UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
-----------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
-------------- --------------
Commission file number: 0-26642
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MYRIAD GENETICS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 87-0494517
-------- ----------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
320 WAKARA WAY, SALT LAKE CITY, UT 84108
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (801) 584-3600
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
As of February 6, 1997, the registrant had 8,956,676 shares of common stock
outstanding.
MYRIAD GENETICS, INC.
INDEX TO FORM 10-Q
Page
----
PART I - Financial Information
Item 1. Financial Statements.
Condensed Consolidated Balance Sheet as of December 31, 1996
and June 30, 1996 3
Condensed Consolidated Statements of Operations for the three
months and six months ended December 31, 1996 and 1995 4
Condensed Consolidated Statements of Cash Flows for the three
months and six months ended December 31, 1996 and 1995 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
PART II - Other Information
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURE(S) 14
2
MYRIAD GENETICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
Dec. 31, 1996
(Unaudited) June 30, 1996
------------- -------------
Assets
------
Current assets:
Cash and cash equivalents $ 15,259,726 $ 13,235,680
Marketable investment securities 24,747,865 37,212,454
Non trade receivables 123,896 79,066
Prepaid expenses 316,050 88,423
------------ ------------
Total current assets 40,447,537 50,615,623
------------ ------------
Equipment and leasehold improvements:
Equipment 11,568,106 9,097,484
Leasehold improvements 1,728,901 863,306
Construction in progress - 810,108
------------ ------------
13,297,007 10,770,898
Less accumulated depreciation and
amortization 2,200,089 1,375,366
------------ ------------
Net equipment and leasehold
improvements 11,096,918 9,395,532
Long-term marketable investment 22,284,617 19,554,646
securities
Other assets 61,114 41,696
------------ ------------
$ 73,890,186 $ 79,607,497
============ ============
Liabilities and Stockholders' Equity
- ------------------------------------
Current liabilities:
Accounts payable $ 2,253,282 $ 2,193,285
Accrued liabilities 1,038,801 786,791
Deferred revenue 5,699,735 5,661,376
Current portion of notes payable 325,279 308,658
------------ ------------
Total current liabilities 9,317,097 8,950,110
------------ ------------
Notes payable, less current portion 304,734 471,640
Stockholders' equity
Common stock, $0.01 par value,
15,000,000 shares authorized;
issued and outstanding
8,773,462 shares Dec. 31, 1996,
8,702,215 shares June 30, 1996 87,734 87,022
Additional paid-in capital 87,038,588 87,015,215
Fair value adjustment on
available-for-sale marketable
investment securities 9,232 (67,865)
Deferred compensation (1,642,246) (1,907,513)
Accumulated deficit (21,224,953) (14,941,112)
------------ ------------
Net stockholders' equity 64,268,355 70,185,747
------------ ------------
$ 73,890,186 $ 79,607,497
============ ============
See accompanying notes to condensed consolidated financial statements.
3
MYRIAD GENETICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended
----------------------------- -----------------------------
Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1996 Dec. 31, 1995
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
------------- ------------- ------------- -------------
Revenues:
Research revenue $ 2,717,740 $ 1,668,775 $ 4,913,521 $ 2,681,675
Genetic testing revenue 34,060 - 34,060 -
------------ ----------- ------------ ------------
Total revenues 2,751,800 1,668,775 4,947,581 2,681,675
------------ ----------- ------------ ------------
Expenses:
Cost of goods sold 24,283 - 24,283 -
Research and development expense 5,045,154 2,796,727 9,139,897 5,177,913
Selling, general and administrative
expense 1,997,108 485,753 3,757,067 893,911
------------ ----------- ------------ ------------
Total expenses 7,066,545 3,282,480 12,921,247 6,071,824
------------ ----------- ------------ ------------
Operating loss (4,314,745) (1,613,705) (7,973,666) (3,390,149)
Other income (expense):
Interest income 886,783 986,533 1,735,277 1,261,756
Interest expense (17,739) (25,351) (37,391) (52,396)
Gain/(loss) on sale of fixed assets (7,992) 1,200 (7,992) (73,436)
------------ ----------- ------------ ------------
861,052 962,382 1,689,894 1,135,924
------------ ----------- ------------ ------------
Net loss ($3,453,693) ($651,323) ($6,283,772) ($2,254,225)
============ =========== ============ ============
Net loss per share ($0.39) ($0.08) ($0.72) ($0.34)
============ =========== ============ ============
Weighted average shares outstanding 8,743,530 8,138,356 8,728,177 6,602,842
See accompanying notes to condensed consolidated financial statements.
4
MYRIAD GENETICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended Six Months Ended
----------------------------- -----------------------------
Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1996 Dec. 31, 1995
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
------------- ------------- ------------- -------------
Cash flows from operating activities:
Net loss ($3,453,693) ($651,323) ($6,283,772) ($2,254,225)
Adjustments to reconcile net loss to
net cash, provided by (used in)
operating activities:
Depreciation and amortization 612,413 313,937 1,109,180 759,642
Loss (gain) on sale of equipment 7,992 (1,200) 7,992 73,436
(Increase) decrease in non-trade
receivables (106,909) 1,355,428 (44,830) 49,680
(Increase) decrease in other assets (239,018) 175,271 (247,045) 36,232
(Decrease) increase in accounts
payable and accrued expenses (149,832) 1,247,626 312,007 774,101
(Decrease) increase in deferred
revenue (205,860) (349,000) 38,359 1,201,000
----------- ---------- ----------- -----------
Net cash (used in) provided by
operating activities (3,534,907) 2,090,739 (5,108,109) 639,866
----------- ---------- ----------- -----------
Cash flows from investing activities:
Capital expenditures (945,666) (2,621,579) (2,560,864) (3,192,121)
Proceeds from sale of equipment 7,500 1,200 7,500 36,375
Net change in marketable investment 4,966,190 (26,995,155) 9,811,717 (39,633,455)
securities
----------- ---------- ----------- -----------
Net cash provided by (used
in) investing 4,028,024 (29,615,534) 7,258,353 (42,789,201)
activities
----------- ---------- ----------- -----------
Cash flows from financing activities:
Net payments of notes payable (76,099) (68,487) (150,285) (135,280)
Net proceeds from issuance of common
stock (1,872) 49,095,544 24,087 49,095,543
Net proceeds from issuance of
preferred stock - - - 9,982,723
Conversion of preferred stock - (109,414) - (109,414)
------------ ----------- ----------- -----------
Net cash (used in) provided
by financing activities (77,971) 48,917,643 (126,198) 58,833,572
------------ ----------- ----------- -----------
Net increase in cash and cash
equivalents 415,146 21,392,848 2,024,046 16,684,237
Cash and cash equivalents at beginning
of period 14,844,580 7,177,125 13,235,680 11,885,736
------------ ----------- ----------- -----------
Cash and cash equivalents at end of
period $ 15,259,726 $28,569,973 $15,259,726 $28,569,973
============ =========== =========== ===========
See accompanying notes to condensed consolidated financial statements.
5
MYRIAD GENETICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The accompanying condensed unaudited consolidated financial statements have
been prepared by Myriad Genetics, Inc. (the "Company") in accordance with
generally accepted accounting principles for interim financial information
and pursuant to the applicable rules and regulations of the Securities and
Exchange Commission. The condensed unaudited consolidated financial
statements include the accounts of the Company and its wholly-owned
subsidiaries. All material intercompany accounts and transactions have
been eliminated in consolidation. In the opinion of management, the
accompanying financial statements contain all adjustments (consisting of
normal and recurring accruals) necessary to present fairly all financial
statements. The financial statements herein should be read in conjunction
with the Company's audited consolidated financial statements and notes
thereto for the fiscal year ended June 30, 1996, included in the Company's
Annual Report on Form 10-K for the year ended June 30, 1996. Operating
results for the three and six month periods ended December 31, 1996 may not
necessarily be indicative of the results to be expected for any other
interim period or for the full year.
(2) SUBSIDIARIES
During the quarter ended December 31, 1996, the Company established Myriad
Financial, Inc. ("Financial"), a wholly owned subsidiary of the Company.
Financial, a Utah corporation, is a leasing company through which the
Company will lease equipment for its research, development, and production
operations. Financial, along with Myriad Genetic Laboratories, Inc.
("Labs"), the Company's wholly owned genetic testing facility, constitute
the subsidiaries of the Company.
6
MANAGEMENTOS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Since inception, the Company has devoted substantially all of its resources to
maintaining its research and development programs, establishing a genetic
testing laboratory, and supporting collaborative research agreements. Revenues
received by the Company primarily have been payments pursuant to collaborative
research agreements. The Company has been unprofitable since its inception and,
for the quarter ended December 31, 1996, the Company had a net loss of
$3,453,693 and as of December 31, 1996 had an accumulated deficit of
$21,224,953.
In October 1996, the Company announced the introduction of BRACAnalysis/TM/, a
comprehensive BRCA1 and BRCA2 gene sequence analysis for susceptibility to
breast and ovarian cancer. The Company, through its wholly owned subsidiary
Labs, began accepting testing samples on a commercial basis on October 30, 1996.
Genetic testing revenues of $34,060 were recognized for the quarter ended
December 31, 1996.
In August 1995, the Company completed a three-year collaborative research and
development agreement with Eli Lilly and Company to locate and sequence the
BRCA1 breast and ovarian cancer gene. This agreement has provided the Company
with research funding and may in the future provide certain additional payments
upon the attainment of research and regulatory milestones and royalty payments
based on sales of any products resulting from the collaboration. The Company
did not recognize revenue from this agreement during the quarter ended December
31, 1996.
In April 1995, the Company commenced a five-year collaborative research and
development arrangement with Novartis (successor corporation to the merger of
Ciba-Geigy, Ltd. and Sandoz, Ltd.). This collaboration provides the Company
with an equity investment, research funding and potential milestone payments of
up to $60,000,000. The Company is entitled to receive royalties from sales of
therapeutic products sold by Novartis. The Company recognized $1,401,579 in
revenue under this agreement for the quarter ended December 31, 1996.
In September 1995, the Company commenced a five-year collaborative research and
development arrangement with Bayer Corporation ("Bayer"). This collaboration
provides the Company with an equity investment, research funding and potential
milestone payments of up to $71,000,000. The Company is entitled to receive
royalties from sales of therapeutic products sold by Bayer. The Company
recognized $1,316,161 in revenue under this agreement for the quarter ended
December 31, 1996.
In January 1997, the Company announced the identification of the first major
gene responsible for glioma, a form of brain cancer that is the leading killer
of children with cancer. The brain cancer gene, known as BNC1, was located
through a collaborative effort by scientists at the Company and the University
of Texas M.D. Anderson Cancer Center ("M.D. Anderson"). It is anticipated that
the location of BNC1 will accelerate development of new diagnostic and
therapeutic approaches to brain cancer. There can be no assurance, however,
that the identification of this gene will lead to the development of a
diagnostic test or therapeutic products.
In February 1997, the Company announced that the U.S. Patent and Trademark
Office had granted a patent covering the AGT (Angiotensinogen) gene mutation.
