<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 12, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CALIPER TECHNOLOGIES CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3826 33-0675808
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) NUMBER)
</TABLE>
------------------------
605 FAIRCHILD DRIVE
MOUNTAIN VIEW, CA 94043-2234
(650) 623-0700
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
DANIEL L. KISNER, M.D.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
605 FAIRCHILD DRIVE
MOUNTAIN VIEW, CA 94043-2234
(650) 623-0700
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
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<S> <C>
ROBERT L. JONES, ESQ. JONATHAN L. KRAVETZ, ESQ.
BRETT D. WHITE, ESQ. MINTZ, LEVIN, COHN, FERRIS,
COOLEY GODWARD LLP GLOVSKY AND POPEO, P.C.
FIVE PALO ALTO SQUARE ONE FINANCIAL CENTER
3000 EL CAMINO REAL BOSTON, MA 02111
PALO ALTO, CA 94306-2155 (617) 542-6000
(650) 843-5000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
- ---------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
- ---------------
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
- ---------------
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM
AGGREGATE AMOUNT OF
TITLE OF SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $0.001 par value.............................. $60,000,000 $16,680
- ----------------------------------------------------------------------------------------------------------
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</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457(o) under the Securities Act.
------------------------
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 THAT 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 OCTOBER 12, 1999
Shares
Caliper TechnologiesCorp.Logo
Common Stock
------------------
Caliper Technologies Corp. is selling shares of common stock. Prior to this
offering, there has been no public market for our common stock. The initial
public offering price of our common stock is expected to be between $ and
$ per share. We have applied to list our common stock on The Nasdaq Stock
Market's National Market under the symbol "CLPR."
The underwriters have an option to purchase a maximum of
additional shares to cover over-allotments of shares.
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" ON PAGE 6.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS CALIPER
------------------- ------------------- -------------------
<S> <C> <C> <C>
Per Share............................................ $ $ $
Total................................................ $ $ $
</TABLE>
Delivery of the shares of common stock will be made on or about
, 1999.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
CREDIT SUISSE FIRST BOSTON
CIBC WORLD MARKETS
HAMBRECHT & QUIST
The date of this prospectus is , 1999.
<PAGE> 3
[DESCRIPTION OF GRAPHICS]
Captions
Headline: CALIPER'S LABCHIP SYSTEMS
PUTTING THE LAB ON A CHIP
Illustration: This illustration, centered on the page, depicts Caliper's
LabChip technology by showing how laboratory experimental
functions, processes and equipment can be miniaturized,
integrated and automated and put on a microfluidic chip. In the
top half of the illustration, a cross-section of a laboratory
environment is pictured in which five researchers at various lab
stations are shown carrying out various steps of experiments
manually, using various pieces of equipment. The various
processes and pieces of equipment they are using are identified
with a number in a color dot that corresponds to the legend and
captions on the page. Below the illustration of the lab is an
illustration of a LabChip. The activities of the researchers that
are carried out on the chip are identified with connecting lines
to the area on the chip where they take place. The dimensions of
the chip are also described.
Caption:
We are a leader in lab-on-a-chip technologies. We believe our
LabChip systems can assemble the power and reduce the size of
entire laboratories full of equipment and people. Our LabChip
systems miniaturize, integrate and automate many laboratory
processes and put them on a chip that can fit in the palm of a
child's hand. Each chip contains a network of microscopic
channels through which fluids and chemicals are moved, using
electricity or pressure, in order to perform experiments. We
believe our LabChip systems have the potential to revolutionize
experimentation in a wide range of industries by enabling
individuals and organizations to perform laboratory experiments
at a speed, cost and scale previously unattainable.
Caption for side of chip: Actual size ~ 1"
Legend:
Red dot#1 Glassware and plasticware such as test tubes, beakers and other
conventional fluid handling tools are replaced by microscopic
channels in the LabChip environment.
Lime dot#2 Automated liquid handling is programmed into the channel design
and executed by computer control. The chip measures and mixes
fluids, replacing pipets and robotic workstations.
