<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 4, 2000
REGISTRATION NO. 333-32734
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------------
MOLECULAR DEVICES CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 94-2914362
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
</TABLE>
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1311 ORLEANS DRIVE
SUNNYVALE, CALIFORNIA 94089
(408) 747-1700
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------------------
JOSEPH D. KEEGAN, PH.D.
PRESIDENT & CHIEF EXECUTIVE OFFICER
1311 ORLEANS DRIVE
SUNNYVALE, CALIFORNIA 94089
(408) 747-1700
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
-------------------------
COPIES TO:
<TABLE>
<S> <C>
JAMES C. KITCH, ESQ. FRODE JENSEN, ESQ.
SUZANNE SAWOCHKA HOOPER, ESQ. TODD W. ECKLAND, ESQ.
COOLEY GODWARD LLP WINTHROP, STIMSON, PUTNAM & ROBERTS
FIVE PALO ALTO SQUARE FINANCIAL CENTRE
3000 EL CAMINO REAL 695 EAST MAIN STREET
PALO ALTO, CALIFORNIA 94306 STAMFORD, CONNECTICUT 06904-6760
(650) 843-5000 (203) 348-2300
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this registration statement.
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If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
-------------------------
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, other than securities offered only in connection with dividend or interest
reinvestment plans, 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. [ ]
-------------------------
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.
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<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT
AN OFFER TO SELL THESE SECURITIES, AND IT IS NOT SOLICITING AN OFFER TO BUY
THESE SECURITIES, IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED MAY 4, 2000
PROSPECTUS
1,600,000 SHARES
MOLECULAR DEVICES LOGO
COMMON STOCK
-------------------------
Molecular Devices Corporation is selling 1,500,000 shares of common stock
and a selling stockholder is selling 100,000 shares. We will not receive any of
the proceeds from the sale of shares being sold by the selling stockholder.
Our shares are listed for trading on the Nasdaq National Market under the
symbol "MDCC." On May 3, 2000, the last reported sale price of our common stock
on the Nasdaq National Market was $51.69 per share.
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" STARTING ON PAGE 7.
-------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
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PER SHARE TOTAL
- -----------------------------------------------------------------------------------
<S> <C> <C>
Public Offering Price....................................... $ $
Underwriting Discounts and Commissions......................
Molecular Devices' Proceeds.................................
Selling Stockholder's Proceeds..............................
- -----------------------------------------------------------------------------------
</TABLE>
The underwriters have the option to purchase up to an additional 240,000
shares from us and certain selling stockholders to cover over-allotments. The
underwriters expect to deliver the shares to purchasers on or about
, 2000.
ING BARINGS
BEAR, STEARNS & CO. INC.
THOMAS WEISEL PARTNERS LLC
WARBURG DILLON READ LLC
-------------------------
, 2000
<PAGE> 3
Under caption "Innovative Solutions for Drug Discovery":
We are a leading developer of high-performance, bioanalytical measurement
systems that accelerate and improve drug discovery and other life sciences
research.
Under picture of SPECTRAmax GEMINI XS instrument:
We are a leading provider of microplate readers with our MAXline family,
including the recently introduced SPECTRAmax GEMINI XS, which offers a high
level of versatility and sensitivity.
Under picture of FLIPR instrument:
Our FLIPR and CLIPR Cell Analysis systems help researchers screen and optimize
drug candidates at high throughput and ultra-high throughput rates. Our Cell
Analysis systems include proprietary reagent kits that are optimized for use on
our Cell Analysis instruments.
Molecular Devices, the Molecular Devices logo, FLIPR and SPECTRAmax are some of
our trademarks and service marks. Other trademarks, trade names and service
marks referred to in this prospectus are the property of their respective
owners.
<PAGE> 4
PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in this
prospectus and may not contain all of the information that you should consider
before investing in our common stock. You should read carefully this entire
prospectus, including "Risk Factors" and our financial statements that are
incorporated by reference in this prospectus, before making an investment
decision. Unless the context requires otherwise, references in this prospectus
to "we," "us" and "our" refer to Molecular Devices Corporation and its wholly
owned subsidiaries.
MOLECULAR DEVICES CORPORATION
We are a leading developer of high-performance, bioanalytical measurement
systems that accelerate and improve drug discovery and other life sciences
research. Our systems enable pharmaceutical and biotechnology companies to
leverage advances in genomics and combinatorial chemistry by facilitating the
high throughput and cost effective identification and evaluation of drug
candidates. Our instrument systems are based on our advanced core technologies
which integrate our expertise in engineering, molecular and cell biology and
chemistry. Our systems are fundamental tools for drug discovery and life
sciences research, and our MAXline series of microplate readers and our FLIPR
Cell Analysis systems are market share leaders in their respective markets. Our
revenues were $62.0 million in 1999 and have increased at a compound annual rate
of 25% since 1995.
Advances in genomics and combinatorial chemistry have resulted in an
increasing number of new disease targets and drug candidates that can be
screened or evaluated in the drug discovery process. Researchers face severe
bottlenecks in the downstream phases of the drug discovery process, including
assay development, drug candidate screening and lead optimization, which require
more advanced and efficient evaluation technologies. Our products target these
phases of the drug discovery process and are designed to eliminate these
bottlenecks. Industry sources estimate that in 2000, pharmaceutical companies
will spend approximately $2.7 billion on third party drug discovery
instrumentation, reagents and services. We currently offer three product
families to serve this market.
- Our MAXline products include advanced microplate readers that are used to
acquire and process large quantities of biochemical and biological data
and are primarily used in assay development. Our MAXline strategy has
been to continue to introduce new products that include first-of-a-kind
features, as well as to offer varying feature sets and price points to
address different market segments. We have historically focused on the
premium end of the microplate reader market by offering products with
advanced capabilities. MAXline products represented 57% of our revenues
in 1999.
- Our Cell Analysis systems, which include FLIPR and CLIPR, are used to
study the response of live cells to drug candidates and primarily address
high throughput screening and lead optimization. Because our products
permit the analysis of live cells, they allow researchers to obtain more
biologically relevant information than can be obtained through the use of
traditional biochemical assays. FLIPR is the market leader in cellular
high throughput screening, and in 1999 we introduced the CLIPR system,
which provides live cell analysis at an ultra high throughput rate. Our
Cell Analysis systems represented 38% of our revenues in 1999.
- Our Threshold system, which is comprised of a detection instrument and
proprietary reagents, is used to quantify contaminants in the
manufacturing and quality control of bioengineered products. Threshold
system products represented 5% of our revenues in 1999.
We typically invest 10% to 12% of our revenues in research and development,
which has resulted in a track record of technological innovation. Over 70% of
our revenues in 1999 were derived from products that we introduced in the last
three years. We have sold over 13,000 instruments since the introduction of our
first microplate reader in 1987. In addition, over 70 customers have purchased
our FLIPR systems since introduction in 1996, including the 20 largest
pharmaceutical companies, several of which own five or more FLIPR systems. We
expect that increased sales of recently introduced products, including GEMINI
3
<PAGE> 5
XS, FLIPR(384) and CLIPR, and revenues from new instrument introductions will
continue to drive our growth. We also believe that the introduction of reagent
kits optimized for our products represents a significant growth opportunity.
Our objective is to be the world's leading provider of innovative
bioanalytical systems and related consumable products for life sciences
research. We are focusing on the drug discovery market and, specifically, on
providing complete solutions that accelerate and improve the critical downstream
drug discovery processes of assay development, drug candidate screening and lead
optimization. Key elements of our strategy include:
- maintaining and advancing our technological leadership;
- leveraging our market leadership position;
- increasing recurring revenue from our consumable products;
- expanding worldwide distribution and support of our products; and
- acquiring complementary businesses and technologies.
Our executive offices are located at 1311 Orleans Drive, Sunnyvale,
California 94089. Our telephone number is (408) 747-1700 and our internet
address is www.moldev.com. The information on our website is not part of this
prospectus.
RECENT OPERATING RESULTS
On April 13, 2000, we announced our operating results for the quarter ended
March 31, 2000. Our total revenues for the quarter were $17.1 million, an
increase of 26% over revenues of $13.5 million for the same period in 1999. Our
operating income for the quarter ended March 31, 2000 was $3.8 million, an
increase of 38% over operating income of $2.8 million for the same period in
1999. Our operating margins for the quarter ended March 31, 2000 were 22.5%
compared with operating margins of 20.6% for the same period in 1999. Our net
income for the quarter ended March 31, 2000 was $2.6 million, an increase of 32%
over net income of $2.0 million for the same period in 1999. Our earnings per
share for the quarter ended March 31, 2000, on a fully diluted basis, were $0.25
per share compared with fully diluted earnings per share of $0.20 for the same
period in 1999.
4
<PAGE> 6
THE OFFERING
<TABLE>
<S> <C>
Common stock offered by Molecular Devices............. 1,500,000 shares
Common stock offered by the selling stockholder....... 100,000 shares
Common stock to be outstanding after this offering.... 11,245,251 shares
Use of proceeds....................................... To fund ongoing sales and marketing and
research and development activities, working
capital and other general corporate purposes,
which may include possible acquisitions of,
or investments in, complementary products,
technologies or businesses. See "Use of
Proceeds."
Nasdaq National Market symbol......................... MDCC
</TABLE>
The number of shares of common stock offered assumes that the underwriters'
over-allotment option to purchase 240,000 shares from us and certain selling
stockholders is not exercised. See "Underwriting."
The outstanding share information is based upon our shares of common stock
outstanding as of March 31, 2000 and assumes that no options have been exercised
since March 31, 2000. In addition, this information excludes:
- 1,743,888 shares of common stock reserved for issuance pursuant to
outstanding stock options as of March 31, 2000 at a weighted average
exercise price of $25.59 per share; and
- 606,935 shares of common stock reserved for future issuance under our
employee benefit plans as of March 31, 2000.
5
<PAGE> 7
SUMMARY CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1995 1996 1997 1998 1999
------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF INCOME DATA:
Revenues......................................... $25,615 $30,926 $38,286 $47,798 $61,985
Cost of revenues................................. 10,416 11,741 14,426 17,716 22,745
------- ------- ------- ------- -------
Gross margin..................................... 15,199 19,185 23,860 30,082 39,240
Operating expenses:
Research and development....................... 3,639 4,581 4,721 5,686 7,363
Write-off of acquired in-process research and
development(1).............................. -- 4,637 -- 876 2,037
Selling, general and administrative............ 8,549 9,920 11,883 14,078 17,431
------- ------- ------- ------- -------
Total operating expenses............... 12,188 19,138 16,604 20,640 26,831
------- ------- ------- ------- -------
Income from operations........................... 3,011 47 7,256 9,442 12,409
Other income (expense), net...................... (33) 1,079 1,220 1,584 1,421
------- ------- ------- ------- -------
Income before income taxes....................... 2,978 1,126 8,476 11,026 13,830
Income tax provision (benefit)................... (1,081) (1,126) 3,174 4,245 5,325
------- ------- ------- ------- -------
Net income....................................... $ 4,059 $ 2,252 $ 5,302 $ 6,781 $ 8,505
======= ======= ======= ======= =======
Basic net income per share....................... $ 0.58 $ 0.26 $ 0.58 $ 0.72 $ 0.89
Diluted net income per share..................... $ 0.53 $ 0.24 $ 0.55 $ 0.70 $ 0.84
OTHER DATA:
Pro forma diluted net income per share(2)........ $ 0.24 $ 0.37 $ 0.55 $ 0.75 $ 0.97
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1999
------------------------
ACTUAL AS ADJUSTED(3)
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(IN THOUSANDS)
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................... $28,192 $100,609
Working capital............................................. 48,745 121,162
Total assets................................................ 64,751 137,168
Total stockholders' equity.................................. 56,784 129,201
</TABLE>
- -------------------------
(1) Our 1996 income from operations included a $4.6 million write-off for the
acquisition of in-process technology and acquisition costs related to our
acquisition of NovelTech Systems. Our 1998 income from operations included
an $876,000 write-off for the acquisition of in-process technology and
acquisition costs relating to our acquisition of certain technology rights
from Affymax Research Institute, a subsidiary of Glaxo Wellcome. Our 1999
income from operations included a $2.0 million write-off for the acquisition
of in-process technology and acquisition costs relating to our acquisition
of Skatron Instruments AS.
(2) We have excluded the impact of the write-offs of in-process technology and
acquisition costs in 1996, 1998 and 1999 described in footnote (1) above,
net of tax. We have also excluded the impact of the tax benefits we realized
in 1995 and 1996 from the utilization of net operating loss carryforwards
and included a provision for taxes at a 38.5% effective rate.
(3) Adjusted to give effect to the sale by us of 1,500,000 shares of common
stock in this offering (assuming no exercise of the underwriters'
over-allotment option) at an assumed public offering price of $51.69 per
share after deducting the estimated underwriting discounts and commissions
and estimated expenses of this offering.
6
<PAGE> 8
RISK FACTORS
This offering involves a high degree of risk. You should carefully consider
the following information about these risks, as well as the other information
contained or incorporated by reference in this prospectus, before you decide to
buy any shares of our common stock. Except for historical information, the
information contained or incorporated by reference in this prospectus are
"forward-looking" statements about our expected future business and performance.
Our actual operating results and financial performance may prove to be very
different from what we might have predicted as of the date of this prospectus.
The risks described below address some of the factors that may affect our future
operating results and financial performance.
VARIATIONS IN THE AMOUNT OF TIME IT TAKES FOR US TO SELL OUR PRODUCTS AND
COLLECT ACCOUNTS RECEIVABLE AND THE TIMING OF CUSTOMER ORDERS MAY CAUSE
FLUCTUATIONS IN OUR OPERATING RESULTS, WHICH COULD CAUSE OUR STOCK PRICE TO
DECLINE.
The timing of capital equipment purchases by customers is expected to be
uneven and difficult to predict. Our products represent major capital purchases
for our customers. We estimate that the average order price for our MAXline
products is $17,000, and that the average order price for our FLIPR products is
$350,000. Accordingly, our customers generally take a relatively long time to
evaluate our products, and a significant portion of our revenues is typically
derived from sales of a small number of relatively high-priced products.
Purchases are generally made by purchase orders and not long-term contracts.
Delays in receipt of anticipated orders for our relatively high priced products
could lead to substantial variability from quarter to quarter. Furthermore, we
have historically received purchase orders and made a significant portion of
each quarter's product shipments near the end of the quarter. If that pattern
continues, even short delays in the receipt of orders or shipment of products at
the end of a quarter could have a material adverse effect on results of
operations for that quarter.
We expend significant resources educating and providing information to our
prospective customers regarding the uses and benefits of our products. Because
of the number of factors influencing the sales process, the period between our
initial contact with a customer and the time when we recognize revenue from that
customer, if ever, varies widely. Our sales cycles typically range from three to
six months, but can be much longer. During these cycles, we commit substantial
resources to our sales efforts in advance of receiving any revenue, and we may
never receive any revenue from a customer despite our sales efforts.
The relatively high purchase price for a customer order contributes to
collection delays that result in working capital volatility. While the terms of
most of our purchase orders require payment within 30 days of product shipment,
in the past we have experienced significant collection delays. We cannot predict
whether we will continue to experience similar or more severe delays.
The capital spending policies of our customers have a significant effect on
the demand for our products. Those policies are based on a wide variety of
factors, including resources available to make purchases, spending priorities,
and policies regarding capital expenditures during industry downturns or
recessionary periods. Any decrease in capital spending by our customers
resulting from any of these factors could harm our business.
WE DEPEND ON ORDERS THAT ARE RECEIVED AND SHIPPED IN THE SAME QUARTER AND
THEREFORE HAVE LIMITED VISIBILITY OF FUTURE PRODUCT SHIPMENTS.
Our net sales in any given quarter depend upon a combination of orders
received in that quarter for shipment in that quarter and shipments from
backlog. Our products are typically shipped within 30 to 90 days of purchase
order receipt. As a result, we do not believe that the amount of backlog at any
particular date is indicative of our future level of sales. Our backlog at the
beginning of each quarter does not include all product sales needed to achieve
expected revenues for that quarter. Consequently, we are dependent on obtaining
orders for products to be shipped in the same quarter that the order is
received. Moreover, customers may reschedule shipments, and production
difficulties could delay shipments.
7
<PAGE> 9
Accordingly, we have limited visibility of future product shipments, and our
results of operations are subject to significant variability from quarter to
quarter.
MANY OF OUR CURRENT AND POTENTIAL COMPETITORS HAVE SIGNIFICANTLY GREATER
RESOURCES THAN WE DO, AND INCREASED COMPETITION COULD IMPAIR SALES OF OUR
PRODUCTS.
We operate in a highly competitive industry and face competition from
companies that design, manufacture and market instruments for use in the life
sciences research industry, from genomic, pharmaceutical, biotechnology and
diagnostic companies and from academic and research institutions and government
or other publicly-funded agencies, both in the United States and abroad. We may
not be able to compete effectively with all of these competitors. Many of these
companies and institutions have greater financial, engineering, manufacturing,
marketing and customer support resources than we do. As a result, our
competitors may be able to respond more quickly to new or emerging technologies
or market developments by devoting greater resources to the development,
promotion and sale of products, which could impair sales of our products.
Moreover, there has been significant merger and acquisition activity among our
competitors and potential competitors. These transactions by our competitors and
potential competitors may provide them with a competitive advantage over us by
enabling them to rapidly expand their product offerings and service capabilities
to meet a broader range of customer needs. Many of our existing and potential
customers are large companies that require global support and service, which may
be easier for our larger competitors to provide.
We believe that competition within the markets we serve is primarily driven
by the need for innovative products that address the needs of customers. We
attempt to counter competition by seeking to develop new products and provide
quality products and services that meet customers' needs. We cannot assure you,
however, that we will be able to successfully develop new products or that our
existing or new products and services will adequately meet our customers' needs.
Rapidly changing technology, evolving industry standards, changes in
customer needs, emerging competition and frequent new product and service
introductions characterize the markets for our products. To remain competitive,
we will be required to develop new products and periodically enhance our
existing products in a timely manner. We are facing increased competition as new
companies entering the market with new technologies compete, or will compete,
with our products and future products. We cannot assure you that one or more of
our competitors will not succeed in developing or marketing technologies or
products that are more effective or commercially attractive than our products or
future products, or that would render our technologies and products obsolete or
uneconomical. Our future success will depend in large part on our ability to
maintain a competitive position with respect to our current and future
technologies, which we may not be able to do. In addition, delays in the launch
of our new products may result in loss of market share due to our customers'
purchases of competitors' products during any delay.
IF WE ARE NOT SUCCESSFUL IN DEVELOPING NEW AND ENHANCED PRODUCTS, WE MAY LOSE
MARKET SHARE TO OUR COMPETITORS.
The life sciences instrumentation market is characterized by rapid
technological change and frequent new product introductions. Over 70% of our
revenues in 1999 were derived from the sale of products that were introduced in
the last three years, and our future success will depend on our ability to
enhance our current products and to develop and introduce, on a timely basis,
new products that address the evolving needs of our customers. We may experience
difficulties or delays in our development efforts with respect to new products,
and we may not ultimately be successful in developing them. Any significant
delay in releasing new systems could adversely affect our reputation, give a
competitor a first-to-market advantage or cause a competitor to achieve greater
market share. In addition, our future success depends on our continued ability
to develop new applications for our existing products. If we are not able to
complete the development of these applications, or if we experience difficulties
or delays, we may lose our current customers and may not be able to attract new
customers, which could seriously harm our business and our future growth
prospects.
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<PAGE> 10
WE MUST EXPEND A SIGNIFICANT AMOUNT OF TIME AND RESOURCES TO DEVELOP NEW
PRODUCTS AND IF THESE PRODUCTS DO NOT ACHIEVE COMMERCIAL ACCEPTANCE, OUR
OPERATING RESULTS MAY SUFFER.
We expect to spend a significant amount of time and resources to develop
new products and refine existing products. In light of the long product
development cycles inherent in our industry, these expenditures will be made
well in advance of the prospect of deriving revenue from the sale of new
products. Our ability to commercially introduce and successfully market new
products is subject to a wide variety of challenges during this development
cycle that could delay introduction of these products. In addition, since our
customers are not obligated by long-term contracts to purchase our products, our
anticipated product orders may not materialize, or orders that do materialize
may be canceled. As a result, if we do not achieve market acceptance of new
products, our operating results will suffer. In particular, while FLIPR and
CLIPR reagent kits have recently been introduced to the market, they have had
only limited sales to date and have not yet been widely commercially accepted.
We cannot predict whether these or other new products that we expect to
introduce will achieve commercial acceptance. Our products are generally priced
higher than competitive products, which may impair commercial acceptance.
IF WE DELIVER PRODUCTS WITH DEFECTS, OUR CREDIBILITY WILL BE HARMED AND THE
SALES AND MARKET ACCEPTANCE OF OUR PRODUCTS WILL DECREASE.
Our products are complex and sometimes have contained errors, defects and
bugs when introduced. If we deliver products with errors, defects or bugs, our
credibility and the market acceptance and sales of our products would be harmed.
Further, if our products contain errors, defects or bugs, we may be required to
expend significant capital and resources to alleviate such problems. Defects
could also lead to product liability as a result of product liability lawsuits
against us or against our customers. We have agreed to indemnify our customers
in some circumstances against liability arising from defects in our products. In
the event of a successful product liability claim, we could be obligated to pay
damages significantly in excess of our product liability insurance limits.
THE RECENT ISSUANCE BY THE SEC OF AN ACCOUNTING BULLETIN RELATED TO REVENUE
RECOGNITION, SAB 101, MAY HAVE A MATERIAL ADVERSE IMPACT ON OUR FINANCIAL
PERFORMANCE.
In December 1999, the SEC issued Staff Accounting Bulletin No. 101, Revenue
Recognition in Financial Statements, referred to as SAB 101. SAB 101 summarizes
the SEC staff's views in applying generally accepted accounting principles to
revenue recognition in financial statements. We are currently in the process of
evaluating SAB 101 and what effect it may have on our financial statements.
Accordingly, we have not determined whether SAB 101 will have a material impact
on our financial position or results of operations. In the event that the
implementation of SAB 101 requires us to report a change in accounting
principles related to our revenue recognition policy, we would be required to
report such change no later than the quarter ending June 30, 2000. In addition
to other uncertain risks related to SAB 101, it is possible that SAB 101 will
result in increased fluctuations in our quarterly operating results and increase
the likelihood that we may fail to meet the expectations of securities analysts
for any period.
MOST OF OUR CURRENT AND POTENTIAL CUSTOMERS ARE FROM THE PHARMACEUTICAL AND
BIOTECHNOLOGY INDUSTRIES AND ARE SUBJECT TO RISKS FACED BY THOSE INDUSTRIES.
We derive a significant portion of our revenues from sales to
pharmaceutical and biotechnology companies. We expect that sales to
pharmaceutical and biotechnology companies will continue to be a primary source
of revenues for the foreseeable future. As a result, we are subject to risks and
uncertainties that affect the pharmaceutical and biotechnology industries, such
as pricing pressures as third-party payors continue challenging the pricing of
medical products and services, government regulation and uncertainty of
technological change, and reduction and delays in research and development
expenditures by companies in these industries.
In addition, our future revenues may be adversely affected by the ongoing
consolidation in the pharmaceutical and biotechnology industries, which will
reduce the number of our potential customers. Furthermore, we cannot assure you
that the pharmaceutical and biotechnology companies that are our customers will
not develop their own competing products or in-house capabilities.
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<PAGE> 11
OUR PRODUCTS COULD INFRINGE ON THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS, WHICH
MAY CAUSE US TO ENGAGE IN COSTLY LITIGATION AND, IF WE ARE NOT SUCCESSFUL, COULD
ALSO CAUSE US TO PAY SUBSTANTIAL DAMAGES AND PROHIBIT US FROM SELLING OUR
PRODUCTS.
Third parties may assert infringement or other intellectual property claims
against us. We may have to pay substantial damages, including treble damages,
for past infringement if it is ultimately determined that our products infringe
a third party's proprietary rights. Further, any legal action against us could,
in addition to subjecting us to potential liability for damages, prohibit us
from selling our products before we obtain a license to do so from the party
owning the intellectual property, which, if available at all, may require us to
pay substantial royalties. Even if these claims are without merit, defending a
lawsuit takes significant time, may be expensive and may divert management
attention from other business concerns. There may be third-party patents that
may relate to our technology or potential products. Any public announcements
related to litigation or interference proceedings initiated or threatened
against us could cause our stock price to decline. We believe that there may be
significant litigation in the industry regarding patent and other intellectual
property rights. If we become involved in litigation, it could consume a
substantial portion of our managerial and financial resources.
WE MAY NEED TO INITIATE LAWSUITS TO PROTECT OR ENFORCE OUR PATENTS, WHICH WOULD
BE EXPENSIVE AND, IF WE LOSE, MAY CAUSE US TO LOSE SOME OF OUR INTELLECTUAL
PROPERTY RIGHTS, WHICH WOULD REDUCE OUR ABILITY TO COMPETE IN THE MARKET.
We rely on patents to protect a large part of our intellectual property and
our competitive position. In order to protect or enforce our patent rights, we
may initiate patent litigation against third parties, such as infringement suits
or interference proceedings. Litigation may be necessary to:
- assert claims of infringement;
- enforce our patents;
- protect our trade secrets or know-how; or
- determine the enforceability, scope and validity of the proprietary
rights of others.
Lawsuits could be expensive, take significant time and divert management's
attention from other business concerns. They would put our patents at risk of
being invalidated or interpreted narrowly and our patent applications at risk of
not issuing. We may also provoke third parties to assert claims against us.
Patent law relating to the scope of claims in the technology fields in which we
operate is still evolving and, consequently, patent positions in our industry
are generally uncertain. We cannot assure you that we will prevail in any of
these suits or that the damages or other remedies awarded, if any, will be
commercially valuable. During the course of these suits, there may be public
announcements of the results of hearings, motions and other interim proceedings
or developments in the litigation. If securities analysts or investors perceive
any of these results to be negative, it could cause our stock price to decline.
THE RIGHTS WE RELY UPON TO PROTECT OUR INTELLECTUAL PROPERTY UNDERLYING OUR
PRODUCTS MAY NOT BE ADEQUATE, WHICH COULD ENABLE THIRD PARTIES TO USE OUR
TECHNOLOGY AND WOULD REDUCE OUR ABILITY TO COMPETE IN THE MARKET.
Our success will depend in part on our ability to obtain commercially
valuable patent claims and to protect our intellectual property. Our patent
position is generally uncertain and involves complex legal and factual
questions. Legal standards relating to the validity and scope of claims in our
technology field are still evolving. Therefore, the degree of future protection
for our proprietary rights is uncertain.
The risks and uncertainties that we face with respect to our patents and
other proprietary rights include the following:
- the pending patent applications we have filed or to which we have
exclusive rights may not result in issued patents or may take longer than
we expect to result in issued patents;
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<PAGE> 12
- the claims of any patents which are issued may not provide meaningful
protection;
- we may not be able to develop additional proprietary technologies that
are patentable;
- the patents licensed or issued to us or our customers may not provide a
competitive advantage;
- other companies may challenge patents licensed or issued to us or our
customers;
- patents issued to other companies may harm our ability to do business;
- other companies may independently develop similar or alternative
technologies or duplicate our technologies; and
- other companies may design around technologies we have licensed or
developed.
In addition to patents, we rely on a combination of trade secrets,
nondisclosure agreements and other contractual provisions and technical measures
to protect our intellectual property rights. Nevertheless, these measures may
not be adequate to safeguard the technology underlying our products. If they do
not protect our rights, third parties could use our technology, and our ability
to compete in the market would be reduced. In addition, employees, consultants
and others who participate in the development of our products may breach their
agreements with us regarding our intellectual property, and we may not have
adequate remedies for the breach. We also may not be able to effectively protect
our intellectual property rights in some foreign countries. For a variety of
reasons, we may decide not to file for patent, copyright or trademark protection
or prosecute potential infringements of our patents. We also realize that our
trade secrets may become known through other means not currently foreseen by us.
Notwithstanding our efforts to protect our intellectual property, our
competitors or customers may independently develop similar or alternative
technologies or products that are equal or superior to our technology and
products without infringing on any of our intellectual property rights or design
around our proprietary technologies.
WE OBTAIN SOME OF THE COMPONENTS AND SUBASSEMBLIES INCLUDED IN OUR SYSTEMS FROM
A SINGLE SOURCE OR A LIMITED GROUP OF SUPPLIERS, AND THE PARTIAL OR COMPLETE
LOSS OF ONE OF THESE SUPPLIERS COULD CAUSE PRODUCTION DELAYS AND A SUBSTANTIAL
LOSS OF REVENUE.
We rely on outside vendors to manufacture many components and
subassemblies. Certain components, subassemblies and services necessary for the
manufacture of our systems are obtained from a sole supplier or limited group of
suppliers, some of which are our competitors. Additional components, such as
optical, electronic and pneumatic devices, are currently purchased in
configurations specific to our requirements and, together with certain other
components, such as computers, are integrated into our products. We maintain
only a limited number of long-term supply agreements with our suppliers.
Our reliance on a sole or a limited group of suppliers involves several
risks, including the following:
- we may be unable to obtain an adequate supply of required components;
- we have reduced control over pricing and the timely delivery of
components and subassemblies; and
- our suppliers may be unable to develop technologically advanced products
to support our growth and development of new systems.
For example, we currently rely on a single supplier of disposable plastic tips
used with our FLIPR(384) system, and we have in the past experienced delays and
customer dissatisfaction due to our supplier's inability to deliver an adequate
supply of tips. We cannot predict whether we will encounter additional similar
delays in the future. Our current supplier and known potential alternative
suppliers of disposable plastic tips used with our FLIPR(384) system are our
competitors.
Because the manufacturing of certain of these components and subassemblies
involves extremely complex processes and requires long lead times, we may
experience delays or shortages caused by suppliers. We believe that alternative
sources could be obtained and qualified, if necessary, for most sole and limited
source parts. However, if we were forced to seek alternative sources of supply
or to manufacture such components or subassemblies internally, we may be forced
to redesign our systems,
11
<PAGE> 13
which could prevent us from shipping our systems to customers on a timely basis.
Some of our suppliers have relatively limited financial and other resources. Any
inability to obtain adequate deliveries, or any other circumstance that would
restrict our ability to ship our products, could damage relationships with
current and prospective customers and could harm our business.
WE MAY ENCOUNTER MANUFACTURING AND ASSEMBLY PROBLEMS OR DELAYS, WHICH COULD
RESULT IN LOST REVENUE.
We assemble our systems in our manufacturing facilities located in
Sunnyvale, California and Norway. Our manufacturing and assembly processes are
highly complex and require sophisticated, costly equipment and specially
designed facilities. As a result, any prolonged disruption in the operations of
our manufacturing facilities could seriously harm our ability to satisfy our
customer order deadlines. If we cannot deliver our systems in a timely manner,
our revenues will likely suffer.
Our product sales depend in part upon manufacturing yields. We currently
have limited manufacturing capacity and experience variability in manufacturing
yields. We are currently manufacturing high throughput instruments in-house, in
limited volumes and with largely manual assembly. If demand for our high
throughput instruments increases, we will either need to expand our in-house
manufacturing capabilities or outsource to other manufacturers. If we fail to
deliver our products in a timely manner, our relationships with our customers
could be seriously harmed, and revenue would decline.
As we develop new products, we must transition the manufacture of a new
product from the development stage to commercial manufacturing. We have only
recently transitioned GEMINI XS and SPECTRAmax PLUS(384) from the development
stage to commercial manufacturing, and we have only recently begun the
transition process for the CLIPR system. We cannot predict whether we will be
able to complete these transitions on a timely basis and with commercially
reasonable costs. We cannot assure you that manufacturing or quality control
problems will not arise as we attempt to scale-up our production for any future
new products or that we can scale-up manufacturing and quality control in a
timely manner or at commercially reasonable costs. If we are unable to
consistently manufacture our products on a timely basis because of these or
other factors, our product sales will decline.
WE MAY HAVE DIFFICULTY MANAGING OUR GROWTH.
We expect to continue to experience significant growth in the number of our
employees and customers and the scope of our operations. This growth may
continue to place a significant strain on our management and operations. Our
ability to manage this growth will depend upon our ability to broaden our
management team and our ability to attract, hire and retain skilled employees.
Our success will also depend on the ability of our officers and key employees to
continue to implement and improve our operational and other systems, to manage
multiple, concurrent customer relationships and to hire, train and manage our
employees. Our future success is heavily dependent upon growth and acceptance of
new products. If we cannot scale our business appropriately or otherwise adapt
to anticipated growth and new product introductions, a key part of our strategy
may not be successful.
WE RELY UPON DISTRIBUTORS FOR PRODUCT SALES AND SUPPORT OUTSIDE NORTH AMERICA.
