search.
7.18 MANAGEMENT COMPENSATION PLAN. As of the date of this Agreement, the
Company entered into new employment agreements with its C.E.O., C.F.O. and Chief
Scientific Officer in the form of Exhibits H-1, H-2, and H-3, respectively, each
to be effective upon Closing. As of the date of this Agreement, the Company
shall have granted options to the individuals and in the amounts set forth on
Section 7.13 of the Company Disclosure Statement.
7.19 WAIVERS. The Company shall keep in full force and effect the
agreements listed in Sections 3.11(n)(7) and 3.11(n)(8) of the Company
Disclosure Schedule.
7.20 BOARD OBSERVERS. From the date of this Agreement until the Closing, a
representative (who shall be acceptable to the Company in its reasonable
judgment) of each of Sprout, Oxford and Venrock (each an "Observer") shall have
the right to attend all meetings of the board of directors of the Company in a
nonvoting observer capacity, to receive notice of such meetings and to receive
the information provided by the Company to the board of directors; provided,
however, that the Company reserves the right to withhold any information and to
exclude any Observer from any meeting or portion thereof (so long as the Company
notifies such Observer of such withholding) if access to such information or
attendance at such meeting would in the good faith determination of the board of
directors (a) adversely affect the attorney-client privilege between the Company
and its counsel or cause the board of directors to breach its fiduciary duties,
(b) result in a conflict of interest or potential conflict of interest with the
Company, or (c) impair the Company's ability to enforce its rights under this
Agreement in any bona fide dispute with the Observer. Each Observer agrees to
hold all information received pursuant to this Section 7.20 in confidence, to
enter into a reasonable confidentiality agreement with the Company, and not to
use or disclose any of such information to any third party, except to the extent
such information is known, or when such information becomes known, to the public
(other than as a result of a breach of this sentence by any Observer) (such
non-public information, "Confidential Information"); provided, however, that an
Observer may disclose Confidential Information as may be required by law, after
receiving written advice of counsel that such disclosure is required, provided
that such Observer takes reasonable steps to minimize the extent of any such
required disclosure. The Company recognizes that certain of the Observers or
their Affiliates are engaged in the business of providing venture capital
financing and management advice to companies in which they invest (the "Venture
Investors"), and that in their business the Venture Investors may seek to invest
in and/or provide advice to companies that may be competitive with the Company.
Accordingly, notwithstanding anything to the contrary in this Agreement, the
Company understands and agrees that nothing in this Agreement will restrict the
Venture Investors from investing or participating in the management of any
business or entity which competes or may compete, directly or indirectly, with
the Company so long as such Venture Investor does not disclose any Confidential
Information to such business or entity or help or otherwise assist such business
or entity to use such information in violation hereof. The Company further
agrees that, provided a Venture Investor does not disclose Confidential
Information to a third-party in violation hereof, such Venture Investor shall be
free to use for internal use in its business any information it has obtained or
will obtain from the Company; provided, however, that any recipient of such
information is similarly restricted with respect to Confidential Information;
and provided, further, such Venture Investor shall not disclose any such
information to an officer, director, Affiliate, employee, or significant
stockholder of any business or entity that competes or may reasonably be deemed
to compete, directly or indirectly, with the Company.
7.21 THIRD PARTY OFFER. During the period from the date of this Agreement
until the Closing or the effective date of termination of this Agreement, if the
Company intends to seek any financing or to seek any transaction not in the
ordinary course of business consistent with past practice that would qualify as
an Alternative Proposal but for the 20% threshold specified in Section 7.14(c)
or is approached by any third party with any offer to provide such financing or
transaction that the Company does not immediately and unconditionally reject (a
"Third Party Offer"), the Company shall first endeavor to negotiate with the
Investors, for a period not to exceed fifteen (15) Business Days, a financing or
transaction comparable to the Third Party Offer. The Company and the Investors
shall negotiate in good faith with respect to such financing or transaction, but
nothing in this Agreement shall be construed to require the Investors to
provide, on the one hand, or the Company to accept, on the other hand, any such
financing or transaction; provided, however, that if the Company receives a
Third Party Offer, the Company shall notify the Investors of the amount of such
offer and all the other material terms of such offer and, if the Investors,
within the fifteen (15) Business Day period specified above, offer to provide
financing to, or enter into a transaction with, the Company in the amount, as
applicable, and on terms no less favorable than those contained in the Third
Party Offer, the Company shall accept the Investors' offer, if it accepts any
offer. For the avoidance of doubt, the parties hereto agree that any Third Party
Offer involving the right of a Person other than the Investors or their
Affiliates to (i) purchase or acquire less than 20% of the business, properties
or other assets or capital stock or other equity interests in the Company,
whether by share issuance, equity or convertible debt financing, sale of stock
or assets, merger, consolidation, other business combination, tender offer,
exchange offer, recapitalization, reorganization, liquidation, dissolution,
license agreement, mortgage, lease or other transaction involving the Company,
any division or operating or principal business unit or the Intellectual
Property of the Company, on the one hand, and any other Person, on the other
hand or (ii) enter into any transaction, that if consummated, would result in
any Person (or the stockholders of such Person) beneficially owning securities
representing less than 20% of the total voting power of the Company (or of the
surviving parent entity in such transaction) shall be deemed a Third Party Offer
and not an Alternative Proposal.
SECTION 8
TERMINATION
8.1 TERMINATION EVENTS. Without prejudice to other remedies which may be
available to the parties by law or this Agreement, this Agreement may be
terminated and the transactions contemplated hereby may be abandoned at any time
prior to the Closing:
(a) Mutually, by the written consent of the Company and Consent of the
Investors;
(b) by either the Company or Consent of the Investors by giving
written notice to the other party or parties if the Closing shall not have
occurred prior to June 30, 2003, unless extended by written agreement of the
parties; provided that the party seeking termination pursuant to this subsection
(b) is not in default or breach hereunder and provided, further, that the right
to terminate this Agreement under this subsection (b) shall not be available (i)
to any party whose failure to fulfill any obligation under this Agreement has
been the cause of, or resulted in, the failure of the Closing to occur on or
before such date or (ii) in the event that the Closing shall not have occurred
as a result of a failure of any representation to be true and correct in all
material respects and the party seeking termination knew of such breach prior to
the date of this Agreement (such failing or knowing party being the "Delaying
Party");
(c) by either the Company or Consent of the Investors by giving
written notice to the other party or parties if any Governmental Entity shall
have issued an injunction or other ruling prohibiting the consummation of any of
the transactions contemplated by this Agreement and such injunction or other
ruling shall not be subject to appeal or shall have become final and
unappealable;
(d) by either the Company or Consent of the Investors in the event
that Stockholder Approval is not obtained at the Stockholders' Meeting; or
(e) by the Company, if the Company's board of directors shall have
recommended to the stockholders of the Company an Alternative Proposal; provided
that, in order for the termination of this Agreement pursuant to this clause (e)
to be deemed effective, the Company shall have complied with all provisions of
Sections 7.4, 7.14, and 7.21.
8.2 EFFECT OF TERMINATION. In the event of any termination of this
Agreement pursuant to Section 8.1, all rights and obligations of the parties
hereunder shall terminate without any liability on the part of any party or its
Subsidiaries and Affiliates in respect thereof; provided, however, that (A) such
termination shall not relieve the Company or any Investor of any liability for
any breach or non-fulfillment of, or non-compliance with, this Agreement; and
(B) if the Company terminates this Agreement (i) pursuant to Section 8.1(b) and
within six (6) months thereafter enters into a definitive agreement regarding an
Alternative Proposal and the Investors are not a Delaying Party or (ii) pursuant
to Section 8.1(e), then the Company shall pay the Investors an aggregate of
Two-Hundred Fifty Thousand Dollars ($250,000) and in addition shall promptly
reimburse the Investors for their reasonable, documented legal, financial, due
diligence, and advisory fees and expenses; and (C) if the Company terminates
this Agreement pursuant to Section 8.1(d), the Company shall promptly reimburse
the Investors for their reasonable, documented legal, financial, due diligence,
and advisory fees and expenses.
SECTION 9
MISCELLANEOUS
9.1 WAIVERS AND AMENDMENTS. Any provision of this Agreement may be amended,
waived or modified only upon the written consent of the Company and Consent of
the Investors; except that no amendment, waiver or modification of this Section
9.1, the definition of Consent of the Investors, any provision of the Schedule
of Investors on Exhibit A hereto, the form of Warrant annexed as Exhibit B
hereto, or any of the conditions to the Investors' obligations set forth herein
in Section 5, and no amendment, waiver or modification of any provision of this
Agreement which is detrimental to any Investor in a manner materially different
from any other Investor, shall be made without the consent of each affected
Investor. Subject to the foregoing, any amendment or waiver effected in
accordance with this Section 9.1 shall be binding upon each Investor and the
Company.
9.2 GOVERNING LAW. This Agreement shall be governed in all respects by and
construed in accordance with the laws of the State of Delaware without any
regard to conflicts of laws principles.
9.3 WAIVER OF JURY TRIAL; TRIAL COSTS. Each of the Company, for itself and
its Affiliates, and Investors hereby irrevocably waive all right to trial by
jury in any action, proceeding or counterclaim (whether based on contract, tort
or otherwise) arising out of or relating to the actions of the Company and the
Investors or their Affiliates pursuant to this Agreement in the negotiation,
administration, performance or enforcement thereof. The party in whose favor a
final judgment is rendered shall be entitled to reasonable costs and reasonable
attorneys' fees.
9.4 SURVIVAL. The representations and warranties made in this Agreement
shall survive the Closing, and all covenants and agreements shall survive until
fully performed (if capable of being fully performed) pursuant to the terms of
this Agreement, unless terminated in writing sooner (if capable of being
terminated) pursuant to the terms of this Agreement.
9.5 SUCCESSORS AND ASSIGNS. The provisions hereof shall inure to the
benefit of, and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties to this Agreement. Neither the Company nor the
Investors may assign, except as expressly contemplated herein, any rights,
obligations or benefits under this Agreement without the prior written consent
of the other party.
9.6 ENTIRE AGREEMENT. This Agreement, including all exhibits, hereto
constitutes the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof.
9.7 NOTICES, ETC. All notices and other communications required or
permitted under this Agreement shall be effective upon receipt and shall be in
writing and may be delivered in person, by facsimile, overnight delivery service
or registered or certified United States mail, addressed:
If to the Company: Attention: Chief Financial Officer
Ribozyme Pharmaceuticals, Inc.
2950 Wilderness Place
Boulder, CO 80301
Facsimile: (303) 449-6995
With a courtesy copy to: James R. Tanenbaum, Esq.
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, NY 10038
Facsimile: (212) 806-6006
If to the Investor: The
address set forth
next to such
Investor's name in
Exhibit A.
with a courtesy copy to: Warren T. Lazarow, Esq. and
Sam Zucker, Esq.
O'Melveny & Myers, LLP
990 Marsh Road
Menlo Park, CA 94025-1949
Facsimile: (650) 473-2601
All notices and other communications shall be effective upon the earlier of
actual receipt thereof by the person to whom notice is directed or (i) in the
case of notices and communications sent by personal delivery or facsimile, one
Business Day after such notice or communication arrives at the applicable
address or was successfully sent to the applicable facsimile number, (ii) in the
case of notices and communications sent by overnight delivery service, at noon
(local time) on the second Business Day following the day such notice or
communication was sent, and (iii) in the case of notices and communications sent
by United States mail, seven days after such notice or communication shall have
been deposited in the United States mail.
9.8 INTERPRETATION. When a reference is made in this Agreement to Exhibits
or Schedules, such reference shall be to an Exhibit or Schedule to this
Agreement unless otherwise indicated. The words "include," "includes" and
"including" when used in this Agreement shall be deemed in each case to be
followed by the words "without limitation." The phrase "provided to," "furnished
to," or "made available" and terms of similar import in this Agreement means
that the information referred to has been made available to the Investors or
their representatives in the data room established at the Company's principal
office while such Investors or their representatives had access to such data
room and that the Company has used a reasonable procedure for informing the
Investors or their representatives of new or changed information in the data
room. In this Agreement, the phrases "the date of this Agreement", "the date
hereof", and terms of similar import, unless the context otherwise requires,
shall be deemed to refer to February 11, 2003. The table of contents and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
9.9 SEVERABILITY OF THIS AGREEMENT. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be valid, legal, and
enforceable under all applicable laws and regulations. If, however, any
provision of this Agreement shall be invalid, illegal, or unenforceable under
any such law or regulation in any jurisdiction, it shall, as to such
jurisdiction, be deemed modified to conform to the minimum requirements of such
law or regulation, or, if for any reason it is not deemed so modified, it shall
be invalid, illegal, or unenforceable only to the extent of such invalidity,
illegality, or limitation on enforceability without affecting the remaining
provisions of this Agreement, or the validity, legality, or enforceability of
such provision in any other jurisdiction.
9.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
9.11 FURTHER ASSURANCES. Each party to this Agreement shall do and perform
or cause to be done and performed all such further acts and things and shall
execute and deliver all such other agreements, certificates, instruments and
documents as the other party hereto may reasonably request in order to carry out
the intent and accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.
9.12 PUBLIC ANNOUNCEMENTS. Except as may be required by law or regulation,
the Company shall not use the name of, or make reference to, any Investor or any
of its Affiliates in any press release or in any public manner (including any
reports or filings made by the Company under the Exchange Act) without such
Investor's prior written consent which consent shall not be unreasonably
withheld. The initial press release with respect to the execution of this
Agreement shall be approved by the Company and Sprout, Oxford and Venrock on
behalf of the Investors. Thereafter, so long as this Agreement is in effect, the
Company and the Investors shall consult with each other before issuing any press
release or otherwise making any public statements with respect to this Agreement
or the Transactions without the prior consent of the other party, which consent
shall not be unreasonably withheld; provided, however, that the Company, on the
one hand, and the Investors, on the other hand, may, without the prior consent
of the other party, issue a press release or make such public statement as may,
upon the advice of counsel, be required by law if it has used all reasonable
efforts to consult with the other party.
9.13 EXPENSES. The Company shall bear its own expenses, and shall, subject
to the Closing, pay the Investor's reasonable legal fees and expenses of the
Investor Counsel, up to $175,000, and financial, due diligence, and advisory
fees and expenses, up to $75,000, incurred with respect to this Agreement and
the Transactions.
9.14 COMPANY DISCLOSURE SCHEDULE.
(a) Disclosure of information in any one section of the Company
Disclosure Schedule shall be deemed to be disclosure in another section of the
Company Disclosure Schedule if and to the extent it is clear from a reading of
such section, without any additional information, that such disclosure is
applicable to such other section. The Company Disclosure Schedule is qualified
in its entirety by reference to specific provisions of this Agreement, and is
not intended to constitute, and shall not be construed as constituting,
representation or warranties of the Company except as and to the extent provided
in this Agreement. Inclusion of any item in the Company Disclosure Schedule: (1)
does not represent a determination by the Company that such item (i) is material
nor shall it be deemed to establish a standard of materiality (except to the
extent that this Agreement provides otherwise) or (ii) did not arise in the
ordinary course of business (except to the extent that this Agreement provides
otherwise) and (2) shall not constitute, or be deemed to be, an admission to any
third party concerning such item by the Company.
(b) Notwithstanding any disclosure to the contrary in the Disclosure
Schedule, if the Company were deemed to have any Subsidiary, then (i) the
Company's representations and warranties referencing the Company hereunder shall
be deemed to be modified so that for each such representation and warranty the
Company shall be deemed to have made a corresponding representation and warranty
referencing such Subsidiary, and (ii) the definitions in Section 1 that make
reference to the Company shall, as appropriate, be deemed to be modified to also
make reference to such Subsidiary.
[Signature pages follow]
The foregoing agreement is hereby executed as of the date first above
written.
"COMPANY"
RIBOZYME PHARMACEUTICALS, INC.,
a Delaware corporation
By: /s/ Howard W. Robin
------------------------------------
Name: Howard W. Robin
Title: President & Chief Executive Officer
"INVESTORS"
DLJ CAPITAL CORPORATION
By: /s/ Philippe O. Chambon
------------------------------------
Name: Philippe O. Chambon
Title: Managing Director
SPROUT CAPITAL IX, L.P.
By: DLJ Capital Corporation
Its: Managing General Partner
By: /s/ Philippe O. Chambon
------------------------------------
Name: Philippe O. Chambon
Title: Managing Director
SPROUT ENTREPRENEURS' FUND, L.P.
By: DLJ Capital Corporation
Its: General Partner
By: /s/ Philippe O. Chambon
------------------------------------
Name: Philippe O. Chambon
Title: Managing Director
SPROUT IX PLAN INVESTORS, L.P.
By: DLJ LBO Plans Management
Corporation
Its: General Partner
By: /s/ Philippe O. Chambon
------------------------------------
Name: Philippe O. Chambon
Title: Attorney in Fact
"INVESTORS"
VENROCK ASSOCIATES,
by a General Partner
VENROCK ASSOCIATES III, L.P.,
by its General Partner, Venrock
Management III LLC
VENROCK ENTREPRENEURS FUND III, L.P.,
by its General Partner, VEF Management
III LLC
By: /s/ Bryan E. Roberts
------------------------------------
Name: Bryan E. Roberts
As a General Partner or Member
"INVESTORS"
GRANITE GLOBAL VENTURES (Q.P.) L.P.
By: Granite Global Ventures L.L.C., its
general partner
By: /s/ Scott Bonham
------------------------------------
Name: Scott Bonham
Title: Managing Director
GRANITE GLOBAL VENTURES L.P.
By: Granite Global Ventures L.L.C.,
its general partner
By: /s/ Scott Bonham
------------------------------------
Name: Scott Bonham
Title: Managing Director
"INVESTORS"
OXFORD BIOSCIENCE PARTNERS IV L.P.
By: OBP Management IV L.P., its
general partner
By: /s/ Alan G. Walton
------------------------------------
Name: Alan G. Walton
Title: General Partner
mRNA FUND II, L.P.
By: OBP Management IV L.P., its
general partner
By: /s/ Alan G. Walton
------------------------------------
Name: Alan G. Walton
Title: General Partner
"INVESTORS"
TVM V LIFE SCIENCE VENTURES GBMH & CO. KG
By: /s/ John J. DiBello
------------------------------------
Name: John J. DiBello
Title: Managing Limited Partner
By: /s/ Gert Caspritz
------------------------------------
Name: Gert Caspritz
Title: Managing Limited Partner
EXHIBIT A
SCHEDULE OF INVESTORS
NAME AMOUNT
Sprout and Affiliates (Any of DLJ Capital Corporation,
Sprout Capital IX, L.P., Sprout Entrepreneurs' Fund, L.P.,
Sprout IX Plan Investors, L.P.), as allocated in its and their sole
discretion.............................................................. $22,833,333
Venrock Associates...................................................... 1,860,000
Venrock Associates III, L.P............................................. 8,266,667
Venrock Entrepreneurs Fund III, L.P..................................... 206,667
Granite Global Ventures (Q.P.) L.P...................................... 1,966,400
Granite Global Ventures L.P............................................. 33,600
Oxford Bioscience Partners IV L.P....................................... 7,755,517
mRNA Fund II, L.P....................................................... 77,816
TVM V Life Science Ventures GmbH & Co. KG............................... 5,000,000
====================
Total............................................................. $48,000,000
ADDRESSES OF INVESTORS
The Sprout Group
11 Madison Avenue
13th Floor
New York, NY 10010
Facsimile: (212) 538-8245
Oxford Bioscience Partners
315 Post Road West
Westport, CT 06880
Facsimile: (203) 341-3309
Venrock Associates
2494 Sand Hill Road
Suite 200
Menlo Park, CA 94025
Facsimile: (650) 561-9180
Granite Global Ventures
2494 Sand Hill Road
Suite 201
Menlo Park, CA 94025
Facsimile: (650) 475-2151
Techno Venture Management
101 Arch Street, Suite 1950
Boston, MA 02110
Facsimile: (617) 345-9377
EXHIBIT B
FORM OF WARRANT
THIS WARRANT AND THE SHARES OF COMMON STOCK TO BE ISSUED UPON EXERCISE HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (I) AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, (II) AN OPINION OF COUNSEL OR
OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION
IS NOT REQUIRED, (III) RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE
GOVERNMENTAL AUTHORITIES, OR (IV) OTHERWISE COMPLYING WITH THE PROVISIONS OF
SECTION 7 OF THIS WARRANT.
RIBOZYME PHARMACEUTICALS, INC.
WARRANT TO PURCHASE ____ SHARES
OF COMMON STOCK
Warrant No. W-___
THIS CERTIFIES THAT, for value received, ___________and its assigns are
entitled to subscribe for and purchase [___________________________] shares (as
adjusted pursuant to Section 4 hereof, the "SHARES") of the fully paid and
nonassessable common stock, par value $0.01 per share ("COMMON STOCK"), of
Ribozyme Pharmaceuticals, Inc., a Delaware corporation (the "COMPANY"), at the
price of $0.42 per share (such price and such other price as shall result, from
time to time, from the adjustments specified in Section 4 hereof is herein
referred to as the "WARRANT PRICE"), subject to the provisions and upon the
terms and conditions hereinafter set forth. As used herein, (a) the term "DATE
OF GRANT" means the date of the "Closing" as defined in the Common Stock and
Warrant Purchase Agreement dated as of February ___, 2003 among the Company and
the investors listed on EXHIBIT A thereto (the "PURCHASE AGREEMENT"), and (b)
the term "OTHER WARRANTS" means any other warrants issued by the Company in
connection with the transaction with respect to which this Warrant was issued,
and any warrant issued upon transfer or partial exercise of this Warrant. The
term "WARRANT" as used herein shall be deemed to include Other Warrants unless
the context clearly requires otherwise.
1. TERM. The purchase right represented by this Warrant is exercisable, in
whole or in part, at any time and from time to time from the Date of Grant
through five (5) years after the Date of Grant.
2. METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT. Subject to Section
1 hereof, the purchase right represented by this Warrant may be exercised by the
holder hereof, in whole or in part and from time to time, at the election of the
holder hereof, by (a) the surrender of this Warrant (with the notice of exercise
substantially in the form attached hereto as EXHIBIT A-1 duly completed and
executed) at the principal office of the Company and by the payment to the
Company, by certified or bank check, or by wire transfer to an account
designated by the Company (a "WIRE TRANSFER") of an amount equal to the then
applicable Warrant Price multiplied by the number of Shares then being
purchased, or (b) if in connection with a registered public offering of the
Company's securities, the surrender of this Warrant (with the notice of exercise
form attached hereto as EXHIBIT A-2 duly completed and executed) at the
principal office of the Company together with notice of arrangements reasonably
satisfactory to the Company for payment to the Company either by certified or
bank check or by Wire Transfer from the proceeds of the sale of shares to be
sold by the holder in such public offering of an amount equal to the then
applicable Warrant Price per share multiplied by the number of Shares then being
purchased, or (c) exercise of the "net issuance" right provided for in Section
10.2 hereof. The person or persons in whose name(s) any certificate(s)
representing the Shares shall be issuable upon exercise of this Warrant shall be
deemed to have become the holder(s) of record of, and shall be treated for all
purposes as the record holder(s) of, the shares represented thereby (and such
shares shall be deemed to have been issued) immediately prior to the close of
business on the date or dates upon which this Warrant is exercised. In the event
of any exercise of the rights represented by this Warrant, certificates for the
shares of stock so purchased shall be delivered to the holder hereof as soon as
practicable and, if requested by the holder of this Warrant, the Company shall
cause its transfer agent to deliver the certificate representing Shares issued
upon exercise of this Warrant to a broker or other person (as directed by the
holder exercising this Warrant) within the time period required to settle any
trade made by the holder after exercise of this Warrant.
3. STOCK FULLY PAID; RESERVATION OF SHARES. All Shares that may be issued
upon the exercise of the rights represented by this Warrant will, upon issuance
pursuant to the terms and conditions herein, be fully paid and nonassessable,
and free from all taxes, liens and charges with respect to the issue thereof.
During the period within which the rights represented by this Warrant may be
exercised, the Company will at all times have authorized, and reserved for the
purpose of the issue upon exercise of the purchase rights evidenced by this
Warrant, a sufficient number of shares of its Common Stock to provide for the
exercise of the rights represented by this Warrant.
4. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES. The number and kind of
securities purchasable upon the exercise of this Warrant and the Warrant Price
shall be subject to adjustment from time to time upon the occurrence of certain
events, as follows:
(a) RECLASSIFICATION OR MERGER. In case of any reclassification or
change of securities of the class issuable upon exercise of this Warrant
(other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of a subdivision or
combination), or in case of any merger of the Company with or into another
corporation (other than a merger with another corporation in which the
Company is the acquiring and the surviving corporation and which does not
result in any reclassification or change of outstanding securities issuable
upon exercise of this Warrant), or in case of any sale of all or
substantially all of the assets of the Company, the Company, or such
successor or purchasing corporation, as the case may be, shall duly execute
and deliver to the holder of this Warrant a new Warrant (in form and
substance satisfactory to the holder of this Warrant), or the Company shall
make appropriate provision without the issuance of a new Warrant, so that
the holder of this Warrant shall have the right to receive upon exercise of
this Warrant, at a total purchase price not to exceed that payable upon the
exercise of the unexercised portion of this Warrant, and in lieu of the
shares of Common Stock theretofore issuable upon exercise of this Warrant,
the kind and amount of shares of stock, other securities, money and
property receivable upon such reclassification, change or merger by a
holder of the number of shares of Common Stock then purchasable under this
Warrant. Such new Warrant shall provide for adjustments that shall be as
nearly equivalent as may be practicable to the adjustments provided for in
this Section 4. The provisions of this subparagraph (a) shall similarly
apply to successive reclassifications, changes, mergers and transfers.
(b) SUBDIVISION OR COMBINATION OF SHARES. If the Company at any time
while this Warrant remains outstanding and unexpired shall subdivide or
combine its outstanding shares of Common Stock, the Warrant Price shall be
proportionately decreased and the number of Shares issuable hereunder shall
be proportionately increased in the case of a subdivision or the Warrant
Price shall be proportionately increased and the number of Shares issuable
hereunder shall be proportionately decreased in the case of a combination.
(c) STOCK DIVIDENDS AND OTHER DISTRIBUTIONS. If the Company at any
time while this Warrant is outstanding and unexpired shall pay a dividend
or make a distribution to all of its stockholders with respect to its
Common Stock payable in Common Stock, then the Warrant Price shall be
adjusted, from and after the date of determination of stockholders entitled
to receive such dividend or distribution, to that price determined by
multiplying the Warrant Price in effect immediately prior to such date of
determination by a fraction (A) the numerator of which shall be the total
number of shares of Common Stock outstanding immediately prior to such
dividend or distribution, and (B) the denominator of which shall be the
total number of shares of Common Stock outstanding immediately after such
dividend or distribution.
(d) ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment in the
Warrant Price, the number of Shares purchasable hereunder shall be
adjusted, to the nearest whole share, to the product obtained by
multiplying the number of Shares purchasable immediately prior to such
adjustment in the Warrant Price by a fraction, the numerator of which shall
be the Warrant Price immediately prior to such adjustment and the
denominator of which shall be the Warrant Price immediately thereafter.
5. NOTICE OF ADJUSTMENTS. Whenever the Warrant Price or the number of
Shares purchasable hereunder shall be adjusted pursuant to Section 4 hereof, the
Company shall make a certificate signed by its chief executive officer, chief
financial officer or any vice president setting forth, in reasonable detail, the
event requiring the adjustment, the amount of the adjustment, the method by
which such adjustment was calculated, and the Warrant Price and the number of
Shares purchasable hereunder after giving effect to such adjustment, and shall
cause copies of such certificate to be mailed (without regard to Section 13
hereof, by first class mail, postage prepaid) to the holder of this Warrant at
such holder's last known address.
6. FRACTIONAL SHARES. No fractional shares of Common Stock will be issued
in connection with any exercise hereunder, but in lieu of such fractional shares
the Company shall make a cash payment therefor based on the fair market value of
the Common Stock on the date of exercise as reasonably determined in good faith
by the Company's Board of Directors.
7. COMPLIANCE WITH SECURITIES ACT; DISPOSITION OF WARRANT OR SHARES OF
COMMON STOCK.
(a) COMPLIANCE WITH SECURITIES ACT. The holder of this Warrant, by
acceptance hereof, agrees that this Warrant, and the Shares to be issued
upon exercise hereof are being acquired for investment and that such holder
will not offer, sell or otherwise dispose of this Warrant, or any Shares
except under circumstances which will not result in a violation of the
Securities Act of 1933, as amended (the "ACT") or any applicable state
securities laws. Upon exercise of this Warrant, unless the Shares being
acquired are registered under the Act and any applicable state securities
laws or an exemption from such registration is available, the holder hereof
shall confirm in writing that the Shares so purchased are being acquired
for investment and not with a view toward distribution or resale in
violation of the Act and shall confirm such other matters related thereto
as may be reasonably requested by the Company. This Warrant and all Shares
issued upon exercise of this Warrant (unless registered under the Act and
any applicable state securities laws) shall be stamped or imprinted with a
legend in substantially the following form:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO
SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (I) AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO, (II) AN OPINION OF COUNSEL OR
OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATION IS NOT REQUIRED, (III) RECEIPT OF NO-ACTION LETTERS FROM
THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (IV) OTHERWISE COMPLYING
WITH THE PROVISIONS OF SECTION 7 OF THE WARRANT UNDER WHICH THESE
SECURITIES WERE ISSUED, DIRECTLY OR INDIRECTLY."
Said legend shall be removed by the Company, upon the request of a holder,
at such time as the restrictions on the transfer of the applicable security
shall have terminated. In addition, in connection with the issuance of this
Warrant, the holder specifically represents to the Company by acceptance of this
Warrant as follows:
(1) The holder is aware of the Company's business affairs and
financial condition, and has acquired information about the Company
sufficient to reach an informed and knowledgeable decision to acquire
this Warrant. The holder is acquiring this Warrant for its own account
for investment purposes only and not with a view to, or for the resale
in connection with, any "distribution" thereof in violation of the
Act.
(2) The holder understands that this Warrant has not been
registered under the Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona
fide nature of the holder's investment intent as expressed herein.
(3) The holder further understands that this Warrant must be held
indefinitely unless subsequently registered under the Act and
qualified under any applicable state securities laws, or unless
exemptions from registration and qualification are otherwise
available. The holder is aware of the provisions of Rule 144,
promulgated under the Act.
(4) The holder is an "accredited investor" as such term is
defined in Rule 501 of Regulation D promulgated under the Act.
(b) DISPOSITION OF WARRANT OR SHARES. With respect to any offer, sale
or other disposition of this Warrant or any Shares acquired pursuant to the
exercise of this Warrant prior to registration of such Warrant or Shares,
the holder hereof agrees to give written notice to the Company prior
thereto, describing briefly the manner thereof, together with a written
opinion of such holder's counsel, or other evidence satisfactory to the
Company, to the effect that such offer, sale or other disposition may be
effected without registration or qualification (under the Act as then in
effect or any federal or state securities law then in effect) of this
Warrant or the Shares and indicating whether or not under the Act
certificates for this Warrant or the Shares to be sold or otherwise
disposed of require any restrictive legend as to applicable restrictions on
transferability in order to ensure compliance with such law. Upon receiving
such written notice and reasonably satisfactory opinion or other evidence,
the Company, as promptly as practicable but no later than fifteen (15) days
after receipt of the written notice, shall notify such holder that such
holder may sell or otherwise dispose of this Warrant or such Shares, all in
accordance with the terms of the notice delivered to the Company. If a
determination has been made pursuant to this Section 7(b) that the opinion
of counsel for the holder or other evidence is not reasonably satisfactory
to the Company, the Company shall so notify the holder promptly with
details thereof after such determination has been made. Notwithstanding the
foregoing, this Warrant or such Shares may, as to such federal laws, be
offered, sold or otherwise disposed of in accordance with Rule 144 or 144A
under the Act, provided that the Company shall have been furnished with
such information as the Company may reasonably request to provide a
reasonable assurance that the provisions of Rule 144 or 144A have been
satisfied. Each certificate representing this Warrant or the Shares thus
transferred (except a transfer pursuant to Rule 144) shall bear a legend as
to the applicable restrictions on transferability in order to ensure
compliance with such laws, unless in the aforesaid opinion of counsel for
the holder, such legend is not required in order to ensure compliance with
such laws. The Company may issue stop transfer instructions to its transfer
agent in connection with such restrictions.