The composition of matter patent on the gene mutation, which is believed to be
associated with an individual's risk for salt-dependent hypertension, was issued
to the University of Utah, and is exclusively licensed to the Company for
therapeutic applications, and co-exclusively licensed to the Company for
diagnostic applications. There can be no assurance, however, that the patenting
of this gene will lead to the development of a diagnostic test or therapeutic
products.
The Company intends to enter into additional collaborative relationships to
locate and sequence genes associated with other common diseases as well as
continuing to fund internal research projects. There can be no assurance that
the Company will be able to enter into additional collaborative relationships on
terms acceptable to the Company. The Company expects to incur losses for at
least the next several years, primarily due to expansion of its research and
development programs, increased staffing costs, and expansion of its facilities.
Additionally, the Company expects to incur substantial sales, marketing and
other expenses in connection with building its genetic predisposition
7
testing business. The Company expects that losses will fluctuate from quarter to
quarter and that such fluctuations may be substantial.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995
Research revenues for the quarter ended December 31, 1996 increased $1,048,965
from the same quarter of 1995. The increase was attributable to the Company's
corporate research collaboration agreements providing ongoing research funding.
Research revenue from the corporate collaboration agreements is recognized as
related costs are incurred. Consequently, as these programs progress and costs
increase, revenues increase proportionately.
In October 1996, the Company announced the introduction of BRACAnalysis/TM/, a
comprehensive BRCA1 and BRCA2 gene sequence analysis for susceptibility to
breast and ovarian cancer. The Company, through its wholly owned subsidiary
Labs, began accepting testing samples on a commercial basis on October 30, 1996.
Genetic testing revenues of $34,060 were recognized in the quarter ended
December 31, 1996. The Company anticipates genetic testing revenue to increase
in the future as cancer centers develop internal protocols for handling samples,
additional insurance companies offer reimbursement for such tests, and market
awareness of such tests is increased. There can be no assurance that any of
these factors will be realized. The Company also anticipates an improved gross
margin in the future as increased sales reduce inefficiencies related to
underutilization of capacity.
Research and development expenses for the quarter ended December 31, 1996
increased to $5,045,154 from $2,796,727 for the same quarter of 1995. This
increase was primarily due to an increase in research activities as a result of
progress in the Company's collaborations with Novartis and Bayer as well as
those programs funded by the Company, including the successful collaborative
effort by the Company and scientists at M.D. Anderson in discovering and
sequencing the BNC1 brain cancer gene. The increased level of research spending
includes third party research programs, increased depreciation charges related
to purchasing of additional equipment, the hiring of additional personnel and
the associated increase in use of laboratory supplies and reagents. Such
expenses will likely increase to the extent that the Company enters into
additional research agreements with third parties.
Selling, general and administrative expenses for the quarter ended December 31,
1996 increased $1,511,355 from the same quarter of 1995. The increase was
primarily attributable to costs associated with the launch of BRACAnalysis/TM/
as well as additional administrative, sales, marketing and education personnel,
market research activities, educational material development, facilities-related
costs and deferred compensation related to grants of stock options and warrants.
The Company expects its general and administrative expenses will continue to
increase in support of its genetic predisposition testing business and its
research and development efforts.
Interest income for the quarter ended December 31, 1996 decreased to $886,783
from $986,533 for the same quarter of the prior year. This decrease was
primarily due to the decreased funds available for investment, which were spent
in the ordinary course of business, including the establishment of a genetic
predisposition testing lab and internally funded research programs. Interest
expense for the quarter ended December 31, 1996, amounting to $17,739, was due
entirely to borrowings under the Company's equipment financing facility.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 AND 1995
Research revenues increased to $4,913,521 in the first six months of fiscal year
1997 from $2,681,675 in the first six months of fiscal year 1996. The increase
was attributable to the Novartis and Bayer research collaboration agreements
providing ongoing research funding.
Genetic testing revenues of $34,060 were recognized in the six months ended
December 31, 1996. The Company did not perform any genetic tests on a
commercial basis in the six months ended December 31, 1995.
Research and development expenses for the six months ended December 31, 1996
increased to $9,139,897 from $5,177,913 for the prior year. This increase was
primarily due to an increase in research activities as a result of the Company's
collaborations with Novartis and Bayer, and an increase in Company funded
research projects including third party research programs, increased
depreciation charges related to purchasing additional equipment, the hiring of
8
additional personnel and the associated increase in use of laboratory supplies
and reagents. The Company also incurred increased development expenses during
the six month period related to the beta testing and validation of the Company's
BRACAnalysis/TM/ genetic predisposition test for mutations of the BRCA1 and
BRCA2 breast and ovarian cancer genes. Such expenses will also likely increase
to the extent that the Company enters into additional research agreements with
third parties and continues to develop additional commercial tests.
Selling, general and administrative expenses for the six months ended December
31, 1996 increased $2,863,156 from the six month period in the prior year. The
increase was primarily attributable to costs associated with the launch of
BRACAnalysis/TM/ as well as additional administrative, sales, marketing and
education personnel, market research activities, educational material
development, facilities-related costs and deferred compensation related to
grants of stock options and warrants. The Company expects its general and
administrative expenses will continue to increase in support of its genetic
predisposition testing business and its research and development efforts.
Interest income for the first six months of fiscal year 1997 increased to
$1,735,277 from $1,261,756 for the first six months of fiscal year 1996. This
increase was primarily due to the increased funds available for investment,
which were raised in the Company's private placement of preferred stock in
February 1995, its research and development collaborations entered into with
Novartis and Bayer in April 1995 and September 1995, respectively, and its
initial public offering in October 1995. Interest expense for the six months
ended December 31, 1996, amounting to $37,391, was due entirely to borrowings
under the Company's equipment financing facility. The loss on sale of fixed
assets of $7,992 in the six months ended December 31, 1996 and $73,436 in the
six months ended December 31, 1995 is the result of the sale of out-dated
equipment.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities was $3,534,907 during the quarter ended
December 31, 1996 as compared to net cash provided of $2,090,739 during the same
quarter of the prior fiscal year. Non-trade receivables increased $106,909
between September 30, 1996 and December 31, 1996, primarily as a result of
amounts due from the Company's payroll service which were subsequently collected
in January 1997. Accounts payable decreased between September 30, 1996 and
December 31, 1996 due to payments to service providers scheduled for December
1996.
The Company's investing activities provided cash of $4,028,024 in the three
months ended December 31, 1996 and used cash of $29,615,534 in the three months
ended December 31, 1995. Investing activities were comprised primarily of
capital expenditures for research equipment, office furniture, and facility
improvements and marketable investment securities purchased from cash raised
from the Company's initial public offering in October 1995. During the quarter
ended December 31, 1996, the Company shifted a portion of its investment in
marketable securities from longer term investments to cash and cash equivalents
in order to provide for ongoing corporate expenditures.
Financing activities used $77,971 during the quarter ended December 31, 1996.
The Company reduced the amount of principal owing on its equipment financing
facility by $76,099. In addition, several warrants were exercised during the
period. Financing activities provided $48,917,643 in the quarter ended December
31, 1995 primarily as a result of the Company's initial public offering
concluded in October 1995.
The Company anticipates that its existing capital resources, including the net
proceeds of its initial public offering and interest earned thereon, will be
adequate to maintain its current and planned operations for at least the next
two years, although no assurance can be given that changes will not occur that
would consume available capital resources before such time. The Company's
future capital requirements will be substantial and will depend on many factors,
including progress of the Company's research and development programs, the
results and cost of clinical correlation testing of the Company's genetic tests,
the costs of filing, prosecuting and enforcing patent claims, competing
technological and market developments, payments received under collaborative
agreements, changes in collaborative research relationships, the costs
associated with potential commercialization of its gene discoveries, if any,
including the development of manufacturing, marketing and sales capabilities,
the cost and availability of third-party financing for capital expenditures and
administrative and legal expenses. Because of the Company's significant long-
term capital requirements, the Company intends to raise funds when conditions
are favorable, even if it does not have an immediate need for additional capital
at such time.
9
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS
The Company believes that this report on Form 10-Q contains certain forward-
looking statements as that term is defined in the Private Securities Litigation
Reform Act of 1995. Such statements are based on management's current
expectations and are subject to a number of factors and uncertainties which
could cause actual results to differ materially from those described in the
forward-looking statements. The Company cautions investors that there can be no
assurance that actual results or business conditions will not differ materially
from those projected or suggested in such forward-looking statements as a result
of various factors, including, but not limited to, the following: intense
competition related to the discovery of disease-related genes and the
possibility that others may discover, and the Company may not be able to gain
rights with respect to, genes important to the establishment of a successful
genetic testing business; difficulties inherent in developing genetic tests once
genes have been discovered; the Company's limited experience in operating a
genetic testing laboratory; the Company's limited marketing and sales experience
and the risk that BRACAnalysis/TM/ and any other tests which the Company
develops may not be able to be marketed at acceptable prices or receive
commercial acceptance in the markets that the Company is targeting or expects to
target; uncertainty as to whether there will exist adequate reimbursement for
the Company's services from government, private healthcare insurers and third-
party payors; and uncertainties as to the extent of future government regulation
of the Company's business. As a result, the Company's future development efforts
involve a high degree of risk. For further information, refer to the more
specific risks and uncertainties disclosed throughout this Quarterly Report on
Form 10-Q.
10
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is not a party to any litigation in any court, and management is not
aware of any contemplated proceeding by any governmental authority against the
Company.
ITEM 2. CHANGES IN SECURITIES.
During the three months ended December 31, 1996, the Company issued a total of
27,074 shares of Common Stock to various Directors and consultants of the
Company pursuant to the exercise of stock options at a weighted average exercise
price of $0.54 per share.
No person acted as an underwriter with respect to the transactions set forth
above. In each of the foregoing instances, the Company relied on Rule 701
promulgated under the Securities Act of 1933, as amended, for the exemption from
the registration requirements of the Securities Act, since no public offerings
were involved.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On November 15, 1996, the Company held its Annual Meeting of Shareholders (the
"Annual Meeting"). A quorum of 5,516,777 shares of Common Stock of the Company
(of a total 8,725,907 outstanding shares, or approximately 63%) was represented
at the Annual Meeting in person or by proxy, which was held to vote on the
following proposals:
1. To elect eight members to the Board of Directors. Nominees for Directors
were Walter Gilbert, Ph.D., Wolfgang Hartwig, Ph.D., Arthur H. Hayes, Jr., M.D.,
John J. Horan, Alan J. Main, Ph.D., Peter D. Meldrum, Mark H. Skolnick, Ph.D.,
and Dale A. Stringfellow, Ph.D.
2. To consider and act upon a proposal to amend the Company's 1992 Employee,
Director and Consultant Stock Option Plan to increase the aggregate number of
shares of Common Stock authorized for issuance thereunder and to limit the
number of shares of Common Stock that may be granted pursuant to stock options
to any employee in any one year period.
3. To consider and act upon a proposal to ratify the appointment of KPMG Peat
Marwick LLP as the Company's independent public accountants for the fiscal year
ending June 30, 1997.