In 1999 approximately 17% of our sales were made through distributors. We
often rely upon distributors to provide customer support to the ultimate end
users of our products. As a result, our success depends on the continued sales
and customer support efforts of our network of distributors. The use of
distributors involves certain risks, including risks that distributors will not
effectively sell or support our products, that they will be unable to satisfy
financial obligations to us and that they will cease operations. Any reduction,
delay or loss of orders from our significant distributors could harm our
revenues. We also do not currently have distributors in a number of significant
international markets that we have targeted and will need to establish
additional international distribution relationships. There can be no assurance
that we will engage qualified distributors in a timely manner, and the failure
to do so could have a material adverse effect on our business, financial
condition and results of operations.
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<PAGE> 14
IF WE CHOOSE TO ACQUIRE NEW AND COMPLEMENTARY BUSINESSES, PRODUCTS OR
TECHNOLOGIES INSTEAD OF DEVELOPING THEM OURSELVES, WE MAY BE UNABLE TO COMPLETE
THESE ACQUISITIONS OR MAY NOT BE ABLE TO SUCCESSFULLY INTEGRATE AN ACQUIRED
BUSINESS OR TECHNOLOGY IN A COST-EFFECTIVE AND NON-DISRUPTIVE MANNER.
Our success depends on our ability to continually enhance and broaden our
product offerings in response to changing technologies, customer demands and
competitive pressures. To this end, from time to time we have acquired
complementary businesses, products, or technologies instead of developing them
ourselves and may choose to do so in the future. We do not know if we will be
able to complete any acquisitions, or whether we will be able to successfully
integrate any acquired business, operate it profitably or retain its key
employees. Integrating any business, product or technology we acquire could be
expensive and time consuming, disrupt our ongoing business and distract our
management. In addition, in order to finance any acquisitions, we might need to
raise additional funds through public or private equity or debt financings. In
that event, we could be forced to obtain financing on terms that are not
favorable to us and, in the case of equity financing, that may result in
dilution to our shareholders. If we are unable to integrate any acquired
entities, products or technologies effectively, our business will suffer. In
addition, any amortization of goodwill or other assets or charges resulting from
the costs of acquisitions could harm our business and operating results.
WE DEPEND ON OUR KEY PERSONNEL, THE LOSS OF WHOM WOULD IMPAIR OUR ABILITY TO
COMPETE.
We are highly dependent on the principal members of our management,
engineering and scientific staff. The loss of the service of any of these
persons could seriously harm our product development and commercialization
efforts. In addition, research, product development and commercialization will
require additional skilled personnel in areas such as chemistry and biology,
software engineering and electronic engineering. Our corporate headquarters is
located in Sunnyvale, California, where demand for personnel with these skills
is extremely high and is likely to remain high. As a result, competition for and
retention of personnel, particularly for employees with technical expertise, is
intense and the turnover rate for these people is high. If we are unable to
hire, train and retain a sufficient number of qualified employees, our ability
to conduct and expand our business could be seriously reduced. The inability to
retain and hire qualified personnel could also hinder the planned expansion of
our business.
WE ARE DEPENDENT ON INTERNATIONAL SALES AND OPERATIONS, WHICH EXPOSES US TO
FOREIGN CURRENCY EXCHANGE RATE, POLITICAL AND ECONOMIC RISKS.
We maintain facilities in Norway, the United Kingdom and Germany, and sales
to customers outside the U.S. accounted for approximately 39% of our revenues in
1999. We anticipate that international sales will continue to account for a
significant portion of our revenues.
All of our sales to international distributors are denominated in U.S.
dollars. All of our direct sales in the United Kingdom, Germany and Canada are
denominated in local currencies and totaled $13.9 million (22% of total
revenues) in 1999. To the extent that our sales and operating expenses are
denominated in foreign currencies, our operating results may be adversely
affected by changes in exchange rates. Historically, foreign exchange gains and
losses have been immaterial to our results of operations. However, we cannot
predict whether these gains and losses will continue to be immaterial,
particularly as we increase our direct sales outside North America. Owing to the
number of currencies involved, the substantial volatility of currency exchange
rates, and our constantly changing currency exposures, we cannot predict the
effect of exchange rate fluctuations on our future operating results. We do not
engage in foreign currency hedging transactions.
Our reliance on international sales and operations exposes us to foreign
political and economic risks, including:
- political, social and economic instability;
- trade restrictions and changes in tariffs;
- import and export license requirements and restrictions;
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<PAGE> 15
- difficulties in staffing and managing international operations;
- disruptions in international transport or delivery;
- difficulties in collecting receivables; and
- potentially adverse tax consequences.
If any of these risks materialize, our international sales could decrease and
our foreign operations could suffer.
OUR OPERATING RESULTS FLUCTUATE AND ANY FAILURE TO MEET FINANCIAL EXPECTATIONS
MAY DISAPPOINT SECURITIES ANALYSTS OR INVESTORS AND RESULT IN A DECLINE IN OUR
STOCK PRICE.
We typically experience a decrease in the level of sales in the first
calendar quarter as compared to the fourth quarter of the preceding year because
of budgetary and capital equipment purchasing patterns in the life sciences
industry. We also typically experience a decrease in revenues in the third
quarter compared to the second quarter, related to seasonality primarily
associated with lower European and academic sales during the summer months. See
also "The recent issuance by the SEC of an accounting bulletin related to
revenue recognition, SAB 101, may have a material adverse impact on our
financial performance" above.
Our quarterly operating results have fluctuated in the past, and we expect
they will fluctuate in the future as a result of many factors, some of which are
outside of our control. In particular, if sales levels in a particular quarter
do not meet expectations, we may not be able to adjust operating expenses
sufficiently quickly to compensate for the shortfall, and our results of
operations for that quarter may be seriously harmed. We manufacture our products
based on forecasted orders rather than to outstanding orders. Our manufacturing
procedures may in certain instances create a risk of excess or inadequate
inventory levels if orders do not match forecasts. In addition, our expense
levels are based, in part, on expected future sales, and we generally cannot
quickly adjust operating expenses. For example, research and development and
general and administrative expenses are not affected directly by variations in
revenue.
It is possible that in some future quarter or quarters, our operating
results will be below the expectations of securities analysts or investors. In
this event, the market price of our common stock may fall abruptly and
significantly. Because our revenue and operating results are difficult to
predict, we believe that period-to-period comparisons of our results of
operations are not a good indication of our future performance.
OUR STOCK PRICE IS VOLATILE, WHICH COULD CAUSE INVESTORS TO LOSE A SUBSTANTIAL
PART OF THEIR INVESTMENT IN OUR STOCK.
The stock market in general, and the stock prices of technology companies
in particular, have recently experienced volatility which has often been
unrelated to the operating performance of any particular company or companies.
Over the last twelve months, our stock price has ranged from $21.37 to $122.35.
Our stock price could decline regardless of our actual operating performance,
and investors could lose a substantial part of their investment as a result of
industry or market-based fluctuations. In the past, our stock has traded
relatively thinly. If a more active public market for our stock is not sustained
after this offering, it may be difficult for investors to resell shares of our
common stock. Because we do not anticipate paying cash dividends on our common
stock for the foreseeable future, stockholders will not be able to receive a
return on their shares unless they sell them.
THE MARKET PRICE OF OUR COMMON STOCK WILL LIKELY FLUCTUATE IN RESPONSE TO A
NUMBER OF FACTORS, INCLUDING THE FOLLOWING:
- our failure to meet the performance estimates of securities analysts;
- changes in financial estimates of our revenues and operating results or
buy/sell recommendations by securities analysts;
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<PAGE> 16
- the timing of announcements by us or our competitors of significant
products, contracts or acquisitions or publicity regarding actual or
potential results or performance thereof; and
- general stock market conditions, other economic or external factors.
NEW INVESTORS IN OUR COMMON STOCK WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL
DILUTION.
The public offering price of the shares in this offering is substantially
higher than the book value per share of our common stock. Investors purchasing
common stock in this offering will, therefore, incur immediate dilution of
$40.52 in net tangible book value per share of common stock, based on an assumed
public offering price of $51.69 per share. Investors will incur additional
dilution upon the exercise of outstanding stock options and warrants.
PROVISIONS OF OUR CHARTER DOCUMENTS AND DELAWARE LAW MAY INHIBIT A TAKEOVER,
WHICH COULD LIMIT THE PRICE INVESTORS MIGHT BE WILLING TO PAY IN THE FUTURE FOR
OUR COMMON STOCK.
Provisions in our certificate of incorporation and bylaws may have the
effect of delaying or preventing an acquisition, merger in which we are not the
surviving company or changes in our management. For example, our certificate of
incorporation gives our board of directors the authority to issue shares of
preferred stock and to determine the price, rights, preferences and privileges
and restrictions, including voting rights, of those shares without any further
vote or action by our stockholders. The rights of the holders of common stock
will be subject to, and may harmed by, the rights of the holders of any shares
of preferred stock that may be issued in the future. The issuance of preferred
stock may delay, defer or prevent a change in control, as the terms of the
preferred stock that might be issued could potentially prohibit our consummation
of any merger, reorganization, sale of substantially all of our assets,
liquidation or other extraordinary corporate transaction without the approval of
the holders of the outstanding shares of preferred stock. The issuance of
preferred stock could also have a dilutive effect on our stockholders. In
addition, because we are incorporated in Delaware, we are governed by the
provisions of Section 203 of the Delaware General Corporation Law. These
provisions may prohibit large stockholders, in particular those owning 15% or
more of the outstanding voting stock, from consummating a merger or combination
involving us. These provisions could limit the price that investors might be
willing to pay in the future for our common stock.
OUR MANAGEMENT WILL HAVE BROAD DISCRETION TO ALLOCATE THE NET PROCEEDS OF THIS
OFFERING AND THE PROCEEDS MAY NOT BE USED APPROPRIATELY.
Our management will retain broad discretion allocating the proceeds of this
offering. We estimate the net proceeds to us from this offering to be
approximately $72.4 million, or $83.2 million if the underwriters'
over-allotment option is exercised in full, after deducting estimated
underwriting discounts and commissions and estimated offering expenses. We have
no specific allocations for the net proceeds of this offering. The amount of
proceeds we will actually expend for any purpose will vary depending on a number
of factors, including the successful commercialization of our products, progress
in and scope of our research and development activities, costs and magnitude of
product, technology or business acquisitions and our need for manufacturing
capacity. Consequently, management will retain a significant amount of
discretion over the allocation of the net proceeds of this offering. Because of
the number and variability of factors that will determine the use of the net
proceeds of this offering, how we spend these proceeds may vary substantially
from our current intentions. If our management does not apply the net proceeds
effectively, our revenues could decrease and our stock price could fall.
OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN OUR
FORWARD-LOOKING STATEMENTS.
This prospectus, including the documents that we incorporate by reference,
contains forward-looking statements within the meaning of the federal securities
laws that relate to future events or our future financial performance. When used
in this prospectus, you can identify forward-looking statements by terminology
such as "anticipate," "believe," "continue," "estimate," "expect," "intend,"
"may," "plan,"
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<PAGE> 17
"potential," "predict," "should," "will" and the negative of these terms or
other comparable terminology. These statements are only predictions. Our actual
results could differ materially from those anticipated in our forward-looking
statements as a result of many factors, including those set forth here under
"Risk Factors" and elsewhere in this prospectus.
Although we believe that the expectations reflected in our forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Neither we nor any other person assumes
responsibility for the accuracy and completeness of these statements. We assume
no duty to update any of the forward-looking statements after the date of this
prospectus or to conform these statements to actual results.
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<PAGE> 18
USE OF PROCEEDS
We estimate that the net proceeds we will receive from the sale of
1,500,000 shares of common stock offered by us will be approximately $72.4
million based upon an assumed public offering price of $51.69 per share and
after deducting the estimated underwriting discounts and commissions and
estimated offering expenses. We estimate that if the underwriters exercise their
over-allotment option in full, the net proceeds to us will be approximately
$83.2 million. We will not receive any proceeds from the shares sold by the
selling stockholder in this offering.
We expect to use the net proceeds from this offering for sales and
marketing and research and development activities, working capital and other
general corporate purposes. We may use a portion of the net proceeds to acquire,
or make investments in, complementary products, technologies or businesses when
the opportunity arises; however, we currently have no material commitments or
agreements with respect to any such transactions. As of the date of this
prospectus, we cannot specify with certainty the particular uses for the net
proceeds we will receive in this offering. Accordingly, our management will have
broad discretion in applying the net proceeds of this offering. Pending such
uses, the net proceeds of this offering will be primarily invested in investment
grade, interest-bearing securities.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock. We
currently intend to retain earnings to support the development of our business
and do not anticipate paying cash dividends for the foreseeable future. Any
future determination to pay dividends will be at the discretion of our board of
directors.
PRICE RANGE OF COMMON STOCK
Our common stock is listed on the Nasdaq National Market under the symbol
MDCC. The following table sets forth, for the periods indicated, the high and
low closing sale prices of our common stock as reported by the Nasdaq National
Market.
<TABLE>
<CAPTION>
HIGH LOW
------- ------
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1998
First Quarter............................................... $ 22.38 $15.25
Second Quarter.............................................. 19.38 14.38
Third Quarter............................................... 18.50 12.12
Fourth Quarter.............................................. 21.75 16.00
YEAR ENDED DECEMBER 31, 1999
First Quarter............................................... $ 31.00 $20.50
Second Quarter.............................................. 37.50 21.75
Third Quarter............................................... 41.50 26.06
Fourth Quarter.............................................. 52.00 27.94
YEAR ENDING DECEMBER 31, 2000
First Quarter............................................... $113.12 $42.38
Second Quarter (through May 3, 2000)........................ 69.25 40.00
</TABLE>
On May 3, 2000, the last reported sale price of our common stock on the
Nasdaq National Market was $51.69 per share. As of March 31, 2000, there were
9,745,251 shares of our common stock outstanding.
17
<PAGE> 19
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1999:
- on an actual basis; and
- on an as adjusted basis after giving effect to the sale of the 1,500,000
shares of common stock we are offering at an assumed public offering
price of $51.69 per share, after deducting the estimated underwriting
discounts and commissions and estimated offering expenses.
You should read this table in conjunction with the consolidated financial
statements and notes incorporated by reference herein and the information under
"Selected Consolidated Financial Data."
<TABLE>
<CAPTION>
DECEMBER 31, 1999
----------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS, EXCEPT
SHARE NUMBERS)
----------------------
<S> <C> <C>
Debt........................................................ $ -- $ --
Stockholders' Equity:
Preferred stock, no par value; 3,000,000 shares authorized;
no shares issued and outstanding, actual; no shares issued
and outstanding, as adjusted.............................. -- --
Common stock, $0.001 par value; 30,000,000 shares
authorized; 9,661,960 shares issued and outstanding,
actual; 11,161,960 shares issued and outstanding, as
adjusted.................................................. 10 11
Additional paid-in capital.................................. 44,661 117,077
Deferred compensation....................................... (154) (154)
Retained earnings........................................... 12,740 12,740
Accumulated other comprehensive loss........................ (473) (473)
------- --------
Total stockholders' equity................................ 56,784 129,201
------- --------
Total capitalization.............................. $56,784 $129,201
======= ========
</TABLE>
The number of shares outstanding excludes:
- 1,467,392 shares of common stock reserved for issuance pursuant to
outstanding stock options as of December 31, 1999 at a weighted average
exercise price of $10.19 per share; and
- 964,409 shares of common stock reserved for future issuance under our
employee benefit plans as of December 31, 1999.
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<PAGE> 20
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements and notes
thereto incorporated by reference herein. The selected consolidated financial
data set forth below with respect to our consolidated statement of income data
for the years ended December 31, 1997, 1998 and 1999 and with respect to the
consolidated balance sheet data at December 31, 1998 and 1999 have been derived
from audited consolidated financial statements incorporated by reference herein.
The consolidated statement of income data for the years ended December 31, 1995
and 1996 and the consolidated balance sheet data at December 31, 1995, 1996 and
1997 are derived from audited consolidated financial statements not included or
incorporated by reference herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1995 1996 1997 1998 1999
------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF INCOME DATA:
Revenues................................. $25,615 $30,926 $38,286 $47,798 $61,985
Cost of revenues......................... 10,416 11,741 14,426 17,716 22,745
------- ------- ------- ------- -------
Gross margin............................. 15,199 19,185 23,860 30,082 39,240
Operating expenses:
Research and development............... 3,639 4,581 4,721 5,686 7,363
Write-off of acquired in-process
research and development(1)......... -- 4,637 -- 876 2,037
Selling, general and administrative.... 8,549 9,920 11,883 14,078 17,431
------- ------- ------- ------- -------
Total operating expenses............ 12,188 19,138 16,604 20,640 26,831
------- ------- ------- ------- -------
Income from operations................... 3,011 47 7,256 9,442 12,409
Other income (expense), net.............. (33) 1,079 1,220 1,584 1,421
------- ------- ------- ------- -------
Income before income taxes............... 2,978 1,126 8,476 11,026 13,830
Income tax provision (benefit)........... (1,081) (1,126) 3,174 4,245 5,325
------- ------- ------- ------- -------
Net income............................... $ 4,059 $ 2,252 $ 5,302 $ 6,781 $ 8,505
======= ======= ======= ======= =======
Basic net income per share............... $ 0.58 $ 0.26 $ 0.58 $ 0.72 $ 0.89
Diluted net income per share............. $ 0.53 $ 0.24 $ 0.55 $ 0.70 $ 0.84
OTHER DATA:
Pro forma diluted net income per
share(2)............................... $ 0.24 $ 0.37 $ 0.55 $ 0.75 $ 0.97
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------
1995 1996 1997 1998 1999
------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................ $20,379 $23,727 $26,773 $32,689 $28,192
Working capital.......................... 22,786 27,395 35,752 43,438 48,745
Total assets............................. 28,800 36,833 42,791 54,405 64,751
Total stockholders' equity............... 24,525 29,277 37,417 45,823 56,784
</TABLE>
- ---------------
(1) Our 1996 income from operations included a $4.6 million write-off for the
acquisition of in-process technology and acquisition costs related to our
acquisition of NovelTech Systems. Our 1998 income from operations included
an $876,000 write-off for the acquisition of in-process technology and
acquisition costs relating to our acquisition of certain technology rights
from Affymax Research Institute, a subsidiary of Glaxo Wellcome. Our 1999
income from operations included a $2.0 million write-off for the acquisition
of in-process technology and acquisition costs relating to our acquisition
of Skatron Instruments AS.
(2) We have excluded the impact of the write-offs of in-process technology and
acquisition costs in 1996, 1998 and 1999 described in footnote (1) above,
net of tax. We have also excluded the impact of the tax benefits we realized
in 1995 and 1996 from the utilization of net operating loss carryforwards
and included a provision for taxes at a 38.5% effective rate.
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<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
We are a leading developer of high-performance, bioanalytical measurement
systems that accelerate and improve drug discovery and other life sciences
research. Our systems enable pharmaceutical and biotechnology companies to
leverage advances in genomics and combinatorial chemistry by facilitating the
high throughput cost effective identification and evaluation of drug candidates.
Our instrument systems are based on our advanced core technologies which
integrate our expertise in engineering, molecular and cell biology and
chemistry. Our systems are fundamental tools for drug discovery and life
sciences research, and our MAXline series of microplate readers and our FLIPR
Cell Analysis systems are market share leaders in their respective markets. Our
revenues were $62.0 million in 1999 and have increased at a compound annual rate
of 25% since 1995.
We typically invest 10% to 12% of our revenues in research and development,
which has resulted in a track record of technological innovation. Over 70% of
our revenues in 1999 were derived from products that we introduced in the last
three years. We have sold over 13,000 instruments since the introduction of our
first microplate reader in 1987. In addition, over 70 customers have purchased
our FLIPR systems since its introduction in 1996, including the 20 largest
pharmaceutical companies, several of which own five or more FLIPR systems. We
expect that increased sales of recently introduced products, including GEMINI
XS, FLIPR(384) and CLIPR, and revenues from new instrument introductions will
continue to drive our growth. We also believe that the introduction of reagent
kits optimized for our products represents a significant growth opportunity.
Our customers include small and large pharmaceutical, biotechnology and
industrial companies as well as medical centers, universities, government
research laboratories and other institutions throughout the world. No single
customer accounted for more than 5% of our consolidated revenues in 1999. We
recognize revenue on the sale of our products at the time of shipment either
directly to a customer or to a distributor. There are no significant customer
acceptance requirements or post shipment obligations on our part. Service
contract revenue is deferred at the time of sale and recognized ratably over the
period of performance. Total service revenue was less than 5% of total revenues
for all periods presented. In 1999, sales to foreign countries accounted for 39%
of total revenues and total sales denominated in foreign currencies accounted
for 22% of total revenues. We typically experience a decrease in the level of
sales in the first calendar quarter as compared to the fourth quarter of the
preceding year because of budgetary and capital equipment purchasing patterns in
the life sciences industry. We expect this trend to continue in future years.
However, see "Risk Factors -- The recent issuance by the SEC of an accounting
bulletin related to revenue recognition, SAB 101, may have a material adverse
impact on our financial performance."
RECENT OPERATING RESULTS
On April 13, 2000, we announced our operating results for the quarter ended
March 31, 2000. Our total revenues for the quarter were $17.1 million, an
increase of 26% over revenues of $13.5 million for the same period in 1999. Our
operating income for the quarter ended March 31, 2000 was $3.8 million, an
increase of 38% over operating income of $2.8 million for the same period in
1999. Our operating margins for the quarter ended March 31, 2000 were 22.5%
compared with operating margins of 20.6% for the same period in 1999. Our net
income for the quarter ended March 31, 2000 was $2.6 million, an increase of 32%
over net income of $2.0 million for the same period in 1999. Our earnings per
share for the quarter ended March 31, 2000, on a fully diluted basis, were $0.25
per share compared with fully diluted earnings per share of $0.20 for the same
period in 1999.
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<PAGE> 22
RESULTS OF OPERATIONS
The following table summarizes our consolidated statement of income as a
percentage of revenues:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1998 1999
----- ----- -----
<S> <C> <C> <C>
Revenues.................................................... 100.0% 100.0% 100.0%
Cost of revenues............................................ 37.7 37.1 36.7
----- ----- -----
Gross margin................................................ 62.3 62.9 63.3
Research and development.................................... 12.3 11.9 11.9
Write-off of acquired in-process research and development... 0.0 1.8 3.3
Selling, general and administrative......................... 31.0 29.5 28.1
----- ----- -----
Income from operations...................................... 19.0 19.8 20.0
Other income, net........................................... 3.2 3.3 2.3
----- ----- -----
Income before income taxes.................................. 22.1 23.1 22.3
Income tax provision........................................ 8.3 8.9 8.6
----- ----- -----
Net income.................................................. 13.8% 14.2% 13.7%
===== ===== =====
Pro forma income from operations(1)......................... 19.0% 21.6% 23.3%
Pro forma net income(1)..................................... 13.8% 15.3% 15.7%
</TABLE>
- -------------------------
(1) Excludes the impact of the write-offs of acquired in-process research and
development recorded in 1998 and 1999. Pro forma net income is also net of
tax.
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
Revenues for 1999 increased by 30% to approximately $62.0 million from
approximately $47.8 million in 1998. This top-line growth was driven by strong
contributions from our MAXline and Cell Analysis product families, partially
offset by decreased performance of our Threshold product family. MAXline
revenues increased primarily due to the worldwide strength of the SPECTRAmax
GEMINI as well as our newly acquired Skatron liquid handling product line. Cell
Analysis growth was driven primarily by increased worldwide demand for new FLIPR
products introduced in late 1998, particularly FLIPR(384). Threshold revenues
declined primarily as a result of decreased demand from military customers
worldwide.
Revenues for 1998 increased by 25% to approximately $47.8 million from
approximately $38.2 million in 1997. All three product families showed increased
levels of revenue in 1998. MAXline revenues increased due to both greater sales
of the new SPECTRAmax products, including the SPECTRAmax PLUS, SPECTRAmax 190
and SPECTRAmax GEMINI, and increased penetration of MAXline products into our
European distribution channels. Cell Analysis revenues increased due to both the
introduction of FLIPR(384) and increased demand for other FLIPR products
worldwide. Threshold revenues increased due to greater volume shipments to
military customers worldwide.
Gross margin increased to 63.3% in 1999 from 62.9% in 1998 and 62.3% in
1997. Both year to year increases relate to increased sales of higher margin
products in both the MAXline and Cell Analysis product families, primarily the
SPECTRAmax GEMINI and FLIPR(384).
Research and development expenses for 1999 increased by 29% to
approximately $7.4 million from approximately $5.7 million in 1998 and by 20% in
1998 compared to approximately $4.7 million in 1997. The increased spending for
both periods is primarily the result of additional personnel as well as
increased expenditures on development activities required to support both the
introduction and on-going development of new MAXline and Cell Analysis products.
We recorded a charge of $2,037,000 during the second quarter of 1999 due to
the write-off of acquired in-process research and development related to our
acquisition of Skatron. We recorded an $876,000 charge during the third quarter
of 1998 due to the write-off of acquired in-process research and development
related to our acquisition of technology rights from Affymax Research Institute,
a subsidiary of Glaxo Wellcome.
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<PAGE> 23
Selling, general and administrative expenses for 1999 increased by 24% to
approximately $17.4 million from approximately $14.1 million in 1998 and by 18%
in 1998 compared to approximately $11.9 million in 1997. The increased spending
for both periods is primarily the result of additional spending on marketing,
sales and service related activities (including additional personnel) as we
continued our efforts to expand worldwide market coverage and introduce new
products. Selling, general and administrative expenses as a percentage of
revenues were 28.1% in 1999, 29.5% in 1998 and 31.0% in 1997, reflecting
improved operating leverage as our revenue base has grown.
Other income (net), consisting primarily of interest income, decreased by
10% in 1999 to approximately $1.4 million from approximately $1.6 million in
1998 due to a decreased average cash balance primarily as a result of the
Skatron acquisition. Other income (net) increased by 30% in 1998 to
approximately $1.6 million from approximately $1.2 million in 1997 due to
greater interest income earned resulting from higher average cash balances.
We recorded income tax provisions of approximately $5.3 million in 1999,
$4.2 million in 1998 and $3.2 million in 1997. These provisions reflected a
38.5% effective tax rate in 1999 and 1998 as compared to a 37.4% effective tax
rate in 1997. The higher effective tax rate for 1999 and 1998 reflects decreased
tax benefits from our foreign sales corporation.
LIQUIDITY AND CAPITAL RESOURCES
We had cash and cash equivalents of approximately $28.2 million at December
31, 1999 compared to $32.7 million at December 31, 1998. We have typically
financed operations primarily from cash flows provided by operating activities,
which contributed approximately $3.9 million in 1999, $6.9 million in 1998 and
$4.4 million in 1997. Cash provided by operations in these years was primarily
reflective of our earnings as offset by short-term working capital needs for
accounts receivable and inventory. Our requirements for inventory in 1999, in
particular, were greater than in previous years as a result of the Skatron
acquisition as well as the ramp up of production of new Cell Analysis systems.
Net cash used in investing activities was approximately $9.1 million in 1999,
$1.5 million in 1998 and $543,000 in 1997, and was used primarily for capital
expenditures, except for 1999 when approximately $7.1 million of cash was used
for the acquisition of Skatron. Net cash provided by financing activities was
$849,000 in 1999 and $521,000 in 1998 while net cash used in financing
activities was approximately $567,000 for 1997. The 1999 and 1998 proceeds
relate primarily to stock option exercises. The use of funds in 1997 reflects
repayment of a $1.5 million promissory note related to the 1996 acquisition of
NovelTech, partially offset by proceeds from stock option exercises.
We believe that our existing cash and investment securities and anticipated
cash flow from our operations together with our net proceeds of this public
offering will be sufficient to support our current operating plan for the
foreseeable future. Our forecast of the period of time through which our
financial resources will be adequate to support our operations is a
forward-looking statement that involves risks and uncertainties, and actual
results could vary as a result of a number of factors. We have based this
estimate on assumptions that may prove to be wrong. Our future capital
requirements will depend on many factors, including:
- the progress of our research and development;
- the number and scope of our research programs;
- market acceptance and demand for our products;
- the costs that may be involved in enforcing our patent claims and other
intellectual property rights;
- potential acquisition and technology licensing opportunities;
- manufacturing capacity requirements; and
- the costs of expanding our sales, marketing and distribution capabilities
both in the United States and abroad.
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<PAGE> 24
We have generated sufficient cash flow from operations to fund our capital
requirements since our initial public offering in 1995. However, we cannot
assure you that we will not require additional financing in the future to
support our existing operations or potential acquisition and technology
licensing opportunities that may arise. Therefore, we may in the future seek to
raise additional funds through bank facilities, debt or equity offerings or
other sources of capital.
Our cash and investments policy emphasizes liquidity and preservation of
principal over other portfolio considerations. We select investments that
maximize interest income to the extent possible given these two constraints. We
satisfy liquidity requirements by investing excess cash in securities with
different maturities to match projected cash needs and limit concentration of
credit risk by diversifying our investments among a variety of high
credit-quality issuers.
IMPACT OF YEAR 2000
In prior years, we discussed the nature and progress of our plans to become
Year 2000 ready. In late 1999, we completed our remediation and testing of
systems. As a result of those planning and implementation efforts, we
experienced no significant disruptions in mission critical information
technology and non-information technology systems and believe those systems
successfully responded to the Year 2000 date change. We expensed Year 2000
remediation costs as incurred. There were no significant incremental costs
incurred. We are not aware of any material problems resulting from Year 2000
issues, either with our products, our internal systems, or the products and
services of third parties. We will continue to monitor our mission critical
computer applications and those of our suppliers and vendors throughout the Year
2000 so that any latent Year 2000 matters that may arise are addressed promptly.
RECENT PRONOUNCEMENT
In December 1999, the SEC issued Staff Accounting Bulletin No. 101, Revenue
Recognition in Financial Statements, referred to as SAB 101. SAB 101 summarizes
the SEC staff's views in applying generally accepted accounting principles to
revenue recognition in financial statements. We are currently in the process of
evaluating SAB 101 and what effect it may have on our financial statements.
Accordingly, we have not determined whether SAB 101 will have a material impact
on our financial position or results of operations.
23
<PAGE> 25
BUSINESS
OVERVIEW
We are a leading developer of high-performance, bioanalytical measurement
systems that accelerate and improve drug discovery and other life sciences
research. Our systems enable pharmaceutical and biotechnology companies to
leverage advances in genomics and combinatorial chemistry by facilitating the
high throughput and cost effective identification and evaluation of drug
candidates. Our instrument systems are based on our advanced core technologies
which integrate our expertise in engineering, molecular and cell biology and
chemistry. Our systems are fundamental tools for drug discovery and life
sciences research, and our MAXline series of microplate readers and our FLIPR
Cell Analysis systems are market share leaders in their respective markets. Our
revenues were $62.0 million in 1999 and have increased at a compound annual rate
of 25% since 1995.
INDUSTRY BACKGROUND
Life sciences research, particularly drug discovery, is currently
undergoing a revolution as a result of two converging trends. The worldwide
effort to sequence the human genome is beginning to identify a large number of
previously unknown natural molecules that play a role in disease and thus are
likely targets for new therapeutic products. Until recently, only a few hundred
disease targets were available to drug discovery researchers; today, large-scale
DNA sequencing efforts such as the Human Genome Project appear likely to
identify tens of thousands of such targets. At the same time, advances in
combinatorial chemistry have provided chemists with techniques that allow them
to synthesize a greater number of and diversity of compounds than ever before.
Pharmaceutical companies previously maintained "libraries" of hundreds of
thousands of compounds to test against disease targets to determine their
potential as drugs; in the near future, drug researchers most likely will have
access to millions of such compounds.
The identification of disease targets and synthesis of chemical compounds
are key first steps in the drug discovery process. After this, researchers
undertake additional steps to determine which compounds are the most promising
drug candidates prior to entering clinical development. Among the most important
downstream steps in the drug discovery process are assay development, drug
candidate screening and lead optimization.
Assay Development. Once a disease target has been identified, researchers
must develop a test, or assay, to determine whether a particular compound has a
desired effect on the target. Most assays involve creating a biochemical
reaction that takes place in a microplate, which is a plate containing an array
of small wells that are similar to miniature test tubes. The plate is inserted
into a microplate reader, which measures the light absorbed or emitted by the
sample in each well. Depending upon its underlying technology, the reader
detects light in the form of absorption, fluorescence or luminescence. The type
of assay developed depends upon the characteristics of the disease target and
the type of information the researcher is seeking. Two major categories of
assays are biochemical assays and cell-based assays. A cell-based assay measures
how a target on or inside a living cell responds to a compound; in a biochemical
assay, the target is isolated from the cell environment. Because they more
closely mimic the target's natural function, cell-based assays are generally
more valuable than biochemical assays in predicting how well a compound is
likely to function as a drug.