(c) APPLICABILITY OF RESTRICTIONS. Neither any restrictions of any
legend described in this Warrant nor the requirements of Section 7(b) above
shall apply to any transfer or grant of a security interest in, this
Warrant (or the shares of Common Stock obtainable upon exercise thereof) or
any part hereof (i) to a partner of the holder if the holder is a
partnership or to a member of the holder if the holder is a limited
liability company, (ii) to a partnership of which the holder is a partner
or a limited liability company of which the holder is a member, or (iii) to
any affiliate of the holder if the holder is a corporation; provided,
however, in any such transfer, if applicable, the transferee shall on the
Company's request agree in writing to be bound by the terms of this Warrant
as if an original holder hereof.
8. RIGHTS AS SHAREHOLDERS. No holder of this Warrant, as such, shall be
entitled to vote or receive dividends or be deemed the holder of Common Stock or
any other securities which may at any time be issuable on the exercise hereof
for any purpose, nor shall anything contained herein be construed to confer upon
the holder of this Warrant, as such, any of the rights of a shareholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to shareholders at any meeting thereof, or to receive notice of
meetings, or to receive dividends or subscription rights or otherwise until this
Warrant shall have been exercised and the Shares purchasable upon the exercise
hereof shall have become deliverable, as provided herein.
9. REGISTRATION RIGHTS. The Company grants registration rights to the
holder of this Warrant for any shares of Common Stock of the Company obtained
upon exercise hereof as set forth in the Purchase Agreement.
10. ADDITIONAL RIGHTS.
10.1. MERGERS. The Company shall provide the holder of this Warrant with at
least twenty (20) days' written notice prior to the closing thereof of the terms
and conditions of any of the following transactions: (i) the sale, lease,
exchange, conveyance or other disposition of all or substantially all of the
Company's property or business, or (ii) its merger into or consolidation with
any other corporation (other than a wholly-owned subsidiary of the Company), or
(iii) any transaction (including a merger or other reorganization) or series of
related transactions, in which more than 50% of the voting power of the Company
is disposed of.
10.2. RIGHT TO CONVERT WARRANT INTO STOCK: NET ISSUANCE.
(a) RIGHT TO CONVERT. In addition to and without limiting the rights
of the holder under the terms of this Warrant, the holder shall have the
right to convert this Warrant or any portion thereof (the "CONVERSION
RIGHT") into shares of Common Stock as provided in this Section 10.2 at any
time or from time to time during the term of this Warrant. Upon exercise of
the Conversion Right with respect to a particular number of shares subject
to this Warrant (the "CONVERTED WARRANT SHARES"), the Company shall deliver
to the holder (without payment by the holder of any exercise price or any
cash or other consideration) that number of shares of fully paid and
nonassessable Common Stock as is determined according to the following
formula:
X = B - A
-----
Y
Where: X = the number of shares of Common Stock that may be
issued to the holder.
Y = the fair market value of one share of Common Stock.
A = the aggregate Warrant Price of the specified number of
Converted Warrant Shares immediately prior to the exercise
of the Conversion Right (i.e., the number of Converted
Warrant Shares multiplied by the Warrant Price).
B = the aggregate fair market value of the specified number
of Converted Warrant Shares (i.e., the number of Converted
Warrant Shares multiplied by the fair market value of one
Converted Warrant Shares).
No fractional shares shall be issuable upon exercise of the Conversion
Right, and, if the number of shares to be issued determined in accordance with
the foregoing formula is other than a whole number, the Company shall pay to the
holder an amount in cash equal to the fair market value of the resulting
fractional share on the Conversion Date (as hereinafter defined). For purposes
of Section 9 of this Warrant, shares issued pursuant to the Conversion Right
shall be treated as if they were issued upon the exercise of this Warrant.
(b) METHOD OF EXERCISE. The Conversion Right may be exercised by the
holder by the surrender of this Warrant at the principal office of the
Company together with a written statement (which may be in the form of
EXHIBIT A-1 or EXHIBIT A-2 hereto) specifying that the holder thereby
intends to exercise the Conversion Right and indicating the number of
shares subject to this Warrant which are being surrendered (referred to in
Section 10.2(a) hereof as the Converted Warrant Shares) in exercise of the
Conversion Right. Such conversion shall be effective upon receipt by the
Company of this Warrant together with the aforesaid written statement, or
on such later date as is specified therein (the "CONVERSION DATE"), and, at
the election of the holder hereof, may be made contingent upon the closing
of the sale of the Company's Common Stock to the public in a public
offering pursuant to a registration statement under the Act (a "PUBLIC
OFFERING"). Certificates for the shares issuable upon exercise of the
Conversion Right and, if applicable, a new warrant evidencing the balance
of the shares remaining subject to this Warrant, shall be issued as of the
Conversion Date and shall be delivered to the holder within thirty (30)
days following the Conversion Date.
(c) DETERMINATION OF FAIR MARKET VALUE. For purposes of this Section
10.2, "fair market value" of a share of Common Stock as of a particular
date (the "DETERMINATION DATE") shall mean:
(i) If the Conversion Right is exercised in connection with and
contingent upon a Public Offering, and if the Company's Registration
Statement relating to such Public Offering ("REGISTRATION STATEMENT")
has been declared effective by the Securities and Exchange Commission,
then the initial "Price to Public" specified in the final prospectus
with respect to such offering.
(ii) If the Conversion Right is not exercised in connection with
and contingent upon a Public Offering, then as follows:
(A) If traded on a securities exchange, the fair market
value of the Common Stock shall be deemed to be the average of
the closing prices of the Common Stock on such exchange over the
five trading days immediately prior to the Determination Date;
(B) If traded on the Nasdaq Stock Market or other
over-the-counter system, the fair market value of the Common
Stock shall be deemed to be the average of the closing bid prices
of the Common Stock over the five trading days immediately prior
to the Determination Date; and
(C) If there is no public market for the Common Stock, then
fair market value shall be reasonably determined by the Company's
Board of Directors.
If closing prices or closing bid prices are no longer reported by a
securities exchange or other trading system, the closing price or closing bid
price shall be that which is reported by such securities exchange or other
trading system at 4:00 p.m. New York City time on the applicable trading day.
11. REPRESENTATIONS AND WARRANTIES. The Company represents and warrants to
the holder of this Warrant as follows:
(a) This Warrant has been duly authorized and executed by the Company
and is a valid and binding obligation of the Company enforceable in
accordance with its terms, subject to laws of general application relating
to bankruptcy, insolvency, moratorium, reorganization and the relief of
debtors and the rules of law or principles at equity governing specific
performance, injunctive relief and other equitable remedies (regardless of
whether enforcement is sought in equity or at law);
(b) The Shares have been duly authorized and reserved for issuance by
the Company and, when issued in accordance with the terms hereof will be
validly issued, fully paid and non-assessable;
(c) The execution and delivery of this Warrant are not, and the
issuance of the Shares upon exercise of this Warrant in accordance with the
terms hereof will not be, inconsistent with the Company's certificate of
incorporation or by-laws, do not and will not contravene any law,
governmental rule or regulation, judgment or order applicable to the
Company, [and do not and will not conflict with or contravene any provision
of, or constitute a default under, any material indenture, mortgage,
contract or other instrument of which the Company is a party or by which it
is bound or require the consent or approval of, the giving of notice to,
the registration or filing with or the taking of any action in respect of
or by, any Federal, state or local government authority or agency or other
person,] except for the filing of notices pursuant to federal and state
securities laws, which filings will be effected by the time required
thereby; and
(d) There are no actions, suits, audits, investigations or proceedings
pending or, to the knowledge of the Company, threatened against the Company
in any court or before any governmental commission, board or authority
which, if adversely determined, will have a material adverse effect on the
ability of the Company to perform its obligations under this Warrant.
12. MODIFICATION AND WAIVER. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
13. NOTICES. Any notice, request, communication or other document required
or permitted to be given or delivered to the holder hereof or the Company shall
be delivered, or shall be sent by certified or registered mail, postage prepaid,
to each such holder at its address as shown on the books of the Company or to
the Company at the address indicated therefor on the signature page of this
Warrant.
14. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets, and all of the obligations of
the Company relating to the Shares issuable upon the exercise or conversion of
this Warrant shall survive the exercise, conversion and termination of this
Warrant and all of the covenants and agreements of the Company shall inure to
the benefit of the successors and assigns of the holder hereof.
15. LOST WARRANTS OR STOCK CERTIFICATES. The Company covenants to the
holder hereof that, upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant or any
stock certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver a new Warrant or stock
certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated
Warrant or stock certificate.
16. DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant. The language in this Warrant shall be
construed as to its fair meaning without regard to which party drafted this
Warrant.
17. GOVERNING LAW. This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of Delaware.
18. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All
representations and warranties of the Company and the holder hereof contained
herein shall survive the Date of Grant, the exercise or conversion of this
Warrant (or any part hereof) or the termination or expiration of rights
hereunder. All agreements of the Company and the holder hereof contained herein
shall survive indefinitely until, by their respective terms, they are no longer
operative.
19. REMEDIES. In case any one or more of the covenants and agreements
contained in this Warrant shall have been breached, the holders hereof (in the
case of a breach by the Company), or the Company (in the case of a breach by a
holder), may proceed to protect and enforce their or its rights either by suit
in equity and/or by action at law, including, but not limited to, an action for
damages as a result of any such breach and/or an action for specific performance
of any such covenant or agreement contained in this Warrant.
20. NO IMPAIRMENT OF RIGHTS. The Company will not, by amendment of its
certificate of incorporation or through any other means, avoid or seek to avoid
the observance or performance of any of the terms of this Warrant, but will at
all times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the holder of this Warrant against impairment.
21. SEVERABILITY. Whenever possible, each provision of this Warrant shall
be interpreted in such a manner as to be valid, legal and enforceable under all
applicable laws and regulations. If, however, any provision of this Warrant
shall be invalid, illegal or unenforceable under any such law or regulation in
any jurisdiction, it shall, as to such jurisdiction, be deemed modified to
conform to the minimum requirements of such law or regulation, or, if for any
reason it is not deemed to be so modified, it shall be invalid, illegal or
unenforceable only to the extent of such invalidity, illegality or limitation on
enforceability without affecting the remaining provisions of this Warrant or the
validity, legality or enforceability of such provision in any other
jurisdiction.
[Remainder of page intentionally left blank]
22. ENTIRE AGREEMENT; MODIFICATION. This Warrant constitutes the entire
agreement between the parties pertaining to the subject matter contained in it
and supersedes all prior and contemporaneous agreements, representations, and
undertakings of the parties, whether oral or written, with respect to such
subject matter.
RIBOZYME PHARMACEUTICALS, INC.
By:__________________________________
Name:
Title:
Address: 2950 Wilderness Place
Boulder, CO 80301
EXHIBIT A-1
NOTICE OF EXERCISE
1. The undersigned hereby:
[ ] elects to purchase _____ shares of Common Stock of the Company
pursuant to the terms of the attached Warrant, and tenders herewith
payment of the purchase price of such shares in full, or
[ ] elects to exercise its net issuance rights pursuant to Section 10.2
of the attached Warrant with respect to ____ shares of Common Stock.
2. Please issue a certificate or certificates representing said shares in the
name of the undersigned or in such other name or names as are specified
below:
-------------------------------------
(Name)
-------------------------------------
-------------------------------------
-------------------------------------
(Address)
3. The undersigned represents that the aforesaid shares are being acquired for
the account of the undersigned for investment and not with a view to, or
for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such
shares, all except as in compliance with applicable securities laws.
-------------------------------------
(Signature)
Dated: _______________________________
EXHIBIT A-2
NOTICE OF EXERCISE
1. Contingent upon and effective immediately prior to the closing (the
"Closing") of the Company's public offering contemplated by the
Registration Statement on Form S_, filed, _____________, 200__, the
undersigned hereby:
[ ] elects to purchase _____ shares of Common Stock of the Company (or
such lesser number of shares as may be sold on behalf of the
undersigned at the Closing) pursuant to the terms of the attached
Warrant, or
[ ] elects to exercise its net issuance rights pursuant to Section 10.2
of the attached Warrant with respect to _____ Shares of Common Stock.
2. Please deliver to the custodian for the selling shareholders a stock
certificate representing such _____________ shares.
3. The undersigned has instructed the custodian for the selling shareholders
to deliver to the Company $_____ or, if less, the net proceeds due the
undersigned from the sale of shares in the aforesaid public offering. If
such net proceeds are less than the purchase price for such shares, the
undersigned agrees to deliver the difference to the Company prior to the
Closing.
-------------------------------------
(Name)
-------------------------------------
-------------------------------------
-------------------------------------
(Address)
Dated: __________________________
EXHIBIT C
FORM OF OPINION OF COMPANY COUNSEL
[Subject to customary qualifications]
1. The Company is duly incorporated, validly existing and in good standing
under the laws of the State of Delaware and is qualified to do business as a
foreign corporation and is in good standing under the laws of the State of
Colorado. The Company has the requisite corporate power and authority to own its
properties and conduct its business as it is presently conducted.
2. The Common Shares have been duly authorized, and when issued, delivered and
paid for in accordance with the terms of the Common Stock and Warrant Purchase
Agreement, will be validly issued, fully paid and nonassessable.
3. The Company has the requisite corporate power and authority to execute,
deliver and perform the Common Stock and Warrant Purchase Agreement. The Common
Stock and Warrant Purchase Agreement has been duly and validly authorized by the
Company, duly executed and delivered by an authorized officer of the Company and
constitutes a legal, valid and binding obligation of the Company, enforceable by
each of you against the Company in accordance with its terms.
4. There are no statutory preemptive rights.
5. Other than in connection with any securities laws, the Company's execution
and delivery of, and its performance and compliance as of the date hereof with
the terms of the Common Stock and Warrant Purchase Agreement does not violate
any provision of any federal, Delaware corporate law, rule or regulation
applicable to the Company or any provision of the Company's Certificate of
Incorporation, as amended to the date hereof, or Bylaws, as amended to the date
hereof, and does not conflict with or constitute a default under the provisions
of any of the material agreements set forth on Schedule A hereto to which the
Company is a party.
6. Assuming the accuracy of the representations and warranties of each of the
Investors in the Common Stock and Warrant Purchase Agreement, the offer and sale
of the Shares pursuant to the terms of the Common Stock and Warrant Purchase
Agreement are exempt from the registration requirements of Section 5 of the
Securities Act of 1933, as amended (the "Securities Act").
7. Other than in connection with any securities laws, all consents, approvals,
permits, orders or authorizations of, and all qualifications by and
registrations with, any federal or state governmental authority on the part of
the Company required in connection with the execution and delivery of the Common
Stock and Warrant Purchase Agreement and the consummation at the Closing of the
transactions contemplated by the Common Stock and Warrant Purchase Agreement
have been obtained and are effective, and we are not aware of any proceedings,
or written threat of any proceedings, that question the validity thereof.
EXHIBIT D
FORM OF OPINION OF INTELLECTUAL PROPERTY COUNSEL
Re: Ribozyme Pharmaceuticals, Inc.
Dear Sirs:
We represent Ribozyme Pharmaceuticals, Inc. ("the Company") in connection with
the issued patents and pending patent applications listed in Exhibit A, issued
trademark registrations and pending trademark applications listed in Exhibit B,
and related intellectual property matters. This letter, issued at the Company's
request, is limited accordingly.
a. We have disclosed or at all relevant times intended and intend to disclose
to the United States Patent and Trademark Office any references known by us
to be material to the patentability of the claimed inventions of the United
States patent applications of the Company being prosecuted by us and listed
on Exhibit A in a manner that satisfies 37 C.F.R. ss. 1.56.
b. All patents and applications that are being or have been prosecuted by us
relating to RNA interference (RNAi) processes mediated by small interfering
nucleic acid (siNA, including siRNA) molecules (collectively, RNAi
technology), as identified on Exhibit C, have been assigned to the Company,
or the inventors on such patents or patent applications have been
represented to us as being employees of the Company under an obligation to
assign their rights in such patents or patent applications to the Company.
To the best of our knowledge, all of the remaining patents, trademarks, and
applications being prosecuted by us and listed on Exhibit A and Exhibit B
either have been assigned or licensed to the Company, or one or more
inventors on such patents or patent applications are under an obligation to
assign their rights in such patents or patent applications to the Company
or to the Company's licensor.
c. But for the exceptions noted below, we have not, within the last one-year
period, received any written notice from a third party challenging
ownership, validity, or enforceability of any patent or trademark of the
Company. Moreover, but for the exceptions noted below, we have not, within
the last one-year period, received any information from the Company
regarding any written notice from a third party challenging ownership,
validity, or enforceability of any patent or trademark of the Company. As
to the subject matter of the siNA applications identified in Exhibit C, and
but for the exceptions noted below, we have not received and we are not
aware of the Company having received any notice from any third party
charging patent infringement or challenging the ownership, validity, or
enforceability of the Company's position.
Exceptions: (i) a potential interference proceeding in the U.S. Patent and
Trademark Office against Hybridon; (ii) a pending re-examination proceeding
filed by a third party in the U.S. Patent and Trademark Office against one
of the Company's Inbound License Agreement Patents; (iii) an opposition
proceeding in the European Patent Office against one of the Company's
Inbound License Agreement Patents; (iv) a pending opposition proceeding
filed by the Company in the European Patent Office against a third-party
patent application; (v) a possible opposition proceeding being contemplated
by the Company in the European Patent Office against a third-party patent
application; and (vi) pending opposition proceedings have been filed by two
companies, Klinge Pharma and Sofex, against the Company's application to
obtain trademark registration in the European Community for the mark,
"Ribozyme Pharmaceuticals, Inc."
We understand that the Company has disclosed the exceptions noted above.
d. We have not, within the last one-year period, received any written notice
threatening litigation against the Company for infringement with respect to
any patent, trademark, or copyright, or threatening litigation for unfair
competition or misappropriation of trade secret. Moreover, we have not,
within the last one-year period, received any information from the Company
regarding any written notice, received by the Company, threatening
litigation against the Company for infringement with respect to any patent,
trademark, or copyright, or threatening litigation for unfair competition
or misappropriation of trade secret. However, the Company has advised us of
prior communications with Anjinomoto (Japan) and Gene Shears (Australia),
which situations have been disclosed by the Company to our understanding,
and we note the general exceptions listed above.
e. We do not represent the Company in connection with pending litigation
against the Company concerning patent infringement, trademark infringement,
copyright infringement, unfair competition, or misappropriation of trade
secret. Moreover, we are not aware of pending litigation against the
Company concerning patent infringement, trademark infringement, copyright
infringement, unfair competition, or misappropriation of trade secret.
However we note the general exceptions listed above.
f. To the best of our knowledge, based on the information given to us to date
by the Company about the Company's processes and the conduct of its
business, we are not presently aware of any situation in which the
Company's processes or the conduct of its business are violating any
patents, trademarks, copyrights, trade secrets, or other proprietary rights
of a third party. To the extent we have considered any specific aspect of
the Company's processes or its business in relation to a specific patent,
trademark, or copyright of a third party, we have not issued any opinion
that is adverse to the Company and would, in our judgment, materially and
adversely impact the Company's business. Specifically as to RNAi
technology, we previously reviewed the published patent applications
identified in Exhibit D; under U.S. law, we believe the claims presented in
these published patent applications did not literally claim a product that
completely lacks any naturally occurring ribonucleotide. We also note the
general exceptions listed above.
g. We are not aware of any outstanding order, judgment, decree, or stipulation
issued by a court or agency of any United States governmental unit that
materially restricts the use, sale, transfer, assignment or licensing of
the patent or trademark rights or that materially restricts the current
business activities of the Company. The Company has not advised us as to
any outstanding order, judgment, decree, or stipulation issued by a court
or agency of any United States governmental unit that materially restricts
the use, sale, transfer, assignment or licensing of the patent or trademark
rights or that materially restricts the current business activities of the
Company.
h. To our knowledge, the Company has communicated with numerous organizations,
directly or indirectly, regarding a potential license for those
organizations under certain patent rights of the Company. The Company has
also previously communicated with a third party company regarding possible
infringement of one of the Company's trademarks. To our knowledge, the
Company has brought no legal action for patent or trademark infringement
against any such organization within the past year.
i. We note that certain patents, trademarks, and applications identified in
Exhibits A and B were handled in whole or in part by the Company's prior
law firms, and we have limited knowledge with respect to such matters. In
addition, we note that we have been instructed by the Company to abandon
certain patents and patent applications that may not pertain to the
Company's future focus of operation, and Exhibits A and B may not reflect
these instructions in their entirety.
j. We note that we have prepared this letter at the request of the Company in
the belief and understanding that a community of interests exists between
your clients and the Company. Be advised that, by permitting us to respond
as set forth herein, the Company does not waive and does not intend to
waive the attorney-client privilege with respect to any information which
the Company has furnished to us. Moreover, please be advised that our
comments to you should not be construed in any way to constitute a waiver
of the protection of the attorney-client privilege with respect to any of
our work for the Company.
k. This letter and the information contained herein are being provided to you
solely in relation to the Common Stock and Warrant Purchase Agreement
(January 2003), and this letter is not to be quoted in whole or in part or
otherwise referred to in any documents or notes, nor is it to be filed with
any governmental agency or provided to other person without the prior
written consent of our firm and the Company.
l. We are the Company's U.S. counsel, and we represent only the Company in
this matter. Third parties should obtain an opinion of their own counsel
before making business or investment decisions in relation to this matter.
EXHIBIT E
FORM OF NON-COMPETITION and NON-SOLICITATION AGREEMENT
This Non-Competition and Non-Solicitation Agreement (this "AGREEMENT")
is entered into as of February ____, 2003, by and among Ribozyme
Pharmaceuticals, Inc., a Delaware corporation (the "COMPANY") and
_______________, an individual ("EMPLOYEE").
RECITALS
The Company is engaged or proposes to engage in the business of
researching, developing, manufacturing, licensing, selling, and distributing
therapeutics and diagnostic technologies using nucleotides and oligonucleotides
(such business being collectively referred to herein as the "BUSINESS").
From and after the closing of the transactions contemplated by the
Purchase Agreement (as defined below), the Company proposes that its principal
business activities shall relate to the research, development, manufacture,
license, sale and distribution of therapeutic products using siRNA technology
(hereinafter, "siRNA TECHNOLOGY"). During the Non-Competition Period (as
hereinafter defined), the Company may, in addition to or in substitution for
siRNA Technology, have additional platform technologies as its principal
business activity or activities, including without limitation programs [USING
SUCH PLATFORM TECHNOLOGIES] [PRECEDING BRACKETED PHRASE TO BE DELETED FOR
HOWARD, MARVIN AND NASSIM] in therapeutic areas where the Company has advanced a
product into pre-clinical toxicology or later stages of development (the "FIELD
OF INTEREST"). For example, the current Field of Interest would include without
limitation the viruses HBV and HCV and the therapeutic gene target VEGF-Receptor
R-1, which are within the scope of the Company's current principal business
activities, but other therapeutic areas, such as anti-viral therapeutic products
and specific cancer therapeutics, would exceed the scope of activities covered
by the current Field of Interest.
Employee is one of the Company's key employees, an executive officer
of the Company, and a member of the Company's management team. Employee
acknowledges that he has detailed knowledge of the Intellectual Property and
other confidential and proprietary information of the Company.
Pursuant to the Common Stock and Warrant Purchase Agreement dated as
of February ___, 2003 by and among the Company and the Investors listed on
Exhibit A thereto (the "PURCHASE AGREEMENT"), on the terms and subject to the
conditions set forth therein, the Company will issue securities to the
Investors. Capitalized terms used herein shall have the meanings set forth
herein or, if not defined herein, shall have the meanings ascribed to them in
the Purchase Agreement.
Employee has considered the effects of this Agreement, consider them
reasonable and, in order to induce the Investors to enter into the Purchase
Agreement and to enter into or consent to the transactions contemplated thereby
(including without limitation the Employment Agreement between the Employee and
the Company dated as of the date hereof (the "EMPLOYMENT AGREEMENT"), which
agreement would otherwise be prohibited by the terms of the Purchase Agreement),
and in order to obtain the privileges, protections, and benefits of the
Employment Agreement, Employee has agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, Employee and the Company,
intending to be legally bound, hereby agree as follows:
ARTICLE 1
NON-COMPETITION
1.1 NON-COMPETITION. As an inducement for the Investors to enter into
the Purchase Agreement and to enter into or consent to the transactions
contemplated thereby, and in order to obtain the privileges, protections, and
benefits of the Employment Agreement, Employee agrees that from and after the
effective date of the Purchase Agreement (the "EFFECTIVE DATE") and until two
and one-half (2 1/2) years thereafter (the "NON-COMPETITION PERIOD");
(a) Employee shall not, anywhere in the United States, engage,
without the express prior written consent of the Company, in any business or
activity in direct competition with Company in the then current Field of
Interest, whether as an employee, consultant, partner, principal, agent,
representative, equity holder or in any other individual, corporate or
representative capacity (without limitation by specific enumeration of the
foregoing), or render any services or provide any advice to any business,
activity or Person in direct competition with the Company in the then current
Field of Interest (a "COMPETING BUSINESS").
(b) Employee shall not, anywhere in Colorado, engage, without the
express prior written consent of the Company, in any business or activity in
direct competition with the Company in the then current Field of Interest,
whether as an employee, consultant, partner, principal, agent, representative,
equity holder or in any other individual, corporate or representative capacity
(without limitation by specific enumeration of the foregoing), or render any
services or provide any advice to any Competing Business.
(c) Employee shall not, in any of the counties in the State of
Colorado, engage, without the express prior written consent of the Company, in
any business or activity in direct competition with the Company in the then
current Field of Interest, whether as an employee, consultant, partner,
principal, agent, representative, equity holder or in any other individual,
corporate or representative capacity (without limitation by specific enumeration
of the foregoing), or render any services or provide any advice to any Competing
Business.
1.2 LIMITATION ON PROHIBITED ACTIVITIES. Notwithstanding anything to
the contrary contained in this Agreement, if the Employee's employment with the
Company terminates for any reason prior to the end of the Non-Competition
Period, Employee may thereafter engage, without the consent of the Company, in
any business or activity, whether as an employee, consultant, partner,
principal, agent, representative, equity holder or in any other individual,
corporate or representative capacity (without limitation by specific enumeration
of the foregoing) for a Person that is engaged in the then current Field of
Interest at the time of termination of Employee's employment with the Company,
so long as (i) the principal business activity of such Person is not in such
Field of Interest and (ii) Employee does not personally engage or provide
counsel, advice, or direction in any activities that are within such Field of
Interest for such Person. For the avoidance of doubt, Employee may become a
senior executive for a Person that is engaged in such Field of Interest and may
have employees reporting to him that are engaged in such Field of Interest, so
long as Employee does not personally engage directly or directly provide
counsel, advice or direction in any activities that are within such Field of
Interest.
1.3 PUBLICLY TRADED SECURITIES. Notwithstanding the foregoing,
Employee may own, directly or indirectly, up to one percent (1%) of any class of
"publicly traded securities" of any Person which owns or operates a business
that is a Competing Business. For the purposes of this SECTION 1.3, "publicly
traded securities" shall mean securities that are traded on a national
securities exchange or listed on the Nasdaq National Market.
1.4 NO INTERFERENCE WITH THE BUSINESS; NON-SOLICITATION. As an
inducement for the Investors to enter into the Purchase Agreement, Employee
agrees that, during the Non-Competition Period, Employee shall not for any
reason intentionally or knowingly or willfully (a) with respect to the Business,
solicit or divert any business, clients, customers, or partners made known to
Employee during his employment with the Company away from the Company, (b)
induce customers, clients, partners, suppliers, agents or other Persons under
contract or otherwise associated or doing business with the Company who are made
known to Employee during his employment with the Company to reduce or alter any
such association or business with the Company, and/or (c) solicit any Person in
the employment of the Company to (i) terminate such employment, and/or (ii)
accept employment, or enter into any consulting arrangement, with any Person
other than the Company.
ARTICLE 2
REMEDIES
2.1 REMEDIES. The parties to this Agreement agree that (i) if Employee
materially breaches ARTICLE 1 of this Agreement, the damage to the Company may
be substantial, although difficult to ascertain, and money damages will not
afford the Company an adequate remedy, and (ii) if Employee is in breach of any
provision of this Agreement, or threatens a breach of this Agreement, the
Company shall be entitled, in addition to all other rights and remedies as may
be provided by law, to seek specific performance and injunctive and other
equitable relief from any court of competent jurisdiction to prevent or restrain
a breach of any provision of this Agreement.
ARTICLE 3
TERM AND TERMINATION
3.1 TERM. This Agreement shall commence as of the Effective Date, and
shall terminate at the end of the Non-Competition Period; provided, that this
Agreement shall terminate and be of no force or effect in the event that the
transactions contemplated by the Purchase Agreement are not consummated for any
reason.
ARTICLE 4
MISCELLANEOUS
4.1 ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS; SEVERAL AGREEMENTS. This
Agreement contains the entire agreement of the parties with respect to the
subject matter hereof and supersedes all prior agreements, written or oral, with
respect thereto. This Agreement may be amended or modified and the terms and
conditions hereof may be waived, only by a written instrument signed by each of
the parties or, in the case of waiver, by the party waiving compliance. No delay
on the part of either party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any waiver on the part of
either party of any right, power or privilege hereunder, nor any single or
partial exercise of any right, power or privilege hereunder, preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege hereunder. The rights and remedies provided herein are cumulative and
are not exclusive of any rights or remedies that either party may otherwise have
at law or in equity. In addition to this Agreement between the Company and
Employee, the Company has entered into a similar agreement with other key
employees of the Company. It is expressly agreed that this Agreement and the
obligations of the parties hereunder are to be construed separately from any
similar agreements with any other employee of the Company and a breach of a
similar agreement by any other employee of the Company shall not constitute a
breach of this Agreement. No waiver by the Company of any term or condition of
this Agreement with respect to Employee, in any one or more instances, shall be
deemed to be or construed as a waiver of the same or any other term or condition
of any other agreement with respect to any other employee of the Company or any
other Person.
4.2 NOTICES. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally against written receipt or by facsimile transmission against
facsimile confirmation or dispatched by nationally recognized overnight courier
prepaid, to the respective parties at the following addresses or facsimile
numbers:
If to the Company: Ribozyme Pharmaceuticals, Inc.
2950 Wilderness Place
Boulder, CO 80301
Attn: General Counsel
Fax: (303) 449-6995
If to Employee: To the address or facsimile number for
notice set forth on the last page hereof.
All such notices, requests and other communications will (a) if
delivered personally to the address as provided in this section, be deemed given
upon delivery, (b) if delivered by facsimile transmission to the facsimile
number as provided for in this section, be deemed given upon facsimile
confirmation, and (c) if delivered by overnight courier to the address as
provided in this section, be deemed given on the earlier of the first Business
Day following the date deposited with such overnight courier with the requisite
payment and instructions to effect delivery on the next business day or upon
receipt (in each case regardless of whether such notice, request or other
communication is received by any other Person to whom a copy of such notice is
to be delivered pursuant to this section). Any party from time to time may
change its address, facsimile number or other information for the purpose of
notices to that party by giving notice specifying such change to the other
parties hereto.
4.3 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Colorado, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of Colorado or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Colorado.
4.4 PURCHASE AGREEMENT. In the event the Purchase Agreement is not
consummated or is terminated for any reason (other than a breach of this
Agreement) in accordance with its terms, this Agreement shall be null and void.
4.5 SEVERABILITY. To the extent any provision of this Agreement shall
be determined to be unlawful or otherwise unenforceable, in whole or in part,
such determination shall not affect the validity of the remainder of this
Agreement, and this Agreement shall be reformed to the extent necessary to carry
out its provisions to the greatest extent possible. In the absence of such
reformation, such part of such provision shall be considered deleted from this
Agreement and the remainder of such provision and of this Agreement shall be
unaffected and shall continue in full force and effect. In furtherance and not
in limitation of the foregoing, should the duration or geographical extent of,
or business activities covered by any provision of this Agreement be in excess
of that which is valid and enforceable under applicable law, then such provision
shall be construed to cover only that duration, extent or activities which may
validly and enforceably be covered. To the extent any provision of this
Agreement shall be declared invalid or unenforceable for any reason by any
Governmental Entity in any jurisdiction, this Agreement (or provision thereof)
shall remain valid and enforceable in each other jurisdiction where it applies.
Employee acknowledges the uncertainty of the law in this respect and expressly
stipulates that this Agreement shall be given the construction which renders its
provisions valid and enforceable to the maximum extent (not exceeding its
express terms) possible under applicable law.
4.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto, the heirs and legal representatives
of Employee and the successors and assigns of the Company. Employee shall not be
entitled to assign his obligations hereunder. The Company may assign its rights
under this Agreement to successors and assigns of the Company that succeed to
all or substantially all of that portion of the Company's business to which the
employment of Employee principally relates. Employee agrees that, upon request
therefor, Employee will, in writing, acknowledge and consent to any such
assignment of this Agreement.