Yellow dot#3 Mixing is well-controlled and predictable. Miniaturization
eliminates uncontrolled fluid interactions that can produce
unreliable results.
Purple dot#4 Incubation times are programmed into the microchannel design.
Temperature can be independently controlled at different parts of
the chip.
Orange dot#5 Our chip replaces the manual work of moving samples from one lab
station to another with fluidic paths that transfer the samples
from one experimental step to the next.
Blue dot#6 We have successfully integrated different techniques to separate
molecules from each other directly on the chip.
Green dot#7 When the chip is placed in an instrument, the chip presents the
separated molecules to an optical system. The channel design and
computer control over fluid movement ensures that each reaction
is read at exactly the same time.
<PAGE> 4
Fold-Out P.2
Inside Front Cover
The series of four photographs on the right side of the page shows actual
elements of Caliper's personal laboratory system, based on the HP 2100
Bioanalyzer. The first image shows a LabChip device with wells and channels. The
second image shows one of the first chips that Caliper and its commercialization
partner, Hewlett-Packard, are commercializing. The third image shows the chip
inside the HP 2100 Bioanalyzer with the top of the HP 2100 Bioanalyzer open. The
fourth image shows the entire HP 2100 Bioanalyzer system, including chips,
reagents, the chip instrument and a personal computer, monitor, keyboard and
printer.
Top Caption: We have developed two types of LabChip systems based on
distinct chip formats. Our personal laboratory systems use
chips with reservoirs for the various chemical reagents
which the user introduces manually. Our first personal
laboratory system, the HP 2100 Bioanalyzer system, is being
marketed by Hewlett-Packard, and is designed to enhance the
productivity of individual researchers. Our high throughput
systems use our Sipper chips that have a short glass tube,
or capillary, that draws nanoliter volumes of reagents into
the chip. This system is designed to generate massive
quantities of information on an institutional scale.
Headline Personal Laboratory System
Captions:
Magnified chip: Each LabChip format is created using the same
microfabrication manufacturing methods used to make
microchips in the computer industry. Microfabrication makes
it possible to create intricate designs of extremely small
interconnected channels. Each pattern is designed to
produce the series of fluidic manipulations that will
execute an experiment.
Actual HP 2100 chip: The HP 2100 Bioanalyzer has an initial menu of three
LabChip kits for DNA and RNA sizing and concentration
analysis. We are developing new applications for analysis
of proteins and cells as well as additional applications
for DNA and RNA analysis.
Chip in HP 2100: The chip is placed in the instrument, which uses software
to control the movement of fluids with electricity. The
instrument also has an optical system for detecting the
results.
Full System: The HP 2100 Bioanalyzer is a desktop instrument designed to
perform a wide range of everyday scientific applications
using a menu of different LabChip kits. Each kit contains
chips and reagents designed specifically for the
application. This system brings the benefits of
miniaturized, integrated and automated experimentation to
the researcher's desktop.
<PAGE> 5
Fold-out P.3
This series of photographs shows actual elements of Caliper's high throughput
system. The first image shows two Sipper chips in the palm of a hand. One chip
has a single capillary or sipper, the other has 4 capillaries. The second image
is a close-up photograph of the capillary of the Sipper chip poised over a
96-well plate. It is just about to draw a one nanoliter sample from one of the
wells. The third image shows the assay development station that Caliper provides
to customers. The fourth image shows the current high throughput system that
Caliper's technology access program customers are using for drug screening.
Top Caption: Same as above; text will apply to both pages
Headline: High Throughput System
Captions:
Hand with Sipper chips: Our first high throughput system uses a Sipper chip with
a single capillary. We intend to introduce chips with
four and then eight or more capillaries per chip, and to
offer systems that can perform more than 100,000
experiments per day.
Close-up of sipper: The Sipper chip capillary draws a sample into the chip's
channel network. The samples proceed through the channel
network in a continuous flow to perform a complete
experiment.