Drug Candidate Screening. Once an assay has been developed, it is performed
repeatedly to test the effects of a variety of compounds on the disease target,
a process known as screening. Primary screening identifies "hits," or compounds
that exhibit significant activity against a target; secondary screening gathers
more information on the hits to confirm and characterize their activity. Because
drug companies now have a rapidly increasing number of compounds to test, they
are interested in high throughput screening, or HTS, to reduce the amount of
time that is required for primary and secondary screening. Traditional
bioanalytical instruments and methods were not designed for high throughput
screening, which has contributed to the current bottleneck at this stage of the
drug discovery process.
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<PAGE> 26
Lead Optimization. Compounds that emerge from the secondary screening
process, now called "leads," are next subjected to successive rounds of
additional testing and chemical manipulations to make them even more suitable as
drug candidates. This process, known as lead optimization, involves a variety of
tests, such as cell-based assays, that yield a higher level of biological
information than screening assays. As drug companies generate increasing numbers
of leads, bottlenecks have emerged in this stage, resulting in demand for more
efficient lead optimization tools.
After optimization, a lead compound must pass a lengthy and expensive set
of pre-clinical and clinical trials before becoming a drug. Because of the
resources required to conduct such trials, the cost of failure is high; thus,
companies are interested in tools which allow more accurate assessment of a
compound's probability of success as early as possible in the drug discovery
process.
To reduce the length and cost of the drug discovery process, researchers
increasingly need tools that speed up the above steps and increase the value of
the information generated by them. Traditional bioanalytical instruments and
methods do not adequately address these needs because of several limitations,
including:
- Low sensitivity. One way to increase the speed of drug development is to
conduct assays in high-density microplates, such that many samples can be
analyzed in one equipment run. Microplates are now made in standard
formats with either 96, 384 or 1,536 wells; the more wells there are, the
smaller the sample volume in each well. Reading very small-volume samples
requires a higher level of sensitivity than is available in most
traditional detection equipment.
- Lack of automation. Throughput is often enhanced by incorporating a high
degree of automation into the drug discovery process. Some assays which
provide high levels of information, such as live cell-based assays,
require even more automation to run efficiently. For example, gaining
certain kinetic data from a live cell assay, which is valuable in lead
optimization, requires integrated liquid handling equipment so that
compounds can be added to the cells and the detector can read the result
of the assay almost instantaneously. Traditionally, many bioanalytical
instruments have not been designed to integrate easily with automation
equipment.
- Low information content. Many assays which provide a high level of
information about the activity of a compound against a target are
difficult to adapt to a high throughput mode of operation. The reasons
for this vary by the type of assay; for example, performing certain
cell-based assays in microplate wells requires a reader with a special
optical configuration and integrated liquid handling capability. Similar
technical hurdles have prevented researchers from performing other assays
with high information content quickly and efficiently.
The proliferation in disease targets and chemical compounds coupled with
the limitations of traditional technologies have created bottlenecks at each of
the downstream steps of the drug discovery process which our products are
specifically designed to address.
THE MOLECULAR DEVICES SOLUTION
We offer a full range of high-performance bioanalytical systems that
address the sensitivity, automation, and depth-of-information challenges
currently faced by researchers. Our major products possess levels of detection
sensitivity that enable the analysis of high-density microplates and thereby
increase throughput. These products also include, or are easily integrated with,
automation equipment to further enhance throughput and allow complex assays to
be performed with high efficiency. Additionally, we lead the industry in
providing technologies for performing information-rich live cell assays in high
throughput mode.
We currently offer three product families that address different segments
of the drug discovery market. Our MAXline family of microplate readers primarily
addresses the assay development market and offers the assay development
scientist seven differentiated microplate readers that include a wide range of
innovative and flexible feature sets. We are widely perceived as a leader in
microplate reader technology, and we believe that we have been the first to
offer a number of innovative features into the premium end
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<PAGE> 27
of the microplate reader market. Our Cell Analysis products, which include our
Fluorometric Imaging Plate Reader, or FLIPR, system, our new Chemiluminescence
Imaging Plate Reader, or CLIPR, system and our Cytosensor system, address
cell-based research in the high throughput screening and lead optimization
market segments. We believe that our FLIPR, CLIPR and Cytosensor systems provide
researchers with valuable information about the effect of potential drug
compounds on cells. Finally, our Threshold system is aimed at the
biopharmaceutical manufacturing and quality control process, and we believe that
the Threshold system is the only commercially available fully integrated system
that rapidly and reproducibly detects potential contaminants with picogram level
sensitivity.
STRATEGY
Our objective is to be the world's leading provider of innovative
bioanalytical systems and related consumable products for life sciences
research. We are focusing on the drug discovery market and, specifically, on
providing comprehensive solutions that accelerate and improve the critical
downstream drug discovery processes of assay development, drug candidate
screening and lead optimization. Key elements of our strategy include:
- MAINTAIN AND ADVANCE OUR TECHNOLOGICAL LEADERSHIP. Since our first
product introduction in 1987, we have consistently developed innovative,
technologically advanced tools to facilitate and enhance life sciences research.
In the past, we have often been the first company among our competitors to
introduce a new technology to the market. We continue to invest in new products
as well as in enhancements to our existing products, thereby sustaining or
increasing our technological edge over competitors. Maintaining and advancing
our track record of innovation will be a key element of our future success,
particularly as the needs of drug discovery customers change due to advances in
genomics, proteomics, combinatorial chemistry and other disciplines. To
accomplish this, we typically invest and we intend to continue to invest 10% to
12% of our revenues in research and development to build upon our leading-edge
technological expertise and customer application knowledge.
- LEVERAGE OUR MARKET LEADERSHIP POSITION. Our technologically advanced
products and significant field presence have allowed us to develop strong
relationships with a broad range of drug discovery and life sciences research
customers. We have a large direct sales force which, in combination with our
technical and applications support staffs, provides high quality customer
service and possesses an in-depth understanding of customer needs. Historically,
our strong customer relationships have contributed to our ability to introduce
innovative, well-accepted products to the market, and we believe that these
relationships will continue to be an important source of new product development
ideas. Our large installed product base and field presence also provide us with
the opportunity to sell new products and product enhancements to our customers
with less effort and investment than would otherwise be required.
- INCREASE RECURRING REVENUE FROM OUR CONSUMABLE PRODUCTS. In order to
increase the value of our existing products and enhance our market position, we
have launched a significant effort to develop reagent kits that are optimized
for use on our Cell Analysis instruments. We have historically developed and
produced reagent kits for our Threshold systems, and we recently began to sell
consumables for our installed base of Cell Analysis instruments with the
introduction of two kits for performing important assays on FLIPR and CLIPR. We
plan to introduce several additional kits this year, and we have recently
expanded our reagent manufacturing capacity. These products allow us to offer
complete assay systems (instruments and reagents) to our customers, to increase
our market share and to create a recurring revenue stream to balance the
inherent variability of our instrument revenue.
- EXPAND WORLDWIDE DISTRIBUTION AND SUPPORT. We maintain strong sales and
support organizations in North America and Europe and a network of selected
distribution partners to address regions that we do not serve directly. We
intend to enhance our market presence by expanding our existing direct sales
offices, opening new offices in attractive markets and forming additional
distribution relationships in new regions. We believe that building a direct
field presence in key markets in Asia and Europe will allow us to realize the
full potential of these markets in terms of increased sales, closer customer
relationships and improved competitive positioning.
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- ACQUIRE COMPLEMENTARY BUSINESSES AND TECHNOLOGIES. We intend to seek
businesses and technologies that will enhance our ability to provide complete,
innovative solutions to drug discovery and life sciences research customers. As
we identify these opportunities, we intend to seek acquisitions, partnerships
and licensing arrangements with companies that meet our selection criteria. We
will focus on acquisitions that allow us to gain access to novel technologies,
broaden our product offerings to existing customers and extend our reach to new
customers. For example, in 1998 we acquired the underlying technology for CLIPR,
and in 1999 we acquired a complementary product line through our acquisition of
Skatron. In addition to pursuing acquisitions, we intend to seek partnerships
and licensing arrangements to supplement our in-house research and development
efforts and add complementary products to our existing offerings.
OUR PRODUCTS
Our product lines include our MAXline family of microplate readers and
liquid handling systems, our Cell Analysis systems, which include the FLIPR,
CLIPR and Cytosensor systems, and our Threshold system.
<TABLE>
- -------------------------------------------------------------------------------------------------
DATE US LIST PRICE PRIMARY DRUG
PRODUCT INTRODUCED RANGE DISCOVERY APPLICATION
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MAXLINE PRODUCTS
- -------------------------------------------------------------------------------------------------
Emax 1988 $ 5,000 - $ 7,195 Assay Development
- -------------------------------------------------------------------------------------------------
Vmax 1987 $ 6,900 - $ 8,695 Assay Development
- -------------------------------------------------------------------------------------------------
VERSAmax 1998 $ 9,825 - $ 13,800 Assay Development
- -------------------------------------------------------------------------------------------------
SPECTRAmax 340 PC 1998 $ 12,895 - $ 16,870 Assay Development
- -------------------------------------------------------------------------------------------------
SPECTRAmax 190 1998 $ 17,525 - $ 27,500 Assay Development
- -------------------------------------------------------------------------------------------------
SPECTRAmax PLUS(384) 2000 $ 23,000 - $ 29,000 Assay Development/HTS
- -------------------------------------------------------------------------------------------------
SPECTRAmax GEMINI XS 2000 $ 32,775 - $ 40,750 Assay Development/HTS
- -------------------------------------------------------------------------------------------------
Skatron Liquid Handling
Systems 1999 $ 5,990 - $ 39,500 Assay Development/HTS
- -------------------------------------------------------------------------------------------------
CELL ANALYSIS SYSTEMS
- -------------------------------------------------------------------------------------------------
FLIPR 1996 $265,000 Assay Development/HTS
- -------------------------------------------------------------------------------------------------
FLIPR(96) 1999 $320,000 - $410,000 HTS/Lead Optimization
- -------------------------------------------------------------------------------------------------
FLIPR(384) 1998 $370,000 - $460,000 HTS/Lead Optimization
- -------------------------------------------------------------------------------------------------
CLIPR 1999 $425,000 - $475,000 HTS/Lead Optimization
- -------------------------------------------------------------------------------------------------
Cytosensor 1992 $ 59,500 - $ 99,500 Lead Optimization
- -------------------------------------------------------------------------------------------------
Cell Analysis Reagent Kits 1999 $ 2,500 - $ 5,000 HTS
- -------------------------------------------------------------------------------------------------
THRESHOLD SYSTEM
- -------------------------------------------------------------------------------------------------
Threshold Instrument 1989 $ 49,500 Quality Control
- -------------------------------------------------------------------------------------------------
Threshold Reagent Kits 1989 $ 7,735 - $ 9,450 Quality Control
- -------------------------------------------------------------------------------------------------
</TABLE>
MAXLINE PRODUCTS
Our MAXline products, which represented 57% of total revenues in 1999,
consist primarily of advanced microplate readers. Microplate readers have become
one of the most fundamental tools used in life sciences research by addressing
the increasing need for the acquisition and processing of large quantities of
biochemical and biological data. Microplate readers provide scientists the
benefit of high throughput analysis in a standardized, multi-sample format.
Because of the productivity gains using a multi-sample format, microplates have
largely replaced test tubes and cuvettes for many life sciences applications.
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<PAGE> 29
A microplate is a disposable plastic vessel that is used with a microplate
reader to measure light. The basic principles of microplate readers are that
light from an appropriate source is directed to a wavelength selection device,
such as a monochromator, and its intensity is measured before and after passing
through each of the sample wells of a microplate. Application of a mathematical
formula to the light intensity measurements of each microplate well provides a
measure of the sample present in the well. The measurement, known as optical
density, relative fluorescence, or luminescence, is proportional to the
concentration of the substance that is being measured. Historically, the
standard microplate was comprised of 96 individual wells. As cost and throughput
have become increasingly important, however, the industry has begun to move to
higher density plates including 384 wells and 1536 wells. We believe that this
trend towards miniaturization will continue to be a significant factor affecting
the microplate reader market in the future.
Our MAXline strategy has been to continue to introduce new products that
include first-of-a-kind features, as well as to offer varying feature sets and
price points to address different market segments. We have historically focused
on the premium end of the microplate reader market through offering products
with advanced capabilities. Some of the first-of-a-kind features that we have
pioneered include the first reader and software capable of kinetic analysis, the
first monochromator-based reader that enabled continuous wavelength selection
and the first reader capable of performance comparable to a spectrophotometer.
In each case, we believe that the innovation helped expand the utility of
microplate readers and, more broadly, the available market for microplate
readers. Our MAXline family currently includes the following eight primary
products and product lines:
- Emax. This product is aimed at the market for traditional microplate
readers that do not require kinetic capability. We introduced it to
provide a reader for customers in academia and other customers with
restricted capital budgets.
- Vmax. This was the first microplate reader to offer kinetic read
capability and is designed to address the needs of biochemists.
- VERSAmax. The VERSAmax is our low cost variable wavelength offering that
provides kinetic capability and temperature control.
- SPECTRAmax 340PC. This product is a visible range microplate
spectrophotometer, offering tunability and the additional capability of
our patented PathCheck Sensor technology, which corrects common
variability problems across wells of microplates.
- SPECTRAmax 190. The predecessor to this product was the world's first
microplate reader that incorporated a monochromator for continuous
wavelength selection. Wavelength selection provides for enhanced
convenience and flexibility in assay design. In addition, the SPECTRAmax
190 also includes our patented PathCheck Sensor technology.
- SPECTRAmax PLUS(384). The SPECTRAmax PLUS, introduced in 1997, was our
first microplate reader aimed at the spectrophotometer market. It was the
industry's first microplate reader that was able to combine the high
throughput of a microplate reader with the performance of a cuvette based
spectrophotometer as a result of our patented PathCheck Sensor
technology. The SPECTRAmax PLUS was also the first microplate reader with
the ability to read wavelengths as short as 190 nanometers and as long as
1,000 nanometers, the equivalent range to a spectrophotometer. The
SPECTRAmax PLUS(384), introduced in 2000, addresses the needs of the high
throughput screening market by adding 384-well plate compatibility.
- SPECTRAmax GEMINI XS. SPECTRAmax GEMINI, introduced in late 1998, was the
world's first dual-scanning microplate spectrofluorometer. By
incorporating two scanning monochromators, the SPECTRAmax GEMINI allows
the user to automatically optimize the instrument setting for the
particular assay characteristics as well as for every fluorophore that is
in use today. GEMINI also was our first microplate reader capable of
multi-mode operation, in that the product is capable of fluorescence,
luminescence and time-resolved fluorescence measurements. The GEMINI XS
(Extra Sensitive), introduced in 2000, extends the GEMINI franchise by
significantly improving
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<PAGE> 30
sensitivity and adding well scanning capability which allows researchers to
perform more complex cell based assays.
- Skatron Liquid Handling Systems. We acquired a line of liquid handling
systems, primarily washers, through our acquisition of Skatron in 1999.
Washers are used to dispense and remove fluid from microwell plates and
are used as an integral step during the course of many assays. The
Skatron products bring a complete line of state-of-the-art microwell
plate washers and other related tools, including cell harvesters, to the
MAXline product family. These products include a variety of cell and
plate washers that offer 96, 384 and 1536 well washing capabilities.
CELL ANALYSIS SYSTEMS
Our Cell Analysis systems, which represented 38% of our total revenues in
1999, are used to study the response of live cells to drug candidates and are
primarily targeted toward high throughput screening and lead optimization. Many
therapeutic drugs are targeted to cell membrane receptors: special proteins that
function as control switches for cell activity and are triggered by the specific
binding of soluble natural substances to relay messages to the cell via "signal
transduction" mechanisms. Therapeutic drugs which act on receptors either mimic
or block the action of the natural receptor-specific substance. The therapeutic
potential of such drugs is, therefore, most appropriately studied using live
cell systems. These studies are inherently challenging, but a high value is
placed upon them by the pharmaceutical industry and the research community. We
focus on providing complementary tools for studying the response of live cells
to different compounds, both for research and for drug candidate screening
purposes.
FLIPR System
Our FLIPR system satisfies a key demand from pharmaceutical companies for
live cell analysis at a high throughput rate. Our FLIPR was the first instrument
to enable high throughput screening of live cells with high information content
on cellular activation. Over 70 customers have purchased our FLIPR systems since
introduction in 1996, including the 20 largest pharmaceutical companies, several
of which own five or more FLIPR systems. The primary applications for our FLIPR
system are the measurement of intracellular calcium ion flux and membrane
potential change, both of which provide critical information on the activation
of cells by test compounds.
In our FLIPR system, cells, along with appropriate fluorescent dyes, are
maintained in microplates in a humidified, thermally-controlled compartment
together with compound-addition plates. A laser light is then passed through the
wells to provide excitation illumination and fluorescence from cells on the
bottom of the wells. During the reading cycle, a built-in pipettor transfers
compound samples from the compound-addition plate to the cell plate and the
reaction is continuously monitored by an ultrasensitive charge coupled device, a
CCD camera, at intervals of less than one second. This strategy allows for
real-time monitoring of cells before and after compound addition, thus allowing
the measurement of rapid non-linear, response kinetics. Our FLIPR system's
limited depth-of-field fluorometry optical design is patented. We currently
offer three primary products based on our FLIPR technology platform.
- FLIPR. This product was introduced in 1996 and was our first entry into
the high throughput screening market. FLIPR is capable of simultaneously
analyzing each well of a 96 well plate and has a throughput of
approximately 10,000 samples per day. FLIPR will be discontinued in mid-
2000 and replaced with the FLIPR(96) described below.
- FLIPR(384). This product, introduced in 1998, was the second generation
FLIPR product. It combines all of the benefits of the original FLIPR
along with new automation capabilities and the ability to analyze samples
in 384 well microplates, as well as 96 well microplates. FLIPR(384) can
screen as many as 50,000 samples daily, and offers optional integrated
plate stacker and washer accessories which can dramatically reduce the
need for human intervention during sample processing. In addition, the
instrument also incorporates interfaces that enable it to integrate into
automated screening lines.
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<PAGE> 31
- FLIPR(96). This product is built on same chassis as the FLIPR(384) and is
capable of all of the automation benefits of the FLIPR(384). The primary
differentiation is that FLIPR(96) is not 384 well compatible, and
therefore will be targeted at lower throughput applications in lead
optimization. We also offer an upgrade package for the FLIPR(96) that
will enable 384 well capability.
CLIPR System
Our Chemiluminescence Imaging Plate Reader, or CLIPR, system was developed
based on telecentric lens luminometer technology licensed from Affymax Research
Institute in 1998. We introduced this system in the third quarter of 1999. It
satisfies a key demand from pharmaceutical companies for live cell analysis at
an ultra high throughput rate using luminescence technology. Our CLIPR can
support the analysis of over 200,000 samples in an eight hour day.
The system combines an ultra sensitive CCD camera with proprietary wide
field optics to achieve ultra high throughput by simultaneously imaging all of
the wells on a microplate. As a result of the simultaneous imaging, CLIPR is
compatible with any microwell plate format including 96, 384, 1536 and beyond.
Our CLIPR system can be integrated with a linear track robot, used in
workstation mode with an optional light-tight plate stacker module, or used in a
stand-alone mode.
The primary applications for CLIPR are cell-based and non-cell-based assays
such as reporter gene and SPA assays, which are important applications in the
drug discovery market. These applications complement the applications for our
FLIPR system, offering solutions for a wide range of cell-based assays.
Cytosensor System
We developed the Cytosensor system to provide a fast, reliable, single
assay system to investigate multiple cellular functions in numerous cell types.
Our Cytosensor system incorporates our core Light Addressable Potentiometric
Sensor, or LAPS, technology, a detection system capable of measuring a wide
variety of chemical reactions as they occur on the surface of a silicon based
sensor, into a patented system that permits researchers to conduct
microphysiometry (the study of cellular metabolism) without destroying the
cells. Cellular metabolism is the most fundamental and essential of all
physiological processes, and allows for the monitoring of cell activation,
stimulation, growth, toxicity and other biochemical events crucial to the
development of new therapeutics. We believe that the primary applications of the
Cytosensor system are receptor characterization, orphan receptor identification,
human cell pharmacological profiling and in vitro toxicology. We offer a
4-chamber Cytosensor system targeting customers with relatively low throughput
requirements and an 8-chamber system for customers who require higher
throughput.
Cell Analysis Reagents
We are expanding our reagent business by focusing on the internal
development of proprietary reagent kits optimized for our Cell Analysis
instruments. We have historically developed and produced reagent kits for our
Threshold systems, and we recently began to sell consumables for our installed
base of Cell Analysis instruments with the introduction of two kits for
performing important assays on FLIPR and CLIPR. During 1999, we hired a reagent
development and marketing team, built organic chemistry labs and expanded our
reagent production capacity. Our current Cell Analysis reagent offerings
include:
- FLIPR Calcium Assay Kit. This product will be officially released in the
second quarter of 2000, and we believe that it has the potential to
revolutionize the way FLIPR calcium assays are performed. The kit's
unique feature is that it enables researchers to eliminate a step in the
assay protocol, thereby saving up to 15 minutes of processing time for
each 384 well plate. This kit has the potential to significantly increase
throughput, reduce costs and increase screening efficiency.
- CLIPR Luciferase Assay Kit. This is optimized for 1536 well plates used
with the CLIPR system and targeted at reporter gene assay applications.
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<PAGE> 32
THRESHOLD SYSTEM
Our Threshold system, which is comprised of a detection instrument and
proprietary reagents, represented 5% of our total revenues in 1999. Our
Threshold system incorporates our LAPS technology to quantitate a variety of
biomolecules such as DNA, proteins and mRNA rapidly and accurately. The demand
for systems which can quantitate contaminants in the manufacturing and quality
control of bioengineered products is in response to the growing number of
biopharmaceutical therapeutics both entering clinical trials and receiving
regulatory approval for commercial sale. The Threshold system emerged from a
need by biopharmaceutical companies for more sensitive and reproducible methods
to detect contaminants in biopharmaceuticals during the manufacturing and
quality control process. Traditional detection methods, such as DNA
hybridization, can be slow, difficult to use in a manner that provides
reproducible and transferable results, and often require the use of radioactive
materials for detection. We believe that the Threshold system is the only
commercially available, fully-integrated system capable of rapidly and
accurately quantitating DNA with picogram level sensitivity. The Threshold
family of products includes a workstation, software and consumable reagent kits.
- Threshold Instrument. The Threshold reader incorporates the proprietary
LAPS detection technology and proprietary software that collects and
analyzes the Threshold assay data.
- Threshold Reagents. We offer two Threshold reagent products. The Total
DNA Assay Kit allows for the detection of any DNA, and the ILA Kit is a
flexible format that can be used to detect and quantitate numerous
contaminants in the manufacture of bioengineered products.
SOFTWARE AND CUSTOMER SERVICE
In addition to instruments and consumable products, we also offer software
products and support services. All of our instrument products are used with
internally designed and developed software which are sold as an integral part of
the instrument system. We believe that our software is an important
differentiator for our instrument products relative to the competition based on
its ease-of-use and advanced data analysis capabilities.
Our service and support offerings include field service, customer support,
applications assistance and training through an organization of factory-trained
and educated service and application support personnel around the world. We
offer services to our installed base of customers on both a contract and time
and materials basis and we offer a variety of post-warranty contract options for
all our instrument offerings that customers may purchase. Our installed base
provides us with stable, recurring after-market service and support revenue, as
well as product upgrade and replacement opportunities.
RESEARCH AND DEVELOPMENT
Our research and development team included 44 full time employees as of
December 31, 1999. We typically invest 10% to 12% of our revenues in research
and development, which has resulted in a track record of technological
innovation. Over 70% of our revenues in 1999 were derived from products that we
introduced in the last three years. Our research and development expenditures
were approximately $7,363,000 in 1999, $5,686,000 in 1998 and $4,721,000 in
1997.
Our research and development activities are focused on:
- broadening our technology solution, including development of new
proprietary reagent kits;
- providing more sensitive quantitative evaluation of biological events;
- providing greater throughput capability, especially with smaller sample
volumes; and
- developing increasingly sophisticated data management and analysis
capability.
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<PAGE> 33
MARKETING AND CUSTOMERS
Our sales and marketing organization included 68 full time employees in
North America and Europe as of December 31, 1999. We distribute our products
primarily through direct sales representatives in North America. We have
subsidiaries in the United Kingdom and Germany responsible for selling and
servicing our products. Our direct sales effort is supported by a team of
service, technical and applications specialists employed by us. We also sell our
products through international distributors, most of which enter into
distribution agreements with us that provide for exclusive distribution
arrangements and minimum purchase targets. Such agreements also generally
prohibit the distributors from designing, manufacturing, promoting or selling
any products that are competitive with our products.
Our customers include leading pharmaceutical and biotechnology companies as
well as medical centers, universities, government research laboratories and
other institutions throughout the world. No single customer accounted for more
than 5% of our total 1999 revenues.
In 1999, sales to customers outside the United States accounted for 39% of
total revenues and total sales denominated in foreign currencies accounted for
22% of total revenues. We anticipate that international sales will account for
an increasing percentage of revenues in the future. We expect to continue
expanding our international operations in order to take advantage of increasing
international market opportunities resulting from worldwide growth in the life
sciences industry.
MANUFACTURING
We manufacture our products at our facilities in Sunnyvale, California and
Norway. Our California facility is ISO 9001 certified. We manufacture our own
components where we believe it adds significant value, but we rely on suppliers
for the manufacture of selected components and subassemblies, which are
manufactured to our specifications. We conduct all final testing and inspection
of our products. We have established a quality control program, including a set
of standard manufacturing and documentation procedures intended to ensure that,
where required, our instruments are manufactured in accordance with Good
Manufacturing Practices.
PATENTS AND PROPRIETARY TECHNOLOGIES
We protect our proprietary rights from unauthorized use by third parties to
the extent that our proprietary rights are covered by valid and enforceable
patents or are effectively maintained as trade secrets. Patents and other
proprietary rights are an essential element of our business. Our policy is to
file patent applications and to protect technology, inventions and improvements
to inventions that are commercially important to the development of our
business. As of December 31, 1999, we were maintaining 32 U.S. patents and other
corresponding foreign patents based on our discoveries that have been issued or
allowed. In addition, as of that date, we had 26 patent applications pending in
the United States and had filed several corresponding foreign patent
applications.
We are a party to various license agreements that give us rights to use
certain technologies. In particular, we have exclusive licenses for the
technologies on which our FLIPR and CLIPR are based. We pay royalties to the
parties from which we licensed or acquired the FLIPR and CLIPR core
technologies.
We also rely on trade secret, employee and third-party nondisclosure
agreements and other protective measures to protect our intellectual property
rights pertaining to our products and technology.
COMPETITION
The market for life sciences instrumentation is highly competitive, and we
expect competition to increase. We compete for the allocation of customer
capital funds with many other companies marketing capital equipment, including
those not directly competitive with any of our products. Some of our products
also compete directly with similar products from other companies.
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<PAGE> 34
The microplate reader market is characterized by intense competition among
a number of companies, including Bio-Tek Instruments, LJL Biosystems, Packard
BioScience, PerkinElmer, Tecan and Thermo BioAnalysis, that offer, or may in the
future offer, products with performance capabilities generally similar to those
offered by our products. We expect that competition is likely to increase in the
future, as several current and potential competitors have the technological and
financial ability to enter the microplate reader market. Our MAXline products
are generally priced at a premium to other microplate readers. We compete in the
microplate reader market primarily on the basis of performance and productivity.
Many companies, research institutions and government organizations that might
otherwise be customers for our products employ methods for bioanalytical
analysis that are internally developed.
The cell analysis instrument market is also characterized by intense
competition among a number of companies, including Amersham Pharmacia Biotech,
Aurora Biosciences, Cellomics, Packard BioScience, PE Biosystems and
PerkinElmer, that offer, or may in the future offer, products with performance
capabilities generally similar to those offered by our products. We believe that
the primary competitive factors in the market for our products are throughput,
quantitative accuracy, breadth of applications, ease-of-use, productivity
enhancement, quality, support and price/performance. We believe that we compete
favorably with respect to these factors.
Many of our competitors have significantly greater financial, technical,
marketing, sales and other resources than we do. In addition to competing with
us with respect to product sales, these companies and institutions compete with
us in recruiting and retaining highly qualified scientific and management
personnel.
GOVERNMENT REGULATION
In the United States, the development, manufacturing, distribution,
labeling and advertising of products intended for use in the diagnosis of
disease or other conditions is extensively regulated by the U.S. Food and Drug
Administration, known as the FDA. These products generally require FDA clearance
before they may be marketed, and also are subject to postmarket manufacturing,
reporting and labeling requirements. With the exception of certain of our
MAXline microplate readers, none of our products is intended for use in the
diagnosis of disease or other conditions, and, therefore, they are not currently
subject to FDA regulation. The MAXline readers intended for diagnostic uses are
the subject of an FDA marketing clearance. If we were to offer any of our other
products for diagnostic uses, those products would become subject to FDA
regulation.
PROPERTIES
We lease two facilities with approximately 115,000 square feet of
laboratory, manufacturing and administrative space in Sunnyvale, California. Our
leases expire in November 2001 and April 2003. We also lease a sales and service
office in the United Kingdom, a sales and technical office in Germany, and a
small manufacturing facility in Norway. We believe that our current facilities
will be sufficient for our operations through at least 2001.
EMPLOYEES
As of December 31, 1999, we employed 213 persons full time, including 44 in
research and development, 78 in manufacturing, 68 in marketing and sales and 23
in general administration and finance. Of these employees, 36 hold Ph.D. or
other advanced degrees. None of our employees is covered by collective
bargaining agreements, and we consider relations with our employees to be good.
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MANAGEMENT
The following table sets forth information regarding our current directors
and executive officers as of March 31, 2000:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Joseph D. Keegan, Ph.D....................... 46 President, Chief Executive Officer and Director
Timothy A. Harkness.......................... 33 Vice President, Chief Financial Officer
Gillian M.K. Humphries, Ph.D................. 61 Vice President
Tony M. Lima................................. 41 Vice President
Robert J. Murray............................. 52 Vice President
John S. Senaldi.............................. 35 Vice President
Moshe H. Alafi............................... 71 Director
David L. Anderson............................ 56 Director
A. Blaine Bowman............................. 53 Director
Paul Goddard, Ph.D........................... 50 Director
Andre F. Marion.............................. 64 Director
Harden M. McConnell, Ph.D.................... 72 Director
J. Allan Waitz, Ph.D......................... 64 Director
</TABLE>
Joseph D. Keegan, Ph.D., has served as our President and Chief Executive
Officer since March 1998. From 1992 to 1998, Dr. Keegan served in various
positions at Becton Dickinson and Company, a research and diagnostic company,
including the positions of Vice President, Sales and Service, Vice President,
General Manager of the Immunocytometry Systems Division and, most recently,
President of the Worldwide Tissue Culture Business. From 1987 to 1992, he was
employed by LEICA, Inc., a microscope manufacturer, where he held various senior
management positions. Dr. Keegan holds a Ph.D. in Chemistry from Stanford
University.
Timothy A. Harkness has served as our Vice President, Finance and Chief
Financial Officer since July 1998. From 1997 to 1998, Mr. Harkness was Vice
President of Business Development at Vivra Specialty Partners, a physician
practice management company. Previously, Mr. Harkness was with Montgomery
Securities in the Health Care Investment Banking Group from 1994 to 1997 and
with Arthur Andersen & Co. from 1989 to 1992. Mr. Harkness holds an MBA from
Stanford University Graduate School of Business and is a CPA.
Gillian M.K. Humphries, Ph.D., has served as a Vice President of the
Company since March 1990. Dr. Humphries served as a consultant to the Company
since its inception in 1983. In 1984, Dr. Humphries joined the Company on a full
time basis as a research scientist and, from 1985 to 1990, she served as
Director of MAXline and Cytosensor Development. Dr. Humphries holds a Ph.D. in
Biochemistry from Stanford University and an MS in Biochemistry from San Jose
State University.
Tony M. Lima has served as Vice President, in charge of Worldwide Sales and
Service, of the Company since July 1998. Previously, Mr. Lima was Manager, Sales
and Marketing at Cavro Scientific Instruments during a portion of 1998,
President/CEO of Aydius, Inc. from 1996 to 1997, and Vice President, Customer
Services of Behring Diagnostics (formerly Syva Company) from May 1995 to March
1996. From 1981 to May 1995 he was employed by Syva Co., a global clinical
diagnostics company, where he held various senior management positions in
England, Belgium and the United States. Mr. Lima holds a higher TEC Degree in
Electronics from Kingston College London, England.