4.7 REPRESENTATIONS AND WARRANTIES. To Employee's knowledge, Employee
represents and warrants that this Agreement is a legal, valid and binding
obligation, enforceable against Employee in accordance with its terms to the
fullest extent permitted under applicable federal, state or local law.
4.8 EFFECTIVE TIME. This Agreement shall become effective upon the
closing of the transaction contemplated by the Purchase Agreement.
4.9 INDEPENDENT REVIEW AND ADVICE. Employee represents and warrants
that Employee has carefully read this Agreement; that Employee executes this
Agreement with full knowledge of the contents of this Agreement, the legal
consequences thereof, and any and all rights which each party may have with
respect to one another; that Employee has had the opportunity to receive
independent legal advice with respect to the matters set forth in this Agreement
and with respect to the rights and asserted rights arising out of such matters;
that Employee has been advised to, and has had the opportunity to, consult with
Employee's personal attorney prior to entering into this Agreement; and that
Employee is entering into this Agreement of Employee's own free will. Employee
expressly agrees that he or she has no expectations or understandings contrary
to the Agreement and no usage of trade or regular practice in the industry shall
be used to modify this Agreement. The parties agree that this Agreement shall
not be construed for or against either party in any interpretation thereof.
Employee acknowledges that Sills Cummis Radin Tischman Epstein & Gross P.A. and
Stroock & Stroock & Lavan LLP represent the Company and do not represent
Employee in connection with this Agreement, the Purchase Agreement, or any of
the transactions contemplated thereby or hereby.
IN WITNESS WHEREOF, the parties have executed this Non-Competition and
Non-Solicitation Agreement effective as of the date first written above.
COMPANY EMPLOYEE
By:___________________________ _____________________________
Signature
______________________________ _____________________________
Print Name and Title Print Name
Ribozyme Pharmaceuticals, Inc. Address
_____________________________
_____________________________
_____________________________
_____________________________
Non-Company Facsimile Number
_____________________________
Non-Company E-mail
EXHIBIT F-1
FORM OF OFFICER'S CERTIFICATE
RIBOZYME PHARMACEUTICALS, INC.
OFFICER'S CERTIFICATE
The undersigned, [_____________], the duly appointed [Chief Executive
Officer] of Ribozyme Pharmaceuticals, Inc., a Delaware corporation (the
"Company"), in connection with that certain Stock and Warrant Purchase Agreement
(the "Purchase Agreement") dated February __, 2003, by and among the Company and
the Investors named therein, hereby certifies that:
(i) the Company has performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by the Purchase
Agreement to be performed, satisfied or complied with by the Company at or prior
to the date hereof; and
(ii) the representations and warranties of the Company contained in Section
3 of the Purchase Agreement are true and correct in all respects on and as of
the date hereof with the same force and effect as if made on and as of the date
hereof (other than representations and warranties made specifically with
reference to a particular date, which shall have been true and correct in all
respects as of such date), except in each case, or in the aggregate, in which
breaches of any one or more representations and warranties would not, or would
not reasonably be expected to, (i) constitute a Company Material Adverse Effect,
(ii) exceed the Income Statement Threshold, (iii) exceed the Cash Flow
Threshold, or (iv) exceed the Capitalization Threshold (with each of (i), (ii),
(iii) and (iv) measured independently).
Capitalized terms used herein without definition shall have the meanings
ascribed to them in the Purchase Agreement.
IN WITNESS WHEREOF, the undersigned has caused this Certificate to be
executed on this ___ day of _______________ 2003.
By: _________________________
Name:
Title: [Chief Executive Officer]
EXHIBIT F-2
RIBOZYME PHARMACEUTICALS, INC.
FORM OF SECRETARY'S CERTIFICATE
I, [___________________], the duly elected, qualified and acting Secretary
of Ribozyme Pharmaceuticals, Inc., a Delaware corporation (the "Company"), in
connection with that certain Stock and Warrant Purchase Agreement (the "Purchase
Agreement") dated February __, 2003, by and among the Company and the Investors
named therein, do hereby certify on behalf of the Company as follows:
1. Attached hereto as Exhibit A is a true, correct and complete copy of the
Certificate of Incorporation of the Company filed with the Secretary of State of
the State of Delaware, as amended and restated to date and as in effect on the
date hereof. No proceeding for the dissolution or liquidation of the Company is
pending or, to my knowledge, threatened, and no such proceeding is contemplated
by the Company.
2. Attached hereto as Exhibit B is a true, correct and complete copy of the
Bylaws of the Company as amended and restated to date and as in effect on the
date hereof.
3. Attached hereto as Exhibit C are true, correct and complete copies of
resolutions duly adopted by the board of directors of the Company with respect
to the Transactions contemplated by the Purchase Agreement. The resolutions set
forth in Exhibit C constitute all action taken by the board of directors of the
Company (or any committee thereof) with respect to the Transactions contemplated
by the Purchase Agreement. Each of the resolutions set forth in Exhibit C was
duly adopted and has not been amended, modified or repealed and is now in full
force and effect.
4. The persons named below were, on [_______], 2003, and have been at all
times thereafter, to and including the date hereof, the duly appointed and
qualified officers of the Company, holding the respective offices set forth
opposite their names below, and their representative genuine signatures are set
forth opposite their names below.
[____________] Chief Executive Officer
and President ---------------------
[____________] Chief Financial Officer ---------------------
[____________] [____________] ---------------------
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the
Company this ___ day of [_______] 2003.
By: __________________________
Name: [_____________________]
Title: Secretary
The undersigned, [__________], DOES HEREBY CERTIFY that [_____________]
was, on [________] [__], 2003, and has been at all times thereafter, to and
including the date hereof, the duly elected and qualified Secretary of Ribozyme
Pharmaceuticals, Inc., and that the signature on the foregoing Certificate is
the genuine signature.
IN WITNESS WHEREOF, I have hereunto set my hand this ___ day of [_______],
2003.
By: __________________________
Name: [_____________________]
Title: Assistant Secretary
EXHIBIT G
FORM OF INDEMNIFICATION AGREEMENT
This Indemnification Agreement (the "AGREEMENT") is entered into as of the
___ day of _________, 2003, by and among ____________________, a Delaware
corporation (the "COMPANY") and the indemnitees listed on the signature pages
hereto (each an "INDEMNITEE" and collectively, the "INDEMNITEES").
RECITALS
A. The Company and the Indemnitees recognize the continued difficulty in
obtaining liability insurance for the Company's directors, officers, employees,
controlling persons, agents and fiduciaries, the significant increases in the
cost of such insurance and the general reductions in the coverage of such
insurance.
B. The Company and the Indemnitees further recognize the substantial
increase in corporate litigation in general, subjecting directors, officers,
employees, controlling persons, agents and fiduciaries to expensive litigation
risks at the same time as the availability and coverage of liability insurance
has been severely limited.
C. The Indemnitees do not regard the prior protection available as adequate
under the circumstances, and the Indemnitees and other directors, officers,
employees, controlling persons, agents and fiduciaries of the Company are not
willing to serve in such capacities without additional protection, so the
Company and the Indemnitees desire to enter into this Agreement.
D. The Company (i) desires to attract and retain the involvement of highly
qualified groups, such as the Indemnitees, to serve the Company and, in part, to
induce each Indemnitee to be involved with the Company and (ii) wishes to
provide for the indemnification and advancing of expenses to each Indemnitee to
the maximum extent permitted by law.
E. In view of the considerations set forth above, the Company desires that
each Indemnitee be indemnified by the Company as set forth herein.
NOW, THEREFORE, the Company and each Indemnitee hereby agrees as
follows:
1. INDEMNIFICATION.
a. INDEMNIFICATION OF EXPENSES. The Company shall indemnify and
hold harmless each Indemnitee (including, without limitation, its
respective directors, officers, partners, employees, agents and
spouses) and each person who controls any of them or who may be liable
within the meaning of Section 15 of the Securities Act of 1933, as
amended (the "SECURITIES ACT"), or Section 20 of the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT") to the fullest
extent permitted by law if such Indemnitee was or is or becomes a
party to or witness or other participant in, or is threatened to be
made a party to or witness or other participant in, any threatened,
pending or completed action, suit, proceeding or alternative dispute
resolution mechanism, or any hearing, inquiry or investigation that
such Indemnitee reasonably believes might lead to the institution of
any such action, suit, proceeding or alternative dispute resolution
mechanism, whether civil, criminal, administrative, investigative or
other (hereinafter a "CLAIM") by reason of (or arising in part out of)
any event or occurrence related to the fact that such Indemnitee is or
was a director, officer, employee, controlling person, agent or
fiduciary of the Company, or any subsidiary of the Company, or is or
was serving at the request of the Company as a director, officer,
employee, controlling person, agent or fiduciary of another
corporation, partnership, joint venture, trust or other enterprise, or
by reason of any action or inaction on the part of such Indemnitee
while serving in such capacity including, without limitation, any and
all losses, claims, damages, expenses and liabilities, joint or
several (including, without limitation, any investigation, legal and
other expenses incurred in connection with, and any amount paid in
settlement of, any action, suit, proceeding or any claim asserted)
under the Securities Act, the Exchange Act or other federal or state
statutory law or regulation, at common law or otherwise, which relate
directly or indirectly to the registration, purchase, sale or
ownership of any securities of the Company or to any fiduciary
obligation owed with respect thereto (hereinafter an "INDEMNIFICATION
EVENT") against any and all expenses (including, without limitation,
reasonable attorneys' fees and all other reasonable costs, expenses
and obligations incurred in connection with investigating, defending a
witness in or participating in (including, without limitation, on
appeal), or preparing to defend, be a witness in or participate in,
any such action, suit, proceeding, alternative dispute resolution
mechanism, hearing, inquiry or investigation), judgments, fines,
penalties and amounts paid in settlement (if such settlement is
approved in advance by the Company, which approval shall not be
unreasonably withheld) of such Claim and any federal, state, local or
foreign taxes imposed on such Indemnitee as a result of the actual or
deemed receipt of any payments under this Agreement (collectively,
hereinafter "EXPENSES"), including, without limitation, all interest,
assessments and other charges paid or payable in connection with or in
respect of such Expenses. Such payment of allowed Expenses shall be
made by the Company as soon as practicable but in any event no later
than five (5) days after written demand by the Indemnitee therefor is
presented to the Company.
b. REVIEWING PARTY. Notwithstanding the foregoing, (i) the
obligations of the Company under Section 1(a) shall be subject to the
condition that the Reviewing Party (as described in Section 10(e)
hereof) shall not have determined (in a written opinion, in any case
in which the Independent Legal Counsel referred to in Section 10(d)
hereof is involved) that an Indemnitee would not be permitted to be
indemnified under applicable law, and (ii) each Indemnitee
acknowledges and agrees that the obligation of the Company to make an
advance payment of Expenses to an Indemnitee pursuant to Section 2(a)
(an "EXPENSE ADVANCE") shall be subject to the condition that, if,
when and to the extent that the Reviewing Party determines that an
Indemnitee would not be permitted to be so indemnified under
applicable law, the Company shall be entitled to be reimbursed by such
Indemnitee (who hereby agrees to reimburse the Company) for all such
amounts theretofore paid; PROVIDED, HOWEVER, that if such Indemnitee
has commenced or thereafter commences legal proceedings in a court of
competent jurisdiction to secure a determination that such Indemnitee
should be indemnified under applicable law, any determination made by
the Reviewing Party that such Indemnitee would not be permitted to be
indemnified under applicable law shall not be binding and such
Indemnitee shall not be required to reimburse the Company for any
Expense Advance until a final judicial determination is made with
respect thereto (as to which all rights of appeal therefrom have been
exhausted or lapsed). An Indemnitee's obligation to reimburse the
Company for any Expense Advance shall be unsecured and no interest
shall be charged thereon if such reimbursement is made within thirty
(30) days of such final judicial determination, unless otherwise
required by the court. If there has not been a Change in Control (as
defined in Section 10(c) hereof), the Reviewing Party shall be
selected by the Board of Directors, and if there has been such a
Change in Control (other than a Change in Control that has been
approved by a majority of the Company's Board of Directors who were
directors immediately prior to such Change in Control), the Reviewing
Party shall be the Independent Legal Counsel referred to in Section
10(d) hereof. If there has been no determination by the Reviewing
Party or if the Reviewing Party determines that an Indemnitee
substantively would not be permitted to be indemnified in whole or in
part under applicable law, the Indemnitee shall have the right to
commence litigation seeking an initial determination by the court or
challenging any such determination by the Reviewing Party or any
aspect thereof, including, without limitation, the legal or factual
bases therefor, and the Company hereby consents to service of process
and to appear in any such proceeding. Any determination by the
Reviewing Party otherwise shall be conclusive and binding on the
Company and such Indemnitee.
c. CONTRIBUTION. If the indemnification provided for in Section
1(a) above for any reason is held by a court of competent jurisdiction
to be unavailable to an Indemnitee in respect of any losses, claims,
damages, expenses or liabilities referred to therein, then the
Company, in lieu of indemnifying such Indemnitee thereunder, shall
contribute to the amount paid or payable by such Indemnitee as a
result of such losses, claims, damages, expenses or liabilities (i) in
such proportion as is appropriate to reflect the relative benefits
received by the Company and the Indemnitees, or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault
of the Company and the Indemnitees in connection with the action or
inaction that resulted in such losses, claims, damages, expenses or
liabilities, as well as any other relevant equitable considerations.
In connection with the registration of the Company's securities, the
relative benefits received by the Company and the Indemnitees shall be
deemed to be in the same respective proportions that the net proceeds
from the offering (before deducting expenses) received by the Company
and the Indemnitees, in each case as set forth in the table on the
cover page of the applicable prospectus, bear to the aggregate public
offering price of the securities so offered. The relative fault of the
Company and the Indemnitees shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material
fact relates to information supplied by the Company or the Indemnitees
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company and the Indemnitees agree that it would not be just
and equitable if contribution pursuant to this Section 1(c) were
determined by pro rata or per capita allocation or by any other method
of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. In
connection with the registration of the Company's securities, in no
event shall an Indemnitee be required to contribute any amount under
this Section 1(c) in excess of the lesser of (i) that proportion of
the total of such losses, claims, damages or liabilities that are
indemnified against, equal to the proportion of the total securities
sold under such registration statement that are being sold by such
Indemnitee or (ii) the proceeds received by such Indemnitee from its
sale of securities under such registration statement. No person found
guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from
any person who was not found guilty of such fraudulent
misrepresentation.
d. SURVIVAL REGARDLESS OF INVESTIGATION. The indemnification and
contribution provided for in this Section 1 will remain in full force
and effect regardless of any investigation made by or on behalf of the
Indemnitees or any officer, director, employee, agent or controlling
person of the Indemnitees.
e. CHANGE IN CONTROL. The Company agrees that if there is a
Change in Control of the Company (other than a Change in Control that
has been approved by a majority of the Company's Board of Directors
who were directors immediately prior to such Change in Control) then,
with respect to all matters thereafter arising concerning the rights
of the Indemnitees to payments of Expenses under this Agreement or any
other agreement or under the Company's Certificate of Incorporation or
Bylaws as now or hereafter in effect, Independent Legal Counsel (as
defined in Section 10(d) hereof) shall be selected by the Indemnitees
and approved by the Company (which approval shall not be unreasonably
withheld). Such counsel, among other things, shall render its written
opinion to the Company and the Indemnitees as to whether and to what
extent the Indemnitees would be permitted to be indemnified under
applicable law. The Company agrees to abide by such opinion and to pay
the reasonable fees of the Independent Legal Counsel referred to above
and to fully indemnify such counsel against any and all expenses
(including, without limitation, reasonable attorneys' fees), claims,
liabilities and damages arising out of or relating to this Agreement
or its engagement pursuant hereto.
f. MANDATORY PAYMENT OF EXPENSES. Notwithstanding any other
provision of this Agreement, to the extent that the Indemnitees have
been successful on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice, in the
defense of any action, suit, proceeding, inquiry or investigation
referred to in Section 1(a) hereof or in the defense of any claim,
issue or matter therein, each Indemnitee shall be indemnified against
all Expenses incurred by such Indemnitee in connection herewith.
2. EXPENSES; INDEMNIFICATION PROCEDURE.
a. ADVANCEMENT OF EXPENSES. The Company shall advance all
Expenses incurred by the Indemnitees. The advances to be made
hereunder shall be paid by the Company to the Indemnitees as soon as
practicable but in any event no later than five (5) days after written
demand by such Indemnitees therefor to the Company.
b. NOTICE/COOPERATION BY THE INDEMNITEES. Each Indemnitee shall
give the Company notice in writing as soon as practicable of any Claim
made against such Indemnitee for which indemnification will or could
be sought under this Agreement. Notice to the Company shall be
directed to the Company's Chief Executive Officer at the Company's
address (or such other address as the Company shall designate in
writing to the Indemnitees).
c. NO PRESUMPTIONS; BURDEN OF PROOF. For purposes of this
Agreement, the termination of any Claim by judgment, order, settlement
(whether with or without court approval) or conviction, or upon a plea
of nolo contendere, or its equivalent, shall not create a presumption
that the Indemnitees did not meet any particular standard of conduct
or have any particular belief or that a court has determined that
indemnification is not permitted by applicable law. In addition,
neither the failure of the Reviewing Party to have made a
determination as to whether an Indemnitee has met any particular
standard of conduct or had any particular belief, nor an actual
determination by the Reviewing Party that an Indemnitee has not met
such standard of conduct or did not have such belief, prior to the
commencement of legal proceedings by such Indemnitee to secure a
judicial determination that such Indemnitee should be indemnified
under applicable law, shall be a defense to an Indemnitee's claim or
create a presumption that such Indemnitee has not met any particular
standard of conduct or did not have any particular belief. In
connection with any determination by the Reviewing Party or otherwise
as to whether an Indemnitee is entitled to be indemnified hereunder,
the burden of proof shall be on the Company to establish that an
Indemnitee is not so entitled.
d. NOTICE TO INSURERS. If, at the time of the receipt by the
Company of a notice of a Claim pursuant to Section 2(b) hereof, the
Company has liability insurance in effect that may cover such Claim,
the Company shall give prompt notice of the commencement of such Claim
to the insurers in accordance with the procedures set forth in each of
the policies. The Company shall thereafter take all necessary or
desirable action to cause such insurers to pay, on behalf of the
Indemnitees, all amounts payable as a result of such action, suit,
proceeding, inquiry or investigation in accordance with the terms of
such policies.
e. SELECTION OF COUNSEL. In the event the Company shall be
obligated hereunder to pay the Expenses of any Claim, the Company
shall be entitled to assume the defense of such Claim, with counsel
approved by the applicable Indemnitee, upon the delivery to such
Indemnitee of written notice of its election to do so. After delivery
of such notice, approval of such counsel by the Indemnitee and the
retention of such counsel by the Company, the Company will not be
liable to such Indemnitee under this Agreement for any fees of counsel
subsequently incurred by such Indemnitee with respect to the same
Claim; PROVIDED that, (i) the Indemnitee shall have the right to
employ such Indemnitee's counsel in any such Claim at the Indemnitee's
expense and (ii) if (A) the employment of counsel by the Indemnitee
has been previously authorized by the Company, (B) such Indemnitee
shall have reasonably concluded that there is a conflict of interest
between the Company and such Indemnitee in the conduct of any such
defense, or (C) the Company shall not continue to retain such counsel
to defend such Claim, then the fees and expenses of the Indemnitee's
counsel shall be at the expense of the Company. The Company shall have
the right to conduct such defense as it sees fit in its sole
discretion, including, without limitation, the right to settle any
claim against any Indemnitee without the consent of such Indemnitee.
3. ADDITIONAL INDEMNIFICATION RIGHTS; NONEXCLUSIVITY.
a. SCOPE. The Company hereby agrees to indemnify the Indemnitees
to the fullest extent permitted by law, even if such indemnification
is not specifically authorized by the other provisions of this
Agreement, the Company's Certificate of Incorporation, the Company's
Bylaws or by statute. In the event of any change after the date of
this Agreement in any applicable law, statute or rule that expands the
right of a Delaware corporation to indemnify a member of its Board of
Directors or an officer, employee, controlling person, agent or
fiduciary, it is the intent of the parties hereto that the Indemnitees
shall enjoy by this Agreement the greater benefits afforded by such
change. In the event of any change after the date of this Agreement in
any applicable law, statute or rule that narrows the right of a
Delaware corporation to indemnify a member of its Board of Directors
or an officer, employee, agent or fiduciary, such change, to the
extent not otherwise required by such law, statute or rule to be
applied to this Agreement, shall have no effect on this Agreement or
the parties' rights and obligations hereunder except as set forth in
Section 8(a) hereof.
b. NONEXCLUSIVITY. The indemnification provided by this Agreement
shall be in addition to any rights to which the Indemnitees may be
entitled under the Company's Certificate of Incorporation, its Bylaws,
any agreement, any vote of stockholders or disinterested directors,
the Delaware General Corporation Law, or otherwise. The
indemnification provided under this Agreement shall continue as to
each Indemnitee for any action such Indemnitee took or did not take
while serving in an indemnified capacity even though the Indemnitee
may have ceased to serve in such capacity.
4. NO DUPLICATION OF PAYMENTS. The Company shall not be liable under
this Agreement to make any payment in connection with any Claim made
against any Indemnitee to the extent such Indemnitee has otherwise actually
received payment (under any insurance policy, Certificate of Incorporation,
Bylaw or otherwise) of the amounts otherwise indemnifiable hereunder.
5. PARTIAL INDEMNIFICATION. If any Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for any
portion of Expenses incurred in connection with any Claim, but not,
however, for all of the total amount thereof, the Company shall
nevertheless indemnify such Indemnitee for the portion of such Expenses to
which such Indemnitee is entitled.
6. MUTUAL ACKNOWLEDGEMENT. The Company and each Indemnitee acknowledge
that in certain instances, Federal law or applicable public policy may
prohibit the Company from indemnifying its directors, officers, employees,
controlling persons, agents or fiduciaries under this Agreement or
otherwise. Each Indemnitee understands and acknowledges that the Company
has undertaken or may be required in the future to undertake with the
Securities and Exchange Commission to submit the question of
indemnification to a court in certain circumstances for a determination of
the Company's rights under public policy to indemnify the Indemnitees.
7. LIABILITY INSURANCE. To the extent the Company maintains liability
insurance applicable to directors, officers, employees, control persons,
agents or fiduciaries, each of the Indemnitees shall be covered by such
policies in such a manner as to provide the Indemnitees the same rights and
benefits as are accorded to the most favorably insured of the Company's
directors, if such Indemnitee is a director, or of the Company's officers,
if such Indemnitee is not a director of the Company but is an officer; or
of the Company's key employees, controlling persons, agents or fiduciaries,
if such Indemnitee is not an officer or director but is a key employee,
agent, control person, or fiduciary.
8. EXCEPTIONS. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms
of this Agreement:
a. CLAIMS INITIATED BY AN INDEMNITEE. To indemnify or advance
expenses to any Indemnitee with respect to Claims initiated or brought
voluntarily by such Indemnitee and not by way of defense, except (i)
with respect to actions or proceedings to establish or enforce a right
to indemnify under this Agreement or any other agreement or insurance
policy or under the Company's Certificate of Incorporation or Bylaws
now or hereafter in effect relating to Claims for Indemnifiable
Events, (ii) in specific cases if the Board of Directors has approved
the initiation or bringing of such Claim, or (iii) as otherwise
required under Section 145 of the Delaware General Corporation Law,
regardless of whether such Indemnitee ultimately is determined to be
entitled to such indemnification, advance expense payment or insurance
recovery, as the case may be; or
b. CLAIMS UNDER SECTION 16(B). To indemnify any Indemnitee for
expenses and the payment of profits arising from the purchase and sale
by such Indemnitee of securities in violation of Section 16(b) of the
Exchange Act or any similar successor statute; or
c. CLAIMS EXCLUDED UNDER SECTION 145 OF THE DELAWARE GENERAL
CORPORATION LAW. To indemnify any Indemnitee if indemnification is
expressly prohibited by law, subject to the right of the Indemnitee to
challenge such determination pursuant to Section 1(b).
d. CLAIMS RESULTING FROM WILLFUL MISCONDUCT OR FRAUD. To
indemnify or advance Expenses to any Indemnitee with respect to Claims
resulting from such Indemnitee's willful misconduct or fraud on the
part of the Indemnitee.
9. PERIOD OF LIMITATIONS. No legal action shall be brought and no
cause of action shall be asserted by or in the right of the Company against
any Indemnitee or any Indemnitee's estate, spouse, heirs, executors or
personal or legal representatives after the expiration of five (5) years
from the date of accrual of such cause of action, and any claim or cause of
action of the Company shall be extinguished and deemed released unless
asserted by the timely filing of a legal action within such five (5)-year
period; PROVIDED, HOWEVER, that if any shorter period of limitations is
otherwise applicable to any such cause of action, such shorter period shall
govern.
10. CONSTRUCTION OF CERTAIN PHRASES.
a. For purposes of this Agreement, references to the "COMPANY"
shall include, in addition to the resulting corporation, any
constituent corporation (including, without limitation, any
constituent of a constituent) absorbed in a consolidation or merger
that, if its separate existence had continued, would have had power
and authority to indemnify its directors, officers, employees, agents
or fiduciaries, so that if an Indemnitee is or was a director,
officer, employee, agent, control person, or fiduciary of such
constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee, control
person, agent or fiduciary of another corporation, partnership, joint
venture, employee benefit plan, trust or other enterprise, each
Indemnitee shall stand in the same position under the provisions of
this Agreement with respect to the resulting or surviving corporation
as each Indemnitee would have with respect to such constituent
corporation if its separate existence had continued.
b. For purposes of this Agreement, references to "OTHER
ENTERPRISES" shall include, without limitation, employee benefit
plans; references to "FINES" shall include, without limitation, any
excise taxes assessed on any Indemnitee with respect to an employee
benefit plan; and references to "SERVING AT THE REQUEST OF THE
COMPANY" shall include any service as a director, officer, employee,
agent or fiduciary of the Company that imposes duties on, or involves
services by, such director, officer, employee, agent or fiduciary with
respect to an employee benefit plan, its participants or its
beneficiaries; and if any Indemnitee acted in good faith and in a
manner such Indemnitee reasonably believed to be in the interest of
the participants and beneficiaries of an employee benefit plan, such
Indemnitee shall be deemed to have acted in a manner "NOT OPPOSED TO
THE BEST INTERESTS OF THE COMPANY" as referred to in this Agreement.
c. For purposes of this Agreement a "CHANGE IN CONTROL" shall be
deemed to have occurred if (i) any "person" (as such term is used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act), other than a
trustee or other fiduciary holding securities under an employee
benefit plan of the Company or a corporation owned directly or
indirectly by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company, (A) who
is or becomes the beneficial owner, directly or indirectly, of
securities of the Company representing ten percent (10%) or more of
the combined voting power of the Company's then outstanding Voting
Securities (as defined in Section 10(f) hereof), increases his
beneficial ownership of such securities by five percent (5%) or more
over the percentage so owned by such person, or (B) becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Exchange Act),
directly or indirectly, of securities of the Company representing more
than twenty percent (20%) of the total voting power represented by the
Company's then outstanding Voting Securities, (ii) during any period
of two (2) consecutive years, individuals who at the beginning of such
period constitute the Board of Directors of the Company and any new
director whose election by the Board of Directors or nomination for
election by the Company's stockholders was approved by a vote of at
least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose election
or nomination for election was previously so approved, cease for any
reason to constitute a majority thereof, or (iii) the stockholders of
the Company approve a merger or consolidation of the Company with any
other corporation other than a merger or consolidation that would
result in the Voting Securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding
or by being converted into Voting Securities of the surviving entity)
at least eighty percent (80%) of the total voting power represented by
the Voting Securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or the
stockholders of the Company approve a plan of complete liquidation of
the Company or an agreement for the sale or disposition by the Company
of (in one transaction or a series of transactions) all or
substantially all of the Company's assets.
d. For purposes of this Agreement, "INDEPENDENT LEGAL COUNSEL"
shall mean an attorney or firm of attorneys, selected in accordance
with the provisions of Section 2(e) hereof, who shall not have
otherwise performed services for the Company or any Indemnitee within
the last three (3) years (other than with respect to matters
concerning the right of any Indemnitee under this Agreement, or of
other indemnitees under similar indemnity agreements).
e. For purposes of this Agreement, a "REVIEWING PARTY" shall mean
any appropriate person or body consisting of a member or members of
the Company's Board of Directors or any other person or body appointed
by the Board of Directors who is not a party to the particular Claim
for which the Indemnitees are seeking indemnification, or Independent
Legal Counsel.
f. For purposes of this Agreement, "VOTING SECURITIES" shall mean
any securities of the Company that vote generally in the election of
directors.
11. AMENDMENT AND TERMINATION. Any term hereof may be amended (either
generally or in a particular instance and either retroactively or
prospectively) only with the written consent of (a) the Company; and (b)
each Indemnitee, if any, adversely affected by such amendment. Any
amendment so effected shall be binding upon the Company and all Indemnitees
and all of their respective successors and assigns whether or not such
person or entity entered into or approved such amendment or waiver. The
observance of any term hereof may be waived by a party with respect to its
own interests (either generally or in a particular instance and either
retroactively or prospectively) only with the written consent of the party
so waiving the observance of such term. In no event shall such waiver of
any rights hereunder constitute the waiver of such rights in any future
instance unless the waiver so specifies in writing. Notwithstanding
anything to the contrary in this Agreement, the Company may add additional
Indemnitees at any time to this Agreement without the consent of any other
Indemnitee.
12. ATTORNEYS' FEES. In the event that any action is instituted by an
Indemnitee under this Agreement or under any liability insurance policies
maintained by the Company to enforce or interpret any of the terms hereof
or thereof, any Indemnitee shall be entitled to be paid all Expenses
incurred by such Indemnitee with respect to such action, regardless of
whether such Indemnitee is ultimately successful in such action, and shall
be entitled to the advancement of Expenses with respect to such action,
unless, as a part of such action, a court of competent jurisdiction over
such action determines that each of the material assertions made by such
Indemnitee as a basis for such action was not made in good faith or was
frivolous. In the event of an action instituted by or in the name of the
Company under this Agreement to enforce or interpret any of the terms of
this Agreement, the Indemnitee shall be entitled to be paid all Expenses
incurred by such Indemnitee in defense of such action (including, without
limitation, costs and expenses incurred with respect to such Indemnitee's
counterclaims and cross-claims made in such action), and shall be entitled
to the advancement of Expenses with respect to such action, unless, as a
part of such action, a court having jurisdiction over such action
determines that each of such Indemnitee's material defenses to such action
was made in bad faith or was frivolous.
13. BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the parties hereto and their
respective successors, assigns, including, without limitation, any direct
or indirect successor by purchase, merger, consolidation or otherwise to
all or substantially all of the business and/or assets of the Company,
spouses, heirs, and personal and legal representatives.
14. CHOICE OF LAW. This Agreement shall be governed by and its
provisions construed and enforced in accordance with the laws of the State
of Delaware, as applied to contracts between Delaware residents, entered
into and to be performed entirely within the State of Delaware, without
regard to the conflict of laws principles thereof.
15. CONSENT TO JURISDICTION. The Company and each Indemnitee each
hereby irrevocably consents to the jurisdiction of the courts of the State
of Delaware for all purposes in connection with any action or proceeding
that arises out of or relates to this Agreement and agree that any action
instituted under this Agreement shall be commenced, prosecuted and
continued only in the Court of Chancery of the State of Delaware in and for
New Castle County, which shall be the exclusive and only proper forum for
adjudicating such a claim.
16. CORPORATE AUTHORITY. The Board of Directors of the Company and its
stockholders have approved the terms of this Agreement.
17. COUNTERPARTS. This Agreement may be executed in one (1) or more
counterparts, each of which shall constitute an original.
18. INTEGRATION AND ENTIRE AGREEMENT. Subject to Section 3(b), this
Agreement sets forth the entire understanding between the parties hereto
and supersedes and merges all previous written and oral negotiations,
commitments, understandings and agreements relating to the subject matter
hereof between the parties hereto.
19. NO CONSTRUCTION AS EMPLOYMENT AGREEMENT. Nothing contained in this
Agreement shall be construed as giving any Indemnitee any right to be
retained in the employ of the Company or any of its subsidiaries.