Each of the proposals was adopted, with the vote totals as follows:
PROPOSAL 1: FOR WITHHELD
- ------------ --------- --------
Walter Gilbert, Ph.D. 5,483,217 33,560
11
Wolfgang Hartwig, Ph.D. 5,483,217 33,560
Arthur H. Hayes, Jr., M.D. 5,483,217 33,560
John J. Horan 5,483,017 33,760
Alan J. Main, Ph.D. 5,483,017 33,760
Peter D. Meldrum 5,483,217 33,560
Mark H. Skolnick, Ph.D. 5,483,117 33,660
Dale A. Stringfellow, Ph.D. 5,483,017 33,760
PROPOSAL 2:
- -----------
For 2,588,609
---------
Against 1,008,319
---------
Abstain 29,280
---------
Broker Non-Vote 1,890,569
---------
PROPOSAL 3:
- -----------
For 5,508,522
---------
Against 5,780
---------
Abstain 2,475
---------
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
--------
The following is a list of exhibits filed as part of this Quarterly Report on
Form 10-Q.
Exhibit
Number Description
- ------ -----------
10.1 Patent and Technology License Agreement dated December 2, 1996 among
the Board of Regents of the University of Texas System, the
University of Texas M.D. Anderson Cancer Center and the Company. The
Company has excluded from this Exhibit 10.1 portions of the Patent
and Technology License Agreement for which the Company has requested
confidential treatment from the Securities and Exchange Commission.
The portions of the Patent and Technology License Agreement for which
confidential treatment has been requested are marked "[ ]" and such
confidential portions have been filed separately with the Securities
and Exchange Commission.
10.2 Myriad Genetics, Inc. 1992 Employee, Director and Consultant Stock
Option Plan (filed as Exhibit 10.1 to the Company's Registration
Statement on Form S-1, File No. 33-95970, effective October 5, 1995),
as amended on November 15, 1996.
11.1 Statement Regarding Computation of Net Loss Per Share
27.1 Financial Date Schedule
12
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the quarter ended December 31, 1996.
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MYRIAD GENETICS, INC.
Date: February 14, 1997 By: /s/ Peter D. Meldrum
------------------- --------------------------------
Peter D. Meldrum
President and Chief Executive Officer
Date: February 14, 1997 /s/ Jay M. Moyes
------------------- --------------------------------
Jay M. Moyes
Vice President of Finance
(principal financial and accounting
officer)
14
MYRIAD GENETICS, INC.
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
10.1 Patent and Technology License Agreement dated December 2, 1996 among
the Board of Regents of The University of Texas System, The
University of Texas M.D. Anderson Cancer Center and the Company. The
Company has excluded from this Exhibit 10.1 portions of the Patent
and Technology License Agreement for which the Company has requested
confidential treatment from the Securities and Exchange Commission.
The portions of the Patent and Technology License Agreement for
which confidential treatment has been requested are marked "[ ]" and
such confidential portions have been filed separately with the
Securities and Exchange Commission.
10.2 Myriad Genetics, Inc. 1992 Employee, Director and Consultant Stock
Option Plan (filed as Exhibit 10.1 to the Company's Registration
Statement on Form S-1, File No. 33-95970, effective October 5,
1995), as amended on November 15, 1996.
11.1 Statement Regarding Computation of Net Loss Per Share
27.1 Financial Data Schedule
EXHIBIT 10.1
MYRIAD GENETICS, INC. HAS OMITTED FROM THIS EXHIBIT 10.1 PORTIONS OF THE
AGREEMENT FOR WHICH MYRIAD GENETICS, INC. HAS REQUESTED CONFIDENTIAL TREATMENT
FROM THE SECURITIES AND EXCHANGE COMMISSION. THE PORTIONS OF THE AGREEMENT FOR
WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED ARE MARKED "[ ]" AND SUCH
CONFIDENTIAL PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.
PATENT AND TECHNOLOGY LICENSE AGREEMENT
THIS fourteen (14) page AGREEMENT ("AGREEMENT") is made on this 2nd day
-----------
of December, 1996 by and between the BOARD OF REGENTS ("BOARD") of THE
UNIVERSITY OF TEXAS SYSTEM ("SYSTEM"), an agency of the State of Texas, whose
address is 201 West 7th Street, Austin, Texas 78701, THE UNIVERSITY OF TEXAS
M. D. ANDERSON CANCER CENTER ("MDA"), a component Institution of the SYSTEM and
Myriad Genetics, Inc., a Delaware corporation having a principal place of
business located at 390 Wakara Way, Salt Lake City, Utah 84108 ("LICENSEE").
TABLE OF CONTENTS
RECITALS Page 2
I. EFFECTIVE DATE Page 2
II. DEFINITIONS Page 2
III. LICENSE Page 3
IV. CONSIDERATION, PAYMENTS AND REPORTS Page 4
V. PUBLICATION Page 6
VI. PATENTS AND INVENTIONS Page 7
VII. INFRINGEMENT BY THIRD PARTIES Page 7
VIII. PATENT MARKING Page 8
IX. INDEMNIFICATION Page 8
X. USE OF BOARD AND COMPONENT'S NAME Page 8
XI. CONFIDENTIAL INFORMATION Page 9
XII. ASSIGNMENT Page 9
XIII. TERMS AND TERMINATION Page 9
XIV. WARRANTY: SUPERIOR-RIGHTS Page 11
XV. GENERAL Page 12
SIGNATURES Page 13
EXHIBIT I Page 14
1
RECITALS
A. BOARD owns certain TECHNOLOGY RIGHTS related to LICENSED SUBJECT MATTER,
which were developed at MDA, a component institution of SYSTEM.
B. BOARD desires to have the LICENSED SUBJECT MATTER developed in the LICENSED
FIELD and used for the benefit of LICENSEE, BOARD, SYSTEM, MDA, the
inventor, and the public as outlined in the Intellectual Property Policy
promulgated by the BOARD.
C. LICENSEE wishes to obtain a license from BOARD to practice LICENSED SUBJECT
MATTER.
NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL COVENANTS AND PREMISES HEREIN
CONTAINED, THE PARTIES HERETO AGREE AS FOLLOWS:
I. EFFECTIVE DATE
1.1 Subject to approval by BOARD, this AGREEMENT shall be effective as of the
date written herein above ("EFFECTIVE DATE").
II. DEFINITIONS
As used in this AGREEMENT, the following terms shall have the meanings
indicated:
2.1 AFFILIATE shall mean any business entity more than 50% owned by LICENSEE,
any business entity which owns more than 50% of LICENSEE, or any business
entity that is more than 50% owned by a business entity that owns more than
50% of LICENSEE.
2.2 LICENSED FIELD shall mean all human and animal diagnostic, preventive and
therapeutic applications within the LICENSED SUBJECT MATTER.
2.3 LICENSED PRODUCTS shall mean any product or service SOLD by LICENSEE
comprising or making use of LICENSED SUBJECT MATTER pursuant to this
AGREEMENT.
2.4 LICENSED SUBJECT MATTER shall mean inventions and discoveries defined
herein as PATENT RIGHTS or as TECHNOLOGY RIGHTS.
2.5 LICENSED TERRITORY shall mean the entire world.
2
2.6 NET SALES shall mean the gross amounts invoiced by LICENSEE from the SALE
of LICENSED PRODUCTS less sales discounts actually granted in amounts
customary in the trade, including but not limited to pharmacy incentive
programs and all other similar sales incentive programs, all governmental
and healthcare rebates, hospital performance incentive program rebates or
charge backs, sales and/or use taxes actually paid, import and/or export
duties actually paid, outbound transportation actually prepaid or allowed,
insurance and postage, amounts actually allowed or credited due to returns
(not exceeding the original billing or invoice amount) and any
uncollectable amounts owed to LICENSEE from SALES of LICENSED PRODUCTS.
2.7 PATENT RIGHTS shall only mean any and all of BOARD'S rights in information
or discoveries claimed in invention disclosures, patents, and/or patent
applications, whether domestic or foreign, and all divisionals,
substitutions, renewals, continuations, continuations-in-part, reissues,
reexaminations or extensions thereof, and any letters patent that issue
thereon as set forth in Exhibit I hereto,subject to the limitations, if
any, set forth therein.
2.8 SALE or SOLD shall mean the transfer or disposition of a LICENSED PRODUCT
for value to a party other than LICENSEE or an AFFILIATE.
2.9 Subject to the limitations, if any, set forth in Exhibit I hereto,
TECHNOLOGY RIGHTS shall mean BOARD'S rights in any technical information,
know-how, process, procedure, composition, device, method, formula,
protocol, technique, software, design, drawing or data created by the
inventors listed in Exhibit I hereto and relating to the subject matter of
PATENT RIGHTS which is not claimed in PATENT RIGHTS but which is necessary
for practicing PATENT RIGHTS.
III. LICENSE
3.1 BOARD, through MDA, hereby grants to LICENSEE a royalty-bearing, exclusive
license under LICENSED SUBJECT MATTER to make, have made, use and/or sell
LICENSED PRODUCTS within LICENSED TERRITORY for use within LICENSED FIELD
and, subject to Paragraph 4.5 herein, shall extend to BOARD's undivided
interest in any LICENSED SUBJECT MATTER developed during the term of this
AGREEMENT and jointly owned by BOARD and LICENSEE. This grant shall be
subject to Paragraph 14.2 and 14.3, hereinbelow , the payment by LICENSEE
to BOARD of all consideration as provided in Paragraph 4.2 of this
AGREEMENT, and shall be further subject to rights retained by BOARD and MDA
to:
(A) Publish the general scientific findings from research related to
LICENSED SUBJECT MATTER, subject to ARTICLE V herein under; AND
3
(B) Subject to the provisions of ARTICLE XI herein below, use any
information contained in LICENSED SUBJECT MATTER for research,
teaching, patient care, and other educationally related purposes.
3.2 LICENSEE shall have the right to extend the license granted herein to any
AFFILIATE provided that such AFFILIATE consents to be bound by all of the
terms and conditions of this AGREEMENT.
3.3 Subject to the Paragraph 3.4 herein below, LICENSEE shall have the right to
grant sublicenses under LICENSED SUBJECT MATTER consistent with the terms
of this AGREEMENT provided that LICENSEE shall be responsible for its
sublicensees relevant to this AGREEMENT, and for diligently collecting all
amounts due LICENSEE from subicensees. In the event a sublicensee pursuant
hereto becomes bankrupt, insolvent or is placed in the hands of a receiver
or trustee, LICENSEE, to the extent allowed under applicable law and in a
timely manner, agrees to use its best reasonable efforts to collect any and
all consideration owed to LICENSEE and to have the sublicense agreement
confirmed or rejected by a court of proper jurisdiction.
3.4 LICENSEE agrees to deliver to MDA a true and correct copy of each
sublicense granted by LICENSEE, and any modification or termination
thereof, within thirty (30) days after execution, modification, or
termination.
3.5 Upon termination of this AGREEMENT, BOARD and MDA agree to accept as
successors to LICENSEE, existing sublicensees in good standing at the date
of termination provided that such sublicensees consent in writing to be
bound by all of the terms and conditions of this AGREEMENT.
IV. CONSIDERATION, PAYMENTS AND REPORTS
4.1 In consideration of rights granted by BOARD to LICENSEE under this
AGREEMENT, LICENSEE agrees to pay MDA the following:
(A) All out-of-pocket expenses incurred by MDA in filing, prosecuting,
enforcing and maintaining PATENT RIGHTS licensed hereunder, for so
long as, and in such countries as, this AGREEMENT remains in effect.