Robert J. Murray has served as a Vice President, in charge of Worldwide
Operations, since July 1995. Mr. Murray served as the Company's Director of
Operations from 1993 to 1995. During 1993, Mr. Murray was a consultant to Tandem
Computers, Incorporated, a computer manufacturer. From 1991 to 1993, Mr. Murray
was Vice President of Manufacturing at Electromer Corporation, an electronic
component company, and from 1989 to 1991, was Vice President and General Manager
of Comptronix Corp., a contract manufacturing company. Prior to joining
Comptronix Corp., Mr. Murray was Vice President of Gould, Inc., a diversified
conglomerate. Mr. Murray holds an MS in Electrical Engineering from San Jose
State University and a B.S. from the University of California at Davis.
John S. Senaldi has served as Vice President, in charge of Worldwide
Marketing of the Company since August 1998. From 1993 to 1998, Mr. Senaldi
served in various management positions at Becton
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<PAGE> 36
Dickinson and Company, a research and diagnostic company, including the
positions of Director of Business Development and Senior Product Manager in both
Europe and North America for Becton's Diabetes Healthcare business. Most
recently, he was in a Program Management role for Becton's Immunocytometry
Systems Division. Prior to joining Becton Dickinson, Mr. Senaldi held various
management positions in manufacturing and marketing with General Electric
Company's Medical Systems Business Group and in engineering functions with
several start-up medical diagnostic companies. Mr. Senaldi holds an MBA from
Harvard Business School, an MSEE from Rensselaer Polytechnic Institute and a BS
in Engineering from Trinity College.
Moshe H. Alafi has been a director of the Company since 1985. Mr. Alafi has
been the general partner of Alafi Capital Company since January 1984.
David L. Anderson has been a director of the Company since 1983. Mr.
Anderson has been a general partner of Sutter Hill Ventures, a venture capital
firm, since 1974. Mr. Anderson is also a director of Dionex Corporation
("Dionex") and Broadvision.
A. Blaine Bowman has been director of the Company since 1985. Mr. Bowman
is, and has been since 1980, President, Chief Executive Officer and a director
of Dionex.
Paul Goddard, Ph.D., has been a director of the Company since September
1995. Dr. Goddard has served as President and Chief Executive Officer of Elan
Pharmaceuticals, a division of Elan PLC, since 1998. Dr. Goddard served as
Chairman, Chief Executive Officer and Director of Neurex Corporation from 1991
through 1998 when Neurex Corporation was acquired by Elan PLC. From 1976 through
February 1991, Dr. Goddard was employed by SmithKline Beecham Corp. and its
predecessors in various positions, most recently as Senior Vice President and
Director, Japan-Pacific. He is also a director of Onyx Pharmaceutical and
RibiImmunochem Research.
Andre F. Marion has been a director of the Company since September 1995.
Mr. Marion was a founder of Applied Biosystems, Inc., and served as its Chief
Operating Officer from 1983 to 1986, its President from 1985 to 1993, its Chief
Executive Officer from 1986 to 1993 and its Chairman of the Board from 1987 to
February 1993, when it merged with the Perkin-Elmer Corporation. Mr. Marion
served as Vice President of Perkin-Elmer Corporation and President of its
Applied Biosystems Division until his retirement in February 1995. Mr. Marion is
presently a management consultant and also a director of Applied Imaging Corp.,
Cygnus, Inc., Aclara Biosciences, Inc. and several private corporations.
Harden M. McConnell, Ph.D., founder of the Company, has been a director of
and a consultant to the Company since the Company's inception in July 1983. He
is the Robert Eckles Swain Professor of Physical Chemistry at Stanford
University and a member of the National Academy of Sciences. Dr. McConnell has
received many awards in recognition of his scientific work, most recently these
include the 1987 Pauling Medal for Chemistry and, in 1988, the National Academy
of Sciences Award in Chemical Sciences. Dr. McConnell has also received the Wolf
Prize (1984), the Wheland Medal (1988), the National Medal of Science (1989),
the Peter Debeye Award in Physical Chemistry (1990) and the Bruker Prize of the
Royal Society of Chemistry (1995). Dr. McConnell holds a Ph.D. degree from the
California Institute of Technology.
J. Allan Waitz, Ph.D., has been a director of the Company since 1990. Dr.
Waitz is currently retired. Until 1992, Dr. Waitz was President and Chief
Executive Officer of DNAX Research Institute of Molecular and Cellular Biology,
Inc., a subsidiary of Schering-Plough Corporation. From 1991 through December
1996, Dr. Waitz served as chairperson of the Area Committee on Microbiology of
the National Committee for Clinical Laboratory Standards. He is also a director
of TerraGen Diversity, Inc.
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PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information regarding beneficial ownership
of our common stock as of March 31, 2000, except as otherwise noted in the
footnotes, and as adjusted to reflect the sale of 1,600,000 shares of common
stock offered hereby for:
- each stockholder who is known by us to own beneficially more than 5% of
our common stock;
- each director and executive officer;
- all of our directors and executive officers as a group; and
- each other selling stockholder.
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
NUMBER OF BENEFICIALLY OWNED
SHARES NUMBER OF AFTER OFFERING(1)
BENEFICIALLY SHARES TO BE SOLD ----------------------
NAME OF BENEFICIAL OWNER OWNED(1) IN THE OFFERING NUMBER PERCENTAGE
------------------------ ------------ ----------------- --------- ----------
<S> <C> <C> <C> <C>
Kopp Investment Advisors, Inc.(2)............... 1,878,405 -- 1,878,405 16.70%
7701 France Ave. South, Ste. 500
Edina, Minnesota 55435
Chase Manhattan Corporation(2).................. 985,075 -- 985,075 8.76
270 Park Avenue, 35th Floor
New York, New York 10017-2070
Putnam Investments(2)........................... 648,000 -- 648,000 5.76
One Post Office Square
Boston, Massachusetts 02109
Pilgrim Baxter & Associates, Ltd.(2)............ 590,900 -- 590,900 5.25
825 Duportail Road
Wayne, Pennsylvania 19087
Moshe H. Alafi(3)............................... 424,840 -- 424,840 3.78
Dionex Corporation(4)........................... 382,166 100,000 282,166 2.51
501 Mercury Drive
Sunnyvale, CA 94086
Harden M. McConnell, Ph.D.(5)................... 356,600 -- 356,600 3.17
David L. Anderson(4)(6)......................... 188,907 -- 188,907 1.68
Joseph D. Keegan, Ph.D.(7)...................... 103,584 -- 103,584 *
A. Blaine Bowman(4)(8).......................... 62,000 -- 62,000 *
Robert J. Murray(9)............................. 55,759 -- 55,759 *
Gillian M.K. Humphries, Ph.D.(10)............... 47,283 -- 47,283 *
Paul Goddard, Ph.D.(11)......................... 22,000 -- 22,000 *
J. Allan Waitz, Ph.D.(12)....................... 22,000 -- 22,000 *
Timothy A. Harkness(13)......................... 26,978 -- 26,978 *
Tony M. Lima(14)................................ 18,469 -- 18,469 *
Andre F. Marion(15)............................. 16,500 -- 16,500 *
John S. Senaldi(16)............................. 16,017 -- 16,017 *
All directors and executive officers as a group
(13 persons).................................. 1,360,937(17) -- 1,360,937 12.10
</TABLE>
- -------------------------
* Less than one percent.
(1) Beneficial ownership is determined in accordance with the rules of the SEC
and generally includes voting or investment power with respect to
securities. Shares of common stock subject to options currently exercisable
or exercisable within 60 days of March 31, 2000 are deemed outstanding for
computing the percentage of the person holding such options but are not
deemed outstanding for computing the percentage of any other person.
Percentage of beneficial ownership is based on
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<PAGE> 38
9,745,251 shares of common stock outstanding as of March 31, 2000, plus
1,500,000 shares to be sold by us in this offering.
(2) Based on information as of December 31, 1999 reflected in Schedules 13D,
13F and 13G filed with the SEC.
(3) Includes 402,840 shares beneficially owned by Alafi Capital Company, of
which Mr. Alafi, a director of the Company, is a general partner, and
22,000 shares that may be acquired within 60 days after March 31, 2000
pursuant to outstanding stock options.
(4) Mr. Anderson is a director of Dionex, and Mr. Bowman is a director and
Chief Executive Officer of Dionex. Messrs. Anderson and Bowman disclaim
beneficial ownership of shares held by Dionex.
(5) Consists of 351,100 shares held by the Harden M. McConnell and Sophia G.
McConnell Trust, of which Dr. McConnell is a co-trustee, and 5,500 shares
that may be acquired within 60 days after March 31, 2000 pursuant to
outstanding stock options.
(6) Includes 14,710 shares beneficially owned by Anvest, L.P., of which Mr.
Anderson is a general partner, and 22,000 shares that may be acquired
within 60 days after March 31, 2000 pursuant to outstanding stock options.
(7) Includes 80,500 shares that may be acquired within 60 days after March 31,
2000 pursuant to outstanding stock options and periodic stock grants.
(8) Includes 22,000 shares that may be acquired within 60 days after March 31,
2000 pursuant to outstanding stock options.
(9) Includes 55,165 shares that may be acquired within 60 days after March 31,
2000 pursuant to outstanding stock options. Mr. Murray has agreed to sell
up to 5,000 shares of common stock in the event the underwriters exercise
their over-allotment option. If this option were exercised in full, he
would beneficially own 50,759 shares of our common stock after this
offering.
(10) Includes 47,283 shares that may be acquired within 60 days after March 31,
2000 pursuant to outstanding stock options. Dr. Humphries has agreed to
sell up to 5,000 shares of common stock in the event the underwriters
exercise their over-allotment option. If this option were exercised in
full, she would beneficially own 42,283 shares of our common stock after
this offering.
(11) Includes 22,000 shares that may be acquired within 60 days after March 31,
2000 pursuant to outstanding stock options.
(12) Includes 22,000 shares that may be acquired within 60 days after March 31,
2000 pursuant to outstanding stock options.
(13) Includes 19,000 shares that may be acquired within 60 days after March 31,
2000 pursuant to outstanding stock options and periodic stock grants.
(14) Includes 17,500 shares that may be acquired within 60 days after March 31,
2000 pursuant to outstanding stock options. Mr. Lima has agreed to sell up
to 4,300 shares of common stock in the event the underwriters exercise
their over-allotment option. If this option were exercised in full, he
would beneficially own 14,169 shares of our common stock after this
offering.
(15) Includes 16,500 shares that may be acquired within 60 days after March 31,
2000 pursuant to outstanding stock options.
(16) Includes 13,700 shares that may be acquired within 60 days after March 31,
2000 pursuant to outstanding stock options. Mr. Senaldi has agreed to sell
up to 4,000 shares of common stock in the event the underwriters exercise
their over-allotment option. If this option were exercised in full, he
would beneficially own 12,017 shares of our common stock after this
offering.
(17) Includes 768,650 shares held by entities affiliated with certain directors
and 365,148 shares that certain directors and officers have the right to
acquire within 60 days after March 31, 2000 pursuant to the exercise of
outstanding stock options and/or periodic stock grant rights. See footnotes
(3) and (5) through (16).
37
<PAGE> 39
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement, the
underwriters named below have severally agreed to purchase from us and the
selling stockholder the following respective number of shares of common stock at
the public offering price less the underwriting discounts and commissions set
forth on the cover page of this prospectus:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ----------
<S> <C>
ING Barings LLC.............................................
Bear, Stearns & Co. Inc.....................................
Thomas Weisel Partners LLC..................................
Warburg Dillon Read LLC.....................................
----------
Total............................................. 1,600,000
==========
</TABLE>
The underwriting agreement provides that the obligations of the
underwriters are subject to certain conditions precedent and that the
underwriters will purchase all shares of the common stock offered hereby if any
of the shares are purchased.
We have been advised by the underwriters that the underwriters propose to
offer the shares of common stock to the public at the public offering price set
forth on the cover page of this prospectus and to various dealers at that price
less a concession not in excess of $ per share. The underwriters may allow,
and these dealers may reallow, a concession not in excess of $ per share to
other dealers. After the public offering, the public offering price and other
selling terms may be changed by the underwriters.
The following table shows the underwriting discounts and commissions to be
paid to the underwriters by us and the selling stockholders in connection with
this offering. These amounts are shown assuming both no exercise and full
exercise of the underwriters' option to purchase additional shares of common
stock:
<TABLE>
<CAPTION>
PER SHARE NO EXERCISE FULL EXERCISE
--------- ----------- -------------
<S> <C> <C> <C>
Payable by Molecular Devices............................. $ $ $
Payable by the selling stockholders...................... $ $ $
</TABLE>
Other expenses of this offering (including the registration fees and the
fees of financial printers, counsel and accountants) to be paid by us are
expected to be approximately $850,000.
We and certain selling stockholders have granted the several underwriters
an option, exercisable not later than 30 days after the date of this prospectus,
to purchase up to 240,000 additional shares of common stock at the public
offering price less the underwriting discounts and commissions set forth on the
cover page of this prospectus. To the extent that the underwriters exercise this
option, each of the underwriters will have a firm commitment to purchase
approximately the same percentage of the additional shares that the number of
shares of common stock to be purchased by it shown in the table above bears to
1,600,000. To the extent the underwriters exercise this option, we and certain
selling stockholders will be obligated, pursuant to this option, to sell the
additional shares to the underwriters. The underwriters may exercise this option
only to cover over-allotments, if any, made in connection with the sale of the
common stock offered hereby. If purchased, the underwriters will offer the
additional shares on the same terms as those on which the 1,600,000 shares of
common stock are being offered.
In connection with this offering, certain underwriters may engage in
passive market making transactions in the common stock on Nasdaq immediately
prior to the commencement of sales in this offering in accordance with Rule 103
of Regulation M. Passive market making consists of displaying bids on Nasdaq
limited by the bid prices of independent market makers and making purchases
limited by these prices and effected in response to order flow. Net purchases by
a passive market maker on each day are limited to a specified percentage of the
passive market maker's average daily trading volume in the common stock during a
specified period and must be discontinued when this limit is reached. Passive
38
<PAGE> 40
market making may stabilize the market price of the common stock at a level
above that which might otherwise prevail and, if commenced, may be discontinued
at any time.
Subject to applicable limitations, the underwriters, in connection with
this offering, may place bids for or make purchases of the common stock in the
open market or otherwise, for long or short account, or cover short positions
incurred, to stabilize, maintain or otherwise affect the price of the common
stock, which may be higher than the price that might otherwise prevail in the
open market. We cannot assure you that the price of the common stock will be
stabilized, or that stabilizing, if commenced, will not be discontinued at any
time. Subject to applicable limitations, the underwriters may also place bids,
or make purchases on behalf of the underwriting syndicate, to reduce a short
position created in connection with this offering. The underwriters are not
required to engage in these activities and may end these activities at any time.
Other than in the United States, neither we nor the underwriters have taken
any action that would permit a public offering of the shares of common stock
offered hereby in any jurisdiction where action for that purpose is required.
The shares of common stock offered hereby may not be offered or sold, directly
or indirectly, nor may this prospectus or any other offering material or
advertisements in connection with the offer and sale of any of these shares be
distributed or published in any jurisdiction, except under circumstances that
will result in compliance with the applicable rules and regulations of such
jurisdiction. Persons into whose possession this prospectus comes are advised to
inform themselves about, and to observe, any restrictions relating to this
offering of the common stock and the distribution of this prospectus. This
prospectus is not an offer to sell or a solicitation of an offer to buy any
shares of common stock offered hereby in any jurisdiction in which such an offer
or solicitation is unlawful.
The underwriting agreement contains covenants of indemnity among us, the
selling stockholders and the underwriters against certain civil liabilities,
including liabilities under the Securities Act of 1933.
We, and each of our directors and executive officers and certain of our
stockholders, who in the aggregate will beneficially own, following this
offering (assuming no exercise of the over-allotment option), 1,643,103 shares
of common stock which includes options to purchase 365,148 shares of common
stock currently exercisable or exercisable within 60 days of March 31, 2000,
have agreed not to directly or indirectly, without the prior written consent of
ING Barings LLC, offer, sell, offer to sell, contract to sell, or otherwise
dispose of any shares of common stock or securities exchangeable for or
convertible into common stock for a period of 90 days after the date of this
prospectus, except that we may issue, and grant options to purchase, shares of
common stock under our current stock option and purchase plans.
Thomas Weisel Partners LLC, one of the underwriters, was organized and
registered as a broker-dealer in December 1998. Since December 1998, Thomas
Weisel Partners LLC has been named as a lead manager or co-manager on 167 filed
public offerings of equity securities, of which 113 have been completed, and has
acted as a syndicate member in an additional 91 public offerings of equity
securities. Thomas Weisel Partners LLC does not have any material relationship
with us or any of our officers, directors or other controlling persons, except
with respect to its contractual relationship with us pursuant to the
underwriting agreement entered into in connection with this offering.
LEGAL MATTERS
The validity of the shares of common stock being sold in this offering and
other legal matters relating to this offering will be passed upon for us by
Cooley Godward LLP, Palo Alto, California. The validity of the shares of our
common stock being sold in this offering will be passed upon for the
underwriters by Winthrop, Stimson, Putnam & Roberts, Stamford, Connecticut.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedule at December 31, 1999 and for each of the three
years ended December 31, 1999, as detailed in their report. We have incorporated
by reference those consolidated financial statements and schedule in
39
<PAGE> 41
this prospectus in reliance on Ernst & Young LLP's report, given on their
authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
A registration statement on Form S-3 with respect to the shares of common
stock offered hereby, together with any amendments, exhibits and schedules
thereto, has been filed with the SEC under the Securities Act of 1933. This
prospectus does not contain all of the information contained in the registration
statement on Form S-3, certain portions of which have been omitted pursuant to
the rules and regulations of the SEC. For further information with respect to
Molecular Devices and the shares offered hereby, reference is made to the
registration statement on Form S-3. The registration statement may be inspected
without charge at the SEC's principal office in Washington, D.C., and copies of
all or any part thereof may be obtained from the Public Reference Room of the
SEC, Washington, D.C., 20549, upon payment of prescribed fees.
We are a reporting company and file annual, quarterly and special reports,
proxy statements and other information with the SEC. You may inspect and copy
these materials at the Public Reference Room maintained by the SEC at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for more information on the Public Reference Room. You can also
find our SEC filings at the SEC's website at www.sec.gov. You may also inspect
reports and other information concerning Molecular Devices at the offices of the
Nasdaq Stock Market at 1735 K Street, N.W., Washington, D.C. 20006.
The SEC allows us to incorporate by reference information into this
prospectus, which means we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is considered to be part of this prospectus, except
for any information superseded by information in this prospectus. This
prospectus incorporates by reference the documents listed below, which we have
previously filed with the SEC. These documents contain important information
about us, our business and our finances:
- Annual Report on Form 10-K for the fiscal year ended December 31, 1999;
- Current Report on Form 8-K filed on April 14, 2000;
- Our definitive proxy statement, dated April 25, 2000, filed in connection
with our 2000 annual meeting of stockholders; and
- The description of our common stock in our Registration Statement on Form
8-A filed with the SEC on December 1, 1995 including any amendments or
reports filed for the purpose of updating such description.
Any documents we file pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 after the date of this prospectus but before the
end of this offering will be deemed to be incorporated by reference.
If you request, either orally or in writing, we will provide to you a copy
of any or all documents which are incorporated by reference. We will provide
these documents to you free of charge, but will not include any exhibits, unless
those exhibits are incorporated by reference into the document. You should
address written requests for documents to: Molecular Devices Corporation, Attn:
Investor Relations, 1311 Orleans Drive, Sunnyvale, California 94089, (408)
747-1700.
40
<PAGE> 42
- ------------------------------------------------------
- ------------------------------------------------------
YOU SHOULD RELY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO WHICH
WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE
ACCURATE ON THE DATE OF THIS DOCUMENT. THIS DOCUMENT MAY BE USED ONLY WHERE IT
IS LEGAL TO SELL THESE SECURITIES.
-------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 7
Use of Proceeds....................... 17
Dividend Policy....................... 17
Price Range of Common Stock........... 17
Capitalization........................ 18
Selected Consolidated Financial
Data................................ 19
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 20
Business.............................. 24
Management............................ 34
Principal and Selling Stockholders.... 36
Underwriting.......................... 38
Legal Matters......................... 39
Experts............................... 39
Where You Can Find More Information... 40
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
1,600,000 SHARES
[MOLECULAR DEVICES LOGO]
COMMON STOCK
-------------------------
PROSPECTUS
-------------------------
ING BARINGS
BEAR, STEARNS & CO. INC.
THOMAS WEISEL PARTNERS LLC
WARBURG DILLON READ LLC
, 2000
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 43
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by us in connection with the sale of the
common stock being registered. All the amounts shown are estimates except for
the SEC registration fee and NASD filing fee.
<TABLE>
<S> <C>
SEC registration fee........................................ $ 39,600
NASD filing fee............................................. 15,500
Printing and engraving expenses............................. 125,000
Legal fees and expenses..................................... 400,000
Accounting fees and expenses................................ 125,000
Transfer Agent and Registrar fees and expenses.............. 25,000
Blue Sky fees and expenses.................................. 5,000
Miscellaneous............................................... 114,900
--------
Total....................................................... $850,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
As permitted by Delaware law, our amended and restated certificate of
incorporation provides that no director of ours will be personally liable to us
or our stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability:
- For any breach of duty of loyalty to us or to our stockholders;
- For acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
- For unlawful payment of dividends or unlawful stock repurchases or
redemptions under Section 174 of the Delaware General Corporation Law; or
- For any transaction from which the director derived an improper personal
benefit.
Our bylaws further provide that we must indemnify our directors and
officers and may indemnify our other employees and agents to the fullest extent
permitted by Delaware law. We believe that indemnification under our bylaws
covers negligence and gross negligence on the part of indemnified parties.
We have entered into indemnification agreements with each of our directors
and certain officers. These agreements, among other things, require us to
indemnify each director and officer for certain expenses including attorneys'
fees, judgments, fines and settlement amounts incurred by any such person in any
action or proceeding, including any action by or in the right of Molecular
Devices Corporation, arising out of the person's services as our director or
officer, any subsidiary of ours or any other company or enterprise to which the
person provides services at our request.
The underwriting agreement (see Exhibit 1.1) will provide for
indemnification by the underwriters of Molecular Devices Corporation, our
directors, our officers who sign the registration statement, and our controlling
persons for some liabilities, including liabilities arising under the Securities
Act.
II-1
<PAGE> 44
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<S> <C>
1.1 Form of Underwriting Agreement
4.1(1) Amended and Restated Certificate of Incorporation of
Registrant
4.2(1) Bylaws of the Registrant
4.3(1) Specimen Certificate of Common Stock
5.1 Legal Opinion of Cooley Godward LLP
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Cooley Godward LLP (see Exhibit 5.1)
24.1* Power of Attorney (contained on signature page)
</TABLE>
- -------------------------
* Previously filed.
(1) Incorporated by reference to the similarly described exhibit in the
Company's Registration Statement on Form S-1 (File No. 33-98926), as
amended.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) That, for purposes of determining any liability under the
Securities Act of 1933, as amended (the "Securities Act"), each filing of
the Registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the registration statement 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.
(2) That, for purposes of determining any liability under the
Securities Act, 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.
(3) That, for the purpose of determining any liability under the
Securities 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.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-2
<PAGE> 45
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Sunnyvale, State of California, on May
4, 2000.
MOLECULAR DEVICES CORPORATION
By: /s/ TIMOTHY A. HARKNESS
------------------------------------
Timothy A. Harkness
In accordance with the requirements of the Securities Act of 1933, as
amended, this Amendment No. 1 to the Registration Statement has been signed
below on May 4, 2000 by the following persons in the capacities stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C> <C>
* President, Chief Executive
- ----------------------------------------------------- Officer and Director (Principal
Joseph D. Keegan, Ph.D. Executive Officer)
/s/ TIMOTHY A. HARKNESS Vice President, Finance and
- ----------------------------------------------------- Chief Financial Officer
Timothy A. Harkness (Principal Financial and
Accounting Officer)
* Director
- -----------------------------------------------------
Moshe H. Alafi
* Director
- -----------------------------------------------------
David L. Anderson
Director
- -----------------------------------------------------
A. Blaine Bowman
Director
- -----------------------------------------------------
Paul Goddard, Ph.D.
* Director
- -----------------------------------------------------
Andre F. Marion
* Director
- -----------------------------------------------------
Harden M. McConnell, Ph.D.
* Director
- -----------------------------------------------------
J. Allan Waitz, Ph.D.
*By: /s/ TIMOTHY A. HARKNESS
------------------------------------------------
Timothy A. Harkness
Attorney-in-fact
</TABLE>
II-3
<PAGE> 46
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
1.1 Form of Underwriting Agreement
4.1(1) Amended and Restated Certificate of Incorporation of
Registrant
4.2(1) Bylaws of the Registrant
4.3(1) Specimen Certificate of Common Stock
5.1 Legal Opinion of Cooley Godward LLP
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Cooley Godward LLP (see Exhibit 5.1)
24.1* Power of Attorney (contained on signature page)
</TABLE>
- -------------------------
* Previously filed.
(1) Incorporated by reference to the similarly described exhibit in the
Company's Registration Statement on Form S-1 (File No. 33-98926), as
amended.
<PAGE> 1
EXHIBIT 1.1
Molecular Devices Corporation
1,600,000 Shares of Common Stock*
(par value $.001 per share)
UNDERWRITING AGREEMENT
New York, New York
[____], 2000
ING Barings LLC
Bear, Stearns & Co. Inc.
Thomas Weisel Partners LLC
Warburg Dillon Read LLC
c/o ING Barings LLC
55 East 52nd Street
New York, New York 10055
Ladies and Gentlemen:
Each of Molecular Devices Corporation, a Delaware corporation (the
COMPANY), and the selling stockholders named in Schedule I hereto (each, a
SELLING STOCKHOLDER and, collectively, the SELLING STOCKHOLDERS) respectively
proposes, subject to the terms and conditions stated herein, severally and not
jointly, to issue or sell to the several underwriters named in Schedule II
hereto (the UNDERWRITERS) (i) in the case of such issue and sale by the Company,
(A) 1,500,000 shares (the COMPANY FIRM SHARES) of the Company's common stock,
par value $0.001 per share (the COMMON STOCK), and (B) for the sole purpose of
covering over-allotments in connection with the sale of the Firm Shares (as
defined below), at the option of the Underwriters, up to an additional 221,700
shares of Common Stock (the COMPANY OPTION SHARES), (ii) in the case of such
sale by each Selling Stockholder listed as a Firm Selling Stockholder on
Schedule I hereto (each, a FIRM SELLING STOCKHOLDER), the number of shares of
Common Stock set forth opposite the name of such Firm Selling Stockholder on
Schedule I hereto (the SELLING STOCKHOLDER FIRM SHARES and, together with the
Company Firm Shares, the FIRM SHARES) and (iii) in the case of such sale by each
Selling Stockholder listed as an Option Selling Stockholder on Schedule I hereto
(each, an OPTION SELLING STOCKHOLDER), for the sole purpose of covering
over-allotments in connection with the sale of the Firm Shares, at the option of
the Underwriters, up to the number
- ---------------
* Plus the option to purchase up to an additional 240,000 shares of Common
Stock to cover over-allotments described herein.
<PAGE> 2
of shares of Common Stock set forth opposite the name of such Option Selling
Stockholder on Schedule I hereto (the SELLING STOCKHOLDER OPTION SHARES and,
together with the Company Option Shares, the OPTION SHARES). The aggregate
number of Selling Stockholder Firm Shares is 100,000, and the aggregate number
of Selling Stockholder Option Shares is 18,300. The Option Shares and the Firm
Shares are sometimes referred to herein collectively as the SHARES.
1. Representations and Warranties of the Company. The Company represents
and warrants to and agrees with each of the Underwriters that:
(a) The Company has prepared and filed with the Securities and
Exchange Commission (the COMMISSION) a registration statement on Form S-3 (No.
333-32734), for the registration of the Shares under the Securities Act of 1933,
as amended (the 1933 ACT). Such registration statement, including the
prospectus, financial statements and schedules, exhibits and all other documents
filed as a part thereof, as amended through the time of effectiveness of such
registration statement, and the documents filed by the Company with the
Commission under the Securities Exchange Act of 1934, as amended (the 1934 ACT),
that are or are deemed to be incorporated by reference in the Prospectus (as
defined below) pursuant to Item 12 of Form S-3 under the 1933 Act (the
INCORPORATED DOCUMENTS) and any information deemed to be a part thereof as of
the time of such effectiveness pursuant to Rule 430A or Rule 434 of the rules
and regulations of the Commission under the 1933 Act (the 1933 ACT REGULATIONS),
is herein called the REGISTRATION STATEMENT. Any registration statement filed by
the Company pursuant to Rule 462(b) of the 1933 Act Regulations is herein called
the RULE 462(b) REGISTRATION STATEMENT, and from and after the date and time of
filing of the Rule 462(b) Registration Statement, the term REGISTRATION
STATEMENT as used herein includes the Rule 462(b) Registration Statement. The
prospectus, in the form first filed with the Commission pursuant to Rule 424(b)
of the 1933 Act Regulations or filed as part of the Registration Statement at
the time of effectiveness if no filing under Rule 424(b) or Rule 434 of the 1933
Act Regulations is required, including in either case the Incorporated Documents
at the time thereof, is herein called the PROSPECTUS. The term PRELIMINARY
PROSPECTUS as used herein means a preliminary prospectus included in the
Registration Statement at the time it is declared effective as described in Rule
430A of the 1933 Act Regulations, including the Incorporated Documents at such
time. Notwithstanding the foregoing, if the Company has, with the consent of ING
Barings LLC (ING BARINGS), elected to rely upon Rule 434 of the 1933 Act
Regulations, the term PRELIMINARY PROSPECTUS as used herein means the Company's
prospectus subject to completion dated [_____], 2000, including the Incorporated
Documents as of such date, and the term PROSPECTUS as used herein means such
preliminary prospectus, together with the applicable term sheet (the TERM SHEET)
prepared and filed by the Company with the Commission under Rules 434 and 424(b)
of the 1933 Act Regulations, and all references in this Agreement to the date of
the Prospectus shall mean the date of the Term Sheet. All references in this
Agreement to the Registration Statement, the Rule 462(b) Registration Statement,
any preliminary prospectus, the Prospectus or the Term Sheet, or any amendments
or supplements to any of the foregoing, shall include any copy thereof filed
with the Commission pursuant to its Electronic Data Gathering, Analysis and
Retrieval System (EDGAR). For purposes of this Agreement, the words AMEND or
AMENDMENT or SUPPLEMENT or SUPPLEMENTED with respect to the Registration
Statement or the Prospectus means amendments or supplements to the Registration
Statement or the Prospectus, as well as Incorporated Documents filed after the
date of effectiveness of the Registration Statement or the filing of the
Prospectus under Rule 424(b) or Rule 434 of the 1933 Act Regulations, as the
case may be.
2
<PAGE> 3
(b) Each preliminary prospectus and the Prospectus, if filed by
electronic transmission pursuant to EDGAR (except as may be permitted by
Regulation S-T under the 1933 Act), was identical to the copy thereof delivered
to the Underwriters for use in connection with the offer and sale of the Shares.
At the time of the effectiveness of the Registration Statement or the
effectiveness of any Rule 462(b) Registration Statement and any post-effective
amendment thereto, when the Prospectus is first filed with the Commission
pursuant to Rule 424(b) or Rule 434 of the 1933 Act Regulations, when any
supplement to or amendment of the Prospectus is filed with the Commission and at
the Closing Date and the Additional Closing Date (each as defined in Section 3
hereof), as applicable, (i) the Registration Statement and the Prospectus and
any amendments thereof and supplements thereto complied (and, in the event of
any of the aforementioned filings that may occur in the future, will, at the
time of each such filing, comply) with the applicable provisions of the 1933 Act
and the 1933 Act Regulations, did not and will not contain an untrue statement
of a material fact and did not and will not omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading and (ii) each Incorporated Document as originally filed
complied as to form when so filed in all material respects with the applicable
requirements of the 1934 Act and the 1934 Act Regulations. When any related
preliminary prospectus was first filed with the Commission (whether filed as
part of the Registration Statement for the registration of the Shares or any
amendment thereto or pursuant to Rule 424(a) of the 1933 Act Regulations) and
when any amendment thereof or supplement thereto was first filed with the
Commission, such preliminary prospectus and any amendments thereof and
supplements thereto complied with the applicable provisions of the 1933 Act and
the 1933 Act Regulations and did not contain an untrue statement of a material
fact and did not omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading. No
representation and warranty is made in this Section 1(b), however, with respect
to the statements set forth in the first (including the table), third, seventh,
eighth and twelfth paragraphs under "Underwriting" in, and the last paragraph on
the cover page of, the Prospectus (the UNDERWRITING INFORMATION). If Rule 434 of
the 1933 Act Regulations is used, the Company will comply with the requirements
thereof. The Commission has not issued any stop order suspending the
effectiveness of the Registration Statement or any order preventing or
suspending the use of the Prospectus or any preliminary prospectus or, to the
knowledge of the Company, instituted proceedings for that purpose.