20. NOTICE. All notices and other communications required or permitted
hereunder shall be in writing, shall be effective when given, and shall in
any event be deemed to be given (i) two (2) days after deposit with the
U.S. Postal Service or other applicable postal service, if delivered by
first class mail, postage prepaid, (ii) upon delivery, if delivered by
hand, (iii) one (1) business day after the business day of deposit with
Federal Express or similar overnight courier, freight prepaid, or (iv) one
(1) day after the business day of delivery by facsimile transmission, if
deliverable by facsimile transmission, with copy by first class mail,
postage prepaid, and shall be addressed if to the Indemnitees, at each
Indemnitee's address as set forth beneath the Indemnitees' signatures to
this Agreement and if to the Company at the address of its principal
corporate offices (Attention: Secretary) or at such other address as such
party may designate by ten (10) days' advance written notice to the other
party hereto.
21. SEVERABILITY. The provisions of this Agreement shall be severable
in the event that any of the provisions hereof (including, without
limitation, any provision within a single section, paragraph or sentence)
are held by a court of competent jurisdiction to be invalid, void or
otherwise unenforceable, and the remaining provisions shall remain
enforceable to the fullest extent permitted by law. Furthermore, to the
fullest extent possible, the provisions of this Agreement (including,
without limitation, each portion of this Agreement containing any provision
held to be invalid, void or otherwise unenforceable, that is not itself
invalid, void or unenforceable) shall be construed so as to give effect to
the intent manifested by the provision held invalid, illegal or
unenforceable.
22. SUBROGATION. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the
rights of recovery of an Indemnitee who shall execute all documents
required and shall do all acts that may be necessary to secure such rights
and to enable the Company effectively to bring suit to enforce such rights.
23. SUCCESSORS AND ASSIGNS. The Company shall require and cause any
successor (whether direct or indirect by purchase, merger, consolidation or
otherwise) to all, substantially all, or a substantial part, of the
business and/or assets of the Company, by written agreement in form and
substance satisfactory to each Indemnitee, expressly to assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform if no such succession had taken place.
This Agreement shall continue in effect with respect to Claims relating to
Indemnifiable Events regardless of whether any Indemnitee continues to
serve as a director, officer, employee, agent, controlling person, or
fiduciary of the Company or of any other enterprise, including, without
limitation, subsidiaries of the Company, at the Company's request.
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and
as of the day and year first written above.
COMPANY:
__________________________
a Delaware corporation
By:_________________________________
Name:_______________________________
President and Chief Executive Officer
Address:
SIGNATURE PAGE TO INDEMNIFICATION AGREEMENT
INDEMNITEES:
_____________________________________
Name
Address:_____________________________
_____________________________
_____________________________________
By:__________________________________
Its:_________________________________
_____________________________________
By:__________________________________
Address:_____________________________
_____________________________
EXHIBIT H-1
FORM OF C.E.O. EMPLOYMENT AGREEMENT
February _____, 2003
Mr. Howard W. Robin
2210 Meadow Avenue
Boulder, CO 80304
Dear Howard:
This letter shall serve to amend and restate the terms of employment
offered to you by Ribozyme Pharmaceuticals, Inc. (the "Company") and acknowledge
your acceptance of the employment on such terms as detailed below. This letter
is being entered into in connection with the proposed private venture capital
financing in the approximate amount of $45 million for the Company (the
"Financing"), and shall become effective upon the closing of the Financing and
the transactions contemplated thereby (the "Effective Time"). Until the
Effective Time, your current employment letter agreement dated January 4, 2001,
as amended on June 19, 2001 and June 24, 2002 (collectively, the "Current
Agreement") shall remain in full force and effect.
Capitalized terms used herein and not otherwise defined herein shall have
the meanings ascribed to them on Appendix 1 hereto.
1. POSITIONS AND SCOPE OF EMPLOYMENT. Upon the Effective Time, you shall
continue to serve as President and Chief Executive Officer of the Company. You
shall render such business and professional services in the performance of your
duties, consistent with your position within the Company, consistent with the
Bylaws of the Company and as shall reasonably be assigned to you by the
Company's Board of Directors (the "Board"), and you shall report directly to the
Board. You shall perform your duties faithfully and to the best of your ability
and shall devote your full business efforts and time to the Company. The Company
agrees that you shall continue to be nominated and elected to the Board
throughout the term of your employment with the Company.
2. COMPENSATION.
(a) BASE SALARY; ANNUAL REVIEWS. During the period beginning as of the
Effective Time and ending on December 31, 2003, the Company shall pay to you as
compensation for your services a base salary at the annualized rate of $345,000
(the "Base Salary"). Thereafter, your Base Salary shall be subject to annual
performance review by the Board for appropriate upward adjustment, and you will
be considered for additional grants of stock options in connection with each
annual review by the Board. Your Base Salary shall be paid in accordance with
the Company's normal payroll practices.
(b) BONUS. In each calendar year of your employment with the Company
you shall be eligible to earn a bonus, including the 2003 calendar year. The
annual bonus shall be based upon attainment of reasonable and achievable goals
which shall be mutually agreed upon by you and the Board. The amount of the
annual bonus which you shall be eligible to earn shall be equal to thirty
percent (30%) of your then current annual Base Salary in the event you achieve
such goals. Your bonus shall be reasonably increased or decreased based on the
overachievement or underachievement of such goals. Such bonus shall be payable
in a cash lump sum within thirty (30) days after the end of the calendar year
with respect to which the bonus is payable.
(c) OPTIONS. On or before the date of signing of the Stock Purchase
Agreement in connection with the Financing, the Company shall grant to you stock
options to purchase such number of shares of the Company's common stock as shall
equal four and one-half percent (4 1/2%) of the Company's issued and outstanding
common stock immediately after the closing of the Financing, on a fully diluted,
fully converted basis, less 377,000 shares (which 377,000 shares have been
calculated based on the Company's current capitalization and before the proposed
reverse stock split, and will be considered a credit against the stock options
otherwise relating to four and one-half (4 1/2%) of the Company's issued and
outstanding common stock), which options shall be exercisable for a period of
ten (10) years at an exercise price equal to the greater of (i) the Fair Market
Value (as defined in the Company's stock option plan) on the date of the stock
option grant and (ii) $0.35 per share. Except as otherwise provided in Sections
4(d)(iii) and 5 below, the stock options shall vest during your employment with
the Company over a period of five (5) years beginning on the Effective Time, at
the rate of twenty percent (20%) after the first year and on a monthly basis
thereafter throughout years two (2) through five (5) (so as to be fully vested
at the end of a period of five (5) years after the Effective Time). Each stock
option grant shall be in the form of incentive stock options in the maximum
amount permitted by applicable law. To the extent that any such stock option
grant shall be in the form of non-qualified stock options (either by initial
grant or by reason of any incentive stock options being disqualified as such),
you shall be permitted to exercise such non-qualified stock options for a period
of five (5) years following the termination of your employment for any reason;
provided, that if you are terminated for Cause (as defined below) you may
exercise such non-qualified stock options only during the ninety (90) day period
following the termination of your employment.
(d) EMPLOYEE BENEFITS. During your employment with the Company, you
shall be entitled to participate in the employee benefit plans currently and
hereafter maintained by the Company which shall include, without limitation, the
following:
(i) group PPO medical and dental insurance plans (the coverage
under which shall include your dependents and contain no restrictions
relative to pre-existing conditions and no waiting period prior to coverage
becoming effective);
(ii) short-term disability insurance and long-term disability
insurance with a benefit of at least sixty percent (60%) of predisability
income up to a maximum benefit of $250,000 annually (which coverage shall
contain no restrictions relative to pre-existing conditions). The Company
shall continue to provide for your benefit additional long-term disability
coverage up to a maximum benefit of $250,000 annually, at your expense (but
only to the extent of the premium cost for the annual benefit in excess of
$72,000), at the group rates applicable to the Company (which coverage
shall contain no restrictions relative to pre-existing conditions);
(iii) term life insurance in the amount of $500,000, with your
having the right to designate the beneficiary(ies) thereof;
(iv) participation in the Company's 401(k) plan, your
contributions to which may be matched by the Company with contributions of
shares of its common stock if approved by the Board; provided that any such
matching contributions shall vest over three (3) years of service;
(v) participation in the Company's Flexible Spending Account; and
(vi) participation in the Company's Stock Purchase Plan, allowing
purchase of shares of the Company's common stock at fifteen percent (15%)
below the market price.
The Company reserves the right to revise, add or rescind any benefits
at any time for its employees generally; provided that any such permitted
revision, addition or rescission of benefits by the Company shall be without
prejudice to your rights provided in Section 4(d) hereof.
(e) VACATION DAYS; SICK DAYS; HOLIDAYS. You shall be entitled to paid
vacation, sick days and holidays in accordance with the Company's policies as in
effect from time to time.
(f) EXPENSES. The Company shall reimburse you for reasonable travel,
entertainment or other expenses incurred by you in the furtherance of or in
connection with the performance of your duties hereunder, in accordance with the
Company's expense reimbursement policy as in effect from time to time.
3. LOAN. The Company previously provided to you an interest-free loan in
the amount of $400,000 (the "Loan"). As of the date hereof, the Company has
forgiven forty percent (40%) of the original principal amount of the Loan and
the balance of the Loan shall continue to be forgiven by the Company at the rate
of twenty percent (20%) of the original principal amount of the Loan each year
on the anniversary date in accordance with the original terms thereof until the
Loan has been fully forgiven on January 3, 2006, provided, however, that the
Loan shall be fully forgiven in the event of termination of your employment due
to your death or permanent disability (as hereinafter defined). In the event
that it shall be determined that any payment shall be due by you for taxes of
any kind or nature relating to the forgiveness of the Loan or the imputation of
interest in connection therewith ("Taxes"), the Company shall deliver to you an
additional payment in an amount such that, after payment of any taxes applicable
to such additional payment by the Company, the net amount available to you after
payment of all such taxes shall be equal to the Taxes payable by you, together
with any interest or penalties associated therewith (a "Gross-Up Payment").
4. TERMINATION.
(a) AT-WILL EMPLOYMENT. You and the Company agree that your employment
with the Company shall be "at-will" employment, that you are free to resign and,
subject to the provisions hereof, the Company is free to terminate your
employment at any time, without notice, procedure or formality, with or without
Cause (for any reason or no reason).
(b) VOLUNTARY TERMINATION; TERMINATION FOR CAUSE. In the event that
your employment with the Company is terminated voluntarily by you or for Cause
by the Company, then (i) all options which have vested shall continue to be
exercisable in accordance with the terms of Section 2(c) of this Agreement, the
Company's stock option plan and applicable legal requirements; (ii) all payments
of Base Salary and bonuses accrued but unpaid on the date of termination, as
well as all expenses incurred to the date of termination, shall be due and
payable to you immediately and all further compensation by the Company to you
hereunder shall terminate as of the date of termination; (iii) the unforgiven
balance of the Loan shall be repaid by you within thirty (30) days of the date
of termination; and (iv) you shall be entitled to continue medical and dental
insurance coverage for yourself and your dependents, at your expense, at the
same level of coverage as was provided to the you under the Company's insurance
plan immediately prior to the termination ("Health Care Coverage") by electing
COBRA continuation coverage ("COBRA") in accordance with applicable law.
(c) TERMINATION UPON DEATH OR DISABILITY. In the event that your
employment with the Company is terminated as a result of your death or permanent
disability then (i) all options which have vested shall continue to be
exercisable in accordance with the terms of Section 2(c) of this Agreement, the
Company's stock option plan and applicable legal requirements; (ii) the Company
shall pay to you or your estate, as applicable, all payments of Base Salary and
bonuses accrued but unpaid on the date of termination, as well as expenses
incurred to the date of termination, immediately upon the date of termination
and all further compensation by the Company to you hereunder shall terminate as
of the date of termination; (iii) the Company shall forgive all amounts owed by
you or your estate, as applicable, in connection with the Loan and make any
necessary Gross-Up Payment; and (iv) you shall be entitled to continue medical
and dental insurance coverage for yourself and your dependents, at your expense,
at the same level of coverage as was provided to you under the Company's Health
Care Coverage by electing COBRA in accordance with applicable law. For purposes
hereof, the term "permanent disability" shall mean your inability to perform
your duties hereunder on account of illness, accident or other physical or
mental incapacity which shall continue for a consecutive period of ninety (90)
days or an aggregate of one hundred twenty (120) days in any consecutive
twelve-month period.
(d) TERMINATION WITHOUT CAUSE OR FOR GOOD REASON. In the event that
your employment with the Company is terminated by the Company without Cause or
by you for Good Reason, then (i) all options which have vested shall continue to
be exercisable in accordance with the terms of Section 2(c) of this Agreement,
the Company's stock option plan and applicable legal requirements; (ii) all
payments of Base Salary and bonuses accrued but unpaid on the date of
termination, as well as all expenses incurred to the date of termination, shall
be due and payable to you immediately; (iii) subject to the provisions of
Section 5 hereof, fifty percent (50%) of all unvested options shall become fully
vested and exercisable, and the remaining fifty percent (50%) of your unvested
options shall terminate; (iv) the Company shall forgive all amounts owed by you
in connection with the Loan and make any necessary Gross-Up Payment; (v) the
Company shall pay to you a severance payment, in monthly installments, equal to
your Base Salary plus the lesser of your full annual target bonus for the then
current calendar year (which shall be equal to thirty percent (30%) of your then
current Base Salary) or the average of your actual annual bonuses for the
previous two (2) calendar years, for a period of twelve (12) months; provided,
however, that either in the event you are terminated without Cause within twelve
(12) months after the Effective Time or the termination is a result of a Change
of Control (whether due to termination without Cause or your termination for
Good Reason following a Change of Control) the amount of such severance payment
shall be eighteen (18) months' severance; provided, further, that in the event
you obtain other employment during the applicable twelve (12) or eighteen (18)
months severance period, your severance payments thereafter shall be reduced on
a prospective basis (not to less than 0) in the amount of cash compensation
received by you during the remainder of such applicable severance period; and
(vi) the Company shall be responsible for all costs relating to maintaining your
Health Care Coverage for you and your dependents under COBRA for the shorter of
eighteen (18) months or for so long as allowed by law; provided, however, that
such Health Care Coverage shall terminate upon your obtaining comparable Health
Care Coverage from a future employer (after taking into account any waiting
periods for such coverage to become effective).
5. CHANGE OF CONTROL. Notwithstanding anything to the contrary contained
herein, in the event of a Change of Control of the Company, then (i) all options
which have vested shall continue to be exercisable in accordance with Section
2(c) of this Agreement, the Company's stock option plan and applicable legal
requirements; (ii) one hundred percent (100%) of the unvested options shall vest
one (1) year after the Change of Control; (iii) the Company shall forgive all
amounts owed by you in connection with the Loan and make any necessary Gross-Up
Payment; and (iv) to the extent that such Change of Control results in your
termination, whether by the Company without Cause or by you for Good Reason, the
Company shall pay to you a severance payment in accordance with the provisions
of Section 4(d) above, plus one hundred percent (100%) of the unvested options
shall vest immediately upon such termination. Notwithstanding the foregoing, to
the extent that the acceleration of vesting as contemplated in clause (ii) above
shall cause the options to not qualify as incentive stock options under
applicable tax laws, you shall be entitled to require that the Company not
accelerate the vesting of all or part of your unvested stock options in such
manner as shall preserve the status of the options as incentive stock options.
6. NON-DISCLOSURE/INVENTION ASSIGNMENT AGREEMENT;
NON-COMPETITION/NON-SOLICITATION AGREEMENT. You acknowledge that you previously
have entered into the Company's standard Non-Disclosure and Invention Assignment
Agreement upon commencing employment hereunder, in the forms of ATTACHMENT A and
ATTACHMENT B hereto. In addition, you agree to enter into the
Non-Competition/Non-Solicitation Agreement in the form of ATTACHMENT C hereto.
7. DIRECTORS' AND OFFICERS' LIABILITY POLICY. You will be covered under the
Company's directors' and officers' liability insurance policy, which shall
provide coverage in an amount and upon terms customary to similarly situated
companies. The Company shall maintain such policy throughout the duration of
your employment.
8. EXPENSES ASSOCIATED WITH THIS AGREEMENT. The Company shall reimburse you
for all expenses incurred by you in the preparation, review and negotiation of
this Agreement, including, without limitation, reasonable attorneys' fees and
accountants' fees.
9. INDEMNIFICATION. The Company agrees that if you are made a party or are
threatened to be made a party to any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "Proceeding"), by reason of the
fact that you are or were a director or officer of the Company or any subsidiary
or affiliate of the Company, whether or not the basis of such Proceeding is
alleged action in an official capacity as a director, officer, employee or
agent, you shall be indemnified and held harmless by the Company to the fullest
extent authorized by Delaware law, as the same exists or may hereafter amended,
against all damages, losses, judgments, liabilities, fines, penalties, excise
taxes, settlements and costs, including reasonable attorneys' fees, accountants'
fees and disbursement, incurred or suffered by you in connection therewith
(including the advancement of your defense costs and expenses as and when
incurred) and such indemnification shall continue as to you even if you have
ceased to be an officer, director or agent and are no longer employed by the
Company and shall inure to the benefit of your heirs, executors and
administrators.
10. ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of (a) your heirs, executors and legal representatives upon your death
and (b) any successor of the Company. Any such successor of the Company shall be
deemed substituted for the Company under the terms of this Agreement for all
purposes. For this purpose, "successor" means any person, firm, corporation or
other business entity which at any time, whether by purchase, merger or
otherwise, directly or indirectly acquires all or substantially all of the
assets or business of the Company.
11. NOTICES. All notices, requests, demands and other communications
provided hereunder shall be in writing and shall be deemed given (i) on the date
of delivery if delivered personally, (ii) one (1) day after being sent by a well
established commercial overnight service, or (iii) four (4) days after being
mailed by registered or certified mail, return receipt requested, prepaid and
addressed to the parties or their successors at the following addresses, or at
such other addresses as the parties may later designate in writing:
If to the Company:
RIBOZYME PHARMACEUTICALS, INC.
2950 Wilderness Place
Boulder, Colorado 80301
Attn: Chairman of the Board
If to you:
at the last residential address known by the Company.
12. SEVERABILITY. In the event that any provision hereof becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision.
13. INTEGRATION. Upon the Effective Time, this Agreement, together with the
Non-Disclosure and Invention Assignment Agreement represents the entire
agreement and understanding between the parties as to the subject matter herein
and supersedes all prior or contemporaneous agreements whether written or oral,
including without limitation the Change of Control Agreement, dated as of April
30, 2001, between you and the Company and, except as expressly provided in
Section 16 below, the Current Agreement. No waiver, alteration, or modification
of any of the provisions of this Agreement shall be binding unless in writing
and signed by duly authorized representatives of the parties hereto.
14. GOVERNING LAW. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Colorado, without reference to
principles of conflict of laws.
15. SALE OF STOCK. You shall have the opportunity to exercise your vested
options and sell any Company capital stock owned by you in reasonable
quantities, consistent with legal and your Company obligations.
16. CONDITIONAL WAIVER OF CHANGE OF CONTROL. You agree to waive the
occurrence of a Change of Control under the Current Agreement, but only with
respect to the Financing, subject, however, to the condition that such waiver
shall not be considered to be a material modification of the Loan under the
Sarbanes-Oxley Act of 2002 (the "Act"), which would prohibit a loan to an
officer or director of the Company after the effective date thereof. In the
event that such waiver would constitute a material modification of the Loan
under the Act, your waiver hereunder shall have no force or effect, and you will
be entitled to all of your rights relating to the Loan under the Current
Agreement and this Agreement with respect to the Change of Control by reason of
the Financing.
17. EFFECTIVE TIME. This Agreement shall become effective at the Effective
Time.
Please sign this Agreement and return one signed original copy to me,
acknowledging your agreement with and acceptance of these terms of employment.
Sincerely,
RIBOZYME PHARMACEUTICALS, INC.
By:________________________________
Name:
Title:
Agreed and accepted:
_________________________
Howard W. Robin
Dated: February ____, 2003
Acknowledged and agreed:
OXFORD BIOSCIENCE PARTNERS IV L.P.
By:_________________________
Name:
Title:
THE SPROUT GROUP
By:_________________________
Name:
Title:
VENROCK ASSOCIATES
By:_________________________
Name:
Title:
Appendix 1
DEFINITIONS
CAUSE. "Cause" is defined as (i) conviction of a felony crime involving
moral turpitude, (ii) an intentional action or intentional failure to act which
was performed in bad faith and to the material detriment of the Company, (iii)
continued intentional refusal or intentional failure to act in accordance with
any lawful and proper direction or order of the Board, (iv) willful and habitual
neglect of the duties of employment, or (v) breach of the Non-Disclosure
Agreement, contemplated hereunder; provided, however, that with respect to the
events of "cause" described under clauses (ii) through (v) above, the Company
shall have first provided to you written notice describing the nature of the
event and, thereafter, provided a reasonable opportunity to cure such event,
which reasonable opportunity shall in no event be less than thirty (30) days
following receipt of such notice.
CHANGE OF CONTROL. "Change of Control" of the Company is defined as: (i)
any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended) becomes the "beneficial owner" (as defined in
Rule 13d-3 under said Act), directly or indirectly, of securities of the Company
representing fifty percent (50%) or more of the total voting power represented
by the Company's then outstanding voting securities; or (ii) the consummation of
a merger or consolidation of the Company with any other corporation that has
been approved by the stockholders of the Company, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or the stockholders
of the Company approve a plan of complete liquidation of the Company; or
(iii) the consummation of the sale or disposition by the Company of all or
substantially all the Company's assets; or (iv) when the individuals who on the
date hereof constitute the Board and any new director (other than a director
designated by a person or entity who has entered into an agreement to effect a
transaction described in clause (i), (ii) or (iii) above), whose nomination
and/or election to the Board was approved by a vote of at least a majority of
the directors still in office who either were directors on the date hereof or
whose election or nomination for election was previously approved, cease for any
reason to constitute a majority of the Board. For the avoidance of doubt, the
Financing in no event shall be deemed a Change of Control for the purposes of
this Agreement except as expressly provided in Section 16 of this Agreement.
GOOD REASON. "Good Reason" is defined as your voluntary resignation from
your employment with the Company upon the occurrence of any of the following
without your express written consent: (i) the assignment to you of any duties or
responsibilities inconsistent with the scope of the duties or responsibilities
associated with your titles or positions or any diminution to or adverse change
of your titles, positions, status or circumstances of employment; (ii) a
reduction by the Company in your Base Salary or bonus target percentage or,
absent a good business reason, of the facilities, benefits and perquisites
available to you immediately prior to such reduction; (iii) the taking of any
action by the Company which would adversely affect your participation in, or
reduce your benefits under, the Company's benefit plans (including equity
benefits) as of the date of execution hereof, except to the extent that the
benefits of all other employees of the Company are similarly reduced; provided,
that regardless of whether the Company may similarly reduce the benefits of
other employees, it shall constitute Good Reason in the event the Company takes
any action which would adversely affect your participation in, or adversely
affect or reduce in any material aspect your benefits under, the Company's
medical, dental, short-term disability and/or long-term disability benefit plans
or arrangements; (iv) a relocation of your principal office to a location more
than thirty (30) miles from Boulder, Colorado, except for reasonable periods of
required travel on Company business; (v) any breach by the Company of any
material provision of this Agreement; or (vi) any failure by the Company to
obtain the assumption of this Agreement in writing by any successor or assign of
the Company.
EXHIBIT H-2
FORM OF C.F.O. EMPLOYMENT AGREEMENT
February _____, 2003
Mr. Marvin Tancer
2424 Keller Farm Drive
Boulder, CO 80304
Dear Marvin:
This letter shall serve to amend and restate the terms of employment
offered to you by Ribozyme Pharmaceuticals, Inc. (the "Company") and acknowledge
your acceptance of the employment on such terms as detailed below. This letter
is being entered into in connection with the proposed private venture capital
financing in the approximate amount of $45 million for the Company (the
"Financing"), and shall become effective upon the closing of the Financing and
the transactions contemplated thereby (the "Effective Time"). Until the
Effective Time, your current employment letter agreement dated May 29, 2001, as
amended on July 15, 2001 (collectively, the "Current Agreement") shall remain in
full force and effect.
Capitalized terms used herein and not otherwise defined herein shall
have the meanings ascribed to them on Appendix 1 hereto.
1. POSITIONS AND SCOPE OF EMPLOYMENT. Upon the Effective Time, you
shall continue to serve as Vice President of Operations and Chief Financial
Officer of the Company. You shall render such business and professional services
in the performance of your duties, consistent with your position within the
Company, consistent with the Bylaws of the Company and as shall reasonably be
assigned to you by the Company's President and Chief Executive Officer and/or
the Board of Directors (the "Board"), and you shall report directly to the
President and Chief Executive Officer. You shall perform your duties faithfully
and to the best of your ability and shall devote your full business efforts and
time to the Company.
2. COMPENSATION. (a) BASE SALARY; ANNUAL REVIEWS. During the period
beginning as of the Effective Time and ending on December 31, 2003, the Company
shall pay to you as compensation for your services a base salary at the
annualized rate of $266,000 (the "Base Salary"). Thereafter, your Base Salary
shall be subject to annual performance review by the President and Chief
Executive Officer for appropriate upward adjustment, and you will be considered
for additional grants of stock options in connection with each annual review by
the Board. Your Base Salary shall be paid in accordance with the Company's
normal payroll practices.
(b) BONUS. In each calendar year of your employment with the Company
you shall be eligible to earn a bonus, including the 2003 calendar year. The
annual bonus shall be based upon attainment of reasonable and achievable goals
which shall be mutually agreed upon by you and the President and Chief Executive
Officer. The amount of the annual bonus which you shall be eligible to earn
shall be equal to twenty percent (20%) of your then current annual Base Salary
in the event you achieve such goals. Your bonus shall be reasonably increased or
decreased based on the overachievement or underachievement of such goals. Such
bonus shall be payable in a cash lump sum within thirty (30) days after the end
of the calendar year with respect to which the bonus is payable.
(c) OPTIONS. On or before the date of signing of the Stock Purchase
Agreement in connection with the Financing, the Company shall grant to you stock
options to purchase such number of shares of the Company's common stock as shall
equal one and one-half percent (1 1/2%) of the Company's issued and outstanding
common stock immediately after the closing of the Financing, on a fully diluted,
fully converted basis, less 197,500 shares (which 197,500 shares have been
calculated based on the Company's current capitalization and before the proposed
reverse stock split, and will be considered a credit against the stock options
otherwise relating to one and one-half (1 1/2%) of the Company's issued and
outstanding common stock), which options shall be exercisable for a period of
ten (10) years at an exercise price equal to the greater of (i) the Fair Market
Value (as defined in the Company's stock option plan) on the date of the stock
option grant and (ii) $0.35 per share. Except as otherwise provided in Sections
4(d)(iii) and 5 below, the stock options shall vest during your employment with
the Company over a period of five (5) years beginning on the Effective Time, on
a monthly basis (so as to be fully vested at the end of a period of five (5)
years after the Effective Time). Each stock option grant shall be in the form of
incentive stock options in the maximum amount permitted by applicable law.
(d) EMPLOYEE BENEFITS. During your employment with the Company, you
shall be entitled to participate in the employee benefit plans currently and
hereafter maintained by the Company which shall include, without limitation, the
following:
(i) group PPO medical and dental insurance plans (the coverage
under which shall include your dependents and contain no restrictions
relative to pre-existing conditions and no waiting period prior to
coverage becoming effective);
(ii) short-term disability insurance and long-term disability
insurance (which coverage shall contain no restrictions relative to
pre-existing conditions);
(iii) term life insurance in the amount of $500,000, with your
having the right to designate the beneficiary(ies) thereof;
(iv) participation in the Company's 401(k) plan, your
contributions to which may be matched by the Company with
contributions of shares of its common stock if approved by the Board;
provided that any such matching contributions shall vest over three
(3) years of service;
(v) participation in the Company's Flexible Spending Account; and
(vi) participation in the Company's Stock Purchase Plan, allowing
purchase of shares of the Company's common stock at fifteen percent
(15%) below the market price.
The Company reserves the right to revise, add or rescind any benefits
at any time for its employees generally; provided that any such permitted
revision, addition or rescission of benefits by the Company shall be without
prejudice to your rights provided in Section 4(d) hereof.
(e) VACATION DAYS; SICK DAYS; HOLIDAYS. You shall be entitled to paid
vacation, sick days and holidays in accordance with the Company's policies as in
effect from time to time.
(f) EXPENSES. The Company shall reimburse you for reasonable travel,
entertainment or other expenses incurred by you in the furtherance of or in
connection with the performance of your duties hereunder, in accordance with the
Company's expense reimbursement policy as in effect from time to time.
3. LOAN. The Company previously provided to you an interest-free loan
in the amount of $200,000 (the "Loan"). As of the date hereof, the Company has
forgiven twenty percent (20%) of the original principal amount of the Loan and
the balance of the Loan shall continue to be forgiven by the Company at the rate
of twenty percent (20%) of the original principal amount of the Loan each year
on the anniversary date in accordance with the original terms thereof until the
Loan has been fully forgiven on June 17, 2006, provided, however, that the Loan
shall be fully forgiven in the event of termination of your employment due to
your death or permanent disability (as hereinafter defined). In the event that
it shall be determined that any payment shall be due by you for taxes of any
kind or nature relating to the forgiveness of the Loan or the imputation of
interest in connection therewith ("Taxes"), the Company shall deliver to you an
additional payment in an amount such that, after payment of any taxes applicable
to such additional payment by the Company, the net amount available to you after
payment of all such taxes shall be equal to the Taxes payable by you, together
with any interest or penalties associated therewith (a "Gross-Up Payment").
4. TERMINATION.
(a) AT-WILL EMPLOYMENT. You and the Company agree that your employment
with the Company shall be "at-will" employment, that you are free to resign and,
subject to the provisions hereof, the Company is free to terminate your
employment at any time, without notice, procedure or formality, with or without
Cause (for any reason or no reason).
(b) VOLUNTARY TERMINATION; TERMINATION FOR CAUSE. In the event that
your employment with the Company is terminated voluntarily by you or for Cause
by the Company, then (i) all options which have vested shall continue to be
exercisable in accordance with the terms of the Company's stock option plan and
applicable legal requirements; (ii) all payments of Base Salary and bonuses
accrued but unpaid on the date of termination, as well as all expenses incurred
to the date of termination, shall be due and payable to you immediately and all
further compensation by the Company to you hereunder shall terminate as of the
date of termination; (iii) the unforgiven balance of the Loan shall be repaid by
you within thirty (30) days of the date of termination; and (iv) you shall be
entitled to continue medical and dental insurance coverage for yourself and your
dependents, at your expense, at the same level of coverage as was provided to
the you under the Company's insurance plan immediately prior to the termination
("Health Care Coverage") by electing COBRA continuation coverage ("COBRA") in
accordance with applicable law.
(c) TERMINATION UPON DEATH OR DISABILITY. In the event that your
employment with the Company is terminated as a result of your death or permanent
disability then (i) all options which have vested shall continue to be
exercisable in accordance with the terms of the Company's stock option plan and
applicable legal requirements; (ii) the Company shall pay to you or your estate,
as applicable, all payments of Base Salary and bonuses accrued but unpaid on the
date of termination, as well as expenses incurred to the date of termination,
immediately upon the date of termination and all further compensation by the
Company to you hereunder shall terminate as of the date of termination; (iii)
the Company shall forgive all amounts owed by you or your estate, as applicable,
in connection with the Loan and make any necessary Gross-Up Payment; and (iv)
you shall be entitled to continue medical and dental insurance coverage for
yourself and your dependents, at your expense, at the same level of coverage as
was provided to you under the Company's Health Care Coverage by electing COBRA
in accordance with applicable law. For purposes hereof, the term "permanent
disability" shall mean your inability to perform your duties hereunder on
account of illness, accident or other physical or mental incapacity which shall
continue for a consecutive period of ninety (90) days or an aggregate of one
hundred twenty (120) days in any consecutive twelve-month period.