MDA will invoice LICENSEE upon a quarterly basis for expenses incurred
by MDA , and the amounts invoiced will be due and payable by LICENSEE
within thirty (30) days thereafter; AND
(B) A non-refundable prepaid royalty in the amount of [ ] which
shall not reduce the amount of any other payment provided for in this
ARTICLE IV, and which shall be due and payable within thirty (30) days
after execution of this agreement by LICENSEE; AND
4
(C) A running royalty equal to [ ] of LICENSEE's NET SALES of
LICENSED PRODUCTS in national political jurisdictions in the LICENSED
TERRITORY where LICENSED SUBJECT MATTER is covered by one (1) or more
issued patents or pending patent applications. Such royalties shall be
reduced to [ ] of the rate stated above for LICENSEE'S
NET SALES of LICENSED PRODUCTS in national political jurisdictions in
the LICENSED TERRITORY where BOARD and LICENSEE decide not to file
patent applications and therefore LICENSED SUBJECT MATTER is NOT
covered by one (1) or more issued patents or pending patent
applications.
(D) [ ] of all consideration (royalties not included)
other than Research and Development ("R&D") money and direct
equity investment received by LICENSEE from (i) any sublicensee
pursuant to Paragraphs 3.3 and 3.4 herein above and (ii) any assignee
pursuant to Paragraph 12.1 hereinbelow, including but not limited to
up-front payments, marketing, distribution, franchise, option,
license, or documentation fees, bonus and milestone payments, plus[
] of NET SALES of LICENSED PRODUCTS of sublicensee and
LICENSEE (if applicable), all payable within thirty (30) days after
March 31, June 30, September 30, and December 31 of each year during
the term of this AGREEMENT, at which time LICENSEE shall also deliver
to BOARD and MDA a true and accurate report, giving such particulars
of the business conducted by LICENSEE and its sublicensees, if any
exist, during the preceding three (3) calendar months under this
AGREEMENT as necessary for BOARD to account for LICENSEE's payments
hereunder. Such report shall include all pertinent data, including,
but not limited to: (a) the total quantities of LICENSED PRODUCTS
produced; (b) the total SALES, (c) the calculation of royalties
thereon; (d) the total royalties (or minimum royalties) so computed
and due MDA; and (e) all other amounts due MDA herein. Simultaneously
with the delivery of each such report, LICENSEE shall pay to MDA the
amount, if any, due for the period of such report. If no payments are
due, it shall be so reported. Should LICENSEE be obligated to pay
running royalties to third parties to avoid infringing such third
parties' patent rights which otherwise because of infringement would
preclude LICENSEE from practicing LICENSED SUBJECT MATTER, LICENSEE
may reduce the running royalty due MDA by such running royalties to
such third parties, provided, however, the running royalty due MDA
shall in no case be less than one-half the rates stated herein.
5
4.2 As further consideration to BOARD and MDA, LICENSEE at its sole cost and
expense agrees to use its reasonable commercial efforts to:
(a) isolate the [ ] on [ ].
(b) identify mutations of said gene.
4.3 During the Term of this AGREEMENT and for one (1) year thereafter, LICENSEE
shall keep complete and accurate records of its and its sublicensees' SALES
and NET SALES of LICENSED PRODUCTS to enable the royalties payable
hereunder to be determined. LICENSEE shall permit MDA or its
representatives, at MDA's expense, to periodically examine its books,
ledgers, and records once annually during regular business hours and with
reasonable advanced notice for the purpose of and to the extent necessary
to verify any report required under this AGREEMENT. In the event that the
amounts due to MDA are determined to have been underpaid in an amount equal
to or greater than five percent (5%) of the total amount due during the
period of time so examined, LICENSEE shall pay the cost of such
examination, and accrued interest at the highest allowable rate.
4.4 Upon the request of MDA but not more often than once per calendar year,
LICENSEE shall deliver to MDA a written report as to LICENSEE'S (and
sublicensees') efforts and accomplishments during the preceding year in
diligently commercializing LICENSED SUBJECT MATTER in the LICENSED
TERRITORY and LICENSEE'S (and sublicensees') commercialization plans for
the upcoming year.
4.5 All amounts payable hereunder by LICENSEE shall be payable in United States
funds without deductions for taxes, assessments, fees, or charges of any
kind. Checks shall be made payable to The University of Texas M. D.
Anderson Cancer Center and mailed by U.S. Mail to Box 297402, Houston,
Texas 77297 Attention: Manager, Sponsored Programs.
4.6 No payments due or royalty rates under this AGREEMENT shall be reduced as
the result of co-ownership of LICENSED SUBJECT MATTER by BOARD and another
party, including LICENSEE.
V. PUBLICATION
5.1 MDA shall have the right to publish the general scientific findings related
to the LICENSED SUBJECT MATTER, provided such pubication, presentation or
public disclosure is submitted to LICENSEE at least sixty (60) days prior
to submitting it to a journal, editor, or other third party. LICENSEE shall
have sixty (60) days after receipt to review the proposed publication,
presentation or public disclosure.
6
VI. PATENTS AND INVENTIONS
6.1 It is agreed by LICENSEE and MDA that in the event an invention, whether
patentable or not, is made solely by LICENSEE or jointly by LICENSEE and MDA
under the Article 4.2 hereof, LICENSEE shall assign all its right, title and
interest in said invention to MDA, and MDA shall be the sole owner of such
invention. If after consultation with LICENSEE it is agreed by MDA and
LICENSEE that a new patent application should be filed for LICENSED SUBJECT
MATTER, MDA will prepare and file appropriate patent applications, and
LICENSEE will pay the cost of searching, preparing, filing, prosecuting and
maintaining same. If LICENSEE notifies MDA that it does not intend to pay
the cost of an application, or the prosecution or maintenance thereof in a
national political jurisdiction, then MDA may file, prosecute or maintain
such application at its own expense and LICENSEE shall have no rights to
such patent application or patent in that national ploitical jurisdiction.
MDA shall provide LICENSEE with a copy of the application for which LICENSEE
has paid the cost of filing, as well as copies of any documents received or
filed during prosecution thereof.
VII. INFRINGEMENT BY THIRD PARTIES
7.1 LICENSEE shall have the obligation of enforcing at its expense any patent
exclusively licensed hereunder against infringement by third parties and
shall be entitled to retain recovery from such enforcement. LICENSEE shall
pay MDA a royalty on any monetary recovery to the extent that such monetary
recovery by LICENSEE is held to be damages or a reasonable royalty in lieu
thereof. In the event that LICENSEE does not file suit against a
substantial infringer of such patents within six (6) months of knowledge
thereof, then BOARD and MDA shall have the right to enforce any patent
licensed hereunder on behalf of itself and LICENSEE, with MDA retaining all
recoveries from such enforcement.
7.2 In any suit or dispute involving an infringer, the parties shall cooperate
fully, and upon the request and at the expense of the party bringing suit,
the other party shall make available to the party bringing suit at
reasonable times and under appropriate conditions all relevant personnel,
records, papers, information, samples, specimens, and the like which are in
its possession.
7.3 In the event that an action for infringment is brought against LICENSEE,
its AFFILIATES or sublicensees by a third party because of manufacture, use
or sale of LICENSED PRODUCTS, LICENSEE shall defend, at its own cost, any
such third party claim or action. MDA shall cooperate fully in such defense
and furnish to LICENSEE all evidence and assistance.
7
VIII. PATENT MARKING
8.1 LICENSEE agrees that all packaging containing individual LICENSED
PRODUCT(S), and documentation therefor, sold by LICENSEE, SUBSIDIARIES, and
sublicensees of LICENSEE will be marked permanently and legibly with the
number of the applicable patent(s) licensed hereunder in accordance with
each country's patent laws, including Title 35, United States Code.
IX. INDEMNIFICATION
9.1 LICENSEE shall hold harmless and indemnify BOARD, SYSTEM, MDA, its Regents,
officers, employees, students, and agents from and against any claims,
demand, or causes of action whatsoever, costs of suit and reasonable
attorney's fees including without limitation those costs arising on account
of any injury or death of persons or damage to property caused by, or
arising out of, or resulting from, the exercise or practice of the license
granted hereunder by LICENSEE or its officers, employees, agents or
representatives.
X. USE OF BOARD AND COMPONENT'S NAME
10.1 LICENSEE shall not use the name of (or the name of any employee of) MDA,
SYSTEM or BOARD without the advance, express written consent of BOARD
secured through:
The University of Texas
M. D. Anderson Cancer Center
Office of Public Affairs
1515 Holcombe Boulevard
Box 229
Houston, Texas 77030
ATTENTION: Stephen C. Stuyck
8
XI. CONFIDENTIAL INFORMATION
11.1 MDA and LICENSEE each agree that all information contained in documents
marked "confidential" which are forwarded to one by the other shall be
received in strict confidence, used only for the purposes of this
AGREEMENT, and not disclosed by the recipient party (except as required by
law or court order), its agents or employees without the prior written
consent of the other party, unless such information (a) was in the public
domain at the time of disclosure, (b) later became part of the public
domain through no act or omission of the recipient party, its employees,
agents, successors or assigns, (c) was lawfully disclosed to the recipient
party by a third party having the right to disclose it, (d) was already
known by the recipient party at the time of disclosure, (e) was
independently developed or (f) is required to be submitted to a government
agency pursuant to any preexisting obligation.
11.2 MDA's and LICENSEE's obligation of confidence hereunder shall be fulfilled
by using the same degree of care with the other party's confidential
information as it uses to protect its own confidential information. This
obligation shall exist while this AGREEMENT is in force and for a period of
three (3) years thereafter.
XII. ASSIGNMENT
12.1 Except in connection with merger, consolidation or sale of substantially
all of LICENSEE's assets to a third party this AGREEMENT may not be
assigned by LICENSEE without the prior written consent of BOARD.
XIII. TERMS AND TERMINATION
13.1 Subject to Articles 13.2, 13.3 and 13.4 hereinbelow, the term of this
AGREEMENT shall extend from the Effective Date set forth hereinabove to (i)
the full end of the term or terms for which PATENT RIGHTS have not expired,
or (ii)d if only TECHNOLOGY RIGHTS are licensed and no PATENT RIGHTS are
applicable, for a term of fifteen (15) years.
9
13.2 BOARD and MDA shall have the right at any time after one (1) year from
the EFFECTIVE DATE of this AGREEMENT to terminate the license granted
herein in any national political jurisdiction within the LICENSED TERRITORY
if LICENSEE, within ninety (90) days after written notice from MDA of such
intended termination, fails to provide written evidence satisfactory to MDA
that LICENSEE has commercialized or is actively and effectively attempting
to commercialize an invention licensed hereunder within such
jurisdiction(s). Accurate, written evidence provided by LICENSEE to MDA
within said ninety (90) day period that LICENSEE has an effective, ongoing
and active research, development, manufacturing, marketing, or sales
program, as appropriate, directed toward obtaining regulatory approval
and/or production and/or sale of LICENSED PRODUCTS incorporating PATENT
RIGHTS or incorporating TECHNOLOGY RIGHTS within such jurisdiction shall be
deemed satisfactory evidence.