(c) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with full
corporate power and authority to own, lease and operate its properties and
engage in the business in which it is engaged or in which it proposes to engage
as described in the Registration Statement, each preliminary prospectus and the
Prospectus. The Company is duly registered and qualified to do business as a
foreign corporation in good standing in each jurisdiction where the character,
location, ownership or leasing of its properties (owned, leased or licensed) or
the nature or conduct of its business requires such registration or
qualification, except where the failure to be so qualified would not,
individually or in the aggregate, result in a material adverse effect on or
affecting the business, operations, assets, properties, condition (financial or
other), stockholders' equity, prospects or results of operations of the Company
and its subsidiaries taken as a whole (a MATERIAL ADVERSE EFFECT).
3
<PAGE> 4
(d) The Company has no subsidiaries (as defined in the 1933 Act
Regulations), other than Skatron Instruments, AS, Molecular Devices Limited,
Molecular Devices FSC, Inc. and Molecular Devices GmbH (each, a SUBSIDIARY and,
collectively, the SUBSIDIARIES), each of which is a wholly-owned subsidiary of
the Company. The Company does not own or control, directly or indirectly, any
shares of stock or any other equity or long-term debt securities of any
corporation or have any equity interest in any firm, partnership, joint venture,
association, or other entity other than the Subsidiaries, except for the
Company's security holdings in JCR Pharmaceuticals Co., Ltd. All the outstanding
share capital of each Subsidiary has been duly and validly authorized and issued
and is fully paid and nonassessable, is owned solely by the Company and is free
and clear of any security interest, pledge, claim (legal or equitable), lien,
charge, equity, mortgage, encumbrance or other restriction (each, a LIEN),
shareholders' agreements, voting trusts or defects of title. Each Subsidiary has
been duly organized and is validly existing as a corporation in good standing
under the laws of its jurisdiction of organization, with full power and
authority to own, lease and operate its properties and conduct the business in
which it is engaged or in which it proposes to engage. Each Subsidiary is duly
registered and qualified as a foreign corporation in good standing in each
jurisdiction where the character, location, ownership or leasing of its
properties or the nature or conduct of its business requires such registration
or qualification, except where the failure to be so qualified would not have a
Material Adverse Effect. No Subsidiary is currently prohibited, directly or
indirectly, from paying any dividends to the Company, from making any other
distribution on its share capital, from repaying to the Company any loans or
advances to it from the Company or from transferring any of its property or
assets to the Company or any other subsidiary of the Company.
(e) Ernst & Young LLP, the accountants who have expressed their
opinion with respect to the consolidated financial statements (including the
related notes and supporting schedules) of the Company and the Subsidiaries
filed with the Commission as a part of the Registration Statement, each
preliminary prospectus and the Prospectus, are, with respect to the Company and
the Subsidiaries, independent public accountants as required by the 1933 Act and
the 1933 Act Regulations and the 1934 Act and the rules and regulations of the
Commission under the 1934 Act (the 1934 ACT REGULATIONS).
(f) As of the date hereof, the Company has an authorized
capitalization as set forth in the Registration Statement, each preliminary
prospectus and the Prospectus and there has been no material change in its
capitalization since that date. All outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully paid and
nonassessable, have been issued in compliance with all federal and state
securities laws and were not issued in violation of any preemptive right, resale
right, right of first refusal or similar right. The authorized and outstanding
capital stock of the Company conforms to the description thereof contained in
the Registration Statement, each preliminary prospectus and the Prospectus (and
such description correctly states the substance of the provisions of the
instruments defining the capital stock of the Company). Except as described in
the Registration Statement, each preliminary prospectus and the Prospectus,
there are no authorized or outstanding rights (including, without limitation,
preemptive rights, co-sale rights, resale rights, rights of first refusal or
similar rights), warrants or options to acquire, or instruments convertible into
or exercisable or exchangeable for, any share of capital stock or other equity
interest or ownership interest in the Company or any Subsidiary or any contract,
commitment, agreement,
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<PAGE> 5
understanding or arrangement of any kind relating to the issuance of any capital
stock or other equity interest or ownership interest in the Company or any
Subsidiary or any such convertible or exercisable or exchangeable securities or
instruments or any such rights, warrants or options, except for any such rights
that have been effectively waived in writing so as not to be exercisable in
connection with the registration, offer or sale of the Shares. The Shares to be
issued pursuant to this Agreement will not be issued in violation of any
preemptive right, co-sale right, resale right, right of first refusal or similar
right. The description of the Company's stock option, stock bonus and other
stock plans or arrangements, and the options or other rights granted thereunder,
set forth in the Registration Statement, each preliminary prospectus and the
Prospectus accurately and fairly presents in all material respects the
information required to be shown with respect to such plans, arrangements,
options and rights. The Shares have been duly authorized for issuance and, when
issued and delivered to and paid for by the Underwriters pursuant to this
Agreement, will be validly issued, fully paid and nonassessable, good title to
the Shares will be transferred to the Underwriters free and clear of any Liens
and the certificates representing the Shares will be in valid and sufficient
form.
(g) There is (i) no action, suit or proceeding or, to the knowledge
of the Company, investigation, before or by any court, arbitrator or
governmental agency, body or official, domestic or foreign, pending or, to the
knowledge of the Company, threatened or contemplated, as to which the Company or
any Subsidiary is (or, to the extent threatened or contemplated, will be) a
party or as to which the business, assets or property of the Company or any
Subsidiary (or, to the extent threatened or contemplated, will be) subject, (ii)
no statute, rule, regulation or order that has been enacted, adopted or issued
by any governmental agency, body or official, and (iii) no injunction,
restraining order or order of any nature that has been issued by a federal or
state court or foreign court of competent jurisdiction to which the Company or
any Subsidiary is or will be subject or affecting the business, assets or
property of the Company or any Subsidiary, that could reasonably be expected to
(in the case of clauses (i), (ii) and (iii) above), individually or in the
aggregate, whether or not arising from transactions in the ordinary course of
business, have a Material Adverse Effect, be required to be disclosed in the
Registration Statement, each preliminary prospectus or the Prospectus or
materially and adversely affect the ability of the Company to perform its
obligations under this Agreement. There are no legal or administrative
proceedings, Contracts (as defined in Section 1(l) hereof) or documents
concerning the Company or any Subsidiary of a character that would be required
to be described in or filed as an exhibit to a registration statement on Form
S-3 under the 1933 Act that are not described or filed, as required, in the
Registration Statement, each preliminary prospectus and the Prospectus.
(h) The consolidated financial statements of the Company and the
Subsidiaries, together with the related notes thereto, incorporated by reference
in the Registration Statement, each preliminary prospectus and the Prospectus,
present fairly the consolidated financial position and the consolidated results
of operations, changes in stockholders' equity and changes in cash flows of the
Company and the Subsidiaries as of the respective dates and for the respective
periods specified therein. All of such financial statements and related notes
have been prepared in conformity with generally accepted accounting principles
as applied in the United States applied on a consistent basis throughout the
periods involved and comply as to form in all material respects with the
applicable accounting requirements included in Regulation S-X under the 1933 Act
and the 1934 Act (REGULATION S-X). The supporting schedules and tables included
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<PAGE> 6
or incorporated by reference in the Registration Statement, each preliminary
prospectus and the Prospectus, and the financial data set forth under
"Prospectus Summary--Summary Consolidated Financial Data" and "Selected
Consolidated Financial Data" in the Prospectus and each preliminary prospectus,
fairly present the information purported to be shown thereby at the respective
dates thereof and for the respective periods covered thereby and have been
presented on a basis consistent with that of the audited financial statements
therein. No other financial statements or supporting schedules are required by
the 1933 Act or the 1933 Act Regulations or the 1934 Act or the 1934 Act
Regulations (including Regulation S-X) to be included therein.
(i) Subsequent to the respective dates as of which information is
given in the Registration Statement, each preliminary prospectus and the
Prospectus, there has not been (i) any loss or adverse change, or any
development that could reasonably be expected to result in a loss or adverse
change in or affecting the business, properties, management, assets, prospects,
stockholders' equity, operations, condition (financial or other), or results of
operations of the Company and its Subsidiaries taken as a whole, (ii) any
transaction entered into by the Company or any Subsidiary, except transactions
in the ordinary course of business, (iii) any obligation, direct or contingent,
incurred by the Company or any Subsidiary that is material to the Company and
the Subsidiaries taken as a whole, except for liabilities or obligations that
are reflected in the Registration Statement, the preliminary prospectus and the
Prospectus, (iv) any change in the capital stock or outstanding indebtedness of
the Company or (v) any dividend or distribution of any kind declared, paid or
made on the capital stock of the Company, which in any case described in clause
(i), )(ii), (iii), (iv) or (v) above, could reasonably be expected to,
individually or in the aggregate, have a Material Adverse Effect or materially
and adversely affect the ability of the Company to perform its obligations under
this Agreement.
(j) The Company and the Subsidiaries have good and marketable title
to all properties and assets described in the Registration Statement, each
preliminary prospectus and the Prospectus as being owned by them, free and clear
of all Liens except Liens for taxes not yet due and payable. The Company and the
Subsidiaries have valid and enforceable leases for the properties leased by
them, the Company and the Subsidiaries enjoy peaceful and undisturbed possession
under all such leases with such exceptions as do not materially interfere with
the use thereof made by the Company and the Subsidiaries, and such leases
conform in all material respects to the descriptions thereof set forth in the
Registration Statement, each preliminary prospectus and the Prospectus. The
Company and the Subsidiaries own, lease or otherwise have rights to use all
properties and assets as are important to their respective operations as now
conducted and as proposed to be conducted.
(k) The Company and the Subsidiaries have all requisite corporate
power and authority, and all licenses, certificates, approvals, consents,
concessions, qualifications, orders, registrations, authorizations and permits
from all federal, state, foreign and other governmental and regulatory agencies,
bodies and authorities (collectively, PERMITS) that are material to and
necessary for the conduct of the business of the Company and the Subsidiaries as
such business is currently conducted. The Company reasonably believes that it
will be able to obtain Permits that are material to and necessary for the
conduct of the business of the Company and the Subsidiaries as such business is
proposed to be conducted as described in the Registration Statement, each
preliminary prospectus and the Prospectus. All such Permits are valid and in
full force and effect and there is no proceeding pending or, to the best
knowledge of the Company,
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<PAGE> 7
threatened, that could reasonably be expected to cause any such Permit to be
withdrawn, canceled, suspended or not renewed. The Company and the Subsidiaries
are not in violation of, or in default under, and have fulfilled and performed
all their obligations with respect to, such Permits, except as would not have a
Material Adverse Effect. No event has occurred that allows or would allow
revocation or termination of any such Permit or result in any material
impairment of the rights of the holder of any such Permit. The Contracts to
which the Company or any Subsidiary is a party are valid and binding agreements,
enforceable against the Company and such Subsidiary in accordance with their
terms and, to the best of the Company's knowledge, the other contracting party
or parties thereto are not in breach or default under any of such Contracts.
(l) The Company and each Subsidiary are not (i) in violation of
their respective certificates or articles of incorporation, as amended, or
bylaws, as amended, or (ii) in breach of or default in the performance or
observance of any obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, loan agreement, franchise, joint venture, deed of
trust, bond, note, lease, Permit or other agreement or instrument to which the
Company or such Subsidiary is a party or by which the Company or such Subsidiary
may be bound or to which any of the property or assets of the Company or such
Subsidiary is subject (each, a CONTRACT), or in violation of any law, order,
rule, regulation, writ, injunction or decree of any court or governmental
agency, body or authority, except in the case of this clause (ii) for such
breaches, defaults or violations that could not reasonably be expected to,
individually or in the aggregate, have a Material Adverse Effect or materially
and adversely affect the ability of the Company to perform its obligations under
this Agreement.
(m) The Company and the Subsidiaries own, possess, license or have
rights to use all patents, patent applications, trademarks, trademark
applications, service marks, service mark applications, tradenames, inventions,
discoveries, concepts, ideas, techniques, methods, source codes, object codes,
copyrights, manufacturing processes, formulas, computer software, databases,
works of authorship, technology, trade secrets, know-how and other unpatented or
unpatentable proprietary or confidential information, collaborative research
agreements, systems or procedures and material intangible property and assets
(collectively, INTELLECTUAL PROPERTY) necessary to the conduct of their business
as currently conducted and as proposed to be conducted. The Company reasonably
believes that the Company and the Subsidiaries will be able to own or possess
adequate licenses or other rights to use all Intellectual Property necessary to
the conduct of their business as proposed to be conducted as described in the
Registration Statement. The Registration Statement, each preliminary prospectus
and the Prospectus fairly and accurately describe the Company's rights with
respect to Intellectual Property. Neither the Company nor any Subsidiary has
received any notice of, and otherwise has no knowledge of, any infringement of
or conflict with asserted rights or claims of others with respect to any
Intellectual Property and the Company is unaware of any fact that could form a
reasonable basis for any such claim.
(n) Rights that any other party may have in the Patent Rights (as
defined in Schedule 1(n) hereto) will not have a Material Adverse Effect or
materially and adversely affect the ability of the Company to perform its
obligations under this Agreement. There are no outstanding licenses or other
agreements that relate to or restrict the Company's use of the Patent Rights in
a manner that could reasonably be expected to have a Material Adverse Effect. No
Patent has been or is now involved in any interference, reissue, reexamination
or opposition
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<PAGE> 8
proceeding in the United States Patent and Trademark Office. To the knowledge of
the Company, there is no patent or patent application of any person that
conflicts in any material respect with any Patent or invalidates any claim the
Company has in any Patent or Patent application. With regard to the Patent
Rights, the Company has no knowledge of any unpaid maintenance fees, any patents
that have lapsed or any abandonment of applications, except as set forth on
Schedule 1(n) hereto, and knows of no reason why any patent applications should
not be allowed. There are no claims, actions or proceedings, pending or to the
Company's best knowledge, threatened, challenging the validity of any of its
claims in any of the Intellectual Property. To the knowledge of the Company,
there is no prior art that may render any Patent Right invalid or a Patent
Application (as defined in Schedule 1(n) hereto) unpatentable.
(o) The Company is the sole and exclusive owner of all right, title
and interest in the registered trademarks and service marks listed on Schedule
1(n) hereto (collectively, REGISTERED MARKS). The Company has applied for the
United States trademarks and service marks listed on Schedule 1(n) hereto
(collectively, APPLIED MARKS). The Company has not allowed any Applied Marks or
Registered Marks to be abandoned or canceled or to lapse, except as set forth on
Schedule 1(n) hereto. The Company has no knowledge of any claims, actions or
proceedings, pending or threatened, challenging the validity of any of the
Registered Marks or the registration of any Applied Marks. The Company has no
knowledge of the existence of trademarks or service marks, or trademark or
service mark applications, owned by third parties that may have, individually or
in the aggregate, a Material Adverse Effect or materially and adversely affect
the ability of the Company to perform its obligations under this Agreement. The
Company has registered with Network Solutions, Inc. the Internet domain name
"www.moldev.com." The Company has no knowledge of a registered trademark held by
a third party that may be used to prevent the Company from using such domain
name. The Company has taken all reasonable steps to secure, protect and maintain
such domain name and the Registered Marks and Applied Marks listed on Schedule
1(n) hereto.
(p) The Software (as defined below) owned or purported to be owned
by the Company or any Subsidiary was either (i) developed by employees of the
Company or such Subsidiary within the scope of their employment, (ii) developed
by independent contractors who have assigned their rights to the Company or such
Subsidiary pursuant to written agreements or (iii) otherwise lawfully acquired
by the Company or such Subsidiary from a third party pursuant to a Contract. The
Software does not contain any programming code, documentation or other materials
or development environments that embody Intellectual Property rights of any
person other than the Company except for such materials or development
environments obtained by the Company or the Subsidiaries from other persons who
make such materials or development environments generally available on
non-discriminatory commercial terms. The term SOFTWARE as used herein means any
and all (A) computer programs, including any and all software implementations of
algorithms, models and methodologies, whether in source code or object code, (B)
databases and compilations, including any and all data and collections of data,
whether machine readable or otherwise, (C) descriptions, schematics, flow-charts
and other work product used to design, plan, organize and develop any of the
foregoing and (D) all documentation, including user manuals and training
materials, relating to any of the foregoing.
(q) The Company and the Subsidiaries have filed on a timely basis
with the appropriate taxing authorities (or have received an extension for
filing with respect to) all
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<PAGE> 9
necessary federal, state and foreign income and franchise tax returns, reports
and other information required to be filed by them. Each such tax return, report
or other information was, when filed, accurate and complete in all material
respects. The Company and the Subsidiaries have duly paid, or have made adequate
charges, accruals and reserves in the financial statements for, all such taxes
required to be paid by them and any other assessment, fine or penalty levied
against them, for all periods as to which the tax liability of the Company or
the Subsidiaries has not been finally determined. No tax deficiency has been or,
to the best of the Company's knowledge, might be asserted or contemplated
against the Company or any Subsidiary.
(r) The Company and the Subsidiaries are insured by recognized,
financially sound and reputable institutions with policies in such amounts and
with such deductibles and covering such risks as are generally deemed adequate
and customary for their business, including, without limitation, policies
covering real and personal property owned or leased by the Company and the
Subsidiaries against theft, damage, destruction, acts of vandalism and
earthquakes, general liability and directors and officers liability, all of
which insurance is in full force and effect. The Company has no reason to
believe that it or the Subsidiaries will not be able to (i) renew its existing
insurance coverage as and when such policies expire or (ii) obtain comparable
coverage from similar institutions as may be necessary or appropriate to conduct
its business as now conducted and at a cost that would not result in a Material
Adverse Effect or materially and adversely affect the ability of the Company to
perform its obligations under this Agreement. Neither of the Company nor any
Subsidiary has been denied any insurance coverage that it has sought or for
which it has applied.
(s) Neither the Company nor any Subsidiary is involved in any labor
dispute, disturbance, lockout, slowdown or stoppage of employees, and, to the
knowledge of the Company, no such dispute or disturbance is threatened or
imminent. The Company is not aware of any existing or imminent labor disturbance
by the employees of any of its principal suppliers, subassemblers, value added
resellers, subcontractors, original equipment manufacturers, authorized dealers
or international distributors that could reasonably be expected to result in a
Material Adverse Effect or materially and adversely affect the ability of the
Company to perform its obligations under this Agreement.
(t) In the ordinary course of its business, the Company periodically
reviews the effect of Environmental Laws (as defined below) on the business,
operations and properties of the Company and the Subsidiaries, in the course of
which it identifies and evaluates associated costs and liabilities (including,
without limitation, any capital or operating expenditures required for clean-up,
closure of properties or compliance with Environmental Laws, or any Permit, any
related constraints on operating activities and any potential liabilities to
third parties). On the basis of such review, the Company and the Subsidiaries
(i) are in compliance in all material respects with all applicable foreign,
United States federal, state and local environmental laws, rules, regulations,
treaties, statutes and codes relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes, pollutants
or contaminants (ENVIRONMENTAL LAWS), (ii) have received all Permits required of
them under applicable Environmental Laws to conduct their business as currently
conducted, (iii) are in compliance in all material respects with all terms and
conditions of any such Permit and (iv) have not received notice of any actual or
potential liability for the investigation or remediation of any disposal or
release of hazardous or toxic substances or wastes, pollutants or contaminants.
No action,
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<PAGE> 10
proceeding, revocation proceeding, writ, injunction or claim is pending or, to
the knowledge of the Company, threatened, relating to the Environmental Laws or
to the Company's or the Subsidiaries' activities involving Hazardous Materials.
HAZARDOUS MATERIALS means any material or substance (A) that is prohibited or
regulated by any Environmental Law or (B) that has been designated or regulated
by any governmental body or authority as radioactive, toxic, hazardous or
otherwise a danger to health, reproduction or the environment. Neither the
Company nor any Subsidiary has been named as a "potentially responsible party"
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended.
(u) Neither the Company nor any Subsidiary has engaged in the
generation, use, manufacture, transportation or storage of any Hazardous
Materials on any of the Company's or any Subsidiary's properties or former
properties, except in compliance in all material respects with all applicable
Environmental Laws. No Hazardous Materials have been treated or disposed of on
any of the Company's or the Subsidiaries' properties or on properties formerly
owned or leased by the Company or the Subsidiaries during the time of such
ownership or lease, except in compliance with Environmental Laws.
(v) No payments or inducements have been made or given, directly or
indirectly, to any federal or local official or candidate for any federal or
state office in the United States or foreign offices by the Company or any
Subsidiary, by any of their officers, directors, employees or agents or, to the
knowledge of the Company, by any other person in connection with any
opportunity, Contract, Permit, certificate, consent, order, approval, waiver or
other authorization relating to the business of the Company or the Subsidiaries,
except for such payments or inducements as were lawful under applicable written
laws, rules and regulations. Neither the Company nor any Subsidiary, nor any
director, officer, agent, employee or, to the knowledge of the Company, other
person associated with or acting on behalf of the Company or the Subsidiaries,
(i) has used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expense relating to political activity; (ii)
made any direct or indirect unlawful payment to any government official or
employee from corporate funds; (iii) violated or is in violation of any
provision of the Foreign Corrupt Practices Act of 1977; or (iv) made any bribe,
unlawful rebate, payoff, influence payment, kickback or other unlawful payment
in connection with the business of the Company or the Subsidiaries.
(w) Neither the Company nor any Subsidiary has any liability for any
prohibited transaction (within the meaning of Section 4975(c) of the Internal
Revenue Code of 1986, as amended (the CODE), or Part 4 of Title I of the
Employee Retirement Income Security Act of 1974, as amended (ERISA)) (or an
accumulated funding deficiency within the meaning of Section 412 of the Code or
Section 302 of ERISA), or any complete or partial withdrawal liability (within
the meaning of Section 4201 of ERISA), with respect to any pension, profit
sharing or other plan that is subject to ERISA, to which the Company and any
Subsidiary make or ever have made a contribution and in which any employee of
the Company and any Subsidiary is or has ever been a participant. With respect
to such plans, the Company and such Subsidiary are in compliance in all material
respects with all applicable provisions of ERISA.
(x) The Company and the Subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or specific
authorization, (ii) transactions are
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appropriately recorded to permit preparation of financial statements in
conformity with United States generally accepted accounting principles and to
maintain accountability for assets, (iii) access to assets is permitted only in
accordance with management's general or specific authorization, (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences and (v) assets are properly accounted for and safeguarded against
loss from unauthorized use. The Company has not received from its independent
public accountants a letter describing, or been informed by them of, a
substantial or material deficiency in the Company's internal accounting controls
in connection with their audit of the Company's financial statements
incorporated by reference in the Registration Statement, each preliminary
prospectus and the Prospectus.
(y) There are no outstanding loans, advances (except normal advances
for business expenses in the ordinary course of business) or guarantees of
indebtedness by the Company or any Subsidiary to or for the benefit of any of
the officers or directors or shareholders of the Company or any Subsidiary or
any of the members of the families of any of them, except as disclosed in the
Registration Statement, each preliminary prospectus and the Prospectus.
(z) No consent, approval, registration, authorization, filing,
qualification, Permit or order of or with any court or supervisory, regulatory,
administrative or governmental agency, body or authority, arbitrator or others
(including securityholders) is required in connection with the execution and
delivery of this Agreement, the issuance, sale or delivery of the Shares to be
issued, sold and delivered by the Company hereunder, or the consummation of any
other of the transactions contemplated herein or the fulfillment of the terms
hereof, except the registration under the 1933 Act of the Shares and such
consents, approvals, registrations, authorizations, filings, qualifications,
Permits or orders as may be required under the state securities or "blue sky"
laws or the bylaws and rules of the National Association of Securities Dealers,
Inc. (the NASD) or as have been obtained and that are in full force and effect
in connection with the offer, purchase and distribution by the Underwriters of
the Shares.
(aa) The execution, delivery and performance by the Company of this
Agreement and the issuance and sale of the Shares and the consummation of the
transactions contemplated herein have been duly authorized by all necessary
corporate action. Neither the issuance, offer, sale or delivery of the Shares,
the execution, delivery and performance by the Company of this Agreement nor the
compliance by the Company with all the provisions hereof nor the consummation of
the transactions contemplated hereby (i) conflicts with or will conflict with,
or constitutes or will constitute a breach or violation of or a default under
(or an event that, with notice or lapse of time or both, would constitute such a
breach, violation or default), or results in or will result in the imposition of
a Lien upon any property or assets of the Company or any Subsidiary under any of
the terms or provisions of the certificate of incorporation or by-laws or other
organizational or constitutive documents of the Company or any Subsidiary, (ii)
conflicts with or will conflict with or constitutes or will constitute a breach
or violation of, or a default under (or an event that with notice or the lapse
of time or both would constitute a default) or the loss of any material benefit
under, or the termination of, or results in or will result in the creation or
imposition of any Lien upon any property or assets of the Company or any
Subsidiary pursuant to, any Contract or (iii) violates or conflicts with or will
violate or conflict with any law, statute, rule or regulation applicable to the
Company or any Subsidiary or any
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<PAGE> 12
judgment, decree or order applicable to the Company or any Subsidiary of any
court or supervisory, regulatory, administrative or governmental agency, body or
authority, or arbitrator having jurisdiction over the Company or any Subsidiary
or any of their respective properties or assets.
(bb) The Company has full corporate power and authority to enter
into this Agreement and to perform the transactions contemplated hereby. This
Agreement and the transactions contemplated herein have been duly and validly
authorized, executed and delivered by the Company and this Agreement constitutes
the legal, valid and binding agreement of the Company, enforceable against the
Company in accordance with its terms, except as the enforceability thereof may
be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium
or other laws now or hereafter in effect relating to or affecting creditors'
rights generally and (ii) general principles of equity (regardless of whether
such enforcement is considered in a proceeding in equity or at law) and except
to the extent that the provisions of Section 7 hereof may be limited by
applicable federal or state securities laws or unenforceable as against public
policy.
(cc) The Company has duly and validly authorized the issuance and
sale of the Shares. The description of the Shares in the Registration Statement,
each preliminary prospectus and the Prospectus is accurate in all material
respects.
(dd) The Company is not now, and as a result of the offer and sale
of the Shares in the manner contemplated in this Agreement, the Registration
Statement, each preliminary prospectus and the Prospectus and the application of
the net proceeds of such sale as described in under "Use of Proceeds" in the
Prospectus and each preliminary prospectus will not be, an "investment company"
or an "affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended (the INVESTMENT COMPANY ACT), without taking account of any exemption
arising out of the number or type of holders of the Company's securities.
(ee) The Company has not incurred any liability for a fee,
commission or other compensation on account of the employment of a broker or
finder in connection with the transactions contemplated by this Agreement other
than the discount contemplated hereby.
(ff) Neither the Company nor any Subsidiary nor, to the Company's
best knowledge, any of its or their officers, directors or affiliates (as
defined in Rule 501(b) of the 1933 Act Regulations) has taken or will take,
directly or indirectly, any action designed to cause or to result in or that has
constituted, or might reasonably be expected to cause or result in or
constitute, under the 1934 Act or otherwise, the stabilization or manipulation
of the price of any security of the Company to facilitate the sale or resale of
the Shares.
(gg) The Company has not distributed and will not distribute, prior
to the later of (i) the Additional Closing Date, if applicable, and (ii) the
completion of the distribution of the Shares by the Underwriters and dealers,
any offering material (including, without limitation, content on its website, if
any, that may be deemed to be offering material) in connection with the offering
and sale of the Shares other than any preliminary prospectus and the Prospectus.
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(hh) There are no holders of securities of the Company that by
reason of the filing of the Registration Statement or otherwise in connection
with the sale of the Shares contemplated hereby have the right to request or
demand that the Company register under the 1933 Act any of their securities in
connection with the Registration Statement, except for any such rights that have
been effectively waived in writing so as not to be exercisable in connection
with the registration, offer or sale of the Shares.
(ii) There is no tax, duty, levy, impost, deduction, charge or
withholding imposed by any political subdivision or taxing authority by virtue
of the execution, delivery, performance or enforcement, or to ensure the
legality, validity or admissibility into evidence, of this Agreement, and
neither is it necessary that the Shares be submitted to, or filed or recorded
with, any court or other authority to ensure such legality, validity,
enforceability or admissibility into evidence. There are no transfer taxes or
other similar fees or charges under federal law or the laws of any state, or any
political subdivision thereof, required to be paid in connection with the
execution and delivery of this Agreement or the issuance and sale by the Company
of the Shares.
(jj) All necessary actions, authorizations, conditions and things
reasonably required to be taken, given, fulfilled and done by the Company and
the Subsidiaries on or prior to the date of this Agreement, have been, or on the
Closing Date or the Additional Closing Date, if applicable, will have been
taken, given, fulfilled and done in connection with (i) the issue of the
Prospectus, (ii) the execution and delivery of this Agreement, (iii) the
execution, delivery and issuance of the Shares, (iv) the compliance with all
provisions of this Agreement to be performed or complied with by such date and
(v) the right of any holders of securities of the Company to request or demand
that the Company register under the 1933 Act any of their securities in
connection with the Registration Statement.
(kk) There are no issues related to the Company's or any
Subsidiary's preparedness for or reaction to the Year 2000 that (i) are of a
character required to be described or referred to in the Registration Statement,
each preliminary prospectus or the Prospectus that have not been accurately
described therein or (ii) could result in any Material Adverse Effect or might
materially adversely affect their properties, assets or rights. The Company and
the Subsidiaries have inquired of all their material vendors as to their
preparedness for the Year 2000 and the Company has disclosed in the Registration
Statement, each preliminary prospectus and the Prospectus any issues that could
result in a Material Adverse Effect or adversely affect the ability of the
Company to perform its obligations under this Agreement or be otherwise
important in the context of the sale of the Shares.
(ll) The Common Stock is registered pursuant to Section 12(g) of the
1934 Act and is quoted on the Nasdaq National Market, and the Company has taken
no action designed to, or likely to have the effect of, terminating the
registration of the Common Stock under the 1934 Act or delisting the Common
Stock from the Nasdaq National Market, nor has the Company received any
notification that the Commission or the Nasdaq National Market is contemplating
terminating such registration or listing.
(mm) The Company has timely and properly filed with the Commission
all reports and other documents required to have been filed by it with the
Commission pursuant to the 1933 Act or the 1933 Act Regulations or the 1934 Act
or the 1934 Act Regulations. True and
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<PAGE> 14
complete copies of all such reports and other documents have been delivered to
the Underwriters or counsel for the Underwriters.
(nn) Except as described in the Registration Statement, any
preliminary prospectus and the Prospectus, and except in connection with
exercises of outstanding options to acquire not more than [_____] shares of
Common Stock, the Company has not sold or issued any shares of capital stock
within the six month period preceding the date of the Prospectus, all of which
sales and issuances were made in compliance with the 1933 Act and the 1933 Act
Regulations.
(oo) The information contained in the Registration Statement, any
preliminary prospectus or the Prospectus regarding the Company's expectations,
plans and intentions, and any other information that constitutes
"forward-looking" information within the meaning of the 1933 Act and the 1933
Act Regulations or the 1934 Act and the 1934 Act Regulations and were made by
the Company on a reasonable basis and reflect the Company's good faith estimate
of the matters described therein.
(pp) Each officer and director of the Company named under
"Management" in the Prospectus, each of the Selling Stockholders and each of
Alafi Capital Company, the Harden M. McConnell and Sophie G. McConnell Trust and
Anvest, L.P. (such stockholders of the Company, together with such officers and
directors, the LOCKED-UP PARTIES) has agreed to sign an agreement substantially
in the form attached hereto as Exhibit A (the LOCK-UP AGREEMENTS). The Company
also has provided to counsel for the Underwriters true, accurate and complete
copies of all of the Lock-up Agreements presently in effect or effected hereby.
The Company has given "no transfer" instructions to its transfer agent and
registrar with respect to such securities.
Any certificate signed by an officer of the Company and delivered to
the Underwriters or to counsel for the Underwriters shall be deemed to be a
representation and warranty by the Company to each Underwriter as to the matters
set forth therein.
2. Representations and Warranties of the Selling Stockholders.
(a) Each Selling Stockholder, severally and not jointly, represents
and warrants to each Underwriter that:
(i) Such Selling Stockholder is the lawful owner of the Shares to
be sold by such Selling Stockholder pursuant to this Agreement and has,
and on the Closing Date and the Additional Closing Date, if applicable,
will have, good and clear title to such Shares, free of all restrictions
on transfer, liens, encumbrances, security interests, equities and
claims whatsoever. [Such Shares are certificated securities in
registered form and not held by or through any securities intermediary
within the meaning of the New York Uniform Commercial Code (the NYUCC).