(d) TERMINATION WITHOUT CAUSE OR FOR GOOD REASON. In the event that
your employment with the Company is terminated by the Company without Cause or
by you for Good Reason, then (i) all options which have vested shall continue to
be exercisable in accordance with the terms of the Company's stock option plan
and applicable legal requirements; (ii) all payments of Base Salary and bonuses
accrued but unpaid on the date of termination, as well as all expenses incurred
to the date of termination, shall be due and payable to you immediately; (iii)
subject to the provisions of Section 5 hereof, your unvested options shall
continue to vest, on a monthly basis, during the applicable nine (9) or twelve
(12) month severance period described in Section 4(d)(v) below, but such
continuing vesting of your unvested options shall cease upon your obtaining new
comparable employment during the applicable severance period; (iv) the Company
shall forgive all amounts owed by you in connection with the Loan and make any
necessary Gross-Up Payment; (v) the Company shall pay to you a severance
payment, in monthly installments, equal to your Base Salary plus the lesser of
your full annual target bonus for the then current calendar year (which shall be
equal to twenty percent (20%) of your then current Base Salary) or the average
of your actual annual bonuses for the previous two (2) calendar years, for a
period of nine (9) months; provided, however, that in the event you are
terminated as a result of a Change of Control (whether due to termination
without Cause or your termination for Good Reason following a Change of
Control), the amount of such severance payment shall be twelve (12) months'
severance; provided, further, that in the event you obtain other employment
during the applicable nine (9) or twelve (12) month severance period, your
severance payments thereafter shall be reduced on a prospective basis (not to
less than 0) in the amount of cash compensation received by you during the
remainder of such applicable severance period; and (vi) the Company shall be
responsible for all costs relating to maintaining your Health Care Coverage for
you and your dependents under COBRA for the shorter of eighteen (18) months or
for so long as allowed by law; provided, however, that such Health Care Coverage
shall terminate upon your obtaining comparable Health Care Coverage from a
future employer (after taking into account any waiting periods for such coverage
to become effective).
5. CHANGE OF CONTROL. Notwithstanding anything to the contrary
contained herein, in the event of a Change of Control of the Company, then (i)
all options which have vested shall continue to be exercisable in accordance
with the Company's stock option plan and applicable legal requirements; (ii) one
hundred percent (100%) of the unvested options shall vest immediately if your
employment is terminated by you for Good Reason within six (6) months after a
Change of Control or if, during the period from ninety (90) days prior to the
commencement or public announcement of a Change of Control until two (2) years
after a Change of Control, your employment with the Company is terminated by the
Company other than for Cause; (iii) the Company shall forgive all amounts owed
by you in connection with the Loan and make any necessary Gross-Up Payment; and
(iv) to the extent that such Change of Control results in your termination,
whether by the Company without Cause or by you for Good Reason, the Company
shall pay to you a severance payment in accordance with the provisions of
Section 4(d) above. Notwithstanding the foregoing, to the extent that the
acceleration of vesting as contemplated in clause (ii) above shall cause the
options to not qualify as incentive stock options under applicable tax laws, you
shall be entitled to require that the Company not accelerate the vesting of all
or part of your unvested stock options in such manner as shall preserve the
status of the options as incentive stock options.
6. NON-DISCLOSURE/INVENTION ASSIGNMENT AGREEMENT;
NON-COMPETITION/NON-SOLICITATION AGREEMENT. You acknowledge that you previously
have entered into the Company's standard Non-Disclosure and Invention Assignment
Agreement upon commencing employment hereunder, in the forms of ATTACHMENT A and
ATTACHMENT B hereto. In addition, you agree to enter into the
Non-Competition/Non-Solicitation Agreement in the form of ATTACHMENT C hereto.
7. DIRECTORS' AND OFFICERS' LIABILITY POLICY. You will be covered
under the Company's directors' and officers' liability insurance policy, which
shall provide coverage in an amount and upon terms customary to similarly
situated companies. The Company shall maintain such policy throughout the
duration of your employment.
8. EXPENSES ASSOCIATED WITH THIS AGREEMENT. The Company shall
reimburse you for all expenses incurred by you in the preparation, review and
negotiation of this Agreement, including, without limitation, reasonable
attorneys' fees and accountants' fees.
9. INDEMNIFICATION. The Company agrees that if you are made a party or
are threatened to be made a party to any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "Proceeding"), by reason of
the fact that you are or were a director or officer of the Company or any
subsidiary or affiliate of the Company, whether or not the basis of such
Proceeding is alleged action in an official capacity as a director, officer,
employee or agent, you shall be indemnified and held harmless by the Company to
the fullest extent authorized by Delaware law, as the same exists or may
hereafter amended, against all damages, losses, judgments, liabilities, fines,
penalties, excise taxes, settlements and costs, including reasonable attorneys'
fees, accountants' fees and disbursement, incurred or suffered by you in
connection therewith (including the advancement of your defense costs and
expenses as and when incurred) and such indemnification shall continue as to you
even if you have ceased to be an officer, director or agent and are no longer
employed by the Company and shall inure to the benefit of your heirs, executors
and administrators.
10. ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of (a) your heirs, executors and legal representatives upon your death
and (b) any successor of the Company. Any such successor of the Company shall be
deemed substituted for the Company under the terms of this Agreement for all
purposes. For this purpose, "successor" means any person, firm, corporation or
other business entity which at any time, whether by purchase, merger or
otherwise, directly or indirectly acquires all or substantially all of the
assets or business of the Company.
11. NOTICES. All notices, requests, demands and other communications
provided hereunder shall be in writing and shall be deemed given (i) on the date
of delivery if delivered personally, (ii) one (1) day after being sent by a well
established commercial overnight service, or (iii) four (4) days after being
mailed by registered or certified mail, return receipt requested, prepaid and
addressed to the parties or their successors at the following addresses, or at
such other addresses as the parties may later designate in writing:
If to the Company:
RIBOZYME PHARMACEUTICALS, INC.
2950 Wilderness Place
Boulder, Colorado 80301
Attn: Chairman of the Board
If to you:
at the last residential address known by the Company.
12. SEVERABILITY. In the event that any provision hereof becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision.
13. INTEGRATION. Upon the Effective Time, this Agreement, together
with the Non-Disclosure and Invention Assignment Agreement represents the entire
agreement and understanding between the parties as to the subject matter herein
and supersedes all prior or contemporaneous agreements whether written or oral,
including without limitation the Change of Control Agreement, dated as of April
30, 2001, between you and the Company and, except as expressly provided in
Section 15 below, the Current Agreement. No waiver, alteration, or modification
of any of the provisions of this Agreement shall be binding unless in writing
and signed by duly authorized representatives of the parties hereto.
14. GOVERNING LAW. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of Colorado, without reference to
principles of conflict of laws.
15. CONDITIONAL WAIVER OF CHANGE OF CONTROL. You agree to waive the
occurrence of a Change of Control under the Current Agreement, but only with
respect to the Financing, subject, however, to the condition that such waiver
shall not be considered to be a material modification of the Loan under the
Sarbanes-Oxley Act of 2002 (the "Act"), which would prohibit a loan to an
officer or director of the Company after the effective date thereof. In the
event that such waiver would constitute a material modification of the Loan
under the Act, your waiver hereunder shall have no force or effect, and you will
be entitled to all of your rights relating to the Loan under the Current
Agreement and this Agreement with respect to the Change of Control by reason of
the Financing.
16. EFFECTIVE TIME. This Agreement shall become effective at the
Effective Time.
Please sign this Agreement and return one signed original copy to me,
acknowledging your agreement with and acceptance of these terms of employment.
Sincerely,
RIBOZYME PHARMACEUTICALS, INC.
By:________________________________
Name:
Title:
Agreed and accepted:
__________________________
Marvin Tancer
Dated: February ____, 2003
Acknowledged and agreed:
OXFORD BIOSCIENCE PARTNERS IV L.P.
By:_________________________
Name:
Title:
THE SPROUT GROUP
By:_________________________
Name:
Title:
VENROCK ASSOCIATES
By:_________________________
Name:
Title:
Appendix 1
DEFINITIONS
CAUSE. "Cause" is defined as (i) conviction of a felony crime
involving moral turpitude, (ii) an intentional action or intentional failure to
act which was performed in bad faith and to the material detriment of the
Company, (iii) continued intentional refusal or intentional failure to act in
accordance with any lawful and proper direction or order of the Board, (iv)
willful and habitual neglect of the duties of employment, or (v) breach of the
Non-Disclosure Agreement, contemplated hereunder; provided, however, that with
respect to the events of "cause" described under clauses (ii) through (v) above,
the Company shall have first provided to you written notice describing the
nature of the event and, thereafter, provided a reasonable opportunity to cure
such event, which reasonable opportunity shall in no event be less than thirty
(30) days following receipt of such notice.
CHANGE OF CONTROL. "Change of Control" of the Company is defined as:
(i) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended) becomes the "beneficial owner" (as
defined in Rule 13d-3 under said Act), directly or indirectly, of securities of
the Company representing fifty percent (50%) or more of the total voting power
represented by the Company's then outstanding voting securities; or (ii) the
consummation of a merger or consolidation of the Company with any other
corporation that has been approved by the stockholders of the Company, other
than a merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) more than fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or the stockholders
of the Company approve a plan of complete liquidation of the Company; or (iii)
the consummation of the sale or disposition by the Company of all or
substantially all the Company's assets; or (iv) when the individuals who on the
date hereof constitute the Board and any new director (other than a director
designated by a person or entity who has entered into an agreement to effect a
transaction described in clause (i), (ii) or (iii) above), whose nomination
and/or election to the Board was approved by a vote of at least a majority of
the directors still in office who either were directors on the date hereof or
whose election or nomination for election was previously approved, cease for any
reason constitute a majority of the Board. For the avoidance of doubt, the
Financing in no event shall be deemed a Change of Control for the purposes of
this Agreement except as expressly provided in Section 15 of this Agreement.
GOOD REASON. "Good Reason" is defined as your voluntary resignation
from your employment with the Company upon the occurrence of any of the
following without your express written consent: (i) the assignment to you of any
duties or responsibilities inconsistent with the scope of the duties or
responsibilities associated with your titles or positions or any diminution to
or adverse change of your titles, positions, status or circumstances of
employment; (ii) a reduction by the Company in your Base Salary or bonus target
percentage or, absent a good business reason, of the facilities, benefits and
perquisites available to you immediately prior to such reduction; (iii) the
taking of any action by the Company which would adversely affect your
participation in, or reduce your benefits under, the Company's benefit plans
(including equity benefits) as of the date of execution hereof, except to the
extent that the benefits of all other employees of the Company are similarly
reduced; provided, that regardless of whether the Company may similarly reduce
the benefits of other employees, it shall constitute Good Reason in the event
the Company takes any action which would adversely affect your participation in,
or adversely affect or reduce in any material aspect your benefits under, the
Company's medical, dental, short-term disability and/or long-term disability
benefit plans or arrangements; (iv) a relocation of your principal office to a
location more than thirty (30) miles from Boulder, Colorado, except for
reasonable periods of required travel on Company business; (v) any breach by the
Company of any material provision of this Agreement; or (vi) any failure by the
Company to obtain the assumption of this Agreement in writing by any successor
or assign of the Company.
EXHIBIT H-3
FORM OF C.S.O. EMPLOYMENT AGREEMENT
February _____, 2003
Dr. Nassim Usman
2129 Night Sky Lane
Lafayette, CO 80026
Dear Nassim:
This letter shall serve to amend and restate the terms of employment
offered to you by Ribozyme Pharmaceuticals, Inc. (the "Company") and acknowledge
your acceptance of the employment on such terms as detailed below. This letter
is being entered into in connection with the proposed private venture capital
financing in the approximate amount of $45 million for the Company (the
"Financing"), and shall become effective upon the closing of the Financing and
the transactions contemplated thereby (the "Effective Time"). Until the
Effective Time, your current employment letter agreement dated August 13, 1992,
as amended on April 14, 1994, May 2, 1996, July 6, 2000, April 30, 2001,
December 19, 2001 and July 31, 2002 (collectively, the "Current Agreement")
shall remain in full force and effect.
Capitalized terms used herein and not otherwise defined herein shall
have the meanings ascribed to them on Appendix 1 hereto.
1. POSITIONS AND SCOPE OF EMPLOYMENT. Upon the Effective Time, you
shall continue to serve as Vice President of Research and Development and Chief
Scientific Officer of the Company. You shall render such business and
professional services in the performance of your duties, consistent with your
position within the Company, consistent with the Bylaws of the Company and as
shall reasonably be assigned to you by the Company's President and Chief
Executive Officer and/or the Board of Directors (the "Board"), and you shall
report directly to the President and Chief Executive Officer. You shall perform
your duties faithfully and to the best of your ability and shall devote your
full business efforts and time to the Company.
2. COMPENSATION. (a) BASE SALARY; ANNUAL REVIEWS. During the period
beginning as of the Effective Time and ending on December 31, 2003, the Company
shall pay to you as compensation for your services a base salary at the
annualized rate of $254,000 (the "Base Salary"). Thereafter, your Base Salary
shall be subject to annual performance review by the President and Chief
Executive Officer for appropriate upward adjustment, and you will be considered
for additional grants of stock options in connection with each annual review by
the Board. Your Base Salary shall be paid in accordance with the Company's
normal payroll practices.
(b) BONUS. In each calendar year of your employment with the Company
you shall be eligible to earn a bonus, including the 2003 calendar year. The
annual bonus shall be based upon attainment of reasonable and achievable goals
which shall be mutually agreed upon by you and the President and Chief Executive
Officer. The amount of the annual bonus which you shall be eligible to earn
shall be equal to twenty percent (20%) of your then current annual Base Salary
in the event you achieve such goals. Your bonus shall be reasonably increased or
decreased based on the overachievement or underachievement of such goals. Such
bonus shall be payable in a cash lump sum within thirty (30) days after the end
of the calendar year with respect to which the bonus is payable.
(c) OPTIONS. On or before the date of signing of the Stock Purchase
Agreement in connection with the Financing, the Company shall grant to you stock
options to purchase such number of shares of the Company's common stock as shall
equal one and one-half percent (1 1/2%) of the Company's issued and outstanding
common stock immediately after the closing of the Financing, on a fully diluted,
fully converted basis, less 161,900 shares (which 161,900 shares have been
calculated based on the Company's current capitalization and before the proposed
reverse stock split, and will be considered a credit against the stock options
otherwise relating to one and one-half (1 1/2%) of the Company's issued and
outstanding common stock), which options shall be exercisable for a period of
ten (10) years at an exercise price equal to the greater of (i) the Fair Market
Value (as defined in the Company's stock option plan) on the date of the stock
option grant and (ii) $0.35 per share. Except as otherwise provided in Sections
3(d)(iii) and 4 below, the stock options shall vest during your employment with
the Company over a period of five (5) years beginning on the Effective Time, on
a monthly basis (so as to be fully vested at the end of a period of five (5)
years after the Effective Time). Each stock option grant shall be in the form of
incentive stock options in the maximum amount permitted by applicable law.
(d) EMPLOYEE BENEFITS. During your employment with the Company, you
shall be entitled to participate in the employee benefit plans currently and
hereafter maintained by the Company which shall include, without limitation, the
following:
(i) group PPO medical and dental insurance plans (the coverage
under which shall include your dependents and contain no restrictions
relative to pre-existing conditions and no waiting period prior to
coverage becoming effective);
(ii) short-term disability insurance and long-term disability
insurance (which coverage shall contain no restrictions relative to
pre-existing conditions);
(iii) term life insurance in the amount of $500,000, with your
having the right to designate the beneficiary(ies) thereof;
(iv) participation in the Company's 401(k) plan, your
contributions to which may be matched by the Company with
contributions of shares of its common stock if approved by the Board;
provided that any such matching contributions shall vest over three
(3) years of service;
(v) participation in the Company's Flexible Spending Account; and
(vi) participation in the Company's Stock Purchase Plan, allowing
purchase of shares of the Company's common stock at fifteen percent
(15%) below the market price.
The Company reserves the right to revise, add or rescind any benefits
at any time for its employees generally; provided that any such permitted
revision, addition or rescission of benefits by the Company shall be without
prejudice to your rights provided in Section 4(d) hereof.
(e) VACATION DAYS; SICK DAYS; HOLIDAYS. You shall be entitled to paid
vacation, sick days and holidays in accordance with the Company's policies as in
effect from time to time.
(f) EXPENSES. The Company shall reimburse you for reasonable travel,
entertainment or other expenses incurred by you in the furtherance of or in
connection with the performance of your duties hereunder, in accordance with the
Company's expense reimbursement policy as in effect from time to time.
3. TERMINATION.
(a) AT-WILL EMPLOYMENT. You and the Company agree that your employment
with the Company shall be "at-will" employment, that you are free to resign and,
subject to the provisions hereof, the Company is free to terminate your
employment at any time, without notice, procedure or formality, with or without
Cause (for any reason or no reason).
(b) VOLUNTARY TERMINATION; TERMINATION FOR CAUSE. In the event that
your employment with the Company is terminated voluntarily by you or for Cause
by the Company, then (i) all options which have vested shall continue to be
exercisable in accordance with the terms of the Company's stock option plan and
applicable legal requirements; (ii) all payments of Base Salary and bonuses
accrued but unpaid on the date of termination, as well as all expenses incurred
to the date of termination, shall be due and payable to you immediately and all
further compensation by the Company to you hereunder shall terminate as of the
date of termination; and (iii) you shall be entitled to continue medical and
dental insurance coverage for yourself and your dependents, at your expense, at
the same level of coverage as was provided to the you under the Company's
insurance plan immediately prior to the termination ("Health Care Coverage") by
electing COBRA continuation coverage ("COBRA") in accordance with applicable
law.
(c) TERMINATION UPON DEATH OR DISABILITY. In the event that your
employment with the Company is terminated as a result of your death or permanent
disability then (i) all options which have vested shall continue to be
exercisable in accordance with the terms of the Company's stock option plan and
applicable legal requirements; (ii) the Company shall pay to you or your estate,
as applicable, all payments of Base Salary and bonuses accrued but unpaid on the
date of termination, as well as expenses incurred to the date of termination,
immediately upon the date of termination and all further compensation by the
Company to you hereunder shall terminate as of the date of termination; and
(iii) you shall be entitled to continue medical and dental insurance coverage
for yourself and your dependents, at your expense, at the same level of coverage
as was provided to you under the Company's Health Care Coverage by electing
COBRA in accordance with applicable law. For purposes hereof, the term
"permanent disability" shall mean your inability to perform your duties
hereunder on account of illness, accident or other physical or mental incapacity
which shall continue for a consecutive period of ninety (90) days or an
aggregate of one hundred twenty (120) days in any consecutive twelve-month
period.
(d) TERMINATION WITHOUT CAUSE OR FOR GOOD REASON. In the event that
your employment with the Company is terminated by the Company without Cause or
by you for Good Reason, then (i) all options which have vested shall continue to
be exercisable in accordance with the terms of the Company's stock option plan
and applicable legal requirements; (ii) all payments of Base Salary and bonuses
accrued but unpaid on the date of termination, as well as all expenses incurred
to the date of termination, shall be due and payable to you immediately; (iii)
subject to the provisions of Section 4 hereof, your unvested options shall
continue to vest, on a monthly basis, during the applicable nine (9) or twelve
(12) month severance period described in Section 3(d)(iv) below, but such
continuing vesting of your unvested options shall cease upon your obtaining new
comparable employment during the applicable severance period; (iv) the Company
shall pay to you a severance payment, in monthly installments, equal to your
Base Salary plus the lesser of your full annual target bonus for the then
current calendar year (which shall be equal to twenty percent (20%) of your then
current Base Salary) or the average of your actual annual bonuses for the
previous two (2) calendar years, for a period of nine (9) months; provided,
however, that in the event you are terminated as a result of a Change of Control
(whether due to termination without Cause or your termination for Good Reason
following a Change of Control), the amount of such severance payment shall be
twelve (12) months' severance; provided, further, that in the event you obtain
other employment during the applicable nine (9) or twelve (12) month severance
period, your severance payments thereafter shall be reduced on a prospective
basis (not to less than 0) in the amount of cash compensation received by you
during the remainder of such applicable severance period; and (v) the Company
shall be responsible for all costs relating to maintaining your Health Care
Coverage for you and your dependents under COBRA for the shorter of eighteen
(18) months or for so long as allowed by law; provided, however, that such
Health Care Coverage shall terminate upon your obtaining comparable Health Care
Coverage from a future employer (after taking into account any waiting periods
for such coverage to become effective).
4. CHANGE OF CONTROL. Notwithstanding anything to the contrary contained
herein, in the event of a Change of Control of the Company, then (i) all options
which have vested shall continue to be exercisable in accordance with the
Company's stock option plan and applicable legal requirements; (ii) one hundred
percent (100%) of the unvested options shall vest immediately if your employment
is terminated by you for Good Reason within six (6) months after a Change of
Control or if, during the period from ninety (90) days prior to the commencement
or public announcement of a Change of Control until two (2) years after a Change
of Control, your employment with the Company is terminated by the Company other
than for Cause; and (iii) to the extent that such Change of Control results in
your termination, whether by the Company without Cause or by you for Good
Reason, the Company shall pay to you a severance payment in accordance with the
provisions of Section 3(d) above. Notwithstanding the foregoing, to the extent
that the acceleration of vesting as contemplated in clause (ii) above shall
cause the options to not qualify as incentive stock options under applicable tax
laws, you shall be entitled to require that the Company not accelerate the
vesting of all or part of your unvested stock options in such manner as shall
preserve the status of the options as incentive stock options.
5. NON-DISCLOSURE/INVENTION ASSIGNMENT AGREEMENT;
NON-COMPETITION/NON-SOLICITATION AGREEMENT. You acknowledge that you previously
have entered into the Company's standard Non-Disclosure and Invention Assignment
Agreement upon commencing employment hereunder, in the forms of ATTACHMENT A and
ATTACHMENT B hereto. In addition, you agree to enter into the
Non-Competition/Non-Solicitation Agreement in the form of ATTACHMENT C hereto.
6. DIRECTORS' AND OFFICERS' LIABILITY POLICY. You will be covered under the
Company's directors' and officers' liability insurance policy, which shall
provide coverage in an amount and upon terms customary to similarly situated
companies. The Company shall maintain such policy throughout the duration of
your employment.
7. EXPENSES ASSOCIATED WITH THIS AGREEMENT. The Company shall reimburse you
for all expenses incurred by you in the preparation, review and negotiation of
this Agreement, including, without limitation, reasonable attorneys' fees and
accountants' fees.
8. INDEMNIFICATION. The Company agrees that if you are made a party or are
threatened to be made a party to any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "Proceeding"), by reason of the
fact that you are or were a director or officer of the Company or any subsidiary
or affiliate of the Company, whether or not the basis of such Proceeding is
alleged action in an official capacity as a director, officer, employee or
agent, you shall be indemnified and held harmless by the Company to the fullest
extent authorized by Delaware law, as the same exists or may hereafter amended,
against all damages, losses, judgments, liabilities, fines, penalties, excise
taxes, settlements and costs, including reasonable attorneys' fees, accountants'
fees and disbursement, incurred or suffered by you in connection therewith
(including the advancement of your defense costs and expenses as and when
incurred) and such indemnification shall continue as to you even if you have
ceased to be an officer, director or agent and are no longer employed by the
Company and shall inure to the benefit of your heirs, executors and
administrators.
9. ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of (a) your heirs, executors and legal representatives upon your death
and (b) any successor of the Company. Any such successor of the Company shall be
deemed substituted for the Company under the terms of this Agreement for all
purposes. For this purpose, "successor" means any person, firm, corporation or
other business entity which at any time, whether by purchase, merger or
otherwise, directly or indirectly acquires all or substantially all of the
assets or business of the Company.
10. NOTICES. All notices, requests, demands and other communications
provided hereunder shall be in writing and shall be deemed given (i) on the date
of delivery if delivered personally, (ii) one (1) day after being sent by a well
established commercial overnight service, or (iii) four (4) days after being
mailed by registered or certified mail, return receipt requested, prepaid and
addressed to the parties or their successors at the following addresses, or at
such other addresses as the parties may later designate in writing:
If to the Company:
RIBOZYME PHARMACEUTICALS, INC.
2950 Wilderness Place
Boulder, Colorado 80301
Attn: Chairman of the Board
If to you:
at the last residential address known by the Company.
11. SEVERABILITY. In the event that any provision hereof becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision.
12. INTEGRATION. Upon the Effective Time, this Agreement, together with the
Non-Disclosure and Invention Assignment Agreement represents the entire
agreement and understanding between the parties as to the subject matter herein
and supersedes all prior or contemporaneous agreements whether written or oral,
including without limitation the Change of Control Agreement, dated as of April
30, 2001, between you and the Company and the Current Agreement. No waiver,
alteration, or modification of any of the provisions of this Agreement shall be
binding unless in writing and signed by duly authorized representatives of the
parties hereto.
13. GOVERNING LAW. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Colorado, without reference to
principles of conflict of laws.
14. WAIVER OF CHANGE OF CONTROL. You agree to waive the occurrence of a
Change of Control under the Current Agreement, but only with respect to the
Financing.
15. EFFECTIVE TIME. This Agreement shall become effective at the Effective
Time.
Please sign this Agreement and return one signed original copy to me,
acknowledging your agreement with and acceptance of these terms of employment.
Sincerely,
RIBOZYME PHARMACEUTICALS, INC.
By:________________________________
Name:
Title:
Agreed and accepted:
___________________________
Nassim Usman
Dated: February ____, 2003
Acknowledged and agreed:
OXFORD BIOSCIENCE PARTNERS IV L.P.
By:_________________________
Name:
Title:
THE SPROUT GROUP
By:_________________________
Name:
Title:
VENROCK ASSOCIATES
By:_________________________
Name:
Title:
Appendix 1
DEFINITIONS
CAUSE. "Cause" is defined as (i) conviction of a felony crime involving
moral turpitude, (ii) an intentional action or intentional failure to act which
was performed in bad faith and to the material detriment of the Company, (iii)
continued intentional refusal or intentional failure to act in accordance with
any lawful and proper direction or order of the Board, (iv) willful and habitual
neglect of the duties of employment, or (v) breach of the Non-Disclosure
Agreement, contemplated hereunder; provided, however, that with respect to the
events of "cause" described under clauses (ii) through (v) above, the Company
shall have first provided to you written notice describing the nature of the
event and, thereafter, provided a reasonable opportunity to cure such event,
which reasonable opportunity shall in no event be less than thirty (30) days
following receipt of such notice.
CHANGE OF CONTROL. "Change of Control" of the Company is defined as: (i)
any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended) becomes the "beneficial owner" (as defined in
Rule 13d-3 under said Act), directly or indirectly, of securities of the Company
representing fifty percent (50%) or more of the total voting power represented
by the Company's then outstanding voting securities; or (ii) the consummation of
a merger or consolidation of the Company with any other corporation that has
been approved by the stockholders of the Company, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or the stockholders
of the Company approve a plan of complete liquidation of the Company; or (iii)
the consummation of the sale or disposition by the Company of all or
substantially all the Company's assets; or (iv) when the individuals who on the
date hereof constitute the Board and any new director (other than a director
designated by a person or entity who has entered into an agreement to effect a
transaction described in clause (i), (ii) or (iii) above), whose nomination
and/or election to the Board was approved by a vote of at least a majority of
the directors still in office who either were directors on the date hereof or
whose election or nomination for election was previously approved, cease for any
reason to constitute a majority of the Board. For the avoidance of doubt, the
Financing in no event shall be deemed a Change of Control for the purposes of
this Agreement.
GOOD REASON. "Good Reason" is defined as your voluntary resignation from
your employment with the Company upon the occurrence of any of the following
without your express written consent: (i) the assignment to you of any duties or
responsibilities inconsistent with the scope of the duties or responsibilities
associated with your titles or positions or any diminution to or adverse change
of your titles, positions, status or circumstances of employment; (ii) a
reduction by the Company in your Base Salary or bonus target percentage or,
absent a good business reason, of the facilities, benefits and perquisites
available to you immediately prior to such reduction; (iii) the taking of any
action by the Company which would adversely affect your participation in, or
reduce your benefits under, the Company's benefit plans (including equity
benefits) as of the date of execution hereof, except to the extent that the
benefits of all other employees of the Company are similarly reduced; provided,
that regardless of whether the Company may similarly reduce the benefits of
other employees, it shall constitute Good Reason in the event the Company takes
any action which would adversely affect your participation in, or adversely
affect or reduce in any material aspect your benefits under, the Company's
medical, dental, short-term disability and/or long-term disability benefit plans
or arrangements; (iv) a relocation of your principal office to a location more
than thirty (30) miles from Boulder, Colorado, except for reasonable periods of
required travel on Company business; (v) any breach by the Company of any
material provision of this Agreement; or (vi) any failure by the Company to
obtain the assumption of this Agreement in writing by any successor or assign of
the Company.
ANNEX B
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
RIBOZYME PHARMACEUTICALS, INC.
Ribozyme Pharmaceuticals, Inc., a corporation organized and existing under
the laws of the State of Delaware (the "Corporation"), hereby certifies as
follows:
1. The name of the Corporation is Ribozyme Pharmaceuticals, Inc. The date
of filing of its original Certificate of Incorporation with the
Secretary of State of the State of Delaware was January 27, 1992.
2. The Corporation amended its Certificate of Incorporation by filing an
Amended and Restated Certificate of Incorporation with the Secretary
of State of the State of Delaware on April 17, 1996.
3. This Amended and Restated Certificate of Incorporation restates,
integrates, and further amends the provisions of the Amended and
Restated Certificate of Incorporation of the Corporation.
4. This Amended and Restated Certificate of Incorporation was duly
adopted in accordance with Sections 242 and 245 of the Delaware
General Corporation Law.
5. The text of the Amended and Restated Certificate of Incorporation is
as follows:
I.
NAME OF CORPORATION. The name of this corporation is [new name will be
substituted].
II.
ADDRESS OF CORPORATION AND AGENT. The address of the registered office of
the Corporation in the State of Delaware is Corporation Trust Center, 1209
Orange Street, City of Wilmington, County of New Castle, and the name of the
registered agent of the Corporation in the State of Delaware at such address is
The Corporation Trust Company.
III.
PURPOSE. The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware.
IV.
A. AUTHORIZED SHARES. This corporation is authorized to issue two classes
of stock to be designated, respectively, "Common Stock" and "Preferred Stock."
The total number of shares which the Corporation is authorized to issue is
[____] million [(__,000,000)] shares. [____] million [(__,000,000)] shares shall
be Common Stock, each having a par value of $0.01. [Five] million (5,000,000)
shares shall be Preferred Stock, each having a par value of $0.01.
The Preferred Stock may be issued from time to time in one or more series.
The Board of Directors is hereby authorized, by filing a certificate (a
"Preferred Stock Designation") pursuant to the Delaware General Corporation Law,
to fix or alter from time to time the designation, powers, preferences and
rights of the shares of each such series and the qualifications, limitations or
restrictions of any wholly unissued series of Preferred Stock, and to establish
from time to time the number of shares constituting any such series or any of
them; and to increase or decrease the number of shares of any series subsequent
to the issuance of shares of that series, but not below the number of shares of
such series then outstanding. In case the number of shares of any series shall
be decreased in accordance with the foregoing sentence, the shares constituting
such decrease shall resume the status that they had prior to the adoption of the
resolution originally fixing the number of shares of such series.
B. SERIES A CONVERTIBLE EXCHANGEABLE PREFERRED STOCK. All cross-references
in each subparagraph of this Section B of Article IV refer to other
subparagraphs in this Section B of Article IV unless otherwise indicated.
(1) SERIES A PREFERRED SHARES DESIGNATION. 25,000 shares of Preferred Stock
shall be designated and known as the "Series A Preferred Stock." Such number of
shares may be increased or decreased by resolution of the Board of Directors of
the Corporation after obtaining the consent of a majority in interest of the
holder(s) of the then-outstanding shares of Series A Preferred Stock; PROVIDED,
that no decrease shall reduce the number of shares of Series A Preferred Stock
to a number less than the number of shares then outstanding plus the number of
such shares issuable upon exercise of outstanding rights, options or warrants or
upon conversion of outstanding securities issued by the Corporation.
(2) DIVIDEND PROVISIONS. Each share of Series A Preferred Stock, for a
period of six years from the date of first issuance of the Series A Preferred
Stock, shall be entitled to receive a mandatory dividend equal to 6.0% per year
of the Original Issue Price (as defined below) thereof. Such dividend shall (1)
shall compound on a semi-annual basis, the first compounding to commence six
months from the date hereof, and (2) be payable semi-annually on each succeeding
six and 12 month anniversary of the first issuance, solely by the issuance of
additional shares of Series A Preferred Stock, at a price per share equal to the
Original Issue Price thereof, and not in cash. Fractional shares of Series A
Preferred Stock shall be issuable for purposes hereunder.
