-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Dew4LYlwdtgOpLObS/c9ku6lBhc3+lgdWYDra+6S8oi8aYLpYGy17DNTR+VTL5Sj SNrvuPGQiQKVggFD8OV8qA== 0000898430-99-001840.txt : 19990505 0000898430-99-001840.hdr.sgml : 19990505 ACCESSION NUMBER: 0000898430-99-001840 CONFORMED SUBMISSION TYPE: S-1 PUBLIC DOCUMENT COUNT: 31 FILED AS OF DATE: 19990504 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BIOMARIN PHARMACEUTICAL INC CENTRAL INDEX KEY: 0001048477 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 680397820 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1 SEC ACT: SEC FILE NUMBER: 333-77701 FILM NUMBER: 99610130 BUSINESS ADDRESS: STREET 1: 11 PIMENTEL COURT CITY: NOVATO STATE: CA ZIP: 94949 MAIL ADDRESS: STREET 2: 11 PIMENTEL COURT CITY: NOVATO STATE: CA ZIP: 94949 S-1 1 FORM S-1 As filed with the Securities and Exchange Commission on May 4, 1999 Registration No. 333- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 --------------- FORM S-1 REGISTRATION STATEMENT Under The Securities Act of 1933 --------------- BIOMARIN PHARMACEUTICAL INC. (Exact name of Registrant as specified in its charter) Delaware 2834 68-0397820 (State or other (Primary Standard (I.R.S. Employer jurisdiction of Industrial Identification Number) incorporation or Classification Code organization) Number) 371 Bel Marin Keys Boulevard, Suite 210 Novato, CA 94949 (415) 884-6700 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) --------------- Raymond W. Anderson Chief Financial Officer BioMarin Pharmaceutical Inc. 371 Bel Marin Keys Boulevard, Suite 210 Novato, CA 94949 (415) 884-6700 (Name, address, including zip code, and telephone number, including area code, of agent for service) --------------- Copies to: Francis S. Currie, Esq. Patrick A. Pohlen, Esq. William Hinman, Esq. Donna M. Petkanics, Esq. Cooley Godward LLP Shearman & Sterling Wilson Sonsini Goodrich Five Palo Alto Square 1550 El Camino Real & Rosati 3000 El Camino Real Menlo Park, Ca 94025 Professional Corporation Palo Alto, CA 94306 (650) 330-2200 650 Page Mill Road (650) 843-5000 Palo Alto, CA 94304 (650) 493-9300 --------------- Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [_] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [_] --------------- CALCULATION OF REGISTRATION FEE - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
Proposed Maximum Title of Each Class of Securities Aggregate Offering Amount of to be Registered Price(2) Registration Fee - ------------------------------------------------------------------------------ Common Stock, $0.001 par value(1)...... $58,500,000 $16,263
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- (1) The shares of Common Stock being registered hereby consist of shares initially being offered in the United States, and any shares initially offered or sold outside the United States that are thereafter sold or resold in the United States in transactions not exempt from registration under Section 4(1) or 4(3) of the Securities Act of 1933, as amended. Offers and sales outside of the United States are being made pursuant to the exemption afforded by Rule 901 of Regulation S under the Securities Act, and this Registration Statement shall not be deemed effective with respect to such offers and sales. (2) Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933. --------------- The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +The information in this prospectus is not complete and may be changed. We may + +not sell these securities until the Securities and Exchange Commission + +declares our registration statement effective. This prospectus is not an + +offer to sell these securities and is not soliciting an offer to buy these + +securities in any state where the offer or sale is not permitted. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subject to completion, dated May 4, 1999 Shares BIOMARIN PHARMACEUTICAL INC. Common Stock $ per share [LOGO] - -------------------------------------------------------------------------------- . BioMarin . This is our initial Pharmaceutical Inc. is public offering and no offering public market shares. of these currently exists for shares are being our shares. offered in the United States and Canada and . Proposed trading are being symbol: Nasdaq offered in Europe and National Market and elsewhere outside the Swiss Exchange--BMRN. United States and Bank J. Vontobel & Co. Canada. The final AG has sponsored the allocation may vary. application for listing on the Swiss . We anticipate that the Exchange. initial public offering price will be between $ and $ per share. . Genzyme has agreed to purchase $10.0 million of stock at the initial public offering price in a private placement concurrent with this offering. --------------------- This investment involves risk. See "Risk Factors" beginning on page 6. - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Per Share Total --------- ------------ Public offering price................................... $x.xx $xxx,xxx,xxx Underwriting discounts.................................. $x.xx $ x,xxx,xxx Proceeds to BioMarin Pharmaceutical Inc................. $x.xx $xxx,xxx,xxx
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The underwriters have a 30-day option to purchase up to additional shares of common stock from us to cover over-allotments, if any. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of anyone's investment in these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. U.S. Bancorp Piper Jaffray Vontobel Securities Ltd. Schroders Leerink Swann & Company The date of this prospectus is , 1999. INSIDE FRONT COVER Picture of face of 12 year-old MPS-I child Computer-generated image of enzyme LEGEND: Children with MPS-I exhibit rapid deterioration of growth and development and usually die before the age of 10 Picture of face of 1 year-old child TABLE OF CONTENTS
Page ---- Summary............................................................... 3 Risk Factors.......................................................... 6 Use of Proceeds....................................................... 19 Dividend Policy....................................................... 19 Certain Information................................................... 19 Forward-Looking Statements............................................ 20 Capitalization........................................................ 21 Dilution.............................................................. 22 Selected Consolidated Financial Data.................................. 23 Management's Discussion and Analysis of Financial Condition and Results of Operations................................................ 25 Business.............................................................. 32 Management............................................................ 52 Certain Transactions.................................................. 64 Principal Stockholders................................................ 67 Description of Capital Stock.......................................... 69 Shares Eligible for Future Sale....................................... 71 Underwriting.......................................................... 73 Legal Matters......................................................... 76 Experts............................................................... 76 Where You Can Find More Information................................... 76 Index to Financial Statements ........................................ F-1
------------------------------- You should rely only on the information contained in this prospectus. We have not, and the underwriters have not, authorized any other person to provide you with different information. The prospectus is not an offer to sell, nor is it seeking an offer to buy, these securities in any state where the offer or sale is not permitted. The information in this prospectus is complete and accurate as of the date of the front cover, but the information may have changed since that date. 2 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SUMMARY The items in the following summary are described in more detail later in this prospectus. This summary provides an overview of selected information and does not contain all the information you should consider. Therefore, you should also read the more detailed information set out in this prospectus, including the financial statements and the other information incorporated by reference into this prospectus. Except as set forth in the consolidated financial statements or as otherwise specified in this prospectus, all information in this prospectus: (1) assumes no exercise of the underwriters' over-allotment option and (2) reflects the issuance of 2,600,000 shares of common stock, excluding shares issuable upon conversion of accrued interest, upon the automatic conversion of the convertible promissory notes on the date of the final prospectus for this offering. Business of BioMarin BioMarin Pharmaceutical Inc. is a leading developer of carbohydrate enzyme therapies for debilitating, life-threatening, chronic genetic disorders and other diseases and conditions. In October 1998, we completed the primary evaluation for the pivotal clinical trial of our lead enzyme replacement product candidate, BM101, for the treatment of mucopolysaccharidosis-I or MPS- I. Based on the data from that trial, we intend to complete the filing of a BLA with the FDA in the second half of 1999. We have a joint venture with Genzyme Corporation for the worldwide development and commercialization of BM101. MPS-I is a life-threatening genetic disorder caused by the lack of a sufficient quantity of the enzyme (alpha)-L-iduronidase, which affects about 3,400 patients in developed countries, including approximately 1,000 in the United States and Canada. Patients with MPS-I have multiple debilitating symptoms resulting from the buildup of carbohydrates in all tissues in the body. These symptoms include delayed physical and mental growth, enlarged livers and spleens, skeletal and joint deformities, airway obstruction, heart disease and impaired hearing and vision. If untreated, most children diagnosed with MPS-I will die from complications associated with the disease before adulthood. BM101 is a specific form of (alpha)-L-iduronidase that is intended to replace a deficiency of (alpha)-L-iduronidase in MPS-I patients. In October 1998, we completed the primary evaluation period for our pivotal clinical trial for BM101. This clinical trial treated ten patients with MPS-I for a period of six months at five medical centers in the United States. BM101 met the primary endpoints in its pivotal trial, reducing liver or spleen sizes in eight of ten patients and lowering urinary carbohydrate levels in all ten patients. In addition, various secondary endpoints were reached in each of the patients. We received notice from the FDA that our BLA will receive fast track designation for the treatment of the more severe forms of MPS-I, which account for approximately 60% of all cases. The FDA has granted BM101 an orphan drug designation giving us exclusive rights to market BM101 to treat MPS-I for seven years from the date of FDA approval if BM101 is the first (alpha)-L-iduronidase drug to be approved by the FDA for the treatment of MPS-I. In September 1998, we established a joint venture with Genzyme for the worldwide development and commercialization of BM101 for the treatment of MPS- I. Our responsibilities within the joint venture include obtaining U.S. regulatory approvals as well as manufacturing and process development. Genzyme is responsible for obtaining international regulatory approvals, worldwide sales and marketing as well as pricing and reimbursement. We will share expenses and profits from the joint venture equally with Genzyme. Genzyme invested $8.0 million upon signing the agreement and has agreed to purchase $10.0 million of common stock at the initial public offering price in a private placement concurrent with this offering. Genzyme has committed to pay us an additional $12.1 million upon approval of the BLA for BM101. 3 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- We are also developing enzyme replacement therapies for other life-threatening genetic diseases. There are nine additional MPS disorders caused by single enzyme deficiencies. We are developing BM102 for the treatment of MPS-VI. We received an orphan drug designation for BM102 to treat MPS-VI and intend to file an IND for the use of BM102 to treat MPS-VI in the fourth quarter of 1999. We are also developing carbohydrate enzymes intended to improve burn debridement and act as anti-fungals. Through a wholly-owned subsidiary, we provide carbohydrate analysis to research institutions and commercial laboratories. Our strategy is to: (1) focus on drug candidates with known biology and low technical risk, (2) target products that address life-threatening conditions that may be developed and approved quickly, (3) pursue well-defined, niche markets, (4) develop a direct sales and marketing organization for select markets and (5) enhance enzymatic expertise through our wholly-owned subsidiary, Glyko, Inc. Office Location Our principal executive offices are located at 371 Bel Marin Keys Boulevard, Suite 210, Novato, CA 94949 and our telephone number is (415) 884-6700. The Offering Common stock offered by us.................. shares(/1/) Common stock issued to Genzyme in the concurrent private placement............... shares Common stock outstanding after this offering................................... shares(/2/) Offering price.............................. $ per share Use of proceeds............................. To fund our 50% share of the expenses of the joint venture with Genzyme for the worldwide development and commercialization for BM101, to fund additional product programs, including BM102 and other enzyme therapies, to fund process development, clinical and commercial manufacturing facilities and general corporate purposes. See "Use of Proceeds." Proposed Nasdaq National Market and Swiss Exchange symbol............................ BMRN
- ------------------------------ (/1/) Of these shares [.] are being offered in the United States and Canada and [.] shares are being offered outside the United States and Canada. The final allocation may vary. (/2/) Excludes 3,706,476 shares of common stock issuable upon exercise of options outstanding at April 20, 1999, with a weighted average exercise price of $4.61 per share and warrants to purchase 801,500 shares of common stock with an exercise price of $1.00 per share. 4 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Summary Consolidated Financial Data (in thousands, except per share data)
Period from Period from March 21, 1997 March 21, 1997 (Inception) to Year Ended (Inception) to December 31, December 31, December 31, Consolidated Statements of 1997 1998 1998 Operations Data (1): -------------- ------------ -------------- Revenues......................... $ -- $ 1,190 $ 1,190 Operating costs and expenses: Cost of goods sold............. -- 108 108 Research and development....... 1,914 10,502 12,416 General and administrative..... 914 3,531 4,445 ------- -------- -------- Loss from operations............. (2,828) (12,951) (15,779) Interest income.................. 65 684 749 Equity in loss of joint venture.. -- (47) (47) ------- -------- -------- Net loss......................... $(2,763) $(12,314) $(15,077) ======= ======== ======== Net loss per common share, basic and diluted..................... $ (0.34) $ (0.55) $ (0.93) ======= ======== ======== Weighted average common shares outstanding..................... 8,136 22,488 (/2/) 16,184
As of December 31, 1998 ----------------------------------------- Pro Forma Actual Pro Forma /(3)/ As Adjusted /(4)/ Consolidated Balance Sheet Data: ------- --------------- ----------------- Cash, cash equivalents and short- term investments................... $11,389 $36,304 Total current assets................ 12,819 37,734 Total assets........................ 31,509 57,509 Long-term liabilities............... 110 26,110 Total stockholders' equity.......... 29,395 29,395
- ------------------------------ (/1/) BioMarin's acquisition of Glyko, Inc. was accounted for as a purchase. As a result, the consolidated statements of operations data of BioMarin include the operations of Glyko, Inc. from October 7, 1998, the date of its acquisition by BioMarin, through December 31, 1998. Financial information for Glyko, Inc. for the years ended December 31, 1994, 1995, 1996, 1997 and the period ended October 7, 1998 is included in the Selected Consolidated Financial Data and financial statements for Glyko, Inc. for the year ended December 31, 1997 and the period ended October 7, 1998 are included in the Financial Statements elsewhere in the prospectus. (/2/) Weighted average common shares outstanding as of December 31, 1998 excludes 2,801,240 shares of common stock issuable upon exercise of outstanding options at December 31, 1998 with a weighted average exercise price of $3.85 per share and warrants to purchase 801,500 shares of common stock with an exercise price of $1.00 per share. See "Capitalization," "Management--Stock Plans," "Underwriting" and Notes 3, 5, 9 and 11 of Notes to Consolidated Financial Statements of BioMarin. (/3/) Reflects the sale on April 13, 1999 of $26.0 million of convertible promissory notes, net of issuance costs of $1.1 million. (/4/) As adjusted for (1) the sale of [.] shares of common stock by BioMarin at an assumed initial public offering price of $[.] per share; (2) the sale of $10.0 million of common stock to Genzyme at the initial public offering price in a private placement concurrent with this offering; and (3) the issuance of 2,600,000 shares of common stock, excluding shares issuable upon conversion of accrued interest, upon the automatic conversion of the convertible promissory notes on the date of the final prospectus for this offering, after deducting underwriting discounts and commissions and estimated offering expenses. See "Use of Proceeds," "Capitalization" and "Underwriting." 5 RISK FACTORS You should carefully consider the following risk factors before you decide to buy our common stock. You should also consider the other information in this prospectus as well as the other documents incorporated by reference. In addition, the risks and uncertainties described below are not the only ones facing BioMarin because we are also subject to additional risks and uncertainties not presently known to us. This prospectus also contains forward looking statements that involve risks and uncertainties. Actual results could differ materially from those discussed in these forward looking statements. If any of these risks actually occur, our business, financial condition, operating results or cash flows, could be materially adversely affected. This could cause the trading price of our common stock to decline, and you may lose part or all of your investment. Risks Related To The Company Early Stage Company: We Have Only A Limited Operating History And Are In An Early Stage Of Development. We are in an early stage of development. Since we began operations in March 1997, we have been engaged primarily in research and development. We have a limited operating history on which to base an evaluation of our business and prospects, and we have no sales revenues from any of our drug candidates. Capital Requirements: We Must Generate Substantial Capital To Fund Our Operations. We expect to continue to spend substantial amounts of capital for our operations for the foreseeable future. Activities which will require additional expenditures include: research and development programs, preclinical studies and clinical trials, regulatory processes, establishment of commercial scale manufacturing capabilities and expansion of sales and marketing activities. The amount of capital we may need depends on many factors, including: . The progress, timing and scope of our research and development programs . The progress, timing and scope of our preclinical studies and clinical trials . The time and cost involved in obtaining regulatory approvals . Installing, validating and completing process qualification of manufacturing capacity . Competing technological and market developments . Changes and developments in our existing collaborative, licensing and other commercial relationships . Any new collaborative, licensing and other commercial relationships that we may establish Moreover, our fixed expenses such as rent, license payments and other contractual commitments are substantial and are likely to increase in the future. We believe that the net proceeds of this offering, together with our available cash, cash equivalents, short-term investment securities and investment income, will be sufficient to meet our operating and capital requirements through at least the next 12 months. This estimate is based on certain assumptions which may prove to be wrong. As a result, we may need additional financing prior to that time. In the future, we may need to raise substantial additional capital to fund operations. We cannot be certain that any financing will be available when needed. Even if financing is available, the terms may not be attractive. In addition, we may be required to grant superior rights to future stockholders. If we 6 fail to raise additional financing as we need it, we may have to slow or adversely change our plans for growth and our business and prospects may suffer. Accumulated Deficit: We Have An Accumulated Deficit Of $15.1 Million And Expect To Incur Operating Losses For The Foreseeable Future. We have operated with a net loss since we were formed. As of December 31, 1998, we had an accumulated deficit of approximately $15.1 million. To date, we have not generated any sales revenues from our drug candidates, and we expect our operating losses to increase as we conduct more research and development. Our losses mainly arise from expenses related to research and development, including clinical trials for drug candidates and related administrative activities. We expect to spend substantial amounts in the future for additional research, development and manufacturing activities. Examples of these activities include the following: . Preclinical studies . Clinical trials . Regulatory submission and review . Manufacturing process development, scale-up and start-up activities . Construction of research, process development, clinical manufacturing and commercial manufacturing facilities Because of the relative small size and scale of our wholly-owned subsidiary, Glyko, Inc., profits from products and services offered by it are expected to be insufficient to offset the expenses associated with our pharmaceutical business. As a result, we expect that operating losses will continue and increase for the foreseeable future. Our future profitability depends on our receiving regulatory approval of our drug candidates and our ability to successfully manufacture and market any approved drugs, either by ourselves or jointly with others. The extent of our future losses and the timing of profitability are highly uncertain and cannot be accurately predicted. Product Marketability: None Of Our Drug Products Are Currently Marketed And We Are Not Certain That Any Of Them Will Ever Be Marketed. None of our drug candidates has received regulatory approval to be commercially marketed and sold. We have several drug candidates in various stages of preclinical and clinical development. For example, our first drug candidate, an enzyme replacement therapy for MPS-I, is not expected to be commercially available until at least 2000. Our other drug candidates will not be commercially available for at least several more years. Because of the risks and uncertainties in biopharmaceutical development, our drug candidates could take a significantly longer time to gain regulatory approval than we expect or may never gain approval. Prior to being commercially sold, all of our drug candidates must evolve through the following stages: . Laboratory testing and preclinical studies . Clinical trials . Manufacturing process development, scale-up and start-up activities . Regulatory approval Even if our drug candidates receive regulatory approval, we must be able to manufacture approved products at acceptable cost and successfully market the approved products before we can become profitable. 7 Clinical Trials: We Must Successfully Complete Clinical Trials Before Our Drug Products Can Be Submitted for Regulatory Approval. We must demonstrate that our drug candidates are safe and effective for use on the target patients in order to receive regulatory approval for commercial sale. Typically, if a drug candidate is intended to treat a chronic disease, such as MPS-I, safety and efficacy data must be gathered over an extended period of time. In addition, clinical trials are typically conducted in three phases. The FDA generally requires two pivotal clinical trials that demonstrate substantial evidence of safety and efficacy and appropriate dosing in a broad patient population at multiple sites to support an application for regulatory approval. Clinical trials of drugs are time consuming and costly. In certain circumstances, a single trial may be sufficient to prove safety and efficacy under the FDA's Modernization Act of 1997. Our strategy for the development of therapeutics for certain genetic disorders is to conduct only one clinical trial on a small number of patients, which would then be the basis for our submission of a Biologics License Application, or BLA, to the FDA. For example, at the end of October 1998, we completed one clinical trial with 10 patients on our first drug candidate BM101 to support our BLA submission. The FDA may request additional trials to be conducted. If we have to conduct further clinical trials, whether for BM101 or other products developed in the future, it would significantly increase our expenses and delay regulatory approval and product launch. If BM101 is approved based on our Phase III study, we will be required to conduct a Phase IV study of BM101 to validate the Phase III endpoints. If the Phase IV study fails to verify the clinical benefit of BM101 or demonstrates that BM101 is not safe or effective, our FDA approval can be withdrawn on an expedited basis. Furthermore, if adverse effects are identified after marketing, FDA approval may be rapidly revoked and the drug no longer marketed. Preclinical Studies And Clinical Trial Results: The Results Of Preclinical Studies And Clinical Trials Are Not Necessarily Indicative Of The Success Of A Drug Candidate. We must conduct preclinical studies in animals and clinical trials in humans for each of our drug candidates before we can seek FDA approval to commercially sell the drug candidate. We expect the number of preclinical studies and clinical trials that the FDA will require will vary depending on the drug candidates, the indications and the regulatory pathway for the particular drug candidate. We may need to perform preclinical studies on multiple animal models using various doses and formulations before we can begin clinical trials, which could result in delays of commercialization of any drug candidates. Furthermore, even if we obtain favorable results in preclinical studies on animals, the results in humans may be different. An additional risk inherent in clinical trials is that the results of initial smaller clinical trials differ from the results obtained from subsequent more extensive testing and long-term trials. Adverse or inconclusive final clinical results would stop us from filing for regulatory approval. Such results may also cause us to abandon further work on a drug candidate. As a result, we cannot be certain that our research and development, including preclinical studies and clinical trials, will be successfully completed. We cannot guarantee that our drug candidates will obtain the necessary regulatory approvals. Finally, additional factors that can cause delay or termination of our clinical trials include: . Slow patient enrollment . Longer treatment time required to demonstrate efficacy with respect to primary and secondary clinical endpoints . Lack of sufficient supplies of the drug candidate . Adverse medical events or side effects in treated patients . Lack of effectiveness of the drug candidate being tested 8 Small Patient Populations: Small Patient Populations Heighten Our Need For Attractive Pricing And High Penetration Into The Market. Our strategy with respect to our initial drug candidates is to target disorders where the patient populations are small and seek orphan drug designation. For example, two of our initial drug candidates in genetic disorders, BM101 and BM102, target patients with MPS-I and MPS-VI, respectively. We estimate that in the United States and Canada, there are approximately 1,000 patients with MPS-I and 340 patients with MPS-VI. In addition, other drug candidates we are developing are to treat conditions, such as other genetic diseases and serious burns, with small patient populations. Due to the small patient populations in these markets, obtaining attractive pricing and patient reimbursement for our drug candidates is critical to our success. We cannot be certain that we will be able to obtain sufficient pricing to justify our product development efforts. We also cannot be certain that we will be able to achieve sufficient penetration of these small markets to achieve any commercial success. Government Regulation: We Must Receive Regulatory Approval Before Selling and Marketing Our Drugs. Our drug candidates are subject to extensive regulation by the federal government, principally the FDA and by state and local governments. FDA regulations govern the development, testing, manufacturing, advertising and selling of drug products. If our products are distributed abroad, they are also subject to foreign government regulation. Before we can commercially sell our products in the United States, we must obtain FDA approval for each drug for a particular indication that we intend to commercialize. The FDA approval process is typically lengthy and expensive, and approval is never certain. As part of the FDA approval process, we must conduct, at our own expense, preclinical studies and clinical trials on each drug candidate. Even if the FDA grants approval, it may later withdraw its approval if we fail to comply with their regulations or if subsequent problems with our drug candidates occur. FDA approval may also limit the uses or indications for which our drug candidates may be promoted and sold. In addition, manufacture of our drug products must comply with the FDA's cGMP regulations. The cGMP regulations govern quality control and documentation policies and procedures. Our manufacturing facilities are continuously subject to inspection by the FDA, the State of California and foreign regulatory authorities, before and after product approval. Because we are currently in the process of developing the manufacturing site and process for commercial manufacture of BM101, our facility has not yet been inspected by any governmental entity. Before commercial manufacturing can commence, we must obtain regulatory approval of our manufacturing facility and process. We cannot guarantee that BioMarin, or any potential third-party manufacturer of our drug products, will be able to comply with cGMP regulations. Certain material changes to the manufacturing processes after approvals are also subject to review and approval by the FDA or other regulatory agencies. We cannot guarantee that we will obtain the necessary government approvals or comply with applicable laws for manufacturing or marketing any of our drug candidates. If we fail to comply with FDA regulations, the FDA could deny marketing approval or withdraw approval if it has been granted. If we were to fail to receive approval, were delayed in receiving approval, or failed to comply with FDA regulations, we could be prevented from selling our drug candidates. If we fail to comply with FDA regulations after a particular drug candidate is on the market, we may receive warning letters and face sanctions such as fines, withdrawals of previous FDA approvals and criminal prosecutions. The FDA may also impose injunctions preventing us from manufacturing or selling the product or it may recall or seize our products. Although BM101 has obtained a fast track designation, we cannot guarantee a faster review process or faster approval compared to the normal FDA procedures. The FDA may still require us to conduct 9 further clinical trials to confirm the beneficial effects, if any, of BM101, and to validate surrogate endpoints prior to approval. Failure to verify clinical benefit of BM101 or demonstrate that BM101 is safe and effective can subject BM101 to expedited withdrawal procedures. We will also have to submit all promotional materials related to BM101 for FDA review and pre-approval until such time that the FDA removes this requirement. The commercial launch of BM101 would be delayed if the FDA decides that more data or additional larger studies for BM101 are needed. Orphan Drug Exclusivity: Our Success Depends On Our Ability To Obtain Orphan Drug Exclusivity. We received orphan drug designation from the FDA for BM101 in September 1997. In February 1999, we received orphan drug designation from the FDA for BM102. Under the Orphan Drug Act, the FDA may designate a product as an orphan drug if it is a drug intended to treat a rare disease or condition defined as a patient population of less than 200,000. The sponsor that obtains the first FDA approval for a designated orphan drug for a given rare disease receives marketing exclusivity for use of that drug for the orphan indication for a period of seven years. However, different drugs can be approved for the same orphan indication. We cannot guarantee we will receive the first FDA approval on any designated drug and, therefore, receive market exclusivity or that orphan drug exclusivity will reduce competition. As part of our business strategy, we intend to develop drugs that may be eligible for FDA orphan drug designation. Because the extent and scope of patent protection for our drug candidates is uncertain, orphan drug designation is particularly important for our products that are eligible for such designation. We plan to rely on the exclusivity period under the orphan drug designation to maintain a competitive position. However, we do not know if the FDA will grant orphan drug designation or marketing exclusivity for any of our products other than BM101 and BM102. Even if we obtain orphan drug designation, we cannot guarantee that we will be the first to obtain marketing approval for any orphan indication or that exclusivity would effectively protect the product from competition. Orphan drug designation does not shorten the development or FDA review time of a drug so designated nor give the drug any advantage in the FDA review or approval process. Third-Party Payors: Our Success Depends On Our Ability To Be Reimbursed By Third-Party Payors. Our ability to successfully commercialize our drug candidates depends on the availability of reimbursement for our drugs from government health agencies, such as Medicare and Medicaid in the United States, private health insurers and other organizations. The course of treatment for patients with MPS-I using BM101 is expected to be expensive. We expect patients to need treatment throughout their lifetimes. We expect that families of patients will not be capable of paying for this treatment themselves. If medical reimbursement were denied for this treatment, there would be no commercially viable market for BM101. Third-party payors, such as government or private health care insurers, carefully review and increasingly challenge the price charged for drugs. Reimbursement rates from private companies vary depending on the third-party payor, the insurance plan and other factors. Reimbursement systems in international markets vary significantly by country and by region, and reimbursement approvals must be obtained on a country-by-country basis. We cannot be certain that third-party payors will pay for the costs of our drugs and the courses of treatment. Even if we are able to obtain reimbursement from third-party payors, we cannot be certain that reimbursement rates will be enough to allow us to profit from sales of our drugs. We currently have no expertise in reimbursement and expect to rely on our partner Genzyme and its expertise to obtain reimbursement for BM101. We cannot predict what the reimbursement rates will be. In addition, we will need to develop our own reimbursement expertise for future drug candidates unless we enter into collaborations with other companies with the necessary expertise. 10 We expect that reimbursement in the future will be subject to increased restrictions both in the United States and internationally. The escalating cost of health care has led to increased pressure on the health care industry to reduce costs. Governmental and private third-party payors have proposed health care reforms and cost reductions. In the United States there have been a number of federal and state proposals to control the cost of health care, including the cost of drug treatments. In certain foreign markets, the government controls the pricing which would affect the profitability of drugs. Current government regulations and possible future legislation regarding health care may affect our future revenues from sales of our drugs and may adversely affect our business and prospects. Proprietary Technology: Our Ability To Protect Our Patents And Our Proprietary Technology And Information Is Uncertain. Where appropriate, we seek patent protection for certain aspects of our technology. However, for some of the enzymes we are developing, including BM101 and BM102, meaningful patent protection may not be available. The patent positions of biotechnology companies are extremely complex and uncertain. The scope and extent of patent protection for some of our products are particularly uncertain because key information on some of the enzymes we are developing has existed in the public domain for many years. This means that other parties have published the structure of the enzyme, the methods for purifying or producing the enzyme or the methods of treatment. If such publications exist, they can prevent our patent applications from issuing or can limit the scope of coverage for issued patents. In addition, our owned and licensed patents and patent applications do not ensure the protection of our intellectual property for a number of other reasons: . We do not know whether our patent applications will result in actual patents. For example, we may not have developed a method for treating a disease before others developed similar methods. . Our competitors may interfere in our patent process, which can delay the grant of a patent and reduce the scope of our patent protection. . Even if we receive a patent, it may not provide much practical protection. The government agencies that grant patents have not followed a consistent policy. If we receive a patent with a narrow scope, then it will be easier for competitors to design products that do not infringe on our patent. . Enforcing patents is expensive and may absorb significant time by our management. In litigation, a competitor could claim that our issued patents are not valid for a number of reasons. If the court agrees, we would lose that patent. In addition, competitors also seek patent protection for their technology. There are many patents in our field of technology, and we cannot guarantee that we do not infringe on those patents or that we will not infringe on patents granted in the future. If a patent holder believes our product infringes on their patent, the patent holder may sue us even if we have received patent protection for our technology. If someone else claims we infringe on their technology, we would face a number of issues, including: . Defending a lawsuit takes significant time and can be very expensive. . If the court decides that our product infringes on the competitor's patent, we may have to pay substantial damages for past infringement. . The court may prohibit us from selling or licensing the product unless the patent holder licenses the patent to us. The patent holder is not required to grant us a license. If a license is available, we may have to pay substantial royalties or grant cross-licenses to our patents. 11 . Redesigning our product so it does not infringe may not be possible and could require substantial funds and time. It is also unclear whether our trade secrets will provide useful protection. While we use reasonable efforts to protect our trade secrets, our employees or consultants may unintentionally or willfully disclose our information to competitors. Enforcing a claim that someone else illegally obtained and is using our trade secrets, like patent litigation, is expensive and time consuming. We cannot predict the outcome of such litigation. In addition, courts outside the United States are sometimes less willing to protect trade secrets. Our competitors may independently develop equivalent knowledge, methods and know-how. We may also support and collaborate in research conducted by government organizations or by universities. We cannot guarantee that we will be able to acquire any exclusive rights to technology or products derived from such collaborations. If we do not obtain required licenses or rights, we could encounter delays in product development while we attempt to design around blocking patents or even be prohibited from developing, manufacturing or selling products requiring such licenses. There is also a risk that disputes may arise as to the rights to technology or products developed in collaboration with other parties. Our BM101 product depends on our license with Harbor-UCLA. Harbor-UCLA can terminate the agreement if we breach it. Genzyme Relationship: Our Success Depends On Our Continued Relationship With Genzyme. On September 4, 1998, we established a joint venture with Genzyme for the worldwide development and commercialization of BM 101 for the treatment of MPS- I. Under the agreement, the joint venture is owned half by us and half by Genzyme. Genzyme is responsible for obtaining foreign regulatory approvals, handling sales and marketing of BM101 and obtaining reimbursement. Furthermore, we are relying on Genzyme to apply its expertise and know-how that it has developed through the launch and sale of Ceredase(R) and Cerezyme(R) enzymes for Gaucher disease, a rare genetic disorder. We cannot guarantee that Genzyme will devote the resources necessary to successfully market BM101. In addition, either party may terminate the joint venture for any reason. If Genzyme were to terminate the joint venture, we would be required to undertake Genzyme's responsibilities ourselves. We have no experience in selling, marketing or obtaining reimbursement for pharmaceutical products. In addition, we would be required to pursue foreign regulatory approvals. Termination of the joint venture could therefore cause significant delays in product launch in the United States, difficulties in obtaining third-party reimbursement and delays or failure to obtain foreign regulatory approval, any of which could hurt our business and results of operations. Since Genzyme funds 50% of the joint venture's operating expenses, the termination of the joint venture would double the financial burden on BioMarin and reduce the funds available for other product programs. Limited Drug Manufacturing Experience: Our Lack Of Manufacturing Experience Heightens The Risks Associated With Process Development And Manufacturing Scale-Up. We have no experience manufacturing our drug candidates in volumes that will be necessary to support commercial sales. In addition, the FDA and state regulatory agencies must clear our manufacture and any third party manufacture of our drug candidates and confirm that the facilities are cGMP compliant. There is a high probability that an unproven manufacturing process will not meet initial expectations as to schedule, reproducibility, yields, purity, costs, quality, and other measurements of performance. Improvements in manufacturing processes typically are very difficult to achieve and are often very expensive. The time required to make such improvements is highly uncertain. If we contract for manufacturing services with an unproven process, our contractor is subject to the same uncertainties, high standards and regulatory controls. 12 The FDA and other international pharmaceutical regulatory agencies must clear our manufacturing processes, facilities, quality assurance/controls, validation procedures and records as to processes and facilities and essentially all aspects of the manufacturing process. We must continually demonstrate compliance with the FDA's standards for cGMP in our facilities. Applicable state agencies also inspect and certify facilities and provide an additional level of regulatory control. If we change facilities or processes, we must satisfy elaborate tests required by comparability protocols to insure that the new facilities and processes are producing product that is comparable to the product produced in the original facility and with the original process. Failure to correctly implement or comply with cGMPs could delay FDA approval until corrective action is satisfactorily completed. Failure to maintain compliance with cGMPs after approval could result in product recalls or other enforcement actions by the FDA. We currently have a contract with Harbor-UCLA Research and Education Institute to manufacture BM101 in limited quantities for use in preclinical studies and clinical trials. In order to produce initial commercial requirements for BM101 in our facility we will have to execute a comparability protocol to prove that the product manufactured at our facility is comparable to the clinical trial product produced in the Harbor-UCLA facility. This may require clinical testing. We must pass FDA and state inspections and manufacture three process qualification batches to final specifications under cGMP controls before the BM101 BLA can be approved. Increasing the scale or size of manufacturing is an uncertain process that may result in process control problems with, among other things: . Production yields . Purity . Quality control and assurance . Shortages of qualified personnel . Compliance with FDA regulations If we are unable to establish and maintain commercial scale manufacturing within our planned time and cost parameters, sales of our products and our financial performance will be adversely affected. Scale-up problems could result in significant delays and cost over-runs before completion. We are also developing 23,000 square feet in another facility for additional manufacturing capacity for BM101. This facility is subject to all the same risks as the facility mentioned above. In addition, there is additional risk that the construction schedules will take longer than planned and the actual construction costs will be greater than budgeted. We expect that all of our new products, including BM102, will require similar long and uncertain development of the manufacturing process before commercial manufacturing can begin. Even if we can establish this capacity, we cannot be certain that manufacturing costs will be commercially reasonable, especially if reimbursement is substantially lower than expected. In order to achieve our product cost targets, we must develop efficient manufacturing processes either by improving the cell lines and processes licensed from others or by developing a recombinant cell line and related purification and production processes. The development of a stable, high production cell line for any given enzyme is risky, expensive and unpredictable and may not yield adequate results. In addition, the development of protein purification processes is difficult and may not produce the high purity required with acceptable yield and costs. If we are not able to develop efficient manufacturing processes, the investment in manufacturing capacity sufficient to satisfy market demand will be much greater and will place heavy financial demands upon us. If we do not achieve our manufacturing cost targets, we will have lower margins and reduced profitability in commercial production and greater losses in manufacturing start-up phases. 13 Limited Marketing Capability: Our Success Depends On Our Ability To Sell And Market Our Products. If we decide to sell and market the drug candidates that we are developing, we will have to establish appropriate pharmaceutical sales and marketing capabilities and distribution channels. We have recently entered into a joint venture with Genzyme where Genzyme will be responsible for marketing and distributing BM101. We cannot guarantee that we will be able to establish sales and distribution capabilities or that BioMarin, the joint venture or any future collaborators will successfully sell any of our drug candidates. To increase our distribution and marketing for both our drug candidates and our Glyko, Inc. products, we will have to increase our current sales force and/or enter into additional third-party marketing and distribution agreements. We cannot guarantee that we will be able to hire the qualified sales and marketing personnel we need in a timely manner, if at all. Nor can we guarantee that we will be able to enter into any marketing or distribution agreements on acceptable terms, if at all. If we cannot increase our marketing capabilities as we intend, either through increasing our sales force or entering into agreements with third parties, sales of our products may be adversely affected. Management Of Growth: Our Success Depends On Our Ability To Manage Our Growth. Rapid growth of our management, administrative and operational resources have placed a significant strain on our managerial, operational, financial and other resources. We expect this growth to continue. We recently acquired Glyko, Inc. and entered into a joint venture with Genzyme. We expect to hire more personnel, expand our facilities and upgrade our information systems. Additionally, if we receive FDA approval to market BM101, the joint venture will be required to devote additional resources to support the commercialization of BM101. To manage expansion effectively, we need to continue to develop and improve our operating and financial systems, sales and marketing capabilities and expand, train, retain, manage and motivate our employees. We cannot guarantee that our systems, procedures or controls will be adequate to support our operations or that our management will be able to manage successfully future market opportunities or our relationships with customers and other third parties. We cannot guarantee that we will continue to grow or, if we do, that we will effectively manage such growth. Our failure to manage growth would adversely affect our business and prospects. Competition: We Operate In A Highly Competitive Market. We have many existing and potential competitors, including large pharmaceutical companies, biotechnology companies and laboratory and testing services firms. Furthermore, many of our current and potential competitors have several advantages over us, including: . Longer operating histories . Greater financial resources . More extensive or better research and development programs, including experience in obtaining regulatory approval . Greater manufacturing and marketing resources and experience Our competitors may succeed in developing, manufacturing and marketing products that are more effective or less expensive than any of our drug candidates. They may also succeed in obtaining regulatory approvals for their products faster than we can obtain them, including orphan drug designation, or commercializing their products before we do. These companies will also compete with 14 us in attracting qualified personnel and in attracting parties for acquisitions, joint ventures or other collaborations. They will also compete with us in attracting academic research institutions as partners and in obtaining licensing of such institution's proprietary technology. Several pharmaceutical and biotechnology companies have already established themselves in the field of enzyme therapeutics, including Genzyme, our joint venture partner. Universities and public and private research institutions are another source of competition for us. While these organizations primarily have educational objectives, they may develop proprietary technology and acquire patents that we may need for the development of our drug candidates. We will attempt to obtain licenses for such proprietary technology, if available. Such licenses may not be available to us on acceptable terms, if at all. We will also directly compete with a number of these organizations in the recruitment of personnel, especially scientists and technicians. We believe competition for Glyko Inc.'s products and services are established technologies provided by other companies, such as laboratory and testing services firms. For example, Glyko, Inc.'s FACE Imaging System competes with alternative carbohydrate analytical technologies, including capillary electrophoresis, high-pressure liquid chromatography, mass spectrometry and nuclear magnetic resonance spectrometry. These competitive technologies have established customer bases and are more widely used and accepted by scientific and technical personnel because they can be used for non-carbohydrate applications. Companies competing with Glyko, Inc. may have greater financial, manufacturing and marketing resources and experience. Key Personnel: We Need To Recruit And Retain Skilled Professionals And Technicians. Our future growth and success depend on our ability to train, retain, manage and motivate our employees. Because of the specialized scientific nature of our business, we rely heavily on our ability to attract and retain qualified scientific, technical and managerial personnel. In particular, the loss of Grant W. Denison, Jr., Chairman and Chief Executive Officer, John C. Klock, M.D., President and Secretary or Christopher M. Starr, Ph.D., Vice President for Research and Development would be detrimental to us. The competition for qualified personnel in the biopharmaceutical field is intense. We cannot be certain that we will continue to attract and retain qualified personnel necessary for the development of our business. The loss of the services of existing personnel as well as the failure to recruit additional key scientific, technical and managerial personnel in a timely manner would harm our research and development programs and our business and prospects. Product Liability: Liability Claims Could Adversely Affect Our Earnings And Financial Condition. We develop drug treatments for use in humans. The nature of the biopharmaceutical business exposes us to potential product liability risks inherent in the testing, manufacturing and marketing of human drug treatments. We currently do not maintain insurance against product liability lawsuits. Although we intend to obtain product liability insurance, we cannot be certain that we will be able to obtain adequate insurance coverage. We cannot be certain that we can successfully defend any product liability lawsuit brought against us. Even if we are able to establish insurance coverage, the cost may be prohibitive. If we are the subject of a successful product liability claim which exceeds the limits of our insurance coverage, we may incur substantial liabilities which would adversely affect our business and prospects. Year 2000: Any Problems With Year 2000 Compliance In Our Internal Systems Or Customer Solutions Could Harm Our Business. The following is intended to constitute "Year 2000 Readiness Disclosure" under the Year 2000 Information and Readiness Disclosure Act of 1998. 15 Beginning in the year 2000, the date fields coded in certain software products and computer systems will need to accept four digit entries in order to distinguish 21st century dates from 20th century dates (commonly known as the year 2000 problem). It is not clear what potential problems may arise as the biopharmaceutical industry, and other industries, try to resolve this year 2000 problem. It is possible that our currently installed computer systems, software products or other business systems, or those of our suppliers or service providers, working either alone or in conjunction with other software or systems, will not accept input of, store, manipulate and output dates for the years 1999, 2000 or subsequent years without error or interruption. We have formed a team to review and resolve those aspects of the year 2000 problem that are within our direct control and adjust to or influence those aspects that are not within our direct control. The team has reviewed our software products, including those under development, and determined that our software products do not use date data and are year 2000 compliant. Our biopharmaceutical products do not have any year 2000 exposure. Based on representations from our vendors, the team has reviewed the year 2000 compliance status of our major internal information technology programs and systems used for administrative requirements and determined that they are year 2000 compliant. Some risks associated with the year 2000 problem are beyond our ability to control, including the extent to which our suppliers and service providers can address the year 2000 problem. The failure by a third party to adequately address the year 2000 issue could have an adverse effect on their operations, which could have an adverse effect on us. We are assessing the possible effects on our operations of the possible failure of our key suppliers and providers, contractors and collaborators to identify and remedy potential year 2000 problems. Volatility: Our Stock Price May Be Volatile And You Could Suffer A Decline In Value. Prior to this offering there has been no public market for our common stock. Although application has been made for our common stock to be listed on the Nasdaq National Market as well as on the Swiss Exchange, an active trading market may not develop or be sustained either in the United States or in Switzerland after the offering. The initial public offering price will be negotiated among the underwriters and us and may not be indicative of prices that will prevail in the trading markets after the offering. Accordingly, the initial public offering price will be determined through negotiations between BioMarin and the underwriters. Our valuation and the initial public offering stock price have no meaningful relationship to current or historical earnings, asset values, book value or any other criteria of value. The market price of the common stock after this offering will fluctuate and may be higher or lower than the initial public offering price due to factors including: . Progress of BM101 and our other lead drug candidates through the regulatory process, especially BM101 regulatory actions in the United States . Results of clinical trials, announcements of technological innovations or new products by us or our competitors . Government regulatory action affecting our drug candidates or our competitors' drug candidates in both the United States and foreign countries . Developments or disputes concerning patent or proprietary rights . General market conditions for emerging growth and biopharmaceutical companies . Economic conditions in the United States or abroad . Actual or anticipated fluctuations in our operating results . Broad market fluctuations may cause the market price of our common stock to fluctuate . Changes in financial estimates by securities analysts 16 In the past, following periods of large price declines in the public market price of a company's securities, securities class action litigation has often been initiated against that company. Such litigation could result in substantial costs and diversion of management's attention and resources, which would hurt our business. Any adverse determination in such litigation could also subject us to significant liabilities. Further, we do not know the extent to which investor interest in BioMarin will lead to the development of an active trading market or how liquid that market might be. The market price of our common stock is likely to be highly volatile as frequently occurs with publicly traded emerging growth companies and biopharmaceutical companies. There can be no assurance that the Swiss Exchange will develop into a stable and liquid market for securities over the long term. Furthermore, an inactive market in one of the two markets could cause the price of our common stock to fluctuate more dramatically in that market. Dramatic fluctuations in the price of our common stock in one market could have a negative impact on the trading price of our common stock in the other market. Concentration Of Ownership: Our Officers And Directors Control A Large Portion Of The Common Stock. After this offering, our directors and officers will control approximately [.]% of the outstanding shares of common stock. If the underwriters exercise their over-allotment option in its entirety then the officers and directors will own approximately [.]%. Glyko Biomedical will own [.]% of the outstanding shares of capital stock after this offering. Three of six Glyko Biomedical directors are officers or directors of BioMarin. As a result, after this offering, due to their concentration of stock ownership, directors and officers, together with Glyko Biomedical if they act together, may be able to otherwise control our management and operations, and may be able to prevail on all matters requiring a stockholder vote including: . The election of all directors . The amendment of charter documents or the approval of a merger, sale of assets or other major corporate transactions . The defeat of any non-negotiated takeover attempt that might otherwise benefit the public stockholders Anti-Takeover Provisions: Our Charter Documents Make It Difficult For Another Company To Acquire Us. Our board of directors will have after the closing of this offering the authority to issue 1,000,000 shares of preferred stock and to determine the terms of those shares of stock without any further action by the stockholders. The rights of holders of our common stock are subject to the rights of the holders of any such preferred stock that may be issued. The issuance of preferred stock, while providing desirable flexibility in connection with possible acquisitions and to the corporate purposes, could have the effect of making it more difficult for a third party to acquire a majority of the outstanding voting stock of BioMarin. Some provisions of our certificate of incorporation and bylaws and of Delaware law could delay or make difficult a merger, tender offer or proxy contest involving BioMarin. BioMarin is incorporated in Delaware. Certain anti-takeover provisions of Delaware law and our charter documents as in effect at the time of the closing may make a change in control of BioMarin more difficult, even if a change in control would be beneficial to the stockholders. Our anti-takeover provisions include: provisions in the certificate of incorporation providing that stockholders' meetings may only be called by the board of directors and the provision in the bylaws providing that the stockholders may not take action by written consent. These provisions may allow the board of directors to prevent changes in the management and control of BioMarin. Under applicable Delaware law, our board of directors may adopt additional anti-takeover measures in the future. 17 Risks Related To This Offering Shares Eligible: The Sale Of A Substantial Number Of Shares Of Common Stock Could Cause The Market Price Of Our Common Stock To Decline. After this offering, we will have a total of [.] shares of common stock outstanding. If the underwriters exercise their entire over-allotment option we will have [.] shares outstanding. The sale by our company or the resale by stockholders of shares of our common stock in the public market after the offering could cause the market price of the common stock to decline. The federal securities laws impose restrictions on the ability of certain stockholders to resell their shares of [.] common stock. In addition, certain stockholders have agreed with the underwriters, not to sell their shares for 180 days following the offering. U.S. Bancorp Piper Jaffray may decide at any time, without notice, to allow these stockholders to sell their shares prior to 180 days following the offering. The [.] shares of common stock outstanding after this offering will be available for resale on The Nasdaq National Market as follows:
Number of Shares Date Available for Resale ---------------- ------------------------- [.] Immediately 1,973 181 days following the offering without volume limitations 23,674,207 181 days following the offering with volume and certain other limitations [.] Various dates beginning 181 days following the offering with volume limitations
Beginning 181 days after the date of this prospectus all [.] restricted shares held by existing stockholders shall be eligible for sale on the Swiss Exchange. Sales of restricted securities on the Swiss Exchange, however, will be subject to restrictions under U.S. securities laws for varying periods of time. After this offering, holders of [.] shares of the common stock may require us to register their shares for resale under federal securities laws. Registration of such shares would result in these stockholders being able to immediately resell their shares on The Nasdaq National Market or the Swiss Exchange. Any such sales or anticipation thereof could cause the market price of the common stock to decline. We also intend to file a registration statement following the offering to permit the sale of approximately 5,450,000 shares of common stock under our stock plans beginning 181 days after the offering. As of April 20, 1999, options to purchase 3,706,476, shares of BioMarin common stock upon exercise of options with a weighted average exercise price per share of $4.61 were outstanding, however, many of these shares are subject to vesting that generally occurs over a period of four years following the date of grant. All vested options are subject to agreements with the underwriters not to sell such shares for 180 days after the offering. Dilution: As We Issue Stock At The Initial Public Offering Price There Will Be Immediate And Substantial Dilution To New Investors. The initial public offering price is substantially higher than the net tangible book value per share of common stock immediately after the offering. The present owners of our issued and outstanding shares of common stock have also acquired a controlling interest in BioMarin at a cost substantially less than the price at which the investors in this offering will bear a substantial portion of the risk of loss. Investors in this offering will suffer immediate and substantial dilution. Dilution also occurs whenever more shares of the common stock are issued. The effect of dilution is that any earnings of the company will have to be divided among more shares. As a result, unless the issuance of the shares involves an increase in our value or earnings, each outstanding share will be worth a lesser amount. Because voting power is shared among all outstanding shares, the issuance of more shares also reduces the voting power of each previously outstanding share. 18 USE OF PROCEEDS The net proceeds to us from the sale of [.] shares of common stock in this offering at an assumed public offering price of $[.] per share and the sale of $10.0 million of common stock to Genzyme at the initial public offering price in a private placement concurrent with this offering, are estimated to be approximately $[.] million (approximately $[.] million if the underwriters' over-allotment option is exercised in full) after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We intend to use the net proceeds of this offering for the following purposes: . To fund our share of costs associated with the development and commercialization of BM101 . To fund research and development including clinical trials, regulatory processes and manufacturing for our product programs . For process development, scale-up and start-up of manufacturing activities . For research, development, clinical and commercial manufacturing facilities, including related equipment . General corporate purposes A portion of the proceeds may also be used to acquire or invest in complementary businesses or products or to obtain rights to use complementary technologies. The amounts and timing of our actual expenditures for each of these purposes may vary significantly depending upon numerous factors, including the status of our product development efforts, regulatory approvals, competition, sales and marketing activities and market acceptance of our products. Pending use for these or other purposes, we intend to invest the net proceeds of this offering in short-term, investment-grade, interest-bearing securities. See "Risk Factors--Capital Requirements." DIVIDEND POLICY We have never paid cash dividends on our common stock. We currently intend to retain all of our future earnings to finance the growth and development of our business. We do not intend to pay cash dividends on our common stock in the foreseeable future. CERTAIN INFORMATION BioMarin acquired Glyko, Inc. in October 1998. Unless otherwise specified, the terms "us" and "we" refer to both BioMarin and Glyko, Inc. BioMarin was incorporated in Delaware in October 1996 and began operations on March 21, 1997, the date of inception. Our principal executive offices are located at 371 Bel Marin Keys Boulevard, Suite 210, Novato, California 94949 and our telephone number is (415) 884-6700. This prospectus contains certain trademarks of BioMarin. Each trademark, trade name or service mark of any other company appearing in this prospectus belongs to its holder. 19 FORWARD-LOOKING STATEMENTS This prospectus contains "forward-looking statements" as defined under securities laws. These statements can be identified by the use of terminology such as "believes," "expects," "anticipates," "plans," "may," "will," "projects," "continues," "estimates," "potential," "opportunity" and so on. These forward-looking statements may be found in the "Summary," "Risk Factors," "Business," and other sections of this prospectus. Our actual results or experience could differ significantly from the forward-looking statements. Factors that could cause or contribute to such differences include those discussed in "Risk Factors," as well as those discussed elsewhere in this prospectus. You should carefully consider that information before you make an investment decision. You should not place undue reliance on such statements, which speak only as of the date that they were made. These cautionary statements should be considered in connection with any written or oral forward-looking statements that we may issue in the future. We do not undertake any obligation to release publicly any revisions to such forward-looking statements after completion of the offering to reflect later events or circumstances or to reflect the occurrence of unanticipated events. 20 CAPITALIZATION The following table sets forth our actual capitalization at December 31, 1998. The pro forma capitalization gives effect to the sale of $26.0 million of convertible promissory notes, net of issuance costs of $1.1 million. The as adjusted data reflects (1) the sale of [.] shares of common stock by BioMarin at an assumed initial public offering price of $[.] per share; (2) the sale of $10.0 million of common stock to Genzyme at the initial public offering price in a private placement concurrent with the offering; and (3) the issuance of 2,600,000 shares of common stock, excluding shares issuable upon conversion of accrued interest, upon the automatic conversion of the convertible promissory notes on the date of the final prospectus for this offering, after deducting underwriting discounts and commissions and estimated offering expenses:
As of December 31, 1998, ---------------------------- Pro As Actual Forma Adjusted -------- -------- -------- (in thousands) Cash, cash equivalents and investments............ $ 11,389 $ 36,304 $ ======== ======== ==== Long-term liabilities (/1/)....................... $ 110 $ 26,110 $ Stockholders' equity: Common stock, $0.001 par value; 30,000,000 shares authorized, actual; 50,000,000 shares authorized, pro forma; 75,000,000 shares authorized, as adjusted; 26,176,180 shares issued and outstanding, actual and pro forma; [.] shares issued and outstanding, as adjusted (/2/).......................................... 26 26 Preferred stock, $0.001 par value; no shares authorized, actual and pro forma; 1,000,000 shares authorized, as adjusted; no shares issued and outstanding actual, pro forma and as adjusted....................................... Additional paid-in capital...................... 47,868 47,868 Warrants........................................ 128 128 Notes receivable from stockholders.............. (2,565) (2,565) Deferred compensation........................... (986) (986) Accumulated deficit............................. (15,076) (15,076) -------- -------- ---- Total stockholders' equity.................... 29,395 29,395 -------- -------- ---- Total capitalization........................ $ 29,505 $ 55,505 $ ======== ======== ====
- ------------------------------- (/1/) See Notes 3 and 12 of Notes to BioMarin's Financial Statements. (/2/) Excludes (1) 2,801,240 shares of common stock issuable upon exercise of outstanding options at December 31, 1998 with a weighted average exercise price of $3.85 per share, and (2) 801,500 shares of common stock issuable upon exercise of outstanding warrants at an exercise price of $1.00 per share. 21 DILUTION Our pro forma net tangible book value as of December 31, 1998, was $17,690,794 or $0.68 per share of common stock. Pro forma net tangible book value per share represents the amount of BioMarin's pro forma stockholders' equity, less intangible assets, divided by the pro forma number of shares of common stock outstanding as of December 31, 1998 after giving effect to: . The application of the net proceeds from the sale on April 13, 1999 of $26.0 million of convertible promissory notes and the issuance of 2,600,000 shares of common stock, excluding shares issuable upon conversion of accrued interest, upon the automatic conversion of the convertible promissory notes on the date of the final prospectus for this offering . The application of the net proceeds from the sale of [.] shares of common stock by BioMarin at an assumed initial public offering price of $[.] per share . The sale of $10.0 million of common stock to Genzyme at the initial public offering price in a private placement concurrent with this offering As of December 31, 1998, after giving effect to the items above, the pro forma net tangible book value of BioMarin would have been $[.] million or $[.] per share. This represents an immediate increase in net tangible book value to existing stockholders of $[.] per share and an immediate dilution to new investors of $[.] per share. The following table illustrates the per share dilution: Assumed initial public offering price per share................... $ [.] Pro forma net tangible book value per share as of December 31, 1998........................................................... $0.68 Increase in pro forma net tangible book value per share attributable to new investors.................................. $[.] Pro forma net tangible book value per share after the offering.... $ [.] Dilution per share to new investors............................... $ [.] ======
The following table sets forth on a pro forma basis as of December 31, 1998, the issuance of 2,600,000 shares of common stock, excluding shares issuable upon conversion of accrued interest, upon the automatic conversion of the convertible promissory notes on the date of the final prospectus for this offering, the difference between the number of shares of common stock purchased, the total consideration paid and the average price per share paid by the existing stockholders and by the new investors in this offering and the concurrent private placement, which is calculated before deduction of underwriting discounts and commissions and estimated offering expenses:
Shares Total Purchased Consideration Average -------------- -------------- Price Number Percent Amount Percent Per Share ------ ------- ------ ------- --------- Existing stockholders.................. [.] % $ % $ New investors in this offering......... --- --- --- --- --- Total.............................. 100% $ 100% $ === === === === ===
The foregoing table assumes no exercise of the underwriters over-allotment option and no exercise of stock options outstanding at December 31, 1998. As of December 31, 1998, there were options outstanding to purchase a total of 2,801,240 shares, at a weighted average exercise price of $3.85 per share. As of December 31, 1998, there were warrants outstanding to purchase 801,500 shares of common stock at an exercise price of $1.00 per share. See "Capitalization," "Management--Compensation of Directors," "--Executive Compensation" and Notes 3 and 12 of Notes to BioMarin's Consolidated Financial Statements. 22 SELECTED CONSOLIDATED FINANCIAL DATA (in thousands, except per share data) The selected consolidated financial data of BioMarin Pharmaceutical Inc. presented below are derived from the consolidated financial statements of BioMarin Pharmaceutical Inc. and subsidiaries, including Glyko, Inc. from October 7, 1998, the date on which it was acquired by BioMarin. These consolidated financial statements of BioMarin and subsidiaries have been audited by Arthur Andersen LLP, independent public accountants. The consolidated balance sheets as of December 31, 1997 and 1998, and the related consolidated statements of operations for the period from March 21, 1997 (inception) to December 31, 1997, the year ended December 31, 1998, and the period from March 21, 1997 (inception) to December 31, 1998, and the related report, are included elsewhere in this prospectus. The selected financial data of Glyko, Inc. presented below are derived from the financial statements of Glyko, Inc. These financial statements have been audited by Arthur Andersen LLP, independent public accountants. The balance sheets as of December 31, 1997 and October 7, 1998 and the statements of operations for the years ended December 31, 1996 and 1997 and for the period ended October 7, 1998, and the related report, are included elsewhere in this prospectus. The balance sheets as of December 31, 1994, 1995 and 1996 and the statements of operations for the years ended December 31, 1994 and 1995, are not included in this prospectus. The selected consolidated financial data set forth below contain only a portion of BioMarin's and Glyko, Inc.'s financial statement information and should be read in conjunction with the Consolidated Financial Statements of BioMarin Pharmaceutical Inc. and the Financial Statements of Glyko, Inc. and related Notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus.
Period from Period from March 21, 1997 March 21, 1997 (Inception) to Year ended (Inception) to December 31, December 31, December 31, 1997 1998 1998 -------------- ------------ -------------- BioMarin's Consolidated Statements of Operations Data: Revenues............. $ -- $ 1,190 $ 1,190 Operating costs and expenses: Cost of goods sold.............. -- 108 108 Research and development....... 1,914 10,502 12,416 General and administrative.... 914 3,531 4,445 ------- -------- -------- Loss from operations.......... (2,828) (12,951) (15,779) Interest income...... 65 684 749 Equity in loss of joint venture....... -- (47) (47) ------- -------- -------- Net loss............. $(2,763) $(12,314) $(15,077) ======= ======== ======== Net loss per common share, basic and diluted............. $ (0.34) $ (0.55) $ (0.93) ======= ======== ======== Weighted average common shares outstanding........ 8,136 22,488 16,184 ========== ======= ======== ========
23
As of December 31, -------------- 1997 1998 BioMarin's Consolidated Balance Sheet Data: ------ ------- Cash, cash equivalents and short-term investments............... $6,888 $11,389 Total current assets............................................ 7,507 12,819 Total assets.................................................... 7,653 31,509 Long-term liabilities........................................... -- 110 Total stockholders' equity...................................... 7,380 29,395
Years Ended December 31, --------------------------------- Period From January 1 Glyko, Inc.'s Statements 1994 1995 1996 1997 to October 7, 1998 of Operations Data: ------- ------- ------- ------ --------------------- Revenues................ $ 883 $ 1,569 $ 1,331 $2,064 $1,160 Operating costs and expenses: Cost of products and services............. 320 512 509 483 285 Research and development.......... 1,141 1,096 1,015 633 613 Selling, general and administrative....... 1,695 1,640 1,490 563 521 Other................. -- -- -- -- (166) ------- ------- ------- ------ ------ Income (loss) from operations............. (2,273) (1,679) (1,683) 385 (93) Other income (loss)..... (1) -- 87 (2) (1) Interest income......... 18 30 18 12 28 ------- ------- ------- ------ ------ Income (loss) before income taxes........... (2,256) (1,649) (1,578) 395 (66) Provision for income taxes.................. -- -- -- -- -- ------- ------- ------- ------ ------ Net income (loss)....... $(2,256) $(1,649) $(1,578) $ 395 $ (66) ======= ======= ======= ====== ======
As of December 31, As of ------------------------------ October 7, 1994 1995 1996 1997 1998 Glyko, Inc.'s Balance Sheet Data: ----- ------ ------- ------- ---------- Cash, cash equivalents and short- term investments.................. $ 79 $ 621 $ 211 $ 528 $ 24 Total current assets............... 438 1,098 478 867 407 Total assets....................... 619 1,212 588 988 503 Long-term liabilities.............. 93 77 3,652 3,804 -- Total stockholders' equity (deficit)......................... (485) 449 (3,712) (3,316) 298
24 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of the financial condition and results of operations should be read in conjunction with our consolidated financial statements and the financial statements of Glyko, Inc. and their notes appearing elsewhere in this prospectus. Overview We are a leading developer of carbohydrate enzyme therapies for debilitating, life-threatening, chronic genetic disorders and other diseases or conditions. Since our inception on March 21, 1997, we have been engaged in research and development activities, including preclinical studies, clinical trials and clinical manufacturing, the establishment of laboratory and manufacturing facilities, and administrative activities. BioMarin was incorporated in October 1996 as a wholly-owned subsidiary of Glyko Biomedical. BioMarin was funded by Glyko Biomedical and began operations on March 21, 1997, the date of inception. We have incurred net losses since inception and had an accumulated deficit through December 31, 1998 of $15.1 million. Our losses have resulted primarily from research and development activities and related administrative expenses. We expect to continue to incur operating losses through at least the year 2000. To date, we have not generated revenues from the sale of our drug candidates. Our financial results may vary depending on many factors, including: . The progress of BM101 in the regulatory processes and initial sales activities . The investment in manufacturing process development and in manufacturing capacity for BM101 and other product candidates . The acceleration of our other pharmaceutical candidates into preclinical studies and clinical trials . The progress of our additional research and development efforts In September 1998, we established a joint venture with Genzyme for the worldwide development and commercialization of BM101 for the treatment of MPS- I. Under the agreement, our company and Genzyme are each required to make capital contributions to the joint venture equal to 50% of the expenses associated with the development and commercialization of BM101. We will share equally in any profits generated from the sales of BM101. On April 13, 1999, we issued $26.0 million of convertible promissory notes. The notes will convert into 2,600,000 shares of our common stock, excluding shares issuable upon conversion of interest, on the date of the final prospectus for this offering at an initial conversion price, subject to adjustment, of $10.00 per share. Acquisition of Glyko, Inc. In October 1998, we acquired Glyko, Inc., a wholly-owned subsidiary of Glyko Biomedical in a transaction valued at $14.5 million. Glyko, Inc. provides products and services that perform carbohydrate analysis to research institutions and commercial laboratories. As consideration for the acquisition of all of the outstanding shares of Glyko, Inc., we: (1) issued 2,259,039 shares of common stock to Glyko Biomedical, (2) assumed the stock options of Glyko, Inc. employees exercisable for 255,540 shares of our common stock and (3) paid $500 in cash. 25 Historical Results of Operations--BioMarin The Period From March 21, 1997 (Inception) to December 31, 1997 and the Year Ended December 31, 1998 In October 1998, we acquired Glyko, Inc. from Glyko Biomedical. The acquisition was accounted for as a purchase. As a result, our consolidated statements of operations data include the operations of Glyko, Inc. from October 7, 1998, the date of the acquisition, through December 31, 1998. Revenue. BioMarin generated revenues of $1.2 million in 1998 compared to no revenues in the 1997 period. Revenues in 1998, consisted of revenues from our joint venture with Genzyme and product, service and other revenues related to Glyko, Inc. subsequent to the acquisition of Glyko, Inc. in October 1998. Cost of Goods Sold. In 1998, BioMarin had cost of goods sold of $108,000 as a result of the sale of Glyko, Inc. products. In the 1997 period, BioMarin had no sales and, consequently, no cost of goods sold. Research and Development. Research and development expenses were $10.5 million in 1998, compared to $1.9 million in the 1997 period. The increase was due primarily to a full year of BM101 expenses including 12 months of clinical trials in 1998, compared to only one month of clinical trials in the 1997 period. In addition, we expanded significantly our product programs, staff and facilities in 1998 in contrast to limited start-up research and development activities in the 1997 period. We expect to substantially increase our research and development expenditures in future years. General and Administrative. General and administrative expenses were $3.5 million in 1998 compared to $914,000 in the 1997 period. General and administrative expenses increased in 1998 to support the significantly expanded scale of operations in 1998 compared to the smaller administrative requirements in the shorter, start-up 1997 period. We expect to substantially increase our general and administrative expenses to support our increased scale of operations. Interest Income. Interest income in 1998 was $685,000 while interest income totaled $65,000 in the 1997 period. The higher interest income in 1998 resulted from higher cash balances available for investment in 1998 as a result of the first private placement late in 1997, a second private placement in mid-year 1998 and the Genzyme investment in the third quarter of 1998. Equity in Loss of Joint Venture. BioMarin entered the BM101 joint venture in October 1998 and recorded a net loss of $47,000 for 1998. See note 1 to the consolidated financial statements of BioMarin for details of accounting for the joint venture. Historical Results of Operations--Glyko, Inc. Period from January 1, 1998 to October 7, 1998 (Date of Acquisition by BioMarin) and Year Ended December 31, 1997 During the year ended December 31, 1997, Glyko, Inc. operated independently for the entire year. The year ended December 31, 1998, only includes Glyko, Inc.'s operations for the nine month and seven day period from January 1, 1998 through October 7, 1998, the date of Glyko, Inc.'s acquisition by BioMarin. The comparisons below, as they relate to Glyko, Inc., are for twelve months of 1997 versus nine months seven days of 1998. Revenue. Revenues in the 1998 period were $1.2 million and consisted of sales of products and services of $865,000 and other revenues representing development fees of $25,000 and grant revenues of $270,000. Sales of products and services consisted of sales of chemical analysis kits and imaging 26 systems, and fees for custom analytic services. Revenues in 1997 were $2.1 million and consisted of sales of products and services of $1.2 million and other revenues representing technology, development and licensing fees of $704,000 and grant revenues of $157,000. The decline in product revenues in 1998 was due to a decrease in sales volume and due to the sale of Glyko, Inc. to BioMarin in October 1998. The decrease in other revenues was due to development, technology and licensing fees received in 1997 that did not recur in 1998. Cost of Products and Services. Glyko's cost of products and services was $285,000 in the 1998 period compared to $483,000 in 1997. The decrease in cost of products and services was primarily due to lower sales resulting from the shorter sales period of nine months in 1998 compared to 12 months in 1997. In addition, lower manufacturing overhead costs reduced the cost of products. Research and Development. Glyko, Inc.'s research and development expenses in the 1998 period were $613,000 compared to $633,000 in 1997. The decrease in research and development expenses was mainly due to the shorter period in 1998. Selling, General and Administrative. Glyko, Inc.'s selling, general and administrative expenses were $521,000 in the 1998 period compared to $563,000 in 1997. The decrease was due to the shorter period in 1998. Other Operating Expenses. Glyko, Inc.'s other operating expenses in the 1998 period represents a gain of of $165,880 on the settlement of a claim at an amount less than was provided for by Glyko, Inc. Interest Income. Glyko, Inc.'s interest income in 1998 and 1997 of $28,000 and $13,000, respectively, reflected earnings on cash invested in short term interest bearing accounts. The increase in interest income in the 1998 period resulted from higher cash balances available for investment compared to 1997. Interest expense in 1998 and 1997 was immaterial. Years Ended December 31, 1997 and 1996 Revenue. Revenues in the 1997 period were approximately $2.1 million. Revenues consisted of: (1) sales of products and services of approximately $1.2 million, (2) other revenues (consisting of development, technology and licensing fees) of $704,000, and (3) grant revenues of $157,000. Sales of products and services consisted of sales of chemical analysis kits and imaging systems, and fees for custom analytic services. Revenues in the 1996 period were approximately $1.3 million. Revenues for 1996 consisted of sales of products and services of approximately $1.3 million and other revenues (primarily grant fees and equipment rental revenues) of $34,000. The decline in product revenues in 1997 was due principally to the relocation of Glyko, Inc.'s California facilities in February 1997 which caused delays in fulfilling orders. The increase in other revenues was due to new or revised development, technology and licensing agreements negotiated in 1997. Cost of Products and Services. Glyko's cost of products and services was approximately $483,000 in 1997 compared to $509,000 in 1996. The decrease in 1997 was primarily due to reduced sales of products and services in 1997. Cost of products and services as a percent of sales was slightly higher in 1997 at 40% compared to 39% in 1996 due to changes in product mix. Research and Development. Glyko, Inc.'s research and development expenses in 1997 were $633,000 compared to approximately $1.0 million in 1996. The decrease is due to the transfer of lab personnel in 1997 to BioMarin programs. The decrease was also due, in part, to the reduction of salary and benefits allocated to Glyko, Inc. for Dr. Christopher Starr, Vice President of Research and Development, whose time allocated to Glyko, Inc. went from 100% in 1996 to 30% in 1997. One 27 other full-time Ph.D. was shifted 100% to BioMarin in 1997. Also, in October 1996, Glyko, Inc. reduced its workforce, which included one full-time lab technician, in an effort to reduce expenditures. Selling, General and Administrative. Glyko, Inc.'s selling, general and administrative expenses were $563,000 in 1997, compared to $1.5 million in 1996. Marketing and promotional expenses were lower in 1997 due to the cut-back of two full-time marketing positions in October 1996. General and administrative expenses were reduced due to the reduction of rent expense resulting from Glyko, Inc.'s relocation to a smaller facility in 1997 and due to the sublease rental income from BioMarin in 1997. Rent expense in 1996 was offset by a write-off of the deferred rent balance of $62,538 at December 31, 1996 related to a lease abandonment (see Note 5 of the financial statements of Glyko, Inc.). General and administrative expenses were also reduced due to the cut-back of administrative staff in October 1996 plus the reduction of salary and benefits allocated to Glyko, Inc. for Dr. John Klock, President, whose time allocated to Glyko, Inc. went from 100% in 1996 to 30% in 1997. Interest Income. Glyko, Inc.'s interest income in 1997 and 1996 was $13,000 and $18,000, respectively, as a result of interest earned on cash balances available for short-term investment. Interest expense in 1997 and 1996 was immaterial. Liquidity and Capital Resources We have financed our operations since our inception by the issuance of common stock and the related interest income earned on cash balances available for short-term investment. As of December 31, 1998, we have raised aggregate net proceeds of $30.0 million. Initially funded by Glyko Biomedical with a $1.5 million investment, BioMarin has since raised additional capital from the sale of common stock in private placements and the sale of promissory notes convertible, according to their terms, into common stock and an investment of $8.0 million by Genzyme as part of BioMarin/Genzyme LLC, a joint venture. Our combined cash, cash equivalents and short-term investments totaled $11.4 million at December 31, 1998, an increase of $4.5 million from December 31, 1997. The primary use of cash during the year ended December 31, 1998 was to finance operations. For the year ended December 31, 1998, operations used $8.0 million, we purchased $6.4 million of property, equipment and leasehold improvements and invested $732,000 in the joint venture. During the year, we raised net proceeds of $19.7 million in a private financing. From our inception through December 31, 1998, we have purchased approximately $6.5 million of property, equipment and leasehold improvements. We expect that our investment in property, equipment and leasehold improvements will increase significantly during the next two years because we will provide facilities and equipment for an increased number of staff and increase manufacturing capacity. In September 1998, we established a joint venture with Genzyme for the worldwide development and commercialization of BM101 for the treatment of MPS- I. We will share expenses and profits from the joint venture equally with Genzyme. Genzyme invested $8.0 million upon signing the agreement and has agreed to purchase $10.0 million of common stock at the initial public offering price in a private placement concurrent with this offering. Genzyme has committed to pay us an additional $12.1 million upon approval of the BLA for BM101. On October 7, 1998, we purchased Glyko, Inc. from Glyko Biomedical for an aggregate purchase price of $14.5 million. The purchase price was paid for with 2,259,039 shares of common stock of BioMarin, our assumption of certain stock options held by Glyko, Inc. employees which were exercisable into a maximum of 255,540 shares of our common stock and $500 in cash. On April 13, 1999, we sold a total of $26.0 million of convertible promissory notes. The notes are convertible into our common stock at an initial conversion price, subject to adjustment, of $10.00 per 28 share, and these notes bear an interest rate of 10% annually. These notes have weighted average anti-dilution protection for subsequent private placements of certain equity securities of BioMarin made after the date of issuance of the notes but before their conversion. Until we can generate sufficient levels of cash from our operations, we expect to continue to finance future cash needs through: . The sale of equity securities . Equipment-based financing . Collaborative agreements with corporate partners We do not expect to generate positive internal cash flow for at least the next two years due to the expected increase in operational expenses and manufacturing investment for the joint venture and for research and development activities, including: . Preclinical studies, clinical trials and regulatory review . Commercialization of our drug candidates . Development of manufacturing operations . Process development . Scale-up of manufacturing facilities . Sales and marketing activities We anticipate a need for additional financing to fund the future operations of its business, including the commercialization of our drug candidates currently under development. We cannot assure you that additional financing will be obtained or, if obtained, will be available on reasonable terms. Our future capital requirements will depend on many factors, including, but not limited to: . The progress of its research and development programs . The progress of preclinical studies and clinical trials . The time and cost involved in obtaining regulatory approvals . Scaling up, installing and validating manufacturing capacity . Competing technological and market developments . Changes and developments in collaborative, licensing and other relationships . The development of commercialization activities and arrangements . The leasing and build-out of additional facilities . The purchase of additional capital equipment (See "Risk Factors-- Capital Requirements") We plan to continue our policy of investing available funds in government securities and investment grade, interest-bearing securities, primarily with maturities of one year or less. We do not invest in derivative financial instruments, as defined by Statement of Financial Accounting Standards No. 119. At December 31, 1998, we had tax net operating loss carryforwards of approximately $24.1 million for federal income tax purposes and $12.4 million for California income tax purposes and research tax credits of approximately $1.8 million for federal purposes and $580,000 for California, which will begin to expire in the year 2012. The Tax Reform Act of 1986 contains provisions that may limit the net operating loss carryforwards and research and development credit available to be used in any given 29 year should certain events occur, including sale of equity securities and other changes in ownership. The acquisition of Glyko, Inc. and the related issuance of stock represented a change of ownership under these provisions. In addition, the net operating loss carryforwards and research tax credits related to Glyko, Inc. can only be used to offset future taxable income and tax, respectively, if any, of Glyko, Inc. There is no assurance that we will be able to use our net operating loss carryforwards and credits before expiration. Impact of Year 2000 The following constitutes "Year 2000 Readiness Disclosure" under the Year 2000 Information and Readiness Disclosure Act of 1998. We are aware of the potential problems associated with certain computer programs and systems that use only two digits to identify the year in the date field. Application and system programs may be unable correctly to process date information for dates after December 31, 1999. This year 2000 defect could cause the disruption or failure of computer systems. If present in our products, the defect could expose us to litigation or a significant decrease in sales of our products. The year 2000 defect could affect both our internal information technology systems and other functional systems that use embedded computer programs for control or other purposes. The defect could also affect the information technology and other functional systems of suppliers of products and services to us. The defect could affect the overall economy and have a significant impact on us. We have formed a team to review and resolve those aspects of the year 2000 problem which are within our direct control and adjust to or influence those aspects which are not within our direct control. The team has reviewed our software products (including those under development) and determined that our software products do not use date data and are year 2000 compliant. Our biopharmaceutical products do not have any year 2000 exposure. Based on representations from our vendors, the team has reviewed the year 2000 compliance status of its major internal information technology programs and systems used for administrative requirements and determined that such systems are year 2000 compliant. Our team is in the process of reviewing other internal functional systems that may have a year 2000 defect within the embedded computer systems used for control. We believe that we can resolve our significant internal year 2000 compliance issues before the year 2000 with expenditures that are currently estimated not to be material. If we do not achieve on a timely basis year 2000 compliance for its internal systems, our operations and business could be adversely affected. With respect to suppliers, we do not currently process orders, payments and other business communications electronically from computer to computer. However, if BioMarin's suppliers and ultimate customers are not yet year 2000 compliant within their own systems, their disruptions could have a significant direct or indirect impact on our operations and business. Among many potential impacts, the following are representative of disruptions to which our business might be subject: . Financial institutions may not be able to process checks, accept deposits, provide records, process wire transfers, provide stock ownership and transfer records and facilitate many other financial transactions and services. . Suppliers may not be able to process orders, manufacture products, deliver in accordance with production schedules, or in general provide the current level of timely products and services. . Voice and data communication systems used by BioMarin and its customers and suppliers might be disrupted. . Health care suppliers and third-party payors may be unable to process patient records, add to or modify the content of their pharmacy authorizations, accept or make payments, and handle the many other data requirements of the modern health care system. The added 30 costs for back-up systems, for temporary or emergency fixes and the ongoing requirements to handle critical functions on a timely basis combined with the resultant managerial distractions may delay the review and introduction of the new drugs and therapeutic practices. Deferred Compensation Charge We record deferred compensation representing the difference between the exercise price of options granted and the deemed fair market value of the common stock at the time of grant. We recorded deferred compensation of approximately $1.0 million through December 31, 1998 related to the grant of options. We will recognize deferred compensation as an expense over the related four-year vesting period of the options. In 1997, we recorded deferred compensation of $200,000. This $200,000 represented interest imputed at 9% on notes receivable of $2.5 million from three executive officers, the principal of which was used by these executive officers to purchase 2.5 million shares of BioMarin's common stock. The notes bear an interest rate of 6% per year, expire on July 31, 2000, are with full recourse, and are secured by the underlying stock. Deferred compensation is amortized over the life of the notes. 31 BUSINESS Overview BioMarin is a leading developer of carbohydrate enzyme therapies for debilitating, life-threatening, chronic genetic disorders and other diseases and conditions. In October 1998, we completed the primary evaluation for the pivotal clinical trial of our lead enzyme replacement product candidate, BM101, for the treatment of mucopolysaccharidosis-I or MPS-I. Based on the data from that trial, we intend to complete the filing of a BLA with the FDA in the second half of 1999. We formed a joint venture with Genzyme for the worldwide development and commercialization of BM101. MPS-I is a life-threatening genetic disorder caused by the lack of a sufficient quantity of the enzyme (alpha)-L-iduronidase, which affects about 3,400 patients in developed countries, including approximately 1,000 in the United States and Canada. Patients with MPS-I have multiple debilitating symptoms resulting from the buildup of carbohydrates in all tissues in the body. These symptoms include delayed physical and mental growth, enlarged livers and spleens, skeletal and joint deformities, airway obstruction, heart disease and impaired hearing and vision. If untreated, most children diagnosed with MPS-I will die from complications associated with the disease before adulthood. BM101 is a specific form of (alpha)-L-iduronidase that is intended to replace a deficiency of (alpha)-L-iduronidase in MPS-I patients. In October 1998, we completed the primary evaluation period for our pivotal clinical trial for BM101. This clinical trial treated ten patients with MPS-I for a period of six months at five medical centers in the United States. BM101 met the primary endpoints in its pivotal trial, reducing liver or spleen sizes in eight of ten patients and lowering urinary carbohydrate levels in all ten patients. In addition, various secondary endpoints were reached in each of the patients. We received notice from the FDA that our BLA will receive fast track designation for the treatment of the more severe forms of MPS-I, which account for approximately 60% of all cases. The FDA has granted BM101 an orphan drug designation giving us exclusive rights to market BM101 to treat MPS-I for seven years from the date of FDA approval if BM101 is the first drug to be approved by the FDA for the treatment of MPS-I. Carbohydrate-active Enzyme Therapeutics Carbohydrates are a fundamental class of biological molecules that play diverse and critical roles in maintaining the health and functional integrity of all cells and tissues. Enzymes are proteins that act as catalysts for many vital biological reactions. Enzymes that act on carbohydrates, called carbohydrate- active enzymes, cleave, construct or otherwise modify carbohydrates to regulate their production, maintenance and degradation. These carbohydrate-active enzymes are critical to a wide range of functions within the body, including cell proliferation, digestion, blood clotting, immune response, wound healing, conception and control of infection and inflammation. The body, when functioning normally, produces appropriate quantities of carbohydrate-active enzymes to perform these functions. Carbohydrate-active enzymes have the potential to play an important therapeutic role in certain diseases or disorders by either replacing deficient enzymes or supplementing the enzymes that are naturally present in the body. Role of Carbohydrate-active Enzymes in Genetic Diseases We believe that there are more than 700 genetic diseases of which approximately 200 are known to be caused by the deficiency of a single enzyme. In these genetic diseases the body fails to produce sufficient or functional quantities of certain enzymes. Most of these genetic diseases are rare, affecting only a few hundred to a few thousand people in the United States. Examples of such genetic diseases include Gaucher disease, hemophilia and MPS disorders. Currently, only eight of the more than 700 genetic diseases have effective treatments, and five of these eight are treated through enzyme replacement. Historically, enzyme replacement therapy has been 32 limited by the inability of manufacturers to produce the correct form of enzymes with sufficient quantities. Production of sufficient quantities to support a therapeutic program has now become possible with advancements in recombinant production methods. In 1998, the worldwide sales of pharmaceuticals used to treat genetic diseases by enzyme replacement were approximately $2.7 billion. Genzyme's treatment for Gaucher disease is an example of a treatment using enzyme replacement therapy. Gaucher disease, which afflicts approximately 5,000 people in the developed world, is caused by a deficiency in glucocerebrosidase, an enzyme that breaks down certain glycolipids in the body. In April 1991, following a single clinical trial involving 13 patients, Genzyme's treatment for Gaucher disease was approved for marketing by the FDA. Approximately 2,400 patients worldwide are using Genzyme's treatment for Gaucher disease. Sales of Genzyme's treatments for Gaucher disease, Cerezyme(R) enzyme and Ceredase(R) enzyme, generated total revenue of $411.1 million in 1998. Other Therapeutic Roles for Carbohydrate-active Enzymes Carbohydrate-active enzymes can also treat conditions other than those caused by genetic diseases, such as burns and infections. Supplementing the amount of enzymes naturally present in a patient's body or adding a new enzyme can enable or enhance the body's ability to respond to certain conditions and accelerate the healing process. For example, using a topical enzymatic formulation to supplement naturally occurring enzymes may speed the debridement of burn wounds by removing dead tissue. Adding or increasing the concentration of an enzyme that selectively targets and kills microbes may help the body fight infection. Business Strategy Our business strategy is to develop therapeutic products to treat a variety of diseases and conditions involving carbohydrates using our proprietary carbohydrate-active enzyme technology. The principal elements of this strategy are: . Focus on Drug Candidates with Known Biology and Low Technical Risk. We select therapeutic candidates that treat serious diseases or conditions where the biological role of carbohydrate-active enzymes is well understood and the method of treatment is straightforward. As part of this strategy, we are initially focusing on treating certain genetic diseases, including MPS-I and MPS-VI, which are each caused by the deficiency of a single enzyme. We believe that the duration of the clinical trial to demonstrate efficacy needed for approval can be relatively short. The clinical trial patient evaluation period for MPS-I was six months, although the patients will continue to be monitored for an additional 18 months. . Select Products that We Believe May Be Developed and Approved Quickly. We are initially focusing on developing therapeutic products for serious diseases or conditions that we believe will require limited time and capital to conduct preclinical studies and small numbers of patients for clinical trials. In addition, we believe that many of our current drug candidates may qualify for fast track designation by the FDA. In September 1998, we received from the FDA fast track designation for BM101 for the treatment of Hurler and Hurler-Scheie syndromes, which are disorders within the MPS-I family of diseases. . Pursue Well-defined, Niche Markets. We develop drug candidates to treat small patient populations for diseases for which there are currently no effective therapies. Additionally, we focus on niche markets in which we believe we will be reimbursed for our products at favorable rates. We believe we will receive orphan drug designation from the FDA for many of our products, providing us with market exclusivity for our drug formulation for seven years if we are first to gain product approval to treat the specific disease. 33 . Develop Direct Sales and Marketing Organization for Select Markets. We are able to directly market some of our drug candidates because of the small patient populations, for which the treatments are often concentrated in specialized institutions, and because of the existence of patient support groups for many of our initial disease targets. We may develop a small sales and marketing organization to target markets where we believe we can effectively reach the targeted patient and physician groups. Alternatively, we may pursue strategic collaborations with biopharmaceutical or other companies to develop products targeted at markets with larger patient populations. . Enhance Enzymatic Expertise through Glyko, Inc. Glyko, Inc. contributes its technical knowledge and expertise in cloning enzymes to our technology base. Glyko, Inc. provides access to cloning assets such as cDNA libraries, proprietary vectors and cell lines. In addition, Glyko, Inc.'s research and development in glycobiology provides us with a strategic opportunity to keep current with new developments and opportunities in that field. Products Under Development Mucopolysaccharidosis Disorders MPS disorders are a group of seriously debilitating genetic disorders characterized by the accumulation in the body of mucopolysaccharides, which are also known as glycosaminoglycans or GAGs. GAGs are complex carbohydrates synthesized by all cells in the body. At least ten enzymes are required for the complete breakdown of GAGs. The normal breakdown of GAGs is blocked if any one of these enzymes is not present in sufficient quantity. Ten possible enzyme deficiencies cause ten distinct disorders. Patients with MPS are usually diagnosed by six to 24 months of age. MPS disorders are progressive diseases that frequently lead to early death. During the course of the disease, the build-up of GAGs in all cells of the body results in one or more of the following symptoms: . Inhibited growth . Delayed mental or physical development . Enlarged liver and spleen . Skeletal deformities . Coarse facial features . Upper airway obstruction . Joint deformities and reduced range of motion . Heart disease . Impaired vision and hearing . Sleep disorders . Malaise and reduced endurance MPS-I. MPS-I is a genetic disorder caused by the deficiency of the enzyme (alpha)-L-iduronidase. About 3,400 patients in developed countries have MPS-I, including about 1,000 in the United States and Canada. If untreated, almost all children diagnosed with the more severe forms of MPS-I will die before reaching adulthood. Patients with milder forms of MPS-I still exhibit many of the symptoms described above. Currently, the only available treatment for MPS-I is a bone marrow transplant. 34 However, few patients find an appropriate bone marrow donor. Of the patients that find appropriate donors, many choose not to receive the therapy because of its serious side effects. BM101. We are developing a specific form of (alpha)-L-iduronidase, designated BM101, for the treatment of MPS-I. BM101 treats MPS-I by replacing a deficiency in (alpha)-L-iduronidase. In September 1998, we established a joint venture with Genzyme for the worldwide development and commercialization of BM101. Until now, enzyme replacement therapy for MPS-I has been impractical because no one has been able to manufacture adequate supplies of (alpha)-L-iduronidase with the proper structure. The proper structure is essential to ensure a therapeutic effect at relatively low doses. The genetic sequence of (alpha)-L- iduronidase has been discovered and is in the public domain. The sequence has been transfected into a mammalian cell line that, when combined with viable production and purification processes, allow the production of sufficient quantities of BM101 with the proper structure. In 1994, preclinical studies of BM101 were conducted using dogs with canine MPS-I. Dogs with canine MPS-I have symptoms similar to those exhibited by humans with MPS-I. BM101 diminished canine MPS-I symptoms in the dogs. Stored carbohydrate material was cleared from the dogs' major organs, including their brains. This scientific research, which we have licensed, was performed at Harbor-UCLA Research and Education Institute. In October 1998, we completed the primary evaluation period for what we believe is our pivotal clinical trial for BM101. Initiated in December 1997, this clinical trial treated ten patients with MPS-I for a period of six months at five medical centers in the United States. Patients were treated with a slow intravenous infusion of BM101 once a week at a dose of 125,000 units per kilogram of patient weight. The primary endpoints of the trial were a reduction in liver or spleen size and a reduction in urinary GAG levels. Eight of the ten patients achieved the primary endpoint goal of a 20% reduction of liver size within the six-month evaluation period. Of the two patients who did not achieve the targeted liver reduction, one patient achieved a liver size in the normal range and the second patient, who had hepatitis at the end of the six-month period, achieved the 20% reduction after the six-month period. Five of the ten patients achieved a 20% reduction in spleen size. All of the ten patients achieved the primary endpoint goal of at least a 50% reduction in urinary GAG levels. We believe that these clinical results achieved the primary endpoints of the clinical trial. Each patient with MPS-I presents us with a different mix of clinical symptoms. We tested each patient at intervals throughout the six-month evaluation period on a variety of clinical parameters to provide a basis for the validation of the primary endpoints. Secondary clinical endpoints included joint disease, eye disease and cardiac function. Additional measures of efficacy included sleep apnea and airway evaluations, central nervous system abnormalities, endurance and fatigue, and evaluations of bone. Except for the bone measure of efficacy where no improvement was expected due to the short duration of the trial, most patients who exhibited physical symptoms of the disease achieved improvement in those symptoms during the course of the evaluation period for each of the secondary endpoints and additional clinical measures of efficacy. We believe that the clinical results on secondary endpoints and additional measures of efficacy provide an initial validation of the primary endpoints. Three of the ten patients experienced severe headaches which were resolved within six weeks into treatment. Four out of the ten patients experienced immune responses to the enzyme. These four patients experienced complement activation, with symptoms thereof observed in one of the four patients. No long-term effects of the immune responses are apparent at this time. Certain patients experienced allergic responses which manifested themselves in hives. On behalf of the joint venture, we intend to complete the filing of our BLA with the FDA in the second half of 1999. We believe that data from our recently completed clinical trial of BM101 will support the 35 BLA and is sufficient for approval of the BLA. However, the FDA may require additional clinical trials and BM101 may not be approved for marketing. Assuming approval, the joint venture plans to complete the validation of the primary endpoints from the pivotal clinical trial by the long-term monitoring of the original trial patients and the continuing assessment of the efficacy of treatment with BM101. The ten original trial patients will be treated and monitored for an additional 18 months. The parameters for this follow-on clinical study are expected to include: . Patient growth in height and weight . Cardiac function . Pulmonary hypertension . Corneal clouding . Visual acuity . Joint range of motion . Airway function . Endurance and fatigue We received orphan drug designation for BM101 from the FDA. This orphan drug designation gives us exclusive rights to market a product using (alpha)-L- iduronidase to treat MPS-I in the United States for seven years if we receive FDA approval of BM101 before any other company receives approval of (alpha)-L- iduronidase to treat MPS-I. In addition, we received notice from the FDA that our BLA for BM101 for the treatment of Hurler and Hurler-Scheie syndromes, which are the two more severe disorders within the MPS-I family of diseases that account for approximately 60% of MPS-I patients, will receive fast track designation. Drugs that show a potential to address an unmet medical need for a serious or life threatening disease may be eligible to receive fast track designation. Fast track designation does not guarantee a faster approval. The FDA may still require additional studies or data regarding BM101 which may delay approval and subsequent commercial sales. See "Risk Factors--Clinical Trials; -- Orphan Drug Exclusivity; --Genzyme Relationship;" and "--Government Regulation." At the request of the FDA, the joint venture will conduct a clinical trial to investigate the effect of BM101 on the prevention or stabilization of the progressive mental dysfunction experienced by patients with Hurler Syndrome, the most severe form of MPS-I. The trial, which will enroll six patients and will last two years, is expected to begin in the fourth quarter of 1999. This Hurler trial for mental dysfunction is independent of the pivotal trial that is intended to support the BLA submission for BM101 in MPS-I. At the end of October 1998, we presented summary data of this clinical trial at the American Society for Human Genetics. MPS-VI. MPS-VI, also known as Maroteaux-Lamy syndrome, is a genetic disorder caused by a deficiency of the enzyme N-acetylgalactosamine 4-sulfatase, which is designated BM102. Of approximately 1,100 patients suffering with MPS-VI in the developed world, about 340 are in the United States and Canada. Patients with MPS-VI have symptoms similar to those for MPS-I. However, MPS-VI patients do not suffer mental retardation. If untreated, the average life span of MPS-VI patients is estimated to be between ten years in the severe form to 30 years in the mild form. MPS-VI has been treated by bone marrow transplants. However, few patients find an appropriate bone marrow donor. Of the patients who find an appropriate donor, many choose not to receive a bone marrow transplant because of its serious side effects. BM102. We are developing BM102 for the treatment of MPS-VI. BM102 may treat MPS-VI by replacing a deficiency in the enzyme N-acetylgalactosamine 4- sulfatase. 36 During 1994 through 1996, preclinical studies of BM102 were conducted on cats with feline MPS-VI. Cats with MPS-VI have physiological characteristics and clinical symptoms similar to those exhibited by humans with MPS-VI. We are conducting additional studies in cats of alternative dosing regimens to better match the likely dosing regimen in humans. We believe that preclinical studies conducted on over 50 afflicted cats treated with BM102 will provide a sufficient basis to support an IND for BM102 to initiate human clinical trials. In August 1998, we licensed rights to use data on feline MPS-VI and a producing cell line for BM102 from Women's and Children's Hospital in Adelaide, Australia. We are developing improved production and purification processes for BM102, first in clinical and then in commercial processes. We received an orphan drug designation for BM102 in February 1999 to treat MPS-VI and intend to file an IND for the use of BM102 to treat MPS-VI in the fourth quarter of 1999. We cannot assure you that the FDA will allow clinical trials based on the limited testing on cats conducted to date. We will make a request to the FDA that a single clinical trial with a small number of MPS-VI patients is sufficient to support a BLA. However, the FDA may require additional preclinical testing, clinical trials or additional patients or trial duration before approving BM102 if it is ever approved. Enzyme Replacement Therapy in Other Genetic Diseases We intend to develop additional enzyme replacement therapies for other genetic diseases. We have identified genetic diseases that we believe will respond well to enzyme replacement therapy. We are only developing enzyme replacement therapies that we believe qualify for orphan drug designation. We are in the process of cloning, expressing and producing enzymes for additional potential genetic diseases. Due to the small patient populations for these other genetic diseases and the known biologic mechanism of proposed enzyme replacement therapies, we believe that the size and scope of our human clinical trials for future genetic diseases may be similar in size and scope to those for MPS-I. Other Diseases And Conditions Burns In 1997, approximately 65,000 patients in the United States were admitted to hospitals with burns. Approximately 20% of these patients had very severe burns that destroyed all layers of the skin, referred to as full-thickness or third- degree burns. Full-thickness burns require major skin grafts. This typically requires admission to one of approximately 150 major burn centers in the United States. Treatment of full-thickness burns involves removal of unhealthy and dead tissue, a process called debridement, to prevent infection and prepare the site for skin grafting or other therapy. Currently, full-thickness burns are debrided by multiple surgical procedures that are complicated by loss of blood, loss of healthy tissue, continued trauma and pain and scarring. In many instances, surgery must be delayed in severely compromised patients. Additionally, certain parts of the body, such as the hands and face, are difficult to treat by this method. A limited number of topical debridement products are available as an alternative to surgery. Topical enzymatic products, however, have not been widely accepted by physicians because they are ineffective and often compromise living tissue resulting in pain and bleeding. A significant part of the skin is made up of carbohydrates and proteins. We believe that there is an opportunity for more selective enzyme debridement products that have greater specificity at digesting carbohydrates or proteins in dead tissue. We currently have two products under preclinical development for the treatment of full-thickness burns. We intend to file an IND for one of these products in the second half of 1999 based on the activity and safety profiles obtained in preclinical studies that are in progress. 37 Based on discussions with general wound specialists, we believe that demonstration of efficacy in the treatment of full-thickness burns will be applicable to other wound applications. BM201. BM201 is a carbohydrate-specific enzyme therapeutic originating from our research efforts. BM201 has been shown to accelerate the rate of debridement of burn wounds without signs of topical or systemic toxicity in mice in a model developed at the University of California at San Diego. In addition, BM201 significantly reduced the total time in which grafts were successfully made and wounds closed when compared to phosphate buffered saline, which was used as a control, and to selected topical enzymatic products. The total time required for the debridement and graft take compared favorably to that obtained using standard surgical debridement techniques. The enzyme is now being evaluated for its ability to debride wounds and influence graft acceptance in a more stringent model of full-thickness burn treatment in pigs at Vanderbilt Medical Center. BM202. BM202 is a therapeutic protease discovered by W.R. Grace & Co. Upon review of the data from preclinical studies that were conducted by W.R. Grace, we obtained a three-year option in May of 1998 to obtain an exclusive license to BM202. In preclinical studies supported by W.R. Grace, BM202 was shown to safely debride full-thickness burns in pigs, and accelerate wound healing in less severe lesions. In sponsored studies by us at UCSD, the enzyme was also shown to be capable of debriding wounds and allowing for graft acceptance in the full-thickness burn model in mice. BM202 is now being assessed for its compatibility to allow for graft acceptance in a pig burn model at Vanderbilt Medical Center. Anti-fungal Enzymes We are developing two naturally occurring enzymes to combat infection by Aspergillus spp. Aspergillus is one of the most common fungi in the environment. Although aspergillus is not usually harmful to people with healthy immune systems, it can pose a life-threatening risk to those with compromised immune systems, such as cancer patients undergoing chemotherapy, organ and bone marrow transplant recipients and people with late-stage AIDS. Aspergillosis, a fungal infection caused by aspergillus, begins as an upper airway infection and can become a systemic fungal infection in immuno-compromised patients. It is difficult to diagnose, currently has no adequate treatment and often proves fatal. We believe that an effective drug for systemic aspergillosis may be used as a preventative measure for immuno-compromised patients. The number of patients in the United States potentially at risk for contracting systemic aspergillosis is estimated to exceed 85,000 by the year 2000. We believe that a carbohydrate- active enzyme that breaks down the carbohydrates in the cell walls of aspergillus will kill the fungi and treat the infection. BM301 and BM302. We are conducting preclinical research on the use of BM301 and BM302, recombinant forms of two naturally occurring enzymes, to treat aspergillosis. In BioMarin-sponsored preclinical studies on mice conducted at Boston University Medical Center demonstrated that BM301 and BM302 effectively treated aspergillosis. Approximately 20% of the mice treated with BM301 or BM302 died, compared to a 100% fatality rate in untreated, infected mice. No toxicity or other adverse side effects were observed in these animal studies. We intend to apply for FDA orphan drug designation for these anti-fungal enzymes. Clinical trials may not show that our products are safe or effective. We may fail to develop products that can be marketed. See "Risk Factors--Early Stage Company; --Product Marketability; --Clinical Trials; --Orphan Drug Exclusivity; and --Government Regulation." Other Research and Development We are also focusing a portion of our research and development on carbohydrate- active enzymes that we believe can be beneficial in the treatment of certain inflammatory conditions. We have initiated a research 38 program to develop a carbohydrate-active enzyme to treat psoriasis, an inflammatory skin condition, and we have identified and produced sufficient amounts of product to conduct preclinical studies. We initiated these studies in the third quarter of 1998 at Brigham and Women's Hospital in Boston. We have also initiated a research program to develop a carbohydrate-based product to increase sperm motility and vitality. Carbohydrate-active enzymes can break down mucosal carbohydrates in cervical and seminal fluids. This break down improves sperm motility through these fluids. Carbohydrate Analysis, Products and Services Glyko, Inc., our wholly-owned subsidiary, sells carbohydrate analysis products and services. These products and services provide sophisticated carbohydrate analysis to research institutions and commercial laboratories. Commercial laboratories use carbohydrate analysis for determination of carbohydrate structure, sequence and quantity for quality control and for other processes. Glyko, Inc.'s key technology, Fluorphore Assisted Carbohydrate Electrophoresis, also known as FACE(R), is a rapid and relatively inexpensive method of analyzing complex carbohydrates. In a typical application, FACE rapidly processes a sample of unknown composition to identify the carbohydrate structures present, to quantify their abundance and prepare a detailed report. Glyko, Inc.'s primary product is the FACE Imaging System, an electrophoretic system that includes an imager and software designed to separate, identify and quantify carbohydrates. To support this system, Glyko, Inc. sells the consumable products required for the system's operation, including four specialized gels, 13 types of kits and the consumable reagents necessary for carbohydrate analysis. In addition, Glyko, Inc. provides: . Reagents used in carbohydrate chemistry, including carbohydrate- active enzymes . Custom analytical services for profiling and sequencing complex carbohydrates . Research services on carbohydrate related problems . Diagnostic methods and services for lysosomal storage diseases, including MPS disorders Glyko, Inc. also markets the only urinary screening test cleared by the FDA for certain lysosomal storage diseases and provides a lysosomal storage diseases screening service using its test and related diagnostic technology. Glyko, Inc.'s diagnostics line includes software for the automated diagnosis of oligosaccharidoses, a subclass of lysosomal storage diseases. Glyko, Inc. is developing similar software for MPS disorders. Glyko, Inc. is expanding its ability to measure GAGs in urine. In addition to MPS-I, elevated or reduced levels of GAGs in urine may serve as early, non-invasive indicators for a number of diseases, including osteoporosis, degenerative joint diseases, kidney diseases as well as lysosomal storage diseases. In addition, Glyko, Inc. provides analysis of plasma heparin, a type of GAG, and is developing an automated analyzer for heparin in whole blood. Corporate Collaborations Joint Venture with Genzyme Corporation In September 1998, we established a joint venture with Genzyme for the worldwide development and commercialization of BM101 for the treatment of MPS- I. Our responsibilities within the joint venture include: . Obtaining the necessary U.S. regulatory approvals . Manufacturing BM101 for clinical and commercial purposes 39 Genzyme is responsible for: . Obtaining the necessary international regulatory approvals . Providing pricing and reimbursement requirements . Providing overall sales and marketing Under the agreement, BioMarin and Genzyme are each required to make capital contributions to the joint venture equal to 50% of the costs and expenses associated with the development and commercialization of BM101. BioMarin and Genzyme will share equally in any profits generated from sales of BM101. Genzyme purchased $8.0 million of our common stock in a private placement in September 1998. Genzyme has agreed to purchase an additional $10.0 million of our common stock at the initial public offering price in a private placement concurrent with this offering. Genzyme has also committed to pay us $12.1 million in cash upon approval of the BLA for BM101. We have licensed to the joint venture certain of our intellectual property rights related to BM101. If either party fails to fund its 50% share of costs and expenses, then the other party may buy out the party that breaches, or the profit sharing interests and the future funding obligations of the parties will be adjusted to correspond to the cumulative amount of capital contributions made by each party. The joint venture may be terminated by either party with one year prior written notice that may be given at any time after the earlier of approval of the BLA for BM101 or December 31, 2000. Upon termination of the collaboration agreement, the terminating party's share of the joint venture may be bought out by the other party. Grant Agreements and Licenses We have entered into research and development collaboration agreements with various academic and research institutions. Under these agreements, we fund research and development by these institutions. Some of the agreements also provide for the grant to us of exclusive, royalty-bearing licenses or rights of first negotiation regarding licenses to intellectual property and other subject matter developed by these institutions in the course of this research. Typically, these agreements are terminable for cause by either party upon 90- days written notice. In April 1997, we entered into the Grant Terms and Conditions Agreement with Harbor-UCLA. Under this agreement, we funded a two-year research program related to (alpha)-L-iduronidase and obtained an exclusive, worldwide license to certain cell lines and methods related to the production and purification of the enzyme and intellectual property and materials developed by Harbor-UCLA. In exchange for the license, we pay Harbor-UCLA an annual licensing fee and certain royalties. This agreement may be terminated by either party for breach upon 90 days prior written notice. In connection with Dr. Kakkis' prior employment with Harbor-UCLA, he will receive a portion of the royalties paid to Harbor-UCLA by BioMarin. In May 1998, we entered into an agreement with W.R. Grace regarding BM202, a therapeutic protease for the debridement of burns. Under this agreement, we have obtained an option to acquire from W.R. Grace an exclusive license, with the right to grant and authorize sublicenses for certain patents related to BM202. We may exercise our option at any time during the three-year period from the agreement's effective date so long as we have made certain payments to W.R. Grace. Under the terms of the agreement, we would pay W.R. Grace certain milestone payments and annual licensing fees. We would also pay W.R. Grace additional royalties based on meeting certain net annual sales thresholds of BM202 with a minimum annual royalty. If we cannot reach agreement with W.R. Grace on the additional terms and conditions of the license within six months of the exercise of our option, then we may initiate binding arbitration proceedings to establish the other terms of the license. The agreement also requires us to use our best efforts to produce material toxicology studies on BM202 between 40 May 1, 1999 and May 1, 2000 and begin clinical testing of products based on BM202. See "Risk Factors--Genzyme Relationship." In August 1998, we entered into a license agreement with Women's and Children's Hospital of Adelaide, Australia under which Women's and Children's Hospital of Adelaide granted us a worldwide, exclusive, perpetual license to certain technology and products for use in enzyme replacement therapy for MPS-VI. The licensed technology includes the feline MPS-VI preclinical data and a host cell line that expresses this enzyme. We paid Women's and Children's Hospital of Adelaide an initial license fee and will continue to pay royalties based on net sales with a minimum annual royalty. The royalty rate is reduced if a product competitive with MPS-VI enters the market. The terms of the license agreement require that both parties reach agreement on the design of the MPS-VI clinical trials within a specified period. The license agreement further requires us to file an IND with the FDA or equivalent regulatory authority in another country and to begin clinical trials within specified time periods. The term of the agreement is ten years and we have an option to renew the agreement for two one-year periods. Manufacturing Pharmaceutical Manufacturing. The drug candidates we are currently developing require the manufacture of recombinant enzymes. For our genetic disease programs, we expect to manufacture the carbohydrate-active enzymes. These enzymes will be produced using rDNA techniques in mammalian cell culture and purified using column chromatography. We believe that we will be able to manufacture sufficient quantities of our genetic disease drug candidates for clinical trials and commercial sale in part because relatively low doses are required for treatment and because the targeted patient populations are small. Under the agreement with Harbor-UCLA, Harbor-UCLA produces BM101 for MPS-I clinical trials and will continue to do so into the second quarter of 1999. We are developing an 8,000 square foot facility in Torrance, California, dedicated to the production of BM101. We are required by the FDA to demonstrate compliance with cGMP in our new facility. Because clinical supplies of BM101 were produced in a different facility and at a smaller scale, we will be required to demonstrate comparability between batches of BM101 produced at the two sites. The FDA may also require that we conduct additional studies or clinical trials in order to demonstrate equivalence with the drugs used in the clinical trial. Genzyme will do final fill and finish operations for BM101 in its Massachusetts facilities. We are currently developing a 23,000 square foot cGMP production facility in Novato, California. This facility has utility systems and support laboratories and offices sufficient to support an additional manufacturing suite of approximately 10,000 square feet in a second phase of development. Following the first phase we will have the capacity to conduct process development and commercial production of BM101. We have a 1,200 square foot cGMP laboratory designed for clinical production of enzymes for our genetic disease programs. This laboratory has the capability for cell culture production, purification and filling of small-scale production lots. We currently intend that the first application of this facility will be the production of BM102 to support clinical trials for MPS-VI. We have also developed a 1,000 square foot bacterial fermentation facility for preclinical studies and clinical trial requirements for burn and anti-fungal drug candidates. Production for clinical trial requirements and commercial scale manufacture is currently supplemented with third-party manufacturers. Additionally, we have leased a 36,000 square foot shell that is expected to be completed in the third quarter of 1999. This facility may be used for additional manufacturing capacity as needed. 41 We are developing the manufacturing capacity to support commercial sales of BM101 and eventually BM102. We cannot assure you that this capacity can be brought into production in a timely manner or that it will be sufficient to supply the market demand if sales exceed projections. As a company, we have no experience manufacturing BM101 or other enzymes in commercial quantity, although we have hired and are in the process of hiring additional experienced personnel who do have experience manufacturing in commercial quantities in other companies. Because our manufacturing facilities are in the process of construction, validation, and process qualification, we have yet to be subject to governmental inspection for compliance with cGMP. We will have to register our manufacturing facilities with the FDA, the State of California and other foreign regulatory agencies. These facilities, and those of any third-party manufacturers, will be subject to periodic inspections confirming compliance with applicable law. Our facilities must be cGMP certified before we can manufacture our drugs for commercial sales. Failure to comply with such requirements could result in the shutdown of such facilities, fines or other penalties. A shutdown or fine could have a serious effect on our business financial condition and results of operations. See "Risk Factors--Limited Drug Manufacturing Experience; and --Government Regulation" and "Business-- Facilities." Carbohydrate Analysis Products Manufacturing. Glyko, Inc. assembles its FACE Imaging System and kits from standard components readily available from multiple commercial sources. A key component of the FACE Imaging System is the operating and interpretative software, which Glyko, Inc. writes and tests itself. Glyko, Inc. mixes and casts its gels using proprietary and patented formulations best suited for carbohydrate applications. Glyko, Inc. also manufactures its carbohydrate-active enzymes using various rDNA techniques. Glyko, Inc. believes that it has adequate manufacturing capacity to produce much larger quantities of its products than are currently required. Sales and Marketing Pharmaceutical Sales and Marketing. We have no experience marketing or selling pharmaceutical products. To commercially market our products once the necessary regulatory approvals are obtained, we must either develop our own sales and marketing force or enter into arrangements with third parties to market and sell our products. We established a joint venture with Genzyme for the worldwide development and commercialization of BM101 for the treatment of MPS- I. Under the joint venture, Genzyme will be responsible for marketing, distribution, sales and reimbursement of BM101 worldwide. In the future, we may develop the capability to market and sell our drug products that are targeted at small or concentrated patient populations. We believe that these patient populations are typically well-informed and well- connected to the medical community. We believe that direct marketing to these patients is an effective strategy. We may also market our products through distributors or other collaborators, particularly those targeted at larger patient populations. We cannot guarantee that Genzyme will devote the resources necessary to successfully market BM101. In addition, either party may terminate the joint venture for any reason. If Genzyme were to terminate the joint venture, we would be required to undertake Genzyme's responsibilities ourselves. We have no experience in marketing, selling or obtaining reimbursement for pharmaceutical products. In addition, we would be required to pursue foreign regulatory approvals. Termination of the joint venture could therefore cause significant delays in product launch in the United States, difficulties in obtaining third party reimbursement and delays or failure to obtain foreign regulatory approval, any of which could hurt our business and results of operations. Sales and Marketing of Carbohydrate Analysis Products and Services. Glyko, Inc. sells its products and services primarily to distributors of research products, quality control laboratories and research laboratories. Glyko, Inc. has a sales staff of two, who cover the United States and Canada. Direct sales 42 efforts accounted for approximately 40% of Glyko, Inc.'s revenues in 1998. Glyko, Inc. has established a network of distributors to expand its reach in the analytical products market. Glyko, Inc. has relationships with three major research products distributors worldwide and with one distributor for North America that allow these companies to sell Glyko, Inc. manufactured products under the distributor's own name. Glyko, Inc. also has distribution agreements with third parties covering Asia, Australia, Europe and Mexico. Distributor sales accounted for approximately 22% of revenues in 1998. The remaining 38% of Glyko, Inc. revenues are from sales of contract services, including services sold to us, and government grants. Services provided to us accounted for approximately 5% of Glyko, Inc.'s overall revenue in 1998. See "Risk Factors-- Genzyme Relationship;--Limited Marketing Capability; and --Competition." Patents and Proprietary Rights Our success depends in part on our ability to: . Obtain patents . Protect trade secrets . Operate without infringing the proprietary rights of others . Prevent others from infringing on our proprietary rights We may obtain licenses to patents and patent applications from others. We have five patent applications presently pending in the United States Patent and Trademark Office. We have filed one foreign counterpart application and expect to file foreign counterparts to the other four pending U.S. patent applications at the proper times. Glyko, Inc. owns seven issued U.S. patents and two pending applications, one of which has been allowed. In addition, Glyko, Inc. has licensed four U.S. patents and certain foreign counterparts from AstroMed Ltd. and its successor Astroscan Ltd. on an exclusive, worldwide, perpetual and royalty-free basis. Glyko, Inc. has also licensed seven U.S. patents from Glycomed Incorporated on an exclusive, worldwide, perpetual and royalty-free basis. These patents are all related to Glyko, Inc.'s products and services. We primarily protect our proprietary information by filing U.S. and foreign patent applications related to our proprietary technology, inventions and improvements. Proprietary rights relating to our technologies will be protected from unauthorized use by third parties only to the extent that they are covered by valid and enforceable patents or are effectively maintained as trade secrets. The patent positions of biotechnology companies are extremely complex and uncertain. The scope and extent of our patent protections for some of our products, including BM101 and BM102, are particularly uncertain because some of the enzymes we are developing have existed in the public domain for many years. Other parties may have published the structure of the enzyme, the methods for purifying or producing the enzyme or the methods of treatment or use. If such publications exist, they can prevent our patent applications from issuing or can limit the scope of coverage for issued patents. We cannot assure you that any patents owned by, or licensed to, us will afford protection against competitors. Nor can we assure you that any patent applications will result in patents being issued. In addition, the laws of certain foreign countries do not protect our intellectual property rights to the same extent as do the laws of the United States. The patent position of biopharmaceutical companies involves complex legal and factual questions and their enforceability cannot be predicted with certainty. We cannot assure you that any of our patents or patent applications, if issued, will not be challenged, invalidated or designed around. Nor can we assure you that the patents will provide proprietary protection or competitive advantages to us. Furthermore, we cannot assure you that others will not independently develop similar technologies or duplicate any technology developed by us. 43 Our commercial success depends significantly on our ability to operate without infringing the patents and other proprietary rights of third parties. We cannot assure you that our technologies do not and will not infringe the patents or violate other proprietary rights of third parties. In the event of such infringement or violation, we and our corporate partners may be enjoined from pursuing research, development or commercialization of their products and our business, financial condition and results of operations would be seriously and negatively impacted. There has been extensive litigation regarding patents and other intellectual property rights in the biotechnology and pharmaceutical industries. The defense and prosecution of intellectual property suits and related legal and administrative proceedings in the United States and abroad involve complex legal and factual questions. These proceedings are costly and time-consuming to pursue and their outcome is uncertain. Litigation may be necessary to enforce patents issued to or licensed by us, to protect trade secrets or know-how owned or licensed by us and to determine the enforceability, scope and validity of the proprietary rights of others. We will incur substantial expense and be forced to divert significant effort and resources of our technical and management personnel in the event we must prosecute or defend any litigation or other administrative proceeding. If an adverse determination were made in any such proceedings, we could incur significant liabilities to third parties or be required to seek licenses which may not be available from third parties or may be prevented from selling our products in certain markets, if at all. Although patent and intellectual property disputes are often settled through licensing or similar arrangements, costs associated with such arrangements may be substantial and could include ongoing royalties. Furthermore, we cannot assure you that the necessary licenses would be available to us on satisfactory terms, if at all. In addition to patents, we rely on trade secrets and proprietary know-how, which we seek to protect, in part, through confidentiality agreements with its employees. We cannot assure you that such confidentiality or proprietary information agreements will meaningfully protect our technology or provide us with adequate remedies in the event of unauthorized use or disclosure of such information. Nor can we assure you that the parties to such agreements will not breach such agreements or that our trade secrets will not otherwise become known to or be independently developed by competitors. See "Risk Factors-- Proprietary Technology; and--Competition." Government Regulation Our pharmaceutical products are subject to extensive government regulation in the United States. If we distribute our products abroad, these products will also be subject to extensive foreign government regulation. In the United States, pharmaceutical and biological products are regulated by the FDA. FDA regulations govern the testing, manufacturing, advertising, promotion, labeling, sale and distribution of our products. Currently, we believe that BM101 and other enzyme drug candidates that we may develop will be regulated by the FDA as biologics rather than as drugs. The FDA approval process for a biologic includes: . Preclinical studies . Submission to the FDA of an IND application for clinical trials (i.e. testing in humans) . Adequate and well-controlled human clinical trials to establish the safety and effectiveness of the product . Submission to the FDA of a BLA . FDA review of the BLA . FDA inspection of the facilities used in the manufacturing of the biologic to assess compliance with the FDA's cGMP regulations 44 The FDA testing and approval process requires substantial time, effort and money. We cannot assure you that any approval will ever be granted. Preclinical studies include laboratory evaluation of the product, as well as animal studies to assess the potential safety and effectiveness of the product. These studies must be performed according to Good Laboratory Practices, or "GLPs." The results of the preclinical studies, together with manufacturing information and analytical data, are submitted to the FDA as part of the IND. Clinical trials (studies in humans) may begin 30 days after the IND is received by the FDA, unless the FDA raises concerns or questions about the conduct of the clinical trials. If the FDA does raise such concerns or questions, the IND sponsor and the FDA must resolve any outstanding concerns before clinical trials can proceed. We cannot assure you that submission of an IND will result in FDA authorization to commence clinical trials. Nor can we assure you that if clinical trials are approved, that data from such trials will result in marketing approval. Clinical trials involve the administration of the product that is the subject of the trial to volunteers or patients under the supervision of a qualified principal investigator. Furthermore, each clinical trial must be reviewed and approved by an independent Institutional Review Board, or "IRB," at each institution at which the study will be conducted. The IRB will consider, among other things, ethical factors, the safety of human subjects and the possible liability of the institution. Also, clinical trials must be performed according to Good Clinical Practices, or "GCPs," GCPs are enumerated in FDA regulations and guidance documents. Clinical trials typically are conducted in three sequential phases, Phases I, II and III, with Phase IV studies conducted after approval and generally required for fast track designated drugs. These phases may overlap. In Phase I clinical trials, the drug is usually tested on healthy volunteers to determine: . Safety . Any adverse effects . Dosage tolerance . Absorption . Metabolism . Distribution . Excretion . Pharmaco-dynamics In Phase II clinical trials, the drug is usually tested on a limited number of afflicted patients to: . Evaluate the efficacy of the drug for specific, targeted indications . Determine dosage tolerance and optimal dosage . Identify possible adverse effects and safety risks In Phase III clinical trials, the drug is usually tested on a larger number of afflicted patients, an expanded patient population and at multiple clinical sites. The FDA may require that we suspend clinical trials at any time on various grounds, including a finding that the subjects are being exposed to an unacceptable health risk. In addition, FDA approval may be conditioned and limit the indicated uses for our products. In Phase IV clinical trials, after a drug has received FDA approval, additional studies are conducted to gain experience from the treatment of afflicted patients in the intended therapeutic indication. Additional studies are also conducted to document a clinical benefit where drugs are approved under 45 fast track designation and based on surrogate endpoints. Failure to promptly conduct Phase IV clinical trials could result in expedited withdrawal of approval for products approved under fast track designation. Our regulatory strategy is to conduct only one clinical trial to support a BLA for each drug candidate for certain genetic diseases. The FDA may require us to conduct additional clinical trials or expand the scope of our existing trial for BM101. Regulatory approval would be delayed if we were required to undertake additional clinical trials or expand the existing trial to include more patients. We will also be subject to a variety of foreign regulations governing clinical trials, manufacture and sales of our products. Whether or not FDA approval has been obtained, approval of a product by the comparable regulatory authorities of foreign countries must still be obtained prior to marketing in those countries. The approval process varies from country to country and the time needed to secure approval may be longer or shorter than that required for FDA approval. Food and Drug Administration Modernization Act of 1997 (FDAMA). The Food and Drug Administration Modernization Act of 1997, or "FDAMA," was enacted, in part, to ensure the availability of safe and effective drugs, biologics and medical devices by expediting the FDA review process for new products. FDAMA establishes a statutory program for the approval of fast track products, including biologics. The fast track provisions essentially codify the FDA's Accelerated Approval regulations for drugs and biologics. A fast track product is defined as a new drug or biologic intended for the treatment of a serious or life-threatening condition that demonstrates the potential to address unmet medical needs for such a condition. Under the new fast track program, the sponsor of a new drug or biologic may request the FDA to designate the drug or biologic as a fast track product at any time during the clinical development of the product. FDAMA specifies that the FDA must determine if the product qualifies for fast track designation within 60 days of receipt of the sponsor's request. Approval of an application for fast track designation for a product can be based on an effect on a clinical endpoint or on a surrogate endpoint that is reasonably likely to predict clinical benefit. Approval of an application for fast track designation will be subject to: . Post-approval studies to validate the surrogate endpoint or confirm the effect on the clinical endpoint . Prior review of all promotional materials If a preliminary review of the clinical data suggests that the product is effective, the FDA may initiate review of sections of an application for fast track designation for a product before the application is complete. This rolling review is available if the applicant provides a schedule for submission of remaining information and pays applicable user fees. However, the time period specified in the Prescription Drug User Fees Act, which governs the time period goals the FDA has committed to reviewing an application, does not begin until the complete application is submitted. In September 1998, the FDA granted our application for fast track designation of our BLA for BM101 for the more severe forms of MPS-I. We cannot predict the ultimate impact, if any, of the fast track process on the timing or likelihood of FDA approval of BM101 or any of our other potential products. Orphan Drug Designation. In September 1997, BM101 received orphan drug designation from the FDA. In February 1999, BM102 received orphan drug designation from the FDA. Orphan drug designation is granted by the FDA to drugs intended to treat a rare disease or condition. A rare disease or condition is one which generally affects fewer than 200,000 individuals in the United States. Orphan drug designation must be requested before submitting a BLA. After the FDA grants orphan drug designation, the generic identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. 46 Orphan drug designation does not shorten the FDA regulatory review and approval process for an orphan drug, nor does it give that drug any advantage in the FDA regulatory review and approval process. If an orphan drug later receives FDA approval for the indication for which it has such designation, the FDA may not approve any other applications to market the same drug for the same indication, except in very limited circumstances, for seven years. Although obtaining FDA approval to market a product with orphan drug exclusivity may be advantageous, we cannot be certain that we will be the first to obtain FDA approval for any drug for which we obtain orphan drug designation. Nor can we be certain that orphan drug designation will result in any commercial advantage or reduce competition. Nor can we be certain that the limited exceptions to this exclusivity will not be invoked by the FDA. Regulation of Glyko, Inc.'s Diagnostic Tests as Medical Devices. Our subsidiary, Glyko, Inc., develops diagnostic tests used to help screen for certain diseases such as lysosomal storage diseases, including MPS disorders. The FDA regulates these tests as medical devices requires companies that desire to market new medical devices to obtain either 510(k) clearance Pre-market Approval Application, or PMA, approval before they are sold. If these diagnostic tests fail to receive 510(k) clearance, however, then we must seek approval under PMA regulation, which can be significantly more costly and time consuming. Glyko, Inc. has received 510(k) clearance from the FDA for a urinary carbohydrate analysis and is developing other diagnostic tests, which we believe qualify for 510(k) clearance. Glyko, Inc.'s diagnostic tests may be regulated as medical devices by the FDA as Class I, Class II or Class III devices. The degree of regulation, as well as the cost and time required to obtain regulatory approvals or clearances, generally increases from Class I to Class III. Most diagnostic tests are regulated as Class I or Class II devices. Glyko, Inc.'s diagnostic test for urinary carbohydrate analysis has been classified as a Class I device. Under the FDAMA, most Class I devices are exempt from the 510(k) clearance requirement. A 510(k) premarket notification is sufficient for a device that is "substantially equivalent" to a legally marketed Class I or Class II device, or a Class III "predicate" device for which the FDA has not yet required submission of PMAs. Following submission of a 510(k) premarket notification, a company may not market the device for clinical use until the FDA finds that product is substantially equivalent to a legally marketed predicate device. It generally takes four to 12 months from the date of submission of a 510(k) to obtain the FDA's determination, but it may take longer. The FDA may determine that the device is not substantially equivalent and require submission and approval of a PMA. Alternatively, the FDA may require further information before making a determination regarding substantial equivalence. The FDA requires a new 510(k) submission and a separate FDA determination of substantial equivalence for any devices cleared through the 510(k) process that have had modifications or enhancements that could significantly affect their safety or effectiveness, or that change their intended use. If a device does not qualify for the 510(k) premarket notification procedure, a company must file a PMA application. The PMA review and approval process can be expensive, uncertain and lengthy. A PMA application must be supported by extensive data, including laboratory and clinical trial data establishing the safety and effectiveness of the device, as well as extensive manufacturing information. After a preliminary review, the FDA makes an initial determination about whether a PMA application is sufficiently complete to permit a substantive review. If the FDA finds the PMA application sufficiently complete, the FDA accepts the application for filing. Once the PMA application is accepted for filing, the FDA begins a more in-depth review, which likely includes review by a scientific advisory panel. During the PMA review process, the FDA will conduct an inspection of the manufacturer's facilities to ensure compliance with the applicable Quality System Regulation or QSR requirements. The FDA may determine that additional clinical data is necessary or request other information, which may delay the regulatory review process. 47 Modifications to a device that is the subject of an approved PMA, its labeling, manufacturing or clinical use may require approval by the FDA of PMA supplements or new PMAs. PMA supplements often require submission of the same type of information required for the initial PMA except that the supplement generally is limited to that data needed to support the proposed changes. Regulatory approval, if granted, may limit the uses for which the device may be marketed. Approvals, once granted, may be withdrawn if problems occur after initial marketing. Sales of medical devices outside of the United States are subject to regulatory requirements that vary from country to country. The time required to obtain international regulatory clearance or approval for international sales may be longer or shorter than that required for FDA clearance approval. The requirements may differ as well. We cannot assure you that we will be able to obtain the required regulatory approval in a timely manner, if at all. Regulation of Glyko, Inc.'s Manufacturing. Glyko, Inc. is required to comply with the FDA's QSR requirements when manufacturing its diagnostic tests. The QSR requirements incorporate the FDA's former cGMP regulations. QSR requirements address the design, controls, methods, facilities and quality assurance controls used in manufacturing, packing, storing and installing medical devices. In addition, certain international markets have quality assurance and manufacturing requirements that may be more or less rigorous than those in the United States. A failure by us to comply with QSR requirements or other requirements could have a serious impact on our business and services. Regulation of Clinical Laboratories. Laboratories using Glyko, Inc.'s diagnostic tests for clinical use in the United States are regulated under Clinical Laboratory Improvement Amendments of 1998 or CLIA. CLIA establishes requirements for laboratories and laboratory personnel governing: . Administration of laboratories . Participation and proficiency testing . Patient test management . Quality control . Personnel . Quality assurance . Inspection The complexity of the tests being performed by the laboratory will determine which CLIA requirements apply. Under CLIA regulations, all laboratories performing moderately complex or highly complex tests will be required to obtain either a registration certificate or certificate of accreditation from the Health Care Financing Administration. CLIA requirements may prevent some clinical laboratories from using certain of Glyko, Inc.'s diagnostic tests. CLIA regulations may seriously impact our business, financial condition and results of operations by limiting the potential market for Glyko, Inc.'s products. Glyko, Inc. has CLIA certification and a California state laboratory license to perform urinary carbohydrate analysis tests. The California laboratory license only allows testing for patients in California. We may be required to obtain other licenses to perform our laboratory services in other states or to provide services to patients or health care professionals who reside or practice medicine in other states. See "Risk Factors--Government Regulation; and--Orphan Drug Exclusivity." Competition Pharmaceutical Products. The biopharmaceutical industry is rapidly evolving and highly competitive. We face significant competition from biotechnology and pharmaceutical companies. Many of these companies have significantly greater financial, manufacturing, marketing and product research resources 48 and experience than we have. Large pharmaceutical companies in particular have extensive experience in clinical testing and in obtaining regulatory approvals, including orphan drug designations. Accordingly, competitors may succeed in obtaining regulatory approvals for and commercialization of their products faster than we will. In addition, these companies will compete with us to attract qualified personnel, and to attract parties for acquisitions, joint ventures or other collaborations. Several pharmaceutical and biotechnology companies have established themselves in the field of enzyme therapeutics, including Genzyme, our joint venture partner. Many colleges, universities and public and private research organizations are also active in the human health care field. While these entities focus on education, they may develop proprietary technology and acquire patents that we may require for the development of our products. We may attempt to obtain licenses to such proprietary technology. We cannot assure you, though, that we will be able to obtain these licenses. We also compete with a number of these organizations to recruit scientists and technicians. We believe that the primary competitive factors in the market for biological drug products are: . Product safety . Effectiveness of such products . Ability to obtain orphan drug exclusivity . Distribution channels . Price . Time required to develop new products . Time required to obtain regulatory and reimbursement approval . Ability to respond quickly to medical and technological changes . Ability to develop new products We also believe we compete favorably with respect to these factors. We cannot assure you, however, that we will be able to continue to do so. Carbohydrate Analysis Products and Services. The FACE Imaging System's primary competitors are alternative carbohydrate analytical technologies including: . Capillary electrophoresis . High pressure liquid chromatography . Mass spectrometry . Nuclear magnetic resonance spectrometry The major advantages of FACE are: . Low cost . Quantification of carbohydrates present . Easy application to samples of unknown composition . User friendly procedures and software . Provides versatility for other non-carbohydrate applications The competition in the carbohydrate-active enzymes business is comprised primarily of distributors of broad lines of research products and supplies, particularly fine chemicals and reagents. Glyko, Inc. 49 competes on the basis of its catalog of products offered, the number of carbohydrate-active enzymes and their proprietary nature and service. Glyko, Inc. believes that it provides superior service because it provides customers with sales information and assistance based on scientific understanding of carbohydrate chemistry and function. However, it does not offer as many products as some of its competitors. Glyko, Inc. plans to expand its enzyme product offerings over the next several years to compete with the broadest product lines offered today by competitors. However, neither we nor Glyko, Inc. can assure you that Glyko, Inc. will successfully broaden its product offerings or will otherwise compete successfully. Glyko, Inc.'s diagnostic product line competes primarily with alternative technologies and laboratory services. Glyko, Inc. believes that its diagnostic approaches are novel. Glyko, Inc. has the only urinary screening test cleared by the FDA for certain lysosomal storage diseases. Glyko, Inc. believes that the test may be used as a screening tool for early detection of a number of lysosomal storage diseases and that success of the product will depend on whether it becomes widely adopted. See "Risk Factors--Competition." Facilities We currently have operations in a total of six buildings. Five of our buildings are located in Novato, California, each within a half-mile radius. The five buildings, each named for the streets on which they are located, are: . Bel Marin Keys facility . Galli Drive facility . Pimentel Court facility . Digital Drive facility . Digital Drive sublease facility The sixth building, the Carson Street facility, is located in Torrance, California. The Bel Marin Keys facility houses administrative staff and a clinical production laboratory. It consists of approximately 13,400 square feet. The lease expires in May 2001. We have an option to extend the lease for up to two additional three-year periods. The Galli Drive facility consists of a total of approximately 31,000 square feet and currently houses 6,700 square feet of modular laboratory space used for research and development. We are currently developing an additional 23,400 square feet for a manufacturing facility, including core utility and support functions sufficient for the entire building once fully developed. This development will also create approximately 3,000 square feet of additional mezzanine office space. This development is scheduled to be completed in the third quarter of 1999. The lease expires in August 2003. We have an option to extend the lease for one additional five-year period. The Pimentel Court facility houses the administrative staff and research and manufacturing operations of Glyko, Inc. It consists of approximately 11,000 square feet. The lease expires in March 2000. We have subleased a portion of this facility to a third party. The Digital Drive facility, when completed, is intended to house either a research or a manufacturing facility. It is currently under construction. When completed, it will consist of approximately 35,000 square feet. Construction of the shell of the building is scheduled to be completed in the third quarter of 1999. The lease expires ten years and sixty days after the shell of the building is completed. 50 The Digital Drive sublease facility houses a chemistry laboratory. It consists of approximately 1,200 square feet. The facility has been subleased from a third party. The sublease expires in January 2000. The Carson Street facility houses our initial commercial manufacturing facility for BM101 and consists of approximately 8,000 square feet. The lease expires in June 2001. We have an option to extend the lease until April 2003. Employees As of March 31, 1999, we had 77 full-time employees, 35 of whom are in research and development, 29 of whom are in manufacturing, two of whom are in sales and marketing and 11 of whom are in administration. We consider our employee relations to be good. Our employees are not covered by a collective bargaining agreement. We have not experienced employment related work stoppages. We cannot assure you that we will be able to continue attracting qualified personnel in sufficient numbers to meet our needs. Legal Proceedings We have no material legal proceedings pending. 51 MANAGEMENT Executive Officers, Directors and Key Employees Set forth below is certain information regarding our executive officers, directors and key employees:
Name Age Position with BioMarin ---- --- ---------------------- Grant W. Denison, Jr................ 49 Chief Executive Officer and Chairman of the Board John C. Klock, M.D.................. 54 President, Secretary and Director Raymond W. Anderson................. 57 Chief Financial Officer, and Vice President, Finance and Administration Christopher M. Starr, Ph.D.......... 46 Vice President, Research and Development Emil D. Kakkis, M.D., Ph.D.......... 38 Vice President of BioMarin and President, BioMarin Genetics, a division of BioMarin Stuart J. Swiedler, M.D., Ph.D...... 43 Vice President, Scientific and Clinical Affairs Brian K. Brandley, Ph.D............. 42 Vice President of BioMarin and Managing Director, Glyko, Inc., a wholly-owned subsidiary of BioMarin Ansbert S. Gadicke, M.D.(/1/)(/2/).. 41 Director Erich Sager(/1/).................... 41 Director Gwynn R. Williams(/1/)(/2/)......... 65 Director
------------------------------- (/1/Member)of the Compensation Committee. (/2/Member)of the Audit Committee. Each director will hold office until the next annual meeting of stockholders and until his successor is elected and qualified or until his earlier resignation or removal. Each officer serves at the discretion of the Board of Directors. Grant W. Denison, Jr. has served as a director and Chief Executive Officer of BioMarin since its inception and as Chairman of the Board since April 1997. From July 1993 to April 1997, Mr. Denison served as President, Consumer Products and Corporate Senior Vice President, Business Development at Searle, a pharmaceutical company. From April 1986 to June 1993, Mr. Denison served as Vice President Corporate Planning and President, U.S. Operations at Monsanto Company, a diversified life sciences company. From 1985 to 1986, Mr. Denison served as Vice President, International Operations at Squibb Medical Systems, a medical devices company. From 1980 to 1985, Mr. Denison served as Vice President, Planning and Business Development at Pfizer, Inc., a pharmaceutical company. Mr. Denison serves as a director of BioSyn, Nastech Pharmaceutical Company Inc., Dentalview, Inc. and Clubb BioCapital. Mr. Denison received an A.B. in Mathematical Economics from Colgate University and an M.B.A. from Harvard Graduate School of Business Administration. John C. Klock, M.D. has served as the President and Secretary of BioMarin and served as a director since its inception. Dr. Klock has served as the President of Glyko, Inc. since October 1989. Dr. Klock was a founder of Glyko Biomedical Ltd. and has served as a director since December 1992. Dr. Klock was a founder of Glycomed Incorporated, a biotechnology company, at which he served as Vice President, Medical Affairs from July 1987 to July 1990. Dr. Klock was a scientific director at the Institute of Cancer Research at California Pacific Medical Center from July 1981 to July 1987. Dr. Klock was an academic physician and carbohydrate researcher at the University of California at San Francisco from 1982 to 1986. Dr. Klock received a B.S. in Zoology from Louisiana State University and received an M.D. from Tulane University. Raymond W. Anderson has served as Chief Financial Officer and Vice President, Finance and Administration since June 1998. Mr. Anderson served as the Vice President, Finance and 52 Chief Financial Officer at Fusion Medical Technologies, Inc., a medical technology company developing drug delivery systems, from July 1997 to June 1998. Mr. Anderson served as the Vice President, Finance and Chief Financial Officer at Fidus Medical Technology, Inc., a medical technology company specializing in cardiac arrhythmias, from October 1996 to July 1997. Mr. Anderson served as a director of Recombinant Capital, a consulting firm, from July 1994 to October 1996. Mr. Anderson served as the Vice President, Finance and Chief Financial Officer of Glycomed Incorporated, a biotechnology company, from April 1989 to July 1994. Mr. Anderson was the Chief Financial Officer at Chiron Corporation, a biotechnology company, from 1985 to 1989. Mr. Anderson was a Controller and Director of Financial Planning and Analysis at Syntex Laboratories, a pharmaceutical company, from 1981 to 1985. Mr. Anderson has served as a director of Glyko Biomedical, Ltd. and its predecessor, Glyko, Inc., since October 1989. Mr. Anderson received a B.S. in Engineering from the United States Military Academy, an M.S. in Administration from George Washington University and an M.B.A. from the Harvard Graduate School of Business Administration. Christopher M. Starr, Ph.D. has served as the Vice President, Research and Development of BioMarin since its inception. From July 1991 to April 1998, Dr. Starr has served as the Vice President, Research and Development for Glyko, Inc., a carbohydrate analytical and diagnostic company. Dr. Starr held the position as National Research Associate at the National Institutes of Health in Bethesda, Maryland from August 1986 to June 1991. Dr. Starr received a B.S. in Biology from Syracuse University and a Ph.D. in Biochemistry and Molecular Biology from the State University of New York, Health Science Center, Syracuse, NY. Emil D. Kakkis, M.D., Ph.D. has served as Vice President of BioMarin and President of BioMarin Genetics, a division of BioMarin, since September 1998. From July 1994 to August 1998, Dr. Kakkis was a Physician Specialist at the Department of Pediatrics at Harbor-UCLA Medical Center. From July 1991 to June 1994, Dr. Kakkis completed a Fellowship in Genetics at the UCLA Intercampus Medical Genetics Training Program. Dr. Kakkis received a B.A. in Biology from Pomona College and received a Ph.D. in Biological Chemistry from UCLA. Dr. Kakkis received an M.D. from UCLA. Stuart J. Swiedler, M.D., Ph.D. has served as Vice President of Scientific and Clinical Affairs of BioMarin since June 1998. From November 1997 to June 1998, Dr. Swiedler was as an independent biotechnology consultant. From February 1993 to November 1997, Dr. Swiedler has served, in chronological order, with Glycomed Incorporated, a biotechnology company, as Assistant Vice President, Biology from February 1993 to July 1994, as Assistant Vice President, Research from July 1994 to May 1995, and as Vice President, Research from May 1995 to November 1997. Dr. Swiedler received a B.S. in Biology from the State University of New York at Albany. Dr. Swiedler received an M.D. and a Ph.D. in Biochemistry from the Johns Hopkins University School of Medicine. Brian K. Brandley, Ph.D. has served as Vice President of BioMarin since October 1998. Dr. Brandley has served as the Managing Director of Glyko, Inc., a carbohydrate analytical and diagnostic company, since April 1998. He was an Assistant Professor at Rush University from July 1995 to April 1998, and was the Senior Scientist, Head of Cell Biology at Glycomed Incorporated, a biotechnology company, from July 1988 to July 1995. Dr. Brandley received a B.S. and an M.S. in Biology from the University of Miami. Dr. Brandley received a Ph.D. in Biology from the University of Sydney, Australia. Ansbert S. Gadicke, M.D. has served as a director of BioMarin since December 1997. Since July 1992, Dr. Gadicke has served as the Chairman of the Board and Managing Director of MPM Capital, L.P., an investment company specializing in the healthcare industry. From 1989 to 1992, Dr. Gadicke was a consultant with Boston Consulting Group. Dr. Gadicke currently serves on the boards of MediGene AG, Genome Pharmaceuticals Corporation AG, t.Breeders Inc., Idea and Novirio Pharmaceuticals, Ltd. Dr. Gadicke received a Ph.D. and an M.D. from J.W. Goethe Universitat, Frankfurt, Germany. Erich Sager has served as a director of BioMarin since November 1997. Since September 1996, Mr. Sager has served as the Chairman of LaMont Asset Management S.A., a private investment 53 management firm. From April 1994 to August 1996, Mr. Sager served as Senior Vice President, Head of Private Banking for Dresdner Bank (Switzerland) Ltd. From September 1991 to March 1994, Mr. Sager served as Vice President, Private Banking-Head German Desk for Deutsche Bank (Switzerland) Ltd. From 1981 to 1989, Mr. Sager held various positions at a number of banks in Switzerland. Mr. Sager serves as a director of BioNebraska, Inc., Comptec Industries Ltd., Dentalview, Inc., LaMont Asset Management, S.A., and Sermont Asset Management. Mr. Sager received a Business Degree from the School of Economics and Business Administration in Zurich, Switzerland. Gwynn R. Williams has served as a director of BioMarin since its inception. Mr. Williams founded AstroMed Limited and Astroscan Limited, UK manufacturers of scientific equipment, in March 1984, which entities, in December 1997, merged into Life Science Resources Ltd. Previously, Mr. Williams was a partner in Arthur Andersen & Co., a mathematician with General Motors Research, and a mathematician with British Steel. Mr. Williams was a founder of Glyko Biomedical Ltd. and its predecessor Glyko, Inc. Mr. Williams received a B.S. in Theoretical Physics from the University of Wales. Board Committees The board has established an Audit Committee and a Compensation Committee. The Audit Committee, which consists of Dr. Gadicke and Mr. Williams, reviews BioMarin's financial statements and accounting practices, makes recommendations to the board regarding the selection of independent auditors and reviews the results and scope of the audit and other services provided by BioMarin's independent auditors. The Compensation Committee, which consists of Dr. Gadicke, Mr. Sager and Mr. Williams, sets general compensation policy for BioMarin and has final approval power over compensation to specific employees. The Compensation Committee also has final approval power over guidelines and criteria for employees' bonuses and administers the 1997 Stock Plan and 1998 Director Option Plan. Director Compensation Directors do not receive cash compensation for their services as directors of BioMarin but are reimbursed for their reasonable expenses in attending meetings of the board and while performing services for BioMarin. Prior to the effectiveness of the 1998 Director Option Plan, BioMarin had granted each non- employee director an option to purchase 20,000 shares of BioMarin common stock with an exercise price set at the fair market value on the dates of grant, $1.00, upon their election to the board as consideration for their willingness to sit on the board. In March 1999, BioMarin also issued to each such non- employee director, for services performed as a director, an additional option to purchase 15,000 shares of common stock with an exercise price set at the fair market value on the date of grant, $7.00, as consideration for their ongoing services to BioMarin as directors. In March 1999, Mr. Sager and Mr. Gadicke were each also issued an option to purchase an additional 20,000 shares of common stock of BioMarin at an exercise price set at the fair market value on the date of grant, $7.00, as consideration for services rendered by them to BioMarin in connection with this offering. 1998 Director Option Plan The 1998 Director Option Plan was adopted by the board in December 1998. It was approved by the stockholders as of January 15, 1999. The plan provides for the grant of nonstatutory stock options to non-employee directors. A total of 200,000 shares of BioMarin common stock has been reserved for issuance under the plan. The plan also provides for an annual increase in this number of shares equal to the lesser of: (1) 0.5% of BioMarin's outstanding capital stock, (2) 200,000 shares, or (3) a lesser amount determined by the board. 54 As of December 1998, no options had been granted under the 1998 Director Option Plan. In March 1999, options to purchase 45,000 shares of common stock had been granted under the 1998 Director Plan. The 1998 Director Option Plan provides that each non-employee director shall automatically be granted an option to purchase 20,000 shares of BioMarin common stock on the date which such person first becomes a non-employee director. This option shall have a term of ten years. The shares subject to this initial option shall vest over one year. Each non-employee director shall thereafter also be automatically granted an option to purchase 15,000 shares of BioMarin common stock on the anniversary of the date of their respective initial appointments to the board and each anniversary thereafter, provided that he or she retains their board seat on such anniversary date. The shares subject to this annual option shall vest in full one year from the date of grant and shall have a term of ten years. These options shall continue to vest only while the director serves. The exercise price of each of these options shall be 100% of the fair market value of a share of BioMarin common stock at the date of the option. In the event of a merger or the sale of substantially all of the assets of BioMarin, each option may be assumed or substituted by the successor corporation. If an option is assumed or substituted, it shall continue to vest as provided in the plan. However, if a non-employee director's status as a director of BioMarin or the successor corporation, as applicable, is terminated, other than upon a voluntary resignation by the non-employee director, the option shall immediately become fully vested and exercisable. If the successor corporation does not agree to assume or substitute for the option, each option shall become fully vested and exercisable for a period of 30 days from the date the board notifies the optionee of the option's full exercisability, after which period the option shall terminate. Options granted under the plan must be exercised within three months of the end of the optionee's tenure as a director, or within 12 months after such director's termination by death or disability, but in no event later than the expiration of the option's ten-year term. No option granted under the plan is transferable by the optionee other than by will or the laws of descent or distribution. Each option is exercisable, during the lifetime of the optionee, only by such optionee. Unless sooner terminated by the board, the plan will terminate automatically ten years from the effective date of the plan. 55 Executive Compensation Summary Compensation Table. The following table sets forth all compensation awarded to, earned by, or paid for services rendered to BioMarin in all capacities during the year ended December 31, 1998, by (1) BioMarin's chief executive officer and (2) the other four most highly compensated executive officers other than the chief executive officer who were serving as executive officers as of December 31, 1998, collectively, the "Named Executive Officers". Fiscal 1998 Summary Compensation Table
1998 Annual Compensation Long-Term Compensation ---------------------------------- ------------------------ Number of Name and Principal All Other Shares Underlying Position Salary($) Bonus($) Compensation($) Options Granted(#) (/1/) - ------------------ --------- -------- --------------- ------------------------ Grant W. Denison, Jr.... 202,500 87,550 -- 400,000 Chief Executive Officer John C. Klock, M.D...... 222,450 87,550 2,142 300,000 President Christopher M. Starr, Ph.D................... 139,560 87,550 876 200,000 Vice President, Research and Development Emil D. Kakkis, M.D., Ph.D................... 75,000 50,000 18 200,000 Vice President of BioMarin, President of BioMarin Genetics, a division of the Company Brian K. Brandley, Ph.D................... 101,620 -- 348 -- Vice President of BioMarin, Managing Director of Glyko, Inc., a wholly-owned subsidiary of BioMarin
- ------------------------------- (/1/In)connection with BioMarin's acquisition of Glyko, Inc. on October 7, 1998, the following individuals executed Share Exchange Agreements under which they agreed that, upon exercise of certain of their options to purchase common shares of Glyko BioMedical granted in connection with services previously rendered by each of them to Glyko, Inc., they would receive the following number of shares of BioMarin common stock in lieu of common shares of Glyko BioMedical, to John C. Klock: 66,246 shares; to Christopher M. Starr: 40,275 shares; and to Brian K. Brandley: 65,415 shares. These shares are not reflected in this column because they are not issuable upon the exercise of options to purchase BioMarin common stock granted for services rendered to BioMarin. Until October 1998, Mr. Denison devoted 70% of his time to BioMarin. Subsequently, Mr. Denison has devoted 100% of his time to BioMarin. Since October 1998 Mr. Denison's annual salary has been $257,000. Until April 1998, Dr. Klock and Dr. Starr devoted, respectively, 70% of their time to BioMarin and 30% to Glyko, Inc. Since April 1998, Dr. Klock and Dr. Starr have devoted 100% of their time to BioMarin. In 1998, Dr. Klock's annual salary was $250,000 and Dr. Starr's annual salary was $150,000. Dr. Kakkis' employment began in September 1998 as Vice President of BioMarin and as President of BioMarin Genetics, a division of BioMarin. His starting annual salary was $225,000. Dr. Brandley began employment with Glyko, Inc. in April 1998. His starting annual salary was $135,000. As of April 20, 1999, the board has granted options to purchase the following number of shares of BioMarin common stock: 100,000 shares to Grant W. Denison, Jr., 75,000 shares to John C. Klock, 50,000 shares to Christopher M. Starr, 20,375 shares to Emil D. Kakkis and 17,270 shares to Brian K. Brandley. 56 Stock Option Grants Table. The following table sets forth further information regarding options granted to each of the Named Executive Officers during 1998. Fiscal 1998 Stock Option Grants
Option Term ------------------------- Potential Realizable Value at Assumed Annual Rates of Stock Price Number of Percent of Appreciation Securities Total Options for Option Underlying Granted to Exercise Price Term (/4/) Options Employees Per Expiration ------------- Name Granted (/1/) in 1998 (/2/) Share($) (/3/) Date 5% 10% ---- ------------- ------------- -------------- ---------- ------ ------ Grant W. Denison, Jr.... 400,000 18% $4.00 6/08 $ $ John C. Klock, M.D...... 300,000 13% $4.00 6/08 $ $ Christopher M. Starr, Ph.D................... 200,000 9% $4.00 6/08 $ $ Emil D. Kakkis, M.D., Ph.D................... 200,000 9% $4.00 6/08 $ $ Brian K. Brandley, Ph.D................... -- -- -- -- -- --
- ------------------------------- (/1/) These options are incentive stock options that vest over four years as follows: (i) for Mr. Denison, Dr. Klock and Dr. Starr, 2/3 of such total shares subject to such options shall vest at a rate of 1/48 of this subtotal per month, with the remaining 1/3 of such total to vest upon the completion of this offering or upon completion of four years of continued employment, and (ii) for Dr. Kakkis, 12.5% of the total shares subject to such options vest six months after the vesting commencement date and 1/48 of such total shall vest monthly thereafter. In connection with BioMarin's acquisition of Glyko, Inc. on October 7, 1998, the following individuals executed Share Exchange Agreements under which they agreed that, upon exercise of certain of their options to purchase common shares of Glyko Biomedical granted in connection with services previously rendered by each of them to Glyko, Inc., they would receive the following number of shares of BioMarin common stock in lieu of common shares of Glyko Biomedical: to John C. Klock: 66,246 shares; to Christopher M. Starr: 40,275 shares; and to Brian K. Brandley: 65,415 shares. These shares are not reflected in this column because they are not issuable upon the exercise of options to purchase BioMarin common stock granted for services rendered to BioMarin. (/2/) Based on an aggregate of 2,252,120 shares subject to options granted by BioMarin during 1998 to employees, consultants and the Named Executive Officers. (/3/) Options were granted at an exercise price equal to the fair market value of the common stock, as determined by the Board of Directors, on the date of grant. (/4/) The 5% and 10% assumed annual rates of compounded stock price appreciation are mandated by rules of the Securities and Exchange Commission. BioMarin cannot assure any executive officer or any other holder of its securities that the actual stock price appreciation over the option term will be at the assumed 5% and 10% levels or at any other defined level. Unless the market price of its common stock appreciates over the option term, no value will be realized from the option grants made to the executive officers. The potential realizable value is calculated by assuming that the initial public offering price of $[ . ] per share appreciates at the indicated rate for the entire term of the option and that the option is exercised at the exercise price and sold on the last day of its term at the appreciated price. The potential realizable value computation is net of the applicable exercise price, but does not take into account applicable federal or state income tax consequences and other expenses of option exercises or sales of appreciated stock. The values shown do not consider non-transferability or termination of the options upon termination of such employee's employment with BioMarin. 57 Fiscal Year-End Option Value Table. The following table sets forth the number of shares covered by both exercisable and unexercisable stock options held by each of the Named Executive Officers at December 31, 1998. No shares were acquired upon the exercise of stock options during 1998. Aggregate 1998 Fiscal Year-End Option Value Table
Number of Securities Value of Unexercised Underlying Unexercised In-the-Money Options Options at Year-End (/1/) at Year-End (/2/) ------------------------- ------------------------- Name Exercisable Unexercisable Exercisable Unexercisable ---- ----------- ------------- ----------- ------------- Grant W. Denison, Jr...... 50,000 350,000 $ $ John C. Klock, M.D........ 37,500 262,500 $ $ Christopher M. Starr, Ph.D..................... 25,000 175,000 $ $ Emil D. Kakkis, M.D., Ph.D..................... 25,000 175,000 $ $ Brian K. Brandley, Ph.D... -- -- $ $
- ------------------------------- (/1/)These options are incentive stock options that vest over four years as follows: (i) for Mr. Denison Dr. Klock and Dr. Starr, 2/3 of such total shares subject to such options shall vest at a rate of 1/48 of this subtotal per month, with the remaining 1/3 of such total to vest upon the completion of this offering or upon four years of service, and (ii) for Dr. Kakkis, at a rate of 12.5% of the total shares subject to such options vest six months from vesting commencement date and 1/48 of such total shall vest monthly thereafter. In connection with BioMarin's acquisition of Glyko, Inc. on October 7, 1998, the following individuals executed Share Exchange Agreements under which they agreed that, upon exercise of certain of their options to purchase common shares of Glyko Biomedical granted in connection with services previously rendered by each of them to Glyko, Inc., they would receive the following number of shares of BioMarin common stock in lieu of common shares of Glyko Biomedical: to John C. Klock: 66,246 shares; to Christopher M. Starr: 40,275 shares; and to Brian K. Brandley: 65,415 shares. These shares are not reflected in this column because they are not issuable upon the exercise of options to purchase BioMarin common stock granted for services rendered to BioMarin. See "Employee Benefits Plans" for a description of the material terms of these options. (/2/)Based on the assumed public offering price of $[.] per share, less the exercise price. Employment Agreements We have entered into an employment agreement with Mr. Denison dated June 26, 1997, which has been subsequently amended. The term of this employment agreement is three years. Pursuant to the terms of this employment agreement, Mr. Denison was paid at an annual rate of $257,000 in 1998 and is eligible to receive an annual bonus. The annual bonus, of which the cash portion shall not exceed 100% of Mr. Denison's base salary, is calculated based upon BioMarin's market capitalization. Pursuant to a right granted under this employment agreement, Mr. Denison purchased 1,300,000 shares of BioMarin's stock at a purchase price of $1.00 per share. We provided a three-year loan to him for the purchase. The loan bears interest at a rate of 6%. If Mr. Denison's employment is terminated by us for any reason, he has the right to sell any or all of these shares of common stock to us at a price per share equal to the lesser of the then-current per share market price of such shares or the original per share purchase price. In the event he ceases employment with us for any reason, we also have the right, but not the obligation, to repurchase the unvested portion of the shares at their original purchase price. Fifty percent of the shares vested after one year from the date of his employment, with the remainder vesting at a rate of 1/24 per month thereafter. Mr. Denison is also entitled to certain other benefits and reimbursement. This employment agreement is terminable without cause by BioMarin upon six months prior written notice, or by Mr. Denison upon three months prior written notice to BioMarin. BioMarin is obligated to pay Mr. Denison's salary and benefits until such termination. In the event that he is involuntarily terminated within one year of a change of control of BioMarin he is entitled to: (1) a severance payment equal to six months of his then-current annual salary, (2) 50% of the annual bonus that he would otherwise be entitled to and (3) 50% of the unvested portion of his outstanding options to purchase BioMarin stock shall immediately vest. 58 We have entered into an employment agreement with Dr. Klock dated June 26, 1997, which has been subsequently amended. The term of this employment agreement is three years. Pursuant to the terms of this employment agreement, Dr. Klock was paid at an annual rate of $250,000 in 1998, and is eligible to receive an annual bonus. The annual bonus, of which the cash portion shall not exceed 100% of Dr. Klock's base salary, is calculated based upon BioMarin's market capitalization. Pursuant to a right granted under this employment agreement, Dr. Klock purchased 800,000 shares of our stock at a purchase price of $1.00 per share. We provided a three-year loan to him for the purchase. The loan bears interest at a rate of 6%. If Dr. Klock's employment is terminated by us for any reason, he has the right to sell any or all the shares of common stock to us at a price per share equal to the lesser of the then-current per share market price of such shares or their original per share purchase price. In the event he ceases his employment with us for any reason, we also have the right, but not the obligation, to repurchase the unvested portion of the shares at their original purchase price. Fifty percent of the shares vested one year from the date of his employment, with the remainder vesting at a rate of 1/24 per month thereafter. Dr. Klock is also entitled to certain other benefits and reimbursement. This employment agreement is terminable without cause by us upon six months prior written notice, or, by Dr. Klock, upon three months prior written notice to us. We are obligated to pay Dr. Klock's salary and benefits until such termination. In the event that he is involuntarily terminated within one year of a change of control of BioMarin he is entitled to: (1) a severance payment equal to six months of his then-current annual salary, (2) 50% of the annual bonus that he would otherwise be entitled to and (3) 50% of the unvested portion of his outstanding options to purchase BioMarin stock shall immediately vest. We have entered into an employment agreement with Dr. Starr dated June 26, 1997, which has been subsequently amended. The term of this employment agreement is three years. Pursuant to the terms of this employment agreement, Dr. Starr was paid at an annual rate of $150,000 in 1998 and is eligible to receive an annual bonus. The annual bonus, of which the cash portion shall not exceed 100% of Dr. Starr's base salary, is calculated based upon our market capitalization. Pursuant to a right granted under this employment agreement, Dr. Starr purchased 400,000 shares of BioMarin's stock at a purchase price $1.00 per share. We provided a three-year loan to him for the purchase. The loan bears interest at a rate of 6%. If Dr. Starr's employment is terminated by us for any reason, he has the right to sell any or all the shares of common stock to us at a per share price equal to the lesser of the then-current per share market price of such shares or the original per share purchase price. In the event he ceases his employment with us for any reason, we also have the right, but not the obligation, to repurchase the unvested portion of the shares at their original purchase price. Fifty percent of the shares vested one year from the date of his employment, with the remainder vesting at a rate of 1/24 per month thereafter. Dr. Starr is entitled to certain other benefits and reimbursement. This employment agreement is terminable without cause by us upon six months prior written notice, or by Dr. Starr upon three months prior written notice to us. We are obligated to pay Dr. Starr's salary and benefits until such termination. In the event that he is involuntarily terminated within one year of a change of control of BioMarin he is entitled to: (1) a severance payment equal to six months of his then-current annual salary, (2) 50% of the annual bonus that he would otherwise be entitled to and (3) 50% of the unvested portion of his outstanding options to purchase BioMarin stock shall immediately vest. We have been assigned an employment agreement originally entered into between Glyko, Inc. and Dr. Brandley dated February 22, 1998. This employment agreement has been subsequently amended. Under the terms of this employment agreement. Dr. Brandley was paid at an annual rate of $135,000 in 1998 and is eligible to receive an annual bonus, payable in cash or stock, customarily between 10-15% of his annual salary. Pursuant to the terms of this employment agreement, Dr. Brandley was granted an option to purchase up to 150,000 shares of Glyko Biomedical's common stock and was to be entitled to certain other benefits and reimbursement. This Employment Agreement is terminable without cause by us upon six months prior written notice, or by Dr. Brandley upon three months prior written notice 59 to us. We are obligated to pay Dr. Brandley's salary and benefits until such termination. Pursuant to the Share Exchange Agreement, pursuant to which we purchased Glyko, Inc. in October 1998, Dr. Brandley's options were assumed by us and are now exercisable, when fully vested, for a total of 65,415 shares of our common stock. In the event that he is involuntarily terminated within one year of a change of control of BioMarin he is entitled to: (1) a severance payment equal to six months of his then-current annual salary, (2) 50% of the annual bonus that he would otherwise be entitled to and (3) 50% of the unvested portion of his outstanding options to purchase BioMarin stock shall immediately vest. We have entered into an employment agreement with Raymond W. Anderson dated June 22, 1998, which has been subsequently amended. Under the terms of this employment agreement, Mr. Anderson was paid at an annual rate of $185,000 in 1998, and is eligible to receive an annual cash bonus. Under the terms of this employment agreement, Mr. Anderson was granted an option to purchase 200,000 shares of common stock, and is entitled to certain other benefits and reimbursement. This employment agreement is terminable without cause by us upon six months prior written notice, or by Mr. Anderson upon three months prior written notice to us. BioMarin is obligated to pay his salary and benefits until such termination. In the event that he is involuntarily terminated within one year of a change of control of BioMarin he is entitled to: (1) a severance payment equal to six months of his then-current annual salary, (2) 50% of the annual bonus that he would otherwise be entitled to and (3) 50% of the unvested portion of his outstanding options to purchase BioMarin stock shall immediately vest. We have entered into an employment agreement with Emil Kakkis, M.D., Ph.D., dated June 30, 1998, which has been subsequently amended. Under the terms of this employment agreement, Dr. Kakkis was paid at an annual rate of $225,000 in 1998, with bonus payments contingent upon BioMarin's making certain regulatory filings and obtaining certain regulatory approvals. Dr. Kakkis was also granted an option to purchase 200,000 shares of common stock, and is entitled to certain other benefits and reimbursement. This employment agreement is terminable without cause by us upon six months prior written notice, or by Dr. Kakkis upon three months prior written notice to us. We are is obligated to pay his salary and benefits until such termination. In the event that he is involuntarily terminated within one year of a change of control of BioMarin he is entitled to: (1) a severance payment equal to six months of his then-current annual salary, (2) 50% of the annual bonus that he would otherwise be entitled to and (3) 50% of the unvested portion of his outstanding options to purchase BioMarin stock shall immediately vest. We have entered into an employment agreement with Stuart Swiedler, M.D., Ph.D., dated May 29, 1998, which has been subsequently amended. Under the terms of this employment agreement, Dr. Swiedler was paid at an annual rate of $150,000 in 1998 and is eligible to receive an annual cash bonus, payable in cash or stock, customarily between 10-15% of his annual salary. Dr. Swiedler was granted an option to purchase up to 150,000 shares of common stock and is entitled to certain other benefits and reimbursement. This employment agreement is terminable without cause by us upon six months prior written notice, or by Dr. Swiedler upon three months prior written notice to us. We are obligated to pay his salary and benefits until such termination. In the event that he is involuntarily terminated within one year of a change of control of BioMarin he is entitled to: (1) a severance payment equal to six months of his then-current annual salary, (2) 50% of the annual bonus that he would otherwise be entitled to and (3) 50% of the unvested portion of his outstanding options to purchase BioMarin stock shall immediately vest. In December 1998, the board approved a form of indemnification agreement to be entered into between us and each of our officers and directors. This indemnification agreement requires us, among other things, to indemnify officers and directors against liabilities that may arise by reasons of their status or performance of their duties as officers or directors and to advance their expenses incurred as a result of any proceeding against them as to which they could be indemnified. 60 For a description of other transactions between BioMarin and affiliates of BioMarin, see "--Management; and --Compensation Committee Interlocks and Insider Participation." Compensation Committee Interlocks and Insider Participation No member of the Compensation Committee of the board has at any time since our formation been an officer or employee of BioMarin. Other than Dr. Klock and Mr. Anderson, who are each directors of Glyko Biomedical, no executive officer of BioMarin serves as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on the Board or the Compensation Committee of the Board. Mr. Anderson also serves on the Compensation Committee of Glyko Biomedical. Employee Benefit Plans 1997 Stock Plan. On November 14, 1997, the board adopted the 1997 Stock Plan and approved the reservation of a total of 3,000,000 shares of common stock for issuance under the 1997 Stock Plan. The stockholders approved the 1997 Stock Plan in April 1998. In December 1998, the board approved an amendment to the 1997 Stock Plan. The stockholders approved the amendment as of January 15, 1999. The amendment increases the number of shares reserved for issuance under the 1997 Stock Plan to an aggregate of 5,000,000. The amendment also added an "evergreen provision" providing for an annual increase in the number of shares that may be optioned or sold under the 1997 Stock Plan without need for additional board or stockholder actions, which increase shall be the lesser of: (1) 4% of the then-outstanding capital stock of BioMarin, (2) 2,000,000 shares, or (3) a lower amount set by the board. The 1997 Stock Plan provides for the grant of stock options and the issuance of restricted stock by BioMarin to its employees, officers, directors and consultants. The 1997 Stock Plan permits the grant of options that are either incentive stock options, or ISOs, as defined in Section 422 of the Internal Revenue Code of 1986, as amended, or nonqualified stock options, or NSOs, on terms, including the exercise price, which may not be less than 85% of the fair market value of our common stock for NSOs, and the vesting schedule, determined by the board, subject to certain statutory limitations and other limitations in the 1997 Stock Plan. Options granted under the 1997 Stock Plan are generally not transferable by the optionee. Options granted under the 1997 Stock Plan must generally be exercised within three months after the end of the optionee's status as an employee, director or consultant of BioMarin, or within twelve months after such optionee's termination by death or disability, but in no event later than the expiration of the option's term. The exercise price of all incentive stock options granted under the 1997 Stock Plan must be at least equal to the fair market value of BioMarin common stock on the date of grant. The exercise price of NSOs granted under the 1997 Stock Plan is determined by the board at an exercise price not less than 85% of fair market value. With respect to nonstatutory stock options intended to qualify as "performance-based compensation" within the meaning of Section 162(m) of the Internal Revenue Code, the exercise price must be at least equal to the fair market value of BioMarin common stock on the date of grant. With respect to any participant who owns stock possessing more than 10% of voting power of all classes of BioMarin's outstanding capital stock, the exercise price of any incentive stock option granted must be at least equal to 110% of the fair market value on the grant date and the term of such incentive stock option must not exceed five years. The term of all other options granted under the 1997 Stock Plan may not exceed ten years. The 1997 Stock Plan provides that in the event of a merger of BioMarin with or into another corporation, or a sale of substantially all of BioMarin's assets, each option may be assumed or an equivalent option substituted for by the successor corporation. If the outstanding options are not assumed or substituted, the administrator shall provide for the optionee to have the right to exercise 61 the option as to all of the optioned stock, including shares as to which it would not otherwise be exercisable. 1998 Employee Stock Purchase Plan. In December 1998, the board adopted, and as of January 15, 1999, the stockholders approved, the 1998 Employee Stock Purchase Plan. A total of 250,000 shares of BioMarin common stock has been reserved for issuance under the 1998 Employee Stock Purchase Plan. The plan also contains an "evergreen provision" providing for an annual increase in the number of shares which may be sold thereunder equal to the lesser of (1) 0.5% of the then-outstanding BioMarin capital stock, (2) 200,000 shares, or (3) a lesser amount set by the board. As of December 31, 1998, no shares have been issued under the 1998 Employee Stock Purchase Plan. This plan will become effective upon the completion of this offering. The 1998 Employee Stock Purchase Plan is intended to qualify under Section 423 of the Internal Revenue Code and contains consecutive, overlapping, 24 month offering periods. Each offering period includes four six-month purchase periods. The offering periods generally start on the first trading day on or after May 1 and November 1 of each year, except for the first such offering period that commences on the first trading day on or after the effective date of this offering and ends on the last trading day on or before October 31, 2000. Employees are eligible to participate if they are customarily employed by BioMarin or a participating subsidiary for at least 20 hours per week and more than five months in any calendar year. However, any employee who either: (1) immediately after grant owns stock possessing 5% or more of the total combined voting power or value of all classes of BioMarin capital stock, or (2) whose rights to purchase stock under all of BioMarin's employee stock purchase plans accrue at a rate which exceeds $25,000 worth of stock for each calendar year, may not be granted an option to purchase stock under the 1998 Employee Stock Purchase Plan. The 1998 Employee Stock Purchase Plan permits employees to purchase common stock through payroll deduction of up to 10% of the employee's compensation that is base earnings and commissions, excluding overtime, shift premium, incentive payments and bonuses. The maximum number of shares an employee may purchase during a single purchase period is 5,000 shares. The price of stock purchased under the 1998 Employee Stock Purchase Plan is generally 85% of the lower of the fair market value of the common stock: (1) at the beginning of the offering period or (2) at the end of the purchase period. In the event the fair market value at the end of a purchase period is less than the fair market value at the beginning of the offering period, the employees will be withdrawn from the current offering period following exercise and automatically re-enrolled in a new offering period. The new offering period will use the lower fair market value as of the first date of the new offering period to determine the purchase price for future purchase periods. Employees may end their participation at any time during an offering period, and they will be paid their payroll deductions to date. Participation ends automatically upon termination of employment with BioMarin. Rights granted under the 1998 Employee Stock Purchase Plan are generally not transferable by an employee other than by will or the laws of descent and distribution. In the event of a merger of BioMarin with or into another corporation or a sale of substantially all of BioMarin's assets, each outstanding option under the 1998 Employee Stock Purchase Plan may be assumed or substituted for by the successor corporation. If the successor corporation refuses to assume or substitute for the outstanding options, the offering period then in progress will be shortened and a new exercise date will be set. The board of directors has the authority to terminate or amend the 1998 Employee Stock Purchase Plan to the extent necessary to avoid unfavorable financial accounting consequences by altering the purchase price for any offering period, shortening any offering period or allocating remaining shares 62 among the participants. The 1998 Employee Stock Purchase plan will terminate automatically ten years from the effective date of this offering unless it is terminated sooner by the board. 401(k) Plan. BioMarin sponsors the Glyko Retirement Savings Plan or the 401(k) Plan. Employees are eligible to participate immediately following the start of their employment, on the earlier of the next occurring January 1 or July 1. Participants may contribute up to approximately 15% of their current compensation, up to a statutorily prescribed annual limit, to the 401(k) Plan. Each participant is fully vested in his or her salary reduction contributions. Participant contributions are held in trust as required by law. Individual participants may direct the trustee to invest their accounts in authorized investment alternatives. BioMarin pays the direct expenses of the 401(k) Plan but does not currently match or make contributions to employee accounts. The 401(k) Plan is intended to qualify under Section 401(a) of the Internal Revenue Code so that contributions to the 401(k) Plan, and income earned on such contributions, are not taxable to participants until withdrawn or distributed from the 401(k) Plan. 63 CERTAIN TRANSACTIONS On April 19, 1997, BioMarin sold to Glyko Biomedical, 1,500,000 shares of BioMarin's common stock for aggregate consideration of $1.5 million. Dr. John Klock, who is the President and Secretary of BioMarin, as well as a director, is also the President, Chief Executive Officer and Chief Financial Officer of Glyko Biomedical, as well as a director thereof. On June 26, 1997, BioMarin entered into a license agreement with Glyko Biomedical pursuant to which BioMarin was granted an exclusive, worldwide, perpetual royalty-free license to certain technology for therapeutic uses. On September 24, 1997, we issued 7,000,000 shares of our common stock to Glyko Biomedical as consideration for the license granted to it under the Glyko Biomedical license agreement. BioMarin entered into a pre-emptive rights agreement, dated June 26, 1997, with Glyko Biomedical, pursuant to which Glyko Biomedical was granted the right to purchase a pro rata share of certain new issuances of securities by BioMarin. This agreement terminates immediately prior to the initial public offering. On April 18, 1997, Gwynn Williams was appointed one of the three initial directors of BioMarin. Mr. Williams is a holder of 11% of the outstanding capital stock of Glyko Biomedical. On October 1, 1997, BioMarin sold 800,000 shares of common stock to Dr. Klock in exchange for a full recourse, three-year promissory note secured by such shares in the principal amount of $800,000. On October 1, 1997, BioMarin sold 1,300,000 shares of common stock to Mr. Denison in exchange for a full recourse, three-year promissory note secured by such shares in the principal amount of $1.3 million. On October 1, 1997, BioMarin sold 400,000 shares of common stock to Dr. Starr in exchange for a full recourse, three-year promissory note secured by such shares in the principal amount of $400,000. These loans bear interest at a rate of 6%. If their respective employments are terminated by BioMarin for any reason, each of Mr. Denison, Dr. Klock and Dr. Starr has the right to sell any or all of these shares to BioMarin at a per share price equal to the lesser of the then-current per share market price of such shares or the original per share purchase price. In the event any of these officers ceases to be an employee for any reason, BioMarin has the right, but not the obligation, to repurchase the unvested portion of the shares at their original purchase price. Fifty percent of the shares vested after one year from their date of employment with the remainder vesting at a rate of 1/24 per month thereafter. On November 14, 1997, Erich Sager, Chairman of LaMont Asset Management S.A., a holder of 13% of the outstanding capital stock of Glyko Biomedical, was appointed to the board of BioMarin. Since November 14, 1997, BioMarin has sold 935,000 shares of its common stock to LaMont Asset Management S.A. as well as certain convertible promissory notes. BioMarin entered into an Agency Agreement dated August 5, 1997 with Clubb Capital Ltd., or Clubb, an entity with which Mr. Denison is affiliated through his directorship of Clubb Biocapital, an entity affiliated with Clubb, pursuant to which BioMarin was to pay Clubb a placement agent's commission in connection with a proposed $8.5 million private placement financing. Between October 1, 1997 and December 30, 1997, as part of an approximately $8.8 million private placement financing, BioMarin issued, as a commission 801,500 shares of common stock and warrants to purchase another 801,500 shares of common stock to Clubb pursuant to the terms of the Agency Agreement dated August 5, 1997. On December 30, 1997, BioMarin entered into a preemptive rights agreement with BB BioVentures L.P., or BBB, in connection with its purchase on such date of 5,000,000 shares of common stock of BioMarin, pursuant to which BBB was granted the right to purchase a pro rata share of certain new issuances of securities by BioMarin. This agreement terminates immediately prior to the initial public offering. Also in connection with such investment by BBB, Dr. Gadicke, an affiliate of BBB, was 64 appointed to the board of BioMarin. Also in connection with such investment, BioMarin, Dr. Klock, Mr. Denison, Dr. Starr and Glyko Biomedical entered into a voting agreement pursuant to which each party agreed to vote all shares of BioMarin's outstanding capital stock held by such party in favor of a BBB nominee to BioMarin's board, so long as BBB held at least 5% of the outstanding capital stock of BioMarin, which agreement shall terminate upon the initial public offering of BioMarin's capital stock, in a firm commitment underwriting with aggregate gross proceeds to BioMarin of at least $5.0 million. As long as BBB holds a board position in BioMarin, BBB has a right to participate in the management of BioMarin. In the event that BBB does not retain a board position in BioMarin, BBB is entitled to certain board observation rights which terminate upon the offering. On November 14, 1997, for their services as directors, the board approved the grant to each of Mr. Sager and Mr. Williams of an option to purchase 20,000 shares of common stock at an exercise price of $1.00 per share. On January 22, 1998, for his services as a director, the board approved a grant to Dr. Gadicke of an option to purchase 20,000 shares of common stock at an exercise price of $1.00 per share. On June 15, 1998, the board approved the following option grants to officers of BioMarin: (1) to Mr. Denison of an option to purchase 400,000 shares, (2) to Dr. Klock of an option to purchase 300,000 shares, (3) to Dr. Starr of an option to purchase 200,000 shares, (4) to Mr. Anderson of an option to purchase 200,000 shares, (5) to Dr. Kakkis of an option to purchase 200,000 shares and (6) to Dr. Swiedler to purchase 150,000 shares, each at an exercise price of $4.00 per share. BioMarin entered into a second Agency Agreement with Clubb, dated June 26, 1998, pursuant to which BioMarin was to pay Clubb placement agent's commission in connection with a proposed $11.5 million private placement financing. Between June 30, 1998 and August 3, 1998, BioMarin issued, as a commission, 98,000 shares of BioMarin's common stock to Clubb or its affiliates. Under the pre-emptive rights agreement, on June 30, 1998, BioMarin sold an additional 166,667 shares of BioMarin's common stock to Glyko Biomedical for aggregate consideration of $1.0 million. On July 14, 1998, BioMarin sold to BBB, a holder of greater than 10% of BioMarin's outstanding Capital Stock, MPM BioVentures Parallel Fund L.P. and MPM Asset Management Investors 1998 L.L.C., the latter two entities being affiliated with BBB, each of which entities are affiliated with Dr. Gadicke, a director of BioMarin, a total of 416,667 shares of common stock for an aggregate consideration of $2.5 million. On September 4, 1998, BioMarin received $8.0 million from Genzyme upon execution of a joint venture agreement in which we issued 1,333,333 shares of common stock to Genzyme. As a result of this joint venture agreement, BioMarin has a 50% interest in the income or loss of the joint venture, BioMarin/Genzyme, LLC. On October 7, 1998, BioMarin purchased Glyko, Inc., a wholly-owned subsidiary of Glyko Biomedical, from Glyko Biomedical, for an aggregate purchase price of $14.5 million. Such purchase price was paid for with 2,259,039 shares of common stock of BioMarin, valued at $6.00 per share, the assumption by BioMarin of certain stock options held by Glyko, Inc. employees which were exercisable into a maximum of 255,540 shares of common stock of BioMarin, and $500 in cash. Included in the assumed stock options was an option granted to Dr. Brandley, which is exercisable for 65,415 shares of BioMarin's common stock, when fully vested, and option granted to Dr. Klock exercisable for 66,246 shares of BioMarin's common stock when fully vested and an option to Dr. Starr exercisable for 40,275 shares of our common stock when fully vested. BioMarin had contractual agreements for office space and certain administrative, research, and development functions with Glyko, Inc. prior to the acquisition date of October 7, 1998. BioMarin 65 reimbursed Glyko, Inc. for rent, salaries and related benefits, and other administrative costs. Glyko, Inc. also reimbursed BioMarin for salaries and related benefits. BioMarin reimbursed Glyko, Inc. for a net $240,848, $101,888, and $342,736 for the period from March 21, 1997 (inception) to December 31, 1997, the year ended December 31, 1998, and the period from March 21, 1997 (inception) to October 7, 1998. On December 22, 1998, the board approved indemnification agreements with each officer and each director of BioMarin. On January 15, 1999, the board approved the following option grants to officers of BioMarin: (1) to Mr. Denison an option to purchase 100,000 shares, (2) to Dr. Klock an option to purchase 75,000 shares, (3) to Dr. Starr an option to purchase 50,000 shares, (4) to Mr. Anderson an option to purchase 25,000 shares, (5) to Dr. Kakkis an option to purchase 16,667 shares, (6) to Dr. Swiedler an option to purchase 23,438 shares and (7) to Dr. Brandley an option to purchase 12,265 shares, each at an exercise price of $7.00 per share. On March 22, 1999, options were granted to Dr. Gadicke, Mr. Sager and Mr. Williams to purchase 15,000 shares each at an exercise price of $7.00 per share as compensation for their services as directors under the 1998 Director Option Plan. On March 22, 1999, the board approved option grants to Dr. Gadicke and Mr. Sager to purchase 20,000 shares each at an exercise price of $7.00 per share as compensation for services provided to the management of BioMarin in regards to the offering. Also on March 22, 1999, the board approved the following option grants to officers of BioMarin: (1) to Mr. Anderson an option to purchase 4,573 shares, (2) to Dr. Kakkis an option to purchase 3,708 shares, (3) to Dr. Swiedler an option to purchase 4,634 shares, and (4) to Dr. Brandley an option to purchase 5,005 shares. On April 12, 1999, BioMarin sold a total of $26.0 million worth of three-year promissory notes convertible, according to their terms, into BioMarin common stock, at an initial conversion price, subject to adjustment, of $10.00 per share. Glyko BioMedical Ltd. purchased $4.3 million worth of such notes and LaMont Asset Management S.A. purchased $9.7 million worth of such notes. In connection with this transaction, BioMarin also entered into an agency agreement with LaMont Asset Management S.A., pursuant to which BioMarin agreed to pay LaMont Asset Management S.A. a cash commission on sales of notes to certain European purchasers introduced to BioMarin by LaMont Asset Management S.A. 66 PRINCIPAL STOCKHOLDERS The following table sets forth certain information with respect to the beneficial ownership of our common stock as of March 1, 1999, and as adjusted to reflect the sale of the common stock being offered hereby, by (1) each person, or group of affiliated persons, who is known by us to own beneficially more than 5% of the common stock, (2) each of our directors, (3) each of our Named Executive Officers, and (4) all of our directors and current executive officers as a group. Except as otherwise noted, the persons or entities in this table have sole voting and investing power with respect to all the shares of common stock owned by them.