13.3 Subject to any rights herein which survive termination, this AGREEMENT will
earlier terminate in its entirety:
(A) automatically if LICENSEE shall become bankrupt or insolvent and/or if
the business of LICENSEE shall be placed in the hands of a receiver or
trustee, whether by voluntary act of LICENSEE or otherwise; or
(B) (i) upon thirty (30) days written notice by MDA if LICENSEE shall
breach or default on the payment obligations of ARTICLE IV, or use of
name obligations of ARTICLE X; or (ii) upon ninety (90) days written
notice by MDA if LICENSEE shall breach or default on any other
obligation under this AGREEMENT; provided, however, LICENSEE may avoid
such termination if before the end of such thirty (30) or ninety (90)
day period if LICENSEE provides notice and accurate, written evidence
satisfactory to MDA that such breach has been cured and the manner
of such cure; or.
(C) at any time by mutual written agreement between LICENSEE, MDA and
BOARD, or without cause upon one hundred eighty (180) days written
notice by LICENSEE to MDA and, subject to any terms herein which
survive termination.
10
13.4 Upon termination of this AGREEMENT for any cause:
(A) nothing herein shall be construed to release either party of any
obligation matured prior to the effective date of such termination.
(B) LICENSEE covenants and agrees to be bound by the provisions of
ARTICLES IX, X AND XI of this AGREEMENT.
(C) LICENSEE may, after the effective date of such termination, sell all
LICENSED PRODUCTS and parts therefore that it may have on hand at the
date of termination, provided that LICENSEE pays the earned royalty
thereon and any other amounts due pursuant to ARTICLE IV of this
AGREEMENT.
XIV. WARRANTY: SUPERIOR-RIGHTS
14.1 Except for the rights, if any, of the Government of the United States as
set forth hereinbelow, BOARD represents and warrants its belief that it is
the owner of the entire right, title, and interest in and to LICENSED
SUBJECT MATTER, and that it has the sole right to grant licenses
thereunder, and that it has not knowingly granted licenses thereunder to
any other entity that would restrict rights granted hereunder except as
stated herein.
14.2 LICENSEE understands that the LICENSED SUBJECT MATTER may have been
developed under a funding agreement with the Government of the United
States of America and, if so, that the Government may have certain rights
relative thereto. This AGREEMENT is explicitly made subject to the
Government's rights under any such agreement and any applicable law or
regulation, including P.L. 96-517 as amended by P.L. 98-620. To the extent
that there is a conflict between any such agreement, applicable law or
regulation and this AGREEMENT, the terms of such Government agreement,
applicable law or regulation shall prevail.
14.3 LICENSEE understands and agrees that BOARD, by this AGREEMENT, makes no
representation as to the operability or fitness for any use, safety,
efficacy, approvablity by regulatory authorities, time and cost of
development, patentability, and/or breadth of the LICENSED SUBJECT MATTER.
BOARD, by this AGREEMENT, makes no representation as to whether there are
any patents now held, or which will be held, by others or by BOARD in the
LICENSED FIELD, nor does BOARD make any representation that the inventions
contained in PATENT RIGHTS do not infringe any other patents now held or
that will be held by others or by BOARD.
11
14.4 LICENSEE, by execution hereof, acknowledges, covenants and agrees that
LICENSEE has not been induced in anyway by BOARD, SYSTEM, MDA or employees
thereof to enter into this Agreement, and further warrants and represents
that (i) LICENSEE has conducted sufficient due diligence with respect to
all items and issues pertaining to Article XIV herein and all other matters
pertaining to this Agreement; and (ii) LICENSEE has adequate knowledge and
expertise, or has utilized knowledgeable and expert consultants, to
adequately conduct such due diligence, and agrees to accept all risks
inherent herein.
XV. GENERAL
15.1 This AGREEMENT constitutes the entire and only AGREEMENT between the
parties for LICENSED SUBJECT MATTER and all other prior negotiations,
representations, agreements and understandings are superseded hereby. No
agreements altering or supplementing the terms hereof may be made except by
means of a written document signed by the duly authorized representatives
of the parties.
15.2 Any notice required by this AGREEMENT shall be given by prepaid, first
class, certified mail, return receipt requested, and addressed in the case
of BOARD to:
BOARD OF REGENTS
The University of Texas System
201 West Seventh Street
Austin, Texas 78701
ATTENTION: Office of General Counsel
with copy to: The University of Texas
M.D. Anderson Cancer Center
Office of Technology Development
1020 Holcombe Boulevard, Suite 1405
Houston, Texas 77030
ATTENTION: William J. Doty
or in the case of
LICENSEE to: Myriad Genetics, Inc.
390 Wakara WAy
Salk Lake City, Utah 84108
ATTENTION: President
or such other address as may be given from time to time under the terms of
this notice provision.
12
15.3 LICENSEE covenants and agrees to comply with all applicable federal, state
and local laws and regulations in connection with its activities pursuant
to this AGREEMENT.
15.4 This AGREEMENT shall be construed and enforced in accordance with the laws
of the United States of America and of the State of Texas.
15.5 Failure of BOARD to enforce a right under this AGREEMENT shall not act as a
waiver of that right or the ability to later assert that right relative to
the particular situation involved.
15.6 Headings included herein are for convenience only and shall not be used to
construe this AGREEMENT.
15.7 If any provision of this AGREEMENT shall be found by a court to be void,
invalid or unenforceable, the same shall be reformed to comply with
applicable law or stricken if not so conformable, so as not to affect the
validity or enforceability of this AGREEMENT.
IN WITNESS WHEREOF, PARTIES HERETO HAVE CAUSED THEIR DULY AUTHORIZED
REPRESENTATIVES TO EXECUTE THIS AGREEMENT.
THE UNIVERSITY OF TEXAS BOARD OF REGENTS OF THE
M.D. ANDERSON CANCER CENTER UNIVERSITY OF TEXAS SYSTEM
By /s/ Michael J. Best By /s/ Ray Farabee
----------------------------- ------------------------------
Michael J. Best Ray Farabee
Chief Financial Officer Vice Chancellor and
General Counsel
APPROVED AS TO CONTENT: APPROVED AS TO FORM:
By /s/ William J. Doty By /s/ Dudley R. Dobie, Jr.
----------------------------- ------------------------------
William J. Doty Dudley R. Dobie, Jr.
Director, Technology Development Manager, Intellectual Property
MYRIAD GENETICS, INC.
By /s/ Peter D. Meldrum
-----------------------------
Peter D. Meldrum
President and CEO
13
EXHIBIT I
[
]
THE DATA REFERENCED ABOVE IS AGREED TO BE CONFIDENTIAL AND SUBJECT TO THE
CONDITIONS OF ARTICLE XI OF THE AGREEMENT TO WHICH THIS EXHIBIT IS ATTACHED.
14
EXHIBIT 10.2
MYRIAD GENETICS, INC.
1992 EMPLOYEE, DIRECTOR AND CONSULTANT STOCK OPTION PLAN
(AS AMENDED AND RESTATED NOVEMBER 15, 1996)
1. DEFINITIONS.
-----------
Unless otherwise specified or unless the context otherwise requires, the
following terms, as used in this Myriad Genetics, Inc. 1992 Employee,
Director and Consultant Stock Option Plan, have the following meanings:
Administrator means the Board of Directors, unless it has delegated
-------------
power to act on its behalf to a committee. (See Paragraph 4)
Affiliate means a corporation which, for purposes of Section 424 of
---------
the Code, is a parent or subsidiary of the Company, direct or
indirect.
Board of Directors means the Board of Directors of the Company.
------------------
Code means the United States Internal Revenue Code of 1986, as
----
amended.
Committee means the Committee to which the Board of Directors has
---------
delegated power to act under or pursuant to the provisions of the
Plan.
Common Stock means shares of the Company's common stock, $.01 par
------------
value.
Company means Myriad Genetics, Inc., a Delaware corporation.
-------
Disability or Disabled means permanent and total disability as defined
---------- --------
in Section 22(e)(3) of the Code.
Fair Market Value of a Share of Common Stock means:
-----------------
(1) If the Common Stock is listed on a national securities exchange or
traded in the over-the-counter market and sales prices are regularly
reported for the Common Stock, either (a) the average of the closing
or last prices of the Common Stock on the Composite Tape or other
comparable reporting system for the ten (10) consecutive trading days
immediately preceding the applicable date or (b) the closing or last
price of the Common Stock on the Composite Tape or other comparable
reporting system for the trading day immediately preceding the
applicable date, as the Administrator
shall determine;
(2) If the Common Stock is not traded on a national securities
exchange but is traded on the over-the-counter market, if sales prices
are not regularly reported for the Common Stock for the trading days
or day referred to in clause (1), and if bid and asked prices for the
Common Stock are regularly reported, either (a) the average of the
mean between the bid and the asked price for the Common Stock at the
close of trading in the over-the-counter market for the ten (10) days
on which Common Stock was traded immediately preceding the applicable
date or (b) the mean between the bid and the asked price for the
Common Stock at the close of trading in the over-the-counter market
for the trading day on which Common Stock was traded immediately
preceding the applicable date, as the Administrator shall determine;
and
(3) If the Common Stock is neither listed on a national securities
exchange nor traded in the over-the-counter market, such value as the
Administrator, in good faith, shall determine.
ISO means an option meant to qualify as an incentive stock option
---
under Code Section 422.
Key Employee means an employee of the Company or of an Affiliate
------------
(including, without limitation, an employee who is also serving as an
officer or director of the Company or of an Affiliate), designated by
the Administrator to be eligible to be granted one or more Options
under the Plan.
Non-Qualified Option means an option which is not intended to qualify
--------------------
as an ISO.
Option means an ISO or Non-Qualified Option granted under the Plan.
------
Option Agreement means an agreement between the Company and a
----------------
Participant delivered pursuant to the Plan.
Participant means a Key Employee, director or consultant to whom one
-----------
or more Options are granted under the Plan. As used herein,
"Participant" shall include "Participant's Survivors" where the
context requires.
Participant's Survivors means a deceased Participant's legal
-----------------------
representatives and/or any person or persons who
-2-
acquired the Participant's rights to an Option by will or by the laws
of descent and distribution.
Plan means this Myriad Genetics, Inc. 1992 Employee, Director and
----
Consultant Stock Option Plan.
Shares means shares of the Common Stock as to which Options have been
------
or may be granted under the Plan or any shares of capital stock into
which the Shares are changed or for which they are exchanged within
the provisions of Paragraph 3 of the Plan. The Shares issued upon
exercise of Options granted under the Plan may be authorized and
unissued shares or shares held by the Company in its treasury, or
both.
2. PURPOSES OF THE PLAN.
--------------------
The Plan is intended to encourage ownership of Shares by Key Employees,
directors and certain consultants to the Company in order to attract such
people, to induce them to work for the benefit of the Company or of an Affiliate
and to provide additional incentive for them to promote the success of the
Company or of an Affiliate. The Plan provides for the granting of ISOs and Non-
Qualified Options.