Development station: We sell assay development systems to our technology
access program customers so that they can modify
experimental conditions used with our standard assay
chips to be suitable for each new drug target.
Full System: Our first high throughput system is based on the Caliper
110, which is designed to perform a wide range of
experiments using a menu of different chips. We
currently offer two Sipper chips used for performing
drug screening for several classes of enzymes.
<PAGE> 6
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TABLE OF CONTENTS
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PAGE
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<S> <C>
PROSPECTUS SUMMARY.................... 2
RISK FACTORS.......................... 6
SPECIAL NOTE REGARDING FORWARD-
LOOKING STATEMENTS.................. 16
USE OF PROCEEDS....................... 17
DIVIDEND POLICY....................... 17
CAPITALIZATION........................ 18
DILUTION.............................. 19
SELECTED FINANCIAL DATA............... 20
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS....................... 21
BUSINESS.............................. 27
</TABLE>
<TABLE>
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PAGE
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MANAGEMENT............................ 43
CERTAIN TRANSACTIONS.................. 57
PRINCIPAL STOCKHOLDERS................ 59
DESCRIPTION OF CAPITAL STOCK.......... 61
SHARES ELIGIBLE FOR FUTURE SALE....... 64
UNDERWRITING.......................... 66
NOTICE TO CANADIAN RESIDENTS.......... 68
LEGAL MATTERS......................... 69
EXPERTS............................... 69
WHERE YOU CAN FIND MORE INFORMATION... 69
INDEX TO FINANCIAL STATEMENTS......... F-1
</TABLE>
------------------
YOU SHOULD RELY ONLY 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. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.
------------------
Unless otherwise indicated, information in this prospectus assumes the
following:
- the conversion of all of our outstanding shares of preferred stock into
shares of common stock upon the closing of this offering
- a -for- reverse stock split to be effected prior to the
closing of this offering
- the filing of our amended and restated certificate of incorporation
immediately following the closing of this offering
- no exercise of the underwriters' over-allotment option
We have applied for registration of the following trademarks: Caliper, the
Caliper logo, LabChip, the LabChip logo, and LibraryCard. This prospectus also
includes trademarks of companies other than Caliper.
------------------
DEALER PROSPECTUS DELIVERY OBLIGATION
UNTIL , 2000 (25 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING),
ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE DEALER'S OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS AN
UNDERWRITER AND WITH RESPECT TO UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE> 7
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary does not contain all the information you should consider before
buying shares in the offering. You should read the entire prospectus carefully.
CALIPER
We are a leader in lab-on-a-chip technologies. We develop, manufacture and
sell our proprietary LabChip systems to pharmaceutical and other companies. We
believe our LabChip systems can assemble the power and reduce the size of entire
laboratories full of equipment and people. Our LabChip systems miniaturize,
integrate and automate many laboratory processes, and put them on a chip that
can fit in the palm of a child's hand. Each chip contains a network of
microscopic channels through which fluids and chemicals are moved, using
electricity or pressure, in order to perform experiments. The chips are the key
components of our LabChip systems, which also include reagents as well as
instruments and software that together control and read the chips. We believe
our LabChip systems have the potential to revolutionize experimentation in a
wide range of industries by enabling individuals and organizations to perform
laboratory experiments at a speed, cost and scale previously unattainable.
We believe that we are the first company to sell and deliver lab-on-a-chip
products to customers. During 1999, we introduced our first two LabChip systems:
- Personal Laboratory System. In collaboration with Hewlett-Packard, we
launched the HP 2100 Bioanalyzer system, our first personal laboratory
system for use by individual laboratory researchers.
- High Throughput System. We have sold and delivered initial versions of
our high throughput systems for drug screening to Amgen and Hoffmann-La
Roche, and have contracted to deliver a high throughput system to Eli
Lilly.