Percentage of Shares Number of Beneficially Owned Shares ---------------------- Beneficially Before After Name of Beneficial Owner Owned/(1)/ Offering Offering/(2)/ - ------------------------ ------------ -------- ------------- Glyko Biomedical, Ltd...................... 10,925,706 41.7% 371 Bel Marin Keys Blvd., Suite 210 Novato, CA 94949 BB BioVentures, L.P./(3)/.................. 5,416,667 20.7% One Cambridge Center, 9th Floor Cambridge, MA 02142 Genzyme Corporation........................ 1,333,333 5.1% One Kendall Square Cambridge, MA 02139 Grant W. Denison, Jr./(4)/................. 1,505,556 5.7% John C. Klock, M.D./(5)/................... 1,020,413 3.9% Christopher M. Starr, Ph.D./(6)/........... 543,054 2.1% Emil D. Kakkis, M.D., Ph.D./(7)/........... 44,448 * Brian K. Brandley, Ph.D./(8)/.............. 21,470 * Ansbert S. Gadicke/(9)/.................... 43,750 * Erich Sager/(10)/.......................... 308,750 1.2% Gwynn R. Williams/(11)/.................... 23,750 * All Current executive officers and directors as a Group (10 persons)/(12)/........................ 3,643,740 13.8%
- ------------------------------- * Represents less than 1% of the Company's outstanding common stock. /(1)/ Based on 26,176,180 shares of common stock outstanding at March 1, 1999, and [.] shares of common stock outstanding after the offering unless otherwise indicated below, the persons and entities named in the table have sole voting and sole investment power with respect to all shares beneficially owned, subject to community property laws where applicable. Shares of common stock subject to options or warrants that are currently exercisable or exercisable within 60 days of March 1, 1999 are deemed to be outstanding and to be beneficially owned by the person holding such options or warrants for the purpose of computing the percentage ownership of such person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. /(2)/ After giving effect to the sale to Genzyme of [.] shares of common stock, the conversion of outstanding convertible promissory notes into 2,600,000 shares of common stock, assuming no interest due thereon is converted into shares of common stock, and the sale and issuance of [.] shares of common stock in this offering. /(3)/ Includes shares held by MPM Asset Management 1998 Investors L.L.C. and MPM BioVentures Parallel Fund L.P., both of which are affiliated with BB BioVentures L.P. /(4)/ Includes 72,222 shares subject to options currently exercisable or exercisable within 60 days of March 1, 1999 and 133,333 shares which will become exercisable upon the completion of the offering. Mr. Denison disclaims beneficial ownership in the shares of common stock and warrants to purchase common stock currently held by Clubb Capital Ltd., of which Mr. Denison is an affiliate. 67 /(5)/ Includes 120,413 shares subject to options currently exercisable or exercisable within 60 days of March 1, 1999 of which 66,246 are issuable upon exercise of options assumed in connection with the acquisition of Glyko, Inc. and 100,000 shares which will become exercisable upon the completion of the offering. Dr. Klock disclaims beneficial ownership in the shares of common stock currently held by Glyko Biomedical of which Dr. Klock is an owner of 625,871 shares (less than 5%) and of which Dr. Klock is an officer and a director. /(6)/ Includes 76,387 shares subject to options currently exercisable or exercisable within 60 days of March 1, 1999 of which 40,275 shares are issuable upon exercise of options assumed in connection with the acquisition of Glyko, Inc. and 66,667 shares which will become exercisable upon the completion of the offering. Dr. Starr disclaims beneficial ownership in the shares of common stock currently held by Glyko Biomedical of which Dr. Starr is an owner of 10,115 shares (less than 1%). /(7)/ Includes 44,448 shares subject to options currently exercisable or exercisable within 60 days of March 1, 1999. /(8)/ Includes 21,470 shares subject to options currently exercisable or exercisable within 60 days of March 1, 1999 of which 17,717 shares are issuable upon exercise of options assumed in connection with the acquisition of Glyko, Inc. /(9)/ Includes 23,750 shares subject to options currently exercisable or exercisable within 60 days of March 1, 1999 and 20,000 shares which will become exercisable (with certain criteria) upon the completion of the offering. Dr. Gadicke disclaims beneficial ownership in the shares of common stock currently held by BB BioVentures, L.P., MPM Asset Management 1998 Investors L.L.C. and MPM BioVenture Parallel Fund L.P., of which Dr. Gadicke is an affiliate. /(10)/ Includes 23,750 shares subject to options currently exercisable or exercisable within 60 days of March 1, 1999 and 20,000 shares which will become exercisable (with certain criteria) upon the completion of the offering. Mr. Sager claims beneficial ownership of 265,000 shares of common stock currently held by LaMont Asset Management, S.A., of which Mr. Sager is an affiliate. Mr. Sager disclaims beneficial ownership of shares of common stock currently held by Belmont Capital Limited of which Mr. Sager is an affiliate. /(11)/ Includes 23,750 shares subject to options currently exercisable or exercisable within 60 days of March 1, 1999. Mr. Williams disclaims beneficial ownership in the shares of common stock currently held by Glyko Biomedical, of which Mr. Williams is an owner of 3,080,100 shares or 11% and of which Mr. Williams is a director. /(12)/ See footnotes 4 through 11. Includes 472,123 shares subject to options currently exercisable or exercisable within 60 days of March 1, 1999 and 406,667 shares that will become exercisable upon the completion of the offering. 68 DESCRIPTION OF CAPITAL STOCK Immediately following the closing of this offering, the authorized capital stock of BioMarin will consist of 75,000,000 shares of common stock, $0.001 par value per share, and 1,000,000 shares of preferred stock, $0.001 par value per share. As of December 31, 1998, there were outstanding 26,176,180 shares of common stock held of record by 48 stockholders, warrants to purchase 801,500 shares of common stock and options to purchase 2,801,240 shares of common stock. Common Stock Subject to preferences that may apply to shares of preferred stock outstanding at the time, the holders of outstanding shares of common stock are entitled to receive dividends out of assets legally available therefore at such times and in such amounts as the board may from time to time determine. Each stockholder is entitled to one vote for each share of common stock held on all matters submitted to a vote of stockholders. Cumulative voting for the election of directors is not provided for in BioMarin's certificate of incorporation, which means that the holders of a majority of the shares voted can elect all of the directors then standing for election. The common stock is not entitled to preemptive rights and is not subject to conversion or redemption. Each outstanding share of common stock is, and all shares of common stock to be outstanding upon completion of this offering will be, fully paid and nonassessable. Preferred Stock Immediately following the closing of this offering, pursuant to BioMarin's amended and restated certificate of incorporation, the board of directors will have the authority, without further action by the stockholders, to issue up to 1,000,000 shares of preferred stock in one or more series and to fix the designations, powers, preferences, privileges, and relative participating, optional or special rights as well as the qualifications, limitations or restrictions thereof, including dividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences, any or all of which may be greater than the rights of the common stock. The board of directors, without stockholder approval, will be able to issue preferred stock with voting, conversion or other rights that could adversely affect the voting power and other rights of the holders of common stock. Preferred stock could thus be issued quickly with terms calculated to delay or prevent a change in control of BioMarin or make removal of management more difficult. Additionally, the issuance of preferred stock may have the effect of decreasing the market price of the common stock, and may adversely affect the voting and other rights of the holders of common stock. At present, there are no shares of preferred stock outstanding. Anti-Takeover Provisions Delaware Law Section 203 of the Delaware General Corporation Law is applicable to corporate takeovers of Delaware corporations. Subject to certain exceptions set forth therein, Section 203 provides that a corporation shall not engage in any business combination with any "interested stockholder" for a three-year period following the date that such stockholder becomes an interested stockholder unless (1) prior to such date, the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder, (2) upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding certain shares, or (3) on or subsequent to such date, the business combination is approved by the board of directors of the corporation and by the affirmative votes of holders of at least two-thirds of the outstanding voting stock that is not owned by the interested stockholder. Except as specified in Section 203, an interested stockholder is generally defined 69 to include any person who, together with any affiliates or associates of such person, beneficially owns, directly or indirectly, 15% or more of the outstanding voting stock of the corporation, or is an affiliate or associate of the corporation and was the owner of 15% or more of the outstanding voting stock of the corporation, any time within three years immediately prior to the relevant date. Under certain circumstances, Section 203 makes it more difficult for an interested stockholder to effect various business combinations with a corporation for a three-year period, although the stockholders may elect not to be governed by this section, by adopting an amendment to our certificate of incorporation or bylaws, effective 12 months after adoption. BioMarin's certificate of incorporation and its bylaws do not exclude BioMarin from the restrictions imposed under Section 203. It is anticipated that the provisions of Section 203 may encourage companies interested in acquiring BioMarin to negotiate in advance with the board since the stockholder approval requirement would be avoided if a majority of the directors then in office excluding an interested stockholder approve either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder. These provisions may have the effect of deterring hostile takeovers or delaying changes in control of BioMarin, which could depress the market price of the common stock and which could deprive stockholders of opportunities to realize a premium on shares of the common stock held by them. Charter and Bylaw Provisions Immediately following the closing of this offering, BioMarin's amended and restated certificate of incorporation and Bylaws will contain certain provisions that could discourage potential takeover attempts and make more difficult attempts by stockholders to change management. BioMarin's amended and restated certificate of incorporation will provide that stockholders may not take action by written consent but may only act at a stockholders' meeting, and that special meetings of the stockholders of BioMarin may only be called by the Chairman of the Board or a majority of the board. Registration Rights Beginning six months after the effective date of the registration statement, the holders of [.] shares of common stock, the registrable securities, will have certain rights with respect to the registration of those shares under the Act. If holders of at least 30% of the registrable securities request that BioMarin register at least 30% of the registrable securities, BioMarin must file a registration statement to register such securities. In addition, if BioMarin proposes to register any of its shares of common stock under the Securities Act other than in connection with a BioMarin employee benefit plan or certain corporate acquisitions, mergers or reorganizations, the holders of the registrable securities may require BioMarin to include all or a portion of their shares in such registration, subject to certain rights of the managing underwriter of a public offering of such shares to limit the number of shares in any such offering. Further, the holders of registrable securities may require BioMarin to register all or any portion of their registrable securities on Form S-3 when such form becomes available to BioMarin, as long as the aggregate offering price of would exceed $2.5 million, subject to certain other conditions and limitations. All expenses incurred in connection with such registrations (other than underwriters' discounts and commissions) will be borne by BioMarin. No holder of registrable securities will be entitled to registration rights at such time as such holder can sell registrable securities in compliance with Rule 144 of the Securities Act during any two successive three month periods. Transfer Agent and Registrar The transfer agent and registrar for our common stock is [.]. 70 SHARES ELIGIBLE FOR FUTURE SALE Prior to this offering, there has been no market for the common stock and there can be no assurance that a liquid trading market for the common stock will develop or be sustained after this offering. Future sales of substantial amounts of common stock, including shares issued upon exercise of outstanding options and warrants, in the public market after this offering or the anticipation thereof could adversely affect market prices prevailing from time to time and could impair BioMarin's ability to raise capital through sales of its equity securities. As described below, no shares currently outstanding will be available for sale immediately after this offering due to certain contractual restrictions on resale of such shares. Sales of substantial amounts of common stock of BioMarin in the public market after these restrictions lapse or the anticipation thereof could adversely affect the prevailing market price of the common stock and the ability of BioMarin to raise equity capital in the future. Upon completion of this offering, BioMarin will have outstanding [.] shares of common stock, assuming no exercise of the Underwriters' over-allotment option and no exercise of outstanding options or warrants. Of these shares, the shares sold in this offering will be freely tradable without restriction under the Securities Act unless purchased by "affiliates" of BioMarin as that term is defined in Rule 144 under the Securities Act. The remaining [.] restricted shares held by existing stockholders, are subject to various lock-up agreements providing that, with certain limited exceptions, the stockholder will not offer, sell, contract to sell, grant an option to purchase, effect a short sale or otherwise dispose of or engage in any hedging or other transaction that is designed or reasonably expected to lead to a disposition of any shares of common stock or any option to purchase common stock or any securities exchangeable for or convertible into common stock for a period of 180 days after the date of this prospectus without the prior written consent of U.S. Bancorp Piper Jaffray Inc. Notwithstanding that such shares may be eligible for earlier sale under the provisions of Rules 144, 144(k) and 701 under the Securities Act, none of these shares will be saleable until 181 days after the date of this prospectus as a result of these lock-up agreements. Beginning 181 days after the date of this prospectus, 23,676,180 restricted shares will be eligible for sale in the U.S. public market, although all but 1,973 shares will be subject to certain volume limitations. Thereafter, [.] shares will become eligible for sale in the U.S. public market after the end of the lock-up period. Beginning 181 days after the date of this prospectus all [.] restricted shares held by existing stockholders shall be eligible for sale on the Swiss Exchange. Sales of restricted securities on the Swiss Exchange, however, will be subject to restrictions under U.S. securities laws for varying periods of time. In addition, as of April 20, 1999, there were outstanding options to purchase 3,706,476 shares of common stock, none of which options are expected to be exercised prior to the closing of the offering. All of the shares issued upon such exercises will be subject to lock-up agreements. U.S. Bancorp Piper Jaffray Inc. may, in its sole discretion and at any time without notice, release all or any portion of the securities subject to lock-up agreements from the restrictions applicable to such securities. In general, under Rule 144 as currently in effect, beginning 90 days after the date of this prospectus, a person, or persons whose shares are aggregated, who has beneficially owned restricted shares for at least one year is entitled to sell within any three-month period up to that number of shares that does not exceed the greater of: (1) 1% of the number of shares of common stock then outstanding, which is approximately [.] shares, will be outstanding immediately after this offering, or (2) the average weekly trading volume of the common stock during the four calendar weeks preceding the filing of a Form 144 with respect to such sale. Sales under Rule 144 are also subject to certain "manner of sale" provisions and notice requirements and to the requirement that current public information about BioMarin be available. Under Rule 144(k), a person who is not deemed to have been an affiliate of BioMarin at any time during the three months preceding a sale, and who has beneficially owned the shares proposed to be sold for at least two years, including the holding period of any prior owner except an affiliate, is entitled to sell such shares without complying with the manner of sale, public information, volume limitation or notice provisions of Rule 144. 71 Rule 701 permits resales of qualified shares held by certain affiliates in reliance upon Rule 144 but without compliance with certain restrictions, including the holding period requirement, of Rule 144. Any employee, officer or director of or consultant to BioMarin who purchased his or her shares pursuant to a written compensatory plan or contract may be entitled to rely on the resale provisions of Rule 701. Rule 701 further provides that non-affiliates may sell such shares in reliance on Rule 144 without having to comply with the holding period, public information, volume limitation or notice provisions of Rule 144. All holders of Rule 701 shares of common stock are required to wait until 90 days after the date of this prospectus before selling such shares. However, all shares issued pursuant to Rule 701 are subject to lock-up agreements and will only become eligible for sale at the earlier of the expiration of the 180-day lock-up or between 90 and 180 days after the offering with the prior written consent of U.S. Bancorp Piper Jaffray Inc. 72 UNDERWRITING The U.S. Managers named below (the "U.S. Underwriters"), acting through their global coordinators, U.S. Bancorp Piper Jaffray Inc. and Bank J. Vontobel & Co. AG (the "Global Coordinators"), have severally agreed, subject to the terms and conditions of a U.S. Underwriting Agreement (the "U.S. Underwriting Agreement") with us to purchase from us the number of shares of BioMarin common stock set forth opposite their respective names below.
Number of U.S. Underwriters Shares ----------------- ------ U.S. Bancorp Piper Jaffray Inc........................................... Vontobel Securities Ltd. ................................................ Schroders................................................................ ------ Total.................................................................. ======
The U.S. Underwriters have agreed, subject to the terms and conditions set forth in the U.S. Underwriting Agreement, to purchase all of the shares of BioMarin common stock being sold pursuant to the Underwriting Agreement if any of the shares of BioMarin common stock being sold pursuant to the U.S. Underwriting Agreement are purchased. We have entered into an International Underwriting Agreement (the "International Underwriting Agreement") with the underwriters of the international offering (the "International Underwriters", and together with the U.S. Underwriters, the "Underwriters") providing for the concurrent sale of [ . ] shares of BioMarin common stock in Switzerland and elsewhere outside the United States and Canada. The closing of the international offering is a condition to the closing of the U.S. offering and vice versa. We have granted the U.S. Underwriters and the International Underwriters an option, exercisable by the Global Coordinators for 30 days after the date of this Prospectus, to purchase up to an additional [ . ] shares of BioMarin common stock to cover over-allotments, if any, at the public offering price, less the underwriting discount. To the extent that such option is exercised, each of the Managers will have a firm commitment, subject to certain conditions, to purchase approximately the same percentage of the option shares that the number of shares to be purchased initially by that Manager is of the number of shares of BioMarin common stock initially purchased by the Managers. The Global Coordinators have advised us that the U.S. Underwriters propose to offer the shares of BioMarin common stock offered hereby to the public in the United States and on a private placement basis in Canada initially at the public offering price set forth on the cover page of this Prospectus, and to certain dealers at such price less a concession not in excess of $[ . ] per share. The U.S. Underwriters may allow, and such dealers may reallow, a discount not in excess of $[ . ] per share on sales to certain other dealers. After the public offering of the BioMarin common stock, the public offering price, concession and discount may be changed. The public offering price, the underwriting discounts and concession and discount to dealers for the international offering are the same as for the U.S. offering. The prospectus is intended for use only in connection with offers and sales of BioMarin common stock in the U.S. offering and any shares initially offered in the international offering that are thereafter sold or resold in the United States by underwriters or, for a period of 90 days after the date of this prospectus, dealers (as such terms are defined in the Securities Act). The initial offers and sales of BioMarin common stock in the international offering are not being registered under the Securities Act and this Prospectus is not to be sent or given to any person outside the United States and Canada. The company has been informed that the U.S. Underwriters and the International Underwriters have entered into an Intersyndicate Agreement dated the date hereof (the "Intersyndicate Agreement") which 73 provides for the coordination of their activities. Under the terms of the Intersyndicate Agreement, the U.S., Underwriters and the International Underwriters are permitted to sell shares of BioMarin common stock to each other. [ . ] shares of BioMarin common stock are initially being offered in the U.S. offering in the United States and Canada and [ . ] shares are initially being concurrently offered in the international offering in Switzerland and elsewhere outside the United States and Canada. The final allocation of BioMarin common stock between the U.S. offering and the international offering may differ from these amounts. Pursuant to the Intersyndicate Agreement, sales may be made between the U.S. Managers and the International Managers and, to the extent such sales are made, the number of shares of BioMarin common stock initially available for sale by the U.S. Underwriters or by the International Underwriters may be more or less than the above amounts. Pursuant to the Intersyndicate Agreement, each of the U.S. Underwriters has agreed that, as part of the distribution of shares of BioMarin common stock in the U.S. offering, it has not offered or sold, and will not offer or sell, directly or indirectly, any shares of BioMarin common stock or distribute any prospectus relating to the BioMarin common stock outside the United States or Canada or to any dealer who does not so agree. Each International Underwriter has agreed that, as part of the distribution of shares of BioMarin common stock in the international offering it has not offered or sold, and will not offer or sell, directly or indirectly, any shares of BioMarin common stock or distribute any prospectus relating to the BioMarin common stock in the United States or Canada or to any dealer who does not so agree. The foregoing limitations do not apply to transactions between the International Underwriters and the U.S. Underwriters pursuant to the Intersyndicate Agreement. As used herein, "United States" means the United States of America (including the States and the District of Columbia), its territories, possessions and other areas subject to its jurisdiction, "Canada" means Canada, its provinces, territories, possessions and other areas subject to its jurisdiction, and an offer or sale shall be deemed made in the United States or Canada if it is made to (1) any individual resident in the United States or Canada or (2) any corporation, partnership, pension, profit-sharing or other trust or other entity (including any such entity acting as an investment adviser with discretionary authority) whose office most directly involved with the purchase is located in the United States or Canada. Application has been made to have the BioMarin common stock approved for quotation on The Nasdaq National Market and the Swiss Exchange under the symbol BMRN. We have agreed to indemnify the Underwriters against certain liabilities which may be incurred in connection with the offering of the BioMarin common stock and the exercise of the over-allotment options, including liabilities under the Securities Act and other applicable securities laws. The Underwriters have informed us that they do not expect to confirm sales of BioMarin common stock offered hereby to any accounts over which they exercise discretionary authority. Prior to this offering, there has been no public market for the BioMarin common stock. Accordingly, the initial public offering price for the shares will be determined by negotiation among us and the Global Coordinators. In determining such price, consideration will be given to various factors, including market conditions for initial public offerings, the history of and prospects for our business, our past and present operations, the present state of our development, certain of our financial information, an assessment of our management, the market for securities of companies in businesses similar to ours, the general condition of the securities markets and other factors deemed relevant. There can be no assurance that the initial public offering price will correspond to the price at which the BioMarin common stock will trade in the public market subsequent to the offering or that an active trading market for the BioMarin common stock will develop and continue after the offering. U.S. Bancorp Piper Jaffray Inc. and Vontobel Securities Ltd., on behalf of the Underwriters, may engage in over-allotment, stabilizing transactions, syndicate covering transactions and penalty bids. 74 Over-allotment involves syndicate sales in excess of the offering size, which creates a syndicate short position. Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum. Syndicate covering transactions involve purchases of the BioMarin common stock in the open market after the distribution has been completed in order to cover syndicate short positions. Penalty bids permit the Underwriters to reclaim a selling concession from a syndicate member when the BioMarin common stock originally sold by such syndicate member is purchased in a syndicate covering transaction to cover syndicate short positions. Such stabilizing transactions, syndicate covering transactions and penalty bids may cause the price of the BioMarin common stock to be higher than it would otherwise be in the absence of such transactions. These transactions may be effected on The Nasdaq National Market and the Swiss Exchange or otherwise and, if commenced, may be discontinued at any time. We and our executive officers and directors and other existing stockholders have agreed that we will not, for a period of 180 days following the date of the final prospectus directly or indirectly, offer to sell, grant any option for the sale of, or otherwise dispose of, any shares of BioMarin common stock or any securities convertible into or exchangeable or exercisable for any such shares, subject to certain limited exceptions. All such securities held by such other stockholders will be released from the foregoing restrictions at the end of such 180 day period. U.S. Bancorp Piper Jaffray Inc. may release any stockholder from the foregoing restrictions, in whole or in part, at an earlier date, in its discretion. No action has been or will be taken in any jurisdiction by us or any Underwriter that would permit a public offering of the shares of BioMarin common stock or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than the United States, Canada and Switzerland. Persons into whose possession this prospectus comes are required by us and the Underwriters to inform themselves about and to observe any restriction as to the offering of shares of BioMarin common stock and the distribution of this prospectus. 75 LEGAL MATTERS The validity of the common stock offered by this prospectus will be passed upon for BioMarin by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto, California. Certain legal matters in connection with this offering will be passed upon for the underwriters by Cooley Godward LLP, Palo Alto, California and Shearman & Sterling, Menlo Park, California. EXPERTS The financial statements included in this prospectus and elsewhere in this registration statement have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their reports with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said reports. WHERE YOU CAN FIND MORE INFORMATION We have filed a registration statement on Form S-1 with the SEC for the stock we are offering by this prospectus. This prospectus does not include all of the information contained in the registration statement. You should refer to the registration statement and its exhibits for additional information. Whenever we make reference in this prospectus to any of our contracts, agreements or other documents, the references are not necessarily complete and you should refer to the exhibits attached to the registration statement for copies of the actual contract, agreement or other document. When we complete this offering, we will also be required to file annual, quarterly and special reports, proxy statements and other information with the SEC. You can read our SEC filings, including the registration statement, over the Internet at the SEC's web site at http://www.sec.gov. You may also read and copy any document we file with the SEC at its public reference facilities at 450 Fifth Street, NW, Washington, DC 20549, 7 World Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. You may also obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the SEC at 450 Fifth Street, NW, Washington, DC 20549. Please call the SEC at 1-800-SEC- 0330 for further information on the operation of the public reference facilities. Our SEC filings are also available at the office of the Nasdaq National Market. For further information on obtaining copies of our public filings at the Nasdaq National Market you should call (212) 656-5060. 76 INDEX TO FINANCIAL STATEMENTS BioMarin Pharmaceutical Inc. Financial Statements Report of Independent Public Accountants................................... F-2 Consolidated Balance Sheets................................................ F-3 Consolidated Statements of Operations...................................... F-4 Statement of Changes in Stockholders' Equity............................... F-5 Consolidated Statements of Cash Flows...................................... F-7 Notes to Consolidated Financial Statements................................. F-8 Glyko, Inc. Financial Statements Report of Independent Public Accountants................................... F-21 Balance Sheets............................................................. F-22 Statements of Operations................................................... F-23 Statements of Changes in Stockholders' Equity (Deficit).................... F-24 Statements of Cash Flows................................................... F-25 Notes to Financial Statements.............................................. F-26
F-1 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders of BioMarin Pharmaceutical Inc.: We have audited the consolidated balance sheets of BioMarin Pharmaceutical Inc. (a Delaware corporation in the development stage) and subsidiaries as of December 31, 1997 and 1998, and the related consolidated statements of operations, changes in stockholders' equity, and cash flows for the period from March 21, 1997 (inception) to December 31, 1997, the year ended December 31, 1998 and the period from March 21, 1997 (inception) to December 31, 1998. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of BioMarin Pharmaceutical Inc. and subsidiaries as of December 31, 1997 and 1998, and the results of its operations and its cash flows for the period from March 21, 1997 (inception) to December 31, 1997, the year ended December 31, 1998 and the period from March 21, 1997 (inception) to December 31, 1998, in conformity with generally accepted accounting principles. San Francisco, California, March 17, 1999 (Except for the matter discussed in the fifth paragraph of Note 1, for which the date is April 13, 1999) F-2 BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES (a development-stage company) Consolidated Balance Sheets As of December 31, 1997 and 1998
1997 1998 ----------- ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents......................... $ 5,987,433 $ 9,413,662 Short-term investments............................ 900,827 1,975,800 Accounts receivable, net.......................... -- 148,396 Due from Glyko Biomedical, Ltd.................... 79,607 114,005 Due from joint venture............................ -- 418,712 Inventories....................................... -- 71,730 Prepaid expenses.................................. 539,445 676,214 ----------- ------------ Total current assets............................ 7,507,312 12,818,519 PROPERTY AND EQUIPMENT, net......................... 145,683 6,223,058 GOODWILL AND OTHER INTANGIBLE ASSETS................ -- 11,703,726 INVESTMENT IN JOINT VENTURE......................... -- 684,657 DEPOSITS............................................ -- 79,142 ----------- ------------ Total assets.................................... $ 7,652,995 $ 31,509,102 =========== ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable.................................. $ 168,062 $ 1,340,355 Accrued liabilities............................... 43,395 640,016 Due to Glyko, Inc................................. 61,072 -- Notes payable short-term.......................... -- 24,366 ----------- ------------ Total current liabilities....................... 272,529 2,004,737 LONG-TERM LIABILITIES: Long-term portion of notes payable............................................ -- 109,845 ----------- ------------ Total liabilities............................... 272,529 2,114,582 ----------- ------------ STOCKHOLDERS' EQUITY: Common stock, $0.001 par value: 30,000,000 shares authorized, 20,566,500 and 26,176,180 shares issued and outstanding at December 31, 1997 and 1998, respectively............................... 20,567 26,176 Additional paid-in capital........................ 12,548,924 47,867,868 Warrants.......................................... 128,240 128,240 Deferred compensation............................. (217,000) (986,425) Notes receivable from stockholders................ (2,337,500) (2,564,920) Deficit accumulated during the development stage.. (2,762,765) (15,076,419) ----------- ------------ Total stockholders' equity...................... 7,380,466 29,394,520 ----------- ------------ Total liabilities and stockholders' equity...... $ 7,652,995 $ 31,509,102 =========== ============
The accompanying notes are an integral part of these statements. F-3 BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES (a development-stage company) Consolidated Statements of Operations For the Period from March 21, 1997 (inception) to December 31, 1997, the Year ended December 31, 1998, and for the Period from March 21, 1997 (inception) to December 31, 1998
Period from Period from March 21, 1997 March 21, 1997 (inception), to Year ended (inception), to December 31, December 31, December 31, 1997 1998 1998 --------------- ------------ --------------- Revenues: Revenues--products and services....................... $ -- $ 250,297 $ 250,297 Revenues from joint venture..... -- 837,457 837,457 Revenues--other................. -- 102,655 102,655 ----------- ------------ ------------ Total revenues................. -- 1,190,409 1,190,409 Operating Costs and Expenses: Cost of goods sold.............. -- 107,942 107,942 Research and development........ 1,913,795 10,502,636 12,416,431 General and administrative...... 914,299 3,530,886 4,445,185 ----------- ------------ ------------ Loss from operations........... (2,828,094) (12,951,055) (15,779,149) Interest income.................. 65,329 684,572 749,901 Equity in loss of joint venture.. -- (47,171) (47,171) ----------- ------------ ------------ Net loss....................... $(2,762,765) $(12,313,654) $(15,076,419) =========== ============ ============ Net loss per share, basic and diluted......................... $ (0.34) $ (0.55) $ (0.93) =========== ============ ============ Weighted average common shares outstanding..................... 8,136,475 22,488,481 16,184,162 =========== ============ ============
The accompanying notes are an integral part of these statements. F-4 BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES (a development stage company) Statement of Changes in Stockholders' Equity For the Period from March 21, 1997 (inception), to December 31, 1997, for the Year ended December 31, 1998, and for the Period from March 21, 1997 (inception), to December 31, 1998
Deficit Notes Accumulated Common Stock Additional Warrants Receivable During Total ------------------ Paid-in ---------------- Deferred from Development Stockholders' Shares Amount Capital Shares Amount Compensation Stockholders Stage Equity ---------- ------- ----------- ------- -------- ------------ ------------ ----------- ------------- BALANCE, MARCH 21, 1997............... -- $ -- $ -- -- $ -- $ -- $ -- $ -- $ -- Issuance of common stock to Glyko Biomedical, Ltd. on March 21, 1997, for cash, $1.00 per share......... 1,500,000 1,500 1,498,500 -- -- -- -- -- 1,500,000 Issuance of common stock to Glyko Biomedical, Ltd. in June 1997 in exchange for tech- nology, $1.00 per share............. 7,000,000 7,000 (7,000) -- -- -- -- -- -- Issuance of common stock in October 1997, $1.00 per share (net of is- suance costs of $439,720, includ- ing the issuance of 299,000 shares of common stock, $1.00 per share, and warrants to purchase an addi- tional 299,000 shares of common stock for broker- age services)..... 4,039,000 4,039 3,595,241 299,000 47,840 -- -- -- 3,647,120 Issuance of common stock to employees in exchange for notes in October 1997, $1.00 per share............. 2,500,000 2,500 2,497,500 -- -- (200,000) (2,300,000) -- -- Issuance of common stock and warrants on December 31, 1997, $1.00 per share (net of is- suance costs of $592,309, includ- ing the issuance of 502,500 shares of common stock, $1.00 per share, and warrants to purchase an addi- tional 502,500 shares of common stock for broker- age services)..... 5,527,500 5,528 4,929,663 502,500 80,400 -- -- -- 5,015,591 Common stock op- tions granted in exchange for serv- ices.............. -- -- 35,020 -- -- (17,000) -- -- 18,020 Interest on notes receivable........ -- -- -- -- -- -- (37,500) -- (37,500) Net loss for the period from March 21, 1997 (incep- tion), to December 31, 1997.......... -- -- -- -- -- -- -- (2,762,765) (2,762,765) ---------- ------- ----------- ------- -------- --------- ----------- ----------- ----------- BALANCE, DECEMBER 31, 1997........... 20,566,500 $20,567 $12,548,924 801,500 $128,240 $(217,000) $(2,337,500) $(2,762,765) $ 7,380,466 ========== ======= =========== ======= ======== ========= =========== =========== ===========
The accompanying notes are an integral part of these statements. F-5 BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES (a development stage company) Statement of Changes in Stockholders' Equity For the Period from March 21, 1997 (inception), to December 31, 1997, for the Year ended December 31, 1998, and for the Period from March 21, 1997 (inception), to December 31, 1998
Deficit Notes Accumulated Common Stock Additional Warrants Receivable During Total ------------------ Paid-in ---------------- Deferred from Development Stockholders' Shares Amount Capital Shares Amount Compensation Stockholders Stage Equity ---------- ------- ----------- ------- -------- ------------ ------------ ------------ ------------- BALANCE, JANUARY 1, 1988........... 20,566,500 $20,567 $12,548,924 801,500 $128,240 $ (217,000) $(2,337,500) $ (2,762,765) $ 7,380,466 Issuance of com- mon stock on June 30, 1998, for cash, $6.00 per share (net of is- suance costs of $263,208, includ- ing the issuance of 31,368 shares of common stock, $6.00 per share, for brokerage services)........ 598,535 598 3,327,404 -- -- -- -- -- 3,328,002 Issuance of com- mon stock on July 14, 1998, for cash, $6.00 per share (net of is- suance costs of $387,474, includ- ing the issuance of 64,579 shares of common stock, $6.00 per share, for brokerage services)........ 1,385,414 1,386 7,923,624 -- -- -- -- -- 7,925,010 Issuance of com- mon stock on Au- gust 3, 1998, for cash, $6.00 per share (net of is- suance costs of $12,318, includ- ing the issuance of 2,053 shares of common stock, $6.00 per share, for brokerage services)........ 31,386 31 175,967 -- -- -- -- -- 175,998 Issuance of com- mon stock to Genzyme Corpora- tion on September 4, 1998, for cash, $6.00 per share............ 1,333,333 1,333 7,998,665 -- -- -- -- -- 7,999,998 Issuance of com- mon stock to Glyko Biomedical, Ltd. for the pur- chase of Glyko, Inc. on October 7, 1998, for com- mon shares, $6.00 per share and the assumption of op- tions of Glyko, Inc. employees (see Note 1)..... 2,259,039 2,259 14,859,063 -- -- -- -- -- 14,861,322 Exercise of com- mon stock op- tions............ 1,973 2 1,971 -- -- -- -- -- 1,973 Interest on notes receivable....... -- -- -- -- -- -- (133,000) -- (133,000) Deferred compen- sation on stock options.......... -- -- 1,032,250 -- -- (1,032,250) -- -- -- Amortization of deferred compen- sation........... -- -- -- -- -- 262,825 (94,420) -- 168,405 Net loss......... -- -- -- -- -- -- -- (12,313,654) (12,313,654) ---------- ------- ----------- ------- -------- ----------- ----------- ------------ ------------ BALANCE, DECEMBER 31, 1998.......... 26,176,180 $26,176 $47,867,868 801,500 $128,240 $ (986,425) $(2,564,920) $(15,076,419) $ 29,394,520 ========== ======= =========== ======= ======== =========== =========== ============ ============
The accompanying notes are an integral part of these statements. F-6 BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES (a development-stage company) Consolidated Statements of Cash Flows For the Period from March 21, 1997 (inception), the Year ended December 31, 1998 and for the Period from March 21, 1997 (inception) to December 31, 1998
Period from Period from March 21, 1997 March 21, 1997 (inception), to Year ended (inception), to December 31, December 31, December 31, 1997 1998 1998 --------------- ------------ --------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss........................ $(2,762,765) $(12,313,654) $(15,076,419) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation................... 4,790 307,645 312,435 Amortization of deferred compensation.................. -- 262,825 262,825 Amortization of goodwill....... -- 271,274 271,274 Compensation in the form of common stock and common stock options....................... 18,020 -- 18,020 Loss from joint venture........ -- 47,131 47,131 Write-off of in-process technology.................... -- 2,625,000 2,625,000 Changes in operating assets and liabilities: Accounts receivable............ -- (148,396) (148,396) Due from Glyko Biomedical, Ltd........................... (79,607) (34,398) (114,005) Due from joint venture......... -- (418,712) (418,712) Inventories.................... -- (71,730) (71,730) Prepaid expenses............... (539,445) (136,769) (676,214) Deposits....................... -- (79,142) (79,142) Accounts payable............... 168,062 1,172,293 1,340,355 Accrued liabilities............ 43,395 596,621 640,016 Due to Glyko, Inc.............. 61,072 (61,072) -- ----------- ------------ ------------ Net cash used in operating activities................... (3,086,478) (7,981,084) (11,067,562) ----------- ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment...................... (150,473) (6,385,020) (6,535,493) Investment in joint venture..... -- (731,788) (731,788) Sale of short-term investments.. (900,827) (1,074,973) (1,975,800) ----------- ------------ ------------ Net cash used in investing activities................... (1,051,300) (8,191,781) (9,243,081) ----------- ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from note payable...... -- 134,211 134,211 Bridge loan..................... 880,000 -- 880,000 Accrued interest on notes receivable from stockholders... (37,500) (227,420) (264,920) Proceeds from sale of common stock, net of issuance costs... 9,282,711 19,692,303 28,975,014 ----------- ------------ ------------ Net cash provided by financing activities................... 10,125,211 19,599,094 29,724,305 ----------- ------------ ------------ Net increase in cash and cash equivalents.................. 5,987,433 3,426,229 9,413,662 CASH AND CASH EQUIVALENTS: Beginning of period............. -- 5,987,433 -- ----------- ------------ ------------ End of period................... $ 5,987,433 $ 9,413,662 $ 9,413,662 =========== ============ ============
The accompanying notes are an integral part of these statements. F-7 BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES (a development-stage company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Nature of Operations and Business Risks--BioMarin Pharmaceutical Inc. (BioMarin or the Company) is a privately held biopharmaceutical company specializing in the development of carbohydrate enzyme therapies for debilitating life- threatening chronic genetic disorders and other diseases and conditions. With its recent acquisition of Glyko, Inc., BioMarin added analytical and diagnostic products and services in the area of carbohydrate biology. BioMarin was incorporated on October 25, 1996, in the state of Delaware. BioMarin first began business on March 21, 1997 (inception), and issued 1,500,000 shares of common stock to Glyko Biomedical, Ltd. (GBL) for $1,500,000. Beginning in October 1997, BioMarin issued stock to outside investors, resulting in Glyko Biomedical's ownership of BioMarin being reduced to 41.3 percent at December 31, 1997. Since inception, the Company has devoted substantially all of its efforts to research and development activities, including preclinical studies and clinical trials, the establishment of laboratory and clinical scale manufacturing facilities, clinical manufacturing, and related administrative activities. On September 4, 1998, the Company entered into an agreement with Genzyme Corporation (Genzyme) to establish a joint venture dedicated to the development and commercialization of (alpha)-L-iduronidase (BM101) to treat mucopoly- saccharidosis-I (MPS-I) (Note 8). On October 7, 1998, the Company acquired Glyko, Inc., a wholly-owned subsidiary of Glyko Biomedical, in a transaction valued at $14,500,500. The transaction was accounted for as a purchase and resulted in Glyko, Inc. becoming a wholly owned subsidiary of the Company. Glyko, Inc. provides products and services that perform sophisticated carbohydrate analysis for research institutions and commercial laboratories. As consideration for the acquisition of all of the outstanding shares of Glyko, Inc., BioMarin issued 2,259,039 shares of common stock to Glyko Biomedical, assumed Glyko, Inc.'s employee stock options exercisable for 255,540 shares of BioMarin common stock, and paid $500 in cash (see Note 11). As a result of this transaction, Glyko Biomedical's ownership of BioMarin was increased from 36.2 percent to 41.7 percent at October 7, 1998. Through December 31, 1998 the Company had accumulated losses during its development stage of $15,076,419 and has continued to incur significant losses subsequent to December 31, 1998. Management expects to incur further losses in 1999 and beyond. As further discussed in Note 12, the Company entered into a convertible note financing in the amount of $26,000,000 on April 13, 1999. Management believes that this financing will be sufficient to meet the Company's minimum obligations through at least December 31, 1999. However, the Company will seek additional financing in the near term to execute its business strategies and meet its longer term obligations. The Company's lead product candidate, BM101, has completed clinical trials. There can be no assurance that the Company's research and development efforts will be successfully completed or that its products will be shown to be safe and effective. There can be no assurance that its products will be approved for marketing by the U.S. Food and Drug Administration (FDA) or any equivalent foreign government agency or that its products will be successfully commercialized or achieve any significant degree of market acceptance. BioMarin's core technology is based on the biological applications of carbohydrate-active enzymes in therapeutic indications. In June 1997, rights to certain related technology were transferred to BioMarin F-8 BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES (a development-stage company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) by Glyko Biomedical in exchange for 7,000,000 shares of BioMarin common stock (see Note 3). Certain of the Company's products rely on proprietary technology and patents owned by certain universities and other institutions and licensed to BioMarin. These universities also provide research and development services. Cessation of relationships with these universities could significantly affect the Company's future operations. In order to grow significantly, the Company must expand its efforts to develop new products in pharmaceutical applications. The Company will also need to establish manufacturing capabilities and to develop marketing capabilities and/or enter into collaborative arrangements with third parties having the capacity for such manufacturing or marketing. BioMarin's product candidates require regulatory approval by government agencies. This includes preclinical and clinical testing and approval processes in the United States and other countries. Approvals can take several years and can require substantial expenditures. There can be no assurance that difficulties or excessive costs will not be encountered by the Company in this process, which could delay or preclude the Company's marketing of its products. There can be no assurance that any of BioMarin's current or future product candidates will be successfully developed, prove to be effective in clinical trials, receive required regulatory approvals, be capable of being produced in commercial quantities at reasonable costs, gain reasonable reimbursement levels, or be successfully marketed. In addition, the Company is subject to a number of risks, including the need for additional financing, dependence on key personnel, small patient population, patent protection, significant competition from larger organizations, dependence on corporate partners and collaborators, and expected increased restrictions on reimbursement, as well as other changes in the healthcare industry. Basis of Presentation--These consolidated financial statements include the accounts of BioMarin, Glyko, Inc., a wholly-owned subsidiary of BioMarin (for the period from October 7, 1998 to December 31, 1998), and BioMarin Genetics, Inc., a wholly-owned subsidiary of BioMarin formed for the purpose of the joint venture discussed in Note 8. All significant intercompany transactions have been eliminated. Concentration of Credit Risk--Financial instruments that may potentially subject the Company to concentration of credit risk consist principally of cash, cash equivalents, and short-term investments. All cash, cash equivalents, and short-term investments are placed in financial institutions with strong credit ratings, which minimizes the risk of loss due to nonpayment. The Company has not experienced any losses due to credit impairment or other factors related to its financial instruments. Use of Estimates--The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates made by management include determination of progress to date under research and development contracts and the amortization period of goodwill and other intangibles (see Notes 6 and 8). Cash and Cash Equivalents--For the statements of cash flows, the Company treats liquid investments with original maturities of less than three months as cash and cash equivalents. Available-for-Sale Securities--The Company records its investment securities as available-for-sale because the sale of such securities may be required prior to maturity. F-9 BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES (a development-stage company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Inventories--Inventories consist of analytic kits, and instrument-based systems held for sale. Inventories are stated at the lower of cost (first-in, first-out method) or estimated market value. All inventories at December 31, 1998, belong to Glyko, Inc. Investment in Joint Venture and Related Revenue--Under the terms of the Company's joint venture agreement with Genzyme (Note 8), the Company and Genzyme have each agreed to provide 50 percent of the funding for the joint venture. All research and development, sales and marketing, and other activities performed by Genzyme and the Company on behalf of the joint venture are billed to the joint venture at cost. Any profits of the joint venture will be shared equally by the two parties. Losses of the joint venture ($1,769,257 at December 31, 1998) are allocated in proportion to the funding provided by each joint venture partner. Through December 31, 1998, each joint venture partner had provided $1,569,285 of funding to the joint venture. During the year ended December 31, 1998, the Company billed $1,674,915 under the agreement, of which $837,457, or 50 percent, was recognized as revenue in accordance with the Company's policy of recognizing revenue to the extent that research and development costs billed have been funded by Genzyme. At December 31, 1998, the Company had a receivable of $418,712 related to these billings. The Company accounts for its investment in the joint venture on the equity method. Accordingly, the Company recorded a reduction in its investment in the joint venture of $884,628 during the year ended December 31, 1998, representing its 50 percent share of the loss of the joint venture. The percentage of the research and development costs billed to the joint venture that was funded by the Company (50 percent, or $837,457) was recorded as a credit to the Company's equity in the loss of the joint venture. Research and Development--Research and development expenses include the expenses associated with contract research and development provided to third parties, research and development provided in connection with the joint venture including clinical and regulatory costs, and internal research and development costs. All research and development costs discussed above are expensed as incurred. Property and Equipment--Property and equipment are stated at cost. Depreciation is computed using the straight-line method. Leasehold improvements are amortized over the life of the asset or the term of the lease, whichever is shorter. Significant additions and improvements are capitalized, while repairs and maintenance are charged to expense as incurred. Property and equipment consisted of the following:
December 31 -------------------- 1997 1998 Estimated Useful Lives -------- ---------- ------------------------ Computer hardware and software................... $ 27,688 $ 161,994 3 years Office furniture and equipment.................. -- 372,037 5 years Laboratory equipment........ 119,002 3,468,978 5 years Shorter of life of asset Leasehold improvements...... 3,783 2,532,484 or lease term -------- ---------- 150,473 6,535,493 Less: Accumulated depreciation............... (4,790) (312,435) -------- ---------- Total, net.............. $145,683 $6,223,058 ======== ==========
Depreciation expense for the period from March 21, 1997 (inception) to December 31, 1997, the year ended December 31, 1998 and for the period from March 21, 1997 (inception) to December 31, 1998, was $4,790, $307,645, and $312,435, respectively. F-10 BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES (a development-stage company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Goodwill and Other Intangible Assets--In connection with the acquisition of Glyko, Inc., the Company acquired certain intangible assets including developed technology, customer relationships and goodwill. These assets are being amortized over approximately ten years. The purchase price of $14,500,500 was allocated to the net tangible and intangible assets acquired, based on the relative fair value of these assets as determined in an independent appraisal. In connection with this allocation $2,625,000 was expensed as a charge for the purchase of in-process research and development. In performing this allocation, the Company considered, among other factors, Glyko, Inc.'s technology research and development projects in-process at the date of acquisition. With regard to the in-process research and development projects, the Company considered factors such as the stage of development of the technology at the time of acquisition, the importance of each project to the overall development plan, alternative future use of the technology and the projected incremental cash flows from the projects when completed and any associated risks. Total amortization expense from October 7, 1998 (date of acquisition), to December 31, 1998, was $271,274. Impairment of Long-Lived Assets--The Company regularly reviews long-lived assets and identifiable intangibles held and used by the Company for possible impairment. Whenever events or circumstances indicate that the carrying amount of an asset may not be fully recoverable, the Company adjusts the carrying amount of the asset. No such adjustments have been made. Accrued Liabilities--Accrued liabilities consisted of the following:
December 31 ---------------- 1997 1998 ------- -------- Vacation.................................................... $25,579 $123,274 Other....................................................... 17,816 516,742 ------- -------- Total................................................... $43,395 $640,016 ======= ========
Product Sales--The Company recognizes product revenues and related cost of sales upon shipment of products. Service revenues are recognized upon completion of services as evidenced by the transmission of reports to customers. Other revenues, principally licensing and distribution fees, are recognized upon completion of applicable contractual obligations. Revenue from the joint venture is recognized to the extent that research and development costs billed by the Company have been funded by Genzyme. Net Income (Loss) per Share--Basic net income (loss) per share is calculated by dividing net income (loss) by the weighted average common shares outstanding during the period. Diluted net income per share is calculated by dividing net income by the weighted average of common stock outstanding and potential common shares during the period. Potential common shares include dilutive shares issuable upon the exercise of outstanding common stock options, warrants, and contingent issuances of common stock. For periods in which the Company has losses, such potential common shares are excluded from the computation of diluted net loss per share, as their effect is antidilutive. F-11 BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES (a development-stage company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Potentially dilutive securities include:
December 31 ------------------- 1997 1998 --------- --------- Options to purchase common stock......................... 297,000 2,801,240 Warrants to purchase common stock........................ 801,500 801,500 --------- --------- Total................................................ 1,098,500 3,602,740 ========= =========
Segment Reporting--For the year ended December 31, 1998, the Company adopted the provisions of SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information". The Company operates two segments. The Analytic and Diagnostic segment represents the operations of Glyko, Inc. which involve the manufacture and sale of analytic and diagnostic products. The Pharmaceutical segment represents the research and development activities related to the development and commercialization of carbohydrate enzyme therapeutics. Management of the Company has concluded that the operations of the Analytic and Diagnostic segment are, and will continue to be, immaterial with respect to the Company's overall activities and, thus, disclosure of segment information is not required. New Accounting Standards--In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 is not expected to have a material impact on the Company's financial position or results of operations. 2. BRIDGE LOANS: In the third quarter of 1997, the Company drew upon a bridge loan from certain stockholders in the amount of $880,000. This bridge loan was converted into 880,000 shares of common stock in the fourth quarter of 1997. 3. STOCKHOLDERS' EQUITY: Common Stock and Warrants--On March 21, 1997, BioMarin's parent company, GBL, provided initial equity funding by purchasing 1,500,000 shares of common stock for $1,500,000. BioMarin and GBL have entered into a License Agreement dated June 26, 1997, pursuant to which GBL granted BioMarin an exclusive, worldwide, perpetual, irrevocable, royalty-free right and license to certain of its worldwide patents, trade secrets, copyrights, and other proprietary rights to all know- how, processes, formulae, concepts, data, and other such intellectual property, whether patented or not, owned or licensed by GBL and its subsidiaries as of the date of the license agreement for application in therapeutic uses, including without limitation, drug discovery and genomics. As consideration for this license, BioMarin issued to GBL 7,000,000 shares of BioMarin common stock. Under the same License Agreement, BioMarin granted GBL an exclusive, worldwide, perpetual, irrevocable, royalty-free cross-license to all improvements BioMarin may make upon the licensed intellectual property. As disclosed in the accompanying statements of stockholders' equity, the Company closed a number of private placements in 1997 and 1998. In connection with these placements, an entity with which the chief executive officer and chairman of the board is affiliated (see Note 7) was issued a total of 899,500 shares (valued at $1,389,500) and warrants (valued at $128,240) to purchase an additional 801,500 shares of common stock at an exercise price of $1 per share. These issuances were made for F-12 BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES (a development-stage company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) brokerage services rendered in connection with these placements and were accounted for as a cost of raising capital. The warrants expire on various dates in 2001. In addition, 880,000 shares were issued to stockholders to retire an $880,000 bridge loan. Notes Receivable from Stockholders--Notes receivable from stockholders relate to 2,500,000 shares of common stock issued in October 1997 to three executive officers under the terms of the Founder's Stock Purchase Agreement (the Agreement). These notes bear interest at 6 percent per annum, and are due on July 31, 2000, or on the date of the employee's termination, whichever is earlier. The notes are secured by the underlying stock and are with full recourse. Interest was imputed at nine percent, resulting in an interest discount and related deferred compensation of $200,000, which is being amortized over the life of the notes. Amortization expense for the period from March 21, 1997 (inception) to December 31, 1997, the year ended December 31, 1998, and for the period from March 21, 1997 (inception), to December 31, 1998, was $37,500, $94,420, and $131,920, respectively. In the event that their employment is terminated by the Company, the Company has the obligation, if requested by the officer, to repurchase any or all of the shares issued under the Agreement at the lower of the original purchase price or the current market value of the shares. In the event one of these officers ceases to be an employee, the Company has the right, but not the obligation, to repurchase the unvested portion of the shares at their original purchase price. Pursuant to the terms of the Agreement, 50% of the shares vest after one year from the date of employment, with the remainder vesting at a rate of 1/24 per month thereafter. Deferred Compensation--In connection with certain stock option grants during the year ended December 31, 1998, the Company recognized deferred compensation totaling $1,032,250, which is being amortized over the four-year estimated service periods of the grantees. Amortization expense recognized during the year ended December 31, 1998, was $168,405. 4. INCOME TAXES: The significant components of net deferred tax assets and liabilities are as follows:
December 31 ------------------------- 1997 1998 ----------- ------------ Net operating loss carryforwards................. $ 1,052,000 $ 9,792,000 Research and development credit carryforwards.... 210,000 1,760,000 Research and development capitalized............. 0 50,000 Other............................................ (255,000) (160,000) Valuation allowance.............................. (1,007,000) (11,442,000) ----------- ------------ Net deferred tax asset........................... $ -- $ -- =========== ============
The net operating loss carryforwards and research and development credit carryforwards at December 31, 1998 include the net operating loss carryforwards ($4,567,000) and research and development credits carryforwards ($701,000) and related valuation allowances ($5,269,000) of Glyko, Inc. F-13 BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES (a development-stage company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The reconciliation of the effective tax rate is as follows:
Period from March 21, Period from 1997 March 21, 1997 (Inception) Year ended (Inception), to to December December 31, December 31, 31, 1997 1998 1998 -------------- ---------------- ---------------- Amount % Amount % Amount % --------- --- ----------- --- ----------- --- U.S. statutory tax rate... $(821,000) (34) $(4,164,000) (34) $(4,985,000) (33) State taxes, net of federal income tax benefit.................. (145,000) (6) (735,000) (6) (880,000) (6) Research and development tax credit............... (142,000) (5) (634,000) (5) (776,000) (5) Other..................... 149,000 5 656,000 5 805,000 5 Change in valuation allowance................ 959,000 40 4,877,000 40 5,836,000 39 --------- --- ----------- --- ----------- --- Provision for income taxes.................... $ -- -- $ -- -- $ -- -- ========= === =========== === =========== ===
As of December 31, 1998, net operating loss carryforwards are approximately $24.1 million and $12.4 million for federal and California income tax purposes, respectively. These federal and state carryforwards expire beginning in the year 2011 and 2004, respectively. The Company also has research and development credits available to reduce future federal and California income taxes, if any, of approximately $1,760,000 and $580,000, respectively, at December 31, 1998. These federal and state carryforwards expire beginning in 2012 and 2013, respectively. The net operating loss carryforwards and research and development credits related to Glyko, Inc. as of October 7, 1998, can only be utilized to offset future taxable income and tax, respectively, if any, of Glyko, Inc. In addition, the Tax Reform Act of 1986 contains provisions that may limit the net operating loss carryforwards and research and development credits available to be used in any given year should certain events occur, including sale of equity securities and other changes in ownership. The acquisition of Glyko, Inc. and the related issuance of stock represented a change of ownership under these provisions. There can be no assurance that the Company will be able to utilize net operating loss carryforwards and credits before expiration. Deferred income taxes are recorded to reflect the tax consequences on future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each period-end. The Company has a cumulative net operating loss carryforward since inception, resulting in net deferred tax assets. A valuation allowance is placed on the net deferred tax assets to reduce them to an assumed net realizable value of zero. 5. STOCK OPTION PLANS: The Company's 1997 Stock Option Plan (the Plan) provides for the grant of incentive common stock options and nonstatutory common stock options to employees, directors, and consultants of the Company. The maximum aggregate number of shares that may be optioned and sold under the Plan is 5,000,000 shares. F-14 BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES (a development-stage company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Had compensation cost for the Plan been determined consistent with SFAS No. 123 for option grants to employees, the effect on the Company's net loss would have been as follows:
Period from Period from March 21, 1997 March 21, 1997 (Inception), Year ended (Inception), to December December 31, to December 31, 1997 1998 31, 1998 -------------- ------------ -------------- Net loss as reported.............. $(2,762,765) $(12,313,654) $(15,076,419) Pro forma effect of SFAS No. 123.. (1,640) (468,000) (469,640) ----------- ------------ ------------ Pro forma net loss................ $(2,764,405) $(12,781,654) $(15,546,059) =========== ============ ============ Net loss per common share as reported......................... (0.34) (0.55) (0.93) =========== ============ ============ Pro forma loss per common share... (0.34) (0.57) (0.96) =========== ============ ============
A summary of the status of the Company's stock option plan is as follows:
Weighted Weighted Average Exercisable Average Fair Option Exercise at End of Value of Options Shares Price Year Granted --------- -------- ----------- ---------------- Outstanding at March 21, 1997..................... -- $ -- Granted................. 297,000 1.00 $0.22 Exercised............... -- -- Canceled................ -- -- --------- Outstanding at December 31, 1997................. 297,000 1.00 232,000 ======= Granted................. 2,507,660 4.18 $2.40 Exercised............... (1,973) 1.00 Canceled................ (1,447) 1.00 --------- Outstanding at December 31, 1998................. 2,801,240 $3.85 761,609 ========= =======
There are 2,198,760 options available for grant under the Plan at December 31, 1998. The average remaining contractual life of the options outstanding at December 31, 1998, is four years. As of December 31, 1998, the 2,801,240 options outstanding consist of the following:
Number of Options Exercise Weighted Average Number of Options Outstanding Price Contractual Life Exercisable ----------------- -------- ---------------- ----------------- 398,020 $1.00 3.88 347,333 255,540 2.30 3.11 180,846 1,548,000 4.00 9.03 202,875 599,680 6.00 4.69 30,555 --------- ------- 2,801,240 761,609 ========= =======
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions used for grants in 1997 and 1998: risk-free interest rates ranging from 5.2 to 6.2 percent; expected dividend yield of 0 percent; expected life of four years for the Plan's options; and expected volatility of 0 percent. F-15 BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES (a development-stage company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 6. COMMITMENTS AND CONTINGENCIES: Lease Commitments--The Company leases office space and research and testing laboratory space in various facilities under operating agreements expiring at various dates through 2009. Future minimum lease payments for the year ended December 31 are as follows: 1999........................................................... $1,336,910 2000........................................................... 1,173,573 2001........................................................... 1,019,827 2002........................................................... 1,014,837 2003........................................................... 866,405 Thereafter..................................................... 2,820,662 ---------- Total...................................................... $8,232,214 ==========
Rent expense for the period from March 21, 1997 (inception) to December 31, 1997, the year ended December 31, 1998 and for the period from March 21, 1997 (inception), to December 31, 1998, was $34,613, $380,1873, and $414,800, respectively. Research and Development Funding and Technology Licenses--The Company uses experts and laboratories at universities and other institutions to perform research and development activities. Funding commitments to these institutions for the year ended December 31 are as follows: 1999........................................................... $1,076,335 2000........................................................... 305,900 2001........................................................... 50,000 2002........................................................... 50,000 2003........................................................... 50,000 ---------- Total...................................................... $1,532,235 ==========
The Company has also licensed technology from certain institutions, for which it is required to pay a royalty upon future sales, subject to certain minimums. Consulting Agreements--BioMarin had agreements with two consultants whereby the consultants were paid cash and granted common stock options in exchange for services. Options for 206,000 shares of common stock were granted in satisfaction for these services. These options were valued at $35,020 and were expensed during the period from March 21, 1997 (inception), through December 31, 1997. Product Liability and Lack of Insurance--The Company is subject to the risk of exposure to product liability claims in the event that the use of its technology results in adverse effects during testing or commercial sale. The Company currently does not maintain product liability insurance. There can be no assurance that the Company will be able to obtain product liability insurance coverage at economically reasonable rates or that such insurance will provide adequate coverage against all possible claims. 7. RELATED-PARTY TRANSACTIONS: BioMarin had contractual agreements for office space and certain administrative, research, and development functions with Glyko, Inc. prior to the acquisition date of October 7, 1998. BioMarin reimbursed Glyko, Inc. for rent, salaries and related benefits, and other administrative costs. Glyko, Inc. also reimbursed BioMarin for salaries and related benefits. BioMarin reimbursed Glyko, Inc. for a F-16 BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES (a development-stage company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) net $240,848, $101,888, and $342,736 for the period from March 21, 1997 (inception) to December 31, 1997, the year ended December 31, 1998, and the period from March 21, 1997 (inception) to October 7, 1998. As discussed in Note 3, during August 1997, the Company entered into an agency agreement with an entity with which the chief executive officer and chairman of the board is affiliated. During June 1998, the Company entered into a second agency agreement. The Company issued a total of 899,500 shares of common stock and warrants to purchase another 801,500 shares of common stock to this entity and its affiliates for brokerage services pursuant to the terms of these agreements, also discussed in Note 3. As further discussed in Note 12, on April 13, 1999, the Company entered into a convertible note financing agreement in the amount of $26,000,000. Of this amount GBL purchased $4,300,000 worth of such notes and LaMont Asset Management ("LAM") purchased $9,700,000. A director of the Company is also the chairman of LAM. The Company also entered into an agency agreement with LAM pursuant to which the Company agreed to pay LAM a 5 percent cash commission on sales to certain note purchasers. In addition, at December 31, 1997 and 1998, the Company had recorded amounts due from GBL of $79,607 and $114,005, respectively. 8. COLLABORATIVE AGREEMENTS: Genzyme--Effective September 4, 1998, the Company entered into an agreement (the Collaboration Agreement) with Genzyme to establish a joint venture dedicated to the worldwide development and commercialization of BM101 to treat MPS-I. In conjunction with the formation of the joint venture, the Company established a wholly owned subsidiary, BioMarin Genetics, Inc. The Company has a 49 percent interest in the joint venture, BioMarin Genetics, Inc. has a 1 percent interest, and Genzyme has the remaining 50 percent interest. Under the Collaboration Agreement, BioMarin and Genzyme are each required to make capital contributions to the joint venture in an amount equal to 50 percent of costs and expenses associated with the development and commercialization of BM101. The parties also agree to share the profits equally from such commercialization. In addition, Genzyme purchased 1,333,333 shares of BioMarin common stock at $6.00 per share for total proceeds of $7,999,998 in a private placement and is obligated to purchase an additional $10,000,000 of common stock at the initial public offering price in a private placement concurrent with the initial public offering of the Company's stock. Genzyme has also agreed to pay BioMarin $12,100,000 in cash upon FDA approval of the BLA for BM101. Other Agreements--The Company is engaged in research and development collaborations with various academic institutions, commercial research groups, and other entities. The agreements provide for sponsorship of research and development by the Company and may also provide for exclusive royalty-bearing intellectual property licenses or rights of first negotiation regarding licenses to intellectual property development under the collaborations. Typically, these agreements are terminable for cause by either party upon 90 days' written notice. 9. COMPENSATION PLANS: Employment Agreements--The Company has entered into employment agreements with seven officers of the Company. All of these agreements are terminable without cause by the Company upon six months' prior notice, or by the officer upon three months' prior written notice to the Company, with F-17 BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES (a development-stage company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) the Company obligated to pay salary and benefits hereunder until such termination. The annual salaries committed to under these agreements total approximately $1,000,000. In addition, three of the agreements provide for the payment of an annual cash bonus of up to 100 percent of the base annual salary of the three officers based upon the Company's market capitalization. For the year ended December 31, 1998, the Company recorded compensation expense of $112,650 under these agreements. 401(k) Plan--The Company participates in the Glyko Retirement Savings Plan (the 401(k) Plan). Most employees (the Participants) are eligible to participate following the start of their employment, on the earlier of the next occurring January 1 or July 1. Participants may contribute up to 15 percent of their current compensation to the 401(k) Plan or an amount up to a statutorily prescribed annual limit. The Company pays the direct expenses of the 401(k) Plan but does not currently match or make contributions to employee accounts. 1997 Stock Plan--In November 1997, the Board adopted, and in April 1998, the stockholders approved, the 1997 Stock Plan (the 1997 Plan), which provided for the reservation of a total of 3,000,000 shares of common stock for issuance under the 1997 Plan. In December 1998, the Board adopted, and in January 1999, the stockholders approved, an amendment to the 1997 Plan to increase the number of shares reserved for issuance under it to an aggregate of 5,000,000 and to add an "evergreen provision" providing for an annual increase in the number of shares which may be optioned or sold under the 1997 Plan without need for additional Board or stockholder action to approve such increase (which increase shall be the lesser of 4 percent of the then-outstanding capital stock, 2,000,000 shares, or a lower amount set by the Board). The 1997 Plan provides for the grant of stock options and the issuance of restricted stock by the Company to its employees, officers, directors, and consultants. 1998 Employee Stock Purchase Plan--In December 1998 the Board adopted, and in January 1999 the stockholders approved, the 1998 Employee Stock Purchase Plan (the 1998 Purchase Plan). A total of 250,000 shares of Company common stock has been reserved for issuance under the 1998 Purchase Plan, plus annual increases equal to the lesser of 0.5 percent of the outstanding capital stock, 200,000 shares, or a lesser amount set by the Board. As of December 31, 1998, no shares have been issued under the 1998 Purchase Plan. The implementation of this plan is contingent on the completion of an initial public offering. 1998 Director Option Plan--The 1998 Director Option Plan (the Director Plan) was adopted by the Board of Directors in December 1998 and approved by the stockholders in January 1999. The Director Plan provides for the grant of nonstatutory stock options to nonemployee directors. A total of 200,000 shares of Company common stock, plus an annual increase equal to the number of shares needed to restore the maximum aggregate number of shares available for sale under the Director Plan or the lesser of 0.5 percent of the outstanding capital stock, 200,000 shares, or a lesser amount set by the Board, have been reserved for issuance under the Director Plan. As of December 1998, no options have been granted under the Director Plan. In January 1999, the Board granted 689,774 stock options under the 1997 Plan to employees and directors of the Company at $7.00 per share and subsequently granted 55,000 stock options to employees of the Company at $7.00 per share. The Company's management estimates that these stock option prices reflect current market value. F-18 BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES (a development-stage company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 10. SUPPLEMENTAL CASH FLOW INFORMATION: The following noncash transactions took place for the periods presented:
Period from Period from March 21, 1997 March 21, 1997 (Inception), Year ended (Inception), to December December 31, to December 31, 1997 1998 31, 1998 -------------- ------------ -------------- Common stock issued in exchange for notes....................... $2,500,000 $ -- $2,500,000 Compensation in the form of common stock and common stock options......................... 18,020 -- 18,020 Common stock and common stock warrants issued in exchange for brokerage services.............. 929,740 588,000 1,517,740 Bridge loan converted to common stock........................... 880,000 -- 880,000
11. GLYKO, INC. : On October 7, 1998, the Company entered into an agreement to acquire all of the outstanding stock of its affiliate, Glyko, Inc. The total consideration for the acquisition was $14,500,500, comprising 2,259,039 shares of common stock of the Company, valued at $6.00 per share, the assumption of options held by certain Glyko, Inc. employees to purchase shares of GBL's common stock, which would require 255,540 shares of the Company's common stock to be issued if fully exercised, and $500 in cash. The acquisition was accounted for as a purchase. The following unaudited pro forma consolidated financial information reflects the results of operations for the year ended December 31, 1998 and for the periods from March 21, 1997 (inception), to December 31, 1997 and 1998 as if the acquisition had occurred on January 1, 1998 and March 21, 1997 (inception), respectively:
Period from Period from March 21, 1997 March 21, 1997 (Inception), to Year ended (Inception), to December 31, December 31, December 31, 1997 1998 1998 --------------- ------------ --------------- Revenues..................... $ 1,995,562 $ 2,530,325 $ 4,345,887 Loss from operations......... (6,027,890) (13,044,201) (17,532,186) Net loss..................... (5,953,934) (12,379,832) (16,797,384) Net loss per share, basic and diluted..................... (0.57) (0.51) (0.93) Weighted average number of common shares outstanding... 10,464,474 24,214,135 18,133,509
12. SUBSEQUENT EVENT: On April 13, 1999, the Company entered into a convertible note financing agreement in the amount of $26,000,000. Of this amount, GBL invested $4,300,000. These notes bear interest at 10 percent per annum. F-19 BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES (a development-stage company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) All unpaid principal, together with all unpaid interest, shall be due and payable upon the earlier of (a) April 2002 (the "Maturity Date"), (b) immediately prior to a sale of all of the assets of the Company or a merger or acquisition of the Company with another entity, or (c) an initial public offering with net proceeds to the Company of at least $20,000,000. On the Maturity Date, in lieu of any repayment in cash, the Company has the right to convert the amounts owed under the notes, in whole or part, into fully paid and nonassessable shares of common stock of the Company. At any time prior to the Maturity Date, the notes automatically convert to shares of common stock of the Company immediately prior to (a) any merger or acquisition of the Company, (b) a sale of all the assets of the Company, or (c) an initial public offering with net proceeds to the Company of at least $20,000,000. The price at which the notes will convert into shares of common stock is initially set at $10.00 per share and is subject to certain adjustments for possible future events. The convertible note agreement also contains certain anti-dilutive provisions. F-20 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders of Glyko, Inc.: We have audited the balance sheets of Glyko, Inc. as of December 31, 1997, and October 7, 1998 (acquisition date), and the related statements of operations, changes in stockholders' equity (deficit), and cash flows for the years ended December 31, 1996 and 1997, and for the period from January 1, 1998 to October 7, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Glyko, Inc. as of December 31, 1997 and October 7, 1998, and the results of its operations and its cash flows for the years ended December 31, 1996 and 1997, and for the period from January 1, 1998 to October 7, 1998, in conformity with generally accepted accounting principles. San Francisco, California, March 17, 1999 F-21 GLYKO, INC. BALANCE SHEETS AS OF DECEMBER 31, 1997, AND OCTOBER 7, 1998
December 31, October 7, 1997 1998 ------------ ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents........................ $ 528,280 $ 24,010 Accounts receivable, net of allowance for doubtful accounts of $10,000, and $20,000, respectively.................................... 141,744 186,340 Due from related parties......................... 86,425 108,097 Inventories...................................... 95,210 76,595 Other assets..................................... 15,178 12,478 ------------ ------------ Total current assets........................... 866,837 407,520 PROPERTY AND EQUIPMENT, net........................ 118,910 93,368 OTHER ASSETS....................................... 2,206 2,206 ------------ ------------ Total assets................................... $ 987,953 $ 503,094 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES: Accounts payable................................. $ 20,380 $ 88,490 Accrued expenses................................. 96,116 102,805 Deferred rent.................................... 7,418 12,066 Deferred revenue................................. 10,675 1,525 Payable to former stockholder.................... 365,880 0 ------------ ------------ Total current liabilities...................... 500,469 204,886 DUE TO GLYKO BIOMEDICAL, LTD....................... 3,803,820 0 ------------ ------------ Total liabilities.............................. 4,304,289 204,886 ------------ ------------ STOCKHOLDERS' EQUITY (DEFICIT): Convertible preferred stock, $0.01 par value, 5,000 shares authorized, 2,000 shares issued and outstanding at December 31, 1997, and October 7, 1998 (acquisition date)......................... 20 20 Common stock, $0.01 par value, 15,000 shares authorized, 3,882 shares issued and outstanding at December 31, 1997, and October 7, 1998 (acquisition date).............................. 39 39 Additional paid-in capital....................... 8,999,005 12,679,727 Accumulated deficit.............................. (12,315,400) (12,381,578) ------------ ------------ Total stockholders' equity (deficit)........... (3,316,336) 298,208 ------------ ------------ Total liabilities and stockholders' equity (deficit)..................................... $ 987,953 $ 503,094 ============ ============
The accompanying notes are an integral part of these statements. F-22 GLYKO, INC. STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997, AND FOR THE PERIOD ENDED OCTOBER 7, 1998
Period from January 1, Year Ended Year Ended 1998, to December December October 7, 31, 1996 31, 1997 1998 ----------- ---------- ---------- REVENUES: Sales of products and services........... $ 1,297,123 $1,202,982 $ 865,164 Other revenues........................... 33,512 860,935 294,752 ----------- ---------- ---------- Total revenues......................... 1,330,635 2,063,917 1,159,916 OPERATING COSTS AND EXPENSES: Cost of products and services............ 509,248 482,770 284,860 Research and development................. 1,014,966 633,086 613,055 Selling general and administrative....... 1,490,244 563,231 521,060 Other.................................... 0 0 (165,880) ----------- ---------- ---------- Income (Loss) from operations.......... (1,683,823) 384,830 (93,179) OTHER (LOSS) INCOME........................ 87,418 (2,045) (1,300) INTEREST INCOME............................ 18,367 12,610 28,301 ----------- ---------- ---------- Income (Loss) before income taxes...... (1,578,038) 395,395 (66,178) Provision for income taxes............. -- -- -- ----------- ---------- ---------- Net income (Loss)...................... $(1,578,038) $ 395,395 $ (66,178) =========== ========== ==========
The accompanying notes are an integral part of these statements. F-23 GLYKO, INC. STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997, AND FOR THE PERIOD ENDED OCTOBER 7, 1998
Preferred Total Stock Common Stock Additional Stockholders' ------------- ------------- Paid-in Accumulated Equity Shares Amount Shares Amount Capital Deficit (Deficit) ------ ------ ------ ------ ----------- ------------ ------------- BALANCE, January 1, 1996................... 2,000 $20 3,882 $39 $ 8,999,005 $(11,132,757) $(2,133,693) Net loss............... 0 0 0 0 0 (1,578,038) (1,578,038) ----- --- ----- --- ----------- ------------ ----------- BALANCE, December 31, 1996................... 2,000 20 3,882 39 8,999,005 (12,710,795) (3,711,731) Net income............. 0 0 0 0 0 395,395 395,395 ----- --- ----- --- ----------- ------------ ----------- BALANCE, December 31, 1997................... 2,000 20 3,882 39 8,999,005 (12,315,400) (3,316,336) Balance due to Glyko Biomedical, Ltd. converted to additional paid-in capital............... 0 0 0 0 3,680,722 0 3,680,722 Net loss for the period ended October 7, 1998 (acquisition date).... 0 0 0 0 0 (66,178) (66,178) ----- --- ----- --- ----------- ------------ ----------- BALANCE, October 7, 1998................... 2,000 $20 3,882 $39 $12,679,727 $(12,381,578) $ 298,208 ===== === ===== === =========== ============ ===========
The accompanying notes are an integral part of these statements. F-24 GLYKO, INC. STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997, AND FOR THE PERIOD ENDED OCTOBER 7, 1998 (ACQUISITION DATE)
Period from January 1, 1998, Year Ended Year Ended to December December 31, October 31, 1996 1997 7, 1998 ----------- ------------ --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) income....................... $(1,578,038) $ 395,395 $ (66,178) Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: Depreciation.......................... 61,139 58,914 34,376 Loss on disposal of fixed assets...... 4,046 1,230 0 Gain on lease abandonment............. (62,538) 0 0 Gain on settlement of claim........... 0 0 (165,880) Changes in operating assets and liabilities: Accounts receivable................... 200,630 14,432 (44,596) Inventories........................... 40,066 (26,758) 18,615 Due from related parties.............. 0 (69,898) (21,672) Other assets.......................... (20,854) 10,841 2,701 Accounts payable...................... 52,357 (154,352) 68,110 Accrued expenses...................... (20,097) (113,195) 15,825 Deferred rent......................... 0 7,418 4,648 Deferred revenue...................... (174,386) 10,675 (9,150) Payable to former stockholder......... 0 0 (200,000) Payable to related parties............ 0 0 (132,235) ----------- --------- --------- Net cash (used in) provided by operating activities............... (1,497,675) 134,702 (495,436) ----------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment...... (61,061) (71,009) (8,834) ----------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Payment of capital lease obligations.... (14,016) 0 0 Investment from Glyko Biomedical........ 1,163,024 253,595 0 ----------- --------- --------- Net cash provided by financing activities......................... 1,149,008 253,595 0 ----------- --------- --------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS.............................. (409,728) 317,288 (504,270) CASH AND CASH EQUIVALENTS: Beginning of period..................... 620,720 210,992 528,280 ----------- --------- --------- End of period........................... $ 210,992 $ 528,280 $ 24,010 =========== ========= ========= SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS: Balance due to Glyko Biomedical converted to equity.................... 0 0 3,680,722 =========== ========= =========
The accompanying notes are an integral part of these statements. F-25 GLYKO, INC. NOTES TO FINANCIAL STATEMENTS 1. THE COMPANY AND DESCRIPTION OF THE BUSINESS: Glyko, Inc. (the Company) is a Delaware corporation that was incorporated in October 1990. Until October 7, 1998, the Company had been a wholly owned subsidiary of Glyko Biomedical, Ltd. (GBL), a Canadian company. The Company's principal activities are the sale of chemical kits and equipment incorporating its proprietary carbohydrate technology and the development of commercial applications based on complex carbohydrates. The Company has developed a line of analytic instrumentation laboratory products that include an imaging system, analysis software, and a chemical analysis kit referred to as analytic and diagnostic products, which are used in carbohydrate testing, including detection, separation, and sequencing. Shipment of these products began in December 1992. The Company's technology is called "FACE" or Fluorophore- Assisted Carbohydrate Electrophoresis. The Company is continuing to develop additional chemical kits for use with the imaging system and is also developing a line of diagnostic products based on carbohydrate technology. As further discussed in Note 10, on October 7, 1998, the Company was acquired by its affiliate, BioMarin Pharmaceutical Inc. (BioMarin). BioMarin is a biopharmaceutical company specializing in the discovery, development and commercialization of carbohydrate enzyme therapeutics. As consideration for the acquisition of all of the outstanding shares of the Company, BioMarin issued 2,259,039 shares of common stock to GBL and assumed stock options held by certain employees of the Company to purchase shares of GBL's common stock, which will require 255,540 shares of the Company's common stock to be issued, if fully exercised and paid $500 in cash (see Note 10). The accompanying financial statements include the balance sheet of the Company as of October 7, 1998 (acquisition date), and the statements of operations, changes in stockholders equity, and cash flows for the period from January 1, 1998, to October 7, 1998. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Use of Estimates The preparation of the Company's financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Significant estimates made by management include allowance for doubtful accounts receivable and certain other reserves. Cash and Cash Equivalents Cash and cash equivalents consist of amounts held with banks and short-term investments with original maturities of 90 days or less. Inventories Inventories consist of raw materials, analytic and diagnostic kits, and instrument-based systems held for sale. Inventories are stated at the lower of cost (first-in, first-out method) or estimated market value. The components of inventories are as follows:
December 31, 1997 October 7, 1998 ----------------- --------------- Raw materials............................ $90,647 $73,845 Finished products........................ 4,563 2,750 ------- ------- $95,210 $76,595 ======= =======
F-26 GLYKO, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) Property and Equipment Property and equipment are stated at cost. The cost and accumulated depreciation for property and equipment sold, retired, or otherwise disposed of are relieved from the accounts, and the resulting gains or losses are reflected in the statements of operations. Depreciation is computed using the straight- line method over the following estimated useful lives: Office furniture................................................ 5 years Computer equipment.............................................. 3 years Lab and production equipment.................................... 5 years
Product Sales The Company recognizes product revenues and related cost of sales upon shipment of products. Service revenues are recognized upon completion of services as evidenced by the transmission of reports to customers. Other revenues, principally licensing and distribution fees, are recognized upon completion of applicable contractual obligations. Payments received in advance for future product shipments or hardware maintenance and service contracts are classified as deferred revenue on the accompanying balance sheets. Upon shipment of products, revenue is recognized and the corresponding liability (deferred revenue) is reduced. Revenues from maintenance and service contracts are recognized monthly pro rata over the period of the contract, and the corresponding liability (deferred revenue) is reduced. Income Taxes The Company provides for income taxes under Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." Under SFAS No. 109, deferred income taxes are recorded to reflect the tax consequences on future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each period-end. The Company has a cumulative net operating loss carryforward since inception, resulting in net deferred tax assets. A valuation allowance is placed on the net deferred tax assets to reduce them to their net realizable values. 3. PROPERTY AND EQUIPMENT: Property and equipment at December 31, 1997, and October 7, 1998 consisted of the following:
December 31, 1997 October 7, 1998 ----------------- --------------- Lab equipment............................ $ 229,701 $ 231,586 Computer equipment....................... 94,712 101,661 Production equipment..................... 37,164 37,164 Office furniture......................... 13,510 13,510 Leasehold improvements................... 68,343 68,343 --------- --------- 443,430 452,264 Less: Accumulated depreciation........... (324,520) (358,896) --------- --------- Property and equipment, net............ $ 118,910 $ 93,368 ========= =========
Total depreciation expense for the years ended December 31, 1996 and 1997, and for the period from January 1, 1998 to October 7, 1998 was $61,139, $58,914, and $34,376, respectively. F-27 GLYKO, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) 4. INCOME TAXES: The significant components of net deferred tax assets and liabilities are as follows:
December 31, 1997 October 7, 1998 ----------------- --------------- Net operating loss carryforwards....... $ 4,573,000 $ 4,520,000 Research and development capitalized... 60,000 782,000 Research and development credit carryforwards......................... 595,000 668,000 Other.................................. (255,000) (249,000) Valuation allowance.................... (4,973,000) (5,721,000) ----------- ----------- Net deferred tax asset................. $ 0 $ 0 =========== ===========
The reconciliation of the effective tax rate is as follows:
Year Ended December 31 ------------------------------ Period Ended 1996 1997 October 7, 1998 -------------- ------------- ---------------- Amount % Amount % Amount % --------- --- -------- --- ---------- ----- U.S. statutory tax rate..... $(495,000) (34)% $ 96,000 34% $ 6,000 34% State taxes, net of federal income tax benefit......... (87,000) (6) 17,000 6 1,000 6 Research and development tax credit..................... (17,000) (1) (37,000) (13) (48,000) (259) Other....................... (155,000) (10) 4,000 2 53,000 284 Change in valuation allowance.................. 754,000 51 (80,000) (29) (12,000) (65) --------- --- -------- --- --------- ----- Provision for income taxes.................... $ 0 0% $ 0 0% $ 0 0% ========= === ======== === ========= =====
As of October 7, 1998, net operating loss carryforwards are approximately $11.9 million and $5.3 million for federal and California income tax purposes, respectively. Federal operating loss carryforwards expire from 2006 to 2012, and state operating loss carryforwards expire from 1998 to 2001. The Company also has research and development credits available to reduce future federal and California income taxes, if any, of approximately $452,000 and $216,000, respectively, at October 7, 1998 (acquisition date). These federal and state carryovers expire from 2007 to 2011. The Tax Reform Act of 1986 contains provisions that may limit, for federal and state tax purposes, the net operating loss carryforwards and research and development credits available to be used in any given year in certain situations, including sale of equity securities and other significant changes in ownership. As a result of the acquisition and the resultant change in ownership of the Company by BioMarin, the utilization of the Company's net operating losses will be limited and such net operating losses will only be available to offset the taxable income, if any, of the Company. F-28 GLYKO, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) 5. COMMITMENTS AND CONTINGENCIES: Leases The Company leases its facilities and office and other equipment under agreements that expire at various dates through 2000. Future minimum annual rental commitments under operating leases are as follows:
Years Ending October 7 ---------------------- 1999........................................................... $ 81,660 2000........................................................... 43,915 2001........................................................... -- 2002........................................................... -- 2003 and thereafter............................................ -- -------- $125,575 ========
Total rent expense for the years ended December 31, 1996 and 1997, and for the period from January 1, 1998 to October 7, 1998 was $274,284, $57,950 (net of sublease rental income) and $35,636 (net of sublease rental income), respectively. Product Liability and Lack of Insurance The Company is subject to the risk of exposure to product liability claims in the event that the use of its technology results in adverse effects during testing or commercial sale. The Company currently does not maintain product liability insurance. There can be no assurance that the Company will be able to obtain product liability insurance coverage at economically reasonable rates or that such insurance will provide adequate coverage against all possible claims. 6. CONVERTIBLE PREFERRED STOCK: The Company has authorized 5,000 shares of convertible preferred stock with a par value of $0.01 per share. The convertible preferred stock is entitled to a preference of $1,000 per share plus any declared but unpaid dividends upon voluntary or involuntary liquidation, dissolution, or winding up of the Company. The convertible preferred stock is convertible at the option of the holder into common stock of the Company. The number of shares of common stock into which shares of preferred may be converted is determined by multiplying the number of preferred shares to be converted by the conversion ratio in effect on the date of conversion. The conversion ratio is subject to adjustment in certain events. Holders of preferred stock are entitled to the number of votes as is equal to the number of shares of common stock into which such shares of preferred could be converted on the record date for the vote. 7. STOCK OPTION PLAN: GBL has a stock option plan (the Plan) under which options to purchase common stock in GBL may be granted by the Board of Directors to GBL's directors, officers, and consultants at not less than fair market value, less any permissible discounts, on the date of grant. Options granted under the Plan may be incentive stock options (as defined under Section 422 of the U.S. Internal Revenue Code) or nonstatutory stock options. Options are exercisable over a number of years specified at the time of the grant, which cannot exceed ten years. The maximum aggregate number of shares that may be granted and sold under the Plan is 3,000,000 shares. Directors, officers, consultants, and employees of the Company are also eligible under the Plan. F-29 GLYKO, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) The Company accounts for these option grants under APB Opinion No. 25, under which no compensation cost has been recognized, except for options granted to consultants, because, under the Plan, the option exercise price equals the market value of stock on the date of grant. In general, plan options vest over 48 months, and all options expire after five years or 90 days after employee termination. Had compensation cost for the Plan been determined consistently with FASB Statement No. 123, the Company's net income (loss) would have been increased to the following pro forma amounts to reflect the compensation expense associated with the grants to the Company's directors, officers, consultants, and employees:
Year Ended December 31 --------------------- Period Ended 1996 1997 October 7, 1998 ----------- -------- --------------- Net income (loss): As reported......................... $(1,578,038) $395,395 $ (66,178) Pro forma........................... (1,646,866) 312,666 (188,379)
Because the FASB Statement No. 123 method of accounting has not been applied to options granted prior to January 1, 1995, the resulting pro forma compensation cost may not be representative of that to be expected in future years. The fair value of each option granted is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions used for grants in 1996, 1997, and 1998, respectively: risk-free weighted average interest rates of 5.3 percent, 6.3 percent, and 5.4 percent; expected dividend yield of zero percent; expected life of four years for the Plan's options; expected volatility of 87 percent, 92 percent, 65 percent. 8. 401(k) PLAN: The Company participates in the Glyko Retirement Savings Plan (the 401(k) Plan). Most employees (Participants) are eligible to participate following the start of their employment on the earlier of the next occurring January 1 or July 1. Participants may contribute up to approximately 15 percent of their current compensation, up to a statutorily prescribed annual limit, to the 401(k) Plan. 9. RELATED-PARTY TRANSACTIONS: The Company subleases office and lab space, certain administrative functions, and research and development functions to BioMarin. BioMarin reimburses the Company for rent, salaries and related Company benefits, and other administrative costs, and the Company reimburses BioMarin for salaries and related benefits. The net reimbursement amount received by the Company for the years ended December 31, 1996 and 1997, and for the period from January 1, 1998 to October 1, 1998, was $0, $240,848, and $101,888, respectively. The Company also provided analytical services and products to BioMarin at a discount in 1997 and 1998. Total receipts to the Company from sales to BioMarin for the years ended December 31, 1996 and 1997, and for the period from January 1, 1998 to October 1, 1998 were $0, $39,301, and $111,702, respectively. At December 31, 1997, the Company had recorded a payable to stockholder amount of $365,880. This amount related to a claim by a previous lessor relating to a facilities dispute and other matters. This claim was settled during the year ended December 31, 1998, and the Company recorded a gain of $165,880, as the amount of the settlement was less than the amount provided for by the Company. F-30 GLYKO, INC. NOTES TO FINANCIAL STATEMENTS--(Continued) 10. ACQUISITION BY BIOMARIN: On October 7, 1998, GBL entered into an agreement to sell all of the outstanding stock of the Company to its affiliate, BioMarin. The total consideration for the acquisition was $14,500,500, comprising 2,259,039 shares of common stock of BioMarin, valued at $6.00 per share, the assumption of options held by certain employees of the Company to purchase shares of GBL's common stock, which will require 255,540 shares of BioMarin common stock to be issued if fully exercised, and $500 in cash. The acquisition was accounted for as a purchase. In conjunction with the sale, GBL converted $3,680,722 of its intercompany receivable into equity in the Company. The remaining balance of $1,212,278 was repaid to GBL in cash. F-31 Liver biopsy from MPS-I dog Liver biopsy from MPS-1 dog treated with MB 101 Gel image of MPS material in children with various MPS diseases Aspergillus culture Aspergillus culture treated with BM 104 Shares BIOMARIN PHARMACEUTICAL INC. Common Stock [LOGO] --------------------- PROSPECTUS --------------------- Until [ . ], all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions. U.S. Bancorp Piper Jaffray Vontobel Securities Ltd. Schroders Leerink Swann & Company , 1999 PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 13. Other Expenses of Issuance and Distribution The following table sets forth the costs and expenses, other than underwriting discounts and commissions, payable by the Registrant in connection with the sale of Common Stock being registered. All amounts are estimates except the registration fee and the NASD filing fee.
Amount To Be Paid ------- Registration fee.................................................. $16,263 NASD filing fee................................................... 6,350 Nasdaq National Market listing fee................................ * Swiss Exchange filing fees........................................ * Printing and engraving............................................ * Legal fees and expenses........................................... * Accounting fees and expenses...................................... * Blue Sky fees and expenses........................................ * Transfer Agent fees............................................... * Miscellaneous..................................................... * ------- Total......................................................... $ =======
- ------------------------------- *Indicates that these fees shall be filed by amendment. Item 14. Indemnification of Directors and Officers Reference is made to the Amended and Restated Certificate of Incorporation of the Registrant; the Bylaws of the Registrant; Section 145 of the Delaware General Corporation Law; and the form of indemnification agreement filed herewith as Exhibit 10.1 which, among other things, and subject to certain conditions, authorize the Registrant to indemnify, or indemnify by their terms, as the case may be, the directors and officers of the Registrant against certain liabilities and expenses incurred by such persons in connection with claims made by reason of their being such a director or officer. The form of the Underwriting Agreement filed as Exhibit 1.1 to this Registration Statement provides for indemnification by the Underwriters and their controlling persons, on the one hand of the Registrant and its controlling persons on the other hand, for certain liabilities arising under the Securities Act of 1933, as amended (the "Act"), the Securities Exchange Act of 1934, as amended or otherwise. The Registrant maintains director's and officer's insurance providing indemnification against certain liabilities for certain of the Registrant's directors, officers, affiliates, partners or employees. The indemnification provisions in the Registrant's Bylaws, and the indemnification agreements entered into between the Registrant and its directors and executive officers, may be sufficiently broad to permit indemnification of the Registrant's officers and directors for liabilities arising under the Act. Reference is made to the following documents filed as exhibits to this Registration Statement regarding relevant indemnification provisions described above and elsewhere herein: (1) the form of Underwriting Agreement, filed as Exhibit 1.1; (2) the Amended and Restated Certificate of Incorporation, filed as Exhibit 3.1B; (3) the Bylaws of the Registrant, filed as Exhibit 3.2; and (4) the form of Indemnification Agreement entered into by the Registrant with each of its directors and executive officers, filed as Exhibit 10.1. II-1 Item 15. Recent Sales of Unregistered Securities Since its inception, the Registrant has issued the following unregistered securities: (1) On April 19, 1997, the Registrant issued and sold 1,500,000 shares of common stock to an institutional investor for aggregate consideration of $1,500,000. (2) On September 24, 1997, the Registrant issued and sold 7,000,000 shares of common stock to an institutional investor in exchange for a license valued at $7,000,000. (3) On October 1, 1997, the Registrant issued and sold 2,500,000 shares of common stock to three founders for aggregate consideration in the form of promissory notes in the aggregate principal amount of $2,500,000. (4) On October 1, 1997, the Registrant issued and sold 3,289,000 shares of common stock and a warrant to purchase 299,000 shares of common stock to a group of institutional investors, individuals and venture capital funds for aggregate consideration of $2,911,500. (5) On October 16, 1997, the Registrant issued and sold 750,000 shares of common stock to a group of individuals for aggregate consideration of $750,000. (6) On December 30, 1997, the Registrant issued and sold 5,527,500 shares of common stock and a warrant to purchase 502,500 shares of common stock to an institutional investor and a venture capital fund for aggregate consideration of $5,016,000. (7) On June 30, 1998, the Registrant issued and sold 598,535 shares of common stock to a group of institutional investors and a venture capital fund for aggregate consideration of $3,328,000. (8) On July 14, 1998, the Registrant issued and sold a total of 1,385,414 shares of common stock to a group of institutional investors, individuals and venture capital funds for aggregate consideration of $7,915,010. (9) On August 3, 1998, the Registrant issued and sold a total of 31,386 shares of common stock to a group of institutional investors and individuals for aggregate consideration of $175,998. (10) On September 4, 1998, the Registrant issued and sold a total of 1,333,333 shares of common stock to an institutional investor for aggregate consideration of $7,999,998. (11) On October 7, 1998, the Registrant issued 2,259,039 shares of common stock to Glyko Biomedical, valued at $13,554,234, and assumed certain stock options which were converted into options to purchase 255,540 shares of common stock of the Registrant as consideration for the acquisition of 100% of the voting securities of a subsidiary of Glyko Biomedical. (12) On April 12, 1999, the Registrant issued and sold to a group of institutional investors $26.0 million convertible promissory notes convertible, according to their terms, into shares of the Registrant's common stock initially at a price of $10.00 per share, subject to subsequent adjustment. (13) From November 1997 to March 31, 1999, the Registrant issued and sold 1,973 shares of common stock to employees and directors of and consultants to the Registrant upon exercise of stock options granted pursuant to the Registrant's 1997 Stock Plan and 1998 Director Plan. There were no underwriters employed in connection with any of the transactions set forth in Item 15. For additional information concerning these equity investment transactions, reference is made to the information contained under the caption "Certain Transactions" in the form of prospectus included herein. II-2 The issuances described in Items 15(1), 15(2), and 15(4) through 15(12) were deemed to be exempt from registration under the Act in reliance on Section 4(2) of the Act as transactions by an issuer not involving a public offering. In addition, the issuances described in Items 15(3) and 15(13) were deemed exempt from registration under the Act in reliance on Rule 701 promulgated thereunder as transactions pursuant to compensatory benefit plans and contracts relating to compensation. The recipients of securities in each such transaction represented their intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the share certificates and other instruments issued in such transactions. All recipients either received adequate information about the Registrant or had access, through employment or other relationships, to such information. Item 16. Exhibits and Financial Statement Schedules (a) Exhibits
Exhibit Number Description of Document ------- ----------------------- 1.1* Form of Underwriting Agreement. 2.1 Share Exchange Agreement with Glyko Biomedical, Ltd. 3.1A Amended and Restated Certificate of Incorporation of BioMarin Pharmaceutical Inc., a Delaware Corporation, as filed on March 22, 1999. 3.1B(1)* Form of Amended and Restated Certificate of Incorporation of BioMarin Pharmaceutical Inc., a Delaware Corporation. 3.2 Amended and Restated Bylaws of BioMarin Pharmaceutical Inc., a Delaware corporation. 4.1 Form of Amended and Restated Registration Rights Agreement, by and among the Company and the investors named therein. 5.1* Opinion of Wilson Sonsini Goodrich & Rosati. 10.1 Form of Indemnification Agreement for directors and officers. 10.2 1997 Stock Plan, as amended on December 22, 1998, and forms of agreements thereunder. 10.3 1998 Director Option Plan and forms of agreements thereunder 10.4 1998 Employee Stock Purchase Plan and forms of agreements thereunder. 10.5 Amended and Restated Founder's Stock Purchase Agreement with Dr. John C. Klock dated as of October 1, 1997 with exhibits. 10.6 Amended and Restated Founder's Stock Purchase Agreement with Grant W. Denison, Jr. dated as of October 1, 1997 with exhibits. 10.7 Amended and Restated Founder's Stock Purchase Agreement with Dr. Christopher M. Starr dated as of October 1, 1997 with exhibits. 10.8 Employment Agreement with Dr. John C. Klock dated June 26, 1997, as amended. 10.9 Employment Agreement with Grant W. Denison, Jr. dated June 26, 1997, as amended. 10.10 Employment Agreement with Dr. Christopher M. Starr dated June 26, 1997, as amended. 10.11 Employment Agreement with Raymond W. Anderson dated June 22, 1998, as amended. 10.12 Employment Agreement with Stuart J. Swiedler, M.D., Ph.D., dated May 29, 1998, as amended.
II-3
Exhibit Number Description of Document ------- ----------------------- 10.13 Employment Agreement with Emil Kakkis, M.D., Ph.D., dated June 30, 1998, as amended. 10.14 Employment Agreement between Brian K. Brandley, Ph.D and Glyko, Inc. dated February 22, 1998, as amended. 10.15 License Agreement with Glyko Biomedical, Ltd. dated June 26, 1997 with exhibits attached. 10.16* Option Agreement with W.R. Grace & Co. dated as of May 1, 1998.(2) 10.17* Grant Terms and Conditions Agreement with Harbor-UCLA Research and Education Institute dated April 1, 1997, as amended. (2) 10.18* License Agreement with Womens and Children's Hospital, Adelaide, Australia dated August 14, 1998.(2) 10.19 Lease Agreement dated May 18, 1998 for 371 Bel Marin Keys Boulevard, as amended. 10.20 Standard NNN Lease dated June 25, 1998 for 46 Galli Drive. 10.21 Standard Industrial Commercial Single-Tenant Lease dated May 29, 1998 for 110 Digital Drive, as amended. 10.22 Sublease dated June 24, 1998 for 1123 West Carson Street. 10.23 Commercial Lease and Deposit Receipt with Glyko, Inc. for 11 Pimintel Court and 13 Pimintel Court, dated December 23, 1996. 10.24* Collaboration Agreement with Genzyme Corporation dated September 4, 1998. (2) 10.25 Purchase Agreement with Genzyme Corporation dated September 4, 1998. 10.26 Subscription Agreement with Genzyme dated September 4, 1998. 10.27 Form of Convertible Note Purchase Agreement dated as of April 12, 1999 with form of convertible promissory note. 21.1 List of Subsidiaries 23.1 Consent of Independent Public Accountants. 23.2* Consent of Counsel (included in Exhibit 5.1). 24.1 Power of Attorney (see page II-6). 27.1 Financial Data Schedule (available in EDGAR format only).
------------------------------- * To be filed by Amendment. (1) As proposed to be filed with the Secretary of State of the State of Delaware prior to the effectiveness of the offering. (2) This Exhibit has been filed separately with the Commission pursuant to an application for confidential treatment. The confidential portions of this Exhibit have been omitted and are marked by an asterisk. (b) Financial Statement Schedule None. Schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or notes thereto. II-4 Item 17. Undertakings Insofar as indemnification for liabilities arising under the Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions referenced in Item 14 of this Registration Statement or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer, or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered hereunder, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. The undersigned Registrant hereby undertakes that for the purpose of determining any liability under the Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. The undersigned Registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreements certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser. II-5 SIGNATURES Pursuant to the of the Securities Act of 1933, the Registrant has duly caused this Registration Statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Novato, State of California, on this 4th day of May, 1999. Biomarin Pharmaceutical Inc. /s/ Grant W. Denison, Jr. By: _________________________________ Grant W. Denison, Jr. Chief Executive Officer and Chairman of the Board POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Grant W. Denison, Jr. and Raymond W. Anderson, and each of them, his true and lawful agent, proxy and attorney-in- fact, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to (i) act on, sign and file with the Securities and Exchange Commission any and all amendments (including post-effective amendments) to this registration statement together with all schedules and exhibits thereto and any subsequent registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended, together with all schedules and exhibits thereto, (ii) act on, sign and file such certificates, instruments, agreements and other documents as may be necessary or appropriate in connection therewith, (iii) act on and file any supplement to any prospectus included in this registration statement or any such amendment or any subsequent registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and (iv) take any and all actions which may be necessary or appropriate to be done, as fully for all intents and purposes as he or she might or could do in person, hereby approving, ratifying and confirming all that such agent, proxy and attorney-in-fact or any of his substitutes may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- /s/ Grant W. Denison, Jr. Chief Executive Officer May 4, 1999 ______________________________________ and Chairman of the Board Grant W. Denison, Jr. (Principal Executive Officer) /s/ Raymond W. Anderson Chief Financial Officer May 4, 1999 ______________________________________ and Vice President of Raymond W. Anderson Finance and Administration (Principal Financial and Accounting Officer) /s/ Ansbert S. Gadicke Director May 4, 1999 ______________________________________ Ansbert S. Gadicke, M.D., Ph.D. /s/ John C. Klock, M.D. Director May 4, 1999 ______________________________________ John C. Klock, M.D. /s/ Erich Sager Director May 4, 1999 ______________________________________ Erich Sager /s/ Gwynn R. Williams Director May 4, 1999 ______________________________________ Gwynn R. Williams
II-6 EXHIBIT INDEX
Exhibit Number Description of Document ------- ----------------------- 1.1* Form of Underwriting Agreement. 2.1 Share Exchange Agreement with Glyko Biomedical, Ltd. 3.1A Amended and Restated Certificate of Incorporation of BioMarin Pharmaceutical Inc., a Delaware Corporation, as filed on March 22, 1999. 3.1B(1)* Form of Amended and Restated Certificate of Incorporation of BioMarin Pharmaceutical Inc., a Delaware Corporation. 3.2 Amended and Restated Bylaws of BioMarin Pharmaceutical Inc., a Delaware corporation. 4.1 Form of Amended and Restated Registration Rights Agreement, by and among the Company and the investors named therein. 5.1* Opinion of Wilson Sonsini Goodrich & Rosati. 10.1 Form of Indemnification Agreement for directors and officers. 10.2 1997 Stock Plan as amended on December 22, 1998 and forms of agreements thereunder. 10.3 1998 Director Option Plan and forms of agreements thereunder. 10.4 1998 Employee Stock Purchase Plan and forms of agreements thereunder. 10.5 Amended and Restated Founder's Stock Purchase Agreement with Dr. John C. Klock dated as of October 1, 1997, with exhibits. 10.6 Amended and Restated Founder's Stock Purchase Agreement with Grant W. Denison, Jr. dated as of October 1, 1997, with exhibits. 10.7 Amended and Restated Founder's Stock Purchase Agreement with Dr. Christopher M. Starr dated as of October 1, 1997, with exhibits. 10.8 Employment Agreement with Dr. John C. Klock dated June 26, 1997, as amended. 10.9 Employment Agreement with Grant W. Denison, Jr. dated June 26, 1997, as amended. 10.10 Employment Agreement with Dr. Christopher M. Starr dated June 26, 1997, as amended. 10.11 Employment Agreement with Raymond W. Anderson dated June 22, 1998, as amended. 10.12 Employment Agreement with Stuart J. Swiedler, M.D., Ph.D., dated May 29, 1998, as amended. 10.13 Employment Agreement with Emil Kakkis, M.D., Ph.D., dated June 30, 1998, as amended. 10.14 Employment Agreement between Brian K. Brandley PhD and Glyko Inc. dated February 22, 1998, as amended. 10.15 License Agreement with Glyko Biomedical, Ltd. dated June 26, 1997 with exhibits attached.
Exhibit Number Description of Document ------- ----------------------- 10.16* Option Agreement with W.R. Grace & Co. dated as of May 1, 1998.(2) 10.17* Grant Terms and Conditions Agreement with Harbor-UCLA Research and Education Institute dated April 1, 1997, as amended.(2) 10.18* License Agreement with Womens and Children's Hospital Adelaide, Australia dated August 14, 1998.(2) 10.19 Lease Agreement dated May 18, 1998 for 371 Bel Marin Keys Boulevard, as amended. 10.20 Standard NNN Lease dated June 25, 1998 for 46 Galli Drive. 10.21 Standard Industrial Commercial Single-Tenant Lease dated May 29, 1998 for 110 Digital Drive, as amended. 10.22 Sublease dated June 24, 1998 for 1123 West Carson Street. 10.23 Commercial Lease and Deposit Receipt with Glyko, Inc. for 11 Pimintel Court and 13 Pimintel Court, dated December 23, 1996. 10.24* Collaboration Agreement with Genzyme Corporation dated September 4, 1998.(2) 10.25 Purchase Agreement with Genzyme Corporation dated September 4, 1998. 10.26 Subscription Agreement with Genzyme dated September 4, 1998. 10.27 Form of Convertible Note Purchase Agreement dated as of April 12, 1999 with form of convertible promissory note. 21.1 List of Subsidiaries 23.1 Consent of Independent Public Accountants. 23.2* Consent of Counsel (included in Exhibit 5.1). 24.1 Power of Attorney (see page II-6). 27.1 Financial Data Schedule (available in EDGAR format only).