3. SHARES SUBJECT TO THE PLAN.
--------------------------
The number of Shares subject to this Plan as to which Options may be
granted from time to time shall be 1,500,000 or the equivalent of such number of
Shares after the Administrator, in its sole discretion, has interpreted the
effect of any stock split, stock dividend, combination, recapitalization or
similar transaction in accordance with Paragraph 16 of the Plan.
If an Option ceases to be "outstanding", in whole or in part, the Shares
which were subject to such Option shall be available for the granting of other
Options under the Plan. Any Option shall be treated as "outstanding" until such
Option is exercised in full, or terminates or expires under the provisions of
the Plan, or by agreement of the parties to the pertinent Option Agreement.
4. ADMINISTRATION OF THE PLAN.
--------------------------
The Administrator of the Plan will be the Board of Directors, except to the
extent the Board of Directors delegates its authority to a Committee of the
Board of Directors. Following the date on which the Common Stock is registered
under the Securities and
-3-
Exchange Act of 1934, as amended (the "1934 Act"), the Plan is intended to
comply in all respects with Rule 16b-3 or its successors, promulgated pursuant
to Section 16 of the 1934 Act with respect to Participants who are subject to
Section 16 of the 1934 Act, and any provision in this Plan with respect to such
persons contrary to Rule 16b-3 shall be deemed null and void to the extent
permissible by law and deemed appropriate by the Administrator. Subject to the
provisions of the Plan, the Administrator is authorized to:
a. Interpret the provisions of the Plan or of any Option or Option
Agreement and to make all rules and determinations which it deems
necessary or advisable for the administration of the Plan;
b. Determine which employees of the Company or of an Affiliate shall be
designated as Key Employees and which of the Key Employees, directors
and consultants shall be granted Options;
c. Determine the number of Shares for which an Option or Options shall be
granted; and
d. Specify the terms and conditions upon which an Option or Options may
be granted;
provided, however, that all such interpretations, rules, determinations, terms
and conditions shall be made and prescribed in the context of preserving the tax
status under Code Section 422 of those Options which are designated as ISOs.
Subject to the foregoing, the interpretation and construction by the
Administrator of any provisions of the Plan or of any Option granted under it
shall be final, unless otherwise determined by the Board of Directors, if the
Administrator is other than the Board of Directors.
5. ELIGIBILITY FOR PARTICIPATION.
-----------------------------
The Administrator will, in its sole discretion, name the Participants in
the Plan, provided, however, that each Participant must be a Key Employee,
director or consultant of the Company or of an Affiliate at the time an Option
is granted. Members of the Company's Board of Directors, who are not (i)
employees of the Company or of an Affiliate or (ii) nominated or elected
pursuant to or in satisfaction of a contractual obligation of the Company, may
receive options pursuant to Paragraph 6, Subparagraph A(e), but only pursuant
thereto. Notwithstanding any of the foregoing provisions, the Administrator may
authorize the grant of an Option to a person not then an employee, director or
consultant of the
-4-
Company or of an Affiliate. The actual grant of such Option, however, shall be
conditioned upon such person becoming eligible to become a Participant at or
prior to the time of the execution of the Option Agreement evidencing such
Option. ISOs may be granted only to Key Employees. Non-Qualified Options may be
granted to any Key Employee, director or consultant of the Company or an
Affiliate. In no event shall any employee be granted in any calendar year
Options to purchase more than 1,000,000 shares of the Company's Common Stock
pursuant to this Plan. The granting of any Option to any individual shall
neither entitle that individual to, nor disqualify him or her from,
participation in any other grant of Options.
6. TERMS AND CONDITIONS OF OPTIONS.
-------------------------------
Each Option shall be set forth in writing in an Option Agreement, duly
executed by the Company and, to the extent required by law or requested by the
Company, by the Participant. The Administrator may provide that Options be,
granted subject to such conditions as the Administrator may deem appropriate
including, without limitation, subsequent approval by the stockholders of the
Company of this Plan or any amendments thereto. The Option Agreements shall be
subject to at least the following terms and conditions:
A. Non-Qualified Options: Each Option intended to be a Non-Qualified
---------------------
Option shall be subject to the terms and conditions which the
Administrator determines to be appropriate and in the best interest of
the Company, subject to the following minimum standards for any such
Non-Qualified Option:
a. Option Price: The option price (per share) of the Shares covered
by each Option shall be determined by the Administrator but shall
not be less than the par value per share of Common Stock.
b. Each Option Agreement shall state the number of Shares to which
it pertains;
c. Each Option Agreement shall state the date or dates on which it
first is exercisable and the date after which it may no longer be
exercised, and may provide that the Option rights accrue or
become exercisable in installments over a period of months or
years, or upon the occurrence of certain conditions or the
attainment of stated goals or events; and
-5-
d. Exercise of any Option may be conditioned upon the Participant's
execution of a Share purchase agreement in form satisfactory to
the Administrator providing for certain protections for the
Company and its other shareholders including requirements that:
i. The Participant's or the Participant's Survivors' right to
sell the Shares may be restricted; and
ii. The Participant or the Participant's Survivors may be
required to execute letters of investment intent and must
also acknowledge that the Shares will bear legends noting
any applicable restrictions.
e. Each director of the Company who is not (i) an employee of the
Company or any Affiliate, or (ii) nominated or elected pursuant
to or in satisfaction of a contractual obligation of the Company,
who is elected or appointed to the Board of Directors after the
date on which the initial underwritten public offering of the
Company's Common Stock is consummated, upon such election or
appointment shall be granted a Non-Qualified Option to purchase
5,000 Shares (the "Initial Grant") and upon every anniversary
thereof, provided that on such dates such director has been in
the continued and uninterrupted service of the Company as a
director since his or her election or appointment and remains a
director of the Company who is not (i) an employee of the Company
or (ii) nominated or elected pursuant to or in satisfaction of a
contractual obligation of the Company, each such Director shall
be granted an additional Non-Qualified Option to purchase 7,500
Shares. Each such Option shall (i) have an exercise price equal
to the Fair Market Value (per share) of the Shares on the date of
grant of the Option, (ii) have a term of ten (10) years, and
(iii) shall become cumulatively exercisable in three (3) equal
annual installments of thirty-three and 33/100 percent (33.33%)
each, upon completion of one full year of service on the Board of
directors after the date of grant, and continuing on each of the
next two (2) full years of service thereafter. Additionally,
each grant of an Option subsequent to the Initial Grant shall be
subject to adjustment such that the number of Shares subject to
such Option, shall be
-6-
increased on a proportional basis to reflect any increase in the
issued and outstanding shares of capital stock of the Company in
the year of the subject grant over the number of such shares
issued and outstanding at the time of the Initial Grant,
provided, that no such adjustment shall be required until such
--------
adjustment results in an increase in the grant equal to at least
100 Shares. Any director entitled to receive an Option grant
under this subparagraph may elect to decline the Option.
Notwithstanding the provisions of Paragraph 23 concerning
amendment of the Plan, the provisions of this subparagraph shall
not be amended more than once every six months, other than to
comport with changes in the Code, the Employee Retirement Income
Security Act, or the rules thereunder. The provisions of
Paragraphs 10, 11, 12 and 13 below shall not apply to Options
granted pursuant to this subparagraph.
Except as otherwise provided in the pertinent Option Agreement, if a
director who receives Options pursuant to this subparagraph:
i. ceases to be a member of the Board of Directors of the
Company for any reason other than death or disability, any
then unexercised Options granted to such director may be
exercised by the director within a period of ninety (90)
days after the date the director ceases to be a member of
the Board of Directors, but only to the extent of the number
of Shares with respect to which the Options are exercisable
on the date the director ceases to be a member of the Board
of Directors, and in no event later than the expiration date
of the Option; or,
ii. ceases to be a member of the Board of Directors of the
Company by reason of his or her death or Disability, any
then unexercised Options granted to such Director may be
exercised by the Participant (or by the Participant's
personal representative, or the Participant's Survivors)
within a period of one hundred eighty (180) days after the
date the director ceases to be a member of the Board of
Directors, but only to the extent of the number of Shares
with respect to which the Options are exercisable on the
date the
-7-
director ceases to be a member of the Board of Directors,
and in no event later than the expiration date of the
Option.
B. ISOs: Each Option intended to be an ISO shall be issued only to a Key
----
Employee and be subject to at least the following terms and
conditions, with such additional restrictions or changes as the
Administrator determines are appropriate but not in conflict with Code
Section 422 and relevant regulations and rulings of the Internal
Revenue Service:
a. Minimum standards: The ISO shall meet the minimum standards
required of Non-Qualified Options, as described above, except
clause (a) thereunder.
b. Option Price: Immediately before the Option is granted, if the
Participant owns, directly or by reason of the applicable
attribution rules in Code Section 424(d):
i. Ten percent (10%) or less of the total combined voting power
-------
of all classes of share capital of the Company or an
Affiliate, the Option price per share of the Shares covered
by each Option shall not be less than one hundred percent
(100%) of the Fair Market Value per share of the Shares on
the date of the grant of the Option.
ii. More than ten percent (10%) of the total combined voting
power of all classes of share capital of the Company or an
Affiliate, the Option price per share of the Shares covered
by each Option shall not be less than one hundred ten
percent (110%) of the said Fair Market Value on the date of
grant.
c. Term of Option: For Participants who own
i. Ten percent (10%) or less of the total combined voting power
-------
of all classes of share capital of the Company or an
Affiliate, each Option shall terminate not more than ten
(10) years from the date of the grant or at such earlier
time as the Option Agreement may provide;
ii. More than ten percent (10%) of the total
-8-
combined voting power of all classes of share capital of the
Company or an Affiliate, each Option shall terminate not
more than five (5) years from the date of the grant or at
such earlier time as the Option Agreement may provide.
d. Limitation on Yearly Exercise: The Option Agreements shall
restrict the amount of Options which may be exercisable in any
calendar year (under this or any other ISO plan of the Company or
an Affiliate) so that the aggregate Fair Market Value (determined
at the time each ISO is granted) of the stock with respect to
which ISOs are exercisable for the first time by the Participant
in any calendar year does not exceed one hundred thousand dollars
($100,000), provided that this subparagraph (e) shall have no
force or effect if its inclusion in the Plan is not necessary for
Options issued as ISOs to qualify as ISOs pursuant to Section
422(d) of the Code.
e. Limitation on Grant of ISOs: No ISOs shall be granted after the
date which is the earlier of ten (10) years from the date of the
-------
adoption of the Plan by the Company and the date of the approval
of the Plan by the shareholders of the Company.
-9-
7. EXERCISE OF OPTION AND ISSUE OF SHARES.
--------------------------------------
An Option (or any part or installment thereof) shall be exercised by giving
written notice to the Company at its principal office address, together with
provision for payment of the full purchase price in accordance with this
paragraph for the Shares as to which such Option is being exercised, and upon
compliance with any other condition(s) set forth in the Option Agreement. Such
written notice shall be signed by the person exercising the Option, shall state
the number of Shares with respect to which the Option is being exercised and
shall contain any representation required by the Plan or the Option Agreement.