Upon delivery to an Underwriter or its agent of such Shares endorsed in
blank or registered in the name of such Underwriter, such Underwriter
will be a "protected purchaser" (as defined in Section 8-303 of the
NYUCC) of such Shares and will acquire its interest in such Shares free
of any adverse claim. Upon payment for such Shares pursuant to this
Agreement on the Closing Date and the Additional Closing Date, if
applicable, and the crediting by The Depository Trust
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<PAGE> 15
Company (DTC) of such Shares to the Underwriters' securities accounts,
the Underwriters will acquire a security entitlement (within the meaning
of Section 8-501 of the NYUCC) in respect of such Shares to be purchased
by them and no action (whether framed in conversion, replevin,
constructive trust, equitable lien or other theory) based on an adverse
claim to such Shares may be asserted against the Underwriters.] [Upon
delivery of and payment for the Shares to be sold by such Selling
Stockholder pursuant to this Agreement on the Closing Date and the
Additional Closing Date, if applicable, good and clear title to such
Shares will pass to the Underwriters, free of all restrictions on
transfer, liens, encumbrances, security interests and claims
whatsoever.]
(ii) Such Selling Stockholder has, and on the Closing Date and
the Additional Closing Date, if applicable, will have, full legal right,
power and authority to enter into this Agreement, the Custody Agreement
signed by such Selling Stockholder and [Transfer Agent], as Custodian,
relating to the deposit of the Shares to be sold by such Selling
Stockholder (the CUSTODY AGREEMENT) and the Power of Attorney of such
Selling Stockholder appointing certain individuals as such Selling
Stockholder's attorneys-in-fact (the ATTORNEYS) to the extent set forth
therein, relating to the transactions contemplated hereby and by the
Registration Statement and the Custody Agreement (the POWER OF ATTORNEY)
and to sell, assign, transfer and deliver such Shares in the manner
provided herein and therein. This Agreement has been duly executed and
delivered by, and is a valid and binding agreement of, such Selling
Stockholder, enforceable against such Selling Stockholder in accordance
with its terms, except as rights to indemnification thereunder may be
limited by applicable law and except as the enforcement thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting creditors' rights generally or by
general equitable principles.
(iii) The Custody Agreement of such Selling Stockholder has been
duly authorized, executed and delivered by such Selling Stockholder and
is a valid and binding agreement of such Selling Stockholder,
enforceable in accordance with its terms.
(iv) The Power of Attorney of such Selling Stockholder has been
duly authorized, executed and delivered by such Selling Stockholder and
is a valid and binding instrument of such Selling Stockholder,
enforceable in accordance with its terms, and, pursuant to such Power of
Attorney, such Selling Stockholder has, among other things, authorized
the Attorneys, or any one of them, to execute and deliver on such
Selling Stockholder's behalf, this Agreement and any other document that
they, or any one of them, may deem necessary or desirable in connection
with the transactions contemplated hereby and thereby and to deliver the
Shares to be sold by such Selling Stockholder pursuant to this
Agreement.
(v) The execution, delivery and performance of this Agreement and
the Custody Agreement and the Power of Attorney of such Selling
Stockholder by or on behalf of such Selling Stockholder, the compliance
by such Selling Stockholder with all the provisions hereof and thereof
and the consummation of the transactions contemplated hereby and thereby
will not (A) require any consent, approval, authorization or other order
of, or qualification with, any court or governmental body or agency
(except such as may be required under the state securities or "blue sky"
laws), (B) conflict with or
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<PAGE> 16
constitute a breach of any of the terms or provisions of, or a default
under, any indenture, loan agreement, mortgage, lease or other material
agreement or instrument to which such Selling Stockholder is a party or
by which such Selling Stockholder or any property of such Selling
Stockholder is bound or (C) violate or conflict with any applicable law
or any rule, regulation, judgment, order or decree of any court or any
governmental body or agency having jurisdiction over such Selling
Stockholder or any property of such Selling Stockholder.
(vi) Neither such Selling Stockholder, nor any person acting on
behalf of such Selling Stockholder, has taken, directly or indirectly,
any action designed to stabilize or manipulate the price of any security
of the Company, or that has constituted or that might in the future
reasonably be expected to cause or result in stabilization or
manipulation of the price of any security of the Company, to facilitate
the sale or resale of the Shares or otherwise.
(vii) Each certificate signed by or on behalf of such Selling
Stockholder and delivered to the Underwriters or counsel for the
Underwriters shall be deemed to be a representation and warranty by such
Selling Stockholder to the Underwriters as to the matters covered
thereby.
(b) Each Selling Stockholder listed as a Group A Selling Stockholder
on Schedule I hereto (each, a GROUP A SELLING STOCKHOLDER), severally and not
jointly, represents and warrants to each Underwriter that, at the time of the
effectiveness of the Registration Statement or the effectiveness of any Rule
462(b) Registration Statement and any post-effective amendment thereto, when the
Prospectus is first filed with the Commission pursuant to Rule 424(b) or Rule
434 of the 1933 Act Regulations, when any supplement to or amendment of the
Prospectus is filed with the Commission and at the Closing Date and the
Additional Closing Date, if applicable, the Registration Statement and the
Prospectus and any amendments thereof and supplements thereto did not and will
not omit to state any material fact required to be stated therein or necessary
in order to make the statements therein not misleading. When any related
preliminary prospectus was first filed with the Commission (whether filed as
part of the Registration Statement for the registration of the Shares or any
amendment thereto or pursuant to Rule 424(a) of the 1933 Act Regulations) and
when any amendment thereof or supplement thereto was first filed with the
Commission, such preliminary prospectus and any amendments thereof and
supplements thereto did not contain an untrue statement of a material fact and
did not omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading. No
representation and warranty is made in this Section 2(b), however, with respect
to the Underwriting Information.
(c) Each Selling Stockholder listed as a Group B Selling Stockholder
on Schedule I hereto (each, a GROUP B SELLING STOCKHOLDER), severally, and not
jointly, represents and warrants to each Underwriter that, at the time of the
effectiveness of the Registration Statement or the effectiveness of any Rule
462(b) Registration Statement and any post-effective amendment thereto, when the
Prospectus is first filed with the Commission pursuant to Rule 424(b) or Rule
434 of the 1933 Act Regulations, when any supplement to or amendment of the
Prospectus is filed with the Commission and at the Closing Date and the
Additional Closing Date, if applicable, the Registration Statement and the
Prospectus and any amendments thereof
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<PAGE> 17
and supplements thereto did not and will not omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading. When any related preliminary prospectus was first filed
with the Commission (whether filed as part of the Registration Statement for the
registration of the Shares or any amendment thereto or pursuant to Rule 424(a)
of the 1933 Act Regulations) and when any amendment thereof or supplement
thereto was first filed with the Commission, such preliminary prospectus and any
amendments thereof and supplements thereto did not contain an untrue statement
of a material fact and did not omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading. No representation and warranty is made in this Section 2(c),
however, with respect to any statements or omissions in the Registration
Statement, the Prospectus, any preliminary prospectus or in any amendments
thereof or supplements thereto, other than statements or omissions made therein
in reliance upon and in conformity with information relating to such Group B
Selling Stockholder furnished to the Company by or on behalf of such Group B
Selling Stockholder.
3. Purchase, Sale and Delivery of the Shares.
(a) The Company agrees to issue and sell 1,500,000 Company Firm
Shares, and each Firm Selling Stockholder agrees to sell the number of Selling
Stockholder Firm Shares set forth opposite the name of such Firm Selling
Stockholder on Schedule I hereto, in each case to the several Underwriters upon
the terms herein set forth. On the basis of the representations, warranties,
covenants and agreements herein contained, but subject to the terms and
conditions herein set forth, the Underwriters, severally and not jointly, agree
to purchase from the Company and the Firm Selling Stockholders, at a purchase
price per share of $[___], the number of Firm Shares set forth opposite the
respective names of the Underwriters in Schedule II hereto plus an additional
number of Firm Shares that such Underwriter may become obligated to purchase
pursuant to the provisions of Section 10 hereof.
(b) Payment of the purchase price for, and delivery of, the Firm
Shares and the Option Shares (if the option provided for in Section 3(c) hereof
has been exercised on or before the third full business day prior to the Closing
Date) shall be made at the offices of Winthrop, Stimson, Putnam & Roberts, One
Battery Park Plaza, New York, New York, or at such other place as shall be
agreed upon by ING Barings and the Company, at 10:00 A.M. on the third full
business day (as permitted under Rule 15c6-1 of the 1934 Act Regulations)
(unless postponed in accordance with the provisions of Section 10 hereof)
following the date of the effectiveness of the Registration Statement (unless
the Company has elected to rely upon Rule 430A of the 1933 Act Regulations, in
which case the third or fourth full business day (as permitted under Rule 15c6-1
of the 1934 Regulations) after the determination of the public offering price of
the Firm Shares), or such other time not later than five business days after
such date as shall be agreed upon by the Underwriters and the Company (such time
and date of payment and delivery being herein called the CLOSING DATE);
provided, however, that if the Company has not made available to the
Underwriters copies of the Prospectus in such quantities and at such places
requested by the Underwriters, no later than noon on the business day following
the execution of this Agreement, ING Barings may, in its sole discretion,
postpone the Closing Date until no later than two full business days following
the delivery of such copies of the Prospectus. Payment for the Firm Shares shall
be made, in the case of the Company Firm Shares, to the Company by wire transfer
in immediately available funds to the order of the
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<PAGE> 18
Company, against delivery to the Underwriters of the Firm Shares to be purchased
by them and, in the case of the Selling Stockholder Firm Shares, to each Firm
Selling Stockholder by wire transfer in immediately available funds to the order
of such Firm Selling Stockholder, against delivery to the Underwriters of the
Selling Stockholder Firm Shares to be purchased by the Firm Selling
Stockholders. Certificates for the Firm Shares shall be registered in such name
or names and in such authorized denominations as the Underwriters may request on
or before noon on the business day prior to the Closing Date. The Company will
permit the Underwriters to examine and package such certificates at or before
noon on the business day prior to the Closing Date. The term BUSINESS DAY as
used herein means any day other than a Saturday, Sunday or a legal holiday or a
day on which banking institutions or trust companies are authorized or obligated
by law to close in New York City.
(c) In addition, for the sole purpose of covering over-allotments in
the sale of Firm Shares by the Underwriters, (i) the Company hereby grants to
the Underwriters the option to purchase, severally and not jointly, up to
221,700 Company Option Shares, at the same purchase price per share to be paid
by the Underwriters for the Firm Shares as set forth in this Section 3 and (ii)
each Option Selling Stockholder hereby agrees to grant to the Underwriters the
option to purchase, severally and not jointly, up to the number of Selling
Stockholder Option Shares set forth opposite the name of such Option Selling
Stockholder on Schedule I hereto. Such options may be exercised from time to
time and at any time, in whole or in part, on or before the 30th day following
the date of the Prospectus, by notice from ING Barings to the Company and such
Selling Stockholders. Any such notice shall set forth the aggregate number of
Company Option Shares and Selling Stockholder Option Shares as to which such
option is being exercised and the date and time, as reasonably determined by ING
Barings, when such Option Shares are to be delivered (such date and time being
herein sometimes referred to as the ADDITIONAL CLOSING DATE); provided, however,
that the Additional Closing Date shall not be earlier than the Closing Date or
earlier than the second full business day after the date on which such option
has been exercised nor later than the fifth full business day after the date on
which such option has been exercised (unless such time and date are postponed in
accordance with the provisions of Section 10 hereof). Payment for the Option
Shares shall be made to an account designated by the Company and the Option
Selling Stockholders by wire transfer in immediately available funds, against
delivery to the Underwriters of the Option Shares to be purchased by them.
Certificates for the Option Shares shall be registered in such name or names and
in such authorized denominations as the Underwriters may request on or before
noon on the business day prior to the Additional Closing Date. The Company will
permit the Underwriters to examine and package such certificates at or before
noon on the business day prior to the Additional Closing Date.
The number of Option Shares to be sold to each Underwriter shall be
the number that bears the same ratio to the aggregate number of Option Shares
being purchased as the number of Firm Shares set forth opposite the name of such
Underwriter on Schedule II hereto (or such number increased as set forth in
Section 10 hereof) bears to the aggregate number of Firm Shares being purchased,
subject, however, to such adjustments to eliminate any fractional shares as ING
Barings in its sole discretion makes. The number of Company Option Shares to be
sold by the Company shall be the number that bears the same ratio to the
aggregate number of Option Shares being sold as the number of Company Option
Shares bears to the aggregate number of Option Shares under this Agreement,
subject, however, to such adjustments to eliminate any
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<PAGE> 19
fractional shares as ING Barings in its sole discretion makes. The number of
Selling Stockholder Option Shares to be sold by each Option Selling Stockholder
shall be the number that bears the same ratio to the aggregate number of Option
Shares being sold as the number of Selling Stockholder Option Shares set forth
opposite the name of such Option Selling Stockholder on Schedule I hereto bears
to the aggregate number of Option Shares under this Agreement, subject, however,
to such adjustments to eliminate any fractional shares as ING Barings in its
sole discretion makes.
(d) Time shall be of the essence and delivery at the time and place
specified in this Agreement is a further condition to the obligations of the
Underwriters.
4. Offering. It is understood that the several Underwriters propose to
offer the Shares for sale to the public upon the terms set forth in the
Prospectus.
5. Covenants of the Company. The Company covenants and agrees with each
Underwriter that:
(a) If the Registration Statement has not been declared effective at
the time of the execution of this Agreement, the Company will use its best
efforts to cause the Registration Statement and any amendments thereto to become
effective as promptly as possible. If Rule 430A of the 1933 Act Regulations is
used or the filing of the Prospectus is otherwise required under Rule 424(b) or
Rule 434 of the 1933 Act Regulations, the Company will file the Prospectus
(properly completed if Rule 430A of the 1933 Act Regulations has been used)
pursuant to Rule 424(b) or Rule 434 of the 1933 Act Regulations within the
prescribed time period and will provide evidence satisfactory to the
Underwriters of such timely filing. If the Company elects to rely on Rule 434 or
the 1933 Act Regulations, the Company will prepare and file a term sheet that
complies with the requirements of Rule 434 of the 1933 Act Regulations. If the
Company elects to rely on Rule 462(b) of the 1933 Act Regulations, the Company
will file a Rule 462(b) Registration Statement with the Commission in compliance
with Rule 462(b) of the 1933 Act Regulations prior to the time confirmations are
sent or given, as specified by Rule 462(b)(2) of the 1933 Act Regulations, and
will pay the applicable fees in accordance with Rule 111 of the 1933 Act
Regulations.
The Company will notify the Underwriters immediately (and, if
requested by the Underwriters, will confirm such notice in writing) (i) when the
Registration Statement and any amendments thereto become effective, (ii) of any
request by the Commission for any amendment of or supplement to the Registration
Statement, any preliminary prospectus or the Prospectus or for additional
information, (iii) of the mailing or the delivery to the Commission for filing
of any amendment of or supplement to the Registration Statement or the
Prospectus, (iv) of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or any post-effective amendment
thereto or of the initiation, or the threatening, of any proceedings therefor,
(v) of the receipt of any comments from the Commission and (vi) of the receipt
by the Company of any notification with respect to the suspension of the
qualification of the Shares for sale in any jurisdiction or the initiation or
threatening of any proceeding for that purpose. If a stop order or suspension of
qualification is proposed at any time, the Company will use its best efforts to
prevent the issuance of any such stop order and, if issued, to obtain the
lifting thereof as soon as possible. The Company will not file any amendment to
the Registration
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<PAGE> 20
Statement or any amendment of or supplement to any preliminary prospectus or the
Prospectus (including the prospectus required to be filed pursuant to Rule
424(b) or Rule 434 of the 1933 Act Regulations) that differs from the prospectus
on file at the time of the effectiveness of the Registration Statement before or
after the effective date of the Registration Statement to which the Underwriters
reasonably object in writing after being timely furnished in advance a copy
thereof.
(b) If, at any time when a prospectus relating to the Shares is
required to be delivered under the 1933 Act by an Underwriter or dealer, any
event has occurred as a result of which the Prospectus as then amended or
supplemented would, in the reasonable judgment of ING Barings, counsel for the
Underwriters or the Company, include an untrue statement of a material fact or
omit to state any material fact required to be stated therein, or necessary to
make the statements therein, not misleading, or if it is necessary at any time
to amend or supplement the Registration Statement, any preliminary prospectus or
the Prospectus to comply with any law, the Company will promptly notify ING
Barings and prepare and file with the Commission and furnish at its own expense
to the Underwriters and dealers, an appropriate amendment or supplement (in form
and substance reasonably satisfactory to ING Barings) that will correct such
untrue statement or omission so that the Registration Statement, any preliminary
prospectus and the Prospectus will comply with law and will use its best efforts
to have any amendment to the Registration Statement declared effective as soon
as possible.
(c) As soon as practicable, but not later than 45 days after the end
of its fiscal quarter in which the first anniversary date of the date of
effectiveness of the Registration Statement occurs, the Company will make
generally available (within the meaning of Section 11(a) of the 1933 Act) to its
securityholders and to the Underwriters an earning statement or statements of
the Company that will satisfy the provisions of Section 11(a) of the 1933 Act
and Rule 158 of the 1933 Act Regulations, covering a period of at least twelve
consecutive months beginning after the effective date of the Registration
Statement; and will, during the period of five years from the date of the
Prospectus, make generally available (within the meaning of Section 11(a) of the
1933 Act) to its securityholders as soon as practicable after the end of each
fiscal year, an annual report (including a balance sheet and statements of
financial condition, operations, cash flows and changes in stockholders' equity
of the Company, certified by the Company's independent public accountants) and,
as soon as practicable after the end of each of the first three quarters of each
fiscal year (beginning with the fiscal quarter ending after the effective date
of the Registration Statement), consolidated summary financial information of
the Company for such quarter in reasonable detail.
(d) The Company will furnish without charge to the Underwriters and
counsel for the Underwriters three complete signed copies of the Registration
Statement (including exhibits thereto), and to each other Underwriter a copy of
the Registration Statement (without exhibits thereto) and, so long as, in the
reasonable opinion of counsel for the Underwriters, delivery of a prospectus by
an Underwriter or dealer may be required by the 1933 Act, as many copies of each
preliminary prospectus and the Prospectus and any amendment or supplement
thereto as the Underwriters may request.
(e) The Company will arrange for the qualification of the Shares for
sale under the laws of such jurisdictions (both national and foreign) as ING
Barings may designate
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<PAGE> 21
and will make such applications, file such documents and furnish such
information as may be required for that purpose and will maintain such
qualifications in effect for so long as required for the distribution of the
Shares; provided, however, that in no event shall the Company be required to
qualify to do business in any such jurisdiction in which it is not already
qualified or to file a general consent to service of process in any jurisdiction
in which it is not now so required, other than in respect of suits arising out
of the offering or sale of the Shares. The Company will, from time to time,
prepare and file such statements, reports and other documents as are or may be
required to continue such qualifications in effect for so long a period as ING
Barings may request for the distribution of the Shares. The Company will
cooperate with ING Barings and counsel for the Underwriters in connection with
the filings required to be made by ING Barings with the NASD and will pay the
fee of the NASD in connection with its review of the offering of the Shares and
will use its best efforts to maintain quotation of its shares on the Nasdaq
National Market System.
(f) During the period of five years from the date of effectiveness
of the Registration Statement, the Company will furnish to the several
Underwriters, without charge, copies of, in such quantities as the Underwriters
may request from time to time, (i) as soon as available, all reports or other
communications (financial or other) furnished generally by the Company to its
securityholders, (ii) as soon as practicable after the end of each fiscal year,
copies of the Annual Report of the Company containing the balance sheet of the
Company as of the close of such fiscal year and statements of income,
stockholders' equity and cash flows for the year then ended and the opinion
thereon of the Company's independent public or certified public accountants and
(iii) as soon as practicable after the filing thereof, copies of each proxy
statement, Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current
Report on Form 8-K or other report filed by the Company with the Commission, the
NASD or any other supervisory, regulatory, administrative or governmental
agency, body or authority whether pursuant to the 1934 Act or otherwise or any
national securities exchange or system on which any class of securities of the
Company is listed or quoted.
(g) For a period of 90 days from the date of the Prospectus (the
LOCK-UP PERIOD), without the prior written consent of ING Barings, neither the
Company nor any Locked-Up Party shall, directly or indirectly: (i) issue, offer
for sale, contract to sell, sell, pledge or otherwise dispose of (or enter into
any transaction or device that is designed to, or could be expected to, result
in the disposition (whether by actual disposition or effective economic
disposition due to cash settlement or otherwise) by any person at any time in
the future of) any shares of Common Stock or securities convertible into,
exercisable or exchangeable for, or represent the right to receive, Common Stock
or sell or grant options, rights or warrants with respect to any shares of
Common Stock or any of the foregoing or announce the offering of or register for
sale any of the foregoing or any outstanding shares of Common Stock; provided,
however, that the Company may grant options and issue and sell Common Stock
pursuant to any directors' and employees' stock plan (including any employees'
stock purchase plan) or stock ownership plan of the Company in effect at the
date of effectiveness of the Registration Statement and that are described in
the Prospectus so long as none of those shares that may be issued to any
Locked-Up Party may be transferred during the Lock-Up Period and the Company
shall enter stop transfer instructions with its transfer agent and registrar
against any such transfer; or (ii) enter into any swap, repurchase agreement,
pledge, transfer or other transaction that transfers to another, in whole or in
part, any of the economic benefits or risks of ownership of
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<PAGE> 22
such shares of Common Stock or other securities, whether any such transaction
described in clause (i) or (ii) above is to be settled by delivery of Common
Stock or other securities, in cash or otherwise. In addition, during such
period, the Company and the Subsidiaries also agree not to file any registration
statement with respect to, and each of the executive officers, directors and
certain securityholders of the Company has agreed not to make any demand for, or
exercise any right with respect to, the registration of any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock without the prior written consent of ING Barings.
(h) During the period when, in the opinion of counsel for the
Underwriters, the delivery of a Prospectus by an Underwriter or dealer may be
required by the 1933 Act, the Company will comply, at its own expense, with all
requirements imposed upon it by the Commission, the 1933 Act and the 1933 Act
Regulations and the 1934 Act and the 1934 Act Regulations, so far as necessary
to permit the continuance of sales of or dealing in the Shares during such
period in accordance with the provisions hereof and the Prospectus. In addition,
during such period the Company shall file, on a timely basis, with the
Commission and the Nasdaq National Market all reports and documents required to
be filed under the 1934 Act and the 1934 Act Regulations.
(i) Each of the Company and the Subsidiaries will conduct its
business in compliance with all applicable laws, rules, regulations, decisions,
directives and orders. The Company will do and perform all things required or
necessary to be done and performed under this Agreement by the Company on or
prior to the Closing Date and to comply or cause to be satisfied, to the extent
such are within its control, the conditions precedent to the several obligations
of the Underwriters specified in Section 9 hereof.
(j) Neither the Company nor any of its affiliates (as defined in
Rule 501(b) of the 1933 Act Regulations), will take, directly or indirectly, any
action designed to cause or result in, or that constitutes or that might
reasonably be expected to cause, result in, or constitute, under the 1934 Act,
or otherwise, stabilization or manipulation of the price of the shares of Common
Stock of the Company to facilitate the offering and distribution of the Shares
or any other action prohibited by Regulation M of the 1934 Act Regulations.
(k) The Company will apply the net proceeds to the Company from the
offering and sale of the Shares to be sold by the Company in the manner set
forth under "Use of Proceeds" in the Prospectus.
(l) The Company will engage and maintain, at its expense, a
registrar and transfer agent for the Shares.
(m) The Company will use its best efforts to maintain listing of its
shares of Common Stock on the Nasdaq National Market.
(n) The Company is familiar with the Investment Company Act and the
rules and regulations of the Commission thereunder, and has in the past
conducted its affairs, and will in the future conduct its affairs, in such a
manner so as to ensure that the Company was not and
22
<PAGE> 23
will not be an "investment company" within the meaning of the Investment Company
Act and the rules and regulations of the Commission thereunder.
(o) The Company shall cause to be prepared and delivered, at its
expense, within one business day from the date hereof, to the Underwriters an
"electronic Prospectus" to be used by the Underwriters in connection with the
offering and sale of the Shares. The term ELECTRONIC PROSPECTUS as used herein
means a form of Prospectus, and any amendment or supplement thereto, that meets
each of the following conditions: (i) it shall be encoded in an electronic
format, satisfactory to the Underwriters, that may be transmitted electronically
by the Underwriters to offerees and purchasers of the Shares for at least the
period during which, in the opinion of counsel for the Underwriters, the
Prospectus is required to be delivered under the 1933 Act or the 1934 Act; (ii)
it shall disclose the same information as the paper version of the Prospectus
and the Prospectus filed pursuant to EDGAR, except to the extent that graphic
and image material cannot be disseminated electronically, in which case such
graphic and image material shall be replaced in the electronic Prospectus with a
fair and accurate narrative description or tabular representation of such
material, as appropriate; and (iii) it shall be in or convertible into a paper
format or an electronic format, satisfactory to the Underwriters, that will
allow investors to store and have continuously ready access to the Prospectus at
any future time, without charge to investors (other than any fee charged for
subscription to the system as a whole and for on-line time).
6. Payment of Expenses.
(a) Whether or not the transactions contemplated by this Agreement
are consummated or this Agreement is terminated, the Company will pay, or
reimburse ING Barings if paid by the Underwriters, all costs, fees and expenses
incident to the performance of the obligations of the Company and the Selling
Stockholders under this Agreement, including, without limitation, costs, fees
and expenses of or relating to (i) the preparation by the Company of, and the
printing and filing of, the Registration Statement and exhibits to it, each
preliminary prospectus, the Prospectus and any amendment or supplement to the
Registration Statement or the Prospectus (including, without limitation, the
fees and expenses of the Company's counsel, accountants and other advisors),
(ii) the preparation and delivery of certificates representing the Shares, (iii)
the printing of this Agreement and Underwriters' Questionnaires, Underwriters'
Powers of Attorney, Blue Sky Memoranda or Surveys, Master Agreements Among
Underwriters and Master Selling Agreements, and all other documents relating to
the public offering of the Shares (including those documents supplied to the
Underwriters in quantities as hereinabove stated), and the furnishing (including
costs of shipping and mailing) of such number of copies of the Registration
Statement, the Prospectus and any preliminary prospectus, and all exhibits,
schedules, consents, certificates of experts, amendments and supplements
thereto, as may be requested for use in connection with the offering and sale of
the Shares by the Underwriters or by dealers to whom Shares may be sold, (iv)
the quotation of the Shares on the Nasdaq National Market, (v) any filings
required to be made with, and the review by, the NASD and the fees,
disbursements and other charges of counsel for the Underwriters in connection
therewith, (vi) the registration or qualification (or obtaining exemptions from
such registration or qualification) of the Shares for offer and sale under the
state securities or "blue sky" laws of such jurisdictions designated pursuant to
Section 5(e) hereof, including the fees, disbursements and other charges of
counsel for the Underwriters in connection therewith, and the preparation and
printing of
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<PAGE> 24
preliminary, supplemental and final Blue Sky Memoranda or Surveys, (vii) the
issuance, transfer and delivery of the Shares to the Underwriters and the
Selling Stockholders, including any issue, transfer, stamp or other taxes
payable thereon, (viii) the transfer agent or registrar for the Shares, (ix) the
costs and expenses of the Underwriters incident to the preparation and
undertaking of "road show" preparations to be made to prospective investors and
(x) all other fees, costs and expenses referred to in Part II of the
Registration Statement. Except as otherwise provided herein, the Underwriters
shall pay their own expenses, including the fees and disbursement of their
counsel.
(b) If this Agreement is terminated by the Company otherwise than as
explicitly permitted by this Agreement, or if any condition to the obligations
of the Underwriters set forth in Section 9 hereof is not satisfied, or if this
Agreement is terminated by ING Barings as permitted hereunder pursuant to
Section 9, 10 or 12 hereof, or if the sale to the Underwriters of the Shares on
the Closing Date is not consummated because of any refusal, inability or failure
on the part of the Company to perform any agreement herein or to comply with any
provision hereof, the Company agrees to reimburse ING Barings and the other
Underwriters (or such Underwriters as have terminated this Agreement with
respect to themselves), severally, upon demand for all out-of-pocket expenses
that shall have been incurred by ING Barings and the other Underwriters in
connection with the proposed purchase and the offering and sale of the Shares,
including, without limitation, fees and disbursements of counsel, printing
expenses, travel expenses, postage, facsimile and telephone charges.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless each
Underwriter, its directors, officers, employees, and agents and each person, if
any, who controls any Underwriter within the meaning of Section 15 of the 1933
Act or Section 20(a) of the 1934 Act (each, a PURCHASER INDEMNIFIED PARTY),
against any and all losses, liabilities, claims, damages, actions and expenses
whatsoever, as incurred (including, without limitation, attorneys' fees and any
and all expenses whatsoever incurred in investigating, preparing, compromising
or defending against any litigation, commenced or threatened, or any claim
whatsoever, and any and all amounts paid in settlement of any claim or
litigation), joint or several, to which they or any of them may become subject
under the 1933 Act, the 1934 Act or other federal or state statutory law or
regulation, or at common law or otherwise, insofar as such losses, liabilities,
claims, damages or expenses (or actions in respect thereof) arise out of or are
based upon (i) any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement for the registration of the Shares,
as originally filed or any amendment thereof, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; or (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto), or the omission or alleged omission to state therein a material fact
necessary in order to make statements therein, not misleading; or (iii) in whole
or in part any inaccuracy in the representations and warranties of the Company
contained herein; or (iv) in whole or in part any failure of the Company to
perform its obligations hereunder or under law; or (v) any act or failure to act
or any alleged act or failure to act by an Underwriter in connection with, or
relating in any manner to, the Shares or the offering contemplated hereby, and
that is included as part of or referred to in any loss, claim, damage, liability
or action arising
24
<PAGE> 25
out of or based upon any matter covered by clause (i), (ii), (iii) or (iv)
above, provided that the Company will not be liable under this clause (v) to the
extent that a court of competent jurisdiction has determined by a final judgment
that such loss, claim, damage, liability or action resulted directly from any
such acts or failures to act undertaken or omitted to be taken by such
Underwriter through its bad faith or willful misconduct; provided, however, that
the Company will not be liable in any such case covered by clause (i), (ii),
(iii), (iv) or (v) above to the extent, but only to the extent, that any such
loss, liability, claim, damage, action or expense arises out of or is based upon
any such untrue statement or alleged untrue statement or omission or alleged
omission made therein in reliance upon and in conformity with written
information relating to an Underwriter furnished to the Company by any
Underwriter expressly for use therein; and provided, further, that with respect
to any preliminary prospectus, the foregoing indemnity in this Section 7(a)
shall not inure to the benefit of any Underwriter from whom the person asserting
any loss, claim, damage, liability or expense purchased Shares, or any of its
directors, officers or employees or any person controlling such Underwriter, if
copies of the Prospectus were timely delivered to such Underwriter and a copy of
the Prospectus (as then amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) was not sent or given by or on
behalf of such Underwriter to such person, if required by law so to have been
delivered, at or prior to the written confirmation of the sale of such Shares to
such person, and if the Prospectus (as so amended or supplemented) would have
cured the defect giving rise to such loss, claim, damage, liability, action or
expense. The Company acknowledges that the Underwriting Information constitutes
the only information furnished in writing relating to an Underwriter by or on
behalf of any Underwriter expressly for use in the Registration Statement
relating to the Shares as originally filed or in any amendment thereof, any
related preliminary prospectus or the Prospectus or in any amendment thereof or
supplement thereto, as the case may be. This indemnity agreement will be in
addition to any liability that the Company may otherwise have, including under
this Agreement.