(3) SENIORITY; LIQUIDATION PREFERENCE.
a) The Series A Preferred Stock, as to its liquidation preference,
shall rank senior to or pari passu with any future class or
series of Preferred Stock issued by the Company; pari passu with
the Series B Convertible Preferred Stock, par value $0.01 per
share (the "Series B Preferred Stock"), and senior to the
Company's Common Stock.
b) In the event of any liquidation, dissolution or winding-up of the
affairs of the Corporation, whether voluntary or involuntary,
(collectively, a "Liquidation"), before any payment of cash or
distribution of other property shall be made to the holders of
the Common Stock or any other class or series of stock
subordinate in liquidation preference to the Series A Preferred
Stock, the holders of the Series A Preferred Stock and the Series
B Preferred Stock, on a pro rata basis based on their aggregate
liquidation preferences then outstanding, shall be entitled to
receive out of the assets of the Corporation legally available
for distribution to its shareholders, the Original Issue Price
per share (as appropriately adjusted for any combinations or
divisions or similar recapitalizations affecting the Series A
Preferred Stock after issuance) and accrued and unpaid dividends
thereon (the "Series A Liquidation Preference"). As used herein,
the "Original Issue Price" per share is $1,000.
c) If, upon any Liquidation, the assets of the Corporation available
for distribution to its shareholders shall be insufficient to pay
the holders of the Series A Preferred Stock and the Series B
Preferred Stock the full amounts to which they shall be entitled,
the holders of the Series A Preferred Stock and the Series B
Preferred Stock shall share ratably (based on their respective
outstanding aggregate liquidation preferences) in any
distribution of assets in proportion to the respective amounts
which would be payable to them in respect of the shares held by
them if all amounts payable to them in respect of such were paid
in full pursuant to Section 3(b).
d) After the distributions described in Section 3(c) above have been
paid, subject to the rights of other series of preferred stock
that exist or may from time to time come into existence, the
remaining assets of the Corporation available for distribution to
shareholders shall be distributed among the holders of Common
Stock pro rata based on the number of shares of Common Stock held
by each.
(4) CONVERSION. The holders of the Series A Preferred Stock shall have
conversion rights the "Series A Conversion Right"), through and including date
that is six years after the first issuance of the Series A Preferred Stock (the
"Conversion Termination Date"):
a) Right to Convert.
(1) Each share of Series A Preferred Stock shall be convertible,
at the option of the holder thereof, at any time after
October 7, 2002, at the office of the Corporation or any
transfer agent for such stock, into such number of fully
paid and non- assessable shares of Common Stock as is
determined by dividing (x) the sum of the Original Issue
Price of such share of Series A Preferred Stock and all
accrued and unpaid dividends thereon by (y) the Series A
Conversion Price (as defined below). The "Series A
Conversion Price" shall be (w) $12.00; PROVIDED, that such
conversion occurs on or prior to the date that is three
years after the date of issuance, (x) $13.20; PROVIDED, that
such conversion occurs after the date that is three years
after the date of issuance but on or prior to the date that
is four years after the date of issuance, (y) $14.40;
PROVIDED, that such conversion occurs after the date that is
fours years after the date of issuance by on or prior to the
date that is five years after the date of issuance and (z)
$15.00; PROVIDED, that such conversion occurs after the date
that is five years after the date of issuance (and the
Series A Conversion Price shall be subject to adjustment as
set forth below in this Section 4(a)). Notwithstanding the
above, the holder(s) of the Series A Preferred Stock shall
have the right, at the option of such holder(s), at any time
within the two-year period after the issuance thereof, to
cause the Company automatically to convert the Series A
Preferred Stock into shares of Common Stock at the Series A
Conversion Price then in effect, upon the occurrence of any
of the following: (i) a merger, consolidation or similar
transaction involving the Corporation or (ii) the
transactions involving the Corporation in a share-for-share
merger or similar transaction.
(2) Before any holder of Series A Preferred Stock shall be
entitled to convert such shares into shares of Common Stock,
such holder shall surrender the certificate or certificates
therefor, duly endorsed, at the office of the Corporation or
of any transfer agent for the Series A Preferred Stock, and
shall give written notice to the Corporation at its
principal corporate office, of the election to convert the
same and shall state therein the name or names in which the
certificate or certificates for shares of Common Stock are
to be issued. The Corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder
of Series A Preferred Stock, or to the nominee or nominees
of such holder, a certificate or certificates for the number
of shares of Common Stock to which such holder shall be
entitled as set forth above. Such conversion shall be deemed
to have been made immediately prior to the close of business
on the date of such surrender of the shares of Series A
Preferred Stock to be converted, and the person or persons
entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock as
of such date.
(3) In the event the Corporation should at any time fix a record
date for the effectuation of a split or subdivision of the
outstanding shares of Common Stock or the determination of
holders of Common Stock entitled to receive a dividend or
other distribution payable in additional shares of Common
Stock or other securities or rights convertible into, or
entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter
referred to as "Common Stock Equivalents") without payment
of any consideration by such holder for the additional
shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable
upon conversion or exercise thereof) or with payment that is
less than the Series A Conversion Price then in effect,
then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is
fixed), the Series A Conversion Price of the Series A
Preferred Stock shall be appropriately decreased so that the
number of shares of Common Stock issuable on conversion of
each share of such series shall be increased in proportion
to such increase of the aggregate of (a) shares of Common
Stock outstanding and (b) those issuable with respect to
such Common Stock Equivalents, with the number of shares
issuable with respect to Common Stock Equivalents determined
from time to time as provided in Section 4(a)(5) below.
(4) If the number of shares of Common Stock outstanding at any
time is decreased by a combination of the outstanding shares
of Common Stock, then, following the record date of such
combination, the Series A Conversion Price for the Series A
Preferred Stock shall be appropriately increased so that the
number of shares of Common Stock issuable on conversion of
each share of such series shall be decreased in proportion
to such decrease in outstanding shares.
(5) The following provisions shall apply for purposes of this
Section 4(a):
(a) The aggregate maximum number of shares of Common Stock deliverable
upon conversion or exercise of Common Stock Equivalents (assuming the
satisfaction of any conditions to convertibility or exercisability,
including, without limitation, the passage of time, but without taking into
account potential antidilution adjustments) shall be deemed to have been
issued at the time such Common Stock Equivalents were issued.
(b) In the event of any change in the number of shares of Common Stock
deliverable or in the consideration payable to the Corporation upon
conversion or exercise of such Common Stock Equivalents including, but not
limited to, a change resulting from the antidilution provisions thereof,
the Series A Conversion Price of the Series A Preferred Stock, to the
extent in any way affected by or computed using such Common Stock
Equivalents, shall be recomputed to reflect such change, but no further
adjustment shall be made for the actual issuance of Common Stock or any
payment of such consideration upon the exercise of any such options or
rights or the conversion or exchange of such securities.
(c) Upon the termination or expiration of the convertibility or
exercisability of any such Common Stock Equivalents, the Series A
Conversion Price of the Series A Preferred Stock, to the extent in any way
affected by or computed using such Common Stock Equivalents, shall be
recomputed to reflect the issuance of only the number of shares of Common
Stock (and Common Stock Equivalents which remain convertible or
exercisable) actually issued upon the conversion or exercise of such Common
Stock Equivalents.
(5) EXCHANGE RIGHT. Provided that (a) all of the shares of Series A
Preferred Stock initially issued and sold by the Corporation to Elan
International Services, Ltd., a Bermuda exempted limited liability company
("EIS"), have not been converted, as provided in Section 4 above, and (b) the
Exchange Termination Date (as defined below) shall not have occurred, the
holders of the Series A Preferred Stock (acting by act of the majority holders
thereof) shall have the right to exchange all of their shares of Series A
Preferred Stock (the "Exchange Right") of the Corporation for initially 3,612
shares of non-voting convertible preferred shares (the "Preferred Shares") (as
adjusted for any combinations or divisions or similar recapitalizations) of
Medizyme Pharmaceutical Ltd., a Bermuda exempted limited liability company
("Newco"), held by the Corporation, so that, in any event, after giving effect
to the exercise of the Exchange Right, EIS and the Corporation will each hold
50% of the total outstanding share capital of Newco, on a fully diluted basis,
assuming that neither EIS nor the Corporation has sold any shares of Newco. Upon
exercise of the Exchange Right, the Preferred Shares held by the Corporation
shall be transferred legally and beneficially to EIS.
The rights of the holders to exercise the Exchange Right shall commence at
any time after October 7, 2002 and shall terminate and be of no further force
and effect on the date that is the later of (i) seven months thereafter and (ii)
the completion of Newco's development period, as agreed in the business plan of
Newco and as set forth in the Subscription, Joint Development and Operating
Agreement dated as of January 7th, 2000, among Elan Pharmaceuticals
Technologies, a division of Elan Corporation, plc, an Irish public limited
company, EIS, Elan Pharma International Limited, an Irish corporation ("EPIL"),
Newco and the Corporation (the "Exchange Termination Date").
Upon exercise of the Exchange Right, the shares of Series A Preferred Stock
originally purchased from the Corporation, but not including any of the accrued
and unpaid dividends thereon (all of which shall remain outstanding), shall be
canceled and shall no longer be entitled to any rights in the Corporation. If
any shares of the Series A Preferred Stock (other than shares in respect of
accrued dividends) are converted pursuant to Section 4(a), to shares of Common
Stock, the Exchange Right with respect to the shares of Series A Preferred Stock
originally purchased from the Corporation, but not including any of the accrued
and unpaid dividends thereon, shall be canceled and shall no longer be entitled
to any rights in the Corporation. In order to exercise the Exchange Right, the
holders shall provide written notice thereof to the Corporation, setting forth
(a) the fact that such holders intend to exercise the Exchange Right, and (b)
the proposed date for such exercise (the "Exercise Date"), which shall be
between 10 and 30 days after the date of such notice. On the Exercise Date, (y)
the holders shall tender their shares of Series A Preferred Stock to the
Corporation for cancellation, and (z) the Corporation shall cause to be
delivered to EIS, acting on behalf of such holders, such shares of Newco. The
holders and the Corporation shall take all other necessary or appropriate
actions in connection with or to effect such closing. Section 5(c) of the
Securities Purchase Agreement, dated as of January 7th, 2000, between EIS and
the Corporation contains certain additional provisions relating to the Exchange
Right.
(6) OTHER DISTRIBUTIONS. On or prior to the Conversion Termination Date, in
the event the Corporation shall declare a distribution payable in securities of
other entities, evidences of indebtedness issued by the Corporation or other
entities, assets (excluding cash dividends) or options or rights not referred to
in Section 4, then, in each such case for the purpose of this Section 6, the
holders of the Series A Preferred Stock shall be entitled to a proportionate
share of any such distribution as though they were the holders of the number of
shares of Common Stock of the Corporation into which their shares of Series A
Preferred Stock would be convertible as of the record date fixed for the
determination of the holders of Common Stock of the Corporation entitled to
receive such distribution.
(7) RECAPITALIZATIONS. On or prior to the Conversion Termination Date, if
at any time or from time to time there shall be a recapitalization of the Common
Stock (other than a subdivision, combination or merger or sale of assets
provided for in Section 3 or Section 4 hereof) provision shall be made so that
the holders of the Series A Preferred Stock shall thereafter be entitled to
receive upon conversion of the Series A Preferred Stock the number of shares of
stock or other securities or property of the Corporation or otherwise, to which
a holder of Common Stock deliverable upon conversion would have been entitled on
such recapitalization. In any such case, appropriate adjustment shall be made in
the application of the provisions of Section 4 with respect to the rights of the
holders of the Series A Preferred Stock after the recapitalization to the end
that the provisions of Section 4 (including adjustment of the Series A
Conversion Price then in effect and the number of shares purchasable upon
conversion of the Series A Preferred Stock) shall be applicable after that event
as nearly equivalent as may be practicable.
(8) NO IMPAIRMENT. The Corporation will not, by amendment of Certificate of
Incorporation or through any reorganization, recapitalization, transfer of
assets, consolidation, merger, dissolution, issuance or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms to be observed or performed hereunder by the Corporation,
but will at all times in good faith assist in the carrying out of all the
provisions hereof and in the taking of all such action as may be necessary or
appropriate in order to protect the Series A Conversion Right and Exchange Right
of the holders of the Series A Preferred Stock against impairment.
(9) NO FRACTIONAL SHARES AND CERTIFICATE AS TO ADJUSTMENTS.
a) No fractional shares shall be issued upon the conversion of any
share or shares of the Series A Preferred Stock, and the number
of shares of Common Stock to be issued shall be rounded to the
nearest whole share. Whether or not fractional shares are
issuable upon such conversion shall be determined on the basis of
the aggregate number of shares of Series A Preferred Stock each
holder is at the time converting into Common Stock and the
aggregate number of shares of Common Stock issuable to each such
holder upon such conversion.
b) Upon the occurrence of each adjustment or readjustment of the
Series A Conversion Price pursuant to Section 4, the Corporation,
at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and
furnish to each holder of shares of Series A Preferred Stock a
certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written
request at any time of any holder of Series A Preferred Stock,
furnish or cause to be furnished to such holder a like
certificate setting forth (i) such adjustment and readjustment,
(ii) the Series A Conversion Price at the time in effect, and
(iii) the number of shares of Common Stock and the amount, if
any, of other property which at the time would be received upon
the conversion of a share of Series A Preferred Stock.
(10) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Corporation shall
at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Series A Preferred Stock, such number of its shares of Common
Stock that shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series A Preferred Stock; and if at any time the
number of authorized but unissued shares of Common Stock not otherwise reserved
for issuance shall not be sufficient to effect the conversion of all then
outstanding shares of the Series A Preferred Stock, in addition to such other
remedies as shall be available to the holders of such Series A Preferred Stock,
the Corporation will take such corporate action that may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purposes,
including without limitation, engaging in best efforts to obtain the requisite
shareholder approval of any necessary amendment to its Certificate of
Incorporation.
(11) NOTICES. Any notice required by the provisions hereof to be given to
the holders of shares of Series A Preferred Stock shall be deemed given on the
date of service if served personally on the party to whom notice is to be given,
or on the date of transmittal of services by facsimile transmission to the party
to whom notice is to be given, and addressed to each holder of record at his
address appearing on the books of the Corporation.
(12) VOTING RIGHTS. Subject to Section 13 below, holders of Series A
Preferred Stock shall not be entitled to vote, including with respect to the
election of directors of the Corporation.
(13) PROTECTIVE PROVISIONS. Subject to the rights of any series of
preferred stock that exist or may from time to time come into existence, so long
as any shares of Series A Preferred Stock are outstanding, the Corporation shall
not without first obtaining the approval (by vote or written consent, as
provided by law) of the holders of at least a majority of the then-outstanding
shares of Series A Preferred Stock, voting separately as a series:
a) amend its Certificate of Incorporation so as to affect adversely
the shares of Series A Preferred Stock or any holder thereof
(including by creating any additional classes or series of
preferred stock with a liquidation preference or other rights
senior to the Series A Preferred Stock); or
b) change the rights of the holders of the holders of the Series A
Preferred Stock in any other respect.
(14) STATUS OF CONVERTED STOCK. In the event any shares of Series A
Preferred Stock shall be converted pursuant to Section 4 or exchanged pursuant
to Section 5 hereof, the shares so converted or exchanged shall be canceled and
shall not be reissuable by the Corporation. The Certificate of Incorporation of
the Corporation shall be appropriately amended to effect the corresponding
reduction in the Corporation's authorized capital stock."
(15) TERM. In the event that the Series A Preferred Stock shall not have
been converted into shares of Common Stock or exchanged, as provided in Section
5 above, on or prior to the date that is the later of (A) six years after the
date hereof and (B) the Exchange Termination Date, the Series A Preferred Stock
shall either, at the option of the Corporation, (i) remain outstanding or (ii)
be repaid in amount equal to the Series A Liquidation Preference plus accrued
dividends thereon, in cash or by the issuance of shares at the Corporation's
Common Stock based on the then-current Conversion Price.
C. SERIES B CONVERTIBLE PREFERRED STOCK. All cross-references in each
subparagraph of this Section C of Article IV refer to other subparagraphs in
this Section C of Article IV unless otherwise indicated.
(1) DESIGNATION. 25,000 shares of Preferred Stock shall be designated and
known as the "Series B Preferred Stock." Such number of shares may be increased
or decreased by resolution of the Board of Directors of the Corporation after
obtaining the consent of a majority in interest of the holder(s) of the
then-outstanding shares of Series B Preferred Stock; PROVIDED, that no decrease
shall reduce the number of shares of Series B Preferred Stock to a number less
than the number of shares then outstanding plus the number of such shares
issuable upon exercise of outstanding rights, options or warrants or upon
conversion of outstanding securities issued by the Corporation.
(2) DIVIDEND PROVISIONS. Each share of Series B Preferred Stock, for a
period of six years from the date of first issuance of the Series B Preferred
Stock, shall be entitled to receive a mandatory dividend equal to 12.0% per year
of the Original Issue Price (as defined below) thereof. Such dividend shall (1)
shall compound on a semi- annual basis, the first compounding to commence six
months from the date hereof, and (2) be payable semi-annually on each succeeding
six and 12-month anniversary of the first issuance, solely by the issuance of
additional shares of Series B Preferred Stock, at a price per share equal to the
Original Issue Price thereof, and not in cash. Fractional shares of Series B
Preferred Stock shall be issuable for purposes hereunder.
(3) SENIORITY; LIQUIDATION PREFERENCE
a) The Series B Preferred Stock, as to its liquidation preference,
shall rank senior to or pari passu with any existing or future
class or series of Preferred Stock issued by the Company; pari
passu with the Series A Preferred Stock; and senior to the
Company's Common Stock.
b) In the event of any Liquidation (as defined in Section B of
Article IV hereof), before any payment of cash or distribution of
other property shall be made to the holders of the Common Stock
or any other class or series of stock subordinate in liquidation
preference to the Series B Preferred Stock, the holders of the
Series A Preferred Stock and Series B Preferred Stock, on a pro
rata basis based on their aggregate liquidation preferences then
outstanding shall be entitled to receive out of the assets of the
Corporation legally available for distribution to its
shareholders, the Original Issue Price per share (as
appropriately adjusted for any combinations or divisions or
similar recapitalizations affecting the Series B Preferred Stock
after issuance) and accrued and unpaid dividends thereon (the
"Series B Liquidation Preference"). As used herein, the "Original
Issue Price" per share is $1,000.
c) If, upon any Liquidation, the assets of the Corporation available
for distribution to its shareholders shall be insufficient to pay
the holders of the Series A Preferred Stock and Series B
Preferred Stock the full amounts to which they shall be entitled,
the holders of the Series A Preferred Stock and Series B
Preferred Stock shall share ratably (based on their respective
outstanding aggregate liquidation preferences) in any
distribution of assets in proportion to the respective amounts
which would be payable to them in respect of the shares held by
them if all amounts payable to them in respect of such were paid
in full pursuant to Section 3(b).
d) After the distributions described in Section 3(c) above have been
paid, subject to the rights of other series of preferred stock
that exist or may from time to time come into existence, the
remaining assets of the Corporation available for distribution to
shareholders shall be distributed among the holders of Common
Stock pro rata based on the number of shares of Common Stock held
by each.
(4) CONVERSION. The holders of the Series B Preferred Stock shall have
conversion rights (the "Series B Conversion Right"), through and including the
date that is six years after the first issuance of any shares of Series B
Preferred Stock (the "Conversion Termination Date").
a) Right to Convert.
(1) Each share of Series B Preferred Stock shall be convertible,
at the option of the holder thereof, at any time, at the office
of the Corporation or any transfer agent for such stock, into
such number of fully paid and non-assessable shares of Common
Stock as is determined by dividing (x) the sum of the Original
Issue Price of such share of Series B Preferred Stock and all
accrued and unpaid dividends thereon by (y) the Series B
Conversion Price (as defined below). The "Series B Conversion
Price" shall for each issue of Series B Preferred Stock be a
price equal to 150% of the average closing price of the Common
Stock for the 60 trading days prior to the date of written notice
of such purchase request of the Company for the purchase of such
issue of Series B Preferred Stock.
(2) Before any holder of Series B Preferred Stock shall be
entitled to convert such shares into shares of Common Stock, such
holder shall surrender the certificate or certificates therefor,
duly endorsed, at the office of the Corporation or of any
transfer agent for the Series B Preferred Stock, and shall give
written notice to the Corporation at its principal corporate
office, of the election to convert the same and shall state
therein the name or names in which the certificate or
certificates for shares of Common Stock are to be issued. The
Corporation shall, as soon as practicable thereafter, issue and
deliver at such office to such holder of Series B Preferred
Stock, or to the nominee or nominees of such holder, a
certificate or certificates for the number of shares of Common
Stock to which such holder shall be entitled as set forth above.
Such conversion shall be deemed to have been made immediately
prior to the close of business on the date of such surrender of
the shares of Series B Preferred Stock to be converted, and the
person or persons entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes
as the record holder or holders of such shares of Common Stock as
of such date.
(3) In the event the Corporation should at any time fix a record
date for the effectuation of a split or subdivision of the
outstanding shares of Common Stock or the determination of
holders of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock or
Common Stock Equivalents without payment of any consideration by
such holder for the additional shares of Common Stock or the
Common Stock Equivalents (including the additional shares of
Common Stock issuable upon conversion or exercise thereof) or
with payment that is less than the Series B Conversion Price then
in effect, then, as of such record date (or the date of such
dividend distribution, split or subdivision if no record date is
fixed), the Series B Conversion Price of the Series B Preferred
Stock shall be appropriately decreased so that the number of
shares of Common Stock issuable on conversion of each share of
such series shall be increased in proportion to such increase of
the aggregate of (a) shares of Common Stock outstanding and (b)
those issuable with respect to such Common Stock Equivalents,
with the number of shares issuable with respect to Common Stock
Equivalents determined from time to time as provided in Section
4(a)(5) below.
(4) If the number of shares of Common Stock outstanding at any
time is decreased by a combination of the outstanding shares of
Common Stock, then, following the record date of such
combination, the Series B Conversion Price for the Series B
Preferred Stock shall be appropriately increased so that the
number of shares of Common Stock issuable on conversion of each
share of such series shall be decreased in proportion to such
decrease in outstanding shares.
(5) The following provisions shall apply for purposes of this
Section 4(a):
(a) The aggregate maximum number of shares of Common Stock
deliverable upon conversion or exercise of Common Stock
Equivalents (assuming the satisfaction of any conditions to
convertibility or exercisability, including, without
limitation, the passage of time, but without taking into
account potential antidilution adjustments) shall be deemed
to have been issued at the time such Common Stock
Equivalents were issued.
(b) In the event of any change in the number of shares of
Common Stock deliverable or in the consideration payable to
the Corporation upon conversion or exercise of such Common
Stock Equivalents including, but not limited to, a change
resulting from the antidilution provisions thereof, the
Series B Conversion Price of the Series B Preferred Stock,
to the extent in any way affected by or computed using such
Common Stock Equivalents, shall be recomputed to reflect
such change, but no further adjustment shall be made for the
actual issuance of Common Stock or any payment of such
consideration upon the exercise of any such options or
rights or the conversion or exchange of such securities.
(c) Upon the termination or expiration of the convertibility
or exercisability of any such Common Stock Equivalents, the
Series B Conversion Price of the Series B Preferred Stock,
to the extent in any way affected by or computed using such
Common Stock Equivalents, shall be recomputed to reflect the
issuance of only the number of shares of Common Stock (and
Common Stock Equivalents which remain convertible or
exercisable) actually issued upon the conversion or exercise
of such Common Stock Equivalents.
(5) EXCHANGE RIGHT. In the event that EIS (as defined in Section B of
Article IV hereof) shall have exercised the Exchange Right (as defined in
Section B of Article IV hereof), EIS shall, at its option, within 30 days
thereof, (i) cause to be paid to the Corporation, an amount equal to 30.1% of
the aggregate amount of the Development Funding (as such term is defined in the
Funding Agreement, dated as of January 7th, 2000, among EIS, Newco, EPIL, the
Corporation and Elan (as such terms are defined in Section B of Article IV
hereof) to date provided by each of the parties Newco), in accordance with the
terms of the Funding Agreement, including any accrued and unpaid interest and/or
dividends paid to EIS thereon, from and after the date hereof and until the date
of such exercise, or (ii) surrender for cancellation, including any accrued and
unpaid interest and/or dividends thereon paid to EIS, a portion of each issuance
of Series B Preferred Stock having an aggregate Original Issue Price equal to
30.1% of the total amount of Development Funding provided by each of the parties
to Newco, in accordance with the terms of the Funding Agreement in connection
with the issuance of such Series B Preferred Stock, from and after the date
hereof and until the date of the exercise of the Exchange Right, against the
outstanding Series B Preferred Stock, if any, and/or the convertible promissory
note dated as of January, 2000 by the Corporation in favor of EIS in the
original principal amount of $12.015 million or (iii) effect a combination of
(i) and (ii) above if applicable.
(6) OTHER DISTRIBUTIONS. On or prior to the Conversion Termination Date, in
the event the Corporation shall declare a distribution payable in securities of
other persons, evidences of indebtedness issued by the Corporation or other
persons, assets (excluding cash dividends) or options or rights not referred to
in Section 4, then, in each such case for the purpose of this Section 6, the
holders of the Series B Preferred Stock shall be entitled to a proportionate
share of any such distribution as though they were the holders of the number of
shares of Common Stock of the Corporation into which their shares of Series B
Preferred Stock would be convertible as of the record date fixed for the
determination of the holders of Common Stock of the Corporation entitled to
receive such distribution.
(7) RECAPITALIZATIONS. On or prior to the Conversion Termination Date, if
at any time or from time to time there shall be a recapitalization of the Common
Stock (other than a subdivision, combination or merger or sale of assets
provided for in Section 3 or Section 4 hereof) provision shall be made so that
the holders of the Series B Preferred Stock shall thereafter be entitled to
receive upon conversion of the Series B Preferred Stock the number of shares of
stock or other securities or property of the Corporation or otherwise, to which
a holder of Common Stock deliverable upon conversion would have been entitled on
such recapitalization. In any such case, appropriate adjustment shall be made in
the application of the provisions of Section 4 with respect to the rights of the
holders of the Series B Preferred Stock after the recapitalization to the end
that the provisions of Section 4 (including adjustment of the Series B
Conversion Price then in effect and the number of shares purchasable upon
conversion of the Series B Preferred Stock) shall be applicable after that event
as nearly equivalent as may be practicable.
(8) NO IMPAIRMENT. The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issuance or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Corporation, but will at all times in good faith assist in the carrying out of
all the provisions hereof and in the taking of all such action as may be
necessary or appropriate in order to protect the Series B Conversion Rights and
Exchange Right of the holders of the Series B Preferred Stock against
impairment.
(9) NO FRACTIONAL SHARES AND CERTIFICATE AS TO ADJUSTMENTS.
a) No fractional shares shall be issued upon the conversion of any
share or shares of the Series B Preferred Stock, and the number
of shares of Common Stock to be issued shall be rounded to the
nearest whole share. Whether or not fractional shares are
issuable upon such conversion shall be determined on the basis of
the aggregate number of shares of Series B Preferred Stock each
holder is at the time converting into Common Stock and the
aggregate number of shares of Common Stock issuable to each such
holder upon such conversion.
b) Upon the occurrence of each adjustment or readjustment of the
Series B Conversion Price pursuant to Section 4, the Corporation,
at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and
furnish to each holder of shares of Series B Preferred Stock a
certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written
request at any time of any holder of Series B Preferred Stock,
furnish or cause to be furnished to such holder a like
certificate setting forth (i) such adjustment and readjustment,
(ii) the Series B Conversion Price at the time in effect, and
(iii) the number of shares of Common Stock and the amount, if
any, of other property which at the time would be received upon
the conversion of a share of Series B Preferred Stock.
(10) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Corporation shall
at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Series B Preferred Stock, such number of its shares of Common
Stock that shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series B Preferred Stock; and if at any time the
number of authorized but unissued shares of Common Stock not otherwise reserved
for issuance shall not be sufficient to effect the conversion of all then
outstanding shares of the Series B Preferred Stock, in addition to such other
remedies as shall be available to the holders of such Series B Preferred Stock,
the Corporation will take such corporate action that may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purposes,
including without limitation, engaging in best efforts to obtain the requisite
shareholder approval of any necessary amendment to its Certificate of
Incorporation.
(11) NOTICES. Any notice required by the provisions hereof to be given to
the holders of shares of Series B Preferred Stock shall be deemed given on the
date of service if served personally on the party to whom notice is to be given,
or on the date of transmittal of services by facsimile transmission to the party
to whom notice is to be given, and addressed to each holder of record at his
address appearing on the books of the Corporation. (12) REPURCHASES OR
REDEMPTIONS OF THE SERIES B PREFERRED STOCK. (a) The Series B Preferred Stock
shall be redeemable, in whole or in part (in increments of at least $250,000),
at the option of the Corporation for cash at 100% of the Original Issue Price
plus accrued dividends (the "Redemption Price"), so long as all of the amounts
provided to be funded as set forth in the Securities Purchase Agreement, dated
as of January 7th, 2000, between EIS and the Corporation, have been funded or
the Corporation has waived its right to any additional funding. Any shares of
Series B Preferred Stock called for redemption shall no longer be entitled to
the Conversion Right.
(b) The Corporation shall notify the holders of the Series B Preferred
Stock in writing setting forth (a) the terms of the redemption of the Series B
Preferred Stock, and (b) the proposed date for such redemption (the "Redemption
Date"), which shall be between 10 and 30 days after the date of such notice. On
the Redemption Date, (x) the Corporation shall pay in cash an amount equal to
the Redemption Price to the holders of the Series B Preferred Stock by check or
wire transfer to an account designated by such holders, and (y) the holders
shall tender their shares of Series B Preferred Stock, subject to the
redemption, to the Corporation, for cancellation. The holders and the
Corporation shall take all other necessary or appropriate actions in connection
with or to effect such closing.
(13) VOTING RIGHTS. Subject to Section 14 below, holders of Series B
Preferred Stock shall not be entitled to vote, including with respect to the
election of directors of the Corporation.
(14) PROTECTIVE PROVISIONS. Subject to the rights of any series of
preferred stock that exist or may from time to time come into existence, so long
as any shares of Series B Preferred Stock are outstanding, the Corporation shall
not without first obtaining the approval (by vote or written consent, as
provided by law) of the holders of at least a majority of the then-outstanding
shares of Series B Preferred Stock, voting separately as a series:
a) amend its Certificate of Incorporation so as to affect adversely
the shares of Series B Preferred Stock or any holder thereof
(including by creating any additional classes or series of
preferred stock with a liquidation preference or other rights
senior to with the Series B Preferred Stock); or
b) change the rights of the holders of the holders of the Series B
Preferred Stock in any other respect.
(15) STATUS OF CONVERTED STOCK. In the event any shares of Series B
Preferred Stock shall be converted pursuant to Section 4, the shares so
converted or exchanged shall be canceled and shall not be reissuable by the
Corporation. The Certificate of Incorporation of the Corporation shall be
appropriately amended to effect the corresponding reduction in the Corporation's
authorized capital stock."
(16) TERM. In the event that the Series B Preferred Stock shall not have
been converted into shares of Common Stock or exchanged, as provided in Section
5 above, on or prior to the date that is the later of (A) six years after the
date hereof and (B) the Exchange Termination Date, the Series B Preferred Stock
shall either, at the option of the Corporation, (i) remain outstanding or (ii)
be repaid in amount equal to the Series B Liquidation Preference plus accrued
dividends thereon, in cash or by the issuance of shares at the Corporation's
Common Stock based on the then-current Conversion Price.
V.
A. REVERSE STOCK SPLIT
(1) Effective 12:01 a.m. on [__________, 2003] (the "Effective Time") each
one (1) share of Common Stock of the Corporation issued and outstanding
immediately prior to the Effective Time ("Old Common Stock") shall automatically
be combined, without any action on the part of the holder thereof, into [_____]
of one share of fully paid and nonassessable Common Stock of the Corporation
("New Common Stock"), subject to the treatment of fractional shares described
below.
(2) Following the Effective Time, each holder of Old Common Stock shall be
entitled to receive upon surrender of such holder's certificate(s) representing
Old Common Stock (whether one or more, "Old Certificates") for cancellation
pursuant to procedures adopted by the Corporation, a certificate(s) representing
the number of whole shares of New Common Stock (whether one or more, "New
Certificates") into which and for which the shares of Old Common Stock formerly
represented by such Old Certificates so surrendered are reclassified under the
terms hereof. From and after the Effective Time, Old Certificates shall
represent only the right to receive New Certificates and, where applicable, cash
in lieu of fractional shares, as provided below.
(3) No fractional shares of New Common Stock of the Corporation shall be
issued. No stockholder of the Corporation shall transfer any fractional shares
of Common Stock of the Corporation. The Corporation shall not recognize on its
stock record books any purported transfer of any fractional share of Common
Stock of the Corporation. A holder of Old Certificates at the Effective Time who
would otherwise be entitled to a fraction of a share of New Common Stock shall,
in lieu thereof, be entitled to receive a cash payment in an amount equal to the
fraction to which the stockholder would otherwise be entitled multiplied by the
per share closing sales price of the Common Stock on the day immediately prior
to the Effective Time, as reported on the Nasdaq National Market (or if such
price is not available, then such other price as determined by the board of
directors).