Payment of the purchase price for the Shares as to which such Option is being
exercised shall be made (a) in United States dollars in cash or by check, or (b)
at the discretion of the Administrator, through delivery of shares of Common
Stock having a fair market value equal as of the date of the exercise to the
cash exercise price of the Option, determined in good faith by the
Administrator, or (c) at the discretion of the Administrator, by delivery of the
grantee's personal recourse note bearing interest payable not less than annually
at no less than 100% of the applicable Federal rate, as defined in Section
1274(d) of the Code, or (d) at the discretion of the Administrator, in
accordance with a cashless exercise program established with a securities
brokerage firm, and approved by the Administrator, (e) at the discretion of the
Administrator, by any combination of (a), (b), (c) and (d) above.
Notwithstanding the foregoing, the Administrator shall accept only such payment
on exercise of an ISO as is permitted by Section 422 of the Code.
The Company shall then reasonably promptly deliver the Shares as to which
such Option was exercised to the Participant (or to the Participant's Survivors,
as the case may be). In determining what constitutes "reasonably promptly," it
is expressly understood that the delivery of the Shares may be delayed by the
Company in order to comply with any law or regulation which requires the Company
to take any action with respect to the Shares prior to their issuance. The
Shares shall, upon delivery, be evidenced by an appropriate certificate or
certificates for fully paid, non-assessable Shares.
The Administrator shall have the right to accelerate the date of exercise
of any installment of any Option; provided that the Administrator shall not
accelerate the exercise date of any installment of any Option granted to any Key
Employee as an ISO (and not previously converted into a Non-Qualified Option
pursuant to paragraph 19) if such acceleration would violate the annual vesting
limitation contained in Section 422(d) of the Code, as described in paragraph
6(e).
-10-
The Administrator may, in its discretion, amend any term or condition of an
outstanding Option provided (i) such term or condition as amended is permitted
by the Plan, (ii) any such amendment shall be made only with the consent of the
Participant to whom the Option was granted, or in the event of the death of the
Participant, the Participant's Survivors, if the amendment is adverse to the
Participant, (iii) any such amendment of any ISO shall be made only after the
Administrator, after consulting the counsel for the Company, determines whether
such amendment would constitute a "modification" of any Option which is an ISO
(as that term is defined in Section 424(h) of the Code) or would cause any
adverse tax consequences for the holders of such ISO, and (iv) with respect to
any Option held by any Participant who is subject to the provisions of Section
16(a) of the 1934 Act, any such amendment shall be made only after the
Administrator, after consulting with counsel for the Company, determines whether
such amendment would constitute the grant of a new Option.
8. RIGHTS AS A SHAREHOLDER.
-----------------------
No Participant to whom an Option has been granted shall have rights as a
shareholder with respect to any Shares covered by such Option, except after due
exercise of the Option and tender of the full purchase price for the Shares
being purchased pursuant to such exercise and registration of the Shares in the
Company's share register in the name of the Participant.
9. ASSIGNABILITY AND TRANSFERABILITY OF OPTIONS.
--------------------------------------------
By its terms, an Option granted to a Participant shall not be transferable
by the Participant other than by will or by the laws of descent and distribution
or pursuant to a qualified domestic relations order as defined by the Code or
Title I of the Employee Retirement Income Security Act or the rules thereunder,
provided, however, that the designation of a beneficiary of an Option by a
- -------- -------
Participant shall not be deemed a transfer prohibited by this Paragraph. Except
as provided in the preceding sentence, an Option shall be exercisable, during
the Participant's lifetime, only by such Participant (or by his or her legal
representative). Such Option shall not be assigned, pledged or hypothecated in
any way (whether by operation of law or otherwise) and shall not be subject to
execution, attachment or similar process. Any attempted transfer, assignment,
pledge, hypothecation or other disposition of any Option or of any rights
granted thereunder contrary to the provisions of this Plan, or the levy of any
attachment or similar
-11-
process upon an Option, shall be null and void.
10. EFFECT OF TERMINATION OF SERVICE OTHER THAN "FOR CAUSE".
-------------------------------------------------------
Except as otherwise provided in the pertinent Option Agreement, in the
event of a termination of service (whether as an employee, director or
consultant) with the Company or an Affiliate before the Participant has
exercised all Options, the following rules apply:
a. A Participant who ceases to be an employee, director or consultant of
the Company or of an Affiliate (for any reason other than termination
"for cause", Disability, or death for which events there are special
rules in Paragraphs 11, 12, and 13, respectively), may exercise any
Option granted to him or her to the extent that the right to purchase
Shares has accrued on the date of such termination of service, but
only within such term as the Administrator has designated in the
pertinent Option Agreement.
b. In no event may an Option Agreement provide, if the Option is intended
to be an ISO, that the time for exercise be later than three (3)
months after the Participant's termination of employment.
c. The provisions of this paragraph, and not the provisions of Paragraph
12 or 13, shall apply to a Participant who subsequently becomes
disabled or dies after the termination of employment, director status
or consultancy, provided, however, in the case of a Participant's
death within three (3) months after the termination of employment,
director status or consulting, the Participant's Survivors may
exercise the Option within one (1) year after the date of the
Participant's death, but in no event after the date of expiration of
the term of the Option.
d. Notwithstanding anything herein to the contrary, if subsequent to a
Participant's termination of employment, termination of director
status or termination of consultancy, but prior to the exercise of an
Option, the Board of Directors determines that, either prior or
subsequent to the Participant's termination, the Participant engaged
in conduct which would constitute "cause", then such Participant shall
forthwith cease to have any right to exercise any Option.
e. A Participant to whom an Option has been granted under
-12-
the Plan who is absent from work with the Company or with an Affiliate
because of temporary disability (any disability other than a permanent
and total Disability as defined in Paragraph 1 hereof), or who is on
leave of absence for any purpose, shall not, during the period of any
such absence, be deemed, by virtue of such absence alone, to have
terminated such Participant's employment, director status or
consultancy with the Company or with an Affiliate, except as the
Administrator may otherwise expressly provide.
f. Options granted under the Plan shall not be affected by any change of
employment or other service within or among the Company and any
Affiliates, so long as the Participant continues to be an employee,
director or consultant of the Company or any Affiliate, provided,
however, if a Participant's employment by either the Company or an
Affiliate should cease (other than to become an employee of an
Affiliate or the Company), such termination shall affect the
Participant's rights under any Option granted to such Participant in
accordance with the terms of the Plan and the pertinent Option
Agreement.
11. EFFECT OF TERMINATION OF SERVICE "FOR CAUSE".
--------------------------------------------
Except as otherwise provided in the pertinent Option Agreement, the
following rules apply if the Participant's service (whether as an employee,
director or consultant) with the Company or an Affiliate is terminated "for
cause" prior to the time that all of his or her outstanding Options have been
exercised:
a. All outstanding and unexercised Options as of the date the Participant
is notified his or her service is terminated "for cause" will
immediately be forfeited, unless the Option Agreement provides
otherwise.
b. For purposes of this Article, "cause" shall include (and is not
limited to) dishonesty with respect to the employer, insubordination,
substantial malfeasance or non-feasance of duty, unauthorized
disclosure of confidential information, and conduct substantially
prejudicial to the business of the Company or any Affiliate. The
determination of the Administrator as to the existence of cause will
be conclusive on the Participant and the Company.
c. "Cause" is not limited to events which have occurred prior to a
Participant's termination of service, nor is
-13-
it necessary that the Administrator's finding of "cause" occur prior
to termination. If the Administrator determines, subsequent to a
Participant's termination of service but prior to the exercise of an
Option, that either prior or subsequent to the Participant's
termination the Participant engaged in conduct which would constitute
"cause", then the right to exercise any Option is forfeited.
d. Any definition in an agreement between the Participant and the Company
or an Affiliate, which contains a conflicting definition of "cause"
for termination and which is in effect at the time of such
termination, shall supersede the definition in this Plan with respect
to such Participant.
12. EFFECT OF TERMINATION OF SERVICE FOR DISABILITY.
-----------------------------------------------
Except as otherwise provided in the pertinent Option Agreement, a
Participant who ceases to be an employee, director or consultant of the Company
or of an Affiliate by reason of Disability may exercise any Option granted to
such Participant:
a. To the extent exercisable but not exercised on the date of Disability;
and
b. In the event rights to exercise the Option accrue periodically, to the
extent of a pro rata portion of any additional rights as would have
accrued had the Participant not become Disabled prior to the end of
the accrual period which next ends following the date of Disability.
The proration shall be based upon the number of days of such accrual
period prior to the date of Disability.
A Disabled Participant may exercise such rights only within a period of not
more than one (1) year after the date that the Participant became Disabled,
notwithstanding that the Participant might have been able to exercise the Option
as to some or all of the Shares on a later date if he or she had not become
disabled and had continued to be an employee, director or consultant or, if
earlier, within the originally prescribed term of the Option.
The Administrator shall make the determination both of whether Disability
has occurred and the date of its occurrence (unless a procedure for such
determination is set forth in another agreement between the Company and such
Participant, in which case such procedure shall be used for such determination).
If requested, the Participant shall be examined by a physician selected or
approved
-14-
by the Administrator, the cost of which examination shall be paid for by the
Company.
13. EFFECT OF DEATH WHILE AN EMPLOYEE, DIRECTOR OR CONSULTANT.
---------------------------------------------------------
Except as otherwise provided in the pertinent Option Agreement, in the
event of the death of a Participant to whom an Option has been granted while the
Participant is an employee, director or consultant of the Company or of an
Affiliate, such Option may be exercised by the Participant's Survivors:
a. To the extent exercisable but not exercised on the date of death; and
b. In the event rights to exercise the Option accrue periodically, to the
extent of a pro rata portion of any additional rights which would have
accrued had the Participant not died prior to the end of the accrual
period which next ends following the date of death. The proration
shall be based upon the number of days of such accrual period prior to
the Participant's death.
If the Participant's Survivors wish to exercise the Option, they must take
all necessary steps to exercise the Option within one (1) year after the date of
death of such Participant, notwithstanding that the decedent might have been
able to exercise the Option as to some or all of the Shares on a later date if
he or she had not died and had continued to be an employee, director or
consultant or, if earlier, within the originally prescribed term of the Option.
14. PURCHASE FOR INVESTMENT.
-----------------------
Unless the offering and sale of the Shares to be issued upon the particular
exercise of an Option shall have been effectively registered under the
Securities Act of 1933, as now in force or hereafter amended (the "1933 Act"),
the Company shall be under no obligation to issue the Shares covered by such
exercise unless and until the following conditions have been fulfilled:
a. The person(s) who exercise such Option shall warrant to the Company,
prior to the receipt of such Shares, that such person(s) are acquiring
such Shares for their own respective accounts, for investment, and not
with a view to, or for sale in connection with, the distribution of
-15-
any such Shares, in which event the person(s) acquiring such Shares
shall be bound by the provisions of the following legend which shall
be endorsed upon the certificate(s) evidencing their Shares issued
pursuant to such exercise or such grant:
"The shares represented by this certificate have been taken for
investment and they may not be sold or otherwise transferred by
any person, including a pledgee, unless (1) either (a) a
Registration Statement with respect to such shares shall be
effective under the Securities Act of 1933, as amended, or (b)
the Company shall have received an opinion of counsel
satisfactory to it that an exemption from registration under such
Act is then available, and (2) there shall have been compliance
with all applicable state securities laws.
b. The Company shall have received an opinion of its counsel that the
Shares may be issued upon such particular exercise in compliance with
the 1933 Act without registration thereunder.