The pharmaceutical, agriculture, clinical diagnostics and chemical
industries, among others, rely on laboratory experimentation to obtain important
information that can be used to discover and develop new products. We are
initially focusing on the pharmaceutical industry, where industry experts
believe more than $30 billion will be spent on research and development in the
year 2000. Pharmaceutical companies have realized that to stay competitive and
to meet their goals for growth, they will have to increase significantly the
number of new drugs they introduce each year. To achieve this, pharmaceutical
companies have found that they must engage in experimentation on a massive
scale. These companies, however, still rely on manual, multi-step experiments
that use tools such as test tubes, beakers and large pieces of equipment that
utilize decades-old technology. These tools and processes are expensive and
labor-intensive, rendering them inadequate to handle the accelerating needs for
greater research and development productivity.
We believe that our LabChip systems represent a revolutionary advance in
laboratory experimentation. Our LabChip systems have the potential to expand the
capabilities and improve the productivity of individual researchers and, on an
institutional level, enable pharmaceutical companies to perform the massive
scale experimentation they need to advance the drug discovery process. As a
result, our LabChip technology has the potential to reduce the time it takes to
discover and commercialize new drugs.
Our LabChip systems miniaturize, integrate and automate fluidic
experimentation to an unprecedented degree. Because we have great flexibility in
channel design and can exert split-second computer control over fluid flow, we
have the ability to create chips for a multitude of experiments, or
applications. We believe the key benefits of our LabChip systems are:
- High Speed. Our LabChip systems accelerate experiments as much as 10-fold
or more, depending on the application.
- Reduced Cost. Our LabChip systems use only a small fraction of the normal
amount of expensive reagents, as little as 1/100,000th in some cases, and
also reduce labor involved in each experiment.
2
<PAGE> 8
- Expanded Individual Researcher Capability. Because our LabChip systems
can collapse a multi-step, complex experiment into one step, individual
researchers can perform experiments previously outside their areas of
expertise.
- Improved Data Accuracy. Our LabChip systems generally produce more
accurate and consistent data by reducing human error and the variability
caused by the use of multiple instruments.
- Improved Enterprise-Wide Productivity. We believe our LabChip systems can
improve data quality to the point where researchers can rely on data
generated outside their laboratory or organization, thereby improving
enterprise-wide productivity.
Our objective is to be the leading lab-on-a-chip company. Key elements of
our strategy to achieve this objective are as follows:
- Focus on the pharmaceutical industry first
- Rapidly build our installed customer base
- Leverage our installed customer base by expanding the menu of chip
applications
- Generate recurring revenue from high-value chips
- Build a substantial intellectual property estate
- Maintain leadership in chip technology and manufacturing
- Opportunistically penetrate new industries
We are currently commercializing our LabChip systems through a combination
of a major commercial partnership and direct sales. Hewlett-Packard is selling
our first personal laboratory system, the HP 2100 Bioanalyzer system, as part of
a broad strategic alliance we established in 1998. We are selling our high
throughput systems directly to large pharmaceutical companies through our
technology access program. In addition, we are selling screening services
directly through our value added screening collaborations program.
We have made substantial investments in lab-on-a-chip research since our
inception, and today we are supplementing these efforts with applied product
development efforts. As of September 30, 1999, we owned or held licenses to 34
issued U.S. patents and 120 pending U.S. patent applications.
Caliper was incorporated in Delaware on July 26, 1995. Our principal
offices and manufacturing facilities are located at 605 Fairchild Drive,
Mountain View, California 94043-2234, and our telephone number is (650)
623-0700. Our website is located at http://www.calipertech.com. Information
contained on our website is not a part of this prospectus.
3
<PAGE> 9
THE OFFERING
<TABLE>
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Common stock offered.................................... shares
Common stock to be outstanding after the offering....... shares
Use of proceeds......................................... For general corporate purposes, including
capital expenditures, manufacturing
scale-up, product development and technology
research. See "Use of Proceeds."