VI.
MANAGEMENT. For the management of the business and for the conduct of the
affairs of the Corporation, and in further definition, limitation and regulation
of the powers of the Corporation, of its directors and of its stockholders or
any class thereof, as the case may be, it is further provided that:
A. BOARD OF DIRECTORS
(1) The management of the business and the conduct of the affairs of the
Corporation shall be vested in its Board of Directors. The number of directors
which shall constitute the whole Board of Directors shall be designated in the
Amended and Restated Bylaws of the Corporation (the "Bylaws"). The directors
shall be divided into three classes with the term of office of the first class
(Class I) to expire at the annual meeting of stockholders held in 2004; the term
of office of the second class (Class II) to expire at the annual meeting of
stockholders held in 2005; the term of office of the third class (Class III) to
expire at the annual meeting of stockholders held in 2006; and thereafter for
each such term to expire at each third succeeding annual meeting of stockholders
after such election.
(2) Subject to the rights of the holders of any series of Preferred Stock
to elect additional directors under specified circumstances, directors shall be
elected at each annual meeting of stockholders for a term of one year. Each
director shall serve until his successor is duly elected and qualified or until
his death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
(3) Elections of directors need not be by written ballot unless the Bylaws
of the Corporation shall so provide.
(4) Subject to the rights of the holders of any series of Preferred Stock,
no director shall be removed without cause. Subject to any limitations imposed
by law, the Board of Directors or any individual director may be removed from
office at any time with cause by the affirmative vote of the holders of a
majority of the outstanding voting stock of the Corporation.
(5) Subject to the rights of the holders of any series of Preferred Stock,
any vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or other causes and any newly created directorships
resulting from any increase in the number of directors, shall, unless the Board
of Directors determines by resolution that any such vacancies or newly created
directorships shall be filled by the stockholders, except as otherwise provided
by law, be filled only by the affirmative vote of a majority of the directors
then in office, even though less than a quorum of the Board of Directors, and
not by the stockholders. Any director elected in accordance with the preceding
sentence shall hold office for the remainder of the full term of the director
for which the vacancy was created or occurred and until such director's
successor shall have been elected and qualified.
B. STOCKHOLDERS
(1) Subject to paragraph (6) of Article VI of the Bylaws, the Bylaws may be
altered or amended or new Bylaws adopted by the affirmative vote of at least
sixty-six and two-thirds percent (66-2/3 %) of the voting power of all of the
then outstanding voting stock of the Corporation. The Board of Directors shall
also have the power to adopt, amend, or repeal Bylaws.
(2) Any action required to be taken, or any action which may be taken, at
any annual or special meeting of stockholders of the Corporation, may be taken
without a meeting, without prior notice and without a vote, 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.
(3) Special meetings of the stockholders of the Corporation may be called,
for any purpose or purposes, by (i) the Chairman of the Board of Directors, (ii)
the Chief Executive Officer, or (iii) the Board of Directors pursuant to a
resolution, and shall be held at such place, on such date, and at such time as
the Board of Directors shall fix.
(4) Advance notice of stockholder nominations for the election of directors
and of business to be brought by stockholders before any meeting of the
stockholders of the Corporation shall be given in the manner provided in the
Bylaws of the Corporation.
VII.
A. LIMITATION OF LIABILITY. A director of the Corporation shall not be
personally liable to the Corporation or its stockholders for monetary damages
for any breach of fiduciary duty as a director, except for liability (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
Delaware General Corporation Law, or (iv) for any transaction from which the
director derived an improper personal benefit. If the Delaware General
Corporation Law is amended after approval by the stockholders of this Article to
authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director shall be eliminated or
limited to the fullest extent permitted by the Delaware General Corporation Law,
as so amended.
B. INDEMNIFICATION. The Corporation shall indemnify to the fullest extent
permitted by law any person who was or is made or is threatened to be made a
party to an action or proceeding, whether criminal, civil, administrative or
investigative, by reason of the fact that he or she or a person of whom he or
she is the legal representative 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.
C. AMENDMENTS. Any repeal or modification of this Article VII shall be
prospective and shall not affect the rights under this Article VII in effect at
the time of the alleged occurrence of any act or omission to act giving rise to
liability or indemnification.
VIII.
A. The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Amended and Restated Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, except as provided in
paragraph B of this Article VIII, and all rights conferred upon the stockholders
herein are granted subject to this reservation.
B. Notwithstanding any other provisions of this Amended and Restated
Certificate of Incorporation or any provision of law which might otherwise
permit a lesser vote or no vote, but in addition to any affirmative vote of the
holders of any particular class or series of the then outstanding voting stock
of the Corporation required by law, this Amended and Restated Certificate of
Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3 %) of the voting
power of all of the then outstanding voting stock of the Corporation, voting
together as a single class, shall be required to alter, amend or repeal
Articles.
IN WITNESS WHEREOF, this certificate has been signed this ___ day of
_______, 2003 by the undersigned who affirms that the statements made herein are
true and correct.
---------------------
Name:
Title:
ANNEX C
RIBOZYME PHARMACEUTICALS, INC.
2001 STOCK OPTION PLAN
(AS AMENDED AND RESTATED AS OF FEBRUARY 4, 2003)
SECTION 1. PURPOSE
This plan (the "Plan") amends and restates the plan known as the "RPI 2001
STOCK OPTION PLAN." The purpose of the Plan is to promote the interests of
Ribozyme Pharmaceuticals, Inc. (the "Company") and its Subsidiaries and the
Company's stockholders by (i) attracting and retaining key officers, employees,
and directors of, and consultants to, the Company and its Subsidiaries and any
future Affiliates; (ii) motivating such individuals by means of
performance-related incentives to achieve long-range performance goals, (iii)
enabling such individuals to participate in the long-term growth and financial
success of the Company, (iv) encouraging ownership of stock in the Company by
such individuals, and (v) linking their compensation to the long-term interests
of the Company and its stockholders. With respect to any Options granted under
the Plan that are intended to comply with the requirements of "performance-based
compensation" under Section 162(m) of the Code, the Plan shall be interpreted in
a manner consistent with such requirements.
SECTION 2 DEFINITIONS
As used in the Plan, the following terms shall have the meanings set forth
below:
(a) "AFFILIATE" shall mean (i) any entity that, directly or
indirectly, is controlled by the Company, (ii) any entity in which the
Company has a significant equity interest, (iii) an affiliate of the
Company, as defined in Rule 12b-2 promulgated under Section 12 of the
Exchange Act, and (iv) any entity in which the Company has at least twenty
percent (20%) of the combined voting power of the entity's outstanding
voting securities, in each case as designated by the Board as being a
participating employer in the Plan.
(b) "BOARD" shall mean the board of directors of the Company.
(c) "CHANGE IN CONTROL" shall mean, unless otherwise defined in the
applicable Option Agreement, any of the following events:
(i) An acquisition (other than directly from the Company) of any
voting securities of the Company (the "Voting Securities") by any
"Person" (as the term Person is used for purposes of Section 13 (d) or
14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) immediately after which such Person has "Beneficial
Ownership" (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of fifty percent (50%) or more of the combined voting
power of the then outstanding Voting Securities; provided, however,
that in determining whether a Change in Control has occurred, Voting
Securities which are acquired in a "Non-Control Acquisition" (as
hereinafter defined) shall not constitute an acquisition which would
cause a Change in Control. A "Non-Control Acquisition" shall mean an
acquisition by (i) an employee benefit plan (or a trust forming a part
thereof) maintained by (A) the Company or (B) any subsidiary or (ii)
the Company or any Subsidiary;
(ii) The individuals who, as of the date hereof, are members of
the Board (the "Incumbent Board"), cease for any reason to constitute
at least two-thirds of the Board; provided, however, that if the
election or nomination for election by the Company's stockholders of
any new director was approved by a vote of at least two-thirds of the
Incumbent Board, such new director shall, for purposes of this
Agreement, be considered as a member of the Incumbent Board; provided,
further, however, that no individual shall be considered a member of
the Incumbent Board if (1) such individual initially assumed office as
a result of either an actual or threatened "Election Contest" (as
described in Rule 14a-11 promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board (a "Proxy Contest") including
by reason of any agreement intended to avoid or settle any Election
Contest or Proxy Contest or (2) such individual was designated by a
Person who has entered into an agreement with the Company to effect a
transaction described in clause (i) or (iii) of this paragraph; or
(iii) Approval by stockholders of the Company of:
(A) A merger, consolidation or reorganization involving the
Company, unless,
(1) The stockholders of the Company immediately before such merger,
consolidation or reorganization, own, directly or indirectly, immediately
following such merger, consolidation or reorganization, at least seventy-five
percent (75%) of the combined voting power of the outstanding Voting Securities
of the corporation (the "Surviving Corporation") in substantially the same
proportion as their ownership of the Voting Securities immediately before such
merger, consolidation or reorganization;
(2) The individuals who were members of the Incumbent Board immediately prior to
the execution of the agreement providing for such merger, consolidation or
reorganization constitute at least two-thirds of the members of the board of
directors of the Surviving Corporation; and
(3) no Person (other than the Company, any Subsidiary, any employee benefit plan
(or any trust forming a part thereof) maintained by the Company, the Surviving
Corporation or any Subsidiary, or any Person who, immediately prior to such
merger, consolidation or reorganization, had Beneficial Ownership of fifty
percent (50%) or more of the then outstanding Voting Securities) has Beneficial
Ownership of fifty percent (50%) or more of the combined voting power of the
Surviving Corporation's then outstanding Voting Securities.
(B) A complete liquidation or dissolution of the Company; or
(C) An agreement for the sale or other disposition of all or
substantially all of the assets of the Company to any Person
(other than a transfer to a Subsidiary)
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because any Person (the "Subject Person") acquired Beneficial
Ownership of more than the permitted amount of the outstanding Voting Securities
as a result of the acquisition of Voting Securities by the Company which, by
reducing the number of Voting Securities outstanding, increased the proportional
number of shares Beneficially Owned by the Subject Person, provided that if a
Change in Control would occur (but for the operation of this sentence) as a
result of the acquisition of Voting Securities by the Company, and after such
share acquisition by the Company, the Subject Person becomes the Beneficial
Owner of any additional Voting Securities Beneficially Owned by the Subject
Person, then a Change in Control shall occur.
(d) "CODE" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(e) "COMMITTEE" shall mean a committee of the Board composed of not
less than two Non-Employee Directors, each of whom shall be a "Non-Employee
Director" for purposes of Exchange Act Section 16 and Rule 16b-3 thereunder
and an "outside director" for purposes of Section 162(m) and the
regulations promulgated under the Code.
(f) "CONSULTANT" shall mean any consultant to the Company or its
Subsidiaries or Affiliates.
(g) "DIRECTOR" shall mean a member of the Board.
(h) "DISABILITY" shall mean, unless otherwise defined in the
applicable Option Agreement, a disability that would qualify as a total and
permanent disability under the Company's then current long-term disability
plan.
(i) "EMPLOYEE" shall mean a current or prospective officer or employee
of the Company or of any Subsidiary or Affiliate.
(j) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(k) "FAIR MARKET VALUE" with respect to the Shares, shall mean, for
purposes of a grant of an Option as of any date, (i) the closing sales
price of the Shares on any exchange on which the Shares are traded, on such
date, or in the absence of reported sales on such date, the closing sales
price on the immediately preceding date on which sales were reported or
(ii) in the event there is no public market for the Shares on such date,
the fair market value as determined, in good faith, by the Committee in its
sole discretion, and for purposes of a sale of a Share as of any date, the
actual sales price on that date.
(l) "INCENTIVE STOCK OPTION" shall mean an option to purchase Shares
from the Company that is granted under Section 6 of the Plan and that is
intended to meet the requirements of Section 422 of the Code or any
successor provision thereto.
(m) "NON-QUALIFIED STOCK OPTION" shall mean an option to purchase
Shares from the Company that is granted under Section 6 of the Plan and is
not intended to be an Incentive Stock Option.
(n) "NON-EMPLOYEE DIRECTOR" shall mean a member of the Board who is
not an officer or employee of the Company or any Subsidiary or Affiliate.
(o) "OPTION" shall mean an Incentive Stock Option or a Non-Qualified
Stock Option, or any stock option granted under the 1996 Plan which is
outstanding on the effective date of the amendment and restatement of this
Plan as described in Section 12.1.
(p) "OPTION AGREEMENT" shall mean any written agreement, contract, or
other instrument or document evidencing any Option, which may, but need
not, be executed or acknowledged by a Participant.
(q) "OPTION PRICE" shall mean the purchase price payable to purchase
one Share upon the exercise of an Option.
(r) "OUTSIDE DIRECTOR" means, with respect to the grant of an Option,
a member of the Board then serving on the Committee.
(s) "PARTICIPANT" shall mean any Employee, Director, Consultant or
other person who receives an Option under the Plan.
(t) "PERSON" shall mean any individual, corporation, partnership,
limited liability company, associate, joint-stock company, trust,
unincorporated organization, government or political subdivision thereof or
other entity.
(u) "RETIREMENT" shall mean, unless otherwise defined in the
applicable Option Agreement, retirement of a Participant from the employ or
service of the Company or any of its Subsidiaries or Affiliates in
accordance with the terms of the applicable Company retirement plan or, if
a Participant is not covered by any such plan, retirement on or after such
Participant's 65th birthday.
(v) "SEC' shall mean the Securities and Exchange Commission or any
successor thereto.
(w) "SECTION 16" shall mean Section 16 of the Exchange Act and the
rules promulgated thereunder and any successor provision thereto as in
effect from time to time.
(x) "SECTION 162 (m)" shall mean Section 162 (m) of the Code and the
regulations promulgated thereunder and any successor or provision thereto
as in effect from time to time.
(y) "SHARES" shall mean shares of the Common Stock, $0.01 par value,
of the Company.
(z) "SUBSIDIARY" shall mean any Person (other than the Company) of
which a majority of its voting power or its equity securities or equity
interest is owned directly or indirectly by the Company. Notwithstanding
the preceding, for purposes of granting an Incentive Stock Option to an
Employee of a Subsidiary (and in connection with a termination of such
Employee's employment with the Company and all Subsidiaries), the term
"Subsidiary" shall only include a corporation 50% or more of whose stock
having general voting power is owned by the Company, or by another
Subsidiary (as defined in this sentence) of the Company.
SECTION 3. ADMINISTRATION
3.1 AUTHORITY OF COMMITTEE. The Plan shall be administered by the
Committee, which shall be appointed by and serve at the pleasure of the Board;
provided, however, with respect to Options to Outside Directors, all references
in the Plan to the Committee shall be deemed to be references to the Board.
Subject to the terms of the Plan and applicable law, and in addition to other
express powers and authorizations conferred on the Committee by the Plan, the
Committee shall have full power and authority in its discretion to: (i)
designate Participants; (ii) determine the type or types of Options to be
granted to a Participant; (iii) determine the number of Shares to be covered by,
or with respect to which payments, rights, or other matters are to be calculated
in connection with Options; (iv) determine the timing, terms, and conditions of
any Option; (v) accelerate the time at which all or any part of an Option may be
settled or exercised; (vi) determine whether, to what extent, and under what
circumstances Options may be settled or exercised in cash, Shares, other
securities, other Options or other property, or canceled, forfeited, or
suspended and the method or methods by which Options may be settled, exercised,
canceled, forfeited, or suspended; (vii) determine whether, to what extent, and
under what circumstances cash, Shares, other securities, other Options, other
property, and other amounts payable with respect to an Option shall be deferred
either automatically or at the election of the holder thereof or of the
Committee; (viii) interpret and administer the Plan and any instrument or
agreement relating to, or Option made under, the Plan; (ix) amend or modify the
terms of any Option at or after grant (with the consent of the holder of the
Option if adversely affected); (x) establish, amend, suspend, or waive such
rules and regulations and appoint such agents as it shall deem appropriate for
the proper administration of the Plan; and (xi) make any other determination and
take any other action that the Committee deems necessary or desirable for the
administration of the Plan, subject to the exclusive authority of the Board
under Section 10 hereunder to amend or terminate the Plan.
3.2 COMMITTEE DISCRETION BINDING. Unless otherwise expressly provided in
the Plan, all designations, determinations, interpretations, and other decisions
under or with respect to the Plan or any Option shall be within the sole
discretion of the Committee, may be made at any time and shall be final,
conclusive, and binding upon all Persons, including the Company, any Subsidiary
or Affiliate, any Participant and any holder or beneficiary of any Option.
3.3 ACTION BY THE COMMITTEE. The Committee shall select one of its members
as its Chairperson and shall hold its meetings at such times and places and in
such manner as it may determine. A majority of its members shall constitute a
quorum. All determinations of the Committee shall be made by not less than a
majority of its members. Any decision or determination reduced to writing and
signed by all of the members of the Committee shall be fully effective as if it
had been made by a majority vote at a meeting duly called and held. The exercise
of an Option or receipt of an Option shall be effective only if an Option
Agreement shall have been duly executed and delivered on behalf of the Company
following the grant of the Option or other Option. The Committee may appoint a
Secretary and may make such rules and regulations for the conduct of its
business, as it shall deem advisable.
3.4 DELEGATION. Subject to the terms of the Plan and applicable law, the
Committee may delegate to one or more officers or managers of the Company or of
any Subsidiary or Affiliate, or to a Committee of such officers or managers, the
authority, subject to such terms and limitations as the Committee shall
determine, to grant Options to, or to cancel, modify or waive rights with
respect to, or to alter, discontinue, suspend, or terminate Options held by
Participants who are not officers or directors of the Company for purposes of
Section 16 or who are otherwise not subject to such Section.
3.5 NO LIABILITY. No member of the Board or Committee shall be liable for
any action taken or determination made in good faith with respect to the Plan or
any Option granted hereunder.
SECTION 4. SHARES AVAILABLE FOR OPTIONS
4.1 SHARES AVAILABLE. Subject to the provisions of Section 4.2 hereof, the
stock to be subject to Options under the Plan shall be the Shares of the Company
and the maximum number of Shares with respect to which Options may be granted
under the Plan shall be 39,309,224 (which includes 2,309,224 Shares which are
subject to outstanding Options or available for future grants under the
Company's 1996 Stock Option Plan (the "1996 Plan")). The maximum number of
Shares which may be the subject of Options granted during any calendar year to
any individual shall not exceed 12,000,000 Shares (subject to adjustment under
Section 4.2 hereof consistent with Section 162(m) of the Code). If the Shares
that would be issued or transferred pursuant to any Options are not issued or
transferred and cease to be issuable or transferable for any reason, the number
of Shares subject to such Option will no longer be charged against the
limitation provided for herein and may again be made subject to Options.
Notwithstanding the preceding, with respect to any Option granted to any
individual who is a "covered employee" within the meaning of Section 162(m) of
the Code that is cancelled, the number of shares subject to such Option shall
continue to count against the maximum number of Shares which may be the subject
of Options granted to such individual. For purposes of the preceding sentence,
if, after grant, the exercise price of an Option is reduced, such reduction
shall be treated as a cancellation of such Option and the grant of a new Option,
and both the cancellation of the Option and the new Option shall reduce the
maximum number of Shares for which Options may be granted to the holder of such
Option.
4.2 ADJUSTMENTS. If, prior to the complete exercise of any Option, there
shall be declared and paid a stock dividend upon the Shares or if the Shares
shall be split up, converted, exchanged, reclassified, or in any way substituted
for, then the Option, to the extent that it has not been exercised, shall
entitle the holder thereof upon the future exercise of the Option to such number
and kind of securities or cash or other property subject to the terms of the
Option to which he would have been entitled had he actually owned the Shares
subject to the unexercised portion of the Option at the time of the occurrence
of such stock dividend, split-up, conversion, exchange, reclassification or
substitution, and the aggregate purchase price upon the future exercise of the
Option shall be the same as if the originally optioned Shares were being
purchased thereunder. Any fractional shares or securities issuable upon the
exercise of the Option as a result of such adjustment shall be payable in cash
based upon the Fair Market Value of such shares or securities at the time of the
exercise. If any such event should occur, the number of Shares with respect to
which Options remain to be issued, or with respect to which Options may be
reissued (including, in each case, Options to be granted to any individual
during any calendar year), shall be adjusted in a similar manner. In the event
of any other change in the corporate structure or outstanding Shares such that
an adjustment is determined by the Committee, in its sole discretion, to be
appropriate, then the Committee shall, in such manner as it may deem equitable
(and, with respect to Incentive Stock Options, in such manner as is consistent
with Section 422 of the Code and the regulations thereunder): (i) adjust any or
all of (1) the aggregate number of Shares or other securities of the Company (or
number and kind of other securities or property) with respect to which Options
may be granted under the Plan; (2) the number of Shares or other securities of
the Company (or number and kind of other securities or property) subject to
outstanding Options under the Plan; and (3) the grant or exercise price with
respect to any Option under the Plan, provided that the number of shares subject
to any Option shall always be a whole number; (ii) if deemed appropriate,
provide for an equivalent Option in respect of securities of the surviving
entity of any merger, consolidation or other transaction or event having a
similar effect; or (iii) if deemed appropriate, make provision for a cash
payment to the holder of an outstanding Option.
4.3 SUBSTITUTE OPTIONS. Any Shares issued by the Company as Substitute
Options in connection with the assumption or substitution of outstanding grants
from any acquired corporation shall not reduce the Shares available for Options
under the Plan if the original stockholder approval in connection with such
outstanding grants (or approval by the Company's stockholders of the relevant
transaction) is such that it will continue to apply to the Substitute Options
without requiring further approval by stockholders of the Company. If such
original stockholder approval (or approval of the transaction) will not continue
to apply to the Substitute Options, then any Shares issued pursuant to such
Substitute Options shall reduce the Shares available for Options under the Plan.
4.4 SOURCES OF SHARES DELIVERABLE UNDER OPTIONS. Any Shares delivered
pursuant to an Option may consist, in whole or in part, of authorized and
unissued Shares or of issued Shares that have been reacquired by the Company.
SECTION 5. ELIGIBILITY
Any Employee, Director or Consultant shall be eligible to be designated a
Participant; provided, however, that Non-Employee Directors and Outside
Directors shall only be eligible to receive Options granted consistent with
Section 7.
SECTION 6. STOCK OPTIONS
6.1 GRANT. Subject to the provisions of the Plan, the Committee shall have
sole and complete authority to determine the Participants to whom Options shall
be granted, the number of Shares subject to each Option, the exercise price and
the conditions and limitations applicable to the exercise of each Option. The
Committee shall have the authority to grant Incentive Stock Options, or to grant
Non-Qualified Stock Options, or to grant both types of Options; provided,
however, that an Incentive Stock Option may only be granted to a person who at
the time of grant is an Employee of the Company or a Subsidiary. In the case of
Incentive Stock Options, the terms and conditions of such grants shall be
subject to and comply with such rules as may be prescribed by Section 422 of the
Code, as from time to time amended, and any regulations implementing such
statute. A person who has been granted an Option under this Plan may be granted
additional Options under the Plan if the Committee shall so determine; provided,
however, that to the extent the aggregate Fair Market Value (determined at the
time the Incentive Stock Option related thereto is granted) of the Shares with
respect to which all Incentive Stock Options are exercisable for the first time
by an Employee during any calendar year (under all plans described in subsection
(d) of Section 422 of the Code of the Company and its Subsidiaries) exceeds
$100,000 (or such higher amount as is permitted in the future under Section
422(d) of the Code), such Options shall be treated as Non-Qualified Stock
Options.
6.2 PRICE. The Committee in its sole discretion shall establish the Option
Price at the time each Option is granted. Except in the case of Substitute
Options, the Option Price of an Option which is intended to be an Incentive
Stock Option may not be less than 100% of the Fair Market Value of the Shares
with respect to which the Option is granted on the date of grant of such Option.
6.3 TERM. Subject to the Committee's authority under Section 3.1 and the
provisions of Section 6.5, each Option and all rights and obligations thereunder
shall expire on the date determined by the Committee and specified in the Option
Agreement. The Committee shall be under no duty to provide terms of like
duration for Options granted under the Plan. Notwithstanding the foregoing, no
Option shall be exercisable after the expiration of ten (10) years from the date
such Option was granted.
6.4 EXERCISE.
(a) Each Option shall be exercisable at such times and subject to such
terms and conditions as the Committee may, in its sole discretion, specify
in the applicable Option Agreement or thereafter. The Committee shall have
full and complete authority to determine, subject to Section 6.5 herein,
whether an Option will be exercisable in full at any time or from time to
time during the tern of the Option, or to provide for the exercise thereof
in such installments, upon the occurrence of such events and at such times
during the term of the Option as the Committee may determine.
(b) The Committee may impose such conditions with respect to the
exercise of Options, including without limitation, any relating to the
application of federal, state or foreign securities laws or the Code, as it
may deem necessary or advisable. The exercise of any Option granted
hereunder shall be effective only at such time as the sale of Shares
pursuant to such exercise will not violate any state or federal securities
or other laws.
(c) An Option may be exercised in whole or in part at any time, with
respect to whole Shares only, within the period permitted thereunder for
the exercise thereof, and shall be exercised by written notice of intent to
exercise the Option, delivered to the Company at its principal office, and
payment in full to the Company at the direction of the Committee of the
amount of the Option Price for the number of Shares with respect to which
the Option is then being exercised. The exercise of an Option shall result
in the termination of the other to the extent of the number of Shares with
respect to which the Option is exercised.
(d) Payment of the Option Price shall be made in cash or cash
equivalents, or, at the discretion of the Committee, (i) in whole Shares
having a Fair Market Value on the date of exercise (or next succeeding
trading date, if the date of exercise is not a trading date) equal to the
aggregate Option Price, together with any applicable withholding taxes, or
(ii) by a combination of such cash (or cash equivalents) and such Shares;
provided, however, that the optionee shall not be entitled to tender Shares
which have not been beneficially owned by the optionee for at least six
months. Subject to applicable securities laws, an Option may also be
exercised by delivering a notice of exercise of the Option and
simultaneously selling the Shares thereby acquired, pursuant to a brokerage
or similar agreement approved in advance by proper officers of the Company,
using the proceeds of such sale as payment of the Option Price, together
with any applicable withholding taxes. Until the optionee has been issued
the Shares subject to such exercise, he or she shall possess no rights as a
stockholder with respect to such Shares.
6.5 TEN PERCENT STOCK RULE. Notwithstanding any other provisions in the
Plan, if at the time an Option is otherwise to be granted pursuant to the Plan
the optionee owns directly or indirectly (within the meaning of Section 424(d)
of the Code) Shares of the Company possessing more than ten percent (10%) of the
total combined voting power of all classes of Stock of the Company or its parent
or Subsidiary or Affiliate corporations (within the meaning of Section 422 (b)
(6) of the Code), then any Incentive Stock Option to be granted to such optionee
pursuant to the Plan shall satisfy the requirement of Section 422(c) (5) of the
Code, and the Option Price shall be not less than 110% of the Fair Market Value
of the Shares of the Company on the date such Option is granted, and such Option
by its terms shall not be exercisable after the expiration of five (5) years
from the date such Option is granted.
6.6 OPTIONS GRANTED UNDER 1996 PLAN. The Plan shall cover all Options
granted under the 1996 Plan which are outstanding on the effective date
described in Section 12.1. Such Options shall continue to be subject to the same
terms and conditions as were applicable to such Options pursuant to the 1996
Plan and the Option Agreements executed thereunder.
SECTION 7. NON-EMPLOYEE DIRECTOR AND OUTSIDE DIRECTOR OPTIONS
The Board may provide that all or a portion of a Non-Employee Director's
and/or Outside Director's annual retainer, meeting fees and/or other Options or
compensation as determined by the Board, be payable (either automatically or at
the election of a Non-Employee Director or Outside Director) in the form of
Non-Qualified Stock Options. The Board shall determine the terms and conditions
of any such Options, including the terms and conditions which shall apply upon a
termination of the Non-Employee Director's or Outside Director's service as a
member of the Board, and shall have full power and authority in its discretion
to administer such Options, subject to the terms of the Plan and applicable law.
With respect to such Options, all references in the Plan to the Committee shall
be deemed to be references to the Board.
SECTION 8. TERMINATION OF EMPLOYMENT OR SERVICE
The Committee shall have the full power and authority to determine the
terms and conditions that shall apply to any Option upon a termination of
employment or service with the Company, its Subsidiaries and Affiliates,
including a termination by the Company with or without cause, by a Participant
voluntarily, or by reason of death, Disability or Retirement, and may provide
such terms and conditions in the Option Agreement or in such rules and
regulations as it may prescribe. Notwithstanding the preceding, if and to the
extent that any Option which is intended to be an Incentive Stock Option is
exercised more than three months after the Participant's termination of
employment with the Company and its Subsidiaries other than due to death or
Disability, or more than twelve months after the Participant's termination of
employment with the Company and its Subsidiaries due to Disability, such Option
shall be treated as a Non-Qualified Stock Option. Unless otherwise determined by
the Committee at the time of grant, in the case of any Option granted to an
Employee, a change in the status of such Employee to that of a Consultant shall
be treated as a termination of employment and service for purposes of such
Option and the Plan; provided, however, that the Committee may in its sole
discretion, at the time of such termination, determine that all or a portion of
such Option may continue to vest during the holder's service as a Consultant and
may remain exercisable for such period as may be determined by the Committee
(but not longer than ten years after the date of grant of the Option if, at the
date of grant, the Option was intended to be an Incentive Stock Option).
SECTION 9. CHANGE IN CONTROL
Upon a Change in Control, to the extent permitted by applicable law: (i)
any surviving or acquiring corporation shall assume any Options outstanding
under the Plan or shall substitute similar Options (including an option to
acquire the same consideration paid to the stockholders in the transaction) for
those outstanding under the Plan, or (ii) such Options shall continue in full
force and effect. In the event any surviving or acquiring corporation refuses to
assume such Options, or to substitute similar options for those outstanding
under the Plan, then, with respect to Options held by persons then performing
services as Employees, Directors or Consultants, the time during which such
Options may be exercised shall be accelerated prior to such event and the
Options shall be terminated if not exercised after such acceleration and at or
prior to such event.
SECTION 10. AMENDMENT AND TERMINATION
10.1 AMENDMENTS TO THE PLAN. The Board may amend, alter, suspend,
discontinue, or terminate the Plan or any portion thereof at any time; provided
that no such amendment, alteration, suspension, discontinuation or termination
shall be made without stockholder approval if such approval is necessary to
comply with any tax or regulatory requirement for which or with which the Board
deems it necessary or desirable to comply.
10.2 AMENDMENTS TO OPTIONS. Subject to the restrictions of Section 6.2, the
Committee may waive any conditions or rights under, amend any terms of, or
alter, suspend, discontinue, cancel or terminate, any Option theretofore
granted, prospectively or retroactively; provided that any such waiver,
amendment, alteration, suspension, discontinuance, cancellation or termination
that would adversely affect the rights of any Participant or any holder or
beneficiary of any Option theretofore granted shall not to that extent be
effective without the consent of the affected Participant, holder, or
beneficiary.
10.3 ADJUSTMENTS OF OPTIONS UPON THE OCCURRENCE OF CERTAIN UNUSUAL OR
NONRECURRING EVENTS. The Committee is hereby authorized to make adjustments in
the terms and conditions of, and the criteria included in, Options in
recognition of unusual or nonrecurring events (including, without limitation,
the events described in Section 4.2 hereof) affecting the Company, any
Subsidiary or Affiliate, or the financial statements of the Company or any
Subsidiary or Affiliate, or of changes in applicable laws, regulations, or
accounting principles, whenever the Committee determines that such adjustments
are appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan.
SECTION 11. GENERAL PROVISIONS
11.1 LIMITED TRANSFERABILITY OF OPTIONS. Except as otherwise provided in
the Plan, no Option shall be assigned, alienated, pledged, attached, sold or
otherwise transferred or encumbered by a Participant, except by will or the laws
of descent and distribution and/or as may be provided by the Committee in its
discretion, at or after grant, in the Option Agreement. An Incentive Stock
Option shall not be transferred other than by will or the laws of descent and
distribution and, during the holder's lifetime, may only be exercised by the
holder. No transfer of an Option by will or by laws of descent and distribution
shall be effective to bind the Company unless the Company shall have been
furnished with written notice thereof and an authenticated copy of the will
and/or such other evidence as the Committee may deem necessary or appropriate to
establish the validity of the transfer.
11.2 NO RIGHTS TO OPTIONS. No Person shall have any claim to be granted any
Option, and there is no obligation for uniformity of treatment of Participants
or holders or beneficiaries of Options. The terms and conditions of Options need
not be the same with respect to each Participant.