-------- * To be filed by Amendment. (1) As proposed to be filed with the Secretary of State of the State of Delaware prior to the effectiveness of the offering. (2) This Exhibit has been filed separately with the Commission pursuant to an application for confidential treatment. The confidential portions of this Exhibit have been omitted and are marked by an asterisk. EX-2.1 2 SHARE OF AGREEMENT WITH GLYKO BIOMEDICAL EXHIBIT 2.1 THIS SHARE EXCHANGE AGREEMENT made as of the 15th day of September, 1998. B E T W E E N: GLYKO BIOMEDICAL LTD., a corporation incorporated under the laws of Canada, (hereinafter called the "Vendor") OF THE FIRST PART; - and - BIOMARIN PHARMACEUTICAL INC., a corporation incorporated under the laws of the State of Delaware, (hereinafter called the "Purchaser") OF THE SECOND PART. WHEREAS the Vendor is the sole stockholder of Glyko, Inc., a Delaware corporation, and desires to sell and to cause to be sold, and the Purchaser desires to purchase from the Vendor all of the issued and outstanding shares of capital stock of Glyko, Inc., upon the terms and conditions set forth in this Agreement; NOW THEREFORE THIS AGREEMENT WITNESSETH in consideration of the mutual covenants and agreements herein contained, and other good and valuable consideration, Vendor and Purchaser represent, warrant, covenant and agree as follows: 1. INTERPRETATION -------------- 1.1 Defined Terms. Where used herein or in any amendments hereto, the ------------- following terms shall have the following meanings: "AGREEMENT" means this Share Exchange Agreement, all Schedules attached hereto and all amendments made hereto or thereto by written agreement signed by each of Vendor and Purchaser; "BIOMARIN SHARES" means 2,259,039 shares of Purchaser's Common Stock to be issued in the name of Vendor as partial payment of the Purchase Price pursuant to Section 2.2 hereof; "BUSINESS DAY" means any day, which is not a Saturday, Sunday or a statutory holiday in the Province of Ontario or the State of California; "CLOSING" means the consummation of the Transaction as herein contemplated; "CLOSING DATE" means October 7, 1998, or such other date as may be mutually agreed upon by the parties hereto in writing for the closing of the transactions contemplated by this Agreement; "EFFECTIVE DATE" means September 15, 1998; "EMPLOYEE OPTIONS" means the options to purchase a total of 585,969 shares of Common Stock of the Vendor which are held by certain employees of Glyko, Inc., which options shall be assumed by Purchaser and converted into options to purchase 255,540 shares of Common Stock of Purchaser as enumerated in Schedule "A" attached hereto; ------------ "ENCUMBRANCES" means any and all claims, liens, security interests, mortgages, pledges, pre-emptive rights, charges, options, equity interests, encumbrances, proxies, voting agreements, voting trusts or other interests of any nature or kind whatsoever, howsoever created; "GLYKO SHARES" means 3,882 shares of Common Stock and 2,000 shares of Preferred Stock of Glyko, Inc., representing all of the issued and outstanding capital stock of Glyko, Inc. as of the Closing Date; "INTELLECTUAL PROPERTY" means all patents, patent applications and other patent rights, trade secrets, copyrights and other proprietary rights as listed on Schedule "B" hereto; ------------ "PERSON" includes an individual, partnership, association, unincorporated organization, trust, corporation and a natural person acting in such person's individual capacity or in such person's capacity as trustee, executor, administrator, agent or other legal representative; "PURCHASE PRICE" has the meaning attributed thereto in Section 2.2 hereof; "TECHNOLOGY" means all know-how, processes, formulae, concepts, ideas, data, technical and non-technical data and information, testing results, descriptions, technologies, procedures, articles of manufacture, compositions of matter (including pharmaceutical, chemical, biological, genetic and biochemical compositions), designs, inventions, discoveries, documents and works of authorship, whether or not patentable or patented, now owned or licensed by Glyko, Inc.; "TIME OF CLOSING" means 10:00 a.m. (San Francisco time) on the Closing Date; and "TRANSACTION" means the sale by the Vendor and the purchase by the Purchaser of the Glyko Shares as contemplated herein. 1.2 Currency. Unless otherwise expressly provided, all dollar amounts referred -------- to in this Agreement are in U.S. funds. 1.3 Gender and Number. Except where the context otherwise indicates, words ----------------- importing the singular number only shall include the plural, and vice versa, and words -2- importing the masculine gender shall include the feminine and neutral genders, and vice versa. 1.4 Division and Headings. The division of this Agreement into Articles and --------------------- sections and the insertion of headings are for the convenience of reference only and shall not affect the construction or interpretation of this Agreement . The terms "this Agreement", "hereof", "hereunder", "hereto", "herein" and similar expressions refer to this Agreement and not to any particular Article, section or other portion of this Agreement and include any amendment hereto. Unless something in the subject matter or context is inconsistent therewith, references herein to Articles and sections are to Articles and sections of this Agreement. 1.5 To the knowledge of. The term "to the knowledge of" the appropriate party -------------------- as used herein means to the knowledge of the current officers of the appropriate party without any special inquiry or investigation whatsoever. 2. AGREEMENT TO EXCHANGE --------------------- 2.1 Transfer. Subject to the terms and conditions hereof, on the Closing Date -------- at the Time of Closing, the Vendor shall deliver to the Purchaser certificates representing the Glyko Shares together with such executed documentation as is necessary and appropriate to effect the transfer of ownership of the Glyko Shares from Vendor to Purchaser in exchange for good and valuable consideration enumerated in Section 2.2 below. 2.2 Payment of Purchase Price. The purchase price for the Glyko Shares shall ------------------------- be equal to the sum of $14,500,500 (the "Purchase Price"). The Purchase Price shall be paid and satisfied by Purchaser as follows: (i) the assumption by the Purchaser of responsibility for the Employee Options as discussed in Section 2.3 below and as set forth on Schedule A attached hereto, having an aggregate value ---------- as enumerated therein, (ii) the delivery to the Vendor of a certificate representing the BioMarin Shares issued in the name of Vendor, such BioMarin Shares valued at $6.00 per share and (iii) a cash payment of $500. 2.3 Assumption of Stock Options. At the Effective Date, certain Employee --------------------------- Options outstanding under the Vendor's Share Option Plan - 1994 (the "Option ------ Plan"), or otherwise, shall be assumed by Purchaser as follows: - ---- (i) At the Effective Date, certain Employee Options listed on Schedule A ---------- attached hereto, whether vested or unvested, shall be, in connection with the Transaction, assumed by Purchaser. Each Employee Option so assumed by Purchaser under this Agreement shall continue to have, and be subject to, the same terms and conditions set forth in the Option Plan, except that: (A) each Employee Option shall be exercisable for that number of whole shares of Common Stock of Purchaser equal to the product of the number of shares of Common Stock of Vendor that were issuable upon exercise of such Employee Option immediately prior to the Effective Date multiplied by the Conversion Ratio, as defined in subparagraph (ii) below, rounded down to the nearest whole number of shares of Common Stock of Purchaser and (B) the per share exercise price for the shares of Common Stock of Purchaser issuable upon exercise of such assumed Employee Option shall be equal to the quotient determined by dividing the exercise price per share of Common Stock of Vendor at which such Employee Option was exercisable immediately prior to the Effective Date by the Conversion Ratio, rounded up to the nearest whole cent; and -3- (ii) For the purposes of this Section 2.3, the Conversion Ratio shall be equal to the quotient of the fair market value of a share of Common Stock of Vendor (converted to U.S. dollars), $2.61659, divided by the current fair market value of a share of Common Stock of Purchaser, $6.00, which quotient is equal to .436098. It is the intention of the parties that the Employee Options assumed by Purchaser qualify following the Effective Date as incentive stock options as defined in Section 422 of the Code to the extent that the Employee Options qualified as incentive stock options immediately prior to the Effective Date. Promptly following the Effective Date, Purchaser will issue to each holder of an outstanding Employee Option a document evidencing the foregoing assumption of such Employee Option by Purchaser. 2.4 Closing. The Closing shall occur at the Time of Closing on the Closing -------- Date at the offices of the Vendor, or at such other place or other time and date as the Purchaser and the Vendor may agree. Any document or instrument to be delivered by either party hereto at the Closing shall be tabled at the Closing at the place of closing referred to above by the party which is to deliver such document or instrument and any document or instrument so tabled by a party hereto shall: (a) be deemed to have been delivered by such party for the purposes of this Agreement; (b) be held in escrow by counsel for such party to be dealt with in accordance with subparagraphs (c) and (d) below; (c) be delivered to the party to which it is to be delivered pursuant to the terms hereof, if all documents or instruments which are to be delivered at the Closing are tabled in accordance with this section at the Closing; and (d) be delivered to, or in accordance with the directions of, the party which tabled it, if subparagraph (c) does not apply. 3. REPRESENTATIONS AND WARRANTIES OF THE VENDOR -------------------------------------------- Except as set forth in the disclosure schedule attached hereto as Schedule -------- "C," the Vendor hereby represents and warrants to the Purchaser as follows as of - ---- the date hereof and acknowledges and confirms that the Purchaser is relying upon such representations and warranties in connection with the transactions contemplated hereby: (a) Attached hereto as Schedule "D" are Glyko, Inc.'s unaudited balance ----------- sheet as of June 30, 1998 and the related unaudited statements of income and cash flow for the six (6) month period ended June 30, 1998 (collectively, the "Financials"). The Financials are correct in all ---------- material respects and have been prepared in accordance with United States generally accepted accounting principles ("GAAP") consistently applied on a basis consistent throughout the periods indicated and consistent with each other (except that the Financials do not contain footnotes and other -4- presentation items that may be required by GAAP). The Financials present fairly the financial condition, operating results and cash flows of Glyko, Inc. as of the dates and during the periods indicated therein, subject to normal year-end adjustments, which normal year-end adjustments have not been material in amount or significance in any individual case or in the aggregate in prior years. Glyko, Inc.'s unaudited balance sheet as of June 30, 1998, is referred to hereinafter as the "Current Balance Sheet." --------------------- (b) Glyko, Inc. has no liability, indebtedness, obligation, expense, claim, deficiency, guaranty or endorsement of any type, whether accrued, absolute, contingent, matured, unmatured or other (whether or not required to be reflected in financial statements in accordance with GAAP), which individually or in the aggregate (i) has not been reflected in the Current Balance Sheet, or (ii) has not arisen in the ordinary course of business consistent with past practices since June 30, 1998, in either case which amounts do not exceed $50,000 in the aggregate. (c) Since June 30, 1998, there has not been, occurred or arisen any: (i) transaction by Glyko, Inc. except in the ordinary course of business as conducted on that date and consistent with past practices; (ii) amendments or changes to the Certificate of Incorporation or Bylaws of Glyko, Inc.; (iii) capital expenditure or commitment by Glyko, Inc. exceeding $25,000 individually or $50,000 in the aggregate; (iv) destruction of, damage to or loss of any material assets, material business or material customer of Glyko, Inc. (whether or not covered by insurance); (v) claim of wrongful discharge or other unlawful labor practice or action; (vi) change in accounting methods or practices (including any change in depreciation or amortization policies or rates) by Glyko, Inc. other than required by GAAP; (vii) revaluation by Glyko, Inc. of any of its assets which, in the aggregate, changed such value by an amount exceeding $5,000, either individually or in the aggregate; (viii) declaration, setting aside or payment of a dividend or other distribution (whether in cash, stock or property) in respect of any capital stock of Glyko, Inc., or any split, combination or reclassification in respect of any shares of capital stock of Glyko, Inc., or any issuance or authorization of any issuance of any other securities in respect of, in lieu of or in substitution for shares of capital stock of Glyko, Inc., or any direct or indirect repurchase, redemption, or other acquisition by Glyko, Inc. of any shares of capital stock of Glyko, Inc. (or options, warrants or other rights convertible into, exercisable or exchangeable therefor), except in -5- accordance with the agreements evidencing option grants by Glyko, Inc.; (ix) except in the ordinary course of its business as conducted on June 30, 1998, increase in the salary or other compensation payable or to become payable by Glyko, Inc. to any of its officers, directors, employees or advisors, or the declaration, payment or commitment or obligation of any kind for the payment, by Glyko, Inc., of a bonus or other additional salary or compensation to any such person; (x) agreement, contract, covenant, instrument, lease, license or commitment to which Glyko, Inc. is a party or by which it or any of its assets (including but not limited to the Intellectual Property and intangible assets) are bound or any termination, extension, amendment or modification the terms of any agreement, contract, covenant, instrument, lease, license or commitment to which Glyko, Inc. is a party or by which it or any of its assets are bound; (xi) sale, lease, license or other disposition of any of the material assets or properties of Glyko, Inc. or any creation of any security interest in such assets or properties; (xii) loan by Glyko, Inc. to any person or entity, incurring by Glyko, Inc. of any indebtedness, guaranteeing by Glyko, Inc. of any indebtedness, issuance or sale of any debt securities of Glyko, Inc. or guaranteeing of any debt securities of others, except for advances to employees for travel and business expenses in the ordinary course of business consistent with past practices; (xiii) waiver or release of any right or claim of Glyko, Inc., including any write-off or other compromise of any account receivable of Glyko, Inc. which, in the aggregate, had a value of at least $5,000; (xiv) written notice received by Vendor or Glyko, Inc. of the commencement or threat of any lawsuit, proceeding or other investigation against Glyko, Inc. or its affairs, or, to the knowledge of Vendor, the commencement, notice or threat of any lawsuit or proceeding or other investigation against Glyko, Inc. or its affairs; (xv) written notice received by Vendor or Glyko, Inc. of any claim or potential claim of ownership by any person other than Glyko, Inc. of the Intellectual Property or of infringement by Glyko, Inc. of any other person's intellectual property or, to the knowledge of Vendor, notice of such in any other form other than written documentation; (xvi) issuance or sale, or contract to issue or sell, by Glyko, Inc. of any shares of capital stock of Glyko, Inc. or securities convertible into, or exercisable or exchangeable for, shares of capital stock of Glyko, Inc., or any securities, warrants, options or rights to purchase any of the foregoing; (xvii) (i) sale or license of any of the Intellectual Property or entering into of any agreement with respect to the Intellectual Property with any person or entity or with respect to the intellectual property of any person or entity, or (ii) purchase or license of any of the Intellectual Property or entering into of any agreement with respect to the intellectual property of any -6- person or entity, or (iii) change in pricing or royalties set or charged by Glyko, Inc. to its customers or licensees or in pricing or royalties set or charged by persons who have licensed any of the Intellectual Property to Glyko, Inc.; (xviii)any event or condition of any character that has had or is reasonably likely to have a material adverse effect on Glyko, Inc.; or (xix) agreement by Glyko, Inc. or any officer or employees thereof to do any of the things described in the preceding clauses (i) through (xviii) (d) Neither the execution and delivery of this Agreement by the Vendor nor the consummation of the transactions herein contemplated will conflict with or result in: (i) a violation, contravention or breach by the Vendor or Glyko, Inc. of any of the terms, conditions or provisions of any agreement or instrument to which the Vendor or Glyko, Inc. is a party, or by which the Vendor or Glyko, Inc. is bound or constitute a default by the Vendor or Glyko, Inc. thereunder, or under any statute, regulation, judgment, decree or law by which the Vendor or Glyko, Inc. is subject or bound, or result in the creation or imposition of any mortgage, lien, charge or encumbrance of any nature whatsoever upon any of the Glyko Shares or any of the Intellectual Property; or (ii) a violation by the Vendor or Glyko, Inc. of any law or regulation or any applicable order of any court, arbitrator or governmental authority having jurisdiction over the Vendor or Glyko, Inc. , or require the Vendor or Glyko, Inc., prior to the Closing or as a condition precedent thereof, to make any governmental or regulatory filings, obtain any consent, authorization, approval, clearance or other action by any Person, or await the expiration of any applicable waiting period. (e) The Glyko Shares are duly and validly created, authorized and issued and are fully paid and non-assessable. (f) No Person has any agreement or option or any right or privilege (whether pre-emptive or contractual) which is or is capable of becoming an agreement or option for the purchase from the Vendor of any of the Glyko Shares or any of the Intellectual Property. (g) Glyko, Inc. is not a party to nor is it bound by: (i) any written employment or consulting agreement, contract or commitment with an employee or individual consultant or salesperson or consulting or sales agreement, contract or commitment with a firm or other organization, or employee benefit plan, option plan or option agreement; -7- (ii) any agreement or plan, including, without limitation, any stock option plan, stock appreciation rights plan or stock purchase plan, any of the benefits of which will be increased, or the vesting of benefits of which will be accelerated, by the occurrence of any of the transactions contemplated by this Agreement or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement (for the purposes of this Section 3(g)(ii), such agreement or plan shall include any agreement or plan of Vendor being assumed by Purchaser pursuant to Section 2.2(i) hereof); (iii) any fidelity or surety bond or completion bond; (iv) any lease of real or personal property having a value in excess of $25,000 individually or $50,000 in the aggregate; (v) any agreement, contract or commitment containing any covenant limiting the freedom of Glyko, Inc. to engage in any line of business or to compete with any person, (vi) any agreement, contract or commitment relating to capital expenditures and involving future payments in excess of $25,000 individually or $50,000 in the aggregate; (vii) any agreement, contract or commitment relating to the disposition or acquisition of assets or any interest in any business enterprise outside the ordinary course of Glyko, Inc.'s business; (viii) any mortgages, indentures, loans or credit agreements, security agreements or other agreements or instruments relating to the borrowing of money or extension of credit; (ix) any purchase order or contract for the purchase of materials involving in excess of $25,000 individually or $50,000 in the aggregate; (x) any construction contracts in excess of $10,000 individually or $20,000 in the aggregate; (xi) any dealer, distribution, joint marketing or development agreement; (xii) any sales representative, original equipment manufacturer, value added remarketer, reseller or independent vendor or other agreement for use or distribution of Glyko, Inc.'s products, technology or services; or (xiii) any other agreement, contract or commitment that involves $25,000 individually or $50,000 in the aggregate or more and is not cancelable without penalty within thirty (30) days. (h) Glyko, Inc. is in compliance with and has not breached, violated or defaulted under, or received notice that it has breached, violated or defaulted under, any of the terms or conditions of any material agreement, contract, covenant, instrument, lease, license or commitment to which -8- Glyko, Inc. is a party or by which it is bound (collectively a "Contract"), nor is Glyko, Inc. aware of any event that would -------- constitute such a breach, violation or default with the lapse of time, giving of notice or both. Each Contract is in full force and effect and Glyko, Inc. is not subject to any default thereunder, nor to the knowledge of Glyko, Inc. is any party obligated to Glyko, Inc. pursuant to any such Contract subject to any default thereunder. Following the Closing Date, Glyko, Inc. will be permitted to exercise all of Glyko, Inc.'s rights under the Contracts without the payment of any additional amounts or consideration other than ongoing fees, royalties or payments which Glyko, Inc. would otherwise be required to pay had the transactions contemplated by this Agreement not occurred. (i) The Vendor has all necessary power, authority and capacity to enter into this Agreement and all other agreements and instruments to be executed by it as contemplated by this Agreement and to carry out its obligations under this Agreement and such other agreements and instruments. The execution and delivery of this Agreement and such other agreements and instruments and the consummation of the transactions contemplated hereby and such other agreements and instruments have been duly authorized by all necessary corporate action on the part of the Vendor. (j) This Agreement constitutes a valid and binding obligation of the Vendor enforceable against the Vendor in accordance with its terms subject, however, to limitations with respect to enforcement imposed by law in connection with bankruptcy, insolvency, reorganization or other laws affecting creditors' rights generally and to the extent that equitable remedies such as specific performance and injunctions are only available in the discretion of the court from which they are sought. (k) The Vendor is the record and beneficial owner of the Glyko Shares and has good and marketable title thereto free and clear of any Encumbrances. The Vendor has the exclusive right and full power to transfer the Glyko Shares to the Purchaser as herein contemplated free and clear of any Encumbrances. (l) Intellectual Property: (i) Glyko, Inc. owns all right, title and interest in and to the Intellectual Property with good and marketable title thereto, free and clear of all Encumbrances; (ii) Glyko, Inc. is entitled to make use of or otherwise exploit the Intellectual Property (including without limitation the right to derivatives and improvements thereto) without payment of any royalty or other amounts; (iii) Glyko, Inc. is under no obligation to obtain any approval or consent for use of or other exploitation (including without limitation enforcement, assignment, license, sublicense or other transfer) of the Intellectual Property; (iv) no charge, complaint action, suit, proceeding, hearing, investigation, claim or demand is pending or threatened which challenges the legality, validity, enforceability, use or ownership by Glyko, Inc. of any of the Intellectual Property; -9- (iv) no charge, complaint action, suit, proceeding, hearing, investigation, claim or demand is pending or threatened which challenges the legality, validity, enforceability, use or ownership by Glyko, Inc. of any of the Intellectual Property; (v) the Intellectual Property represents all intellectual property rights (including without limitation patents, patent applications, trademarks, trademark applications, service marks, service mark applications, trade names, copyrights, manufacturing process, trade secrets) which are reasonably necessary or material to the conduct of Glyko, Inc.'s business as presently conducted; (vi) neither the Intellectual Property , the Technology nor the use or exploitation thereof would infringe any patent, copyright, trade secret or other proprietary right owned or controlled by Vendor and no basis for such claim exists and neither Vendor nor Glyko, Inc. has received notice, written or otherwise, of such a claim of infringement by any third party; (vii) the Intellectual Property is not subject to any outstanding judgment, order decree, stipulation, injunction or charge nor the subject matter or any charge, complaint, action, suit, proceeding of any Federal, state, local or foreign jurisdiction or before any arbitrator; (viii) Glyko, Inc. has not given or otherwise communicated to any entity any notice, charge, claim or assertion of any present, impending or threatened infringement by such other entity of any of the Intellectual Property; (ix) Glyko, Inc. has taken all steps that are reasonably required to protect Glyko, Inc.'s rights in confidential information and trade secrets of Glyko, Inc. or provided by any other entity to Glyko, Inc. Without limiting the foregoing, Glyko, Inc. has, and enforces, a policy requiring each employee, consultant and contractor to execute proprietary information, confidentiality and assignment agreements in Glyko, Inc.'s standard forms, and all current and former employees, consultants and contractors of Glyko, Inc. have executed such an agreement. A copy of such agreement has been provided to counsel for Purchaser; and (x) the Intellectual Property has not been licensed to or licensed from any third party or the Vendor. (m) To the knowledge of the Vendor, there is not pending, threatened or contemplated, any suit, action, legal proceeding, litigation or governmental investigation of any sort relating to Glyko, Inc., the Glyko Shares, the Intellectual Property or the Transaction, nor is there any present state of facts or circumstances which can be reasonably anticipated to be a basis for any such suit, action, legal proceeding, litigation or governmental investigation nor is there presently outstanding against Glyko, Inc., any judgment, decree, injunction, rule or order of any court, governmental department, commission, agency, instrumentality, or arbitrator, to which the Vendor or Glyko, Inc. is a party or to which the property of the Vendor or Glyko, Inc. is subject that would result individually or in the aggregate in -10- any material adverse change in the operation, business, condition, income or future prospects of the Vendor or Glyko, Inc. (n) No order ceasing or suspending trading in securities of Glyko, Inc. or prohibiting the sale of securities by Glyko, Inc. has been issued and no proceedings for this purpose have been instituted, or are pending, or, to the knowledge of the Vendor, are contemplated or threatened. (o) Glyko, Inc. has not, directly or indirectly, declared or paid any dividend or declared or made any other distribution on any of its shares or securities or, directly or indirectly, redeemed, purchased or otherwise acquired any of its shares or securities or agreed to do any of the foregoing. (p) The Vendor has not entered into any agreement that would entitle any person to any valid claim against the Purchaser for a broker's commission, finder's fee, or any like payment in respect of the sale of the Glyko Shares or the purchase of the BioMarin Shares or any other matters contemplated by this Agreement. (q) Glyko, Inc. has not received any notices of violation with respect to, any foreign, federal, state or local statute, law or regulation, including without limitation environmental laws and regulations and, to the knowledge of Vendor, Glyko, Inc. has complied with and is not in violation of any of the foregoing. (r) None of the foregoing representations and warranties knowingly contains any untrue statement of material fact or knowingly omits to state any material fact necessary to make any such representation or warranty not misleading to a prospective purchaser of the Glyko Shares seeking full information as to the Glyko Shares and the Intellectual Property. (s) Vendor has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the purchase of the BioMarin Shares pursuant to this Agreement and of protecting the Vendor's interests in connection herewith. Vendor has the ability to bear the economic risk of the investment, including complete loss of the investment. (t) Vendor is acquiring the BioMarin Shares for investment for its own account, not as a nominee or agent, and not with a view to, or for resale in connection with, any distribution thereof, and Vendor has no present intention of selling, granting any participation in, or otherwise distributing the same. Vendor understands that the BioMarin Shares have not been registered under the Securities Act of 1933, as amended (the "Securities Act") but have been issued pursuant to a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of Vendor's representations as expressed herein. (u) Vendor understands that the BioMarin Shares are characterized as "restricted securities" under U.S. federal securities laws inasmuch as they are being acquired from Purchaser in a transaction not involving a public offering and that under such laws and applicable regulations the BioMarin Shares may be resold without registration under the Securities Act only in -11- certain limited circumstances. Vendor acknowledges that the BioMarin Shares must be held indefinitely unless subsequently registered under the Securities Act or an exemption from such registration is available. Vendor is aware of the provisions of Rule 144 promulgated under the Securities Act which permits limited resale of shares purchased in a private placement subject to the satisfaction of certain conditions. (v) Vendor understands that the BioMarin Shares may be subject to a lock- up period of up to 180 days following the effective date a Registration Statement filed under the Securities Act, pursuant to Section 7 of the Amended and Restated Registration Rights Agreement attached hereto as Schedule "E". ------------ (w) Vendor understands that no public market now exists for the Common Stock of Purchaser or for any other securities issued by Purchaser and that there is no assurance that a public market will ever exist for the BioMarin Shares. (x) Without in any way limiting the representations set forth above, Vendor further agrees not to make any offer or sale of all or any portion of the BioMarin Shares within the United States or to a U.S. resident unless and until; (i) There is then in effect a Registration Statement under the Securities Act covering such proposed offer or sale and such offer or sale is made in accordance with such Registration Statement; or (ii) Vendor shall have notified Purchaser of the proposed offer or sale and shall have furnished Purchaser with a detailed statement of the circumstances surrounding the proposed disposition, and if reasonably requested by the Purchaser, Vendor shall have furnished Purchaser with an opinion of counsel, reasonably satisfactory to Purchaser, that such offer or sale is exempt from the registration requirements under the Securities Act. (y) The certificate representing the BioMarin Shares, and any securities issued in respect thereof or exchange therefor shall bear legends substantially in the following forms (in addition to any legend required under applicable state securities laws): "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION UNLESS THE CORPORATION RECEIVES AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT. COPIES OF THE AGREEMENTS COVERING THE PURCHASE OF THESE SECURITIES AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY -12- OF THE CORPORATION AT THE PRINCIPAL EXECUTIVE OFFICES OF THE CORPORATION. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A LOCKUP PERIOD OF 180 DAYS FOLLOWING THE EFFECTIVE DATE OF A REGISTRATION STATEMENT OF THE COMPANY FILED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AS SET FORTH IN AN AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SECURITIES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE CORPORATION. SUCH LOCKUP PERIOD IS BINDING ON TRANSFEREES OF THESE SECURITIES." (z) Vendor presently does and will as of the Closing Date qualify as an "accredited investor" within the meaning of Rule 501(a) promulgated under the Securities Act and meets the relevant criteria indicated on its completed and signed copy of the Accredited Investor Questionnaire attached hereto as Schedule "F". ------------ (aa) Immediately following the Closing, Vendor will not own any material asset other than 10,917,091 shares of Common Stock of Purchaser. For avoidance of any doubt, immediately following the Closing Vendor will not own any right, title or other interest in or to any intellectual property rights (including without limitation domestic and foreign patents, patent applications, trademarks (other than "Glyko BioMedical Limited"), trade mark applications, trade names (other than "Glyko BioMedical Limited"), copyrights or trade secrets). (bb) All inter-company debt and equity accounts between Vendor and Glyko, Inc., have been settled on or before the Closing Date. 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER ----------------------------------------------- Except as set forth in the disclosure schedule attached hereto as Schedule -------- G, the Purchaser hereby represents and warrants to the Vendor as follows as of - - the date hereof and acknowledges and confirms that the Vendor is relying upon such representations and warranties in connection with the transactions contemplated hereby: (a) Attached hereto as Schedule "H" are Purchaser's unaudited balance ----------- sheet as of June 30, 1998 and the related unaudited statements of income and cash flow for the six (6) month period ended June 30, 1998 (collectively, the "Financials"). The Financials are correct in all ---------- material respects and have been prepared in accordance with United States generally accepted accounting principles ("GAAP") consistently applied on a basis consistent throughout the periods indicated and consistent with each other (except that the Financials do not contain footnotes and other presentation items that may be required by GAAP). The Financials present fairly the financial condition, operating results and cash flows of Purchaser as of the dates and during the periods indicated therein, subject to normal year-end adjustments, which normal year-end adjustments have not been material in amount or significance in any individual case or in the aggregate in prior years. Purchaser's unaudited -13- balance sheet as of June 30, 1998, is referred to hereinafter as the "Current Balance Sheet." --------------------- (b) Glyko, Inc. has no liability, indebtedness, obligation, expense, claim, deficiency, guaranty or endorsement of any type, whether accrued, absolute, contingent, matured, unmatured or other (whether or not required to be reflected in financial statements in accordance with GAAP), which individually or in the aggregate (i) has not been reflected in the Current Balance Sheet, or (ii) has not arisen in the ordinary course of business consistent with past practices since June 30, 1998, in either case which amounts do not exceed $50,000 in the aggregate. (c) Since June 30, 1998, there has not been, occurred or arisen any: (i) transaction by Purchaser except in the ordinary course of business as conducted on that date and consistent with past practices; (ii) amendments or changes to the Certificate of Incorporation or Bylaws of Purchaser; (iii) capital expenditure or commitment by Purchaser exceeding $25,000 individually or $50,000 in the aggregate; (iv) destruction of, damage to or loss of any material assets, material business or material customer of Purchaser (whether or not covered by insurance); (v) claim of wrongful discharge or other unlawful labor practice or action; (vi) change in accounting methods or practices (including any change in depreciation or amortization policies or rates) by Purchaser other than required by GAAP; (vii) revaluation by Purchaser of any of its assets which, in the aggregate, changed such value by at least $5,000; (viii) declaration, setting aside or payment of a dividend or other distribution (whether in cash, stock or property) in respect of any capital stock of Purchaser, or any split, combination or reclassification in respect of any shares of capital stock of Purchaser, or any issuance or authorization of any issuance of any other securities in respect of, in lieu of or in substitution for shares of capital stock of Purchaser, or any direct or indirect repurchase, redemption, or other acquisition by Purchaser of any shares of capital stock of Purchaser (or options, warrants or other rights convertible into, exercisable or exchangeable therefor), except in accordance with the agreements evidencing option grants by Purchaser; (ix) except in the ordinary course of its business as conducted on June 30, 1998, increase in the salary or other compensation payable or to become payable by Purchaser to any of its officers, directors, employees or advisors, or the declaration, payment or commitment -14- or obligation of any kind for the payment, by Purchaser, of a bonus or other additional salary or compensation to any such person; (x) agreement, contract, covenant, instrument, lease, license or commitment to which Purchaser is a party or by which it or any of its assets (including but not limited to the intellectual property of Purchaser and intangible assets) are bound or any termination, extension, amendment or modification the terms of any agreement, contract, covenant, instrument, lease, license or commitment to which Purchaser is a party or by which it or any of its assets are bound; (xi) sale, lease, license or other disposition of any of the material assets or properties of Purchaser or any creation of any security interest in such assets or properties; (xii) loan by Purchaser to any person or entity, incurring by Purchaser of any indebtedness, guaranteeing by Purchaser of any indebtedness, issuance or sale of any debt securities of Purchaser or guaranteeing of any debt securities of others, except for advances to employees for travel and business expenses in the ordinary course of business consistent with past practices; (xiii) waiver or release of any right or claim of Purchaser, including any write-off or other compromise of any account receivable of Purchaser which, in the aggregate, had a value of a least $5,000; (xiv) written notice of the commencement or threat of any lawsuit, proceeding or other investigation against Purchaser or its affairs, or, to the knowledge of Purchaser, the commencement, notice or threat of any lawsuit or proceeding or other investigation against Purchaser or its affairs; (xv) written notice of any claim or potential claim of ownership by any person other than Purchaser of the intellectual property of Purchaser or of infringement by Purchaser of any other person's intellectual property or, to the knowledge of Purchaser, notice of such in any other form other than written documentation; (xvi) issuance or sale, or contract to issue or sell, by Purchaser of any shares of capital stock of Purchaser or securities convertible into, or exercisable or exchangeable for, shares of capital stock of Purchaser, or any securities, warrants, options or rights to purchase any of the foregoing; (xvii) (i) sale or license of any of the intellectual property of Purchaser or entering into of any agreement with respect to the intellectual property of Purchaser with any person or entity or with respect to the intellectual property of any person or entity, or (ii) purchase or license of any of the intellectual property of Purchaser or entering into of any agreement with respect to the intellectual property of any person or entity, or (iii) change in pricing or -15- royalties set or charged by Purchaser to its customers or licensees or in pricing or royalties set or charged by persons who have licensed any of the intellectual property of Purchaser to Purchaser; (xviii)any event or condition of any character that has had or is reasonably likely to have a material adverse effect on Purchaser; or (xix) agreement by Purchaser or any officer or employees thereof to do any of the things described in the preceding clauses (i) through (xviii). (d) Purchaser is not a party to nor is it bound by: (i) any written employment or consulting agreement, contract or commitment with an employee or individual consultant or salesperson or consulting or sales agreement, contract or commitment with a firm or other organization, or employee benefit plan, option plan or option agreement; (ii) any agreement or plan, including, without limitation, any stock option plan, stock appreciation rights plan or stock purchase plan, any of the benefits of which will be increased, or the vesting of benefits of which will be accelerated, by the occurrence of any of the transactions contemplated by this Agreement or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement; (iii) any fidelity or surety bond or completion bond; (iv) any lease of real or personal property having a value in excess of $25,000 individually or $50,000 in the aggregate; (v) any agreement, contract or commitment containing any covenant limiting the freedom of Purchaser to engage in any line of business or to compete with any person, (vi) any agreement, contract or commitment relating to capital expenditures and involving future payments in excess of $25,000 individually or $50,000 in the aggregate; (vii) any agreement, contract or commitment relating to the disposition or acquisition of assets or any interest in any business enterprise outside the ordinary course of Purchaser's business; (viii) any mortgages, indentures, loans or credit agreements, security agreements or other agreements or instruments relating to the borrowing of money or extension of credit; (ix) any purchase order or contract for the purchase of materials involving in excess of $25,000 individually or $50,000 in the aggregate; (x) any construction contracts in excess of $10,000 individually or $20,000 in the aggregate; -16- (xi) any dealer, distribution, joint marketing or development agreement; (xii) any sales representative, original equipment manufacturer, value added remarketer, reseller or independent vendor or other agreement for use or distribution of Purchaser's products, technology or services; or (xiii) any other agreement, contract or commitment that involves $25,000 individually or $50,000 in the aggregate or more and is not cancelable without penalty within thirty (30) days. (e) Purchaser is in compliance with and has not breached, violated or defaulted under, or received notice that it has breached, violated or defaulted under, any of the terms or conditions of any material agreement, contract, covenant, instrument, lease, license or commitment to which Purchaser is a party or by which it is bound (collectively a "Purchaser Contract"), nor is Purchaser aware of any ------------------ event that would constitute such a breach, violation or default with the lapse of time, giving of notice or both. Each Purchaser Contract is in full force and effect and Purchaser is not subject to any default thereunder, nor to the knowledge of Purchaser is any party obligated to Purchaser pursuant to any such Purchaser Contract subject to any default thereunder. Following the Closing Date, Purchaser will be permitted to exercise all of Purchaser's rights under the Purchaser Contracts without the payment of any additional amounts or consideration other than ongoing fees, royalties or payments which Purchaser would otherwise be required to pay had the transactions contemplated by this Agreement not occurred. (f) The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on behalf of the Purchaser and this Agreement has been duly executed and delivered by the Purchaser and is a valid and binding obligation of the Purchaser. (g) At the Time of Closing the BioMarin Shares will be duly and validly created, authorized and issued as fully paid and non-assessable shares, and the shares of Common Stock of Purchaser issuable upon exercise of the options set forth on Schedule A shall, upon exercise ---------- in accordance with their terms, be duly and validly created, authorized and issued as fully paid and non-assessable shares. (h) Neither the execution and delivery of this Agreement by the Purchaser nor the consummation of the transactions contemplated hereby will conflict with or result in or create a state of facts which after notice or lapse of time or delay or both, will conflict with or result in: (i) a violation, contravention or breach by the Purchaser of any of the terms, conditions or provisions of the Restated Certificate of Incorporation, Bylaws or resolutions of the Purchaser or of any agreement or instrument to which the Purchaser is a party or by which it is bound or constitute a default of the Purchaser thereunder, or of any statute, regulation, judgment, decree or law by which the Purchaser or the assets of the Purchaser are subject -17- or bound, or result in the creation or imposition of any Encumbrance upon any of the BioMarin Shares; or (ii) a violation by the Purchaser of any law or regulation or any applicable order of any court, arbitrator or governmental authority having jurisdiction over the Purchaser, or require the Purchaser, prior to the Closing or as a condition precedent thereof, to make any governmental or regulatory filings, obtain any consent, authorization, approval, clearance or other action by any Person or await the expiration of any applicable waiting period. (i) The authorized capital stock of the Purchaser consists of 30, 000,000 shares of Common Stock. Immediately prior to the Closing, 23,916,483 shares of Common Stock are issued and outstanding, all of which have been duly authorized and validly issued, are fully paid and nonassessable. Warrants to purchase 801,500 shares of Common Stock are currently outstanding. Immediately prior to the Closing, the Board of Directors has approved the grant of options to purchase a total of 2,304,120 shares of Common Stock to outside consultants, directors and employees. There are no other options, warrants, conversion privileges, pre-emptive rights (other than the pre-emptive rights agreement between Glyko Biomedical Ltd. and the Purchaser dated June 27, 1997, the pre-emptive rights agreement between BB BioVentures L.P. and the Purchaser dated December 30, 1997, and the pre-emptive rights agreement between Genzyme Corporation and the Purchaser dated September 4, 1998) presently outstanding to purchase or otherwise acquire any capital stock or other securities of the Company; (j) To the knowledge of the Purchaser, there is not pending, threatened or contemplated, any suit, action, legal proceeding, litigation or governmental investigation of any sort relating to the Purchaser or the BioMarin Shares, nor is there any present state of facts or circumstances which can be reasonably anticipated to be a basis for any such suit, action, legal proceeding, litigation or governmental investigation nor is there presently outstanding against the Purchaser, any judgment, decree, injunction, rule or order of any court, governmental department, commission, agency, instrumentality, or arbitrator, to which the Purchaser is a party or to which the property of the Purchaser is subject that would result individually or in the aggregate in any material adverse change in the operation, business, condition, income or future prospects of the Purchaser. (k) No order ceasing or suspending trading in securities of the Purchaser or prohibiting the sale of securities by the Purchaser has been issued and no proceedings for this purpose have been instituted, or are pending, or, to the knowledge of the Purchaser, are contemplated or threatened. (l) Neither the Restated Certificate of Incorporation or Bylaws of the Purchaser nor any agreement, mortgage, note, debenture, indenture or other instrument or document to which the Purchaser is a party, contain any restriction upon or impediment to the declaration or payment of dividends by the directors of the Purchaser or the payment of dividends by the Purchaser to the holders of the BioMarin Shares. -18- (m) Upon execution of the Amended and Restated Registration Rights Agreement, attached hereto as Schedule "E," Vendor shall have ----------- registration rights with regard to the BioMarin Shares, as enumerated therein. (n) The Purchaser has not entered into any agreement that would entitle any person to any valid claim against the Vendor for a broker's commission, finder's fee, or any like payment in respect of the purchase of the Glyko Shares or the sale of the BioMarin Shares or any other matters contemplated by this Agreement. (o) Purchaser has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the purchase of the Glyko Shares pursuant to this Agreement and of protecting the Purchaser's interests in connection herewith. Purchaser has the ability to bear the economic risk of the investment, including complete loss of the investment. (p) Purchaser is acquiring the Glyko Shares for investment for its own account, not as a nominee or agent, and not with a view to, or for resale in connection with, any distribution thereof, and Purchaser has no present intention of selling, granting any participation in, or otherwise distributing the same. Purchaser understands that the Glyko Shares have not been registered under the Securities Act of 1933, as amended (the "Securities Act") but have been issued pursuant to a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of Purchaser 's representations as expressed herein. (q) Purchaser understands that the Glyko Shares are characterized as "restricted securities" under U.S. federal securities laws and that under such laws and applicable regulations the Glyko Shares may be resold without registration under the Securities Act only in certain limited circumstances. Purchaser acknowledges that the Glyko Shares must be held indefinitely unless subsequently registered under the Securities Act or an exemption from such registration is available. Purchaser is aware of the provisions of Rule 144 promulgated under the Securities Act which permits limited resale of shares purchased in a private placement subject to the satisfaction of certain conditions. (r) Purchaser understands that no public market now exists for the Common Stock of Glyko, Inc. or for any other securities issued by Glyko, Inc. and that there is no assurance that a public market will ever exist for the Glyko Shares. (s) Without in any way limiting the representations set forth above, Purchaser further agrees not to make any offer or sale of all or any portion of the Glyko Shares within the United States or to a U.S. resident unless and until; (i) There is then in effect a Registration Statement under the Securities Act covering such proposed offer or sale and such offer or sale is made in accordance with such Registration Statement; or -19- (ii) Purchaser shall have notified Glyko, Inc. of the proposed offer or sale and shall have furnished Glyko, Inc. with a detailed statement of the circumstances surrounding the proposed disposition, and if reasonably requested by the Glyko, Inc., Purchaser shall have furnished Glyko, Inc. with an opinion of counsel, reasonably satisfactory to Glyko, Inc., that such offer or sale is exempt from the registration requirements under the Securities Act. (t) Purchaser presently does and will as of the Closing Date qualify as an "accredited investor" within the meaning of Rule 501(a) promulgated under the Securities Act and meets the relevant criteria indicated on its completed and signed copy of the Accredited Investor Questionnaire attached hereto as Schedule "F". ------------ (u) None of the foregoing representations and warranties knowingly contains any untrue statement of material fact or knowingly omits to state any material fact necessary to make any such representation or warranty not misleading to a prospective purchaser of the BioMarin Shares seeking full information as to the BioMarin Shares. 5. CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS ----------------------------------------------- All obligations of the Purchaser under this Agreement, including but not limited to those to purchase the Glyko Shares, to assume the Employee Options and to sell to Vendor the BioMarin Shares, are subject to the fulfillment prior to or at the Closing of each of the following conditions: (a) Purchaser shall have received from Vendor a certificate, dated as of the Closing Date, signed by the President of Vendor, stating that the representations and warranties made by the Vendor in or under this Agreement are true in all material respects on and as of the date of the Closing and that, on or prior to the Closing, Vendor has complied with all covenants and agreements herein agreed to be performed or caused to be performed by it on or prior to the Closing Date. (b) On or before the Closing Date there shall have been obtained from all appropriate Federal, provincial, state, municipal, foreign or other governmental or administrative bodies all such approvals and consents, if any, in form and terms satisfactory to the Purchaser, as may be required in order to permit the change of ownership of the Glyko Shares. (c) On or before the Closing Date the Vendor and Glyko, Inc. shall have settled all inter-company debt and equity accounts. (d) Purchaser shall have received from Vendor a copy of this Agreement duly executed on behalf of Vendor with all schedules attached thereto completed to the mutual satisfaction of Purchaser and Vendor. (e) Purchaser shall have received from Vendor an executed copy of the Amended and Restated Registration Rights Agreement attached hereto as Schedule "E." ------------- -20- (f) Purchaser shall have received from counsel to Vendor an executed legal opinion in a form reasonably satisfactory to Purchaser. (g) Vendor shall have delivered, subject to the provisions of Section 2.4 hereof, the Glyko Shares together with such executed documentation as is necessary and appropriate to the effect the transfer of ownership of the Glyko Shares from Vendor to Purchaser. In case any of the foregoing conditions cannot be fulfilled on or before the Closing Date to the satisfaction of the Purchaser, the Purchaser may rescind this Agreement by notice to the Vendor and in such event each of the Purchaser and the Vendor shall be released from all obligations hereunder; provided, however, that any such conditions may be waived in whole or in part by the Purchaser without prejudice to its rights of rescission in the event of the non- fulfillment of any other condition or conditions, and that the closing of the Transaction as contemplated by this Agreement shall be deemed to be a waiver of any unfulfilled conditions. 6. CONDITIONS PRECEDENT TO THE VENDOR'S OBLIGATIONS ------------------------------------------------ All obligations of the Vendor under this Agreement, including but not limited to those to sell the Glyko Shares to Purchaser and to purchase the BioMarin Shares, are subject to the fulfillment prior to or at the Closing of each of the following conditions: (a) Vendor shall have received from Purchaser a certificate dated as of the Closing Date, signed by the Chief Executive Officer of Purchaser, stating that the representations and warranties of the Purchaser under this Agreement are true in all material respects on and as of the date of such Closing and that, on or prior to the Closing, the Purchaser has complied with all covenants and agreements herein agreed to be performed or caused to be performed by it on or prior to the Closing Date. (b) No action shall have been taken by any court or governmental body prohibiting or making illegal the execution and delivery of this Agreement, or any transaction contemplated by this Agreement. No action, suit or proceeding shall have been instituted and be continuing by any Person to restrain, modify or prevent the consummation of the transactions contemplated by this Agreement, or to seek damages against the Purchaser in connection with such Transaction, or that has been or is reasonably likely to have a material adverse affect on the ability of any party hereto to fully consummate the transactions contemplated by this Agreement. (c) The Purchaser shall have delivered to Vendor, subject to the provisions of Section 2.4 hereof, releases of the Employee Options executed by the subject optionees, in form reasonably satisfactory to the Vendor. (d) Purchaser shall have delivered, subject to the provisions of Section 2.4 hereof, a certificate representing the BioMarin Shares registered in the name of the Vendor bearing restrictive legends as provided for in Section 3(z). (e) On or before the Closing Date the Vendor and Glyko, Inc. shall have settled all inter-company debt and equity accounts. -21- (f) Vendor shall have received from counsel to Purchaser an executed legal opinion in a form reasonably satisfactory to Vendor. (g) Vendor shall have received from Purchaser a copy of this Agreement duly executed on behalf of Purchaser with all schedules attached thereto completed to the mutual satisfaction of Purchaser and Vendor. (h) Vendor shall have received from Purchaser $500 in cash pursuant to Section 2.2 hereof. (i) Vendor shall have received from Purchaser an executed copy of the Amended and Restated Registration Rights Agreement attached hereto as Schedule "E." ------------- In case any of the foregoing conditions cannot be fulfilled on or before the Closing Date to the satisfaction of the Vendor, the Vendor may rescind this Agreement by notice to Purchaser and in such event each of the Vendor and the Purchaser shall be released from all obligations hereunder; provided, however, that any such conditions may be waived in whole or in part by the Vendor without prejudice to its rights or rescission in the event of the non-fulfillment of any other condition or conditions and that the Closing shall be deemed to be a waiver of any unfulfilled conditions. 7. NATURE OF REPRESENTATIONS AND WARRANTIES ---------------------------------------- (a) Regardless of any investigation at any time made by or on behalf of any party hereto or of any information any party may have in respect thereof, all representations and warranties made hereunder shall survive the Closing for a period of 24 months following the Closing Date. (b) This Agreement, and the documents specifically referred to herein or executed and delivered concurrently herewith or at the Closing constitute the entire agreement, understanding, representations and warranties of the parties hereto and supersede any prior agreement, understanding, representation, warranty or documents relating to the subject matter of this Agreement. 8. NOTICES ------- All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given, if delivered in person, telegraphed, or mailed by certified registered mail, postage prepaid: -22- (a) If to the Vendor, addressed as follows: Glyko Biomedical Limited 11 Pimental Court Novato, Ca. 94949 Attention: Dr. John Klock Telecopy No.: 415-382-7889 With a copy to: Cassels Brock & Blackwell Suite 2100 Scotia Plaza Toronto, Ontario M5H 3C2 Attention: Mark I. Young Telecopy No.: 416-350-6902 (b) If to the Purchaser, addressed as follows: BioMarin Pharmaceutical Inc. 11 Pimental Court Novato, Ca. 94949 Attention: Grant W. Denison, Jr. Telecopy No.: 415-382-7889 With a copy to: Wilson Sonsini Goodrich & Rosati 650 Page Mill Road Palo Alto, CA 94303-1050 Attention: Frank Currie Telecopy No.: 650-493-6811 or to such other address as the party to be notified shall have furnished to the other party in writing. Any notice given in accordance with the foregoing shall be deemed to have been given when delivered in person or on the next business day following the date on which it shall have been telegraphed or mailed. 9. AMENDMENTS ---------- This Agreement may be amended or modified only by a written instrument executed by the parties affected thereby, or by their respective successors and permitted assigns. -23- 10. GENERAL ------- (a) This Agreement: (i) shall be construed and enforced in accordance with the laws of the Province of Ontario; and (ii) shall enure to the benefit of and be binding upon the Purchaser and the Vendor and their respective executors, administrators, legal representatives, successors and permitted assigns, nothing in this Agreement, express or implied, being intended to confer upon any other person any rights or remedies hereunder. (b) Time shall be of the essence hereof. (c) Each of the parties hereto covenants and agrees that at any time and from time to time after the Closing Date such party will, upon the request of the other party, do, execute, acknowledge and deliver all such further acts, documents and assurances as may be reasonably required for the better carrying out of the terms of this Agreement and to consummate the transactions contemplated hereby. (d) This Agreement may be executed in one or more counterparts, each of which so executed shall constitute an original and all of which together shall constitute one and the same agreement. (e) Each of the parties hereto shall pay their respective legal and accounting costs and expenses incurred in connection with the preparation, execution and delivery of this Agreement and all documents and instruments executed pursuant hereto and any other costs and expenses whatsoever and howsoever incurred in connection with the completion of the transactions contemplated hereby. (f) The parties hereto agree to file in a timely manner all forms required to be filed after the Closing Date by applicable law and by the regulations and policies of all applicable securities regulatory authorities in connection with the transactions contemplated hereby. (g) Neither this Agreement nor any right or obligation hereunder shall be assignable by any party hereto without the prior written consent of the other parties hereto, which consent may be arbitrarily withheld. -24- IN WITNESS WHEREOF the parties hereto have duly executed this Agreement as of the day and date first above written. GLYKO BIOMEDICAL LTD. By: /s/ John C. Klock ----------------- Dr. John C. Klock, President BIOMARIN PHARMACEUTICAL INC. By: /s/ Grant W. Denison, Jr. ------------------------- Grant W. Denison, Jr., Chief Executive Officer [SIGNATURE PAGE TO AGREEMENT REGARDING SALE OF CAPITAL STOCK OF GLYKO, INC.] -25- EX-3.1(A) 3 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION EXHIBIT 3.1A AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF BIOMARIN PHARMACEUTICAL INC. BioMarin Pharmaceutical Inc., a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows: A. The name of the Corporation is BioMarin Pharmaceutical Inc. The Corporation was originally incorporated under the same name and the original Certificate of incorporation of the Corporation was filed with the Delaware Secretary of State on October 25, 1996, and subsequently restated on May 6, 1997. B. Pursuant to Sections 241 and 245 of the General Corporation Law of the State of Delaware, this Restated Certificate of Incorporation restates and amends the provisions of the Certificate of Incorporation of this Corporation. C. The amendment and statement has been duly approved by the required vote of stockholders in accordance with Section 228 and 242 of the Delaware General Corporation Law. The number of shares of Common Stock voting in favor of the amendment and restatement equaled or exceeded the vote required. The percentage vote required was more than 50% of the outstanding Common Stock. D. The Restated Certificate of Incorporation which follows has been duly adopted by resolutions adopted by the Board of Directors of the Corporation in accordance with the provisions of Section 241(b) of the General Corporation Law of the State of Delaware. E. The text of the Certificate of Incorporation is hereby amended and restated in its entirety to read as follows: ARTICLE I. The name of the corporation (the "Corporation") is BioMarin Pharmaceutical Inc. ARTICLE II. The address of the Corporation's registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle, Delaware 19801. The name of its registered agent at such address is The Corporation Trust Company. ARTICLE III. The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation law of Delaware. ARTICLE IV. The Corporation is authorized to issue one class of stock to be designated as "Common Stock." The number of shares of Common Stock which the corporation is authorized to issue is Fifty Million (50,000,000) shares, par value $0.001 per share (the "Common Stock"). The shares of Common Stock may be issued from time to time for such consideration as the Board of Directors may determine. Each holder of shares of Common Stock shall be entitled to one vote for each share of Common Stock held of record on all matters on which the holders of Common Stock are entitled to vote. ARTICLE V. The Corporation reserves the right to amend, alter, change, or repeal any provisions contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon the stockholders herein are granted subject to this right. ARTICLE VI. The Corporation is to have perpetual existence. ARTICLE VII. 1. Limitation of Liability. To the fullest extent permitted by the ----------------------- General Corporation Law of the State of Delaware as the same exists or as may hereafter be amended, a director of the Corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. 2. Indemnification. The corporation shall indemnify to the fullest --------------- extent permitted by law any person made or threatened to be made a party to an action or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that such person or his or her testator or intestate is or was a director, officer or employee of the Corporation, or any predecessor of the corporation, or serves or served at any other enterprise as a director, officer or employee at the request of the Corporation or any predecessor to the Corporation. 3. Amendments. Neither any amendment nor repeal of this Article VII, nor ---------- the adoption of any provision of the Corporation's Certificate of Incorporation inconsistent with this Article VII, shall eliminate or reduce the effect of this Article VII, in respect of any matter occurring, or any action or proceeding accruing or arising or that, but for this Article VII, would accrue or arise, prior to such amendment, repeal, or adoption of an inconsistent provision. ARTICLE VIII. Elections of Directors need not be by written ballot unless the Bylaws of the Corporation shall so provide. -2- ARTICLE IX. In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter, amend or repeal the Bylaws of the Corporation. ARTICLE X. Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws may provide. The books of the Corporation may be kept (subject to any provision contained in the statutes) outside of the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the Corporation. ARTICLE XI. The name and mailing address of the incorporator are: Francis S. Currie, Esq. Wilson Sonsini Goodrich & Rosati 650 Page Mill Road Palo Alto, California 94304-1050 * * * [THIS SPACE LEFT INTENTIONALLY BLANK] -3- F. We declare under penalty of perjury under the laws of the State of Delaware that the matters set forth in the foregoing certificate are true and correct of our own knowledge. IN WITNESS WHEREOF, the Corporation has caused this certificate to be signed by R. William Anderson, its Chief Financial Officer, this 22nd day of March, 1999. /s/ R. William Anderson --------------------------------------------- R. William Anderson, Chief Financial Officer -4- EX-3.2 4 AMENDED AND RESTATED BYLAWS EXHIBIT 3.2 AMENDED AND RESTATED BYLAWS OF BIOMARIN PHARMACEUTICAL INC. TABLE OF CONTENTS
PAGE ---- ARTICLE I - CORPORATE OFFICES.......................................... 1 1.1 REGISTERED OFFICE........................................... 1 1.2 OTHER OFFICES............................................... 1 ARTICLE II - MEETINGS OF STOCKHOLDERS.................................. 1 2.1 PLACE OF MEETINGS........................................... 1 2.2 ANNUAL MEETING.............................................. 1 2.3 SPECIAL MEETING............................................. 2 2.4 NOTICE OF STOCKHOLDERS' MEETINGS............................ 2 2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE................ 2 2.6 QUORUM...................................................... 2 2.7 ADJOURNED MEETING; NOTICE................................... 2 2.8 VOTING...................................................... 3 2.9 WAIVER OF NOTICE............................................ 3 2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING..................................................... 3 2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS. 4 2.12 PROXIES..................................................... 4 2.13 LIST OF STOCKHOLDERS ENTITLED TO VOTE....................... 5 ARTICLE III - DIRECTORS................................................ 5 3.1 POWERS...................................................... 5 3.2 NUMBER OF DIRECTORS......................................... 5 3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS..... 6 3.4 RESIGNATION AND VACANCIES................................... 6 3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE.................... 7 3.6 FIRST MEETINGS.............................................. 7 3.7 REGULAR MEETINGS............................................ 7 3.8 SPECIAL MEETINGS; NOTICE.................................... 7 3.9 QUORUM...................................................... 8 3.10 WAIVER OF NOTICE............................................ 8 3.11 ADJOURNED MEETING; NOTICE................................... 8 3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING........... 8 3.13 FEES AND COMPENSATION OF DIRECTORS.......................... 9 3.14 APPROVAL OF LOANS TO OFFICERS............................... 9 3.15 REMOVAL OF DIRECTORS........................................ 9
i ARTICLE IV - COMMITTEES................................................ 9 4.1 COMMITTEES OF DIRECTORS..................................... 9 4.2 COMMITTEE MINUTES........................................... 10 4.3 MEETINGS AND ACTION OF COMMITTEES........................... 10 ARTICLE V - OFFICERS................................................... 11 5.1 OFFICERS.................................................... 11 5.2 ELECTION OF OFFICERS........................................ 11 5.3 SUBORDINATE OFFICERS........................................ 11 5.4 REMOVAL AND RESIGNATION OF OFFICERS......................... 11 5.5 VACANCIES IN OFFICES........................................ 11 5.6 CHAIRMAN OF THE BOARD....................................... 12 5.7 PRESIDENT................................................... 12 5.8 VICE PRESIDENT.............................................. 12 5.9 SECRETARY................................................... 12 5.10 TREASURER................................................... 13 5.11 ASSISTANT SECRETARY......................................... 13 5.12 ASSISTANT TREASURER......................................... 13 5.13 AUTHORITY AND DUTIES OF OFFICERS............................ 14 ARTICLE VI - INDEMNITY................................................. 14 6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS................... 14 6.2 INDEMNIFICATION OF OTHERS................................... 14 6.3 INSURANCE................................................... 14 ARTICLE VII - RECORDS AND REPORTS...................................... 15 7.1 MAINTENANCE AND INSPECTION OF RECORDS....................... 15 7.2 INSPECTION BY DIRECTORS..................................... 15 7.3 ANNUAL STATEMENT TO STOCKHOLDERS............................ 16 7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS.............. 16 ARTICLE VIII - GENERAL MATTERS......................................... 16 8.1 CHECKS...................................................... 16 8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS............ 16 8.3 STOCK CERTIFICATES; PARTLY PAID SHARES...................... 17 8.4 SPECIAL DESIGNATION ON CERTIFICATES......................... 17 8.5 LOST CERTIFICATES........................................... 17 8.6 CONSTRUCTION; DEFINITIONS................................... 18 8.7 DIVIDENDS................................................... 18
ii 8.8 FISCAL YEAR................................................. 18 8.9 SEAL........................................................ 18 8.10 TRANSFER OF STOCK........................................... 18 8.11 STOCK TRANSFER AGREEMENTS................................... 19 8.12 REGISTERED STOCKHOLDERS..................................... 19 ARTICLE IX - AMENDMENTS................................................ 19 ARTICLE X - DISSOLUTION................................................ 19 ARTICLE XI - CUSTODIAN................................................. 20 11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES................. 20 11.2 DUTIES OF CUSTODIAN......................................... 21
iii AMENDED AND RESTATED BYLAWS --------------------------- OF -- BIOMARIN PHARMACEUTICAL INC. ---------------------------- ARTICLE I CORPORATE OFFICES ----------------- 1.1 REGISTERED OFFICE ----------------- The registered office of the corporation shall be in the City of Wilmington, County of New Castle, State of Delaware. The name of the registered agent of the corporation at such location is The Corporation Trust Company. 1.2 OTHER OFFICES ------------- The board of directors may at any time establish other offices at any place or places where the corporation is qualified to do business. ARTICLE II MEETINGS OF STOCKHOLDERS ------------------------ 2.1 PLACE OF MEETINGS ----------------- Meetings of stockholders shall be held at any place, within or outside the State of Delaware, designated by the board of directors. In the absence of any such designation, stockholders' meetings shall be held at the registered office of the corporation. 2.2 ANNUAL MEETING -------------- The annual meeting of stockholders shall be held each year on a date and at a time designated by the board of directors. In the absence of such designation, the annual meeting of stockholders shall be held on the third Wednesday of June in each year at 10 a.m.. However, if such day falls on a legal holiday, then the meeting shall be held at the same time and place on the next succeeding full 1 business day. At the meeting, directors shall be elected and any other proper business may be transacted. 2.3 SPECIAL MEETING --------------- A Special meeting of the Stockholders may be called, at any time for any purpose or purposes, by the Board of Directors or by such person or persons as may be authorized by the Certificate of Incorporation or the Bylaws. 2.4 NOTICE OF STOCKHOLDERS' MEETINGS -------------------------------- All notices of meetings with stockholders shall be in writing and shall be sent or otherwise given in accordance with Section 2.5 of these bylaws not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting. The notice shall specify the place, date, and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. 2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE -------------------------------------------- Written notice of any meeting of stockholders, if mailed, is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the corporation. An affidavit of the secretary or an assistant secretary or of the transfer agent of the corporation that the notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. 2.6 QUORUM ------ The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation. If, however, such quorum is not present or represented at any meeting of the stockholders, then the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present or represented. At such adjourned meeting at which a quorum is present or represented, any business may be transacted that might have been transacted at the meeting as originally noticed. 2.7 ADJOURNED MEETING; NOTICE ------------------------- When a meeting is adjourned to another time or place, unless these bylaws otherwise require, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business that might have been transacted at the original meeting. If the adjournment is for more 2 than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. 2.8 VOTING ------ The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 2.11 of these bylaws, subject to the provisions of Sections 217 and 218 of the General Corporation Law of Delaware (relating to voting rights of fiduciaries, pledgors and joint owners of stock and to voting trusts and other voting agreements). Except as provided in the last paragraph of this Section 2.8, or as may be otherwise provided in the certificate of incorporation, each stockholder shall be entitled to one vote for each share of capital stock held by such stockholder. At a stockholders' meeting at which directors are to be elected, or at elections held under special circumstances, a stockholder shall be entitled to cumulate votes (i.e., cast for any candidate a number of votes greater than the number of votes which such stockholder normally is entitled to cast). Each holder of stock, or of any class or classes or of a series or series thereof, who elects to cumulate votes shall be entitled to as many votes as equals the number of votes which (absent this provision as to cumulative voting) he would be entitled to cast for the election of directors with respect to his shares of stock multiplied by the number of directors to be elected by him, and he may cast all of such votes for a single director or may distribute them among the number to be voted for, or for any two or more of them, as he may see fit. 2.9 WAIVER OF NOTICE ---------------- Whenever notice is required to be given under any provision of the General Corporation Law of Delaware or of the certificate of incorporation or these bylaws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice unless so required by the certificate of incorporation or these bylaws. 2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING ------------------------------------------------------- Unless otherwise provided in the certificate of incorporation, any action required by this chapter to be taken at any annual or special meeting of stockholders of a corporation, or any action that may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice, and without a vote if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding stock having not less than the minimum number of 3 votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. If the action which is consented to is such as would have required the filing of a certificate under any section of the General Corporation Law of Delaware if such action had been voted on by stockholders at a meeting thereof, then the certificate filed under such section shall state, in lieu of any statement required by such section concerning any vote of stockholders, that written notice and written consent have been given as provided in Section 228 of the General Corporation Law of Delaware. 2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS ----------------------------------------------------------- In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the board of directors may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. If the board of directors does not so fix a record date: (i) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. (ii) The record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the board of directors is necessary, shall be the day on which the first written consent is expressed. (iii) The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting. 2.1 PROXIES ------- Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for 4 him by a written proxy, signed by the stockholder and filed with the secretary of the corporation, but no such proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. A proxy shall be deemed signed if the stockholder's name is placed on the proxy (whether by manual signature, typewriting, telegraphic transmission or otherwise) by the stockholder or the stockholder's attorney-in-fact. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212(c) of the General Corporation Law of Delaware. 2.13 LIST OF STOCKHOLDERS ENTITLED TO VOTE ------------------------------------- The officer who has charge of the stock ledger of a corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. ARTICLE III DIRECTORS --------- 3.1 POWERS ------ Subject to the provisions of the General Corporation Law of Delaware and any limitations in the certificate of incorporation or these bylaws relating to action required to be approved by the stockholders or by the outstanding shares, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the board of directors. 3.2 NUMBER OF DIRECTORS ------------------- The authorized number of directors shall be five (5). This number may be changed by a duly adopted amendment to the certificate of incorporation or by an amendment to this bylaw adopted by the vote or written consent of the holders of a majority of the stock issued and outstanding and entitled to vote or by resolution of a majority of the board of directors. No reduction of the authorized number of directors shall have the effect of removing any director before that director's term of office expires. 5 3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS ------------------------------------------------------- Except as provided in Section 3.4 of these bylaws, directors shall be elected at each annual meeting of stockholders to hold office until the next annual meeting. Directors need not be stockholders unless so required by the certificate of incorporation or these bylaws, wherein other qualifications for directors may be prescribed. Each director, including a director elected to fill a vacancy, shall hold office until his successor is elected and qualified or until his earlier resignation or removal. Elections of directors need not be by written ballot. 3.4 RESIGNATION AND VACANCIES ------------------------- Any director may resign at any time upon written notice to the corporation. When one or more directors so resigns and the resignation is effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office as provided in this section in the filling of other vacancies. Unless otherwise provided in the certificate of incorporation or these bylaws: (i) Vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. (ii) Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the provisions of the certificate of incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected. If at any time, by reason of death or resignation or other cause, the corporation should have no directors in office, then any officer or any stockholder or an executor, administrator, trustee or guardian of a stockholder, or other fiduciary entrusted with like responsibility for the person or estate of a stockholder, may call a special meeting of stockholders in accordance with the provisions of the certificate of incorporation or these bylaws, or may apply to the Court of Chancery for a decree summarily ordering an election as provided in Section 211 of the General Corporation Law of Delaware. If, at the time of filling any vacancy or any newly created directorship, the directors then in office constitute less than a majority of the whole board (as constituted immediately prior to any such 6 increase), then the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten (10) percent of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office as aforesaid, which election shall be governed by the provisions of Section 211 of the General Corporation Law of Delaware as far as applicable. 3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE ---------------------------------------- The board of directors of the corporation may hold meetings, both regular and special, either within or outside the State of Delaware. Unless otherwise restricted by the certificate of incorporation or these bylaws, members of the board of directors, or any committee designated by the board of directors, may participate in a meeting of the board of directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting. 3.6 FIRST MEETINGS -------------- The first meeting of each newly elected board of directors shall be held at such time and place as shall be fixed by the vote of the stockholders at the annual meeting and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present. In the event of the failure of the stockholders to fix the time or place of such first meeting of the newly elected board of directors, or in the event such meeting is not held at the time and place so fixed by the stockholders, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the board of directors, or as shall be specified in a written waiver signed by all of the directors. 3.7 REGULAR MEETINGS ---------------- Regular meetings of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by the board. 3.8 SPECIAL MEETINGS; NOTICE ------------------------ Special meetings of the board of directors for any purpose or purposes may be called at any time by the chairman of the board, the president, any vice president, the secretary or any two (2) directors. Notice of the time and place of special meetings shall be delivered personally or by telephone to each director or sent by first-class mail or telegram, charges prepaid, addressed to each director at that director's address as it is shown on the records of the corporation. If the notice is mailed, it shall be deposited in the United States mail at least four (4) days before the time of the holding of the 7 meeting. If the notice is delivered personally or by telephone or by telegram or by facsimile, it shall be delivered personally or by telephone or to the telegraph company at least one (1) hour before the time of the holding of the meeting. Any oral notice given personally or by telephone may be communicated either to the director or to a person at the office of the director who the person giving the notice has reason to believe will promptly communicate it to the director. The notice need not specify the purpose or the place of the meeting, if the meeting is to be held at the principal executive office of the corporation. 3.9 QUORUM ------ At all meetings of the board of directors, a majority of the authorized number of directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board of directors, except as may be otherwise specifically provided by statute or by the certificate of incorporation. If a quorum is not present at any meeting of the board of directors, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present. 3.10 WAIVER OF NOTICE ---------------- Whenever notice is required to be given under any provision of the General Corporation Law of Delaware or of the certificate of incorporation or these bylaws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the directors, or members of a committee of directors, need be specified in any written waiver of notice unless so required by the certificate of incorporation or these bylaws. 3.11 ADJOURNED MEETING; NOTICE ------------------------- If a quorum is not present at any meeting of the board of directors, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present. 3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING ------------------------------------------------- Unless otherwise restricted by the certificate of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the board of directors, or of any committee thereof, may be taken without a meeting if all members of the board or committee, as the case may be, consent thereto in writing and the writing or writings are filed with the minutes of proceedings of the board or committee. 8 3.13 FEES AND COMPENSATION OF DIRECTORS ---------------------------------- Unless otherwise restricted by the certificate of incorporation or these bylaws, the board of directors shall have the authority to fix the compensation of directors. 3.14 APPROVAL OF LOANS TO OFFICERS ----------------------------- The corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the corporation or of its subsidiary, including any officer or employee who is a director of the corporation or its subsidiary, whenever, in the judgment of the directors, such loan, guaranty or assistance may reasonably be expected to benefit the corporation. The loan, guaranty or other assistance may be with or without interest and may be unsecured, or secured in such manner as the board of directors shall approve, including, without limitation, a pledge of shares of stock of the corporation. Nothing in this section contained shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the corporation at common law or under any statute. 3.15 REMOVAL OF DIRECTORS -------------------- Unless otherwise restricted by statute, by the certificate of incorporation or by these bylaws, any director or the entire board of directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors. No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of such director's term of office. ARTICLE IV COMMITTEES ---------- 4.1 COMMITTEES OF DIRECTORS ----------------------- The board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, with each committee to consist of one or more of the directors of the corporation. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the board of directors or in the bylaws of the corporation, shall have and may exercise all the powers and authority of the board of directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers that may require it; but no 9 such committee shall have the power or authority to (i) amend the certificate of incorporation (except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the board of directors as provided in Section 151(a) of the General Corporation Law of Delaware, fix any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the corporation), (ii) adopt an agreement of merger or consolidation under Sections 251 or 252 of the General Corporation Law of Delaware, (iii) recommend to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, (iv) recommend to the stockholders a dissolution of the corporation or a revocation of a dissolution, or (v) amend the bylaws of the corporation; and, unless the board resolution establishing the committee, the bylaws or the certificate of incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend, to authorize the issuance of stock, or to adopt a certificate of ownership and merger pursuant to Section 253 of the General Corporation Law of Delaware. 4.2 COMMITTEE MINUTES ----------------- Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required. 4.3 MEETINGS AND ACTION OF COMMITTEES --------------------------------- Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of Article III of these bylaws, Section 3.5 (place of meetings and meetings by telephone), Section 3.7 (regular meetings), Section 3.8 (special meetings and notice), Section 3.9 (quorum), Section 3.10 (waiver of notice), Section 3.11 (adjournment and notice of adjournment), and Section 3.12 (action without a meeting), with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the board of directors and its members; provided, however, that the time of regular meetings of committees may also be called by resolution of the board of directors and that notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The board of directors may adopt rules for the government of any committee not inconsistent with the provisions of these bylaws. 10 ARTICLE V OFFICERS -------- 5.1 OFFICERS -------- The officers of the corporation shall be a president, one or more vice presidents, a secretary, and a treasurer. The corporation may also have, at the discretion of the board of directors, a chairman of the board, one or more assistant vice presidents, assistant secretaries, assistant treasurers, and any such other officers as may be appointed in accordance with the provisions of Section 5.3 of these bylaws. Any number of offices may be held by the same person. 5.2 ELECTION OF OFFICERS -------------------- The officers of the corporation, except such officers as may be appointed in accordance with the provisions of Sections 5.3 or 5.5 of these bylaws, shall be chosen by the board of directors, subject to the rights, if any, of an officer under any contract of employment. 5.3 SUBORDINATE OFFICERS -------------------- The board of directors may appoint, or empower the president to appoint, such other officers and agents as the business of the corporation may require, each of whom shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws or as the board of directors may from time to time determine. 5.4 REMOVAL AND RESIGNATION OF OFFICERS ----------------------------------- Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by an affirmative vote of the majority of the board of directors at any regular or special meeting of the board or, except in the case of an officer chosen by the board of directors, by any officer upon whom such power of removal may be conferred by the board of directors. Any officer may resign at any time by giving written notice to the corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party. 5.5 VACANCIES IN OFFICES -------------------- Any vacancy occurring in any office of the corporation shall be filled by the board of directors. 11 5.6 CHAIRMAN OF THE BOARD --------------------- The chairman of the board, if such an officer be elected, shall, if present, preside at meetings of the board of directors and exercise and perform such other powers and duties as may from time to time be assigned to him by the board of directors or as may be prescribed by these bylaws. If there is no president, then the chairman of the board shall also be the chief executive officer of the corporation and shall have the powers and duties prescribed in Section 5.7 of these bylaws. 5.7 PRESIDENT --------- Subject to such supervisory powers, if any, as may be given by the board of directors to the chairman of the board, if there be such an officer, the president shall be the chief executive officer of the corporation and shall, subject to the control of the board of directors, have general supervision, direction, and control of the business and the officers of the corporation. He shall preside at all meetings of the shareholders and, in the absence or nonexistence of a chairman of the board, at all meetings of the board of directors. He shall have the general powers and duties of management usually vested in the office of president of a corporation and shall have such other powers and duties as may be prescribed by the board of directors or these bylaws. 5.8 VICE PRESIDENT -------------- In the absence or disability of the president, the vice presidents, if any, in order of their rank as fixed by the board of directors or, if not ranked, a vice president designated by the board of directors, shall perform all the duties of the president and when so acting shall have all the powers of, and be subject to all the restrictions upon, the president. The vice presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the board of directors, these bylaws, the president or the chairman of the board. 5.9 SECRETARY --------- The secretary shall keep or cause to be kept, at the principal executive office of the corporation or such other place as the board of directors may direct, a book of minutes of all meetings and actions of directors, committees of directors, and shareholders. The minutes shall show the time and place of each meeting, whether regular or special (and, if special, how authorized and the notice given), the names of those present at directors' meetings or committee meetings, the number of shares present or represented at shareholders' meetings, and the proceedings thereof. The secretary shall keep, or cause to be kept, at the principal executive office of the corporation or at the office of the corporation's transfer agent or registrar, as determined by resolution of the board of directors, a share register, or a duplicate share register, showing the names of all shareholders and their addresses, the number and classes of shares held by each, the number and date of certificates evidencing such shares, and the number and date of cancellation of every certificate surrendered for cancellation. 12 The secretary shall give, or cause to be given, notice of all meetings of the shareholders and of the board of directors required to be given by law or by these bylaws. He shall keep the seal of the corporation, if one be adopted, in safe custody and shall have such other powers and perform such other duties as may be prescribed by the board of directors or by these bylaws. 5.10 TREASURER --------- The treasurer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, retained earnings, and shares. The books of account shall at all reasonable times be open to inspection by any director. The treasurer shall deposit all money and other valuables in the name and to the credit of the corporation with such depositaries as may be designated by the board of directors. He shall disburse the funds of the corporation as may be ordered by the board of directors, shall render to the president and directors, whenever they request it, an account of all of his transactions as treasurer and of the financial condition of the corporation, and shall have such other powers and perform such other duties as may be prescribed by the board of directors or these bylaws. 5.11 ASSISTANT SECRETARY ------------------- The assistant secretary, or, if there is more than one, the assistant secretaries in the order determined by the stockholders or board of directors (or if there be no such determination, then in the order of their election) shall, in the absence of the secretary or in the event of his or her inability or refusal to act, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors or the stockholders may from time to time prescribe. 5.12 ASSISTANT TREASURER ------------------- The assistant treasurer, or, if there is more than one, the assistant treasurers, in the order determined by the stockholders or board of directors (or if there be no such determination, then in the order of their election), shall, in the absence of the treasurer or in the event of his or her inability or refusal to act, perform the duties and exercise the powers of the treasurer and shall perform such other duties and have such other powers as the board of directors or the stockholders may from time to time prescribe. 13 5.13 AUTHORITY AND DUTIES OF OFFICERS -------------------------------- In addition to the foregoing authority and duties, all officers of the corporation shall respectively have such authority and perform such duties in the management of the business of the corporation as may be designated from time to time by the board of directors or the stockholders. ARTICLE VI INDEMNITY --------- 6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS ----------------------------------------- The corporation shall, to the maximum extent and in the manner permitted by the General Corporation Law of Delaware, indemnify each of its directors and officers against expenses (including attorneys' fees), judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding, arising by reason of the fact that such person is or was an agent of the corporation. For purposes of this Section 6.1, a "director" or "officer" of the corporation includes any person (i) who is or was a director or officer of the corporation, (ii) who is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, or (iii) who was a director or officer of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation. 6.2 INDEMNIFICATION OF OTHERS ------------------------- The corporation shall have the power, to the extent and in the manner permitted by the General Corporation Law of Delaware, to indemnify each of its employees and agents (other than directors and officers) against expenses (including attorneys' fees), judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding, arising by reason of the fact that such person is or was an agent of the corporation. For purposes of this Section 6.2, an "employee" or "agent" of the corporation (other than a director or officer) includes any person (i) who is or was an employee or agent of the corporation, (ii) who is or was serving at the request of the corporation as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or (iii) who was an employee or agent of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation. 6.3 INSURANCE --------- The corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any 14 such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of the General Corporation Law of Delaware. ARTICLE VII RECORDS AND REPORTS ------------------- 7.1 MAINTENANCE AND INSPECTION OF RECORDS ------------------------------------- The corporation shall, either at its principal executive office or at such place or places as designated by the board of directors, keep a record of its shareholders listing their names and addresses and the number and class of shares held by each shareholder, a copy of these bylaws as amended to date, accounting books, and other records. Any stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the corporation's stock ledger, a list of its stockholders, and its other books and records and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person's interest as a stockholder. In every instance where an attorney or other agent is the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing that authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the corporation at its registered office in Delaware or at its principal place of business. The officer who has charge of the stock ledger of a corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. 7.2 INSPECTION BY DIRECTORS ----------------------- Any director shall have the right to examine the corporation's stock ledger, a list of its stockholders, and its other books and records for a purpose reasonably related to his position as a director. The Court of Chancery is hereby vested with the exclusive jurisdiction to determine whether a director is entitled to the inspection sought. The Court may summarily order the 15 corporation to permit the director to inspect any and all books and records, the stock ledger, and the stock list and to make copies or extracts therefrom. The Court may, in its discretion, prescribe any limitations or conditions with reference to the inspection, or award such other and further relief as the Court may deem just and proper. 7.3 ANNUAL STATEMENT TO STOCKHOLDERS -------------------------------- The board of directors shall present at each annual meeting, and at any special meeting of the stockholders when called for by vote of the stockholders, a full and clear statement of the business and condition of the corporation. 7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS ---------------------------------------------- The chairman of the board, the president, any vice president, the treasurer, the secretary or assistant secretary of this corporation, or any other person authorized by the board of directors or the president or a vice president, is authorized to vote, represent, and exercise on behalf of this corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this corporation. The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority. ARTICLE VIII GENERAL MATTERS --------------- 8.1 CHECKS ------ From time to time, the board of directors shall determine by resolution which person or persons may sign or endorse all checks, drafts, other orders for payment of money, notes or other evidences of indebtedness that are issued in the name of or payable to the corporation, and only the persons so authorized shall sign or endorse those instruments. 8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS ------------------------------------------------ The board of directors, except as otherwise provided in these bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation; such authority may be general or confined to specific instances. Unless so authorized or ratified by the board of directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount. 16 8.3 STOCK CERTIFICATES; PARTLY PAID SHARES -------------------------------------- The shares of a corporation shall be represented by certificates, provided that the board of directors of the corporation may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the corporation. Notwithstanding the adoption of such a resolution by the board of directors, every holder of stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate signed by, or in the name of the corporation by the chairman or vice-chairman of the board of directors, or the president or vice-president, and by the treasurer or an assistant treasurer, or the secretary or an assistant secretary of such corporation representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. The corporation may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate issued to represent any such partly paid shares, upon the books and records of the corporation in the case of uncertificated partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully paid shares, the corporation shall declare a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon. 8.4 SPECIAL DESIGNATION ON CERTIFICATES ----------------------------------- If the corporation is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the corporation shall issue to represent such class or series of stock; provided, however, that, except as otherwise provided in Section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements there may be set forth on the face or back of the certificate that the corporation shall issue to represent such class or series of stock a statement that the corporation will furnish without charge to each stockholder who so requests the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. 8.5 LOST CERTIFICATES ----------------- Except as provided in this Section 8.5, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the corporation and cancelled 17 at the same time. The corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the corporation may require the owner of the lost, stolen or destroyed certificate, or his legal representative, to give the corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares. 8.6 CONSTRUCTION; DEFINITIONS ------------------------- Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the Delaware General Corporation Law shall govern the construction of these bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term "person" includes both a corporation and a natural person. 8.7 DIVIDENDS --------- The directors of the corporation, subject to any restrictions contained in the certificate of incorporation, may declare and pay dividends upon the shares of its capital stock pursuant to the General Corporation Law of Delaware. Dividends may be paid in cash, in property, or in shares of the corporation's capital stock. The directors of the corporation may set apart out of any of the funds of the corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve. Such purposes shall include but not be limited to equalizing dividends, repairing or maintaining any property of the corporation, and meeting contingencies. 8.8 FISCAL YEAR ----------- The fiscal year of the corporation shall be fixed by resolution of the board of directors and may be changed by the board of directors. 8.9 SEAL ---- The corporation shall adopt a corporate seal, which may be altered at pleasure, and use the same by causing it or a facsimile thereof, to be impressed or affixed or in any other manner reproduced. 8.10 TRANSFER OF STOCK ----------------- Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate, and record the transaction in its books. 18 8.11 STOCK TRANSFER AGREEMENTS ------------------------- The corporation shall have power to enter into and perform any agreement with any number of shareholders of any one or more classes of stock of the corporation to restrict the transfer of shares of stock of the corporation of any one or more classes owned by such stockholders in any manner not prohibited by the General Corporation Law of Delaware. 8.12 REGISTERED STOCKHOLDERS ----------------------- The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner, shall be entitled to hold liable for calls and assessments the person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. ARTICLE IX AMENDMENTS ---------- The original or other bylaws of the corporation may be adopted, amended or repealed by the stockholders entitled to vote; provided, however, that the corporation may, in its certificate of incorporation, confer the power to adopt, amend or repeal bylaws upon the directors. The fact that such power has been so conferred upon the directors shall not divest the stockholders of the power, nor limit their power to adopt, amend or repeal bylaws. ARTICLE X DISSOLUTION ----------- If it should be deemed advisable in the judgment of the board of directors of the corporation that the corporation should be dissolved, the board, after the adoption of a resolution to that effect by a majority of the whole board at any meeting called for that purpose, shall cause notice to be mailed to each stockholder entitled to vote thereon of the adoption of the resolution and of a meeting of stockholders to take action upon the resolution. At the meeting a vote shall be taken for and against the proposed dissolution. If a majority of the outstanding stock of the corporation entitled to vote thereon votes for the proposed dissolution, then a certificate stating that the dissolution has been authorized in accordance with the provisions of Section 275 of the General Corporation Law of Delaware and setting forth the names and residences 19 of the directors and officers shall be executed, acknowledged, and filed and shall become effective in accordance with Section 103 of the General Corporation Law of Delaware. Upon such certificate's becoming effective in accordance with Section 103 of the General Corporation Law of Delaware, the corporation shall be dissolved. Whenever all the stockholders entitled to vote on a dissolution consent in writing, either in person or by duly authorized attorney, to a dissolution, no meeting of directors or stockholders shall be necessary. The consent shall be filed and shall become effective in accordance with Section 103 of the General Corporation Law of Delaware. Upon such consent's becoming effective in accordance with Section 103 of the General Corporation Law of Delaware, the corporation shall be dissolved. If the consent is signed by an attorney, then the original power of attorney or a photocopy thereof shall be attached to and filed with the consent. The consent filed with the Secretary of State shall have attached to it the affidavit of the secretary or some other officer of the corporation stating that the consent has been signed by or on behalf of all the stockholders entitled to vote on a dissolution; in addition, there shall be attached to the consent a certification by the secretary or some other officer of the corporation setting forth the names and residences of the directors and officers of the corporation. ARTICLE XI CUSTODIAN --------- 11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES ------------------------------------------- The Court of Chancery, upon application of any stockholder, may appoint one or more persons to be custodians and, if the corporation is insolvent, to be receivers, of and for the corporation when: (i) at any meeting held for the election of directors the stockholders are so divided that they have failed to elect successors to directors whose terms have expired or would have expired upon qualification of their successors; or (ii) the business of the corporation is suffering or is threatened with irreparable injury because the directors are so divided respecting the management of the affairs of the corporation that the required vote for action by the board of directors cannot be obtained and the stockholders are unable to terminate this division; or (iii) the corporation has abandoned its business and has failed within a reasonable time to take steps to dissolve, liquidate or distribute its assets. 20 11.2 DUTIES OF CUSTODIAN ------------------- The custodian shall have all the powers and title of a receiver appointed under Section 291 of the General Corporation Law of Delaware, but the authority of the custodian shall be to continue the business of the corporation and not to liquidate its affairs and distribute its assets, except when the Court of Chancery otherwise orders and except in cases arising under Sections 226(a)(3) or 352(a)(2) of the General Corporation Law of Delaware. 21 CERTIFICATE OF SECRETARY ------------------------ I, the undersigned, do hereby certify: 1. That I am the duly elected and acting Secretary of BioMarin Pharmaceutical Inc.; and 2. That the foregoing Bylaws, comprising 21 pages, constitute the Bylaws of said corporation as duly adopted by the Board of Directors of the corporation on December 30, 1997. IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the seal of the corporation as of the 30th day of December, 1997. /s/ John C. Klock ------------------------------------------ John C. Klock, Secretary 22 EX-4.1 5 FORM OF AMENDED AND RESTATED REG. RIGHTS AGREEMENT EXHIBIT 4.1 AMENDED AND RESTATED -------------------- REGISTRATION RIGHTS AGREEMENT ----------------------------- THIS AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT is entered into as of April ___, 1999, by and among BIOMARIN PHARMACEUTICAL INC., a Delaware corporation (the "CORPORATION"), and the individuals and entities listed on Schedule A hereto (the "HOLDERS"). RECITALS: In connection with the sale and issue of the shares of Common Stock, the Corporation and certain Holders entered into a Registration Rights Agreement, some of which are dated October 1, 1997, and others of which are dated October 16, 1997 (the "ORIGINAL RIGHTS AGREEMENT"), pursuant to which the Corporation granted certain registration and information rights such Holders. This Amended and Restated Registration Rights Agreement, which amends and restates the Original Rights Agreement in its entirety, has been previously entered into in connection with the sale and issuance of shares of Common Stock to other investors who purchased shares of Common Stock pursuant to Subscription Agreements (the "SUBSCRIPTION AGREEMENTS"), which sales closed on October 1, 1997, October 16, 1997, December 30, 1997, June 30, 1998, July 14, 1998, August 3, 1998, and September 4, 1998. NOW, THEREFORE, in consideration of the foregoing and of the mutual promises and covenants contained herein the parties hereby agree as follows: 1. Definition. As used herein, the following terms shall have the following ---------- respective meanings: (a) "Commission" shall mean the Securities and Exchange Commission or ---------- any other Federal agency at the time administering the Securities Act (b) "Holders" shall mean and include any person or persons to whom ------- Registrable Securities (as defined herein) were originally issued or qualifying transferees under Section 10 hereof who hold Registrable Securities, (c) The terms "register," "registered" and "registration" refer to a -------- ---------- ------------ registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of the effectiveness of such registration statement. (d) "Registrable Securities" means: (i) shares of the Corporation's ---------------------- Common Stock issued pursuant to a Subscription Agreement, (ii) any Common Stock of the Corporation issued as (or issuable upon the conversion or exercise of any warrant, right or other security that is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of the shares referred to in (i) above, excluding in all cases, however, any Registrable Securities sold by a person in a transaction in which the rights under this Agreement are not assigned, and (iii) shares of stock owned by parties as to which the Corporation has granted registration rights pursuant to Section 12. (e) "Registration Expenses" shall mean all expenses incurred by the --------------------- Corporation in complying with Sections 2 and 3 hereof, including, without limitation, all registration, qualification and filing fees, printing expenses, escrow fees, fees and disbursements of counsel for the Corporation, reasonable fees and disbursements of one counsel for all Holders, blue sky fees and expenses, and the expense of any special audits incident to or required by any such registration (but excluding the compensation of regular employees of the Corporation which shall be paid in any event by the Corporation). (f) "Securities Act" shall mean the Securities Act of 1933, as -------------- amended, or any similar federal statute and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. (g) "Selling Expenses" shall mean all underwriting fees, discounts, ---------------- selling commissions and stock transfer taxes applicable to the securities registered by the Holders and all fees and disbursements of counsel for any Holder, other than the fees and disbursements for one counsel acting on behalf of all Holders with respect to any registration effected pursuant to the terms of Sections 2 or 3 hereof. 2. Registration Rights. ------------------- A. Corporation Registration. ------------------------ (a) Notice of Registration to Holders. If at any time or from time to --------------------------------- time, the Corporation shall determine to register any of its securities, either for its own account or the account of a security holder or holders, other than: (i) a registration relating solely to employee benefit plans, or (ii) a registration relating solely to a Commission Rule 145 transaction, the Corporation will: (i) promptly give to each Holder written notice thereof, and (ii) include in such registration (and any related qualification under blue sky laws or other compliance), and in any underwriting involved therein, all the Registrable Securities specified in a written request or requests, made within 15 days after receipt of such written notice from the Corporation, by any Holder or Holders. -2- (b) Underwriting. If the registration of which the Corporation gives ------------ notice is for a registered public offering involving an underwriting, the Corporation shall so advise the Holders as a part of the written notice given pursuant to Section 2(a)(i). In such event the right of any Holder to registration pursuant to this Section 2 shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Corporation) enter into an underwriting agreement in, customary form, with the underwriter selected for such underwriting by the Corporation. Notwithstanding any other provision of this Section 2, if the managing underwriter determines that marketing factors require a limitation of the number of shares to be underwritten, the underwriter may exclude some or all Registrable Securities from such registration and underwriting. The Corporation shall so advise all Holders distributing their securities through such underwriting, and the number of shares of Registrable Securities that may be included in the registration and underwriting shall be allocated among all Holders requesting registration, in proportion, as nearly as practicable, to the respective amounts of securities held by all such Holders entitled to inclusion in such registration at the time of filing of the registration statement. No securities other than Registrable Securities (other than those to be sold for the account of the Corporation) may be included in such registration unless all Registrable Securities requested for inclusion shall have first been included. If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw therefrom by written notice to the Corporation and the managing underwriter. Any securities excluded or withdrawn from such underwriting shall be withdrawn from such registration, but if the registration is the first offering by the Corporation to the general public of its securities for its own account, then the securities so excluded or withdrawn shall not be transferred in a public distribution prior to one hundred and eighty (180) days after the effective date of the registration statement relating thereto. B. Demand Registration. ------------------- (a) If, at any time after the earlier of: (x) December 1, 2000 or (y) the date six (6) months after the effective date of the first registration statement for a public offering of securities of the Corporation, the Corporation should receive from a Holder or Holders ("Initiating Holders") a written request that the Corporation effect a registration statement under the Securities Act with respect to at least thirty percent (30%) of the outstanding Registrable Securities, then the Corporation shall: (i) within ten (10) days of the receipt thereof, give written notice of such request to all Holders; and (ii) use its best efforts to effect such registration as soon as practicable and in any event to file within sixty (60) days of the receipt of such request a registration statement under the Securities Act covering all the Registrable Securities that the Holders request in writing to be -3- registered within ten (10) days of receipt of the Corporation's written notice under clause (i) and to use its best efforts to have such registration statement become effective. (b) If the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Corporation as a part of their request made pursuant to subsection 2B(a) and the Corporation shall include such information in the written notice referred to in subsection 2B(a)(i). The underwriter will be selected by the Corporation and shall be reasonably acceptable to a majority in interest of the Initiating Holders. In such event, the right of any Holder to include Registrable Securities in such registration shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting (unless otherwise mutually agreed by a majority in interest of the Initiating Holders and such Holder) to the extent provided herein. All Holders proposing to distribute their Registrable Securities through such underwriting shall (together with the Corporation as provided in subsection 5(e)) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting. Notwithstanding any other provision of this Section 2B, if the underwriter advises the Initiating Holders in writing that marketing factors require a limitation of the number of shares to be underwritten, then the Initiating Holders shall so advise all Holders of Registrable Securities that would otherwise be underwritten pursuant hereto, and the number of shares of Registrable Securities that may be included in the underwriting shall be allocated among all Holders thereof, including the Initiating Holders, in proportion (as nearly as practicable) to the amount of Registrable Securities owned by each such Holder; provided, however, that the number of shares of Registrable Securities to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting. (c) Notwithstanding the foregoing, if the Corporation shall furnish to the Initiating Holders a certificate signed by the Chairman or President of the Corporation stating that, in the good faith judgment of the Board of Directors of the Corporation, it would be seriously detrimental to the Corporation and its shareholders for a registration statement to be filed on or before the date filing would be required, and it is therefore essential to defer the filing of such registration statement, the Corporation shall have the right to defer such filing for a period of not more than one hundred twenty (120) days after receipt of the request of the Initiating Holders; provided, however, that the Corporation may not utilize this right more than once in any twelve-month period. (d) The Corporation shall not be obligated to effect, or to take any action to effect, any registration pursuant to this Section 2B after the Corporation has effected one registration on Form S-1 or a successor form pursuant to this Section 2B and such registration statement has been declared or ordered effective and the sales of Registrable Securities under such registration statement have closed. (e) No demand right under this Section 2B shall be construed to limit any registration required under Section 2A or Section 3 hereof. -4- 3. Registration on Form S-3. ------------------------ (a) In addition to the rights set forth in Sections 2A and 2B, if Holders request that the Corporation file a registration statement on Form S-3 (or any successor to Form S-3) for a public offering of shares of Registrable Securities the reasonably anticipated aggregate price to the public of which would equal at least $2,500,000 (the "S-3 Initiating Holders"), and the Corporation is a registrant entitled to use Form S-3 to register such shares for such an offering, the Corporation shall, within ten (10) days thereafter, give written notice of the proposed registration, and any related qualification or compliance, to all other Holders and shall use its best efforts to cause such shares, together with all or such portion of the Registrable Securities of any other Holder or Holders joining in such request as are specified in a written request given within fifteen (15) days after receipt of such written notice from the Corporation, to be registered for the offering as soon as practicable on Form S-3 (or any successor form to Form S-3). The Corporation shall include in the registration statement a description of the manner of intended sale or distribution requested by each such Holder. The number of shares of Registrable Securities that may be included on the Form S-3 shall be allocated among all Holders requesting registration in proportion to the respective amounts of Registrable Securities entitled to inclusion in such registration at the time of filing the registration statement. (b) Notwithstanding the foregoing, the Corporation shall not be obligated to take any action pursuant to this Section 3: (i) in any particular jurisdiction in which the Corporation would be required to execute a general consent to service of process in effecting such registration, qualification or compliance unless the Corporation is already subject to service in such jurisdiction and except as may be required by the Securities Act; (ii) if the Corporation, within ten (10) days of the receipt of the request of the S-3 Initiating Holders, gives notice of its bona fide intention to effect the filing of a registration statement with the Commission within ninety (90) days of receipt of such request (other than with respect to a registration statement relating to a Rule 145 transaction, an offering solely to employees, or any other registration which is not appropriate for the registration of Registrable Securities); or (iii) during the period starting with the date of filing of, and ending on a date which is six (6) months following the effective date of, a registration statement described in (ii) above, or filed pursuant to this Section 3(b) or Section 2A or 2B hereof, provided that the Corporation is actively employing in good faith all reasonable efforts to cause the registration statement referred to in (ii) or (iii), respectively, to become effective and provided, further, that no other person or entity could require the Corporation to file a registration statement in such period. -5- (c) Subject to the foregoing clauses, the Corporation shall file a registration statement on Form S-3 covering the Registrable Securities so requested to be registered as soon as practicable after receipt of the request of the S-3 Initiating Holders; provided, however, that if the Corporation shall furnish to such S-3 Initiating Holders a certificate signed by the Chairman or President of the Corporation stating that in the good faith judgment of the Board of Directors of the Corporation, it would be seriously detrimental to the Corporation and its shareholders for such registration statement to be filed on or before the date filing would be required, and it is therefore essential to defer the filing of such registration statement, the Corporation shall have the right to defer such filing for a period of not more than 120 days after receipt of the request of the S-3 Initiating Holders provided that the Corporation may not utilize this right more than once in any 12-month period. (d) Underwriting. ------------ If the S-3 Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Corporation as a part of their request made pursuant to Section 3(a) and the Corporation shall include such information in the written notice referred to in that Section. In such event, the Corporation (together with all S-3 Initiating Holders proposing to distribute their securities through such underwriting) shall enter into an underwriting agreement in customary form with the managing underwriter selected for such underwriting by a majority in interest of the S-3 Initiating Holders requesting such underwriting. 4. Expenses of Registration. All Registration Expenses incurred in connection ------------------------ with any registration, qualification or compliance pursuant to Sections 2A, 2B or 3 hereof shall be borne by the Corporation. All Selling Expenses relating to securities registered by the Holders shall be borne by the holders of such securities pro rata on the basis of the number of shares so registered. 5. Registration Procedures. In the case of each registration, qualification ----------------------- or compliance requested pursuant to this Agreement, the Corporation will keep each Holder advised in writing as to the initiation of each registration, qualification and compliance and as to the completion thereof. Whenever required under this Agreement to use its best efforts to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible, prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become effective. In addition, at its expense, the Corporation will: (a) Keep such registration, qualification or compliance effective and current for a period of ninety (90) days (or such longer period as may be necessary to accommodate the filing of amendments or supplements necessary to comply with the Securities Act) or until the Holder or Holders have completed the distribution described in the registration statement relating thereto, whichever first occurs; provided, however, that such 90-day period shall be extended for a period of -6- time equal to the period the Holder refrains from selling any securities included in such registration at the request of an underwriter; (b) Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement; (c) Furnish such number of prospectuses, in conformity with the requirements of the Securities Act, and other documents incident thereto as a Holder from time to time may reasonably request; (d) Use its best efforts to register and qualify the securities covered by such registration statement under such other securities or blue sky laws of such jurisdictions as shall be reasonably requested by the Holders, provided that the Corporation shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdiction, unless the Corporation is already subject to service in such jurisdiction and except as may be required by the Securities Act; (e) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering. Each Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement; and (f) Notify each Holder of Registrable Securities covered by such registration statement, at any time when a prospectus relating thereto covered by such registration statement is required to be delivered under the Securities Act, of the occurrence of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, and promptly prepare and file such supplements and amendments thereto as may be required under Section 5(b) on account of such event, and use its best efforts to cause each such supplement and amendment to become effective. 6. Indemnification. --------------- (a) The Corporation will indemnify each Holder, each of such Holder's officers and directors and partners, and such Holder's legal counsel and independent accountants, and each person controlling any such persons within the meaning of Section 15 of the Securities Act, with respect to which registration, qualification or compliance has been effected pursuant to this Agreement, and each underwriter, if any, and each person who controls any underwriter within the meaning of Section 15 of the Securities Act, against all expenses, claim losses, damages and liabilities (or actions in respect thereof), including any of the foregoing incurred in settlement of any -7- litigation, commenced or threatened, provided such settlement is effected with the written consent of the Corporation (which consent shall not be unreasonably withheld), arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement, prospectus, offering circular or other document, or any amendment or supplement thereto, incident to any such registration, qualification or compliance, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein, not misleading, or any violation by the Corporation of any rule or regulation promulgated under the Securities Act or any state securities laws applicable to the Corporation and relating to action or inaction by the Corporation in connection with any such registration, qualification or compliance, and will reimburse each such Holder, each of its officers and directors and partners and such Holder's legal counsel and independent accountants, and each person controlling any such persons, each such underwriter and each person who controls any such underwriter, for any legal and any other expenses reasonably incurred in connection with investigating, preparing or defending any such claim, loss, damage, liability or action, provided that the Corporation will not be liable in any such case to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission or alleged untrue statement or omission, made in reliance upon and in conformity with written information furnished to the Corporation by such Holder or underwriter for inclusion in the respective registration statement, prospectus or offering circular. (b) Each Holder will, if Registrable Securities held by such Holder are included in the securities as to which such registration, qualification or compliance is being effected, indemnify the Corporation, each of its directors and officers and its legal counsel and independent accountants, and each underwriter, if any, of the Corporation's securities covered by such a registration statement, each person who controls the Corporation or such underwriter within the meaning of Section 15 of the Securities Act, and each other such Holder, each of its officers, directors, partners, legal counsel and independent accountants and each person controlling such Holder within the meaning of Section 15 of the Securities Act against all expenses, claims, losses, damages and liabilities (or actions in respect thereof), including any of the foregoing, incurred in settlement of any litigation, commenced or threatened, provided such settlement is effected with the written consent of the Holder (which consent shall not be unreasonably withheld), arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement, prospectus, offering circular or other document, or any amendment or supplement thereto, incident to any such registration, qualification or compliance or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Corporation, such Holders, such directors, officers, partners, legal counsel, independent accountants, underwriters or control persons for any legal or any other expenses reasonably incurred in connection with investigating, preparing or defending any such claim, loss, damage, liability or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement, prospectus, offering circular, other document, or amendment or supplement thereto in reliance upon and in conformity with information furnished to the Corporation by such Holder for inclusion in the respective registration statement, prospectus or offering circular. -8- (c) Each party entitled to indemnification under this Section 6 (the "Indemnified Party") shall give notice to the party required to provide indemnification (the "Indemnifying Party") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom, provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld). The Indemnified Party may participate in such defense at such party's expense; provided, however, that the Indemnifying Party shall bear the expense of such defense of the Indemnified Party if representation of both parties by the same counsel would be inappropriate due to actual or potential conflicts of interest. The failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Agreement, unless such failure is prejudicial to the ability of the Indemnifying Party to defend the action. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party a release from all liability in respect of such claim or litigation. 7. Lockup Agreement. In consideration for the Corporation agreeing to its ---------------- obligations under this Agreement, each Holder agrees, in connection with the first registration of the Corporation's securities, upon the request of the Corporation or the underwriters managing the underwritten offering of the Corporation's securities, not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any Registrable Securities (other than those included in the registration) without the prior written consent of the Corporation or such underwriters, as the case may be, for such period of time (not to exceed one hundred and eighty (180) days) from the effective date of such registration as the Corporation or the underwriters may specify; provided, however, that nothing herein shall prevent any Holder that is a partnership from making a distribution of Registrable Securities to the partners thereof that is otherwise in compliance with applicable securities laws. 8. Information by Holder. The Holder or Holders of Registrable Securities --------------------- included in any registration shall furnish in writing to the Corporation such information regarding such Holder or Holders and the distribution proposed by such Holder or Holders as the Corporation may request in writing and as shall be required in connection with any registration, qualification or compliance referred to in this Agreement. 9. Rule 144 Reporting. With a view to making available the benefits of ------------------ certain rules and regulations of the Commission which may at any time permit the sale of securities of the Corporation to the public without registration, after such time as a public market exists for the Common Stock of the Corporation, the Corporation agrees to: (a) Make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act, at all times after the effective date of the first -9- registration under the Securities Act filed by the Corporation for an offering of its securities to the general public; and (b) Use its best efforts to then file with the Commission in a timely manner all reports and other documents required of the Corporation under the Securities Act and the Securities Exchange Act of 1934, as amended (the "Exchange Act") (at any time after it has become subject to such reporting requirements); and (c) So long as a Holder owns any Registrable Securities, furnish to the Holder forthwith upon request a written statement by the Corporation as to its compliance with the reporting requirements of said Rule 144 (at any time after ninety (90) days following the effective date of the first registration statement filed by the Corporation for an offering of its securities to the general public), and of the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), a copy of the most recent annual or quarterly report of the Corporation, and such other reports and documents of the Corporation as a Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing a Holder to sell any such securities without registration. 10. Transfer of Registration Rights. The rights to cause the Corporation to ------------------------------- register securities granted Holders under Section 3 hereof may be assigned by any Holder of Registrable Securities to a transferee or assignee who following such transfer holds at least fifty percent (50%) of the Registrable Securities initially held by such Holder, provided that the Corporation receives prior written notice of each such assignment. Notwithstanding the foregoing, rights to cause the Corporation to register securities may be assigned in connection with the transfer or assignment of Registrable Securities, without limitation, either during the Holder's lifetime or upon death by will or intestacy to such Holder's other ancestors, descendants or spouse, or any custodian or trustee for the account of a Holder or a Holder's ancestors, descendants or spouse or to any partner of a Holder, where such Holder is a partnership, or to any parent or subsidiary corporation or any officer, director or principal shareholder thereof, where such Holder is a corporation. All transferees and assignees of Registrable Securities, as a condition to the transfer of Registrable Securities, shall covenant to be bound by the agreement set forth in Section 7. 11. Termination of Registration Rights. Securities of the Corporation held by ---------------------------------- any Holder shall cease to be Registrable Securities at such time as such Holder may sell such Securities under Rule 144, or a successor rule, in any two successive three-month periods. 12. Limitations on Registration Rights Granted To Other Securities. The -------------------------------------------------------------- parties hereto agree that additional holders may be added as parties to this Agreement with respect to any or all securities of the Corporation held by them; provided, however, that from and after the date of this Agreement, the Corporation shall not without the prior written consent of the Holders of sixty- six percent (66%) of the Registrable Securities then outstanding, enter into any agreement with any holder or prospective holder of any securities of the Corporation providing for the grant to such holder of registration rights superior to those granted herein. Any additional parties shall execute a -10- counterpart of this Agreement, and upon execution by such additional parties and by the Corporation, shall be considered Holders for all purposes of this Agreement and Schedule "A" shall be amended accordingly. 13. Miscellaneous. ------------- (a) Waivers and Amendments. With the written consent of the ---------------------- Corporation and the holders of at least sixty-six percent (66%) in the aggregate of Registrable Securities then outstanding, the obligations and rights of the Corporation and the Holders under this Agreement may be waived (either generally or in a particular instance, either retroactively or prospectively, and either for a specified period of time or indefinitely) or amended; provided, however, that no such waiver or amendment shall reduce the aforesaid portion of Registrable Securities, the holders of which are required to consent to any waiver or amendment, without the consent of all the Holders. Upon the effectuation of each such waiver or amendment, the Corporation shall promptly give written notice thereof to any Holders who have not previously consented to such waiver in writing. (b) Governing Law. This Agreement shall be governed by and construed ------------- under the laws of the State of California as such laws are applied to contracts made and to be fully performed entirely within that state between residents of that state. (c) Successors and Assigns. Except as otherwise expressly provided ---------------------- herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, permitted assigns, heirs, executors and administrators of the parties hereto. (d) Entire Agreement. This Agreement constitutes the full and entire ---------------- understanding and agreement between the parties with regard to the subject matter hereof. (e) Notices. All notices and other communications required or ------- permitted hereunder shall be in writing and shall be deemed effectively given upon personal delivery; upon confirmed transmission by telecopy or telex; or seven (7) days following deposit with the United States Post Office, by certified mail, postage prepaid, addressed (i) if to a Holder, to such Holder's address set forth in the Subscription Agreement, or to such other address as such Holder shall have furnished to the Corporation in writing, or (ii) if to the Corporation, to 11 Pimentel Court, Novato, California 94949, or to such other address as the Corporation shall have furnished to the Holders in writing, with a copy to the Corporation's legal counsel, Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo Alto, California 94304, Attn: Frank Currie. (f) Severability. In case any provision of this Agreement shall be ------------ invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby. -11- (g) Titles and Subtitles. The titles of the sections and subsections -------------------- of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement. (h) Counterparts. This Agreement may be executed in any number of ------------ counterparts, each of which shall be an original, but all of which together constitute one instrument. 14. Aggregation. Shares of capital stock of the Corporation owned by ----------- partnerships and corporations having substantially common ownership interests or managed by the same principals and owned by individual investors affiliated with one another may be aggregated for the purposes of calculating the aggregate percentage of capital stock of the Corporation owned by any Holder and any permitted transferee hereunder. -12- The foregoing Agreement is hereby executed as of the date set forth above. THE CORPORATION BIOMARIN PHARMACEUTICAL INC. By: ____________________________________________ Title: _________________________________________ THE HOLDER By: ____________________________________________ Name: __________________________________________ Address: _______________________________________ ________________________________________________ ________________________________________________ Phone: ( ) ----------------------------------------- Telecopy: ( ) -------------------------------------- GENZYME CORPORATION By: ____________________________________________ Name: __________________________________________ Title: _________________________________________ Phone: ( ) ----------------------------------------- Telecopy: ( ) -------------------------------------- -13- SCHEDULE A ---------- HOLDERS ------- NUMBER OF NAME SHARES - --------------------------------------------------------- ---------- Argentiere Holdings Ltd. 1,500 Banca Del Gottardo 300,000 Bank Sarasin & Cie 150,000 BB Bio Ventures L.P. 5,000,000 BB Bio Ventures L.P. 381,792 Belmont Capital Ltd. 60,000 Belmont Capital Ltd. 60,000 Belmont Capital Ltd. 60,000 Belmont Capital Ltd. 20,500 Belmont Capital Ltd. 10,000 Belmont Capital Ltd. 3,350 Belmont Capital Ltd. 22,750 The estate of Olga H. Bolenius, Richard E. Drews Executor 250,000 Cambrian Holdings Limited 500 Cambrian Holdings Limited 2,500 Cardigan Inc. 511,000 Ciaran Overseas Ltd. 15,000 Clariden Biotechnology Equity Fund 67,000 Clubb Capital Ltd. 41,079 Clubb Capital Ltd. 2,053 Clubb Capital Ltd. 22,658 Danske & Co. 333,500 Grant W. Denison 1,300,000 Bruce B. Dunnan 16,667 Douglas M. Dunnan 16,667 NUMBER OF NAME SHARES - --------------------------------------------------------- ---------- Egger & Co. 185,000 Egger & Co. 15,000 Falcon Corporate Investments Limited 250,000 Foundation Limbau, Vaduz 8,833 Genzyme Corporation 1,333,333 Gerlach & Company 20,000 Gerlach & Company 60,000 Thomas Girschweiler 180,000 John S. Glass 16,667 Glyko Biomedical Ltd. 1,500,000 Glyko Biomedical Ltd. 7,000,000 Glyko Biomedical Ltd. 166,667 Glyko Biomedical Ltd. 2,259,039 Angela Graham 360 Grosvenor Fund, L.P. 400,000 Hare & Co. 115,000 Mark Holmes 30,000 Mark Holmes 5,000 JDS Partners 34,000 John C. Klock 800,000 Nicole R. Kubin 4,167 LaMont Asset Management S.A. 400,000 LaMont Asset Management S.A. 200,000 LaMont Asset Management S.A. 50,000 LaMont Asset Management S.A. 25,000 LaMont Asset Management S.A. 250,000 LaMont Asset Management S.A. 10,000 Liechtensteinische Landesbank AG 1,500 Maureen E. Mallon 1,000 -2- NUMBER OF NAME SHARES - --------------------------------------------------------- ---------- MPM Asset Management Investors 1998 LLC 4,792 MPM Bioventures Parallel Fund L.P. 30,083 Paul & Yannick Rochester & LeGuyader 100,000 Royal Bank of Canada Trust Company (Jersey) Limited 250,000 A/C 835292 Royal Bank of Canada Trust Company (Jersey) Limited 333,500 A/C 835292 Rud, Blass & Cie 750,000 Rued Blass & Cie AG 37,500 Rued Blass & Cie AG 100,000 Rudolf Stager 3,500 Christopher Starr 400,000 Swiss Bank Corporation 150,000 Maurizio Tassi 10,000 C. Bowdoin Train 16,667 Dmitri Vassin 8,333 Wealth Management Services Ltd. 750 Andreas Wueger 10,000 -3- EX-10.1 6 FORM OF INDEMNIFICATION AGREEMENT EXHIBIT 10.1 BIOMARIN PHARMACEUTICAL INC. INDEMNIFICATION AGREEMENT This Indemnification Agreement (the "AGREEMENT") is effective as of 1998, by and between Biomarin Pharmaceutical Inc., a Delaware corporation (the "COMPANY"), and ___________ (the "INDEMNITEE"). WHEREAS, the Company desires to attract and retain the services of highly qualified individuals, such as Indemnitee, to serve the Company and its related entities; WHEREAS, in order to induce Indemnitee to continue to provide services to the Company, the Company wishes to provide for the indemnification of, and advancement of expenses to, Indemnitee to the maximum extent permitted by law; WHEREAS, Indemnitee does not regard the current protection available as adequate under the present circumstances, and the Indemnitee and other directors, officers, employees, agents and fiduciaries of the Company may not be willing to continue to serve in such capacities without additional protection; WHEREAS, the Company and Indemnitee further recognize the substantial increase in corporate litigation in general, subjecting directors, officers, employees, agents and fiduciaries to expensive litigation risks at the same time as the availability and coverage of liability insurance has been severely limited; and WHEREAS, in view of the considerations set forth above, the Company desires that Indemnitee shall be indemnified by the Company as set forth herein; NOW, THEREFORE, the Company and Indemnitee hereby agree as set forth below. 1. Certain Definitions. ------------------- (a) "CHANGE IN CONTROL" shall mean, and shall be deemed to have occurred if, on or after the date of this Agreement, (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company acting in such capacity or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing more than 50% of the total voting power represented by the Company's then outstanding Voting Securities, (ii) during any BioMarin Indemnification Agreement Page 2 period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new director whose election by the Board of Directors or nomination for election by the Company's stockholders was approved by a vote of at least two thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation other than a merger or consolidation which would result in the Voting Securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 80% of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of (in one transaction or a series of related transactions) all or substantially all of the Company's assets. (b) "CLAIM" shall mean any threatened, pending or completed action, suit, proceeding or alternative dispute resolution mechanism, or any hearing, inquiry or investigation that Indemnitee in good faith believes might lead to the institution of any such action, suit, proceeding or alternative dispute resolution mechanism, whether civil, criminal, administrative, investigative or other. (c) References to the "COMPANY" shall include, in addition to BioMarin Pharmaceutical Inc., any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger to which BioMarin Pharmaceutical Inc. (or any of its wholly owned subsidiaries) is a party which, if its separate existence had continued, would have had power and author ity to indemnify its directors, officers, employees, agents or fiduciaries, so that if Indemnitee is or was a director, officer, employee, agent or fiduciary of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, employee benefit plan, trust or other enterprise, Indemnitee shall stand in the same position under the provisions of this Agreement with respect to the resulting or surviving corporation as Indemnitee would have with respect to such constituent corporation if its separate existence had continued. (d) "EXPENSES" shall mean any and all expenses (including attorneys' fees and all other costs, expenses and obligations incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, to be a witness in or to participate in, any action, suit, proceeding, alternative dispute resolution mechanism, hearing, inquiry or investigation), judgments, fines, penalties and amounts paid in settlement (if such settlement is approved in advance by the Company, which approval shall not be unreasonably withheld) of any Claim regarding any Indemnifiable Event and any federal, state, local or foreign taxes imposed on the Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement. BioMarin Indemnification Agreement Page 3 (e) "EXPENSE ADVANCE" shall mean an advance payment of Expenses to Indemnitee pursuant to Section 3(a). (f) "INDEMNIFIABLE EVENT," subject to the exceptions set forth in Section 9 hereof, shall mean any event or occurrence related to the fact that Indemnitee is or was a director, officer, employee, agent or fiduciary of the Company, or any subsidiary of the Company, or is or was serving at the request of the Company as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action or inaction on the part of Indemnitee while serving in such capacity, if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company. (g) "INDEPENDENT LEGAL COUNSEL" shall mean an attorney or firm of attorneys, selected in accordance with the provisions of Section 2(c) hereof, who shall not have otherwise performed services for the Company or Indemnitee within the last three years (other than with respect to matters concerning the rights of Indemnitee under this Agreement, or of other indemnitees under similar indemnity agreements). (h) References to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on Indemnitee with respect to an employee benefit plan; and references to "serving at the request of the Company" shall include any service as a director, officer, employee, agent or fiduciary of the Company which imposes duties on, or involves services by, such director, officer, employee, agent or fiduciary with respect to an employee benefit plan, its participants or its beneficiaries; and if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan, Indemnitee shall be deemed to have acted in a manner "not opposed to the best interests of the Company" as referred to in this Agreement. (i) "REVIEWING PARTY" shall mean any appropriate person or body consisting of a member or members of the Company's Board of Directors or any other person or body appointed by the Board of Directors who is not a party to the particular Claim for which Indemnitee is seeking indemnification, or Independent Legal Counsel. (j) "VOTING SECURITIES" shall mean any securities of the Company that vote generally in the election of directors. 2. Indemnification. --------------- (a) Indemnification of Expenses. The Company shall indemnify --------------------------- Indemnitee to the fullest extent permitted by law if Indemnitee was or is or becomes a party to or witness or other participant in, or is threatened to be made a party to or witness or other participant in, any Claim by reason of (or arising in part out of) any Indemnifiable Event against Expenses, including all interest, BioMarin Indemnification Agreement Page 4 assessments and other charges paid or payable in connection with or in respect of such Expenses. Such payment of Expenses shall be made by the Company as soon as practicable but in any event no later than seven (7) business days after written demand by Indemnitee therefor is presented to the Company. (b) Reviewing Party. Notwithstanding the foregoing, (i) the --------------- obligations of the Company under Section 2(a) shall be subject to the condition that the Reviewing Party shall not have determined (in a written opinion, in any case in which the Independent Legal Counsel referred to in Section 2(c) hereof is involved) that Indemnitee would not be permitted to be indemnified under applicable law, and (ii) the obligation of the Company to make an Expense Advance shall be subject to the condition that, if, when and to the extent that the Reviewing Party determines that Indemnitee would not be permitted to be so indemnified under applicable law, the Company shall be entitled to be reimbursed by Indemnitee (who hereby agrees to reimburse the Company) for all such amounts theretofore paid; provided, however, that if Indemnitee has commenced or -------- ------- thereafter commences legal proceedings in a court of competent jurisdiction to secure a determination that Indemnitee should be indemnified under applicable law, any determination made by the Reviewing Party that Indemnitee would not be permitted to be indemnified under applicable law shall not be binding and Indemnitee shall not be required to reimburse the Company for any Expense Advance until a final judicial determination is made with respect thereto (as to which all rights of appeal therefrom have been exhausted or lapsed). Indemnitee's obligation to reimburse the Company for any Expense Advance shall be unsecured and no interest shall be charged thereon. If there has not been a Change in Control, the Reviewing Party shall be selected by the Board of Directors, and if there has been such a Change in Control (other than a Change in Control which has been approved by a majority of the Company's Board of Directors who were directors immediately prior to such Change in Control), the Reviewing Party shall be the Independent Legal Counsel. If there has been no determination by the Reviewing Party or if the Reviewing Party determines that Indemnitee substantively would not be permitted to be indemnified in whole or in part under applicable law, Indemnitee shall have the right to commence litigation seeking an initial determination by the court or challenging any such determination by the Reviewing Party or any aspect thereof, including the legal or factual bases therefor, and the Company hereby consents to service of process and to appear in any such proceeding. Absent such litigation, any determination by the Reviewing Party shall be conclusive and binding on the Company and Indemnitee. (c) Change in Control. The Company agrees that if there is a Change ----------------- in Control of the Company (other than a Change in Control which has been approved by a majority of the Company's Board of Directors who were directors immediately prior to such Change in Control), then with respect to all matters thereafter arising concerning the rights of Indemnitee to payments of Expenses and Expense Advances under this Agreement or any other agreement or under the Company's Certificate of Incorporation or Bylaws as now or hereafter in effect, Independent Legal Counsel, if desired by Indemnitee, shall be selected by Indemnitee and approved by the Company (which approval shall not be unreasonably withheld). Such counsel, among other things, shall render its written opinion to the Company and Indemnitee as to whether and to what extent Indemnitee would be permitted to be indemnified under applicable law and the Company agrees to abide by such opinion. The Company BioMarin Indemnification Agreement Page 5 agrees to pay the reasonable fees of the Independent Legal Counsel referred to above and to indemnify fully such counsel against any and all expenses (including attorneys' fees), claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto. Notwithstanding any other provision of this Agreement, the Company shall not be required to pay Expenses of more than one Independent Legal Counsel in connection with all matters concerning a single Indemnitee, and such Independent Legal Counsel shall be the Independent Legal Counsel for any or all other Indemnitees unless (i) the Company otherwise determines or (ii) any Indemnitee shall provide a written statement setting forth in detail a reasonable objection to such Independent Legal Counsel representing other Indemnitees. (d) Mandatory Payment of Expenses. Notwithstanding any other ----------------------------- provision of this Agreement other than Section 10 hereof, to the extent that Indemnitee has been successful on the merits or otherwise, including, without limitation, the dismissal of an action without prejudice, in defense of any Claim regarding any Indemnifiable Event, Indemnitee shall be indemnified against all Expenses incurred by Indemnitee in connection therewith. 3. Expenses; Indemnification Procedure. ----------------------------------- (a) Advancement of Expenses. The Company shall advance all Expenses ----------------------- incurred by Indemnitee. The advances to be made hereunder shall be paid by the Company to Indemnitee as soon as practicable but in any event no later than seven (7) business days after written demand by Indemnitee therefor to the Company. Expenses incurred in defending any proceeding may be advanced by the Company prior to the final disposition of the proceeding upon receipt of an undertaking by or on behalf of Indemnitee to repay the Expenses incurred, if it shall be determined ultimately that Indemnitee is not entitled to be indemnified. (b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a -------------------------------- condition precedent to Indemnitee's right to be indemnified under this Agreement, give the Company notice in writing as soon as practicable of any Claim made against Indemnitee for which indemnification will or could be sought under this Agreement. Notice to the Company shall be directed to the Chief Executive Officer of the Company at the address shown on the signature page of this Agreement (or such other address as the Company shall designate in writing to Indemnitee). In addition, Indemnitee shall give the Company such information and cooperation as it may reasonably require and as shall be within Indemnitee's power. (c) No Presumptions; Burden of Proof. For purposes of this -------------------------------- Agreement, the termination of any Claim by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere, or its equivalent, shall not create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law. In addition, neither the failure of the Reviewing Party to have made a determination as to whether Indemnitee has met any particular standard of conduct or had any particular belief, nor an actual determination by the Reviewing Party that BioMarin Indemnification Agreement Page 6 Indemnitee has not met such standard of conduct or did not have such belief, prior to the commencement of legal proceedings by Indemnitee to secure a judicial determination that Indemnitee should be indemnified under applicable law, shall be a defense to Indemnitee's claim or create a presumption that Indemnitee has not met any particular standard of conduct or did not have any particular belief. (d) Notice to Insurers. If, at the time of the receipt by the ------------------ Company of a notice of a Claim pursuant to Section 3(b) hereof, the Company has liability insurance in effect which may cover such Claim, the Company shall give prompt notice of the commencement of such Claim to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such Claim in accordance with the terms of such policies. (e) Selection of Counsel. In the event the Company shall be -------------------- obligated hereunder to pay the Expenses of any Claim the Company, if appropriate, shall be entitled to assume the defense of such Claim with counsel approved by Indemnitee (not to be unreasonably withheld) upon the delivery to Indemnitee of written notice of the Company's election so to do. After delivery of such notice, approval of such counsel by Indemnitee and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same Claim; provided that, (i) Indemnitee shall have the right to employ Indemnitee's separate counsel in any such Claim at Indemnitee's expense and (ii) if (A) the employment of separate counsel by Indemnitee has been previously authorized by the Company, (B) Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company and Indemnitee in the conduct of any such defense, or (C) the Company shall not continue to retain such counsel to defend such Claim, then the fees and expenses of Indemnitee's separate counsel shall be at the expense of the Company. 4. Additional Indemnification Rights; Nonexclusivity. ------------------------------------------------- (a) Scope. The Company hereby agrees to indemnify the Indemnitee to ----- the fullest extent permitted by law, notwithstanding that such indemnification is not specifically authorized by the other provisions of this Agreement, the Company's Amended and Restated Certificate of Incorporation, the Company's Bylaws or by statute. In the event of any change after the date of this Agreement in any applicable law, statute or rule which expands the right of a Delaware corporation to indemnify a member of its board of directors or an officer, employee, agent or fiduciary, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits afforded by such change. In the event of any change in any applicable law, statute or rule which narrows the right of a Delaware corporation to indemnify a member of its board of directors or an officer, employee, agent or fiduciary, such change, to the extent not otherwise required by such law, statute or rule to be applied to this Agreement, shall have no effect on this Agreement or the parties' rights and obligations hereunder except as set forth in Section 9(a) hereof. BioMarin Indemnification Agreement Page 7 (b) Nonexclusivity. The indemnification provided by this Agreement -------------- shall be in addition to any rights to which Indemnitee may be entitled under the Company's Amended and Restated Certificate of Incorporation, its Bylaws, any other agreement, any vote of stockholders or disinterested directors, the General Corporation Law of the State of Delaware, or otherwise. The indemnification provided under this Agreement shall continue as to Indemnitee for any action taken or not taken while serving in an indemnified capacity even though Indemnitee may have ceased to serve in such capacity. 5. No Duplication of Payments. The Company shall not be liable under -------------------------- this Agreement to make any payment in connection with any Claim made against Indemnitee to the extent Indemnitee has otherwise actually received payment (under any insurance policy, provision of the Company's Certificate of Incorporation, bylaw or otherwise) of the amounts otherwise indemnifiable hereunder. 6. Partial Indemnification. If Indemnitee is entitled under any ----------------------- provision of this Agreement to indemnification by the Company for some or a portion of Expenses incurred in connection with any Claim, but not, however, for all of the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion of such Expenses to which Indemnitee is entitled. 7. Mutual Acknowledgment. Both the Company and Indemnitee acknowledge --------------------- that in certain instances, federal law or applicable public policy may prohibit the Company from indemnifying its directors, officers, employees, agents or fiduciaries under this Agreement or otherwise. Indemnitee understands and acknowledges that the Company has undertaken or may be required in the future to undertake with the Securities and Exchange Commission to submit the question of indemnification to a court in certain circumstances for a determination of the Company's right under public policy to indemnify Indemnitee. 8. Liability Insurance. To the extent the Company maintains liability ------------------- insurance applicable to directors, officers, employees, agents or fiduciaries, Indemnitee shall be covered by such policies in such a manner as to provide Indemnitee the same rights and benefits as are provided to the most favorably insured of the Company's directors, if Indemnitee is a director; or of the Company's officers, if Indemnitee is not a director of the Company but is an officer; or of the Company's key employees, agents or fiduciaries, if Indemnitee is not an officer or director but is a key employee, agent or fiduciary. 9. Exceptions. Notwithstanding any other provision of this Agreement, ---------- the Company shall not be obligated pursuant to the terms of this Agreement: (a) Excluded Actions or Omissions. To indemnify Indemnitee for acts, ----------------------------- omissions or transactions in violation of the Company's policies and practices or from which Indemnitee may not be indemnified under applicable law. (b) Claims Initiated by Indemnitee. To indemnify or advance expenses ------------------------------ to Indemnitee with respect to Claims initiated or brought voluntarily by Indemnitee and not by way of defense, except BioMarin Indemnification Agreement Page 8 (i) with respect to actions or proceedings brought to establish or enforce a right to indemnification under this Agreement or any other agreement or insurance policy or under the Company's Amended and Restated Certificate of Incorporation or Bylaws now or hereafter in effect relating to Claims for Indemnifiable Events, (ii) in specific cases if the Board of Directors has approved the initiation or bringing of such Claim, or (iii) as otherwise required under Section 145 of the Delaware General Corporation Law, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advance expense payment or insurance recovery, as the case may be. (c) Lack of Good Faith. To indemnify Indemnitee for any expenses ------------------ incurred by the Indemnitee with respect to any proceeding instituted by Indemnitee to enforce or interpret this Agreement, if a court of competent jurisdiction determines that each of the material assertions made by the Indemnitee in such proceeding was not made in good faith or was frivolous. (d) Claims Under Section 16(b). To indemnify Indemnitee for expenses -------------------------- and the payment of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 16(b) of the Securities Exchange Act of 1934, as amended, or any similar successor statute. 10. Period of Limitations. No legal action shall be brought and no cause --------------------- of action shall be asserted by or in the right of the Company against Indemnitee, Indemnitee's estate, spouse, heirs, executors or personal or legal representatives after the expiration of two years from the date of accrual of such cause of action, and any claim or cause of action of the Company shall be extinguished and deemed released unless asserted by the timely filing of a legal action within such two-year period; provided, however, that if any shorter -------- ------- period of limitations is otherwise applicable to any such cause of action, such shorter period shall govern. 11. Counterparts. This Agreement may be executed in one or more ------------ counterparts, each of which shall constitute an original. 12. Binding Effect; Successors and Assigns. This Agreement shall be -------------------------------------- binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, assigns (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), spouses, heirs and personal and legal representatives. The Company shall require and cause any successor (whether direct or indirect, and whether by purchase, merger, consolidation or otherwise) to all, substantially all, or a substantial part, of the business or assets of the Company, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. This Agreement shall continue in effect regardless of whether Indemnitee continues to serve as a director, officer, employee, agent or fiduciary (as applicable) of the Company or of any other enterprise at the Company's request. BioMarin Indemnification Agreement Page 9 13. Attorneys' Fees. In the event that any action is instituted by --------------- Indemnitee under this Agreement or under any liability insurance policies maintained by the Company to enforce or interpret any of the terms hereof or thereof, Indemnitee shall be entitled to be paid all Expenses incurred by Indemnitee with respect to such action, regardless of whether Indemnitee is ultimately successful in such action, and shall be entitled to the advancement of Expenses with respect to such action, unless as a part of such action a court of competent jurisdiction over such action determines that each of the material assertions made by Indemnitee as a basis for such action were not made in good faith or were frivolous. In the event of an action instituted by or in the name of the Company under this Agreement to enforce or interpret any of the terms of this Agreement, Indemnitee shall be entitled to be paid all Expenses incurred by Indemnitee in defense of such action (including costs and expenses incurred with respect to Indemnitee's counterclaims and cross-claims made in such action), and shall be entitled to the advancement of Expenses with respect to such action, unless as a part of such action a court having jurisdiction over such action determines that each of Indemnitee's material defenses to such action were made in bad faith or were frivolous. 14. Notice. All notices, requests, demands and other communications under ------ this Agreement shall be in writing and shall be deemed duly given (i) if delivered by hand and signed for by the party addressed, on the date of such delivery, or (ii) if mailed by domestic certified or registered mail with postage prepaid, on the third business day after the date postmarked. Addresses for notice to either party are as shown on the signature page of this Agreement, or as subsequently modified by written notice. 15. Consent to Jurisdiction. The Company and Indemnitee each hereby ----------------------- irrevocably consent to the jurisdiction of the courts of the State of Delaware for all purposes in connection with any action or proceeding which arises out of or relates to this Agreement and agree that any action instituted under this Agreement shall be commenced, prosecuted and continued only in the Court of Chancery of the State of Delaware in and for New Castle County, which shall be the exclusive and only proper forum for adjudicating such a claim. 16. Severability. The provisions of this Agreement shall be severable in ------------ the event that any of the provisions hereof (including any provision within a single section, paragraph or sentence) are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, and the remaining provisions shall remain enforceable to the fullest extent permitted by law. Furthermore, to the fullest extent possible, the provisions of this Agreement (including, without limitations, each portion of this Agreement containing any provision held to be invalid, void or otherwise unenforceable, that is not itself invalid, void or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable. 17. Choice of Law. This Agreement shall be governed by and its provisions ------------- construed and enforced in accordance with the laws of the State of Delaware as applied to contracts between Delaware residents entered into and to be performed entirely within the State of Delaware. BioMarin Indemnification Agreement Page 10 18. Subrogation. In the event of payment under this Agreement, the ----------- Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all documents required and shall do all acts that may be necessary to secure such rights and to enable the Company effectively to bring suit to enforce such rights. 19. Amendment and Termination. No amendment, modification, termination or ------------------------- cancellation of this Agreement shall be effective unless it is in writing signed by both the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed to be or shall constitute a waiver of any other provisions hereof (whether or not similar), nor shall such waiver constitute a continuing waiver. 20. Integration and Entire Agreement. This Agreement sets forth the -------------------------------- entire understanding between the parties hereto and supersedes and merges all previous written and oral negotiations, commitments, understandings and agreements relating to the subject matter hereof between the parties hereto. 21. No Construction as Employment Agreement. Nothing contained in this --------------------------------------- Agreement shall be construed as giving Indemnitee any right to be retained in the employ of the Company or any of its subsidiaries or affiliated entities. [Remainder of page left blank intentionally] BioMarin Indemnification Agreement Page 11 IN WITNESS WHEREOF, the parties hereto have executed this Indemnification Agreement as of the date first above written. "COMPANY" BIOMARIN PHARMACEUTICAL INC. By:__________________________________ Name: John Klock, M.D. Title: President and Secretary Address: 371 Bel Marin Key Boulevard Novato, CA 94949 "INDEMNITEE" Signature: __________________________ Name: __________________________ Address: __________________________ __________________________ __________________________ [SIGNATURE PAGE TO BIOMARIN INDEMNIFICATION AGREEMENT] EX-10.2 7 1997 AMENDED STOCK PLAN AND FORMS OF AGREEMENT EXHIBIT 10.2 PRIVATE COMPANY SECTION 25102(O) PLAN BIOMARIN PHARMACEUTICAL INC. 1997 STOCK PLAN, AS AMENDED ON DECEMBER 22, 1998 1. Purposes of the Plan. The purposes of this Stock Plan are to attract -------------------- and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to Employees, Directors and Consultants and to promote the success of the Company's business. Options granted under the Plan may be Incentive Stock Options or Nonstatutory Stock Options, as determined by the Administrator at the time of grant. Stock Purchase Rights may also be granted under the Plan. 2. Definitions. As used herein, the following definitions shall apply: ----------- (a) "Administrator" means the Board or any of its Committees as shall ------------- be administering the Plan in accordance with Section 4 hereof. (b) "Applicable Laws" means the requirements relating to the --------------- administration of stock option plans under U.S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any other country or jurisdiction where Options or Stock Purchase Rights are granted under the Plan. (c) "Board" means the Board of Directors of the Company. ----- (d) "Code" means the Internal Revenue Code of 1986, as amended. ---- (e) "Committee" means a committee of Directors appointed by the Board --------- in accordance with Section 4 hereof. (f) "Common Stock" means the Common Stock of the Company. ------------ (g) "Company" means BioMarin Pharmaceutical Inc., a Delaware ------- corporation. (h) "Consultant" means any person who is engaged by the Company or any ---------- Parent or Subsidiary to render consulting or advisory services to such entity. (i) "Director" means a member of the Board of Directors of the -------- Company. (j) "Disability" means total and permanent disability as defined in ---------- Section 22(e)(3) of the Code. (k) "Employee" means any person, including Officers and Directors, -------- employed by the Company or any Parent or Subsidiary of the Company. A Service Provider shall not cease to be an Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company, its Parent, any Subsidiary, or any successor. For purposes of Incentive Stock Options, no such leave may exceed ninety days, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, on the 181st day of such leave any Incentive Stock Option held by the Optionee shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory Stock Option. Neither service as a Director nor payment of a director's fee by the Company shall be sufficient to constitute "employment" by the Company. (l) "Exchange Act" means the Securities Exchange Act of 1934, as ------------ amended. (m) "Fair Market Value" means, as of any date, the value of Common ----------------- Stock determined as follows: (i) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system for the last market trading day prior to the time of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; (ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shall be the mean between the high bid and low asked prices for the Common Stock on the last market trading day prior to the day of determination; or (iii) In the absence of an established market for the Common Stock, the Fair Market Value thereof shall be determined in good faith by the Administrator. (n) "Incentive Stock Option" means an Option intended to qualify as an ---------------------- incentive stock option within the meaning of Section 422 of the Code. (o) "Nonstatutory Stock Option" means an Option not intended to qualify ------------------------- as an Incentive Stock Option. (p) "Officer" means a person who is an officer of the Company within ------- the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder. (q) "Option" means a stock option granted pursuant to the Plan. ------ -2- (r) "Option Agreement" means a written or electronic agreement between ---------------- the Company and an Optionee evidencing the terms and conditions of an individual Option grant. The Option Agreement is subject to the terms and conditions of the Plan. (s) "Option Exchange Program" means a program whereby outstanding ----------------------- Options are exchanged for Options with a lower exercise price. (t) "Optioned Stock" means the Common Stock subject to an Option or a -------------- Stock Purchase Right. (u) "Optionee" means the holder of an outstanding Option or Stock -------- Purchase Right granted under the Plan. (v) "Parent" means a "parent corporation," whether now or hereafter ------ existing, as defined in Section 424(e) of the Code. (w) "Plan" means this 1997 Stock Plan. ---- (x) "Restricted Stock" means shares of Common Stock acquired pursuant ---------------- to a grant of a Stock Purchase Right under Section 11 below. (y) "Section 16(b)" means Section 16(b) of the Securities Exchange Act ------------- of 1934, as amended. (z) "Service Provider" means an Employee, Director or Consultant. ---------------- (aa) "Share" means a share of the Common Stock, as adjusted in ----- accordance with Section 12 below. (bb) "Stock Purchase Right" means a right to purchase Common Stock -------------------- pursuant to Section 11 below. (cc) "Subsidiary" means a "subsidiary corporation," whether now or ---------- hereafter existing, as defined in Section 424(f) of the Code. 3. Stock Subject to the Plan. Subject to the provisions of Section 12 of ------------------------- the Plan, the maximum aggregate number of Shares which may be subject to option and sold under the Plan is 5,000,000 Shares plus an annual increase to be added on the first day of the Company's fiscal year beginning in 1999 equal to the lesser of (i) 4% of the then-outstanding capital stock of the Company, (ii) 2,000,000 shares, or (iii) a lesser amount set by the Board. The Shares may be authorized but unissued, or reacquired Common Stock. If an Option or Stock Purchase Right expires or becomes unexercisable without having been exercised in full, or is surrendered pursuant to an Option Exchange Program, the unpurchased Shares which were subject thereto shall become available for future grant or sale under the Plan (unless the Plan has terminated). However, Shares that have actually been issued -3- under the Plan, upon exercise of either an Option or Stock Purchase Right, shall not be returned to the Plan and shall not become available for future distribution under the Plan, except that if Shares of Restricted Stock are repurchased by the Company at their original purchase price, such Shares shall become available for future grant under the Plan. 4. Administration of the Plan. -------------------------- (a) Administrator. The Plan shall be administered by the Board or a ------------- Committee appointed by the Board, which Committee shall be constituted to comply with Applicable Laws. (b) Powers of the Administrator. Subject to the provisions of the --------------------------- Plan and, in the case of a Committee, the specific duties delegated by the Board to such Committee, and subject to the approval of any relevant authorities, the Administrator shall have the authority in its discretion: (i) to determine the Fair Market Value; (ii) to select the Service Providers to whom Options and Stock Purchase Rights may from time to time be granted hereunder; (iii) to determine the number of Shares to be covered by each such award granted hereunder; (iv) to approve forms of agreement for use under the Plan; (v) to determine the terms and conditions, of any Option or Stock Purchase Right granted hereunder. Such terms and conditions include, but are not limited to, the exercise price, the time or times when Options or Stock Purchase Rights may be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding any Option or Stock Purchase Right or the Common Stock relating thereto, based in each case on such factors as the Administrator, in its sole discretion, shall determine; (vi) to determine whether and under what circumstances an Option may be settled in cash under subsection 9(e) instead of Common Stock; (vii) to reduce the exercise price of any Option to the then current Fair Market Value if the Fair Market Value of the Common Stock covered by such Option has declined since the date the Option was granted; (viii) to initiate an Option Exchange Program; -4- (ix) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of qualifying for preferred tax treatment under foreign tax laws; (x) to allow Optionees to satisfy withholding tax obligations by electing to have the Company withhold from the Shares to be issued upon exercise of an Option or Stock Purchase Right that number of Shares having a Fair Market Value equal to the amount required to be withheld. The Fair Market Value of the Shares to be withheld shall be determined on the date that the amount of tax to be withheld is to be determined. All elections by Optionees to have Shares withheld for this purpose shall be made in such form and under such conditions as the Administrator may deem necessary or advisable; and (xi) to construe and interpret the terms of the Plan and awards granted pursuant to the Plan. (c) Effect of Administrator's Decision. All decisions, determinations ---------------------------------- and interpretations of the Administrator shall be final and binding on all Optionees. 5. Eligibility. ----------- (a) Nonstatutory Stock Options and Stock Purchase Rights may be granted to Service Providers. Incentive Stock Options may be granted only to Employees. (b) Each Option shall be designated in the Option Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Optionee during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such Options shall be treated as Nonstatutory Stock Options. For purposes of this Section 5(b), Incentive Stock Options shall be taken into account in the order in which they were granted. The Fair Market Value of the Shares shall be determined as of the time the Option with respect to such Shares is granted. (c) Neither the Plan nor any Option or Stock Purchase Right shall confer upon any Optionee any right with respect to continuing the Optionee's relationship as a Service Provider with the Company, nor shall it interfere in any way with his or her right or the Company's right to terminate such relationship at any time, with or without cause. 6. Term of Plan. The Plan shall become effective upon its adoption by the ------------ Board. It shall continue in effect for a term of ten (10) years unless sooner terminated under Section 14 of the Plan. -5- 7. Term of Option. The term of each Option shall be stated in the Option -------------- Agreement; provided, however, that the term shall be no more than ten (10) years from the date of grant thereof. In the case of an Incentive Stock Option granted to an Optionee who, at the time the Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Option shall be five (5) years from the date of grant or such shorter term as may be provided in the Option Agreement. 8. Option Exercise Price and Consideration. --------------------------------------- (a) The per share exercise price for the Shares to be issued upon exercise of an Option shall be such price as is determined by the Administrator, but shall be subject to the following: (i) In the case of an Incentive Stock Option (A) granted to an Employee who, at the time of grant of such Option, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the exercise price shall be no less than 110% of the Fair Market Value per Share on the date of grant. (B) granted to any other Employee, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant. (ii) In the case of a Nonstatutory Stock Option (A) granted to a Service Provider who, at the time of grant of such Option, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the exercise price shall be no less than 110% of the Fair Market Value per Share on the date of grant. (B) granted to any other Service Provider, the per Share exercise price shall be no less than 85% of the Fair Market Value per Share on the date of grant. (iii) Notwithstanding the foregoing, Options may be granted with a per Share exercise price other than as required above pursuant to a merger or other corporate transaction. (b) The consideration to be paid for the Shares to be issued upon exercise of an Option, including the method of payment, shall be determined by the Administrator (and, in the case of an Incentive Stock Option, shall be determined at the time of grant). Such consideration may consist of (1) cash, (2) check, (3) promissory note, (4) other Shares which (x) in the case of Shares acquired upon exercise of an Option, have been owned by the Optionee for more than six months on the date of surrender, and (y) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which such Option shall be exercised, (5) -6- consideration received by the Company under a cashless exercise program implemented by the Company in connection with the Plan, or (6) any combination of the foregoing methods of payment. In making its determination as to the type of consideration to accept, the Administrator shall consider if acceptance of such consideration may be reasonably expected to benefit the Company. 9. Exercise of Option. ------------------ (a) Procedure for Exercise; Rights as a Shareholder. Any Option granted ----------------------------------------------- hereunder shall be exercisable according to the terms hereof at such times and under such conditions as determined by the Administrator and set forth in the Option Agreement. Except in the case of Options granted to Officers, Directors and Consultants, Options shall become exercisable at a rate of no less than 20% per year over five (5) years from the date the Options are granted. Unless the Administrator provides otherwise, vesting of Options granted hereunder shall be tolled during any unpaid leave of absence. An Option may not be exercised for a fraction of a Share. An Option shall be deemed exercised when the Company receives: (i) written or electronic notice of exercise (in accordance with the Option Agreement) from the person entitled to exercise the Option, and (ii) full payment for the Shares with respect to which the Option is exercised. Full payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Option Agreement and the Plan. Shares issued upon exercise of an Option shall be issued in the name of the Optionee or, if requested by the Optionee, in the name of the Optionee and his or her spouse. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the Shares, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 12 of the Plan. Exercise of an Option in any manner shall result in a decrease in the number of Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised. (b) Termination of Relationship as a Service Provider. If an Optionee ------------------------------------------------- ceases to be a Service Provider, such Optionee may exercise his or her Option within such period of time as is specified in the Option Agreement (of at least thirty (30) days) to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the term of the Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for three (3) months following the Optionee's termination. If, on the date of termination, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after -7- termination, the Optionee does not exercise his or her Option within the time specified by the Administrator, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan. (c) Disability of Optionee. If an Optionee ceases to be a Service ---------------------- Provider as a result of the Optionee's Disability, the Optionee may exercise his or her Option within such period of time as is specified in the Option Agreement (of at least six (6) months) to the extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for twelve (12) months following the Optionee's termination. If, on the date of termination, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan. (d) Death of Optionee. If an Optionee dies while a Service Provider, ----------------- the Option may be exercised within such period of time as is specified in the Option Agreement (of at least six (6) months) to the extent that the Option is vested on the date of death (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement) by the Optionee's estate or by a person who acquires the right to exercise the Option by bequest or inheritance. In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for twelve (12) months following the Optionee's termination. If, at the time of death, the Optionee is not vested as to the entire Option, the Shares covered by the unvested portion of the Option shall immediately revert to the Plan. If the Option is not so exercised within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan. (e) Buyout Provisions. The Administrator may at any time offer to buy ----------------- out for a payment in cash or Shares, an Option previously granted, based on such terms and conditions as the Administrator shall establish and communicate to the Optionee at the time that such offer is made. 10. Non-Transferability of Options and Stock Purchase Rights. The Options -------------------------------------------------------- and Stock Purchase Rights may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Optionee, only by the Optionee. 11. Stock Purchase Rights. --------------------- (a) Rights to Purchase. Stock Purchase Rights may be issued either ------------------ alone, in addition to, or in tandem with other awards granted under the Plan and/or cash awards made outside of the Plan. After the Administrator determines that it will offer Stock Purchase Rights under the Plan, it shall advise the offeree in writing or electronically of the terms, conditions and restrictions related to the offer, including the number of Shares that such person shall be entitled to -8- purchase, the price to be paid, and the time within which such person must accept such offer. The terms of the offer shall comply in all respects with Section 260.140.42 of Title 10 of the California Code of Regulations. The offer shall be accepted by execution of a Restricted Stock purchase agreement in the form determined by the Administrator. (b) Repurchase Option. Unless the Administrator determines otherwise, ----------------- the Restricted Stock purchase agreement shall grant the Company a repurchase option exercisable upon the voluntary or involuntary termination of the purchaser's service with the Company for any reason (including death or disability). The purchase price for Shares repurchased pursuant to the Restricted Stock purchase agreement shall be the original price paid by the purchaser and may be paid by cancellation of any indebtedness of the purchaser to the Company. The repurchase option shall lapse at such rate as the Administrator may determine. Except with respect to Shares purchased by Officers, Directors and Consultants, the repurchase option shall in no case lapse at a rate of less than 20% per year over five (5) years from the date of purchase. (c) Other Provisions. The Restricted Stock purchase agreement shall ---------------- contain such other terms, provisions and conditions not inconsistent with the Plan as may be determined by the Administrator in its sole discretion. (d) Rights as a Shareholder. Once the Stock Purchase Right is ----------------------- exercised, the purchaser shall have rights equivalent to those of a shareholder and shall be a shareholder when his or her purchase is entered upon the records of the duly authorized transfer agent of the Company. No adjustment shall be made for a dividend or other right for which the record date is prior to the date the Stock Purchase Right is exercised, except as provided in Section 12 of the Plan. 12. Adjustments Upon Changes in Capitalization, Merger or Asset Sale. ---------------------------------------------------------------- (a) Changes in Capitalization. Subject to any required action by the ------------------------- shareholders of the Company, the number of shares of Common Stock covered by each outstanding Option or Stock Purchase Right, and the number of shares of Common Stock which have been authorized for issuance under the Plan but as to which no Options or Stock Purchase Rights have yet been granted or which have been returned to the Plan upon cancellation or expiration of an Option or Stock Purchase Right, as well as the price per share of Common Stock covered by each such outstanding Option or Stock Purchase Right, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company. The conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration." Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. 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 -9- thereof shall be made with respect to, the number or price of shares of Common Stock subject to an Option or Stock Purchase Right. (b) Dissolution or Liquidation. In the event of the proposed -------------------------- dissolution or liquidation of the Company, the Administrator shall notify each Optionee as soon as practicable prior to the effective date of such proposed transaction. The Administrator in its discretion may provide for an Optionee to have the right to exercise his or her Option or Stock Purchase Right until fifteen (15) days prior to such transaction as to all of the Optioned Stock covered thereby, including Shares as to which the Option or Stock Purchase Right would not otherwise be exercisable. In addition, the Administrator may provide that any Company repurchase option applicable to any Shares purchased upon exercise of an Option or Stock Purchase Right shall lapse as to all such Shares, provided the proposed dissolution or liquidation takes place at the time and in the manner contemplated. To the extent it has not been previously exercised, an Option or Stock Purchase Right will terminate immediately prior to the consummation of such proposed action. (c) Merger or Asset Sale. In the event of a merger of the Company with -------------------- or into another corporation, or the sale of substantially all of the assets of the Company, each outstanding Option and Stock Purchase Right shall be assumed or an equivalent option or right substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. In the event that the successor corporation refuses to assume or substitute for the Option or Stock Purchase Right, the Optionee shall fully vest in and have the right to exercise the Option or Stock Purchase Right as to all of the Optioned Stock, including Shares as to which it would not otherwise be vested or exercisable. If an Option or Stock Purchase Right becomes fully vested and exercisable in lieu of assumption or substitution in the event of a merger or sale of assets, the Administrator shall notify the Optionee in writing or electronically that the Option or Stock Purchase Right shall be fully exercisable for a period of fifteen (15) days from the date of such notice, and the Option or Stock Purchase Right shall terminate upon the expiration of such period. For the purposes of this paragraph, the Option or Stock Purchase Right shall be considered assumed if, following the merger or sale of assets, the option or right confers the right to purchase or receive, for each Share of Optioned Stock subject to the Option or Stock Purchase Right immediately prior to the merger or sale of assets, the consideration (whether stock, cash, or other securities or property) received in the merger or sale of assets by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the merger or sale of assets is not solely common stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Option or Stock Purchase Right, for each Share of Optioned Stock subject to the Option or Stock Purchase Right, to be solely common stock of the successor corporation or its Parent equal in fair market value to the per share consideration received by holders of Common Stock in the merger or sale of assets. -10- 13. Time of Granting Options and Stock Purchase Rights. The date of grant -------------------------------------------------- of an Option or Stock Purchase Right shall, for all purposes, be the date on which the Administrator makes the determination granting such Option or Stock Purchase Right, or such other date as is determined by the Administrator. Notice of the determination shall be given to each Employee to whom an Option or Stock Purchase Right is so granted within a reasonable time after the date of such grant. 14. Amendment and Termination of the Plan. ------------------------------------- (a) Amendment and Termination. The Board may at any time amend, alter, ------------------------- suspend or terminate the Plan. (b) Shareholder Approval. The Board shall obtain shareholder approval -------------------- of any Plan amendment to the extent necessary and desirable to comply with Applicable Laws. (c) Effect of Amendment or Termination. No amendment, alteration, ---------------------------------- suspension or termination of the Plan shall impair the rights of any Optionee, unless mutually agreed otherwise between the Optionee and the Administrator, which agreement must be in writing and signed by the Optionee and the Company. Termination of the Plan shall not affect the Administrator's ability to exercise the powers granted to it hereunder with respect to Options granted under the Plan prior to the date of such termination. 15. Conditions Upon Issuance of Shares. ---------------------------------- (a) Legal Compliance. Shares shall not be issued pursuant to the ---------------- exercise of an Option unless the exercise of such Option and the issuance and delivery of such Shares shall comply with Applicable Laws and shall be further subject to the approval of counsel for the Company with respect to such compliance. (b) Investment Representations. As a condition to the exercise of an -------------------------- Option, the Administrator may require the person exercising such Option to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required. 16. Inability to Obtain Authority. The inability of the Company to obtain ----------------------------- authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained. -11- 17. Reservation of Shares. The Company, during the term of this Plan, --------------------- shall at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan. 18. Shareholder Approval. The Plan shall be subject to approval by the -------------------- shareholders of the Company within twelve (12) months after the date the Plan is adopted. Such shareholder approval shall be obtained in the degree and manner required under Applicable Laws. 19. Information to Optionees and Purchasers. The Company shall provide to --------------------------------------- each Optionee and to each individual who acquires Shares pursuant to the Plan, not less frequently than annually during the period such Optionee or purchaser has one or more Options or Stock Purchase Rights outstanding, and, in the case of an individual who acquires Shares pursuant to the Plan, during the period such individual owns such Shares, copies of annual financial statements. The Company shall not be required to provide such statements to key employees whose duties in connection with the Company assure their access to equivalent information. -12- EXHIBIT A --------- 1997 STOCK PLAN EXERCISE NOTICE BioMarin Pharmaceutical Inc. 11 Pimentel Court Novato, CA 94949 Attention: Corporate Secretary 1. Exercise of Option. Effective as of today, ___________, 19__, the ------------------ undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase _________ shares of the Common Stock (the "Shares") of BioMarin Pharmaceutical Inc. (the "Company") under and pursuant to the 1997 Stock Plan (the "Plan") and the Stock Option Agreement dated ________, 19______ (the "Option Agreement"). 2. Delivery of Payment. Purchaser herewith delivers to the Company the ------------------- full purchase price of the Shares, as set forth in the Option Agreement. 3. Representations of Optionee. Optionee acknowledges that Optionee has --------------------------- received, read and understood the Plan and the Option Agreement and agrees to abide by and be bound by their terms and conditions. 4. Rights as Shareholder. Until the issuance of the Shares (as evidenced --------------------- by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Shares shall be issued to the Optionee as soon as practicable after the Option is exercised. No adjustment shall be made for a dividend or other right for which the record date is prior to the date of issuance except as provided in Section [12] of the Plan. 5. Company's Right of First Refusal. Before any Shares held by Optionee -------------------------------- or any transferee (either being sometimes referred to herein as the "Holder") may be sold or otherwise transferred (including transfer by gift or operation of law), the Company or its assignee(s) shall have a right of first refusal to purchase the Shares on the terms and conditions set forth in this Section (the "Right of First Refusal"). (a) Notice of Proposed Transfer. The Holder of the Shares shall --------------------------- deliver to the Company a written notice (the "Notice") stating: (i) the Holder's bona fide intention to sell or otherwise transfer such Shares; (ii) the name of each proposed purchaser or other transferee ("Proposed Transferee"); (iii) the number of Shares to be transferred to each Proposed Transferee; and (iv) the bona fide cash price or other consideration for which the Holder proposes to transfer the -1- Shares (the "Offered Price"), and the Holder shall offer the Shares at the Offered Price to the Company or its assignee(s). (b) Exercise of Right of First Refusal. At any time within thirty (30) ---------------------------------- days after receipt of the Notice, the Company and/or its assignee(s) may, by giving written notice to the Holder, elect to purchase all, but not less than all, of the Shares proposed to be transferred to any one or more of the Proposed Transferees, at the purchase price determined in accordance with subsection (c) below. (c) Purchase Price. The purchase price ("Purchase Price") for the -------------- Shares purchased by the Company or its assignee(s) under this Section shall be the Offered Price. If the Offered Price includes consideration other than cash, the cash equivalent value of the non-cash consideration shall be determined by the Board of Directors of the Company in good faith. (d) Payment. Payment of the Purchase Price shall be made, at the ------- option of the Company or its assignee(s), in cash (by check), by cancellation of all or a portion of any outstanding indebtedness of the Holder to the Company (or, in the case of repurchase by an assignee, to the assignee), or by any combination thereof within 30 days after receipt of the Notice or in the manner and at the times set forth in the Notice. (e) Holder's Right to Transfer. If all of the Shares proposed in the -------------------------- Notice to be transferred to a given Proposed Transferee are not purchased by the Company and/or its assignee(s) as provided in this Section, then the Holder may sell or otherwise transfer such Shares to that Proposed Transferee at the Offered Price or at a higher price, provided that such sale or other transfer is consummated within 120 days after the date of the Notice, that any such sale or other transfer is effected in accordance with any applicable securities laws and that the Proposed Transferee agrees in writing that the provisions of this Section shall continue to apply to the Shares in the hands of such Proposed Transferee. If the Shares described in the Notice are not transferred to the Proposed Transferee within such period, a new Notice shall be given to the Company, and the Company and/or its assignees shall again be offered the Right of First Refusal before any Shares held by the Holder may be sold or otherwise transferred. (f) Exception for Certain Family Transfers. Anything to the contrary -------------------------------------- contained in this Section notwithstanding, the transfer of any or all of the Shares during the Optionee's lifetime or on the Optionee's death by will or intestacy to the Optionee's immediate family or a trust for the benefit of the Optionee's immediate family shall be exempt from the provisions of this Section. "Immediate Family" as used herein shall mean spouse, lineal descendant or antecedent, father, mother, brother or sister. In such case, the transferee or other recipient shall receive and hold the Shares so transferred subject to the provisions of this Section, and there shall be no further transfer of such Shares except in accordance with the terms of this Section. (g) Termination of Right of First Refusal. The Right of First Refusal ------------------------------------- shall terminate as to any Shares upon the first sale of Common Stock of the Company to the general -2- public pursuant to a registration statement filed with and declared effective by the Securities and Exchange Commission under the Securities Act of 1933, as amended. 6. Tax Consultation. Optionee understands that Optionee may suffer ---------------- adverse tax consequences as a result of Optionee's purchase or disposition of the Shares. Optionee represents that Optionee has consulted with any tax consultants Optionee deems advisable in connection with the purchase or disposition of the Shares and that Optionee is not relying on the Company for any tax advice. 7. Restrictive Legends and Stop-Transfer Orders. -------------------------------------------- (a) Legends. Optionee understands and agrees that the Company shall ------- cause the legends set forth below or legends substantially equivalent thereto, to be placed upon any certificate(s) evidencing ownership of the Shares together with any other legends that may be required by the Company or by state or federal securities laws: THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COMPANY COUNSEL SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH. THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND A RIGHT OF FIRST REFUSAL HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING ON TRANSFEREES OF THESE SHARES. (b) Stop-Transfer Notices. Optionee agrees that, in order to ensure --------------------- compliance with the restrictions referred to herein, the Company may issue appropriate "stop transfer" instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records. (c) Refusal to Transfer. The Company shall not be required (i) to ------------------- transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of -3- this Agreement or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred. 8. Successors and Assigns. The Company may assign any of its rights under ---------------------- this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Agreement shall be binding upon Optionee and his or her heirs, executors, administrators, successors and assigns. 9. Interpretation. Any dispute regarding the interpretation of this -------------- Agreement shall be submitted by Optionee or by the Company forthwith to the Administrator which shall review such dispute at its next regular meeting. The resolution of such a dispute by the Administrator shall be final and binding on all parties. 10. Governing Law; Severability. This Agreement is governed by the --------------------------- internal substantive laws but not the choice of law rules, of the State of California. -4- 11. Entire Agreement. The Plan and Option Agreement are incorporated ---------------- herein by reference. This Agreement, the Plan, the Option Agreement and the Investment Representation Statement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof, and may not be modified adversely to the Optionee's interest except by means of a writing signed by the Company and Optionee. Submitted by: Accepted by: OPTIONEE: BIOMARIN PHARMACEUTICAL INC. __________________________________ By:_________________________________ Signature __________________________________ Title:_______________________________ Print Name Address: Address: - ------- ------- __________________________________ 11 Pimentel Court __________________________________ Novato, CA 94949 _____________________________________ Date Received -5- EXHIBIT B --------- INVESTMENT REPRESENTATION STATEMENT OPTIONEE: COMPANY: BIOMARIN PHARMACEUTICAL INC. SECURITY: COMMON STOCK AMOUNT: DATE: In connection with the purchase of the above-listed Securities, the undersigned Optionee represents to the Company the following: (a) Optionee is aware of the Company's business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Securities. Optionee is acquiring these Securities for investment for Optionee's own account only and not with a view to, or for resale in connection with, any "distribution" thereof within the meaning of the Securities Act of 1933, as amended (the "Securities Act"). (b) Optionee acknowledges and understands that the Securities constitute "restricted securities" under the Securities Act and have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Optionee's investment intent as expressed herein. In this connection, Optionee understands that, in the view of the Securities and Exchange Commission, the statutory basis for such exemption may be unavailable if Optionee's representation was predicated solely upon a present intention to hold these Securities for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Securities, or for a period of one year or any other fixed period in the future. Optionee further understands that the Securities must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Optionee further acknowledges and understands that the Company is under no obligation to register the Securities. Optionee understands that the certificate evidencing the Securities will be imprinted with a legend which prohibits the transfer of the Securities unless they are registered or such registration is not required in the opinion of counsel satisfactory to the Company. (c) Optionee is familiar with the provisions of Rule 701 and Rule 144, each promulgated under the Securities Act, which, in substance, permit limited public resale of "restricted securities" acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to the satisfaction of certain conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the time of the grant of the Option to the Optionee, the exercise will be exempt from registration under the Securities Act. In the event the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter (or such longer period as any market stand-off agreement may require) the Securities exempt under Rule 701 may be resold, subject to the satisfaction of certain of the conditions specified by Rule 144, including: (1) the resale being made through a broker in an unsolicited "broker's transaction" or in transactions directly with a market maker (as said term is defined under the Securities Exchange Act of 1934); and, in the case of an affiliate, (2) the availability of certain public information about the Company, (3) the amount of Securities being sold during any three month period not exceeding the limitations specified in Rule 144(e), and (4) the timely filing of a Form 144, if applicable. In the event that the Company does not qualify under Rule 701 at the time of grant of the Option, then the Securities may be resold in certain limited circumstances subject to the provisions of Rule 144, which requires the resale to occur not less than one year after the later of the date the Securities were sold by the Company or the date the Securities were sold by an affiliate of the Company, within the meaning of Rule 144; and, in the case of acquisition of the Securities by an affiliate, or by a non-affiliate who subsequently holds the Securities less than two years, the satisfaction of the conditions set forth in sections (1), (2), (3) and (4) of the paragraph immediately above. (d) Optionee further understands that in the event all of the applicable requirements of Rule 701 or 144 are not satisfied, registration under the Securities Act, compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact that Rules 144 and 701 are not exclusive, the Staff of the Securities and Exchange Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rules 144 or 701 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. Optionee understands that no assurances can be given that any such other registration exemption will be available in such event. Signature of Optionee: ______________________________________ Date:__________________________, 19___ -2- BIOMARIN PHARMACEUTICAL INC. 1997 STOCK PLAN STOCK OPTION AGREEMENT Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Option Agreement. I. NOTICE OF STOCK OPTION GRANT ---------------------------- Name: ______________________ Address: ___________________ ____________________________ ____________________________ The undersigned Optionee has been granted an Option to purchase Common Stock of the Company, subject to the terms and conditions of the Plan and this Option Agreement, as follows: Grant Number _________________________________ Date of Grant _________________________________ Vesting Commencement Date _________________________________ Exercise Price Per Share _________________________________ Total Number of Shares Granted _________________________________ Total Exercise Price _________________________________ Type of Option ______ Incentive Stock Option ______ Nonstatutory Stock Option Term/Expiration Date _________________________________ Vesting Schedule: ---------------- This Option shall be exercisable, in whole or in part, according to the following vesting schedule: -13- _____________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ Termination Period: ------------------ This Option shall be exercisable for three months after Optionee ceases to be a Service Provider. Upon Optionee's death or disability, this Option may be exercised for one year after Optionee ceases to be a Service Provider. In no event may Optionee exercise this Option after the Term/Expiration Date as provided above. II. AGREEMENT --------- 20. Grant of Option. The Plan Administrator of the Company hereby grants --------------- to the Optionee named in the Notice of Grant (the "Optionee"), an option (the "Option") to purchase the number of Shares set forth in the Notice of Grant, at the exercise price per Share set forth in the Notice of Grant (the "Exercise Price"), and subject to the terms and conditions of the Plan, which is incorporated herein by reference. Subject to Section [14(c)] of the Plan, in the event of a conflict between the terms and conditions of the Plan and this Option Agreement, the terms and conditions of the Plan shall prevail. If designated in the Notice of Grant as an Incentive Stock Option ("ISO"), this Option is intended to qualify as an Incentive Stock Option as defined in Section 422 of the Code. Nevertheless, to the extent that it exceeds the $100,000 rule of Code Section 422(d), this Option shall be treated as a Nonstatutory Stock Option ("NSO"). 21. Exercise of Option. ------------------ (a) Right to Exercise. This Option shall be exercisable during its ----------------- term in accordance with the Vesting Schedule set out in the Notice of Grant and with the applicable provisions of the Plan and this Option Agreement. (b) Method of Exercise. This Option shall be exercisable by delivery ------------------ of an exercise notice in the form attached as Exhibit A (the AExercise Notice@) which shall state the election to exercise the Option, the number of Shares with respect to which the Option is being exercised, and such other representations and agreements as may be required by the Company. The Exercise Notice shall be accompanied by payment of the aggregate Exercise Price as to all Exercised Shares. This Option shall be deemed to be exercised upon receipt by the Company of such fully executed Exercise Notice accompanied by the aggregate Exercise Price. No Shares shall be issued pursuant to the exercise of an Option unless such issuance and such exercise complies with Applicable laws. Assuming such compliance, for income tax -14- purposes the Shares shall be considered transferred to the Optionee on the date on which the Option is exercised with respect to such Shares. 22. Optionee's Representations. In the event the Shares have not been -------------------------- registered under the Securities Act of 1933, as amended, at the time this Option is exercised, the Optionee shall, if required by the Company, concurrently with the exercise of all or any portion of this Option, deliver to the Company his or her Investment Representation Statement in the form attached hereto as Exhibit B[, and shall read the applicable rules of the Commissioner of Corporations attached to such Investment Representation Statement]. 23. Lock-Up Period. Optionee hereby agrees that, if so requested by the -------------- Company or any representative of the underwriters (the "Managing Underwriter") in connection with any registration of the offering of any securities of the Company under the Securities Act, Optionee shall not sell or otherwise transfer any Shares or other securities of the Company during the 180-day period (or such other period as may be requested in writing by the Managing Underwriter and agreed to in writing by the Company) (the "Market Standoff Period") following the effective date of a registration statement of the Company filed under the Securities Act. Such restriction shall apply only to the first registration statement of the Company to become effective under the Securities Act that includes securities to be sold on behalf of the Company to the public in an underwritten public offering under the Securities Act. The Company may impose stop-transfer instructions with respect to securities subject to the foregoing restrictions until the end of such Market Standoff Period. 24. Method of Payment. Payment of the aggregate Exercise Price shall be by ----------------- any of the following, or a combination thereof, at the election of the Optionee: (a) cash or check; (b) consideration received by the Company under a formal cashless exercise program adopted by the Company in connection with the Plan; or (c) surrender of other Shares which, (i) in the case of Shares acquired upon exercise of an option, have been owned by the Optionee for more than six (6) months on the date of surrender, and (ii) have a Fair Market Value on the date of surrender equal to the aggregate Exercise Price of the Exercised Shares. 25. Restrictions on Exercise. This Option may not be exercised until such ------------------------ time as the Plan has been approved by the shareholders of the Company, or if the issuance of such Shares upon such exercise or the method of payment of consideration for such shares would constitute a violation of any Applicable Law. 26. Non-Transferability of Option. This Option may not be transferred in ----------------------------- any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the -15- lifetime of Optionee only by Optionee. The terms of the Plan and this Option Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee. 27. Term of Option. This Option may be exercised only within the term set -------------- out in the Notice of Grant, and may be exercised during such term only in accordance with the Plan and the terms of this Option. 28. Tax Consequences. Set forth below is a brief summary as of the date of ---------------- this Option of some of the federal tax consequences of exercise of this Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES. (a) Exercise of ISO. If this Option qualifies as an ISO, there will be --------------- no regular federal income tax liability upon the exercise of the Option, although the excess, if any, of the Fair Market Value of the Shares on the date of exercise over the Exercise Price will be treated as an adjustment to the alternative minimum tax for federal tax purposes and may subject the Optionee to the alternative minimum tax in the year of exercise. (b) Exercise of Nonstatutory Stock Option. There may be a regular ------------------------------------- federal income tax liability upon the exercise of a Nonstatutory Stock Option. The Optionee will be treated as having received compensation income (taxable at ordinary income tax rates) equal to the excess, if any, of the Fair Market Value of the Shares on the date of exercise over the Exercise Price. If Optionee is an Employee or a former Employee, the Company will be required to withhold from Optionee's compensation or collect from Optionee and pay to the applicable taxing authorities an amount in cash equal to a percentage of this compensation income at the time of exercise, and may refuse to honor the exercise and refuse to deliver Shares if such withholding amounts are not delivered at the time of exercise. (c) Disposition of Shares. In the case of an NSO, if Shares are held --------------------- for at least one year, any gain realized on disposition of the Shares will be treated as long-term capital gain for federal income tax purposes. In the case of an ISO, if Shares transferred pursuant to the Option are held for at least one year after exercise and of at least two years after the Date of Grant, any gain realized on disposition of the Shares will also be treated as long-term capital gain for federal income tax purposes. If Shares purchased under an ISO are disposed of within one year after exercise or two years after the Date of Grant, any gain realized on such disposition will be treated as compensation income (taxable at ordinary income rates) to the extent of the difference between the Exercise Price and the lesser of (1) the Fair Market Value of the Shares on the date of exercise, or (2) the sale price of the Shares. Any additional gain will be taxed as capital gain, short-term or long-term depending on the period that the ISO Shares were held. (d) Notice of Disqualifying Disposition of ISO Shares. If the Option ------------------------------------------------- granted to Optionee herein is an ISO, and if Optionee sells or otherwise disposes of any of the Shares acquired -16- pursuant to the ISO on or before the later of (1) the date two years after the Date of Grant, or (2) the date one year after the date of exercise, the Optionee shall immediately notify the Company in writing of such disposition. Optionee agrees that Optionee may be subject to income tax withholding by the Company on the compensation income recognized by the Optionee. 29. Entire Agreement; Governing Law. The Plan is incorporated herein by ------------------------------- reference. The Plan and this Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof, and may not be modified adversely to the Optionee's interest except by means of a writing signed by the Company and Optionee. This agreement is governed by the internal substantive laws but not the choice of law rules of [state]. 30. No Guarantee of Continued Service. OPTIONEE ACKNOWLEDGES AND AGREES --------------------------------- THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE. Optionee acknowledges receipt of a copy of the Plan and represents that he or she is familiar with the terms and provisions thereof, and hereby accepts this Option subject to all of the terms and provisions thereof. Optionee has reviewed the Plan and this Option in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option and fully understands all provisions of the Option. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan or this Option. Optionee further agrees to notify the Company upon any change in the residence address indicated below. -17- OPTIONEE: BIOMARIN PHARMACEUTICAL INC. ___________________________________ By:___________________________________ Signature ___________________________________ Title:________________________________ Print Name ___________________________________ ___________________________________ Residence Address -18- EX-10.3 8 1998 DIRECTOR OPTION PLAN EXHIBIT 10.3 BIOMARIN PHARMACEUTICAL INC. 1998 DIRECTOR OPTION PLAN 1. Purposes of the Plan. The purposes of this 1998 Director Option Plan -------------------- are to attract and retain the best available personnel for service as Outside Directors (as defined herein) of the Company, to provide additional incentive to the Outside Directors of the Company to serve as Directors, and to encourage their continued service on the Board. All options granted hereunder shall be nonstatutory stock options. 2. Definitions. As used herein, the following definitions shall apply: ----------- (a) "BOARD" means the Board of Directors of the Company. ----- (b) "CODE" means the Internal Revenue Code of 1986, as amended. ---- (c) "COMMON STOCK" means the common stock of the Company. ------------ (d) "COMPANY" means BioMarin Pharmaceutical Inc., a Delaware ------- corporation. (e) "DIRECTOR" means a member of the Board. -------- (f) "EMPLOYEE" means any person, including officers and Directors, -------- employed by the Company or any Parent or Subsidiary of the Company. The payment of a Director's fee by the Company shall not be sufficient in and of itself to constitute "employment" by the Company. (g) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as ------------ amended. (h) "FAIR MARKET VALUE" means, as of any date, the value of Common ----------------- Stock determined as follows: (i) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system for the last market trading day prior to the time of determination as reported in The Wall Street Journal or such other source as the Administrator deems reliable; (ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a Share of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock for the last market trading day prior to the time of determination, as reported in The Wall Street Journal or such other source as the Board deems reliable; or (iii) In the absence of an established market for the Common Stock, the Fair Market Value thereof shall be determined in good faith by the Board; or (iv) For purposes of Options granted pursuant to Section 4(b)(i) only, the Fair Market Value shall be the initial price to the public as set forth in the final prospectus included within the registration statement in Form S-1 filed with the Securities and Exchange Commission for the initial public offering of the Company's Common Stock (the "Registration Statement"). (i) "INSIDE DIRECTOR" means a Director who is an Employee. --------------- (j) "OPTION" means a stock option granted pursuant to the Plan. ------ (k) "OPTIONED STOCK" means the Common Stock subject to an Option. -------------- (l) "OPTIONEE" means a Director who holds an Option. -------- (m) "OUTSIDE DIRECTOR" means a Director who is not an Employee. ---------------- (n) "PARENT" means a "parent corporation," whether now or hereafter ------ existing, as defined in Section 424(e) of the Code. (o) "PLAN" means this 1998 Director Option Plan. ---- (p) "SHARE" means a share of the Common Stock, as adjusted in ----- accordance with Section 10 of the Plan. (q) "SUBSIDIARY" means a "subsidiary corporation," whether now or ---------- hereafter existing, as defined in Section 424(f) of the Internal Revenue Code of 1986. 3. Stock Subject to the Plan. Subject to the provisions of Section 10 of ------------------------- the Plan, the maximum aggregate number of Shares which may be optioned and sold under the Plan is 200,000 Shares, plus an annual increase to be added on the first day of the Company's fiscal year beginning in 1999 equal to the lesser of (i) 200,000 Shares, (ii) .5% of the outstanding Shares on such date or (iii) a lesser amount determined by the Board (the "Pool"). The Shares may be authorized, but unissued, or reacquired Common Stock. If an Option expires or becomes unexercisable without having been exercised in full, the unpurchased Shares that were subject thereto shall become available for future grant or sale under the Plan (unless the Plan has terminated). Shares that have actually been issued under the Plan shall not be returned to the Plan and shall not become available for future distribution under the Plan. 4. Administration and Grants of Options under the Plan. All grants of --------------------------------------------------- Options to Outside Directors under this Plan shall be automatic and nondiscretionary and shall be made strictly in accordance with the following provisions: -2- (a) No person shall have any discretion to select which Outside Directors shall be granted Options or to determine the number of Shares to be covered by Options granted to Outside Directors. (b) Each Outside Director shall be automatically granted an Option to purchase 20,000 Shares (the "FIRST OPTION") on the date on which the later of the following events occurs: (i) the effective date of this Plan, as determined in accordance with Section 6 hereof, or (ii) the date on which such person first becomes an Outside Director, whether through election by the stockholders of the Company or appointment by the Board to fill a vacancy; provided, however, that an Inside Director who ceases to be an Inside Director but who remains a Director shall not receive a First Option. (c) Each Outside Director shall be automatically granted an Option to purchase 15,000 Shares (a "SUBSEQUENT OPTION") on each anniversary of the date on which such person first becomes an Outside Director, whether through election by the stockholders of the Company or appointment by the Board to fill a vacancy, provided he or she is then an Outside Director and if as of such date he or she shall have served on the Board for at least the preceding six (6) months. (d) Notwithstanding the provisions of subsections (ii) and (iii) hereof, any exercise of an Option granted before the Company has obtained stockholder approval of the Plan in accordance with Section 16 hereof shall be conditioned upon obtaining such stockholder approval of the Plan in accordance with Section 16 hereof. (e) The terms of a First Option granted hereunder shall be as follows: (i) the term of the First Option shall be ten (10) years. (ii) the First Option shall be exercisable only while the Outside Director remains a Director of the Company, except as set forth in Sections 8 and 10 hereof. (iii) the exercise price per Share shall be 100% of the Fair Market Value per Share on the date of grant of the First Option. (iv) subject to Section 10 hereof, the First Option shall become exercisable as to 25% percent of the Shares subject to the First Option on the first day of each of the Company's fiscal quarters thereafter so as to be 100% vested on the anniversary of its date of grant, provided that the Optionee continues to serve as a Director on such dates. (f) The terms of a Subsequent Option granted hereunder shall be as follows: (i) the term of the Subsequent Option shall be ten (10) years. (ii) the Subsequent Option shall be exercisable only while the Outside Director remains a Director of the Company, except as set forth in Sections 8 and 10 hereof. (iii) the exercise price per Share shall be 100% of the Fair Market Value per Share on the date of grant of the Subsequent Option. -3- (iv) subject to Section 10 hereof, the Subsequent Option shall become exercisable as to 25% of the Shares subject to the Subsequent Option on the first day of each of the Company's fiscal quarters thereafter so as to be 100% vested on the anniversary of its date of grant, provided that the Optionee continues to serve as a Director on such date. (g) In the event that any Option granted under the Plan would cause the number of Shares subject to outstanding Options plus the number of Shares previously purchased under Options to exceed the Pool, then the remaining Shares available for Option grant shall be granted under Options to the Outside Directors on a pro rata basis. No further grants shall be made until such time, if any, as additional Shares become available for grant under the Plan through action of the Board or the stockholders to increase the number of Shares which may be issued under the Plan or through cancellation or expiration of Options previously granted hereunder. 5. Eligibility. Options may be granted only to Outside Directors. All ----------- Options shall be automatically granted in accordance with the terms set forth in Section 4 hereof. The Plan shall not confer upon any Optionee any right with respect to continuation of service as a Director or nomination to serve as a Director, nor shall it interfere in any way with any rights which the Director or the Company may have to terminate the Director's relationship with the Company at any time. 6. Term of Plan. Subject to Section 16 of the Plan, the Plan shall ------------ become effective upon the date of the Company's initial public offering of its equity securities registered on Form S-1 with the Securities and Exchange Commission. It shall continue in effect for a term of ten (10) years unless sooner terminated under Section 11 of the Plan. 7. Form of Consideration. The consideration to be paid for the Shares to --------------------- be issued upon exercise of an Option, including the method of payment, shall consist of (i) cash, (ii) check, (iii) other shares which (x) in the case of Shares acquired upon exercise of an Option, have been owned by the Optionee for more than six (6) months on the date of surrender, and (y) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option shall be exercised, (iv) consideration received by the Company under a cashless exercise program implemented by the Company in connection with the Plan, or (v) any combination of the foregoing methods of payment. 8. Exercise of Option. ------------------ (a) Procedure for Exercise; Rights as a Stockholder. Any Option ----------------------------------------------- granted hereunder shall be exercisable at such times as are set forth in Section 4 hereof; provided, however, that no Options shall be exercisable until stockholder approval of the Plan in accordance with Section 16 hereof has been obtained. An Option may not be exercised for a fraction of a Share. An Option shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms of the Option by the person entitled to exercise the Option and full payment for the Shares with respect to which the Option is -4- exercised has been received by the Company. Full payment may consist of any consideration and method of payment allowable under Section 7 of the Plan. Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the stock certificate evidencing such Shares, no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. A share certificate for the number of Shares so acquired shall be issued to the Optionee as soon as practicable after exercise of the Option. No adjustment shall be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in Section 10 of the Plan. Exercise of an Option in any manner shall result in a decrease in the number of Shares which thereafter may be available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised. (b) Termination of Continuous Status as a Director. Subject to ---------------------------------------------- Section 10 hereof, in the event an Optionee's status as a Director terminates (other than upon the Optionee's death or total and permanent disability (as defined in Section 22(e)(3) of the Code)), the Optionee may exercise his or her Option, but only within three (3) months following the date of such termination, and only to the extent that the Optionee was entitled to exercise it on the date of such termination (but in no event later than the expiration of its ten (10) year term). To the extent that the Optionee was not entitled to exercise an Option on the date of such termination, and to the extent that the Optionee does not exercise such Option (to the extent otherwise so entitled) within the time specified herein, the Option shall terminate. (c) Disability of Optionee. In the event Optionee's status as a ---------------------- Director terminates as a result of total and permanent disability (as defined in Section 22(e)(3) of the Code), the Optionee may exercise his or her Option, but only within twelve (12) months following the date of such termination, and only to the extent that the Optionee was entitled to exercise it on the date of such termination (but in no event later than the expiration of its ten (10) year term). To the extent that the Optionee was not entitled to exercise an Option on the date of termination, or if he or she does not exercise such Option (to the extent otherwise so entitled) within the time specified herein, the Option shall terminate. (d) Death of Optionee. In the event of an Optionee's death, the ----------------- Optionee's estate or a person who acquired the right to exercise the Option by bequest or inheritance may exercise the Option, but only within twelve (12) months following the date of death, and only to the extent that the Optionee was entitled to exercise it on the date of death (but in no event later than the expiration of its ten (10) year term). To the extent that the Optionee was not entitled to exercise an Option on the date of death, and to the extent that the Optionee's estate or a person who acquired the right to exercise such Option does not exercise such Option (to the extent otherwise so entitled) within the time specified herein, the Option shall terminate. 9. Non-Transferability of Options. The Option may not be sold, pledged, ------------------------------ assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Optionee, only by the Optionee. -5- 10. Adjustments Upon Changes in Capitalization, Dissolution, Merger or ------------------------------------------------------------------ Asset Sale. - ---------- (a) Changes in Capitalization. Subject to any required action by the ------------------------- stockholders of the Company, the number of Shares covered by each outstanding Option, the number of Shares which have been authorized for issuance under the Plan but as to which no Options have yet been granted or which have been returned to the Plan upon cancellation or expiration of an Option, as well as the price per Share covered by each such outstanding Option, and the number of Shares issuable pursuant to the automatic grant provisions of Section 4 hereof shall be proportionately adjusted for any increase or decrease in the number of issued Shares resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued Shares effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration." 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 an Option. (b) Dissolution or Liquidation. In the event of the proposed -------------------------- dissolution or liquidation of the Company, to the extent that an Option has not been previously exercised, it shall terminate immediately prior to the consummation of such proposed action. (c) Merger or Asset Sale. In the event of a merger of the Company -------------------- with or into another corporation or the sale of substantially all of the assets of the Company, outstanding Options may be assumed or equivalent options may be substituted by the successor corporation or a Parent or Subsidiary thereof (the "SUCCESSOR CORPORATION"). If an Option is assumed or substituted for, the Option or equivalent option shall continue to be exercisable as provided in Section 4 hereof for so long as the Optionee serves as a Director or a director of the Successor Corporation. Following such assumption or substitution, if the Optionee's status as a Director or director of the Successor Corporation, as applicable, is terminated other than upon a voluntary resignation by the Optionee, the Option or option shall become fully exercisable, including as to Shares for which it would not otherwise be exercisable. Thereafter, the Option or option shall remain exercisable in accordance with Sections 8(b) through (d) above. If the Successor Corporation does not assume an outstanding Option or substitute for it an equivalent option, the Option shall become fully vested and exercisable, including as to Shares for which it would not otherwise be exercisable. In such event the Board shall notify the Optionee that the Option shall be fully exercisable for a period of thirty (30) days from the date of such notice, and upon the expiration of such period the Option shall terminate. For the purposes of this Section 10(c), an Option shall be considered assumed if, following the merger or sale of assets, the Option confers the right to purchase or receive, for each Share of Optioned Stock subject to the Option immediately prior to the merger or sale of assets, the consideration (whether stock, cash, or other securities or property) received in the merger or sale of assets by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares). If such consideration received in the merger or sale of assets -6- is not solely common stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Option, for each Share of Optioned Stock subject to the Option, to be solely common stock of the successor corporation or its Parent equal in fair market value to the per share consideration received by holders of Common Stock in the merger or sale of assets. 11. Amendment and Termination of the Plan. ------------------------------------- (a) Amendment and Termination. The Board may at any time amend, ------------------------- alter, suspend, or discontinue the Plan, but no amendment, alteration, suspension, or discontinuation shall be made which would impair the rights of any Optionee under any grant theretofore made, without his or her consent. In addition, to the extent necessary and desirable to comply with any applicable law, regulation or stock exchange rule, the Company shall obtain stockholder approval of any Plan amendment in such a manner and to such a degree as required. (b) Effect of Amendment or Termination. Any such amendment or ---------------------------------- termination of the Plan shall not affect Options already granted and such Options shall remain in full force and effect as if this Plan had not been amended or terminated. 12. Time of Granting Options. The date of grant of an Option shall, for ------------------------ all purposes, be the date determined in accordance with Section 4 hereof. 13. Conditions Upon Issuance of Shares. Shares shall not be issued ---------------------------------- pursuant to the exercise of an Option unless the exercise of such Option and the issuance and delivery of such Shares pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated thereunder, state securities laws, and the requirements of any stock exchange upon which the Shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance. As a condition to the exercise of an Option, the Company may require the person exercising such Option to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares, if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned relevant provisions of law. Inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained. 14. Reservation of Shares. The Company, during the term of this Plan, --------------------- will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan. -7- 15. Option Agreement. Options shall be evidenced by written option ---------------- agreements in such form as the Board shall approve. 16. Stockholder Approval. The Plan shall be subject to approval by the -------------------- stockholders of the Company within twelve (12) months after the date the Plan is adopted by the Board. Such stockholder approval shall be obtained in the degree and manner required under applicable state and federal law and any stock exchange rules. -8- BIOMARIN PHARMACEUTICAL INC. 1998 DIRECTOR OPTION PLAN DIRECTOR OPTION AGREEMENT FIRST OPTION 1. Grant of Option. Effective as of today, ___________________, _____, --------------- (the "DATE OF GRANT") BioMarin Pharmaceutical Inc., a Delaware corporation (the "COMPANY"), hereby grants to _______________________ (the "OPTIONEE"), a nonstatutory stock option to purchase a total of __________ shares of the Company's Common Stock ("COMMON STOCK"), at the price determined as provided herein, and in all respects subject to the terms, definitions and provisions of the Company's 1998 Director Option Plan (the "PLAN") adopted by the Company which is incorporated herein by reference. The terms defined in the Plan shall have the same defined meanings herein. 2. Exercise Price. The exercise price is $_______ for each share of -------------- Common Stock. 3. Exercise of Option. This Option shall be exercisable during its term ------------------ in accordance with the provisions of Section 8 of the Plan as follows: (a) Right to Exercise. ----------------- (i) This Option shall become exercisable in installments cumulatively with respect to twenty-five percent (25%) of the shares subject to the Option on the first day of each of the Company's fiscal quarters after the Date of Grant, subject to Optionee continuing to provide services as a Director, so that one hundred percent (100%) of the Optioned Stock shall be exercisable one year after the date of grant. (ii) This Option may not be exercised for a fraction of a share. (iii) In the event of Optionee's death, Disability or other termination of service as a Director, the exercisability of the Option is governed by Section 8 of the Plan. (b) Method of Exercise. This Option shall be exercisable by written ------------------ notice, which shall state the election to exercise the Option and the number of Shares in respect of which the Option is being exercised. Such written notice, in the form attached hereto as EXHIBIT A, shall be signed by the Optionee and --------- shall be delivered in person or by certified mail to the Secretary of the Company. The written notice shall be accompanied by payment of the exercise price. 4. Method of Payment. Payment of the exercise price shall be by any of ----------------- the following, or a combination thereof, at the election of the Optionee: (a) cash; (b) check; [OR] (c) surrender of other shares which (x) in the case of Shares acquired upon exercise of an option, have been owned by the Optionee for more than six (6) months on the date of surrender, and (y) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option shall be exercised [; OR (D) DELIVERY OF A PROPERLY EXECUTED EXERCISE NOTICE TOGETHER WITH SUCH OTHER DOCUMENTATION AS THE COMPANY AND THE BROKER, IF APPLICABLE, SHALL REQUIRE TO EFFECT AN EXERCISE OF THE OPTION AND DELIVERY TO THE COMPANY OF THE SALE OR LOAN PROCEEDS REQUIRED TO PAY THE EXERCISE PRICE]. 5. Restrictions on Exercise. This Option may not be exercised if the ------------------------ issuance of such Shares upon such exercise or the method of payment of consideration for such shares would constitute a violation of any applicable federal or state securities or other law or regulations, or if such issuance would not comply with the requirements of any stock exchange upon which the Shares may then be listed. As a condition to the exercise of this Option, the Company may require Optionee to make any representation and warranty to the Company as may be required by any applicable law or regulation. 6. Non-Transferability of Option. This Option may not be transferred in ----------------------------- any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Optionee only by the Optionee. The terms of this Option shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee. 7. Term of Option. This Option may not be exercised more than ten (10) -------------- years from the date of grant of this Option, and may be exercised during such period only in accordance with the Plan and the terms of this Option. 8. Taxation Upon Exercise of Option. Optionee understands that, upon -------------------------------- exercise of this Option, he or she will recognize income for tax purposes in an amount equal to the excess of the then Fair Market Value of the Shares purchased over the exercise price paid for such Shares. Since the Optionee is subject to Section 16(b) of the Securities Exchange Act of 1934, as amended, under certain limited circumstances the measurement and timing of such income (and the commencement of any capital gain holding period) may be deferred, and the Optionee is advised to contact a tax advisor concerning the application of Section 83 in general and the availability a Section 83(b) election in particular in connection with the exercise of the Option. Upon a resale of such Shares by the Optionee, any difference between the sale price and the Fair Market Value of the Shares on the date of exercise of the Option, to the extent not included in income as described above, will be treated as capital gain or loss. -2- Optionee acknowledges receipt of a copy of the Plan, a copy of which is attached hereto, and represents that he or she is familiar with the terms and provisions thereof, and hereby accepts this Option subject to all of the terms and provisions thereof. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Board upon any questions arising under the Plan. OPTIONEE BIOMARIN PHARMACEUTICAL INC. _________________________________ __________________________________________ Signature By _________________________________ __________________________________________ Print Name Title _________________________________ Residence Address _________________________________ Signature Page to "First Option" -3- EXHIBIT A --------- 1998 DIRECTOR OPTION PLAN DIRECTOR OPTION EXERCISE NOTICE BioMarin Pharmaceutical Inc. 371 Bel Marin Keys Blvd. Novato, CA 94949 Telephone: (800) 334-5956 Fax: (415) 382-7889 Attention: Secretary 1. Exercise of Option. The undersigned ("OPTIONEE") hereby elects to ------------------ exercise Optionee's option to purchase ______ shares of the Common Stock (the "SHARES") of BioMarin Pharmaceutical Inc. (the "COMPANY") under and pursuant to the Company's 1998 Director Option Plan and the Director Option Agreement dated _______________ (the "AGREEMENT"). 2. Representations of Optionee. Optionee acknowledges that Optionee has --------------------------- received, read and understood the Agreement. 3. Tax Consequences. Optionee understands that Optionee may suffer ---------------- adverse tax consequences as a result of Optionee's purchase or disposition of the Shares. Optionee represents that Optionee has consulted with any tax consultant(s) Optionee deems advisable in connection with the purchase or disposition of the Shares and that Optionee is not relying on the Company for any tax advice. 4. Delivery of Payment. Optionee herewith delivers to the Company the ------------------- aggregate purchase price for the Shares that Optionee has elected to purchase and has made provision for the payment of any federal or state withholding taxes required to be paid or withheld by the Company. 5. Entire Agreement. The Agreement is incorporated herein by reference. ---------------- This Exercise Notice, the Plan and the Agreement constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof. This Exercise Notice, the Plan and the Agreement are governed by California law except for that body of law pertaining to conflict of laws. Submitted by: Accepted by: PURCHASER BIOMARIN PHARMACEUTICAL INC. _________________________________ __________________________________________ Signature By _________________________________ __________________________________________ Print Name Its Address: Address: - ------- ------- _________________________________ 371 Bel Marin Keys Blvd. _________________________________ Novato, CA 94949 _________________________________ Date Received Signature Page to First Option "Director Option Exercise Notice" -2- BIOMARIN PHARMACEUTICAL INC. 1998 DIRECTOR OPTION PLAN DIRECTOR OPTION AGREEMENT SUBSEQUENT OPTION 1. Grant of Option. Effective as of today, ___________________, ____, --------------- (the "DATE OF GRANT") BioMarin Pharmaceutical Inc., a Delaware corporation (the "COMPANY"), hereby grants to _______________________ (the "OPTIONEE"), a nonstatutory stock option to purchase a total of __________ shares of the Company's Common Stock ("COMMON STOCK"), at the price determined as provided herein, and in all respects subject to the terms, definitions and provisions of the Company's 1998 Director Option Plan (the "PLAN") adopted by the Company which is incorporated herein by reference. The terms defined in the Plan shall have the same defined meanings herein. 2. Exercise Price. The exercise price is $_______ for each share of -------------- Common Stock. 3. Exercise of Option. This Option shall be exercisable during its term ------------------ in accordance with the provisions of Section 8 of the Plan as follows: (a) Right to Exercise. (i) This Option shall become exercisable in installments cumulatively with respect to twenty-five percent (25%) of the shares subject to the Option on the first day of each of the Company's fiscal quarters after the Date of Grant, subject to Optionee continuing to provide services as a Director, so that one hundred percent (100%) of the Optioned Stock shall be exercisable one year after the date of grant. (ii) This Option may not be exercised for a fraction of a share. (iii) In the event of Optionee's death, Disability or other termination of service as a Director, the exercisability of the Option is governed by Section 8 of the Plan. (b) Method of Exercise. This Option shall be exercisable by written ------------------ notice, which shall state the election to exercise the Option and the number of Shares in respect of which the Option is being exercised. Such written notice, in the form attached hereto as EXHIBIT A, shall be signed by the Optionee and --------- shall be delivered in person or by certified mail to the Secretary of the Company. The written notice shall be accompanied by payment of the exercise price. 4. Method of Payment. Payment of the exercise price shall be by any of ----------------- the following, or a combination thereof, at the election of the Optionee: (a) cash; (b) check; [OR] (c) surrender of other shares which (x) in the case of Shares acquired upon exercise of an option, have been owned by the Optionee for more than six (6) months on the date of surrender, and (y) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option shall be exercised [; OR (D) DELIVERY OF A PROPERLY EXECUTED EXERCISE NOTICE TOGETHER WITH SUCH OTHER DOCUMENTATION AS THE COMPANY AND THE BROKER, IF APPLICABLE, SHALL REQUIRE TO EFFECT AN EXERCISE OF THE OPTION AND DELIVERY TO THE COMPANY OF THE SALE OR LOAN PROCEEDS REQUIRED TO PAY THE EXERCISE PRICE]. 5. Restrictions on Exercise. This Option may not be exercised if the ------------------------ issuance of such Shares upon such exercise or the method of payment of consideration for such shares would constitute a violation of any applicable federal or state securities or other law or regulations, or if such issuance would not comply with the requirements of any stock exchange upon which the Shares may then be listed. As a condition to the exercise of this Option, the Company may require Optionee to make any representation and warranty to the Company as may be required by any applicable law or regulation. 6. Non-Transferability of Option. This Option may not be transferred in ----------------------------- any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Optionee only by the Optionee. The terms of this Option shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee. 7. Term of Option. This Option may not be exercised more than ten (10) -------------- years from the date of grant of this Option, and may be exercised during such period only in accordance with the Plan and the terms of this Option. 8. Taxation Upon Exercise of Option. Optionee understands that, upon -------------------------------- exercise of this Option, he or she will recognize income for tax purposes in an amount equal to the excess of the then Fair Market Value of the Shares purchased over the exercise price paid for such Shares. Since the Optionee is subject to Section 16(b) of the Securities Exchange Act of 1934, as amended, under certain limited circumstances the measurement and timing of such income (and the commencement of any capital gain holding period) may be deferred, and the Optionee is advised to contact a tax advisor concerning the application of Section 83 in general and the availability a Section 83(b) election in particular in connection with the exercise of the Option. Upon a resale of such Shares by the Optionee, any difference between the sale price and the Fair Market Value of the Shares on the date of exercise of the Option, to the extent not included in income as described above, will be treated as capital gain or loss. Optionee acknowledges receipt of a copy of the Plan, a copy of which is attached hereto, and represents that he or she is familiar with the terms and provisions thereof, and hereby accepts this Option subject to all of the terms and provisions thereof. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Board upon any questions arising under the Plan. -2- OPTIONEE BIOMARIN PHARMACEUTICAL INC. _________________________________ __________________________________________ Signature By _________________________________ __________________________________________ Print Name Title _________________________________ Residence Address _________________________________ Signature Page to "Subsequent Option" -3- EXHIBIT A --------- 1998 DIRECTOR OPTION PLAN DIRECTOR OPTION EXERCISE NOTICE BioMarin Pharmaceutical Inc. 371 Bel Marin Keys Blvd. Novato, CA 94949 Telephone: (800) 334-5956 Fax: (415) 382-7889 Attention: Secretary 1. Exercise of Option. The undersigned ("OPTIONEE") hereby elects to ------------------ exercise Optionee's option to purchase ______ shares of the Common Stock (the "SHARES") of BioMarin Pharmaceutical Inc. (the "COMPANY") under and pursuant to the Company's 1998 Director Option Plan and the Director Option Agreement dated _______________ (the "AGREEMENT"). 2. Representations of Optionee. Optionee acknowledges that Optionee has --------------------------- received, read and understood the Agreement. 3. Tax Consequences. Optionee understands that Optionee may suffer ---------------- adverse tax consequences as a result of Optionee's purchase or disposition of the Shares. Optionee represents that Optionee has consulted with any tax consultant(s) Optionee deems advisable in connection with the purchase or disposition of the Shares and that Optionee is not relying on the Company for any tax advice. 4. Delivery of Payment. Optionee herewith delivers to the Company the ------------------- aggregate purchase price for the Shares that Optionee has elected to purchase and has made provision for the payment of any federal or state withholding taxes required to be paid or withheld by the Company. 5. Entire Agreement. The Agreement is incorporated herein by reference. ---------------- This Exercise Notice, the Plan and the Agreement constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof. This Exercise Notice, the Plan and the Agreement are governed by California law except for that body of law pertaining to conflict of laws. Submitted by: Accepted by: PURCHASER BIOMARIN PHARMACEUTICAL INC. _________________________________ __________________________________________ Signature By _________________________________ __________________________________________ Print Name Its Address: Address: - ------- ------- _________________________________ 371 Bel Marin Keys Blvd. _________________________________ Novato, CA 94949 __________________________________________ Date Received Signature Page to Subsequent Option "Director Option Exercise Notice" -2- EX-10.4 9 1998 EMPLOYEE STOCK PURCHASE PLAN EXHIBIT 10.4 BIOMARIN PHARMACEUTICAL INC. 1998 EMPLOYEE STOCK PURCHASE PLAN The following constitute the provisions of the 1998 Employee Stock Purchase Plan of BioMarin Pharmaceutical Inc. 1. Purpose. The purpose of the Plan is to provide employees of the ------- Company and its Designated Subsidiaries with an opportunity to purchase Common Stock of the Company through accumulated payroll deductions. It is the intention of the Company to have the Plan qualify as an "Employee Stock Purchase Plan" under Section 423 of the Internal Revenue Code of 1986, as amended. The provisions of the Plan, accordingly, shall be construed so as to extend and limit participation in a manner consistent with the requirements of that section of the Code. 2. Definitions. ----------- (a) "BOARD" shall mean the Board of Directors of the Company. ----- (b) "CODE" shall mean the Internal Revenue Code of 1986, as amended. ---- (c) "COMMON STOCK" shall mean the common stock of the Company. ------------ (d) "COMPANY" shall mean BioMarin Pharmaceutical Inc. and any ------- Designated Subsidiary of the Company. (e) "COMPENSATION" shall mean all base straight time gross earnings ------------ and commissions, but exclusive of payments for overtime, shift premium, incentive compensation, incentive payments, bonuses and other compensation. (f) "DESIGNATED SUBSIDIARY" shall mean any Subsidiary which has been --------------------- designated by the Board from time to time in its sole discretion as eligible to participate in the Plan. (g) "EMPLOYEE" shall mean any individual who is an Employee of the -------- Company for tax purposes whose customary employment with the Company is at least twenty (20) hours per week and more than five (5) months in any calendar year. For purposes of the Plan, the employment relationship shall be treated as continuing intact while the individual is on sick leave or other leave of absence approved by the Company. Where the period of leave exceeds 90 days and the individual's right to reemployment is not guaranteed either by statute or by contract, the employment relationship shall be deemed to have terminated on the 91st day of such leave. (h) "ENROLLMENT DATE" shall mean the first Trading Day of each --------------- Offering Period. Page 2 (i) "EXERCISE DATE" shall mean the last Trading Day of each Purchase ------------- Period. (j) "FAIR MARKET VALUE" shall mean, as of any date, the value of ----------------- Common Stock determined as follows: (1) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system for the last market trading day on the date of such determination, as reported in The Wall Street Journal or such other source as the Board deems reliable; (2) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shall be the mean of the closing bid and asked prices for the Common Stock on the date of such determination, as reported in The Wall Street Journal or such other source as the Board deems reliable; (3) For purposes of the Enrollment Date of the first Offering Period under the Plan, the Fair Market Value shall be the initial price to the public as set forth in the final prospectus included within the registration statement in Form S-1 filed with the Securities and Exchange Commission for the initial public offering of the Company's Common Stock (the "REGISTRATION STATEMENT"); or (4) In the absence of an established market for the Common Stock, the Fair Market Value thereof shall be determined in good faith by the Board. (k) "OFFERING PERIODS" shall mean the periods of approximately ---------------- twenty-four (24) months during which an option granted pursuant to the Plan may be exercised, commencing on the first Trading Day on or after May 1 and November 1 of each year and terminating on the last Trading Day in the periods ending twenty-four months later; provided, however, that the first Offering Period under the Plan shall commence with the first Trading Day on or after the date on which the Securities and Exchange Commission declares the Company's Registration Statement effective and ending on the last Trading Day on or before October 31, 2000. The duration and timing of Offering Periods may be changed pursuant to Section 4 of this Plan. (l) "PLAN" shall mean this 1998 Employee Stock Purchase Plan. ---- (m) "PURCHASE PERIOD" shall mean the approximately six month period --------------- commencing after one Exercise Date and ending with the next Exercise Date, except that the first Purchase Period of any Offering Period shall commence on the Enrollment Date and end with the Page 3 next Exercise Date; provided, however, that the first Purchase Period under the Plan shall commence with the first Trading Day on or after the date on which the Securities and Exchange Commission declares the Company's Registration Statement effective and shall end on the last Trading Day on or before October 31, 2000. (n) "PURCHASE PRICE" shall mean 85% of the Fair Market Value of a -------------- share of Common Stock on the Enrollment Date or on the Exercise Date, whichever is lower; provided however, that the Purchase Price may be adjusted by the Board pursuant to Section 20. (o) "RESERVES" shall mean the number of shares of Common Stock covered -------- by each option under the Plan which have not yet been exercised and the number of shares of Common Stock which have been authorized for issuance under the Plan but not yet placed under option. (p) "SUBSIDIARY" shall mean a corporation, domestic or foreign, of ---------- which not less than 50% of the voting shares are held by the Company or a Subsidiary, whether or not such corporation now exists or is hereafter organized or acquired by the Company or a Subsidiary. (q) "TRADING DAY" shall mean a day on which national stock exchanges ----------- and the Nasdaq System are open for trading. 3. Eligibility. ----------- (a) Any Employee who shall be employed by the Company on a given Enrollment Date shall be eligible to participate in the Plan. (b) Any provisions of the Plan to the contrary notwithstanding, no Employee shall be granted an option under the Plan (i) to the extent that, immediately after the grant, such Employee (or any other person whose stock would be attributed to such Employee pursuant to Section 424(d) of the Code) would own capital stock of the Company and/or hold outstanding options to purchase such stock possessing five percent (5%) or more of the total combined voting power or value of all classes of the capital stock of the Company or of any Subsidiary, or (ii) to the extent that his or her rights to purchase stock under all employee stock purchase plans of the Company and its subsidiaries accrues at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of stock (determined at the fair market value of the shares at the time such option is granted) for each calendar year in which such option is outstanding at any time. 4. Offering Periods. The Plan shall be implemented by consecutive, ---------------- overlapping Offering Periods with a new Offering Period commencing on the first Trading Day on or after May 1 and November 1 of each year, or on such other date as the Board shall determine, and continuing thereafter until terminated in accordance with Section 20 hereof; provided, however, that the first Page 4 Offering Period under the Plan shall commence with the first Trading Day on or after the date on which the Securities and Exchange Commission declares the Company's Registration Statement effective and ending on the last Trading Day on or before October 31, 2000. The Board shall have the power to change the duration of Offering Periods (including the commencement dates thereof) with respect to future offerings without stockholder approval if such change is announced prior to the scheduled beginning of the first Offering Period to be affected thereafter. 5. Participation. ------------- (a) An eligible Employee may become a participant in the Plan by completing a subscription agreement authorizing payroll deductions in the form of EXHIBIT A to this Plan and filing it with the Company's payroll office prior --------- to the applicable Enrollment Date. (b) Payroll deductions for a participant shall commence on the first payroll following the Enrollment Date and shall end on the last payroll in the Offering Period to which such authorization is applicable, unless sooner terminated by the participant as provided in Section 10 hereof. 6. Payroll Deductions. ------------------ (a) At the time a participant files his or her subscription agreement, he or she shall elect to have payroll deductions made on each pay day during the Offering Period in an amount not exceeding ten percent (10%) of the Compensation which he or she receives on each pay day during the Offering Period. (b) All payroll deductions made for a participant shall be credited to his or her account under the Plan and shall be withheld in whole percentages only. A participant may not make any additional payments into such account. (c) A participant may discontinue his or her participation in the Plan as provided in Section 10 hereof, or may increase or decrease the rate of his or her payroll deductions during the Offering Period by completing or filing with the Company a new subscription agreement authorizing a change in payroll deduction rate. The Board may, in its discretion, limit the number of participation rate changes during any Offering Period. The change in rate shall be effective with the first full payroll period following five (5) business days after the Company's receipt of the new subscription agreement unless the Company elects to process a given change in participation more quickly. A participant's subscription agreement shall remain in effect for successive Offering Periods unless terminated as provided in Section 10 hereof. Page 5 (d) Notwithstanding the foregoing, to the extent necessary to comply with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's payroll deductions may be decreased to zero percent (0%) at any time during a Purchase Period. Payroll deductions shall recommence at the rate provided in such participant's subscription agreement at the beginning of the first Purchase Period which is scheduled to end in the following calendar year, unless terminated by the participant as provided in Section 10 hereof. (e) At the time the option is exercised, in whole or in part, or at the time some or all of the Company's Common Stock issued under the Plan is disposed of, the participant must make adequate provision for the Company's federal, state, or other tax withholding obligations, if any, which arise upon the exercise of the option or the disposition of the Common Stock. At any time, the Company may, but shall not be obligated to, withhold from the participant's compensation the amount necessary for the Company to meet applicable withholding obligations, including any withholding required to make available to the Company any tax deductions or benefits attributable to sale or early disposition of Common Stock by the Employee. 7. Grant of Option. On the Enrollment Date of each Offering Period, each --------------- eligible Employee participating in such Offering Period shall be granted an option to purchase on each Exercise Date during such Offering Period (at the applicable Purchase Price) up to a number of shares of the Company's Common Stock determined by dividing such Employee's payroll deductions accumulated prior to such Exercise Date and retained in the Participant's account as of the Exercise Date by the applicable Purchase Price; provided that in no event shall an Employee be permitted to purchase during each Purchase Period more than 5,000 shares of the Company's Common Stock (subject to any adjustment pursuant to Section 19), and provided further that such purchase shall be subject to the limitations set forth in Sections 3(b) and 12 hereof. The Board may, for future Offering Periods, increase or decrease, in its absolute discretion, the maximum number of shares of the Company's Common Stock an Employee may purchase during each Purchase Period of such Offering Period. Exercise of the option shall occur as provided in Section 8 hereof, unless the participant has withdrawn pursuant to Section 10 hereof. The option shall expire on the last day of the Offering Period. 8. Exercise of Option. ------------------ (a) Unless a participant withdraws from the Plan as provided in Section 10 hereof, his or her option for the purchase of shares shall be exercised automatically on the Exercise Date, and the maximum number of full shares subject to option shall be purchased for such participant at the applicable Purchase Price with the accumulated payroll deductions in his or her account. No fractional shares shall be purchased; any payroll deductions accumulated in a participant's account which are not sufficient to purchase a full share shall be retained in the participant's account for the subsequent Purchase Period or Offering Period, subject to earlier withdrawal by the participant as Page 6 provided in Section 10 hereof. Any other monies left over in a participant's account after the Exercise Date shall be returned to the participant. During a participant's lifetime, a participant's option to purchase shares hereunder is exercisable only by him or her. (b) If the Board determines that, on a given Exercise Date, the number of shares with respect to which options are to be exercised may exceed (i) the number of shares of Common Stock that were available for sale under the Plan on the Enrollment Date of the applicable Offering Period, or (ii) the number of shares available for sale under the Plan on such Exercise Date, the Board may in its sole discretion (x) provide that the Company shall make a pro rata allocation of the shares of Common Stock available for purchase on such Enrollment Date or Exercise Date, as applicable, in as uniform a manner as shall be practicable and as it shall determine in its sole discretion to be equitable among all participants exercising options to purchase Common Stock on such Exercise Date, and continue all Offering Periods then in effect, or (y) provide that the Company shall make a pro rata allocation of the shares available for purchase on such Enrollment Date or Exercise Date, as applicable, in as uniform a manner as shall be practicable and as it shall determine in its sole discretion to be equitable among all participants exercising options to purchase Common Stock on such Exercise Date, and terminate any or all Offering Periods then in effect pursuant to Section 20 hereof. The Company may make pro rata allocation of the shares available on the Enrollment Date of any applicable Offering Period pursuant to the preceding sentence, notwithstanding any authorization of additional shares for issuance under the Plan by the Company's stockholders subsequent to such Enrollment Date. 9. Delivery. As promptly as practicable after each Exercise Date on -------- which a purchase of shares occurs, the Company shall arrange the delivery to each participant, as appropriate, of a certificate representing the shares purchased upon exercise of his or her option. 10. Withdrawal. ---------- (a) A participant may withdraw all but not less than all the payroll deductions credited to his or her account and not yet used to exercise his or her option under the Plan at any time by giving written notice to the Company in the form of EXHIBIT B to this Plan. All of the participant's payroll deductions --------- credited to his or her account shall be paid to such participant promptly after receipt of notice of withdrawal and such participant's option for the Offering Period shall be automatically terminated, and no further payroll deductions for the purchase of shares shall be made for such Offering Period. If a participant withdraws from an Offering Period, payroll deductions shall not resume at the beginning of the succeeding Offering Period unless the participant delivers to the Company a new subscription agreement. (b) A participant's withdrawal from an Offering Period shall not have any effect upon his or her eligibility to participate in any similar plan which may hereafter be adopted by the Page 7 Company or in succeeding Offering Periods which commence after the termination of the Offering Period from which the participant withdraws. 11. Termination of Employment. ------------------------- Upon a participant's ceasing to be an Employee, for any reason, he or she shall be deemed to have elected to withdraw from the Plan and the payroll deductions credited to such participant's account during the Offering Period but not yet used to exercise the option shall be returned to such participant or, in the case of his or her death, to the person or persons entitled thereto under Section 15 hereof, and such participant's option shall be automatically terminated. The preceding sentence notwithstanding, a participant who receives payment in lieu of notice of termination of employment shall be treated as continuing to be an Employee for the participant's customary number of hours per week of employment during the period in which the participant is subject to such payment in lieu of notice. 12. Interest. No interest shall accrue on the payroll deductions of a -------- participant in the Plan. 13. Stock. ----- (a) Subject to adjustment upon changes in capitalization of the Company as provided in Section 19 hereof, the maximum number of shares of the Company's Common Stock which shall be made available for sale under the Plan shall be 250,000 shares, plus an annual increase to be added on the first day of the Company's fiscal year beginning in 1999 equal to the lesser of (i) 200,000 shares, (ii) .5% of the outstanding shares on such date or (iii) a lesser amount determined by the Board. (b) The participant shall have no interest or voting right in shares covered by his option until such option has been exercised. (c) Shares to be delivered to a participant under the Plan shall be registered in the name of the participant or in the name of the participant and his or her spouse. 14. Administration. The Plan shall be administered by the Board or a -------------- committee of members of the Board appointed by the Board. The Board or its committee shall have full and exclusive discretionary authority to construe, interpret and apply the terms of the Plan, to determine eligibility and to adjudicate all disputed claims filed under the Plan. Every finding, decision and determination made by the Board or its committee shall, to the full extent permitted by law, be final and binding upon all parties. Page 8 15. Designation of Beneficiary. -------------------------- (a) A participant may file a written designation of a beneficiary who is to receive any shares and cash, if any, from the participant's account under the Plan in the event of such partici pant's death subsequent to an Exercise Date on which the option is exercised but prior to delivery to such participant of such shares and cash. In addition, a participant may file a written designation of a beneficiary who is to receive any cash from the participant's account under the Plan in the event of such participant's death prior to exercise of the option. If a participant is married and the designated beneficiary is not the spouse, spousal consent shall be required for such designation to be effective. (b) Such designation of beneficiary may be changed by the participant at any time by written notice. In the event of the death of a participant and in the absence of a beneficiary validly designated under the Plan who is living at the time of such participant's death, the Company shall deliver such shares and/or cash to the executor or administrator of the estate of the participant, or if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its discretion, may deliver such shares and/or cash to the spouse or to any one or more dependents or relatives of the participant, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate. 16. Transferability. Neither payroll deductions credited to a --------------- participant's account nor any rights with regard to the exercise of an option or to receive shares under the Plan may be assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution or as provided in Section 15 hereof) by the participant. Any such attempt at assignment, transfer, pledge or other disposition shall be without effect, except that the Company may treat such act as an election to withdraw funds from an Offering Period in accordance with Section 10 hereof. 17. Use of Funds. All payroll deductions received or held by the Company ------------ under the Plan may be used by the Company for any corporate purpose, and the Company shall not be obligated to segregate such payroll deductions. 18. Reports. Individual accounts shall be maintained for each participant ------- in the Plan. Statements of account shall be given to participating Employees at least annually, which statements shall set forth the amounts of payroll deductions, the Purchase Price, the number of shares purchased and the remaining cash balance, if any. 19. Adjustments Upon Changes in Capitalization, Dissolution, Liquidation, --------------------------------------------------------------------- Merger or Asset Sale. -------------------- (a) Changes in Capitalization. Subject to any required action by the ------------------------- stockholders of the Company, the Reserves, the maximum number of shares each participant may purchase each Page 9 Purchase Period (pursuant to Section 7), as well as the price per share and the number of shares of Common Stock covered by each option under the Plan which has not yet been exercised shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration". Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. 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 of Common Stock subject to an option. (b) Dissolution or Liquidation. In the event of the proposed -------------------------- dissolution or liquidation of the Company, the Offering Period then in progress shall be shortened by setting a new Exercise Date (the "NEW EXERCISE DATE"), and shall terminate immediately prior to the consummation of such proposed dissolution or liquidation, unless provided otherwise by the Board. The New Exercise Date shall be before the date of the Company's proposed dissolution or liquidation. The Board shall notify each participant in writing, at least ten (10) business days prior to the New Exercise Date, that the Exercise Date for the participant's option has been changed to the New Exercise Date and that the participant's option shall be exercised automatically on the New Exercise Date, unless prior to such date the participant has withdrawn from the Offering Period as provided in Section 10 hereof. (c) Merger or Asset Sale. In the event of a proposed sale of all or -------------------- substantially all of the assets of the Company, or the merger of the Company with or into another corporation, each outstanding option shall be assumed or an equivalent option substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. In the event that the successor corporation refuses to assume or substitute for the option, any Purchase Periods then in progress shall be shortened by setting a new Exercise Date (the "NEW EXERCISE DATE") and any Offering Periods then in progress shall end on the New Exercise Date. The New Exercise Date shall be before the date of the Company's proposed sale or merger. The Board shall notify each participant in writing, at least ten (10) business days prior to the New Exercise Date, that the Exercise Date for the participant's option has been changed to the New Exercise Date and that the participant's option shall be exercised automatically on the New Exercise Date, unless prior to such date the participant has withdrawn from the Offering Period as provided in Section 10 hereof. Page 10 20. Amendment or Termination. ------------------------ (a) The Board of Directors of the Company may at any time and for any reason terminate or amend the Plan. Except as provided in Section 19 hereof, no such termination can affect options previously granted, provided that an Offering Period may be terminated by the Board of Directors on any Exercise Date if the Board determines that the termination of the Offering Period or the Plan is in the best interests of the Company and its stockholders. Except as provided in Section 19 and this Section 20 hereof, no amendment may make any change in any option theretofore granted which adversely affects the rights of any participant. The Company shall obtain stockholder approval of any Plan amendment to the extent necessary and desirable to comply with Section 423 of the Code (or any successor rule or provision or any other applicable law, regulation or stock exchange rule), the Company shall obtain stockholder approval in such a manner and to such a degree as required. (b) Without stockholder consent and without regard to whether any participant rights may be considered to have been "adversely affected," the Board (or its committee) shall be entitled to change the Offering Periods, limit the frequency and/or number of changes in the amount withheld during an Offering Period, establish the exchange ratio applicable to amounts withheld in a currency other than U.S. dollars, permit payroll withholding in excess of the amount designated by a participant in order to adjust for delays or mistakes in the Company's processing of properly completed withholding elections, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Common Stock for each participant properly correspond with amounts withheld from the participant's Compensation, and establish such other limitations or procedures as the Board (or its committee) determines in its sole discretion advisable which are consistent with the Plan. (c) In the event the Board determines that the ongoing operation of the Plan may result in unfavorable financial accounting consequences, the Board may, in its discretion and, to the extent necessary or desirable, modify or amend the Plan to reduce or eliminate such accounting consequence including, but not limited to: (1) altering the Purchase Price for any Offering Period including an Offering Period underway at the time of the change in Purchase Price; (2) shortening any Offering Period so that the Offering Period ends on a new Exercise Date, including an Offering Period underway at the time of the Board action; and (3) allocating shares. Page 11 Such modifications or amendments shall not require stockholder approval or the consent of any Plan participants. 21. Notices. All notices or other communications by a participant to the ------- Company under or in connection with the Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof. 22. Conditions Upon Issuance of Shares. Shares shall not be issued with ---------------------------------- respect to an option unless the exercise of such option and the issuance and delivery of such shares pursuant thereto shall comply with all applicable provisions of law, domestic or foreign, including, without limitation, the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance. As a condition to the exercise of an option, the Company may require the person exercising such option to represent and warrant at the time of any such exercise that the shares are being purchased only for investment and without any present intention to sell or distribute such shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned applicable provisions of law. 23. Stockholder Approval. The Plan shall be subject to approval by the -------------------- stockholders of the Company within twelve (12) months after the date the Plan is adopted by the Board. Such stockholder approval shall be obtained in the degree and manner required under applicable state and federal law and any stock exchange rules. 24. Term of Plan. Subject to Section 23 of the Plan, the Plan shall ------------ become effective upon the date of the Company's initial public offering of its equity securities registered on Form S-1 with the Securities and Exchange Commission. It shall continue in effect for a term of ten (10) years unless sooner terminated under Section 20 of the Plan. 25. Automatic Transfer to Low Price Offering Period. To the extent ----------------------------------------------- permitted by any applicable laws, regulations, or stock exchange rules if the Fair Market Value of the Common Stock on any Exercise Date in an Offering Period is lower than the Fair Market Value of the Common Stock on the Enrollment Date of such Offering Period, then all participants in such Offering Period shall be automatically withdrawn from such Offering Period immediately after the exercise of their option on such Exercise Date and automatically re-enrolled in the immediately following Offering Period as of the first day thereof. EXHIBIT A --------- BIOMARIN PHARMACEUTICAL INC. 1998 EMPLOYEE STOCK PURCHASE PLAN SUBSCRIPTION AGREEMENT _____ Original Application Enrollment Date: ___________ _____ Change in Payroll Deduction Rate _____ Change of Beneficiary(ies) 1. ____________________________________________________ hereby elects to participate in the BioMarin Pharmaceutical Inc. 1998 Employee Stock Purchase Plan (the "EMPLOYEE STOCK PURCHASE PLAN") and sub scribes to purchase shares of the Company's Common Stock in accordance with this Sub scription Agreement and the Employee Stock Purchase Plan. 2. I hereby authorize payroll deductions from each paycheck in the amount of ____% of my Compensation on each payday (from 1 to 10%) during the Offering Period in accordance with the Employee Stock Purchase Plan. (Please note that no fractional percentages are permitted.) 3. I understand that said payroll deductions shall be accumulated for the purchase of shares of Common Stock at the applicable Purchase Price determined in accordance with the Employee Stock Purchase Plan. I understand that if I do not withdraw from an Offering Period, any accumulated payroll deductions will be used to automatically exercise my option. 4. I have received a copy of the complete Employee Stock Purchase Plan. I understand that my participation in the Employee Stock Purchase Plan is in all respects subject to the terms of the Plan. I understand that my ability to exercise the option under this Subscription Agreement is subject to stockholder approval of the Employee Stock Purchase Plan. 5. Shares purchased for me under the Employee Stock Purchase Plan should be issued in the name(s) of (Employee or Employee and Spouse only):___________ __________________________________________________________________________. 6. I understand that if I dispose of any shares received by me pursuant to the Plan within 2 years after the Enrollment Date (the first day of the Offering Period during which I purchased such shares) or one year after the Exercise Date, I will be treated for federal income tax purposes Subscription Agreement Page 2 as having received ordinary income at the time of such disposition in an amount equal to the excess of the fair market value of the shares at the time such shares were purchased by me over the price which I paid for the shares. I hereby agree to notify the Company in writing within 30 days -------------------------------------------------------------- after the date of any disposition of my shares and I will make adequate ----------------------------------------------------------------------- provision for Federal, state or other tax withholding obligations, if any, -------------------------------------------------------------------------- which arise upon the disposition of the Common Stock. The Company may, ---------------------------------------------------- but will not be obligated to, withhold from my compensation the amount necessary to meet any applicable withholding obligation including any withholding necessary to make available to the Company any tax deductions or benefits attributable to sale or early disposition of Common Stock by me. If I dispose of such shares at any time after the expiration of the 2- year and 1-year holding periods, I understand that I will be treated for federal income tax purposes as having received income only at the time of such disposition, and that such income will be taxed as ordinary income only to the extent of an amount equal to the lesser of (1) the excess of the fair market value of the shares at the time of such disposition over the purchase price which I paid for the shares, or (2) 15% of the fair market value of the shares on the first day of the Offering Period. The remainder of the gain, if any, recognized on such disposition will be taxed as capital gain. 7. I hereby agree to be bound by the terms of the Employee Stock Purchase Plan. The effectiveness of this Subscription Agreement is dependent upon my eligibility to participate in the Employee Stock Purchase Plan. 8. In the event of my death, I hereby designate the following as my beneficiary(ies) to receive all payments and shares due me under the Employee Stock Purchase Plan: NAME: (Please print)________________________________________________________ (First) (Middle) (Last) __________________________ ______________________________________________ Relationship ______________________________________________ (Address) Subscription Agreement Page 3 Employee's Social Security Number: ____________________________________ Employee's Address: ____________________________________ ____________________________________ ____________________________________ I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME. Dated:_________________________ ________________________________________ Signature of Employee ________________________________________ Spouse's Signature (If beneficiary other than spouse) EXHIBIT B --------- BIOMARIN PHARMACEUTICAL INC. 1998 EMPLOYEE STOCK PURCHASE PLAN NOTICE OF WITHDRAWAL The undersigned participant in the Offering Period of the BioMarin Pharmaceutical Inc. 1998 Employee Stock Purchase Plan which began on ____________, 19____ (the "ENROLLMENT DATE") hereby notifies the Company that he or she hereby withdraws from the Offering Period. He or she hereby directs the Company to pay to the undersigned as promptly as practicable all the payroll deductions credited to his or her account with respect to such Offering Period. The undersigned understands and agrees that his or her option for such Offering Period will be automatically termi nated. The undersigned understands further that no further payroll deductions will be made for the purchase of shares in the current Offering Period and the undersigned shall be eligible to participate in succeeding Offering Periods only by delivering to the Company a new Subscription Agreement. Name and Address of Participant: ________________________________ ________________________________ ________________________________ Signature: ________________________________ Date:___________________________ EX-10.5 10 FOUNDER'S STOCK PURCHASE AGREEMENT WITH DR. KLOCK EXHIBIT 10.5 BIOMARIN PHARMACEUTICAL INC. AMENDED AND RESTATED FOUNDER'S STOCK PURCHASE AGREEMENT THIS AGREEMENT (the "Agreement") is made between John Klock (the "Purchaser") and BIOMARIN PHARMACEUTICAL INC. (the "Company") as of October 1, 1997. WHEREAS the Purchaser is an employee of the Company, and the Purchaser's continued participation is considered by the Company to be important for the Company's continued growth; and WHEREAS the Company granted the Purchaser the right to purchase eight hundred thousand (800,000) shares of the Company's common stock (the "Shares"); NOW THEREFORE, the parties agree as follows: 1. Sale of Stock. The Company hereby agrees to sell to the Purchaser and ------------- the Purchaser hereby agrees to purchase the Shares at a price of $1.00 per Share on the terms and conditions contained herein, for an aggregate purchase price of $800,000.00. 2. Payment of Purchase Price. The aggregate purchase price for the ------------------------- Shares may be paid by delivery to the Company at the time of execution of this Agreement of cash, a check, promissory note (in the form attached hereto as Exhibit A), or some combination thereof. - --------- 3. Repurchase Option and Sale Rights. --------------------------------- (a) Company's Repurchase Option. In the event the Purchaser ceases to --------------------------- be an employee for any or no reason (including death or disability) before all of the Shares are released from the Company's Repurchase Option (see Section 4), the Company shall, upon the date of such termination (as reasonably fixed and determined by the Company) have the right, but not the obligation (except as provided in Section 3(b) below) (the "Repurchase Option"), for a period of sixty (60) days from such date, to repurchase up to that number of shares which constitute the Unreleased Shares (as defined in Section 4) at the original purchase price per share, plus any interest paid to the Company by the Purchaser with respect to the Shares (the "Repurchase Price"). The Repurchase Option shall be exercised by the Company by delivering written notice to the Purchaser or the Purchaser's executor (with a copy to the Escrow Holder) AND, at the Company's option, (i) by delivering to the Purchaser or the Purchaser's executor a check in the amount of the aggregate Repurchase Price, or (ii) by canceling an amount of the Purchaser's indebtedness to the Company equal to the aggregate Repurchase Price, or (iii) by a combination of (i) and (ii) so that the combined payment and cancellation of indebtedness equals the aggregate Repurchase Price. Upon delivery of such notice and the payment of the aggregate Repurchase Price, the Company shall become the legal and beneficial owner of the Shares being repurchased and all rights and interests therein or relating thereto, and the Company shall have the right to retain and transfer to its own name the number of Shares being repurchased by the Company. (b) Purchaser's Sale Rights. In the event the Purchaser's employment ----------------------- is terminated by the Company for any or no reason (including death or disability), the Purchaser shall, upon the date of such termination (as reasonably fixed and determined by the Company) have the right, but not the obligation (the "Sale Right"), for a period of sixty (60) days from such date, to sell to the Company, and the Company shall have the obligation to purchase from the Purchaser, the Shares at the lower of the original purchase price per share or the then current market price per share, plus any interest paid to the Company by the Purchaser with respect to the Shares (the "Sale Price"). The Sale Right may be exercised by the Purchaser by delivering written notice to the Company (with a copy to the Escrow Holder). At the Company's option, it shall pay the Sale Price to the Purchaser (i) by delivering to the Purchaser or the Purchaser's executor a check in the amount of the aggregate Sale Price, or (ii) by canceling an amount of the Purchaser's indebtedness to the Company equal to the aggregate Sale Price, or (iii) by a combination of (i) and (ii) so that the combined payment and cancellation of indebtedness equals the aggregate Sale Price. Upon delivery of such notice and the payment of the aggregate Sale Price, the Company shall become the legal and beneficial owner of the Shares being purchased and all rights and interests therein or relating thereto, and the Company shall have the right to retain and transfer to its own name the number of Shares being purchased by the Company. (c) Whenever the Company shall have the right or the obligation to repurchase or purchase Shares hereunder, the Company may designate and assign one or more employees, officers, directors or shareholders of the Company or other persons or organizations to exercise all or a part of the Company's purchase rights or obligations under this Agreement and purchase all or a part of such Shares. If the fair market value of the Shares to be purchased on the date of such designation or assignment (the "FMV") exceeds the aggregate Repurchase Price or Sale Price, as the case may be, of such Shares, then each such designee or assignee shall pay the Company cash equal to the difference between the FMV and the aggregate Repurchase Price or Sale Price, as the case may be, of such Shares. 4. Release of Shares From Repurchase Option. ---------------------------------------- (a) Thirty-five percent (35%) of the Shares shall not be subject to the Repurchase Option, fifteen percent (15%) of the Shares shall be released from the Repurchase Option at the end of the first year of employment, and 1/24 of the remaining 50% of the Shares shall be released from the Repurchase Option at the end of each month after one year from the date of grant, provided that - -------------------------------------------------------------- the Purchaser does not cease to be an employee prior to the date of any such release. (b) Immediately prior to a Change of Control (as defined below), fifty percent (50%) of the Shares that have not been released from the Repurchase Option, as of such time, shall be released from the Repurchase Option. The remaining Shares that have not yet been released from the Repurchase Option shall be released from the Repurchase Option pursuant to Section 4(a). For purposes of this Agreement, a "Change of Control" means the happening of any of the following: -2- (i) When any "person," as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), other than the Company, a subsidiary of the Company or a Company employee benefit plan, including any trustee of such plan acting as trustee, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the combined voting power of the Company's then outstanding securities entitled to vote generally in the election of directors; or (ii) The effective date of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the shareholders of the Company approve an agreement for the sale or disposition by the Company of all or substantially all the Company's assets. (c) Any of the Shares that have not yet been released from the Repurchase Option are referred to herein as "Unreleased Shares." (d) The Shares that have been released from the Repurchase Option shall be delivered to the Purchaser at the Purchaser's request (see Section 6). (e) Shares released from the Company's Repurchase Option remain subject to the Company's Right of First Refusal described in Section 7. 5. Restriction on Transfer. Except for the escrow described in Section 6 ----------------------- or the transfer of the Shares to the Company or its assignees contemplated by this Agreement, none of the Shares or any beneficial interest therein shall be transferred, encumbered or otherwise disposed of in any way until such Shares are released from the Company's Repurchase Option in accordance with the provisions of this Agreement, other than by will or the laws of descent and distribution. 6. Escrow of Shares. ---------------- (a) To ensure the availability for delivery of the Purchaser's Unreleased Shares upon repurchase by the Company pursuant to the Repurchase Option, the Purchaser shall, upon execution of this Agreement, deliver and deposit with an escrow holder designated by the Company (the "Escrow Holder") the share certificates representing the Unreleased Shares, together with the stock assignment duly endorsed in blank, attached hereto as Exhibit B. The --------- Unreleased Shares and stock assignment shall be held by the Escrow Holder, pursuant to the Joint Escrow Instructions of the Company and Purchaser attached hereto as Exhibit C, until such time as the Company's Repurchase Option expires. --------- As a further condition to the Company's obligations under this Agreement, the Company may require the spouse of -3- Purchaser, if any, to execute and deliver to the Company the Consent of Spouse attached hereto as Exhibit D. (b) The Escrow Holder shall not be liable for any act it may do or omit to do with respect to holding the Unreleased Shares in escrow while acting in good faith and in the exercise of its judgment. (c) If the Company or any assignee exercises the Repurchase Option hereunder, the Escrow Holder, upon receipt of written notice of such exercise from the proposed transferee, shall take all steps necessary to accomplish such transfer. (d) When the Repurchase Option has been exercised or expires unexercised or a portion of the Shares has been released from the Repurchase Option, upon request the Escrow Holder shall promptly cause a new certificate to be issued for the released Shares and shall deliver the certificate to the Company or the Purchaser, as the case may be. (e) Subject to the terms hereof, the Purchaser shall have all the rights of a stockholder with respect to the Shares while they are held in escrow, including without limitation, the right to vote the Shares and to receive any cash dividends declared thereon. If, from time to time during the term of the Repurchase Option, there is (i) any stock dividend, stock split or other change in the Shares, or (ii) any merger or sale of all or substantially all of the assets or other acquisition of the Company, any and all new, substituted or additional securities to which the Purchaser is entitled by reason of the Purchaser's ownership of the Shares shall be immediately subject to this escrow, deposited with the Escrow Holder and included thereafter as "Shares" for purposes of this Agreement and the Repurchase Option. 7. Company's Right of First Refusal. Before any Shares that are held by -------------------------------- Purchaser or any transferee (either being sometimes referred to herein as the "Holder") may be sold or otherwise transferred (including transfer by gift or operation of law), the Company or its assignees(s) shall have a right of first refusal to purchase the Shares (the "Right of First Refusal") on the terms and conditions set forth below. (a) Notice of Proposed Transfer. The Holder shall deliver to the --------------------------- Company a written notice (the "Notice") stating: (i) the Holder's bona fide intention to sell or otherwise transfer such Shares; (ii) the name of each proposed purchaser or other transferee (the "Proposed Transferee"); (iii) the number of Shares to be transferred to each Proposed Transferee; and (iv) the bona fide cash price or other consideration for which the Holder proposes to transfer the Shares (the "Offered Price"), and the Holder shall offer the Shares at the Offered Price to the Company or its assignee(s). (b) Exercise of Right of First Refusal. At any time within thirty ---------------------------------- (30) days after receipt of the Notice, the Company and/or its assignee(s) may, by giving written notice to the Holder, elect to purchase all, but not less than all, of the Shares proposed to be transferred to any one or more of the Proposed Transferees, at the purchase price determined in accordance with subsection (c) below. -4- (c) Purchase Price. The purchase price (the "Purchase Price") for the -------------- Shares purchased by the Company or its assignee(s) under this Section shall be the Offered Price. If the Offered Price includes consideration other than cash, the cash equivalent value of the non-cash consideration shall be determined by the Board of Directors of the Company in good faith. (d) Payment. Payment of the Purchase Price shall be made, at the ------- option of the Company or its assignee(s), in cash, by check, by cancellation of all or a portion of any outstanding indebtedness of the Holder to the Company (or, in the case of purchase by an assignee, to the assignee), or by any combination thereof within thirty (30) days after receipt of the Notice or in the manner and at the times set forth in the Notice. (e) Holder's Right to Transfer. If all of the Shares proposed in the -------------------------- Notice to be transferred to a given Proposed Transferee are not purchased by the Company and/or its assignee(s) as provided in this Section, then the Holder may sell or otherwise transfer such Shares to that Proposed Transferee at the Offered Price or at a higher price, provided that such sale or other transfer is consummated within one hundred twenty (120) days after the date of the Notice and provided further that any such sale or other transfer is effected in accordance with any applicable securities laws and the Proposed Transferee agrees in writing that the provisions of this Agreement shall continue to apply to the Shares in the hands of such Proposed Transferee. If the Shares described in the Notice are not trans ferred to the Proposed Transferee within such period, a new Notice shall be given to the Company, and the Company and/or its assignees shall again be offered the Right of First Refusal before any Shares held by the Holder may be sold or otherwise transferred. (f) Exception for Certain Family Transfers. Anything to the contrary -------------------------------------- contained in this Section notwithstanding, the transfer of any or all of the Shares during the Purchaser's lifetime or on the Purchaser's death by will or intestacy to the Purchaser's immediate family or a trust for the benefit of the Purchaser's immediate family shall be exempt from the provisions of this Section, provided that the Purchaser notifies the Company in writing within thirty (30) days of said transfer. "Immediate Family" as used herein shall mean spouse, lineal descendant or antecedent, father, mother, brother or sister. In such case, the transferee or other recipient shall receive and hold the Shares so transferred subject to the provisions of this Agreement, and there shall be no further transfer of such Shares except in accordance with the terms of this Section. (g) Termination of Right of First Refusal. The Right of First Refusal ------------------------------------- shall terminate as to any Shares upon the date of the first sale of common stock of the Company to the general public pursuant to a registration statement filed with and declared effective by the Securities and Exchange Commission under the Securities Act of 1933, as amended (the "Act"). 8. Legends; Investment Intent. -------------------------- (a) The share certificate evidencing the Shares, if any, issued hereunder shall be endorsed with the following legends, or legends substantially equivalent thereto (in addition to any legend required under applicable state securities laws): -5- THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE ACT AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE, TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH. THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS UPON TRANSFER, A RIGHT OF REPURCHASE AND A RIGHT OF FIRST REFUSAL AS SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY. (b) Market Standoff. Purchaser hereby agrees that, if so requested --------------- by the Company or any representative of the underwriters in connection with any registration of the offering of any securities of the Company under the Act, Purchaser shall not sell or otherwise transfer any Shares or other securities of the Company during such period as the Company and the representatives of the underwriters may request (not to exceed 180 days) following the effective date of any registration statement of the company filed under the Act for an underwritten public offering. (c) Refusal to Transfer. The Company (i) shall not be required to ------------------- transfer on its books, or may issue appropriate "stop transfer" instructions to its transfer agents, if any, with respect to any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Agreement, and (ii) the Company shall not be required to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred. (d) Investment Intent. Purchaser shall, if required by the Company, ----------------- concurrently with the execution of this Agreement, deliver to the Company his or her Investment Representation Statement in the form attached hereto as Exhibit F. 8. Adjustment for Stock Split. All references to the number of Shares -------------------------- and the purchase price of the Shares in this Agreement shall be appropriately adjusted to reflect any stock split, stock dividend or other change in the Shares which may be made by the Company after the date of this Agreement. 9. Tax Consequences. The Purchaser has reviewed with the Purchaser's own ---------------- tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contem plated by this Agreement. The Purchaser is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. The Purchaser understands that the Purchaser -6- (and not the Company) shall be responsible for the Purchaser's own tax liability that may arise as a result of the transactions contemplated by this Agreement. The Purchaser understands that Section 83 of the Internal Revenue Code of 1986, as amended (the "Code"), taxes as ordinary income the difference between the purchase price for the Shares and the Fair Market Value of the Shares as of the date any restrictions on the Shares lapse. In this context, "restriction" includes the right of the Company to buy back the Shares pursuant to the Repurchase Option. The Purchaser understands that the Purchaser may elect to be taxed at the time the Shares are purchased rather than when and as the Repurchase Option expires by filing an election under Section 83(b) of the Code with the IRS within 30 days from the date of purchase. The form for making this election is attached as Exhibit E hereto. THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE RESPONSIBILITY AND NOT THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b), EVEN IF THE PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON THE PURCHASER'S BEHALF. 10. General Provisions. ------------------ (a) Choice of Law; Entire Agreement. This Agreement shall be governed ------------------------------- by the internal substantive laws, but not the choice of law rules, of California. This Agreement represents the entire agreement between the parties with respect to the purchase of the Shares by the Purchaser. (b) Notices. Any notice, demand or request required or permitted to ------- be given by either the Company or the Purchaser pursuant to the terms of this Agreement shall be in writing and shall be deemed given when delivered personally or deposited in the U.S. mail, First Class with postage prepaid, and addressed to the parties at the addresses of the parties set forth below or such other address as a party may request by notifying the other in writing: BIOMARIN PHARMACEUTICAL INC. 11 Pimintel Court Novato, California 94929 Any notice to the Escrow Holder shall be sent to the Company's address with a copy to the other party hereto. (c) Successors. The rights of the Company under this Agreement shall ---------- be transferable to any one or more persons or entities, and all covenants and agreements hereunder shall inure to the benefit of, and be enforceable by the Company's successors and assigns. The rights and obligations of the Purchaser under this Agreement may only be assigned with the prior written consent of the Company. (d) Waiver. Either party's failure to enforce any provision of this ------ Agreement shall not in any way be construed as a waiver of any such provision, nor prevent that party from thereafter enforcing any other provision of this Agreement. The rights granted both parties hereunder are -7- cumulative and shall not constitute a waiver of either party's right to assert any other legal remedy available to it. (e) Further Documents. The Purchaser agrees upon request to execute ----------------- any further documents or instruments necessary or desirable to carry out the purposes or intent of this Agreement, including (but not limited to) Exhibits A through F to this Agreement. (f) Severability. Should any provision of this Agreement be found to ------------ be illegal or unenforceable, the other provisions shall nevertheless remain effective and shall remain enforceable. (g) PURCHASER ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO SECTION 4 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS AN EMPLOYEE AT THE WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED OR PURCHASING SHARES HEREUNDER). PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS AN EMPLOYEE FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH PURCHASER'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE PURCHASER'S RELATIONSHIP AS AN EMPLOYEE AT ANY TIME, WITH OR WITHOUT CAUSE. By Purchaser's signature below, Purchaser represents that he or she is familiar with the terms of this Agreement, and hereby accepts this Agreement subject to all of the terms and provisions thereof. Purchaser has read this Agreement in its entirety, has had an opportunity to obtain the advice of counsel prior to executing this Agreement and fully understands all provisions of this Agreement. Purchaser agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under this Agreement. Purchaser further agrees to notify the Company upon any change in the residence indicated in Section 11. DATED: October 1, 1997 PURCHASER: BIOMARIN PHARMACEUTICAL INC. /s/ John Klock /s/ John Klock - ------------------------ ------------------------------- John Klock By: John Klock, President, Chief Financial Officer and Secretary -8- EXHIBIT A --------- NOTE $800,000.00 Novato, California October 1, 1997 FOR VALUE RECEIVED, John Klock promises to pay to BIOMARIN PHARMACEUTICAL INC., a Delaware corporation (the "Company"), or order, the principal sum of eight hundred thousand dollars ($800,000.00), together with interest on the unpaid principal hereof from the date hereof at the rate of six percent (6%) per annum, compounded semiannually. Principal and interest shall be due and payable on October 1, 2000. Payment of principal and interest shall be made in lawful money of the United States of America. Payment will be applied first towards unpaid interest and then towards unpaid principal. The undersigned may at any time prepay all or any portion of the principal or interest owing hereunder. This Note is subject to the terms of the Founder's Stock Purchase Agreement, dated as of October 1, 1997. This Note is secured in part by a pledge of the Company's Common Stock under the terms of a Security Agreement of even date herewith and is subject to all the provisions thereof. The holder of this Note shall have full recourse against the undersigned, and shall not be required to proceed against the collateral securing this Note in the event of default. The holder of this Note hereby waives presentment, notice of non-payment, notice of dishonor, protest, demand and diligence. In the event the undersigned shall cease to be an employee, director or consultant of the Company for any reason, or the undersigned shall be in default under the terms of the Security Agreement attached hereto as Exhibit A-1, this ------------ Note shall be automatically accelerated, and the whole unpaid balance on this Note of principal and accrued interest shall be immediately due and payable. Should any action be instituted for the collection of this Note, the reasonable costs and attorneys' fees therein of the holder shall be paid by the undersigned. _________________________________ John Klock EXHIBIT B --------- SECURITY AGREEMENT This Security Agreement is made as of October 1, 1997 between BIOMARIN PHARMACEUTICAL INC., a Delaware corporation ("Pledgee"), and John Klock ("Pledgor"). Recitals -------- Pursuant to Pledgor's election to purchase shares under the Founder's Stock Purchase Agreement dated October 1, 1997 (the "Purchase Agreement"), between Pledgor and Pledgee, and Pledgor's election under the terms of the Purchase Agreement to pay for such shares with his promissory note (the "Note"), Pledgor has purchased 800,000 shares of Pledgee's Common Stock (the "Shares") at a price of $1.00 per share, for a total purchase price of $800,000.00. NOW, THEREFORE, it is agreed as follows: 1. Creation and Description of Security Interest. In consideration of --------------------------------------------- the transfer of the Shares to Pledgor under the Purchase Agreement, Pledgor, pursuant to the California Commercial Code, hereby pledges all of such Shares (herein sometimes referred to as the "Collateral") represented by certificate number ______, duly endorsed in blank or with executed stock powers, and herewith delivers said certificate to the Secretary of Pledgee ("Pledgeholder"), who shall hold said certificate subject to the terms and conditions of this Security Agreement. The pledged stock (together with an executed blank stock assignment for use in transferring all or a portion of the Shares to Pledgee if, as and when required pursuant to this Security Agreement) shall be held by the Pledgeholder as security for the repayment of the Note, and any extensions or renewals thereof, to be executed by Pledgor pursuant to the terms of the Purchase Agreement, and the Pledge holder shall not encumber or dispose of such Shares except in accordance with the provisions of this Security Agreement. 2. Pledgor's Representations and Covenants. To induce Pledgee to enter --------------------------------------- into this Security Agreement, Pledgor represents and covenants to Pledgee, its successors and assigns, as follows: a. Payment of Indebtedness. Pledgor will pay the principal sum of ----------------------- the Note secured hereby, together with interest thereon, at the time and in the manner provided in the Note. b. Encumbrances. The Shares are free of all other encumbrances, ------------ defenses and liens, and Pledgor will not further encumber the Shares without the prior written consent of Pledgee. c. Margin Regulations. In the event that Pledgee's Common Stock is ------------------ now or later becomes margin-listed by the Federal Reserve Board and Pledgee is classified as a "lender" within the -10- meaning of the regulations under Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G"), Pledgor agrees to cooperate with Pledgee in making any amendments to the Note or providing any additional collateral as may be necessary to comply with such regulations. 3. Voting Rights. During the term of this pledge and so long as all ------------- payments of principal and interest are made as they become due under the terms of the Note, Pledgor shall have the right to vote all of the Shares pledged hereunder. 4. Stock Adjustments. In the event that during the term of the pledge ----------------- any stock dividend, reclassification, readjustment or other changes are declared or made in the capital structure of Pledgee, all new, substituted and additional shares or other securities issued by reason of any such change shall be delivered to and held by the Pledgee under the terms of this Security Agreement in the same manner as the Shares originally pledged hereunder. In the event of substitution of such securities, Pledgor, Pledgee and Pledgeholder shall cooperate and execute such documents as are reasonable so as to provide for the substitution of such Collateral and, upon such substitution, references to "Shares" in this Security Agreement shall include the substituted shares of capital stock of Pledgor as a result thereof. 5. Options and Rights. In the event that, during the term of this ------------------ pledge, subscription options or other rights or options shall be issued in connection with the pledged Shares, such rights and options shall be the property of Pledgor and, if exercised by Pledgor, all new stock or other securities so acquired by Pledgor as it relates to the pledged Shares then held by Pledgeholder shall be immediately delivered to Pledgeholder, to be held under the terms of this Security Agreement in the same manner as the Shares pledged. 6. Default. Pledgor shall be deemed to be in default of the Note and of ------- this Security Agreement in the event: a. Payment of principal or interest on the Note shall be delinquent for a period of 10 days or more; b. Pledgor fails to perform any of the covenants set forth in the Purchase Agreement or contained in this Security Agreement for a period of 10 days after written notice thereof from Pledgee; or c. Pledgor ceases to be an employee, director or consultant of the Company. In the case of an event of Default, as set forth above, the principal and all accrued interest under the Note shall become immediately due and payable in full. Pledgee shall thereafter be entitled to pursue its remedies under the California Commercial Code. 7. Release of Collateral. Subject to any applicable contrary rules under --------------------- Regulation G, there shall be released from this pledge a portion of the pledged Shares held by Pledgeholder hereunder upon payments of the principal of the Note. The number of the pledged Shares which shall be released shall be that number of full Shares which bears the same proportion to the initial number of Shares pledged hereunder as the payment of principal bears to the initial full principal amount of the Note. -2- 8. Withdrawal or Substitution of Collateral. Pledgor shall not sell, ---------------------------------------- withdraw, pledge, substitute or otherwise dispose of all or any part of the Collateral without the prior written consent of Pledgee. 9. Term. The within pledge of the Shares shall continue until the ---- payment of all indebtedness secured hereby, at which time the remaining pledged stock shall be promptly delivered to Pledgor, subject to the provisions for prior release of a portion of the Collateral as provided in paragraph 7 above. 10. Insolvency. Pledgor agrees that if a bankruptcy or insolvency ---------- proceeding is instituted by or against it, or if a receiver is appointed for the property of Pledgor, or if Pledgor makes an assignment for the benefit of creditors, the entire amount unpaid on the Note shall become immediately due and payable, and Pledgee may proceed as provided in the case of default. 11. Pledgeholder Liability. In the absence of willful or gross ---------------------- negligence, Pledgeholder shall not be liable to any party for any of his acts, or omissions to act, as Pledgeholder. 12. Invalidity of Particular Provisions. Pledgor and Pledgee agree that ----------------------------------- the enforceability or invalidity of any provision or provisions of this Security Agreement shall not render any other provision or provisions herein contained unenforceable or invalid. 13. Successors or Assigns. Pledgor and Pledgee agree that all of the --------------------- terms of this Security Agreement shall be binding on their respective successors and assigns, and that the term "Pledgor" and the term "Pledgee" as used herein shall be deemed to include, for all purposes, the respective designees, successors, assigns, heirs, executors and administrators. 14. Governing Law. This Security Agreement shall be interpreted and ------------- governed under the internal substantive laws, but not the choice of law rules, of California. -3- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. "PLEDGOR" ________________________________________ Signature John Klock Address: ________________________________________ ________________________________________ "PLEDGEE" BIOMARIN PHARMACEUTICAL INC., a Delaware corporation ________________________________________ Signature ________________________________________ John Klock, President, Chief Officer and Secretary "PLEDGEHOLDER" ________________________________________ Secretary of BIOMARIN PHARMACEUTICAL INC. -4- ASSIGNMENT SEPARATE FROM CERTIFICATE FOR VALUE RECEIVED I, John Klock, hereby sell, assign and transfer unto __________________________________________________ (__________) shares of the Common Stock of ____________________standing in my name of the books of said corporation represented by Certificate No. _____ herewith and do hereby irrevocably constitute and appoint --------------------------------- to transfer the said stock on the books of the within named corporation with full power of substitution in the premises. This Stock Assignment may be used only in accordance with the Founders Stock Purchase Agreement (the "Agreement") between________________________ and the undersigned dated ______________, 19__. Dated: _______________, 19__ Signature:__________________________ INSTRUCTIONS: Please do not fill in any blanks other than the signature line. The purpose of this assignment is to enable the Company to exercise the Repurchase Option, as set forth in the Agreement, without requiring additional signatures on the part of the Purchaser. EXHIBIT C --------- JOINT ESCROW INSTRUCTIONS ------------------------- October 1, 1997 Corporate Secretary BIOMARIN PHARMACEUTICAL INC. 11 Pimintel Court Novato, CA 95054 Dear Sir or Madam: As Escrow Agent for both BIOMARIN PHARMACEUTICAL INC., a Delaware corporation (the "Company"), and the undersigned purchaser of stock of the Company (the "Purchaser"), you are hereby authorized and directed to hold the documents delivered to you pursuant to the terms of that certain Founders Stock Purchase Agreement ("Agreement") between the Company and the undersigned, in accordance with the following instructions: 1. In the event the Company and/or any assignee of the Company (referred to collectively as the "Company") exercises the Company's Repurchase Option set forth in the Agreement, the Company shall give to Purchaser and you a written notice specifying the number of shares of stock to be purchased, the purchase price, and the time for a closing hereunder at the principal office of the Company. Purchaser and the Company hereby irrevocably authorize and direct you to close the transac tion contemplated by such notice in accordance with the terms of said notice. 2. At the closing, you are directed (a) to date the stock assignments necessary for the transfer in question, (b) to fill in the number of shares being transferred, and (c) to deliver same, together with the certificate evidencing the shares of stock to be transferred, to the Company or its assignee, against the simultaneous delivery to you of the purchase price (by cash, a check, or some combination thereof) for the number of shares of stock being purchased pursuant to the exercise of the Company's Repurchase Option. 3. Purchaser irrevocably authorizes the Company to deposit with you any certificates evidencing shares of stock to be held by you hereunder and any additions and substitutions to said shares as defined in the Agreement. Purchaser does hereby irrevocably constitute and appoint you as Purchaser's attorney-in-fact and agent for the term of this escrow to execute with respect to such securities all documents necessary or appropriate to make such securities negotiable and to complete any transaction herein contemplated, including but not limited to the filing with any applicable state blue sky authority of any required applications for consent to, or notice of transfer of, the securities. Subject to the provisions of this paragraph 3, Purchaser shall exercise all rights and privileges of a stockholder of the Company while the stock is held by you. 4. Upon written request of the Purchaser, but no more than once per calendar year, unless the Company's Repurchase Option has been exercised, you shall deliver to Purchaser a certificate or certificates representing so many shares of stock as are not then subject to the Company's Repurchase Option. Within 90 days after Purchaser ceases to be an employee, you shall deliver to Purchaser a certificate or certificates representing the aggregate number of shares held or issued pursuant to the Agreement and not purchased by the Company or its assignees pursuant to exercise of the Company's Repurchase Option. 5. If at the time of termination of this escrow you should have in your possession any documents, securities, or other property belonging to Purchaser, you shall deliver all of the same to Purchaser and shall be discharged of all further obligations hereunder. 6. Your duties hereunder may be altered, amended, modified or revoked only by a writing signed by all of the parties hereto. 7. You shall be obligated only for the performance of such duties as are specifically set forth herein and may rely and shall be protected in relying or refraining from acting on any instrument reasonably believed by you to be genuine and to have been signed or presented by the proper party or parties. You shall not be personally liable for any act you may do or omit to do hereunder as Escrow Agent or as attorney-in-fact for Purchaser while acting in good faith, and any act done or omitted by you pursuant to the advice of your own attorneys shall be conclusive evidence of such good faith. 8. You are hereby expressly authorized to disregard any and all warnings given by any of the parties hereto or by any other person or corporation, excepting only orders or process of courts of law, and are hereby expressly authorized to comply with and obey orders, judgments or decrees of any court. In case you obey or comply with any such order, judgment or decree, you shall not be liable to any of the parties hereto or to any other person, firm or corporation by reason of such compliance, notwithstanding any such order, judgment or decree being subsequently reversed, modified, annulled, set aside, vacated or found to have been entered without jurisdiction. 9. You shall not be liable in any respect on account of the identity, authorities or rights of the parties executing or delivering or purporting to execute or deliver the Agreement or any documents or papers deposited or called for hereunder. 10. You shall not be liable for the outlawing of any rights under the statute of limitations with respect to these Joint Escrow Instructions or any documents deposited with you. 11. You shall be entitled to employ such legal counsel and other experts as you may deem necessary properly to advise you in connection with your obligations hereunder, may rely upon the advice of such counsel, and may pay such counsel reasonable compensation therefor. 12. Your responsibilities as Escrow Agent hereunder shall terminate if you shall cease to be an officer or agent of the Company or if you shall resign by written notice to each party. In the event of any such termination, the Company shall appoint a successor Escrow Agent. -2- 13. If you reasonably require other or further instruments in connection with these Joint Escrow Instructions or obligations in respect hereto, the necessary parties hereto shall join in furnishing such instruments. 14. It is understood and agreed that should any dispute arise with respect to the delivery and/or ownership or right of possession of the securities held by you hereunder, you are authorized and directed to retain in your possession without liability to anyone all or any part of said securities until such disputes shall have been settled either by mutual written agreement of the parties concerned or by a final order, decree or judgment of a court of competent jurisdiction after the time for appeal has expired and no appeal has been perfected, but you shall be under no duty whatsoever to institute or defend any such proceedings. 15. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States Post Office, by registered or certified mail with postage and fees prepaid, addressed to each of the other parties thereunto entitled at the following addresses or at such other addresses as a party may designate by ten days' advance written notice to each of the other parties hereto. COMPANY: BIOMARIN PHARMACEUTICAL INC. 11 Pimintel Court Novato, CA 95054 PURCHASER: John Klock _______________________________ _______________________________ ESCROW AGENT: Corporate Secretary BIOMARIN PHARMACEUTICAL INC. 11 Pimintel Court Novato, CA 94929 16. By signing these Joint Escrow Instructions, you become a party hereto only for the purpose of said Joint Escrow Instructions; you do not become a party to the Agreement. 17. This instrument shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and permitted assigns. -3- 18. These Joint Escrow Instructions shall be governed by, and construed and enforced in accordance with, the internal substantive laws, but not the choice of law rules, of California. Very truly yours, BIOMARIN PHARMACEUTICAL INC. __________________________________________________ John Klock, President, Chief Financial Officer and Secretary PURCHASER: __________________________________________________ John Klock ESCROW AGENT: __________________________ Corporate Secretary -4- EXHIBIT D --------- CONSENT OF SPOUSE ----------------- I, ____________________, spouse of ___________________, have read and approve the foregoing Founders Stock Purchase Agreement (the "Agreement"). In consideration of the Company's grant to my spouse of the right to purchase shares of BIOMARIN PHARMACEUTICAL INC., as set forth in the Agreement, I hereby appoint my spouse as my attorney-in-fact in respect to the exercise of any rights under the Agreement and agree to be bound by the provisions of the Agreement insofar as I may have any rights in said Agreement or any shares issued pursuant thereto under the community property laws or similar laws relating to marital property in effect in the state of our residence as of the date of the signing of the foregoing Agreement. Dated: _______________, 19____ __________________________________________ Signature of Spouse EXHIBIT E --------- ELECTION UNDER SECTION 83(b) ---------------------------- OF THE INTERNAL REVENUE CODE OF 1986 ------------------------------------ The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended, to include in taxpayer's gross income for the current taxable year the amount of any compensation taxable to taxpayer in connection with his or her receipt of the property described below: 1. The name, address, taxpayer identification number and taxable year of the undersigned are as follows: NAME: TAXPAYER: SPOUSE: ADDRESS: IDENTIFICATION NO.: TAXPAYER: SPOUSE: TAXABLE YEAR: 2. The property with respect to which the election is made is described as follows: _______ shares (the "Shares") of the Common Stock of BIOMARIN PHARMACEUTICAL INC. (the "Company"). 3. The date on which the property was transferred is: ______________, 1997. 4. The property is subject to the following restrictions: The Shares may be repurchased by the Company, or its assignee, upon certain events. This right lapses with regard to a portion of the Shares based on the continued performance of services by the taxpayer over time. 5. The fair market value at the time of transfer, determined without regard to any restriction other than a restriction which by its terms will never lapse, of such property is: 6. The amount (if any) paid for such property is: The undersigned has submitted a copy of this statement to the person for whom the services were performed in connection with the undersigned's receipt of the above-described property. The transferee of such property is the person performing the services in connection with the transfer of said property. The undersigned understands that the foregoing election may not be revoked - -------------------------------------------------------------------------- except with the consent of the Commissioner. - ------------------------------------------- Dated: ___________________, 1997 ______________________________________________ Taxpayer The undersigned spouse of taxpayer joins in this election. Dated: ___________________, 19__ ______________________________________________ Spouse of Taxpayer EXHIBIT F --------- INVESTMENT REPRESENTATION STATEMENT PURCHASER : John Klock COMPANY : BIOMARIN PHARMACEUTICAL INC. SECURITY : COMMON STOCK AMOUNT : $800,000.00 DATE : October 1, 1997 In connection with the purchase of the above-listed securities (the "Securities"), the undersigned Purchaser represents to the Company the following: (a) Purchaser is aware of the Company's business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Securities. Purchaser is acquiring these Securities for investment for Purchaser's own account only and not with a view to, or for resale in connection with, any "distribution" thereof within the meaning of the Securities Act of 1933, as amended (the "Act"). (b) Purchaser acknowledges and understands that the Securities constitute "restricted securities" under the Act and have not been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Purchaser's investment intent as expressed herein. In this connection, Purchaser understands that, in the view of the Securities and Exchange Commission, the statutory basis for such exemption may be unavailable if Purchaser's representation was predicated solely upon a present intention to hold these Securities for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Securities, or for a period of one (1) year or any other fixed period in the future. Purchaser further understands that the Securities must be held indefinitely unless they are subsequently registered under the Act or an exemption from such registration is available. Purchaser further acknowledges and understands that the Company is under no obligation to register the Securities. Purchaser understands that the certificate evidencing the Securities will be imprinted with a legend which prohibits the transfer of the Securities unless they are registered or such registration is not required in the opinion of counsel satisfactory to the Company, a legend prohibiting their transfer without the consent of the Commissioner of Corporations of the State of California and any other legend required under applicable state securities laws. (c) Purchaser is familiar with the provisions of Rule 701 and Rule 144, each promulgated under the Act, which, in substance, permit limited public resale of "restricted securities" acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to the satisfaction of certain conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the time the Securities are purchased by the Purchaser, the exercise will be exempt from registration under the Act. In the event the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter (or such longer period as any market stand-off agreement may require) the Securities exempt under Rule 701 may be resold, subject to the satisfaction of certain of the conditions specified by Rule 144, including: (1) the resale being made through a broker in an unsolicited "broker's transaction" or in transactions directly with a market maker (as said term is defined under the Securities Exchange Act of 1934); and, in the case of an affiliate, (2) the availability of certain public information about the Company, (3) the amount of Securities being sold during any three (3) month period not exceeding the limitations specified in Rule 144(e), and (4) the timely filing of a Form 144, if applicable. In the event that the Company does not qualify under Rule 701 at the time the Securities are purchased by the Purchaser, then the Securities may be resold in certain limited circumstances subject to the provisions of Rule 144, which requires the resale to occur not less than two (2) years after the later of the date the Securities were sold by the Company or the date the Securities were sold by an affiliate of the Company, within the meaning of Rule 144; and, in the case of acquisition of the Securities by an affiliate, or by a non-affiliate who subsequently holds the Securities less than three years, the satisfaction of the conditions set forth in sections (1), (2), (3) and (4) of the paragraph immediately above. (d) Purchaser hereby agrees that if so requested by the Company or any representative of the underwriters in connection with any registration of the offering of any securities of the Company under the Act, Purchaser shall not sell or otherwise transfer any Shares or other securities of the Company during the 180-day period following the effective date of a registration statement of the Company filed under the Act; provided, however, that such restriction shall only apply to the first registration statement of the Company to become effective under the Act which include securities to be sold on behalf of the Company to the public in an underwritten public offering under the Act. The Company may impose stop-transfer instructions with respect to securities subject to the foregoing restrictions until the end of such 180-day period. (e) Purchaser further understands that in the event all of the applicable requirements of Rule 701 or 144 are not satisfied, registration under the Act, compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact that Rules 144 and 701 are not exclusive, the Staff of the Securities and Exchange Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rules 144 or 701 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. Purchaser understands that no assurances can be given that any such other registration exemption will be available in such event. _________________________________ John Klock Date: October 1, 1997 -2- EX-10.6 11 FOUNDER'S STOCK PURCHASE AGREEMENT WITH G. DENISON EXHIBIT 10.6 BIOMARIN PHARMACEUTICAL INC. AMENDED AND RESTATED FOUNDER'S STOCK PURCHASE AGREEMENT THIS AGREEMENT (the "Agreement") is made between Grant W. Denison Jr. (the "Purchaser") and BIOMARIN PHARMACEUTICAL INC. (the "Company") as of October 1, 1997. WHEREAS the Purchaser is an employee of the Company, and the Purchaser's continued participation is considered by the Company to be important for the Company's continued growth; and WHEREAS the Company granted the Purchaser the right to purchase one million three hundred thousand(1,300,000) shares of the Company's common stock (the "Shares"); NOW THEREFORE, the parties agree as follows: 1. Sale of Stock. The Company hereby agrees to sell to the Purchaser and ------------- the Purchaser hereby agrees to purchase the Shares at a price of $1.00 per Share on the terms and conditions contained herein, for an aggregate purchase price of $1,300,000.00. 2. Payment of Purchase Price. The aggregate purchase price for the ------------------------- Shares may be paid by delivery to the Company at the time of execution of this Agreement of cash, a check, promissory note (in the form attached hereto as Exhibit A), or some combination thereof. - --------- 3. Repurchase Option and Sale Rights. --------------------------------- (a) Company's Repurchase Option. In the event the Purchaser ceases to --------------------------- be an employee for any or no reason (including death or disability) before all of the Shares are released from the Company's Repurchase Option (see Section 4), the Company shall, upon the date of such termination (as reasonably fixed and determined by the Company) have the right, but not the obligation (except as provided in Section 3(b) below) (the "Repurchase Option"), for a period of sixty (60) days from such date, to repurchase up to that number of shares which constitute the Unreleased Shares (as defined in Section 4) at the original purchase price per share, plus any interest paid to the Company by the Purchaser with respect to the Shares (the "Repurchase Price"). The Repurchase Option shall be exercised by the Company by delivering written notice to the Purchaser or the Purchaser's executor (with a copy to the Escrow Holder) AND, at the Company's option, (i) by delivering to the Purchaser or the Purchaser's executor a check in the amount of the aggregate Repurchase Price, or (ii) by canceling an amount of the Purchaser's indebtedness to the Company equal to the aggregate Repurchase Price, or (iii) by a combination of (i) and (ii) so that the combined payment and cancellation of indebtedness equals the -aggregate Repurchase Price. Upon delivery of such notice and the payment of the aggregate Repurchase Price, the Company shall become the legal and beneficial owner of the Shares being repurchased and all rights and interests therein or relating thereto, and the Company shall have the right to retain and transfer to its own name the number of Shares being repurchased by the Company. (b) Purchaser's Sale Rights. In the event the Purchaser's employment ----------------------- is terminated by the Company for any or no reason (including death or disability), the Purchaser shall, upon the date of such termination (as reasonably fixed and determined by the Company) have the right, but not the obligation (the "Sale Right"), for a period of sixty (60) days from such date, to sell to the Company, and the Company shall have the obligation to purchase from the Purchaser, the Shares at the lower of the original purchase price per share or the then current market value per share, plus any interest paid to the Company by the Purchaser with respect to the Shares (the "Sale Price"). The Sale Right may be exercised by the Purchaser by delivering written notice to the Company (with a copy to the Escrow Holder). At the Company's option, it shall pay the Sale Price to the Purchaser (i) by delivering to the Purchaser or the Purchaser's executor a check in the amount of the aggregate Sale Price, or (ii) by canceling an amount of the Purchaser's indebtedness to the Company equal to the aggregate Sale Price, or (iii) by a combination of (i) and (ii) so that the combined payment and cancellation of indebtedness equals the aggregate Sale Price. Upon delivery of such notice and the payment of the aggregate Sale Price, the Company shall become the legal and beneficial owner of the Shares being purchased and all rights and interests therein or relating thereto, and the Company shall have the right to retain and transfer to its own name the number of Shares being purchased by the Company. (c) Whenever the Company shall have the right or the obligation to repurchase or purchase Shares hereunder, the Company may designate and assign one or more employees, officers, directors or shareholders of the Company or other persons or organizations to exercise all or a part of the Company's purchase rights or obligations under this Agreement and purchase all or a part of such Shares. If the fair market value of the Shares to be purchased on the date of such designation or assignment (the "FMV") exceeds the aggregate Repurchase Price or Sale Price, as the case may be, of such Shares, then each such designee or assignee shall pay the Company cash equal to the difference between the FMV and the aggregate Repurchase Price or Sale Price, as the case may be, of such Shares. 4. Release of Shares From Repurchase Option. ---------------------------------------- (a) Thirty-five percent (35%) of the Shares shall not be subject to the Repurchase Option, fifteen percent (15%) of the Shares shall be released from the Repurchase Option at the end of the first year of employment, and 1/24 of the remaining 50% of the Shares shall be released from the Repurchase Option at the end of each month after one year from the date of grant, provided that - -------------------------------------------------------------- the Purchaser does not cease to be an employee prior to the date of any such release. (b) Immediately prior to a Change of Control (as defined below), fifty percent (50%) of the Shares that have not been released from the Repurchase Option, as of such time, shall be released from the Repurchase Option. The remaining Shares that have not yet been released from the Repurchase Option shall be released from the Repurchase Option pursuant to Section 4(a). For purposes of this Agreement, a "Change of Control" means the happening of any of the following: -2- (i) When any "person," as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), other than the Company, a subsidiary of the Company or a Company employee benefit plan, including any trustee of such plan acting as trustee, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the combined voting power of the Company's then outstanding securities entitled to vote generally in the election of directors; or (ii) The effective date of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the shareholders of the Company approve an agreement for the sale or disposition by the Company of all or substantially all the Company's assets. (c) Any of the Shares that have not yet been released from the Repurchase Option are referred to herein as "Unreleased Shares." (d) The Shares that have been released from the Repurchase Option shall be delivered to the Purchaser at the Purchaser's request (see Section 6). (e) Shares released from the Company's Repurchase Option remain subject to the Company's Right of First Refusal described in Section 7. 5. Restriction on Transfer. Except for the escrow described in Section 6 ----------------------- or the transfer of the Shares to the Company or its assignees contemplated by this Agreement, none of the Shares or any beneficial interest therein shall be transferred, encumbered or otherwise disposed of in any way until such Shares are released from the Company's Repurchase Option in accordance with the provisions of this Agreement, other than by will or the laws of descent and distribution. 6. Escrow of Shares. ---------------- (a) To ensure the availability for delivery of the Purchaser's Unreleased Shares upon repurchase by the Company pursuant to the Repurchase Option, the Purchaser shall, upon execution of this Agreement, deliver and deposit with an escrow holder designated by the Company (the "Escrow Holder") the share certificates representing the Unreleased Shares, together with the stock assignment duly endorsed in blank, attached hereto as Exhibit B. The --------- Unreleased Shares and stock assignment shall be held by the Escrow Holder, pursuant to the Joint Escrow Instructions of the Company and Purchaser attached hereto as Exhibit C, until such time as the Company's Repurchase Option expires. --------- As a further condition to the Company's obligations under this Agreement, the Company may require the spouse of -3- Purchaser, if any, to execute and deliver to the Company the Consent of Spouse attached hereto as Exhibit D. (b) The Escrow Holder shall not be liable for any act it may do or omit to do with respect to holding the Unreleased Shares in escrow while acting in good faith and in the exercise of its judgment. (c) If the Company or any assignee exercises the Repurchase Option hereunder, the Escrow Holder, upon receipt of written notice of such exercise from the proposed transferee, shall take all steps necessary to accomplish such transfer. (d) When the Repurchase Option has been exercised or expires unexercised or a portion of the Shares has been released from the Repurchase Option, upon request the Escrow Holder shall promptly cause a new certificate to be issued for the released Shares and shall deliver the certificate to the Company or the Purchaser, as the case may be. (e) Subject to the terms hereof, the Purchaser shall have all the rights of a stockholder with respect to the Shares while they are held in escrow, including without limitation, the right to vote the Shares and to receive any cash dividends declared thereon. If, from time to time during the term of the Repurchase Option, there is (i) any stock dividend, stock split or other change in the Shares, or (ii) any merger or sale of all or substantially all of the assets or other acquisition of the Company, any and all new, substituted or additional securities to which the Purchaser is entitled by reason of the Purchaser's ownership of the Shares shall be immediately subject to this escrow, deposited with the Escrow Holder and included thereafter as "Shares" for purposes of this Agreement and the Repurchase Option. 7. Company's Right of First Refusal. Before any Shares that are held by -------------------------------- Purchaser or any transferee (either being sometimes referred to herein as the "Holder") may be sold or otherwise transferred (including transfer by gift or operation of law), the Company or its assignees(s) shall have a right of first refusal to purchase the Shares (the "Right of First Refusal") on the terms and conditions set forth below. (a) Notice of Proposed Transfer. The Holder shall deliver to the --------------------------- Company a written notice (the "Notice") stating: (i) the Holder's bona fide intention to sell or otherwise transfer such Shares; (ii) the name of each proposed purchaser or other transferee (the "Proposed Transferee"); (iii) the number of Shares to be transferred to each Proposed Transferee; and (iv) the bona fide cash price or other consideration for which the Holder proposes to transfer the Shares (the "Offered Price"), and the Holder shall offer the Shares at the Offered Price to the Company or its assignee(s). (b) Exercise of Right of First Refusal. At any time within thirty ---------------------------------- (30) days after receipt of the Notice, the Company and/or its assignee(s) may, by giving written notice to the Holder, elect to purchase all, but not less than all, of the Shares proposed to be transferred to any one or more of the Proposed Transferees, at the purchase price determined in accordance with subsection (c) below. -4- (c) Purchase Price. The purchase price (the "Purchase Price") for the -------------- Shares purchased by the Company or its assignee(s) under this Section shall be the Offered Price. If the Offered Price includes consideration other than cash, the cash equivalent value of the non-cash consideration shall be determined by the Board of Directors of the Company in good faith. (d) Payment. Payment of the Purchase Price shall be made, at the ------- option of the Company or its assignee(s), in cash, by check, by cancellation of all or a portion of any outstanding indebtedness of the Holder to the Company (or, in the case of purchase by an assignee, to the assignee), or by any combination thereof within thirty (30) days after receipt of the Notice or in the manner and at the times set forth in the Notice. (e) Holder's Right to Transfer. If all of the Shares proposed in the -------------------------- Notice to be transferred to a given Proposed Transferee are not purchased by the Company and/or its assignee(s) as provided in this Section, then the Holder may sell or otherwise transfer such Shares to that Proposed Transferee at the Offered Price or at a higher price, provided that such sale or other transfer is consummated within one hundred twenty (120) days after the date of the Notice and provided further that any such sale or other transfer is effected in accordance with any applicable securities laws and the Proposed Transferee agrees in writing that the provisions of this Agreement shall continue to apply to the Shares in the hands of such Proposed Transferee. If the Shares described in the Notice are not trans ferred to the Proposed Transferee within such period, a new Notice shall be given to the Company, and the Company and/or its assignees shall again be offered the Right of First Refusal before any Shares held by the Holder may be sold or otherwise transferred. (f) Exception for Certain Family Transfers. Anything to the contrary -------------------------------------- contained in this Section notwithstanding, the transfer of any or all of the Shares during the Purchaser's lifetime or on the Purchaser's death by will or intestacy to the Purchaser's immediate family or a trust for the benefit of the Purchaser's immediate family shall be exempt from the provisions of this Section, provided that the Purchaser notifies the Company in writing within thirty (30) days of said transfer. "Immediate Family" as used herein shall mean spouse, lineal descendant or antecedent, father, mother, brother or sister. In such case, the transferee or other recipient shall receive and hold the Shares so transferred subject to the provisions of this Agreement, and there shall be no further transfer of such Shares except in accordance with the terms of this Section. (g) Termination of Right of First Refusal. The Right of First Refusal ------------------------------------- shall terminate as to any Shares upon the date of the first sale of common stock of the Company to the general public pursuant to a registration statement filed with and declared effective by the Securities and Exchange Commission under the Securities Act of 1933, as amended (the "Act"). 8. Legends; Investment Intent. -------------------------- (a) The share certificate evidencing the Shares, if any, issued hereunder shall be endorsed with the following legends, or legends substantially equivalent thereto (in addition to any legend required under applicable state securities laws): -5- THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE ACT AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE, TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH. THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS UPON TRANSFER, A RIGHT OF REPURCHASE AND A RIGHT OF FIRST REFUSAL AS SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY. (b) Market Standoff. Purchaser hereby agrees that, if so requested --------------- by the Company or any representative of the underwriters in connection with any registration of the offering of any securities of the Company under the Act, Purchaser shall not sell or otherwise transfer any Shares or other securities of the Company during such period as the Company and the representatives of the underwriters may request (not to exceed 180 days) following the effective date of any registration statement of the company filed under the Act for an underwritten public offering. (c) Refusal to Transfer. The Company (i) shall not be required to ------------------- transfer on its books, or may issue appropriate "stop transfer" instructions to its transfer agents, if any, with respect to any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Agreement, and (ii) the Company shall not be required to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred. (d) Investment Intent. Purchaser shall, if required by the Company, ----------------- concurrently with the execution of this Agreement, deliver to the Company his or her Investment Representation Statement in the form attached hereto as Exhibit F. 8. Adjustment for Stock Split. All references to the number of Shares -------------------------- and the purchase price of the Shares in this Agreement shall be appropriately adjusted to reflect any stock split, stock dividend or other change in the Shares which may be made by the Company after the date of this Agreement. 9. Tax Consequences. The Purchaser has reviewed with the Purchaser's own ---------------- tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contem plated by this Agreement. The Purchaser is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. The Purchaser understands that the Purchaser -6- (and not the Company) shall be responsible for the Purchaser's own tax liability that may arise as a result of the transactions contemplated by this Agreement. The Purchaser understands that Section 83 of the Internal Revenue Code of 1986, as amended (the "Code"), taxes as ordinary income the difference between the purchase price for the Shares and the Fair Market Value of the Shares as of the date any restrictions on the Shares lapse. In this context, "restriction" includes the right of the Company to buy back the Shares pursuant to the Repurchase Option. The Purchaser understands that the Purchaser may elect to be taxed at the time the Shares are purchased rather than when and as the Repurchase Option expires by filing an election under Section 83(b) of the Code with the IRS within 30 days from the date of purchase. The form for making this election is attached as Exhibit E hereto. THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE RESPONSIBILITY AND NOT THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b), EVEN IF THE PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON THE PURCHASER'S BEHALF. 10. General Provisions. ------------------ (a) Choice of Law; Entire Agreement. This Agreement shall be governed ------------------------------- by the internal substantive laws, but not the choice of law rules, of California. This Agreement represents the entire agreement between the parties with respect to the purchase of the Shares by the Purchaser. (b) Notices. Any notice, demand or request required or permitted to ------- be given by either the Company or the Purchaser pursuant to the terms of this Agreement shall be in writing and shall be deemed given when delivered personally or deposited in the U.S. mail, First Class with postage prepaid, and addressed to the parties at the addresses of the parties set forth below or such other address as a party may request by notifying the other in writing: BIOMARIN PHARMACEUTICAL INC. 11 Pimintel Court Novato, California 94929 Any notice to the Escrow Holder shall be sent to the Company's address with a copy to the other party hereto. (c) Successors. The rights of the Company under this Agreement shall ---------- be transferable to any one or more persons or entities, and all covenants and agreements hereunder shall inure to the benefit of, and be enforceable by the Company's successors and assigns. The rights and obligations of the Purchaser under this Agreement may only be assigned with the prior written consent of the Company. (d) Waiver. Either party's failure to enforce any provision of this ------ Agreement shall not in any way be construed as a waiver of any such provision, nor prevent that party from thereafter enforcing any other provision of this Agreement. The rights granted both parties hereunder are -7- cumulative and shall not constitute a waiver of either party's right to assert any other legal remedy available to it. (e) Further Documents. The Purchaser agrees upon request to execute ----------------- any further documents or instruments necessary or desirable to carry out the purposes or intent of this Agreement, including (but not limited to) Exhibits A through F to this Agreement. (f) Severability. Should any provision of this Agreement be found to ------------ be illegal or unenforceable, the other provisions shall nevertheless remain effective and shall remain enforceable. (g) PURCHASER ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO SECTION 4 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS AN EMPLOYEE AT THE WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED OR PURCHASING SHARES HEREUNDER). PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS AN EMPLOYEE FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH PURCHASER'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE PURCHASER'S RELATIONSHIP AS AN EMPLOYEE AT ANY TIME, WITH OR WITHOUT CAUSE. By Purchaser's signature below, Purchaser represents that he or she is familiar with the terms of this Agreement, and hereby accepts this Agreement subject to all of the terms and provisions thereof. Purchaser has read this Agreement in its entirety, has had an opportunity to obtain the advice of counsel prior to executing this Agreement and fully understands all provisions of this Agreement. Purchaser agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under this Agreement. Purchaser further agrees to notify the Company upon any change in the residence indicated in Section 11. DATED: October 1, 1997 PURCHASER: BIOMARIN PHARMACEUTICAL INC. /s/Grant W. Denison, Jr. /s/ John Klock - ------------------------ --------------------------------------- Grant W. Denison Jr. By: John Klock, President, Chief Financial Officer and Secretary -8- EXHIBIT A --------- NOTE $1,300,000.00 Novato, California October 1, 1997 FOR VALUE RECEIVED, Grant W. Denison Jr. promises to pay to BIOMARIN PHARMACEUTICAL INC., a Delaware corporation (the "Company"), or order, the principal sum of one million three hundred thousand dollars ($1,300,000.00), together with interest on the unpaid principal hereof from the date hereof at the rate of six percent (6%) per annum, compounded semiannually. Principal and interest shall be due and payable on October 1, 2000. Payment of principal and interest shall be made in lawful money of the United States of America. Payment will be applied first towards unpaid interest and then towards unpaid principal. The undersigned may at any time prepay all or any portion of the principal or interest owing hereunder. This Note is subject to the terms of the Founder's Stock Purchase Agreement, dated as of October 1, 1997. This Note is secured in part by a pledge of the Company's Common Stock under the terms of a Security Agreement of even date herewith and is subject to all the provisions thereof. The holder of this Note shall have full recourse against the undersigned, and shall not be required to proceed against the collateral securing this Note in the event of default. The holder of this Note hereby waives presentment, notice of non-payment, notice of dishonor, protest, demand and diligence. In the event the undersigned shall cease to be an employee, director or consultant of the Company for any reason, or the undersigned shall be in default under the terms of the Security Agreement attached hereto as Exhibit A-1, this ------------ Note shall be automatically accelerated, and the whole unpaid balance on this Note of principal and accrued interest shall be immediately due and payable. Should any action be instituted for the collection of this Note, the reasonable costs and attorneys' fees therein of the holder shall be paid by the undersigned. ____________________________ Grant W. Denison Jr. EXHIBIT B --------- SECURITY AGREEMENT This Security Agreement is made as of October 1, 1997 between BIOMARIN PHARMACEUTICAL INC., a Delaware corporation ("Pledgee"), and Grant W. Denison Jr. ("Pledgor"). Recitals -------- Pursuant to Pledgor's election to purchase shares under the Founder's Stock Purchase Agreement dated October 1, 1997 (the "Purchase Agreement"), between Pledgor and Pledgee, and Pledgor's election under the terms of the Purchase Agreement to pay for such shares with his promissory note (the "Note"), Pledgor has purchased 1,300,000 shares of Pledgee's Common Stock (the "Shares") at a price of $1.00 per share, for a total purchase price of $1,300,000.00. NOW, THEREFORE, it is agreed as follows: 1. Creation and Description of Security Interest. In consideration of --------------------------------------------- the transfer of the Shares to Pledgor under the Purchase Agreement, Pledgor, pursuant to the California Commercial Code, hereby pledges all of such Shares (herein sometimes referred to as the "Collateral") represented by certificate number ______, duly endorsed in blank or with executed stock powers, and herewith delivers said certificate to the Secretary of Pledgee ("Pledgeholder"), who shall hold said certificate subject to the terms and conditions of this Security Agreement. The pledged stock (together with an executed blank stock assignment for use in transferring all or a portion of the Shares to Pledgee if, as and when required pursuant to this Security Agreement) shall be held by the Pledgeholder as security for the repayment of the Note, and any extensions or renewals thereof, to be executed by Pledgor pursuant to the terms of the Purchase Agreement, and the Pledge holder shall not encumber or dispose of such Shares except in accordance with the provisions of this Security Agreement. 2. Pledgor's Representations and Covenants. To induce Pledgee to enter --------------------------------------- into this Security Agreement, Pledgor represents and covenants to Pledgee, its successors and assigns, as follows: a. Payment of Indebtedness. Pledgor will pay the principal sum of ----------------------- the Note secured hereby, together with interest thereon, at the time and in the manner provided in the Note. b. Encumbrances. The Shares are free of all other encumbrances, ------------ defenses and liens, and Pledgor will not further encumber the Shares without the prior written consent of Pledgee. c. Margin Regulations. In the event that Pledgee's Common Stock is ------------------ now or later becomes margin-listed by the Federal Reserve Board and Pledgee is classified as a "lender" within the meaning of the regulations under Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G"), Pledgor agrees to cooperate with Pledgee in making any amendments to the Note or providing any additional collateral as may be necessary to comply with such regulations. 3. Voting Rights. During the term of this pledge and so long as all ------------- payments of principal and interest are made as they become due under the terms of the Note, Pledgor shall have the right to vote all of the Shares pledged hereunder. 4. Stock Adjustments. In the event that during the term of the pledge ----------------- any stock dividend, reclassification, readjustment or other changes are declared or made in the capital structure of Pledgee, all new, substituted and additional shares or other securities issued by reason of any such change shall be delivered to and held by the Pledgee under the terms of this Security Agreement in the same manner as the Shares originally pledged hereunder. In the event of substitution of such securities, Pledgor, Pledgee and Pledgeholder shall cooperate and execute such documents as are reasonable so as to provide for the substitution of such Collateral and, upon such substitution, references to "Shares" in this Security Agreement shall include the substituted shares of capital stock of Pledgor as a result thereof. 5. Options and Rights. In the event that, during the term of this ------------------ pledge, subscription options or other rights or options shall be issued in connection with the pledged Shares, such rights and options shall be the property of Pledgor and, if exercised by Pledgor, all new stock or other securities so acquired by Pledgor as it relates to the pledged Shares then held by Pledgeholder shall be immediately delivered to Pledgeholder, to be held under the terms of this Security Agreement in the same manner as the Shares pledged. 6. Default. Pledgor shall be deemed to be in default of the Note and of ------- this Security Agreement in the event: a. Payment of principal or interest on the Note shall be delinquent for a period of 10 days or more; b. Pledgor fails to perform any of the covenants set forth in the Purchase Agreement or contained in this Security Agreement for a period of 10 days after written notice thereof from Pledgee; or c. Pledgor ceases to be an employee, director or consultant of the Company. In the case of an event of Default, as set forth above, the principal and all accrued interest under the Note shall become immediately due and payable in full. Pledgee shall thereafter be entitled to pursue its remedies under the California Commercial Code. 7. Release of Collateral. Subject to any applicable contrary rules under --------------------- Regulation G, there shall be released from this pledge a portion of the pledged Shares held by Pledgeholder hereunder upon payments of the principal of the Note. The number of the pledged Shares which shall be released shall be that number of full Shares which bears the same proportion to the initial number of Shares pledged hereunder as the payment of principal bears to the initial full principal amount of the Note. -2- 8. Withdrawal or Substitution of Collateral. Pledgor shall not sell, ---------------------------------------- withdraw, pledge, substitute or otherwise dispose of all or any part of the Collateral without the prior written consent of Pledgee. 9. Term. The within pledge of the Shares shall continue until the ---- payment of all indebtedness secured hereby, at which time the remaining pledged stock shall be promptly delivered to Pledgor, subject to the provisions for prior release of a portion of the Collateral as provided in paragraph 7 above. 10. Insolvency. Pledgor agrees that if a bankruptcy or insolvency ---------- proceeding is instituted by or against it, or if a receiver is appointed for the property of Pledgor, or if Pledgor makes an assignment for the benefit of creditors, the entire amount unpaid on the Note shall become immediately due and payable, and Pledgee may proceed as provided in the case of default. 11. Pledgeholder Liability. In the absence of willful or gross ---------------------- negligence, Pledgeholder shall not be liable to any party for any of his acts, or omissions to act, as Pledgeholder. 12. Invalidity of Particular Provisions. Pledgor and Pledgee agree that ----------------------------------- the enforceability or invalidity of any provision or provisions of this Security Agreement shall not render any other provision or provisions herein contained unenforceable or invalid. 13. Successors or Assigns. Pledgor and Pledgee agree that all of the --------------------- terms of this Security Agreement shall be binding on their respective successors and assigns, and that the term "Pledgor" and the term "Pledgee" as used herein shall be deemed to include, for all purposes, the respective designees, successors, assigns, heirs, executors and administrators. 14. Governing Law. This Security Agreement shall be interpreted and ------------- governed under the internal substantive laws, but not the choice of law rules, of California. -3- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. "PLEDGOR" ______________________________________ Signature Grant W. Denison Jr. Address: ______________________________________ ______________________________________ "PLEDGEE" BIOMARIN PHARMACEUTICAL INC., a Delaware corporation ______________________________________ ______________________________________ John Klock ______________________________________ President, Chief Financial Officer and Secretary "PLEDGEHOLDER" ______________________________________ Secretary of BIOMARIN PHARMACEUTICAL INC. -4- ASSIGNMENT SEPARATE FROM CERTIFICATE FOR VALUE RECEIVED I, Grant W. Denison Jr., hereby sell, assign and transfer unto __________________________________________________ (__________) shares of the Common Stock of ____________________standing in my name of the books of said corporation represented by Certificate No. _____ herewith and do hereby irrevocably constitute and appoint to transfer the said stock on the --------------------------------- books of the within named corporation with full power of substitution in the - ---------------------------------------------------------------------------- premises. - --------- This Stock Assignment may be used only in accordance with the Founders Stock Purchase Agreement (the "Agreement") between________________________ and the undersigned dated ______________, 19__. Dated: _______________, 19__ Signature:______________________________ INSTRUCTIONS: Please do not fill in any blanks other than the signature line. The purpose of this assignment is to enable the Company to exercise the Repurchase Option, as set forth in the Agreement, without requiring additional signatures on the part of the Purchaser. EXHIBIT C --------- JOINT ESCROW INSTRUCTIONS ------------------------- October 1, 1997 Corporate Secretary BIOMARIN PHARMACEUTICAL INC. 11 Pimintel Court Novato, CA 95054 Dear Sir or Madam: As Escrow Agent for both BIOMARIN PHARMACEUTICAL INC., a Delaware corporation (the "Company"), and the undersigned purchaser of stock of the Company (the "Purchaser"), you are hereby authorized and directed to hold the documents delivered to you pursuant to the terms of that certain Founders Stock Purchase Agreement ("Agreement") between the Company and the undersigned, in accordance with the following instructions: 1. In the event the Company and/or any assignee of the Company (referred to collectively as the "Company") exercises the Company's Repurchase Option set forth in the Agreement, the Company shall give to Purchaser and you a written notice specifying the number of shares of stock to be purchased, the purchase price, and the time for a closing hereunder at the principal office of the Company. Purchaser and the Company hereby irrevocably authorize and direct you to close the transac tion contemplated by such notice in accordance with the terms of said notice. 2. At the closing, you are directed (a) to date the stock assignments necessary for the transfer in question, (b) to fill in the number of shares being transferred, and (c) to deliver same, together with the certificate evidencing the shares of stock to be transferred, to the Company or its assignee, against the simultaneous delivery to you of the purchase price (by cash, a check, or some combination thereof) for the number of shares of stock being purchased pursuant to the exercise of the Company's Repurchase Option. 