The Company may delay issuance of the Shares until completion of any action
or obtaining of any consent which the Company deems necessary under any
applicable law (including, without limitation, state securities or "blue sky"
laws).
15. DISSOLUTION OR LIQUIDATION OF THE COMPANY.
-----------------------------------------
Upon the dissolution or liquidation of the Company, all Options granted
under this Plan which as of such date shall not have been exercised will
terminate and become null and void; provided, however, that if the rights of a
Participant or a Participant's Survivors have not otherwise terminated and
expired, the Participant or the Participant's Survivors will have the right
immediately prior to such dissolution or liquidation to exercise any Option to
the extent that the Option is exercisable as of the date immediately prior to
such dissolution or liquidation.
16. ADJUSTMENTS.
-----------
Upon the occurrence of any of the following events, a Participant's rights
with respect to any Option granted to him or her hereunder which have not
previously been exercised in full shall be adjusted as hereinafter provided,
unless otherwise specifically provided in the written agreement between the
Participant and the Company relating to such Option:
-16-
A. Stock Dividends and Stock Splits. If the shares of Common Stock shall
--------------------------------
be subdivided or combined into a greater or smaller number of shares or if the
Company shall issue any shares of Common Stock as a stock dividend on its
outstanding Common Stock, the number of shares of Common Stock deliverable upon
the exercise of such Option shall be appropriately increased or decreased
proportionately, and appropriate adjustments shall be made in the purchase price
per share to reflect such subdivision, combination or stock dividend. The
number of Shares subject to options to be granted to directors pursuant to
Subparagraph e of Paragraph 6 shall also be proportionately adjusted upon the
occurrence of such events.
B. Consolidations or Mergers. If the Company is to be consolidated with
-------------------------
or acquired by another entity in a merger, sale of all or substantially all of
the Company's assets or otherwise (an "Acquisition"), the Administrator or the
board of directors of any entity assuming the obligations of the Company
hereunder (the "Successor Board"), shall, as to outstanding Options, either (i)
make appropriate provision for the continuation of such Options by substituting
on an equitable basis for the Shares then subject to such Options either the
consideration payable with respect to the outstanding shares of Common Stock in
connection with the Acquisition or securities of any successor or acquiring
entity; or (ii) upon written notice to the Participants, provide that all
Options must be exercised (either, to the extent then exercisable or, at the
discretion of the Administrator, all Options being made fully exercisable for
purposes of this subsection), within a specified number of days of the date of
such notice, at the end of which period the Options shall terminate; or (iii)
terminate all Options in exchange for a cash payment equal to the excess of the
Fair Market Value of the shares subject to such Options (either to the extent
then exercisable or, at the discretion of the Administrator, all Options being
made fully exercisable for purposes of this subsection) over the exercise price
thereof.
C. Recapitalization or Reorganization. In the event of a
----------------------------------
recapitalization or reorganization of the Company (other than a transaction
described in subparagraph B above) pursuant to which securities of the Company
or of another corporation are issued with respect to the outstanding shares of
Common Stock, a Participant upon exercising an Option shall be entitled to
receive for the purchase price paid upon such exercise the securities he or she
would have received if he or she had exercised such Option prior to such
recapitalization or reorganization.
D. Modification of ISOs. Notwithstanding the foregoing, any adjustments
--------------------
made pursuant to subparagraph A, B or C with respect to ISOs shall be made only
after the Administrator, after
-17-
consulting with counsel for the Company, determines whether such adjustments
would constitute a "modification" of such ISOs (as that term is defined in
Section 424(h) of the Code) or would cause any adverse tax consequences for the
holders of such ISOs. If the Administrator determines that such adjustments made
with respect to ISOs would constitute a modification of such ISOs, it may
refrain from making such adjustments, unless the holder of an ISO specifically
requests in writing that such adjustment be made and such writing indicates that
the holder has full knowledge of the consequences of such "modification" on his
or her income tax treatment with respect to the ISO.
17. ISSUANCES OF SECURITIES.
-----------------------
Except as expressly provided herein, no issuance by the Company of shares
of stock of any class, or securities convertible into shares of stock of any
class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares subject to Options. Except as
expressly provided herein, no adjustments shall be made for dividends paid in
cash or in property (including without limitation, securities) of the Company.
18. FRACTIONAL SHARES.
-----------------
No fractional share shall be issued under the Plan and the person
exercising such right shall receive from the Company cash in lieu of such
fractional share equal to the Fair Market Value thereof.
19. CONVERSION OF ISOs INTO NON-QUALIFIED OPTIONS:
----------------------------------------------
TERMINATION OF ISOs.
-------------------
The Administrator, at the written request of any Participant, may in its
discretion take such actions as may be necessary to convert such Participant's
ISOs (or any portions thereof) that have not been exercised on the date of
conversion into Non-Qualified Options at any time prior to the expiration of
such ISOs, regardless of whether the Participant is an employee of the Company
or an Affiliate at the time of such conversion. Such actions may include, but
not be limited to, extending the exercise period or reducing the exercise price
of the appropriate installments of such Options. At the time of such
conversion, the Administrator (with the consent of the Participant) may impose
such conditions on the exercise of the resulting Non-Qualified Options as the
Administrator in its discretion may determine, provided that such conditions
shall not be inconsistent with this Plan. Nothing in the Plan shall be deemed
to give any Participant the right to have
-18-
such Participant's ISO's converted into Non-Qualified Options, and no such
conversion shall occur until and unless the Administrator takes appropriate
action. The Administrator, with the consent of the Participant, may also
terminate any portion of any ISO that has not been exercised at the time of such
termination.
20. WITHHOLDING.
-----------
In the event that any federal, state, or local income taxes, employment
taxes, Federal Insurance Contributions Act ("F.I.C.A.") withholdings or other
amounts are required by applicable law or governmental regulation to be withheld
from the Optionholder's salary, wages or other remuneration in connection with
the exercise of an Option or a Disqualifying Disposition (as defined in
Paragraph 21), the Optionholder shall advance in cash to the Company, or to any
Affiliate of the Company which employs or employed the Optionholder, the amount
of such withholdings unless a different withholding arrangement, including the
use of shares of the Company's Common Stock, is authorized by the Administrator
(and permitted by law); provided, however, that with respect to persons subject
to Section 16 of the 1934 Act, any such withholding arrangement shall be in
compliance with any applicable provisions of Rule 16b-3 promulgated under
Section 16 of the 1934 Act. For purposes hereof, the fair market value of the
shares withheld for purposes of payroll withholding shall be determined in the
manner provided in Paragraph 1 above, as of the most recent practicable date
prior to the date of exercise. If the fair market value of the shares withheld
is less than the amount of payroll withholdings required, the Optionholder may
be required to advance the difference in cash to the Company or the Affiliate
employer. The Administrator in its discretion may condition the exercise of an
Option for less than the then Fair Market Value on the Participant's payment of
such additional withholding.
21. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION.
----------------------------------------------
Each Key Employee who receives an ISO must agree to notify the Company in
writing immediately after the Key Employee makes a Disqualifying Disposition of
any shares acquired pursuant to the exercise of an ISO. A Disqualifying
Disposition is any disposition (including any sale) of such shares before the
later of (a) two years after the date the Key Employee was granted the ISO, or
(b) one year after the date the Key Employee acquired shares by exercising the
ISO. If the Key Employee has died before such stock
-19-
is sold, these holding period requirements do not apply and no Disqualifying
Disposition can occur thereafter.
22. TERMINATION OF THE PLAN.
-----------------------
The Plan will terminate on November 9, 2002, the date which is ten (10)
years from the earlier of the date of its adoption and the date of its approval
-------
by the shareholders of the Company. The Plan may be terminated at an earlier
date by vote of the shareholders of the Company; provided, however, that any
such earlier termination will not affect any Options granted or Option
Agreements executed prior to the effective date of such termination.
23. AMENDMENT OF THE PLAN AND AGREEMENTS.
------------------------------------
The Plan may be amended by the shareholders of the Company. The Plan may
also be amended by the Administrator, including, without limitation, to the
extent necessary to qualify any or all outstanding Options granted under the
Plan or Options to be granted under the Plan for favorable federal income tax
treatment (including deferral of taxation upon exercise) as may be afforded
incentive stock options under Section 422 of the Code, to the extent necessary
to ensure the qualification of the Plan under Rule 16b-3, at such time, if any,
as the Company has a class of stock registered pursuant to Section 12 of the
1934 Act, and to the extent necessary to qualify the shares issuable upon
exercise of any outstanding Options granted, or Options to be granted, under the
Plan for listing on any national securities exchange or quotation in any
national automated quotation system of securities dealers. Any amendment
approved by the Administrator which is of a scope that requires shareholder
approval in order to ensure favorable federal income tax treatment for any
incentive stock options or requires shareholder approval in order to ensure the
compliance of the Plan with Rule 16b-3 at such time, if any, as the Company has
a class of stock registered pursuant to Section 12 of the 1934 Act, shall be
subject to obtaining such shareholder approval. Any modification or amendment
of the Plan shall not, without the consent of a Participant, affect his or her
rights under an Option previously granted to him or her. With the consent of
the Participant affected, the Administrator may amend outstanding Option
Agreements in a manner which may be adverse to the Participant but which is not
inconsistent with the Plan. In the discretion of the Administrator, outstanding
Option Agreements may be amended by the Administrator in a manner which is not
adverse to the Participant.
24. EMPLOYMENT OR OTHER RELATIONSHIP.
--------------------------------
-20-
Nothing in this Plan or any Option Agreement shall be deemed to prevent the
Company or an Affiliate from terminating the employment, consultancy or director
status of a Participant, nor to prevent a Participant from terminating his or
her own employment, consultancy or director status or to give any Participant a
right to be retained in employment or other service by the Company or any
Affiliate for any period of time.
25. GOVERNING LAW.
-------------
This Plan shall be construed and enforced in accordance with the law of the
State of Delaware.
-21-
Exhibit 11.1
------------
Myriad Genetics, Inc.
Statement Regarding Computation of Net Loss Per Share
Three Months Ended Six Months Ended
Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1996 Dec. 31, 1995
------------- ------------- ------------- -------------
Net loss ($3,453,693) ($651,323) ($6,283,772) ($2,254,225)
Weighted average common shares
outstanding 8,743,530 7,880,951 8,728,177 5,720,794
Weighted average preferred shares
outstanding - 257,405 - 882,048
Shares used in computation 8,743,530 8,138,356 8,728,177 6,602,842
===============================================================
Net loss per share ($0.39) ($0.08) ($0.72) ($0.34)
===============================================================
5
6-MOS
JUN-30-1997
JUL-01-1996
DEC-31-1996
15,259,726
47,032,482
123,896
0
0
40,447,537
13,297,007
2,200,089
73,890,186
9,317,097
0
0
0
87,734
64,180,621
73,890,186
34,060
4,947,581
24,283
12,921,247
0
0
37,391
(6,283,772)
0
(6,283,772)
0
0
0
(6,283,772)
(0.72)
(0.72)