11.3 SHARE CERTIFICATES. All certificates for Shares or other securities of
the Company or any Subsidiary or Affiliate delivered under the Plan pursuant to
any Option or the exercise thereof shall be subject to such stop transfer orders
and other restrictions as the Committee may deem advisable under the Plan or the
rules, regulations and other requirements of the SEC or any state securities
commission or regulatory authority, any stock exchange or other market upon
which such Shares or other securities are then listed, and any applicable
Federal or state laws, and the Committee may cause a legend or legends to be put
on any such certificates to make appropriate reference to such restrictions.
11.4 WITHHOLDING. A Participant may be required to pay to the Company or
any Subsidiary or Affiliate and the Company or any Subsidiary or Affiliate shall
have the right and is hereby authorized to withhold from any Option, from any
payment due or transfer made under any Option or under the Plan, or from any
compensation or other amount owing to a Participant the amount (in cash, Shares,
other securities, other Options or other property) of any applicable withholding
or other taxes in respect of an Option, its exercise, or any payment or transfer
under an Option or under the Plan and to take such other action as may be
necessary in the opinion of the Company to satisfy all obligations for the
payment of such taxes. If withholding is satisfied by withholding Shares which
would otherwise be issued pursuant to the exercise of an Option, then the Shares
withheld shall have a Fair Market Value on the date on which such withholding is
satisfied equal to the statutory minimum amount required to be withheld.
11.5 OPTION AGREEMENTS. Each Option hereunder shall be evidenced by an
Option Agreement that shall be delivered to the Participant and may specify the
terms and conditions of the Option and any rules applicable thereto. In the
event of a conflict between the terms of the Plan and any Option Agreement, the
terms of the Plan shall prevail.
11.6 NO LIMIT ON OTHER COMPENSATION ARRANGEMENTS. Nothing contained in the
Plan shall prevent the Company or any Subsidiary or Affiliate from adopting or
continuing in effect other compensation arrangements, which may, but need not,
provide for the grant of Options.
11.7 NO RIGHT TO EMPLOYMENT. The grant of an Option shall not be construed
as giving a Participant the right to be retained in the employ of the Company or
any Subsidiary or Affiliate. Further, the Company or a Subsidiary or Affiliate
may at any time dismiss a Participant from employment, free from any liability
or any claim under the Plan, unless otherwise expressly provided in an Option
Agreement.
11.8 NO RIGHTS AS STOCKHOLDER. Subject to the provisions of the Plan and
the applicable Option Agreement, no Participant or holder or beneficiary of any
Option shall have any rights as a stockholder with respect to any Shares to be
distributed under the Plan until such person has become a holder of such Shares.
11.9 GOVERNING LAW. The validity, construction and effect of the Plan and
any rules and regulations relating to the Plan and any Option Agreement shall be
determined in accordance with the laws of the State of Colorado without giving
effect to conflicts of laws principles.
11.10 SEVERABILITY. If any provision of the Plan or any Option Agreement
is, or becomes, or is deemed to be invalid, illegal, or unenforceable in any
jurisdiction or as to any Person or Option, or would disqualify the Plan or any
Option under any law deemed applicable by the Committee, such provision shall be
construed or deemed amended to conform to the applicable laws, or if it cannot
be construed or deemed amended without, in the determination of the Committee,
materially altering the intent of the Plan or the Option, such provision shall
be stricken as to such jurisdiction, Person or Option and the remainder of the
Plan and any such Option shall remain in full force and effect.
11.11 OTHER LAWS. The Committee may refuse to issue or transfer any Shares
or other consideration under an Option if, acting in its sole discretion, it
determines that the issuance or transfer of such Shares or such other
consideration might violate any applicable law or regulation (including
applicable non-U.S. laws or regulations) or entitle the Company to recover the
same under Exchange Act Section 16 (b), and any payment tendered to the Company
by a Participant, other holder or beneficiary in connection with the exercise of
such Option shall be promptly refunded to the relevant Participant, holder, or
beneficiary.
11.12 NO TRUST OR FUND CREATED. Neither the Plan nor any Option shall
create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company or any Subsidiary or Affiliate and a
Participant or any other Person. To the extent that any Person acquires a right
to receive payments from the Company or any Subsidiary or Affiliate pursuant to
an Option, such right shall be no greater than the right of any unsecured
general creditor of the Company or any Subsidiary or Affiliate.
11.13 NO FRACTIONAL SHARES. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Option, and the Committee shall determine
whether cash, other securities, or other property shall be paid or transferred
in lieu of any fractional Shares or whether such fractional Shares or any rights
thereto shall be canceled, terminated or otherwise eliminated.
11.14 HEADINGS. Headings are given to the sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.
SECTION 12. TERM OF THE PLAN
12.1 EFFECTIVE DATE. This amendment and restatement of the Plan shall be
effective as of February 4, 2003, provided it is approved and ratified by the
Company's stockholders on or prior to February 3, 2004. If this amendment and
restatement of the Plan is not so approved by the Company's stockholders, then
any Options granted pursuant to the amended provisions of the Plan shall be void
and of no further force or effect.
12.2 EXPIRATION DATE. No new Options shall be granted under the Plan after
March 21, 2011. Unless otherwise expressly provided in the Plan or in an
applicable Option Agreement, any Option granted hereunder may, and the authority
of the Board or the Committee to amend, alter, adjust, suspend, discontinue, or
terminate any such Option or to waive any conditions or rights under any such
Option shall, continue after said expiration date.
ANNEX D
RIBOZYME PHARMACEUTICALS, INC.
EMPLOYEE STOCK PURCHASE PLAN
ADOPTED FEBRUARY 29, 1996, AMENDED AND RESTATED AS OF APRIL 30, 2001
1. PURPOSE.
(a) The purpose of the Employee Stock Purchase Plan (the "Plan") is to
provide a means by which employees of Ribozyme Pharmaceuticals, Inc., a Delaware
corporation (the "Company"), and its Affiliates, as defined in subparagraph
l(b), which are designated as provided in subparagraph 2(b), may be given an
opportunity to purchase stock of the Company.
(b) The word "Affiliate" as used in the Plan means any parent corporation
or subsidiary corporation of the Company, as those terms are defined in Sections
424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended
(the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of its
employees, to secure and retain the services of new employees, and to provide
incentives for such persons to exert maximum efforts for the success of the
Company.
(d) The Company intends that the rights to purchase stock of the Company
granted under the Plan be considered options issued under an "employee stock
purchase plan" as that term is defined in Section 423(b) of the Code.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors (the "Board")
of the Company unless and until the Board delegates administration to a
Committee, as provided in subparagraph 2(c). Whether or not the Board has
delegated administration, the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(i) To determine when and how rights to purchase stock of the Company shall
be granted and the provisions of each offering of such rights (which need not be
identical).
(ii) To designate from time to time which Affiliates of the Company shall
be eligible to participate in the Plan.
(iii) To construe and interpret the Plan and rights granted under it, and
to establish, amend and revoke rules and regulations for its administration. The
Board, in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan, in a manner and to the extent it shall deem necessary
or expedient to make the Plan fully effective.
(iv) To amend the Plan as provided in paragraph 13.
(v) Generally, to exercise such powers and to perform such acts as the
Board deems necessary or expedient to promote the best interests of the Company
and its Affiliates and to carry out the intent that the Plan be treated as an
"employee stock purchase plan" within the meaning of Section 423 of the Code.
(c) The Board may delegate administration of the Plan to a Committee
composed of not fewer than two (2) members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 12 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to rights granted under
the Plan shall not exceed in the aggregate 600,000 shares of the Company's
common stock (the "Common Stock"). If any right granted under the Plan shall for
any reason terminate without having been exercised, the Common Stock not
purchased under such right shall again become available for the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. GRANT OF RIGHTS; OFFERING.
The Board or the Committee may from time to time grant or provide for the
grant of rights to purchase Common Stock of the Company under the Plan to
eligible employees (an "Offering") on a date or dates (the "Offering Date(s)")
selected by the Board or the Committee. Each Offering shall be in such form and
shall contain such terms and conditions as the Board or the Committee shall deem
appropriate, which shall comply with the requirements of Section 423(b)(5) of
the Code that all employees granted rights to purchase stock under the Plan
shall have the same rights and privileges. The terms and conditions of an
Offering shall be incorporated by reference into the Plan and treated as part of
the Plan. The provisions of separate Offerings need not be identical, but each
Offering shall include (through incorporation of the provisions of this Plan by
reference in the document comprising the Offering or otherwise) the period
during which the Offering shall be effective, which period shall not exceed 27
months beginning with the Offering Date, and the substance of the provisions
contained in paragraphs 5 through 8, inclusive.
5. ELIGIBILITY.
(a) Rights may be granted only to employees of the Company or, as the Board
or the Committee may designate as provided in subparagraph 2(b), to employees of
any Affiliate of the Company. Except as provided in subparagraph 5(b), an
employee of the Company or any Affiliate shall not be eligible to be granted
rights under the Plan, unless, on the Offering Date, such employee has been in
the employ of the Company or any Affiliate for such continuous period preceding
such grant as the Board or the Committee may require, but in no event shall the
required period of continuous employment be greater than two (2) years. In
addition, unless otherwise determined by the Board or the Committee and set
forth in the terms of the applicable Offering, no employee of the Company or any
Affiliate shall be eligible to be granted rights under the Plan, unless, on the
Offering Date, such employee's customary employment with the Company or such
Affiliate is for at least twenty (20) hours per week and at least five (5)
months per calendar year.
(b) The Board or the Committee may provide that, each person who, during
the course of an Offering, first becomes an eligible employee of the Company or
designated Affiliate will, on a date or dates specified in the Offering which
coincides with the day on which such person becomes an eligible employee or
occurs thereafter, receive a right under that Offering, which right shall
thereafter be deemed to be a part of that Offering. Such right shall have the
same characteristics as any rights originally granted under that Offering, as
described herein, except that:
(i) the date on which such right is granted shall be the "Offering Date" of
such right for all purposes, including determination of the exercise price of
such right;
(ii) the period of the Offering with respect to such right shall begin on
its Offering Date and end coincident with the end of such Offering; and
(iii) the Board or the Committee may provide that if such person first
becomes an eligible employee within a specified period of time before the end of
the Offering, he or she will not receive any right under that Offering.
(c) No employee shall be eligible for the grant of any rights under the
Plan if, immediately after any such rights are granted, such employee owns stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Affiliate. For purposes of this
subparagraph 5(c), the rules of Section 424(d) of the Code shall apply in
determining the stock ownership of any employee, and stock which such employee
may purchase under all outstanding rights and options shall be treated as stock
owned by such employee.
(d) An eligible employee may be granted rights under the Plan only if such
rights, together with any other rights granted under "employee stock purchase
plans" of the Company and any Affiliates, as specified by Section 423(b)(8) of
the Code, do not permit such employee's rights to purchase stock of the Company
or any Affiliate to accrue at a rate which exceeds twenty-five thousand dollars
($25,000) of fair market value of such stock (determined at the time such rights
are granted) for each calendar year in which such rights are outstanding at any
time.
(e) Officers of the Company and any designated Affiliate shall be eligible
to participate in Offerings under the Plan, provided, however, that the Board
may provide in an Offering that certain employees who are highly compensated
employees within the meaning of Section 423(b)(4)(D) of the Code shall not be
eligible to participate.
6. RIGHTS; PURCHASE PRICE.
(a) On each Offering Date, each eligible employee, pursuant to an Offering
made under the Plan, shall be granted the right to purchase up to the number of
shares of Common Stock of the Company purchasable with a percentage designated
by the Board or the Committee not exceeding fifteen percent (15%) of such
employee's Earnings (as defined in subparagraph 7(a)) during the period which
begins on the Offering Date (or such later date as the Board or the Committee
determines for a particular Offering) and ends on the date stated in the
Offering, which date shall be no later than the end of the Offering. The Board
or the Committee shall establish one or more dates during an Offering (the
"Purchase Date(s)") on which rights granted under the Plan shall be exercised
and purchases of Common Stock carried out in accordance with such Offering.
(b) In connection with each Offering made under the Plan, the Board or the
Committee may specify a maximum number of shares that may be purchased by any
employee as well as a maximum aggregate number of shares that may be purchased
by all eligible employees pursuant to such Offering. In addition, in connection
with each Offering that contains more than one Purchase Date, the Board or the
Committee may specify a maximum aggregate number of shares which may be
purchased by all eligible employees on any given Purchase Date under the
Offering. If the aggregate purchase of shares upon exercise of rights granted
under the Offering would exceed any such maximum aggregate number, the Board or
the Committee shall make a pro rata allocation of the shares available in as
nearly a uniform manner as shall be practicable and as it shall deem to be
equitable.
(c) The purchase price of stock acquired pursuant to rights granted under
the Plan shall be not less than the lesser of:
(i) an amount equal to eighty-five percent (85%) of the fair market value
of the stock on the Offering Date; or
(ii) an amount equal to eighty-five percent (85%) of the fair market value
of the stock on the Purchase Date.
7. PARTICIPATION; WITHDRAWAL; TERMINATION.
(a) An eligible employee may become a participant in the Plan pursuant to
an Offering by delivering a participation agreement to the Company within the
time specified in the Offering, in such form as the Company provides. Each such
agreement shall authorize payroll deductions of up to the maximum percentage
specified by the Board or the Committee of such employee's Earnings during the
Offering. "Earnings" is defined as an employee's regular salary or wages
(including amounts thereof elected to be deferred by the employee, which would
otherwise have been paid, under any arrangement established by the Company that
is intended to comply with Section 125, Section 401(k), Section 402(h) or
Section 403(b) of the Code or that provides non-qualified deferred
compensation), which shall include overtime pay, but shall exclude bonuses,
commissions, incentive pay, profit sharing, other remuneration paid directly to
the employee, the cost of employee benefits paid for by the Company or an
Affiliate, education or tuition reimbursements, imputed income arising under any
group insurance or benefit program, traveling expenses, business and moving
expense reimbursements, income received in connection with stock options,
contributions made by the Company or an Affiliate under any employee benefit
plan, and similar items of compensation, or such other set of inclusions or
exclusions as may be determined by the Board or the Committee. The payroll
deductions made for each participant shall be credited to an account for such
participant under the Plan and shall be deposited with the general funds of the
Company. A participant may reduce (including to zero) or increase such payroll
deductions, and an eligible employee may begin such payroll deductions, after
the beginning of any Offering only as provided for in the Offering. A
participant may make additional payments into his or her account only if
specifically provided for in the Offering and only if the participant has not
had the maximum amount withheld during the Offering.
(b) At any time during an Offering, a participant may terminate his or her
payroll deductions under the Plan and withdraw from the Offering by delivering
to the Company a notice of withdrawal in such form as the Company provides. Such
withdrawal may be elected at any time prior to the end of the Offering except as
provided by the Board or the Committee in the Offering. Upon such withdrawal
from the Offering by a participant, the Company shall distribute to such
participant all of his or her accumulated payroll deductions (reduced to the
extent, if any, such deductions have been used to acquire stock for the
participant) under the Offering, without interest, and such participant's
interest in that Offering shall be automatically terminated. A participant's
withdrawal from an Offering will have no effect upon such participant's
eligibility to participate in any other Offerings under the Plan but such
participant will be required to deliver a new participation agreement in order
to participate in subsequent Offerings under the Plan.
(c) If the fair market value of the Common Stock on any Purchase Date is
lower than the fair market value of the Common Stock on the initial, or first,
Offering Date for the Offering in which such Purchase Date occurs, then all
participants in such Offering shall be automatically withdrawn from such
Offering immediately after the exercise of their right to purchase Common Stock
on such Purchase Date and automatically re-enrolled in the next Offering, which
Offering shall commence on the day immediately following such Purchase Date.
(d) Rights granted pursuant to any Offering under the Plan shall terminate
immediately upon cessation of any participating employee's employment with the
Company and any designated Affiliate, for any reason, and the Company shall
distribute to such terminated employee all of his or her accumulated payroll
deductions (reduced to the extent, if any, such deductions have been used to
acquire stock for the terminated employee), under the Offering, without
interest.
(e) Rights granted under the Plan shall not be transferable by a
participant otherwise than by will or the laws of descent and distribution, or
by a beneficiary designation as provided in paragraph 14 and, otherwise during
his or her lifetime, shall be exercisable only by the person to whom such rights
are granted.
8. EXERCISE.
(a) On each Purchase Date specified therefor in the relevant Offering, each
participant's accumulated payroll deductions and other additional payments
specifically provided for in the Offering (without any increase for interest)
will be applied to the purchase of whole shares of stock of the Company, up to
the maximum number of shares permitted pursuant to the terms of the Plan and the
applicable Offering, at the purchase price specified in the Offering. No
fractional shares shall be issued upon the exercise of rights granted under the
Plan. The amount, if any, of accumulated payroll deductions remaining in each
participant's account after the purchase of shares which is less than the amount
required to purchase one share of stock on the final Purchase Date of an
Offering shall be held in each such participant's account for the purchase of
shares under the next Offering under the Plan, unless such participant withdraws
from such next Offering, as provided in subparagraph 7(b), or is no longer
eligible to be granted rights under the Plan, as provided in paragraph 5, in
which case such amount shall be distributed to the participant after such final
Purchase Date, without interest. The amount, if any, of accumulated payroll
deductions remaining in any participant's account after the purchase of shares
which is equal to the amount required to purchase whole shares of stock on the
final Purchase Date of an Offering shall be distributed in full to the
participant after such Purchase Date, without interest.
(b) No rights granted under the Plan may be exercised to any extent unless
the shares to be issued upon such exercise under the Plan (including rights
granted thereunder) are covered by an effective registration statement pursuant
to the Securities Act of 1933, as amended (the "Securities Act") and the Plan is
in material compliance with all applicable state, foreign and other securities
and other laws applicable to the Plan. If on a Purchase Date in any Offering
hereunder the Plan is not so registered or in such compliance, no rights granted
under the Plan or any Offering shall be exercised on such Purchase Date, and the
Purchase Date shall be delayed until the Plan is subject to such an effective
registration statement and such compliance, except that the Purchase Date shall
not be delayed more than twelve months and the Purchase Date shall in no event
be more than twenty-seven months from the Offering Date. If on the Purchase Date
of any Offering hereunder, as delayed to the maximum extent permissible, the
Plan is not registered and in such compliance, no rights granted under the Plan
or any Offering shall be exercised and all payroll deductions accumulated during
the Offering (reduced to the extent, if any, such deductions have been used to
acquire stock) shall be distributed to the participants, without interest.
9. COVENANTS OF THE COMPANY.
(a) During the terms of the rights granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such rights.
(b) The Company shall seek to obtain from each federal, state, foreign or
other regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to issue and sell shares of stock upon exercise of
the rights granted under the Plan. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such rights unless and until
such authority is obtained.
10. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to rights granted under the Plan
shall constitute general funds of the Company.
11. RIGHTS AS A STOCKHOLDER.
A participant shall not be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to rights granted
under the Plan unless and until the participant's shareholdings acquired upon
exercise of rights under the Plan are recorded in the books of the Company.
12. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject to
any rights granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan and outstanding rights will
be appropriately adjusted in the class(es) and maximum number of shares subject
to the Plan and the class(es) and number of shares and price per share of stock
subject to outstanding rights. Such adjustments shall be made by the Board or
the Committee, the determination of which shall be final, binding and
conclusive. (The conversion of any convertible securities of the Company shall
not be treated as a "transaction not involving the receipt of consideration by
the Company".)
(b) In the event of: (1) a dissolution or liquidation of the Company; (2) a
merger or consolidation in which the Company is not the surviving corporation;
(3) a reverse merger in which the Company is the surviving corporation but the
shares of the Company's Common Stock outstanding immediately preceding the
merger are converted by virtue of the merger into other property, whether in the
form of securities, cash or otherwise; or (4) the acquisition by any person,
entity or group within the meaning of Section 13(d) or 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") or any comparable
successor provisions (excluding any employee benefit plan, or related trust,
sponsored or maintained by the Company or any Affiliate of the Company) of the
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act, or comparable successor rule) of securities of the Company
representing at least fifty percent (50%) of the combined voting power entitled
to vote in the election of directors, then, as determined by the Board in its
sole discretion (i) any surviving or acquiring corporation may assume
outstanding rights or substitute similar rights for those under the Plan, (ii)
such rights may continue in full force and effect, or (iii) participants'
accumulated payroll deductions may be used to purchase Common Stock immediately
prior to the transaction described above and the participants' rights under the
ongoing Offering terminated.
13. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 12 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
(i) Increase the number of shares reserved for rights under the Plan;
(ii) Modify the provisions as to eligibility for participation in the Plan
(to the extent such modification requires stockholder approval in order for the
Plan to obtain employee stock purchase plan treatment under Section 423 of the
Code or to comply with the requirements of Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended ("Rule 16b-3")); or
(iii) Modify the Plan in any other way if such modification requires
stockholder approval in order for the Plan to obtain employee stock purchase
plan treatment under Section 423 of the Code or to comply with the requirements
of Rule 16b-3.
It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide eligible employees
with the maximum benefits provided or to be provided under the provisions of the
Code and the regulations promulgated thereunder relating to employee stock
purchase plans and/or to bring the Plan and/or rights granted under it into
compliance therewith.
(b) Rights and obligations under any rights granted before amendment of the
Plan shall not be impaired by any amendment of the Plan, except with the consent
of the person to whom such rights were granted, or except as necessary to comply
with any laws or governmental regulations, or except as necessary to ensure that
the Plan and/or rights granted under the Plan comply with the requirements of
Section 423 of the Code.
14. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a beneficiary who is to
receive any shares and cash, if any, from the participant's account under the
Plan in the event of such participant's death subsequent to the end of an
Offering but prior to delivery to the participant of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death during an Offering.
(b) Such designation of beneficiary may be changed by the participant at
any time by written notice. In the event of the death of a participant and in
the absence of a beneficiary validly designated under the Plan who is living at
the time of such participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its sole discretion, may deliver such shares
and/or cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
15. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board in its discretion, may suspend or terminate the Plan at any
time. No rights may be granted under the Plan while the Plan is suspended or
after it is terminated.
(b) Rights and obligations under any rights granted while the Plan is in
effect shall not be impaired by suspension or termination of the Plan, except as
expressly provided in the Plan or with the consent of the person to whom such
rights were granted, or except as necessary to comply with any laws or
governmental regulation, or except as necessary to ensure that the Plan and/or
rights granted under the Plan comply with the requirements of Section 423 of the
Code.
16. EFFECTIVE DATE OF PLAN.
The Plan shall become effective on the same day that the Company's initial
public offering of shares of common stock becomes effective (the "Effective
Date"), but no rights granted under the Plan shall be exercised unless and until
the Plan has been approved by the stockholders of the Company within twelve
months before or after the date the Plan is adopted by the Board or the
Committee, which date may be prior to the Effective Date. The Plan is amended
and restated as of April 30, 2001 for any Offering commencing on or after May 1,
2001.
RIBOZYME PHARMACEUTICALS, INC.
By: /s/ Lawrence E. Bullock
----------------------------------
Title: Vice President of Finance &
Administration
Date: April 30, 2001
Exhibit 1
FAIRNESS OPINION OF FINANCIAL ADVISOR
February 4, 2003
Board of Directors
Ribozyme Pharmaceuticals, Inc.
2950 Wilderness Place
Boulder, Colorado 80301
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the shareholders of the outstanding common stock (the "Common Stock")
of Ribozyme Pharmaceuticals, Inc. (the "Company") of the sale to certain
identified new investors (the "New Investors") of (i) up to $48.0 million of the
Company's common stock at a price of $0.35 per share and (ii) five-year warrants
exercisable for 20.0% of the common stock purchased by the new investors at an
exercise price of $0.42 per share (the "Warrants"), with the price per share
subject to adjustment downward and the number of shares under the Warrants
subject to adjustment upward based upon resolution of identified balance sheet
contingencies prior to or proximate to closing, (the Common Stock and Warrants
together defined as the "Financing") pursuant to the Common Stock and Warrant
Purchase Agreement between the Company and the new investors dated February 4,
2003 (the "Agreement").
In connection with our review of the proposed Financing and the preparation
of our opinion, we have, among other things:
o reviewed the financial terms and conditions as stated in the
Agreement;
o reviewed the audited financial statements of the Company as of and for
the years ended December 31, 2001 and 2000;
o reviewed the Company's Annual Reports filed on Form 10-K for the year
ending December 31, 2001 and the Company's Quarterly Reports filed on
10-Q for the quarters ended March 31, 2002, June 30, 2002, and
September 30, 2002;
o reviewed other financial and operating information, including
projections provided by the Company in writing;
o reviewed certain other publicly available information on the Company;
and
o discussed with members of the senior management of the Company certain
information relating to the aforementioned and other matters which we
have deemed relevant to our inquiry.
We have assumed and relied upon the accuracy and completeness of all information
supplied or otherwise made available to us by the Company or any other party and
have not attempted to verify independently any of such information. We have not
made or obtained an independent appraisal of the assets or liabilities
(contingent or otherwise) of the Company. With respect to financial projections
and other information and data provided to or otherwise reviewed by or discussed
with us, we have assumed that such projections and other information and data
have been reasonably prepared in good faith on bases reflecting the best
currently available estimates and judgments of management, and we have relied
upon management to advise us promptly if any information previously provided
became inaccurate or was required to be updated during the period of our review.
Our opinion is based upon market, economic, financial, and other circumstances
and conditions existing and disclosed to us as of February 4, 2003. Any material
change in such circumstances and conditions since that date would require a
re-evaluation of this opinion, which we are under no obligation to undertake.
We express no opinion as to the underlying business decision to complete the
Financing, the structure or tax consequences of the transactions contemplated by
the Agreement, or the availability or advisability of any alternatives to the
Financing. This letter does not express any opinion as to the likely trading
range of the Company's common stock following the Financing, which may vary
depending on numerous factors that generally impact the price of securities or
on the financial condition of the Company at that time. Our opinion is limited
to the fairness, from a financial point of view, of the Financing to the
shareholders of the Company. We express no opinion with respect to any other
reasons, legal, business, or otherwise, that may support the decision of the
Board of Directors to approve or consummate the Financing.
In conducting our investigation and analyses and in arriving at our opinion, we
have taken into account such accepted financial and investment banking
procedures and considerations as we have deemed relevant, including the review
of: (i) historical and projected revenues, operating earnings, net income, and
capitalization of the Company and certain other publicly-held biotechnology
companies we believe to be similar to the Company; (ii) the current and
projected financial position, results of operations, and capital resources of
the Company; (iii) the historical market prices and trading activity of the
Common Stock of the Company; (iv) financial and operating information for
selected biotechnology company financing transactions that we deemed to be
similar, in whole or in part, to the Financing; (v) the condition of the
securities markets generally and the biotechnology financing market
specifically; and (vi) the financial prospects for the Company absent the
Financing.
In arriving at this opinion, Raymond James did not attribute any particular
weight to any analysis or factor considered by it, but rather made qualitative
judgments as to the significance and relevance, if any, of each analysis and
factor. Accordingly, Raymond James believes that its analyses must be considered
as a whole and that selecting portions of its analyses, without considering all
analyses, would create an incomplete view of the process underlying this
opinion.
Raymond James & Associates, Inc. ("Raymond James") is actively engaged in
the health care investment banking business and regularly undertakes the
valuation of investment securities in connection with public offerings, private
placements, business combinations, and similar transactions. Raymond James has
been engaged to render financial advisory services to the Company in connection
with the proposed Financing and will receive a fee for such services, which fee
is contingent upon consummation of the Financing. Raymond James also will
receive a fee upon the delivery of this opinion. In addition, the Company has
agreed to indemnify us against certain liabilities arising out of our
engagement.
In the ordinary course of our business, Raymond James may trade in the
securities of the Company for our own account or for the accounts of our
customers and, accordingly, may at any time hold a long or short position in
such securities.
It is understood that this letter is for the information of the Board of
Directors of the Company in evaluating the proposed Financing and does not
constitute a recommendation to any shareholder of the Company regarding how said
shareholder should vote on the proposed Financing. The Company may include the
full text of this letter in any proxy statement or offering memorandum prepared
by the Company in connection with and describing the Financing. Except for such
uses, this opinion is not to be quoted or referred to, in whole or in part,
without our prior written consent, which will not be unreasonably withheld.
Based upon and subject to the foregoing, it is our opinion that, as of February
4, 2003, the Financing is fair, from a financial point of view, to the holders
of the Company's outstanding Common Stock.
Very truly yours,
/S/ RAYMOND JAMES & ASSOCIATES, INC.
RAYMOND JAMES & ASSOCIATES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
RIBOZYME PHARMACEUTICALS, INC.
SPECIAL MEETING OF STOCKHOLDERS
The undersigned stockholder of Ribozyme Pharmaceuticals, Inc., a Delaware
corporation, hereby acknowledges receipt of the Notice of Special Meeting of
Stockholders and proxy statement each dated March __, 2003 and hereby appoints
Marvin Tancer, proxy and attorney-in-fact, with full power of substitution, on
behalf and in the name of the undersigned to represent the undersigned at the
Special Meeting of Stockholders of Ribozyme Pharmaceuticals, Inc. to be held on
April __, 2003 at __________, local time, at Ribozyme Pharmaceuticals, Inc.'s
headquarters located at 2950 Wilderness Place, Boulder, Colorado 80301 and at
any postponement or adjournment thereof, and to vote all shares of common stock
which the undersigned would be entitled to vote if then and there personally
present, on the matters set forth below:
1. Proposal to approve the terms of RPI's private placement of $48 million of
shares of its common stock at a purchase price of anywhere between $0.28 and
$0.33 per share and warrants exercisable for shares of common stock at $0.42 per
share.
|_| FOR |_| AGAINST |_| ABSTAIN
2. Proposal to approve an amendment to our current amended and restated
certificate of incorporation to effect a reverse split of our common stock of
not less than 1-for-5 and not more than 1-for-15, with our board of directors
having the authority to determine which, if any, of these reverse stock splits
to effect within those parameters.
|_| FOR |_| AGAINST |_| ABSTAIN
3. Proposal to approve an amendment to our current amended and restated
certificate of incorporation to increase the number of authorized shares of
capital stock.
|_| FOR |_| AGAINST |_| ABSTAIN
4. Proposal to approve an amendment to our current amended and restated
certificate of incorporation to change our name from Ribozyme Pharmaceuticals,
Inc. to a name that better reflects our new business focus.
|_| FOR |_| AGAINST |_| ABSTAIN
5. Proposal to approve an amendment to our current amended and restated
certificate of incorporation to permit stockholders to act by written consent in
lieu of a meeting.
|_| FOR |_| AGAINST |_| ABSTAIN
6. Proposal to approve an amendment to our 1996 Stock Option Plan and to our
2001 Stock Option Plan as a result of which we will (a) terminate the 1996 Stock
Option Plan and merge it into the 2001 Stock Option Plan, (b) increase the
number of shares reserved for issuance pursuant to our 2001 Stock Option Plan by
a total of 34 million shares and (c) provide a maximum limit on options granted
to any individual during any calendar year of 12 million shares.
|_| FOR |_| AGAINST |_| ABSTAIN
7. Proposal to approve an increase in the number of shares reserved for issuance
pursuant to our Employee Stock Purchase Plan by a total of 5 million shares.
|_| FOR |_| AGAINST |_| ABSTAIN
SEE REVERSE SIDE
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED,
WILL BE VOTED "FOR" PROPOSALS ONE, TWO, THREE, FOUR, FIVE, SIX AND SEVEN AND AS
THE PROXY HOLDERS DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY COME BEFORE THE
MEETING.
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS HEREON. IF THE STOCK IS REGISTERED IN
THE NAMES OF TWO OR MORE PERSONS, EACH SHOULD SIGN. EXECUTORS, ADMINISTRATORS,
TRUSTEES, GUARDIANS AND ATTORNEYS-IN-FACT SHOULD ADD THEIR TITLES. IF SIGNER IS
A CORPORATION, PLEASE GIVE FULL CORPORATE NAME AND HAVE A DULY AUTHORIZED
OFFICER SIGN, STATING TITLE. IF SIGNER IS A PARTNERSHIP, PLEASE SIGN IN
PARTNERSHIP NAME BY AUTHORIZED PERSON.
PLEASE SIGN, DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED RETURN ENVELOPE
WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES.
DATE:
_________________________________, 2003
__________________________________
SIGNATURE(S)
__________________________________
SIGNATURE(S)
NOTE: This proxy should be marked, signed by the stockholder(s) exactly as his
or her name appears hereon, and returned promptly in the enclosed envelope.
Persons signing in a fiduciary capacity should so indicate. If shares are held
by joint tenants or as community property, both should sign.