3. Purchaser irrevocably authorizes the Company to deposit with you any certificates evidencing shares of stock to be held by you hereunder and any additions and substitutions to said shares as defined in the Agreement. Purchaser does hereby irrevocably constitute and appoint you as Purchaser's attorney-in-fact and agent for the term of this escrow to execute with respect to such securities all documents necessary or appropriate to make such securities negotiable and to complete any transaction herein contemplated, including but not limited to the filing with any applicable state blue sky authority of any required applications for consent to, or notice of transfer of, the securities. Subject to the provisions of this paragraph 3, Purchaser shall exercise all rights and privileges of a stockholder of the Company while the stock is held by you. 4. Upon written request of the Purchaser, but no more than once per calendar year, unless the Company's Repurchase Option has been exercised, you shall deliver to Purchaser a certificate or certificates representing so many shares of stock as are not then subject to the Company's Repurchase Option. Within 90 days after Purchaser ceases to be an employee, you shall deliver to Purchaser a certificate or certificates representing the aggregate number of shares held or issued pursuant to the Agreement and not purchased by the Company or its assignees pursuant to exercise of the Company's Repurchase Option. 5. If at the time of termination of this escrow you should have in your possession any documents, securities, or other property belonging to Purchaser, you shall deliver all of the same to Purchaser and shall be discharged of all further obligations hereunder. 6. Your duties hereunder may be altered, amended, modified or revoked only by a writing signed by all of the parties hereto. 7. You shall be obligated only for the performance of such duties as are specifically set forth herein and may rely and shall be protected in relying or refraining from acting on any instrument reasonably believed by you to be genuine and to have been signed or presented by the proper party or parties. You shall not be personally liable for any act you may do or omit to do hereunder as Escrow Agent or as attorney-in-fact for Purchaser while acting in good faith, and any act done or omitted by you pursuant to the advice of your own attorneys shall be conclusive evidence of such good faith. 8. You are hereby expressly authorized to disregard any and all warnings given by any of the parties hereto or by any other person or corporation, excepting only orders or process of courts of law, and are hereby expressly authorized to comply with and obey orders, judgments or decrees of any court. In case you obey or comply with any such order, judgment or decree, you shall not be liable to any of the parties hereto or to any other person, firm or corporation by reason of such compliance, notwithstanding any such order, judgment or decree being subsequently reversed, modified, annulled, set aside, vacated or found to have been entered without jurisdiction. 9. You shall not be liable in any respect on account of the identity, authorities or rights of the parties executing or delivering or purporting to execute or deliver the Agreement or any documents or papers deposited or called for hereunder. 10. You shall not be liable for the outlawing of any rights under the statute of limitations with respect to these Joint Escrow Instructions or any documents deposited with you. 11. You shall be entitled to employ such legal counsel and other experts as you may deem necessary properly to advise you in connection with your obligations hereunder, may rely upon the advice of such counsel, and may pay such counsel reasonable compensation therefor. 12. Your responsibilities as Escrow Agent hereunder shall terminate if you shall cease to be an officer or agent of the Company or if you shall resign by written notice to each party. In the event of any such termination, the Company shall appoint a successor Escrow Agent. -2- 13. If you reasonably require other or further instruments in connection with these Joint Escrow Instructions or obligations in respect hereto, the necessary parties hereto shall join in furnishing such instruments. 14. It is understood and agreed that should any dispute arise with respect to the delivery and/or ownership or right of possession of the securities held by you hereunder, you are authorized and directed to retain in your possession without liability to anyone all or any part of said securities until such disputes shall have been settled either by mutual written agreement of the parties concerned or by a final order, decree or judgment of a court of competent jurisdiction after the time for appeal has expired and no appeal has been perfected, but you shall be under no duty whatsoever to institute or defend any such proceedings. 15. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States Post Office, by registered or certified mail with postage and fees prepaid, addressed to each of the other parties thereunto entitled at the following addresses or at such other addresses as a party may designate by ten days' advance written notice to each of the other parties hereto. COMPANY: BIOMARIN PHARMACEUTICAL INC. 11 Pimentel Court Novato, CA 95054 PURCHASER: ____________________________ ____________________________ ESCROW AGENT: Corporate Secretary BIOMARIN PHARMACEUTICAL INC. 11 Pimentel Court Novato, CA 94929 16. By signing these Joint Escrow Instructions, you become a party hereto only for the purpose of said Joint Escrow Instructions; you do not become a party to the Agreement. 17. This instrument shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and permitted assigns. -3- 18. These Joint Escrow Instructions shall be governed by, and construed and enforced in accordance with, the internal substantive laws, but not the choice of law rules, of California. Very truly yours, BIOMARIN PHARMACEUTICAL INC. ________________________________________________ John Klock President, Chief Financial Officer and Secretary PURCHASER: ________________________________________________ Grant W. Denison Jr. ESCROW AGENT: __________________________ Corporate Secretary -4- EXHIBIT D --------- CONSENT OF SPOUSE ----------------- I, ____________________, spouse of ___________________, have read and approve the foregoing Founders Stock Purchase Agreement (the "Agreement"). In consideration of the Company's grant to my spouse of the right to purchase shares of BIOMARIN PHARMACEUTICAL INC., as set forth in the Agreement, I hereby appoint my spouse as my attorney-in-fact in respect to the exercise of any rights under the Agreement and agree to be bound by the provisions of the Agreement insofar as I may have any rights in said Agreement or any shares issued pursuant thereto under the community property laws or similar laws relating to marital property in effect in the state of our residence as of the date of the signing of the foregoing Agreement. Dated: _______________, 19____ __________________________________ Signature of Spouse EXHIBIT E --------- ELECTION UNDER SECTION 83(b) ---------------------------- OF THE INTERNAL REVENUE CODE OF 1986 ------------------------------------ The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended, to include in taxpayer's gross income for the current taxable year the amount of any compensation taxable to taxpayer in connection with his or her receipt of the property described below: 1. The name, address, taxpayer identification number and taxable year of the undersigned are as follows: NAME: TAXPAYER: SPOUSE: ADDRESS: IDENTIFICATION NO.: TAXPAYER: SPOUSE: TAXABLE YEAR: 2. The property with respect to which the election is made is described as follows: _______ shares (the "Shares") of the Common Stock of BIOMARIN PHARMACEUTICAL INC. (the "Company"). 3. The date on which the property was transferred is: ______________, 1997. 4. The property is subject to the following restrictions: The Shares may be repurchased by the Company, or its assignee, upon certain events. This right lapses with regard to a portion of the Shares based on the continued performance of services by the taxpayer over time. 5. The fair market value at the time of transfer, determined without regard to any restriction other than a restriction which by its terms will never lapse, of such property is: 6. The amount (if any) paid for such property is: The undersigned has submitted a copy of this statement to the person for whom the services were performed in connection with the undersigned's receipt of the above-described property. The transferee of such property is the person performing the services in connection with the transfer of said property. The undersigned understands that the foregoing election may not be revoked - -------------------------------------------------------------------------- except with the consent of the Commissioner. - ------------------------------------------- Dated: ___________________, 1997 ____________________________________________ Taxpayer The undersigned spouse of taxpayer joins in this election. Dated: ___________________, 19__ ____________________________________________ Spouse of Taxpayer EXHIBIT F --------- INVESTMENT REPRESENTATION STATEMENT PURCHASER : Grant W. Denison Jr. COMPANY : BIOMARIN PHARMACEUTICAL INC. SECURITY : COMMON STOCK AMOUNT : $1,300,000.00 DATE : October 1, 1997 In connection with the purchase of the above-listed securities (the "Securities"), the undersigned Purchaser represents to the Company the following: (a) Purchaser is aware of the Company's business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Securities. Purchaser is acquiring these Securities for investment for Purchaser's own account only and not with a view to, or for resale in connection with, any "distribution" thereof within the meaning of the Securities Act of 1933, as amended (the "Act"). (b) Purchaser acknowledges and understands that the Securities constitute "restricted securities" under the Act and have not been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Purchaser's investment intent as expressed herein. In this connection, Purchaser understands that, in the view of the Securities and Exchange Commission, the statutory basis for such exemption may be unavailable if Purchaser's representation was predicated solely upon a present intention to hold these Securities for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Securities, or for a period of one (1) year or any other fixed period in the future. Purchaser further understands that the Securities must be held indefinitely unless they are subsequently registered under the Act or an exemption from such registration is available. Purchaser further acknowledges and understands that the Company is under no obligation to register the Securities. Purchaser understands that the certificate evidencing the Securities will be imprinted with a legend which prohibits the transfer of the Securities unless they are registered or such registration is not required in the opinion of counsel satisfactory to the Company, a legend prohibiting their transfer without the consent of the Commissioner of Corporations of the State of California and any other legend required under applicable state securities laws. (c) Purchaser is familiar with the provisions of Rule 701 and Rule 144, each promulgated under the Act, which, in substance, permit limited public resale of "restricted securities" acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to the satisfaction of certain conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the time the Securities are purchased by the Purchaser, the exercise will be exempt from registration under the Act. In the event the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter (or such longer period as any market stand-off agreement may require) the Securities exempt under Rule 701 may be resold, subject to the satisfaction of certain of the conditions specified by Rule 144, including: (1) the resale being made through a broker in an unsolicited "broker's transaction" or in transactions directly with a market maker (as said term is defined under the Securities Exchange Act of 1934); and, in the case of an affiliate, (2) the availability of certain public information about the Company, (3) the amount of Securities being sold during any three (3) month period not exceeding the limitations specified in Rule 144(e), and (4) the timely filing of a Form 144, if applicable. In the event that the Company does not qualify under Rule 701 at the time the Securities are purchased by the Purchaser, then the Securities may be resold in certain limited circumstances subject to the provisions of Rule 144, which requires the resale to occur not less than two (2) years after the later of the date the Securities were sold by the Company or the date the Securities were sold by an affiliate of the Company, within the meaning of Rule 144; and, in the case of acquisition of the Securities by an affiliate, or by a non-affiliate who subsequently holds the Securities less than three years, the satisfaction of the conditions set forth in sections (1), (2), (3) and (4) of the paragraph immediately above. (d) Purchaser hereby agrees that if so requested by the Company or any representative of the underwriters in connection with any registration of the offering of any securities of the Company under the Act, Purchaser shall not sell or otherwise transfer any Shares or other securities of the Company during the 180-day period following the effective date of a registration statement of the Company filed under the Act; provided, however, that such restriction shall only apply to the first registration statement of the Company to become effective under the Act which include securities to be sold on behalf of the Company to the public in an underwritten public offering under the Act. The Company may impose stop-transfer instructions with respect to securities subject to the foregoing restrictions until the end of such 180-day period. (e) Purchaser further understands that in the event all of the applicable requirements of Rule 701 or 144 are not satisfied, registration under the Act, compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact that Rules 144 and 701 are not exclusive, the Staff of the Securities and Exchange Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rules 144 or 701 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. Purchaser understands that no assurances can be given that any such other registration exemption will be available in such event. ___________________________ Grant W. Denison Jr. Date: October 1, 1997 -2- EX-10.7 12 FOUNDER'S STOCK PURCHASE PLAN WITH DR. STARR EXHIBIT 10.7 BIOMARIN PHARMACEUTICAL INC. AMENDED AND RESTATED FOUNDER'S STOCK PURCHASE AGREEMENT THIS AGREEMENT (the "Agreement") is made between Christopher Starr (the "Purchaser") and BIOMARIN PHARMACEUTICAL INC. (the "Company") as of October 1, 1997. WHEREAS the Purchaser is an employee of the Company, and the Purchaser's continued participation is considered by the Company to be important for the Company's continued growth; and WHEREAS the Company granted the Purchaser the right to purchase four hundred thousand (400,000) shares of the Company's common stock (the "Shares"); NOW THEREFORE, the parties agree as follows: 1. Sale of Stock. The Company hereby agrees to sell to the Purchaser and ------------- the Purchaser hereby agrees to purchase the Shares at a price of $1.00 per Share on the terms and conditions contained herein, for an aggregate purchase price of $400,000.00. 2. Payment of Purchase Price. The aggregate purchase price for the ------------------------- Shares may be paid by delivery to the Company at the time of execution of this Agreement of cash, a check, promissory note (in the form attached hereto as Exhibit A), or some combination thereof. - --------- 3. Repurchase Option and Sale Rights. --------------------------------- (a) Company's Repurchase Option. In the event the Purchaser ceases to --------------------------- be an employee for any or no reason (including death or disability) before all of the Shares are released from the Company's Repurchase Option (see Section 4), the Company shall, upon the date of such termination (as reasonably fixed and determined by the Company) have the right, but not the obligation (except as provided in Section 3(b) below) (the "Repurchase Option"), for a period of sixty (60) days from such date, to repurchase up to that number of shares which constitute the Unreleased Shares (as defined in Section 4) at the original purchase price per share, plus any interest paid to the Company by the Purchaser with respect to the Shares (the "Repurchase Price"). The Repurchase Option shall be exercised by the Company by delivering written notice to the Purchaser or the Purchaser's executor (with a copy to the Escrow Holder) AND, at the Company's option, (i) by delivering to the Purchaser or the Purchaser's executor a check in the amount of the aggregate Repurchase Price, or (ii) by canceling an amount of the Purchaser's indebtedness to the Company equal to the aggregate Repurchase Price, or (iii) by a combination of (i) and (ii) so that the combined payment and cancellation of indebtedness equals the aggregate Repurchase Price. Upon delivery of such notice and the payment of the aggregate Repurchase Price, the Company shall become the legal and beneficial owner of the Shares being repurchased and all rights and interests therein or relating thereto, and the Company shall have the right to retain and transfer to its own name the number of Shares being repurchased by the Company. (b) Purchaser's Sale Rights. In the event the Purchaser's employment ----------------------- is terminated by the Company for any or no reason (including death or disability), the Purchaser shall, upon the date of such termination (as reasonably fixed and determined by the Company) have the right, but not the obligation (the "Sale Right"), for a period of sixty (60) days from such date, to sell to the Company, and the Company shall have the obligation to purchase from the Purchaser, the Shares at the lower of the original purchase price per share or the then current market value per share, plus any interest paid to the Company by the Purchaser with respect to the Shares (the "Sale Price"). The Sale Right may be exercised by the Purchaser by delivering written notice to the Company (with a copy to the Escrow Holder). At the Company's option, it shall pay the Sale Price to the Purchaser (i) by delivering to the Purchaser or the Purchaser's executor a check in the amount of the aggregate Sale Price, or (ii) by canceling an amount of the Purchaser's indebtedness to the Company equal to the aggregate Sale Price, or (iii) by a combination of (i) and (ii) so that the combined payment and cancellation of indebtedness equals the aggregate Sale Price. Upon delivery of such notice and the payment of the aggregate Sale Price, the Company shall become the legal and beneficial owner of the Shares being purchased and all rights and interests therein or relating thereto, and the Company shall have the right to retain and transfer to its own name the number of Shares being purchased by the Company. (c) Whenever the Company shall have the right or the obligation to repurchase or purchase Shares hereunder, the Company may designate and assign one or more employees, officers, directors or shareholders of the Company or other persons or organizations to exercise all or a part of the Company's purchase rights or obligations under this Agreement and purchase all or a part of such Shares. If the fair market value of the Shares to be purchased on the date of such designation or assignment (the "FMV") exceeds the aggregate Repurchase Price or Sale Price, as the case may be, of such Shares, then each such designee or assignee shall pay the Company cash equal to the difference between the FMV and the aggregate Repurchase Price or Sale Price, as the case may be, of such Shares. 4. Release of Shares From Repurchase Option. ---------------------------------------- (a) Thirty-five percent (35%) of the Shares shall not be subject to the Repurchase Option, fifteen percent (15%) of the Shares shall be released from the Repurchase Option at the end of the first year of employment, and 1/24 of the remaining 50% of the Shares shall be released from the Repurchase Option at the end of each month after one year from the date of grant, provided that - -------------------------------------------------------------- the Purchaser does not cease to be an employee prior to the date of any such release. (b) Immediately prior to a Change of Control (as defined below), fifty percent (50%) of the Shares that have not been released from the Repurchase Option, as of such time, shall be released from the Repurchase Option. The remaining Shares that have not yet been released from the Repurchase Option shall be released from the Repurchase Option pursuant to Section 4(a). For purposes of this Agreement, a "Change of Control" means the happening of any of the following: -2- (i) When any "person," as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), other than the Company, a subsidiary of the Company or a Company employee benefit plan, including any trustee of such plan acting as trustee, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the combined voting power of the Company's then outstanding securities entitled to vote generally in the election of directors; or (ii) The effective date of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the shareholders of the Company approve an agreement for the sale or disposition by the Company of all or substantially all the Company's assets. (c) Any of the Shares that have not yet been released from the Repurchase Option are referred to herein as "Unreleased Shares." (d) The Shares that have been released from the Repurchase Option shall be delivered to the Purchaser at the Purchaser's request (see Section 6). (e) Shares released from the Company's Repurchase Option remain subject to the Company's Right of First Refusal described in Section 7. 5. Restriction on Transfer. Except for the escrow described in Section 6 ----------------------- or the transfer of the Shares to the Company or its assignees contemplated by this Agreement, none of the Shares or any beneficial interest therein shall be transferred, encumbered or otherwise disposed of in any way until such Shares are released from the Company's Repurchase Option in accordance with the provisions of this Agreement, other than by will or the laws of descent and distribution. 6. Escrow of Shares. ---------------- (a) To ensure the availability for delivery of the Purchaser's Unreleased Shares upon repurchase by the Company pursuant to the Repurchase Option, the Purchaser shall, upon execution of this Agreement, deliver and deposit with an escrow holder designated by the Company (the "Escrow Holder") the share certificates representing the Unreleased Shares, together with the stock assignment duly endorsed in blank, attached hereto as Exhibit B. The --------- Unreleased Shares and stock assignment shall be held by the Escrow Holder, pursuant to the Joint Escrow Instructions of the Company and Purchaser attached hereto as Exhibit C, until such time as the Company's Repurchase Option expires. --------- As a further condition to the Company's obligations under this Agreement, the Company may require the spouse of -3- Purchaser, if any, to execute and deliver to the Company the Consent of Spouse attached hereto as Exhibit D. (b) The Escrow Holder shall not be liable for any act it may do or omit to do with respect to holding the Unreleased Shares in escrow while acting in good faith and in the exercise of its judgment. (c) If the Company or any assignee exercises the Repurchase Option hereunder, the Escrow Holder, upon receipt of written notice of such exercise from the proposed transferee, shall take all steps necessary to accomplish such transfer. (d) When the Repurchase Option has been exercised or expires unexercised or a portion of the Shares has been released from the Repurchase Option, upon request the Escrow Holder shall promptly cause a new certificate to be issued for the released Shares and shall deliver the certificate to the Company or the Purchaser, as the case may be. (e) Subject to the terms hereof, the Purchaser shall have all the rights of a stockholder with respect to the Shares while they are held in escrow, including without limitation, the right to vote the Shares and to receive any cash dividends declared thereon. If, from time to time during the term of the Repurchase Option, there is (i) any stock dividend, stock split or other change in the Shares, or (ii) any merger or sale of all or substantially all of the assets or other acquisition of the Company, any and all new, substituted or additional securities to which the Purchaser is entitled by reason of the Purchaser's ownership of the Shares shall be immediately subject to this escrow, deposited with the Escrow Holder and included thereafter as "Shares" for purposes of this Agreement and the Repurchase Option. 7. Company's Right of First Refusal. Before any Shares that are held by -------------------------------- Purchaser or any transferee (either being sometimes referred to herein as the "Holder") may be sold or otherwise transferred (including transfer by gift or operation of law), the Company or its assignees(s) shall have a right of first refusal to purchase the Shares (the "Right of First Refusal") on the terms and conditions set forth below. (a) Notice of Proposed Transfer. The Holder shall deliver to the --------------------------- Company a written notice (the "Notice") stating: (i) the Holder's bona fide intention to sell or otherwise transfer such Shares; (ii) the name of each proposed purchaser or other transferee (the "Proposed Transferee"); (iii) the number of Shares to be transferred to each Proposed Transferee; and (iv) the bona fide cash price or other consideration for which the Holder proposes to transfer the Shares (the "Offered Price"), and the Holder shall offer the Shares at the Offered Price to the Company or its assignee(s). (b) Exercise of Right of First Refusal. At any time within thirty ---------------------------------- (30) days after receipt of the Notice, the Company and/or its assignee(s) may, by giving written notice to the Holder, elect to purchase all, but not less than all, of the Shares proposed to be transferred to any one or more of the Proposed Transferees, at the purchase price determined in accordance with subsection (c) below. -4- (c) Purchase Price. The purchase price (the "Purchase Price") for the -------------- Shares purchased by the Company or its assignee(s) under this Section shall be the Offered Price. If the Offered Price includes consideration other than cash, the cash equivalent value of the non-cash consideration shall be determined by the Board of Directors of the Company in good faith. (d) Payment. Payment of the Purchase Price shall be made, at the ------- option of the Company or its assignee(s), in cash, by check, by cancellation of all or a portion of any outstanding indebtedness of the Holder to the Company (or, in the case of purchase by an assignee, to the assignee), or by any combination thereof within thirty (30) days after receipt of the Notice or in the manner and at the times set forth in the Notice. (e) Holder's Right to Transfer. If all of the Shares proposed in the -------------------------- Notice to be transferred to a given Proposed Transferee are not purchased by the Company and/or its assignee(s) as provided in this Section, then the Holder may sell or otherwise transfer such Shares to that Proposed Transferee at the Offered Price or at a higher price, provided that such sale or other transfer is consummated within one hundred twenty (120) days after the date of the Notice and provided further that any such sale or other transfer is effected in accordance with any applicable securities laws and the Proposed Transferee agrees in writing that the provisions of this Agreement shall continue to apply to the Shares in the hands of such Proposed Transferee. If the Shares described in the Notice are not trans ferred to the Proposed Transferee within such period, a new Notice shall be given to the Company, and the Company and/or its assignees shall again be offered the Right of First Refusal before any Shares held by the Holder may be sold or otherwise transferred. (f) Exception for Certain Family Transfers. Anything to the contrary -------------------------------------- contained in this Section notwithstanding, the transfer of any or all of the Shares during the Purchaser's lifetime or on the Purchaser's death by will or intestacy to the Purchaser's immediate family or a trust for the benefit of the Purchaser's immediate family shall be exempt from the provisions of this Section, provided that the Purchaser notifies the Company in writing within thirty (30) days of said transfer. "Immediate Family" as used herein shall mean spouse, lineal descendant or antecedent, father, mother, brother or sister. In such case, the transferee or other recipient shall receive and hold the Shares so transferred subject to the provisions of this Agreement, and there shall be no further transfer of such Shares except in accordance with the terms of this Section. (g) Termination of Right of First Refusal. The Right of First ------------------------------------- Refusal shall terminate as to any Shares upon the date of the first sale of common stock of the Company to the general public pursuant to a registration statement filed with and declared effective by the Securities and Exchange Commission under the Securities Act of 1933, as amended (the "Act"). 8. Legends; Investment Intent. -------------------------- (a) The share certificate evidencing the Shares, if any, issued hereunder shall be endorsed with the following legends, or legends substantially equivalent thereto (in addition to any legend required under applicable state securities laws): -5- THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE ACT AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE, TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH. THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS UPON TRANSFER, A RIGHT OF REPURCHASE AND A RIGHT OF FIRST REFUSAL AS SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY. (b) Market Standoff. Purchaser hereby agrees that, if so requested --------------- Company or any representative of the underwriters in connection with any registration of the offering of any securities of the Company under the Act, Purchaser shall not sell or otherwise transfer any Shares or other securities of the Company during such period as the Company and the representatives of the underwriters may request (not to exceed 180 days) following the effective date of any registration statement of the company filed under the Act for an underwritten public offering. (c) Refusal to Transfer. The Company (i) shall not be required to ------------------- transfer on its books, or may issue appropriate "stop transfer" instructions to its transfer agents, if any, with respect to any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Agreement, and (ii) the Company shall not be required to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred. (d) Investment Intent. Purchaser shall, if required by the Company, ----------------- concurrently with the execution of this Agreement, deliver to the Company his or her Investment Representation Statement in the form attached hereto as Exhibit F. 8. Adjustment for Stock Split. All references to the number of Shares -------------------------- and the purchase price of the Shares in this Agreement shall be appropriately adjusted to reflect any stock split, stock dividend or other change in the Shares which may be made by the Company after the date of this Agreement. 9. Tax Consequences. The Purchaser has reviewed with the Purchaser's own ---------------- tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contem plated by this Agreement. The Purchaser is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. The Purchaser understands that the Purchaser -6- (and not the Company) shall be responsible for the Purchaser's own tax liability that may arise as a result of the transactions contemplated by this Agreement. The Purchaser understands that Section 83 of the Internal Revenue Code of 1986, as amended (the "Code"), taxes as ordinary income the difference between the purchase price for the Shares and the Fair Market Value of the Shares as of the date any restrictions on the Shares lapse. In this context, "restriction" includes the right of the Company to buy back the Shares pursuant to the Repurchase Option. The Purchaser understands that the Purchaser may elect to be taxed at the time the Shares are purchased rather than when and as the Repurchase Option expires by filing an election under Section 83(b) of the Code with the IRS within 30 days from the date of purchase. The form for making this election is attached as Exhibit E hereto. THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE RESPONSIBILITY AND NOT THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b), EVEN IF THE PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON THE PURCHASER'S BEHALF. 10. General Provisions. ------------------ (a) Choice of Law; Entire Agreement. This Agreement shall be governed ------------------------------- by the internal substantive laws, but not the choice of law rules, of California. This Agreement represents the entire agreement between the parties with respect to the purchase of the Shares by the Purchaser. (b) Notices. Any notice, demand or request required or permitted to ------- be given by either the Company or the Purchaser pursuant to the terms of this Agreement shall be in writing and shall be deemed given when delivered personally or deposited in the U.S. mail, First Class with postage prepaid, and addressed to the parties at the addresses of the parties set forth below or such other address as a party may request by notifying the other in writing: BIOMARIN PHARMACEUTICAL INC. 11 Pimintel Court Novato, California 94929 Any notice to the Escrow Holder shall be sent to the Company's address with a copy to the other party hereto. (c) Successors. The rights of the Company under this Agreement shall ---------- be transferable to any one or more persons or entities, and all covenants and agreements hereunder shall inure to the benefit of, and be enforceable by the Company's successors and assigns. The rights and obligations of the Purchaser under this Agreement may only be assigned with the prior written consent of the Company. (d) Waiver. Either party's failure to enforce any provision of this ------ Agreement shall not in any way be construed as a waiver of any such provision, nor prevent that party from thereafter enforcing any other provision of this Agreement. The rights granted both parties hereunder are -7- cumulative and shall not constitute a waiver of either party's right to assert any other legal remedy available to it. (e) Further Documents. The Purchaser agrees upon request to execute ----------------- any further documents or instruments necessary or desirable to carry out the purposes or intent of this Agreement, including (but not limited to) Exhibits A through F to this Agreement. (f) Severability. Should any provision of this Agreement be found to ------------ be illegal or unenforceable, the other provisions shall nevertheless remain effective and shall remain enforceable. (g) PURCHASER ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO SECTION 4 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS AN EMPLOYEE AT THE WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED OR PURCHASING SHARES HEREUNDER). PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS AN EMPLOYEE FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH PURCHASER'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE PURCHASER'S RELATIONSHIP AS AN EMPLOYEE AT ANY TIME, WITH OR WITHOUT CAUSE. By Purchaser's signature below, Purchaser represents that he or she is familiar with the terms of this Agreement, and hereby accepts this Agreement subject to all of the terms and provisions thereof. Purchaser has read this Agreement in its entirety, has had an opportunity to obtain the advice of counsel prior to executing this Agreement and fully understands all provisions of this Agreement. Purchaser agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under this Agreement. Purchaser further agrees to notify the Company upon any change in the residence indicated in Section 11. DATED: October 1, 1997 PURCHASER: BIOMARIN PHARMACEUTICAL INC. /s/ Christopher Starr /s/ John Klock - ------------------------------- -------------------------------------- Christopher Starr By: John Klock, President, Chief Financial Officer and Secretary -8- EXHIBIT A --------- NOTE $400,000.00 Novato, California October 1, 1997 FOR VALUE RECEIVED, Christopher Starr promises to pay to BIOMARIN PHARMACEUTICAL INC., a Delaware corporation (the "Company"), or order, the principal sum of four hundred thousand dollars ($400,000.00), together with interest on the unpaid principal hereof from the date hereof at the rate of six percent (6%) per annum, compounded semiannually. Principal and interest shall be due and payable on October 1, 2000. Payment of principal and interest shall be made in lawful money of the United States of America. Payment will be applied first towards unpaid interest and then towards unpaid principal. The undersigned may at any time prepay all or any portion of the principal or interest owing hereunder. This Note is subject to the terms of the Founder's Stock Purchase Agreement, dated as of October 1, 1997. This Note is secured in part by a pledge of the Company's Common Stock under the terms of a Security Agreement of even date herewith and is subject to all the provisions thereof. The holder of this Note shall have full recourse against the undersigned, and shall not be required to proceed against the collateral securing this Note in the event of default. The holder of this Note hereby waives presentment, notice of non-payment, notice of dishonor, protest, demand and diligence. In the event the undersigned shall cease to be an employee, director or consultant of the Company for any reason, or the undersigned shall be in default under the terms of the Security Agreement attached hereto as Exhibit A-1, this ------------ Note shall be automatically accelerated, and the whole unpaid balance on this Note of principal and accrued interest shall be immediately due and payable. Should any action be instituted for the collection of this Note, the reasonable costs and attorneys' fees therein of the holder shall be paid by the undersigned. _______________________________ Christopher Starr EXHIBIT B --------- SECURITY AGREEMENT This Security Agreement is made as of October 1, 1997 between BIOMARIN PHARMACEUTICAL INC., a Delaware corporation ("Pledgee"), and Christopher Starr ("Pledgor"). Recitals -------- Pursuant to Pledgor's election to purchase shares under the Founder's Stock Purchase Agreement dated October 1, 1997 (the "Purchase Agreement"), between Pledgor and Pledgee, and Pledgor's election under the terms of the Purchase Agreement to pay for such shares with his promissory note (the "Note"), Pledgor has purchased 924,494 shares of Pledgee's Common Stock (the "Shares") at a price of $1.00 per share, for a total purchase price of $400,000.00. NOW, THEREFORE, it is agreed as follows: 1. Creation and Description of Security Interest. In consideration of --------------------------------------------- the transfer of the Shares to Pledgor under the Purchase Agreement, Pledgor, pursuant to the California Commercial Code, hereby pledges all of such Shares (herein sometimes referred to as the "Collateral") represented by certificate number ______, duly endorsed in blank or with executed stock powers, and herewith delivers said certificate to the Secretary of Pledgee ("Pledgeholder"), who shall hold said certificate subject to the terms and conditions of this Security Agreement. The pledged stock (together with an executed blank stock assignment for use in transferring all or a portion of the Shares to Pledgee if, as and when required pursuant to this Security Agreement) shall be held by the Pledgeholder as security for the repayment of the Note, and any extensions or renewals thereof, to be executed by Pledgor pursuant to the terms of the Purchase Agreement, and the Pledge holder shall not encumber or dispose of such Shares except in accordance with the provisions of this Security Agreement. 2. Pledgor's Representations and Covenants. To induce Pledgee to enter --------------------------------------- into this Security Agreement, Pledgor represents and covenants to Pledgee, its successors and assigns, as follows: a. Payment of Indebtedness. Pledgor will pay the principal sum of ----------------------- the Note secured hereby, together with interest thereon, at the time and in the manner provided in the Note. b. Encumbrances. The Shares are free of all other encumbrances, ------------ defenses and liens, and Pledgor will not further encumber the Shares without the prior written consent of Pledgee. c. Margin Regulations. In the event that Pledgee's Common Stock is ------------------ now or later becomes margin-listed by the Federal Reserve Board and Pledgee is classified as a "lender" within the -10- meaning of the regulations under Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G"), Pledgor agrees to cooperate with Pledgee in making any amendments to the Note or providing any additional collateral as may be necessary to comply with such regulations. 3. Voting Rights. During the term of this pledge and so long as all ------------- payments of principal and interest are made as they become due under the terms of the Note, Pledgor shall have the right to vote all of the Shares pledged hereunder. 4. Stock Adjustments. In the event that during the term of the pledge ----------------- any stock dividend, reclassification, readjustment or other changes are declared or made in the capital structure of Pledgee, all new, substituted and additional shares or other securities issued by reason of any such change shall be delivered to and held by the Pledgee under the terms of this Security Agreement in the same manner as the Shares originally pledged hereunder. In the event of substitution of such securities, Pledgor, Pledgee and Pledgeholder shall cooperate and execute such documents as are reasonable so as to provide for the substitution of such Collateral and, upon such substitution, references to "Shares" in this Security Agreement shall include the substituted shares of capital stock of Pledgor as a result thereof. 5. Options and Rights. In the event that, during the term of this ------------------ pledge, subscription options or other rights or options shall be issued in connection with the pledged Shares, such rights and options shall be the property of Pledgor and, if exercised by Pledgor, all new stock or other securities so acquired by Pledgor as it relates to the pledged Shares then held by Pledgeholder shall be immediately delivered to Pledgeholder, to be held under the terms of this Security Agreement in the same manner as the Shares pledged. 6. Default. Pledgor shall be deemed to be in default of the Note and of ------- this Security Agreement in the event: a. Payment of principal or interest on the Note shall be delinquent for a period of 10 days or more; b. Pledgor fails to perform any of the covenants set forth in the Purchase Agreement or contained in this Security Agreement for a period of 10 days after written notice thereof from Pledgee; or c. Pledgor ceases to be an employee, director or consultant of the Company. In the case of an event of Default, as set forth above, the principal and all accrued interest under the Note shall become immediately due and payable in full. Pledgee shall thereafter be entitled to pursue its remedies under the California Commercial Code. 7. Release of Collateral. Subject to any applicable contrary rules under --------------------- Regulation G, there shall be released from this pledge a portion of the pledged Shares held by Pledgeholder hereunder upon payments of the principal of the Note. The number of the pledged Shares which shall be released shall be that number of full Shares which bears the same proportion to the initial number of Shares pledged hereunder as the payment of principal bears to the initial full principal amount of the Note. -2- 8. Withdrawal or Substitution of Collateral. Pledgor shall not sell, ---------------------------------------- withdraw, pledge, substitute or otherwise dispose of all or any part of the Collateral without the prior written consent of Pledgee. 9. Term. The within pledge of the Shares shall continue until the ---- payment of all indebtedness secured hereby, at which time the remaining pledged stock shall be promptly delivered to Pledgor, subject to the provisions for prior release of a portion of the Collateral as provided in paragraph 7 above. 10. Insolvency. Pledgor agrees that if a bankruptcy or insolvency ---------- proceeding is instituted by or against it, or if a receiver is appointed for the property of Pledgor, or if Pledgor makes an assignment for the benefit of creditors, the entire amount unpaid on the Note shall become immediately due and payable, and Pledgee may proceed as provided in the case of default. 11. Pledgeholder Liability. In the absence of willful or gross ---------------------- negligence, Pledgeholder shall not be liable to any party for any of his acts, or omissions to act, as Pledgeholder. 12. Invalidity of Particular Provisions. Pledgor and Pledgee agree that ----------------------------------- the enforceability or invalidity of any provision or provisions of this Security Agreement shall not render any other provision or provisions herein contained unenforceable or invalid. 13. Successors or Assigns. Pledgor and Pledgee agree that all of the --------------------- terms of this Security Agreement shall be binding on their respective successors and assigns, and that the term "Pledgor" and the term "Pledgee" as used herein shall be deemed to include, for all purposes, the respective designees, successors, assigns, heirs, executors and administrators. 14. Governing Law. This Security Agreement shall be interpreted and ------------- governed under the internal substantive laws, but not the choice of law rules, of California. -3- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. "PLEDGOR" _________________________________ Signature Christopher Starr Address: _________________________________ _________________________________ "PLEDGEE" BIOMARIN PHARMACEUTICAL INC., a Delaware corporation _________________________________ Signature _________________________________ John Klock _________________________________ President, Chief Financial Office Secretary "PLEDGEHOLDER" _________________________________ Secretary of BIOMARIN PHARMACEUTICAL INC. -4- ASSIGNMENT SEPARATE FROM CERTIFICATE FOR VALUE RECEIVED I, Christopher Starr, hereby sell, assign and transfer unto __________________________________________________ (__________) shares of the Common Stock of ____________________standing in my name of the books of said corporation represented by Certificate No. _____ herewith and do hereby irrevocably constitute and appoint______________to transfer the said stock on the books of the within named corporation with full power of substitution in the premises. This Stock Assignment may be used only in accordance with the Founders Stock Purchase Agreement (the "Agreement") between________________________ and the undersigned dated ______________,19__. Dated: _______________,19__ Signature:______________________________ INSTRUCTIONS: Please do not fill in any blanks other than the signature line. The purpose of this assignment is to enable the Company to exercise the Repurchase Option, as set forth in the Agreement, without requiring additional signatures on the part of the Purchaser. EXHIBIT C --------- JOINT ESCROW INSTRUCTIONS ------------------------- October 1, 1997 Corporate Secretary BIOMARIN PHARMACEUTICAL INC. 11 Pimintel Court Novato, CA 95054 Dear Sir or Madam: As Escrow Agent for both BIOMARIN PHARMACEUTICAL INC., a Delaware corporation (the "Company"), and the undersigned purchaser of stock of the Company (the "Purchaser"), you are hereby authorized and directed to hold the documents delivered to you pursuant to the terms of that certain Founders Stock Purchase Agreement ("Agreement") between the Company and the undersigned, in accordance with the following instructions: 1. In the event the Company and/or any assignee of the Company (referred to collectively as the "Company") exercises the Company's Repurchase Option set forth in the Agreement, the Company shall give to Purchaser and you a written notice specifying the number of shares of stock to be purchased, the purchase price, and the time for a closing hereunder at the principal office of the Company. Purchaser and the Company hereby irrevocably authorize and direct you to close the transac tion contemplated by such notice in accordance with the terms of said notice. 2. At the closing, you are directed (a) to date the stock assignments necessary for the transfer in question, (b) to fill in the number of shares being transferred, and (c) to deliver same, together with the certificate evidencing the shares of stock to be transferred, to the Company or its assignee, against the simultaneous delivery to you of the purchase price (by cash, a check, or some combination thereof) for the number of shares of stock being purchased pursuant to the exercise of the Company's Repurchase Option. 3. Purchaser irrevocably authorizes the Company to deposit with you any certificates evidencing shares of stock to be held by you hereunder and any additions and substitutions to said shares as defined in the Agreement. Purchaser does hereby irrevocably constitute and appoint you as Purchaser's attorney-in-fact and agent for the term of this escrow to execute with respect to such securities all documents necessary or appropriate to make such securities negotiable and to complete any transaction herein contemplated, including but not limited to the filing with any applicable state blue sky authority of any required applications for consent to, or notice of transfer of, the securities. Subject to the provisions of this paragraph 3, Purchaser shall exercise all rights and privileges of a stockholder of the Company while the stock is held by you. 4. Upon written request of the Purchaser, but no more than once per calendar year, unless the Company's Repurchase Option has been exercised, you shall deliver to Purchaser a certificate or certificates representing so many shares of stock as are not then subject to the Company's Repurchase Option. Within 90 days after Purchaser ceases to be an employee, you shall deliver to Purchaser a certificate or certificates representing the aggregate number of shares held or issued pursuant to the Agreement and not purchased by the Company or its assignees pursuant to exercise of the Company's Repurchase Option. 5. If at the time of termination of this escrow you should have in your possession any documents, securities, or other property belonging to Purchaser, you shall deliver all of the same to Purchaser and shall be discharged of all further obligations hereunder. 6. Your duties hereunder may be altered, amended, modified or revoked only by a writing signed by all of the parties hereto. 7. You shall be obligated only for the performance of such duties as are specifically set forth herein and may rely and shall be protected in relying or refraining from acting on any instrument reasonably believed by you to be genuine and to have been signed or presented by the proper party or parties. You shall not be personally liable for any act you may do or omit to do hereunder as Escrow Agent or as attorney-in-fact for Purchaser while acting in good faith, and any act done or omitted by you pursuant to the advice of your own attorneys shall be conclusive evidence of such good faith. 8. You are hereby expressly authorized to disregard any and all warnings given by any of the parties hereto or by any other person or corporation, excepting only orders or process of courts of law, and are hereby expressly authorized to comply with and obey orders, judgments or decrees of any court. In case you obey or comply with any such order, judgment or decree, you shall not be liable to any of the parties hereto or to any other person, firm or corporation by reason of such compliance, notwithstanding any such order, judgment or decree being subsequently reversed, modified, annulled, set aside, vacated or found to have been entered without jurisdiction. 9. You shall not be liable in any respect on account of the identity, authorities or rights of the parties executing or delivering or purporting to execute or deliver the Agreement or any documents or papers deposited or called for hereunder. 10. You shall not be liable for the outlawing of any rights under the statute of limitations with respect to these Joint Escrow Instructions or any documents deposited with you. 11. You shall be entitled to employ such legal counsel and other experts as you may deem necessary properly to advise you in connection with your obligations hereunder, may rely upon the advice of such counsel, and may pay such counsel reasonable compensation therefor. 12. Your responsibilities as Escrow Agent hereunder shall terminate if you shall cease to be an officer or agent of the Company or if you shall resign by written notice to each party. In the event of any such termination, the Company shall appoint a successor Escrow Agent. -2- 13. If you reasonably require other or further instruments in connection with these Joint Escrow Instructions or obligations in respect hereto, the necessary parties hereto shall join in furnishing such instruments. 14. It is understood and agreed that should any dispute arise with respect to the delivery and/or ownership or right of possession of the securities held by you hereunder, you are authorized and directed to retain in your possession without liability to anyone all or any part of said securities until such disputes shall have been settled either by mutual written agreement of the parties concerned or by a final order, decree or judgment of a court of competent jurisdiction after the time for appeal has expired and no appeal has been perfected, but you shall be under no duty whatsoever to institute or defend any such proceedings. 15. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States Post Office, by registered or certified mail with postage and fees prepaid, addressed to each of the other parties thereunto entitled at the following addresses or at such other addresses as a party may designate by ten days' advance written notice to each of the other parties hereto. COMPANY: BIOMARIN PHARMACEUTICAL INC. 11 Pimintel Court Novato, CA 95054 PURCHASER: Christopher Starr __________________________________ __________________________________ ESCROW AGENT: Corporate Secretary BIOMARIN PHARMACEUTICAL INC. 11 Pimintel Court Novato, CA 95054 16. By signing these Joint Escrow Instructions, you become a party hereto only for the purpose of said Joint Escrow Instructions; you do not become a party to the Agreement. 17. This instrument shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and permitted assigns. -3- 18. These Joint Escrow Instructions shall be governed by, and construed and enforced in accordance with, the internal substantive laws, but not the choice of law rules, of California. Very truly yours, BIOMARIN PHARMACEUTICAL INC. __________________________________________ John Klock, President, Chief Financial Officer and Secretary PURCHASER: __________________________________________ Christopher Starr ESCROW AGENT: ____________________________ Corporate Secretary -4- EXHIBIT D --------- CONSENT OF SPOUSE ----------------- I, ____________________, spouse of ___________________, have read and approve the foregoing Founders Stock Purchase Agreement (the "Agreement"). In consideration of the Company's grant to my spouse of the right to purchase shares of BIOMARIN PHARMACEUTICAL INC., as set forth in the Agreement, I hereby appoint my spouse as my attorney-in-fact in respect to the exercise of any rights under the Agreement and agree to be bound by the provisions of the Agreement insofar as I may have any rights in said Agreement or any shares issued pursuant thereto under the community property laws or similar laws relating to marital property in effect in the state of our residence as of the date of the signing of the foregoing Agreement. Dated: _______________, 19____ __________________________________________ Signature of Spouse EXHIBIT E --------- ELECTION UNDER SECTION 83(b) ---------------------------- OF THE INTERNAL REVENUE CODE OF 1986 ------------------------------------ The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended, to include in taxpayer's gross income for the current taxable year the amount of any compensation taxable to taxpayer in connection with his or her receipt of the property described below: 1. The name, address, taxpayer identification number and taxable year of the undersigned are as follows: NAME: TAXPAYER: SPOUSE: ADDRESS: IDENTIFICATION NO.: TAXPAYER: SPOUSE: TAXABLE YEAR: 2. The property with respect to which the election is made is described as follows: _______ shares (the "Shares") of the Common Stock of BIOMARIN PHARMACEUTICAL INC. (the "Company"). 3. The date on which the property was transferred is: ______________, 1997. 4. The property is subject to the following restrictions: The Shares may be repurchased by the Company, or its assignee, upon certain events. This right lapses with regard to a portion of the Shares based on the continued performance of services by the taxpayer over time. 5. The fair market value at the time of transfer, determined without regard to any restriction other than a restriction which by its terms will never lapse, of such property is: 6. The amount (if any) paid for such property is: The undersigned has submitted a copy of this statement to the person for whom the services were performed in connection with the undersigned's receipt of the above-described property. The transferee of such property is the person performing the services in connection with the transfer of said property. The undersigned understands that the foregoing election may not be revoked - -------------------------------------------------------------------------- except with the consent of the Commissioner. - ------------------------------------------- Dated: ___________________, 1997 _____________________________________________ Taxpayer The undersigned spouse of taxpayer joins in this election. Dated: ___________________, 19___ ___________________________________________ Spouse of Taxpayer EXHIBIT F --------- INVESTMENT REPRESENTATION STATEMENT PURCHASER : Christopher Starr COMPANY : BIOMARIN PHARMACEUTICAL INC. SECURITY : COMMON STOCK AMOUNT : $400,000.00 DATE : October 1, 1997 In connection with the purchase of the above-listed securities (the "Securities"), the undersigned Purchaser represents to the Company the following: (a) Purchaser is aware of the Company's business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Securities. Purchaser is acquiring these Securities for investment for Purchaser's own account only and not with a view to, or for resale in connection with, any "distribution" thereof within the meaning of the Securities Act of 1933, as amended (the "Act"). (b) Purchaser acknowledges and understands that the Securities constitute "restricted securities" under the Act and have not been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Purchaser's investment intent as expressed herein. In this connection, Purchaser understands that, in the view of the Securities and Exchange Commission, the statutory basis for such exemption may be unavailable if Purchaser's representation was predicated solely upon a present intention to hold these Securities for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Securities, or for a period of one (1) year or any other fixed period in the future. Purchaser further understands that the Securities must be held indefinitely unless they are subsequently registered under the Act or an exemption from such registration is available. Purchaser further acknowledges and understands that the Company is under no obligation to register the Securities. Purchaser understands that the certificate evidencing the Securities will be imprinted with a legend which prohibits the transfer of the Securities unless they are registered or such registration is not required in the opinion of counsel satisfactory to the Company, a legend prohibiting their transfer without the consent of the Commissioner of Corporations of the State of California and any other legend required under applicable state securities laws. (c) Purchaser is familiar with the provisions of Rule 701 and Rule 144, each promulgated under the Act, which, in substance, permit limited public resale of "restricted securities" acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to the satisfaction of certain conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the time the Securities are purchased by the Purchaser, the exercise will be exempt from registration under the Act. In the event the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter (or such longer period as any market stand-off agreement may require) the Securities exempt under Rule 701 may be resold, subject to the satisfaction of certain of the conditions specified by Rule 144, including: (1) the resale being made through a broker in an unsolicited "broker's transaction" or in transactions directly with a market maker (as said term is defined under the Securities Exchange Act of 1934); and, in the case of an affiliate, (2) the availability of certain public information about the Company, (3) the amount of Securities being sold during any three (3) month period not exceeding the limitations specified in Rule 144(e), and (4) the timely filing of a Form 144, if applicable. In the event that the Company does not qualify under Rule 701 at the time the Securities are purchased by the Purchaser, then the Securities may be resold in certain limited circumstances subject to the provisions of Rule 144, which requires the resale to occur not less than two (2) years after the later of the date the Securities were sold by the Company or the date the Securities were sold by an affiliate of the Company, within the meaning of Rule 144; and, in the case of acquisition of the Securities by an affiliate, or by a non-affiliate who subsequently holds the Securities less than three years, the satisfaction of the conditions set forth in sections (1), (2), (3) and (4) of the paragraph immediately above. (d) Purchaser hereby agrees that if so requested by the Company or any representative of the underwriters in connection with any registration of the offering of any securities of the Company under the Act, Purchaser shall not sell or otherwise transfer any Shares or other securities of the Company during the 180-day period following the effective date of a registration statement of the Company filed under the Act; provided, however, that such restriction shall only apply to the first registration statement of the Company to become effective under the Act which include securities to be sold on behalf of the Company to the public in an underwritten public offering under the Act. The Company may impose stop-transfer instructions with respect to securities subject to the foregoing restrictions until the end of such 180-day period. (e) Purchaser further understands that in the event all of the applicable requirements of Rule 701 or 144 are not satisfied, registration under the Act, compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact that Rules 144 and 701 are not exclusive, the Staff of the Securities and Exchange Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rules 144 or 701 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. Purchaser understands that no assurances can be given that any such other registration exemption will be available in such event. ________________________________ Christopher Starr Date: October 1, 1997 -2- EX-10.8 13 EMPLOYMENT AGREEMENT WITH DR. KLOCK EXHIBIT 10.8 EMPLOYMENT AGREEMENT BioMarin Pharmaceutical, Inc, a California corporation ("BioMarin"), and John C. Klock ("Klock"), an individual resident of California, enter into this Employment Agreement ("Agreement"), effective on the date that it is signed by the second of them. RECITALS A. BioMarin wishes to employ Klock as its president, and once Klock is employed, to retain him, in order to avail itself of Klock's experience, skills, and knowledge. B. Klock wishes to be employed as BioMarin's president and, once employed, to be assured of security in his position. C. BioMarin and Klock wish to enter into this Agreement on the terms and conditions set forth below. AGREEMENT 1. TERM. 1.1 BioMarin shall employ Klock as its president for three years, commencing on the effective date of this agreement. Unless BioMarin or Klock gives notice of its or his intention not to renew in accord with the notice requirements of Paragraph 11.2 this Agreement shall be deemed renewed at the expiration of its three-year term on all of its terms and conditions, except those governing Klock's compensation, which shall be renewed under Paragraph 1.2 1.2. If this Agreement is renewed under the provisions of Paragraph 1.1, BioMarin and Klock shall confer, as soon as is practicable after the commencement of the renewal term, and shall negotiate in good faith the adjustment of Klock's compensation during this Agreement's renewal term. Should BioMarin and Klock fail to meet or to agree upon the adjustment of Klock's compensation within fifteen days after the renewal of this Agreement, BioMarin may, upon two day's written notice, unilaterally adjust the compensation by amounts that, under the circumstances, BioMarin reasonably believes will compensate Klock fairly for his services during the renewal term. In that event, Klock, without penalty or liability for BioMarin or Klock, and upon fifteen days' written notice, may terminate this agreement as of the effective date of the compensation adjustment, unless BioMarin agrees on or before such effective date to any compensation adjustment demanded by Klock in his written notice. 2. KLOCK'S DUTIES. 2.1 In his capacity as BioMarin's president, Klock shall perform all acts or services and do all things necessary or advisable to manage or conduct BioMarin's business, subject to the policies set by BioMarin's board of directors. 2.2 Except with the written consent of BioMarin's board of directors, Klock shall devote seventy percent (70%) of his productive time, ability, and attention to BioMarin's business and during this 70% of time, shall not engage in any other business or render any services of a business, commercial, or professional nature to or on behalf of any other person or enterprise. With respect to the 30% of his time not devoted to BioMarin, Klock shall not do any activity which is directly competitive with BioMarin. This provision shall not prevent Klock from making passive personal investments, except investments that result in Klock's direct or indirect acquisition of an interest in a business actually or potentially competitive with BioMarin, provided, however, that notwithstanding the foregoing, Klock shall not be prohibited from acquiring in the public market shares of securities that do not exceed 1% of the outstanding stock of such issuer, and to the extent that, on the effective date of this Agreement, Klock has interests in businesses actually or potentially competitive with BioMarin, nothing in this Agreement shall be construed to require Klock to divest himself of such interests. 2.3 Klock shall not misuse, misappropriate, or, except as authorized by BioMarin's board of directors, disclose to persons not employed by BioMarin, any confidential information concerning BioMarin so long as the information is reasonably subject to characterization as a "trade secret" within the meaning of California Civil Code Section 3426.1 (d) as that section exists on the date of this Agreement is executed or renewed. The confidential information subject to the prohibition in this paragraph includes, but is not limited to, information concerning finances, personnel, customers, computer operations and programs, research and development, products, or services. 3. BIOMARIN'S DUTIES. 3.1 BioMarin shall provide Klock with the compensation, incentives, benefits, and business expense reimbursement set out in other paragraphs of this Agreement. 4. KLOCK'S COMPENSATION. 4.1 During the first year of this Agreement Klock's BioMarin compensation shall be the sum of $175,000.00 payable in twenty-four equal installments of $7,291.66 each. During the second and third years of this Agreement, Klock's compensation shall be reviewed by the board of directors and appropriate adjustments based on cost-of-living and performance, but in no case will the salary be less than paid in the first year of this Agreement. During any renewal of this Agreement, Klock's compensation shall be as set forth in an addendum to this Agreement, signed by or on behalf of BioMarin and Klock. 4.2 The installments provided in Paragraph 4.1 shall be paid on the fifteenth and last days of each month, unless those days are Saturdays, Sundays, or legal holidays, in which case the installments shall be paid on the last preceeding business day. 4.3 On the first day of every quarter or the first trading day of a quarter, the Company will calculate the capitalization of BioMarin using the price of the common stock either on a publically traded exchange or the most recent price at which a disinterested third party has acquired securities with a value of at least one million dollars ($1,000,000) times the number of outstanding shares. The first adjustment in Klock's salary occurs when the capitalization of BioMarin reaches 50 million dollars ($50,000,000) and for each subsequent increase or decrease of 50 million dollars ($50,000,000), Klock's compensation shall be adjusted upwards or downwards by adding or subtracting fifty thousand dollars ($50,000) in compensation for each fifty million dollar ($50,000,000) change in BioMarin's capitalization. 5. KLOCK'S BENEFITS. 5.1 BioMarin shall reimburse Klock for the use of his personal automobile(s) for BioMarin-related activities, and Klock shall maintain written records of such use and shall be reimbursed at standard mileage rates acceptable to the Internal Revenue Service payable to him as a result of such personal use. 5.2 BioMarin shall provide Klock with term life insurance, payable as directed by Klock, in the amount of twice his annual compensation, but in no case less than $300,000.00, and shall provide Klock and his dependents with coverage under the Company's health insurance policy. 5.3 If Klock, in the opinion of a licensed medical doctor, becomes mentally or physically incapacitated to the extent that he is unable to discharge his employment duties under this Agreement for a period of six months or more, BioMarin shall continue to provide Klock, for a period ending six months from the determination of incapacity, or at until end of the term of this Agreement if earlier, with his compensation as set out in Paragraph 4.1. 5.4 If Klock dies during the term of this Agreement, BioMarin shall continue to pay, for six months following Klock's death, or until the end of the term of this Agreement if earlier, Klock's compensation, as set out in Paragraph 4.1 of this Agreement, to Klock's surviving spouse, if there is one, or, if not, to the executor or administrator of Klock's estate. BioMarin shall pay any sums owed to Klock as of the date of his death to the executor or administrator of his estate. 5.5 Klock shall be entitled to such vacation time each year as BioMarin provides to its other management employees, on the same terms and conditions. 6. REIMBURSEMENT OF KLOCK'S REASONABLE BUSINESS EXPENSES. BioMarin shall promptly reimburse Klock for all reasonable business expenses incurred by Klock in the discharge of his duties under this agreement, so long as the expenditures qualify as proper business deductions under the Internal Revenue Code, and they are properly substantiated by Klock with documentation adequate to establish their deductibility under the Internal Revenue Code. 7. TERMINATION. 7.1 This Agreement shall be terminated upon Klock's disability, subject to the provisions of Paragraph 5.3; death, subject to the provisions of Paragraph 5.4; upon Klock's voluntary resignation, or retirement. 7.2 This Agreement may be terminated at any time by BioMarin without cause upon six months' notice to Klock and by Klock upon three months' notice to BioMarin's board of directors. If this Agreement is terminated under the provisions of this paragraph, BioMarin shall determine in its sole discretion whether Klock shall continue to discharge his duties as BioMarin's president or if his duties shall terminate at a date prior to the date this Agreement is terminated. In any case, Klock shall be entitled to compensation and benefits as provided in this Agreement until the effective date of this Agreement's termination. 7.3 If, within twelve months of the effective date of this Agreement, Klock employment terminates for "Cause" (as defined herein), Klock shall not be entitled to compensation and benefits as provided in this Agreement. "Cause" is defined as (i) an act of personal dishonesty taken by Klock in connection with his responsibilities as an employee and intended to result in personal enrichment of Klock, (ii) Klock's conviction of, plea of nolo ---- contendere to, a felony, (iii) a willful act by Klock which constitutes gross - ---------- misconduct and which is injurious to the Company, and (iv) following delivery to Klock of a written demand for performance from the Company which describes the basis for the Company's belief that Klock has not substantially performed his duties, continued violations by Klock of Klock's obligations to the Company. The notice of termination under the provisions of this paragraph shall state the grounds for termination and state all relevant facts supporting the grounds. 8. PURCHASE OF STOCK AND STOCK BUY-BACK RIGHTS. Klock shall be entitled to purchase 800,000 shares of the Company's stock at a purchase price of one dollar ($1.00) per share. The Company shall provide a 4-year loan as of the effective date of this Agreement to Klock for the purpose of share purchase. Any stock purchase loans to Klock from the Company shall be due and payable upon termination of employment. If this Agreement is terminated for any reason, then Klock agrees to resell back to BioMarin up to one-half of any stock sold or given to him by BioMarin as compensation at the original purchase price on a pro-rata basis as stated below: For example if Klock has been sold 1000 Shares, such shares resold are equal to 1000 minus (1000 times the number of days from June 26, 1997 until June 25,2001 divided by one thousand four hundred sixty (1460)). For example if the agreement is terminated at 300 days after June 26, 1997, the number of shares resold would be: 1000 - 1000 x 300 = 794 Shares (capped at 50% or 500 shares) ----------- 1460 9. EFFECT OF MERGER, TRANSFER OF ASSETS, OR DISSOLUTION. This Agreement shall not be terminated by a voluntary or involuntary termination of BioMarin's existence resulting from a merger or consolidation in which BioMarin is not the consolidated or surviving entity or a transfer of all or substantially all of BioMarin's assets. If such a merger, consolidation, or transfer of assets occurs, BioMarin's obligations shall be delegated to the surviving, resulting, or transferee entity. 10. OWNERSHIP OF INTANGIBLES. All research, development, designs, processes, inventions, copyrights, patents, trademarks, service marks, and the like that Klock conceives or develops while this Agreement is in effect shall be BioMarin's property. Klock shall execute and deliver to BioMarin a copy of BioMarin's standard employee confidentiality and proprietary rights agreement. 11. NON-COMPETITION BY KLOCK AFTER TERMINATION 11.1. Immediately upon termination of this Agreement, Klock shall immediately deliver to BioMarin all of BioMarin's property then in his possession or under his control. 11.2 For a period of two years after termination of this Agreement. Klock agrees not to compete unfairly, whether directly or indirectly, with BioMarin. For purposes of this paragraph, to "compete unfairly" is to (a) use or provide to third parties property that is owned by BioMarin under Paragraph 9; (b) use or provide to third parties trade secrets within the definition of California Civil Code Section 3426.1(d) as that section exists on the date this Agreement is executed or renewed; (c) compete or to assist third parties to compete with BioMarin for the business of BioMarin's customers with respect to the services offered by BioMarin on the date this Agreement is terminated; or (d) attempt to induce or assist third parties to induce or attempt to induce, any of BioMarin's employees to terminate employment with BioMarin and obtain employment by any person or entity that competes with BioMarin. 12. MISCELLANEOUS PROVISIONS. 12.1. This Agreement is made in and is subject to the law of the State of California. 12.2 Notices to be given in writing shall be transmitted by personal delivery or by certified mail, return receipt requested, addressed as set forth below or to another address given through written notice under the provisions of this paragraph: If to BioMarin: BioMarin, Inc Attention: Board of Directors 11 Pimentel Court Novato, California 94949 If to Klock: John C. Klock 11 Pimentel Court Novato, California 94949 Notices delivered personally shall be deemed communicated as of the date of receipt. Mailed notices shall be deemed communicated as of the date of mailing. 12.3 Disputes concerning this Agreement shall be referred to arbitration under the California Arbitration Act upon written notice to the other by the party seeking arbitration. BioMarin and Klock shall each appoint one person to hear the dispute, and those persons shall appoint a third. The decision of the arbitrators shall be by a majority and shall be final, and costs -------------------------- of the arbitration are to be borne in such proportion as the arbitrators may decide. 12.4 This Agreement is BioMarin's and Klock's entire agreement with respect to Klock's employment and it supersedes all other agreements, whether written or oral, between them. Each acknowledges there is no representation, inducement, promise, or agreement, whether oral or in writing, with respect to this Agreement's subject matter that is not incorporated into this Agreement. Executed at Toronto, Canada this 26th day of June, 1997 BioMarin Pharmaceuticals, Inc By /s/ Gwynn R. Williams ------------------------------ Director Executed at Toronto, Canada this 26th day of June, 1997 John C. Klock /s/ JOHN C. KLOCK ------------------- AMENDMENT TO EMPLOYMENT AGREEMENT --------------------------------- WHEREAS: BioMarin Pharmaceutical Inc. (the "COMPANY") and John C. Klock ------- ("EMPLOYEE") entered into an Employment Agreement dated as of June 26, 1997, a copy of which is attached hereto as Exhibit "A" (the "EMPLOYMENT AGREEMENT"); ---------- and WHEREAS: Each of the Company and Employee now desire to amend, in part, ------- Section 2.2 of the Employment Agreement. NOW, THEREFORE, the Company and Employee agree that, as of October 26, 1998, the first two sentences of Section 2.2 of the Employment Agreement shall be amended to read as follows: "2.2 Except with the written consent of BioMarin's board of directors, Klock shall devote one hundred percent (100%) of his productive, time, ability and attention to BioMarin's business and shall not engage in any other business or render any services of a business, commercial or professional nature to or on behalf of any other person or enterprise. Klock shall not engage in any activity which is directly competitive with BioMarin." IN WITNESS WHEREOF, each of the parties have executed this Amendment to the Employment Agreement as of October 26, 1998. BIOMARIN PHARMACEUTICAL INC. By: /s/ RAYMOND W. ANDERSON ------------------------------- Raymond W. Anderson Chief Financial Officer EMPLOYEE /s/ JOHN C. KLOCK ------------------------------- John C. Klock AMENDMENT TO EMPLOYMENT AGREEMENT --------------------------------- WHEREAS: BioMarin Pharmaceutical Inc. (the "COMPANy") and John C. Klock ------- ("EMPLOYEE") entered into an Employment Agreement dated as of June 26, 1997, a copy of which is attached hereto as Exhibit "A"; ----------- WHEREAS: The Company and Employee entered into an amendment to the ------- Employment Agreement dated October 26, 1998, a copy of which is attached hereto as Exhibit "B" (Exhibit A and Exhibit B together, the "EMPLOYMENT AGREEMENT"); ----------- and WHEREAS: Each of the Company and Employee now desire to amend Section 4.3 ------- of the Employment Agreement. NOW, THEREFORE, the Company and Employee agree that, as of January 1, 1998, Section 4.3 of the Employment Agreement shall be amended to read as follows: "4.3 Klock shall be paid an annual bonus, in addition to annual cash compensation as detailed in Sections 4.1 and 4.2, according to the guidelines enumerated on the document titled `Founders' Incentive Compensation Adjustment as of January 1, 1998,' which document is hereby deemed incorporated by reference herein. " The document titled "Founders' Incentive Compensation Adjustment as of January 1, 1998" is attached hereto as Exhibit "C". ----------- IN WITNESS WHEREOF, each of the parties have executed this Amendment to the Employment Agreement as of January 1, 1998. BIOMARIN PHARMACEUTICAL INC. By: /s/ Raymond W. Anderson --------------------------- Raymond W. Anderson Chief Financial Officer EMPLOYEE /s/ John C. Klock --------------------------- John C. Klock AMENDMENT TO EMPLOYMENT AGREEMENT --------------------------------- WHEREAS: BioMarin Pharmaceutical Inc. (the "COMPANY") and John C. ------- Lelock ("EMPLOYEE") entered into an Employment Agreement dated as of June 26, 1997, a copy of which is attached hereto as Exhibit "A"; ----------- WHEREAS: Each of the Company and Employee now desire to amend the ------- Employment Agreement. NOW, THEREFORE, the Company and Employee agree that, as of January 1, 1999, the Employment Agreement shall be amended to add the following provisions: In the event of the Involuntary Termination, as defined below, of Employee's employment with the Company within one (1) year of a Change of Control, as defined below, Employee shall be entitled to receive from the Company, within ten (10) days of such Involuntary Termination, a severance payment equal to six (6) months of Employee's then-current annual salary and fifty percent (50%) of the annual bonus that Employee would otherwise be entitled to receive for the calendar year in which such Involuntary Termination occurs. Additionally, upon such Involuntary Termination, fifty percent (50%) of the then-unvested portion of all of Employee's options to purchase capital stock of the Company shall immediately vest. The capitalized terms used above shall have the following meanings: 1. "Change of Control" shall mean the occurrence of any of the following events: a) Any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becoming the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company's then outstanding voting securities; b) A change in the composition of the Board of Directors of the Company occurring within a two-year period, as a result of which fewer than a majority of the directors are Incumbent Directors. "Incumbent Directors" shall mean directors who either (A) are directors of the Company as of the date hereof, or (B) are elected, or nominated for election, to the Board of Directors of the Company with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual not otherwise an Incumbent Director whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or c) The approval by stockholders of the Company of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the approval by the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company's assets. 2. "Involuntary Termination" shall mean (i) without the Employee's express written consent, a significant reduction of the Employee's duties, position or responsibilities, or the removal of the Employee from such position and responsibilities, unless the Employee is provided with a comparable position (i.e., a position of equal or greater organizational level, duties, authority, compensation and status); (ii) without the Employee's express written consent, a substantial reduction, without good business reasons, of the facilities and perquisites (including office space and location) available to the Employee immediately prior to such reduction; (iii) a reduction by the Company in the annual salary of the Employee as in effect immediately prior to such reduction; (iv) a material reduction by the Company in the kind or level of employee benefits to which the Employee is entitled immediately prior to such reduction with the result that the Employee's overall benefits package is significantly reduced; (v) without the Employee's express written consent, the relocation of the Employee to a facility or a location more than 25 miles from the Employee's then present location; (vi) any purported termination of the Employee by the Company which is not effected for disability or for Cause, or any purported termination for which the grounds relied upon are not valid; or (vii) the failure of the Company to obtain the assumption of this Agreement by any successors in the event of a Change of Control. IN WITNESS WHEREOF, each of the parties have executed this Amendment to the Employment Agreement as of January 1, 1999. BIOMARIN PHARMACEUTICAL INC. By: /s/ Grant W. Denison, Jr. ------------------------------------------- Grant W. Denison, Jr. Chief Executive Officer EMPLOYEE /s/ John C. Klock -------------------- John C. Klock EX-10.9 14 EMPLOYMENT AGREEMENT WITH G. DENISON EXHIBIT 10.9 EMPLOYMENT AGREEMENT BioMarin Pharmaceutical, Inc, a California corporation ("BioMarin"), and Grant W. Denison, Jr. ("Denison"), an individual resident of Illinois, enter into this Employment Agreement ("Agreement"), effective on the date that it is signed by the second of them. RECITALS A. BioMarin wishes to employ Denison as its Chief Executive Officer, and once Denison is employed, to retain him, in order to avail itself of Denison's experience, skills, and knowledge. B. Denison wishes to be employed as BioMarin's Chief Executive Officer and, once employed, to be assured of security in his position. C. BioMarin and Denison wish to enter into this Agreement on the terms and conditions set forth below. AGREEMENT 1. TERM. 1.1 BioMarin shall employ Denison as its Chief Executive Officer for three years, commencing on the effective date of this agreement. Unless BioMarin or Denison gives notice of its or his intention not to renew in accord with the notice requirements of Paragraph 11.2 this Agreement shall be deemed renewed at the expiration of its three-year term on all of its terms and conditions, except those governing Denison's compensation, which shall be renewed under Paragraph 1.2 1.2. If this Agreement is renewed under the provisions of Paragraph 1.1, BioMarin and Denison shall confer, as soon as is practicable after the commencement of the renewal term, and shall negotiate in good faith the adjustment of Denison's compensation during this Agreement's renewal term. Should BioMarin and Denison fail to meet or to agree upon the adjustment of Denison's compensation within fifteen days after the renewal of this Agreement, BioMarin may, upon two day's written notice, unilaterally adjust the compensation by amounts that, under the circumstances, BioMarin reasonably believes will compensate Denison fairly for his services during the renewal term. In that event, Denison, without penalty or liability for BioMarin or Denison, and upon fifteen days' written notice, may terminate this agreement as of the effective date of the compensation adjustment, unless BioMarin agrees on or before such effective date to any compensation adjustment demanded by Denison in his written notice. 2. DENISON'S DUTIES. 2.1 In his capacity as BioMarin's Chief Executive Officer, Denison shall perform all acts or services and do all things necessary or advisable to manage or conduct BioMarin's business, subject to the policies set by BioMarin's board of directors. 2.2 Except with the written consent of BioMarin's board of directors, Denison shall devote seventy percent (70%) of his productive time, ability, and attention to BioMarin's business and during this 70% of time, shall not engage in any other business or render any services of a business, commercial, or professional nature to or on behalf of any other person or enterprise. With respect to the 30% of his time not devoted to BioMarin, Denison shall not do any activity which is directly competitive with BioMarin. This provision shall not prevent Denison from making passive personal investments, except investments that result in Denison's direct or indirect acquisition of an interest in a business actually or potentially competitive with BioMarin, provided, however, that notwithstanding the foregoing, Denison shall not be prohibited from acquiring in the public market shares of securities that do not exceed 1% of the outstanding stock of such issuer, and to the extent that, on the effective date of this Agreement, Denison has interests in businesses actually or potentially competitive with BioMarin, nothing in this Agreement shall be construed to require Denison to divest himself of such interests. 2.3 Denison shall not misuse, misappropriate, or, except as authorized by BioMarin's board of directors, disclose to persons not employed by BioMarin, any confidential information concerning BioMarin so long as the information is reasonably subject to characterization as a "trade secret" within the meaning of California Civil Code Section 3426.1 (d) as that section exists on the date of this Agreement is executed or renewed. The confidential information subject to the prohibition in this paragraph includes, but is not limited to, information concerning finances, personnel, customers, computer operations and programs, research and development, products, or services. 3. BIOMARIN'S DUTIES. 3.1 BioMarin shall provide Denison with the compensation, incentives, benefits, and business expense reimbursement set out in other paragraphs of this Agreement. 4. DENISON'S COMPENSATION. 4.1 During the first year of this Agreement Denison's BioMarin compensation shall be the sum of $180,000.00 payable in twenty-four equal installments of $7,500.00 each. During the second and third years of this Agreement, Denison's compensation shall be reviewed by the board of directors and appropriate adjustments based on cost-of-living and performance, but in no case will the salary be less than paid in the first year of this Agreement. During any renewal of this Agreement, Denison's compensation shall be as set forth in an addendum to this Agreement, signed by or on behalf of BioMarin and Denison. 4.2 The installments provided in Paragraph 4.1 shall be paid on the fifteenth and last days of each month, unless those days are Saturdays, Sundays, or legal holidays, in which case the installments shall be paid on the last preceeding business day. 4.3 On the first day of every quarter or the first trading day of a quarter, the Company will calculate the capitalization of BioMarin using the price of the common stock either on a publically traded exchange or the most recent price at which a disinterested third party has acquired securities with a value of at least one million dollars ($1,000,000) times the number of outstanding shares. The first adjustment in Denison's salary occurs when the capitalization of BioMarin reaches 50 million dollars ($50,000,000) and for each subsequent increase or decrease of 50 million dollars ($50,000,000), Denison's compensation shall be adjusted upwards or downwards by adding or subtracting fifty thousand dollars ($50,000) in compensation for each fifty million dollar ($50,000,000) change in BioMarin's capitalization. 5. DENISON'S BENEFITS. 5.1 BioMarin shall reimburse Denison for the use of his personal automobile(s) for BioMarin-related activities, and Denison shall maintain written records of such use and shall be reimbursed at standard mileage rates acceptable to the Internal Revenue Service payable to him as a result of such personal use. 5.2 BioMarin shall provide Denison with term life insurance, payable as directed by Denison, in the amount of twice his annual compensation, but in no case less than $360,000.00, and shall provide Denison and his dependents with coverage under the Company's health insurance policy. 5.3 If Denison, in the opinion of a licensed medical doctor, becomes mentally or physically incapacitated to the extent that he is unable to discharge his employment duties under this Agreement for a period of six months or more, BioMarin shall continue to provide Denison, for a period ending six months from the determination of incapacity, or until the end of the term of this Agreement if earlier, with his compensation as set out in Paragraph 4.1. 5.4 If Denison dies during the term of this Agreement, BioMarin shall continue to pay, for six months following Denison's death, or until the end of the term of this Agreement if earlier, Denison's compensation, as set out in Paragraph 4.1 of this Agreement, to Denison's surviving spouse, if there is one, or, if not, to the executor or administrator of Denison's estate. BioMarin shall pay any sums owed to Denison as of the date of his death to the executor or administrator of his estate. 5.5 Denison shall be entitled to such vacation time each year as BioMarin provides to its other management employees, on the same terms and conditions. 6. REIMBURSEMENT OF DENISON'S REASONABLE BUSINESS EXPENSES. BioMarin shall promptly reimburse Denison for all reasonable business expenses incurred by Denison in the discharge of his duties under this agreement, so long as the expenditures qualify as proper business deductions under the Internal Revenue Code, and they are properly substantiated by Denison with documentation adequate to establish their deductibility under the Internal Revenue Code. 7. TERMINATION. 7.1. This Agreement shall be terminated upon Denison's disability, subject to the provisions of Paragraph 5.3; death, subject to the provisions of Paragraph 5.4; upon Denison's voluntary resignation, or retirement. 7.2 This Agreement may be terminated at any time by BioMarin without cause upon six months' notice to Denison and by Denison upon three months' notice to BioMarin's board of directors. If this Agreement is terminated under the provisions of this paragraph, BioMarin shall determine in its sole discretion whether Denison shall continue to discharge his duties as BioMarin's chief executive officer or if his duties shall terminate at a date prior to the date this Agreement is terminated. In any case, Denison shall be entitled to compensation and benefits as provided in this Agreement until the effective date of this Agreement's termination. 7.3 If, within twelve months of the effective date of this Agreement, Denison employment terminates for "Cause" (as defined herein), Denison shall not be entitled to compensation and benefits as provided in this Agreement. "Cause" is defined as (i) an act of personal dishonesty taken by Denison in connection with his responsibilities as an employee and intended to result in personal enrichment of Denison, (ii) Denison's conviction of, plea of nolo contendere to, a felony, (iii) a willful act by Denison which constitutes - --------------- gross misconduct and which is injurious to the Company, and (iv) following delivery to Denison of a written demand for performance from the Company which describes the basis for the Company's belief that Denison has not substantially performed his duties, continued violations by Denison of Denison's obligations to the Company. The notice of termination under the provisions of this paragraph shall state the grounds for termination and state all relevant facts supporting the grounds. 8. PURCHASE OF STOCK AND STOCK BUY-BACK RIGHTS. Denison shall be entitled to purchase 1,300,000 shares of the Company's stock at a purchase price of one dollar ($l.00) per share. The Company shall provide a 4-year loan as of the effective date of this Agreement to Denison for the purpose of share purchase. Any stock purchase loans to Denison from the Company shall be due and payable upon termination of employment. If this Agreement is terminated for any reason, then Denison agrees to resell back to BioMarin up to one-half of any stock sold or given to him by BioMarin as compensation at the original purchase price on a pro-rata basis as stated below: For example if Denison has been sold 1000 Shares, such shares resold are equal to 1000 times the number of days from January 01, 1996 until December 31, 1999 divided by one thousand four hundred sixty (1460). For example if the agreement is terminated at 300 days after January 01, 1996, the number of shares resold would be: 1000 - 1000 x 300 = 794 Shares (capped at 50% or 500 shares) ----------- 1460 9. EFFECT OF MERGER, TRANSFER OF ASSETS, OR DISSOLUTION. This Agreement shall not be terminated by a voluntary or involuntary termination of BioMarin's existence resulting from a merger or consolidation in which BioMarin is not the consolidated or surviving entity or a transfer of all or substantially all of BioMarin's assets. If such a merger, consolidation, or transfer of assets occurs, BioMarin's obligations shall be delegated to the surviving, resulting, or transferee entity. 10. OWNERSHIP OF INTANGIBLES. All research, development, designs, processes, inventions, copyrights, patents, trademarks, service marks, and the like that Denison conceives or develops while this Agreement is in effect shall be BioMarin's property. Denison shall execute and deliver to BioMarin a copy of BioMarin's standard employee confidentiality and proprietary rights agreement. 11. NON-COMPETITION BY DENISON AFTER TERMINATION 10.1. Immediately upon termination of this Agreement, Denison shall immediately deliver to BioMarin all of BioMarin's property then in his possession or under his control. 11.2 For a period of two years after termination of this Agreement, Denison agrees not to compete unfairly, whether directly or indirectly, with BioMarin. For purposes of this paragraph, to "compete unfairly" is to (a) use or provide to third parties property that is owned by BioMarin under Paragraph 9; (b) use or provide to third parties trade secrets within the definition of California Civil Code Section 3426.1 (d) as that section exists on the date this Agreement is executed or renewed; (c) compete or to assist third parties to compete with BioMarin for the business of BioMarin's customers with respect to the services offered by BioMarin on the date this Agreement is terminated; or(d) attempt to induce or assist third parties to induce or attempt to induce, any of BioMarin's employees to terminate employment with BioMarin and obtain employment by any person or entity that competes with BioMarin. 12. MISCELLANEOUS PROVISIONS. 11.1. This Agreement is made in and is subject to the law of the State of California. 12.2 Notices to be given in writing shall be transmitted by personal delivery or by certified mail, return receipt requested, addressed as set forth below or to another address given through written notice under the provisions of this paragraph: If to BioMarin: BioMarin, Inc Attention: Board of Directors 11 Pimentel Court Novato, California 94949 If to Denison: Grant W. Denison, Jr. 119 Abingdon Avenue Kenilworth, IL 60043 Notices delivered personally shall be deemed communicated as of the date of receipt. Mailed notices shall be deemed communicated as of the date of mailing. 12.3 Disputes concerning this Agreement shall be referred to arbitration under the California Arbitration Act upon written notice to the other by the party seeking arbitration. BioMarin and Denison shall each appoint one person to hear the dispute, and those persons shall appoint a third. The decision of the arbitrators shall be by majority and shall be final, and costs ------------------------ of the arbitration are to be borne in such proportion as the arbitrators may decide. 12.4 This Agreement is BioMarin's and Denison's entire agreement with respect to Denison's employment and it supersedes all other agreements, whether written or oral, between them. Each acknowledges there is no representation, inducement, promise, or agreement, whether oral or in writing, with respect to this Agreement's subject matter that is not incorporated into this Agreement. Executed at Toronto, Canada this 26th day of June, 1997 BioMarin Pharmaceuticals, Inc By /s/ Gwynn R. Williams -------------------------------- Director Executed at ________________, _______________ this ___ day of ____, 1997 Grant W. Denison, Jr. /s/ GRANT W. DENISON, JR. ------------------------- AMENDMENT TO EMPLOYMENT AGREEMENT --------------------------------- WHEREAS: BioMarin Pharmaceutical, Inc. (the "COMPANY") and Grant W. -------- Denison, Jr. ("EMPLOYEE") entered into an Employment Agreement dated as of June 26, 1997, a copy of which is attached hereto as Exhibit "A" (the "EMPLOYMENT ---------- AGREEMENT"); and WHEREAS: Each of the Company and Employee now desire to amend, in part, -------- Section 2.2 of the Employment Agreement. NOW, THEREFORE, the Company and Employee agree that, as of October 26, 1998, the first two sentences of Section 2.2 of the Employment Agreement shall be amended to read as follows: "2.2 Except with the written consent of BioMarin's board of directors, Denison shall devote one hundred percent (100%) of his productive, time, ability and attention to BioMarin's business and shall not engage in any other business or render any services of a business, commercial or professional nature to or on behalf of any other person or enterprise except to the extent such activities are in the interest of BioMarin. Denison shall not engage in any activity which is directly competitive with BioMarin." IN WITNESS WHEREOF, each of the parties have executed this Amendment to the Employment Agreement as of October 26, 1998. BIOMARIN PHARMACEUTICAL INC. By: /s/ RAYMOND W. ANDERSON -------------------------------- Raymond W. Anderson Chief Financial Officer EMPLOYEE /s/ GRANT W. DENISON, JR. -------------------------------- Grant W. Denison, Jr. Chairman of the Board and Chief Executive Officer AMENDMENT TO EMPLOYMENT AGREEMENT --------------------------------- WHEREAS: BioMarin Pharmaceutical Inc. (the "COMPANY") and Grant W. ------- Denison, Jr. ("EMPLOYEE") entered into an Employment Agreement dated as of June 26, 1997, a copy of which is attached hereto as Exhibit "A"; ----------- WHEREAS: The Company and Employee entered into an amendment to the ------- Employment Agreement dated October 26, 1998, a copy of which is attached hereto as Exhibit "B" (Exhibit A and Exhibit B together, the "EMPLOYMENT AGREEMENT"); ----------- and WHEREAS: Each of the Company and Employee now desire to amend Section 4.3 ------- of the Employment Agreement. NOW, THEREFORE, the Company and Employee agree that, as of January 1, 1998, Section 4.3 of the Employment Agreement shall be amended to read as follows: "4.3 Denison shall be paid an annual bonus, in addition to annual cash compensation as detailed in Sections 4.1 and 4.2, according to the guidelines enumerated on the document titled `Founders' Incentive Compensation Adjustment as of January 1, 1998,' which document is hereby deemed incorporated by reference herein." The document titled "Founders' Incentive Compensation Adjustment as of January 1, 1998" is attached hereto as Exhibit "C". ----------- IN WITNESS WHEREOF, each of the parties have executed this Amendment to the Employment Agreement as of January 1, 1998. BIOMARIN PHARMACEUTICAL INC. By: /s/ Raymond W. Anderson ------------------------- Raymond W. Anderson Chief Financial Officer EMPLOYEE /s/ Grant W. Denison, Jr. ------------------------- Grant W. Denison, Jr. AMENDMENT TO EMPLOYMENT AGREEMENT --------------------------------- WHEREAS: BioMarin Pharmaceutical Inc. (the "COMPANY") and Grant W. ------- Denison, Jr. ("EMPLOYEE") entered into an Employment Agreement dated as of June 26, 1997, a copy of which is attached hereto as Exhibit "A"; ----------- WHEREAS: Each of the Company and Employee now desire to amend the ------- Employment Agreement. NOW, THEREFORE, the Company and Employee agree that, as of January 1, 1999, the Employment Agreement shall be amended to add the following provisions: In the event of the Involuntary Termination, as defined below, of Employee's employment with the Company within one (1) year of a Change of Control, as defined below, Employee shall be entitled to receive from the Company, within ten (10) days of such Involuntary Termination, a severance payment equal to six (6) months of Employee's then-current annual salary and fifty percent (50%) of the annual bonus that Employee would otherwise be entitled to receive for the calendar year in which such Involuntary Termination occurs. Additionally, upon such Involuntary Termination, fifty percent (50%) of the then-unvested portion of all of Employee's options to purchase capital stock of the Company shall immediately vest. The capitalized terms used above shall have the following meanings: 1. "Change of Control" shall mean the occurrence of any of the following events: a) Any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becoming the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company's then outstanding voting securities; b) A change in the composition of the Board of Directors of the Company occurring within a two-year period, as a result of which fewer than a majority of the directors are Incumbent Directors. "Incumbent Directors" shall mean directors who either (A) are directors of the Company as of the date hereof, or (B) are elected, or nominated for election, to the Board of Directors of the Company with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual not otherwise an Incumbent Director whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or c) The approval by stockholders of the Company of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the approval by the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company's assets. 2. "Involuntary Termination" shall mean (i) without the Employee's express written consent, a significant reduction of the Employee's duties, position or responsibilities, or the removal of the Employee from such position and responsibilities, unless the Employee is provided with a comparable position (i.e., a position of equal or greater organizational level, duties, authority, compensation and status); (ii) without the Employee's express written consent, a substantial reduction, without good business reasons, of the facilities and perquisites (including office space and location) available to the Employee immediately prior to such reduction; (iii) a reduction by the Company in the annual salary of the Employee as in effect immediately prior to such reduction; (iv) a material reduction by the Company in the kind or level of employee benefits to which the Employee is entitled immediately prior to such reduction with the result that the Employee's overall benefits package is significantly reduced; (v) without the Employee's express written consent, the relocation of the Employee to a facility or a location more than 25 miles from the Employee's then present location; (vi) any purported termination of the Employee by the Company which is not effected for disability or for Cause, or any purported termination for which the grounds relied upon are not valid; or (vii) the failure of the Company to obtain the assumption of this Agreement by any successors in the event of a Change of Control. IN WITNESS WHEREOF, each of the parties have executed this Amendment to the Employment Agreement as of January 1, 1999. BIOMARIN PHARMACEUTICAL INC. By: /s/ Raymond W. Anderson ---------------------------- Raymond W. Anderson, Chief Financial Officer EMPLOYEE /s/ Grant W. Denison, Jr. -------------------------- Grant W. Denison, Jr. EX-10.10 15 EMPLOYMENT AGREEMENT WITH DR. STARR EXHIBIT 10.10 EMPLOYMENT AGREEMENT BioMarin Pharmaceutical, Inc, a California corporation ("BioMarin"), and Christopher M. Starr ("Starr"), an individual resident of California, enter into this Employment Agreement ("Agreement"), effective on the date that it is signed by the second of them. RECITALS A. BioMarin wishes to employ Starr as its Vice President for Research and Development, and once Starr is employed, to retain him, in order to avail itself of Starr's experience, skills, and knowledge. B. Starr wishes to be employed as BioMarin's Vice President for Research and Development and, once employed, to be assured of security in his position. C. BioMarin and Starr wish to enter into this Agreement on the terms and conditions set forth below. AGREEMENT 1. TERM. 1.1 BioMarin shall employ Starr as its Vice President for Research and Development for three years, commencing on the effective date of this agreement. Unless BioMarin or Starr gives notice of its or his intention not to renew in accord with the notice requirements of Paragraph 11.2 this Agreement shall be deemed renewed at the expiration of its three-year term on all of its terms and conditions, except those governing Starr's compensation, which shall be renewed under Paragraph 1.2 1.2. If this Agreement is renewed under the provisions of Paragraph 1.1, BioMarin and Starr shall confer, as soon as is practicable after the commencement of the renewal term, and shall negotiate in good faith the adjustment of Starr's compensation during this Agreement's renewal term. Should BioMarin and Starr fail to meet or to agree upon the adjustment of Starr's compensation within fifteen days after the renewal of this Agreement, BioMarin may, upon two day's written notice, unilaterally adjust the compensation by amounts that, under the circumstances, BioMarin reasonably believes will compensate Starr fairly for his services during the renewal term. In that event, Starr, without penalty or liability for BioMarin or Starr, and upon fifteen days' written notice, may terminate this agreement as of the effective date of the compensation adjustment, unless BioMarin agrees on or before such effective date to any compensation adjustment demanded by Starr in his written notice. 2. STARR'S DUTIES. 2.1 In his capacity as BioMarin's Vice President of Research and Development, Starr shall perform all acts or services and do all things necessary or advisable to manage or conduct BioMarin's business, subject to the policies set by BioMarin's board of directors. 2.2 Except with the written consent of BioMarin's board of directors, Starr shall devote seventy percent (70%) of his productive time, ability, and attention to BioMarin's business and during this 70% of his time shall not engage in any other business or render any services of a business, commercial, or professional nature to or on behalf of any other person or enterprise. With respect to the 30% of his time not devoted to BioMarin, Starr shall not do any activity which is directly competitive with BioMarin. This provision shall not prevent Starr from making passive personal investments, except investments that result in Starr's direct or indirect acquisition of an interest in a business actually or potentially competitive with BioMarin, provided, however, that notwithstanding the foregoing Starr shall not be prohibited from acquiring in the public market shares of securities that do not exceed 1% of the outstanding stock of such issuer and to the extent that, on the effective date of this Agreement, Starr has interests in businesses actually or potentially competitive with BioMarin, nothing in this Agreement shall be construed to require Starr to divest himself of such interests. 2.3 Starr shall not misuse, misappropriate, or, except as authorized by BioMarin's board of directors, disclose to persons not employed by BioMarin, any confidential information concerning BioMarin so long as the information is reasonably subject to characterization as a "trade secret" within the meaning of California Civil Code Section 3426.1 (d) as that section exists on the date of this Agreement is executed or renewed. The confidential information subject to the prohibition in this paragraph includes, but is not limited to, information concerning finances, personnel, customers, computer operations and programs, research and development, products, or services. 3. BIOMARIN'S DUTIES. 3.1 BioMarin shall provide Starr with the compensation, incentives, benefits, and business expense reimbursement set out in other paragraphs of this Agreement. 4. STARR'S COMPENSATION. 4.1 During the first year of this Agreement Starr's BioMarin compensation shall be the sum of $105,000.00 payable in twenty-four equal installments of $4,375.00 each. During the second and third years of this Agreement, Starr's compensation shall be reviewed by the board of directors and appropriate adjustments based on cost-of-living and performance, but in no case will the salary be less than paid in the first year of this Agreement. During any renewal of this Agreement, Starr's compensation shall be as set forth in an addendum to this Agreement, signed by or on behalf of BioMarin and Starr. 4.2 The installments provided in Paragraph 4.1 shall be paid on the fifteenth and last days of each month, unless those days are Saturdays, Sundays, or legal holidays, in which case the installments shall be paid on the last preceeding business day. 4.3 On the first day of every quarter or the first trading day of a quarter, the Company will calculate the capitalization of BioMarin using the price of the common stock either on a publically traded exchange or the most recent price at which a disinterested third party has acquired securities with a value of at least one million dollars ($1,000,000) times the number of outstanding shares. The first adjustment in Starr's salary occurs when the capitalization of BioMarin reaches 50 million dollars ($50,000,000) and for each subsequent increase or decrease of 50 million dollars ($50,000,000), Starr's compensation shall be adjusted upwards or downwards by adding or subtracting fifty thousand dollars ($50,000) in compensation for each fifty million dollar ($50,000,000) change in BioMarin's capitalization. 5. STARR'S BENEFITS. 5.1 BioMarin shall reimburse Starr for the use of his personal automobile(s) for BioMarin-related activities, and Starr shall maintain written records of such use and shall be reimbursed at standard mileage rates acceptable to the Internal Revenue Service payable to him as a result of such personal use. 5.2 BioMarin shall provide Starr with term life insurance, payable as directed by Starr, in the amount of twice his annual compensation, but in no case less than $300,000.00, and shall provide Starr and his dependents with coverage under the Company's health insurance policy. 5.3 If Starr, in the opinion of a licensed medical doctor, becomes mentally or physically incapacitated to the extent that he is unable to discharge his employment duties under this Agreement for a period of six months or more, BioMarin shall continue to provide Starr, for a period ending six months from the determination of incapacity, or at the end of the term of this Agreement if earlier, with his compensation as set out in Paragraph 4.1. 5.4 If Starr dies during the term of this Agreement, BioMarin shall continue to pay, for six months following Starr's death, or until the end of the term of this Agreement if earlier, Starr's compensation, as set out in Paragraph 4.1 of this Agreement, to Starr's surviving spouse, if there is one, or, if not, to the executor or administrator of Starr's estate. BioMarin shall pay any sums owed to Starr as of the date of his death to the executor or administrator of his estate. 5.5 Starr shall be entitled to such vacation time each year as BioMarin provides to its other management employees, on the same terms and conditions. 6. REIMBURSEMENT OF STARR'S REASONABLE BUSINESS EXPENSES. BioMarin shall promptly reimburse Starr for all reasonable business expenses incurred by Starr in the discharge of his duties under this agreement, so long as the expenditures qualify as proper business deductions under the Internal Revenue Code, and they are properly substantiated by Starr with documentation adequate to establish their deductibility under the Internal Revenue Code. 9. TERMINATION. 7.1. This Agreement shall be terminated upon Starr's disability, subject to the provisions of Paragraph 5.3; death, subject to the provisions of Paragraph 5.4; upon Starr's voluntary resignation, or retirement. 7.2 This Agreement may be terminated at any time by BioMarin without cause upon six months' notice to Starr and by Starr upon three months' notice to BioMarin's board of directors. If this Agreement is terminated under the provisions of this paragraph, BioMarin shall determine in its sole discretion whether Starr shall continue to discharge his duties as BioMarin's vice president or if his duties shall terminate at a date prior to the date this Agreement is terminated. In any case, Starr shall be entitled to compensation and benefits as provided in this Agreement until the effective date of this Agreement's termination. 7.3 If, within twelve months of the effective date of this Agreement, Starr employment terminates for "Cause" (as defined herein), Starr shall not be entitled to compensation and benefits as provided in this Agreement. "Cause" is defined as (i) an act of personal dishonesty taken by Starr in connection with his responsibilities as an employee and intended to result in personal enrichment of Starr, (ii) Starr's conviction of, plea of nolo ---- contendere to, a felony, (iii) a willful act by Starr which constitutes gross - ---------- misconduct and which is injurious to the Company, and (iv) following delivery to Starr of a written demand for performance from the Company which describes the basis for the Company's belief that Starr has not substantially performed his duties, continued violations by Starr of Starr's obligations to the Company. The notice of termination under the provisions of this paragraph shall state the grounds for termination and state all relevant facts supporting the grounds. 8. PURCHASE OF STOCK AND STOCK BUY-BACK RIGHTS. Starr shall be entitled to purchase 400,000 shares of the Company's stock at a purchase price of one dollar ($1.00) per share. The Company shall provide a 4-year loan as of the effective date of this Agreement to Starr for the purpose of share purchase. Any stock purchase loans to Starr from the Company shall be due and payable upon termination of employment. If this Agreement is terminated for any reason, then Starr agrees to resell back to BioMarin up to one half of any stock sold or given to him by BioMarin as compensation at the original purchase price on a pro-rata basis as stated below: For example if Starr has been sold 1000 Shares, such shares resold are equal to 1000 minus (1000 times the number of days from June 26, 1997 until June 25, 2001 divided by one thousand four hundred sixty (1460)). For example if the agreement is terminated at 300 days after June 26, 1997, the number of shares resold would be: 1000 - 1000 x 300 = 794 Shares (capped at 50% or 500 shares) ----------- 1460 9. EFFECT OF MERGER, TRANSFER OF ASSETS, OR DISSOLUTION. This Agreement shall not be terminated by a voluntary or involuntary termination of BioMarin's existence resulting from a merger or consolidation in which BioMarin is not the consolidated or surviving entity or a transfer of all or substantially all of BioMarin's assets. If such a merger, consolidation, or transfer of assets occurs, BioMarin's obligations shall be delegated to the surviving, resulting, or transferee entity. 10. OWNERSHIP OF INTANGIBLES. All research, development, designs, processes, inventions, copyrights, patents, trademarks, service marks, and the like that Starr conceives or develops while this Agreement is in effect shall be BioMarin's property. Starr shall execute and deliver to BioMarin a copy of BioMarin's standard employee confidentiality and proprietary rights agreement. 11. NON-COMPETITION BY STARR AFTER TERMINATION 10.1. Immediately upon termination of this Agreement, Starr shall immediately deliver to BioMarin all of BioMarin's property then in his possession or under his control. 11.2 For a period of two years after termination of this Agreement. Starr agrees not to compete unfairly, whether directly or indirectly, with BioMarin. For purposes of this paragraph, to "compete unfairly" is to (a) use or provide to third parties property that is owned by BioMarin under Paragraph 9; (b) use or provide to third parties trade secrets within the definition of California Civil Code Section 3426.1 (d) as that section exists on the date this Agreement is executed or renewed; (c) compete or to assist third parties to compete with BioMarin for the business of BioMarin's customers with respect to the services offered by BioMarin on the date this Agreement is terminated; or (d) attempt to induce or assist third parties to induce or attempt to induce, any of BioMarin's employees to terminate employment with BioMarin and obtain employment by any person or entity that competes with BioMarin. 12. MISCELLANEOUS PROVISIONS. 11.1. This Agreement is made in and is subject to the law of the State of California. 12.2 Notices to be given in writing shall be transmitted by personal delivery or by certified mail, return receipt requested, addressed as set forth below or to another address given through written notice under the provisions of this paragraph: If to BioMarin: BioMarin, Inc Attention: Board of directors 11 Pimentel Court Novato, California 94949 If to Starr: Christopher M. Starr 11 Pimentel Court Novato, California 94949 Notices delivered personally shall be deemed communicated as of the date of receipt. Mailed notices shall be deemed communicated as of the date of mailing. 12.3 Disputes concerning this Agreement shall be referred to arbitration under the California Arbitration Act upon written notice to the other by the party seeking arbitration. BioMarin and Starr shall each appoint one person to hear the dispute, and those persons shall appoint a third. The decision of the arbitrators shall be final, and costs of the arbitration are to be borne in such proportion as the arbitrators may decide. 12.4 This Agreement is BioMarin's and Starr's entire agreement with respect to Starr's employment and it supersedes all other agreements, whether written or oral, between them. Each acknowledges there is no representation, inducement, promise, or agreement, whether oral or in writing, with respect to this Agreement's subject matter that is not incorporated into this Agreement. Executed at Toronto, Canada this 26th day of June, 1997 BioMarin Pharmaceuticals, Inc By /s/ [SIGNATURE] ------------------------------- Director Executed at Toronto, Canada this 26th day of June, 1997 Christopher M. Starr /s/ CHRISTOPHER M. STARR ------------------------ AMENDMENT TO EMPLOYMENT AGREEMENT --------------------------------- WHEREAS: BioMarin Pharmaceutical Inc. (the "COMPANY") and Christopher M. -------- Starr ("EMPLOYEE") entered into an Employment Agreement dated as of June 26, 1997, a copy of which is attached hereto as Exhibit "A" (the "EMPLOYMENT ---------- AGREEMENT"); and WHEREAS: Each of the Company and Employee now desire to amend, in part, -------- Section 2.2 of the Employment Agreement. NOW, THEREFORE, the Company and Employee agree that, as of October 26, 1998, the first two sentences of Section 2.2 of the Employment Agreement shall be amended to read as follows: "2.2 Except with the written consent of BioMarin's board of directors, Starr shall devote one hundred percent (100%) of his productive, time, ability and attention to BioMarin's business and shall not engage in any other business or render any services of a business, commercial or professional nature to or on behalf of any other person or enterprise. Starr shall not engage in any activity which is directly competitive with BioMarin." IN WITNESS WHEREOF, each of the parties have executed this Amendment to the Employment Agreement as of October 26, 1998. BIOMARIN PHARMACEUTICAL INC. By: /s/ RAYMOND W. ANDERSON -------------------------------- Raymond W. Anderson Chief Financial Officer EMPLOYEE /s/ CHRISTOPHER M. STARR -------------------------------- Christopher M. Starr AMENDMENT TO EMPLOYMENT AGREEMENT --------------------------------- WHEREAS: BioMarin Pharmaceutical Inc. (the "COMPANy") and Christopher M. ------- Starr ("EMPLOYEE") entered into an Employment Agreement dated as of June 26, 1997, a copy of which is attached hereto as Exhibit "A"; ----------- WHEREAS: The Company and Employee entered into an amendment to the ------- Employment Agreement dated October 26, 1998, a copy of which is attached hereto as Exhibit "B" (Exhibit A and Exhibit B together, the "EMPLOYMENT AGREEMENT"); ----------- and WHEREAS: Each of the Company and Employee now desire to amend Section 4.3 ------- of the Employment Agreement. NOW, THEREFORE, the Company and Employee agree that, as of January 1, 1998, Section 4.3 of the Employment Agreement shall be amended to read as follows: "4.3 Starr shall be paid an annual bonus, in addition to annual cash compensation as detailed in Sections 4.1 and 4.2, according to the guidelines enumerated on the document titled `Founders' Incentive Compensation Adjustment as of January 1, 1998,' which document is hereby deemed incorporated by reference herein. " The document titled "Founders' Incentive Compensation Adjustment as of January 1, 1998" is attached hereto as Exhibit "C". ----------- IN WITNESS WHEREOF, each of the parties have executed this Amendment to the Employment Agreement as of January 1, 1998. BIOMARIN PHARMACEUTICAL INC. By: /s/ Raymond W. Anderson -------------------------- Raymond W. Anderson Chief Financial Officer EMPLOYEE /s/ Christopher M. Starr -------------------------- Christopher M. Starr AMENDMENT TO EMPLOYMENT AGREEMENT --------------------------------- WHEREAS: BioMarin Pharmaceutical Inc. (the "COMPANY") and Christopher M. ------- Starr ("EMPLOYEE") entered into an Employment Agreement dated as of June 26, 1997, a copy of which is attached hereto as Exhibit "A"; ----------- WHEREAS: Each of the Company and Employee now desire to amend the ------- Employment Agreement. NOW, THEREFORE, the Company and Employee agree that, as of January 1, 1999, the Employment Agreement shall be amended to add the following provisions: In the event of the Involuntary Termination, as defined below, of Employee's employment with the Company within one (1) year of a Change of Control, as defined below, Employee shall be entitled to receive from the Company, within ten (10) days of such Involuntary Termination, a severance payment equal to six (6) months of Employee's then-current annual salary and fifty percent (50%) of the annual bonus that Employee would otherwise be entitled to receive for the calendar year in which such Involuntary Termination occurs. Additionally, upon such Involuntary Termination, fifty percent (50%) of the then-unvested portion of all of Employee's options to purchase capital stock of the Company shall immediately vest. The capitalized terms used above shall have the following meanings: 1. "Change of Control" shall mean the occurrence of any of the following events: a) Any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becoming the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company's then outstanding voting securities; b) A change in the composition of the Board of Directors of the Company occurring within a two-year period, as a result of which fewer than a majority of the directors are Incumbent Directors. "Incumbent Directors" shall mean directors who either (A) are directors of the Company as of the date hereof, or (B) are elected, or nominated for election, to the Board of Directors of the Company with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual not otherwise an Incumbent Director whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or c) The approval by stockholders of the Company of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the approval by the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company's assets. 2. "Involuntary Termination" shall mean (i) without the Employee's express written consent, a significant reduction of the Employee's duties, position or responsibilities, or the removal of the Employee from such position and responsibilities, unless the Employee is provided with a comparable position (i.e., a position of equal or greater organizational level, duties, authority, compensation and status); (ii) without the Employee's express written consent, a substantial reduction, without good business reasons, of the facilities and perquisites (including office space and location) available to the Employee immediately prior to such reduction; (iii) a reduction by the Company in the annual salary of the Employee as in effect immediately prior to such reduction; (iv) a material reduction by the Company in the kind or level of employee benefits to which the Employee is entitled immediately prior to such reduction with the result that the Employee's overall benefits package is significantly reduced; (v) without the Employee's express written consent, the relocation of the Employee to a facility or a location more than 25 miles from the Employee's then present location; (vi) any purported termination of the Employee by the Company which is not effected for disability or for Cause, or any purported termination for which the grounds relied upon are not valid; or (vii) the failure of the Company to obtain the assumption of this Agreement by any successors in the event of a Change of Control. IN WITNESS WHEREOF, each of the parties have executed this Amendment to the Employment Agreement as of January 1, 1999. BIOMARIN PHARMACEUTICAL INC. By: /s/ Grant W. Denison, Jr. --------------------------- Grant W. Denison, Jr., Chief Executive Officer EMPLOYEE /s/ Christopher M. Starr -------------------------- Christopher M. Starr EX-10.11 16 EMPLOYMENT AGREEMENT WITH R. ANDERSON EXHIBIT 10.11 [LOGO OF BIOMARIN PHARMACEUTICAL, INC.] June 22, 1998 R. William Anderson 235 St. Christopher Drive Danville CA 94526 VIA FEDERAL EXPRESS (LOCAL PHONE 510 837 5493) - ---------------------------------------------- Dear Bill: I am pleased to offer you the position of Vice President of Finance and Administration of BioMarin Pharmaceutical, Inc. Contingent on approval at the next Board of Director's meeting you will be an officer of the Company, and you will be reporting directly to me. Your duties will include being responsible for the Company's financial accounting and financial management functions and being the chief administrative officer of the Company with oversight for human resources facilities, purchasing, legal, information systems and administrative support services. The financial functions include directing the company's financial strategy, being responsible for the Company's regulatory reporting and relationships with regulators, and providing business analytical activities for BioMarin. Your duties will also include data, budget and financial analysis, report writing, and general administrative assistance as a member of the management team. Your salary will be $185,000 per year ($15,416.67 per month). Although a performance bonus cannot be guaranteed at this time, it has been the policy of the company to offer such bonuses to its officers depending on the overall performance of the Company and the Company's financial condition. Such bonuses have been in the form of cash or stock options which are customarily 10-15% of salary. Your employment may be terminated at any time by BioMarin without cause upon six months' notice to you and by you upon three months' notice to BioMarin's Board of Directors. If your employment is terminated under the provisions of this paragraph, BioMarin shall determine in its sole discretion whether you shall continue to discharge your duties as Vice President of Finance and Administration. In any case, you shall be entitled to compensation and benefits as provided in this letter until the effective date of your termination. 11 Pimentel Court Novato CA 94949 Phone 415 382 3535 Fax 415 382 7889 If, within twelve months of this letter, your employment terminates for "Cause" (as defined herein), you shall not be entitled to compensation and benefits as provided in this letter. "Cause" is defined as (i) an act of personal dishonesty taken by you in connection with your responsibilities as an employee and intended to result in your personal enrichment, (ii) your conviction of, plea of nolo contendere to, a felony, (iii) a willful act by you which constitutes - --------------- gross misconduct and which is injurious to the Company, and (iv) following delivery to you of a written demand for performance from the Company which describes the basis for the Company's belief that you have not substantially performed your duties, continued violations by you of your obligations to the Company. The notice of termination under the provisions of this paragraph shall state the grounds for termination and state all relevant facts supporting the grounds. If you, in the opinion of a licensed medical doctor, become mentally or physically incapacitated to the extent that you are unable to discharge your employment duties for a period of six months or more, BioMarin shall continue to provide you, for a period ending six months from the determination of incapacity with the compensation as set out in this letter. If you die during the term of your employment, BioMarin shall continue to pay, for six months following your death, your compensation, as set out in this letter, to your surviving spouse, if there is one, or, if not, to the executor or administrator of your estate. As a regular employee of BioMarin Pharmaceutical, Inc. you will accrue three weeks per year of paid vacation, and be covered by the Company's medical, dental, accident-disability, and group life insurance plans. The Company also has a 401k plan for deferred compensation and retirement planning, although at this time the Company is making no contributions to the plan for its staff. A detailed description of the Company's benefits program can be found in the BioMarin employee manual and Principal Mutual brochure which I am providing to you with this letter. Subject to approval of the Board of Directors of BioMarin Pharmaceutical, Inc at its next meeting, you will be offered options to purchase 200,000 shares of common stock in BioMarin Pharmaceutical. The price for these options will be set at fair market value by the Board (the closing stock price at the time of granting the options). Today this price is US$4.00. The shares under this option will have a vesting period of 1/3 at the time of completion of the Company's initial public offering and the remaining 2/3 will vest 6/48th on the sixth month anniversary of your employment and 1/48th per month thereafter until fully vested. This option will expire 5 years from the date of grant or 90 days following your termination if that occurs before 5 years. Please carefully read the enclosed "BioMarin Pharmaceutical Share Option Plan -- 1997" for details. As additional incentive BioMarin Pharmaceutical will also agree to pay for reasonable moving expenses as outlined in your copy of the company's policy manual. This includes packing and moving expenses as well as food, lodging, and car rental for the first month here in the North Bay Area. This offer of employment is made contingent on your providing the Company with the legally required proof of your identity and authorization to work in the United States. Also as stated in the employee manual, I need to remind you that nothing in this letter is designed to imply an employment contract of specific duration with BioMarin Pharmaceutical. Bill, we look forward to your response to this offer. All of us here at BioMarin are excited about your joining us. Please indicate your acceptance of this offer by signing the acknowledgement below and return this letter to us before June 29th. If you accept the position, we would anticipate a starting date of July 1st or sooner. Please do not hesitate to call me if you have any questions. Sincerely, /s/ GRANT W. DENISON, JR. - ------------------------------------ Grant W. Denison, Jr. Chairman and Chief Executive Officer Accepted and agreed to: /s/ R. WILLIAM ANDERSON - ------------------------------------ R. William Anderson July 1, 1998 - ------------------------------------ Date AMENDMENT TO EMPLOYMENT AGREEMENT --------------------------------- WHEREAS: BioMarin Pharmaceutical Inc. (the "COMPANY") and Raymond W. ------- Anderson ("EMPLOYEE") entered into an Employment Agreement dated as of July 1, 1998, a copy of which is attached hereto as Exhibit "A"; ----------- WHEREAS: Each of the Company and Employee now desire to amend the ------- Employment Agreement. NOW, THEREFORE, the Company and Employee agree that, as of January 1, 1999, the Employment Agreement shall be amended to add the following provisions: In the event of the Involuntary Termination, as defined below, of Employee's employment with the Company within one (1) year of a Change of Control, as defined below, Employee shall be entitled to receive from the Company, within ten (10) days of such Involuntary Termination, a severance payment equal to six (6) months of Employee's then-current annual salary and fifty percent (50%) of the annual bonus that Employee would otherwise be entitled to receive for the calendar year in which such Involuntary Termination occurs. Additionally, upon such Involuntary Termination, fifty percent (50%) of the then-unvested portion of all of Employee's options to purchase capital stock of the Company shall immediately vest. The capitalized terms used above shall have the following meanings: 1. "Change of Control" shall mean the occurrence of any of the following events: d) Any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becoming the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company's then outstanding voting securities; e) A change in the composition of the Board of Directors of the Company occurring within a two-year period, as a result of which fewer than a majority of the directors are Incumbent Directors. "Incumbent Directors" shall mean directors who either (A) are directors of the Company as of the date hereof, or (B) are elected, or nominated for election, to the Board of Directors of the Company with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual not otherwise an Incumbent Director whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or f) The approval by stockholders of the Company of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the approval by the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company's assets. 2. "Involuntary Termination" shall mean (i) without the Employee's express written consent, a significant reduction of the Employee's duties, position or responsibilities, or the removal of the Employee from such position and responsibilities, unless the Employee is provided with a comparable position (i.e., a position of equal or greater organizational level, duties, authority, compensation and status); (ii) without the Employee's express written consent, a substantial reduction, without good business reasons, of the facilities and perquisites (including office space and location) available to the Employee immediately prior to such reduction; (iii) a reduction by the Company in the annual salary of the Employee as in effect immediately prior to such reduction; (iv) a material reduction by the Company in the kind or level of employee benefits to which the Employee is entitled immediately prior to such reduction with the result that the Employee's overall benefits package is significantly reduced; (v) without the Employee's express written consent, the relocation of the Employee to a facility or a location more than 25 miles from the Employee's then present location; (vi) any purported termination of the Employee by the Company which is not effected for disability or for Cause, or any purported termination for which the grounds relied upon are not valid; or (vii) the failure of the Company to obtain the assumption of this Agreement by any successors in the event of a Change of Control. IN WITNESS WHEREOF, each of the parties have executed this Amendment to the Employment Agreement as of January 1, 1999. BIOMARIN PHARMACEUTICAL INC. By: /s/ G W Denison Jr --------------------------------------- Grant W. Denison, Jr., Chief Executive Officer EMPLOYEE /s/ R W Anderson -------------------------------------- Raymond W. Anderson EX-10.12 17 EMPLOYMENT AGREEMENT WITH S. SWEIDLER, M.D., PH.D. EXHIBIT 10.12 [LOGO OF BIOMARIN PHARMACEUTICAL, INC.] May 29, 1998 Stuart J. Swiedler, MD, PhD 6012 Auburn Avenue Oakland CA 94618 VIA FEDERAL EXPRESS (LOCAL PHONE 510 655 6309) - ---------------------------------------------- Dear Stuart: I am pleased to offer you the position of Vice President for Scientific and Clinical Affairs at BioMarin Pharmaceutical, Inc. Contingent on approval at the next Board of Director's meeting you will be an officer of the Company, and you will be reporting directly to me. Your duties will include being responsible for the Company's pre-clinical drug development program as well as supporting and supervising various aspects of the Company's human clinical trials and regulatory activities. This effort by you may also include some assistance in the areas of sales and marketing, manufacturing and business development activities. Your duties will also include data, budget and financial analysis, report writing, and administrative assistance as a member of the management team. Your salary will be $150,000 per year ($12,500.00 per month). Although a performance bonus cannot be guaranteed at this time, it has been the policy of the company to offer such bonuses to its officers depending on the overall performance of the Company and the Company's financial condition. Such bonuses have been in the form of cash or stock options which are customarily 10-15% of salary. In addition the Company will pay for reasonable education expenses to maintain your medical license. Your employment may be terminated at any time by BioMarin without cause upon six months' notice to you and by you upon three months' notice to BioMarin's Board of Directors. If your employment is terminated under the provisions of this paragraph, BioMarin shall determine in its sole discretion whether you shall continue to discharge your duties as BioMarin's General Manager. In any case, you shall be entitled to compensation and benefits as provided in this letter until the effective date of your termination. 11 Pimentel Court Novato CA 94949 Phone 415 382 3535 Fax 415 382 7889 If, within twelve months of this letter, your employment terminates for "Cause" (as defined herein), you shall not be entitled to compensation and benefits as provided in this letter. "Cause" is defined as (i) an act of personal dishonesty taken by you in connection with your responsibilities as an employee and intended to result in your personal enrichment, (ii) your conviction of, plea of nolo contendere to, a felony, (iii) a willful act by you which constitutes gross - ---------------- misconduct and which is injurious to the Company, and (iv) following delivery to you of a written demand for performance from the Company which describes the basis for the Company's belief that you have not substantially performed your duties, continued violations by you of your obligations to the Company. The notice of termination under the provisions of this paragraph shall state the grounds for termination and state all relevant facts supporting the grounds. If you, in the opinion of a licensed medical doctor, become mentally or physically incapacitated to the extent that you are unable to discharge your employment duties for a period of six months or more, BioMarin shall continue to provide you, for a period ending six months from the determination of incapacity with the compensation as set out in this letter. If you die during the term of your employment, BioMarin shall continue to pay, for six months following your death, your compensation, as set out in this letter, to your surviving spouse, if there is one, or, if not, to the executor or administrator of your estate. As a regular employee of BioMarin, Inc. you will accrue three weeks per year of paid vacation, and be covered by the Company's medical, dental, accident- disability, and group life insurance plans. The Company also has a 40lk plan for deferred compensation and retirement planning, although at this time the Company is making no contributions to the plan for its staff. A detailed description of the Company's benefit program can be found in the BioMarin employee manual and Principal Mutual brochure which I have provided to you. Subject to approval of the Board of Directors of BioMarin at its next meeting, you will be offered options to purchase 100,000 shares of common stock in BioMarin. The price for these options will be set at fair market value by the Board (the last financing stock price at the time of granting the options). Today this price is US$1.00. The shares under this option will have a vesting period of 6/48th on the sixth month anniversary of your employment and 1/48th per month thereafter until fully vested. This option will expire 5 years from the date of grant or 90 days following your termination if that occurs before 5 years. Please carefully read the enclosed "BioMarin Pharmaceutical 1997 Stock Plan" for details. This offer of employment is made contingent on your providing the Company with the legally required proof of your identity and authorization to work in the United States. Also as stated in the employee manual, I need to remind you that nothing in this letter is designed to imply an employment contract of specific duration with BioMarin. Stu, we look forward to your response to this offer. All of us here at BioMarin are excited about your joining us. Please indicate your acceptance of this offer by signing the acknowledgement below and return this letter to us before June 8th. If you accept the position, we would anticipate a starting date of June 15th or sooner. Please do not hesitate to call me if you have any questions. Sincerely, /s/ JOHN C. KLOCK - --------------------------- John C. Klock President Accepted and agreed to: /s/ STUART J. SWIEDLER - --------------------------- Stuart J. Swiedler, MD, PhD 6/1/98 - --------------------------- Date AMENDMENT TO EMPLOYMENT AGREEMENT ---------------------------------- WHEREAS: BioMarin Pharmaceutical Inc. (the "COMPANY") and Stuart J. ------- Sweidler ("EMPLOYEE") entered into an Employment Agreement dated as of June 1, 1998, a copy of which is attached hereto as Exhibit "A"; ----------- WHEREAS: Each of the Company and Employee now desire to amend the ------- Employment Agreement. NOW, THEREFORE, the Company and Employee agree that, as of January 1, 1999, the Employment Agreement shall be amended to add the following provisions: In the event of the Involuntary Termination, as defined below, of Employee's employment with the Company within one (1) year of a Change of Control, as defined below, Employee shall be entitled to receive from the Company, within ten (10) days of such Involuntary Termination, a severance payment equal to six (6) months of Employee's then-current annual salary and fifty percent (50%) of the annual bonus that Employee would otherwise be entitled to receive for the calendar year in which such Involuntary Termination occurs. Additionally, upon such Involuntary Termination, fifty percent (50%) of the then unvested portion of all of Employee's options to purchase capital stock of the Company shall immediately vest. The capitalized terms used above shall have the following meanings: 1. "Change of Control" shall mean the occurrence of any of the following events: a) Any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becoming the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company's then outstanding voting securities; b) A change in the composition of the Board of Directors of the Company occurring within a two-year period, as a result of which fewer than a majority of the directors are Incumbent Directors. "Incumbent Directors" shall mean directors who either (A) are directors of the Company as of the date hereof, or (B) are elected, or nominated for election, to the Board of Directors of the Company with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual not otherwise an Incumbent Director whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or c) The approval by stockholders of the Company of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the approval by the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company's assets. 2. "Involuntary Termination" shall mean (i) without the Employee's express written consent, a significant reduction of the Employee's duties, position or responsibilities, or the removal of the Employee from such position and responsibilities, unless the Employee is provided with a comparable position (i.e., a position of equal or greater organizational level, duties, authority, compensation and status); (ii) without the Employee's express written consent, a substantial reduction, without good business reasons, of the facilities and perquisites (including office space and location) available to the Employee immediately prior to such reduction; (iii) a reduction by the Company in the annual salary of the Employee as in effect immediately prior to such reduction; (iv) a material reduction by the Company in the kind or level of employee benefits to which the Employee is entitled immediately prior to such reduction with the result that the Employee's overall benefits package is significantly reduced; (v) without the Employee's express written consent, the relocation of the Employee to a facility or a location more than 25 miles from the Employee's then present location; (vi) any purported termination of the Employee by the Company which is not effected for disability or for Cause, or any purported termination for which the grounds relied upon are not valid; or (vii) the failure of the Company to obtain the assumption of this Agreement by any successors in the event of a Change of Control. IN WITNESS WHEREOF, each of the parties have executed this Amendment to the Employment Agreement as of January 1, 1999. BIOMARIN PHARMACEUTICAL INC. By:/s/ R. W. Anderson ------------------------- Raymond W. Anderson, Chief Financial Officer EMPLOYEE /s/ Stuart J. Swiedler ------------------------- Stuart J. Swiedler EX-10.13 18 EMPLOYMENT AGREEMENT WITH E. KAKKIS, M.D., PH.D. EXHIBIT 10.13 [LOGO OF BIOMARIN PHARMACEUTICAL, INC.] June 30, 1998 Emil Kakkis, MD PhD Medical Genetics -- Harbor UCLA 1124 West Carson Street, Building E4 Torrance CA 90502 VIA FEDERAL EXPRESS (LOCAL PHONE 310 222 4145) - ---------------------------------------------- Dear Emil: I am pleased to offer you the position of President of the Genetics Division of BioMarin Pharmaceutical, Inc. ("BioMarin Genetics"). Contingent on approval at the next Board of Director's meeting you will be an officer of the Company, and you will be reporting directly to me. Your duties will include being responsible for the Company's research, pre-clinical and clinical activities for genetic diseases. This includes directing the company's strategic direction, product development, pre-market manufacturing for clinical trials, and business development activities for BioMarin Genetics. Your duties will also include data, budget and financial analysis, report writing, and administrative assistance as a member of the management team. Your salary will be $225,000 per year ($18,750.00 per month). A one-time performance bonus of $50,000 will be paid to you upon the successful filing of any IND by your division. The Company will also pay you a one-time performance bonus of $100,000 for each NDA approval of a drug developed by your division. In addition a one-time signing bonus of $50,000 will be paid to you on your start- date of employment with the understanding that the first performance bonus for an NDA approval will be reduced from $100,000 to $50,000. Your employment may be terminated at any time by BioMarin without cause upon six months' notice to you and by you upon three months' notice to BioMarin's Board of Directors. If your employment is terminated under the provisions of this paragraph, BioMarin shall determine in its sole discretion whether you shall continue to discharge your duties as President of BioMarin Genetics. In any case, you shall be entitled to compensation and benefits as provided in this letter until the effective date of your termination. 11 Pimentel Court Novato CA 94949 Phone 415 382 3535 Fax 415 382 7889 If, within twelve months of this letter, your employment terminates for "Cause" (as defined herein), you shall not be entitled to compensation and benefits as provided in this letter. "Cause" is defined as (i) an act of personal dishonesty taken by you in connection with your responsibilities as an employee and intended to result in your personal enrichment, (ii) your conviction of, plea of nolo contendere to, a felony, (iii) a willful act by you which constitutes gross - --------------- misconduct and which is injurious to the Company. If you, in the opinion of a licensed medical doctor, become mentally or physically incapacitated to the extent that you are unable to discharge your employment duties for a period of six months or more, BioMarin shall continue to provide you, for a period ending six months from the determination of incapacity with the compensation as set out in this letter. If you die during the term of your employment, BioMarin shall continue to pay, for six months following your death, your compensation, as set out in this letter, to your surviving spouse, if there is one, or, if not, to the executor or administrator of your estate. As a regular employee of BioMarin Pharmaceutical, Inc. you will accrue three weeks per year of paid vacation, and be covered by the Company's medical, dental, accident-disability, and group life insurance plans. The Company also has a 401k plan for deferred compensation and retirement planning, although at this time the Company is making no contributions to the plan for its staff. A detailed description of the Company's benefits program can be found in the BioMarin employee manual and Principal Mutual brochure which I am providing to you with this letter. As approved by the Board of Directors of BioMarin Pharmaceutical, Inc,, in a unanimous written consent dated June 15, 1998, I can offer you options to purchase 200,000 shares of common stock in BioMarin Pharmaceutical at $4.00. The shares under this option will have a vesting period of 6/48th on the sixth month anniversary of your employment and 1/48th per month thereafter until fully vested. This option will expire 5 years from the date of grant or 90 days following your termination if that occurs before 5 years. Please carefully read the enclosed "BioMarin Pharmaceutical Share Option Plan -- 1997" for details. Although additional stock option bonuses cannot be guaranteed at this time, it has been the policy of the company to offer such bonuses to its officers depending on the overall performance of the Company and the Company's financial condition. Such bonuses have been in the form of cash or stock options which are customarily 10-15% of salary. As additional incentive BioMarin Pharmaceutical will also agree to pay for reasonable moving expenses as outlined in your copy of the company's policy manual. This includes packing and moving expenses as well as food, lodging, and car rental for the first month here in the Bay Area. As additional incentives, the Company will allow you to pursue some clinical activity in genetics as your schedule allows and at your discretion, as well as guarantee you the use of a small laboratory (~1000 square feet) and research funds of $100,000 per year to pursue basic research activities: This offer of employment is made contingent on your providing the Company with the legally required proof of your identity and authorization to work in the United States. Also as stated in the employee manual, I need to remind you that nothing in this letter is designed to imply an employment contract of specific duration with BioMarin Pharmaceutical. Emil, we look forward to your response to this offer. All of us here at BioMarin are excited about your joining us. Please indicate your acceptance of this offer by signing the acknowledgement below and return this letter to us before June 29th. If you accept the position, we would anticipate a starting date of September 1st or sooner. Please do not hesitate to call me if you have any questions. Sincerely, /s/ JOHN C. KLOCK - -------------------------- John C. Klock President Accepted and agreed to: /s/ EMIL KAKKIS, MD, PhD - -------------------------- Emil Kakkis, MD, PhD July 9, 1998 - -------------------------- Date AMENDMENT TO EMPLOYMENT AGREEMENT --------------------------------- WHEREAS: BioMarin Pharmaceutical Inc. (the "COMPANY") and Emil D. Kakkis ------- ("EMPLOYEE") entered into an Employment Agreement dated as of July 9, 1997, a copy of which is attached hereto as Exhibit "A"; ----------- WHEREAS: Each of the Company and Employee now desire to amend the ------- Employment Agreement. NOW, THEREFORE, the Company and Employee agree that, as of January 1, 1999, the Employment Agreement shall be amended to add the following provisions: In the event of the Involuntary Termination, as defined below, of Employee's employment with the Company within one (1) year of a Change of Control, as defined below, Employee shall be entitled to receive from the Company, within ten (10) days of such Involuntary Termination, a severance payment equal to six (6) months of Employee's then current annual salary and fifty percent (50%) of the annual bonus that Employee would otherwise be entitled to receive for the calendar year in which such Involuntary Termination occurs. Additionally, upon such Involuntary Termination, fifty percent (50%) of the then unvested portion of all of Employee's options to purchase capital stock of the Company shall immediately vest. The capitalized terms used above shall have the following meanings: 1. "Change of Control" shall mean the occurrence of any of the following events: g) Any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becoming the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company's then outstanding voting securities; h) A change in the composition of the Board of Directors of the Company occurring within a two-year period, as a result of which fewer than a majority of the directors are Incumbent Directors. "Incumbent Directors" shall mean directors who either (A) are directors of the Company as of the date hereof, or (B) are elected, or nominated for election, to the Board of Directors of the Company with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual not otherwise an Incumbent Director whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or i) The approval by stockholders of the Company of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the approval by the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company's assets. 2. "Involuntary Termination" shall mean (i) without the Employee's express written consent, a significant reduction of the Employee's duties, position or responsibilities, or the removal of the Employee from such position and responsibilities, unless the Employee is provided with a comparable position (i.e., a position of equal or greater organizational level, duties, authority, compensation and status); (ii) without the Employee's express written consent, a substantial reduction, without good business reasons, of the facilities and perquisites (including office space and location) available to the Employee immediately prior to such reduction; (iii) a reduction by the Company in the annual salary of the Employee as in effect immediately prior to such reduction; (iv) a material reduction by the Company in the kind or level of employee benefits to which the Employee is entitled immediately prior to such reduction with the result that the Employee's overall benefits package is significantly reduced; (v) without the Employee's express written consent, the relocation of the Employee to a facility or a location more than 25 miles from the Employee's then present location; (vi) any purported termination of the Employee by the Company which is not effected for disability or for Cause, or any purported termination for which the grounds relied upon are not valid; or (vii) the failure of the Company to obtain the assumption of this Agreement by any successors in the event of a Change of Control. IN WITNESS WHEREOF, each of the parties have executed this Amendment to the Employment Agreement as of January 1, 1999. BIOMARIN PHARMACEUTICAL INC. By: /s/ R W Anderson ------------------------------------ Raymond W. Anderson, Chief Financial Officer EMPLOYEE /s/ Emil D. Kakkis ------------------------------------ Emil D. Kakkis EX-10.14 19 EMPLOYMENT AGREEMENT BETWEEN GLYKO AND B. BRADLEY EXHIBIT 10.14 _________ G L Y K O --------- February 22, 1998 Brian K. Brandley, PhD 106 Kimberly Court Rolling Hills IL 60008 VIA FEDERAL EXPRESS (LOCAL PHONE 847 397 8901) Dear Brian: I am pleased to offer you the position of General Manager of Glyko, Inc. Contingent on approval at the next Board of Director's meeting you will be an officer of the Company, and you will be reporting directly to me. Your duties will include being responsible for the Company's analytic instrument and reagent business and the consulting business. This includes directing the company's sales and marketing, manufacturing, product development, and business development activities. The Glyko consulting business includes the custom services, diagnostic collaborations and research work for BioMarin Pharmaceutical Inc. Because you will have responsibility for some functions you are not experienced in (i.e. sales & marketing), Chris Starr and I will continue to assist you until you are able to completely manage these tasks independently. We anticipate that this will take 12 months. Furthermore we will ask you to begin a business development effort in the area of industrial enzymes which will require directing your sales team, traveling, and preparing proposals for clients. Your duties will also include data, budget and financial analysis, report writing, and administrative assistance as a member of the management team. Your salary will be $135,000 per year ($11,250.00 per month). Although a performance bonus cannot be guaranteed at this time, it has been the policy of the company to offer such bonuses to its officers depending on the overall performance of the Company and the Company's financial condition. Such bonuses have been in the form of cash or stock options which are customarily 10-15% of salary. Your employment may be terminated at any time by Glyko without cause upon six months' notice to you and by you upon three months' notice to Glyko's Board of Directors. If your employment is terminated under the provisions of this paragraph, Glyko shall determine in its sole discretion whether you shall continue to discharge your duties as Glyko's General Manager. In any case, you shall be entitled to compensation and benefits as provided in this letter until the effective date of your termination. If, within twelve months of this letter, your employment terminates for "Cause" (as defined herein), you shall not be entitled to compensation and benefits as provided in this letter. "Cause" is defined as (i) an act of personal dishonesty taken by you in connection with your responsibilities as an employee and intended to result in your personal enrichment, (ii) your conviction of, plea of nolo contendere to, a felony, (iii) a willful act by you which constitutes gross - --------------- misconduct and which is injurious to the Company, and (iv) following delivery to you of a written demand for performance from the Company which describes the basis for the Company's belief that you have not substantially performed your duties, continued violations by you of your obligations to the Company. The notice of termination under the provisions of this paragraph shall state the grounds for termination and state all relevant facts supporting the grounds. If you, in the opinion of a licensed medical doctor, become mentally or physically incapacitated to the extent that you are unable to discharge your employment duties for a period of six months or more, Glyko shall continue to provide you, for a period ending six months from the determination of incapacity with the compensation as set out in this fetter. If you die during the term of your employment, Glyko shall continue to pay, for six months following your death, your compensation, as set out in this letter, to your surviving spouse, if there is one, or, if not, to the executor or administrator of your estate. As a regular employee of Glyko, Inc. you will accrue three weeks per year of paid vacation, and be covered by the Company's medical, dental, accident- disability, and group life insurance plans. The Company also has a 40 l k plan for deferred compensation and retirement planning, although at this time the Company is making no contributions to the plan for its staff. A detailed description of the Company's benefits program can be found in the Glyko employee manual and Principal Mutual brochure which I am providing to you with this letter. Subject to approval of the Board of Directors of Glyko Biomedical Ltd at its next meeting, you will be offered options to purchase 150,000 shares of common stock in Glyko Biomedical Ltd. The price for these options will be set at fair market value by the Board (the closing stock price at the time of granting the options). Today this price is US$1.70. The shares under this option will have a vesting period of 6/48th on the sixth month anniversary of your employment and 1/48th per month thereafter until fully vested. This option will expire 5 years from the date of grant or 90 clays following your termination if that occurs before 5 years. Please carefully read the enclosed "Glyko Biomedical Share Option-Plan- 1994" for details. As additional incentive Glyko will also agree to pay for reasonable moving expenses as outlined in your copy of the company's policy manual. This includes packing and moving expenses as well as food, lodging, and car rental for the first month here in California. This offer of employment is made contingent on your providing the Company with the legally required proof of yore: identity and authorization to work in the United States. Also as stated in the employee manual, I need to remind you that nothing in this letter is designed to imply an employment contract of specific duration with Glyko. Brian, we look forward to your response to this offer. All of us here at Glyko are excited about your joining us. Please indicate your acceptance of this offer by signing the acknowledgement below and return this letter to us before March 6th. If you accept the position, we would anticipate a starting date of April 1st or sooner. Please do not hesitate to call me if you have any questions. Sincerely, /s/ John C. Klock John C. Klock President Accepted and agreed to: /s/ Brian K. Brandley - ------------------------- Brian K. Brandley, PhD 2/25/98 - ------- Date AMENDMENT TO EMPLOYMENT AGREEMENT --------------------------------- WHEREAS: BioMarin Pharmaceutical Inc. (the "COMPANY") and Brian K. Brandley ------- ("EMPLOYEE") entered into an Employment Agreement dated as of February 25, 1998, a copy of which is attached hereto as Exhibit "A"; ----------- WHEREAS: Each of the Company and Employee now desire to amend the ------- Employment Agreement. NOW, THEREFORE, the Company and Employee agree that, as of January 1, 1999, the Employment Agreement shall be amended to add the following provisions: In the event of the Involuntary Termination, as defined below, of Employee's employment with the Company within one (1) year of a Change of Control, as defined below, Employee shah be entitled to receive from the Company, within ten (10) days of such Involuntary Termination, a severance payment equal to six (6) months of Employee's then-current annual salary and fifty percent (50%) of the annual bonus that Employee would otherwise be entitled to receive for the calendar year in which such Involuntary Termination occurs. Additionally, upon such Involuntary Termination, fifty percent (50%) of the then unvested portion of all of Employee's options to purchase capital stock of the Company shall immediately vest. The capitalized terms used above shall have the following meanings: 1. "Change of Control" shall mean the occurrence of any of the following events: j) Any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becoming the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company's then outstanding voting securities; k) A change in the composition of the Board of Directors of the Company occurring within a two-year period, as a result of which fewer than a majority of the directors are Incumbent Directors. "Incumbent Directors" shall mean directors who either (A) are directors of the Company as of the date hereof, or (B) are elected, or nominated for election, to the Board of Directors of the Company with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual not otherwise an Incumbent Director whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or l) The approval by stockholders of the Company of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the approval by the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company's assets. 2. "Involuntary Termination" shall mean (i) without the Employee's express written consent, a significant reduction of the Employee's duties, position or responsibilities, or the removal of the Employee from such position and responsibilities, unless the Employee is provided with a comparable position (i.e., a position of equal or greater organizational level, duties, authority, compensation and status); (ii) without the Employee's express written consent, a substantial reduction, without good business reasons, of the facilities and perquisites (including office space and location) available to the Employee immediately prior to such reduction; (iii) a reduction by the Company in the annual salary of the Employee as in effect immediately prior to such reduction; (iv) a material reduction by the Company in the kind or level of employee benefits to which the Employee is entitled immediately prior to such reduction wish the result that the Employee's overall benefits package is significantly reduced; (v) without the Employee's express written consent, the relocation of the Employee to a facility or a location more than 25 miles from the Employee's then present location; (vi) any purported termination of the Employee by the Company which is not effected for disability or for Cause, or any purported termination for which the grounds relied upon are not valid; or (vii) the failure of the Company to obtain the assumption of this Agreement by any successors in the event of a Change of Control. IN WITNESS WHEREOF, each of the parties have executed this Amendment to the Employment Agreement as of January 1, 1999. BIOMARIN PHARMACEUTICAL INC. By: /s/ R W Anderson -------------------------------- Raymond W. Anderson, Chief Financial Officer EMPLOYEE /s/ Brian K Brandley -------------------------------- Brian K. Brandley EX-10.15 20 LICENSE AGREEMENT WITH GLYKO BIOMEDICAL EXHIBIT 10.15 LICENSE AGREEMENT This LICENSE AGREEMENT (the "Agreement") is made and entered into as of June 26, 1997, by and between Glyko Biomedical Ltd, ("Glyko"), a Canadian corporation having its offices at Cassels Brock Blackwell, 40 King Street West, 21st Floor, Toronto, Ontario M5H 3C2, Canada existing under the laws of Canada and BioMarin Pharmaceuticals, Inc, having offices at 11 Pimentel Court, Novato, CA 94949 existing under the laws of California ("BioMarin"). RECITALS WHEREAS, Glyko has rights in certain technology; and WHEREAS BioMarin desires to acquire from Glyko, and Glyko is willing to grant to BioMarin, rights in such technology for the purpose of allowing BioMarin to develop and market products for Therapeutic Uses (as defined below); NOW THEREFORE, in consideration of the foregoing and the mutual promises contained herein, the parties agree as follows: 1. DEFINITIONS ----------- 1.1 "Technology" shall mean all know-how, processes, formulae, concepts, ---------- ideas, data, technical information, testing results, descriptions, technologies, procedures, processes, articles of manufacture, compositions of matter, designs, inventions, discoveries, documents and works of authorship, whether or not patentable or patented, now owned or licensed by Glyko and its subsidiaries and affiliates, including without limitation the items described in Exhibit A --------- hereto. 1.2 "Therapeutic Uses" shall mean pharmaceutical entities, medical ------------------ devices, chemicals or materials for pharmaceutical use, or other chemicals which can be used for the treatment of diseases in humans or animals, all uses other than Diagnostic or Analytical Uses, including without limitation uses for drug discovery and genomics. 1.3 "Diagnostic or Analytical Uses" shall mean all uses for scientific ------------------------------- laboratory research and all uses for diagnosis of disease in humans and animals (but not the development of products or services to prevent and/or treat diseases in humans or animals). 1 1.4 "Intellectual Property Rights" shall mean all current and future ---------------------------- worldwide patents, patent applications and other patent rights, trade secrets, copyrights and other proprietary rights. 1.5 "Effective Date" shall mean the date upon which the last of the -------------- signatures is applied to this Agreement. 2. GRANT OF RIGHTS --------------- 2.1 License. Glyko hereby grants to BioMarin an exclusive, worldwide, ------- perpetual, irrevocable, royalty-free right and license, with the right to grant and authorize sublicenses, under all of Glyko's Intellectual Property Rights in and to the Technology, including without limitation those issued patents and pending patent applications listed in Exhibit B hereto, to make, have made, use, --------- offer for sale, import and sell products for Therapeutic Uses incorporating, manufactured using, or derived from the Technology. 2.2 Patent Marking. BioMarin and its sublicensees shall mark products for -------------- Therapeutic Uses made, sold or otherwise disposed of under the license granted in Section 2.1 with such patent and other proprietary right notices as Glyko may provide to BioMarin from time to time. 2.3 Reservation of Rights. Except to the extent expressly granted to --------------------- BioMarin herein, Glyko retains all of its right, title and interest in and to the Technology and all Intellectual Property Rights therein and thereto. Nothing in this Agreement shall be deemed to prevent Glyko from making, having made, using, offering for sale, importing and/or selling any product other than products for Therapeutic Uses. 2.4 Disclosure of Technology. As soon as practicable after the Effective ------------------------ Date, and on an ongoing basis thereafter, Glyko shall make the Technology available to BioMarin. 3. CONSIDERATION ------------- In consideration for the license granted under Section 2 and Glyko's other obligations hereunder, BioMarin shall issue Glyko on the Effective Date, seven million (7,000,000) fully-paid, non-assessable shares of the common stock of BioMarin. 4. LICENSE TO IMPROVEMENTS BY BIOMARIN ----------------------------------- BioMarin hereby grants to Glyko an exclusive, worldwide, perpetual, irrevocable, royalty-free right and license, with the right to grant and authorize sublicenses, under all of BioMarin's Intellectual Property Rights in and to any and all inventions, discoveries, or developments that modify, improve upon, extend or enhance the Technology, which are made, conceived or reduced to practice or expression by BioMarin ("Improvements"), 2 to make, have made, use, offer for sale, import and sell products for Diagnostic and Analytic Uses. 5. OBLIGATIONS OF BIOMARIN ----------------------- BioMarin shall at all times use reasonable commercial efforts to develop and commercialize products for Therapeutic Uses. 5. REPRESENTATIONS AND WARRANTIES ------------------------------ 6.1 Representations and Warranties by Glyko. Glyko represents and --------------------------------------- warrants that (i) Glyko owns or has sufficient rights in the Intellectual Property Rights relating to the Technology to give it the necessary power, right and authority to enter into this Agreement and to grant the license granted herein and to disclose the Technology to BioMarin; (ii) to the best of its knowledge the Technology does not infringe any patent, copyright, trade secret or other proprietary right of any third party; (iii) the Technology is free and clear of any lien, encumbrance, security interest or restriction on transfer or license, (iv) Glyko has not previously granted, and will not grant during the term of this Agreement, any right license or interest in and to the Technology, or any portion thereof for products(s) for Therapeutic Uses, which is in conflict with the rights and licenses granted to BioMarin herein; and (v) Glyko has no right, title or interest in any issued patents or pending patent applications other than those set forth in Exhibit B hereto which relate to the --------- Technology. 6.2 Disclaimer. EXCEPT FOR THE REPRESENTATIONS AND WARANTIES SET FORTH ---------- ABOVE, GLYKO DISCLAIMS ALL WARRANTIES, EXPRESS, IMPLIED, STATUTORY, IN ANY COMMUNICATION WITH BIOMARIN OR OTHERWISE, AND EXPRESSLY DISCLAIMS ANY IMPLIED WARRANTY OF NONINFRINGEMENT, MERCHANTIBILITY OR FITNESS FOR A PARTICULAR PURPOSE. WITHOUT LIMITING THE FOREGOING, GLYKO DISCLAIMS (i) ANY WARRANTY REGARDING THE VALIDITY OF THE PATENTS AND PATENT APPLICATIONS LISTED IN EXHIBIT ------- B HERETO AND (ii) ANY WARRANTY THAT THE MANUFACTURER, USE OR SALE OF ANY - - PRODUCT(S) FOR THERAPEUTIC USES WILL NOT INFRINGE ANY PATENT OR OTHER PROPRIETARY RIGHT OF ANY THIRD PARTY. 7. PROTECTION AND ENFORCEMENT OF INTELLECTUAL PROPERTY --------------------------------------------------- 7.1 Maintenance of Patents. Glyko shall maintain any and all issued ---------------------- patents pertaining to the Technology, including without limitation those patents listed in Exhibit B hereto. If Glyko elects not to pay any fee required to --------- maintain any such patent, Glyko shall so notify BioMarin at least sixty (60) days prior to the date that such patent would no longer be effective, and BioMarin shall have the right to pay such fee. 3 7.2 Prosecution of Patent Applications. Glyko shall have the right, at its ---------------------------------- option and expense, to control the filing for, prosecution, issuance and maintenance of new and existing patent applications (including without limitation the patent applications listed in Exhibit B hereto) coveting the --------- Technology. Glyko shall keep BioMarin reasonably informed as to the status of all such patent applications, including without limitation (i) the scope and content of all such patent applications and (ii) responses to official actions of patent offices during prosecution of all such patent applications. If Glyko elects not to pursue any patent application coveting the Technology in any country, Glyko shall so notify BioMarin at least sixty (60) days prior to the date that such application would no longer be effective. In such case, BioMarin shall have the right to control the filing for, prosecution, issuance and maintenance of such application in that country at its own expense, and Glyko shall give BioMarin all reasonably requested assistance to enable BioMarin to do so. 7.3 Notification of Infringement. Each party shall notify the other upon ---------------------------- such party becoming aware of any infringement by any third party or any Intellectual Property Rights with respect to the Technology, and shall provide the other with the available evidence, if any, of such infringement. In addition, Glyko shall notify BioMarin in the event that Glyko becomes aware that the Technology infringes a patent, copyright, trade secret or other proprietary right of any third party. 7.4 Enforcement of Patent Rights. If Glyko or BioMarin has actual notice ---------------------------- of infringement by any third party of any Intellectual Property Rights with respect to the Technology, the respective officers of Glyko and BioMarin shall promptly confer to determine in good faith an appropriate course of action to enforce such Intellectual Property Rights or otherwise abate the infringement thereof. Glyko shall have the right but not the obligation, at its own expense and within its sole control, to take appropriate action to enforce such rights. If, within six (6) months after notice of infringement, Glyko has not commenced reasonably sufficient action to enforce such Intellectual Property Rights, BioMarin shall have the right, at its own expense, to take appropriate action to enforce such Intellectual Property Rights and Glyko shall cooperate with BioMarin as reasonably requested by BioMarin, including the joinder by Glyko in such action as a party plaintiff. Each party shall retain any and all amounts recovered in any action by it to enforce such Intellectual Property Rights. 8. CONFIDENTIALITY 8.1 Confidentiality. Each party agrees that any inventions, know-how, --------------- ideas and other business, technical or financial information it obtains from the other are the confidential property of the disclosing party or its licensors ("Confidential Information"). Confidential Information of Glyko shall include, without limitation the Technology, Confidential Information of BioMarin shall include, without limitation, the Improvements. The receiving party shall not use or disclose the Confidential Information of the disclosing party except as expressly permitted herein, and shall keep confidential such Confidential Information using the same degree of care it uses to protect its own 4 information of a similar nature, but in no event with less than reasonable care; provided however that the foregoing restrictions shall not apply to any - ---------------- Confidential Information of the disclosing party which is (i) independently developed by the receiving party without the use of or reference to the Confidential Information of the disclosing party, (ii) in the public domain at the time of its receipt or thereafter becomes part of the public domain through no fault of the recipient, (iii) received without any obligation of confidentiality from a third party having the right to disclose such information, (iv) released from the restrictions of this Section 8 by the express written consent of the disclosing party or (v) required by law, statute, rule or court order to be disclosed (the receiving party shall, however, use all reasonable efforts to obtain confidential treatment of any such disclosure). 8.2 Permitted Disclosures. Notwithstanding the provisions of Section 8.1 --------------------- thereof, either party may, to the extent necessary, disclose Confidential Information of the other party (i) for the purpose of securing safety agency approvals and/or (ii) to exercise its rights under this Agreement, provided that in each such instance (x) the other party shall have been notified of the disclosure and (y) any such disclosure shall be made to third parties which either have agreed to be bound by or are already subject to duties of non-use and non-disclosure at least as restrictive as that set forth in Section 8.1 hereof. 8.3 Technology. Each of Glyko and BioMarin agrees to use reasonable ---------- efforts to maintain the confidentiality of the Technology. 9. PURCHASE OF GLYKO PRODUCTS AND SERVICES --------------------------------------- BioMarin shall have the right to purchase any and all products manufactured by Glyko (including without limitation enzymes) and services offered by Glyko at a discount which is equal to the lowest price to its most favored customer, subject to the reasonable availability of such products and/or services. 10. TERM ---- This Agreement shall commence on the Effective Date and shall continue in full force and effect thereafter. 11. LIMITATION OF LIABILITY ----------------------- EXCEPT WITH RESPECT TO ANY GROSS NEGLIGENCE OR WILLFUL MISCONDUCT BY SUCH PARTY, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL OR INDIRECT DAMAGES, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY, WHETHER TORT (INCLUDING NEGLIGENCE), BREACH OF CONTRACT OR OTHERWISE, AND WHETHER OR NOT THE PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGE. 5 12. GENERAL PROVISIONS ------------------ 12.1 Governing Law. This Agreement shall be governed by the laws of the ------------- state of California without reference to its conflict of laws provisions. The parties hereby consent to the personal and exclusive jurisdiction of the state and federal courts in Marin County California to adjudicate any dispute arising out of this Agreement. 12.2. Modification. This Agreement may be modified only by a writing ------------ signed by both parties hereto. 12.3 Entire Agreement. This Agreement (together with its Exhibits A and ---------------- B) represents the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior or contemporaneous agreements, understandings, proposals and representations by the parties. 12.4 Assignment. Either party may assign or delegate its rights or ---------- obligations under this Agreement in the case of a transfer of ownership or control of substantially all of its assets to which this Agreement pertains. No assignments or delegations by either party other than those set forth herein shall be permitted, and any such attempted assignment by either party in violation of this Section 12.4 shall be void. Subject to the foregoing, this Agreement shall bind and inure to the benefit of the parties hereto and their successors and assigns. 12.5 Further Assurances. Each party agrees to duly execute and deliver, ------------------ or cause to be duly executed and delivered, such further instruments, and to do and cause to be done, such further acts and things, including without limitation the execution and filing of such additional agreements, documents and instruments, that may be necessary or as the other party hereto may from time to time reasonably request in connection with this agreement in order to carry out more effectually the provisions and purposes of this Agreement, or to better assure and confirm unto such other party its rights under this agreement. 12.6 Notices. All notices under this Agreement shall be in writing and ------- sent by (i) certified airmail, return receipt requested, postage prepaid or (ii) commercial courier service if properly addressed to or delivered at the addresses of the parties set forth above, notices and other communications shall be deemed given upon delivery or, when delivery cannot be effected due to the actions of the addressee, upon tender. Either party may change its address by a notice given in compliance with this section. 12.7 Severability. If any provision thereof should be held invalid, ------------ illegal or unenforceable in any respect in any jurisdiction, then, to the extent permitted by law, (i) all other provisions thereof shall remain in full fore and effect in such jurisdiction and the invalid, illegal or unenforceable provision shall be liberally construed in order to carry out the intentions of the parties hereto as nearly as may be possible and (ii) such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of such provision in any other jurisdiction. To the extent permitted by 6 applicable law, each party hereby waives any provision of law that would render any provision hereof prohibited or unenforceable in any respect. 12.8 No Waiver. The failure or delay of either party to exercise any --------- right under this Agreement may not be construed as a waiver of that right, and no waiver of any term or condition of this Agreement shall be valid or binding on either party unless set forth in a writing signed by such party. 12.9 Counterparts. This Agreement may be executed in any number of ------------ counterparts and when so executed and delivered shall have the same force and effect as though all signatures appeared on one document. IN WITNESS WHEREOF, the parties by their duly authorized representatives have entered into this Agreement as of the Effective Date. Glyko Biomedical Ltd: BioMarin Pharmaceuticals Inc: By: /s/ JOHN S. GLASS By: /s/ GRANT W. DENISON, JR. ------------------------- ------------------------- Name: John S. Glass Name: Grant W. Denison, Jr. ------------------------ ------------------------ Title: Director Title: Chief Executive Officer ----------------------- ------------------------- 7 Exhibit A Technology 1. FACE Technology 2. All clones, vectors and probes developed by Glyko 3. All enzymes developed or offered by Glyko 4. Glyko know-how for practicing the Technology 8 EXHIBIT B LICENSED CURRENT PATENTS ------------------------
PATENT SUBJECT MATTER COUNTRY NUMBER - --------------------- ------- ------ 2D ANALYSIS OF CARBOHYDRATES US ALLOWED ANTS FLUOROPHORE US ISSUED US 5,340,453 2 AMINOACRIDONE TAG US ISSUED US 5,472,582 ANTS-BLOTTING US ISSUED US 5,316,638 FACE CLONING ASSAY US ISSUED US 5,258,295 CLONED NEURAMINIDASE ENZYME US ISSUED US 5,591,839 ANTS-2D ELECTROPHORESIS US ISSUED US 4,975,165 ANTS-2D ELECTROPHORESIS US ISSUED US 5,094,740 ANTS-2D ELECTROPHORESIS EPC ALLOWED ANTS-BLOTTING (GLYCOMED) US ISSUED US 5,019,231 ANSA FLUOROPHORE (GLYCOMED) US ISSUED US 5,094,731 ANSA FLUOROPHORE (GLYCOMED) US ISSUED US 5,035,786 ANSA FLUOROPHORE (GLYCOMED) US ISSUED US 5,087,337 FACE SYNTHESIS US ISSUED US 5,308,460 CARBOHYDRATE SEQUENCING UK ISSUED GB 2215836 CARBOHYDRATE SEQUENCING US ISSUED US 5,104,508 CCD DETECTION OF CARBOHYDRATES (ASTROSCAN) US ISSUED US 4,874,492 CCD DETECTION OF CARBOHYDRATES (ASTROSCAN) PCT ISSUED EP 0,214,713 CCD DETECTION OF CARBOHYDRATES (ASTROSCAN) US ISSUED UK 2,175,690 FLUOROPHORE 2-AMINOACRIDONE UK ISSUED GB 2,254,851 CLONED NEURAMINIDASE US ISSUED US 5,591,839 PRECAST GELS US ALLOWED CCD IMAGER US ALLOWED
ABBREVIATIONS: ANSA=AMINONAPHTHALENE SULFONIC ACID ANTS=2-AMINONAPHTHALENE TRISULFONIC ACID CCD=CHARGE COUPLED DEVICE; FACE=FLUOROPHORE-ASSISTED-CARBOHYDRATE ELECTROPHORESIS. 9 EX-10.19 21 LEASE AGREEMENT DATED 5/18/1998 AS AMENDED EXHIBIT 10.19 371 BEL MARIN KEYS BOULEVARD LEASE AGREEMENT 371 BEL MARIN KEYS BOULEVARD BASIC LEASE INFORMATION Section 1 Date: May 18, 1998 Section 1 Landlord Address: Piazza Trading & Co., Ltd. Sausalito Piazza Building 819 Bridgeway Sausalito, CA 94965 Contact- Toby Dubes Telephone: 415-388-4732 Section 1 Tenant Address: BioMarin Pharmaceuticals ATTN: Chris Starr Ph.D. 11 Pimental Court, Novato, CA 94949 415-382-3510 FAX 415-382-7889 Section 2 Rentable Area of Premises: 8,740 (inclusive of load factor) Section 2 Rentable Area of Building: 32,600 Section 2 Load Factor: 12% Section 2 Floor: Second Section 2 Suites: See Exhibit "A" attached hereto Section 3 Commencement Date: May 18, 1998 Section 3 Expiration Date: May 31, 2001 Section 4 Possession: Upon lease execution Section 5 Rent Commencement: May 15, 1998 Section 5 Monthly Base Rent: $14,858.00 plus $14,858.00 security deposit paid upon lease execution, as adjusted annually. (Addendum, Section 2) Section 6 Base Year: 1998 Section 6 Tenant's Share Expenses & Taxes: 26.81% Section 7 Permitted Uses: Office and Laboratory Section 7 Parking: 26 unassigned and unreserved spaces Section 15 Tenant Liability Insurance: $1,000,000 naming Landlord as "Additionally Insured" Section 27 Real Estate Brokerage: Meridian Commercial, Inc.