(b) Each Group A Selling Stockholder, severally and not jointly,
agrees to indemnify and hold harmless each Underwriter, its directors, officers,
employees, and agents and each person, if any, who controls any Underwriter
within the meaning of Section 15 of the 1933 Act or Section 20(a) of the 1934
Act, against any and all losses, liabilities, claims, damages, actions and
expenses whatsoever, as incurred (including, without limitation, attorneys' fees
and any and all expenses whatsoever incurred in investigating, preparing,
compromising or defending against any litigation, commenced or threatened, or
any claim whatsoever, and any and all amounts paid in settlement of any claim or
litigation), joint or several, to which they or any of them may become subject
under the 1933 Act, the 1934 Act or other federal or state statutory law or
regulation, or at common law or otherwise, insofar as such losses, liabilities,
claims, damages or expenses (or actions in respect thereof) arise out of or are
based upon (i) any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement for the registration of the Shares,
as originally filed or any amendment thereof, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; or (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto), or the omission or alleged omission to state therein a material fact
necessary in order to make statements therein, not misleading; or (iii) in whole
or in part any inaccuracy in the representations and warranties of the Company
or such Group A Selling Stockholder contained herein; or (iv) in whole or in
part any failure of the Company or
25
<PAGE> 26
such Group A Selling Stockholder to perform its obligations hereunder or under
law; or (v) any act or failure to act or any alleged act or failure to act by an
Underwriter in connection with, or relating in any manner to, the Shares or the
offering contemplated hereby, and that is included as part of or referred to in
any loss, claim, damage, liability or action arising out of or based upon any
matter covered by clause (i), (ii), (iii) or (iv) above, provided that no Group
A Selling Stockholder will be liable under this clause (v) to the extent that a
court of competent jurisdiction has determined by a final judgment that such
loss, claim, damage, liability or action resulted directly from any such acts or
failures to act undertaken or omitted to be taken by such Underwriter through
its bad faith or willful misconduct; provided, however, that no Group A Selling
Stockholder will be liable in any such case covered by clause (i), (ii), (iii),
(iv) or (v) above to the extent, but only to the extent, that any such loss,
liability, claim, damage, action or expense arises out of or is based upon any
such untrue statement or alleged untrue statement or omission or alleged
omission made therein in reliance upon and in conformity with written
information relating to an Underwriter furnished to the Company by any
Underwriter expressly for use therein; and provided, further, that with respect
to any preliminary prospectus, the foregoing indemnity in this Section 7(b)
shall not inure to the benefit of any Underwriter from whom the person asserting
any loss, claim, damage, liability or expense purchased Shares, or any of its
directors, officers or employees or any person controlling such Underwriter, if
copies of the Prospectus were timely delivered to such Underwriter and a copy of
the Prospectus (as then amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) was not sent or given by or on
behalf of such Underwriter to such person, if required by law so to have been
delivered, at or prior to the written confirmation of the sale of such Shares to
such person, and if the Prospectus (as so amended or supplemented) would have
cured the defect giving rise to such loss, claim, damage, liability, action or
expense. Each Group A Selling Stockholder acknowledges that the Underwriting
Information constitutes the only information furnished in writing relating to an
Underwriter by or on behalf of any Underwriter expressly for use in the
Registration Statement relating to the Shares as originally filed or in any
amendment thereof, any related preliminary prospectus or the Prospectus or in
any amendment thereof or supplement thereto, as the case may be. Notwithstanding
the foregoing, (A) the aggregate liability of any Group A Selling Stockholder
pursuant to this Section 7(b) and for any breach of any representation or
warranty contained in this Agreement by such Group A Selling Stockholder shall
be limited to an amount equal to the proceeds (after deducting underwriting
discounts and commissions) received by such Group A Selling Stockholder from the
Underwriters for the sale of the Shares sold by such Group A Selling Stockholder
hereunder and (B) to the extent the Company is also liable for indemnification
under Section 7(a) hereof, no Group A Selling Stockholder shall be liable for
indemnification under this Section 7(b) until, and then only to the extent that,
the indemnified party has made demand for indemnification pursuant to Sections
7(a) and 7(e) hereof from the Company and the Company has rejected such demand
or has not made payment to satisfy in full such indemnification claim within 30
days of the date of such original demand. This indemnity agreement will be in
addition to any liability that the Company and the Selling Stockholders may
otherwise have, including under this Agreement.
(c) Each Group B Selling Stockholder, severally and not jointly,
agrees to indemnify and hold harmless each Underwriter, its directors, officers,
employees, and agents and each person, if any, who controls any Underwriter
within the meaning of Section 15 of the 1933 Act or Section 20(a) of the 1934
Act, against any and all losses, liabilities, claims, damages, actions and
expenses whatsoever, as incurred (including, without limitation, attorneys' fees
and
26
<PAGE> 27
any and all expenses whatsoever incurred in investigating, preparing,
compromising or defending against any litigation, commenced or threatened, or
any claim whatsoever, and any and all amounts paid in settlement of any claim or
litigation), joint or several, to which they or any of them may become subject
under the 1933 Act, the 1934 Act or other federal or state statutory law or
regulation, or at common law or otherwise, insofar as such losses, liabilities,
claims, damages or expenses (or actions in respect thereof) arise out of or are
based upon (i) any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement for the registration of the Shares,
as originally filed or any amendment thereof, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; or (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto), or the omission or alleged omission to state therein a material fact
necessary in order to make statements therein, not misleading, in the case of
clause (i) above and this clause (ii) to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to the Company or any Underwriter by such Group B Selling Stockholder,
directly or through such Group B Selling Stockholder's representatives,
specifically for use in the preparation thereof; or (iii) in whole or in part
any inaccuracy in the representations and warranties of such Group B Selling
Stockholder contained herein; or (iv) in whole or in part any failure of such
Group B Selling Stockholder to perform its obligations hereunder or under law;
provided, however, that no Group B Selling Stockholder will be liable in any
such case covered by clause (i), (ii), (iii) or (iv) above to the extent but
only to the extent that any such loss, liability, claim, damage, action or
expense arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance upon
and in conformity with written information relating to an Underwriter furnished
to the Company by any Underwriter expressly for use therein; and provided,
further, that with respect to any preliminary prospectus, the foregoing
indemnity in this Section 7(c) shall not inure to the benefit of any Underwriter
from whom the person asserting any loss, claim, damage, liability or expense
purchased Shares, or any of its directors, officers or employees or any person
controlling such Underwriter, if copies of the Prospectus were timely delivered
to such Underwriter and a copy of the Prospectus (as then amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) was not sent or given by or on behalf of such Underwriter to such
person, if required by law so to have been delivered, at or prior to the written
confirmation of the sale of such Shares to such person, and if the Prospectus
(as so amended or supplemented) would have cured the defect giving rise to such
loss, claim, damage, liability, action or expense. Each Group B Selling
Stockholder acknowledges that the Underwriting Information constitutes the only
information furnished in writing relating to an Underwriter by or on behalf of
any Underwriter expressly for use in the Registration Statement relating to the
Shares as originally filed or in any amendment thereof, any related preliminary
prospectus or the Prospectus or in any amendment thereof or supplement thereto,
as the case may be. Notwithstanding the foregoing, (A) the aggregate liability
of any Group B Selling Stockholder pursuant to this Section 7(c) and for any
breach of any representation or warranty contained in this Agreement by such
Group B Selling Stockholder shall be limited to an amount equal to the proceeds
(after deducting underwriting discounts and commissions) received by such Group
B Selling Stockholder from the Underwriters for the sale of the Shares sold by
such Group B Selling Stockholder hereunder and (C) to the extent the
27
<PAGE> 28
Company is also liable for indemnification under Section 7(a) hereof, no Group B
Selling Stockholder shall be liable for indemnification under this Section 7(c)
until, and then only to the extent that, the indemnified party has made demand
for indemnification pursuant to Sections 7(a) and 7(e) hereof from the Company
and the Company has rejected such demand or has not made payment to satisfy in
full such indemnification claim within thirty days of the date of such original
demand. This indemnity agreement will be in addition to any liability that the
Company and the Selling Stockholders may otherwise have, including under this
Agreement.
(d) Each Underwriter, severally and not jointly, agrees to indemnify
and hold harmless the Company, each Selling Stockholder, each of the directors
of the Company, each of the officers of the Company who has signed the
Registration Statement and each other person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act or Section 20(a) of the 1934
Act (each, a COMPANY INDEMNIFIED PARTY), against any losses, liabilities,
claims, damages and expenses whatsoever as incurred (including, without
limitation, attorneys' fees and any and all expenses whatsoever incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever, and any and all amounts paid in settlement
of any claim or litigation), joint or several, to which they or any of them may
become subject under the 1933 Act, the 1934 Act or otherwise, insofar as such
losses, liabilities, claims, damages or expenses (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement for the registration
of the Shares, as originally filed or any amendment thereof, or any related
preliminary prospectus or the Prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that any such loss, liability, claim, damage or
expense arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance upon
and in conformity with the Underwriting Information; provided, however, that in
no case shall any Underwriter be liable or responsible for any amount in excess
of the underwriting discounts and commissions applicable to the Shares purchased
by such Underwriter hereunder. This indemnity will be in addition to any
liability that any Underwriter may otherwise have, including under this
Agreement.
(e) Promptly after receipt by an indemnified party under Section
7(a) or 7(b) hereof of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against an
indemnifying party thereunder, notify each party against whom indemnification is
to be sought in writing of the commencement thereof (but the failure so to
notify an indemnifying party (A) will not relieve it from any liability or
obligation that it may have under this Section 7 or otherwise unless the failure
to notify results in the forfeiture by the indemnifying party of substantial
rights and defenses and (B) will not in any event relieve the indemnifying party
from any obligations other than the indemnification obligation provided in
Section 7(a) or 7(b) hereof). In case any such action is brought against any
indemnified party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein, and to
the extent it may elect by written notice delivered to the indemnified parties
promptly after receiving the aforesaid notice from an indemnified party, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified parties. Notwithstanding the foregoing, the indemnified party or
parties shall have the right to employ its
28
<PAGE> 29
or their own separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such indemnified party or parties unless (1) the employment of such
counsel has been authorized in writing by one of the indemnifying parties in
connection with the defense of such action, (2) the indemnifying parties have
not employed counsel to have charge of the defense of such action within a
reasonable time after notice of commencement of such action or (3) such
indemnified party or parties have reasonably concluded that a conflict may arise
between the positions of the indemnifying party or parties in conducting the
defense of any such action or that there may be one or more legal defenses
available to it or them that are different from or additional to those available
to one or all of the indemnifying parties (in which case the indemnifying party
or parties shall not have the right to direct the defense of such action on
behalf of the indemnified party or parties), in any of which events such fees
and expenses shall be borne by the indemnifying parties, it being understood,
however, that the indemnifying party or parties shall not, in connection with
any one such action or separate but substantially similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (plus separate local counsel, if retained by the indemnified
party or parties) at any time for all such indemnified parties. An indemnifying
party shall not be liable for any settlement of any claim or action effected
without its written consent, provided that such consent was not unreasonably
withheld. Notwithstanding the foregoing, if at any time an indemnified party has
requested an indemnifying party to reimburse the indemnified party for fees and
expenses of counsel as contemplated in this Section 7, the indemnifying party
agrees that it shall be liable for any settlement of any proceeding effected
without its written consent if (x) such settlement is entered into more than 30
days after receipt by such indemnifying party of the aforesaid request and (y)
such indemnifying party has not reimbursed the indemnified party in accordance
with such request prior to the date of such settlement. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement, compromise or consent to the entry of judgment in any pending or
threatened action, suit or proceeding in respect of which any indemnified party
is or could have been a party and indemnity was or could have been sought
hereunder by such indemnified party, unless such settlement, compromise or
consent is for money damages only and includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter of
such action, suit or proceeding and does not include a statement as to or an
admission of fault, culpability or a failure to act by or on behalf of any
indemnified party.
Any losses, claims, damages, liabilities, expenses or actions for
which an indemnified party is entitled to indemnification or contribution under
this Section 7 or under Section 8 hereof shall be paid by the indemnifying party
to the indemnified party as such losses, claims, damages, liabilities or
expenses are incurred, but in all cases, no later than 30 days after an invoice
is provided to the indemnifying party.
The indemnity and contribution agreements contained in this Section
7 and in Section 8 hereof and the representation and warranties of the Company
and the Selling Stockholders set forth in this Agreement shall remain operative
and in full force and effect, regardless of (i) any investigation made by or on
behalf of any Underwriter or any director, officer or employee of or person
controlling any Underwriter, the Company, its directors or officers or any
persons controlling the Company or any Selling Stockholder, (ii) acceptance of
any Shares and payment therefor hereunder and (iii) any termination of this
Agreement. A
29
<PAGE> 30
successor to any Underwriter, or to the Company, shall be entitled to the
benefits of the indemnity, contribution and reimbursement agreements contained
in this Section 7 and Section 8 hereof.
The parties to this Agreement hereby acknowledge that they are
sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof, including, without limitation, the
provisions of this Section 7 and Section 8 hereof and are fully informed
regarding said provisions. They further acknowledge that the provisions of this
Section 7 and Section 8 hereof fairly allocate the risks in light of the ability
of the parties to investigate the Company and its business in order to assure
that adequate disclosure is made in the Registration Statement, each preliminary
prospectus and Prospectus as required by the 1933 Act and the 1934 Act.
8. Contribution. In order to provide for contribution in circumstances
in which the indemnification provided for in Section 7 hereof is for any reason
held to be unavailable from any indemnifying party or is insufficient to hold
harmless a party indemnified thereunder, each indemnifying party shall severally
contribute to the aggregate losses, claims, damages, liabilities and expenses of
the nature contemplated by such indemnification provision (including any
investigative, legal and other expenses incurred in connection with, and any
amount paid in settlement of, any action, suit or proceeding or any claims
asserted, but after deducting in the case of losses, claims, damages,
liabilities and expenses suffered by the Company any contribution received by
the Company from persons, other than the Underwriters, who may also be liable
for contribution, including persons who control the Company within the meaning
of Section 15 of the 1933 Act or Section 20(a) of the 1934 Act, officers of the
Company who signed the Registration Statement and directors of the Company) as
incurred to which the Company, one or more of the Selling Stockholders and one
or more of the Underwriters may be subject, in such proportions as is
appropriate to reflect the relative benefits received by the Company and the
Selling Stockholders (relative as to each other), on the one hand, and the
Underwriters, severally, on the other hand, from the offering of the Shares or,
if such allocation is not permitted by applicable law or indemnification is not
available as a result of the indemnifying party not having received notice as
provided in Section 7 hereof, in such proportion as is appropriate to reflect
not only the relative benefits referred to above but also the relative fault of
the Company and the Selling Stockholders (relative as to each other), on the one
hand, and the Underwriters, severally, on the other hand, in connection with the
statements or omissions that resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company and the Selling Stockholders, on
the one hand, and the Underwriters, severally, on the other hand, shall be
deemed to be in the same proportion as the total proceeds from the offering of
the Shares (after expenses and underwriting discounts and commissions) received
by the Company and the Selling Stockholders bears to the underwriting discounts
and commissions received by the Underwriters, respectively. The relative fault
of the Company and the Selling Shareholders, on the one hand, and of the
Underwriters, severally, on the other hand, shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company, the Selling Stockholders or the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Company,
the Underwriters and the Selling Stockholders agree that it would not
30
<PAGE> 31
be just and equitable if contribution pursuant to this Section 8 were determined
by pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation that does not take account of
the equitable considerations referred to above. Notwithstanding the provisions
of this Section 8, (i) in no case shall any Underwriter be liable or responsible
for any amount in excess of the underwriting discounts and commissions
applicable to the Shares purchased by such Underwriter hereunder and (ii) no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. Further notwithstanding the
provisions of this Section 8 and the preceding sentence, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages that such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. For purposes of this Section 8, each
director, officer, employee and agent of an Underwriter and each person, if any,
who controls an Underwriter within the meaning of Section 15 of the 1933 Act or
Section 20(a) of the 1934 Act shall have the same rights to contribution as such
Underwriter, and each person, if any, who controls the Company or a Selling
Stockholder within the meaning of Section 15 of the 1933 Act or Section 20(a) of
the 1934 Act, each officer of the Company who has signed the Registration
Statement and each director of the Company shall have the same rights to
contribution as the Company, subject in each case to clauses (i) and (ii) of
this Section 8. Any party entitled to contribution will, promptly after receipt
of notice of commencement of any action, suit or proceeding against such party
in respect of which a claim for contribution may be made against another party
or parties, notify each party or parties from whom contribution may be sought,
but the omission to so notify such party or parties shall not relieve the party
or parties from whom contribution may be sought from any obligation it or they
may have under this Section 8 or otherwise. No party shall be liable for
contribution with respect to any action or claim settled without its consent,
provided that such consent was not unreasonably withheld.
The Underwriters' obligations in this Section 8 to contribute are
several in proportion to their respective underwriting obligations and not
joint. The remedies provided for in this Section 8 are not exclusive and shall
not limit any rights or remedies that may otherwise be available to any
indemnified party at law or in equity.
9. Conditions to the Obligations of the Underwriters. The several
obligations of the Underwriters to purchase and pay for the Firm Shares and the
Option Shares, as provided herein, shall be subject to the accuracy of the
representations and warranties on the part of the Company and the Selling
Stockholders contained herein as of the date hereof, the Closing Date and the
Additional Closing Date, if applicable, to the absence from any certificates,
opinions, written statements or letters furnished to the Underwriters or to
counsel for the Underwriters pursuant to this Section 9 of any misstatement or
omission, to the timely performance by the Company and the Selling Stockholders
of its covenants and other obligations hereunder and to each of the following
additional conditions:
(a) The Registration Statement shall have become effective not later
than, if Rule 430A of the 1933 Act Regulations is used, 5:30 P.M., New York
time, on the date of this Agreement, and if Rule 430A of the 1933 Act
Regulations is not being used, 12:00 Noon, New York time, on the date an
amendment to the Registration Statement containing the public
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offering price has been filed with the Commission, or at such later time and
date as has been consented to in writing by ING Barings; if the Company has
elected to use Rule 430A or Rule 434 of the 1933 Act Regulations, the Prospectus
shall have been filed with the Commission in a timely fashion in accordance with
Section 5(a) hereof; and, at or prior to the Closing Date, no stop order
suspending the effectiveness of the Registration Statement or any post-effective
amendment thereof shall have been issued and no proceedings for such purpose
shall have been initiated or threatened by the Commission; no order suspending
the qualification or registration of the Shares under the state securities or
"blue sky" laws of any jurisdiction shall be in effect and no proceeding for
such purpose shall be pending before or threatened or contemplated by the
authorities of any such jurisdiction; any request for additional information on
the part of the staff of the Commission or any such authorities shall have been
complied with to the satisfaction of the staff of the Commission or such
authorities and to the satisfaction of counsel for the Underwriters; after the
date hereof no amendment or supplement to the Registration Statement or the
Prospectus shall have been filed unless a copy thereof was first submitted to
the Underwriters and the Underwriters did not object thereto; and the NASD, upon
review of the terms of the public offering of the Shares, shall not have raised
any objection to the fairness or reasonableness of the underwriting terms and
arrangements.
(b) The Company shall have furnished to the Underwriters the opinion
of Cooley Godward LLP, counsel for the Company, dated the Closing Date and the
Additional Closing Date, if applicable, addressed to the Underwriters and in
form and substance reasonably satisfactory to Winthrop, Stimson, Putnam &
Roberts, counsel for the Underwriters, to the effect that:
(i) Each of the Company and the Subsidiaries has been duly
incorporated and is validly existing and in good standing under the laws
of its jurisdiction of organization, with the corporate power and
authority to own, lease and operate its properties and engage in the
business in which it is engaged or proposes to engage as described in
the Registration Statement and the Prospectus. Each of the Company and
the Subsidiaries is duly registered and qualified to do business as a
foreign corporation in good standing in each jurisdiction where the
character or location of its properties (owned, leased or licensed) or
the nature or conduct of its business requires such registration or
qualification, except where the failure to so register or qualify,
individually or in the aggregate, would not have a Material Adverse
Effect. To such counsel's knowledge, except as set forth in the
Registration Statement and the Prospectus, or the Underwriting
Agreement, the Company does not own or control, directly or indirectly,
any shares of stock or any other equity or long-term debt securities of
any corporation or have an equity interest in any firm, partnership,
association, joint venture or other entity, other than the Subsidiaries
and JCR Pharmaceuticals Co., Ltd.
(ii) All the outstanding share capital of the Subsidiaries has
been duly authorized and validly issued, are fully paid and
nonassessable, are owned by the Company, free and clear of any Liens,
shareholders' agreements, voting trusts or defects of title, and were
not issued in violation of statutory or, to such counsel's knowledge,
other preemptive rights, co-sale rights, resale rights, rights of first
refusal, or similar rights.
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(iii) The Company's authorized equity capitalization is as set
forth in the Registration Statement and the Prospectus. The Common
Stock, the Firm Shares, the Option Shares and all others shares of
capital stock of the Company conform to the description thereof
contained in the Registration Statement. The outstanding shares of
capital stock of the Company have been duly authorized and validly
issued and are fully paid and nonassessable. The Shares to be issued and
sold to the Underwriters pursuant to this Agreement have been duly
authorized and, when issued and delivered to and paid for by the
Underwriters pursuant to this Agreement, will be validly issued and
fully paid and nonassessable and, to such counsel's knowledge, will be
transferred to the Underwriters free and clear of any Liens and will not
have been issued in violation of or subject to any statutory or, to such
counsel's knowledge, other preemptive rights, resale rights, co-sale
rights, rights of first refusal, or similar rights. The certificates for
the Shares are in valid and sufficient form. The holders of outstanding
shares of capital stock of the Company are not entitled to statutory or,
to such counsel's knowledge, other preemptive rights, co-sale rights,
rights of first refusal, resale rights or similar rights in respect of
the Shares. Except as described in the Registration Statement and the
Prospectus, to such counsel's knowledge, there are no authorized or
outstanding rights, warrants or options to acquire, or instruments
convertible into or exercisable or exchangeable for, any share of
capital stock or other equity interest or ownership interest in the
Company or any Subsidiary or any contract, commitment, agreement,
understanding or arrangement of any kind relating to the issuance of any
capital stock or other equity interest or ownership interest in the
Company or any Subsidiary or any such convertible or exercisable or
exchangeable securities or instruments or any such rights, warrants or
options. To such counsel's knowledge, there are no holders of securities
of the Company that have any rights to the registration of securities of
the Company because of the filing of the Registration Statement or
otherwise in connection with the sale of the Shares contemplated by the
Underwriting Agreement, except for any such rights that have been
effectively waived in writing so as not to be exercisable in connection
with the registration, offer or sale of the Shares.
(iv) To the knowledge of such counsel, there are no legal or
governmental actions, suits, proceedings or investigations pending or
threatened against the Company or any Subsidiary, or as to which the
business, assets or property of the Company or any Subsidiary would be
subject or bound, that are of a character required to be disclosed in
the Registration Statement or the Prospectus that have not been
disclosed therein. The statements under "Part II--Legal Proceedings" in
the Company's Annual Report on Form 10-K incorporated by reference in
the Registration Statement, each preliminary prospectus and the
Prospectus, insofar as such statements constitute a summary of matters
of law relating to pending litigation, fairly summarize, in all material
respects, the matters referred to therein.
(v) The Registration Statement has become effective under the
1933 Act; and all filings required by Rule 424(b) of the 1933 Act
Regulations have been made in the manner and within the time period
required by Rule 424(b). To the knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been instituted or
threatened. The Registration Statement and the Prospectus and each
amendment or supplement
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<PAGE> 34
thereto (other than the financial statements and supporting schedules
and financial data, as to which such counsel need not express any
opinion) comply as to form in all material respects with the applicable
requirements of the 1933 Act and the 1933 Act Regulations. Each
Incorporated Document (other than the financial statements and
supporting schedules and financial data, as to which such counsel need
not express any opinion) as originally filed complied as to form when so
filed in all material respects with the applicable requirements of the
1934 Act and the 1934 Act Regulations.
(vi) This Agreement has been duly authorized, executed and
delivered by, and is the valid and binding agreement of, the Company.
The Company has the corporate power and authority to enter into this
Agreement and to issue, sell and deliver to the Underwriters the Shares
to be issued and sold by it thereunder.
(vii) To the knowledge of such counsel, the Company and the
Subsidiaries are not in violation of their respective certificate of
incorporation or by-laws or other organizational or constitutive
documents.
(viii) Neither the issuance, offer, sale or delivery of the
Shares, the execution, delivery and performance by the Company of this
Agreement nor the compliance by the Company with all the provisions
thereof nor the consummation of the transactions contemplated thereby
(other than performance of the Company's indemnification and
contribution obligations thereunder, concerning which no opinion is
expressed), (A) constitutes or will constitute a breach or violation of
or a default (or an event that with notice or the lapse of time or both
would constitute such a breach, violation or default) under, any of the
terms or provisions of the respective certificate of incorporation or
by-laws or other organizational or constitutive documents of the Company
or the Subsidiaries, (B) constitutes or will constitute a breach or
violation of, or a default (or an event that with notice or the lapse of
time or both would constitute such a breach, violation or default), or
the termination of any Contract filed as an exhibit to any of the
Company's filings with the Commission pursuant to the 1934 Act or (C)
violates or will violate any law, statute, rule or regulation applicable
to the Company or any Subsidiary (other than the state securities or
"blue sky" laws, concerning which no opinion need be expressed) or any
judgment, decree or order known to such counsel and applicable to the
Company or any Subsidiary of any court or governmental agency, body or
authority, having jurisdiction over the Company or any Subsidiary or any
of their respective property or assets, the default under or the breach
or violation of which, in the case of clauses (B) and (C) above,
individually or in the aggregate, could have a Material Adverse Effect.
(ix) The Company is not now, and as a result of the offer and
sale of the Shares in the manner contemplated in this Agreement, the
Registration Statement, each preliminary prospectus and the Prospectus
and the application of the net proceeds of such sale as described in the
Registration Statement, each preliminary prospectus and the Prospectus
will not be, an "investment company" or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company"
within the meaning of the Investment Company Act and the rules and
regulations of the Commission
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thereunder, without taking account of any exemption arising out of the
number or type of holders of the Company's securities.
(x) No consent, approval, authorization, filing, qualification,
Permit or order of any court or governmental agency, body or authority,
or, to the knowledge of such counsel, from the Company's securityholders
is required for the Company's execution, delivery and performance of
this Agreement, the issuance, sale or delivery of the Shares hereunder
or the consummation of any other of the transactions contemplated herein
or the fulfillment of the terms thereof, except such as have been
obtained under the 1933 Act and the 1934 Act and such as may be required
under the state securities or "blue sky" laws of any jurisdiction in
connection with the purchase and distribution of the Shares by the
Underwriters and such other approvals (specified in such opinion) as
have been obtained and that are in full force and effect.
(xi) The Common Stock is registered pursuant to Section 12(g) of
the 1934 Act and is quoted on the Nasdaq National Market, and to the
knowledge of such counsel, the Company has not received any notification
that the Commission or the Nasdaq National Market is contemplating the
termination of such registration or quotation.
(xii) To such counsel's knowledge, each Selling Stockholder is
the lawful owner of the Shares to be sold by such Selling Stockholder
pursuant to this Agreement and has, and on the Closing Date and the
Additional Closing Date, if applicable, will have, good and clear title
to such Shares, free of all restrictions on transfer, liens,
encumbrances, security interests, equities and claims whatsoever. [Such
Shares are certificated securities in registered form and not held by or
through any securities intermediary within the meaning of the NYUCC.
Upon delivery to an Underwriter or its agent of such Shares endorsed in
blank or registered in the name of such Underwriter, such Underwriter
will be a "protected purchaser" (as defined in Section 8-303 of the
NYUCC) of such Shares and will acquire its interest in such Shares free
of any adverse claim (assuming that such Underwriter does not have
notice of any adverse claim to such Shares) Upon payment for such Shares
pursuant to this Agreement on the Closing Date and the Additional
Closing Date, if applicable, and the crediting by DTC of such Shares to
the Underwriters' securities accounts, the Underwriters will acquire a
security entitlement (within the meaning of Section 8-501 of the NYUCC)
in respect of such Shares to be purchased by them and no action (whether
framed in conversion, replevin, constructive trust, equitable lien or
other theory) based on an adverse claim to such Shares may be asserted
against the Underwriters (assuming that the Underwriters acquire such
security entitlement without notice of an adverse claim).] [Upon
delivery of and payment for the Shares to be sold by such Selling
Stockholder pursuant to this Agreement on the Closing Date and the
Additional Closing Date, if applicable, good and clear title to such
Shares will pass to the Underwriters, free of all restrictions on
transfer, liens, encumbrances, security interests and claims
whatsoever.]
(xiii) Each Selling Stockholder had, at the time of entering into
this Agreement and on the Closing Date and the Additional Closing Date,
as applicable, has full legal right, power and authority to enter into
this Agreement and the Custody
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Agreement and the Power of Attorney of such Selling Stockholder and to
sell, assign, transfer and deliver the Shares in the manner provided
herein and therein. This Agreement has been duly executed and delivered
by, and is a valid and binding agreement of, each Selling Stockholder,
enforceable against such Selling Stockholder in accordance with its
terms, except as rights to indemnification thereunder may be limited by
applicable law and except as the enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by general
equitable principles.
(xiv) The Custody Agreement of each Selling Stockholder has been
duly authorized, executed and delivered by such Selling Stockholder and
is a valid and binding agreement of such Selling Stockholder,
enforceable in accordance with its terms;
(xv) The Power of Attorney of each Selling Stockholder has been
duly authorized, executed and delivered by such Selling Stockholder and
is a valid and binding instrument of such Selling Stockholder,
enforceable in accordance with its terms, and, pursuant to such Power of
Attorney, such Selling Stockholder has, among other things, authorized
the Attorneys, or any one of them, to execute and deliver on such
Selling Stockholder's behalf this Agreement and any other document they,
or any one of them, may deem necessary or desirable in connection with
the transactions contemplated hereby and thereby and to deliver the
Shares to be sold by such Selling Stockholder pursuant to this
Agreement;
(xvi) To such counsel's knowledge, the execution, delivery and
performance of this Agreement and the Custody Agreement and the Power of
Attorney of each Selling Stockholder by such Selling Stockholder, the
compliance by each Selling Stockholder with all the provisions hereof
and the consummation of the transactions contemplated hereby do not (A)
require any consent, approval, authorization or other order of, or
qualification with, any court or governmental body or agency (except
such as may be required under the state securities or "blue sky" laws),
(B) conflict with or constitute a breach of any of the terms or
provisions of, or a default under, any indenture, loan agreement,
mortgage, lease or other material agreement or instrument to which any
Selling Stockholder is a party or by which any Selling Stockholder or
any property of any Selling Stockholder is bound or (C) violate or
conflict with any applicable law or any rule, regulation, judgment,
order or decree of any court or any governmental body or agency having
jurisdiction over any Selling Stockholder or any property of any Selling
Stockholder.
In addition, such opinion shall also contain a statement that such
counsel has participated in conferences with officers and representatives of the
Company, representatives of the independent public accountants for the Company
and representatives of and counsel for the Underwriters at which the contents of
the Registration Statement and the Prospectus and related matters were discussed
and no facts have come to the attention of such counsel that cause such counsel
to believe that the Registration Statement (other than financial statements and
supporting schedules and other financial data, as to which such counsel need not
express any opinion) at the time it became effective (including all information
deemed to be part of the Registration Statement (other than financial statements
and supporting schedules and other financial data, as
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to which such counsel need not express any opinion) at the time of effectiveness
pursuant to Rule 430A, Rule 462 or Rule 434, if applicable) contained an untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary to make the statements therein not misleading or
that the Prospectus (other than financial statements and supporting schedules
and other financial data, as to which such counsel need not express any opinion)
as of its date and as of the Closing Date or the Additional Closing Date, as
applicable, contained or contains an untrue statement of a material fact or
omitted or omits to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
Notwithstanding the foregoing, to the extent any of the matters set
forth in this Section 9(b) involve the laws of any jurisdiction other than the
laws of the States of California, the Delaware General Corporation Law and the
federal laws of the United States or as to whether or not the laws of any
particular jurisdiction apply, the Company may furnish, in lieu of the opinion
of Cooley Godward LLP, an opinion or opinions of other counsel that are members
of the bar of any such jurisdiction and acceptable to the Underwriters and
counsel for the Underwriters. In rendering any such opinion, any such counsel
may rely, as to matters of fact, to the extent they deem proper, on certificates
of responsible officers of the Company or any Subsidiary and certificates or
other written statements of officers of departments of various jurisdictions
having custody of documents respecting the corporate existence or good standing
of the Company and any Subsidiary and on certificates from the Selling
Stockholders, provided that copies of any such statements or certificates will
be delivered to counsel for the Underwriters upon request. Moreover, except to
the extent set forth in the immediately preceding paragraph, such counsel need
not render any opinion as to compliance with any antifraud provisions of any
law, rule or regulation relating to the Shares or the sale or issuance thereof.
(c) The Company shall have furnished to the Underwriters the opinion
of McDonnell Boehnen Hulbert & Berghoff, [_________], [__________] and
[________], intellectual property counsel for the Company, dated the Closing
Date and the Additional Closing Date, if applicable, each in a form reasonably
acceptable to the Underwriters and their counsel.