Addendum to Lease: See "Tenant Improvement Allowance" Addendum to Lease: See "Possession" Addendum to Lease' Tenant Improvement Allowance is $23,600.00 The foregoing Basic Lease Information is incorporated into and made part of this Lease. Each reference in this Lease to any of the Basic Lease Information shall mean the specified information set forth above and shall be construed to incorporate all the terms provided under the particular section of this lease pertaining to such information. In the event a conflict between any Basic Lease Information and the remainder of this Lease exist, the remainder of this Lease shall control. TABLE OF CONTENTS -----------------
Section Description - ------- ----------- Basic Lease Information............................................ ii 1. Parties............................................................ 1 2. Premises........................................................... 1 3. Term............................................................... 1 4. Possession......................................................... 1 5. Rent............................................................... 2 7. Use................................................................ 5 8. Compliance with Law................................................ 5 9. Alterations........................................................ 5 10. Repairs............................................................ 6 11. Liens.............................................................. 7 12. Assignment and Subletting.......................................... 7 13. Indemnification.................................................... 8 14. Subrogation........................................................ 9 15. Insurance.......................................................... 9 16. Services and Utilities............................................. 10 17. Taxes on Tenant's Personal Property................................ 12 18. Rules and Regulations.............................................. 12 19. Holding Over....................................................... 12 20. Entry by Landlord.................... ............................ 12 21. Damage and Destruction............................................. 13 22. Default............................................................ 14 23. Remedies in Default................................................ 14 24. Eminent Domain..................................................... 15 25. Estoppel Certificate............................................... 16 26. Authority of Tenant................................................ 16 27. Brokers............................................................ 16 28. Default by Landlord................................................ 17 39. Option to Renew.................................................... 17 30. General Provisions................................................. 17
Exhibit A -- Description of the Premises Exhibit B -- Index of Defined Terms Exhibit C -- Work Agreement Exhibit D -- Expense Exclusions Exhibit E -- Rules and Regulations BEL MARIN KEYS BOULEVARD -i- BEL MARIN KEYS BOULEVARD OFFICE LEASE 1. PARTIES. This Lease, dated for reference purposes only as of the date set forth on the first line of the Basic Lease Information, is made by and between Landlord and Tenant specified in the Basic Lease Information. 2. PREMISES. Landlord leases to Tenant and Tenant leases from Landlord that certain space outlined in the floor plan attached as Exhibit A, together with the improvements now or hereafter located therein (the "Premises"), upon and subject to the conditions set forth in this Lease. Landlord and Tenant agree that, for purposes of this Lease, the Premises shall be deemed to have a Rentable Area equal to the square footage specified in the Basic Lease Information. As used in this Lease, the "Rentable Area" of the Premises shall be equal to the "Usable Area" of the Premises ("usable area" shall be computed in accordance with the American Standard Method of Measuring Floor Area in Office Buildings, ANSI Z65. I-1980, published by the Building Owners and Managers Association) multiplied by the load factor set forth in the Basic Lease Information. The Premises are situated in that certain office building (the "Building") commonly known as 371 Bel Marin Keys Boulevard, Novato, California, in the suite and on the floor specified in the Basic Lease Information. As used in this Lease, the term "Building" includes the land upon which such office building stands and the land and improvements surrounding such office building and designated from time to time by Landlord as land or Common Areas (as defined below) appurtenant to such office building, together with utilities, facilities, drives, walkways and other amenities appurtenant to or servicing such office building. The Rentable Areas of the Building and of the office space in the Building are set forth in the Basic Lease Information. 3. TERM. The Premises are leased for a term (the "Term") to commence and end on the dates respectively specified in the Basic Lease Information, unless the Term shall sooner terminate as provided in this Lease. The dates upon which the Term shall commence and terminate pursuant to this Section 3 are called the "Commencement Date" and the "Expiration Date," respectively. 4. POSSESSION. (a) Landlord shall deliver possession of the Premises to Tenant in its "AS-IS" condition on the Commencement Date. Landlord shall have no obligation to remodel, alter or otherwise improve the Premises prior to or following the Commencement Date. (b) If, for any reason whatsoever, Landlord fails to deliver possession of the Premises to Tenant on the Commencement Date, this Lease shall remain in full force and effect, and Landlord shall have no liability to Tenant for any loss or damage resulting from such failure, provided, however, that, Tenant's obligation to pay Base Rent under Subsection 5(a) and Additional Charges under Section 7 shall be delayed one (1) day for each day Landlord delays in delivering possession to Tenant after the Commencement Date. (c) Following the delivery of possession of the Premises to Tenant, Tenant shall commence the design and construction of the Leasehold Improvement Work in accordance with the Work Agreement attached hereto as Exhibit C. (d) The purpose of attached Exhibit A is only to show the --------- approximate location of the Premises in the Building, and such Exhibit is not meant to constitute an agreement as to the construction or Rentable Area of the Premises, as to the specific location of elements of the Common Areas, or as to the -1- specific location of the accessways to the Premises or the Building. Landlord reserves the right, at any time and from time to time, to make alterations or additions to, to construct other improvements in, and to alter the dimensions and appearance of the Building and the Common Areas. 5. RENT. (a) Beginning on the Rent Commencement Date specified in the Basic Lease Information, Tenant shall pay to Landlord as annual minimum rent for 'the Premises the sum specified in the Basic Lease Information as "Base Rent." Base Rent shall be payable in equal monthly installments on or before the Rent Commencement Date and or before the first day of each and every successive calendar month thereafter. Base Rent shall be paid to Landlord, without any demand and without any deduction or offset whatsoever, in lawful money of the United States of America at the address for Landlord specified in the Basic Lease Information, or to such other person or at such other place as Landlord may from time to time designate by notice to Tenant. (b) Tenant shall pay to Landlord as additional charges all fees, costs, expenses, charges and other mounts required to be paid by Tenant under this Lease other than Base Rent ("Additional Charges"). Additional Charges shall be payable to Landlord at the place where the Base Rent is payable, landlord shall have the same remedies for a default in the payment of Additional Charges as for a default in the payment of Base Rent. The terms "Base Rent" and "Additional Charges" are sometimes collectively referred to herein as "Rent". (c) In addition, upon the execution of this Lease, Tenant shall pay to Landlord the sum (if any) specified in the Basic Lease Information as "Advance Rent." Advance Rent shall be applied to the first amounts of Base Rent due under this Section 5. (d) If more than one (1) time during any twelve (12) consecutive month period Tenant shall fail to pay to Landlord any Rent within ten (10) days after the date on which such Rent is due and payable, then for each such additional failure to pay any Rent, Tenant shall pay to Landlord a late payment charge equal to four percent (4%) of the unpaid amount of such Rent, to compensate Landlord for Landlord's additional administrative and other costs resulting from each such additional failure by Tenant. By way of example, if Tenant shall fail to pay an installment of Base Rent within the time period described above, then Tenant shall pay to Landlord a late payment charge of $782 (viz. 10% of $7,820). This late payment charge shall be paid to Landlord as Additional Charges together with the unpaid amount of such Rent. Any payment of Rent to Landlord following service upon Tenant of a three (3) day notice to pay Rent or quit shall be in the form of cash or a certified or cashier's check. 6. TENANT'S SHARE OF EXPENSES AND TAXES. (a) During the Term, Tenant shall pay to Landlord as Additional Charges (i) Tenant's Expense Share (as defined below) of the total dollar increase, if any, in Expenses (as defined below) attributable to each Computation Year (as defined below) over Base Expenses (as defined below) and (ii) Tenant's Tax Share (as defined below) of the total dollar increase, if any, in Taxes (as defined below) attributable to each Computation Year over Base Taxes (as defined below). (b) During the last month of the Base Year and each Computation Year or as soon thereafter as practicable, Landlord shall give to Tenant notice of Landlord's estimate of the total amounts that will be payable by Tenant under Subsection 7(a) for the following Computation Year. On or before the fast day of each month during the following Computation Year, Tenant shall pay to Landlord one-twelfth (1/12) of such estimated amounts, provided that if Landlord fails to give such notice in the last month of the prior Computation Year, then Tenant shall continue to pay on the basis of the prior Computation Year's estimate until the first day of the calendar month next succeeding the date when such notice is given by Landlord. If at -2- any time or times Landlord determines that the amounts payable under Subsection 7(a) for the current Computation Year will vary from Landlord's estimate given to Tenant, Landlord, by notice to Tenant, may revise the estimate for such Computation Year, and subsequent payments by Tenant for such Computation Year shall be based upon such revised estimate. (c) Following the end of each Computation Year, Landlord shall deliver to Tenant a statement ("Expense Statement") of amounts payable under Subsection 7(a) for such Computation Year, prepared by Landlord and audited by an independent public accounting firm designated by Landlord. Upon written request given by Tenant to Landlord within thirty (30) days after the delivery of any Expense Statement, Landlord shall allow Tenant to review in Landlord's office reasonable back-up documentation for the Expenses included in such Expense Statement. If such Expense Statement shows an amount owing by Tenant that is less than the payments for such Computation Year previously made by Tenant, and if no Event of Default (as defined below) is outstanding at the time such statement is delivered, Landlord shall credit such amount to the next payments of Rent falling due under this Lease or, if the Term has expired, shall refund such amount to Tenant. If such Expense Statement shows an amount owing by Tenant that is more than the payments for such Computation Year previously made by Tenant, Tenant shall pay the deficiency to Landlord within thirty (30) days after delivery of such statement. The obligations of Landlord and Tenant under this Subsection 7(c) shall survive the Expiration Date, and, if the Expiration Date is a day other than the last day of a Computation Year, the adjustment in Kent pursuant to this Section 7 for the Computation Year in which the Expiration Date occurs shall be prorated in the proportion that the number of days in such Computation Year preceding the Expiration Date bears to 365. (d) As used in this Lease, the following terms shall have the meanings specified: (i) "Expenses" shall mean (A) all costs of management, operation, maintenance and repair of the Building, including, without limitation, costs for janitorial, maintenance, security and other service contracts charges for electricity, heat, ventilation, air conditioning, light, power, water, sewer and waste disposal and other utilities; charges or fees for utility connections and equipment costs for materials, supplies, equipment and tools; costs for maintenance, replacements and repairs; insurance premiums and license, permit and inspection fees, but only to the extent such license, permit and inspection fees relate to the Building or the Premises; depreciation on personal property (excluding Tenant's personal property); the fair market rental value of Landlord's and the property manager's offices in the Building; wages, salaries, employee benefits and payroll costs of personnel engaged in the management, operation and maintenance of the Building; fees, charges and other costs for management, consulting, legal, accounting and other services performed by any independent contractors engaged by Landlord or for any such services performed by Landlord in connection with the Building; and any other reasonable expenses incurred by Landlord which, under generally accepted accounting principles, would be considered an operating or maintenance expense of the Building; and (B) the cost of any capital improvements made to the Building after its construction that reduce other Expenses or made to the Building after the date of this Lease as a result of governmental orders, ordinances, codes, rules and regulations that Were inapplicable to the Building at the time permits for its construction were obtained, such cost to be amortized over the useful life of such capital improvements in accordance with generally accepted accounting principles, together with interest on the unamortized balance at a rate equal to the lesser of (1) the rate of interest publicly announced by Bank of America NT&SA in San Francisco, California, as its "reference rate" (or any successor interest rate), plus two percent (2%), which rate on the unamortized balance shall be adjusted as of the effective date of any change in such reference (or successor) rate, or (2) the highest rate permitted by law. Notwithstanding the foregoing, Expenses shall exclude Taxes and any costs set forth in attached Exhibit D. In the event the Rentable Area of the office space in the Building is less than ninety-five percent (95%) occupied during the Base Year or any Computation Year, Expenses for the Base Year and each such Computation Year shall be determined by adjusting the actual costs under clauses (A) and (B) above for the Base Year and each such Computation Year upward to equal Landlord's reasonable estimate of the costs that would have been incurred under clauses (A) and (B) if ninety-five percent (95%) of the total Rentable Area of the office space in the Building had been -3- fully occupied for the entire Base Year and each such Computation Year. The determination of Expenses shall be made by Landlord, shall be audited by Landlord's independent public accounting firm as provided in Section 7(c) and shall be final and binding on Tenant. (ii) "Taxes" shall mean all taxes, assessments and charges levied upon or with respect to the Building (including, without limitation, the Common Areas and all leasehold improvement work), any personal property of Landlord used in the operation of the Building, or Landlord's interest in the Building or in such personal property. Taxes shall include, without limitation, all general real property taxes and general and special assessments, transit charges, housing fund assessments, service payments in lieu of taxes and-any tax, fee or excise on the act of entering into this Lease or any other lease of space in the Building, on the use or occupancy of all or any part of. the Building, on the rent payable under this Lease or any other lease of space in the Building or on or in connection with the business of renting space in the Building, that are now , or hereafter levied or assessed against Landlord by the United States of America, the State of California, or any political subdivision, public corporation, district or other political or public entity, and shall also include any other tax, fee or excise, however described) that may be levied or assessed as a substitute for, or as an addition to, in full or in part, any other Taxes, whether or not now customary or within the contemplation of the parties. Taxes also shall include all reasonable legal, accounting, consulting or other fees, costs and disbursements incurred in connection with proceedings to contest, determine or reduce Taxes. Taxes shall not include franchise, transfer, estate or inheritance taxes, or income taxes measured by the net income of Landlord from all sources, unless, due to a change in the method of taxation, any of these taxes are levied or assessed against Landlord as a substitute for, or as an addition to, in full or in part, any other tax that would otherwise constitute a Tax. (iii) "Base Year" shall mean the calendar year specified in the Basic Lease Information. (iv) "Base Expenses" shall mean the amount of Expenses for the Base Year. (v) "Base Taxes" shall mean the amount of Taxes for the Base Year, provided, however, that if the Building is assessed on less than a fully completed basis for the Base Year, then Base Taxes shall mean the amount of Taxes that would have been payable with respect to the Building for the Base Year if the Building had been assessed on a fully completed basis for the Base Year, as reasonably determined by Landlord. (vi) "Tenant's Expense Share" shall mean the percentage figure so specified in the Basic Lease Information. This percentage figure has been obtained by dividing the Rentable Area of the Premises by the total Rentable Area of the office space in the Building. In the event Tenant's Expense Share is changed during a Computation Year by reason of a change in the Rentable Area of the Premises or the office space in the Building, Tenant's Expense Share shall thereafter mean the percentage figure obtained by dividing the new Rentable Area, if any, of the Premises by the new total Rentable Area, if any, of the office space in the Building. (vii) "Tenant's Tax Share" shall mean the percentage figure so specified in the Basic Lease Information. This percentage figure has been obtained by dividing the Rentable Area of the Premises by the total Rentable Area of the Building. In the event Tenant's Tax Share is changed during a Computation Year by reason of a change in the Rentable Area of the Premises or the Building, Tenant's Tax Share shall thereafter mean the percentage figure obtained by dividing the new Rentable Area, if any, of the Premises by the new total Rentable Area, if any, of the Building. (viii) "Computation Year" shall mean each twelve (12) consecutive month period commencing January 1 of each year during the Term following the Base Year, provided that Landlord, upon notice to Tenant, may change the Computation Year from time to time to any other twelve (12) consecutive month period, and, in the event of any such change, Tenant's Expense Share of Expenses over Base Expenses -4- and Tenant's Tax Share of Taxes over Base Taxes shall be equitably adjusted for the Computation Years involved in any such change. 7. USE. (a) Tenant shall use and continuously occupy the Premises for general office purposes and any other purpose specified in the Basic Lease Information and' shall not use the Premises, or permit the Premises to be used, for any other purpose. (b) Tenant shall take no action nor permit any action to be taken, in or about the Premises that will in any way increase the existing rate of or affect any fire or other insurance upon the Building or any of its contents, or cause cancellation of any insurance policy coveting all or any part of the Building or ,any of its contents. Tenant shall take no action, nor permit any action to be taken, in or about the Premises that will in any way injure, annoy, obstruct or interfere with the rights of other tenants or occupants of the Building nor use or allow the Premises to be used for any improper, immoral, unlawful or objectionable purpose, nor cause, maintain or permit any nuisance in, on or about the Premises. Tenant shall neither commit nor suffer to be committed any waste in, on or about the Premises. (c) Tenant shall have a non-exclusive right to use the Common Areas, provided, however, that Tenant's use of the Common Areas shall be subject to such rules and regulations as Landlord shall make from time to time. The manner and expense of maintaining, repairing and operating the Common Areas shall be at the sole discretion of Landlord. As used in this Lease, the term "Common Areas" shall mean the Building's pedestrian sidewalks, truckways, loading docks, hallways, lobby, corridors, delivery areas, elevators, escalators and stairs outside of the leased areas, public bathrooms and comfort stations, and all other areas or improvements that from time to time may be provided by Landlord for the convenience and use of the tenants of the Building and their respective sub-tenants, agents, employees, customers and invitees and any other licensees of Landlord. Landlord reserves the right, from time to time, to utilize portions of the Common Areas for entertainment, art shows, displays, product shows, the leasing of kiosks or any other uses that Landlord deems reasonable. (d) Tenant shall have the right to use the number of reserved parking places set forth in the Base Lease Information. 8. COMPLIANCE WITH LAW. Tenant shall neither use, nor permit the use of, the Premises in any way that will conflict with any law, statute, ordinance or governmental rule or regulation now in force or hereafter enacted or promulgated (collectively, "Laws"). At its sole expense, Tenant shall promptly comply with all Laws, and with the requirements of any board of fire insurance underwriters or other similar body now or hereafter constituted, relating to or affecting the condition, use or occupancy of the Premises. 9. ALTERATIONS. (a) Except for the Leasehold Improvement Work described in the Work Agreement attached hereto as Exhibit C, Tenant shall neither make nor permit to be made any alterations, additions or improvements to all or any part of the Premises, or attach any fixtures or equipment to the Premises (collectively, "Alterations"), without Landlord's prior approval, which approval shall not be unreasonably withheld. If Tenant desires that any Alterations be made, Tenant shall give notice to Landlord of the nature and estimated cost of such Alterations. Within three (3) business days after Landlords receipt of such notice, Landlord shall give notice to Tenant stating whether Landlord requires Tenant to provide Landlord with detailed plans and specifications for the proposed Alterations. -5- (b) If Landlord requires Tenant to provide detailed plans and specifications, the following procedures shall be followed: Tenant shall have reasonably detailed plans and specifications for the proposed Alterations prepared at Tenant's sole expense by a licensed architect or space planner. Landlord shall approve or disapprove the proposed Alterations within ten (10) business days after delivery of such plans and specifications to Landlord. Failure of Landlord to respond within such ten (10) business day period shall be deemed to be approval by Landlord of the proposed Alterations. If Landlord disapproves the proposed Alterations, Landlord shall specify in reasonable detail its reasons for such disapproval and the changes required in order to secure its approval. In the event Landlord disapproves the proposed Alterations, Tenant may revise the plans and specifications as necessary to secure Landlord's approval or may elect to forego the proposed Alterations. If Tenant elects to revise-the plans and specifications, Landlord shall have a period of ten (10) business days following submission of such revised plans and specifications to approve or disapprove the proposed Alterations as provided above. If Landlord disapproves such revised plans and specifications, the same procedure shall be followed as to further revisions until Landlord's approval is given or is deemed to be given or until Tenant elects to forego the proposed Alterations. (c) If Landlord does not require Tenant to have detailed plans and specifications prepared for the proposed Alterations pursuant to Subsection 10(b), then Landlord shall approve or disapprove the proposed Alterations within five (5) business days of receipt of Tenant's initial notice of the nature and estimated costs of the proposed Alterations pursuant to Subsection 10(a). Failure of Landlord to respond within such five (5) business day period shall be deemed to be approval by Landlord of the proposed Alterations. (d) As a condition of approving the proposed Alterations, Landlord may reasonably require Tenant to agree to remove all or any part of such Alterations no later than the Expiration Date and to reimburse Landlord for any reasonable expenses incurred by Landlord in reviewing the plans and specifications, including, without limitation, the reasonable costs of any outside consultants retained by Landlord for such purpose. (e) If Landlord approves the proposed Alterations, the Alterations shall be made in accordance with the detailed plans and specifications approved by Landlord or, if no plans or specifications were required, in accordance with Tenant's notice to Landlord under Section 10(a) and with any other reasonable requirements imposed by Landlord. The Alterations shall be performed by Landlord or, at Landlord's option, by a contractor selected by Tenant and reasonably approved by Landlord. In either event, all Alterations shall be made at Tenant's sole expense, and Tenant shall reimburse Landlord for all expenses incurred by Landlord with respect to such Alterations: including, without limitation, a reasonable charge for Landlord's overhead if such Alterations are made by Landlord, or a reasonable charge for Landlord's cost of inspecting the Alterations prior to and upon their completion if such Alterations are made by Tenant's contractor. Tenant shall reimburse Landlord for all such expenses within ten (10) days after receipt of any invoice from Landlord. If Tenant's approved contractor constructs or installs the Alterations, Tenant shall provide Landlord with copies of all required permits and other governmental approvals for such Alterations, and Landlord shall have the right from time to time to inspect such Alterations prior to or after their completion. All Alterations shall immediately become Landlord's property and shall remain in the Premises at the end of the Term without compensation to Tenant, unless Landlord conditioned its approval of such Alterations on Tenant's agreement to remove them, in which event Tenant shall by the Expiration Date remove such Alterations and restore the Premises to their condition prior to the installation of such Alterations. 10. REPAIRS. (a) By occupying the Premises, Tenant accepts the Premises as being in the condition in which Landlord is obligated to deliver the Premises under the terms of this Lease. At all times during the Term, and at Tenant's sole expense, Tenant shall keep all of the Premises in good condition and repair, except for ordinary wear and tear or damage by fire, earthquake, act of God or the elements; provided, however, that -6- Tenant shall not be obligated to repair any latent structural defects in the Premises. Tenant waives all rights to make repairs at the expense of Landlord or in lieu of such repairs to vacate the Premises as provided by California Civil Code Sections 1941 and 1942 or any other Laws now or hereafter in effect. Tenant shall at the end of the Term surrender the Premises to Landlord in the same condition as when received, except for ordinary wear and tear, damage by fire, earthquake, act of God or the elements, and Alterations approved by Landlord. Landlord shall have no obligation and has made no promise to alter, remodel, improve, repair, decorate or paint all or any part of the Premises, except as specifically set forth in Section II(b). Furthermore, Landlord has made no representations to Tenant regarding the condition of the Premises or the Building, except as specifically set forth in this Lease. (b) Notwithstanding the provisions of Section II(a), Landlord shall repair and maintain the structural portions of the Building, including the basic plumbing, heating, air conditioning, ventilation and electrical systems, installed or furnished by Landlord, unless the necessity for such maintenance and repair is in any way caused by the negligence or intentional misconduct of, or failure to observe or perform any provision of this Lease by, Tenant, or Tenant's, agents, servants, contractors, employees or invitees, in which case Tenant shall pay to Landlord the reasonable cost of such maintenance and repair. Landlord shall not be liable for any failure to make any such repair or to perform any such maintenance unless Landlord receives notice of the need for such repair or maintenance from Tenant and fails to make such repair or perform such maintenance within a reasonable period of time following such notice by Tenant. Rent shall not abate nor shall Landlord be liable as a result of any injury to or interference with Tenant's business arising from the making of any repair, or the performance of any maintenance, in or to any portion of the Building or the Premises. 11. LIENS. Tenant shall keep the Premises and the Building free from any liens arising out of any act or omission, of Tenant, including, without limitation, any work performed, materials furnished or obligations incurred by Tenant. Landlord shall have the right to post and keep posted on the Premises any notices that may be provided by law or that Landlord may deem to be proper for the protection of Landlord, the Premises and the Building from such liens. Tenant shall give to Landlord at least ten (10) days' prior notice of the date of commencement of the Leasehold Improvement Work or any Alterations on the Premises in order to permit the posting of such notices by Landlord. Landlord may require, in Landlord's sole discretion, that Tenant, at Tenant's sole expense, provide to Landlord a lien and completion bond in form and substance satisfactory to Landlord in an amount equal to one hundred fifty percent (150%) of the total estimated cost of any Alterations, to insure Landlord against any liability for mechanics' and materialmen's liens and to insure completion of work. 12. ASSIGNMENT AND SUBLETTING. (a) Tenant shall not directly or indirectly, voluntarily or by operation of law, sell, assign, encumber, pledge or otherwise transfer or hypothecate all of its interest in or rights with respect to the Premises or Tenant's leasehold estate hereunder (collectively, "Assignment"), or permit all or any portion of the Premises to be occupied by anyone other than Tenant, sublet all or any portion of the Premises or transfer a portion of Tenant's interest in or rights with respect to Tenant's leasehold estate hereunder (collectively, "Sublease"), without Landlord's prior consent in each instance; provided, however, that Tenant shall have the right with notice to, but without the consent of, Landlord to enter into an Assignment of this Lease or to Sublease the Premises to an entity that controls, is controlled by or is under common control with, Tenant (hereinafter referred to as an "Affiliate"). No Assignment of this Lease or Sublease of the Premises to an Affiliate shall relieve Tenant of any obligation to be performed by Tenant under this Lease, whether arising before or after such Assignment or Sublease. (b) If Tenant desires at any time to enter into an Assignment of this Lease or a Sublease of all or any portion of the Premises, Tenant shall first give notice to Landlord of such desire, which notice shall contain (i) the name and address of the proposed assignee, subtenant or occupant, (ii) the nature of the -7- proposed assignee's, subtenant or occupant's business to be carried on in the Premises, (iii) the terms and provisions of the proposed Assignment or Sublease and (iv) such financial information as Landlord may reasonably request concerning the proposed assignee, subtenant or occupant. (c) Except in the case of an Assignment of this Lease or a Sublease of the Premises to an Affiliate, at any time within fifteen (15) business days after Landlord's receipt of the notice specified in Subsection 13(b), Landlord may by notice to Tenant elect to (i) terminate this Lease as to the portion (including all) of the Premises that is specified in Tenant's notice, with a proportionate abatement in Base Rent payable by Tenant, (ii) consent to the Sublease or Assignment, or (iii) disapprove the Sublease or Assignment. As a condition for granting its consent to any Assignment or Sublease, however, Landlord may require that Tenant agree to pay to Landlord the amount by which all sums payable to Tenant in connection with such Assignment or Sublease exceed Rent payable by Tenant to Landlord hereunder (or a proportionate amount of such Rent representing the portion of the Premises subject to a Sublease if less than the entire Premises are subject to a Sublease). If Landlord. consents to the Sublease or Assignment within such fifteen (15) business day period, Tenant may, within ninety (90) days after Landlord's consent, but not later than the expiration of such ninety (90) days, enter into such Assignment or Sublease upon the terms and conditions set forth in the notice furnished by Tenant to Landlord pursuant to Subsection 13(b). (d) No consent by Landlord to any Assignment or Sublease by Tenant shall relieve Tenant of any obligation to be performed by Tenant under this Lease, whether arising before or after such Assignment or Sublease. The consent by Landlord to any Assignment or Sublease shall not relieve Tenant from the obligation to obtain Landlord's express consent to any other Assignment or Sublease. Any Assignment or Sublease that fails to comply with this Section 13 shall be void and, at the option of Landlord, shall constitute an Event of Default by Tenant under this Lease. The acceptance of Rent by Landlord from a proposed assignee or sublessee shall not constitute the consent to such Assignment or Sublease by Landlord. (e) Any sale or other transfer, including, without limitation, one by consolidation, merger or reorganization, of a majority of the voting stock of Tenant (or of any guarantor of Tenant's obligations under this Lease), if Tenant (or such guarantor) is a corporation, or any sale or other transfer of a majority of the partnership interests in Tenant (or of any guarantor of Tenant's obligations under this Lease), if Tenant (or such guarantor) is a partnership, shall be an Assignment for purposes of this Section 13. (f) Each assignee, sublessee or other transferee (including, without, limitation, any Affiliate), other than Landlord, shall assume all obligations of Tenant under this Lease and shall be and remain liable jointly and severally, with Tenant for the payment of Rent, and for the performance of all the provisions of this Lease; provided, 'however, that the assignee, sublessee or other transferee shall be liable to Landlord for rent and additional charges only in the amount set forth in the Assignment or Sublease. No Assignment shall be binding on Landlord unless the assignee or Tenant shall deliver to Landlord a counterpart of the Assignment and an instrument in recordable form that contains a covenant of assumption by the assignee satisfactory in substance and form to Landlord, consistent with the requirements of this Subsection 13(b), but the failure or refusal of the assignee to execute such instrument of assumption shall not release or discharge the assignee from its liability as set forth above. (g) In the event of any Assignment or Sublease by Tenant or in the event Tenant requests Landlord's approval of any Assignment or Sublease, Tenant shall pay Landlord's reasonable attorneys' fees, costs and disbursements incurred in connection therewith, but in no event shall Tenant pay an mount higher than $650.00. 13. INDEMNIFICATION. (a) If Tenant shall default in the performance of its obligations under this Lease, Landlord, at any time thereafter and without notice, may remedy such default for Tenant's account and at Tenant's -8- expense, without thereby waiving any other rights or remedies of Landlord with respect to such default. (b) Tenant agrees to indemnify Landlord against and hold Landlord harmless from any and all loss, cost, liability, damage and expense, including, without limitation, penalties, fines and reasonable attorneys' fees, incurred in connection with or arising from any cause whatsoever in, on or about the Premises, except to the extent caused by the negligence or intentional misconduct of Landlord including, without limitation, (i) any failure by Tenant to observe or perform any of the provisions of this Lease, (ii) the use or occupancy or manner of use or occupancy of the Premises by Tenant or any person claiming through or under Tenant, (iii) the construction of the Leasehold Improvement Work in the Premises, (iv) the condition of the Premises or any occurrence or happening in or on the Premises from any cause whatsoever, or (v) any negligence or intentional misconduct, whether prior to, during or after the Term, Of Tenant or any person claiming through or under Tenant, or of the contractors, agents, servants, employees, visitors or licensees of Tenant or any such person, in, on or about the Premises or the Building. Tenant further agrees to indemnify Landlord, Landlord's agents, and the lessor or lessors under all ground or underlying leases, against and hold them harmless from any and all loss, cost, liability, damage and expense, including, without limitation, reasonable attorneys' fees, incurred in connection with or arising from any claims of any persons by reason of injury to persons or damage to property occasioned by any event referred to in the preceding sentence. (c) Except as specifically provided to the contrary in this Lease, Tenant shall pay to Landlord, within ten (10) business days after delivery by Landlord to Tenant of bills or statements therefor: (i) sums equal to all expenditures made and monetary obligations incurred by Landlord including, without limitation, expenditures made and obligations incurred for reasonable attorneys' fees, in connection with the remedying of any default by Tenant for Tenant's account pursuant to the provisions of Subsection 14(a); (ii) sums equal to all losses, costs, liabilities, damages and expenses referred to in Subsection 14(b); and (iii) sums equal to all expenditures, made and monetary obligations incurred by Landlord, including, without limitation, expenditures made and obligations incurred for reasonable attorneys' fees, in collecting or attempting to collect Rent. (d) Tenant waives all claims against Landlord for damage to any property or for injury or death of any person in, upon or about the Premises or the Building arising at any time and from any cause other than solely by reason of the negligence or intentional misconduct of Landlord or its employees or contractors. (e) Landlord agrees to indemnify Tenant against and hold Tenant harmless from any and all loss, cost, liability, damage and expense, including, without limitation, penalties, flues and reasonable attorneys' fees, incurred in connection with or arising from (i) any failure by Landlord to observe or perform any of the provisions of this Lease or (ii) any gross negligence or intentional misconduct, whether prior to, during or after the Term, of Landlord in, on or about the Premises or the Building. (f) Tenant's and Landlord's obligations under this Section 14 shall survive the expiration or sooner termination of the Term. 14. SUBROGATION. Landlord and Tenant each shall obtain from their insurers a waiver of all rights of subrogation that the insurer of one party might have against the other party under all policies of all risk coverage insurance maintained by either at any time during the Term insuring or covering the Building or Premises or any improvements, fixtures, equipment, furnishings or other property, including, without limitation, salable goods, merchandise, and inventory, if any, in, on or about the Premises. 15. INSURANCE. Tenant agrees to carry and keep in force during the Term, at Tenant's sole expense, the following types of insurance: -9- (i) Public Liability and Property Damage. Comprehensive general ------------------------------------ liability insurance, including contractual liability, with a minimum combined single limit of liability equal to the amount set forth in the Basic Lease Information, insuring against any and all liability for property damage and for injury to or death of persons occurring in, on or about the Premises or arising out of the maintenance, use or occupancy of the Premises. All such comprehensive general liability insurance shall specifically insure the performance by Tenant of its indemnity obligations under Section 14(b) with respect to liability for injury to or death of persons and for damage to property. (ii) Workers' Compensation and Employers' Liability. Workers' ---------------------------------------------- compensation and employers' liability insurance covering employees for California Workers' Compensation benefits, including employers' liability with limits for each accident in an amount reasonably required by Landlord. (iii) Tenant's Property. Insurance covering any and all fixtures, ----------------- equipment, furnishings and personal property of Tenant from time to time in, on or about the Premises, providing protection against all perils included within a standard "all risk from" insurance policy, together with insurance against sprinkler damage, vandalism, and malicious mischief. Such insurance shall be in an amount not less than the full replacement cost of the property insured without deduction for depreciation. (iv) Policy Form. All policies of insurance provided for in this ------------- Section 16 shall be issued by insurance companies with a general policyholders' rating of not less than A and a financial rating of XIII as rated in the most current available "Best's Insurance Reports," and qualified to do business in the State of California; and, except for workers' compensation and employers' liability, all such policies shall name Landlord, and such other persons and entities as Landlord specifies from time to time, as additional insureds. Executed copies or certificates of all such policies of insurance shall be delivered to Landlord at least ten (10) days prior to the delivery of possession of the Premises to Tenant, and thereafter copies or certificates of all renewals of such policies of insurance within thirty (30) days prior to the expiration of the term of each such policy. All comprehensive general liability insurance policies shall contain a provision that Landlord, although named as an insured, shall nevertheless be entitled to recovery under such policies for any loss occasioned to Landlord, its agents and employees by reason of the negligence or willful act of Tenant. As often as any such policy shall expire or terminate, renewal or additional policies shall be procured and maintained by Tenant in like manner and to like extent. All such policies of insurance shall provide that the companies writing such policies shall give to Landlord thirty (30) days' prior written notice (i) of any cancellation or lapse of the policies or (ii) of the effective date of any reduction in the amounts of insurance. All public liability, property damage and other casualty policies shall be written as primary policies, not contributing with and not in excess of coverage that Landlord may carry. 16. SERVICES AND UTILITIES. (a) Subject to the rules and regulations of the Building, Landlord agrees to furnish to the Premises and the Building the following services and utilities: (i) Heating, ventilation, and air conditioning ("HVAC") shall be, provided to the Premises between the hours of 8:00 a.m. and 6:00 p.m., Monday through Friday, except for generally recognized business holidays in San Francisco, California (such hours during these days shall be referred to herein as "Standard Building Hours"), in such amounts as are necessary for the comfortable use and occupancy of the Premises as general office space, as reasonably determined by Landlord. Additionally, upon reasonable advance notice from Tenant, Landlord shall provide the Premises with HVAC during other than Standard Building Hours, provided, however, that Tenant shall separately reimburse Landlord for Landlord's' cost of providing such HVAC to the Premises during other than Standard Building Hours. (ii) Electricity for lighting and fractional horsepower office equipment shall be provided to the, Premises twenty-four (24) hours per day, every day of the year, in such amounts as are necessary for -10- the use and occupancy of the Premises as general office space, as reasonably determined by Landlord, provided, however, that if Tenant requests HVAC during hours other than Standard Building Hours, or if Tenant otherwise regularly uses electricity during other than Standard Business Hours, Landlord shall have the right to require Tenant to pay to Landlord as Additional Charges the cost of Tenant's additional electricity usage during such hours, as reasonably estimated by a utility company or by Landlord's electrical engineer. (iii) Janitorial service shall be provided to the Premises during other than Standard Building Hours, at a level that is sufficient for the use and occupancy of the Premises as general office space, as reasonably determined by Landlord, but including trash disposal, cleaning of all restrooms once on all normal business days, and periodic washing of the inside and outside Building windows. (iv) Water for reasonable drinking and lavatory use shall be provided to the Premises and/or the floor on which the Premises are located twenty-four (24) hours per day, every day. (v) Landlord shall provide services and utilities to the Building, including the Common Areas, as necessary to operate and maintain the Building in a Class-A manner substantially equivalent to the manner in which comparable Class-A office buildings in San Francisco, California, are operated and maintained. (vi) Landlord shall provide security services for the Building that, in Landlord's judgement, are required for the reasonable safety of Tenant's property and employees. Tenant and its employees, guests, invitees and agents shall be given access to the Premises after business hours and on weekends, with appropriate security measures therefor reasonably established by Landlord. (b) Landlord shall .not be liable for, and Tenant shall not be entitled to any abatement of Rent or Additional Charges by reason of, (i)the inadequacy, stoppage, interruption, or discontinuance of any of the services or utilities in Subsection 17(a) above-when caused by accident, breakage, repair, maintenance, strike, lockout or other labor disturbance or labor dispute of any character, or by any other cause, similar or dissimilar, beyond the reasonable control of Landlord, or by the making of any repairs, alterations, additions or improvements to the Premises or to the Building or any portion of either, or (ii) the limitation, curtailment, rationing or restriction on use of water, electricity, gas or any other utility provided to the Premises or the Building by any public utility company or governmental agency. (c) Without the prior consent of Landlord, as provided below, Tenant shall not install or use any equipment or machines in the Premises, including, without limitation, computers, data processing machines, punch card machines and equipment or machines using in excess of 220 volts, that will in any way cause Tenant to use electricity in the Premises in excess of the amount of electricity that is commonly used by other tenants of the Building for the use and occupancy of their respective premises as general office space. If Tenant desires to install and use In the Premises any such equipment or machines that will cause Tenant to use electricity in excess of the amount that is commonly used by other tenants of the Building for the use and occupancy of their respective premises as general office space, Tenant shall fast procure the consent of Landlord to the installation and use of such equipment or machines, which consent shall not be unreasonably withheld. If such consent is granted by Landlord, Landlord shall have the rig, hi to cause an electrical current submeter to be installed in the Premises, so as to measure the amount of electricity consumed for any such use. Promptly upon demand by Landlord, Tenant shall reimburse Landlord, as Additional Charges, for the cost of any such submeter, including, without limitation, the cost of its installation, maintenance and repair, and for the cost of all electricity consumed as shown by such submeter, at the rate charged for such service by the local public utility furnishing the same, plus any additional expense incurred by Landlord in keeping account of the electricity so consumed. If separately submetered, the cost of electricity shall be excluded from the calculation of Expenses for the purpose of computing Tenant's Share of Expenses, except that the cost of electricity used in or with respect to the Common Areas, as reasonably determined by Landlord, shall be included in such calculation. If Landlord elects not to install a separate -11- electric current submeter, the cost of the electricity used by Tenant in excess of the amount that is commonly used by other tenants of the Building for the use and occupancy of their respective premises as general office space shall be established by an estimate made by a utility company or, at Landlord's option, by an electrical engineer selected by Landlord and reasonably approved by Tenant and shall be paid to Landlord monthly as "Additional Charges together with the Rent. 17. TAXES ON TENANT'S PERSONAL PROPERTY. Tenant agrees to pay, before delinquency, any and all taxes levied or assessed during the Term upon' Tenant's equipment, furniture, trade fixtures and other personal property located in, on or about the Premises. In the event any or all of Tenant's equipment, furniture, fixtures and other personal property shall be assessed and taxed with the Building, Tenant shall pay to Landlord as Additional Charges the taxes so levied with respect to such personal property within ten (10) business days after delivery to Tenant by Landlord of a statement setting forth the amount of such taxes' applicable to Tenant's property. 18. RULES AND REGULATIONS. Tenant shall faithfully observe and comply with the rules and regulations for the Building that are attached as Exhibit E. Landlord reserves the right from time to time to make reasonable additions to and modifications of such roles and regulations. Any such additions and modifications shall be binding on 'Tenant upon delivery of a copy of them to Tenant. Landlord shall not be responsible to Tenant for the nonperformance of any such rules and regulations by any other tenants or occupants of the Building 19. HOLDING OVER. Any holding over by Tenant after the Expiration Date with the prior consent of Landlord shall be construed to be a tenancy from month to month on all of the terms, covenants and conditions herein specified but, unless otherwise agreed upon in writing by Landlord and Tenant, at a monthly Base Rent equal' to one hundred twenty-five percent (125%) of the monthly Base Rent in effect immediately prior to the Expiration Date. Acceptance by Landlord of Rent after, the Expiration Date without Landlord's prior consent to Tenant's holding over shall not constitute a consent by Landlord to any such tenancy from month to month or result in any other tenancy or any renewal of the Term. The provisions of this Section 20 are in addition to, and do not affect, Landlord's right of re-entry or other rights hereunder or provided by law, including, without limitation, the right to recover damages for any period when Tenant holds over without Landlord's prior consent. 20. ENTRY BY LANDLORD. Landlord reserves, and shall at all times have the right to enter the Premises to inspect the Premises; to supply janitorial service and any other service to be provided by Landlord hereunder; to read any meters; to show the Premises to prospective purchasers, lenders or tenants (but only after the giving of no less than 8 hours notice by Landlord to Tenant); to determine whether Tenant is in compliance with all of its obligations hereunder; to post notices of nonresponsibility; to erect scaffolding and other necessary structures in or through the Premises where reasonably required by the character of the work to be performed; to alter, repair and improve the Building, the Premises or any part of either; to make additions to and build additional floors on the Building; to alter, repair, or improve or location of entrances or passageways, doors and doorways, electrical, plumbing, heating, ventilating and air conditioning equipment and systems, corridors, elevators, stairs and toilets, and all other facilities serving the Building, wherever located, .and whether or not such alterations, repairs or improvements are required by any governmental agency, entity, ordinance, role or regulation; to construct other buildings or improvements on land adjacent to- the Building; and to change the use of all or any part of the Building, other than the Premises, provided that Landlord shall use reasonable efforts to minimize any interference with Tenant's use and enjoyment of the Premises caused by any such entry. The exercise by Landlord of any of the foregoing rights shall not be deemed an actual or constructive eviction of Tenant, shall not result in any liability of Landlord to Tenant, and shall not entitle Tenant to any reduction of Rent; provided, however, that in the event that the exercise by Landlord of any of the foregoing rights shall result in a permanent actual decrease in the rentable area of the Premises, then the Rent shall be reduced in proportion to such decrease. Tenant waives any claim for damages for any injury or inconvenience to or interference with Tenant's business, any loss of occupancy or quiet -12- enjoyment of the Premises, and any other loss occasioned by such entry. For each of the foregoing purposes, . Landlord shall at all times have and retain a key with which to unlock all of the doors in, on and about the Premises (excluding doors to Tenant's vaults, safes and similar areas designated in writing by Tenant in advance). Landlord shall have the right to use any and all means that Landlord may deem proper to open such doors in an emergency in order to obtain entry to the Premises, and any entry to the Premises obtained by " Landlord by any of such means, or otherwise, shall not under any circumstances be construed or deemed to be a forcible or unlawful entry into or a detainer of the Premises or an eviction, actual or constructive, of Tenant from all or any portion of the Premises. 21. DAMAGE AND DESTRUCTION. (a) If the Premises or the Building is damaged by fire, earthquake, act of God, the elements or other casualty, Landlord shall promptly, but in no event later than thirty 00) days following the occurrence of such damage, give notice to Tenant stating the. number of days, in Landlord's reasonable judgment, that will be necessary to repair such damage. If such damage can substantially be repaired within one hundred twenty (120) days after the damage occurred, Landlord shall commence to repair such damage promptly and shall complete such repairs as soon as reasonably possible thereafter, subject to the provisions of this Section 22. During the making of such repairs by Landlord, this Lease shall remain in full force and effect, except that if the damage is not the result of the ______________________ intentional misconduct of Tenant, its agents, contractors, employees or invitees, Tenant shall be entitled to an abatement of Base Rent, while such repair is being made, in the proportion that the Rentable Area of the Premises rendered unusable by such damage bears to the total Rentable Area of the Premises. If such damage cannot substantially be repaired within one hundred twenty (120) days after the damage, as evidenced by a statement from Landlord's architect or general contractor to such effect, Landlord and Tenant shall each have the option, exercisable at any time within thirty (30) days after Landlord's notice to Tenant as provided above, to terminate this Lease This option to terminate shall be exercised, if at all, by Landlord or Tenant giving notice to the other party within such thirty (30) day period of its election to terminate this Lease, with such termination to be effective as of a date specified in such notice no later than thirty (30) days after the giving of such notice to the other party. If both parties elect to terminate this Lease, the termination date shall be the date specified in Landlord's notice. If either Landlord or Tenant elects to terminate this Lease by giving such notice of termination to the other party, this Lease and . all interest of Tenant in the Premises shall terminate on the date specified in such notice, and the Kent, proportionately abated as provided above, shall be paid up to the date of such termination, with. Landlord refunding to Tenant any Rent previously paid for any period of time subsequent to such date If neither party elects to terminate this Lease as provided above, Landlord promptly shall repair such damage, with this Lease continuing in full force and effect, but with the Base Rent proportionately abated as provided above. If Landlord is required to repair the Premises or the Building under this Section 22, Landlord shall repair at its cost any injury or damage to the Building and the. leasehold improvements in the Premises, and Tenant shall be responsible for and shall repair at its sole cost all trade fixtures, equipment, furniture and other property of Tenant in the Premises. Tenant waives any right to terminate this Lease under Sections 1932__2) and 1933(4) of the California Civil Code, or under any similar Laws now or hereafter in effect. Tenant shall not be entitled to any compensation or damages from Landlord for damage to any of Tenant's trade fixtures, personal property or equipment, for loss of use of all or any part of the Premises, for any damage to Tenant's business or profits, or for any disturbance to Tenant caused by any casualty or the restoration of the Premises following such casualty. (b) Notwithstanding the provisions of Subsection 22(a) above, each party also shall have the option to terminate this Lease, exercisable by notice to the other party within thirty (30) days of damage or destruction to the Premises or Building, in each of the following instances: (i) If more than fifty percent (50%) of the Rentable Area of the Building is destroyed, regardless of whether the Premises are damaged. -13- (ii) If the Premises are substantially damaged or destroyed during the last twelve (12) months of the Term. (c) Notwithstanding the provisions of Subsections 22(a) and Co) above, Landlord also shall , have the option to terminate this Lease, exercisable by notice to Tenant within thirty (30) days of damage or destruction to the Premises or Building, if the uninsured cost of repairing any damage or destruction (excluding the amount of any applicable deductible, in the case of an insured loss) exceeds ten percent (10%) of the full replacement cost of the Building, including, without limitation, all leasehold improvements therein. 22. DEFAULT. The occurrence of an) one or more of the following events shall constitute a default and breach of this Lease by Tenant (an "Event of Default"): (a) The vacation or abandonment of the Premises by Tenant for a period of twenty (20) days or longer. (b) The failure of Tenant to pay any installment of Rent within five (5) business days after such installment is due. (c) The failure by Tenant to observe or perform any of the provisions of this Lease to be observed or performed by Tenant, other than the failure described in Subsection 23(b), where such failure shall continue for a period of fifteen (I5) days after notice of such failure by Landlord to Tenant; provided, however, that if the nature of Tenant's default is such that more than fifteen (15) days are reasonably required for its cure, then Tenant shall not be deemed to be in default if Tenant commences such cure within such fifteen (15) day period and thereafter diligently prosecutes such cure to completion. (d) The making by Tenant of any general assignment or general arrangement for the benefit of creditors; or the filing of any action by or against Tenant under any insolvency, bankruptcy, reorganization, moratorium or other debtor relief statute, whether now or hereafter existing (unless, in the case of such action taken against Tenant, the action is dismissed within sixty (60) days); or the appointment of a trustee or a receiver to take possession of substantially all of Tenant's assets located at the Premises or of Tenant's interest in this Lease, where possession is not restored to Tenant within thirty (30) days after such taking; or the attachment, execution or other judicial seizure of substantially all of Tenant's assets located at the Premises or of Tenant's interest in this Lease, where such seizure is not discharged within ten (10)days; or the admission by Tenant in writing of its inability to pay its debts as they become due. 23. REMEDIES IN DEFAULT. Upon the occurrence of any Event of Default, Landlord may at any time thereafter, with or without notice or demand, Without limitation on Landlord's exercise of any right or remedy that Landlord may have by reason of such Event of Default, and in addition to any other right or remedy Landlord may have at law or in equity: (a) Terminate this Lease and recover damages as provided by Section 1951.2 of the California Civil Code, including, but not limited to, recovery of the worth at the time of award of the amount by which the unpaid Rent for the balance of the Term after the time of award exceeds the amount of rental loss for the same period that Tenant proves could have been reasonably avoided, as computed pursuant to subsection (b) of Section 1951.2; (b) Continue this Lease in effect and enforce all of Landlord's rights and remedies under this. Lease, as provided by Section 1951.4 of the California Civil Code, including, without limitation, the right to recover Rent as it becomes due, for so long as Landlord does not terminate Tenant's right to possession; acts of maintenance or preservation by Landlord, efforts by Landlord to relet or sublet the Premises, or the appointment of a receiver upon Landlord's initiative to protect its interest under this Lease shall not constitute a termination of Tenant's right to possession; -14- (c) Sublet all or any part of the Premises for such term or terms (which may extend beyond the Term), at such rent and on such other terms as Landlord in its sole discretion may deem advisable, with the right to make alterations and repairs to the Premises, all as attorney-in-fact for Tenant pursuant to Subsection 24(f); (d) Enter the Premises and remove therefrom all persons and property, store such property in a public warehouse or elsewhere at the cost of and for the account of Tenant, and sell such property and apply the proceeds therefrom pursuant to applicable California law, all as attorney-in-fact for Tenant pursuant to Subsection 24(f); and (e) Take all steps necessary or appropriate to have a receiver appointed for Tenant to take possession of the Premises, to apply any rental collected from the Premises and to exercise all other rights and remedies granted to Landlord as attorney-in-fact for Tenant pursuant to Subsection 24(f). Additionally, Landlord shall have the following rights, powers, and remedies: (f) For all purposes set forth in Subsections 24(c) through 24(e), Tenant in evocably appoints and constitutes Landlord as attorney-in-fact for Tenant, with power of substitution. No taking possession of the Premises by Landlord, as attorney-in-fact for Tenant, shall be construed as an election on Landlord's part to terminate this Lease unless a written notice of such election is given to Tenant. Notwithstanding any subletting by Landlord without termination under Subsection 24(c.), Landlord may at any time thereafter elect to terminate this Lease for any previous Event of Default. (g) In the case of any Event of Default in the payment of Rent, Landlord shall receive interest on all unpaid Rent at a rate equal to the lesser of (i) the rate of interest publicly announced by Bank of America NT&SA in San Francisco, California, as its "reference rate" (or any successor interest rate), plus five percent (5%), which rate on unpaid Rent shall be adjusted as of the effective date of any change in such reference (or successor) rate, or (ii) the highest rate permitted by law. 24. EMINENT DOMAIN. (a) If all of the Premises are condemned or taken in any manner for public or quasi-public use, including, but not limited to, a conveyance or assignment in lieu of a condemnation or taking, this Lease shall automatically terminate as of the earlier of the date of the vesting of title or the date of dispossession, of Tenant as a result of such condemnation or taking. If a portion of the Premises is so condemned or taken, this Lease shall automatically terminate, as to the portion of the Premises so condemned or taken, as of the earlier of. the date of the vesting of title or the date of dispossession of Tenant as a result of such condemnation or taking. If a portion of the Building is condemned or taken so as to require, in the reasonable judgment of Landlord, a substantial alteration or reconstruction of the remaining portions of the Building, this Lease may be terminated by Landlord, as of the earlier of the date of the vesting of title or the date of dispossession of Tenant as a result of such condemnation or taking, by notice to Tenant within sixty (60) days following notice to Landlord of the date on which such vesting or dispossession will occur. If a material portion of the Premises is condemned or taken so as to render the remaining portion unusable by Tenant, in Tenant's reasonable judgment, this Lease may be terminated by Tenant, as of the earlier of the date of the vesting of title or the date of dispossession of Tenant as a result of such condemnation or taking, by notice to Landlord within sixty (60) days following notice to Tenant of the date on which such vesting or dispossession will occur. (b) Landlord shall be entitled to the entire award in any condemnation proceeding or other proceeding for taking for public or quasi-public use, including, without limitation, any award made for the value of the leasehold estate created by this Lease. No award for any partial or entire taking shall be apportioned, and Tenant assigns to Landlord any award that may be made in such condemnation or taking, -15- together with any and all rights of Tenant now or hereafter arising in or to such award; provided, however, that nothing contained herein shall be deemed to give Landlord any interest in, or to require Tenant to assign to Landlord, any award made to Tenant specifically for its relocation expenses, the taking of personal property and fixtures belonging to Tenant, or the interruption of or damage to Tenant's business. (c) In the event of a partial condemnation or taking that does not result in a termination of this Lease as to the entire Premises, Base Rent shall abate in proportion to the portion of the Premises taken by such condemnation or taking. (d) If all or any portion of the Premises is condemned or taken for public or quasi-public use for a limited period of time, this Lease shall remain in full force and effect and Tenant shall continue to observe all of the terms, conditions and covenants of this Lease; provided, however, that Base Rent shall abate during such limited period in proportion to the portion of the Premises that is rendered untenantable and unusable as a result of such condemnation or taking. Landlord shall be entitled to receive the entire award made in connection with any such temporary condemnation or taking. (e) Tenant waives and releases any right to terminate this Lease under Sections 1265.120 and 1265.130 of the California Code of Civil Procedure, or under any similar Laws now or hereafter in effect. 25. ESTOPPEL CERTIFICATE. At any time and from time to time, and no later than thirty (30) days after notice from Landlord, Tenant shall promptly execute, acknowledge and deliver to Landlord, and, at Landlord's request, to any prospective purchaser, ground lessor, or mortgagee, a certificate certifying (a) that Tenant has accepted the Premises (or, if Tenant has not done so, that Tenant has not accepted the Premises and specifying the reasons for not accepting them); (b) the Commencement, Rent Commencement and Expiration Dates; (c) that this Lease is unmodified and in full force and effect (or, if there have been modifications, that this Lease is in full force and effect as modified and stating the date and nature of each modification); (d) the dates, if any, to which Rent has been paid; (e) whether or not there are then existing any defenses against the enforcement of any of the obligations of Tenant under this Lease (and, if so, specifying such defenses); (f) whether or not there are then existing any defaults by Landlord in the performance of its obligations under this Lease (and, if so, specifying such defaults); and (g) such other matters as may be reasonably requested by Landlord. Any such certificate may be relied upon by Landlord and by any prospective purchaser, ground lessor or mortgagee considering the purchase of or a loan on all or any part of the Building or any interest therein. If Tenant fails to deliver any such certificate within thirty (30) days of receipt, Tenant agrees and acknowledges that Landlord, and any prospective purchaser, ground lessor, or mortgagee, may rely on all in, formation set forth in such certificate as true and correct. Tenant shall indemnify Landlord against and hold Landlord harmless from all costs, damages, expenses, liabilities and fees, including, without limitation, reasonable attorneys' fees and any consequential damages or lost profits, arising from or in any way related to or connected with Tenant's failure to deliver any such certificate within the time specified in this Section 26. 26. AUTHORITY OF TENANT. If Tenant is a corporation or partnership, each individual executing this Lease on behalf of Tenant represents and warrants that he is duly authorized to execute and deliver this Lease on behalf of Tenant, that Tenant is a duly authorized and existing entity, that Tenant has qualified and is qualified to do business in California, that Tenant has full right and authority to enter into this Lease, and that this Lease is binding upon such corporation or partnership in accordance with the terms of this Lease. Upon Landlord's request, Tenant shall provide Landlord with evidence reasonably satisfactory to Landlord confirming the foregoing representations and warranties. 27. BROKERS, Tenant warrants that it has had no dealings with any real estate broker or agent in connection with the negotiation of this Lease, excepting only the brokers specified in the Basic Lease Information, and Tenant knows of no other real estate broker or agent who is entitled to a commission in connection with this Lease. Tenant agrees to indemnify Landlord against and hold Landlord harmless from -16- any and all claims, demands, losses, liabilities; lawsuits, judgments, costs and expenses (including reasonable attorneys' fees) with respect to any leasing commission or equivalent compensation alleged to be owing on account of Tenant's dealings with any real estate broker or agent other than as specified in the Basic Lease Information. 28. DEFAULT BY LANDLORD. Landlord shall not be in default unless Landlord fails to perform obligations required of Landlord within a reasonable time, but in no event later than thirty (30) days after notice by Tenant to Landlord specifying the nature of the obligation Landlord has failed to perform; provided, however, that if the nature of Landlord's obligation is such that more than thirty (30) days are required for performance, then Landlord shall not be in default if Landlord commences performance within such thirty (30) day period and thereafter diligently prosecutes such performance to completion. 30. INTENTIONALLY OMMITTED. 31. GENERAL PROVISIONS. (a) Waiver. The waiver by Landlord or Tenant of the other party's ------ failure to perform or observe any provision of this Lease shall not be deemed to be a continuing waiver of such provision or a waiver of any subsequent failure of Landlord or Tenant to perform or observe the same or any other such provision, and no custom or practice that may develop between the parties during the Term shall be deemed a waiver of, or shall in any way affect, the right of Landlord or Tenant to insist upon performance and observance by the other party in strict accordance with the terms of this Lease. The subsequent acceptance of Rent hereunder by Landlord shall not be deemed to be a waiver of any preceding failure of Tenant to perform or observe any provision of this Lease, other than the failure of Tenant to pay the particular Rent so accepted, irrespective of any knowledge on the part of Landlord of such preceding failure of Tenant at the time of acceptance of such Rent. (b) Notices. Any bills, statements, notices, demands, requests or ------- other communications given or required to be given under this Lease shall be effective only if rendered or given in writing, sent by registered, certified, or express mail or delivered personally, (i) to Tenant (A) at Tenant's address set forth in the Basic Lease Information, if sent prior to Tenant's taking possession of the Premises, (B) at Tenant's address at the Building, if sent subsequent to Tenant's taking possession of the Premises, or (C) at any place where Tenant or any agent or employee of Tenant may be found, if sent subsequent to Tenant's vacating, deserting, abandoning or surrendering the Premises; (ii) to Landlord at Landlord's address set forth in the Basic Lease Information; or (iii) to Tenant or Landlord at such other address as either party may designate as its new address for such purpose by notice given to the other in accordance with the provisions of this Subsection 31(b). If Tenant is notified of the identity and address of Landlord's mortgagee or ground or underlying lessor, Tenant shall give to such mortgagee or ground or underlying lessor notice of any default by Landlord under the terms of this Lease, in writing sent by registered or certified mail, and such mortgagee or ground or underlying lessor shall be given a reasonable opportunity to cure such default prior to Tenant's ground or underlying lessor shall be given a reasonable opportunity to cure such default prior to Tenant's exercising any remedy available to Tenant. -17- (c) Examination of Lease. Submission of this instrument to Tenant for -------------------- its execution does not constitute a reservation or option for a lease, and this instrument is not and shall not be deemed to be effective as a lease or otherwise until its execution and delivery by both Landlord and Tenant. (d) Captions. The captions of this Lease are for convenience of -------- reference only and shall have no effect upon the construction or interpretation of any provision of this Lease. (e) Definitions. The words "Landlord" and "Tenant" as used herein ----------- shall include the plural as well as the singular. Words used in the neuter gender include the masculine and feminine. If Landlord or Tenant is more than one entity, the obligations under this Lease imposed on Landlord or Tenant shall be joint and several. (f) Time. Time is of the essence of this Lease and each and all of its ---- provisions in which performance is a factor (g) Successors and Assigns. The terms, covenants and conditions ---------------------- contained in this Lease shall bind and inure to the benefit of Landlord and Tenant and, except as otherwise provided herein, their personal representatives, successors and assigns; provided, however, that upon the sale, assignment or transfer by Landlord named herein (or by any subsequent Landlord) of its interest in the Building as owner or lessor, including any transfer by operation of law, Landlord named herein (or any subsequent Landlord) shall be relieved from all subsequent obligations and liabilities under this Lease, and all obligations and liabilities subsequent to such sale, assignment or transfer (but not any obligations or liabilities that have accrued prior to the date of such sale, assignment or transfer) shall be binding upon the grantee, assignment or transferee of such interest, and any such grantee, assignee or transferee, by accepting such interest, shall be deemed to have assumed such subsequent obligations and liabilities. A lease of the entire Building to a person other than for such person's occupancy shall be deemed a transfer within the meaning of this Subsection 3l(g). Tenant agrees to execute any and all documents deemed necessary or appropriate by Landlord to evidence the foregoing. (h) Recordation. Tenant shall not record this Lease or a short form ----------- memorandum of this Lease without the prior consent of Landlord. (i) Quiet Possession. Upon Tenant's paying the Rent reserved hereunder ---------------- and observing and performing all of the provisions of this Lease, Tenant shall have quiet' possession of the Premises for the entire Term, subject to all the provisions of this Lease. (j) Prior Agreements. This Lease contains all of the agreements of ---------------- Landlord and Tenant with respect to all matters covered or mentioned in this Lease, and no prior agreements or understandings pertaining to any such matters shall be effective for any purpose. No provision of this Lease may be amended or added to except by an agreement in writing signed by the parties or their successors in interest. Tenant acknowledges that in executing and delivering this Lease, Tenant is not relying on any verbal or written understanding, promise or representation outside the scope of this Lease and not described or referred to herein. (k) Attorneys' Fees. In the event of any action or proceeding brought --------------- by either party against the other under this Lease, the prevailing party shall be entitled to recover all costs and expenses, including, without limitation, its attorneys' fees, for such action or proceeding in such amount as the court or arbitrator may adjudge reasonable. The prevailing party shall be determined by the court or arbitrator based upon an assessment of which party's major arguments made or positions taken in the action or proceeding could fairly be said to have prevailed over court's or arbitrator's decision. If Landlord is named as a defendant in any suit brought against Tenant in -18- connection with or in any way arising out of this Lease or Tenant's use or occupancy of the Premises, Tenant shall pay Landlord's costs and expenses, including, without limitation, reasonable attorneys' fees, incurred in such suit. (1) Subordination: Attornment. Without the necessity of any additional ------------------------- document being executed by Tenant for the purpose of effecting a subordination, this Lease shall be subject and subordinate at all times to (i) all ground leases or underlying leases that may now exist or hereafter be executed affecting the Building or the land upon which the Building is situated, or both, and (ii) the lien of any mortgage or deed of trust that may now exist or hereafter be executed in any amount for which the Building, the land upon which the Building is situated, any ground leases or underlying leases of the Building or such land, or Landlord's interest or estate in any of such items is specified as security, provided that the lessees under such ground or underlying leases, and the mortgagees or beneficiaries named in such mortgages or deeds of trust, shall agree to recognize the interest of Tenant under this Lease in the event of foreclosure, if Tenant is not then in default. Notwithstanding the foregoing, Landlord shall have the right to subordinate or cause to be subordinated to this Lease any such ground leases or underlying leases or any such liens. In the event that any ground lease or underlying lease terminates for any reason or any mortgage or deed of trust is foreclosed or a conveyance in lieu of foreclosure is made for any reason, Tenant shall, notwithstanding any subordination, attorn to and become the Tenant of the successor in interest to Landlord, at the option of such successor in interest. Tenant covenants and agrees to execute and deliver, upon demand by Landlord and in the form requested by Landlord, any additional documents evidencing the priority or subordination of this Lease with . respect to any such ground lease or underlying lease or the lien of any such mortgage or deed of trust. (m) Names. Tenant shall not use the name of the Building or of the ----- development in which the Building is situated for any purpose other than as an address of the business to be conducted by Tenant in the Premises. (n) Severability. Any provision of this Lease that shall prove to be ------------ invalid, void, illegal or unenforceable shall in no way affect, impair or invalidate any other provisions of this Lease, and such other provisions and this Lease shall remain in full force and effect. (o) Cumulative Remedies. No remedy or election hereunder shall be ------------------- deemed exclusive but shall, wherever possible, be cumulative with all other remedies or elections at law or in equity. (p) Choice of Law. This Lease shall be governed by and construed in ------------- accordance with the Laws of the State of California. (q) Signs and Building Name. Tenant shall not place any sign upon the ----------------------- Premises or Building without Landlord's prior consent. All signs to which Landlord so consents and which are placed by Tenant upon or in the Premises shall comply in all respects with size, design, lettering and material guidelines established by Landlord for the Building. Landlord reserves the right to change or alter such guidelines at such times and for such tenants as Landlord may determine in its sole discretion. The name of the Building may be changed from time to time in Landlord's sole discretion. (r) No Merger. The voluntary or other surrender of this Lease by --------- Tenant, or a mutual cancellation of this Lease by Landlord and Tenant, shall not constitute a merger of Tenant's estate and Landlord's estate, and, at the option of Landlord, shall either (i) terminate any or all existing subleases or subtenancies or (ii) operate as an assignment to Landlord of any or all such subleases or subtenancies. (s) Light and Air. Tenant covenants and agrees that no diminution or ------------- shutting off of light, air or view that may result from the erection of any structure (whether or not by Landlord) on property adjacent to the Building, and no closing or shutting off of any windows in the Premises or the Building as a result of -19- The erection of all such structure, shall in anyway affect this Lease, entitle Tenant to any reduction of rent hereunder or result in any liability of Landlord to Tenant, of any type or nature whatsoever. (t) Confidentiality. Tenant shall not disclose the terms of this Lease to ----------------- any unrelated third party except as required in the normal course of Tenant's business (e.g., if necessary to obtain financing). (u) Landlord's Review. The review, approval, inspection or examination by ----------------- Landlord of any item to be reviewed, approved, inspected or examined by Landlord under the terms of this Lease or the attached exhibits shall not constitute the assumption of any responsibility by Landlord for either the accuracy or the sufficiency of any such item or the quality or suitability of such item for its intended use. Any such review, approval, inspection or examination by Landlord is for the sole purpose of protecting Landlord's interests in the Building and under this Lease, and no third parties, including, without limitation, Tenant or any person or entity claiming through or under Tenant, or the contractors, agents, servants, employees, visitors or any such person or entity, shall have any rights arising out of any such review, approval, inspection or-examination. All improvements will be subject to permit and code compliance. LANDLORD: PIAZZA TRADING & CO., LTD. By /s/ Signature ---------------------------- Its: General Manager ----------------------- Date: 5-20-98 --------------------- TENANT: BIOMARIN PHARMACEUTICALS By /s/ Christopher Strarr ---------------------------- Its: Vice President Research ------------------------ Date: MAY 18, 1998 ---------------------- ADDENDUM TO LEASE BY AND BETWEEN PIAZZA TRADING & CO., LTD., LANDLORD AND BIOMARIN PHARMACEUTICALS, TENANT DATED MAY 18, 1998 1. POSSESSION: Upon execution of this agreement, and upon Tenant's presentation to Landlord of Tenant's certificate of Liability Insurance pursuant to Section 15 herein, Tenant shall be granted access to the Premises to commence installation of Tenant's improvements to the Premises and all the terms and conditions of this lease shall be in full force and effect. 2. RENTAL ADJUSTMENT: On or before May 18, 1998, Tenant shall pay to Landlord $14,858.00 as rent from May 18, 1998 to June 17, 1998. Thereafter, for the balance of the first year of the lease term the monthly rent shall be $14,853.00. Commencing June 1, 1999 and each subsequent June 1st thereafter for the balance of the lease term the monthly rent payable shall adjust in accordance with the percentage increase, if any, in the San Francisco- Oakland-San Jose Area "All Urban Consumers" Consumer Price Index. In no event shall the adjustment decrease below the immediately preceeding years rent. 3. CONDITION OF PREMISES: As a condition of Landlord leasing said Premises to Tenant, Tenant agrees to lease the Premises in an "as is' condition and repair, with the exception that Landlord represents to Tenant that the HVAC is in good operating condition and repair as of the lease commencement date. 4. TENANT IMPROVEMENT ALLOWANCE: As a condition of Tenant executing a lease agreement Landlord shall provide Tenant with $23,460.00 Tenant Improvement Allowance. Upon completion of the tenant improvements pursuant to Section 5 herein this Addendum to Lease, Tenant shall provide Landlord with written notice of Tenant's completion and Landlord shall have the right to inspect Tenant's work. Landlord shall pay Tenant 50 % of the total Tenant Improvements ($11,730.00) within thirty (30) days of the lease commencement date and the remaining ($11,730.00) within one hundred eighty (180) days of lease commencement. 5. TENANT IMPROVEMENT PLAN: Tenant shall obtain Landlord's prior consent of Tenant's improvement plan, which consent shall not be unreasonably withheld, prior to Tenant commencing construction of its improvements to the Premises. Landlord shall notify Tenant at the time of Landlord's consent if Landlord wants all or part of the Tenant improvements removed upon the expiration of the lease term. Tenant shall be responsible for all Building Permits and Governmental Fees associated with Tenant's improvement plan. 6. OPTION TO EXTEND: If the Tenant has fully and faithfully kept and performed all of the terms, covenants and conditions of this Lease on the part of the Tenant to be kept and performed, including the full and prompt payments of all rental herein, then Tenant to be kept and performed, including the full and prompt payments of all rental herein, then Tenant shall have the right, at its option, to renew and extend this Lease for one (1) additional term of three (3) years, to begin at the expiration of the lease term, provided Tenant gives written notice to Landlord of Tenant's intent to exercise said option no earlier than twelve (12) months but not later than six (6) months prior to the date of expiration of the term of this Lease. The monthly rent for the option period shall be under the same terms and conditions herein, and adjusted pursuant to Section 2 of this addendum. All other terms and conditions of this lease shall remain in full force effect except as amended herein. LANDLORD- PIAZZA TRADING & CO., LTD. TENANT: BIOMARIN PHARMACEUTICALS By /s/ Signature By /s/ Christopher Starr ---------------------------- ----------------------------- Title: General Mgr. Title: Vice President Research ------------------------- ------------------------- Date: 5-20-98 Date: May 18, 1998 -------------------------- -------------------------- PROPERTY: 371 Bel Marin Keys Boulevard, Novato HAZARDOUS MATERIALS WARNING: Current and future federal, state and local laws and regulations may require the clean-up of such toxic, hazardous or undesirable materials at the expense of those persons who in the past, present or future have had any interest in the Property including, but not limited to, current, past and future owners and users of the Property. Landlord and Tenant are advised to consult with independent legal counsel of their choice or other experts, to determine their potential liability. AMERICANS WITH DISABILITIES ACT: On July 26, 1991, the federal legislation known as the Americans with Disabilities Act (ADA) was signed into law. The purpose of the ADA is to integrate persons with disabilities into the economic and social mainstream of American life. Title III of the ADA applies to landlords and tenants of "places of public accommodation" and "commercial facilities," and requires that places of public accommodation undertake "readily achievable" removal of communication and access barriers to the disabled. This requirement of Title III of the ADA is effective January 26, 1992. Landlord and Tenant should seek expert advice regarding the implications of the Act as it affects this agreement. LIABILITY RELEASE: Meridian Commercial, Inc., and its salespeople in this transaction have no expertise regarding hazardous materials or the Americans with Disabilities Act. Landlord and Tenant agree that they shall indemnify and hold Meridian Commercial, Inc. and its salespeople harmless from any claim, liability, or expense regarding hazardous materials or the ADA. BROKER REPRESENTATION: Meridian Commercial, Inc., is the real estate broker for the Landlord and the Tenant, and both Landlord and Tenant consent and acknowledge herewith. LANDLORD- PIAZZA TRADING & CO., LTD. TENANT: BIOMARIN PHARMACEUTICALS By /s/ Signature By /s/ Christopher Starr --------------------------- --------------------------- Title: General Mgr. Title: Vice President Research ------------------------ ----------------------- Date: 5-20-98 Date: May 18,1998 ------------------------- ------------------------ BIOMARIN PHARMACEUTICAL INC. Exhibit C TENANT IMPROVEMENTS PLANNED FOR 371 BELMARIN KEYS BLVD. We plan to expand the existing laboratory space into the adjacent vacant suite. This will necessitate that we remove and/or move the existing office walls, resurface some of the floor space, add two floor drains and add 2/3 partitions around the perimeter. All of the laboratory area will be upgraded to strict drug production standards required by the FDA making it extremely valuable property in Marin county as there is currently has a shortage of good lab space. We estimate that this facilities work will cost BioMarin about $300,000. An overall renovation plan for the space is attached. We also may need to add a second HVAC system, roof mounted, in order to provide adequate room ventilation. We anticipate using no hazardous chemicals in the facilities and waste will be strictly monitored as required by the FDA. This will be a very clean operation which we feel will add significant value to the property. As some of the modifications that we are planning will result in permanent changes to the floor plan, utilities, plumbing, and ventilation systems, if and when we do vacate the premises we will not be converting the renovated space back to the existing office space configuration. Therefore the owners of the building should consider the addition of this laboratory space as a permanent modification to the building. Based on the current 100% occupancy rate on similar laboratory space in Marin country we believe our renovations will add considerable value to the property. When and if we move from the facility we will agree however to remove all laboratory equipment. Please let me know if you have any concerns or questions that have not been addressed. We agree to the above terms: For BioMarin Pharmaceuticals For Piazza Trading Co. /s/ Christopher M. Starr /s/ Signature - ------------------------- ---------------------------- Christopher M. Starr General Mgr. ---------------------------- VP. Research If we move prior to the beginning of the option term or if the lease terminates early for any reason, we will reimburse for all costs in connection with de- installation of the laboratory fixtures and equipment. 11 PIMENTEL COURT NOVATO, CALIFORNIA 94949 TEL: 415-382-3510 FAX: 415-382- 7889 [PLAN APPEARS HERE] AMENDMENT TO LEASE AGREEMENT DATED MAY 18, 1998 BY & BETWEEN PIAZZA TRADING & COMPANY., LTD., LANDLORD AND BIOMARIN PHARMACEUTICAL, INC., TENANT DATED JULY 9, 1998 The following sections of the lease agreement by and between the Landlord and Tenant referenced herein above shall be amended as follows: Section 2: Rentable Area of Premises: The rentable area of Tenant's Premises shall be increased from 8,740 rentable square feet to 11,165 rentable square feet. Section 2 Suite: Commencing upon execution of this Amendment to Lease, Tenant hereby leases from Landlord Suite 230 located at 371 Bel Marin Keys Boulevard, Novato, California hereinafter the "Amended Premises". Section 4: Possession: Upon execution of this Amendment to Lease, Tenant hereby is granted possession of the Amended Premises in its present "as is" condition and repair, and the Landlord has no obligations to improve the Premises. Section 5: Rent Commencement: Upon execution of this Amendment to Lease, Tenant shall pay to Landlord the first month's rent for the Amended Premises in the mount of $4,365.00. Section 5: Monthly Base Rent: The new monthly base rent payable by Tenant to Landlord shall be $19,218.00 for the Premises as defined in the lease by the parties herein dated May 18, 1998 and the Amended Premises. Upon execution, of the Amendment, Tenant shall deposit with Landlord an additional security deposit in the amount of $4,365.00 which shall increase the security deposit held by Landlord to $19,223.00 Section 6: Tenant's Share Expenses & Taxes: 35.17% Section 7: Parking: Thirty-one (31) unassigned and unreserved spaces. All other terms and conditions of the Lease Agreement by and between the parties herein dated May 18, 1998 shall remain in full force and effect except as amended herein. LANDLORD: PIAZZA TRADING & COMPANY, LTD. BY: By: /s/ Signature ----------------------------- Its: GEN. MGR. ---------------------------- Date: AUG. 7 '98 ---------------------------- TENANT: BIOMARIN PHARMACEUTICAL, INC. By: /s/ Christopher Starr ----------------------------- Its: VP Research ---------------------------- Date: July 16, 1998 ---------------------------- EX-10.20 22 STANDARD NNN LEASE AGREEMENT DATED 6/25/1998 EXHIBIT 10.20 46 GALLI DRIVE, NOVATO, CALIFORNIA STANDARD NNN LEASE--MULTI-TENANT PROPERTY WITNESSETH This lease ("LEASE") is entered into by and between Limar Realty Corp. #18, a California corporation ("LANDLORD") and BioMarin Pharmaceutical, Inc., a Delaware corporation ("TENANT"). For and in consideration of the payment of rents and the performance of the covenants herein set forth by Tenant, Landlord does lease to Tenant and Tenant accepts the Premises described below subject to the agreements herein contained. 1. BASIC LEASE TERMS a. DATE OF LEASE: June 25, 1998 b. TENANT: BioMarin Pharmaceutical, Inc. Address (of the Premises): 46 Galli Drive, South Building, Novato, California Address (for Notices): (Please provide if other than Premises.) c. LANDLORD: Limar Realty Corp. #18 Address (for Notices): 1730 South El Camino Real Suite 400 San Mateo, California 94402 d. TENANT'S USE OF PREMISES: General office, laboratory research and development, production and warehousing. e. PREMISES AREA: 31,056 Rentable Square Feet f. BUILDING: 46 Galli Drive, Novato, California g. PROPERTY: 46 Galli Drive, Novato, California h. INSURING PARTY: Landlord is the "Insuring Party" unless otherwise stated herein. i. TERM (inclusive): Commencement Date: See (P)30. ("Commencement Date") Expiration Date: August 31, 2003 ("Expiration Date") Number of Months: Approximately 60 months j. TENANT'S SHARE OF BUILDING: 44.46% (31,056 / 69,849) k. TENANT'S SHARE OF PROPERTY: 44.46% (31,056 / 69,849) l. TENANT'S NUMBER OF NON-RESERVED PARKING SPACES: 55 m. INITIAL BASE RENT: Thirty Seven Thousand Nine Hundred Eighty Five & 44/100 Dollars ($37,985.44) per month. n. BASE RENT ADJUSTMENT: The cost of living provisions of (P)4.b.) apply using the CPI Index for the CMSA of San Francisco-Oakland, California and the annual floor limit ("FLOOR LIMIT") shall be an increase of three and one-third percent (3-1/3%) and the annual ceiling limit ("CEILING LIMIT") shall be an increase of seven and one-third percent (7-1/3%). o. TOTAL TERM BASE RENT(exclusive of any adjustments due to (P)4.b. & (P)5. and assuming an exact 60 month lease term): $2,279,126.40. p. PREPAID BASE RENT: $37,985.44 q. SECURITY DEPOSIT: $114,000.00 r. BROKER(S): Meridian Commercial, Inc. (Tenant) s. EXHIBITS: Exhibits lettered "A" through "D" are attached hereto and made a part hereof. -1- 2. PREMISES, PARKING AND COMMON AREAS a. PREMISES. The Premises as described in (P)1. and Exhibit A, are a --------- portion of a building, herein sometimes referred to as the "BUILDING" identified in (P)1. The Premises, the Building, the Common Areas, the land upon which the same are located, along with all other buildings and improvements thereon or thereunder, are herein collectively referred to as the "PROPERTY" as described in (P)1. and Exhibit B. --------- Landlord hereby leases to Tenant and Tenant leases from Landlord for the Term (as defined below), at the rental, and upon all of the conditions set forth herein, the real property referred to in the Basic Lease Terms, (P)1. as the "PREMISES", including rights to the Common Areas as hereinafter specified. Subject to any additional work Landlord has agreed herein to do, Tenant hereby accepts the Premises in their condition existing as of the date of the execution hereof, subject to all applicable zoning, municipal, county and state laws, ordinances and regulations governing and regulating the use of the Premises, and accepts this Lease subject thereto and to all matters disclosed thereby and by any exhibits attached hereto. Tenant agrees with the square footage specified for the Premises in (P)1 and will not hereafter challenge such determination and agreement. The rental payable by Tenant pursuant to this Lease is not subject to revision in the event of any discrepancy in the rentable square footage for the Premises. b. VEHICLE PARKING. So long as Tenant is not in default, and subject to the Rules and Regulations attached hereto as Exhibit C, and as --------- established by Landlord from time to time, Tenant shall be entitled to use the number of parking spaces set forth in (P)1. If Tenant commits, permits or allows any of the prohibited activities described in the Lease or the Rules and Regulations then in effect, then Landlord shall have the right, without notice, in addition to such other rights and remedies that it may have, to remove or tow away the vehicle involved and charge the cost to Tenant, which cost shall be immediately payable upon demand by Landlord. c. COMMON AREAS -- DEFINITION. The term "Common Areas" is defined as all areas and facilities outside the Premises and within the exterior boundary line of the Property that are provided and designated by the Landlord from time to time for the general non-exclusive use of Landlord, Tenant and of other tenants of the Property and their respective employees, suppliers, shippers, customers and invitees, including but not limited to common entrances, lobbies, corridors, stairways and stairwells, public restrooms, elevators, parking areas to the extent not otherwise prohibited by this Lease, loading and unloading areas, trash areas, roadways, sidewalks, walkways, parkways, ramps, driveways, landscaped areas and decorative walls. d. COMMON AREAS -- RULES AND REGULATIONS. Tenant agrees to abide by and conform to the Rules and Regulations attached hereto as Exhibit C with --------- respect to the Property and Common Areas, and to cause its employees, suppliers, shippers, customers and invitees to so abide and conform. Landlord, or such other person(s) as Landlord may appoint, shall have the exclusive control and management of the Common Areas and shall have the right, from time to time, to modify, amend and enforce said rules and regulations. Landlord shall not be responsible to Tenant for the non-compliance with said rules and regulations by other tenants, their agents, employees and invitees. e. BUILDING AND COMMON AREAS -- CHANGES. Landlord shall have the right, in Landlord's sole discretion, from time to time: 1) To make changes to the Building interior and exterior and Common Areas, including, without limitation, changes in the location, size, shape, number and appearance thereof, including but not limited to the lobbies, windows, stairways, air shafts, elevators, restrooms, driveways, entrances, parking spaces, parking areas, loading and unloading areas, ingress, egress, direction of traffic, decorative walls, landscaped areas and walkways, so long as the changes do not materially adversely affect Tenant's use and occupancy of the Premises pursuant to (P)1 d. hereof 2) To close temporarily any of the Common Areas for maintenance purposes so long as reasonable access to the Premises remains available; 3) To add additional buildings and improvements to the Common Areas; 4) To use the Common Areas while engaged in making additional improvements, repairs or alterations to the Property or any portion thereof; and 5) To do and perform such other acts and make such other changes in, to or with respect to the Common Areas and Property as Landlord may, in the exercise of sound business judgment deem to be appropriate. f. ACCEPTANCE; QUIET ENJOYMENT. Landlord represents that it is the fee simple owner of the Premises and has full right and authority to make this Lease. Landlord hereby leases the Premises to Tenant and Tenant hereby accepts the same from Landlord, in accordance with the provisions of this Lease. Landlord covenants that Tenant shall have peaceful and quiet enjoyment of the Premises during the Term (as defined below) of this Lease. Tenant covenants that it will not interfere with other tenants' quiet enjoyment of their premises. -2- 3. TERM. The term ("Term") of this Lease is for the period that commences at 12:01 a.m. on the Commencement Date and expires at 11:59 p.m. on the Expiration Date. If Landlord, for any reason, cannot deliver possession of the Premises to Tenant on or before the Commencement Date, this Lease shall not be void or voidable, nor shall Landlord be liable to Tenant for any loss or damage resulting from such delay. In that event, however, there shall be an abatement of Base Rent (as defined below) covering the period between the Commencement Date and the date when Landlord delivers possession to Tenant, all other terms and conditions of this Lease shall remain in full force and effect. If a delay in possession is caused by Tenant's failure to perform any obligation in accordance with this Lease, the Term shall commence as of the Commencement Date, and there shall be no reduction of Base Rent between the Commencement Date and the time Tenant takes possession. Notwithstanding the other provisions of this (P)3., if Landlord has not delivered possession of the Premises to Tenant for the installation of the Approved Work as set forth in (P)29.b. by Tenant within ninety (90) days of Lease execution by Landlord and Tenant, Tenant shall have the right to terminate the Lease upon written notice to Landlord within ten (10) days after the expiration of said ninety (90) day period and Landlord shall not be liable to Tenant for any loss or damage resulting from such delay. 4. RENT a. BASE RENT. Tenant shall pay Landlord in lawful money of the United States, without notice, demand, offset or deduction, rent in the amount(s) set forth in (P)1. which shall be payable in advance on the first day of each and every calendar month ("Base Rent") provided, however, the first month's Base Rent is due and payable upon execution of this Lease. Unless otherwise specified in writing by Landlord, all installments of Base Rent shall be payable to Limar Realty Corp. #18, Department #44294, P.O. Box 44000, San Francisco, California 94144- 4294. Base Rent for any partial month at the beginning or end of this Lease will be prorated in accordance with the number of days in the subject month. For purposes of Section 467 of the Internal Revenue Code, the parties to this Lease hereby agree to allocate the stated Base Rent provided herein to the periods which correspond to the actual Base Rent payments as provided under the terms and conditions of this Agreement. b. COST OF LIVING ADJUSTMENT. The Base Rent shall be subject to increase on each annual anniversary of the Commencement Date. The base for computing the increase is the Consumer Price Index. All Urban Consumers for the CMSA referenced in 111. (1982-84 base year = 100), published by the United States Department of Labor, Bureau of Labor Statistics ("INDEX"), which is in effect on the ninetieth (90th) day preceding the date of the Commencement Date ("BEGINNING INDEX"). The Index ("ADJUSTMENT INDEX") published and in effect on the ninetieth (90th) day preceding each annual anniversary ("ANNUAL ANNIVERSARY") of the Commencement Date is to be used in determining the amount of the increase from one year to the next. Beginning with the Base Rent due on and after the first anniversary, the Base Rent shall be increased to equal the product achieved by multiplying the Base Rent amount by a fraction, the numerator of which will be the Adjustment Index and the denominator of which will be the Beginning Index. If there is a decline from one Annual Anniversary to the next in the Adjustment Index, the Base Rent due during the subsequent lease year shall equal the Base Rent due during the then present lease year (i.e., there shall be no decrease in Base Rent). Notwithstanding the foregoing provisions of this (P)4 b.), each Base Rent adjustment shall be subject to a minimum adjustment in accordance with the Floor Limit if specified in (P)1. and a maximum adjustment in accordance with the Ceiling Limit if specified in (P)1. If the Index is changed so that the base year differs from 1982-84 = 100, the Index shall be converted in accordance with the conversion factor published by the United States Department of Labor, Bureau of Labor Statistics. If the Index is discontinued or revised during the Term, such other government index or computation with which it is replaced shall be used in order to obtain substantially the same result as, in Landlord's reasonable opinion, would be obtained if the Index had not been discontinued or revised. c. RENT WITHOUT OFFSET AND LATE CHARGE. All Rent shall be paid without prior demand or notice and without any deduction or offset whatsoever. All Rent shall be paid in lawful currency of the United States of America. Tenant acknowledges that late payment by Tenant to Landlord of any Rent will cause Landlord to incur costs not contemplated by this Lease, the exact amount of such cost being extremely difficult and impracticable to ascertain. Such costs include, without limitation, processing and accounting charges and late charges that may be imposed on Landlord by the terms of any encumbrance or note secured by the Premises. Therefor, if any Rent is not received by Landlord within five (5) days of its due date, Tenant shall pay to Landlord a late charge equal to six percent (6%) of such overdue payment. Landlord and Tenant hereby agree that such late charge represents a fair and reasonable estimate of the costs that Landlord will incur by reason of any such late payment and that the late charge is in addition to any and all remedies available to the Landlord and that the assessment and/or collection of the late charge shall not. be deemed a waiver of any other default. Additionally, all such delinquent Rent or other sums, plus this late charge, shall bear interest from the due date thereof at the lesser of ten percent (10%) per annum or the maximum legal interest rate permitted by law. Any payments of any kind returned for insufficient funds will be subject to an additional handling charge of $25.00, and thereafter for the remainder of the Term hereof, Landlord may require Tenant to pay all future payments of Rent or other sums due by cashier's check. d. PREPAID BASE RENT. Upon the execution of this Lease, Tenant shall pay to Landlord the Prepaid Base Rent set forth in (P)1., and such Prepaid Base Rent shall be applied toward the Base Rent due for the first month of the Term for which Rent is due. Landlord shall be entitled to immediately endorse and cash Tenant's Prepaid Base Rent; however, such endorsement and cashing shall not constitute Landlord's -3- acceptance of this Lease. In the event Landlord does not accept this Lease, Landlord shall return said Prepaid Base Rent. e. RENT. The term "Rent" as used in this Lease shall refer to Base Rent, Prepaid Base Rent, Real Property Taxes, Operating Expenses, repairs and maintenance costs, insurance, utilities, late charges and other similar charges payable by Tenant pursuant to this Lease either directly to Landlord or otherwise. 5. OPERATING EXPENSES. a. PAYMENT BY TENANT. During the Term of this Lease, Tenant shall pay to Landlord, as additional Rent, on a monthly basis Tenant's Share of the Operating Expenses. To the extent that Operating Expenses are accounted for on a building by building basis, the Tenant's Share of Building shall apply. To the extent that Operating Expenses are accounted for on an overall Property basis, then Tenant's Share of Property shall apply. b. OPERATING EXPENSES. The term "OPERATING EXPENSES" shall mean all expenses, costs and disbursements (not specifically excluded from the definition of Operating Expenses below) of every kind and nature which Landlord shall pay or become obligated to pay because of or in connection with the ownership, maintenance, repair and operation of the Property or any portion thereof (including all Buildings and Common Areas of the Property). Operating Expenses shall include, but not be limited to the following: 1) Wages and salaries of all employees engaged in the operation, maintenance and security of the Property, including taxes, insurance and benefits relating thereto; and the rental cost and overhead of any office and storage space used to provide such services. 2) All supplies and materials used in the operation, repair or maintenance of the Property. 3) Cost of all utilities, including surcharges, for the Property, including the cost of water, power and lighting which are not separately billed to and paid for by Tenant 4) Cost of all maintenance and service agreements for the Property and the equipment thereon, including but not limited to, security services, exterior window cleaning, janitorial service, engineers, gardeners and trash removal services. 5) All Insurance Costs, as such term is defined in (P)16. 6) Cost of repairs and general maintenance (excluding repairs and general maintenance paid by proceeds of Insurance or by Tenant or other third parties, and alterations attributable solely to the other tenants of the Property) including repair and maintenance of the roofing. 7) A reasonable management fee for the property management of the Property, which includes the cost of Landlord's Property Manager, which management fee shall not exceed three percent (3%) of Rent. 8) The costs of any additional services not provided to the Property at the Commencement Date but thereafter provided by Landlord in its management of the Property. 9) The cost of any capital improvements to the Property or any part thereof which are made during the Term hereof which shall be amortized over the useful life of the improvement(s). 10) Real Property Taxes, as that term is defined in (P)11. 11) Assessments, dues and other amounts payable pursuant to the CC&R's described in (P)7.b. c. OPERATING EXPENSES SHALL NOT INCLUDE: 1) Costs paid for directly by Tenant; 2) Principal and interest payments on loans secured by deeds of trust recorded against the Property or the Building of which the Property is a part; 3) Real estate sales or leasing brokerage commissions; 4) Executive salaries of off-site personnel employed by Landlord except for the charge (or pro rata share) of the property manager of the Property; or 5) Costs to maintain the foundations, exterior walls and roof structure of the Property. d. EXTRAORDINARY SERVICES. Tenant shall pay within ten (10) days of receipt of an invoice from Landlord the cost of additional or extraordinary services provided to Tenant at Tenant's request and not paid or payable by Tenant pursuant to other provisions of this Lease. -4- e. IMPOUND. Landlord reserves the right, at Landlord's option, to estimate the annual cost of OPERATING Expenses performed by Landlord ("PROJECTED OPERATING EXPENSES") and to require same to be paid in advance. Tenant shall pay to Landlord, monthly in advance as additional Rent, one-twelfth (1/12) of the Projected Operating Expenses. f. ADJUSTMENT. 1) ACCOUNTING. Within ninety (90) days (or as soon thereafter as possible) after the close of each calendar year or portion thereof of occupancy, Landlord shall provide Tenant a statement of such year's actual Operating Expenses compared to the Projected Operating Expenses. If the actual Operating Expenses are more than the Projected Operating Expenses then Tenant shall pay Landlord, within ten (10) days of receipt of a bill therefor, the difference. If the actual Operating Expenses are less than the Projected Operating Expenses, then Tenant shall receive a credit against future Operating Expenses payments equal to the difference; provided, that in the case of an overpayment for the final lease year of the Term, Landlord shall credit the difference against any sums due from Tenant to Landlord in accordance with the terms of this Lease; and if no sums are due and unpaid, shall promptly refund the net amount to Tenant. 2) PRORATION. Tenant's liability to pay Operating Expenses shall be prorated on the basis of a 365 (or 366, as the case may be) day year to account for any fractional portion of a year included at the commencement or expiration of the Term of this Lease. 3) SURVIVAL. Landlord and Tenant's obligations to pay for or credit any increase or decrease in payments pursuant to this (P)5. shall survive this Lease. g. FAILURE TO PAY. Failure of Tenant to pay any of the charges required to be paid under this (P)5. shall constitute a material default and breach of this Lease and Landlord's remedies shall be as specified in (P)21 6. SECURITY DEPOSIT. Upon execution of this Lease, Tenant shall deposit a security deposit ("SECURITY DEPOSIT") in the amount set forth in (P)1. with Landlord, said Deposit to be in the form of a mutually acceptable Irrevocable Letter of Credit. If Tenant is in default, Landlord can use the Security Deposit or any portion of it to cure the default or to compensate Landlord for any damages sustained by Landlord resulting from Tenant's default. Upon demand, Tenant shall immediately pay to Landlord a sum equal to the portion of the Security Deposit expended or applied by Landlord to restore the Security Deposit to its full amount including any interest which would have been earned on the portion of the Security Deposit expended or applied by the Landlord, from the date of such expense or application. In no event will Tenant have the right to apply any part of the Security Deposit to any Rent due under this Lease. Landlord's obligations with respect to the Security Deposit are those of a debtor and not a trustee, and Landlord can commingle the Security Deposit with Landlord's general funds. Landlord shall not be required to pay Tenant interest on the Security Deposit. Landlord shall be entitled to immediately endorse and cash Tenant's Security Deposit; however, such endorsement and cashing shall not constitute Landlord's acceptance of this Lease. In the event Landlord does not accept this Lease, Landlord shall return said Security Deposit. Each time the Base Rent is increased, Tenant shall deposit additional funds with Landlord sufficient to increase the Security Deposit to an amount which bears the same relationship to the Base Rent as the initial Security Deposit bore to the initial Base Rent. If Tenant is not in default at the expiration or termination of this Lease and has fully complied with the provisions of (P)9., (P)13.d.6) and (P)26., Landlord shall return the Security Deposit to Tenant. 7. USE OF PREMISES a. TENANT'S USE. Tenant shall use the Premises solely for the purposes stated in (P)1. and for no other purposes without obtaining the prior written consent of Landlord, which consent shall not be unreasonably withheld. Tenant acknowledges that neither Landlord nor any agent of Landlord has made any representation or warranty with respect to the Premises or with respect to the suitability of the Premises to the conduct of Tenant's business, nor has Landlord agreed to undertake any modification, alteration or improvement to the Premises, except as provided in writing in this Lease. Tenant shall promptly comply with all laws, statutes, ordinances, orders and governmental regulations affecting the Premises. Tenant shall not do or permit anything to be done in or about the Premises or bring or keep anything in the Premises that will in any way increase the premiums paid by Landlord on its insurance related to the Premises. Tenant will not perform any act or carry on any practices that may injure the Premises. Tenant shall not use the Premises for sleeping, washing clothes, cooking or the preparation, manufacture or mixing of anything that emits any objectionable odor, noises, vibrations or lights onto such other tenants. If, in Landlord's reasonable judgment, sound insulation is required to muffle noise produced by Tenant on the Premises, Tenant at its own cost shall provide all necessary insulation. Tenant shall not do anything on the Premises which will overload any existing parking or service to the Premises. Pets and/or animals of any type shall not be kept on or about the Premises. Tenant covenants that it will not interfere with other tenants' quiet enjoyment of their premises. b. CC&R'S. Tenant agrees that this Lease is subject and subordinate to the Covenants, Conditions and Restrictions, a copy of which is attached hereto as Exhibit D, as they may be amended from time to time --------- ("CC&R'S"), and further agrees that the CC&R's are an integral part of this Lease. Throughout the Term or any extension thereof, notwithstanding any other provision hereof, Tenant shall faithfully and timely assume and perform all obligations of Landlord and/or Tenant under the CC&R's and any modifications or -5- amendments thereto, including the payment of any periodic or special dues or assessments against the Premises. Such dues and assessments shall be included within the definition of Operating Expenses pursuant to (P)5.b.11), and Tenant shall pay such amounts as further set forth in (P)5. Tenant shall hold Landlord, its subsidiaries, shareholders, directors, officers, agents and employees harmless and indemnify Landlord, its subsidiaries, shareholders, directors, officers, agents and employees against any loss, expense and damage, including attorneys' fees and costs, arising out of the failure of Tenant to perform or comply with the CC&R's. c. Rules and Regulations. Tenant shall comply with and use the Premises in accordance with the Rules and Regulations attached hereto as Exhibit C and to any reasonable modifications to such Rules and --------- Regulations as Landlord may adopt from time to time. 8. EMISSIONS; STORAGE, USE AND DISPOSAL OF WASTE a. EMISSIONS. Tenant shall not: 1) Permit any vehicle on the Premises or in the Commons Areas to emit exhaust which is in violation of any governmental law, rule, regulation or requirement; 2) Discharge, emit or permit to be discharged or emitted, any liquid, solid or gaseous matter, or any combination thereof, into the atmosphere or on, into or under the Premises, any building or other improvements of which the Premises are a part, or the ground or any body of water which matter, as reasonably determined by Landlord or any governmental entity, does or may pollute or contaminate the same, or is, or may become, radioactive or does, or may, adversely affect (a) the health or safety of persons, wherever located, whether on the Premises or anywhere else, (b) the condition, use or enjoyment of the Premises or any other real or personal property, whether on the Premises or anywhere else, or (c) the Premises or any of the improvements thereto including buildings, foundations, pipes, utility lines, landscaping or parking areas; 3) Produce, or permit to be produced, any intense glare, light or heat; 4) Create, or permit to be created, any sound pressure level which will interfere with the quiet enjoyment of any real property outside the Premises, or which will create a nuisance or violate any governmental law, rule, regulation or requirement; 5) Create, or permit to be created, any vibration that is discernible outside the Premises; or 6) Transmit, receive or permit to be transmitted or received, any electromagnetic, microwave or other radiation which is or may be harmful or hazardous to any person or property in, or about the Premises, or anywhere else. b. STORAGE AND USE. 1) STORAGE. Subject to the uses permitted and prohibited to Tenant under this Lease, Tenant shall store in appropriate leak proof containers all solid, liquid or gaseous matter, or any combination thereof, which matter, if discharged or emitted into the atmosphere, the ground or any body of water, does or may (a) pollute or contaminate the same, or (b) adversely affect the (i) health or safety of persons, whether on the Premises or anywhere else, (ii) condition, use or enjoyment of the Premises or any real or personal property, whether on the Premises or anywhere else, or (iii) Premises. 2) USE. In addition, without Landlord's prior written consent, Tenant shall not use, store or permit to remain on or about the Premises any solid, liquid or gaseous matter which is, or may become radioactive. If Landlord does give its consent, Tenant shall store the materials in such a manner that no radioactivity will be detectable outside a designated storage area and Tenant shall use the materials in such a manner that (a) no real or personal property outside the designated storage area shall become contaminated thereby and (b) there are and shall be no adverse effects on the (i) health or safety of persons, whether on the Premises or anywhere else, (ii) condition, use or enjoyment of the Premises or any real or personal property thereon or therein, or (iii) Premises or any of the improvements thereto or thereon. 3) HAZARDOUS MATERIALS. Subject to the uses permitted and prohibited to Tenant under this Lease, Tenant shall store, use, employ, transport and otherwise deal with all Hazardous Materials (as defined below) employed on or about the Premises in accordance with all federal, state, or local law, ordinances, rules or regulations applicable to Hazardous Materials in connection with or respect to the Premises. c. DISPOSAL OF WASTE. 1) REFUSE DISPOSAL. Tenant shall not keep any trash, garbage, waste or other refuse on the Premises except in sanitary containers and shall regularly and frequently remove same from the Premises. Tenant shall keep all incinerators, containers or other equipment used for storage or disposal of such materials in a clean and sanitary condition. -6- 2) SEWAGE DISPOSAL. Tenant shall properly dispose of all sanitary sewage and shall not use the sewage disposal system (a) for the disposal of anything except sanitary sewage or (b) amounts in excess of the lesser of: (i) that reasonably contemplated by the uses permitted under this Lease or (ii) that permitted by any governmental entity. Tenant shall keep the sewage disposal system free of all obstructions and in good operating condition. 3) DISPOSAL OF OTHER WASTE. Tenant shall properly dispose of all other waste or other matter delivered to, stored upon, located upon or within, used on, or removed from, the Premises in such a manner that it does not, and will not, adversely affect the (a) health or safety of persons, wherever located, whether on the Premises or elsewhere, (b) condition, use or enjoyment of the Premises or any other real or personal property, wherever located, whether on the Premises or anywhere else, or (c) Premises or any of the improvements thereto or thereon including buildings, foundations, pipes, utility lines, landscaping or parking areas. d. INFORMATION. Tenant shall provide Landlord with any and all information regarding Hazardous Materials in the Premises, including copies of all filings and reports to governmental entities at the time they are originated, and any other information requested by Landlord. In the event of any accident, spill or other incident involving Hazardous Materials, Tenant shall immediately report the same to Landlord and supply Landlord with all information and reports with respect to the same. All information described herein shall be provided to Landlord regardless of any claim by Tenant that it is confidential or privileged. e. COMPLIANCE WITH LAW. Notwithstanding any other provision in this Lease to the contrary, Tenant shall comply with all laws, statutes, ordinances, regulations, rules and other governmental requirements in complying with its obligations under this Lease, and in particular, relating to the storage, use and disposal of Hazardous Materials. f. INDEMNITY. Tenant hereby agrees to indemnify, defend and hold Landlord, its agents, employees, lenders, shareholders, directors, representatives, successors and assigns harmless from and against any and all actions, causes of action, losses, damages, costs, claims, expenses, penalties, obligations or liabilities of any kind whatsoever (including but not limited to reasonable attorneys' fees) arising out of or relating to any Hazardous Materials employed, used, transported across, or otherwise dealt with by Tenant (or investees, or persons or entities under the control of Tenant) in connection with or with respect to the Premises and the Property. Notwithstanding any other provision of this Lease, the indemnity obligation of Tenant pursuant to this (P)8.f. shall survive the termination of this Lease and shall relate to any occurrence as described in this (P)8. occurring in connection with this Lease. Landlord hereby agrees to indemnify, defend and hold Tenant harmless from and against any all actions, causes of action, losses, damages, costs, claims, expenses, penalties, obligations or liabilities of any kind whatsoever (including reasonable attorney's fees) arising out of or relating to hazardous materials employed, used, transported to the Building, for which the Premises are a part thereof, by Landlord, its agent's or employees. For purposes of this Lease the term "HAZARDOUS MATERIALS" shall mean any hazardous, toxic or dangerous waste, substance or material, pollutant or contaminant, as defined for purposes of the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C. Sections 9601 et seq.), as amended, or the Resource Conservation and Recovery Act (42 U.S.C. Sections 6901 et seq.), as amended, or any other federal, state, or local law, ordinance, rule or regulation applicable to the Premises, or any substance which is toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic, or otherwise hazardous, or any substance which contains gasoline, diesel fuel or other petroleum hydrocarbons, polychlorinated biphenyis (PCB's), or radon gas, urea formaldehyde, asbestos or lead. 9. SIGNS. Tenant shall not place any sign upon the Premises or the Property, except that Tenant may, with Landlord's prior written consent, install (but not on the roof) such signs as are reasonably required to indicate Tenant's company name or logo provided such signs are in compliance with all applicable governmental requirements and the CC&R's. The installation of any sign on or adjacent to the Premises by or for Tenant shall be subject to the provisions of (P)13. (Repairs and Maintenance) Tenant shall remove any sign placed on or adjacent to the Premises by Tenant upon the expiration of the Term or sooner termination of this Lease, and Tenant shall repair any damage or injury to the Premises or the Property caused thereby, all at Tenant's expense. If any signs are not removed, or necessary repairs not made, Landlord shall have the right to remove the signs and repair any damage or injury to the Premises at Tenant's sole cost and expense. Landlord reserves all rights to the use of the roof and the right to install, and all revenues from the installation of, such signs on the Premises, including the roof, as do not unreasonably interfere with the conduct of Tenant's business within the Premises. 10. PERSONAL PROPERTY TAXES. Tenant shall pay prior to delinquency all taxes assessed against and levied upon Tenant owned leasehold improvements, trade fixtures, furnishings, equipment and all personal property of Tenant contained in the Premises or elsewhere. When possible, Tenant shall cause its leasehold improvements, trade fixtures, furnishings, equipment and all other personal property to be assessed and billed separately from the real property of Landlord. If any of Tenant's said personal property shall be assessed with Landlord's real property, Tenant shall pay Landlord the taxes attributable to Tenant within ten (10) days after receipt of a written statement setting forth the taxes applicable to Tenant's property. -7- 11. REAL PROPERTY TAXES. a. PAYMENT OF TAXES. Landlord shall pay the Building's Real Property Taxes, as defined in (P)11.c., during the Term of this Lease. Subject to (P)11.b., Tenant shall promptly reimburse Landlord according to (P)5. for Tenant's Share of Property of such Real Property Taxes paid by Landlord. b. ADVANCE PAYMENT. In order to ensure payment when due and before delinquency of any or all Real Property Taxes, Landlord reserves the right, at Landlord's option, to estimate the current Real Property Taxes applicable to the Premises, and to require each installment of the Real Property Taxes to be paid in advance to Landlord by Tenant, either: (i) in a lump sum amount, at least twenty (20) days prior to the applicable delinquency date, or (ii) monthly in advance with the payment of the Base Rent. If Landlord elects to require payment monthly in advance, the monthly payment shall be that equal monthly amount which, over the number of months remaining before the month in which the applicable tax installment would become delinquent, would provide a fund large enough to fully discharge before delinquency the estimated installment of Real Property Taxes to be paid. When the actual amount of the applicable tax bill is known, Landlord may, but is not required to, adjust the amount of such equal monthly advance payment so as to provide the funds needed to pay the applicable Real Property Taxes before delinquency. If the amounts paid to Landlord by Tenant under the provisions of this (P)11 are insufficient to discharge the obligations of Tenant to pay such Real Property Taxes as the same become due, Tenant shall pay to Landlord, upon Landlord's demand, such additional sums as are necessary to pay such obligations. All moneys paid to Landlord under this (P)11. may be intermingled with other moneys of Landlord and shall not bear interest. In the event of a breach by Tenant in the performance of the obligations of Tenant under this Lease, then any balance of funds paid to Landlord under the provisions of this (P)11 may, at the option of Landlord, be treated as an additional Security Deposit under (P)6. c. DEFINITION OF "REAL PROPERTY TAXES". As used herein, the term "REAL PROPERTY TAXES" shall include any form of real estate tax or assessment, general, special, ordinary or extraordinary, and any license fee, commercial rental tax, improvement bond or bonds, levy or tax or other fee, charge, or excise which may be imposed as a substitute for any of the foregoing (other than inheritance, personal income or estate taxes) imposed upon the Property by any authority having the direct or indirect power to tax, including any city, county, state or federal government, or any school, agricultural, sanitary, fire, street, drainage or other improvement district thereof, levied against any legal or equitable interest of Landlord in the Property, Landlord's right to rent or other income therefrom, and/or Landlord's business of leasing the Property. The term "Real Property Taxes" shall also include any tax, fee, levy, assessment or charge, or any increase therein, imposed by reason of events occurring, or changes in applicable law taking effect, during the Term of this Lease, including but not limited to a change in the ownership of the Property or in the improvements thereon, the execution of this Lease, or any modification, amendment or transfer thereof, and whether or not contemplated by the parties hereto. 12. UTILITIES. Tenant shall pay for all water, gas, heat, light, power, telephone, trash disposal and other utilities and services supplied to the Premises, together with any taxes thereon, if any such services are not separately metered to Tenant, Tenant shall pay a reasonable proportion, to be determined by Landlord, of all charges jointly metered with other premises. 13. REPAIRS AND MAINTENANCE a. LANDLORD'S OBLIGATIONS. Landlord shall keep the Property, including the foundation, exterior walls, roof. and common area of the Building, and the equipment whether used exclusively for the Premises or in common with other premises, in good condition and repair subject to reimbursement by Tenant in accordance with (P)5. There shall be no abatement of Rent or liability to Tenant on account of any injury or interference with Tenant's business with respect to any improvements, alterations or repairs made by Landlord to the Property or any part thereof, provided that if any of the foregoing prevent Tenant from using the Premises for more than ten(10) consecutive business days, then commencing upon the expiration of such ten (10) business day period, Rent shall abate until Tenant's use of the Premises is restored. b. TENANT'S OBLIGATIONS. 1) General. Tenant shall, at Tenant's sole cost and expense and at all times, contract for janitorial services and supplies, keep the Premises in good order, condition and repair, including, without limiting the generality of the foregoing, all equipment or facilities serving the Premises, such as plumbing, heating, air conditioning, ventilating, electrical, lighting facilities, boilers, fired or unfired pressure vessels, fixtures, interior walls, ceilings, floors, windows, window frames, interior and exterior doors and door frames, plate glass and skylights. Tenant shall not cause or permit any Hazardous Material to be spilled or released in, on, under or about the Premises (including through the plumbing or sanitary sewer system) and shall promptly, at Tenant's expense, take all investigatory and/or remedial action reasonably recommended, whether or not formally ordered or required, for the cleanup of any contamination of, and for the maintenance, security and/or monitoring of the Premises, the elements surrounding same, or neighboring properties, that was caused or materially contributed to by Tenant, or pertaining to or involving any Hazardous Materials and/or storage tank brought onto the Premises by or for Tenant or under its control. Tenant, in keeping the Premises in good order, condition and repair, shall exercise and perform good maintenance practices. Tenant's obligations shall include restorations, replacements or -8- renewals when necessary to keep the Premises and all improvements thereon or a part thereof in good order, condition and state of repair. 2) CONTRACTS. Tenant shall, at Tenant's sole cost and expense, procure and maintain contracts, with copies to Landlord, in customary form and substance for, and with contractors specializing and experienced in, the inspection, maintenance and service of heating, air conditioning and ventilation equipment, if any, servicing the Premises. Tenant shall keep a detailed preventative maintenance schedule and log showing the frequency of maintenance on all HVAC, mechanical, electrical and other systems servicing the Premises and provide Landlord with a copy of same quarterly. 3) AS-IS CONDITION. The parties affirm that Landlord, its subsidiaries, officers, shareholders, directors, agents and/or employees have made no representations to Tenant respecting the condition of the Premises except as specifically stated herein. 4) AMERICANS WITH DISABILITIES ACT. Tenant acknowledges that as of the Commencement Date, the Premises may not comply with the Americans with Disabilities Act of 1990 ("ADA"), and that Landlord shall have no obligation with respect to any such failure of the Premises to so comply. Tenant shall, at its cost, at any time during the Term as required by any applicable governmental agency having jurisdiction over the Premises, make such modifications and alterations to the Premises as may be required in order to fully comply with the provisions of the ADA, as from time to time amended, and any and all regulations issued pursuant to or in connection with the ADA in such a manner as to satisfy the applicable governmental agency or agencies requiring remediation. Tenant shall at least thirty (30) days prior to the commencement of any construction in connection with satisfaction of the ADA, give written notice to Landlord of its intended commencement of construction together with sufficient details so as to reasonably disclose to Landlord the nature of the proposed construction, copies of any notices received by Tenant from applicable governmental agencies in connection with the ADA and such other documents or information as Landlord may reasonably request. In any event, notwithstanding anything to the contrary contained in this Lease, prior to the termination of the Term, Tenant shall, at its cost, make such modifications and alterations to the Premises as may be required to comply fully with the ADA as from time to time amended and any and all regulations issued thereunder. Tenant shall give the Landlord thirty (30) days prior written notice as described above in connection with any such construction. Any and all construction required to so comply with the ADA shall be completed by Tenant prior to the expiration of the Term. c. COMPLIANCE WITH GOVERNMENTAL REGULATIONS. Tenant shall, at its own cost and expense, promptly and properly observe and comply with all present and future orders, regulations, directions, rules, laws, ordinances, and requirements of all governmental authorities (including but not limited to state, municipal, county and federal governments and their departments, bureaus, boards and officials) arising from the use or occupancy of, or applicable to, the Premises or privileges appurtenant to or in connection with the enjoyment of the Premises. Tenant shall also comply with all such rules, laws, ordinances and requirements at the time Tenant makes any alteration, addition or change to the Premises. d. MISCELLANEOUS. 1) Landlord and Tenant shall each do all acts required to comply with all applicable laws, ordinances and rules of any public authority relating to their respective maintenance obligations as set forth herein. 2) Tenant expressly waives the benefits of any statute now or hereafter in effect which would otherwise afford the Tenant the right to make repairs at Landlord's expense or to terminate this Lease because of Landlord's failure to keep the Premises and the Property in good order condition and repair. Specifically, Tenant waives the provisions of California Civil Code Sections 1941 and 1942 with respect to Landlord's obligations for Tenant tenantability of the Premises and Tenant's right to make repairs and deduct the expenses of such repairs from Rent. 3) Tenant shall not place a load upon any floor of the Premises which exceeds the load per square foot which such floor was designed to carry, as determined by Landlord or Landlord's structural engineer. The cost of any such determination made by Landlord's structural engineer shall be paid for by Tenant upon demand. 4) Except as otherwise expressly provided in this Lease, Landlord shall have no liability to Tenant nor shall Tenant's obligations under this Lease be reduced or abated in any manner whatsoever by reason of any inconvenience, annoyance, interruption or injury to business arising from Landlord making any repairs or changes which Landlord is required to make or is permitted to make by this Lease or by any tenant's lease or is required by law to make in or to any portion of the Premises. Landlord shall nevertheless use reasonable efforts to minimize any interference with Tenant's business in the Premises. 5) Tenant shall give Landlord prompt notice of any damage to or defective condition in any part or appurtenance of the Premises' mechanical, electrical, plumbing, HVAC or other systems serving -9- located in or passing through the Premises. Upon request by Landlord, Tenant shall provide Landlord with evidence reasonably acceptable to Landlord of service contracts on such systems. 6) Upon the expiration or early termination of this Lease, Tenant shall return the Premises to Landlord clean and in the same condition as on the date Tenant took possession, except for normal wear and tear, but including the Approved Work as set forth in (P)29.b. hereof. Any damage to the Premises, including any structural damage, resulting from Tenant's use or from the removal of Tenant's fixtures, furnishings and equipment shall be repaired by Tenant prior to the end of the Term at Tenant's expense. 7) Landlord may, at Landlord's option, choose to perform any of the Tenant's obligations in this 1113. The cost of any such Tenant's obligations so performed by Landlord shall be at Tenant's sole cost and expense. Tenant shall reimburse Landlord for any such costs incurred by Landlord in the performance of such Tenant's obligations within ten (10) days of receipt of a billing from Landlord. 14. ALTERATIONS. Tenant shall not make any alterations to the Premises or the Property without Landlord's prior written consent. If Landlord gives its consent to such alterations, Landlord may post notices in accordance with the laws of the state in which the Premises are located. All alterations made by Tenant, whether or not subject to the approval of Landlord, shall be performed by Tenant and its contractors in a first class workmanlike manner and permits and inspections shall be obtained from all required governmental entities. Any alterations made shall remain on and be surrendered with the Premises upon expiration or termination of this Lease, except that Landlord may, within thirty (30) days before or thirty (30) days after expiration of the Term, elect to require Tenant to remove some or all of the alterations which Tenant may have made to the Premises except for the Approved Work as set forth in (P)29.b. hereof. If Landlord so elects, Tenant shall at its own cost restore the Premises to the condition designated by Landlord in its election, before the last day of the Term or within thirty (30) days after notice of its election is given, whichever is later. Should Landlord consent in writing to Tenant's alteration of the Premises, Tenant shall contract with a contractor approved by Landlord for the construction of such alterations, shall secure all appropriate governmental approvals and permits, and shall complete such alterations with due diligence in compliance with plans and specifications approved by Landlord. Tenant shall pay all costs for such construction and shall keep the Premises free and clear of all mechanics' liens which may result from construction by Tenant. 15. RELEASE AND INDEMNITY. As material consideration to Landlord, Tenant agrees that Landlord shall not be liable to Tenant for any damage to Tenant or Tenant's property from any cause, except for damages resulting from Landlord's gross negligence or willful misconduct, and Tenant waives all claims against Landlord for damage to persons or property arising for any reason, except for damage resulting directly from Landlord's breach of its express obligations under this Lease which Landlord has not cured within a reasonable time after written notice of such breach from Tenant. Tenant shall indemnify and hold Landlord harmless from all damages including attorneys' fees and costs arising out of any damage to any person or property occurring in, on or about the Premises or Tenant's use of the Premises or Tenant's breach of any term of this Lease. Landlord shall indemnify and hold Tenant harmless from all damages including reasonable attorney's fees and costs arising out of damage to any person or property occurring in, on or about the Premises as a result of Landlord's gross negligence or willful misconduct. 16. INSURANCE a. PAYMENT FOR INSURANCE. Regardless of whether the Landlord or Tenant is the Insuring Party, Tenant shall pay for all insurance required under this I]16. ("Insurance Costs") either directly or by reimbursement to Landlord as specified in this (P)16. Premiums for policy periods commencing prior to or extending beyond the Lease Term shall be prorated to correspond to the Lease Term Payment shall be made by Tenant to Landlord within ten (10) days following receipt of an invoice for any amount due. b. LIABILITY INSURANCE. 1) Carried by Tenant. Whether or not Tenant is the Insuring Party, Tenant shall obtain and keep in force during the Term of this Lease a commercial general liability policy of insurance protection Tenant and Landlord (as an additional insured) against claims for bodily injury, personal injury and property damage based upon, involving or arising out of the ownership, use, occupancy or maintenance of the Premises and all areas appurtenant thereto. Such insurance shall be on an occurrence basis providing single limit coverage in an amount not less than $2,000,000 per occurrence with an "Additional Insured-Managers or Landlords of Premises" endorsement and contain an "Amendment of the Pollution Exclusion" for damage caused by heat, smoke or fumes from a hostile fire. The policy shall not contain any intra-insured exclusions as between insured persons or organizations, but shall include coverage for liability assumed under this Lease as an "insured contract" for the performance of Tenant's indemnity obligations under this Lease. The limits of said insurance required by this Lease or as carried by Tenant shall not, however, limit the liability of Tenant nor relieve Tenant of any obligation hereunder. All insurance to be carried by Tenant shall be primary to and not contributory with any similar insurance carried by Landlord whose insurance shall be considered excess insurance only. All insurance coverage required pursuant to this (P)16. which is to name Landlord as a named insured shall also name Landlord's subsidiaries, directors, agents, officers and employees as named insureds. 2) CARRIED BY LANDLORD. In the event Landlord is the Insuring Party, Landlord shall also maintain liability insurance as described in (P)16.b. 1), in addition to, and not in lieu of the insurance required -10- to be maintained by Tenant. In the event Tenant is the Insuring Party, Landlord shall in addition carry Landlord's Risk Coverage and insure the Premises on Landlord's umbrella policy and Tenant shall reimburse Landlord the cost thereof. Tenant shall not be named as an additional insured therein under any insurance obtained by Landlord in accordance with this (P)16.b.2). c. PROPERTY INSURANCE -- BUILDING, IMPROVEMENTS AND RENTAL VALUE. 1) BUILDING AND IMPROVEMENTS. The Insuring Party shall obtain and keep in force during the Term of this Lease a policy or policies in the name of Landlord, with loss payable to Landlord and to the holders of any mortgages, deeds of trust or ground leases on the Property ("LENDER(S)"), insuring loss or damage to the Property. The amount of such insurance shall be equal to the full replacement cost of the Property, as the same shall exist from time to time, or the amount required by Lender(s), but in no event more than the commercially reasonable and available insurable value thereof if, by reason of the unique nature or age of the improvements involved, such latter amount is less than full replacement cost. Such policy or policies shall insure against all risks of direct physical loss or damage (including Boiler and Machinery coverage and the perils of flood and earthquake), including coverage for any additional costs resulting from debris removal and reasonable amounts of coverage for the enforcement of any ordinance or law regulating the reconstruction or replacement of any undamaged sections of the Property required to be demolished shall also contain an agreed valuation provision in lieu of any coinsurance clause, waiver of subrogation and inflation guard protection causing an increase in the annual property insurance coverage amount by a factor of not less than the adjusted U.S. Department of Labor Consumer Price Index for All Urban Consumers for the city nearest to where the Property is located. If such insurance coverage has a deductible clause, then Tenant shall be liable for such deductible amount. Even if Landlord is the Insuring Party, Tenant's personal property shall be insured by Tenant under (P)16.d. rather than by Landlord. 2) RENTAL VALUE. The Insuring Party shall, in addition, obtain and keep in force during the term of this Lease a policy or policies in the name of Landlord, with loss payable to Landlord and Lender(s), insuring the loss of the full rental and other charges payable by Tenant to Landlord under this Lease for one (1) year (including all Real Property Taxes, Insurance Costs and any scheduled Rent increases). Said insurance shall provide that in the event the Lease is terminated by reason of an insured loss, the period of indemnity for such coverage shall be extended beyond the date of the completion of repairs or replacement of the Premises, to provide for one full year's loss of Rent from the date of any such loss. Said insurance shall contain an agreed valuation provision in lieu of any coinsurance clause, and the amount of coverage shall be adjusted annually to reflect the projected Rent, Real Property Taxes, Insurance Costs and other expenses, if any, otherwise payable by Tenant, for the next twelve (12) month period. Tenant shall be liable for any deductible amount in the event of such loss. 3) ADJACENT PREMISES. If the Premises are part of a larger building, or if the Premises are part of a group of buildings owned by Landlord which are adjacent to the Premises, the Tenant shall pay for any increase in the premiums for the property insurance of such building or buildings if said increase is caused by Tenant's acts, omissions, use or occupancy of the Premises. 4) TENANT'S IMPROVEMENTS. If the Landlord is the Insuring Party, the Landlord shall not be required to insure Tenant's personal property and leasehold improvements unless the item in question has become the property of Landlord under the terms of this Lease. If Tenant is the Insuring Party, the policy carried by Tenant under this (P)16.c. shall insure Tenant's personal property and leasehold improvements. d. TENANT'S PROPERTY INSURANCE. Subject to the requirements of (P)16.e., Tenant at its cost shall either by separate policy, or at Landlord's option, by endorsement to a policy already carried, maintain insurance coverage on all of Tenant's personal property and Tenant owned leasehold improvements in, on or about the Premises similar in coverage to that carried by the Insuring Party under (P)16.c. Such insurance shall be full replacement cost coverage with a deductible of not to exceed $10,000 per occurrence. The proceeds from any such insurance shall be used by Tenant for the replacement of personal property or the restoration of Tenant owned leasehold improvements. Tenant shall be the Insuring Party with respect to the insurance required by this (P)16.d. and shall provide Landlord with written evidence that such insurance is in force. e. INSURANCE POLICIES. If Tenant is the Insuring Party, insurance required per this (P)16. shall be with companies duly licensed to transact business in the state where the Premises are located, and maintaining during the policy term a "General Policyholders Rating" of at least A-X, or such other minimal rating as may be required by Lender(s) as set forth in the most current issue of "Best's Insurance Guide" Tenant shall not do or permit to be done anything which shall invalidate the insurance policies referred to in this (P)16. If Tenant is the Insuring Party, Tenant shall cause to be delivered to Landlord certified copies of policies of such insurance or certificates evidencing the existence and amounts of such insurance with the insureds and loss payable clauses as required by this Lease. No such policy shall be cancelable or subject to modification except after thirty (30) days prior written notice to Landlord. Tenant shall at least thirty (30) days prior to the expiration of such policies, furnish Landlord with evidence of renewals or "insurance binders" evidencing renewal thereof, or Landlord may order such insurance and charge the cost thereof to Tenant, which amount shall be payable by Tenant to Landlord upon demand. If the -11- Insuring Party shall fail to procure and maintain the insurance required to be carded by the Insuring Party under this (P)16., the other Party may, but shall not be required to, procure and maintain the same, but at Tenant's expense. f. MUTUAL WAIVER. Notwithstanding anything to the contrary contained in this Lease, to the extent that this release and waiver does not invalidate or impair their respective insurance policies, the parties hereto release each other and their respective agents, employees, officers, directors, shareholders, successors, assignees and subtenants from all liability for injury to any person or damage to any property that is caused by or results from a risk which is actually insured against pursuant to the provisions of this Lease without regard to the negligence or willful misconduct of the parties so released. Each party shall use its best efforts to cause each insurance policy it obtains to provide that the insurer thereunder waives all right of recovery by way of subrogation as required herein in connection with any injury or damage covered by the policy. If such insurance policy cannot be obtained with such waiver of subrogation, or if such waiver of subrogation is only available at additional cost and the party for whose benefit the waiver is not obtained does not pay such additional costs after reasonable notice, then the party obtaining such insurance shall promptly notify the other party of the inability to obtain insurance coverage with the waiver of subrogation 17. DAMAGE AND DESTRUCTION a. DAMAGE -- RESTORATION REQUIRED. In the event that the Building containing the Premises is damaged by fire or other casualty which is covered under insurance pursuant to the provisions of (P)16. above, Landlord shall restore such damage provided that: (i) the destruction of the Building containing the Premises does not exceed sixty percent (60%) of the then replacement value of the Building containing the Premises; (ii) the insurance proceeds are available (inclusive of any deductible amounts) to pay one hundred percent (100%) of the cost of restoration; and (iii) in the reasonable judgment of Landlord, the restoration can be completed within two hundred and seventy (270) days after the date of the damage or casualty under the laws and regulations of the state, federal, county and municipal authorities having jurisdiction. The deductible amount of any insurance coverage for damage to the Premises shall be paid by Tenant. If such conditions apply so as to require Landlord to restore such damage pursuant to this 1117.a., this Lease shall continue in full force and effect, unless otherwise agreed to in writing by Landlord and Tenant. Tenant shall be entitled to a proportionate reduction of Rent while such restoration takes place, such proportionate reduction to be based on the extent to which the damage and restoration efforts interfere with Tenant's business in the Premises. Tenant's right to a reduction of Rent hereunder shall be Tenant's sole and exclusive remedy in connection with any such damage. b. DAMAGE -- RESTORATION NOT REQUIRED. In the event that the Building containing the Premises is damaged by a fire or other casualty and Landlord is not required to restore such damage in accordance with the provisions of (P)17.a. immediately above, Landlord shall have the option to either (i) repair or restore such damage, with the Lease continuing in full force and effect, but Rent to be proportionately abated as provided in (P)17.a. above; or (ii) give notice to Tenant at any time within thirty (30) days after the occurrence of such damage terminating this Lease as of a date to be specified in such notice which date shall not be less than thirty (30) nor more than sixty (60) days after the date on which such notice of termination is given. In the event of the giving of such notice of termination, this Lease shall expire and all interest of Tenant in the Premises shall terminate on the date so specified in such notice and the Rent reduced by any proportionate reduction in Rent as provided for in (P)17.a. above, shall be paid to the date of such termination. Notwithstanding the foregoing, if Tenant delivers to Landlord the funds necessary to make up the shortage (or absence) in insurance proceeds and the restoration can be completed in a two hundred seventy (270) day period, as reasonably determined by Landlord, and the destruction of the Building containing the Premises does not exceed sixty percent (60%) of the then replacement value, Landlord shall restore the Premises as provided in (P)17.a. above. c. END OF TERM CASUALTY. Notwithstanding the provisions of (P)17.a. and (P)17.b. above, either Landlord or Tenant may terminate this Lease if the Building containing the Premises is damaged by fire or other casualty, Landlord's reasonably estimated cost of restoration of the Building containing the Premises exceeds ten percent (10%) of the then replacement value of the Building containing the Premises and such damage or casualty occurs during the last twelve (12) months of the Term of this Lease (or the Term of any renewal option, if applicable) by giving the other notice thereof at any time within thirty (30) days following the occurrence of such damage or casualty. Such notice shall specify the date of such termination which date shall not be less than thirty (30) nor more than sixty (60) days following the date or which such notice of termination is given, in the event of the giving of such notice of termination, this Lease shall expire and all interest of Tenant in the Premises shall terminate on the date so specified in such notice and the Rent shall be paid to the date of such termination. d. TERMINATION BY TENANT. In the event that the destruction to the Building containing the Premises cannot be restored as required herein under applicable laws and regulations within two hundred seventy (270 days of the damage or casualty, notwithstanding the availability of insurance proceeds, Tenant shall have the right to terminate this Lease by giving the Landlord notice thereof within thirty (30) days of date of the occurrence of such casualty specifying the date of termination which shall not be less than thirty (30) days nor more than sixty (60) days following the date on which such notice of termination is given. In the eve of the giving of such notice of termination, this Lease shall expire and all interest of Tenant in the Premises shall terminate on the date so specified in such notice and the Rent, reduced by any proportional reduction in Rent as provided for in (P)17a. above, shall be paid to the date of such termination. -12- e. RESTORATION. Landlord agrees that, in any case in which Landlord is required to, or otherwise agrees to restore the Building containing the Premises, Landlord shall proceed with due diligence to make all appropriate claims and applications for the proceeds of insurance and to apply for and obtain all permits necessary for the restoration of the Building containing the Premises. Landlord shall use reasonable efforts to enforce any and all provisions in any mortgage, deed of trust or other encumbrance on the Building containing the Premises requiring Landlord and Lender to permit insurance proceeds to be used for restoration. Landlord shall restore the Premises at least equal to the condition existing prior to the date of the damage if permitted by applicable law. 18. CONDEMNATION a. DEFINITIONS. The following definitions shall apply: (1) "CONDEMNATION" means (a) the exercise of any governmental power of eminent domain, whether by legal proceedings or otherwise by condemnor, or (b) the voluntary sale or transfer by Landlord to any condemnor either under threat of condemnation or while legal proceedings for condemnation are proceeding; (2) "DATE OF TAKING" means the date the condemnor has right to possession of the property being condemned; (3) "AWARD" means all compensation, sums or anything of value awarded, paid or received on a total or partial Condemnation; and (4) "CONDEMNOR" means any public or quasi-public authority, or private corporation or individual, having power of Condemnation. b. OBLIGATIONS TO BE GOVERNED BY LEASE. If during the Term of the Lease there is any taking of all or any part of the Building containing the Premises, the rights and obligations of the parties shall be determined strictly pursuant to this Lease. c. TOTAL OR PARTIAL TAKING. If the Building containing the Premises are totally taken by Condemnation, this Lease shall terminate on the Date of Taking. If any portion of the Building containing the Premises is taken by Condemnation, this Lease shall remain in effect, except that Tenant can elect to terminate this Lease if the remaining portion of the Premises is rendered unsuitable for Tenant's continued use of the Premises. If Tenant elects to terminate this Lease, Tenant must exercise its right to terminate by giving notice to Landlord within thirty (30) days after the nature and extent of the Condemnation have been finally determined. If Tenant elects to terminate this Lease, Tenant shall also notify Landlord of the date of termination, which date shall not be earlier than thirty (30) days nor later than ninety (90) days after Tenant has notified Landlord of its election to terminate; except that this Lease shall terminate on the Date of Taking if the Date of Taking falls on a date before the date of termination as designated by Tenant. If any portion of the Premises is taken by Condemnation and this Lease remains in full force and effect, on the Date of Taking the Base Rent shall be reduced by an amount in the same ratio as the total number of square feet in the Premises taken bears to the total number of square feet in the Premises immediately before the Date of Taking. Any Award for the taking of all or any part of the Premises under the power of eminent domain or any payment made under threat of the exercise of such power shall be the property of Landlord, whether such Award shall be made as compensation for diminution in value of the leasehold or for the taking of the fee, or as severance damages; provided, however, that Tenant shall be entitled to any compensation separately awarded to Tenant for Tenant's relocation expenses and/or loss of Tenant's trade fixtures. 19. ASSIGNMENT OR SUBLEASE a. Tenant shall not assign or encumber its interest in this Lease or the Premises or sublease all or any part of the Premises or allow any other person or entity (except Tenant's authorized representatives, employees, invitees or guests) to occupy or use all or any part of the Premises without first obtaining Landlord's consent, which consent shall not be unreasonably withheld. Any assignment, encumbrance or sublease without Landlord's prior written consent shall be voidable and at Landlord's election, shall constitute a default. If Tenant is a partnership, a withdrawal or change, voluntary, involuntary or by operation of law of any partner, or the dissolution of the partnership, shall be deemed a voluntary assignment. If Tenant consists of more than one person, a purported assignment, voluntary or involuntary or by operation of law from one person to the other shall be deemed a voluntary assignment. If Tenant is a corporation, any dissolution, merger, consolidation or other reorganization of Tenant, or sale or other transfer of a controlling percentage of the capital stock of Tenant, or the sale of at least fifty percent (50%) of the value of the assets of Tenant shall be deemed a voluntary assignment. Seventy-five percent (75%) of all Rent received by Tenant from its subtenants in excess of the Rent payable by Tenant to Landlord under this Lease applicable to the portion of the Premises subleased shall be paid to Landlord, or seventy-five percent (75%) of any sums to be paid by an assignee to Tenant in consideration of the assignment of this Lease shall be paid to Landlord less Tenant's reasonable cost of real estate commissions, tenant improvements and reasonable legal fees in connection with said assignment or sublet. If Tenant requests Landlord to consent to a proposed assignment or subletting, Tenant shall pay to Landlord, whether or not consent is ultimately given, an amount equal to Landlord's reasonable attorneys' fees and costs incurred in connection with such request. Each request for consent to an assignment or subletting shall be in writing, and shall be accompanied by information as may be relevant to Landlord's determination as to the financial and operational responsibility and stability of the proposed assignee or sublessee and the appropriateness of the proposed use by such assignee or sublessee. Such information shall include a summary of the proposed use of, and any proposed modifications to, the Premises. Tenant shall provide Landlord with such other or additional information and/or documentation as may reasonably be requested by Landlord. Tenant shall, upon completion of any assignment or subletting of all or any portion of the Premises, immediately and irrevocably assign to Landlord as security for Tenant's obligations under the -13- Lease, all Rent from any such subletting or assignment. Landlord, as assignee and attorney in fact for Tenant, shall have the right to collect all rent and other revenues collectable pursuant to any such sublet or assignment and apply such rent and other revenues towards Tenants obligations under the Lease. b. No interest of Tenant in this Lease shall be assignable by involuntary assignment through operation of law (including without limitation the transfer of this Lease by testacy or intestacy). Each of the following acts shall be considered an involuntary assignment: (a) if Tenant is or becomes bankrupt or insolvent, makes an assignment for the benefit of creditors, or institutes proceedings under the Bankruptcy Act in which Tenant is the bankrupt; or if Tenant is a partnership or consists of more than one person or entity, if any partner of the partnership or other person or entity is or becomes bankrupt or insolvent, or makes an assignment for the benefit of creditors; or (b) if a writ of attachment or execution is levied on this Lease; or (c) if in any proceeding or action to which Tenant is a party, a receiver is appointed with authority to take possession of the Premises. An involuntary assignment shall constitute a default by Tenant and Landlord shall have the right to elect to terminate this Lease, in which case this Lease shall not be treated as an asset of Tenant. c. Landlord may, at its option, elect to terminate the Lease instead of approving the requested assignment or sublease. Should Landlord so elect to terminate this Lease, all of the obligations of the parties thereunder shall terminate on the later of sixty (60) days following Landlord's notice to Tenant of its election hereunder, or the effective date of the proposed assignment or subletting sought by the Tenant, but in no event later than one hundred twenty (120) days following the date of Landlord's electron under this (P)19.c. At the time of termination, all obligations of both parties hereunder shall terminate as to obligations thereafter accruing except as otherwise expressly provided in this Lease. 20. DEFAULT. The occurrence of any of the following shall constitute a default by Tenant: (a) a failure of Tenant to pay Rent within five (5) days of its due date; (b) abandonment and vacation of the Premises (failure to occupy and operate the Premises for ten (10) consecutive days shall be deemed an abandonment and vacation); or (c) failure to timely perform any other provision of this Lease within ten (10) days of Landlord's notice thereof to Tenant. 21. LANDLORD'S REMEDIES. Landlord shall have the following remedies if Tenant is in default. (These remedies are not exclusive; they are cumulative and in addition to any remedies now or later allowed by law): a. Landlord may continue this Lease in full force and effect, and this Lease will continue in effect so long as Landlord does not terminate Tenant's right to possession, and Landlord shall have the right to collect Rent when due. During the period Tenant is in default, Landlord can enter the Premises and relet the Premises, or any part of the Premises, to third parties for Tenant's account. Tenant shall be liable immediately to Landlord for all costs Landlord incurs in reletting the Premises, including without limitation, brokers' commissions, expenses of remodeling the Premises required by the reletting, and like costs. Reletting can be for a period shorter or longer than the remaining Term of this Lease. Tenant shall pay to Landlord the Rent due under this Lease on the dates the Rent is due, less the Rent Landlord receives from any reletting. No act by Landlord allowed by this (P)21.a. shall terminate this Lease unless Landlord notifies Tenant in writing that Landlord elects to terminate this Lease. After Tenant's default and for so long as Landlord does not terminate Tenant's right to possession of the Premises, if Tenant obtains Landlords consent, Tenant shall have the right to assign or sublet its interest in this Lease, but Tenant shall not be released from liability. Landlord's consent to such a proposed assignment or subletting shall not be unreasonably withheld. If Landlord elects to relet the Premises as provided in this (P)21.a., Rent that Landlord receives from reletting shall be applied to the payment of first, any indebtedness from Tenant to Landlord other than Rent due from Tenant; second, all costs, including for maintenance incurred by Landlord in reletting; and third, Rent due and unpaid under this Lease. After deducting the payments referred to in this (P)21.a., any sum remaining from the Rent Landlord receives from reletting shall be held by Landlord and applied in payment of future Rent as Rent becomes due under this Lease. In no event shall Tenant be entitled to any excess Rent received by Landlord. If, on the date Rent is due under this Lease, the Rent received from the reletting is less than the Rent due on that date, Tenant shall pay to Landlord, in addition to the remaining Rent due, all costs including for maintenance Landlord incurred in relating that remain after applying the Rent received from the reletting as provided in this (P)21.a.; and b. Landlord may terminate Tenant's right to possession of the Premises at any time. No act by Landlord other than giving express written notice thereof to Tenant shall terminate this Lease. Acts of maintenance, efforts to relet the Premises, or the appointment of a receiver on Landlord's initiative to protect Landlord's interest under this Lease shall not constitute a termination of Tenant's right to possession. Upon termination of Tenant's right to possession, Landlord has the right to recover from Tenant: (1) the Worth of the unpaid Rent that had been earned at the time of termination of Tenants right to possession; (2) the Worth of the amount by which the unpaid Rent that would have been earned after the date of termination until the time of award exceeds the amount of the loss of Rent that Tenant proves could have been reasonably avoided; (3) the Worth of the amount of the unpaid Rent that would have been earned after the award throughout the remaining Term of the Lease to the extent such unpaid Rent exceeds the amount of the loss of Rent that Tenant proves could have been reasonably avoided; and (4) any other amount, including but not limited to, expenses incurred to relet the Premises, court costs, attorneys' fees and collection costs necessary to compensate Landlord for all detriment caused by Tenant's default. The "Worth", as used above in (1) and (2) in this (P)21.b. is to be computed by allowing interest at the lesser of 18 percent per annum or the maximum legal interest rate permitted by law. The "Worth", as used above in (3) in this (P)21.b., is to be computed by discounting the amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of the award, plus one percent (1%). -14- 22. ENTRY OF PREMISES. Landlord and/or its authorized representatives shall have the right to enter the Premises at all reasonable times with reasonable prior notice to Tenant except for emergencies for any of the following purposes: (a) to determine whether the Premises are in good condition and whether Tenant is complying with its obligations under this Lease; (b) to do any necessary maintenance and to make any restoration to the Premises that Landlord has the right or obligation to perform; (c) to post "for sale" signs at any time during the Term, or to post "for rent" or "for lease" signs during the last ninety (90) days of the Term or during any period while Tenant is in default; (d) to show the Premises to prospective brokers, agents, buyers, tenants or persons interested in leasing or purchasing the Premises, at any time during the Term; or (e) to repair, maintain or improve the Premises and to erect scaffolding and protective barricades around and about the Premises but not so as to prevent entry to the Premises and to do any other act or thing necessary for the safety or preservation of the Premises. Landlord shall not be liable in any manner for any inconvenience, disturbance, loss of business, nuisance or other damage arising out of Landlord's entry onto the Premises as provided in this (P)22. Tenant shall not be entitled to an abatement or reduction of Rent if Landlord exercises any rights reserved in this (P)22. Landlord shall conduct its activities on the Premises as provided herein in a commercially reasonable manner that will lessen the inconvenience, annoyance or disturbance to Tenant. 23. SUBORDINATION a. AUTOMATIC SUBORDINATION. Without the necessity of any additional document being executed by Tenant for the purpose of effecting a subordination, and at the election of Landlord or any Lender(s) against the Building containing the Premises, this Lease shall be subject and subordinate at all times to (i) all ground leases or underlying leases which may now exist or hereafter be executed affecting the Building containing the Premises, (ii) the lien of any mortgage or deed of trust which may hereafter be executed affecting the Building containing the Premises, and (iii) the lien of any mortgage or deed of trust which may hereafter be executed in any amount for which the Premises, ground leases or underlying leases, or Landlord's interest or estate in any of said items is specified as security. In the event that any ground lease or underlying lease terminates for any reason or any mortgage or deed of trust is foreclosed or a conveyance in lieu of foreclosure is made for any reason, Tenant shall, notwithstanding any subordination, attorn to and become the Tenant of the successor in interest to Landlord. In connection with any such termination of a ground lease or underlying lease or any foreclosure or conveyance in lieu of foreclosure made in connection with any mortgage or deed of trust, then so long as Tenant is not in default pursuant to this Lease, Tenant shall not be disturbed in its possession of the Premises or in the enjoyment of its rights pursuant to this Lease during the Term of this Lease or any extension or renewal thereof. b. ADDITIONAL SUBORDINATION. From time to time at the request of Landlord, Tenant covenants and agrees to execute and deliver within ten (10) days following the date of written request from Landlord, documents evidencing the priority or subordination of this Lease with respect to any ground lease or underlying lease or the lien of any mortgage or deed of trust in connection with the Building containing the Premises. Any and all such documents shall be in such form as is reasonably acceptable to Tenant and Landlord as well as the Lender(s) and other applicable party. Any subordination agreement so requested by Landlord shall provide for Tenant to attorn to the successor in interest to Landlord and shall further provide that Tenant shall not be disturbed in its possession of the Premises or in the enjoyment of its rights pursuant to this Lease so long as Tenant is not in default with respect to its obligations pursuant to the Lease. Any such Subordination, Non-disturbance and Attornment Agreement shall be recorded in the official records of the office of the County Recorder in the County in which the Premises is located. Tenant hereby irrevocably appoints Landlord as attorney-in-fact of Tenant to execute, deliver and record any such document in the name of and on behalf of Tenant. c. NOTICE FROM LENDER. Tenant shall be entitled to rely upon any notice given by Lender(s) in connection with the Premises requesting that Tenant make all future Rent payments to such Lender(s), and Tenant shall not be liable to Landlord for any payment made to such Lender(s)in accordance with such notice. 24. ESTOPPEL CERTIFICATE; TENANT FINANCIAL STATEMENTS. Tenant, at any time and from time to time, upon not less than ten (10) days written notice from Landlord, will execute, acknowledge and deliver to Landlord and, at Landlord's request, to any existing or prospective purchaser, ground lessor or mortgagee of any part of the Premises, a certificate of Tenant stating: (a) that Tenant has accepted the Premises (or, if Tenant has not done so, Tenant has not accepted the Premises and specifying the reasons therefor); (b) the Commencement and Expiration Dates of this Lease; (c) that this Lease is unmodified and in full force and effect (or, if there have been modifications, that same is in full force and effect as modified and stating the modifications); (d) whether or not to the best of Tenant's knowledge there are then existing any defenses against the enforcement of any of the obligations of Tenant under this Lease (and, if so, specifying same); (e) whether or not to the best of Tenants knowledge there are then existing any defaults by Landlord in the performance of its obligations under this Lease (and, if so, specifying same); (f) the dates, if any, to which the Rent and other charges under this Lease have been paid; (g) whether or not there are Rent increases during the Lease Term and if so the amount of same, (h) whether or not the Lease contains any options or rights of first offer or first refusal; (i) the amount of any Security Deposit or other sums due Tenant; (j) the current notice address for Tenant; and (k) any other information that may reasonably be required by any of such persons. It is intended that any such certificate of Tenant delivered pursuant to this (P)24. may be relied upon by Landlord and any existing or prospective purchaser, ground lessor or mortgagee of the Building containing the Premises. Tenant agrees, at any time upon request by Landlord, to deliver to Landlord the current financial statements of Tenant with an opinion from a certified public accountant, if available, including a balance sheet and profit and loss statement for the most recent prior three fiscal years, all prepared in accordance with generally accepted accounting principles consistently applied. -15- 25. WAIVER. No delay or omission in the exercise of any right or remedy by Landlord shall impair such right or remedy or be construed as a waiver. No act or conduct of Landlord, including without limitation, acceptance of the keys to the Premises, shall constitute an acceptance of the surrender of the Premises by Tenant before the expiration of the Term. Only written notice from Landlord to Tenant shall constitute acceptance of the surrender of the Premises and accomplish termination of the Lease. Landlord's consent to or approval of any act by Tenant requiring Landlord's consent or approval shall not be deemed to waive or render unnecessary Landlord's consent to or approval of any subsequent act by Tenant. Any waiver by Landlord of any Default must be in writing and shall not be a waiver of any other Default concerning the same or any other provision of the Lease. 26. SURRENDER OF PREMISES. Upon expiration of the Term, Tenant shall surrender to Landlord the Premises and all tenant improvements and alterations in the same condition as existed at the Commencement Date which shall include the Approved Work as set forth in (P)29.b. hereof, except for ordinary wear and tear and alterations which Tenant has the right or is obligated to remove under the provisions of (P)14. herein. Tenant shall remove all personal property including, without limitation, all wallpaper, paneling and other decorative improvements or fixtures and shall perform all restoration made necessary by the removal of any alterations made subsequent to the installation of the Approved Work or Tenant's personal property before the expiration of the Term, including, for example, restoring all wall surfaces to their condition as of the Commencement Date. Landlord can elect to retain or dispose of in any manner Tenant's personal property not removed from the Premises by Tenant prior to the expiration of the Term. Tenant waives all claims against Landlord for any damage to Tenant resulting from Landlord's retention or disposition of Tenant's personal property. Tenant shall be liable to Landlord for Landlord's cost for storage, removal and disposal of Tenant's personal property. 27. HOLDOVER. If Tenant with Landlord's consent remains in possession of the Premises after expiration of the Term or after the date in any notice given by Landlord to Tenant terminating this Lease, such possession by Tenant shall be deemed to be a month to month tenancy cancelable by either party on thirty (30) days written notice given at any time by either party and all provisions of this Lease, except those pertaining to Term, renewal options and Base Rent, shall apply and Tenant shall thereafter pay monthly Base Rent computed on a per-month basis, for each month or part thereof (without reduction for any partial month) that Tenant remains in possession, in an amount equal to one hundred fifty percent (150%) of the Base Rent that was in effect for the last full calendar month immediately preceding expiration of the Term. 28. NOTICES. All notices, demands, or other communications required or contemplated under this Lease shall be in writing and shall be deemed to have been duly given 72 hours from the time of mailing if mailed by registered or certified mail, return receipt requested, postage prepaid, or 24 hours from the time of shipping by overnight carrier, or the actual time of delivery if delivered by personal service to the parties at the addresses specified in (P)1. Either Tenant or Landlord may change the address to which notices are to be given to such party hereunder by giving written notice of such change of address to the other in accordance with the notice provisions hereof. 29. TENANT IMPROVEMENTS. a. EXISTING CONDITIONS. The Premises shall be delivered in its "as is" condition as of the Commencement Date of the Lease with the following exceptions: 1) Landlord, at Landlord's sole cost and expense, shall inspect prior to the Commencement Date and, if required by said inspection, repair the HVAC system including the replacement of compressors and exchangers if necessary. Landlord shall provide Tenant with a copy of any written inspection report. 2) Landlord, at Landlord's sole cost and expense, shall inspect and, if required, repair the roof prior to the Commencement Date of the Lease. 