(d) All corporate proceedings and other legal matters in connection
with this Agreement, the form of the Registration Statement, each preliminary
prospectus or the Prospectus, and the registration, authorization, issue, sale
and delivery of the Shares as herein contemplated shall be satisfactory in form
and substance to the Underwriters and to counsel for the Underwriters in the
Underwriters' and such counsel's reasonable discretion. The Underwriters shall
have received from Winthrop, Stimson, Putnam & Roberts, counsel for the
Underwriters, a favorable opinion, dated the Closing Date (and the Additional
Closing Date, if applicable), with respect to the issuance and sale of the
Shares, the Registration Statement, the Prospectus and other related matters as
the Underwriters may reasonably require, and the Company, each Subsidiary and
the Selling Stockholders shall have furnished to counsel for the Underwriters
such documents as they reasonably request for the purpose of enabling them to
pass upon the matters referred to in this Section 9(d).
(e) At the Closing Date (and the Additional Closing Date, if
applicable), the Underwriters shall have received a certificate of the Chief
Executive Officer and Chief Financial
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Officer of the Company, dated the Closing Date (and the Additional Closing Date,
if applicable), to the effect that (i) the condition set forth in Section 9(a)
hereof has been satisfied, (ii) as of the date hereof and as of the Closing Date
(and the Additional Closing Date, if applicable), all the representations and
warranties of the Company set forth in this Agreement are accurate with the same
force and effect as if made on each of such dates, (iii) as of the Closing Date
(and the Additional Closing Date, if applicable), the agreements and obligations
of the Company to be performed hereunder on or prior thereto have been duly
performed, (iv) when the Registration Statement became effective and at all
times subsequent thereto up to the delivery of such certificate, the
Registration Statement and the Prospectus, and any amendments or supplements
thereto, contained the information required to be included therein by the 1933
Act and the 1933 Act Regulations and conformed to the requirements of the 1933
Act and the 1933 Act Regulations; the Registration Statement and the Prospectus,
and any amendments or supplements thereto, did not and do not include any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading; and
since the effective date of the Registration Statement, there has occurred no
event required to be set forth in an amended or supplemented Prospectus that has
not been so set forth and (v) subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus, neither
the Company nor any Subsidiary has sustained any material loss or interference
with their respective business or properties from fire, flood, hurricane,
accident or other calamity, whether or not covered by insurance, or from any
labor dispute or any legal or governmental proceeding, and there has not been
any material adverse change, or any development involving a prospective material
adverse change, in the business, management, properties, operations, prospects,
condition (financial or otherwise), or results of operations of the Company or
any Subsidiary or any transaction that is material to the Company or any of its
subsidiaries, or any obligation, direct or contingent, that is material to the
Company or any Subsidiary incurred by the Company or any Subsidiary, or any
change in the capital stock or outstanding indebtedness of the Company or any
Subsidiary, or any dividend or distribution of any kind declared, paid or made
on the capital stock of the Company or any Subsidiary.
(f) All the representations and warranties of each Selling
Stockholder contained in this Agreement shall be true and correct on the Closing
Date and the Additional Closing Date, if applicable, with the same force and
effect as if made on the Closing Date and the Additional Closing Date and the
Underwriters shall have received on the Closing Date and the Additional Closing
Date, if applicable, a certificate dated the Closing Date and the Additional
Closing Date, if applicable, from each Selling Stockholder to such effect and to
the effect that such Selling Stockholder has complied with all of the agreements
and satisfied all of the conditions herein contained and required to be complied
with or satisfied by such Selling Stockholder on or prior to the Closing Date.
(g) At the time this Agreement is executed and at the Closing Date
and the Additional Closing Date, if applicable, Ernst & Young LLP shall have
furnished to the Underwriters a letter or letters, dated respectively as of the
time this Agreement is executed and as of the Closing Date (and the Additional
Closing Date, if applicable), addressed to the Underwriters and based upon the
procedures described in such letter, but carried out to a date not more than
five days prior to the Closing Date or the Additional Closing Date, as
applicable, and otherwise in form and substance satisfactory to the
Underwriters, confirming that they are
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independent public accountants with respect to the Company within the meaning of
the 1933 Act and Regulation S-X, stating that the answer to Item 10 of the
Registration Statement is correct as it relates to them and that:
(i) in their opinion the audited consolidated financial
statements, the related consolidated financial statement schedules and
the audited financial statements of the Company included in the
Registration Statement and the Prospectus and reported on by them comply
in form in all material respects with the applicable accounting
requirements of the 1933 Act and the 1933 Act Regulations and the 1934
Act and the 1934 Act Regulations;
(ii) on the basis of a reading of the latest unaudited financial
statements made available by the Company and the Subsidiaries, carrying
out certain specified procedures (but not an examination in accordance
with generally accepted auditing standards) that would not necessarily
reveal matters of significance with respect to the comments set forth in
such letter; a reading of the minutes of the meetings of the
stockholders and the board of directors of the Company and the
Subsidiaries and inquiries of certain officials of the Company and the
Subsidiaries who have responsibility for financial and accounting
matters of the Company and the Subsidiaries as to transactions and
events subsequent to December 31, 1999, nothing came to their attention
that caused them to believe that:
(A) any unaudited financial statements included in the
Registration Statement and the Prospectus do not comply as to
form in all material respects with the applicable accounting
requirements of the 1933 Act and the 1933 Act Regulations with
respect to registration statements on Form S-3 and the 1934 Act
and the 1934 Act Regulations; or such unaudited financial
statements are not in conformity with generally accepted
accounting principles applied on a basis substantially consistent
with that of the audited financial statements included in the
Registration Statement and the Prospectus;
(B) at March 31, 2000, there was any change in the capital
stock, stockholders' equity, long-term debt or working capital of
the Company or any decreases in current assets or net assets as
compared with the amounts therefor at December 31, 1999 as shown
in the audited financial statements included in the Registration
Statement and the Prospectus, or for the period from December 31,
1999 to March 31, 2000 there were any decreases, compared with
the corresponding period in the preceding year, in net sales or
in total or per share amounts of net income, except in all
instances for changes or decreases set forth in such letter, in
which case the letter shall be accompanied by an explanation by
the Company as to the significance thereof unless such
explanation is not deemed necessary by ING Barings;
(C) the information included in the Registration Statement
and the Prospectus in response to Item 301 (Selected Financial
Data), Item 302 (Supplementary Financial Information) and Item
402 (Executive Compensation)
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of Regulation S-X is not in conformity with the applicable
disclosure requirements of Regulation S-K under the 1933 Act; or
(D) there was any change at a date within five days of the
date of such letter in the capital stock, stockholders' equity,
long-term debt and working capital of the Company or any
decreases in current assets, net assets or working capital as
compared with the amounts therefor at the December 31, 1999 as
shown in the audited financial statements included in the
Registration Statement and the Prospectus or, for the period from
January 1, 2000 to a date within five days of the date of such
letter, there were any decreases as compared with the
corresponding period in the preceding year in net sales or total
or per share amounts of net income, except in all instances for
changes or decreases that the registration statement discloses
have occurred or as set forth in such letter, in which case the
letter shall be accompanied by an explanation by the Company as
to the significance thereof unless such explanation is not deemed
necessary by ING Barings;
(iii) they have performed the procedures specified by the
American Institute of Certified Public Accountants for a review of
interim financial information as described in Statement of Auditing
Standards No. 71, Interim Financial Information, on the unaudited
financial statements included in the Registration Statement and the
Prospectus; and
(iv) they have performed certain other specified procedures as a
result of which they determined that certain information of an
accounting, financial or statistical nature (which is limited to
accounting, financial or statistical information derived from the
general accounting records of the Company and the Subsidiaries) set
forth in the Registration Statement and the Prospectus, which have been
specified by the Underwriters prior to the date of such letter, agrees
with the accounting records of the Company and its subsidiaries,
excluding any questions of legal interpretation.
In addition, ING Barings shall have received from Ernst & Young LLP
a letter addressed to the Company and made available to the Underwriters stating
that their review of the Company's system of internal accounting controls, to
the extent they deemed necessary in establishing the scope of their examination
of the Company's consolidated financial statements as of December 31, 1999, did
not disclose any weaknesses in internal controls that they considered to be
substantial or material weaknesses.
In the event that the letters to be delivered referred to above set
forth note any changes, decreases or increases in the financial information
included in the Registration Statement and the Prospectus, it shall be a further
condition to the obligations of the Underwriters hereunder that ING Barings
shall have determined in its sole judgment, that such changes, decreases or
increases as are set forth in such letters do not reflect a material adverse
change in the stockholders' equity or long-term debt of the Company as compared
with the amounts shown in the latest balance sheet of the Company included in
the Prospectus, or a material adverse change in total net revenues or net income
of the Company, in each case as compared with the corresponding period of the
prior year.
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(h) Subsequent to the date this Agreement is executed or, if
earlier, the dates as of which information is given in the Registration
Statement (exclusive of any amendment thereof) and the Prospectus (exclusive of
any supplement thereto), there shall not have been (i) any change or decrease
specified in the letter or letters referred to in Section 9(f) hereof or (ii)
any change, or any development involving a prospective change, in or affecting
the condition (financial or other), earnings, business or properties of the
Company and the Subsidiaries, whether or not arising in the ordinary course of
business, the effect of which, in any case referred to in clause (i) or (ii)
above, is, in the sole judgment of ING Barings, material and adverse and that
makes it impracticable or inadvisable to proceed with the offering or delivery
of the Shares as contemplated by the Registration Statement (exclusive of any
amendment thereof) and the Prospectus (exclusive of any supplement thereto).
(i) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, (i) there shall not have been a
material adverse change, or any development involving a prospective material
adverse change, in the general affairs, business, prospects, properties,
management, key personnel, condition (financial or other) or results of
operations of the Company and the Subsidiaries, whether or not arising from
transactions in the ordinary course of business, in each case other than as set
forth in the Registration Statement and the Prospectus (or, in the case of a
prospective change, other than as contemplated by the Registration Statement and
the Prospectus), and (ii) the Company shall not have sustained any material loss
or interference with its business or properties from fire, explosion, flood,
hurricane or other casualty or calamity, whether or not covered by insurance, or
from any labor dispute or any court or legislative or other governmental action,
order or decree, that is not set forth in the Registration Statement and the
Prospectus, if in the reasonable judgment of ING Barings any such development
makes it impracticable or inadvisable to consummate the sale and delivery of the
Shares at the public offering price.
(j) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, there shall have been no
litigation or other proceeding instituted against the Company or any of its
officers or directors in their capacities as such, before or by any federal,
state or local court, commission, regulatory body, administrative agency or
other governmental body, domestic or foreign, in which litigation or proceeding
an unfavorable ruling, decision or finding could reasonably be expected to have
a Material Adverse Effect.
(k) At the time of execution of this Agreement, except as may have
otherwise been consented to in writing by ING Barings, the Company shall have
furnished to the Underwriters a letter addressed to the Underwriters from each
Locked-Up Party, in which each such person agrees not to (i) offer for sale,
contract to sell, sell, pledge or otherwise dispose of (or enter into any
transaction or device that is designed to, or could be expected to, result in
the disposition by any person at any time in the future of) any shares of Common
Stock or securities convertible into, exercisable or exchangeable for, or
represent the right to receive, Common Stock or sell or grant options, rights or
warrants with respect to any shares of Common Stock or register for sale any
outstanding shares of Common Stock or (ii) enter into any swap or other
derivatives transaction that transfers to another, in whole or in part, any of
the economic benefits or risks of ownership of such shares of Common Stock or
securities, whether any such transaction described in clause (i) or (ii) above
is to be settled by delivery of Common Stock or
41
<PAGE> 42
other securities, in cash or otherwise for a period of 90 days following the
time of execution of this Agreement without the prior written consent of ING
Barings, other than shares of Common Stock disposed of as gifts or transfers to
immediate family members or trusts or partnerships, the beneficiaries and sole
partners of which are immediate family members, provided that the donee or
transferee agrees in writing to be bound in the same manner.
(l) The Shares shall be qualified for sale in such jurisdictions as
the Underwriters have requested subject to the terms hereof, each such
qualification shall be in effect and not subject to any stop order or other
proceeding on the Closing Date and the Additional Closing Date, if applicable.
(m) The Company shall have timely filed with the Nasdaq National
Market a notification form for the listing of additional shares on the Nasdaq
National Market with respect to the Firm Shares and the Option Shares, if any.
Such Firm Shares and such Option Shares, if any, shall have been approved for
designation upon notice of issuance on the Nasdaq National Market prior to the
Effective Date.
(n) Each of the Company and the Selling Stockholders shall have
furnished to the Underwriters such certificates, in addition to those
specifically mentioned herein, as the Underwriters may have reasonably requested
(i) as to the accuracy and completeness (to the extent required under applicable
law) at the Closing Date and the Additional Closing Date, if applicable, of any
statement in the Registration Statement, any preliminary prospectus or the
Prospectus, (ii) as to the accuracy at the Closing Date and the Additional
Closing Date, if applicable, of the representations, warranties and covenants of
the Company and the Selling Stockholders herein, (iii) as to the performance by
the Company and the Selling Stockholders of their obligations hereunder or (iv)
as to the fulfillment of the conditions concurrent and precedent to the
obligations of the Underwriters hereunder.
(o) Prior to the Closing Date and the Additional Closing Date, if
applicable, the Company and the Selling Stockholders shall have furnished to the
Underwriters such further information and documents as the Underwriters may
reasonably request.
If any of the conditions specified in this Section 9 have not been
fulfilled in all respects when and as required to be satisfied, or if any of the
opinions and certificates mentioned above or elsewhere in this Agreement are not
reasonably satisfactory in form and substance to the Underwriters and counsel
for the Underwriters, this Agreement and all obligations of the Underwriters
hereunder may be terminated at, or at any time on or prior to, the Closing Date
(and Additional Closing Date, if applicable) by ING Barings. Notice of such
termination shall be given to the Company promptly in writing or by telephone
confirmed in writing.
10. Default by an Underwriter.
(a) If any Underwriter defaults in its, or any Underwriters default
in their, obligations to purchase Firm Shares or Option Shares hereunder, and if
the Firm Shares or the Option Shares with respect to which such default relates
do not (after giving effect to arrangements, if any, made by ING Barings
pursuant to Section 10(b) hereof) exceed in the aggregate 10% of the aggregate
number of the Firm Shares or the Option Shares, the Shares to
42
<PAGE> 43
which the default relates shall be purchased by the non-defaulting Underwriters
in proportion to the respective proportions that the numbers of Firm Shares set
forth opposite their respective names in Schedule II hereto bear to the
aggregate number of Firm Shares set forth opposite the names of the
non-defaulting Underwriters.
(b) In the event that such default relates to more than 10% of the
aggregate number of the Firm Shares or the Option Shares, as the case may be,
ING Barings may in its discretion arrange for itself or for another party or
parties (including any non-defaulting Underwriter or Underwriters who so agree)
to purchase such Firm Shares or Option Shares, as the case may be, to which such
default relates on the terms contained herein. In the event that within five
calendar days after such a default ING Barings does not arrange for the purchase
of such Firm Shares or Option Shares, as the case may be, to which such default
relates as provided in this Section 10, this Agreement or, in the case of a
default with respect to the Option Shares, the obligations of the Underwriters
to purchase and of the Company to sell the Option Shares shall thereupon
terminate, without liability on the part of the Company with respect thereto
(except in each case as provided in Sections 6, 7(a) and 8 hereof) or the
Underwriters, but nothing in this Agreement shall relieve a defaulting
Underwriter or Underwriters of its or their liability, if any, to the other
non-defaulting Underwriters and the Company for damages occasioned by its or
their default hereunder. Notwithstanding the foregoing, if any default occurs
with respect to the Additional Closing Date, this Agreement will not terminate
with respect to the Firm Shares purchased prior to such time.
(c) In the event that the Firm Shares or the Option Shares to which
the default relates are to be purchased by the non-defaulting Underwriters, or
are to be purchased by another party or parties as aforesaid, ING Barings or the
Company shall have the right to postpone the Closing Date or the Additional
Closing Date, if applicable, for a period not exceeding five business days, in
order to effect whatever changes may thereby be made necessary in the
Registration Statement or the Prospectus or in any other documents and
arrangements, and the Company agrees to file promptly any amendment or
supplement to the Registration Statement or the Prospectus that, in the opinion
of counsel for the Underwriters, may thereby be made necessary or advisable. The
term UNDERWRITER as used in this Agreement shall include any party substituted
under this Section 10 with like effect as if it had originally been a party to
this Agreement with respect to such Firm Shares and Option Shares.
11. Survival of Representations and Agreements. All representations and
warranties, covenants and agreements of the Underwriters, the Company and the
Selling Stockholders contained in this Agreement, including the agreements
contained in Sections 5 and 6 hereof, the indemnity agreements contained in
Section 7 hereof and the contribution agreements contained in Section 8 hereof,
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any Underwriter or any controlling person
thereof or by or on behalf of the Company, any of its officers and directors or
any controlling person thereof or by or on behalf of any Selling Stockholder or
any controlling person of any Selling Stockholder, and shall survive delivery of
and payment for the Shares to and by the Underwriters. The representations
contained in Sections 1 and 2 hereof and the agreements contained in Sections 6,
7, 8 and 12(d) hereof also shall survive the termination of this Agreement,
including termination pursuant to Section 10 or 12 hereof.
43
<PAGE> 44
12. Effective Date of Agreement; Termination.
(a) This Agreement shall become effective upon the later of (i) when
the Underwriters and the Company shall have received notification of the
effectiveness of the Registration Statement and (ii) the execution of this
Agreement. If either the public offering price or the purchase price per Share
has not been agreed upon prior to 5:00 P.M., New York time, on the fifth full
business day after this Agreement has become effective, this Agreement shall
thereupon terminate without liability to the Company or the Underwriters except
as herein expressly provided. Until this Agreement becomes effective as
aforesaid, it may be terminated by the Company and the Selling Stockholders by
notifying the Underwriters or by the Underwriters notifying the Company.
Notwithstanding the foregoing, the provisions of this Section 12 and of Sections
1, 2, 6, 7 and 8 hereof shall at all times be in full force and effect.
(b) ING Barings shall have the right to terminate this Agreement at
any time on or prior to the Closing Date, or the obligations of the Underwriters
to purchase the Option Shares at any time on or prior to the Additional Closing
Date, if applicable (but in any event prior to delivery of and payment for the
Shares), if (i) any domestic or international event or act or occurrence has
disrupted, or in the opinion of ING Barings will in the immediate future
disrupt, the market for the Company's securities or securities in general; or
(ii) if trading on the New York or American Stock Exchanges or Nasdaq National
Market has been suspended, or limited, minimum or maximum prices for trading
have been fixed, or maximum ranges for prices for securities have been required,
on the New York Stock Exchange or the Nasdaq National Market by the New York
Stock Exchange or the Nasdaq National Market or by order of the Commission or
any other governmental authority having jurisdiction; or (iii) if a banking
moratorium has been declared by a state or federal authority or if any new
restriction materially adversely affecting the distribution of the Firm Shares
or the Option Shares, as the case may be, has become effective; or (iv) if there
has (A) occurred any outbreak or escalation of hostilities or there is an
outbreak or escalation of national or international hostilities or there is a
declaration by the United States of a national emergency or war or (B) has been
any crisis or calamity or any change or development in domestic or international
political, financial or economic conditions, and the effect of any such event in
clause (A) or (B) above in the sole judgment of ING Barings makes it
impracticable or inadvisable to proceed with the offering, sale and delivery of
the Firm Shares or the Option Shares, as the case may be, on the terms
contemplated by the Prospectus (exclusive of any supplement thereto) or to
enforce contracts for the sale of securities; or (v) in the sole judgment of ING
Barings there has occurred any Material Adverse Effect; or (vi) the Company has
sustained a loss by strike, fire, flood, earthquake, accident or other calamity
of such character as in the sole judgment of ING Barings may interfere
materially with the conduct of the business and operations of the Company
regardless of whether or not such loss shall have been insured. Any termination
pursuant to this Section 12 shall be without liability on the part of (A) the
Company to any Underwriter, except that the Company shall be obligated to
reimburse the expenses of ING Barings and the other Underwriters to the extent
required pursuant to Sections 6, 7 and 8 hereof, (B) any Underwriter to the
Company or (C) of any party hereto to any other party except that the provisions
of Sections 6, 7 and 8 hereof shall at all times be effective and shall survive
such termination.
(c) Any notice of termination pursuant to this Section 12 shall be
by telephone or facsimile and confirmed in writing by letter.
44
<PAGE> 45
13. Agreements of the Selling Stockholders. Each Selling Stockholder
agrees with the Underwriters and the Company: (i) to pay or to cause to be paid
all transfer taxes payable in connection with the transfer of the Shares to be
sold by such Selling Stockholder to the Underwriters; and (ii) to do and perform
all things to be done and performed by such Selling Stockholder under this
Agreement prior to the Closing Date and to satisfy all conditions precedent to
the delivery of the Shares to be sold by such Selling Stockholder pursuant to
this Agreement.
14. Notices. Any notice or notification in any form to be given
hereunder shall be in writing and shall be delivered in person or sent by
telephone or facsimile transmission (but in the case of a notification by
telephone, with subsequent confirmation by letter or facsimile transmission).
Any notice or notification to the Underwriters shall be addressed
to:
ING Barings LLC
55 East 52nd Street
New York, New York 10055
Attention: H. Gill Sawhney
With a copy to:
Winthrop, Stimson Putnam & Roberts
Financial Centre
695 East Main Street
Stamford, Connecticut 06904-6760
Attention: Frode Jensen, Esq.
Any notice or notification to the Company shall be addressed to
the Company at:
Molecular Devices Corporation
1311 Orleans Drive
Sunnyvale, California 94089
Attention: Chief Executive Officer
With a copy to:
Cooley Godward LLP
3000 El Camino Real
Five Palo Alto Square
Palo Alto, California 94306-2155
Attention: James C. Kitch, Esq.
Any notice or notification shall (subject to confirmation when required)
take effect at the time of receipt.
15. Parties. This Agreement shall inure solely to the benefit of, and
shall be binding upon, the Underwriters, the Company, the Selling Stockholders
and the controlling persons, directors,
45
<PAGE> 46
officers, employees and agents referred to in Sections 7 and 8 hereof, and their
respective successors and assigns, and no other person shall have or be
construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provision herein contained. The
term SUCCESSORS AND ASSIGNS shall not include a purchaser, in its capacity as
such, of Shares from any of the Underwriters. Notwithstanding the foregoing,
this Agreement and the terms and provisions hereof are, unless otherwise
specified herein, for the sole benefit of only those persons, except that (i)
the representations, warranties, indemnities and agreements of the Company
contained in this Agreement shall also be deemed to be for the benefit of each
Purchaser Indemnified Party and (ii) the indemnity agreement of the Underwriters
contained in Section 7 hereof shall be deemed to be for the benefit of each
Company Indemnified Party.
16. Consent to Jurisdiction. Any legal suit, action or proceeding
arising out of or based upon this Agreement or the transactions contemplated
hereby (RELATED PROCEEDINGS) may be instituted in the federal courts of the
United States of America located in the City and County of New York or the
courts of the State of New York in each case located in the City and County of
New York (collectively, the SPECIFIED COURTS), and each party irrevocably
submits to the exclusive jurisdiction (except for proceedings instituted in
regard to the enforcement of a judgment of any such court (a RELATED JUDGMENT),
as to which such jurisdiction is non-exclusive) of such courts in any such suit,
action or proceeding. Service of any process, summons, notice or document by
mail to such party's address set forth above shall be effective service of
process for any suit, action or other proceeding brought in any such court. The
parties irrevocably and unconditionally waive any objection to the laying of
venue of any suit, action or other proceeding in the Specified Courts and
irrevocably and unconditionally waive and agree not to plead or claim in any
such court that any such suit, action or other proceeding brought in any such
court has been brought in an inconvenient forum. Each party not located in the
United States irrevocably appoints CT Corporation System, which currently
maintains an office at New York, New York, United States of America, as its
agent to receive service of process or other legal summons for purposes of any
such suit, action or proceeding that may be instituted in any state or federal
court in the City and County of New York.
With respect to any Related Proceeding, each party irrevocably waives,
to the fullest extent permitted by applicable law, all immunity (whether on the
basis of sovereignty or otherwise) from jurisdiction, service of process,
attachment (both before and after judgment) and execution to which it might
otherwise be entitled in the Specified Courts or any other court of competent
jurisdiction, and will not raise or claim or cause to be pleaded any such
immunity at or in respect of any such Related Proceeding or Related Judgment,
including, without limitation, any immunity pursuant to the United States
Foreign Sovereign Immunities Act of 1976, as amended.
17. Miscellaneous. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York applicable to
contracts made and to be performed within the State of New York. This Agreement
may be executed in one or more counterparts, and if executed in more than one
counterpart, the executed counterparts shall together constitute a single
instrument. The descriptive headings in this Agreement are for convenience of
reference only and shall not define or limit the provisions hereof.
46
<PAGE> 47
Time shall be of the essence of this Agreement.
This Agreement constitutes the entire agreement of the parties to this
Agreement and supersedes all prior written or oral and all contemporaneous oral
agreements, understandings and negotiations with respect to the subject matter
hereof.
If any provision or portion of any provision of the Agreement, or the
application of any such provision or any portion thereof to any party or
circumstances, is held invalid or unenforceable, the remaining portion of such
provision and the remaining portion of such provision and the remaining
provisions of this Agreement, and the application of such provision or portion
of such provision as is held invalid or unenforceable to any parties or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby and such remaining portion of such provision and
the remaining provisions of this Agreement shall continue to be valid and in
full force and effect.
47
<PAGE> 48
If the foregoing is in accordance with the Underwriters' understanding
of our agreement, kindly sign and return to us one of the counterparts hereof,
whereupon it will become a binding agreement between the Company and the
Underwriters in accordance with its terms.
Very truly yours,
Molecular Devices Corporation
By:
-------------------------------------------
Name:
Title:
Dionex Corporation
-----------------------------------------------
By:
Attorney-in-fact
48
<PAGE> 49
Gillian M.K. Humphries
-----------------------------------------------
By:
Attorney-in-fact
Tony M. Lima
-----------------------------------------------
By:
Attorney-in-fact
Robert J. Murray
-----------------------------------------------
By:
Attorney-in-fact
John S. Senaldi
-----------------------------------------------
By:
Attorney-in-fact
49
<PAGE> 50
The foregoing Underwriting Agreement is hereby confirmed and accepted as
of the date first above written.
ING Barings LLC
By:
-------------------------------------------
Name: Samuel E. Navarro
Title: Head of Healthcare Investment
Banking
For itself and the other several Underwriters
named in Schedule II to the foregoing
Underwriting Agreement.
50
<PAGE> 51
SCHEDULES
I - Selling Stockholders
II - Underwriters
1(n) - Intellectual Property
Exhibits
A - Form of Lock-Up Agreement
51
<PAGE> 52
SCHEDULE I
<TABLE>
<CAPTION>
Maximum
Number of Selling Number of Selling
Type of Selling Stockholder Firm Stockholder Option
Selling Stockholder Stockholder Shares to be Sold Shares to be Sold
------------------- --------------- ----------------- ------------------
<S> <C> <C> <C>
Dionex Corporation Firm/Group B 100,000 --
Gillian M.K. Humphries Option/Group A -- 5,000
Tony M. Lima Option/Group A -- 4,300
Robert J. Murray Option/Group A -- 5,000
John S. Senaldi Option/Group A -- 4,000
------- ------
Total.................................. 100,000 18,300
======= ======
</TABLE>
<PAGE> 53
SCHEDULE II
<TABLE>
<CAPTION>
Number of
Firm Shares to be
Underwriter Purchased
- ----------- -----------------
<S> <C>
ING Barings LLC.................................
Bear, Stearns & Co. Inc.........................
Thomas Weisel Partners LLC......................
Warburg Dillon Read LLC......................... _________
Total............................ 1,600,000
=========
</TABLE>
<PAGE> 54
Exhibit A
Form of Lock-Up Agreement
ING Barings LLC
Bear, Stearns & Co. Inc.
Thomas Weisel Partners LLC
Warburg Dillon Read LLC
c/o ING Barings LLC
55 East 52nd Street
New York, New York 10055
Molecular Devices Corporation
Ladies and Gentlemen:
The undersigned is the record owner of shares of common stock, par value
$.001 per share (COMMON STOCK), or options to purchase shares of the Common
Stock (such shares and options herein referred to as SECURITIES) of Molecular
Devices Corporation, a Delaware corporation (the COMPANY). The undersigned
understands that the Company currently intends to file with the Securities and
Exchange Commission a Registration Statement on Form S-3 for the registration of
certain shares of Common Stock, which will be purchased by you pursuant to an
underwriting agreement between the Company and you (the UNDERWRITING AGREEMENT).
The undersigned agrees that the undersigned will not, without the prior
consent of ING Barings LLC, directly or indirectly, for a period of 90 days from
the date of the Underwriting Agreement: (1) offer for sale, contract to sell,
sell, pledge or otherwise dispose of (or enter into any transaction or device
that is designed to, or could be expected to, result in the disposition by any
person at any time in the future of) any Securities or securities convertible
into, exercisable or exchangeable for, or representing the right to receive,
Securities or sell or grant options, rights or warrants with respect to any
Securities or register for sale any outstanding Securities; or (2) enter into
any swap or other derivatives transaction that transfers to another, in whole or
in part, any of the economic benefits or risks of ownership of any Securities or
such securities, whether any such transaction described in clause (1) or (2)
above is to be settled by delivery of Securities or other securities, in cash or
otherwise.
Notwithstanding the foregoing, (i) gifts or (ii) transfers to (A) the
undersigned's immediate family or (B) a trust or partnership the beneficiaries
and sole partners of which are members of the undersigned's immediate family or
the undersigned, shall not be prohibited by this agreement if the donee or
transferee agrees in writing to be bound by the foregoing in the same manner as
it applies to the undersigned. For this purpose, IMMEDIATE FAMILY shall mean the
spouse, lineal descendants, the father, the mother or any brother or sister of
the undersigned.
<PAGE> 55
This agreement shall not prohibit the exercise of any stock options to
purchase Common Stock, except that Securities obtained upon any such exercise
shall be subject to the limitations on disposition herein.
Very truly yours,
_______________________________________ By: _______________________________
Legal name of Stockholder as it appears Name:
on the Corporate Records Title:
2
<PAGE> 1
Exhibit 5.1
[COOLEY GODWARD LETTERHEAD]
May 3, 2000
Molecular Devices Corporation
1311 Orleans Drive
Sunnyvale, CA 94089
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in connection
with the filing by Molecular Devices Corporation (the "Company") of a
Registration Statement on Form S-3 (the "Registration Statement") with the
Securities and Exchange Commission covering an underwritten public offering of
up to 1,600,000 shares of common stock, including 1,500,000 shares to be sold by
the Company, plus any shares to be sold by the Company upon exercise of the
over-allotment option (the "Company Shares") and 100,000 shares to be sold by
the selling stockholder, plus any shares to be sold by selling stockholders upon
exercise of the over-allotment option (the "Selling Stockholder Shares"). The
Company Shares and the Selling Stockholder Shares are collectively referred to
herein as "Common Stock."
In connection with this opinion, we have examined and relied upon the
Registration Statement and related Prospectus, the Company's Amended and
Restated Certificate of Incorporation and Bylaws, as amended, and such other
documents, records, certificates, memoranda and other instruments as we deem
necessary as a basis for this opinion. We have assumed the genuineness and
authenticity of all documents submitted to us as originals, the conformity to
originals of all documents submitted to us as copies thereof, and the due
execution and delivery of all documents where due execution and delivery are a
prerequisite to the effectiveness thereof. We have also assumed that the shares
of Common Stock will be sold by the Underwriters at a price established by the
Board of Directors of the Company.
On the basis of the foregoing, and in reliance thereon, we are of the opinion
that the Company Shares, when sold and issued in accordance with the
Registration Statement and related Prospectus, will be validly issued, fully
paid and nonassessable.
<PAGE> 2
May 3, 2000
Page Two
We consent to the reference to our firm under the caption "Legal Matters" in the
Prospectus included on the Registration Statement and to the filing of this
opinion as an exhibit to the Registration Statement.
Very truly yours,
COOLEY GODWARD LLP
By: /s/ Suzanne Sawochka Hooper
--------------------------------
Suzanne Sawochka Hooper
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Amendment No. 1 to Registration Statement (Form S-3 No. 333-32734) and related
prospectus of Molecular Devices Corporation for the registration of shares of
its common stock and to the incorporation by reference therein of our report
dated January 18, 2000, with respect to the consolidated financial statements
and schedules of Molecular Devices Corporation included in its Annual Report
(Form 10-K) for the year ended December 31, 1999, filed with the Securities and
Exchange Commission.
/s/ ERNST & YOUNG LLP
Palo Alto, California
May 3, 2000