3) The interior fire sprinkler system risers serving the Premises shall be braced (if such bracing does not currently exist) as required to meet current code at Landlord's sole cost and expense within sixty (60) days of full Lease execution. b. ADDITIONAL TENANT IMPROVEMENTS. Landlord hereby grants Tenant a Construction Allowance of Fifteen Dollars ($15.00) per rentable square foot ("LANDLORD'S CONSTRUCTION ALLOWANCE") for the cost of additional generic tenant improvements to be installed by Tenant in the Premises (the "ADDITIONAL TENANT IMPROVEMENTS"). Tenant shall submit its plans for the Additional Tenant Improvements for Landlord's approval (the "APPROVED WORK") prior to the commencement of construction of the Approved Work Tenant may, at Tenant's option, submit to Landlord conceptual plans for the Additional Tenant Improvements for Landlord's approval, which conceptual plans shall indicate the type and general nature of the Additional Tenant Improvements and the approximate location of the Additional Tenant Improvements if said conceptual plans have been prepared, initialed and attached hereto, the plans are deemed approved by Landlord and Tenant. Landlord agrees to reasonably approve subsequent detailed construction plans so long as said construction plans substantially conform to the previously approved conceptual plans. Landlord shall pay Tenant's outside vendors or contractors for materials and services constituting the Approved Work, up to the maximum Landlord's Construction Allowance set forth in this (P)29.b., upon Tenant's submittal to Landlord of approved invoices and lien releases for payment. Subject to the total amount available within the Landlord's Construction Allowance, Tenant shall also be reimbursed from Landlord's Construction Allowance for the reasonable cost of plans and permits relating to the installation of the Approved Work. All of the work to be done by Tenant under this (P)29 b shall be -16- done in accordance with the provisions of (P)14. hereof and Tenant shall be required to follow Landlord's reasonable rules and regulations relating to contractors working in the Building. Landlord shall have the right to reasonably approve all of Tenant's proposed contractors and subcontractors related to the installation of the Approved Work. 30. COMMENCEMENT DATE. The Term of the Lease shall commence on the earliest to occur of: 1) Substantial completion of the Approved Work as determined by the Building Architect; or 2) Tenant's commencement of occupancy of the Premises; or 3) September 1, 1998. 31. EARLY POSSESSION. Notwithstanding the provisions of (P)3. hereof and with the written permission of the existing tenant in the Premises, Tenant shall have the right to enter the Premises prior to the Commencement Date so that Tenant can commence the installation of the Approved Work pursuant to (P)29.b. above (the "Construction Period"). All of the terms and conditions of the Lease, except for Tenant's obligations to pay Rent and Operating Expenses, shall be in effect during the Construction Period provided, however, Tenant shall be required to pay for utilities consumed in the Premises during the Construction Period. 32. OPTION TO RENEW. a. GRANT OF OPTION. Tenant shall have the right, at its option, to extend the Lease for one (1) additional period of five (5) years (the "EXTENDED TERM") commencing at the expiration of the Term, provided that at the time of exercise and at the time of commencement of the Extended Term, Tenant is not in default beyond any applicable cure period under this Lease. b. EXERCISE OF OPTION. If Tenant decides to extend the Lease for the Extended Term, Tenant shall give written notice to Landlord of its election to extend not less than ten (10) months prior to the expiration of the Term. Tenant's failure to give timely notice to Landlord of Tenant's election to extend shall be deemed a waiver of Tenant's right to extend. The terms and conditions applicable to the Extended Term shall be the same terms and conditions contained in this Lease except that Tenant shall not be entitled to any further option to extend beyond the Extended Term. The Base Rent for the Extended Term shall be as determined in accordance with (P)32.c. c. DETERMINATION OF BASE RENT DURING THE EXTENDED TERM. 1) AGREEMENT ON INITIAL BASE RENT. Landlord shall not be obligated to provide Tenant with the proposed fair market rental value until six (6) months prior to the expiration of the Term. Landlord and Tenant shall have thirty (30) days after Landlord provides the proposed fair market rental value in which to agree on the Base Rent during the Extended Term, which shall be the fair market rental value of the Premises during the Extended Term. The fair market rental value of the Premises during the Extended Term shall be based on the uses of the Premises permitted under this Lease, the quality, size, design and location of the Premises, and the rental value for lease renewals or extensions of comparable size and quality located in the Bel Marin Keys area of Novato, California. If Landlord and Tenant agree on the Base Rent for the Extended Term during the thirty (30) day period, they shall immediately execute an amendment to this Lease stating the new Base Rent. The establishment of the Base Rent in accordance with this (P)32. shall be without regard to the additional tenant improvement allowance for the additional Approved Work, as set forth in (P)32.a. hereof. 2) SELECTION OF APPRAISERS. If Landlord and Tenant are unable to agree on the Base Rent for the Extended Term within the thirty (30) day period, then within ten (10) days after the expiration of the thirty (30) day period and provided that Tenant has timely exercised the subject renewal option in accordance with (P)32.b., Landlord and Tenant each at its own cost and by giving notice to the other party, shall appoint a competent and disinterested real estate appraiser with at least five (5) years full-time commercial appraisal experience in the Bel Marin Keys area of Novato California market area to appraise the fair market rental value of the Premises and set the Base Rent during the Extended Term. If either Landlord or Tenant does not appoint an appraiser within said ten (10) days, the single appraiser appointed shall be the sole appraiser and shall set the Base Rent during the Extended Term. If two (2) appraisers are appointed by Landlord and Tenant as stated herein, they shall meet promptly and attempt to set the Base Rent for said Extender Term. If the two (2) appraisers are unable to agree within thirty (30) days after the second appraiser has been appointed, they shall attempt to select a third appraiser meeting the same qualifications within ten (10) days after the last day the two (2) appraisers are given to set the Base Rent. If they are unable to agree on the third appraiser, either Landlord or Tenant, by giving ten (10) days' notice to the other party, can apply to the then President of the Real Estate Board. or to the Presiding Judge of the Superior Court of the County in which the Premises are located for the selection of a third appraiser who meets the qualifications stated herein. Landlord and Tenant each shall bear one-half (1/2) of the cost of appointing the third appraiser and of paying the third appraiser's fee. The third appraiser, however selected, shall be a person who has not previously acted in any capacity for either Landlord or Tenant, or their affiliates. -17- 3) VALUE DETERMINED BY THREE (3) APPRAISERS. Within thirty (30) days after the selection of the third appraiser, a majority of the appraisers shall set the Base Rent for the Extended Term. If a majority of the appraisers are unable to set the Base Rent within the stipulated period of time, Landlord's appraiser shall arrange for simultaneous exchange of written appraisals from each of the appraisers and the three (3) appraisals shall be added together and their total divided by three (3); the resulting quotient shall be the Base Rent for the Premises during the Extended Term. If, however, the low appraisal and/or the high appraisal are/is more than fifteen percent (15%) lower and/or higher than the middle appraisal, such low appraisal and/or high appraisal shall be disregarded. If only one (1) appraisal is disregarded, the remaining two (2) appraisals shall be added together and their total divided by two (2); the resulting quotient shall be the Base Rent for the Premises during the Extended Term. If both the low appraisal and the high appraisal are disregarded as stated in this (P)32.c.3), the middle appraisal shall be the Base Rent for the Premises during the Extended Term. 4) MINIMUM BASE RENT LEVEL. Notwithstanding any other provision of this Lease, in no event shall the Base Rent for the Extended Term as determined above be less than the Base Rent prevailing immediately prior to the expiration of the initial Term, and, in any event, the Base Rent during the Extended Term as determined above shall be increased in accordance with (P)1.n. ("BASE RENT ADJUSTMENT") hereof during each of the last four (4) years of the Extended Term. 33. MISCELLANEOUS PROVISIONS. a. TIME OF ESSENCE. Time is of the essence of each provision of this Lease. b. SUCCESSOR. This Lease shall be binding on and inure to the benefit of the parties and their successors, except as provided in (P)19. c. LANDLORD'S CONSENT. Any consent required by Landlord under this Lease must be granted in writing and may be withheld or conditioned by Landlord in its sole and absolute discretion unless otherwise provided. d. PERSONAL RIGHTS. Notwithstanding any other provision(s) of this Lease to the contrary, any provisions of this Lease providing for the renewal, extension or early termination of the Lease and/or for the expansion of the Premises (to include without limitation rights to negotiate, rights of first refusal, etc.) shall be (i) personal to the original Tenant and shall not be assignable or otherwise transferable (either voluntarily or involuntarily) to any third party for any reason whatsoever, and (ii) conditioned upon Tenant not then being in default under this Lease. e. COMMISSIONS. Each party represents that it has not had dealings with any real estate broker, finder or other person with respect to this Lease in any manner, except for the Broker(s) identified in (P)1., who shall be compensated by Landlord in accordance with the separate agreement between Landlord and the Broker(s). f. OTHER CHARGES; LEGAL FEES. If Landlord becomes a party to any litigation concerning this Lease or the Premises by reason of any act or omission of Tenant or Tenants authorized representatives, Tenant shall be liable to Landlord for reasonable attorneys' fees and court costs incurred by Landlord in the litigation. Should the court render a decision which is thereafter appealed by any party thereto, Tenant shall be liable to Landlord for reasonable attorneys' fees and court costs incurred by Landlord in connection with such appeal. If either party commences any litigation against the other party or files an appeal of a decision arising out of or in connection with the Lease, the prevailing party shall be entitled to recover from the other party reasonable attorneys' fees and costs of suit. If Landlord employs a collection agency to recover delinquent charges, Tenant agrees to pay all collection agency and attorneys' fees charged to Landlord in addition to Rent, late charges, interest and other sums payable under this Lease. g. LANDLORD'S SUCCESSORS. In the event of a sale or conveyance by Landlord of the Building containing the Premises, the same shall operate to release Landlord from any liability under this Lease, and in such event Landlord's successor in interest shall be solely responsible for all obligations of Landlord under this Lease. h. INTERPRETATION. This Lease shall be construed and interpreted in accordance with the laws of the state in which the Premises are located. This Lease constitutes the entire agreement between the parties with respect to the Premises, except for such guarantees or modifications as may be executed in writing by the parties from time to time. When required by the context of this Lease, the singular shall include the plural, and the masculine shall include the feminine and/or neuter. "Party" shall mean Landlord or Tenant. If more than one person or entity constitutes Landlord or Tenant, the obligations imposed upon that party shall be joint and several. The enforceability, invalidity or illegality of any provision shall not render the other provisions unenforceable, invalid or illegal. i. AUCTIONS. Tenant shall not conduct, nor permit to be conducted, either voluntarily or involuntarily, any auction upon the Premises without first having obtained Landlord's prior written consent. Notwithstanding anything to the contrary in this Lease, Landlord shall not be obligated to exercise any standard of reasonableness in determining whether to grant such consent. -18- j. CONFLICT. Any conflict between the printed provisions of this Lease and the typewritten or handwritten provisions shall be controlled by the typewritten or handwritten provisions. k. OFFER. Preparation of this Lease by Landlord or Landlord's agent and submission of same to Tenant shall not be deemed an offer to lease to Tenant. This Lease is not intended to be binding until executed by all Parties hereto. l. AMENDMENTS. This Lease may be modified only in writing, signed by the Parties in interest at the time of the modification. The parties shall amend this Lease from time to time to reflect any adjustments that are made to the Base Rent or other Rent payable under this Lease. As long as they do not materially change Tenant's obligations hereunder, Tenant agrees to make reasonable non-monetary modifications to this Lease as may be reasonably required by Lender(s) in connection with the obtaining of normal financing or refinancing of the property of which the Premises are a part. m. CONSTRUCTION. The Landlord and Tenant acknowledge that each has had its counsel review this Lease, and hereby agree that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Lease or in any amendments or exhibits hereto. n. CAPTIONS. Article, section and paragraph captions are not a part hereof. o. EXHIBITS. For reference purposes the Exhibits are listed below: Exhibit A: The Premises Exhibit B: Property Exhibit C: Rules and Regulations Exhibit D: Covenants, Conditions And Restrictions LANDLORD: TENANT: LIMAR REALTY CORP. #18 BIOMARIN PHARMACEUTICAL, INC. a California corporation a Delaware corporation By: /s/ THEODORE H. KRUTTSCHNITT By: /s/ [SIGNATURE] _____________________________ _____________________________ Theodore H. Kruttschnitt President Name: [NAME] ____________________________ Title: [TITLE] ___________________________ Date: 8/7/98 Date: July 24, 1998 ____________________________ ___________________________ -19- EX-10.21 23 STANDARD INDUST. COMM. LEASE DATED 5/29/98 EXHIBIT 10.21 [LOGO OF AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION APPEARS HERE] STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE- GROSS (DO NOT USE THIS FORM FOR MULTI-TENANT BUILDINGS) 1. BASIC PROVISIONS ("BASIC PROVISIONS") 1.1 PARTIES: This Lease ("Lease"), dated for reference purposes only May 29, 98, is made by and between G.W. Realty Partners ("LESSOR"), and BioMarin Pharmaceuticals, a California Corporation ("LESSEE"), (collectively the "PARTIES" or individually a "PARTY"). 1.2 PREMISES: That certain real property, including all improvements to be provided by Lessor under the terms of ; Lease, and commonly known as 110 Digital Drive, Novato, located in the County of Marin, State of California, and generally described as (describe briefly the nature of the property and, if applicable, the "Project", if the property is located within a Project) an approximately 35,346 square foot concrete tilt-up building. ("PREMISES"). (See also Paragraph 2) 1.3 TERM: Ten (10) years and -0- months ("ORIGINAL TERM") commencing See Addendum Item #1 ("COMMENCEMENT DATE") and ending ten (10) years from commencement ("EXPIRATION DATE"). (See also Paragraph 3) 1.4 EARLY POSSESSION:____________________ ("EARLY POSSESSION DATE"). (See also Paragraphs 3.2 and 3.3) 1.5 BASE RENT: $ See Addendum Item #2 /per month ("BASE RENT"), payable on the first day of each month commencing __________________________ (See also Paragraph 4) [_] If this box is checked, there are provisions in this Lease for the Base Rent to be adjusted and/or for common area maintenance charges. 1.6 BASE RENT PAID UPON EXECUTION: Year 1 base monthly rent $33,289,15. as Base Rent for the first month of the lease term. 1.7 SECURITY DEPOSIT: $ 36,823,85 ("SECURITY DEPOSIT"). (See also Paragraph 5) 1.8 AGREED USE: Offices and administration, pharmaceutical laboratory and storage. (See also Paragraph 6) 1.9 INSURING PARTY. Lessor is the "INSURING PARTY". The annual "Base Premium" is $_________. (See also Paragraph 8) 1.10 REAL ESTATE BROKERS: (See also Paragraph 15) (a) REPRESENTATION: The following real estate brokers (collectively, the "Brokers") and brokerage relationships exist in this transaction (check applicable boxes): [_] _____________________ represents Lessor exclusively ("LESSOR'S BROKER"); [_] _____________________ represents Lessee exclusively ("LESSEE'S BROKER"); or [X] Meredian Commercial, Inc. represents both Lessor and Lessee ("DUAL AGENCY"). (b) PAYMENT TO BROKERS: Upon execution and delivery of this Lease by both Parties, Lessor Shall pay to the Broker the fee agreed to in their separate written agreement (or if there is no such agreement, the sum of As Agreed % of the total Base Rent for the brokerage services rendered by said Broker). 1.11 GUARANTOR. The obligations of the Lessee under this Lease are to be guaranteed by ____________________________ ("GUARANTOR"). (See also Paragraph 37) 1.12 ADDENDA AND EXHIBITS. Attached hereto is an Addendum or Addenda consisting of Paragraphs _____ through _____ and Exhibits ____________________, all of which constitute a part of this LEASE. 2. PREMISES. 2.1 LETTING. Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, the Premises, for the term, at the rental, and upon all of the terms, covenants and conditions set forth in this Lease. Unless otherwise provided herein, any statement of size set forth in this Lease, or that may have been used in calculating rental, is an approximation which the Parties agree is reasonable and the rental based thereon; is not subject to revision whether or not the actual size is more or less. 2.2 CONDITION. Lessor shall deliver the Premises broom clean and free of debris on the Commencement Date or the Early Possession date, whichever first occurs ("START DATE"), and warrants that the existing electrical, plumbing, fire sprinkler, lighting, heating, ventilating and air conditioning systems ("HVAC"), loading doors, if any, and all other such elements of the building, in the Premises, other than those constructed by Lessee, shall be in good operating condition on said date and that the surface and structural elements of the roof, bearing walls and foundation of any buildings on the Premises (the "BUILDING") shall be free of material defects. If a non-compliance with said warranty exists as of the Start Date, Lessor shall, except as otherwise provided in this Lease, promptly after receipt of written notice from Lessee setting forth with specificity the nature and extent of such non-compliance, rectify same at Lessor's expense. If, after the Start Date, Lessee does not give Lessor written notice of any non-compliance with this warranty within (I) six (6) months as to the HVAC systems or (ii) thirty (30) days as to the remaining systems and other elements of the Building, correction of such non-compliance shall be the obligation of Lessee at Lessee's sole Cost and expense, except for the roof, foundations, and bearing walls which are handled as provided in paragraph 7. 2.3 COMPLIANCE. Lessor warrants that the improvements on the Premises comply with all applicable laws, covenants or restrictions of record, building codes, regulations and ordinances ("APPLICABLE REQUIREMENTS") in effect on the Start Date. Said warranty does not apply to the use to which Lessee will put the Premises or to any Alterations or Utility Installations (as defined in Paragraph 7.3(a)) made or to be made by Lessee. NOTE: Lessee responsible for determining whether or not the zoning is appropriate for Lessee's intended use, and acknowledges hat past uses of the Premises may no longer be allowed. If the Premises do not comply with said warranty, Lessor shall, except as otherwise provided, promptly after receipt of written notice from Lessee setting forth with specificity the nature and extent of such non-compliance, rectify the same at Lessor's expense. If Lessee does not give Lessor written notice of a non- compliance with this warranty within six (6) months following the Start Date, correction of that non-compliance shall be the obligation of Lessee at Lessee's sole cost and expense, if the Applicable Requirements are hereafter changed (as opposed to being in existence at the Start Date, which is addressed in Paragraph 6.2(e) below) so as to require during the term of this Lease the construction of an addition to or an alteration of the Building, the redemption of any Hazardous substance, or the reinforcement or other physical modification of the Building ("Capital EXPENDITURE"), Lessor and Lessee shall allocate the cost of such work as follows: (a) Subject to Paragraph 2.3(c) below, if such Capital Expenditures are required as a result of the specific and unique use of the Premises by Lessee as compared with uses by tenants in general, Lessee shall be fully responsible for the cost thereof, provided, however that if such Capital Expenditure is required during the last two (2) years of this Lease and the cost thereof exceeds six (6) months' Base Rent, Lessee PAGE 1 initials CMS GW --- -- may instead terminate this Lease unless Lessor notifies Lessee, in writing, within ten (10) days after receipt of Lessee's termination notice that Lessor has elected to pay the difference between the actual cost thereof and the amount equal to six (6) months' Base Rent. if Lessee elects termination, Lessee shall immediately cease the use of the Premises which requires such Capital Expenditure and deliver to Lessor written notice specifying a termination date at least ninety (90) days thereafter. Such termination date shall, however, in no event be earlier than the last day that Lessee could legally utilize the Premises without commencing such Capital Expenditure. (b) If such Capital Expenditure is not the result of the specific and unique use of the Premises by Lessee (such as, governmentally dated seismic modifications), then Lessor and Lessee shall allocate the obligation to pay for such costs pursuant to the provisions of Paragraph 7.1(c); provided, however, that if such Capital Expenditure is required during the last two years of this Lease or if Lessor reasonably ,determines that it is not economically feasible to pay its share thereof, Lessor shall have the option to terminate this Lease upon ninety (90) days prior written notice to Lessee unless Lessee notifies Lessor, in writing, within ten (10) days after receipt of Lessor's termination notice that Lessee will pay for such Capital Expenditure. If Lessor does not elect to terminate, and fails to tender its share of any such Capital Expenditure, Lessee advance such funds and deduct same, with Interest, from Rent until Lessor's share of such costs have been fully paid. If Lessee is unable to finance Lessor's share, or if the balance of the Rent due and payable for the remainder of this Lease is not sufficient to fully reimburse Lessee in offset basis, Lessee shall have the right to terminate this Lease upon thirty (30 days written notice to Lessor. (c) Notwithstanding the above, the provisions concerning Capital Expenditures are intended to apply only to non-voluntary, unexpected, and new Applicable Requirements. If the Capital Expenditures are instead triggered by Lessee as a result of an actual or proposed change in use, change in intensity of use, or modification to the Premises then, and in that event, Lessee shall be fully responsible for the cost thereof, and Lessee shall not have any right to terminate this Lease. 2.5 LESSEE AS PRIOR OWNER/OCCUPANT. The warranties made by Lessor in Paragraph 2 shall be of no force or effect if immediately prior to the Start Date Lessee was the owner or occupant of the Premises. In such event, Lessee shall be responsible for any necessary corrective work. 3. TERM. 3.1 TERM. The Commencement Date, Expiration Date and Original Term of this Lease are as specified in Paragraph 1.3. 3.2 EARLY POSSESSION. If Lessee totally or partially occupies the Premises prior to the Commencement Date, the obligation to pay Base Rent shall be abated for the period of such early possession. All other terms of this Lease shall, however, be in effect during such period. Any such early possession shall not affect the Expiration Date. See Addendum to Lease Item #4. 3.3 DELAY IN POSSESSION. See Addedum to Lease Item #4. 3.4 LESSEE COMPLIANCE. Lessor shall not be required to tender possession of the Premises to Lessee until Lessee complies with its obligation to provide evidence of insurance (Paragraph 8.5). Pending delivery of such evidence, Lessee shall be required to perform all of its obligations under this Lease from and after the Start Date, including the payment of Rent, notwithstanding Lessor's election to withhold possession pending receipt of such evidence of insurance. Further, if Lessee is required to perform any other conditions prior to or concurrent with the Start Date, the Start Date shall occur but Lessor may elect to withhold possession until such conditions are satisfied. 4. RENT. 4.1. RENT DEFINED. All monetary obligations of Lessee to Lessor under the terms of this Lease (except for the Security Deposit) are deemed to be rent ("RENT"). 4.2 PAYMENT. Lessee shall cause payment of Rent to be received by Lessor in lawful money of the United States, without offset or deduction (except as specifically permitted in this Lease), on or before the day on which it is due. Rent for any period during the term hereof which is for less than one (1) full calendar month shall be prorated based upon the actual number of days of said month. Payment of Rent shall be made to Lessor at its address stated herein or to such other persons or place as Lessor may from time to time designate in writing. Acceptance of a payment which is less than the amount then due shall not be a waiver of Lessor's rights to the balance of such Rent, regardless of Lessor's endorsement of any check so stating. 5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon execution hereof the Security Deposit as security for Lessee's faithful performance of its obligations under this Lease. If Lessee fails to pay Rent, or otherwise Defaults under this Lease, Lessor may use, apply or retain all or any portion of said Security Deposit for the payment of any amount due Lessor or to reimburse or compensate Lessor for any liability, expense, loss or damage which Lessor may suffer or incur by reason thereof. If Lessor uses or applies all or any portion of said Security Deposit, Lessee shall within ten (10) days after written request therefor deposit monies with Lessor sufficient to restore said Security Deposit to the full amount required by this Lease. If the Base Rent increases during the term of this Lease, Lessee shall, upon written request from Lessor, deposit additional moneys with Lessor so that the total amount of the Security Deposit shall at all times bear the same proportion to the increased Base Rent as the initial Security Deposit bore to the initial Base Rent. Should the Agreed Use be amended to accommodate a material change in the business of Lessee or to accommodate a sublessee or assignee, Lessor shall have the right to increase the Security Deposit to the extent necessary, in Lessor's reasonable judgment, to account for any increased wear and tear that the Premises may suffer as a result thereof, if a change in control of Lessee occurs during this Lease and following such change the financial condition of Lessee is, in Lessor's reasonable judgment, significantly reduced, Lessee shall deposit such additional monies with Lessor as shall be sufficient to cause the Security Deposit to be at a commercially reasonable level based on said change in financial condition. Lessor shall not be required to keep the Security Deposit separate from its general accounts. Within fourteen (14) days after the expiration or termination of this Lease, if Lessor elects to apply the Security Deposit only to unpaid Rent, and otherwise within thirty (30) days after the Premises have been vacated pursuant to Paragraph 7.4(c) below, Lessor shall return that portion of the Security Deposit not used or applied by Lessor. No part of the Security Deposit shall be considered to be held in trust, to bear interest or to be prepayment for any monies to be paid by Lessee under this Lease. 6. USE. 6.1 USE. Lessee shall use and occupy the Premises only for the Agreed Use, or any other legal use which is reasonably comparable hereto, and for no other purpose. Lessee shall not use or permit the use of the Premises in a manner that is unlawful, creates damage, waste or a nuisance, or that disturbs owners and/or occupants of, or causes damage to neighboring properties. Lessor shall not unreasonably withhold or delay its consent to any Written request for a modification of the Agreed Use, so long as the same will not impair the structural integrity of the improvements on the Premises or the mechanical or electrical systems therein, or is not significantly more burdensome to the Premises. If PAGE 2 initials CMS GW --- -- Lessor elects to withhold consent, Lessor shall within five (5) business days after such request give written notification of same, which notice include an explanation of Lessor's objections to the change in use. 6.2 HAZARDOUS SUBSTANCES. (a) REPORTABLE USES REQUIRE CONSENT. The term "HAZARDOUS SUBSTANCE" as used in this Lease shall mean any product, substance, or waste whose presence, use, manufacture, disposal, transportation, or release, either by itself or in combination with other materials expected to be on the Premises, is either: (i) potentially injurious to the public health, safety or welfare, the environment or the Premises, (ii) regulated or monitored by any governmental authority, or (iii) a basis for potential liability of Lessor to any governmental agency or third party under any applicable statute or common law theory. Hazardous Substances shall include, but not be limited to, hydrocarbons, petroleum, gasoline, and/or crude oil or any products, by-products or fractions thereof. Lessee shall not engage in any activity in or on the Premises which constitutes a Reportable Use of Hazardous Substances without the express prior written consent of Lessor and timely compliance (at Lessee's expense) with all Applicable Requirements. "REPORTABLE USE" shall mean (i) the installation or use of any above or below ground storage tank, (ii) the generation, possession, storage, use, transportation, or disposal of a Hazardous Substance that requires a permit from, or with respect to which a report, notice, registration or business plan is required to be filed with, any governmental authority, and/or (iii) the presence at the Premises of a Hazardous Substance with respect to which any Applicable Requirements requires that a notice be given to persons entering or occupying the Premises or neighboring properties. Notwithstanding the foregoing, Lessee may use any ordinary and customary materials reasonably required to be used in the normal course of the Agreed Use, so long as such use is in compliance with all Applicable Requirements, is not a Reportable Use, and does not expose the Premises or neighboring property to any meaningful risk of contamination or damage or expose Lessor to any liability therefor. In addition, Lessor may condition its consent to any Reportable Use upon receiving such additional assurances as Lessor reasonably deems necessary to protect itself, the public, the Premises and/or the environment against damage, contamination, injury and/or liability, including, but not limited to, the installation (and removal on or before Lease expiration or termination) of protective modifications (such as concrete encasements) and/or increasing the Security Deposit. (b) DUTY TO INFORM LESSOR. If Lessee knows, or has reasonable cause to believe, that a Hazardous Substance has come to be located in, on, under or about the Premises, other than as previously consented to by Lessor, Lessee shall immediately give written notice of such fact to Lessor, and provide Lessor with a copy of any report, notice, claim or other documentation which it has concerning the presence of such Hazardous Substance. (c) LESSEE REMEDIATION. Lessee shall not cause or permit any Hazardous Substance to be spilled or released in, on, under, or about the Premises (including through the plumbing or sanitary sewer system) and shall promptly, at Lessee's expense, take all investigatory and/or remedial action reasonably recommended, whether or not formally ordered or required, for the cleanup of any contamination of, and for the maintenance, security and/or monitoring of the Premises or neighboring properties, that was caused or materially contributed to by Lessee, or pertaining to or involving any Hazardous Substance brought onto the Premises during the term of this Lease, by or for Lessee, or any third party. (d) LESSEE INDEMNIFICATION. Lessee shall indemnify, defend and hold Lessor, its agents, employees, lenders and ground lessor, if any, harmless from and against any and all loss of rents and/or damages, liabilities, judgments, claims, expenses, penalties, and attorneys' and consultants' fees arising out of or involving any Hazardous Substance brought onto the Premises by or for Lessee, or any third party (provided, however, that Lessee shall have no liability under this Lease with respect to underground migration of any Hazardous Substance under the Premises from adjacent properties). Lessee's obligations shall include, but not be limited to, the effects of any contamination or injury to person, property or the environment created or suffered by Lessee, and the cost of investigation, removal, remediation, restoration and/or abatement, and shall survive the expiration or termination of this Lease. NO TERMINATION, CANCELLATION OR RELEASE AGREEMENT ENTERED INTO BY LESSOR AND LESSEE SHALL RELEASE LESSEE FROM ITS OBLIGATIONS UNDER THIS LEASE WITH RESPECT TO HAZARDOUS SUBSTANCES, UNLESS, SPECIFICALLY SO AGREED BY LESSOR IN WRITING AT THE TIME OF SUCH AGREEMENT. (e) LESSOR INDEMNIFICATION. Lessor and its successors and assigns shall indemnify, defend, reimburse and hold Lessee, its employees and lenders, harmless from and against any and all environmental damages, including the cost of remediation, which existed as a result of Hazardous Substances on the Premises prior to the Start Date or which are caused by the gross negligence or willful misconduct of Lessor, its agents or employees. Lessor's obligations, as and when required by the Applicable Requirements, shall include, but not be limited the cost of investigation, removal, remediation, restoration and/or abatement, and shall survive the expiration or termination of this Lease. (f) INVESTIGATIONS AND REMEDIATIONS. Lessor shall retain the responsibility and pay for any investigations or remediation measures required by governmental entities having jurisdiction with respect to the existence of Hazardous Substances on the Premises prior to the Start Date, unless such remediation measure is required as a result of Lessee's use (including alterations) of the Premises, in which event Lessee shall be responsible for such payment. Lessee shall cooperate fully in any such activities at the request of Lessor, including allowing Lessor and Lessor's agents to have reasonable access to the Premises at reasonable times in order to carry out Lessor's investigative and remedial responsibilities. (g) LESSOR TERMINATION OPTION. If a Hazardous Substance Condition occurs during the term of this Lease, unless Lessee is legally responsible therefor (in which case Lessee shall make the investigation and remediation thereof required by the Applicable Requirements and this Lease shall continue in full force and effect, but subject to Lessor's rights under Paragraph 6.2(d) and Paragraph 13), Lessor may: at Lessor's option, either (i) investigate and remediate such Hazardous Substance Condition, if required, as soon as reasonably possible at Lessor's expense, in which event this Lease shall continue in full force and effect, or (ii) if the estimated cost to remediate such condition exceeds twelve (12) times the then monthly Base Rent or $100,000, whichever is greater, give written notice to Lessee, within thirty (30) days after receipt by Lessor of knowledge of the occurrence of such Hazardous Substance Condition, of Lessor's desire to terminate this Lease as of the date. sixty (60) days following the date of such notice. In the event Lessor elects to give a termination notice, Lessee may, within ten (10) days thereafter, give written notice to Lessor of Lessee's commitment to pay the amount by which the cost of the remediation of such Hazardous Substance Condition exceeds an amount equal to twelve (12) times the then monthly Base Rent or $100,000, whichever is greater. Lessee shall provide Lessor with said funds or satisfactory assurance thereof within thirty (30) days following such commitment. In such event, this Lease shall ,continue in full force and effect, and Lessor shall proceed to make such remediation as soon as reasonably possible after the required funds are available. If Lessee does not give such notice and provide the required funds or assurance thereof within the time provided, this Lease shall terminate as of the date specified in Lessor's notice of termination. 6.3 LESSEE'S COMPLIANCE WITH APPLICABLE REQUIREMENTS. Except as otherwise provided in this Lease, Lessee shall, at Lessee's sole expense, fully, diligently and in a timely manner, materially comply with all Applicable Requirements, the requirements of any applicable fire insurance underwriter or rating bureau, and the recommendations of Lessor's engineers and/or consultants which relate in any manner to the Premises, without regard to whether said requirements are now in effect or become effective after the Start Date. Lessee shall, within ten (10) days after receipt of Lessor's written request, provide Lessor with copies of all permits and other documents, and other information evidencing Lessee's compliance with any Applicable Requirements specified by Lessor, and shall immediately upon receipt, notify Lessor in writing (with copies of any documents involved) of any threatened or actual claim, notice, citation, warning, complaint or report pertaining to or involving the failure of Lessee or the Premises to comply with any Applicable Requirements. 6.4 INSPECTION; COMPLIANCE. Lessor and Lessor's "Lender" (as defined in Paragraph 30 below) and consultants shall have the right to enter into Premises at any time, in the case of an emergency, and otherwise at reasonable times, for the purpose of inspecting the condition of the Premises and for verifying compliance by Lessee with this Lease. The cost of any such inspections shall be paid by Lessor, unless a violation of Applicable Requirements, or a contamination is found to exist or be imminent, or the inspection is requested or ordered by a governmental authority. In such case, Lessee shall upon request reimburse Lessor for the cost of such inspections, so long as such inspection is reasonably related to the violation or contamination. 7. MAINTENANCE; REPAIRS, UTILITY INSTALLATIONS; TRADE FIXTURES AND ALTERATIONS. 7.1 LESSEE'S OBLIGATIONS. (a) IN GENERAL. Subject to the provisions of Paragraph 2.2 (Condition), 2.3 (Compliance with Covenants, Restrictions and Building Code), 6.3 (Lessee's Compliance with Applicable Requirements), 7.2 (Lessor's Obligations), 9 (Damage and Destruction), and 14 (Con-demnation), Lessee shall, at Lessee's sole expense, keep the Premises, Utility Installations, and Alterations in good order, condition and repair whether or not the portion of the Premises requiring repairs, or the means of repairing the same, are reasonably or readily accessible to Lessee, and whether or not the need for such repairs occurs as a result of Lessee's use, any prior use, the elements or the age of such portion of the PAGE 3 initials CMS GW --- -- Premises), including, but not limited to, all equipment or facilities, such as plumbing, heating, ventilating, air-conditioning, electrical, lighting ties, boilers, pressure vessels, fire protection system, fixtures, walls (interior) ceilings, floors, windows, doors, skylights, signs, in, on, or adjacent to the Premises. Lessor shall keep the surface and structural elements of the roof, foundations, and bearing walls in good repair (see paragraph 7.2). Lessee, in keeping the Premises in good order, condition and repair, shall exercise and perform good maintenance practices. Lessee's obligations shall include restorations, replacements or renewals when necessary to keep the Premises and all improvements thereon or a part thereof in good order, condition and state of repair. See Addendum to Lease Item #10. (b) SERVICE CONTRACTS. With the consent of Lessor, Lessee shall, at Lessee's sole expense, procure and maintain contracts, with copies to Lessor, in customary, and substance for, and with contractors specializing and experienced in the maintenance of the following equipment and improvements ('Basic Elements"), if any, if and when installed on the Premises: (i) HVAC equipment, (ii) boiler, and pressure vessels, (iii) fire extinguishing systems, including fire alarm and/or smoke detection, (vi) clarifiers, (vii) basic utility feed to the perimeter of the Building, and (viii) any other equipment, if reasonably required by Lessor. (c) REPLACEMENT. Subject to Lessee's indemnification of Lessor as set forth in Paragraph 8.7 below, and without relieving Lessee of liability resulting from Lessee's failure to exercise and perform good maintenance practices, if the Basic Elements described in Paragraph 7.1(b) cannot be repaired other than at a cost which is in excess of 50% of the cost of replacing such Basic Elements, then such Basic Elements shall be replaced by Lessor, and the cost thereof shall be prorated between the Parties and Lessee shall only be obligated to pay each month during the remainder of the term of this Lease, on the date on which Base Rent is due, an amount equal to the product of multiplying the cost of such replacement by a fraction, the numerator of which is one, and the denominator of which is the number of months of useful life of such replacement as such useful life is specified pursuant to Federal income tax regulations or guidelines for depreciation thereof (including interest on the unamortized balance as is then commercially reasonable in the judgment of Lessor's accountants), with Lessee reserving the right to prepay its obligation at any time. 7.2 LESSOR'S OBLIGATIONS. SeeAddendum to Lease, Item #4. 7.3 UTILITY INSTALLATIONS; TRADE FIXTURES; ALTERATIONS. (a) DEFINITIONS; CONSENT REQUIRED. The term "UTILITY INSTALLATIONS" refers to all floor and window coverings, air lines, power panels, electrical distribution, security and fire protection systems and signs, communication systems, lighting fixtures, HVAC equipment, robing, and fencing in or on the Premises. The term "TRADE FIXTURES" shall mean Lessee's machinery and equipment that can be removed hour doing material damage to the Premises. The term "ALTERATIONS" shall mean any modification of the improvements, other than Utility installations or Trade Fixtures, whether by addition or deletion. "LESSEE OWNED ALTERATIONS AND/OR UTILITY INSTALLATIONS" are defined as Alterations and/or Utility Installations made by Lessee that are not yet owned by Lessor pursuant to Paragraph 7.4(a). Lessee shall not make Alterations or Utility Installations to the Premises without Lessor's prior written consent. Lessee may, however, make non-structural Utility Installations to the interior of the Premises (excluding the roof) without such consent but upon notice to Lessor, as long as they are not visible from the outside, do not involve puncturing, relocating or removing the roof or any existing walls, and the cumulative cost thereof during this Lease as extended does not exceed $50,000 in the aggregate or $10,000 in any one year. (b) CONSENT. Any Alterations or Utility Installations that Lessee shall desire to make and which require the consent of the Lessor shall be presented to Lessor in written form with detailed plans. Consent shall be deemed conditioned upon Lessee's: (i) acquiring all applicable governmental permits, (ii) furnishing Lessor with copies of both the permits and the plans and specifications prior to commencement of the work, and (iii) compliance with all conditions of said permits and other Applicable Requirements in a prompt and expeditious manner. Any Alterations or Utility Installations shall be performed in a workmanlike manner with good and sufficient materials. Lessee shall promptly upon completion furnish Lessor with as-built plans and specifications. For work which costs an amount equal, to the greater of one month's Base Rent, or $10,000, Lessor may condition its consent upon Lessee providing a lien and completion bond in an amount equal to one and one-half times the estimated cost of such Alteration or Utility Installation and/or upon Lessee's posting an additional Security Deposit with Lessor. (c) INDEMNIFICATION. Lessee shall pay, when due, all claims for labor or materials furnished or alleged to have been furnished to or for Lessee at or for use on the Premises, which claims are or may be secured by any mechanic's or materialmen's lien against the Premises any or any interest therein. Lessee shall give Lessor not less than ten (10) days' notice prior to the commencement of any work in, on or about the Premises, and Lessor shall have the right to post notices of non-responsibility. If Lessee shall contest the validity of any such lien, claim or demand, then Lessee shall, at its sole expense defend and protect itself, Lessor and the Premises against the same and shall pay and satisfy any such adverse judgment that may be rendered thereon before the enforcement thereof. If Lessor shall require, Lessee shall furnish a surety bond in an amount equal to one and one-half times the amount of such contested lien, claim or demand, indemnifying Lessor against liability for the same. If Lessor elects to participate in any such action, Lessee shall pay Lessor's attorneys' fees and costs. 7.4 OWNERSHIP; REMOVAL; SURRENDER; AND RESTORATION. (a) OWNERSHIP. Subject to Lessor's right to require removal or elect ownership as hereinafter provided, all Alterations and Utility Installations made by Lessee shall be the property of Lessee, but considered a part of the Premises. Lessor may, at any time, elect in writing to be the owner of all or any specified part of the Lessee Owned Alterations and Utility Installations. Unless otherwise instructed per Paragraph 7.4(b) hereof, all Lessee Owned Alterations and Utility Installations shall, at the expiration or termination of this Lease, become the property of Lessor and be surrendered by Lessee with the Premises. (b) REMOVAL. By delivery to Lessee of written notice from Lessor not earlier than ninety (90) and not later than thirty (30) days prior the end of the term of this Lease, Lessor may require that any or all Lessee Owned Alterations or Utility Installations be removed by the expiration or termination of this Lease. Lessor may require the removal at any time of all or any part of any Lessee Owned Alterations or Utility Installations made without the required consent. (c) SURRENDER/RESTORATION. Lessee shall surrender the Premises by the Expiration Date or any earlier termination date, with all of the improvements, parts and surfaces thereof broom clean and free of debris, and in good operating order, condition and state of repair, ordinary wear and tear excepted. "Ordinary wear and tear" shall not include any damage or deterioration that would have been prevented by good maintenance practice. Lessee shall repair any damage occasioned by the installation, maintenance or removal of trade Fixtures, Lessee Owned Alterations and/or Utility Installations, furnishings, and equipment as well as the removal of any storage tank installed by or for Lessee, and the removal, replacement, or remediation of any soil, material or groundwater contaminated by Lessee. Trade Fixtures shall remain the property of Lessee and shall be removed by Lessee. The failure by Lessee to timely vacate the Premises pursuant to this Paragraph 7.4(c) without the express written consent of Lessor shall constitute a holdover under the provisions of Paragraph 26 below. 8. INSURANCE INDEMNITY. See Addendum to Lease Item #6 PAGE 4 initials CMS GW --- -- (b) Lessee shall pay Insurance Cost to Lessor within thirty (30) days after receipt by Lessee of a copy of the premium statement or other reasonable evidence of the amount due. If the insurance policies maintained hereunder cover other property besides the Premises, Lessor shall also deliver to Lessee a statement of the amount of such Insurance Cost attributable only to the Premises showing in reasonable detail the manner in which such amount was computed. Premiums for policy periods commencing prior to, or extending) beyond the term of this Lease, shall be prorated to correspond to the term of this Lease. 8.2 LIABILITY INSURANCE. (a) CARRIED BY LESSEE. Lessee shall obtain and keep in force a Commercial General Liability Policy of Insurance protecting Lessee and Lessor against claims for bodily injury, personal injury and property damage based upon or arising out of the ownership, use, occupancy or maintenance of the Premises and all areas appurtenant thereto. Such insurance shall be on an occurrence basis providing single limit coverage in an amount not less than $2,000,000 per occurrence with an "ADDITIONAL INSURED-MANAGERS OR LESSORS OF PREMISES ENDORSEMENT" and contain the "AMENDMENT OF THE POLLUTION EXCLUSION ENDORSEMENT" for damage caused by heat, smoke or fumes from a hostile fire. The Policy shall not contain any intra-insured exclusions as between insured persons or organizations, but shall include coverage for liability assumed under this Lease as an "insured contract" for the performance of Lessee's indemnity obligations under this Lease. The limits of said insurance shall not, however, limit the liability of Lessee nor relieve Lessee of any obligation hereunder. All insurance carried by Lessee shall be primary to and not contributory with any similar insurance carried by Lessor, whose insurance shall be considered excess insurance only. (b) CARRIED BY LESSOR. Lessor shall maintain liability insurance as described in Paragraph 8.2(a), in addition to, and not in lieu of, the insurance required to be maintained by Lessee. Lessee shall not be named as an additional insured therein. 8.3 PROPERTY INSURANCE - BUILDING, IMPROVEMENTS AND RENTAL VALUE. (a) BUILDING AND IMPROVEMENTS. The Lessor, subject to Addendum to Lease Item #6, shall obtain and keep in force a policy or policies in the name of Lessor, with payable to Lessor, any groundlessor, and to any Lender(s) insuring loss or damage to the Premises. The amount of such insurance shall be equal to the full replacement cost of the Premises, as the same shall exist from time to time, or the amount required by any Lenders, but in no event more than the commercially reasonable and available insurable value thereof. If Lessor is the Insuring Party, however, Lessee Owned Alterations and Utility Installations, Trade Fixtures, and Lessee's personal property shall be insured by Lessee under Paragraph 8.4 rather than by Lessor. if the coverage is available and commercially appropriate, such policy or policies shall insure against all risks of direct physical loss or damage (except the perils of flood and/or earthquake unless required by a Lender or included in the Base Premium), including coverage for debris removal and the enforcement of any Applicable Requirements requiring the upgrading, demolition, reconstruction or replacement of any portion of the Premises as the result of a covered loss. Said policy or policies shall also contain an agreed valuation provision in lieu of any coinsurance clause, waiver of subrogation, and inflation guard protection causing an increase in the annual property insurance coverage amount factor of not less than the adjusted U.S. Department of Labor Consumer Price Index for All Urban Consumers for the city nearest to where the Premises are located. (b) RENTAL VALUE. The Insuring Party shall obtain and keep in force a policy or policies in the name of Lessor, with loss payable to Lessor and any Lender, insuring the loss of the full Rent for one (1) year. Said insurance shall provide that in the event the Lease is terminated by reason of an insured loss, the period of indemnity for such coverage shall be extended beyond the date of the completion of repairs or replacement of the Premises, to provide for one full year's loss of Rent from the date of any such loss. Said insurance shall contain an agreed valuation provision in lieu of any coinsurance clause, and the amount of coverage shall be adjusted annually to reflect the projected Rent otherwise payable by Lessee, for the next twelve (12) month period. (c) ADJACENT PREMISES. If the Premises are part of a larger building, or of a group of buildings owned by Lessor which are adjacent to the Premises, the Lessee shall pay for any increase in the premiums for the property insurance of such building or buildings if said increase mused by Lessee's acts, omissions, use or occupancy of the Premises. 8.4 LESSEE'S PROPERTY/BUSINESS INTERRUPTION INSURANCE. (a) PROPERTY DAMAGE. Lessee shall obtain and maintain insurance coverage on all of Lessee's personal property, Trade Fixtures, and Lessee Owned Alterations and Utility Installations. Such insurance shall be full replacement cost coverage with a deductible of not to exceed $1,000 per occurrence. The proceeds from any such insurance shall be used by Lessee for the replacement of personal property, Trade Fixtures and Lessee Owned Alterations and Utility Installations. Lessee shall provide Lessor with written evidence that such insurance is in force. (b) BUSINESS INTERRUPTION. Lessee shall obtain and maintain loss of income and extra expense insurance in amounts as will reimburse Lessee for direct or indirect loss of earnings attributable to all perils commonly insured against by prudent lessees in the business of Lessee or attributable to prevention of access to the Premises as a result of such perils. (c) NO REPRESENTATION OF ADEQUATE COVERAGE. Lessor makes no representation that the limits or forms of coverage of insurance specified herein are adequate to cover Lessee's property, business operations or obligations under this Lease. 8.5 INSURANCE POLICIES. Insurance required herein shall be by companies duly licensed or admitted to transact business in the state where the Premises are located, and maintaining during the policy term a "General Policyholders Rating" of at least B+, V, as set forth in the most current issue of "Best's Insurance Guide", or such other rating as may be required by a Lender. Lessee shall not do or permit to be done anything which invalidates the required insurance policies. Lessee shall, prior to the Start Date, deliver to Lessor certified copies of policies of such insurance or certificates evidencing the existence and amounts of the required insurance. No such policy shall be cancelable or subject to modification except after thirty (30) days prior written notice to Lessor. Lessee shall, at least thirty (30) days prior to the expiration of such policies, furnish Lessor with evidence of renewals or "insurance binders" evidencing renewal thereof, or Lessor may order such insurance and charge the cost thereof to Lessee, which amount shall be payable by Lessee to Lessor upon demand. Such policies shall be for a term of at least one year, or the length of the remaining term of this Lease, whichever is less. If either Party shall fail to procure and maintain the insurance required to be carried by it, the other Party may, but shall not be required to, procure and maintain the same. 8.6 WAIVER OF SUBROGATION. Without affecting any other rights or remedies, Lessee and Lessor each hereby release and relieve the other, and waive their entire right to recover damages against the other, for loss of or damage to its property arising out of or incident to the perils required to be insured against herein. The effect of such releases and waivers is not limited by the amount of insurance carried or required, or by any deductibles applicable hereto. The Parties agree to have their respective property damage insurance carriers waive any right to subrogation that such companies may have against Lessor or Lessee, as the case may be, so long as the insurance is not invalidated thereby. 8.7 INDEMNITY. Except for Lessor's gross negligence or willful misconduct, Lessee shall indemnify, protect, defend and hold harmless the Premises, Lessor and its agents, Lessor's master or ground lessor, partners and Lenders, from and against any and all claims, loss of rents and/or damages, liens, judgments, penalties, attorneys' and consultants' fees, expenses and/or liabilities arising out of, involving, or in connection with, the use and/or occupancy of the Premises by Lessee. If any action or proceeding is brought against Lessor by reason of any of the foregoing matters, Lessee shall upon notice defend the same at Lessee's expense by counsel reasonably satisfactory to Lessor and Lessor shall cooperate with Lessee in such defense. Lessor need not have first paid any such claim in order to be defended or indemnified. 8.8 EXEMPTION OF LESSOR FROM LIABILITY. Lessor shall not be liable for injury or damage to the person or goods, wares, merchandise or other property of Lessee, Lessee's employees, contractors, invitees, customers, or any other person in or about the Premises, whether such damage or injury is caused by or results from fire, steam, electricity, gas, water or rain, or from the breakage, leakage, obstruction or other defects of pipes, fire sprinklers, wires, appliances, plumbing, HVAC or lighting fixtures, or from any other cause, whether the said injury or damage results from conditions arising upon the Premises or upon other portions of the Building of which the Premises are a part, or from other resources or places. Lessor shall not be liable for any damages arising from any act or neglect of any other tenant of Lessor. Notwithstanding Lessor's negligence or breach of this Lease, Lessor shall under no circumstances be liable for injury to Lessee's business or for any loss of income or profit therefrom. PAGE 5 initials CMS GW --- -- 9. DAMAGE OR DESTRUCTION. 9.1 DEFINITIONS. (a) "PREMISES PARTIAL DAMAGE" shall mean damage or destruction to the improvements on the Premises, other than Lessee Owned Alterations, Utility Installations and Trade Fixtures, which can reasonably be repaired in six (6) months or less from the date of the damage or destruction. Lessor shall notify Lessee in writing within thirty (30) days from the date of the damage or destruction as to whether or not the damage is Partial or Total. (b) "PREMISES TOTAL DESTRUCTION" shall mean damage or destruction to the Premises, other than Lessee Owned Alterations and Utility Installations and Trade Fixtures, which cannot reasonably be repaired in six (6) months or less from the date of the damage or destruction. Lessor shall notify Lessee in writing within thirty (30) days from the date of the damage or destruction as to whether or not the damage is Partial or Total. (c) "INSURED LOSS" shall mean damage or destruction to improvements on the Premises, other than Lessee Owned Alterations and Utility Installations and Trade Fixtures, which was caused by an event required to be covered by the insurance described in Paragraph 8.3(a), irrespective of any deductible amounts or coverage limits involved. (d) "REPLACEMENT COST" shall mean the cost to repair or rebuild the improvements owned by Lessor at the time of the occurrence to their condition existing immediately prior thereto, including demolition, debris removal and upgrading required by the operation of Applicable Requirements, and without deduction for depreciation. (e) "HAZARDOUS SUBSTANCE CONDITION" shall mean the occurrence or discovery of a condition involving the presence of, or a contamination by, a Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the Premises. 9.2 PARTIAL DAMAGE - INSURED LOSS. If a Premises Partial Damage that is an Insured Loss occurs, then Lessor shall, at Lessor's expense, repair such damage (but not Lessee's Trade Fixtures or Lessee Owned Alterations and Utility Installations) as soon as reasonably possible and this Lease shall continue in full force and effect; provided, however, that Lessee shall, at Lessor's election, make the repair of any damage or destruction the total cost to repair of which is $10,000 or less, and, in such event, Lessor shall make any applicable insurance proceeds available to Lessee on a reasonable basis for that purpose. Notwithstanding the foregoing, if the required insurance was not in force or the insurance proceeds are not sufficient to effect such repair, the Insuring Party shall promptly contribute the shortage in proceeds as and when required to complete said repairs. In the event, however, such shortage was due to the fact that, by reason of the unique nature of the improvements, full replacement cost insurance coverage was not commercially reasonable and available, Lessor shall have no obligation to pay for the shortage in insurance proceeds or to fully restore the unique aspects of the Premises unless Lessee provides Lessor with the funds to cover same, or adequate assurance thereof, within ten (10) days following receipt of written notice of such shortage and request therefor. If Lessor receives said funds or adequate assurance thereof within said ten (10) day period, the party responsible for making the repairs shall complete them as soon as reasonably possible and this Lease shall remain in full force and effect. If such funds or assurance are not received, Lessor may nevertheless elect by written notice to Lessee within ten (10) days thereafter to: (i) make such restoration and repair as is commercially reasonable with Lessor paying any shortage in proceeds, in which case this Lease shall remain in full force and effect; or (ii) have this Lease terminate thirty (30) days thereafter. Lessee shall not be entitled to reimbursement of any funds contributed by Lessee to repair any such damage or destruction. Premises Partial Damage due to flood or earthquake shall be subject to Paragraph 9.3, notwithstanding that there may be some insurance coverage, but the net proceeds of any such insurance shall be made available for the repairs if made by either Party. 9.3 PARTIAL DAMAGE - UNINSURED LOSS. If a Premises Partial Damage that is not an Insured Loss occurs, unless caused by a negligent or willful act of Lessee (in which event Lessee shall make the repairs at Lessee's expense), Lessor may either: (i) repair such damage as soon as reasonably possible at Lessor's expense, in which event this Lease shall continue in full force and effect, or (ii) terminate this Lease by giving written notice to Lessee within thirty (30) days after receipt by Lessor of knowledge of the occurrence of such damage. Such termination shall be effective sixty (60) days following the date of such notice. In the event Lessor elects to terminate this Lease, Lessee shall have the right within ten (10) days after receipt of the termination notice to give written notice to Lessor of Lessee's commitment to pay for the repair of such damage without reimbursement from Lessor. Lessee shall provide Lessor with said funds or satisfactory assurance thereof within thirty (30) days after making such commitment. In such event this Lease shall continue in full force and effect, and Lessor shall proceed to make such repairs as soon as reasonably possible after the required funds are available. If Lessee does not make the required commitment, this Lease shall terminate as of the date specified in the termination notice. 9.4 TOTAL DESTRUCTION. Notwithstanding any other provision hereof, if a Premises Total Destruction occurs, this Lease shall terminate sixty (60) days following such Destruction. If the damage or destruction was caused by the gross negligence or willful misconduct of Lessee, Lessor shall have the right to recover Lessor's damages from Lessee, except as provided in Paragraph 8.6. 9.5 DAMAGE NEAR END OF TERM. If at any time during the last six (6) months of this Lease there is damage for which the cost to repair exceeds one (1) month's Base Rent, whether or not an Insured Loss, Lessor may terminate this Lease effective sixty (60) days following the date of occurrence of such damage by giving a written termination notice to Lessee within thirty (30) days after the date of occurrence of such damage. Notwithstanding the foregoing, if Lessee at that time has an exercisable option to extend this Lease or to purchase the Premises, then Lessee may preserve this Lease by, (a) exercising such option and (b) providing Lessor with any shortage in insurance proceeds (or adequate assurance thereof) needed to make the repairs on or before the earlier of (i) the date which is ten days after Lessee's receipt of Lessor's written notice purporting to terminate this Lease, or (ii) the day prior to the date upon which such option expires. If Lessee duly exercises such option during such period and provides Lessor with funds (or adequate assurance thereof) to cover any shortage in insurance proceeds, Lessor shall, at Lessor's commercially reasonable expense, repair such damage as soon as reasonably possible and this Lease shall continue in full force and effect. If Lessee fails to exercise such option and provide such funds or assurance during such period, then this Lease shall terminate on the date specified in the termination notice and Lessee's option shall be extinguished. 9.6 ABATEMENT OF RENT; LESSEE'S REMEDIES. (a) ABATEMENT. In the event of Premises Partial Damage or Premises Total Destruction or a Hazardous Substance Condition for which Lessee is not responsible under this Lease, the Rent payable by Lessee for the period required for the repair, remediation or restoration of such damage shall be abated in proportion to the degree to which Lessee's use of the Premises is impaired, but not to exceed the proceeds received from the Rental Value insurance. All other obligations of Lessee hereunder shall be performed by Lessee, and Lessor shall have no liability for any such damage, destruction, remediation, repair or restoration except as provided herein. (b) REMEDIES. If Lessor shall be obligated to repair or restore the Premises and does not commence, in a substantial and meaningful way, such repair or restoration within ninety (90) days after such obligation shall accrue, Lessee may, at any time prior to the commencement of such repair or restoration, give written notice to Lessor and to any Lenders of which Lessee has actual notice, of Lessee's election to terminate this Lease on a date not less than sixty (60) days following the giving of such notice. If Lessee gives such notice and such repair or restoration is not commenced within thirty (30) days thereafter, this Lease shall terminate as of the date specified in said notice. If the repair or restoration is commenced within said thirty (30) days, this Lease shall continue in full force and effect. "COMMENCE" shall mean either the unconditional authorization of the preparation of the required plans, or the beginning of the actual work on the Premises, whichever first occurs. 9.7 TERMINATION-ADVANCE PAYMENTS. Upon termination of this Lease pursuant to Paragraph 6.2(g) or Paragraph 9, an equitable adjustment shall be made concerning advance Base Rent and any other advance payments made by Lessee to Lessor. Lessor shall, in addition, return to Lessee so much of Lessee's Security Deposit as has not been, or is not then required to be, used by Lessor. 9.8 WAIVE STATUTES. Lessor and Lessee agree that the terms of this Lease shall govern the effect of any damage to or destruction of the Premises with respect to the termination of this Lease and hereby waive the provisions of any present or future statute to the extent inconsistent herewith. 10. REAL PROPERTY TAXES. 10.1 DEFINITION OF "REAL PROPERTY TAXES." As used herein, the term "REAL PROPERTY TAXES" shall include any form of assessment; real estate, general, special, ordinary or extraordinary, or rental levy or tax (other than inheritance, personal income or estate taxes); improvement PAGE 6 initials CMS GW --- -- bond; and/or license fee imposed upon or levied against any legal or equitable interest of Lessor in the Premises, Lessor's right to other income therefrom, and/or Lessor's business of leasing, by any authority having the direct or indirect power to tax and where the funds are generated with reference to the Building address and where the proceeds so generated are to be applied by the city, county or other local taxing authority of a jurisdiction within which the Premises are located. The term "REAL PROPERTY TAXES" shall also include any tax, fee, levy, assessment or charge, or any increase therein, imposed by reason of events occurring during the term of this Lease, including but not limited to, a change in the ownership of the Premises. 10.2 (a) PAYMENT OF TAXES. Lessor shall pay the Real Property Taxes applicable to the Premises provided, however, that Lessee shall to Lessor the Real Property Taxes applicable to the Premises for the fiscal tax year during which the Commencement Date occurs and each year thereafter. Subject to Paragraph 10.2(b), payment of any such Tax shall be made by Lessee to Lessor within thirty (30) days after receipt of Lessor's written statement setting forth the amount due. If any such taxes shall cover any period of time prior to or after the expiration or termination of this Lease, Lessee's share of such taxes shall be prorated to cover only that portion of the tax bill applicable to the period that this Lease is in effect. See Addendum to Lease Item #9 (b) ADVANCE PAYMENT. In the event Lessee incurs a late charge on any Rent payment, Lessor may, at Lessor's option, estimate the current Real Property Taxes, and require that the Tax be paid in advance to Lessor by Lessee, either: (i) in a lump sum amount equal to the amount due, at least twenty (20) days prior to the applicable delinquency date; or (ii) monthly in advance with the payment of the Base Rent. if Lessor elects to require payment monthly in advance, the monthly payment shall be an amount equal to the amount of their estimated installment of the Tax divided by the number of months remaining before the month in which said installment becomes delinquent. When the actual amount of the applicable Tax is known, the amount of such equal monthly advance payments shall be adjusted as required to provide the funds needed to pay the applicable Tax. If the amount collected by Lessor is insufficient to pay the Tax when due, Lessee shall pay Lessor, upon demand, such additional sums as are necessary to pay such obligations. All moneys paid to Lessor under this Paragraph may be intermingled with other moneys of Lessor and shall not bear interest, in the event of a Breach by Lessee in the performance of its obligations under this Lease, then any balance of funds paid to Lessor under the provisions of this Paragraph may at the option of Lessor be treated as an additional Security Deposit. For tax purposes Lessee's pro-rata share of the Building/Premises is 100%. (c) ADDITIONAL IMPROVEMENTS. Notwithstanding anything to the contrary in this Paragraph 10.2, Lessee shall pay to Lessor upon demand therefor the entirety of any increase in Real Property Taxes assessed by reason of Alterations or Utility Installations placed upon the Premises by Lessee or at Lessee's request. 10.3 JOINT ASSESSMENT. If the Premises are not separately assessed, Lessee's liability shall be an equitable proportion of the Tax Increase for all of the land and improvements included within the tax parcel assessed, such proportion to be conclusively determined by Lessor from the respective valuations assigned in the assessor's work sheets or such other information as may be reasonably available. 10.4 PERSONAL PROPERTY TAXES. Lessee shall pay, prior to delinquency, all taxes assessed against and levied upon Lessee Owned Alterations, Utility Installations, Trade Fixtures, furnishings, equipment and all personal property of Lessee. When possible, Lessee shall cause such property to be assessed and billed separately from the real property of Lessor. If any of Lessee's said personal property shall be assessed with Lessor's real property, Lessee shall pay Lessor the taxes attributable to Lessee's property within ten (10) days after receipt of a written 11. UTILITIES. Lessee shall pay for all water, gas, heat, light, power, telephone, trash disposal and other utilities and services supplied to the Premises, together with any taxes thereon, if any such services are not separately metered to Lessee, Lessee shall pay a reasonable proportion, to be determined by Lessor, of all charges jointly metered. 12. ASSIGNMENT AND SUBLETTING. 12.1 LESSOR'S CONSENT REQUIRED. (a) Lessee shall not voluntarily or by operation of law assign, transfer, mortgage or encumber (collectively, "ASSIGN OR ASSIGNMENT") or sublet all or any part of Lessee's interest in this Lease or in the Premises without Lessor's prior written consent. (b) A change in the control of Lessee shall constitute an assignment requiring consent. The transfer, on a cumulative basis, of twenty-five percent (25%) or more of the voting control of Lessee shall constitute a change in control for this purpose. (c) The involvement of Lessee or its assets in any transaction, or series of transactions (by way of merger, sale, acquisition, financing, transfer, leveraged buy-out or otherwise), whether or not a formal assignment or hypothecation of this Lease or Lessee's assets occurs, which results or will result in a reduction of the Net Worth of Lessee by an amount greater than twenty-five percent (25%) of such Net Worth as it was represented at the time of the execution of this Lease or at the time of the most recent assignment to which Lessor has consented, or as it exists immediately prior to said transaction or transactions constituting such reduction, whichever was or is greater, shall be considered an assignment of this Lease to which Lessor may withhold its consent. "NET WORTH OF LESSEE" shall mean the net worth of Lessee excluding any guarantors) established under generally accepted accounting principles. (d) An assignment or subletting without consent shall, at Lessor's option, be a Default curable after notice per Paragraph 13.1(c), or a noncurable Breach without the necessity of any notice and grace period. If Lessor elects to treat such unapproved assignment or subletting as a noncurable Breach, Lessor may either: (i) terminate this Lease, or (ii) upon thirty (30) days written notice, increase the monthly Base Rent to one hundred ten percent (110%) of the Base Rent then in effect. Further, in the event of such Breach and rental adjustment, (i) the purchase price of any option to purchase the Premises held by Lessee shall be subject to similar adjustment to one hundred ten percent (110%) of the price previously in effect, and (ii) all fixed and non-fixed rental adjustments scheduled during the remainder of the Lease term shall be increased to One Hundred Ten Percent (110%) of the scheduled adjusted rent. (e) Lessee's remedy for any breach of Paragraph 12.1 by Lessor shall be limited to compensatory damages and/or injunctive relief. 12.2 TERMS AND CONDITIONS APPLICABLE TO ASSIGNMENT AND SUBLETTING. (a) Regardless of Lessor's consent, any assignment or subletting shall not: (i) be effective without the express written assumption by such assignee or sublessee of the obligations of Lessee under this Lease; (ii) release Lessee of any obligations hereunder; or (iii) alter the primary liability of Lessee for the payment of Rent or for the performance of any other obligations to be performed by Lessee. (b) Lessor may accept Rent or performance of Lessee's obligations from any person Other than Lessee pending approval or disapproval of an assignment. Neither a delay in the approval or disapproval of such assignment nor the acceptance of Rent or performance shall constitute a waiver or estoppel of Lessor's right to exercise its remedies for Lessee's Default or Breach. (c) Lessor's consent to any assignment or subletting shall not constitute a consent to any subsequent assignment or subletting. (d) In the event of any Default or Breach by Lessee, Lessor may proceed directly against Lessee, any Guarantors or anyone else responsible for the performance of Lessee's obligations under this Lease, including any assignee or sublessee, without first exhausting Lessor's remedies against any other person or entity responsible therefore to Lessor, or any security held by Lessor. (e) Each request for consent to an assignment or subletting shall be in writing, accompanied by information relevant to Lessor's determination as to the financial and operational responsibility and appropriateness of the proposed assignee or sublessee, including but not limited to the intended use and/or required modification of the Premises, if any, together with a fee of $1,000 or ten percent (10%) of the current monthly Base Rent applicable to the portion of the Premises which is the subject of the proposed assignment or sublease, whichever is greater, as consideration for Lessor's considering and processing said request. Lessee agrees to provide Lessor with such other or additional information and/or documentation as may be reasonably requested. (f) Any assignee of, or sublessee under, this Lease shall, by reason of accepting such assignment or entering into such sublease, be deemed to have assumed and agreed to conform and comply with each and every term, covenant, condition and obligation herein to be observed or performed by Lessee during the term of said assignment or sublease, other than such obligations as are contrary to or inconsistent with provisions of an assignment or sublease to which Lessor has specifically consented to in writing. 12.3 ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO SUBLETTING. The following terms and conditions shall apply to any subletting by Lessee of all or any part of the Premises and shall be deemed included in all subleases under this Lease whether or not expressly incorporated therein: PAGE 7 initials CMS GW --- -- (a) Lessee hereby assigns and transfers to Lessor all of Lessee's interest in all Rent payable on any sublease, and Lessor may collect such Rent and apply same toward Lessee's obligations under this Lease; provided, however, that until a Breach shall occur in the performance of Lessee's obligations, Lessee may collect said Rent. Lessor shall not, by reason of the foregoing or any assignment of such lease, nor by reason of the collection of Rent, be deemed liable to the sublessee for any failure of Lessee to perform and comply with any of Lessee's obligations to such sublessee. Lessee hereby irrevocably authorizes and directs any such sublessee, upon receipt of a written notice from Lessor stating that a Breach exists in the performance of Lessee's obligations under this Lease, to pay to Lessor all Rent due and to become due under the sublease. Sublessee shall rely upon any such notice from Lessor and shall pay all Rents to Lessor without any obligation or right to inquire as to whether such Breach exists, notwithstanding any claim from Lessee to the contrary. (b) In the event of a Breach by Lessee, Lessor may, at its option, require sublessee to attorn to Lessor, in which event Lessor shall undertake the obligations of the sublessor under such sublease from the time of the exercise of said option to the expiration of such sublease; provided, however, Lessor shall not be liable for any prepaid rents or security deposit paid by such sublessee to such sublessor or for any prior faults or Breaches of such sublessor. (c) Any matter requiring the consent of the sublessor under a sublease shall also require the consent of Lessor. (d) No sublessee shall further assign or sublet all or any part of the Premises without Lessors prior written consent. (e) Lessor shall deliver a copy of any notice of Default or Breach by Lessee to the sublessee, who shall have the right to cure the fault of Lessee within the grace period, if any, specified in such notice. The sublessee shall have a right of reimbursement and offset from and against Lessee for any such Defaults cured by the sublessee. 13. DEFAULT; BREACH; REMEDIES. 13.1 DEFAULT; BREACH. A "DEFAULT" is defined as a failure by the Lessee to comply with or perform any of the terms, covenants, conditions or rules under this Lease. A "BREACH" is defined as the occurrence of one. or more of the following Defaults, and the failure of Lessee cure such Default within any applicable grace period: (a) The abandonment of the Premises; or the vacating of the Premises without providing a commercially reasonable level of security, and/or Security Deposit or where the coverage of the property insurance described in Paragraph 8.3 is jeopardized as a result thereof, or without providing reasonable assurances to minimize potential vandalism. (b) The failure of Lessee to make any payment of Rent or any Security Deposit required to be made by Lessee hereunder, whether Lessor or to a third party, when due, to provide reasonable evidence of insurance or surety bond, or to fulfill any obligation under this Lease which endangers or threatens life or property, where such failure continues for a period of three (3) business days following written notice to Lessee. (c) The failure by Lessee to provide (i) reasonable written evidence of compliance with Applicable Requirements, (ii) the service , contracts, (iii) the rescission of an unauthorized assignment or subletting, (iv) a Estoppel Certificate, (v) a requested subordination, (vi) evidence concerning any guaranty and/or Guarantor, (vii) any document requested under Paragraph 42 (easements), or (viii) any other documentation or information which Lessor may reasonably require of Lessee under the terms of this Lease, where any such failure continues for a period of ten (10) days following written notice to Lessee. (d) A Default by Lessee as to the terms, covenants, conditions or provisions of this Lease, or of the rules adopted under Paragraph 40 hereof, other than those described in subparagraphs 13.1(a), (b) or (c), above, where such Default continues for a period of thirty 30) days after written notice; provided, however, that if the nature of Lessee's Default is such that more than thirty (30) days are reasonably required for its cure, then it shall not be deemed to be a Breach if Lessee commences such cure within said thirty (30) day period and thereafter diligently prosecutes such cure to completion. (e) The occurrence of any of the following events: (i) the making of any general arrangement or assignment for the benefit of creditors; (ii) becoming a "DEBTOR" as defined in 11 U.S.C. (S) 101 or any successor statute thereto (unless, in the case of a petition filed against Lessee, the same is dismissed within sixty (60) days) (iii) the appointment of a trustee or receiver to take possession of substantially all of Lessee's assets located at the Premises or of Lessee's interest in this Lease, where possession is not restored to Lessee within thirty (30) days; or (iv) the attachment, execution or other judicial seizure of substantially all of Lessee's assets located at the Premises or of Lessee's interest in this Lease, where such seizure is not discharged within thirty (30) days; provided, however, in the event that any provision of this subparagraph (e) is contrary to any applicable law, such provision shall be of no force or effect, and not affect the validity of the remaining provisions. (f) The discovery that any financial statement of Lessee or of any Guarantor given to Lessor was materially false. (g) If the performance of Lessee's obligations under this Lease is guaranteed: (i) the death of a Guarantor; (ii) the termination of a guarantor's liability with respect to this Lease other than in accordance with the terms of such guaranty; (iii) a Guarantor's becoming insolvent or the subject of a bankruptcy filing; (iv) a Guarantor's refusal to honor the guaranty; or (v) a Guarantor's breach of its guaranty obligation on an anticipatory basis, and Lessee's failure, within sixty (60) days following written notice of any such event, to provide written alternative assurance or security, which, when coupled with the then existing resources of Lessee, equals or exceeds the combined financial resources of Lessee and the Guarantors that existed at the time of execution of this Lease. 13.2 REMEDIES. If Lessee fails to perform any of its affirmative duties or obligations, within ten (10) days after written notice (or in case of an emergency, without notice), Lessor may, at its option, perform such duty or obligation on Lessee's behalf, including but not limited to the obtaining of reasonably required bonds, insurance policies, or governmental licenses, permits or approvals. The costs and expenses of any such performance by Lessor shall be due and payable by Lessee upon receipt of invoice therefor. If any check given to Lessor by Lessee shall not be honored by the bank upon which it is drawn, Lessor, at its option, may require all future payments to be made by Lessee to be by cashier's check. In the event of a Breach, Lessor may, with or without further notice or demand, and without limiting Lessor in the exercise of any right or remedy which Lessor may have by reason of such Breach: (a) Terminate Lessee's right to possession of the Premises by any lawful means, in which case this Lease shall terminate and Lessee shall immediately surrender possession to Lessor. In such event Lessor shall be entitled to recover from Lessee: (i) the unpaid Rent which had been earned at the time of termination; (ii) the worth at the time of award of the amount by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that the Lessee proves could have been reasonably avoided; (iii) the worth at the time of award of the amount by which the unpaid rent for the balance of the term after the time of award exceeds he amount of such rental loss that the Lessee proves could be reasonably avoided; and (iv) any other amount necessary to compensate Lessor for all the detriment proximately caused by the Lessee's failure to perform its obligations under this Lease or which in the ordinary course of things would be likely to result therefrom, including but not limited to the cost of recovering possession of the Premises, expenses of reletting, including necessary renovation and alteration of the Premises, reasonable attorneys' fees, and that portion of any leasing commission paid by Lessor in connection with this Lease applicable to the unexpired term of this Lease. The worth at the time of award of the amount referred to in provision (iii) of the immediately preceding sentence shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of the District within which the Premises are located at the time of award plus one percent (1%). Efforts by Lessor to mitigate damages caused by Lessee's Breach of this Lease :shall not waive Lessor's right to recover damages under Paragraph 12. If termination of this Lease is obtained through the provisional remedy of unlawful detainer, Lessor shall have the right to recover in such proceeding any unpaid Rent and damages as are recoverable therein, or Lessor may reserve the right to recover all or any part thereof in a separate suit. If a notice and grace period required under Paragraph 13.1 was not previously given, a notice to pay rent or quit, or to perform or quit given to Lessee under the unlawful detainer statute shall also constitute the notice required by Paragraph 13.1. In such case, the applicable grace period required by Paragraph 13.1 and the unlawful detainer statute shall run concurrently, and the failure of Lessee to cure the Default within the greater of the two such grace periods shall constitute both an unlawful detainer and a Breach of this Lease entitling Lessor to the remedies provided for in this Lease and/or by said statute. (b) Continue this Lease and Lessee's right to possession and recover the Rent as it becomes due, in which event Lessee may sublet PAGE 8 initials CMS GW --- -- or assign, subject only to reasonable limitations. Acts of maintenance, efforts to relet, and/or the appointment of a receiver to protect the Lessor's interests, shall not constitute a termination of the Lessee's right to possession. (c) Pursue any other remedy now or hereafter available under the laws or judicial decisions of the state wherein the Premises are located. The expiration or termination of this Lease and/or the termination of Lessee's right to possession shall not relieve Lessee from liability under any indemnity provisions of this Lease as to matters occurring or accruing during the term hereof or by reason of Lessee's occupancy of the Premises. 13.3 INDUCEMENT RECAPTURE. Any agreement for free or abated rent or other charges, or for the giving or paying by Lessor to or for Lessee of any cash or other bonus, inducement or consideration for Lessee's entering into this Lease, all of which concessions are hereinafter referred to as "INDUCEMENT PROVISIONS," shall be deemed conditioned upon Lessee's full and faithful performance of all of the terms, covenants and conditions of this Lease. Upon Breach of this Lease by Lessee, any such Inducement Provision shall automatically be deemed deleted from this Lease and of no further force or effect, and any rent, other charge, bonus, inducement or consideration theretofore abated, given or paid by Lessor including but not limited to real estate commissions paid by Lessor for this lease, under such an Inducement Provision shall be immediately due and payable by Lessee to Lessor, notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by Lessor of rent or the cure of the Breach which initiated the operation of this paragraph shall not be deemed a waiver by Lessor of the provisions of this paragraph unless specifically so stated in writing by Lessor at the time of such acceptance. 13.4 LATE CHARGES. Lessee hereby acknowledges that late payment by Lessee of Rent will cause Lessor to incur costs not contemplated by this Lease, the exact amount of which will be extremely difficult to ascertain. Such costs include, but are not limited to, processing and accounting charges, and late charges which may be imposed upon Lessor by any Lender. Accordingly, if any Rent shall not be received by Lessor within days after such amount shall be due, then, without any requirement for notice to Lessee, Lessee shall pay to Lessor a one-time late charge equal to ten percent (10%) of each such overdue amount. The parties hereby agree that such late charge represents a fair and reasonable estimate of the costs Lessor will incur by reason of such late payment. Acceptance of such late charge by or by Lessor shall in no event constitute a waiver of Lessee's Default or Breach with respect to such overdue amount, nor prevent the exercise of any of the other rights and remedies granted hereunder. In the event that a late charge is payable hereunder, whether or not collected, for three (3) consecutive installments of Base Rent, then notwithstanding any provision of this Lease to the contrary, Base Rent shall, at Lessor's option, become due and payable quarterly in advance. 13.5 INTEREST. Any monetary payment due Lessor hereunder, other than late charges, not received by Lessor, when due as to scheduled payments (such as Base Rent) or within thirty (30) days following the date on which it was due for non- scheduled payment, shall bear interest from the date when due, as to scheduled payments, or the thirty-first (31st) day after it was due as to non-scheduled payments. The interest ("INTEREST") charged shall be equal to the prime rate reported in the Wall Street Journal as published closest prior to the date when due plus 4%, but shall not exceed the maximum rate allowed by law. Interest is payable in addition to the potential late charge provided for in Paragraph 13.4. 13.6 BREACH BY LESSOR. (a) NOTICE OF BREACH. Lessor shall not be deemed in breach of this Lease unless Lessor fails within a reasonable time to perform an obligation required to be performed by Lessor. For purposes of this Paragraph, a reasonable time shall in no event be less than thirty (30) days after receipt by Lessor, and any Lender whose name and address shall have been furnished Lessee in writing for such purpose, of written notice specifying wherein such obligation of Lessor has not been performed; provided, however, that if the nature of Lessor's obligation is such that more than thirty (30) days are reasonably required for its performance, then Lessor shall not be in breach if performance is commenced within such thirty (30) day period and thereafter diligently pursued to completion. (b) PERFORMANCE BY LESSEE ON BEHALF OF LESSOR. In the event that neither Lessor nor Lender cures said breach within thirty (30) days after receipt of said written notice, or if having commenced said cure they do not diligently pursue it to completion, then Lessee may elect to cure said breach at Lessee's expense and offset from Rent an amount equal to the greater of one month's Base Rent or the Security Deposit, and to pay an excess of such expense under protest, reserving Lessee's right to reimbursement from Lessor. Lessee shall document the cost of said cure and supply said documentation to Lessor. 14. CONDEMNATION. If the Premises or any portion thereof are taken under the power of eminent domain or sold under the threat of the exercise of said power (collectively "CONDEMNATION"), this Lease shall terminate as to the part taken as of the date the condemning authority takes title or possession, whichever first occurs. If more than ten percent (10%) of any building portion of the premises, or more than twenty-five percent (25%) of the land area portion of the premises not occupied by any building, is taken by Condemnation, Lessee may, at Lessee's option, to be exercised in writing within ten (10) days after Lessor shall have given Lessee written notice of such taking (or in the absence of such notice, within ten (10) days after the condemning authority shall have taken possession) terminate this Lease as of the date the condemning authority takes such possession. If Lessee does not terminate this Lease in accordance with the foregoing, this Lease shall remain in full force and effect as to the portion of the Premises remaining, except that the Base Rent shall be reduced in proportion to the reduction in utility of the Premises caused by such Condemnation. Condemnation awards and/or payments shall be the property of Lessor, whether such award shall be made as compensation for diminution in value of the leasehold, the value of the part taken, or for severance damages; provided, however, that Lessee shall be entitled to any compensation for Lessee's relocation expenses, loss of business goodwill and/or Trade Fixtures, without regard to whether or not this Lease is terminated pursuant to the provisions of this Paragraph. All Alterations and Utility Installations made to the Premises by Lessee, for purposes of Condemnation only, shall be considered the property of the Lessee and Lessee shall be entitled to any and all compensation which is payable therefor. In the event that this Lease is not terminated by reason of the Condemnation, Lessor shall repair any damage to the Premises caused by such Condemnation. 15. BROKERS' FEE. 15.2 ASSUMPTION OF OBLIGATIONS. Any buyer or transferee of Lessor's interest in this Lease shall be deemed to have assumed Lessor's obligation hereunder. Each Broker shall be a third party beneficiary of the provisions of Paragraphs 1.10, 15, 22 and 31. If Lessor fails to pay to a Broker any amounts due as and for commissions pertaining to this Lease when due, then such amounts shall accrue Interest. In addition, if Lessor fails to pay any amounts to Lessee's Broker when due, Lessee's Broker may send written notice to Lessor and Lessee of such failure and if Lessor fails to pay such amounts within ten (10) days after said notice, Lessee shall pay said monies to its Broker and offset such amounts against Rent. In addition, Lessee's Broker shall be deemed to be a third party beneficiary of any commission agreement entered into by and/or between Lessor and Lessor's Broker. 15.3 REPRESENTATIONS AND INDEMNITIES OF BROKER RELATIONSHIPS. Lessee and Lessor each represent and warrant to the other that it has had no dealings with any person, firm, broker or finder (other than the Brokers, if any) in connection with this Lease, and that no one other an said named Brokers is entitled to any commission or finder's fee in connection herewith. Lessee and Lessor do each hereby agree to demnify, protect, defend and hold the other harmless from and against liability for compensation or charges which may be claimed by any such named broker, finder or other similar party by reason of any dealings or actions of the indemnifying Party, including any costs, expenses, attorneys' fees reasonably incurred with respect thereto. 16. ESTOPPEL CERTIFICATES. (a) Each Party (as "RESPONDING PARTY") shall within ten (10) days after written notice from the other Party (the "REQUESTING PARTY") execute, acknowledge and deliver to the Requesting Party a statement in writing in form similar to the then most current "ESTOPPEL CERTIFICATE" form published by the American Industrial Real Estate Association, plus such additional information, confirmation and/or statements may be reasonably requested by the Requesting Party. (b) If the Responding Party shall fail to execute or deliver the Estoppel Certificate within such ten day period, the Requesting Party Initials CMS GW --- -- Page 9 may execute an Estoppel Certificate stating that: (i) the Lease is in full force and effect without modification except as may be represented by the Requesting Party; (ii) there are no uncured defaults in the Requesting Party's performance; and (iii) if Lessor is the Requesting Party, not more than one month's rent has been paid in advance. Prospective purchasers and encumbrancers may rely upon the Requesting Party's Estoppel Certificate, and the Responding Party shall be estopped from denying the truth of the facts contained in said Certificate. (c) if Lessor desires to finance, refinance, or sell the Premises, or any part thereof, Lessee and all Guarantors shall deliver to any potential lender or purchaser designated by Lessor such financial statements as may be reasonably required by such lender or purchaser, ding but not limited to Lessee's financial statements for the past three (3) years. All such financial statements shall be received by Lessor such lender or purchaser in confidence and shall be used only for the purposes herein set forth. 17. DEFINITION OF LESSOR. The term "LESSOR" as used herein shall mean the owner or owners at the time in question of the fee title to the Premises, or, if this is a sublease, of the Lessee's interest in the prior lease, in the event of a transfer of Lessor's title or interest in the Premises or this Lease, Lessor shall deliver to the transferee or assignee (in cash or by credit) any unused Security Deposit held by Lessor. Except as provided in Paragraph 15, upon such transfer or assignment and delivery of the Security Deposit, as aforesaid, the prior Lessor shall be relieved of all liability with respect to the obligations and/or covenants under this Lease thereafter to be performed by the Lessor. Subject to the foregoing, obligations and/or covenants in this Lease to be performed by the Lessor shall be binding only upon the Lessor as hereinabove defined. Notwithstanding the above, and subject to the provisions of Paragraph 20 below, the original Lessor under this Lease, and all subsequent holders of the Lessor's interest in this Lease shall remain liable and responsible with regard to the potential duties and liabilities of Lessor pertaining to Hazardous Substances as outlined in Paragraph 6 above. 18. SEVERABILITY. The invalidity of any provision of this Lease, as determined by a court of competent jurisdiction, shall in no way affect the validity of any other provision hereof. 19. DAYS. Unless otherwise specifically indicated to the contrary, the word "days" as used in this Lease shall mean and refer to calendar days. 20. LIMITATION ON LIABILITY. Subject to the provisions of Paragraph 17 above, the obligations of Lessor under this Lease shall not constitute personal obligations of Lessor, the individual partners of Lessor or its or their individual partners, directors, officers or shareholders, and Lessee shall look to the Premises, and to no other assets of Lessor, for the satisfaction of any liability of Lessor with respect to this Lease, and shall not seek recourse against the individual partners of Lessor, or its or their individual partners, directors, officers or shareholders, or any of their personal assets for such satisfaction. 21. TIME OF ESSENCE. Time is of the essence with respect to the performance of all obligations to be performed or observed by the Parties under this Lease. 22. NO PRIOR OR OTHER AGREEMENTS; BROKER DISCLAIMER. This Lease contains all agreements between the Parties with respect to any matter mentioned herein, and no other prior or contemporaneous agreement or understanding shall be effective. Lessor and Lessee each represents and warrants to the Brokers that it has made, and is relying solely upon, its own investigation as to the nature, quality, character and financial responsibility of the other Party to this Lease and as to the nature, quality and character of the Premises. Brokers have no responsibility with respect thereto or with respect to any default or breach hereof by either Party. The liability (including court costs and Attorneys' fees), of any Broker with respect to negotiation, execution, delivery or performance by either Lessor or Lessee under this Lease or any amendment or modification hereto shall be limited to an amount up to the fee received by such Broker pursuant to this Lease; provided, however, that the foregoing limitation on each Broker's liability shall not be applicable to any gross negligence or willful misconduct of such Broker. 23. NOTICES. 23.1 NOTICE REQUIREMENTS. All notices required or permitted by this Lease shall be in writing and may be delivered in person (by hand or by courier) or may be sent by regular, certified or registered mail or U.S. Postal Service Express Mail, with postage prepaid, or by facsimile transmission, and shall be deemed sufficiently given if served in a manner specified in this Paragraph 23. The addresses noted adjacent to a Party's signature on this Lease shall be that Party's address for delivery or mailing of notices. Either Party may by written notice to the other specify a different address for notice, except that upon Lessee's taking possession of the Premises, the Premises shall constitute Lessee's address for notice. A copy of all notices to Lessor shall be concurrently transmitted to such party or parties at such addresses as Lessor may time to time hereafter designate in writing. 23.2 DATE OF NOTICE. Any notice sent by registered or certified mail, return receipt requested, shall be deemed given on the date of livery shown on the receipt card, or if no delivery date is shown, the postmark thereon. If sent by regular mail the notice shall be deemed en forty-eight (48) hours after the same is addressed as required herein and mailed with postage prepaid. Notices delivered by United States press Mail or overnight courier that guarantee next day delivery shall be deemed given twenty-four (24) hours after delivery of the same to the Postal Service or courier. Notices transmitted by facsimile transmission or similar means shall be deemed delivered upon telephone confirmation of receipt, provided a copy is also delivered via delivery or mail. If notice is received on a Saturday, Sunday or legal holiday, it shall be deemed received on the next business day. 24. WAIVERS. No waiver by Lessor of the Default or Breach of any term, covenant or condition hereof by Lessee, shall be deemed a waiver any other term, covenant or condition hereof, or of any subsequent Default or Breach by Lessee of the same or of any other term, covenant condition hereof. Lessor's consent to, or approval of, any act shall not be deemed to render unnecessary the obtaining of Lessor's consent or approval of, any subsequent or similar act by Lessee, or be construed as the basis of an estoppel to enforce the provision or provisions of is Lease requiring such consent. The acceptance of Rent by Lessor shall not be a waiver of any Default or Breach by Lessee. Any payment by Lessee may be accepted by Lessor on account of moneys or damages due Lessor, notwithstanding any qualifying statements or conditions made by Lessee in connection therewith, which such statements and/or conditions shall be of no force or effect whatsoever unless specifically freed to in writing by Lessor at or before the time of deposit of such payment. 25. RECORDING. Either Lessor or Lessee shall, upon request of the other, execute, acknowledge and deliver to the other a short form memorandum of this Lease for recording purposes. The Party requesting recordation shall be responsible for payment of any fees applicable hereto. 26. NO RIGHT TO HOLDOVER. Lessee has no right to retain possession of the Premises or any part thereof beyond the expiration or termination this Lease. In the event that Lessee holds over, then the Base Rent shall be increased to one hundred fifty percent (150%) of the Base Rent applicable during the month immediately preceding the expiration or termination. Nothing contained herein shall be construed as consent by Lessor to any holding over by Lessee. 27. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed exclusive but shall, wherever possible, be cumulative with all other remedies at law or in equity. 28. COVENANTS AND CONDITIONS; CONSTRUCTION OF AGREEMENT. All provisions of this Lease to be observed or performed by Lessee are both covenants and conditions. In construing this Lease, all headings and titles are for the convenience of the parties only and shall not be considered a part of this Lease. Whenever required by the context, the singular shall include the plural and vice versa. This Lease shall not be construed as if prepared by one of the parties, but rather according to its fair meaning as a whole, as if both parties had prepared it. 29. BINDING EFFECT; CHOICE OF LAW. This Lease shall be binding upon the parties, their personal representatives, successors and assigns and be governed by the laws of the State in which the Premises are located. Any litigation between the Parties hereto concerning this Lease shall be initiated in the county in which the Premises are located. 30. SUBORDINATION; ATTORNMENT; NON-DISTURBANCE. 30.1 SUBORDINATION. This Lease and any Option granted hereby shall be subject and subordinate to any ground lease, mortgage, deed of trust, or other hypothecation or security device (collectively, "SECURITY DEVICE"), now or hereafter placed upon the Premises, to any and all advances made on the security thereof, and to all renewals, modifications, and extensions thereof. Lessee agrees that the holders of any such Security Devices (in this Lease together referred to as "Lender") shall have no liability or obligation to perform any of the obligations of Lessor rider this Lease. Any Lender may elect to have this Lease and/or any Option granted hereby superior to the lien of its Security Device by giving written notice thereof to Lessee whereupon this Lease and such Options shall be deemed prior to such Security Device. Initials CMS GW --- -- Page 10 notwithstanding the relative dates of the documentation or recordation thereof. 30.2 ATTORNMENT. Subject to the non-disturbance provisions of Paragraph 30.3, Lessee agrees to attorn to a Lender or any other party who acquires ownership of the Premises by reason of a foreclosure of a Security Device, and that in the event of such foreclosure, such new owner shall not: (i) be liable for any act or omission of any prior lessor or with respect to events occurring prior to acquisition of ownership; (ii) be subject to any offsets or defenses which Lessee might have against any prior lessor; or (iii) be bound by prepayment of more than one (1) month's rent. 30.3 NON-DISTURBANCE. With respect to Security Devices entered into by Lessor after the execution of this Lease, Lessee's subordination of this Lease shall be subject to receiving a commercially reasonable non-disturbance agreement (a "NON-DISTURBANCE AGREEMENT") from the Lender which Non-Disturbance Agreement provides that Lessee's possession of the Premises, and this Lease, including options to extend the term hereof, will not be disturbed so long as Lessee is not in Breach hereof and attorns to the record owner of the raises. Further, within sixty (60) days after the execution of this Lease, Lessor shall use its commercially reasonable efforts to obtain a Non-Disturbance Agreement from the holder of any pre-existing Security Device which is secured by the Premises. In the event that Lessor is unable provide the Non-Disturbance Agreement within said sixty (60) days, then Lessee may, at Lessee's option, directly contact Lessor's lender and attempt to negotiate for the execution and delivery of a Non-Disturbance Agreement. 30.4 SELF-EXECUTING. The agreements contained in this Paragraph 30 shall be effective without the execution of any further documents; provided, however, that, upon written request from Lessor or a Lender in connection with a sale, financing or refinancing of the Premises, Lessee and Lessor shall execute such further writings as may be reasonably required to separately document any subordination, attornment and/or Non-Disturbance Agreement provided for herein. 31. ATTORNEYS' FEES. If any Party or Broker brings an action or proceeding involving the Premises to enforce the terms hereof or to declare its hereunder, the Prevailing Party (as hereafter defined) in any such proceeding, action, or appeal thereon, shall be entitled to reasonable attorneys' fees. Such fees may be awarded in the same suit or recovered in a separate suit, whether or not such action or proceeding is pursued decision or judgment. The term, "PREVAILING PARTY" shall include, without limitation, a Party or Broker who substantially obtains or defeats the relief sought, as the case may be, whether by compromise, settlement, judgment, or the abandonment by the other Party or Broker of its claim or defense. The attorneys' fees award shall not be computed in accordance with any court fee schedule, but shall be such as to fully reimburse all attorneys' fees reasonably incurred. In addition, Lessor shall be entitled to attorneys' fees, costs and expenses incurred in the preparation and service of notices of Default and consultations in connection therewith, whether or not a legal action is subsequently commenced in connection with such Default or resulting Breach. 32. LESSOR'S ACCESS; SHOWING PREMISES; REPAIRS. Lessor and Lessor's agents shall have the right to enter the Premises at any time, in case of an emergency, and otherwise at reasonable times for the purpose of showing the same to prospective purchasers, lenders, or sees, and making such alterations, repairs, improvements or additions to the Premises as Lessor may deem necessary. All such activities shall be without abatement of rent or liability to Lessee. Lessor may at any time place on the Premises any ordinary "FOR SALE" signs and Lessor may during the last six (6) months of the term hereof place on the Premises any ordinary "FOR LEASE" signs. Lessee may at any time place on about the Premises any ordinary "FOR SUBLEASE" sign. 33. AUCTIONS. Lessee shall not conduct, nor permit to be conducted, any auction upon the Premises without Lessor's prior written consent. Lessor shall not be obligated to exercise any standard of reasonableness in determining whether to permit an auction. 34. SIGNS. Except for ordinary "For Sublease" signs, Lessee shall not place any sign upon the Premises without Lessor's prior written consent. All signs must comply with all Applicable Requirements. 35. TERMINATION; MERGER. Unless specifically stated otherwise in writing by Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual termination or cancellation hereof, or a termination hereof by Lessor for Breach by Lessee, shall automatically terminate any sublease lesser estate in the Premises; provided, however, that Lessor may elect to continue any one or all existing subtenancies. Lessor's failure within ten (10) days following any such event to elect to the contrary by written notice to the holder of any such lesser interest, shall constitute Lessor's action to have such event constitute the termination of such interest. 36. CONSENTS. Except as otherwise provided herein, wherever in this Lease the consent of a Party is required to an act by or for the other Party, such consent shall not be unreasonably withheld or delayed. Lessor's actual reasonable costs and expenses (including but not limited to architects', attorneys', engineers' and other consultants' fees) incurred in the consideration of, or response to, a request by Lessee for any Lessor consent, including but not limited to consents to an assignment, a subletting or the presence or use of a Hazardous Substance, shall be paid by Lessee upon receipt of an invoice and supporting documentation therefor. Lessor's consent to any act, assignment or subletting shall not constitute an acknowledgment that no Default or Breach by Lessee of this Lease exists, nor shall such consent be deemed a waiver of any then existing Default or Breach, except as may be otherwise specifically stated in writing by Lessor at the time of such consent. The failure to specify herein any particular condition to Lessor's consent shall not preclude the imposition by Lessor at the time of consent of such further or other conditions as are then reasonable with reference to the particular matter for which consent is being given. In the event that either Party disagrees with any determination made by the other hereunder and reasonably requests the reasons for such determination, the determining party shall furnish its reasons in writing and in reasonable detail within ten (10) business days following such request. 37. GUARANTOR. 37.1 EXECUTION. The Guarantors, if any, shall each execute a guaranty in the form most recently published by the American Industrial eal Estate Association, and each such Guarantor shall have the same obligations as Lessee under this Lease. 37.2 DEFAULT. It shall constitute a Default of the Lessee if any Guarantor fails or refuses, upon request to provide: (a) evidence of the execution of the guaranty, including the authority of the party signing on Guarantor's behalf to obligate Guarantor, and in the case of a corporate Guarantor, a certified copy of a resolution of its board of directors authorizing the making of such guaranty, (b) current financial statements, (c) a Estoppel Certificate, or (d) written confirmation that the guaranty is still in effect. 38. Quiet Possession. Subject to payment by Lessee of the Rent and performance of all of the covenants, conditions and provisions on Lessee's part to be observed and performed under this Lease, Lessee shall have quiet possession and quiet enjoyment of the Premises during the term hereof. 39. OPTIONS. 39.1 DEFINITION. "Option" shall mean: (a) the right to extend the term of or renew this Lease or to extend or renew any lease that Lessee as on other property of Lessor; (b) the right of first refusal or first offer to lease either the Premises or other property of Lessor; (c) the right to purchase or the right of first refusal to purchase the Premises or other property of Lessor. 39.2 OPTIONS PERSONAL TO ORIGINAL LESSEE. Each Option granted to Lessee in this Lease is personal to the original Lessee, and cannot be assigned or exercised by anyone other than said original Lessee and only while the original Lessee is in full possession of the Premises and requested by Lessor, with Lessee certifying that Lessee has no intention of thereafter assigning or subletting. 39.3 MULTIPLE OPTIONS. In the event that Lessee has any multiple Options to extend or renew this Lease, a later Option cannot be exercised unless the prior Options have been validly exercised. 39.4 EFFECT OF DEFAULT ON OPTIONS. (a) Lessee shall have no right to exercise an Option: (i) during the period commencing with the giving of any notice of Default and continuing until said Default is cured; (ii) during the period of time any Rent is unpaid (without regard to whether notice thereof is given Lessee); (iii) during the time Lessee is in Breach of this Lease; or (iv) in the event that Lessee has been given three (3) or more notices of separate Default, whether or not the Defaults are cured, during the twelve (12) month period immediately preceding the exercise of the Option. (b) The period of time within which an Option may be exercised shall not be extended or enlarged by reason of Lessee's inability to exercise an Option because of the provisions of Paragraph 39.4(a). (c) An Option shall terminate and be of no further force or effect, notwithstanding Lessee's due and timely exercise of the Option, if after such exercise and prior to the commencement of the extended term, (i) Lessee fails to pay Rent for a period of thirty (30) days after such Rent becomes due (without any necessity of Lessor to give notice thereof), (ii) Lessor gives to Lessee three (3) or more notices of separate Default during any twelve (12) month period, whether or not the Defaults are cured, or (iii) if Lessee commits a Breach of this Lease. Initials CMS GW --- -- Page 11 40. MULTIPLE BUILDINGS. If the Premises are a part of a group of buildings controlled by Lessor, Lessee agrees that it will observe all reasonable rules and regulations which Lessor may make from time to time for the management, safety, and care of said properties, including the care and cleanliness of the grounds and including the parking, loading and unloading of vehicles, and that Lessee will pay its fair share of common expenses incurred in connection therewith. 41. SECURITY MEASURES. Lessee hereby acknowledges that the rental payable to Lessor hereunder does not include the cost of guard service or other security measures, and that Lessor shall have no obligation whatsoever to provide same. Lessee assumes all responsibility for the protection of the Premises, Lessee, its agents and invitees and their property from the acts of third parties. 42. RESERVATIONS. Lessor reserves to itself the right, from time to time, to grant, without the consent or joinder of Lessee, such easements, rights and dedications that Lessor deems necessary, and to cause the recordation of parcel maps and restrictions, so long as such easements, rights, dedications, maps and restrictions do not unreasonably interfere with the use of the Premises by Lessee. Lessee agrees to sign any documents reasonably requested by Lessor to effectuate any such easement rights, dedication, map or restrictions. 43. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to any amount or sum of money to be paid by one Party to the other under the provisions hereof, the Party against whom the obligation to pay the money is asserted shall have the right to make payment "under protest" and such payment shall not be regarded as a voluntary payment and there shall survive the right on the part of said Party to institute suit for recovery of such sum. If it shall be adjudged that there was no legal obligation on the part of said Party to pay such sum or any part thereof, said Party shall be entitled to recover such sum or so much thereof as it was not legally required to pay. 44. AUTHORITY. If either Party hereto is a corporation, trust, limited liability company, partnership, or similar entity, each individual executing this Lease on behalf of such entity represents and warrants that he or she is duly authorized to execute and deliver this Lease on its behalf. Each party shall, within thirty (30) days after request, deliver to the other party satisfactory evidence of such authority. 45. CONFLICT. Any conflict between the printed provisions of this Lease and the typewritten or handwritten provisions shall be controlled by the typewritten or handwritten provisions. 46. OFFER. Preparation of this Lease by either Party or their agent and submission of same to the other Party shall not be deemed an offer to lease to the other Party. This Lease is not intended to be binding until executed and delivered by all Parties hereto. 47. AMENDMENTS. This Lease may be modified only in writing, signed by the Parties in interest at the time of the modification. As long as they do not materially change Lessee's obligations hereunder, Lessee agrees to make such reasonable non-monetary modifications to this Lease as may be reasonably required by a Lender in connection with the obtaining of normal financing or refinancing of the Premises. 48. MULTIPLE PARTIES. If more than one person or entity is named herein as either Lessor or Lessee, such multiple Parties shall have joint and several responsibility to comply with the terms of this Lease. 49. MEDIATION AND ARBITRATION OF DISPUTES. An Addendum requiring the Mediation and/or the Arbitration of all disputes between the Parties and/or Brokers arising out of this Lease [_] is [_] is not attached to this Lease. LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS EASE SHOW THEIR INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS LEASE IS EXECUTED, THE TERMS OF HIS LEASE ARE COMMERCIALLY REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE PREMISES. ________________________________________________________________________________ ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN - --------- INDUSTRIAL REAL ESTATE ASSOCIATION OR BY ANY BROKER AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT RELATES. THE PARTIES ARE URGED TO: 1. SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE. 2. RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF THE PREMISES. SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO THE POSSIBLE PRESENCE OF HAZARDOUS SUBSTANCES, THE ZONING OF THE PREMISES, THE STRUCTURAL INTEGRITY, THE CONDITION OF THE ROOF AND OPERATING SYSTEMS, AND THE SUITABILITY OF THE PREMISES FOR LESSEE'S INTENDED USE. WARNING: IF THE PREMISES IS LOCATED IN A STATE OTHER THAN CALIFORNIA, CERTAIN - ------- PROVISIONS OF THE LEASE MAY NEED TO BE REVISED TO COMPLY WITH THE LAWS OF THE STATE IN WHICH THE PREMISES IS LOCATED. ________________________________________________________________________________ The parties hereto have executed this Lease at the place and on the dates specified above their respective signatures, Executed at: _________________________ Executed at: __________________________ on: _________________________________ on: __________________________________ By LESSOR: G.W. Realty Partners By LESSEE: BioMarin Pharmaceuticals, a California Corporation - -------------------------------------- --------------------------------------- ______________________________________ _______________________________________ By: /s/ Geoffrey Wood By: /s/ Christopher Starr ----------------------------------- ------------------------------------ Name Printed: Geoffrey Wood Name Printed: Christopher M. Starr ------------------------ --------------------------- Title: President Title: VP Research ------------------------------- -------------------------------- By: __________________________________ By: ___________________________________ Name Printed: ________________________ Name Printed: _________________________ Title: ______________________________ Title: _______________________________ Address: 2760 Baker Street Address: 11 Pimentel Court ----------------------------- ------------------------------ San Francisco, CA 94123 Novato, CA 94949 ------------------------------ --------------------------------- Telephone:(415) 921-5577 Telephone:(415) 382-3510 ---------------------- ------------------------ Facsimile:(415) 563-5901 Facsimile:(415) 382-7889 ---------------------- ----------------------- Federal ID No. ______________________ Federal ID No. _______________________ NOTE: These forms are often modified to meet changing requirements of law and industry needs. Always write or call to make sure you are utilizing the most current form: AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION, 700 So. Flower Street, Suite 600, Los Angeles, California 90017. (213) 687- 8777. Fax No. (213) 687-8616 Page 12 ADDENDUM TO LEASE BY & BETWEEN G.W. REALTY PARTNERS, LESSOR AND BIOMARIN PHARMACEUTICALS, A CALIFORNIA CORPORATION, LESSEE DATED MAY 29, 1998 The following terms and conditions of that certain lease agreement by and between the parties shall be modified as follows: 1. COMMENCEMENT: The lease commencement date shall be February 1, 1999 subject to the following timeline being met for delivery of the Premises for occupancy. .June 1, 1998; Lessor and Lessee will have executed a lease agreement with a security deposit equal to the first month's rent paid to Lessor and Lessee shall receive a credit against the security deposit in the amount of $10,000.00 which was previously paid to Lessor as an earnest money deposit. .June 1, 1998; Design Review Approval granted from the City of Novato. .July 1, 1998; Lessee and Lessor shall have approved the Lessee's Tenant Improvement drawings. .August 1, 1998; City of Novato shall have approved the construction documents, issued a Building Permit, and construction shall have commenced. It is the intention of the Lessor to start construction on as much of the Tenant Improvements as possible prior to the final completion of the Building shell. .December 1, 1998; Lessor has delivered the completed Building Shell to Lessee. 2. POSSESSION: Lessor shall deliver to Lessee the Completed Building Shell as defined herein this Addendum to Lease section 7b. by December 1, 1998, and subject to this Addendum to Lease section 5. All the terms and conditions of this Lease shall be in full force and affect with the exception of Lessee's obligation to pay rent and the lease term. Lessee's obligation to pay rent shall commence on February 1, 1999, subject to this Addendum to Lease section 5. Pursuant to section 1.3 of the Lease Agreement the lease term shall commence February 1, 1999 which includes Lessee's obligation to pay rent to Lessor. 3A. RENT: Starting on the lease commencement date the following is the rent schedule; Year 1 $33,289.15 per month Year 2: $36,823.85 per month Years 3 through 10: The rent shall adjust as follows per annum: Commencing in the third year of the lease term the rent shall be adjusted for the ensuing twelve (12) months, and each twelve (12) month period thereafter, by the increase in the National Consumer Price Index All Items, All Urban Consumers of the U.S. Department of Labor, Bureau of Labor Statistics. The comparison month shall be the index for the 13th month of the lease term. In case the U.S. Department of Labor shall discontinue the computation and publication of said Consumer Price Index or the publication thereof should be delayed so as to prevent its use hereunder at the times required, there shall be substituted therefor by Lessor such other index or method of ascertaining changes in the price levels as, in the opinion of the Lessor, most closely resembles the Consumer Price Index and method of arriving at the index figure by said Bureau. In no event shall any adjustment to the fixed minimal rental result in its reduction below the base minimal rent herein provided for and no event shall the rental adjustment exceed 5 % per adjustment period. 3B. OPERATING EXPENSE REIMBURSEMENT: Pursuant to Sections 8 and 10 of the Lease agreement and Sections 3b and 3c of this Addendum to Lease in no event shall these expenses, which are to be paid by Lessee to Lessor, exceed $.20 per square foot per month during the first year of the lease term. The expenses to be paid by Lessee outlined herein will be adjusted and capped each year thereafter pursuant to the change in the Consumer Price Index per Section 2a herein with the following exception; the taxing authority assessing Lessee's lease equipment, fixtures or improvements to the Premises, other than the initial Tenant Improvements, that would be added to Lessor's property tax bill, or any substantial changes to the current governmental proposition 13 property tax structure which currently caps increases in property taxes at 2 % per annum for which Lessee shall be responsible for said increases above the current 2% cap. 4A. LESSOR'S OBLIGATIONS: Subject to Sections 2.2 (Condition), 2.3 (Compliance), 9 (Damage or Destruction) and 14 (Condemnation), it is intended by the Parties hereto that Lessor shall have no obligation, in any manner whatsoever, to repair and maintain the Premises, or the equipment therein, except as indicated herein, all of which obligations are intended to be that of the Lessee, except for the surface, structural, and drainage elements of the roof, the foundations and exterior bearing, structural and wall surfaces, including exterior paint, the repair of which shall be the responsibility of Lessor. It is the intention of the Parties that the terms of this Lease govern the respective obligations of the Lessee and Lessor as to maintenance and repair of the Premises, and they expressly waive the benefit of any statute now or hereafter in effect to the extent it is inconsistent with the terms of this Lease. 4B. The Lessor shall also be responsible for the maintenance and repair of the following items subject to Lessee's reimbursement of the cost thereof as defined herein: .Landscaping and irrigation systems .Driveways, parking areas, striping, benches, sidewalks and trash enclosures .Fencing .Exterior building and parking lot lighting Lessee shall not be responsible for reimbursing the Lessor per the terms and conditions of this lease for the repair or replacement of the following items during the first five (5) years of the lease term; driveways, parking areas, striping, benches, sidewalks, trash enclosures, and fencing unless damaged by Lessee's use and occupancy of the Premises or Lessee's invitees, agents or contractors. 4C. Lessee shall reimburse Lessor within thirty (30) days of receipt of Lessor's invoice representing Lessor's expenditure, including reasonable property management fees to manage the Premises, for the items listed in section 3b. 5. DELAY IN POSSESSION: Lessor agrees to use its best commercially reasonable efforts to complete the Building Shell by December 1, 1998 so that Lessee can commence construction of Lessee's Tenant Improvements. If despite said efforts, Lessor is unable to deliver possession as agreed, Lessor shall not be subject to any liability therefor, nor shall such failure affect the validity of this lease, except as set forth herein. In the event the Lessor has knowledge that the Building Shell will be delivered thirty (30) days or more past December 1, 1998, the Scheduled Building Shell Completion Date, Lessor shall notify Lessee of said delay as soon as Lessor has knowledge that there will be a delay. If possession of the Building Shell is delivered to Lessee within thirty (30) days after the Scheduled Building Shell Completion Date of December 1, 1998, Lessee shall be given one day rent credit starting on the Rent Commencement Date (February 1, 1999) for every day of delay in delivery caused by Lessor, or occasioned by Lessor's Consultants, Planners or Architects. If possession is delivered to Lessee thirty (30) days after the Shell Completion Date, and the delay is the responsibility of Lessor, then Lessee shall receive a credit of two (2) days rent=(free possession) for each day it does not receive actual possession of the completed Building Shell from the 30th day after the Scheduled Building Shell Completion Date onward. In the event that Lessor is unable to deliver possession of the Building Shell to Lessee within ninety (90) days of the Scheduled Building Shell Completion Date, and the delay is the responsibility of Lessor, then Lessee shall have the right to terminate this lease by providing Lessor then (10) days written notice of same. If such written notice from Lessee is not received by Lessor within the ten (10) days period after notice to Lessee of Lessor's failure to deliver, Lessee's right to cancel shall terminate. Except as otherwise provided herein, if possession is not tendered to Lessee by the Building Shell Completion Date, and Lessee does not terminate this lease, any period of rent abatement or credit shall run from the Rent Commencement Date (February 1, 1999). For example, if a delay in Lessee possession totals 42 days and can be ascribed 12 days to Lessee and 30 days to Lessor, no rent abatement shall accrue to Lessee for the 12 days, but 30 days rent abatement shall accrue to Lessee for the Lessor caused delay. 6. LESSEE'S REIMBURSEMENT OF LESSOR'S INSURANCE COST: Pursuant to section 8.3 of the lease agreement, Lessee shall reimburse Lessor within thirty (30) days of receipt of Lessor's annual insurance premium representing the cost of insurance per the lease section referenced herein. 7A. TENANT IMPROVEMENTS: Lessor will provide Lessee the following Tenant Improvement Allowance, over and above the Lessor's Building Shell as defined herein section 7b, which shall include the cost of architectural, engineering, building permits and fees. Total Tenant Improvement Allowance $560,047.50 Lessee shall have the right to use the Tenant Improvement Allowance outlined herein to improve the Premises using its own licensed general contractor and architect subject to Lessor's prior reasonable approval of the Tenant Improvement Plan, Lessee's contractor and architect, and reasonable requirements of Lessor's lender. 7B. BUILDING SHELL: Lessor shall deliver the following Building Shell improvements which shall not be considered Tenant Improvements per section 7a and Exhibit "B" to be attached hereto within thirty (30) days of lease execution. .Exterior outside walls finished and painted .Exterior building glazing in place .Roof parapet area and structural screening for building .HVAC/mechanical systems .Truck roll up doors as shown on the Building Shell plan .Exterior glass exiting doors as shown on the Building Shell plan .1,600 amp electrical service to the main electrical room with sub-panels in place. .Natural gas service to the building .In slab waste lines, unless otherwise specified by Lessee and agreed to by Lessor prior to commencement of the building shell .Water service to the building .Base Building Roof structure .Improved parking lot, including striping and designated handicapped parking spaces. .Trash enclosure(s) .Landscaping and irrigation systems on automatic timer 7C. LESSEE BUILDING SHELL UPGRADES: Lessee shall be responsible for the cost of any Building Shell upgrades over and above the attached Exhibit "B", which defines The Building Shell. The Lessee shall reimburse Lessor for the costs of Building Shell upgrades within fifteen (15) days of presentation of an invoice from Lessor outlining Building Shell upgrades. The Lessee's Building Shell upgrades shall be determined and agreed to by Lessor and Lessee not later than thirty (30) days from lease execution and shall be attached hereto as Exhibit "C" and signed by Lessor and Lessee. 8. ACKNOWLEDGMENTS: Lessee acknowledges that: (a) Lessee has been advised by Lessor and/or Broker in this transaction to satisfy itself with respect to the condition of the Premises (including but not limited to the building electrical service, which Lessor will deliver and will be 1600 AMP service, base building fire sprinkler system, which Lessor will deliver, environmental matters, which Lessor represents to Lessee that Lessor has no knowledge of any environmental issues with the Property for which the Premises are located) and the suitability of the Premises for Lessee's intended use and occupancy of the Premises as described in section 1.8 is allowable by the City of Novato; (b) after delivery of the Building Shell improvements per section 7.b of the Addendum, attached hereto, Lessee shall assume all responsibility thereafter as it relates to Lessee's use and occupancy of the Premises with the exception of any patent or latent defects that may exist with the Lessor's Building Shell work which Lessor will be responsible for. In addition, Lessor acknowledges that: (a) Broker has made no representations, promises or warranties concerning Lessee's ability to honor the Lease or suitability to occupy the Premises; and (b) it is Lessor's sole responsibility to investigate the financial capability and/or suitability of the proposed Lessee. 9. PAYMENT OF TAXES: Subject to section 10.2 (a) in the lease agreement, in the event of the sale or transfer of the ownership of the property in which the Premises are located during the first five years of the lease term which results in a reassessment of the Property by the local taxing authority and the base year property taxes increase as a result of said sale or transfer Lessee will be responsible for fifty percent (50%) of any increases in property taxes over the base year of the lease term as defined herein this section. Additionally, Lessee will be responsible for any increases in Lessor's real property taxes in the event the taxing authority assesses Lessee's specialty, non-building standard building improvements. 10. LESSEE'S OBLIGATIONS: Subject to section 7.1 (a) of the lease agreement, Lessor shall be responsible for any patent or latent defects that may exist with the Lessors Building Shell work and any repairs, maintenance or replacement of items per this section which are the responsibility of the Lessee to repair, maintain or replace which are damaged as a result of any patent or latent defects with the Lessor's Building Shell work. 11. ASSIGNMENT OF LEASE: It is the intent of Lessor to form a new limited liability company known as DIGITAL N COMPANY, LLC, or other entity to be managed by David Sargent and Geoffrey Wood, which entity, shall become the Lessor and assignee of all rights and duties under this lease after formation and certification by the Secretary of State of California. Lessee shall be notified of and hereby consents to such lease assignment. Lessor: G.W. Realty Partners By: /s/ Geoffrey Wood ------------------------------------ Its: Pres ------------------------------------ Date: 6.4.98 ----------------------------------- Lessee: BioMarin Pharmaceutical, a California Corporation By: /s/ Christopher Starr ----------------------------------- Its: VP Research ----------------------------------- Date: May 29, 1998 ---------------------------------- PROPERTY: 110 Digital Drive, Novato ----------------------------- HAZARDOUS MATERIALS WARNING: Current and future federal, state and local laws and regulations may require the clean-up of such toxic, hazardous or undesirable materials at the expense of those persons who in the past, present or furore have had any interest in the Property including, but not limited to, current, past and furore owners and users of the Property. Lessor and Lessee are advised to consult with independent legal counsel of their choice or other experts, to determine their potential liability. AMERICANS WITH DISABILITIES ACT: On July 26, 1991, the federal legislation known as the Americans with Disabilities Act (ADA) was signed into law. The purpose of the ADA is to integrate persons with disabilities into the economic and social mainstream of American life. Title III of the ADA applies to landlords and tenants of "places of public accommodation" and "commercial facilities," and requires that places of public accommodation undertake "readily achievable" removal of communication and access barriers to the disabled. This requirement of Title III of the ADA is effective January 26, 1992. Lessor and Lessee should seek expert advice regarding the implications of the Act as it affects this agreement. LIABILITY RELEASE: Meridian Commercial, Inc., and its salespeople in this transaction have no expertise regarding hazardous materials or the Americans with Disabilities Act. Lessor and Lessee agree that they shall indemnify and hold Meridian Commercial, Inc. and its salespeople harmless from any claim, liability, or expense regarding hazardous materials or the ADA. BROKER REPRESENTATION: Meridian Commercial, Inc., is the real estate broker for the Lessor and the Lessee, and both Lessor and Lessee consent and acknowledge herewith. LESSOR: G.W. Realty Partners LESSEE: BioMarin Pharmaceuticals or Assignees By: /s/ Geoffrey Wood By: /s/ Christopher Starr ------------------------------------ -------------------------------- Its: Pres Its: VP Research ----------------------------------- ------------------------------- Date: 6.4.98 Date: May 29, 1998 --------------------------------- ------------------------------ [LOGO OF AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION APPEARS HERE] AMENDMENT TO LEASE DATED MAY 29, 1998 BY AND BETWEEN DIGITAL N COMPANY, LESSOR AND BIOMARIN PHARMACEUTICAL, LESSEE DATED JULY 1, 1998 The following terms and conditions hereby Amendment that certain lease agreement by and between the parties referenced herein upon the following terms and conditions; THE FOLLOWING PROVISION HEREBY REPLACES A PROVISION OF SECTION I OF THE ADDENDUM TO THE LEASE AGREEMENT DATED MAY 29, 1998; . Lessor and Lessee hereby agree that as of execution of this Amendment to Lease that the Lessors revised delivery date of the Building Shell to the Lessee will be December 15, 1998 because of Lessee's Building Shell upgrades. The following provision hereby replaces section 7c. of the Addendum to the Lease Agreement; 7c. LESSEE BUILDING SHELL UPGRADES: Lessee shall be responsible for the cost of any Building Shell Upgrades over and above the cost of attached Exhibit "B", which hereby defines the Lessors Base Building Shell Costs. Lessee shell deposit the total estimated cost of the Building Shell Upgrades and the estimated cost of the Lessee's Tenant improvement over the Lessor's initial Tenant Improvement Allowance of $560,047.50, per the Lessor and Lessee approved permit set of working drawings to be attached as Exhibit "C", as required for the completion of either the Building Shell and/or the Tenant Improvements. Said deposit shall be made into an interest bearing loan reserve account to the benefit of Lessee and under the control the Lessor or Lessor's construction lender. The deposit shall be made prior to the commencement of the construction of the Building Shell and/or Tenant Improvements as required by the Lessor or Lessor's construction lender. Any amount of Lessee's deposit not used for either construction of the Building Shell Upgrade and/or Tenant Improvements in excess of the Lessors Tenant Improvement Allowance shall be returned to Lessee or credited to Lessee for the next installment of rent(s) due to Lessor under the terms and conditions of the lease. Lessee's Building Shell Upgrades shall be determined and agreed to by Lessor and Lessee not later than forty(45) days from lease execution and shall be attached hereto as Exhibit "C" and signed by both Lessor and Lessee. LESSOR: DIGITAL N COMPANY LESSEE: BIOMARIN PHARMACEUTICAL BY: /s/ [SIGNATURE] BY: /s/ [SIGNATURE] ---------------------------- ---------------------------- ITS: [TITLE] ITS: VP Research -------------------------- --------------------------- DATE: 7.2.98 DATE: July 1, 1998 -------------------------- -------------------------- PAGE 1 initials CMS GW --- -- EX-10.22 24 SUBLEASE DATED 6/24/1998 EXHIBIT 10.22 SUBLEASE -------- THIS SUBLEASE made as of this 24th day of June, 1998 between Bio-Medical Applications of California, Inc., d/b/a Bio-Medical Applications of Los Angeles, a Delaware corporation, hereinafter called "Sublandlord", and Bio Marin Pharmaceutical, Inc., a California corporation, hereinafter called "Subtenant". WHEREAS, by a lease dated July 20, 1992 by and between Sublandlord as lessee and Commercial Building Company, A Partnership, hereinafter called "Landlord", said lease referred to hereinafter as the "Main Lease", a copy of which is attached hereto as Exhibit A with the rental amounts deleted, Landlord leased to --------- Sublandlord approximately 8,000 square feet of space in the building located at 1123 West Carson Street, Torrance, California 90502 (the "Main Premises") upon the terms, covenants and conditions therein contained; and WHEREAS, Sublandlord has agreed to sublease to Subtenant the entire Main Premises, hereinafter referred to as the "Subleased Premises", on the terms stated herein. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows. 1. Sublandlord hereby leases to Subtenant, and Subtenant hereby takes and leases from Sublandlord, the Subleased Premises; TO HAVE AND TO HOLD the Subleased Premises for a term which commences on July 1, 1998 (the "Commencement Date") and ends on June 30, 2001 (the "Expiration Date"). 2. The Subleased Premises shall be delivered to Subtenant in their "as is" condition on the Commencement Date. Subtenant shall have the same rights to make initial improvements to the Subleased Premises as set forth in Section 9 of the Main Lease, except that Sublandlord shall have the same rights to review and approve such work as the rights granted to Landlord under Section 9 of the Main Lease, and that such fights of the Sublandlord shall be in addition to the rights of the Landlord under Section 9 of the Main Lease. 3.1 Subtenant hereby expressly agrees and covenants to Landlord and to Sublandlord, that Subtenant assumes, is bound by and shall faithfully perform, all of the obligations of Sublandlord as tenant under the Main Lease with respect to the Subleased Premises, except as otherwise expressly provided for herein. It is further agreed that the relationship between, and the rights of, Subtenant and Sublandlord shall, except as expressly provided for herein, be governed by the Main Lease as if they were tenant and landlord, respectively, under the Main Lease, and that Sublandlord specifically shall have all rights granted to Landlord under the Main Lease with respect to enforcement of the provisions of this Sublease and the termination hereof; provided, however, that Sublandlord shall not be deemed to guarantee performance by Landlord of its obligations under the Main Lease, and Sublandlord shall have no liability to Subtenant for any default in this Sublease caused by the default or any other act of Landlord under the Main Lease. It is further agreed that performance by Sublandlord shall be conditional upon the performance by Landlord of its obligations under the Main Lease. Sublandlord shall be entitled to exercise any of the remedies set forth in the Main Lease upon the occurrence of any of the defaults set forth therein. 3.2 The following provisions of the Main Lease are excluded from the terms hereof, and Subtenant shall have no fights thereunder: Section 11 (Assignment) except as permitted as described in Section 8, below. 3.3 The following references to numbers of days in the Main Lease are changed as follows with respect to the relationship between Sublandlord and Subtenant: Section 5 (Condition of Premises, Repairs and Maintenance): the ten (10) day notice provision in the final subparagraph shall be changed in this Sublease to five (5) days; Section 7(c)(Damage by Fire or Other Casualty): the thirty (30) days notice shall be changed to twenty (20) days; and Section 15 (Default by Tenant): the time periods provided to Tenant under the Main Lease to cure defaults after receipt of notice from Landlord shall be reduced to five (5) days for monetary defaults and twenty (20) days for non-monetary defaults. 3.4 Subtenant's parking fights shall be comprised of Sublandlord's allocable share of vehicular parking spaces in the Parking Lot and the Parking Garage, if any, as set forth in the Main Lease. Subtenant shall not be entitled to any credit against the Rent due under this Sublease notwithstanding any provision of the Main Lease. 4. Subtenant covenants and agrees with Sublandlord to pay to Sublandlord as rent during the term hereof as follows: 4.1 Base Rent shall be paid in advance on the first day of each month of the term of this Sublease at the monthly rate of: Six Thousand and 00/100 Dollars ($6,000.00) per month. 4.2 All costs for (i) electrical power and utilities allocable to the Subleased Premises, (iv) cleaning and janitorial expenses allocable to the Subleased Premises and (iii) associated with increases in insurance expense allocable to the Subleased Premises shall be paid by Subtenant directly to Sublandlord for the term of this Sublease. All payments under this Paragraph 4 shall be made by Subtenant without any setoff or deduction whatsoever, in lawful money of the United States. Such payments shall be paid to Sublandlord at Sublandlord's office hereinabove set forth or at such other place or to such other party or parties as Sublandlord may from time to time designate by notice to Subtenant. Subtenant shall pay Sublandlord interest at the default rate set forth in the Main Lease on any payments required by this Paragraph 4 which are not made by Subtenant when due. 5. Subtenant covenants and agrees to use the Subleased Premises for the use described in Section 11 of Addendum No. 1 to this Sublease and for no other purpose. 6. Sublandlord warrants and represents that it has no knowledge of any default by itself or by landlord under the Main Lease; that the Main Lease is in full force and effect and that Sublandlord has a good right to sublease its interest in the same provided Sublandlord obtains 2 the consent of Landlord in accordance with Section 11 of the Main Lease and obtains the consent of any of Landlord's lender or lenders who may have approval rights in connection with this Sublease; and that Sublandlord has done nothing to defeat or impair this Sublease. Sublandlord further warrants and covenants that Subtenant, upon performance of Subtenant obligations hereunder and subject to the provisions hereof, shall for the term hereof, succeed to all rights of Sublandlord under the Main Lease with respect to the Subleased Premises and will have quiet possession of the Subleased Premises unless the Main Lease be terminated for any reason; provided, however, that this Sublease shall be in all respects subject to the Main Lease and if the Main Lease shall terminate during the term hereof for any reason, this Sublease shall terminate upon such termination with the same force and effect as if such termination date had been named herein as the termination date hereof; and if any provisions of this Sublease shall be in violation of the provisions of the Main Lease, the provisions of the Main Lease shall be deemed to limit the provisions hereof. It is expressly understood and agreed, however, that nothing stated in this Paragraph 6 shall be deemed to confer upon Subtenant any greater rights than are set forth herein nor limit any of the Subtenant's obligations hereunder. 7. Subtenant agrees to do nothing which will subject the Main Lease to termination by Landlord under the provisions of the Main Lease, and it is further agreed that if Subtenant is in default of the provisions of the Main Lease, Sublandlord may, after five (5) days written notice to Subtenant or immediately in the event of an emergency, but need not cure said default specifically on behalf of and for the account of Subtenant, in which case all costs, damages, and expenses incurred by Sublandlord in connection therewith shall be paid to Sublandlord immediately upon its demand as additional rent hereunder. By curing Subtenant's default on its behalf and account, as aforesaid, Sublandlord shall not be deemed to have waived any of its rights nor to have released Subtenant from any of its obligations under this Sublease. It is agreed, however, that Sublandlord may cure said default on its own account to preserve its interest in the Main Lease, and may terminate this Sublease pursuant to the terms hereof by reason of said default by Subtenant, if Subtenant does not pay as additional rent to Sublandlord all costs, damages and expenses incurred by Sublandlord in connection with such cure within the applicable grace period provided for in the Main Lease, as mended by Paragraph 3 above. In the event of such termination, Sublandlord shall be entitled to all remedies and damages provided for Landlord in the Main Lease, or as otherwise provided by law. In the event that the Main Lease is terminated by Landlord by reason of Subtenant's default, Subtenant shall indemnify and hold Sublandlord harmless from such damages as Sublandlord may become liable to pay under the Main Lease resulting from such default, plus all other expenses and costs related thereto, including without limitation attorneys' fees. 8. Subtenant shall not have the right to sublet the Subleased Premises, or any portion thereof, nor to assign or in any way transfer its interest in the same, nor to suffer or permit others to occupy the same, nor to suffer or permit the same to be assigned or transferred by operation of law or otherwise without the express written consent of Sublandlord and Landlord in their sole and absolute discretion. Notwithstanding anything to the contrary contained herein or in the Main Lease, Subtenant agrees that it shall remain primarily liable under this 3 Sublease regardless of any assignment of this Sublease by Subtenant, any subletting of the Subleased Premises by Subtenant or any transfer by Subtenant of its interest hereunder. 9. Subtenant shall maintain with respect to the Subleased Premises the insurance required by the Main Lease to be taken our by the tenant thereunder, which insurance shall name Landlord and Sublandlord as additional insured, all in accordance with said sections of the Main Lease. 10. At the expiration or earlier termination of this Lease, Subtenant shall surrender and yield up the Subleased Premises in the condition required under Section 9 of the Main Lease, and shall remove all equipment and trade fixtures of Subtenant therefrom, if Subtenant shall remain in possession of the Subleased Premises after the expiration or earlier termination of this Sublease without any express agreement as to such holding over, Subtenant shall be liable to Sublandlord in accordance with the Main Lease. 11. Subtenant further agrees to indemnify and hold Sublandlord harmless from any claim of Landlord under the Main Lease, and against any claim for injury to persons, including death, and for property damages arising out of the occupancy and use of the Subleased Premises by Subtenant, its officers, agents, employees or invitees. Sublandlord agrees to indemnify and hold Subtenant harmless from any claim for injury to persons, including death, and for property damages arising out of the negligence or intentional misconduct of Sublandlord and Landlord agrees to indemnify and hold Subtenant harmless from any claim for injury to persons, including death, and for property damages arising out of the negligence or intentional misconduct of Landlord. 12. Subtenant shall deposit with Sublandlord upon Subtenant's execution hereof a security deposit in an amount equal to one month's Base Rent hereunder (the "Security Deposit") as security for Subtenant's faithful performance of Subtenants obligations under this Sublease. If Subtenant fails to pay Base Rent or other rent or charges due hereunder, or otherwise defaults under this Sublease, Sublandlord may use, apply or retain all or any portion of said Security Deposit for the payment of any amount due Sublandlord or to reimburse or compensate Sublandlord for any liability, cost, expense, loss or damage (including attorneys' fees) which Sublandlord may suffer or incur by reason thereof. If Sublandlord uses or applies all or any portion of said Security Deposit, Subtenant shall within ten (10) days after written request therefore deposit monies with Sublandlord sufficient to restore said Security Deposit to the full mount required by this Sublease. Sublandlord shall not be required to keep all or any part of the Security Deposit separate from its general accounts. Sublandlord shall, at the expiration or earlier termination for the term hereof and after Subtenant has vacated the Premises, return to Subtenant (or, at Sublandlord's option, to the last assignee, if any, of Subtenant's interest herem), that portion of the Security Deposit not used or applied by Sublandlord. Unless otherwise expressly agreed in writing by Sublandlord, no part of the Security Deposit shall be considered to be held in trust, to bear interest or other increment for its use, or to be prepayment for any monies to be paid by Subtenant under this Sublease. 4 13. All notices required to be given under this Sublease shall be sent by prepaid registered or certified mail, return receipt requested, to Sublandlord, at Fresenius Dialysis Services West, 7927 Ostrow Street, San Diego, California 92111, Attention: Jill A. Hall, with a copy to Fresenius Medical Care North America, Two Ledgemont Center, 95 Hayden Argue, Lexington, Massachusetts 02173, Attention: Corporate Legal Department, and to Subtenant, at the Subleased Premises, unless in either case a different address is specified by either party to the other in writing by prepaid registered or certified mail, return receipt requested. Any such notices shall be deemed to have been given when deposited with the U.S. Mail. 14. Sublandlord hereby reserves the fight to enter onto the Subleased Premises from time to rime after reasonable prior notice to Subtenant to ascertain whether Subtenant is in compliance with the provisions of this Sublease. 15. If any provision of this Sublease, or the particular application thereof, shall to any extent be held invalid or unenforceable by a court of competent jurisdiction, the invalidity of such provision shall not be deemed to affect the validity of any other provision of this Sublease. Such invalid provisions shall be deemed to be stricken from this Sublease, which shall otherwise continue in full force and effect in all respects. 16. This Sublease shall be binding upon and inure to the benefit of the parties hereto and their respective permitted successors, assigns, heirs and legal representatives. 17. This Sublease shall be governed by and construed in accordance with the laws of the state of California. 18. Sublandlord and Subtenant each warrant to the other that it has had no dealings with any broker or agent in connection with this Sublease except for Lee & Associates, South Bay who shall be paid by Sublandlord pursuant to Addendum No. 1 attached hereto. Sublandlord and Subtenant covenant to hold harmless and indemnify the other party from and against any and all costs (including, without limitation, attorney's fees for defense of an action), expenses or 1iability for any compensation, commissions and charges which result from the breach of this warranty. 19. Addendum No. 1 to this Sublease is attached hereto and incorporated herein as Exhibit C. 20. Notwithstanding anything to the contrary contained herein, this Sublease shall not become or be deemed to have become effective until mutually executed and delivered by Subtenant and Sublandlord and consented to by Landlord in writing. 5 EXECUTED under seal as of the day and year first above written. SUBLANDLORD: BIO-MEDICAL APPLICATIONS OF CALIFORNIA, INC. By: _______________________________________________ Its: _______________________________________________ hereunto duly authorized SUBTENANT: BIO MARIN PHARMACEUTICAL, INC. By: John C. Klock Its: President hereunto duly authorized LANDLORD: COMMERCIAL BUILDING COMPANY, A PARTNERSHIP By: ________________________________________________ Its: ________________________________________________ hereunto duly authorized 6 EXHIBIT A Copy of Main Lease. 7 EXHIBIT B Legal Description of the property on which the Subleased Premises is located. 8 EXHIBIT C Addendum No. 1 to Sublease. 9 ADDENDUM NO.1 This Addendum No. 1 to the Sublease (The "Addendum") is dated as of June 9/th/, 1998, and is entered into by and between Bio Medical Applications of Los Angeles, Inc. "Sublandlord" and Bio Marin Pharmaceutical, Inc., "Subtenant." RECITALS -------- A. Sublandlord and Subtenant entered into that certain Sublease, dated June 8, 1998, as amended by that certain Addendum No. 1 of Sublease, dated June 9, 1998 (collectively, the "Sublease"), for the Premises located at 1123 W. Carson Street, Torrance California ("The Building"). In consideration of the foregoing recitals, the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Sublandlord and Subtenant hereby agree as follows: AGREEMENT --------- 1. DEFINITIONS ----------- All capitalized terms used in the Addendum No.1 which are not defined herein shall have the same meanings as set forth in the Sublease. Unless expressly stated otherwise herein, the term "Sublease" shall mean the Sublease as amended hereby. 2. GOVERNING LAW ------------- This Addendum No. 1 shall be construed in accordance with and governed by the Laws of the State of California. 3. ENTIRE AGREEMENT ---------------- The Sublease and this Addendum No. 1 constitutes the entire agreement of Sublandlord and Subtenant with respect to the specific subject matter hereof. 4. OPTION TO EXTEND ---------------- Provided Subtenant is not in default under the terms and conditions of the Sublease. Sublandlord hereby grants to Subtenant the option to extend the term of this Sublease for the balance of the original Lease or for one (1) additional two (2) year period(s) whichever is less, commencing upon the expiration of the prior term, upon each and all of the following terms and conditions: A. Subtenant gives to Sublandlord and Sublandlord actually receives on a date which is prior to the date that the Option Period would commence (if exercised) by at least four (4) months and not more than six (6) months a written notice of the exercise of the Option to Extend this Sublease for said additional term, time being of the essence. The rental rate for the Option Period shall be six thousand ($6,000/mo.) per month. 5. TENANT IMPROVEMENTS ------------------- Subtenant shall occupy the Premises in its present condition, ("As Is"), and Sublandlord shall deliver the heating, ventilation, air conditioning, and plumbing in good working condition. Subtenant at Subtenant's sole expense shall have the fight to modify the interior of the building (non- structural) per Subtenant's specification, and plans approved by the city, provided that Subtenant shall submit all Subtenant's Tenant Improvement plans, and working drawings to Sublandlord for Sublandlord's prior' approval (and which shall be subject to Landlord's' review and approval). Such approvals shall not be unreasonably withheld. Sublandlord shall contribute Twenty Thousand and 00/100 Dollars ($20,000.00) to Subtenants Tenant Improvements. Said amount shall be paid to Subtenant upon completion of the Tenant Improvements and receipt of all documentation demonstrating that Subtenant has spent the referenced mount or more in the premises along with a copy of release of all waivers from contractors and subcontractors. 1 ADDENDUM NO. 1 (continued) 6. FIRST (1/st/) MONTH'S RENT AND SECURITY DEPOSIT ----------------------------------------------- Subtenant shall pay Sublandlord a first month's rent of $6,000.00 along with $6,000.00 as a Security Deposit upon execution of the Lease by Subtenant. Said rent shall applied to the first month's rent of the Sublease term (July 1998). 7. EARLY POSSESSION ---------------- Subtenant shall be permitted to occupy the Premises upon full execution of the Sublease by Sublandlord and Subtenant and the Landlord. If Subtenant occupies the Premises prior to the commencement date (such Commencement Date being July 1, 1998) referenced in the Sublease, such occupancy shall be subject to all provisions of this Sublease. Such occupancy shall not change the termination date, but Subtenant shall not pay any Rent for the period prior to July 1, 1998. 8. COMMENCEMENT DATE ----------------- This Sublease Agreement shall commence on July 1, 1998 and rent shall commence on July 1, 1998. 9. UTILITIES AND JANITORIAL SERVICES --------------------------------- Subtenant shall pay and be responsible for all utilities and janitorial services for the premises during the term of Sublease and Option thereof. 10. HEALTH CODE AND MATERIALS ------------------------- The building shall be in compliance with all governmental and city codes as of the commencement date of this Sublease. 11. USE --- Subtenant shall use the Premises for development of Enzyme for treatment and other related medical use. 12. BROKER'S COMMISSION ------------------- Sublandlord and Subtenant hereby being disclosed by Lee & Associates~South Bay that Lee & Associates-South Bay is acting in this Sublease transaction as the agent of both Sublandlord and Subtenant. Sublandlord and Subtenant each consent to such representation by Lee & Associates-South Bay. Sublandlord shall pay Lee & Associates-South Bay a broker's commission of six percent (6%) of the total base rent pursuant to this Sublease upon execution of the Sublease Agreement by Sublandlord, Subtenant and Landlord. In addition, should Subtenant exercise its option to renew the Sublease Agreement, then Sublandlord shall pay a broker's commission to Lee & Associates-South Bay of two and one half percent (2 1/2%) of total base rent of the renewal term when Subtenant renews the Sublease, and exercises Subtenant's option. 13. APPROVAL OF LANDLORD -------------------- This Sublease Agreement, Addendum No. 1 and all other related documents and plans shall be subject to approval by the Landlord, which shall not be unreasonably withheld. If Landlord does not approve of the plans within 30 days of execution of Sublease, Subtenant may terminate the Sublease. 14. COMMON AREA MAINTENANCE, INSURANCE AND PROPERTY TAXES (TRIPLE NET) ------------------------------------------------------------------ Sublandlord shall pay all charges for the Common Area Maintenance, Common Area Building Insurance, and Property Taxes during the Term of the Sublease and Option Period. In addition to all other charges required to be paid by Subtenant pursuant to this Sublease. Subtenant shall pay for any increases in the Common Area Insurance (building insurance) that may result from the Subtenant's use and Tenant Improvements. 2 ADDENDUM NO.1 (continued) 15. PARKING ------- Subtenant shall have the right to occupy 17 parking spaces in front of the building free of charge during the Term of Sublease and Option thereof. 16. SUBLEASE AND ADDENDUM #1 PREPARATION CLAUSE ------------------------------------------- This Addendum No. 1 has been prepared by Lee & Associates at the request of Sublandlord and Subtenant. This Sublandlord and Subtenant agree to indemnify and hold harmless Lee & Associate, its respective Agents and Employees, for any Liability of Loss, including without limitation, reasonable Attorney fees and costs that may be occasioned as a result of completing this Addendum No. 1. Subtenant and Sublandlord acknowledge being advised by Lee & Associates to have this Sublease (prepared by Sublandlord) and Addendum No 1. and the master Lease reviewed by their respective Attorneys, Accountants, or Insurance Agents for professional advice. The Sublease document was prepared by Sublandlord. In witness whereof, Sublandlord, Landlord, and Subtenant have executed this Sublease and Addendum No. 1 as of the day and year first written above. "SUBLANDLORD" "SUBTENANT' BioMedical Applications of Los Angeles, Inc. BioMarin Pharmaceutical, Inc. By: __________________________________ By: /s/ John C Klode --------------------------- Its. _________________________________ Its: President -------------------------- Date: ________________________________ Date: 7-9-98 ------------------------- LANDLORD: By: __________________________________ Its: _________________________________ Date: ________________________________ 3 L E A S E - - - - - THIS LEASE, made and entered into as of the July 20, 1992 by and between COMMERCIAL BUILDING COMPANY, A PARTNERSHIP (LANDLORD, and BIO MEDICAL APPLICATIONS OF LOS ANGELES, INC. a Delaware corporation(TENANT). W I T N E S S E T H 1. PREMISES: Landlord hereby leases to Tenant and Tenant hires from ----------- Landlord for the term and according to the covenants and conditions contained herein the total space of approximately 8,000 square feet in the building located at 1123 West Carson Street, Torrance, California 90502, together with all the improvements, easements and appurtenances related hereto, including an access to an auxiliary electrical generator and all the parking spaces pertaining to the building, all of the foregoing hereinafter referred to as "PREMISES". 2. TERM: The term of this lease shall be for a period of TEN (10) years, ------- beginning May 1, 1993 and ending April 30, 2003. 3. RENT: Tenant agrees to pay during the Ten (10) year period, a minimum ------- rental of Six thousand Dollars ($ 6,000.00) per month inclusive parking and window cleaning for the 1st TWO (2) years, to increase by THREE (3)% per cent per year thereafter payable monthly, Rental shall be payable in lawful money of the United States of America at such places as Landlord may direct by Notice in writing by Tenant. Tenant has a Security Deposit with Landlord in the amount of SIX THOUSAND FIVE HUNDRED TWENTY FIVE ($ 6,525.00) DOLLARS. Landlord upon written Notice to Tenant may elect to use such portion of said Security Deposit as may be reasonably necessary to remedy any default by Tenant. Upon termination of this Lease, so long as Tenant is not in default, Landlord shall refund to TENANT the Security Deposit or the remaining portion of thereof. -1- 4. TAXES AND ASSESSMENTS: During the term of this lease Landlord shall pay ------------------------ and Tenant shall reimburse Landlord promptly upon receipt of bills accompanied by evidence of payment by Landlord for; (a) Twenty five percent (25%) of all-real property taxes imposed upon the entire land and Ninety per cent (90%) on the building, in which the premises are located. (b) During any tax year in which Tenant is in possession for less than the entire year, the taxes to be paid by Tenant shall be prorated. (c) All improvements made by Tenant prior of this Lease or after, shall be billed and paid by Tenant in reference to Property taxes directly. 5. CONDITIONS of PREMISES, REPAIRS and MAINTENANCE: Tenant knows the ----------------------------------------------- conditions of premises and agrees that no statements or representations as to the condition or repair of the premises have been made by Landlord or its agents and tenant accepts the Premises in its present condition, except that Landlord shall pay to Tenant upon signing this Lease Agreement up front EIGHTY THOUSAND ($ 80,000.00) Dollars for Tenant repairs. Tenant agrees that during said term it will at its own expense keep all and every part of the premises and appurtenances thereto, including all glass contained in or upon said premises, in at least as good order and repair and in as clean and wholesome condition as the premises were to Tenant and in compliance with all applicable ordinances and will not commit or allow any waste or misuse of the premises, and that at the expiration of the term, Tenant will yield up and deliver said premises to Landlord in at least as good order and condition as the premises were delivered to Tenant, damage by element, fire or other casualty, and ordinary wear excepted. Landlord shall not be called upon to make any alterations, improvements or repairs whatsoever on the premises or any part thereof, or the appurtenances thereto (except in case of fire or the elements as herein provided). Notwithstanding the foregoing provisions hereof, Landlord agrees to keep and maintain the exterior structural walls (not included windows, door glass or plate glass) and roof in good order and state of repair throughout the term, Tenant agrees to provide routine maintenance for the elevator, but the -2- expense of any extraordinary repair shall be shared equally by Landlord and Tenant. Further Landlord shall at its sole cost and expense maintain areas of the building of which the premises are part, such as entryways sidewalks, parking areas and landscaped areas. All work done on the building and improvements by landlord or Tenant shall be done in first class and good and workmanlike manners and in compliance with all applicable statutes and ordinances and lawful regulations thereunder. If either party shall be in default in performing the covenants or conditions, relating to maintenance, repair or construction obligations, then the other party hereto after ten (10) days of written notice of such default, may make any and all necessary repairs, and, the defaulting party shall and agrees to pay the reasonable expense thereof, plus interest at ten (10%) per annum until paid. 6. UTILITIES RATES & CHARGES. Tenant agrees to pay before delinquency ------------------------- and in addition to any other sums required to be paid hereunder all utilities rates and charges for the services of utilities to the Premises. 7. DAMAGE BY FIRE OR UTHER CASUALTY. If the building or improvements -------------------------------- upon the premises at any time should be damaged or destroyed, in whole or in part, by reason of fire or other casualty covered by the fire insurance policy with extended coverage or by earthquake then the parties agree; (a) If such casualty results in only partial damage or destruction, the Landlord agrees to repair and reconstruct the same to a condition at least equal to its condition immediately preceding the casualty, using due diligence to complete said reconstruction as soon as reasonably possible, and the Lease shall continue in full force and effect except as herein otherwise provided, however if the damage occurs in the final year of the term or extended term of this lease, Landlord shall have the option to terminate this lease. Such option to be exercised within thirty (30) days from the date of the happening of the casualty; or (b) If such casualty results in total destruction and would require more than one hundred twenty (120) working days to complete the work of repair or restoration of the building, than Landlord may, at its option, repair and restore or may terminate the lease. Such option to be exercised by written notice to Tenant within thirty (30) days from the date of the -3- the building, the Lease shall continue in full force and effect and Landlord shall use due diligence to repair nor reconstruct the building within said one hundred twenty (120) day period; or (c) Notwithstanding anything to the contrary contained herein, in the event any such casualty occurs and damage or destruction of the building be so extensive that it would require one hundred twenty (120) working days or more to complete such repair then Tenant may, at its option, terminate this lease by written notice to Landlord given within thirty (30) days from the day of the happening of the casualty and Tenant thereafter shall be released of any further liability hereunder except for items therefore accrued and unpaid and any Security Deposit or prepaid rent shall be refunded to Tenant: or (d) If neither party elects to terminate this Lease as aforementioned then Landlord shall repair or restore the building and tenant shall be responsible to repair or restore the Tenants improvements at the Premises. Tenant shall be entitled to receive from insurance proceeds the replacement value of the contents and Landlord shall be entitled to receive from insurance proceeds the replacement value of the building. If, during any of the periods of repair and restoration provided Tenant is unable to use all or a portion of said building there shall be an abatement in minimum rentals from the date of destruction to the date of completion of reconstruction in proportion to the loss of use of the Premises to Tenant, however rental shall not be abated, beyond thirty (30) days after the completion of reconstruction of the building by Landlord. 8. USE OF PREMISES AND INDEMNITY. Tenant agrees to use the premises for ----------------------------- the purpose of conducting thereon the business of a hemodialysis medical clinic and for incidental purposes related hereto, or for any other legally permissible business or commercial venture, provided however, that Tenant shall not use the Premises in such manner as to violate any applicable law, rule, ordinance or regulation of any governmental body. Effective when Tenant takes possession of the Premises, Tenant covenants to indemnify Landlord against and to keep and save Landlord free and harmless from loss, damages and penalties, fines, charges, costs and expenses including attorneys fees, suffered by or charged or imposed against Landlord on account of any violation or charge of violation of any law, ordinance or regulation thereunder in the operation, care or use of the Premises, or in the conduct of any business thereon, or on account of any damage or injury, to persons or property on the premises or resulting directly or indirectly from the occupancy, use, misuse or neglect of the premises, or from the construction -4- or repair work on the Premises done by Tenant, except for Landlord negligence or wilful misconduct. 9. ALTERATION AND IMPROVEMENTS. Tenant may, provided the value of the --------------------------- premises is not thereby impaired at its option, make improvements to the Premises or may install replace equipment, lighting, partitioning, ceilings, wall coverings, floor coverings, sprinkler systems or other portions of the premises ats its sole cost and expense as may be required by the business conducted therein, upon approval of Plans and Specifications by Landlord, which such improvements, installations, furniture and fixtures made by Tenant, may not be removed by Tenant without prior written consent by Landlord and shall become property of landlord upon Tenants surrender of the Premises. Tenant agrees that any and all such alterations or additions shall be made in compliance with the building code and ordinances laws and regulations applicable to the Premises. Landlord agrees to execute all documents required to obtain necessary building permits. 10. INSURANCES. Tenant agrees to carry and maintain at its expense during ---------- the term hereof, plate glass insurance to the full insurable value thereof on all glass and plate glass in the Premises and Public Liability insurance in a sum no less then $ 1,000,000.00 for each occurrence, damage to property not less than $ 50,000.00. Said policies shall be issued for the benefit of Landlord and Tenant and tenant shall furnish Landlord with written certificate issued by such carrier (insurance) or with duplicate policies thereof. Tenant will, during the term hereof, at Tenants cost and expense, carry and maintain fire insurance with extended coverage endorsement for the benefit of Landlord on the premises in an amount equal to at least one hundred percent (100%) of the full insurable value thereof, excluding foundation and excavation costs, but including the value of all improvements constructed at the Premises by Tenant. The Policy covers flood and earthquake also. Tenant may at its option, bring its obligation to insure under this section within the coverage of any so called blanket policy or policies insurance which tenant may now or hereinafter carry, by appropriate amended, rider endorsement or otherwise, provided, however, that the interest of Landlord shall thereby be as fully protected as there would be otherwise if this option to Tenant to use blanket policies were not permitted. Copies of such policies shall be delivered to Landlord within 30 days after procurement thereof. All such policies shall contain a clause or endorsement to the effect that it may not be terminated or materially amended except -5- after ten (10) days written notice thereof to Landlord. Landlord and Tenant hereby expressly waive any and all claims against each other for loss and/or damage arising or resulting from the occupancy of the Premises and/or from any operation conducted therein or thereabouts caused by fire and/or other perils insured under standard form Fire Insurance Policies with extended coverage endorsement regardless of the cause of such damage including damage resulting from the negligence of Tenant or its agents, servants, employees, or invitees. 11. ASSIGNMENT. Tenant way not assign this Lease in whole or in part ---------- without first obtaining the prior written consent of Landlord, which consent shall not be unreasonably withheld or delayed; provided, however, that Tenant may, without such consent, assign this Lease in whole or in part as security or otherwise to any corporation controlled by controlling or under common control with Tenant (it being understood that Tenant shall remain liable hereunder) or to any surviving corporation resulting from a merger or consolidation of the Tenant with any other corporation or to any corporation wich purchases or otherwise acquires all or substantially all of the assets of Tenant. Any consent to any assignment, shall not be deemed to be a consent to any subsequent assignment by Tenant other than in accordance herewith shall be voidable by Landlord for a period of sixty (60) days after acquiring knowledge of such assignment. Tenant or its Assignee shall and its hereby given, the unqualified right and privilege at its option of subletting the Premises, in whole or in part, subject to all of the rents, terms and condition of this Lease. It is specifically understood by and between Landlord and Tenant that any subletting which Tenants or its Assignees make, as permitted herein, shall in no event relieve Tenant of its obligation or Tenant hereunder, and that the right of subletting shall be that of Tenant or its Assignees only, and shall not extend to any subtenant. 12. BANKRUPTCY OR INSOLVENCY. In the event that Tenant is adjudged ------------------------ bankrupt or makes any assignment for the benefit of creditors, or in the event that this Lease is levied on and put up for sale on execution foreclosure, trustee's sale or judicial proceedings on account of debts of Tenant, or in liquidation proceedings, or in the event a receiver or Trustee for Tenant or a Subtenant or for this Lease or a sublease is appointed in -6- foreclosure proceedings, receivership proceedings under the Bankruptcy Act or other judicial proceedings, this Lease or a sublease or any interest in the leased property shall not thereby or by any such proceedings pass or be assigned to any purchaser, assignee, receiver or trustee, but landlord, at its option, and in the event any such proceedings be not dismissed within thirty (30) days after the institution thereof may terminate this Lease and all of the rights of the Tenant and any such succeding party in or to the premises or in or to this Lease shall terminate, and Landlord may thereupon into possession thereof and remove all persons therefrom. 13. FIXTURES and EQUIPMENT. Except the following equipment which may be ---------------------- removed upon Tenant's surrender of premises, such as; 1.) Central Delivery Machine 2.) Stainless Steel Hot Water heater 3.) Water Purification Equipment 4.) Dialysis Storage System 5.) Emergency Generator and Transfer Switch all improvement, installations, affixed furniture and fixtures made by Tenant shall become property of Landlord upon Tenants surrender of the Premises. During the term hereof or any extended term, Tenant shall at all times pay and discharge all taxes levied upon its personal propertry and fixtures promptly and before delinquency and will not cause or permit any such taxed assessed upon or against the premises. 14. CONDEMNATION. In the event that, during the term hereof or any ------------ extended term, a non material part of the Premises shall be appropriated or taken under the power of eminent domain which partial taking does not render the Premises unsuitable for Tenant's use, then such partial condemnation shall not terminate this Lease and Landlord shall receive the entire award pertaining to the building and shall use the funds derived therefrom as shall be required to restore the building to a completed whole and Landlord shall so reconstruct the building at its expense and Tenant shall be entitled to any award pertaining to a loss of fixtures improvements and equipment installed by Tenant. During any such repairs or reconstruction, Tenant shall be entitled to an abatement in minimum rent in reasonable proportion to the loss of use of the Premises during such period of repair and reconstruction. Upon completion of such restoration rent payable hereunder shall be adjusted so that Tenant shall be required to pay that portion of the rent as the value of the part of the Premises remaining after condemnation bears to the value -7- of the entire Premises at the date of the condemnation. In the event of total condemnation,this Lease shall terminate as of the date of taking and Landlord shall be entitled to the entire award of land and building and Tenant shall be entitled to any award of its fixtures and equipment and improvements. Upon such termination of the Lease each party shall be released of any further liability hereunder except for items theretofore accrued and unpaid and items prepaid by Tenant and which shall be refunded to Tenant. 15. DEFAULT by TENANT. Tenant covenants and agrees that, if the rental ----------------- reserved by this Lease, or other charges to be paid hereunder by Tenant, or any part thereof, shall be unpaid when due, or Tenant shall fail to perform any of the other covenants, conditions or agreements herein contained, or if the Premises should be abandoned by Tenant, Landlord may at its option, recover and resume possession of the Premises by process of law; provided however, that if the default be made in the payment of rentals or other charges to be paid by Tenant, then the said Landlord shall first give Tenant ten (10) days notice in writing to cure said default, which notice shall specify the nature and character of said default of defaults, and if the default shall consist in Tenants failure to perform any of the other covenants, conditions and agreements herein contained then Landlord shall first give Tenant Thirty (30) days' notice in writing to cure said default or defaults, and upon the failure of Tenant to cure said defaults within the time specified in the applicable notice, Landlord may exercise the rights herein granted; provided however, that if such defaults is by its nature impossible to cure within said thirty (30) days and thereafter diligently pursues the cure of said default, to completion as soon as reasonably possible, then Tenant shall not be in default. In the event of such resumption of possession under this Lease, or by summary proceedings, or by any other means, Landlord may remove all persons and property from the Premises and may relet the same as agent for Tenant. Landlord shall be entitled to hold Tenant liable for the difference between the rent herein provided to be paid and other charges payable by Tenant hereunder, during the residue of the original term of this Lease had it continued in force, and the net rent for the residue of the term realized by Landlord by means of reletting the premises to other parties. Tenant agrees that such net rent shall be determined by deducting from the entire rent received by reason of such reletting the expense incurred by Landlord for necessary repairs to the premises or by reason of any breach of the terms, covenants, and conditions of this Lease, and all and any necessary expense -8- incurred in recovering the possession of the premises, and the cost and expenses of such reletting, including the reasonable cost of removing Tenants temporary improvements, but not including any expenses in connection with remodeling for a new Tenant agrees that said reletting may be for the whole or the residue of the demised term or for portions thereof from time to time as opportunity may offer and as Landlord may deem expedient, and in such case Tenant shall be liable for such difference from time to time as the rent would have fallen due if this lease have continued, deducting from the payments so to be made by Tenant from a given period as provided, herein, the net realized during the same period by reletting as aforesaid. Landlord may, at its option, terminate this Lease, and landlord, shall be entitled to recover from Tenant as damages the difference, if any, between the then reasonable rental value of the Premises, for the balance of term reserved in this Lease, and the amount of rental and other charges payable by Tenant for the balance of the term of this Lease together with the Rent then unpaid, including all reasonable attorney's fees, to be fixed by the court, which may be incurred in recovering the possession of said Premises or which may be incurred in collecting such damaged or such rents. It is further understood and agreed, that in the event Landlord shall elect to terminate this Lease as provided in this paragraph, Landlord shall give written notice to Tenant to that effect and may, at its option, immediately institute legal proceedings to collect all of said rental or damages, if any due Landlord by Tenant. (b) No waiver of landlord of its right to enforce any provision hereof after any default on the Part of Tenant shall be deemed a waiver of his rights to enforce each and all of the provisions hereof upon any further or other default of Tenant. No reentry of the said Premises by Landlord, as herein provided, shall be construed as an election of his part to terminate this Lease notice to that effect is delivered to Tenant or mailed to Tenant at its last known address and all remedies herein expressly given to Landlord shall be cumulative to each other and to any other legal or equitable remedy which Landlord might otherwise have in the event of a breach by Tenant, unless written and the exercise of one right or remedy by Landlord shall not in anywise impair the right to any other remedy until all obligations herein imposed on Tenant have been fully performed. 16. NOTICES. Whenever any notice is required to be given or delivered ------- personally or by registered mail or certified mail addressed as follows: To Tenant: -9- To Tenant: Bio-Medical Applications of Los Angeles, Inc. c/o National Medical Care, Inc, 1601 Trapelo Road Waltham, MA 02154 ATTN- DSD Legal Department To Landlord: 500 E. Carson Street, Suite 211 Carson, Ca. 90745 Any notice mailed as above provided, shall be deemed to have given or delivered at the time of mailing. Either party hereto may, by written notice served upon the other, change its mailing address from time to time during the Term hereof. 17. MISCELLANEOUS. ------------- (a) If the Premises are subject to the lien or encumbrance of a mortgage or deed of trust, Landlord shall provide Tenant with a letter of nondisturbance, in form and substance satisfactory to Tenant, wherein the holder of such lien or encumbrance covenants that in case of any foreclosure or forfeiture of landlord's interest in the Premises, Tenant's leasehold estate shall not be disturbed so long as Tenant is not in default under this lease. (b) The language in all parts of this Lease shall in all cases be construed simply according to its fair meaning and not strictly for or against either Landlord or Tenant. In any action or proceeding by one of the parties hereto against the other with respect to enforcement of this Lease, its interpretation or any dispute arising with respect to the said Lease, it is anticipated, that the cost and reasonable attorney's fees incurred by the prevailing party in such action, shall be recovered against the other party as a part of the judgment rendered in such action or proceeding. (c) Any waiver by either of the parties to this Lease, of any of the terms, covenants or agreements of this lease, at any time, shall not be taken or understood as a waiver at any time thereafter of the same terms, covenants or conditions herein contained. (d) This lease contains all of the covenants, conditions, stipulations, agreements and provisions agreed upon between the parties hereto in relation to, the Premises, and this Lease supersedes and cancels each and every other agreement, promise and/or negotiation between the parties with reference to the Premises; and no employee, agent or representative of Landlord or Tenant has the authority to change, modify or alter the terms hereof, and neither party is nor shall be bound by any inducement, statement, representation, promise or agreement not in conformity herewith. -10- 18. Covenants Against Liens; Inspection. Tenant shall indemnify and save ----------------------------------- Landlord harmless from and against any lien or claim of lien attached to or upon the Premises or any part thereof by reason of any act or omission on the part of Tenant. Landlord, or landlord's agents shall at all reasonable times have the right to enter upon the Premises for the purpose of inspecting the same, and for the purpose of posting or keeping posted notices of non-responsibility or any or all forms of notice reasonably necessary or proper to protect Landlord or the Premises against mechanic's or materialmen's liens, or charges, or other liens or charges, which might or could arise out of the use of the Premises by Tenant, or the construction of the improvements or the making of alterations or repairs to the Premises. 19. Covenant of Quiet Enjoyment. Landlords covenants and agrees to and --------------------------- with Tenant that at all times when Tenant is not in default under this Lease and during the term of this Lease, Tenant's quiet and peaceable enjoyment of the Premises shall not be disturbed or interfered with by Landlord or any person claiming by, through or under Landlord. 20. Signs. Tenant may affix, erect and maintain on the Premises such ----- signs, as Tenant shall deem reasonably necessary to the conduct of its business with written approval from Landlord of plans and specifications for such signs, which approval will not be unreasonably withheld or delayed; provided however, that the cost of erection and maintenance of any such sign shall be the responsibility of Tenant. 21. Successors. Each and all of the Terms and Agreements herein contained ---------- shall be binding upon and inure to the benefit of the parties hereto their heirs, personal and legal representatives, successors and assigns. 21. Surrender. Upon the last day of the term of this Lease, or any --------- extended term, or upon any sooner termination hereof under any of the provisions for the termination, Tenant shall quietly and peaceably surrender the possession of the Premises thereon to landlord in at least as good order, condition and repair as at the commencement of the term reasonable tear and wear, acts of God and landlord responsibilities to repair excepted. In the event, that Tenant shall hold over after the expiration of said term, or extended term such holding over shall be from month to month only and Tenant shall pay to Landlord each month in advance a monthly rental which shall be equivalent to the average of monthly rentals (including minimum rental and property taxes) paid -11- by Tenant during the immediately preceding twelve (12) months period and during such holding over, Tenant shall, be subject to each and all of the terms, covenants and conditions of this Lease. DULY EXECUTED by the parties hereto as of the day and year first written above. COMMERCIAL BUILDING COMPANY By: /s/ [SIGNATURE] -------------------------------------------- LANDLORD BIO MEDICAL APPLICATIONS OF LOS ANGELES, INC. By: /s/ [SIGNATURE] -------------------------------------------- By: __________________________________________ TENANT EX-10.23 25 COMMERCIAL LEASE AND DEPOSIT RECEIPT WITH GLYKO EXHIBIT 10.23 COMMERCIAL LEASE AND DEPOSIT RECEIPT RECEIVED FROM Glyko, Inc., a California Corporation, hereinafter referred to as LESSEE, the sum of $19,780.40 (Nineteen Thousand Seven Hundred Eighty and 40/100 dollars), ____ced by a check, as a deposit which shall belong to Lessor and shall be applied as follows:
TOTAL RECEIVED BALANCE DUE PRIOR TO OCCUPANCY ____ for the period from 2/1/97 to 2/28/97 .................. $___________ $ 9,890.20 $___________ _____ty deposit (not applicable toward last month's rent).... $___________ $ 9,890.20 $___________ ............................................................. $___________ $________ $___________ ............................................................. $___________ $19,780.40 $___________
In the event this Lease is not accepted by the Lessor within 5 days, the total deposit received will be refunded. Lessee offers to lease from Lessor the premises situated in the City of Novato, County of Marin of CA described as 11 Pimental Ct. (6,116 sf office) and 13 Pimental Ct. (5,336 sf whse.) the following terms and conditions: 1 TERM: The term will commence on February 1, 1997, and end on March 31, 2000 2 RENT: The rent will be $ 9,890.20, payable as follows: $9,890,20 per month rents will be paid to Lessor or his/her authorized agent, at the following address: Mr. Douglas Kaye, 113 Terrace Avenue, Kentfield, CA 94904 or at such other places as may be designated by Lessor from time to time. In the event rent is not paid within 10 days after due date, Lessee agrees to pay a late charge of $ 200.00 plus interest at 18% per annum on the delinquent amount. Lessee further agrees to pay $25.00 for each dishonored bank check. The late charge period is not a grace period, and Lessor is entitled to make written demand for any Rent if not paid when due. 3 USE: The premises are to be used for the operation of Biomedical Laboratory and associated office use, and for no other purpose, without prior written consent of Lessor. Lessee will not commit any waste upon the premises, or any nuisance or act which may disturb the quiet enjoyment of any tenant in the building. 4 USES PROHIBITED: Lessee will not use any portion of the premises for purposes other than those specified. No use will be made or permitted to be made upon the premises, nor acts done, which will increase the existing rate of insurance upon the property, or cause cancellation of insurance policies covering the property. Lessee will not conduct or permit any sale by auction on the premises. 5 ASSIGNMENT AND SUBLETTING: Lessee will not assign this Lease or sublet any portion of the premises without prior written consent of the Lessor, which will not be unreasonably withheld. Any such assignment or subletting without consent will be void and, at the option of the Lessor, will terminate this Lease. 6 ORDINANCES AND STATUTES: Lessee will comply with all statutes, ordinances, and requirements of all municipal, state and federal authorities now in force, or which may later be in force, regarding the use of the premises. The commencement or pendency of any state or federal court abatement proceeding affecting the use of the premises will, at the option of the Lessor, be deemed a breach of this Lease. 7 MAINTENANCE, REPAIRS, ALTERATIONS: Unless otherwise indicated, Lessee acknowledges that the premises are in good order and repair. Lessee shall, at his/her own expense, maintain the premises in a good and safe condition, including plate glass, electrical wiring, plumbing and heating and air conditioning installations, and any other system or equipment. The premises will be surrendered, at termination of the Lease, in as good condition as received, normal wear and tear excepted. Lessee will be responsible for all repairs required, except the following which will be maintained by Lessor: roof, exterior walls, structural foundations (including any retrofitting required by governmental authorities) and: parking lot and driveways. Lessor will also maintain in good condition the landscaping subject, to 100% reimbursement from Lessee. No improvement or alteration of the premises will be made without the prior written consent of the Lessor. Prior to the commencement of any substantial repair, improvement, or alteration, Lessee will give Lessor at least two (2) days written notice in order that Lessor may post appropriate notices to avoid any liability for liens. 8 ENTRY AND INSPECTION: Lessee will permit Lessor or Lessor's agents to enter the premises at reasonable times end upon reasonable notice for the purpose of inspecting the premises, and will permit Lessor, at any time within sixty (60) days prior to the expiration of this Lease. to place upon the premises any usual "For Lease" signs, and permit persons desiring to lease the premises to inspect the premises at reasonable times. 9 INDEMNIFICATION OF LESSOR: Lessor will not be liable for any damage or injury to Lessee, or any other person, or to any property, occurring on the premises. Lessee agrees to hold Lessor harmless from any claims for damages arising out of Lessee's use of the premises, and to indemnify Lessor for any expense incurred by Lessor in defending any such claims. 10 POSSESSION: If Lessor is unable to deliver possession of the premises at the commencement date set forth above, Lessor will not be liable for any damage caused by the delay, nor will this Lease be void or voidable, but Lessee will not be liable for any rent until possession is delivered. Lessee may terminate this Lease if possession is not delivered within 30 days of the commencement term in item 1. 11 LESSEE'S INSURANCE: Lessee, at his/her expense, will maintain plate glass, public liability, and property damage insurance insuring Lessee and Lessor with minimum coverage as follows: $1,000,000 per occurrence Lessee will provide Lessor with a Certificate of Insurance showing Lessor as additional insured. The policy will require ten (10) day's written notice to Lessor prior to cancellation or material change of coverage. 12 LESSOR'S INSURANCE: Lessor will maintain hazard insurance covering one hundred percent (100%) actual cash value of the improvements throughout the Lease term. Lessor's insurance will not insure Lessee's personal property, leasehold improvements, or trade fixtures. 13 SUBROGATION: To the maximum extent permitted by insurance policies which may be owned by the parties, Lessor and Lessee waive any and all rights of subrogation which might otherwise exist. 14 UTILITIES: Lessee agrees that he/she will be responsible for the payment of all utilities, including water, gas, electricity, heat and other services delivered to the premises. 15 SIGNS: Lessee will not place, maintain, nor permit any sign or awning on any exterior door, wall, or window of the premises without the express written consent of Lessor, which will not be unreasonably withheld. 16 ABANDONMENT OF PREMISES: Lessee will not vacate or abandon the premises at any time during the term of this Lease. If Lessee does abandon or vacate the premises, or is dispossessed by process of law. or otherwise, any personal property belonging to Lessee left on the Premises will be deemed to be abandoned, at the option of Lessor. 17 CONDEMNATION: If any part of the premises is condemned for public use, and a part remains which is susceptible of occupation by Lessee, this Lease will, as to the part taken, terminate as of the date the condemnor acquires possession. Lessee will be required to pay such proportion of the rent for the remaining term as the value of the premises remaining bears to the total value of the premises at the date of condemnation; provided, however, that Lessor may at his/her option, terminate this Lease as of the date the condemnor acquires possession. In the event that the premises are condemned in whole, or the remainder is not susceptible for use by the Lessee, this Lease will terminate upon the date which the condemnor acquires possession. All sums which may be payable on account of any condemnation will belong solely to the Lessor; except that Lessee will be entitled to retain any amount awarded to him/her for his/her trade fixtures or moving expenses. 18 TRADE FIXTURES: Any and all improvements made to the premises during the term will belong to the Lessor, except trade fixtures of the Lessee. Lessee may, upon termination, remove all his/her trade fixtures, but will pay for all costs necessary to repair any damage to the premises occasioned by the removal. 19 DESTRUCTION OF PREMISES: in the event of a partial destruction of the premises during the term, from any cause, Lessor will promptly repair the premises, provided that such repairs can be reasonably made within sixty (60) days. Such partial destruction will not terminate this Lease, except that Lessee will be entitled to a proportionate reduction of rent while such repairs are being made, based upon the extent to which the making of such repairs interferes with the business of Lessee on the premises, if the repairs cannot be made within sixty (60) days, this Lease may be terminated at the option of either party by giving written notice to the other party within the sixty (60) day period. 20 HAZARDOUS MATERIALS: Lessee will not use, store, or dispose of any hazardous substances upon the premises, except the use and storage of such substances that are customarily used in Lessee's business, and are in compliance with all environmental laws. Hazardous substances means any hazardous waste, substance or toxic materials regulated under any environmental laws or regulations applicable to the property. Lessee will be responsible for the cost of removal of any toxic contamination caused by lessee's use of the Premises. 21 INSOLVENCY: The appointment of a receiver, an assignment for the benefits of creditors, or the filing of a petition in bankruptcy by or against Lessee, will constitute a breach of this Lease by Lessee. 22 DEFAULT: in the event of any breach of this Lease by Lessee, Lessor may, at his/tier option, terminate the Lease and recover from Lessee: (a) the worth at the time of award of the unpaid rent which had bean earned at the time of termination; (b) the worth at the time of award of the amount by which the unpaid rent which would have bean earned after termination until the time of the award exceeds the amount of such rental loss that the, Lessee proves could have bean reasonably avoided; (c) the worth at the time of award of the amount by which the unpaid rent for the balance of the term after the time of award exceeds the amount of such rental loss that the Lessee proves could be reasonably avoided; and (d) any other amount necessary to compensate Lessor for all the detriment proximately caused by the Lessee's failure to perform his/her obligations under the Lease or which in the ordinary course of things would be likely to result therefrom. Lessor may, in the alternative, continue this Lease in effect, as long as Lessor does not terminate Lessee's right to possession, and Lessor may enforce all of Lessor's rights and remedies under the Lease, including the right to recover the rent as it becomes due under the Lease. If said breach of Lease continues, Lessor may, at any time thereafter, elect to terminate the Lease. These provisions will not limit any other rights or remedies which Lessor may have. 23 SECURITY: The security deposit will secure the performance of the Lessee's obligations. Lessor may, but will not be obligated to, apply all or per signs of the deposit on account of Lessee's obligations. Any balance remaining upon termination will be returned to Lessee. Lessee will not have the right to apply the security deposit in payment of the last month's rent. 24 DEPOSIT REFUNDS: The balance of all deposits will be refunded within three weeks (or as otherwise required by law), from date possession is delivered to Lessor or his/her authorized agent, together with a statement showing any charges made against the deposits by Lessor. 25 ATTORNEY FEES: in any action or proceeding involving a dispute between Lessor and Lessee arising out of this Lease, the prevailing party will be entitled to reasonable attorney fees. 26 WAIVER: No failure of Lessor to enforce any term of this Lease will be deemed to be a waiver. 27 NOTICES: Any notice which either party may or is required to give will be given by mailing the notice, postage prepaid, to Lessee at the premises, or to Lessor at the address shown in Item 2, or at such other places as may be designated in writing by the parties from time to time. Notice will be effective five days after mailing, or on personal delivery, or when receipt Is acknowledged in writing. 28 HOLDING OVER: Any holding over after the expiration of this Lease, with the consent of Owner, will be a month-to-month tenancy at a monthly rent of $12,000 payable in advance and otherwise subject to the terms of this Lease, as applicable, until either party will terminate the tenancy by giving the other party thirty (30) days written notice. 29 TIME: Time is of the essence of this Lease. 30 HEIRS, ASSIGNS, SUCCESSORS: This Lease is binding upon and Inures to the benefit of the heirs, assigns, and successors of the parties. 31 TAX INCREASE: in the event there is any increase during any year of the term of this Lease in real estate taxes over and above the amount of such taxes assessed for the tax year during which the term of this Lease commences, Lessee will pay to Lessor an amount equal to, 100% of the increase in taxes upon the land and building in which the leased premises ere situated. In the event that such taxes are assessed for e tax year extending beyond the term of the Lease, the obligation of Lessee will be prorated. Lessee will not be responsible for any tax Increase occasioned solely by a sale or transfer of the premises by Lessor. 32 COST OF LIVING INCREASE: The rent provided for in Item 2 will be adjusted effective upon the first day of the month Immediately following the expiration of 12 months from date of commencement of the term, and upon the expiration of each 12 months thereafter, in accordance with changes in the U.S. Consumer Price Index for All Urban Consumers (1982-84 = 100) ("CPI"). The monthly rent will be increased to an amount equal to the monthly rent set forth in Item 2, multiplied by a fraction the numerator of which is the CPI for the second calendar month Immediately preceding the adjustment date, and the denominator of which is the CPI for the second calendar month preceding the commencement of the Lease term; provided, however, that the monthly rent will not be less than the amount set forth in Item 2. 33 AMERICANS WITH DISABILITIES ACT: The parties are alerted to the existence of the Americans With Disabilities Act, which may require costly structural modifications. The parties are advised to consult with a professional familiar with the requirements of the Act. 34 LESSOR'S LIABILITY: in the event of a transfer of Lessor's title or Interest to the property during the term of this Lease, Lessee agrees that the grantee of such title or interest will be substituted as the Lessor under this Lease, and the original Lessor will be released of all further liability; provided, that all deposits will be transferred to the grantee. 35 ESTOPPEL CERTIFICATE: (a) On ten (10) days' prior written notice from Lessor, Lessee will execute, acknowledge, and deliver to Lessor statement in writing: (1) certifying that this Lease is unmodified and in full force and effect (or, if modified, stating the nature of such modification and certifying that this Lease, as so modified, is in full force and effect the amount of any security deposit, and the date to which the rent and other charges are paid in advance, if any; and (2) acknowledging that there are not, to Lessee's knowledge, any uncured defaults on the part of Lessor, or specifying such defaults if any are claimed. Any such statement may be conclusively relied upon by any prospective buyer or encumbrancer of the premises. (b) At Lessor's option. Lessee's failure to deliver such statement within such time will be material breach of this Lease or will be conclusive upon Lessee: (1) that this Lease is in full force and effect, without modification except as may be represented by Lessor; (2) that there are no uncured defaults in Lessor's performance; and (3) that not more than one month's rent has been paid in advance. (c) If Lessor desires to finance, refinance, or sell the premises, or any part thereof, Lessee agrees to deliver to any lender or buyer designated by Lessor such financial statements of Lessee as may be reasonably required by such lender or buyer. All financial statements will be received by the Lessor or the lender or buyer in confidence and will be used only for the purposes set forth. 36 ENTIRE AGREEMENT: The foregoing constitutes the entire agreement between the parties and may be modified only in writing signed by all parties. The following exhibits are a part of this Lease: Addendum to Lease Brokerage Disclosures LESSEE: GLYKO, INC., A CALIFORNIA CORPORATION By: /s/ John C. Klock ----------------------------------- Its: President ----------------------------------- Date: 23 Dec 96 ----------------------------------- LESSOR: DOUGLAS R. KAYE By: /s/ Douglas R. Kaye ----------------------------------- Its: ___________________________________ Date: 12/23/96 ----------------------------------- ADDENDUM TO LEASE BY & BETWEEN DOUGLAS R. KAYE, LESSOR AND GLYKO, INC., LESSEE DATED: DECEMBER 20, 1996 1. Heating, Ventilation and Air Conditioning (HVAC) ------------------------------------------------ Pursuant to section 7 of the lease Lessee shall be responsible to maintain and repair the HVAC system in the Premises pursuant to manufacturer's recommended maintenance schedule. In the event the HVAC compressors or exchangers need to be repaired or replaced not due to Lessee's lack of regularly scheduled HVAC maintenance, as described herein, Lessor shall be responsible to repair or replace the compressors or exchanger at Lessor's sole cost and expense. In the event the HVAC compressor or exchangers need to be repaired or replaced and Lessee has not been maintaining or repairing the HVAC system as described herein, or Lessee has modified the HVAC system without Lessor's consent, Lessee shall be solely responsible to repair or replace the compressors or exchangers as required, at Lessee's sole cost and expense. Upon the commencement date of this lease, Lessor represents to Lessee that the building systems, including the HVAC, electrical, plumbing, lighting, and structural elements of the building, are in good condition and repair. Additionally, Lessor shall repair the warehouse roof on or before the lease commencement date at Lessor's sole cost and expense. 2. Letter of Credit ---------------- This lease agreement is absolutely subject to the Lessee providing the Lessor within 15 days of lease execution, a Letter of Credit in the amount of $29,670.60, naming the Lessor beneficiary of the Letter of Credit if Lessee defaults under the terms and conditions of this lease agreement. So long that Lessee has not been in default under any of the terms and conditions of the lease the Letter of Credit will be reduced to $19,780 at the end of the second year of the lease term. The Letter of Credit shall expire upon the expiration of the lease term so long as Lessee has not been in default under the terms and conditions of this lease. Upon execution of this lease agreement, Lessee shall deposit with Lessor a Security Deposit of $9,890.20. Upon issuance of Letter of Credit, Lessor shall return the Security Deposit to Lessee. 3. Trailer ------- Lessee shall have the right to park a 10' x 20' trailer at the rear of the parking lot for storage of non-hazardous materials subject to the following: The trailer shall conform with all codes and regulations, shall be a mobile trailer not attached to the Premises and Lessee shall be responsible for any taxes, fees or fines relating to Lessee's use and occupancy of the trailer. 1 4. Consumer Price Index -------------------- Pursuant to section 32 of the lease agreement in no event shall the annual Consumer Price Index rental adjustment exceed 5 % per adjustment period. 5. Access to Premises ------------------ Upon execution of this lease Lessee shall have access to the Premises for inspecting the Premises with its contractor, and for installing its telephone and computer system, and for construction of tenant improvements in warehouse only. 6. Subleases --------- Lessee shall have the fight, and Lessor consents hereto, to sublease a portion of the Premises to Marin Head Start, and to BioMarin Pharmaceuticals Inc. 7. Free Rent --------- So long as Lessee is not in default of any obligation of this lease, Lessee shall have the second (2nd) and thirteenth (13th) months of the lease term rent free. LESSOR DOUGLAS R. KAYE By: /s/ Douglas R. Kaye ----------------------------------- Its: ___________________________________ Date: 12/23/96 ----------------------------------- LESSEE: GLYKO, INC., A California Corporation By: /s/ John C. Klock ----------------------------------- Its: President ----------------------------------- Date: 23 Dec 96 ----------------------------------- 2 PROPERTY: 11 & 13 PIMENTAL COURT, NOVATO, CA ---------------------------------------- HAZARDOUS MATERIALS WARNING: Current and future federal, state and local laws and regulations may require the clean-up of such toxic, hazardous or undesirable materials at the expense of those persons who in the past, present or furore have had any interest in the Property including, but not limited to, current, past and future owners and users of the Property. Lessor and Lessee are advised to consult with independent legal counsel of their choice or other experts, to determine their potential liability. AMERICANS WITH DISABILITIES ACT: On July 26, 1991, the federal legislation known as the Americans with Disabilities Act (ADA) was signed into law. The purpose of the ADA is to integrate persons with disabilities into the economic and social mainstream of American life. Title III of the ADA applies to landlords and tenants of "places of public accommodation" and "commercial facilities," and requires that places of public accommodation undertake "readily achievable" removal of communication and access barriers to the disabled. This requirement of Title III of the ADA is effective January 26, 1992. Lessor and Lessee should seek expert advice regarding the implications of the Act as it affects this agreement. LIABILITY RELEASE: Meridian Commercial, Inc., and its salespeople in this transaction have no expertise regarding hazardous materials or the Americans with Disabilities Act. Lessor and Lessee agree that they shall indemnify and hold Meridian Commercial, Inc. and its salespeople harmless from any claim, liability, or expense regarding hazardous materials or the ADA. BROKER REPRESENTATION: Meridian Commercial, Inc., is the real estate broker for the Lessor and the Lessee, and both parties consent hereto. LESSOR: DOUGLAS R. KAYE LESSEE: GLYKO, INC. By: /s/ Douglas R.Kaye By: John C. Klock -------------------------- ----------------------------- Date: 12/23/96 Title: President ------------------------ -------------------------- Date: 23 Dec 96 --------------------------- EX-10.25 26 PURCHASE AGREEMENT WITH GENZYME EXHIBIT 10.25 PURCHASE AGREEMENT between BIOMARIN PHARMACEUTICAL, INC. and GENZYME CORPORATION dated as of September 4, 1998 TABLE OF CONTENTS ARTICLE 1. PURCHASE AND SALE LLC INTEREST............................... 1 1.1. Authorization................................................ 1 1.2. Sale, Assignment and Purchase of the LLC Interest; Payments.. 1 ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF BIOMARIN................... 2 2.1. Organization and Qualification of BioMarin................... 2 2.2. BioMarin/Genzyme LLC......................................... 2 2.3. Ownership of LLC Interest.................................... 2 2.4. Authority.................................................... 2 2.5. Offer and Sale of LLC Interest............................... 3 2.6. No Breach.................................................... 3 2.7. Actions and Proceedings...................................... 3 2.8. Compliance with Laws......................................... 4 2.9. Brokerage.................................................... 4 2.10. Full Disclosure.............................................. 4 ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF GENZYME.................... 4 3.1. Authority for Agreement...................................... 4 3.2. Investment................................................... 4 3.3. Restrictions on Transferability.............................. 5 3.4. Experience................................................... 5 3.5. Brokerage.................................................... 5 ARTICLE 4. CONDITIONS PRECEDENT......................................... 5 4.1. Certificates and Documents................................... 5 4.2. Opinion of Counsel........................................... 6 ARTICLE 5. MISCELLANEOUS................................................ 6 5.1. Assignment................................................... 6 5.2. Severability................................................. 6 5.3. Notices...................................................... 7 5.4. Applicable Law............................................... 7 5.5. Entire Agreement............................................. 7 5.6. Headings..................................................... 7 5.7. Counterparts................................................. 7
PURCHASE AGREEMENT THIS PURCHASE AGREEMENT dated as of September 4, 1998 (the "Agreement") is --------- made by and between BioMarin Pharmaceutical, Inc., a Delaware corporation having its principal place of business at 11 Pimentel Court, Novato, California 94949 ("BioMarin") and Genzyme Corporation, a Massachusetts corporation having its -------- principal place of business at One Kendall Square, Cambridge, Massachusetts 02139 ("Genzyme"). Capitalized terms not defined herein shall have the ------- respective meanings ascribed to them in the Collaboration Agreement of even date herewith (the "Collaboration Agreement") by and among BioMarin, Genzyme and ----------------------- BioMarin/Genzyme LLC, a Delaware limited liability company having its principal place of business at One Kendall Square, Cambridge, Massachusetts 02139 ("BioMarin/Genzyme LLC"). BioMarin and Genzyme are sometimes referred to herein --------------------- individually as a "Party" and collectively as the "Parties." ----- ------- R E C I T A L S WHEREAS, BioMarin, Genzyme and BioMarin/Genzyme LLC have entered into a Collaboration Agreement for the development and commercialization of Collaboration Products throughout the world; and WHEREAS, in contemplation of such collaboration, BioMarin has formed BioMarin/Genzyme LLC and BioMarin Genetics, Inc., a Delaware corporation and a wholly-owned subsidiary of BioMarin ("Subsidiary"), and has assigned one percent ---------- (1%) of its interest in BioMarin/Genzyme LLC to Subsidiary; WHEREAS, in connection with the collaboration, BioMarin desires to sell and assign to Genzyme and Genzyme desires to purchase from BioMarin a fifty percent (50%) interest in BioMarin/Genzyme LLC. NOW THEREFORE, in consideration of the premises and of the covenants herein contained, the Parties mutually agree as follows: ARTICLE 1. PURCHASE AND SALE LLC INTEREST 1.1. Authorization. BioMarin has duly authorized the sale and assignment ------------- by BioMarin to Genzyme of a fifty percent (50%) interest in BioMarin/Genzyme LLC (subject to adjustment pursuant to Section 4.1 of the Collaboration Agreement and pursuant to the Operating Agreement of BioMarin/Genzyme LLC of even date herewith (the "Operating Agreement") by and between BioMarin and Genzyme (the ------------------- "LLC Interest"). ------------ 1.2. Sale, Assignment and Purchase of the LLC Interest; Payments. ----------------------------------------------------------- Concurrently with the execution and delivery of this Agreement, BioMarin hereby sells, assigns and transfers to Genzyme, and Genzyme hereby purchases from BioMarin the LLC Interest for an aggregate purchase price of twelve million one hundred thousand ten dollars ($12,100,010) payable as follows: (i) ten dollars ($10) payable by Genzyme to BioMarin upon execution of this Agreement; and (ii) twelve million one hundred thousand dollars ($12,100,000) upon the first full approval by the U.S. FDA of a BLA by BioMarin/Genzyme LLC for the use of a Collaboration Product in the Field. All of the aforementioned payments shall be made in United States dollars by certified bank check or wire transfer. ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF BIOMARIN In connection with the sale and assignment of the LLC Interest by BioMarin to Genzyme, BioMarin hereby makes the following representations and warranties to Genzyme. 2.1. Organization and Qualification of BioMarin. BioMarin is a ------------------------------------------ corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has full corporate power and lawful authority to own, lease and operate its assets, properties and business and to carry on its business as now being and as heretofore conducted. BioMarin is qualified or otherwise authorized to transact business as a foreign corporation in each jurisdiction (in the United States and outside of the United States) in which such qualification or authorization is required by law and in which the failure to so qualify or be authorized could have a material adverse effect on BioMarin or its assets, properties, business, operations or condition (financial or otherwise) (the "Business of BioMarin"). -------------------- 2.2. BioMarin/Genzyme LLC. BioMarin/Genzyme LLC is a limited liability -------------------- company duly organized, validly existing and in good standing under the laws of the State of Delaware and has full corporate power and lawful authority to own, lease and operate its assets, properties and business and to carry on its business as contemplated by the Collaboration Agreement. The appropriate documents have been filed to qualify BioMarin/Genzyme LLC as a foreign limited liability company in the Commonwealth of Massachusetts. Immediately prior to the execution and delivery of this Agreement, BioMarin and Subsidiary are the only members of BioMarin/Genzyme LLC and BioMarin and Subsidiary hold a ninety-nine percent (99%) and one percent (1%) interest in BioMarin/Genzyme LLC, respectively. BioMarin has previously exclusively licensed to BioMarin/Genzyme LLC all of its right, title and interest in (alpha)-L-iduronidase and technology relating thereto in the Territory and in the Field, including without limitation all patents, know-how, trade secrets, and preclinical and clinical data. 2.3. Ownership of LLC Interest. BioMarin is the legal and beneficial ------------------------- owner of all of the LLC Interest, free and clear of all liens, encumbrances, restrictions and claims of all kinds. BioMarin has full legal right, power and authority to sell, assign, convey, transfer and deliver the LLC Interest to Genzyme pursuant to this Agreement. The assignment by BioMarin of the LLC Interest, together with the execution of the Operating Agreement, pursuant to the provisions hereof will transfer to Genzyme valid title to the LLC Interest, free and clear of all liens, encumbrances, restrictions and claims of every kind arising through BioMarin. 2.4. Authority. The sale of the LLC Interest by BioMarin and the --------- execution, delivery and performance by BioMarin of this Agreement has been duly authorized by all necessary corporate action, and this Agreement has been duly executed and delivered by BioMarin. This Agreement constitutes the valid and binding obligation of BioMarin enforceable against BioMarin in accordance with its terms, subject to applicable bankruptcy, insolvency, moratorium 2 and similar laws affecting the rights and remedies of creditors generally and to general principles of equity. 2.5. Offer and Sale of LLC Interest. Based in part on the representations ------------------------------ made by Genzyme set forth in Article 3 below, the offer and sale of the LLC Interest pursuant to this Agreement is exempt from registration under the Securities Act of 1933, as amended (the "Securities Act"), and applicable state -------------- securities laws. BioMarin has complied with all applicable federal and state securities laws in connection with the offer and sale of the LLC Interest. 2.6. No Breach. The execution, delivery and performance of this --------- Agreement, the Collaboration Agreement and the Operating Agreement and the consummation of the transactions contemplated hereby and thereby will not: (i) violate any provision of the Certificate of Incorporation or By-laws of BioMarin and Subsidiary or the Certificate of Formation of BioMarin/Genzyme LLC; (ii) violate, conflict with or result in the breach of any of the terms or conditions of, result in modification of the effect of, or otherwise give any other contracting party the right to terminate, or constitute (or with notice or lapse of time or both constitute) a default under, any instrument, contract or other agreement to which BioMarin is a party or to which any of the assets or properties of BioMarin, Subsidiary or BioMarin/Genzyme LLC may be bound or subject; (iii) violate any order, judgment, injunction, award or decree of any court, arbitrator or governmental or regulatory body against, or binding upon, BioMarin, Subsidiary or BioMarin/Genzyme LLC or upon the securities, properties, assets or business of BioMarin, Subsidiary or BioMarin/Genzyme LLC; (iv) violate any statute, law or regulation of any jurisdiction as such statute, law or regulation relates to BioMarin, Subsidiary or BioMarin/Genzyme LLC or to the securities, properties, assets or business of BioMarin, Subsidiary or BioMarin/Genzyme LLC, respectively; (v) require the approval, consent or authorization of, or registration or filing with, any foreign, federal, state, local or other governmental or regulatory body or the approval, consent, waiver or notification of any stockholder, creditor, lessor or other non-governmental and non-regulatory persons; or (vi) result in the creation of any lien or other encumbrance on the assets or properties of BioMarin, Subsidiary or BioMarin/Genzyme LLC, excluding from clauses (ii) - (vi) such matters as would not in the aggregate have a material adverse effect on the Businesses of BioMarin, Subsidiary or BioMarin/Genzyme LLC or upon the transactions contemplated hereby or by the Collaboration Agreement or the Operating Agreement. Prior to the date hereof, neither Subsidiary nor BioMarin/Genzyme LLC was a party to any contracts or agreements with a Third Party. References in this Agreement to the Business of Subsidiary or BioMarin/Genzyme LLC mean the assets, properties, business, operations or condition (financial or otherwise) of Subsidiary or BioMarin/Genzyme LLC, as applicable. 2.7. Actions and Proceedings. There are no outstanding orders, judgments, ----------------------- injunctions, awards or decrees of any court, governmental or regulatory body or arbitration tribunal against BioMarin or BioMarin/Genzyme LLC or affecting any of their respective properties or rights. There are no actions, suits or claims or legal, administrative or arbitral proceedings or, to the best knowledge of BioMarin, investigations (whether or not the defense thereof or liabilities in respect thereof are covered by insurance) pending or, to the best knowledge of BioMarin, threatened against BioMarin or BioMarin/Genzyme LLC or affecting any of their respective properties or rights. To the best knowledge of BioMarin, there is no fact, event or circumstance 3 that may give rise to any suit, action, claim, investigation or proceeding that individually or in the aggregate could have a material adverse effect upon the transactions contemplated hereby or upon the Businesses of BioMarin or BioMarin/Genzyme LLC. 2.8. Compliance with Laws. Neither BioMarin nor BioMarin/Genzyme LLC is -------------------- in violation of any statute, law, rule or regulation, or in default with respect to any judgment, writ, injunction, decree, rule or regulation of any court or governmental agency or instrumentality specifically naming BioMarin or BioMarin/Genzyme LLC, including without limitation laws relating to environmental protection, except for such violations or defaults which do not, individually or in the aggregate, materially and adversely affect the Businesses of BioMarin or BioMarin/Genzyme LLC. 2.9. Brokerage. No broker, finder, agent or similar intermediary has --------- acted on behalf of BioMarin in connection with this Agreement or the transactions contemplated hereby, and there are no brokerage commissions, finders fees or similar fees or commissions payable in connection therewith based on any agreement, arrangement or understanding with BioMarin or any action taken by BioMarin. 2.10. Full Disclosure. No representation or warranty of BioMarin --------------- contained in this Agreement (i) contains an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements made, in the context in which made, not false or misleading or (ii) omits to state a material fact that materially adversely affects, or (in the reasonable business judgment of BioMarin based on facts of which it has knowledge) is likely to materially adversely affect the Business of BioMarin, and, to the best knowledge of BioMarin, no other document or paper furnished by or on behalf of BioMarin to Genzyme (or any of its agents) pursuant to this Agreement or in connection with the transactions contemplated hereby, taken as a whole as of the date hereof together with the representations and warranties of BioMarin contained in this Agreement contains an untrue statement of a material fact. There is no fact known to BioMarin that has not been disclosed to Genzyme in this Agreement or otherwise that materially adversely affects, or (in the reasonable business judgment of BioMarin based on facts of which it has knowledge) is likely to materially adversely affect the Business of BioMarin/Genzyme LLC. ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF GENZYME In connection with the purchase by Genzyme of the LLC Interest from BioMarin, Genzyme hereby makes the following representations and warranties to BioMarin. 3.1. Authority for Agreement. The execution, delivery and performance by ----------------------- Genzyme of this Agreement has been duly authorized by all necessary corporate action, and this Agreement has been duly executed and delivered by Genzyme. This Agreement constitutes the valid and binding obligation of Genzyme enforceable against Genzyme in accordance with its terms, subject to applicable bankruptcy, insolvency, moratorium and similar laws affecting the rights and remedies of creditors generally and to general principles of equity. 4 3.2. Investment. Genzyme is acquiring the LLC Interest solely for its own ---------- account, for investment and not with a view to, or for sale in connection with, any distribution thereof, nor with any present intention of distributing or selling the same; Genzyme does not have any present plans to enter into any contract, undertaking, agreement or arrangement relating thereto. 3.3. Restrictions on Transferability. Genzyme understands that the LLC ------------------------------- Interest has not been registered under the Securities Act or under the securities laws of any state or other jurisdiction in reliance upon exemptions thereunder. Genzyme acknowledges and is aware that the LLC Interest cannot be resold unless the LLC Interest is registered under the Securities Act and any applicable securities law of any state or other jurisdiction, or an exemption from registration is available, and that it has no rights to require that the LLC Interest be registered under the Securities Act or any state securities laws. 3.4. Experience. Genzyme has carefully reviewed the representations ---------- concerning BioMarin and BioMarin/Genzyme LLC contained in this Agreement and has had the opportunity to make detailed inquiry concerning BioMarin, BioMarin/Genzyme LLC and their respective businesses and personnel. The officers of BioMarin have made available to Genzyme any and all written information which it has requested and have answered to Genzyme's satisfaction all inquiries made by Genzyme. Genzyme has adequate net worth and means of providing for its current needs and contingencies to sustain a complete loss of its investment in BioMarin/Genzyme LLC. Genzyme's overall commitments to investments which are not readily marketable is not disproportionate to its net worth, and Genzyme's investment in the LLC Interest will not cause such overall commitment to become excessive. Genzyme has sufficient knowledge and experience to evaluate the risk of its investment in BioMarin/Genzyme LLC. 3.5. Brokerage. No broker, finder, agent or similar intermediary has --------- acted on behalf of Genzyme in connection with this Agreement or the transactions contemplated hereby, and there are no brokerage commissions, finders fees or similar fees or commissions payable in connection therewith based on any agreement, arrangement or understanding with Genzyme, or any action taken by it. ARTICLE 4. CONDITIONS PRECEDENT 4.1. Certificates and Documents. Contemporaneously with the execution of -------------------------- this Agreement, BioMarin shall deliver to Genzyme: (a) the Certificate of Incorporation of BioMarin, certified by the Secretary of State of Delaware as of the most recent practicable date; (b) the Certificate of Formation of BioMarin/Genzyme LLC, certified by the Secretary of State of Delaware as of the most recent practicable date; (c) the Certificate of Incorporation of Subsidiary, certified by the Secretary of State of Delaware as of the most recent practicable date; 5 (d) certificate, as of the most recent practicable date, as to the corporate good standing and legal existence of BioMarin issued by the Secretary of State of the states of Delaware and California, each confirming such good standing and legal existence as of such date, together with a facsimile from the Secretary of State of Delaware confirming the legal existence of BioMarin as of the most recent practicable date; (e) facsimile from the Secretary of State of Delaware, dated as of the most recent practicable date, confirming the corporate good standing and legal existence of BioMarin/Genzyme LLC as of such date; (f) By-Laws of BioMarin, certified by its Secretary as of the most recent practicable date; and (g) resolutions of the Board of Directors of BioMarin authorizing and approving all matters in connection with this Agreement and the transactions contemplated hereby, certified by the Secretary of BioMarin as of the most recent practicable date. 4.2. Opinion of Counsel. Contemporaneously with the execution of this ------------------ Agreement, BioMarin shall deliver to Genzyme an opinion of counsel to BioMarin, dated as of the date hereof and addressed to Genzyme, in a form reasonably acceptable to Genzyme. ARTICLE 5. MISCELLANEOUS 5.1. Assignment. This Agreement may not be assigned or otherwise ---------- transferred by any Party without the consent of the other Party; provided, however, that either Party may, without such consent, assign its rights and obligations under this Agreement (a) in connection with a corporate reorganization, to any member of an affiliated group, all or substantially all of the equity interest of which is owned and controlled by such Party or its direct or indirect parent corporation or (b) in connection with a merger, consolidation or sale of substantially all of such Party's assets to an unrelated Third Party; provided, however, that such Party's rights and obligations under this Agreement shall be assumed by its successor in interest in any such transaction and shall not be transferred separate from all or substantially all of its other business assets, including those business assets that are the subject of this Agreement. Any purported assignment in violation of the preceding sentence shall be void. Any permitted assignee shall assume all obligations of its assignor under this Agreement in writing. 5.2. Severability. Each Party hereby agrees that it does not intend to ------------ violate any public policy, statutory or common laws, rules, regulations, treaty or decision of any government agency or executive body thereof of any country or community or association of countries. Should one or more provisions of this Agreement be or become invalid, the Parties hereto shall substitute, by mutual consent, valid provisions for such invalid provisions, which valid provisions in their economic effect are sufficiently similar to the invalid provisions that it can be reasonably assumed that the Parties would have entered into this Agreement with such valid provisions. In case such valid provisions cannot be agreed upon, the invalidity of one or several provisions of this Agreement shall not affect the validity of this Agreement as a whole, unless the invalid provisions are of such essential importance to this Agreement that it is to be reasonably 6 assumed that the Parties would not have entered into this Agreement without the invalid provisions. 5.3. Notices. Any consent, notice or report required or permitted to be ------- given or made under this Agreement by one of the Parties hereto to the other shall be in writing, delivered personally or by facsimile (and promptly confirmed by personal delivery or courier) or courier, postage prepaid (where applicable), addressed to such other Party at its address indicated below, or to such other address as the addressee shall have last furnished in writing to the addressor in accordance with this Section 5.3, and shall be effective upon receipt by the addressee. If to BioMarin Pharmaceutical, Inc. BioMarin: 11 Pimentel Court Novato, California 94949 Attention: President Facsimile: (415) 382-7889 If to Genzyme Corporation Genzyme: One Kendall Square Cambridge, Massachusetts 02139 Attention: President Facsimile: (617) 374-7423 with a copy to: Genzyme Corporation One Kendall Square Cambridge, Massachusetts 02139 Attention: Chief Legal Officer Facsimile: (617) 252-7553. 5.4. Applicable Law. This Agreement shall be governed by and construed in -------------- accordance with the laws of the Commonwealth of Massachusetts without regard to any choice of law principle that would dictate the application of the laws of another jurisdiction. 5.5. Entire Agreement. This Agreement together with the Collaboration ---------------- Agreement and the Operating Agreement contain the entire understanding of the Parties with respect to the subject matter hereof. All express or implied agreements and understandings, either oral or written, heretofore made are expressly merged in and made a part of this Agreement. This Agreement may be amended, or any term hereof modified, only by a written instrument duly executed by the Parties. Each of the Parties hereby acknowledges that this Agreement, the Collaboration Agreement and the Operating Agreement are each the result of mutual negotiation and therefore any ambiguity in their respective terms shall not be construed against the drafting Party. 5.6. Headings. The captions to the several Articles and Sections hereof -------- are not a part of this Agreement, but are merely guides or labels to assist in locating and reading the several Articles and Sections hereof. 7 5.7. Counterparts. This Agreement may be executed in two or more ------------ counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 8 IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first set forth above. BIOMARIN PHARMACEUTICAL, INC. By: /s/ Grant W. Denison, Jr. ------------------------------------------------ Title: Chief Executive Officer and Chairman of the --------------------------------------------- Board --------------------------------------------- Date: September 4, 1998 ---------------------------------------------- GENZYME CORPORATION By: /s/ G. Jan van Heek -------------------------------------------- Title: Executive Vice President --------------------------------------------- Date: August 31, 1998 --------------------------------------------- 9 EX-10.26 27 SUBSCRIPTION AGREEMENT WITH GENZYME DATED 9/4/1998 EXHIBIT 10.26 SUBSCRIPTION AGREEMENT TO: BIOMARIN PHARMACEUTICAL INC. RE: SUBSCRIPTION FOR AND PURCHASE OF SHARES OF COMMON STOCK 1. SUBSCRIPTION ------------ Genzyme Corporation (the "PURCHASER") hereby irrevocably subscribes for and agrees to purchase, on and subject to the terms and conditions set forth herein, from BioMarin Pharmaceutical Inc., a Delaware corporation (the "CORPORATION"), one million three hundred thirty-three thousand, three hundred thirty-three (1,333,333) shares of Common Stock of the Corporation (the "SHARES") at a price of $6.00 per share, having the voting powers, designations, preferences, rights and qualifications set forth in the Corporation's Restated Certificate of Incorporation, the form of which is attached hereto as Exhibit "A" (the "RESTATED CERTIFICATE"). 2. PAYMENT ------- At Closing, as defined below, the aggregate purchase price for the Shares, $7,999,998 (the "SUBSCRIPTION PRICE"), shall be paid by wire transfer to the following account: BIOMARIN PHARMACEUTICAL INC., BANK OF AMERICA, 300 LAKESIDE DRIVE, SUITE 250, OAKLAND, CA 94612; ACCOUNT NUMBER: 1472800983; ROUTING #121000358; CONTACT PERSON: NANETTE ANDINO. 3. DOCUMENTS TO BE PROVIDED BY PURCHASER ------------------------------------- The Purchaser must complete, sign and return as soon as possible, two executed copies of each of this Subscription Agreement, including the Accredited Investor Questionnaire attached hereto as Exhibit "B", the Amended and Restated Registration Rights Agreement (the "REGISTRATION RIGHTS AGREEMENT"), and the Pre-emptive Rights Letter (the "PRE-EMPTIVE RIGHTS LETTER"). 4. CLOSING AND DELIVERY OF SHARE CERTIFICATES ------------------------------------------ Delivery and payment for the Shares will be completed in one closing (the "CLOSING") at the offices of Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo Alto, California at 8:00 a.m. (Pacific Daylight Time) (the "CLOSING TIME") on such date as the Corporation and the Purchaser may agree (the "CLOSING DATE"), but in any event not later than September 4, 1998 (unless extended by mutual agreement of the Corporation and the Purchaser). -1- A certificate representing the Shares (the "CERTIFICATE") will be delivered at Closing against payment to the Corporation of the Subscription Price in the manner specified in Paragraph 2 above. 5. CONDITIONS TO CLOSING OF THE PURCHASER -------------------------------------- The Purchaser's obligation to purchase the Shares at the Closing is, at the option of the Purchaser, subject to fulfillment on or prior to the Closing Date of the following conditions: 2 5.1 Representations and Warranties Correct. The representations and -------------------------------------- warranties made by the Corporation in Section 7 hereof shall be true and correct when made, and shall be true and correct on the Closing Date with the same force and effect as if such representations had been made on and as of said date. 5.2 Covenants. All covenants, agreements and conditions contained in this --------- Subscription Agreement to be performed by the Corporation on or prior to the Closing Date shall have been performed or complied with in all respects. 5.3 Compliance Certificate. The Corporation shall have delivered to the ---------------------- Purchaser a certificate, executed by the President of the Corporation, dated as of the Closing Date, and certifying to the fulfillment of the conditions specified in Sections 5.1 and 5.2 above. 5.4 Secretary's Certificate. The Corporation shall have delivered to the ----------------------- Purchaser a certificate, executed by the Secretary of the Corporation, dated as of the Closing Date, and certifying as to the certificate of incorporation, by- laws, incumbency of officers and authorizing resolutions. 5.5 Opinion of Counsel. Wilson Sonsini Goodrich & Rosati, counsel to the ------------------ Corporation, shall have delivered to the Purchaser an opinion, in form and substance reasonably satisfactory to Purchaser, in the form attached hereto as Exhibit "C." 5.6 Blue Sky. The Corporation shall have obtained all permits and -------- qualifications required by any state in connection with the offer and sale of the Shares, or secured an exemption therefrom. 5.7 Registration Rights Agreement. The Corporation shall have executed ----------------------------- and delivered to the Purchaser the Registration Rights Agreement. 5.8 Subscription Agreement. The Corporation shall have executed and ---------------------- delivered to the Purchaser a copy of this Subscription Agreement. 5.9 Pre-emptive Rights Letter. The Corporation shall have executed and ------------------------- delivered to the Purchaser a copy of the Pre-emptive Rights Letter. 5.10 Collaboration Documents. The Corporation shall have executed and ----------------------- delivered to the Purchaser three copies of the Collaboration Agreement (the "Collaboration Agreement"), Operating Agreement and Purchase Agreement of even date herewith between the Corporation and the Purchaser. 5.11 Waiver of Pre-emptive Rights. The Corporation shall have received ---------------------------- written waivers of the rights triggered by the offer and sale of the Shares under the letter to Glyko BioMedical Ltd. ("Glyko") dated June 27, 1997, regarding certain pre-emptive rights dated June 27, 1997 (the "Glyko Pre-emptive Rights Letter") and under the letter to BB BioVentures L.P., dated December 30, 1997, regarding certain pre-emptive rights (the "BB BioVentures Pre-emptive Rights Letter"). 3 6. CONDITIONS TO CLOSING OF THE CORPORATION ---------------------------------------- The Corporation's obligation to issue and sell the Shares at the Closing to the Purchaser is, at the option of the Corporation, subject to the fulfillment of the following conditions: 6.1 Representations and Warranties. The representations and warranties ------------------------------ made by the Purchaser in Section 9 hereof shall be true and correct when made, and shall be true and correct on the Closing Date with the same force and effect as if such representations had been made on and as of said date. 6.2 Blue Sky. The Corporation shall have obtained all permits and -------- qualifications required by any state in connection with the offer and sale of the Shares, or secured an exemption therefrom. 6.3 Registration Rights Agreement. The Purchaser shall have executed and ----------------------------- delivered to the Corporation the Registration Rights Agreement. 6.4 Subscription Agreement. The Purchaser shall have executed and ---------------------- delivered to the Corporation a copy of this Subscription Agreement. 6.5 Payment. The Corporation shall have received from the Purchaser ------- payment in full for the Subscription Price. 6.6 Pre-emptive Rights Letter. The Purchaser shall have executed and ------------------------- delivered to the Corporation the Pre-emptive Rights Letter. 6.7 Waiver of Pre-emptive Rights. The Corporation shall have received ---------------------------- written waivers of the rights triggered by the offer and sale of the Shares under the Glyko Pre-emptive Rights Letter and the BB BioVentures Pre-emptive Rights Letter by the respective parties thereto. 6.8 Collaboration Documents. The Purchaser shall have executed and ----------------------- delivered to the Corporation three copies of the Collaboration Agreement, the Operating Agreement and the Purchase Agreement, each of even date herewith, between the Corporation and the Purchaser. 7. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION ------------------------------------------------- The Corporation hereby represents and warrants to the Purchaser that, except as otherwise set forth on Exhibit "D" hereto, with specific reference to the subsection of this Section 7 so affected, the following will be true and correct as of the Closing Date: 4 7.1 Organization and Standing. The Corporation is a corporation duly ------------------------- organized and validly existing under, and by virtue of, the laws of the State of Delaware and is in good standing under such laws. The Corporation has the requisite corporate power to own and operate its properties and assets and to carry on its business as presently conducted. The Corporation is qualified to do business as a foreign corporation in the State of California. 7.2 Corporate Power. The Corporation has all requisite legal and --------------- corporate power to execute and deliver this Subscription Agreement, the Registration Rights Agreement and the Pre-emptive Rights Letter, to sell and issue the Shares hereunder and to carry out and perform its obligations under the terms of this Subscription Agreement and the Registration Rights Agreement. 7.3 Subsidiaries. The Corporation has no subsidiaries or affiliated ------------ companies other than Glyko, a company incorporated under the federal laws of Canada. Glyko currently owns 8,666,667 shares of the Corporation's Common Stock. In connection with the transactions contemplated by the Collaboration Agreement between the Corporation and Purchaser, of even date herewith, the Corporation has caused to be incorporated in Delaware a wholly-owned subsidiary, BioMarin Genetics, Inc. ("BIOMARIN GENETICS"). BioMarin Genetics is validly existing under, and by virtue of the laws of the State of Delaware and is in good standing under such laws. BioMarin Genetics has the requisite corporate power to own and operate its property and assets and to carry on its business as presently conducted. Other than BioMarin Genetics, the Corporation does not otherwise own or control, directly or indirectly, any other corporation, association or business entity. 7.4 Capitalization. The authorized capital stock of the Corporation -------------- consists of 30,000,000 shares of Common Stock, of which, at the date hereof, 22,581,835 shares are issued and outstanding. All issued and outstanding shares of Common Stock have been duly authorized and validly issued, and are fully paid and non-assessable. The Common Stock has the voting power, designations, preferences, rights and qualifications set forth in the Restated Certificate. Except as contemplated herein and except for: (i) the pre-emptive rights granted to BB BioVentures L.P. pursuant to a letter dated December 30, 1997, (ii) the pre-emptive rights granted to Glyko pursuant to a letter dated June 27, 1997, (iii) options to purchase 1,949,440 shares of Common Stock of the Corporation granted under its 1997 Stock Plan, and (iv) warrants to purchase a total of up to 801,500 shares of Common Stock, there are no options, warrants, conversion privileges or other rights presently outstanding to purchase or otherwise acquire any authorized but unissued shares of the capital stock or other securities of the Corporation, nor any agreements or understandings with respect thereto. 7.5 Financial Statements. As of the Closing Date, the Corporation will -------------------- have delivered to the Purchaser the audited financial statements of the Corporation as at December 31, 1997 and for the period from March 21, 1997 (the date of inception) to December 31, 1997 (collectively, the "Financial Statements"). The Financial Statements, together with the notes thereto, are complete and correct in all material respects, have been prepared in accordance with generally accepted accounting principles consistently applied throughout the periods covered thereby, and present fairly the financial position of the Corporation as of their respective dates. Other than as described in the 5 Financial Statements, the Corporation has no material liabilities and knows of no material contingent liabilities not disclosed in the Financial Statements, except current liabilities incurred in the ordinary course of business which are not, individually or in the aggregate, materially adverse. 7.6 Subsequent Events. Since December 31, 1997, there has not been: (i) ----------------- a declaration, setting aside or payment of any dividend or other distribution with respect to, or any direct or indirect redemption or acquisition of, any shares of the capital stock of the Corporation or any of its subsidiaries; (ii) a waiver of any material right of the Corporation or any of its subsidiaries or cancellation of any material debt or claim held by the Corporation or any of its subsidiaries; (iii) a loan by the Corporation or any of its subsidiaries to any officer, director, employee or stockholder of the Corporation, or any agreement or commitment therefor; (iv) a material loss, destruction or damage to any property of the Corporation or any of its subsidiaries, whether or not insured; (v) a labor dispute involving the Corporation or any of its subsidiaries or a material change in the personnel of the Corporation or any of its subsidiaries or the terms and conditions of their employment; (vi) an acquisition or disposition of any assets (or any contract or arrangement therefor), or any transaction by the Corporation or any of its subsidiaries otherwise than for fair value in the ordinary course of business; (vii) any sale, assignment or transfer of any patents, trademarks, copyrights, trade secrets or other intangible assets of the Corporation or any of its subsidiaries or (viii) any change in any material agreement to which the Corporation or any of its subsidiaries is a party or by which any of them is bound or any other event or condition of any character that, either individually or in the aggregate, is reasonably likely to have a material adverse effect on the business, assets, condition (financial or otherwise) or results of operations of the Corporation and its subsidiaries taken as a whole (a "Material Adverse Effect"). 7.7 Authorization. All corporate action on the part of the Corporation, ------------- its directors and stockholders necessary for the authorization, execution, delivery and performance of this Agreement, the Registration Rights Agreement, the Pre-emptive Rights Letter, the authorization, sale, issuance and delivery of the Shares and the performance of the Corporation's obligations hereunder and thereunder has been taken or will be taken prior to the Closing. This Agreement, the Registration Rights Agreement and the Pre-emptive Rights Letter, when fully executed and delivered by the Corporation, shall constitute valid and binding obligations of the Corporation, enforceable in accordance with their respective terms, subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other equitable remedies. The Shares, when issued in compliance with the provisions of this Agreement, will be validly issued, fully paid and non-assessable, and free of any liens or encumbrances; provided, however, that the Shares may be subject to certain restrictions on transfer under applicable state and/or Federal securities laws. 7.8 Governmental Consents, etc. No consent, approval or authorization of -------------------------- or designation, declaration or filing with any state or federal governmental authority on the part of the Corporation is required in connection with the valid execution and delivery of this Agreement, the Registration Rights Agreement, the Pre-emptive Rights Letter or the offer, sale or issuance of the Shares, or the consummation of any other transaction contemplated hereby, except qualification (or taking such 6 action as may be necessary to secure an exemption from qualification, if available) under the California Corporate Securities Law and other applicable blue sky laws, of the offer and sale of the Shares, which filing and qualification, if required, will be accomplished in a timely manner prior to or promptly after the Closing. 7.9 Agreements; Actions. ------------------- (a) Except for the agreements explicitly contemplated hereby and agreements between the Corporation and the purchasers of the Corporation's Common Stock previously disclosed to the Purchaser in writing, there are no agreements, understandings or proposed transactions between the Corporation and any of its officers, directors, affiliates or any affiliate thereof. (b) There are no agreements, understandings, instruments, contracts, proposed transactions, judgments, orders, writs or decrees to which the Corporation or any of its subsidiaries is a party or by which any of them is bound which may involve (i) obligations (contingent or otherwise) of, or payments to, the Corporation or any of its subsidiaries in excess of $25,000 (other than obligations of, or payments to, the Corporation or any of its subsidiaries arising from purchase or sale agreements entered into in the ordinary course of business), (ii) the license of any BioMarin Technology or BioMarin Patent Rights, each as defined in the Collaboration Agreement, to or from the Corporation or any of its subsidiaries (other than licenses arising from the purchase of "off the shelf" or other standard products), (iii) provisions restricting or affecting the development, manufacture or distribution of the products or services of the Corporation or any of its subsidiaries or (iv) indemnification by the Corporation or any of its subsidiaries with respect to infringements of proprietary rights (other than indemnification obligations arising from purchase or sale agreements entered into in the ordinary course of business). (c) Neither the Corporation nor any of its subsidiaries has (i) declared or paid any dividends, or authorized or made any distribution upon or with respect to any class or series of its capital stock, (ii) incurred any indebtedness for money borrowed or any other liabilities (other than those incurred in the ordinary course of business or disclosed in the Financial Statements) in excess of $25,000, (iii) made any loans or advances to any person, other than ordinary advances for travel expenses or (iv) sold, exchanged or otherwise disposed of any of its assets or rights, other than the sale of its inventory in the ordinary course of business. 7.10 Title to Properties and Assets; Liens, etc. The Corporation and each ------------------------------------------ of its subsidiaries has a valid leasehold interest in, or valid title to, its properties and assets, including without limitation the assets and properties reflected in the Corporation's balance sheet as of December 31, 1997, in each case subject to no mortgage, pledge, lien, lease, encumbrance or charge, other than: (i) as disclosed in such balance sheet except as incurred in the ordinary course of business since the date of such balance sheet, (ii) the lien of current taxes not yet due and payable, and (iii) possible minor liens and encumbrances which do not in any case materially detract from the value of the property subject thereto or would result in a Material Adverse Effect. 7 7.11 Litigation. ---------- (a) At the date hereof, there are no actions, suits, proceedings or investigations pending or threatened against the Corporation or any of its subsidiaries or any their respective properties before any court or governmental agency, nor is the Corporation or any of its subsidiaries subject to any writ, injunction or order of any court or government agency (nor, to the Corporation's knowledge at the date hereof, is there any basis therefor or threat thereof) which, either individually or in the aggregate, might result in a Material Adverse Effect, or in any material impairment of the right or ability of the Corporation or any of its subsidiaries to carry on their respective businesses as now conducted or as currently proposed to be conducted, or in any material liability on the part of the Corporation or any of its subsidiaries, and, to the Corporation's knowledge at the date hereof, no action, suit, proceeding or investigation pending or threatened against the Corporation questions the validity of this Agreement, the Registration Rights Agreement or the Pre-emptive Rights Letter or any action taken or to be taken in connection herewith or therewith. (b) The Corporation has no current plan to initiate any action, writ, proceeding or investigation before any court or government agency. 7.12 Registration Rights. Except as set forth in the Registration Rights ------------------- Agreement, the Corporation is not under any obligation to register any of its presently outstanding securities, or any of its securities which may hereafter be issued, under the Securities Act of 1933, as amended (the "Securities Act"). 7.13 Brokers or Finders. The Corporation has not incurred, and will not ------------------ incur, directly or indirectly, any liability for brokerage or finders' fees or agents' commissions or any similar charges in connection with this Agreement or any transaction contemplated hereby. 7.14 No Breach. Neither the Corporation nor any of its subsidiaries is: --------- (i) in breach or violation of any of the terms or provisions of, or in default under, this Agreement or any indenture, mortgage, deed of trust, loan agreement or other agreement (written or oral) or instrument to which it is a party or by which it is bound or to which any of the property or assets of the Corporation or any of its subsidiaries is subject, which breach or violation or the consequences thereof would result in a Material Adverse Effect; (ii) in violation of the provisions of its charter, by-laws or any resolutions or (iii) in violation of any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over it or any of its assets or properties, which violation or the consequences thereof would result in a Material Adverse Effect. 8 7.15 No Conflict. The offer and sale of the Shares by the Corporation and ----------- the performance and consummation of the transactions contemplated herein will not conflict with or result in (i) a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement (written or oral) or instrument to which the Corporation is bound or to which any of the property or assets of the Corporation is subject, which breach or violation or the consequences thereof would result in a Material Adverse Effect, (ii) any violation of the provisions of the Restated Certificate, the by-laws or any resolutions of the Corporation or (iii) a violation of any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Corporation or any of its assets or properties, which violation or the consequences thereof would result in a Material Adverse Effect, except that the offer and sale of the Shares will trigger rights under the Glyko Pre-emptive Rights Letter and the BB BioVentures Pre-emptive Rights Letter, each of which rights will be waived on or before the Closing Date. 7.16 Securities Act. The transactions contemplated by this Agreement shall -------------- be exempt from the registration requirements of the Securities Act. 7.17 Intellectual Property. The Corporation has rights to the patents, --------------------- patent applications, trademarks, trade secrets, copyrights and other proprietary rights and technology referred to in the license agreement between the Corporation and Glyko dated as of June 26, 1997 (the "License Agreement") on the basis set forth in the License Agreement. The License Agreement is in full force and effect. The Corporation and its subsidiaries own or possess adequate licenses or other rights to use all patents, patent applications, trademarks, trademark applications, service marks, service mark applications, trade names, copyrights, manufacturing processes, formulae, trade secrets, customer lists and know-how (collectively, "Intellectual Property") necessary for the conduct of their respective businesses as presently conducted and as proposed to be conducted. There are no claims pending or, to the best of the Corporation's knowledge as of the date hereof, threatened, to the effect that the operations of the Corporation or any of its subsidiaries infringe upon or conflict with the asserted rights of any other person under any Intellectual Property, and, to the best of the Corporation's knowledge, there is no basis for any such claim (whether or not pending or threatened). No claim is pending or, to the best of the Corporation's knowledge, threatened, to the effect that any Intellectual Property owned or licensed by the Corporation or any of its subsidiaries, or which the Corporation or any of its subsidiaries otherwise has the right to use, is invalid or unenforceable by the Corporation or such subsidiary, and, to the best of the Corporation's knowledge, there is no basis for any such claim (whether or not pending or threatened). 7.18 Environmental Laws. To the best of the Corporation's knowledge, ------------------ neither the Corporation nor any of its subsidiaries is in violation of any applicable statute, law or regulation relating to the environment or occupational health or safety, and to the best of the Corporation's knowledge no material expenditures are or will be required in order to comply with any such existing statute, law or regulation. 9 7.19 Confidentiality. The Corporation and each of its subsidiaries has --------------- taken all reasonable measures to protect and preserve the confidentiality of all their respective trade secrets and other non-patented proprietary information, including without limitation the procurement of proprietary invention assignments and non-disclosure and non-competition agreements from employees, consultants, sub-contractors, customers and other persons who have access to such information. To the best of the Corporation's knowledge as of the date hereof, the procedures implemented by the Corporation and each of its subsidiaries are in conformity with the practices of similarly situated companies in its industry. 7.20 Taxes. The Corporation has filed all necessary Federal, state, ----- municipal, property, income and franchise tax returns and has paid all taxes shown as due thereon or otherwise owed by it to any taxing authority and there is no tax deficiency which has been or, to the best of the knowledge of the Corporation as of the date hereof, might be asserted against the Corporation which would result in a Material Adverse Effect. The Corporation has not received notice of any audit from any taxing authority, and no controversy with respect to taxes of any type is pending or, to the best knowledge of the Corporation, threatened. The Corporation has paid all applicable Federal and state payroll and withholding taxes, including but not limited to FICA, FUTA, state unemployment taxes and income taxes. 7.21 Employment Matters. There is no collective bargaining or other union ------------------ agreement to which the Corporation or any of its subsidiaries is a party or by which any of them is bound, or which is currently being negotiated. Neither the Corporation nor any of its subsidiaries sponsors, maintains or contributes to any pension, retirement, profit sharing, incentive compensation, bonus or other employee benefit plan, including without limitation any employee benefit plan covered by Title 4 of the Employee Retirement Income Security Act of 1974 ("ERISA") or any "multi-employer plan" as defined in Section 4001(a)(3) of ERISA, other than the Corporation's group medical, disability and life insurance plans (which are not subject to ERISA), and a 401(k) plan to which the Company makes no contributions. To the best knowledge of the Corporation at the date hereof: (i) no employee of the Corporation or any of its subsidiaries is a party to or bound by any agreement, contract or commitment, or subject to any restrictions, particularly but without limitation in connection with any previous employment of any such person, which might result in a Material Adverse Effect, and (ii) no officer has any present intention of terminating his employment with the Corporation or any of its subsidiaries, and the Corporation has no present intention of terminating any such employment. The only employment or consultancy agreements to which the Corporation is a party are the agreements dated June 26, 1997, with each of Grant W. Denison, Jr., John C. Klock and Christopher M. Starr and those certain consulting agreements with The Frankel Group, Dr. Skinner, Axon Research Corporation and employment letters which have been sent to certain prospective executive officer hires. 7.22 Insurance. The Corporation holds valid policies covering all of the --------- insurance required to be maintained by it pursuant to Section 11.5 of this Agreement. 10 7.23 Full Disclosure. This Agreement and the exhibits hereto, the --------------- Registration Rights Agreement and the Pre-emptive Rights Letter do not contain any untrue statement of a material fact nor omit to state a material fact necessary in order to make the statements contained herein or therein, in light of the circumstances in which they were made, not misleading. To the best knowledge of the Corporation, there are no facts which (individually or in the aggregate) material adversely affect the business, assets, liabilities, financial conditions, prospects or operations of the Corporation that have not been set forth in this Agreement and the exhibits hereto, the Registration Rights Agreement and the Pre-emptive Rights Letter. 8. CERTAIN MATTERS RELATING TO THE OFFER AND SALE OF THE SHARES ------------------------------------------------------------ The Purchaser acknowledges and agrees that: (i) it has not been provided with a registration statement, prospectus or any similar document in connection with its purchase of the Shares and (ii) its decision to execute this Agreement, the Registration Rights Agreement, the Pre-emptive Rights Letter and to purchase the Shares has not been based upon any verbal or written representations as to fact or otherwise made by or on behalf of the Corporation and that its decision is based upon the information, representations and covenants of the Corporation contained in this Agreement, its own review of certain of the Corporation's documents and records, and publicly available information concerning the Corporation. 9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER ---------------------------------------------------------- The Purchaser hereby represents, warrants and covenants to the Corporation (which representations, warranties and covenants shall survive the Closing) as of the date hereof and as of the Closing Date as follows: 11 9.1 Experience; Risk. The Purchaser has such knowledge and experience in ---------------- financial and business matters that it is capable of evaluating the merits and risks of the purchase of the Shares pursuant to this Agreement and is capable of protecting its interests in connection herewith. The Purchaser has the ability to bear the economic risk of the investment, including complete loss of the investment. 9.2 Investment. The Purchaser is acquiring the Shares for investment for ---------- its own account, not as a nominee or agent, and not with a view to, or for, resale in connection with any distribution thereof, and the Purchaser has no present intention to sell, grant any participation in, or otherwise distribute the Shares. The Purchaser understands that the Shares have not been registered under the Securities Act and will be issued pursuant to an exemption from the registration requirements thereof, which exemption depends upon, among other things, the bona fide nature of the investment intent and the accuracy of such Purchaser's representations as expressed herein. 9.3 Rule 144. The Purchaser understands that the Shares are "restricted -------- securities" under Federal securities laws, as they are unregistered and are being acquired from the Corporation in a transaction not involving a public offering, and that under such laws and applicable regulations promulgated thereunder the Shares may be resold without registration under the Securities Act only in certain limited circumstances. The Purchaser acknowledges that the Shares must be held indefinitely unless subsequently registered under the Securities Act or an exemption from such registration is available. The Purchaser is aware of the provisions of Rule 144 promulgated under the Securities Act, the provisions of which limit resale of "restricted securities." 9.4 No Public Market. The Purchaser understands that no public market now ---------------- exists for the Shares or for any other securities issued by the Corporation and that there is no assurance that a public market will ever exist for the Shares. 9.5 Authorization. ------------- (a) The Purchaser has the full right, power and authority to enter into and perform its obligations under this Agreement, the Registration Rights Agreement and the Pre-emptive Rights Letter. This Agreement, the Registration Rights Agreement and the Pre-emptive Rights Letter, when executed and delivered by the Purchaser, will constitute valid and binding obligations of the Purchaser, enforceable in accordance with their respective terms, subject to the laws of general application relating to bankruptcy, insolvency and the relief of debtors, rules of law governing specific performance, injunctive relief and other equitable remedies. (b) The Purchaser further represents that it is a validly existing corporation, has the necessary corporate capacity and authority to execute and deliver this Agreement and to observe and perform its covenants and obligations hereunder and has taken all necessary corporate action in respect thereof. 12 9.6 Further Limitations on Disposition. Without in any way limiting the --------------------------------- representations set forth above, the Purchaser further agrees not to make any offer or sale of all or any portion of the Shares within the United States or to a U.S. resident unless and until: (a) There is then in effect a Registration Statement under the Securities Act covering such proposed offer or sale and such offer or sale is made in accordance with such Registration Statement; or (b) The Purchaser shall have notified the Corporation of the proposed offer or sale and shall have furnished the Corporation with a statement of the circumstances surrounding the proposed disposition, and if reasonably requested by the Corporation, such Purchaser shall have furnished the Corporation with an opinion of counsel, reasonably satisfactory to the Corporation, that such offer or sale is exempt from the registration requirements under the Securities Act. (c) Notwithstanding the provisions of paragraph (b) above, no such registration statement or opinion of counsel shall be necessary for a transfer by Purchaser to any transferees in transactions contemplated by paragraph (b) above, if all such transferees agree in writing to be subject to the terms hereof to the same extent as if they were Purchasers hereunder. 9.7 Legends. It is understood that each certificate representing the ------- Shares, and any securities issued in respect thereof or exchange therefor shall bear legends substantially in the following form (in addition to any legend required under applicable state securities laws): "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION UNLESS THE CORPORATION RECEIVES AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT. COPIES OF THE AGREEMENTS COVERING THE PURCHASE OF THESE SECURITIES AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE CORPORATION AT THE PRINCIPAL EXECUTIVE OFFICES OF THE CORPORATION. 13 THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A LOCKUP PERIOD OF 180 DAYS FOLLOWING THE EFFECTIVE DATE OF THE FIRST REGISTRATION STATEMENT OF THE COMPANY FILED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AS SET FORTH IN AN AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SECURITIES, A COPY OF WHICH MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE CORPORATION AT THE PRINCIPAL EXECUTIVE OFFICES OF THE CORPORATION. SUCH LOCKUP PERIOD IS BINDING ON TRANSFEREES OF THESE SECURITIES." 9.8 Accredited Investor Status. The Purchaser presently does, and will -------------------------- as of the Closing Date, qualify as an "accredited investor" within the meaning of Rule 501(a) promulgated under the Securities Act. Purchaser meets the relevant criteria indicated on its completed and signed copy of the Accredited Investor Questionnaire attached hereto as Exhibit "B." 9.9 Brokers or Finders. The Purchaser has not incurred, and will not ------------------ incur, directly or indirectly, any liability for brokerage or finders' fees or agents' commissions or any similar charges in connection with this Agreement or any transactions contemplated hereby. 9.10 Standstill. The Purchaser will not, for a period of one (1) year from ---------- the Closing Date, without the prior written approval of the Corporation's Board of Directors: (i) acquire any shares of the capital stock of the Corporation or of Glyko ("Company Securities") other than as contemplated herein or other than through the indirect acquisition of any Company Securities as a result of, and incidental to, the acquisition by the Purchaser of a corporation or other entity if the primary purpose of such acquisition is not to acquire Company Securities, (ii) enter into any merger, consolidation or similar transaction with the Corporation or Glyko, (iii) otherwise attempt to influence the Boards of Directors of the Corporation or Glyko or the stockholders of the Corporation or Glyko to effect a merger, consolidation or sale of all or substantially all of the assets or business of the Corporation or Glyko, as the case may be, or (iv) make any public announcement relating to the foregoing. Notwithstanding the foregoing, the restrictions contained in the preceding sentence shall be suspended during such time as (i) the Boards of Directors of the Corporation or Glyko determine to accept bids from any responsible bidder to obtain the best price for the sale of the Corporation or Glyko, as the case may be, but only so long as the Corporation or Glyko continues to accept such bids or negotiate or consummate a transaction with any bidder and (ii) any third party makes an unsolicited offer to acquire more than fifty percent (50%) of the outstanding voting securities of the Corporation or Glyko, but only so long as such offer is outstanding. 14 9.11 Further Equity Investment. On the date of the initial public offering ------------------------- of the Corporation's capital stock on Form S-1 or such successor form at a price of at least $6.00 per share (subject to appropriate adjustment for stock splits, stock dividends, combinations and other similar recapitalizations affecting such shares) and which results in net proceeds to the Corporation of at least $20 million, Purchaser hereby agrees to purchase from the Corporation, for $10,000,000 in cash in a private placement, the nearest whole number of shares of Common Stock obtained by dividing $10,000,000 by the per share price paid by the public for such stock in the public offering. Simultaneously, Purchaser shall enter into the Registration Rights Agreement with regard to those shares, and will be subject to all of the terms and conditions contained therein with regard to those shares. 10. RELIANCE UPON REPRESENTATIONS, WARRANTIES AND COVENANTS ------------------------------------------------------- The Purchaser acknowledges that the representations and warranties and covenants contained in this Agreement are made with the intent that they may be relied upon by the Corporation to, among other things, determine its eligibility to purchase the Shares. The Purchaser further agrees that by accepting the Shares, the Purchaser shall be representing and warranting that the foregoing representations and warranties are true as of the Closing with the same force and effect as if they had been made by the Purchaser at the Closing. 15 11. COVENANTS OF THE CORPORATION ---------------------------- 11.1 Quarterly Financial Statements. Within forty-five (45) days after the ------------------------------ end of each of the first three quarters of each fiscal year, the Corporation will deliver to the Purchaser copies of the Corporation's unaudited, consolidated balance sheet as of the end of, and statements of income and cash flows for, such periods. The Corporation's obligation under this subsection shall terminate immediately prior to the happening of a firm commitment public offering of the Corporation's capital stock on Form S-1 or such successor form. 11.2 Annual Financial Statements. Within ninety (90) days after the end of --------------------------- each fiscal year, the Corporation will deliver to the Purchaser financial statements similar to those required by Section 11.1 as at the end of and for such year, accompanied by a certification by independent public accountants of national repute, that such statements have been prepared in accordance with generally accepted accounting principles consistently applied. The Corporation's obligation under this subsection shall terminate immediately prior to the happening of a firm commitment public offering of the Corporation's capital stock on Form S-1 or such successor form. 11.3 Maintenance of Corporate Existence. The Corporation shall use its ---------------------------------- best efforts to maintain in full force and effect its corporate existence, rights and franchises and all licenses and other rights to use patents, processes, licenses, trademarks, trade names or copyrights owned or possessed by it and deemed by the Corporation to be necessary for the conduct of its business. 11.4 Insurance. The Corporation shall maintain insurance with responsible --------- and reputable insurance companies or associations in such amounts and covering such risks as the Corporation believes are usually carried by companies engaged in similar businesses at an equivalent stage of development and using similar properties in the same general areas in which the Corporation operates. 11.5 Compliance with Laws. The Corporation shall comply with all -------------------- applicable laws, rules, regulations and orders, noncompliance with which could result in a Material Adverse Effect. 11.6 Keeping of Records and Books of Account. The Corporation shall keep --------------------------------------- adequate records and books of account, in which complete entries will be made in accordance with generally accepted accounting principles consistently applied, reflecting all financial transactions of the Corporation, and in which, for each fiscal year, all proper reserves for depreciation, depletion, obsolescence, amortization, taxes, bad debts and other purposes in connection with its business shall be made. 16 12. COSTS ----- The Purchaser acknowledges and agrees that all costs and expenses incurred by the Purchaser (including any fees and disbursements of any counsel retained by the Purchaser) relating to the offer and sale of the Shares to the Purchaser shall be paid by the Purchaser. 13. GOVERNING LAW ------------- This Agreement shall be governed in all respects by the laws of the State of California. 14. SURVIVAL -------- This Agreement, including without limitation the representations, warranties and covenants contained herein, shall survive and continue in full force and effect and be binding upon the parties notwithstanding the completion of the purchase of the Shares by the Purchaser pursuant hereto, or any subsequent disposition by the Purchaser of the Shares. 15. ASSIGNMENT ---------- This Agreement is not transferable or assignable by the parties hereto. 16. ENTIRE AGREEMENT; AMENDMENT --------------------------- This Agreement, the Exhibits hereto, and the other documents delivered pursuant hereto constitute the full and entire understanding and agreement among the parties with regard to the subjects hereof and thereof. Neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the Purchaser and the Corporation. 17. NOTICES, ETC. ------------- All notices and other communications required or permitted hereunder shall be in writing and shall be deemed effectively given upon personal delivery; upon confirmed transmission by telecopy or telex; or seven (7) days following deposit with the United States Post Office, by registered or certified mail, postage prepaid, addressed: (a) if to the Purchaser, at One Kendall Square, Cambridge, Massachusetts 02139, or its telecopy number or telex number, addressed to the attention of the Chief Legal Officer, or at such other address as such Purchaser shall have furnished to the Corporation in writing, or (b) if to the Corporation, at 11 Pimental Court, Novato, California 94949, or its telecopy or telex number, addressed to the attention of the President, and with a copy to Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo Alto, California 94304, Attention: Frank Currie, or at such other address as the Corporation shall have furnished to the Purchaser in writing. 17 18. DELAYS OR OMISSIONS. ------------------- No delay or omission to exercise any right, power or remedy accruing to any holder of any Common Stock, upon any breach or default of the Corporation under this Agreement, shall impair any such right, power or remedy of such holder, nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any holder of Common Stock of any breach or default under this Agreement, or any waiver on the part of such holder of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any such holder, shall be cumulative and not alternative. 19. SEVERABILITY ------------ In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision; provided that no such severability shall be effective if it materially changes the economic benefit of this Agreement to any party. 20. COUNTERPARTS ------------ This Agreement may be exercised in counterparts, each of which shall be deemed to be an original and all of which shall constitute one and the same document. 21. SUBSCRIPTION PARTICULARS ------------------------ (a) The aggregate number of Shares being subscribed for is 1,333,333. At a price of $6.00 per share, the aggregate purchase price of the Shares is $7,999,998. (b) The Purchased Shares are to be registered in the name of Genzyme Corporation. 18 (c) The certificate representing the Shares is to be delivered to: Genzyme Corporation at its office at: One Kendall Square, Building 1400, Cambridge, Massachusetts 02139 Contact Name and Number: Gerald E. Quirk, Esq., Corporate Counsel (617) 761-8993 19 DATED at Cambridge, Massachusetts, this 4th day of September, 1998. GENZYME CORPORATION By: /s/ G Jan van Heek ------------------------------------- (Signature of Authorized Representative) G Jan van Heek ---------------------------------------- (Name of Person Signing) Executive Vice President ---------------------------------------- Office or Title 20 ACCEPTANCE The above-mentioned Subscription Agreement is hereby accepted and agreed to by BioMarin Pharmaceutical Inc. DATED at Novato, California, the 31st day of August, 1998. BIOMARIN PHARMACEUTICAL INC. By: /s/ John C. Klock ------------------------------------- John C. Klock President 21 EX-10.27 28 FORM OF CONVERTIBLE NOTE AGREEMENT DATED 4/12/1999 EXHIBIT 10.27 BIOMARIN PHARMACEUTICAL INC. CONVERTIBLE NOTE PURCHASE AGREEMENT This Convertible Note Purchase Agreement (the "AGREEMENT") is made as of April 12, 1999, by and between BioMarin Pharmaceutical Inc., a Delaware corporation (the "COMPANY"), and the individuals listed on the Schedule of Purchasers attached hereto as Exhibit A (the "PURCHASERS"). --------- 1. PURCHASE AND SALE OF NOTE. In consideration of ________ dollars ------------------------- ($_____), the receipt of which is hereby acknowledged by the Company, and subject to the terms and conditions of this Agreement, the Company hereby agrees to sell to Purchasers and Purchasers hereby agree to purchase from the Company, Convertible Promissory Notes, in the form attached hereto as Exhibit B (the --------- "NOTES"), in the principal amounts set forth opposite each Purchaser's name on Exhibit A. - --------- 2. REGISTRATION RIGHTS. Purchasers shall become parties to the Amended ------------------- and Restated Registration Rights Agreement between the Company and certain holders of the Company's Common Stock, a copy of which is attached hereto as Exhibit C. Under the terms of this Amended and Restated Registration Rights - --------- Agreement, upon conversion of the Notes into shares of the Company's Common Stock pursuant to the terms of the Notes, the Purchasers shall be entitled to certain registration rights and shall be subject to certain other restrictions contained therein with regard to the shares of Common Stock issued upon conversion of the Notes held by each Purchaser. 3. CLOSING AND DELIVERY OF NOTES. Payment for and delivery of the Notes ----------------------------- may be completed in more than one closing, with the first such closing (each a "CLOSING") to occur at the offices of Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo Alto, California at 8:00 a.m. (Pacific Daylight Time) (the "CLOSING TIME") on such date as the Company and the Purchaser may agree (the "CLOSING DATE"), but in any event no Closing shall be held later than JUNE 30, 1999 (unless extended by mutual agreement of the Company and the Purchaser). The Notes will be delivered at each Closing against payment to the Company by each Purchaser of their respective principal amount enumerated on the Schedule of Purchasers attached hereto as Exhibit A. The principal amount shall --------- be paid by each Purchaser by wire transfer to the following account: BIOMARIN PHARMACEUTICAL INC., BANK OF AMERICA, 300 LAKESIDE DRIVE, SUITE 250, OAKLAND, CA 94612; ACCOUNT NUMBER: 1472800983; ROUTING #121000358; CONTACT PERSON: NANETTE ANDINO, or such other means as Purchaser and the Company shall mutually agree. Each Purchaser purchasing the Notes pursuant to the exemption from the registration requirements of the Securities Act of 1933, as amended, contained in Regulation S (as discussed in Section 8(i) hereto), on its own behalf or on behalf of others for whom it is contracting hereunder, hereby appoints the Agent, with full power of substitution, as its true and lawful attorney and agent with the full power and authority in its place and stead to swear, execute, file and record any document necessary to give effect to the delivery of the Notes to the Agent, to terminate this Agreement on its behalf in the event that any condition precedent to the Closing has not been satisfied, to execute a receipt for the Notes, and to modify or waive any conditions or grant any waivers on its behalf in connection with the transactions contemplated by this Agreement, the Agency Agreement between LaMont Asset Management S.A. (the "AGENT") and the Company dated -1- April 12, 1999 (the "AGENCY AGREEMENT") and the Amended and Restated Registration Rights Agreement. 4. CONDITIONS TO CLOSING OF THE PURCHASER. The Purchaser's obligation to -------------------------------------- purchase the Notes at the Closing is, at the option of the Purchaser, subject to fulfillment on or prior to the Closing Date of the following conditions: (a) Representations and Warranties Correct. The representations and -------------------------------------- warranties made by the Company in Section 6 hereof shall be true and correct on the applicable Closing Date with the same force and effect as if such representations had been made on and as of said date. (b) Covenants. All covenants, agreements and conditions contained in --------- this Agreement to be performed by the Company on or prior to the applicable Closing Date shall have been performed or complied with in all respects. (c) Compliance Certificate. The Company shall have delivered to the ---------------------- Purchaser a certificate, executed by the President of the Company, dated as of the applicable Closing Date, and certifying to the fulfillment of the conditions specified in Sections 4(a) and 4(b) above. (d) Secretary's Certificate. The Company shall have delivered to the ----------------------- Purchaser a certificate, executed by the Secretary of the Company, dated as of the applicable Closing Date, and certifying as to the authenticity of the Amended and Restated Certificate of Incorporation and the Bylaws, the resolutions of the Board authorizing the transactions contemplated hereby and the incumbency of the Company's officers. (e) Opinion of Counsel. Wilson Sonsini Goodrich & Rosati, counsel to ------------------ the Company, shall have delivered to the Purchaser an opinion, in form and substance reasonably satisfactory to Purchaser, in the form attached hereto as Exhibit D. - --------- (f) Blue Sky. The Company shall have obtained all permits and -------- qualifications required by any state in connection with the offer and sale of the Notes and the shares of Common Stock issuable upon conversion thereof, or secured an exemption therefrom. (g) Convertible Note Purchase Agreement. The Company shall have ----------------------------------- executed and delivered to the Purchaser a copy of this Agreement. (h) Waiver of Pre-emptive Rights. The Company shall have received ---------------------------- written waivers of the rights triggered by the offer and sale of the Notes and the shares of Common Stock issuable upon conversion thereof under: (i) the letter to Glyko BioMedical Ltd. dated June 27, 1997, regarding certain pre- emptive rights (the "GLYKO PRE-EMPTIVE RIGHTS LETTER"), (ii) the letter to Genzyme Corporation dated September 4, 1998 regarding certain pre-emptive rights (the "GENZYME PRE-EMPTIVE RIGHTS LETTER"), and (iii) the letter to BB BioVentures L.P., dated December 30, 1997, regarding certain pre-emptive rights (the "BB BIOVENTURES PRE-EMPTIVE RIGHTS LETTER"). 5. CONDITIONS TO CLOSING OF THE COMPANY. The Company's obligation to ------------------------------------ issue and sell the Notes at the Closing to the Purchaser is, at the option of the Company, subject to the fulfillment of the following conditions: -2- (a) Representations and Warranties. The representations and ------------------------------ warranties made by the Purchaser in Section 8 hereof shall be true and correct when made, and shall be true and correct on the applicable Closing Date with the same force and effect as if such representations had been made on and as of said date. (b) Blue Sky. The Company shall have obtained all permits and -------- qualifications required by any state in connection with the offer and sale of the Notes and the shares of Common Stock issuable upon conversion thereof, or secured an exemption therefrom. (c) Registration Rights Agreement. The Purchaser shall have executed ----------------------------- and delivered to the Company the Amended and Restated Registration Rights Agreement. (d) Convertible Note Purchase Agreement. The Purchaser shall have ----------------------------------- executed and delivered to the Company a copy of this Agreement. (e) Payment. The Company shall have received from or on behalf of the ------- Purchaser written confirmation by facsimile transmission that instructions have been given to initiate a wire to the Company's account specified in Section 3 hereof of payment in full for the principal amount set forth opposite such Purchaser's name on the Schedule of Purchasers attached hereto as Exhibit A. --------- (f) Waiver of Pre-emptive Rights. The Company shall have received ---------------------------- written waivers of the rights triggered by the offer and sale of the Notes and the shares of Common Stock issuable upon conversion thereof under the Glyko Pre- emptive Rights Letter, the Genzyme Pre-emptive Rights Letter and the BB BioVentures Pre-emptive Rights Letter by the respective parties thereto. 6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby --------------------------------------------- represents and warrants to the Purchaser that, except as otherwise set forth on the Schedule of Exceptions attached hereto as Exhibit E, with specific reference --------- to the subsection of this Section 6 so affected, the following will be true and correct as of the applicable Closing Date: (a) Organization and Standing. The Company is a Company duly ------------------------- organized and validly existing under, and by virtue of, the laws of the State of Delaware and is in good standing under such laws. The Company has the requisite corporate power to own and operate its properties and assets and to carry on its business as presently conducted. The Company is qualified to do business as a foreign Company in the State of California. (b) Corporate Power. The Company has all requisite legal and --------------- corporate power to execute and deliver this Agreement, the Notes, to issue the shares of Common Stock issuable upon conversion of the Notes and to carry out and perform its obligations under the terms of this Agreement, the Notes and the Amended and Restated Registration Rights Agreement. (c) Subsidiaries. The Company has no subsidiaries or affiliated ------------ companies other than: (i) Glyko, Inc., (ii) BioMarin Genetics, Inc., and (iii) BioMarin/Genzyme LLC. Glyko, Inc. is duly organized and validly existing under the laws of the State of Delaware. Glyko, Inc. has the requisite corporate power to own and operate its property and assets and to carry on its business as presently conducted. BioMarin/Genzyme LLC is duly organized and validly existing under and by virtue of the laws of the State of Delaware and is in good standing under such laws. BioMarin/Genzyme LLC has the requisite power to own and operate its property and assets and to carry on its business as -3- presently conducted. BioMarin Genetics, Inc. is duly organized and validly existing under, and by virtue of the laws of the State of Delaware and is in good standing under such laws. BioMarin Genetics, Inc. has the requisite corporate power to own and operate its property and assets and to carry on its business as presently conducted. Immediately prior to the Closing, Glyko BioMedical Ltd. owns 10,925,706 shares of the Company's Common Stock. (d) Capitalization. The authorized capital stock of the Company -------------- consists of 50,000,000 shares of Common Stock, of which, at the date hereof, 26,176,180 shares are issued and outstanding. All issued and outstanding shares of Common Stock have been duly authorized and validly issued, and are fully paid and non-assessable. The Common Stock has the voting power, designations, preferences, rights and qualifications set forth in the Amended and Restated Certificate of Incorporation. Except as contemplated herein and except for: (i) the pre-emptive rights granted to BB BioVentures L.P. pursuant to BB BioVentures Pre-emptive Rights Letter, (ii) the pre-emptive rights granted to Glyko BioMedical Ltd. pursuant to the Glyko Pre-emptive Rights Letter, (iii) the pre- emptive rights granted to Genzyme Corporation pursuant to the Genzyme Pre- emptive Rights Letter, (iv) options to purchase 3,406,254 shares of Common Stock of the Company granted under its 1997 Stock Plan, as amended, and the 1998 Directors Plan, (v) warrants to purchase a total of up to 801,500 shares of Common Stock, (vi) Genzyme Corporation's obligation to purchase up to $10 million worth of Common Stock of the Company in a private placement simultaneous with an initial public offering of the Company's Common Stock (subject to certain qualifications) and (vii) the obligation to issue up to 255,222 shares of BioMarin Common Stock to employees of Glyko, Inc. upon exercise of certain of their outstanding options to purchase capital stock of Glyko BioMedical Ltd., which options were assumed by the Company in connection with the acquisition of Glyko, Inc. in October 1998, there are no options, warrants, conversion privileges or other rights presently outstanding to purchase or otherwise acquire any authorized but unissued shares of the capital stock or other securities of the Company, nor any agreements or understandings with respect thereto. The Company has reserved 2,600,000 shares of its Common Stock for issuance upon conversion of the Notes. (e) Financial Statements. As of the Closing Date, the Company will -------------------- have delivered to the Purchaser the unaudited financial statements of the Company as at December 31, 1998 (the "FINANCIAL STATEMENTS"). The Financial Statements are complete and correct in all material respects, have been prepared in accordance with generally accepted accounting principles (except that they do not contain footnotes) consistently applied throughout the periods covered thereby, and present fairly the financial position of the Company as of their respective dates, subject to final year-end adjustments. Other than as described in the Financial Statements, the Company has no material liabilities and knows of no material contingent liabilities not disclosed in the Financial Statements, except current liabilities incurred in the ordinary course of business which are not, individually or in the aggregate, materially adverse. Within approximately 10 business days following the Closing, the Company will deliver to Purchaser audited Financial Statements for the year ended December 31, 1998. -4- (f) Subsequent Events. Since December 31, 1998, there has not been: ----------------- (i) a declaration, setting aside or payment of any dividend or other distribution with respect to, or any direct or indirect redemption or acquisition of, any shares of the capital stock of the Company or any of its subsidiaries; (ii) a waiver of any material right of the Company or any of its subsidiaries or cancellation of any material debt or claim held by the Company or any of its subsidiaries; (iii) a loan by the Company or any of its subsidiaries to any officer, director, employee or stockholder of the Company, or any agreement or commitment therefor; (iv) a material loss, destruction or damage to any property of the Company or any of its subsidiaries, whether or not insured; (v) a labor dispute involving the Company or any of its subsidiaries or a material change in the personnel of the Company or any of its subsidiaries or the terms and conditions of their employment; (vi) an acquisition or disposition of any assets (or any contract or arrangement therefor), or any transaction by the Company or any of its subsidiaries otherwise than for fair value in the ordinary course of business; (vii) any sale, assignment or transfer of any patents, trademarks, copyrights, trade secrets or other intangible assets of the Company or any of its subsidiaries or (viii) any change in any material agreement to which the Company or any of its subsidiaries is a party or by which any of them is bound or any other event or condition of any character that, either individually or in the aggregate, is reasonably likely to have a material adverse effect on the business, assets, condition (financial or otherwise) or results of operations of the Company and its subsidiaries taken as a whole (a "MATERIAL ADVERSE EFFECT"). (g) Authorization. All corporate action on the part of the Company, ------------- its directors and stockholders necessary for the authorization, execution, delivery and performance of this Agreement, the Amended and Restated Registration Rights Agreement, the authorization, sale, issuance and delivery of the Notes and the reservation of the shares of Common Stock issuable upon exercise of the Notes and the performance of the Company's obligations hereunder and thereunder has been taken or will be taken prior to the Closing. This Agreement, the Registration Rights Agreement and the Notes, when fully executed and delivered by the Company, shall constitute valid and binding obligations of the Company, enforceable in accordance with their respective terms, subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other equitable remedies. The shares of Common Stock issuable upon conversion of the Notes, when issued in compliance with the provisions of this Agreement and the Notes, will be validly issued, fully paid and non-assessable, and free of any liens or encumbrances; provided, however, that the shares of Common Stock issuable upon conversion of the Notes may be subject to certain restrictions on transfer under applicable state and/or United States Federal securities laws. (h) Governmental Consents, etc. No consent, approval or authorization -------------------------- of or designation, declaration or filing with any state or United States Federal governmental authority on the part of the Company is required in connection with the valid execution and delivery of this Agreement, the Amended and Restated Registration Rights Agreement, the Notes or the issuance of the shares of Common Stock issuable upon conversion of the Notes, or the consummation of any other transaction contemplated hereby, except qualification (or taking such action as may be necessary to secure an exemption from qualification, if available) under the California Corporate Securities Law and other applicable blue sky laws, of the offer and sale of the Notes and the shares of Common Stock issuable upon conversion of the Notes, which filing and qualification, if required, will be accomplished in a timely manner prior to or promptly after the Closing. -5- (i) Title to Properties and Assets; Liens, etc. The Company and each ------------------------------------------ of its subsidiaries has a valid leasehold interest in, or valid title to, its properties and assets, including without limitation the assets and properties reflected in the Company's balance sheet as of December 31, 1998, in each case subject to no mortgage, pledge, lien, lease, encumbrance or charge, other than: (i) as disclosed in such balance sheet except as incurred in the ordinary course of business since the date of such balance sheet, (ii) the lien of current taxes not yet due and payable, and (iii) possible minor liens and encumbrances which do not in any case materially detract from the value of the property subject thereto or would result in a Material Adverse Effect. (j) Litigation. ---------- (i) At the Closing Date, there are no actions, suits, proceedings or investigations pending or threatened against the Company or any of its subsidiaries or any their respective properties before any court or governmental agency, nor is the Company or any of its subsidiaries subject to any writ, injunction or order of any court or government agency (nor, to the Company's knowledge at the date hereof, is there any basis therefor or threat thereof) which, either individually or in the aggregate, might result in a Material Adverse Effect, or in any material impairment of the right or ability of the Company or any of its subsidiaries to carry on their respective businesses as now conducted or as currently proposed to be conducted, or in any material liability on the part of the Company or any of its subsidiaries, and, to the Company's knowledge at the date hereof, no action, suit, proceeding or investigation pending or threatened against the Company questions the validity of this Agreement, the Amended and Restated Registration Rights Agreement, the Notes or any action taken or to be taken in connection herewith or therewith. (ii) The Company has no current plan to initiate any action, writ, proceeding or investigation before any court or government agency. (k) Registration Rights. Except as set forth in the Amended and ------------------- Restated Registration Rights Agreement, the Company is not under any obligation to register any of its presently outstanding securities, or any of its securities which may hereafter be issued, under the Securities Act of 1933, as amended (the "SECURITIES ACT"). (l) Brokers or Finders. The Company has not incurred, and will not ------------------ incur, directly or indirectly, any liability for brokerage or finders' fees or agents' commissions or any similar charges in connection with this Agreement or any transaction contemplated hereby, except such brokers or finders' fees owed to Agent in connection with the transactions contemplated hereby pursuant to the term of the Agency Agreement. (m) No Breach. Neither the Company nor any of its subsidiaries is: --------- (i) in breach or violation of any of the terms or provisions of, or in default under, this Agreement or any indenture, mortgage, deed of trust, loan agreement or other agreement (written or oral) or instrument to which it is a party or by which it is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, which breach or violation or the consequences thereof would have a Material Adverse Effect; (ii) in violation of the provisions of its Amended and Restated Certificate of Incorporation or Bylaws or (iii) in violation of any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over it or any of its -6- assets or properties, which violation or the consequences thereof would result in a Material Adverse Effect. (n) No Conflict. The offer and sale of the Notes and the issuance of ----------- the shares of Common Stock issuable upon conversion of the Notes by the Company and the performance and consummation of the transactions contemplated herein or therein will not conflict with or result in (i) a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement (written or oral) or instrument to which the Company is bound or to which any of the property or assets of the Company is subject, which breach or violation or the consequences thereof would result in a Material Adverse Effect, (ii) any violation of the provisions of the Amended and Restated Certificate of Incorporation or the Bylaws of the Company or (iii) a violation of any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its assets or properties, which violation or the consequences thereof would result in a Material Adverse Effect, except that the offer and sale of the Notes and the shares of Common Stock issuable upon conversion thereof will trigger rights under the Glyko Pre-emptive Rights Letter, the Genzyme Pre-emptive Rights Letter and the BB BioVentures Pre-emptive Rights Letter, each of which rights will be waived on or before the Closing Date. (o) Securities Act. Assuming compliance by the Agent with its -------------- agreements set forth in the Agency Agreement, the transactions contemplated by this Agreement shall be exempt from the registration requirements of the Securities Act. (p) Intellectual Property. The Company and its subsidiaries own or --------------------- possess adequate licenses or other rights to use all patents, patent applications, trademarks, trademark applications, service marks, service mark applications, trade names, copyrights, manufacturing processes, formulae, trade secrets, customer lists and know-how (collectively, "INTELLECTUAL PROPERTY") necessary for the conduct of their respective businesses as presently conducted. There are no claims pending or, to the best of the Company's knowledge as of the date hereof, threatened, to the effect that the operations of the Company or any of its subsidiaries infringe upon or conflict with the asserted rights of any other person under any Intellectual Property, and, to the best of the Company's knowledge, there is no basis for any such claim (whether or not pending or threatened). No claim is pending or, to the best of the Company's knowledge, threatened, to the effect that any Intellectual Property owned or licensed by the Company or any of its subsidiaries, or which the Company or any of its subsidiaries otherwise has the right to use, is invalid or unenforceable by the Company or such subsidiary, and, to the best of the Company's knowledge, there is no basis for any such claim (whether or not pending or threatened). (q) Environmental Laws. To the best of the Company's knowledge, ------------------ neither the Company nor any of its subsidiaries is in violation of any applicable statute, law or regulation relating to the environment or occupational health or safety, and to the best of the Company's knowledge no material expenditures are or will be required in order to comply with any such existing statute, law or regulation. (r) Confidentiality. The Company and each of its subsidiaries has --------------- taken all reasonable measures to protect and preserve the confidentiality of all their respective trade secrets and other non-patented proprietary information, including without limitation the procurement of -7- proprietary invention assignments and non-disclosure and non-competition agreements from employees, consultants, sub-contractors, customers and other persons who have access to such information. To the best of the Company's knowledge as of the date hereof, the procedures implemented by the Company and each of its subsidiaries are in conformity with the practices of similarly situated companies in its industry. (s) Taxes. The Company has filed all necessary United States Federal, ----- state, municipal, property, income and franchise tax returns and has paid all taxes shown as due thereon or otherwise owed by it to any taxing authority and there is no tax deficiency which has been or, to the best of the knowledge of the Company as of the date hereof, might be asserted against the Company which would have a Material Adverse Effect. The Company has not received notice of any audit from any taxing authority, and no controversy with respect to taxes of any type is pending or, to the best knowledge of the Company, threatened. The Company has paid all applicable United States Federal and state payroll and withholding taxes, including but not limited to FICA, FUTA, state unemployment taxes and income taxes. (t) Employment Matters. There is no collective bargaining or other ------------------ union agreement to which the Company or any of its subsidiaries is a party or by which any of them is bound, or which is currently being negotiated. Neither the Company nor any of its subsidiaries sponsors, maintains or contributes to any pension, retirement, profit sharing, incentive compensation, bonus or other employee benefit plan, including without limitation any employee benefit plan covered by Title 4 of the Employee Retirement Income Security Act of 1974 ("ERISA") or any "multi-employer plan" as defined in Section 4001(a)(3) of ERISA, other than the Company's group medical, disability and life insurance plans (which are not subject to ERISA), and a 401(k) plan to which the Company makes no contributions. To the best knowledge of the Company at the date hereof: (i) no employee of the Company or any of its subsidiaries is a party to or bound by any agreement, contract or commitment, or subject to any restrictions, particularly but without limitation in connection with any previous employment of any such person, which might have a Material Adverse Effect, and (ii) no officer has any present intention of terminating his employment with the Company or any of its subsidiaries, and the Company has no present intention of terminating any such employment. (u) Full Disclosure. This Agreement and the exhibits hereto, the --------------- Amended and Restated Registration Rights Agreement and the Notes do not contain any untrue statement of a material fact nor omit to state a material fact necessary in order to make the statements contained herein or therein, in light of the circumstances in which they were made, not misleading. To the best knowledge of the Company, there are no facts which (individually or in the aggregate) material adversely affect the business, assets, liabilities, financial conditions, prospects or operations of the Company that have not been set forth in this Agreement and the exhibits hereto, the Amended and Restated Registration Rights Agreement and the Notes. -8- 7. CERTAIN MATTERS RELATING TO THE OFFER AND SALE OF THE SHARES. The ------------------------------------------------------------ Purchaser, on its own behalf or, for Purchasers acquiring Regulation S exempt Notes (or on behalf of others for whom it is contracting hereunder) acknowledges and agrees that: (a) it (or others for whom it is contracting hereunder) has not been provided with a registration statement, prospectus or any similar document in connection with its purchase of the Notes and the shares of Common Stock issuable upon conversion of the Notes; (b) its decision to execute this Agreement and the Amended and Restated Registration Rights Agreement and to purchase the Notes and the shares of Common Stock issuable upon conversion of the Notes (on its own behalf or on behalf of others for whom it is contracting hereunder) has not been based upon any verbal or written representations as to fact or otherwise made by or on behalf of the Agent or the Company and that its decision (or the decision of others for whom it is contracting hereunder) is based upon the information, representations and covenants of the Company contained in this Agreement and publicly available information concerning the Company (any such information having been delivered to it without independent investigation or verification by the Agent); and (c) the Agent and its directors, officers, employees, agents and representatives assume no responsibility or liability of any nature whatsoever for the accuracy or adequacy of any of the information, representations and covenants of the Company contained in this Agreement or any such publicly available information or as to whether all information concerning the Company required to be disclosed by it has been generally disclosed. 8. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER. The ---------------------------------------------------------- Purchaser hereby represents, warrants and covenants to the Company (which representations, warranties and covenants shall survive the Closing) as of the Closing Date as follows: (a) Experience; Risk. The Purchaser has such knowledge and experience ---------------- in financial and business matters that it is capable of evaluating the merits and risks of the purchase of the Notes pursuant to this Agreement and the shares of Common Stock of the Company issuable upon conversion of the Notes and is capable of protecting its interests in connection herewith. The Purchaser has the ability to bear the economic risk of the investment, including complete loss of the investment. (b) Investment. ---------- (i) In the case of a Purchaser purchasing the Notes as a principal, the Purchaser is acquiring the Notes and the shares of Common Stock of the Company issuable upon conversion of the Notes for investment for its own account, not as a nominee or agent, and not with a view to, or for, resale in connection with any distribution thereof, and the Purchaser has no present intention to sell, grant any participation in, or otherwise distribute the Notes and the shares of Common Stock of the Company issuable upon conversion of the Notes. The Purchaser understands that the Notes and the shares of Common Stock of the Company issuable upon conversion of the Notes have not been registered under the Securities Act and will be issued pursuant to an exemption from the registration requirements thereof, which exemption depends upon, among other things, the bona fide nature of the investment intent and the accuracy of such Purchaser's representations as expressed herein. (ii) In the case of a purchase of Notes and shares of Common Stock issuable upon exercise of the Notes made in reliance upon Regulation S promulgated under the Securities Act ("REGULATION S") where the Purchaser is acting as agent for a disclosed principal, each -9- beneficial purchaser of the Notes and shares of Common Stock issuable upon exercise of the Notes for whom the Purchaser is acting is purchasing as principal for its own account and not for the benefit of any other person and the Purchaser is an agent with due and proper authority to execute this Agreement and all other documentation in connection with the purchase of the Notes and shares of Common Stock issuable upon exercise of the Notes on behalf of the beneficial purchaser, and this Agreement has been duly authorized, executed and delivered by or on behalf of, and constitutes the legal, valid and binding agreement of, the disclosed principal. (iii) In the case of a purchase of Notes and shares of Common Stock issuable upon exercise of the Notes made in reliance upon Regulation S where the Purchaser is acting as trustee or as agent for a principal which is undisclosed or identified by account number only, this Agreement has been duly authorized, executed and delivered by, and constitutes a legal, valid and binding agreement of, the undersigned acting in such capacity. (c) Restricted Securities. --------------------- (i) Rule 144. The Purchaser understands that the Notes and the shares of Common Stock of the Company issuable upon conversion of the Notes are "restricted securities" under United States Federal securities laws, as they are unregistered and are being acquired from the Company in a transaction not involving a public offering, and that under such laws and applicable regulations promulgated thereunder the Notes and the shares of Common Stock of the Company issuable upon conversion of the Notes may be resold without registration under the Securities Act only in certain limited circumstances. The Purchaser acknowledges that the Notes and the shares of Common Stock of the Company issuable upon conversion of the Notes must be held indefinitely unless subsequently registered under the Securities Act or an exemption from such registration is available. The Purchaser is aware of the provisions of Rule 144 promulgated under the Securities Act, the provisions of which limit resale of "restricted securities." (ii) Regulation S. The Purchaser understand that if the Notes and the shares of Common Stock of the Company issuable upon conversion of the Notes are being acquired on a basis exempt from registration under Regulation S, the Notes and the shares of Common Stock of the Company issuable upon conversion of the Notes may only be resold in accordance with the provisions of Regulation S, pursuant to registration under the Securities Act or pursuant to an available exemption from registration thereunder. (iii) Denial of Registration of Transfer. The Purchaser further acknowledges and understand that if the Notes and the shares of Common Stock of the Company issuable upon conversion of the Notes are being acquired in reliance upon the exemption from registration contained in Regulation S the Company will refuse to register any transfer of the Notes and the shares of Common Stock of the Company issuable upon conversion of the Notes not made in accordance with the provisions of Regulation S, pursuant to registration under the Securities Act or pursuant to an available exemption from registration. (d) No Public Market. The Purchaser understands that no public market ---------------- now exists for the Notes or the shares of Common Stock of the Company issuable upon conversion of the Notes or for any other securities issued by the Company and that the Company cannot assure the Purchaser that a public market will ever exist for any securities issued by the Company. -10- (e) Authorization. The Purchaser has the full right, power and ------------- authority to enter into and perform its obligations under this Agreement and the Amended and Restated Registration Rights Agreement. This Agreement and the Amended and Restated Registration Rights Agreement, when executed and delivered by the Purchaser, will constitute valid and binding obligations of the Purchaser, enforceable in accordance with their respective terms, subject to the laws of general application relating to bankruptcy, insolvency and the relief of debtors, rules of law governing specific performance, injunctive relief and other equitable remedies. (f) Government Consents. No consent, approval or authorization of or ------------------- designation, declaration or filing with any state, United States Federal, or foreign governmental authority on the part of the Purchaser is required in connection with the valid execution and delivery of this Agreement and the Amended and Restated Registration Rights Agreement by the Purchaser, and the consummation by the Purchaser of the transactions contemplated hereby and thereby. (g) Further Limitations on Disposition. Without in any way limiting --------------------------------- the representations set forth above, the Purchaser further agrees not to make any offer or sale of all or any portion of the Notes or the shares of Common Stock of the Company issuable upon conversion of the Notes within the United States or to a U.S. resident unless and until: (i) There is then in effect a Registration Statement under the Securities Act covering such proposed offer or sale and such offer or sale is made in accordance with such Registration Statement; or (ii) The Purchaser shall have notified the Company of the proposed offer or sale and shall have furnished the Company with a statement of the circumstances surrounding the proposed disposition, and if reasonably requested by the Company, such Purchaser shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, that such offer or sale is exempt from the registration requirements under the Securities Act. (iii) Notwithstanding the provisions of paragraphs (i) and (ii) above, no such registration statement or opinion of counsel shall be necessary for a transfer by Purchaser to any transferees in transactions contemplated by paragraph (ii) above, if all such transferees agree in writing to be subject to the terms hereof to the same extent as if they were Purchasers hereunder. (h) Legends. It is understood that each Note and each certificate ------- representing the shares of Common Stock issued upon conversion of the Notes, and any securities issued in respect thereof or exchange therefor shall bear legends substantially in the following form (in addition to any legend required under applicable state securities laws): (i) In the case of Regulation S exempt securities, "THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (THE "1933 ACT") AND MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION ONLY (A) TO THE CORPORATION, (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 903 OR 904 OF -11- REGULATION S UNDER THE 1933 ACT, OR (C) PURSUANT TO AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS, PROVIDED IN SUCH LATTER CASE THAT THE HOLDER UPON REQUEST PRIOR TO SUCH SALE FURNISHES TO THE CORPORATION AN OPINION OF COUNSEL OF RECOGNIZED STANDING TO THAT EFFECT REASONABLY SATISFACTORY TO THE CORPORATION. COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE SECURITIES AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE CORPORATION AT THE PRINCIPAL EXECUTIVE OFFICES OF THE CORPORATION. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A LOCKUP PERIOD OF 180 DAYS FOLLOWING THE EFFECTIVE DATE OF A REGISTRATION STATEMENT OF THE COMPANY FILED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AS SET FORTH IN AN AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SECURITIES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE CORPORATION. SUCH LOCKUP PERIOD IS BINDING ON TRANSFEREES OF THESE SECURITIES." (ii) Or in the case of Regulation D exempt securities: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT. COPIES OF THE AGREEMENTS COVERING THE PURCHASE OF THESE SECURITIES AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE COMPANY AT THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY. (i) Status. ------ (i) Exemption from Registration. The Purchaser is acquiring the Notes and the shares of Common Stock issuable upon conversion of the Notes in reliance upon the exemption from the registration requirements under the Securities Act contained in: -12- (1) Regulation S (___________); OR [CHECK ONE] (2) Regulation D (___________). (ii) Non-U.S. Status. If not resident of the United States, the Purchaser, whether acting as principal, trustee or agent, is neither a U.S. person (as defined in Rule 902(o) of Regulation S promulgated under the Securities Act) nor purchasing the Notes and the shares of Common Stock issuable upon conversion of the Notes for the account of a U.S. person or for resale in the United States, and the Purchaser confirms that the Notes and the shares of Common Stock issuable upon conversion of the Notes have not been offered to the Purchaser in the United States and that this Agreement has not been signed in the United States. (j) Accredited Investor Status. If the Purchaser is acquiring the -------------------------- Notes and the shares of Common Stock issuable upon conversion of the Notes in reliance upon the exemption from the registration requirements under the Securities Act contained in Regulation D, then the Purchaser presently does, and will as of the Closing Date, qualify as an "accredited investor" within the meaning of Rule 501(a) promulgated under the Securities Act. Purchaser meets the relevant criteria indicated on its completed and signed copy of the Accredited Investor Questionnaire attached hereto as Exhibit F. --------- (k) Brokers or Finders. The Purchaser has not incurred, and will not ------------------ incur, directly or indirectly, any liability for brokerage or finders' fees or agents' commissions or any similar charges in connection with this Agreement or any transactions contemplated hereby. (l) Non-Contravention of Foreign Laws. The purchase of the Notes and --------------------------------- the shares of Common Stock issuable upon conversion of the Notes by the Purchaser does not contravene any of the applicable securities legislation in the jurisdiction in which the Purchaser is resident and does not trigger (i) any obligation to prepare and file a registration statement, prospectus or similar document, or any other report with respect to such purchase, and (ii) any registration or other obligation on the part of the Agent. 9. RELIANCE UPON REPRESENTATIONS, WARRANTIES AND COVENANTS. The Purchaser ------------------------------------------------------- acknowledges that the representations and warranties and covenants contained in this Agreement are made with the intent that they may be relied upon by the Company to, among other things, determine its eligibility to purchase the Notes and the shares of Common Stock issuable upon conversion of the Notes. The Purchaser further agrees that by accepting the Notes, the Purchaser shall be representing and warranting that the foregoing representations and warranties are true as of the Closing with the same force and effect as if they had been made by the Purchaser at the Closing. 10. ENTIRE AGREEMENT; AMENDMENT. This Agreement, the Exhibits hereto, and --------------------------- the other documents delivered pursuant hereto constitute the full and entire understanding and agreement among the parties with regard to the subjects hereof and thereof. Neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the Purchaser and the Company. -13- 11. LOCKUP AGREEMENT. Purchasers hereby agree that if so requested by the ---------------- Company or any representative of the underwriters (the "MANAGING UNDERWRITER") in connection with any registration of the offering of any securities of the Company under the Securities Act, Purchasers shall not sell or otherwise transfer any shares of Common Stock issuable upon conversion of the Notes during the 180-day period following the effective date of a registration statement of the Company filed under the Securities Act (the "MARKET STANDOFF PERIOD"). The Company may impose stop-transfer instructions with respect to securities subject to the foregoing restrictions until the end of such Market Standoff Period. 12. MISCELLANEOUS. ------------- (a) The parties agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Agreement. (b) This Agreement shall inure to the benefit of the successors and assigns of the Company and, subject to the restrictions on transfer herein set forth, be binding upon Purchasers, their heirs, executors, administrators, successors and assigns. (c) A waiver by either party of any of the terms and conditions of this Agreement in any instance shall not be deemed or construed to be a waiver of such terms or conditions for the future, or of any subsequent breach thereof. (d) Any and all notices required or permitted to be given hereunder shall be in writing and shall be deemed given and received upon personal delivery, or seven (7) business days after deposit in the United States mail, by certified or registered mail, postage prepaid and addressed as follows or, if by facsimile transmission, on the same day as such facsimile transmission is confirmed received at the applicable number enumerated below: To the Purchasers: At their respective addresses and facsimile numbers enumerated on the Schedule of Purchasers attached hereto as Exhibit A or at such other address as --------- Purchaser shall have furnished the Company in writing. with a copy to: Blake, Cassels & Graydon 7th Floor, 10 Lloyd's Avenue London, England EC3N3AX Fax: 0171-680-4646 To the Company: BioMarin Pharmaceutical Inc. 371 Bel Marin Keys Boulevard Novato, CA 94949 Attn: Corporate Secretary Fax: 415-382-7889 -14- with a copy to: Wilson Sonsini Goodrich & Rosati, P.C. 650 Page Mill Road Palo Alto, California 94304 Attn: Francis S. Currie, Esq. Fax: 650-320-4842 Either party may change by notice the address to which notices to it are to be addressed. (e) If any provision of this Agreement as applied to either party or to any circumstances shall be adjudged by a court of competent jurisdiction to be illegal, void, voidable or unenforceable, the same shall in no way affect the other provisions of this Agreement which shall continue and remain in full force and effect; provided that no such severability shall be effective if it materially changes the economic benefit of this Agreement to any party. (f) This Agreement has been entered into and shall be interpreted in accordance with the internal laws of the State of California, applied to contracts entered into in the State of California, without regard to conflict of law provisions. (g) This Agreement may be signed and delivered in counterparts, and by facsimile, with the same effect as if the signatures thereto and hereto were upon the same instrument and delivered in person. -15- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first written above. "COMPANY" BIOMARIN PHARMACEUTICAL INC. a Delaware corporation By: /s/ John C. Klock ---------------------------------- Name: John C. Klock --------------------------------- Title: President and Secretary -------------------------------- "PURCHASER" By: __________________________________ Name: ________________________________ Title: _______________________________ -16- [APPLICABLE REGULATION D OR REGULATION S LEGEND SPECIFIED IN NOTE PURCHASE AGREEMENT] CONVERTIBLE PROMISSORY NOTE April 12, 1999 $_______________ Novato, California FOR VALUE RECEIVED, BioMarin Pharmaceutical Inc. a Delaware corporation (the "COMPANY") promises to pay to or to the order of ____________________ ("HOLDER"), or its registered assigns, the principal sum of __________ dollars ($_________), or such lesser amount as shall equal the outstanding principal amount hereof, together with interest from the date of this Note on the unpaid principal balance at a rate equal to ten percent (10.00%) per annum, computed on the basis of the actual number of days elapsed and a year of 365 days. All unpaid principal, together with any then unpaid and accrued interest and other amounts payable hereunder, shall be due and payable on the earliest of (i) April 12, 2002 (the "MATURITY DATE"), (ii) immediately prior to a sale of all or substantially all of the assets of the Company or a merger or acquisition of the Company with or into another entity in which the holders of the voting capital stock of the Company immediately prior to such merger or acquisition hold less than fifty percent (50%) of the voting capital stock of the successor entity following such transaction, (iii) the effective date of the final prospectus relating to an initial public offering of the Company's capital stock, which securities are to be listed on a foreign or a United States exchange or exchanges or the Nasdaq national market, with net proceeds to the Company (after deducting underwriters' discounts and expenses) of at least $20 million, or (iv) when, upon or after the occurrence of an Event of Default (as defined below), such amounts are declared due and payable by Holder or made automatically due and payable in accordance with the terms hereof. This Note is one of the "Notes" issued pursuant to the Convertible Note Purchase Agreement of even date herewith (the "NOTE PURCHASE AGREEMENT") between Company and the Purchasers (as defined in the Convertible Note Purchase Agreement). The following is a statement of the rights of Holder and the conditions to which this Note is subject, and to which Holder, by the acceptance of this Note, agrees: 1. DEFINITIONS. As used in this Note, the following capitalized terms ----------- have the following meanings: (a) "Financial Statements" shall mean, with respect to any accounting period for the Company, statements of operations, retained earnings and cash flow of the Company for such period, and balance sheets of the Company as of the end of such period, setting forth in each case in comparative form figures for the corresponding period in the preceding fiscal year if such period is less than a full fiscal year or, if such period is a full fiscal year, corresponding figures from the preceding fiscal year, all prepared in reasonable detail and in accordance with GAAP. (b) "GAAP" shall mean generally accepted accounting principles as in effect in the United States of America from time to time. (c) "Majority in Interest" shall mean, more than 50% of the aggregate outstanding principal amount of the Notes issued pursuant to the Note Purchase Agreement. (d) "Obligations" shall mean and include all loans, advances, debts, liabilities and obligations, howsoever arising, owed by the Company to the Holder of every kind and description (whether or not evidenced by any note or instrument and whether or not for the payment of money), now existing or hereafter arising under or pursuant to the terms of this Note, the Note Purchase Agreement and the other Transaction Documents, including, all interest, fees, charges, expenses, attorneys' fees and costs and accountants' fees and costs chargeable to and payable by the Company hereunder and thereunder, in each case, whether direct or indirect, absolute or contingent, due or to become due, and whether or not arising after the commencement of a proceeding under Title 11 of the United States Code (11 U. S. C. Section 101 et seq.), as amended from time -- --- to time (including post-petition interest) and whether or not allowed or allowable as a claim in any such proceeding. (e) "Transaction Documents" shall mean this Note, each of the other Notes issued under the Note Purchase Agreement and the Note Purchase Agreement itself. 2. CERTAIN COVENANTS. While any amount of principal is outstanding under ----------------- this Note: (a) Information Rights: Notices. The Company shall furnish to Holder the following: (i) Quarterly Financial Statements. Within forty-five (45) days ------------------------------ after the last day of each of the Company's first three fiscal quarters of each year, a copy of the Financial Statements of Company for such quarter and for the fiscal year to date, certified by the chief financial officer or controller of Company to present fairly the financial condition, results of operations and other information presented therein and to have been prepared in accordance with GAAP consistently applied, subject to normal year end adjustments and except that no footnotes need be included with such Financial Statements, and (ii) Annual Financial Statements. Within one hundred twenty (120) --------------------------- days after the close of each fiscal year of Company, (i) copies of the audited Financial Statements of Company for such year, audited by nationally recognized independent certified public accountants, (ii) copies of the unqualified opinions and management letters delivered by such accountants in connection with such Financial Statements, and (iii) a report containing a description of projected business prospects (including capital expenditures) and management's discussion and analysis of financial condition and results of operation of Company. (b) Inspection Rights. Holder and its representatives shall have the right, at any time during normal business hours, upon reasonable prior notice, to visit and inspect the properties of Company and its corporate, financial and operating records, and make abstracts therefrom, and to -2- discuss Company's affairs, finances and accounts with its directors, officers and independent public accountants. 3. EVENTS OF DEFAULT. The occurrence of any of the following shall ----------------- constitute an "Event of Default" under this Note and the other Transaction Documents: (a) Voluntary Bankruptcy or Insolvency Proceedings. The Company shall (i) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian of itself or of all or a substantial part of its property, (ii) be unable, or admit in writing its inability, to pay its debts generally as they mature, (iii) make a general assignment for the benefit of its or any of its creditors, (iv) be dissolved or liquidated, (v) become insolvent (as such term may be defined or interpreted under any applicable statute), (vi) commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or consent to any such relief or to the appointment of or taking possession of its property by any official in an involuntary case or other proceeding commenced against it, or (vii) take any action for the purpose of effecting any of the foregoing; or (b) Involuntary Bankruptcy or Insolvency Proceedings. Proceedings for the appointment of a receiver, trustee, liquidator or custodian of Company or of all or a substantial part of its property, or an involuntary case or other proceedings seeking liquidation, reorganization or other relief with respect to the Company or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect shall be commenced and an order for relief entered or such proceeding shall not be dismissed or discharged within thirty (30) days of commencement. (c) Representations and Warranties Untrue. The representations and warranties made by the Company in Section 6 of the Convertible Note Purchase Agreement dated April 12, 1998 shall be found to have been, as of the Closing Date (as defined therein), false, incorrect, incomplete or misleading in a material respect when made. 4. RIGHTS OF HOLDER UPON DEFAULT. Upon the occurrence or existence of any ----------------------------- Event of Default, immediately and without notice, all outstanding Obligations payable to the Holder by the Company hereunder shall automatically become immediately due and payable in cash pursuant to Section 13 hereof, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything contained herein or in the other Transaction Documents to the contrary notwithstanding. In addition to the foregoing remedies, upon the occurrence or existence of any Event of Default, the Holder may exercise any other right power or remedy granted to it by the Transaction Documents or otherwise permitted to it by law, either by suit in equity or by action at law, or both. 5. CONVERSION. ---------- (a) Voluntary Conversion. The Company has the right, at the Company's option, on the Maturity Date, to convert the amounts owed to Holder under this Note, in accordance with the provisions of Section 5(c) hereof, in whole or in part, into fully paid and nonassessable shares of -3- Common Stock of Company. The number of shares of Common Stock into which this Note may be converted shall be determined by dividing the aggregate principal amount by the Conversion Price (as defined below) in effect at the time of such conversion. The initial "Conversion Price" shall be equal to $10.00. (b) Automatic Conversion. At any time prior to the Maturity Date, the entire principal amount of this Note and any interest accrued thereon pursuant to the terms hereof shall be automatically converted into shares of Common Stock of the Company (at the Conversion Price then in effect) immediately prior to: (i) any merger or acquisition of the Company with or into another entity in which the holders of the voting capital stock of the Company immediately prior to such merger or acquisition hold less than fifty percent (50%) of the voting capital stock of the successor entity following such transaction, or (ii) a sale of all or substantially all of the assets of Company, or (iii) the effective date of the final prospectus relating to the initial public offering of the Company's capital stock, which securities are to be listed on foreign or United States exchange or exchanges or the Nasdaq national market, with net proceeds to the Company (after deducting underwriters' discounts and expenses) of at least $20,000,000. (c) Conversion Procedure. If this Note is automatically converted into Common Stock pursuant to this Section 5, written notice shall be delivered to Holder at the address last shown on the records of Company for Holder or given by Holder to Company for the purpose of notice or, if no such address appears or is given, at the place where the principal executive office of Company is located, notifying Holder of the conversion to be effected, specifying the Conversion Price, the principal amount and any interest accrued thereon pursuant hereto to be converted, the date on which such conversion is expected to occur and calling upon such Holder to surrender to the Company, in the manner and at the place designated, the Note. Upon such conversion of this Note, the Holder shall surrender this Note, duly endorsed, at the principal office of the Company. At its expense, the Company shall, as soon as practicable thereafter, but in any event within ten (10) business days, issue and deliver to such Holder at such principal office a certificate or certificates for the number of shares of Common Stock to which the Holder shall be entitled upon such conversion (bearing such legends as are required by the Note Purchase Agreement and applicable state and Federal securities laws in the opinion of counsel to Company), together with any other securities and property to which the Holder is entitled upon such conversion under the terms of this Note, including a check payable to the Holder for any cash amounts payable as described in Section 5(d). The certificate or certificates representing the shares of Common Stock issuable upon conversion of this Note shall be issued in the name of the Holder. Any conversion of this Note pursuant to Section 5 shall be deemed to have been made immediately prior to the closing of the issuance and sale of shares as described in Section 5 and on and after such date Holder shall be treated for all purposes as the record holder of such shares and a purchaser of such shares under the Note Purchase Agreement and shall be bound by the terms of the Note Purchase Agreement. (d) Fractional Shares; Interest; Effect of Conversion. No fractional shares shall be issued upon conversion of this Note. In lieu of the Company issuing any fractional shares to the Holder upon the conversion of this Note, the Company shall pay to the Holder an amount equal to the product obtained by multiplying the Conversion Price by the fraction of a share of Common -4- Stock not issued pursuant to the previous sentence. In addition, the Company shall pay to Holder any interest accrued on the amount to be paid by the Company pursuant to the previous sentence. Upon conversion of this Note in full and the payment of the amounts specified in this Section 5(d), the Company shall be forever released from all its obligations and liabilities under this Note, including but not limited to the covenants enumerated in Section 2. 6. CONVERSION PRICE ADJUSTMENTS. ---------------------------- (a) Adjustments for Stock Splits and Subdivisions. In the event the --------------------------------------------- Company should at any time or from time to time after the date of issuance hereof fix a record date for the effectuation of a split or subdivision of the outstanding shares of Common Stock or the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly, additional shares of Common Stock (hereinafter referred to as "COMMON STOCK EQUIVALENTS") without payment of any consideration by such holder for the additional shares of Common Stock or the Common Stock Equivalents, then, as of such record date (or the date of such dividend distribution, split or subdivision if no record date is fixed), the Conversion Price shall be appropriately decreased so that the number of shares of Common Stock issuable upon conversion of this Note shall be increased in proportion to such increase of outstanding shares. (b) Adjustments for Reverse Stock Splits. If the number of shares of ------------------------------------ Common Stock outstanding at any time after the date hereof is decreased by a combination of the outstanding shares of Common Stock, then, following the record date of such combination, the Conversion Price shall be appropriately increased so that the number of shares of Common Stock issuable on conversion hereof shall be decreased in proportion to such decrease in outstanding shares. (c) Redemption of Common Stock. Should any or all of the Company's -------------------------- Common Stock be redeemed at any time prior to full payment of all amounts due under this Note then this Note shall immediately become convertible into that number of shares of the Company's Common Stock equal to the number of shares of the Common Stock that would have been received if this Note had been converted in full and the Conversion Price shall be immediately adjusted to equal the quotient obtained by dividing (x) the aggregate Conversion Price of the maximum number of shares of Common Stock into which this Note was convertible immediately prior to such redemption, by (y) the number of shares of Common Stock for which this Note is convertible immediately after such redemption. (d) Adjustment for Dilutive Issuances. In addition to the adjustment --------------------------------- of the respective Conversion Prices provided in Sections 6(a), 6(b) and 6(c) above, the Conversion Price shall be subject to further adjustment from time to time as follows: (i) Special Definitions. For purposes of this Section 6(d), the ------------------- following definitions shall apply: -5- (1) Options shall mean rights, options or warrants to ------- subscribe for, purchase or otherwise acquire either Common Stock or Convertible Securities. (2) Original Issue Date shall mean the date of this Note. ------------------- (3) Convertible Securities shall mean securities ---------------------- convertible into or exchangeable for Common Stock. (4) Additional Shares of Common Stock shall mean all shares --------------------------------- of Common Stock issued (or, pursuant to Section 6(d)(i)(6), deemed to be issued) by the Company after the Original Issue Date other than shares of Common Stock issued (or, pursuant to Section 6(d)(i)(6), deemed to be issued): (a) to officers, directors and employees of, and consultants to the Company pursuant to plans and arrangements approved by the Board of Directors; (b) by way of dividend or other distributions on securities referred to in clause 6(a) above. (c) in connection with an initial public offering of the Company's capital stock, which securities are to be listed on a foreign or United States exchange or exchanges. (5) No Adjustment of Conversion Prices. No adjustment in ---------------------------------- the Conversion Price shall be made in respect of the issuance of Additional Shares of Common Stock unless the consideration per share for an Additional Share of Common Stock issued or deemed to be issued by the Company is less than the Conversion Price on the date of, and immediately prior, to such issue. (6) Deemed Issue of Additional Shares of Common Stock. ------------------------------------------------- (a) Options and Convertible Securities. Except as ---------------------------------- otherwise provided in Sections 6(d)(i)(4)(a)-(c) and 6(d)(i)(5), in the event the Company at any time or from time to time after the Original Issue Date shall issue any Options or Convertible Securities or shall fix a record date for the determination of any holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of shares (as set forth in the instrument relating thereto without regard to any provisions contained therein for a subsequent adjustment of such number) of Common Stock issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date, provided that in any such case in which additional shares of Common Stock are deemed to be issued: -6- (i) no further adjustment in the Conversion Price shall be made upon the subsequent issue of Convertible Securities or shares of Common Stock upon the exercise of such Options or conversion or exchange of such Convertible Securities; (ii) if such Options or Convertible Securities by their terms provide, with the passage of time or otherwise, for any increase or decrease in the consideration payable to the Company, or increase or decrease in the number of shares of Common Stock issuable, upon the exercise, conversion or exchange thereof, the Conversion Prices computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto), and any subsequent adjustments based thereon, shall, upon any such increase or decrease becoming effective, be recomputed to reflect such increase or decrease insofar as it affects such Options or the rights of conversion or exchange under such Convertible Securities; (iii) upon the expiration of any such Options or any rights of conversion or exchange under such Convertible Securities which shall not have been exercised, the Conversion Prices computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto), and any subsequent adjustments based thereon, shall, upon such expiration, be recomputed as if: (1) in the case of Convertible Securities or Options for Common Stock, the only additional shares of Common Stock issued were shares of Common Stock, if any, actually issued upon the exercise of such Options or the conversion or exchange of such Convertible Securities, and the consideration received therefor was the consideration actually received by the Company for the issue of all such Options, whether or not exercised, plus the consideration actually received by the Company upon such exercise, or for the issue of all such Convertible Securities which were actually converted or exchanged, plus the additional consideration, if any, actually received by the Company upon such conversion or exchange, and (2) in the case of Options for Convertible Securities, only the Convertible Securities, if any, actually issued upon the exercise thereof were issued at the time of issue of such Options and the consideration received by the Company for the Additional Shares of Common Stock deemed to have been then issued was the consideration actually received by the Company for the issue of all such Options, whether or not exercised, plus the consideration deemed to have been received by the Company upon the issue of the Convertible Securities with respect to which such Options were actually exercised; (iv) no readjustment pursuant to clause (1) or (2) above shall have the effect of increasing the Conversion Price to an amount which exceeds the lower of (i) the Conversion Price on the original adjustment date, or (ii) the Conversion Price that would have resulted from any issuance of Additional Shares of Common Stock between the original adjustment date and such readjustment date; and -7- v) in the case of any Options which expire by their terms not more than thirty (30) days after the date of issue thereof, no adjustment of the Conversion Price shall be made until the expiration or exercise of all such Options. (ii) Adjustment of Conversion Prices Upon Issuance of Additional ----------------------------------------------------------- Shares of Common Stock. In the event the Company shall issue Additional Shares - ---------------------- of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Section 6(d)(i)(6)) without consideration or for a consideration per share less than the Conversion Price in effect on the date of, and immediately prior to such issue, then and in such event, such Conversion Price shall be reduced, concurrently with such issue, to a price (calculated to the nearest cent) determined by multiplying such Conversion Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such issue plus the number of shares of Common Stock which the aggregate consideration received by the Company for the total number of Additional Shares of Common Stock so issued would purchase at the Conversion Price; and the denominator of which shall be the number of shares of Common Stock outstanding immediately prior to such issue plus the number of such Additional Shares of Common Stock so issued; and provided further that, for the purposes of this Section 6(d)(ii), all shares of Common Stock issuable upon or conversion of outstanding Convertible Securities shall be deemed to be outstanding, and immediately after any Additional Shares of Common Stock are deemed issued pursuant to Section 6(d)(i)(6), such Additional Shares of Common Stock shall be deemed to be outstanding. (iii) Determination of Consideration. For purposes of this ------------------------------ Section 6(d), the consideration received by the Company for the issue of any Additional Shares of Common Stock shall be computed as follows: (1) Cash and Property: Such consideration shall: ----------------- (a) insofar as it consists of cash, be computed at the aggregate amount of cash received by the Company prior to amounts paid or payable for accrued interest or accrued dividends and prior to any commissions or expenses paid by the Company; (b) insofar as it consists of property other than cash, be computed at the fair value thereof at the time of such issue, as determined in good faith by the Board of Directors, except that any securities so delivered shall be valued as provided herein; and (c) in the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Company for consideration which covers both, the consideration paid for the Additional Shares of Common Stock be the proportion of the total of such consideration so received, computed as provided above, as determined in good faith by the Board of Directors. (2) Options and Convertible Securities. The consideration ---------------------------------- per share received by the Company for Additional Shares of Common Stock deemed to have been issued pursuant to Section 6(d)(i)(6), relating to Options and Convertible Securities, shall be determined by dividing -8- (x) the total amount, if any, received or receivable by the Company as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Company upon the exercise of such Option or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities, by (y) the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities. (iv) No Impairment. The Company will not, by amendment of its ------------- Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company but will at all times in good faith assist in the carrying out of all the provisions of this Section 6 and in the taking of all such action as may be necessary or appropriate in order to protect rights of the Holder hereunder against impairment. (v) Certificate as to Adjustments. Upon the occurrence of each ----------------------------- adjustment or readjustment of the Conversion Price pursuant to this Section 6, the Company at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to the Holder a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Company shall, upon the written request at any time of the Holder, furnish or cause to be furnished to such Holder a like certificate setting forth (i) such adjustments and readjustments, (ii) the Conversion Price at the time in effect, and (iii) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of the Note. (e) Notices of Record Date, etc. In the event of: --------------------------- (i) Any taking by the Company of a record of the holders of any class of securities of the Company for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend payable out of earned surplus at the same rate as that of the last such cash dividend theretofore paid) or other distribution or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right; or (ii) Any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of Company or any transfer of all or substantially all of the assets of Company to any other person or entity or any consolidation or merger involving the Company; or -9- (iii) Any voluntary or involuntary dissolution, liquidation or winding-up of the Company, The Company will mail to Holder of this Note at least twenty (20) days prior to the earliest date specified therein, a notice specifying (A) the date on which any such record is to be taken for the purpose of such dividend, distribution or right and the amount and character of such dividend, distribution or right; and (B) the date on which any such reorganization, reclassification, transfer, consolidation, merger, dissolution, liquidation or winding-up is expected to become effective and the record date for determining stockholders entitled to vote thereon. (f) Reservation of Stock Issuable Upon Conversion. The Company shall --------------------------------------------- at all times reserve and keep available out of its authorized but unissued shares of Common Stock solely for the purpose of effecting the conversion of this Note such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of this Note. If at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of the entire outstanding principal amount of this Note and interest accrued thereon pursuant hereto, without limitation of such other remedies as shall be available to the holder of this Note, the Company will use its best efforts to take such corporate action as may, in the opinion of counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes. 7. SUCCESSORS AND ASSIGNS. Subject to the restrictions on transfer ---------------------- described in Sections 9 and 10 below, the rights and obligations of the Company and the Holder under this Note shall be binding upon and benefit the successors, assigns, heirs, administrators and transferees of the parties. 8. WAIVER AND AMENDMENT. Any provision of this Note may be amended, -------------------- waived or modified upon the written consent of the Company and holders of a Majority in Interest of all then-outstanding Notes issued pursuant to the Note Purchase Agreement. 9. TRANSFER OF THIS NOTE OR COMMON STOCK ISSUABLE ON CONVERSION HEREOF. ------------------------------------------------------------------- With respect to any offer, sale or other disposition of this Note or the Common Stock into which this Note may be converted, the Holder will give written notice to the Company prior thereto, describing briefly the manner thereof, together with a written opinion of Holder's counsel (if required by the Company), to the effect that such offer, sale or other distribution may be effected without registration or qualification (under any Federal or state law then in effect). Upon receiving such written notice and reasonably satisfactory opinion, if so requested, the Company, as promptly as practicable, shall notify Holder that Holder may sell or otherwise dispose of this Note or such Common Stock, all in accordance with the terms of the notice delivered to the Company. If a determination has been made pursuant to this Section 9 that the opinion of counsel for Holder is not reasonably satisfactory to the Company, the Company shall so notify Holder promptly after such determination has been made. Each Note thus transferred and each certificate representing the Common Stock thus transferred shall bear a legend as to the applicable restrictions on transferability in order to ensure compliance with the Securities Act of 1933, as amended (the "ACT"), unless in the -10- opinion of counsel for the Company such legend is not required in order to ensure compliance with the Act. The Company may issue stop transfer instructions to its transfer agent in connection with such restrictions. Subject to the foregoing, transfers of this Note shall be registered upon registration books maintained for such purpose by or on behalf of the Company as provided in the Note Purchase Agreement. Prior to presentation of this Note for registration of transfer, the Company shall treat the registered holder hereof as the owner and holder of this Note for the purpose of receiving all payments of principal and interest hereon and for all other purposes whatsoever, whether or not this Note shall be overdue and the Company shall not be affected by notice to the contrary. 10. ASSIGNMENT BY COMPANY. Neither this Note nor any of the rights, --------------------- interests or obligations hereunder may be assigned, by operation of law or otherwise, in whole or in part, by the Company without the prior written consent of the Holder except in connection with an assignment in whole to a successor corporation to the Company, provided that such successor corporation acquires all or substantially all of the Company's property and assets. 11. TAXES. ----- (a) The Company shall pay or cause to be paid all present and future taxes, duties, fees and other charges of whatsoever nature, if any, now or in the future levied or imposed by the United States of America (or any state or possession thereof) or an authority of the United States of America (or any state or possession thereof) or any jurisdiction through or out of which a payment is made on or in connection with the payment of any and all amounts due under this Note. (b) All payments of principal, interest and other amounts due under this Note shall be made without deduction for or on account of any such taxes, duties, fees or other charges. (c) If the Company is prevented by operation of law or otherwise from making or causing to be made such payments without deduction, the principal or (as the case may be) interest or other amounts due under this Note shall be increased to such amount as may be necessary so that the Purchaser receives the full amount it would have received (taking into account any such taxes, duties, fees or other charges payable on amounts payable by the Company under this subsection) had such payments been made without such deduction. (d) If subsection (c) above applies and the Purchaser so requires, the Company shall deliver to the Purchaser official tax receipts evidencing payment (or certified copies of them) within thirty (30) days of the date of payment. 12. NOTICES. Any notice, request or other communication required or ------- permitted hereunder shall be in writing and shall be deemed to have been duly given if personally delivered or mailed by registered or certified mail, postage prepaid, or by recognized overnight courier or personal delivery at the respective addresses of the parties as set forth on Exhibit A of the Note Purchase Agreement or on the register maintained by the Company three (3) business days following such mailing or, if sent by facsimile transmission, on the same date as such confirmed facsimile transmission was made. Any party hereto may by notice so given change its address for future notice hereunder. Notice shall conclusively be deemed to have been given when received. -11- 13. PARI PASSU NOTES. Holder acknowledges and agrees that the payment of ---------------- all or any portion of the outstanding principal amount of this Note and all interest hereon shall be pari passu in right of payment and in all other respects to the other Notes issued pursuant to the Note Purchase Agreement or pursuant to the terms of such Notes. In the event Holder receives payments in excess of its pro rata share of the Company's payments to the holders of all of the Notes, then such Holder shall hold in trust all such excess payments for the benefit of the holders of the other Notes and shall pay such amounts held in trust to such other holders upon demand by such holders. 14. PAYMENT. Payment by the Company of the principal amount under the Note ------- and any interest accrued thereon pursuant hereto shall be made in lawful tender of the United States. 15. DEFAULT RATE; USURY. In the event any interest is paid on this Note ------------------- which is deemed to be in excess of the then legal maximum rate, then that portion of the interest payment representing an amount in excess of the then legal maximum rate shall be deemed a payment of principal and applied against the principal of this Note. 16. EXPENSES; WAIVERS. If action is instituted to collect this Note, the ----------------- Company promises to pay all costs and expenses, including, without limitation, reasonable attorneys' fees and costs, incurred in connection with such action. The Company hereby waives notice of default, presentment or demand for payment, protest or notice of nonpayment or dishonor and all other notices or demands relative to this instrument. 17. GOVERNING LAW. This Note and all actions arising out of or in ------------- connection with this Note shall be governed by and construed in accordance with the laws of the State of California, without regard to the conflicts of law provisions of the State of California, or of any other state. -12- IN WITNESS WHEREOF, Company has caused this Note to be issued as of the date first written above. BIOMARIN PHARMACEUTICAL INC. a Delaware corporation By: /s/ John C. Klock ---------------------------------- Name: John C. Klock -------------------------------- Title: President and Secretary ------------------------------- -13- EX-21.1 29 LIST OF SUBSIDIARIES EXHIBIT 21.1 LIST OF SUBSIDIARIES Glyko, Inc. BioMarin Genetics, Inc. BioMarin/Genzyme LLC EX-23.1 30 CONSENT OF INDEPENDENT ACCOUNTANTS CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our reports (and to all references to our Firm) included in or made a part of this registration statement. Arthur Andersen LLP May 4, 1999 EX-27.1 31 FINANCIAL DATA SCHEDULE
5 1 YEAR DEC-31-1998 JAN-01-1998 DEC-31-1998 9,413,662 1,975,800 691,318 (10,205) 71,730 12,818,519 6,535,493 (312,435) 31,509,102 2,004,737 0 0 0 26,176 29,368,344 31,509,102 250,297 1,190,409 107,942 107,942 14,033,522 0 0 (12,313,654) 0 (12,313,654) 0 0 0 (12,313,654) (0.55) (0.55)
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