Proposed Nasdaq National Market symbol.................. CLPR
</TABLE>
The number of shares to be outstanding after this offering is based on the
number of shares outstanding on September 30, 1999 and excludes:
- 2,605,031 shares issuable upon exercise of options outstanding as of
September 30, 1999 at a weighted average exercise price of $0.52 per
share
- 3,133,129 additional shares that we could issue under our stock option
plans, of which options to purchase 903,700 shares of common stock were
granted in October 1999 at an exercise price of $2.00 per share
- 450,000 shares that we could issue under our employee stock purchase plan
- 116,229 shares issuable upon exercise of warrants outstanding as of
September 30, 1999 at a weighted average exercise price of $0.78 per
share
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(JULY 26, 1995) NINE MONTHS ENDED
THROUGH YEAR ENDED DECEMBER 31, SEPTEMBER 30,
DECEMBER 31, --------------------------- -----------------
1995 1996 1997 1998 1998 1999
--------------- ------- ------- ------- ------- -------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenue.............................. $ -- $ 132 $ 2,266 $ 8,155 $ 4,425 $ 8,859
Costs and expenses................... 534 4,952 9,678 12,516 9,228 17,712
Operating loss....................... (534) (4,820) (7,412) (4,361) (4,803) (8,853)
Net loss............................. (536) (4,710) (6,281) (2,975) (3,745) (8,052)
Accretion on redeemable convertible
preferred stock.................... -- (262) (1,470) (2,174) (1,587) (1,822)
Net loss attributable to common
stockholders....................... $ (536) $(4,972) $(7,751) $(5,149) $(5,332) $(9,874)
Net loss per common share, basic and
diluted............................ $(1.10) $ (2.50) $ (2.81) $ (1.53) $ (1.63) $ (2.36)
Shares used in computing net loss per
common share, basic and diluted.... 488 1,987 2,758 3,365 3,275 4,187
Pro forma net loss per share, basic
and diluted (unaudited)............ $ (0.13) $ (0.34)
Shares used in computing pro forma
net loss per share, basic and
diluted (unaudited)................ 22,381 23,738
</TABLE>
4
<PAGE> 10
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
-----------------------
ACTUAL AS ADJUSTED
-------- -----------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and marketable securities............ $ 27,820 $
Working capital............................................. 23,278
Total assets................................................ 34,658
Long-term obligations, less current portion................. 3,483
Redeemable convertible preferred stock...................... 50,538 --
Total stockholders' deficit................................. (25,262)
</TABLE>
The increase in net loss attributable to common stockholders due to
accretion on redeemable convertible preferred stock will not occur after this
offering because all of the outstanding preferred stock will be converted to
common stock at the closing of the offering.
See Note 1 of notes to our financial statements for an explanation of the
determination of the number of shares used in computing per share data.
The as adjusted balance sheet data gives effect to the receipt and
application of the net proceeds from the sale of the shares of
common stock in this offering at an assumed initial public offering price of
$ per share after deducting underwriting discounts and commissions and
estimated offering expenses and the conversion of all outstanding preferred
stock into common stock. See "Use of Proceeds" and "Capitalization."
5
<PAGE> 11
RISK FACTORS
You should carefully consider the following risk factors and all other
information contained in this prospectus before purchasing our common stock.
Investing in our common stock involves a high degree of risk. Risks and
uncertainties, in addition to those we describe below, that are not presently
known to us or that we currently believe are immaterial may also impair our
business operations. If any of the following risks actually occurs, our
business, operating results and financial condition could be seriously harmed.
In addition, the trading price of our common stock could decline due to the
occurrence of any of these risks, and you may lose all or part of your
investment. See "Special Note Regarding Forward-Looking Statements."
RISKS RELATED TO OUR BUSINESS
OUR LABCHIP SYSTEMS MAY NOT ACHIEVE MARKET ACCEPTANCE, WHICH COULD CAUSE OUR
REVENUE TO DECLINE.
The commercial success of our LabChip systems will depend upon market
acceptance of the merits of our LabChip systems by pharmaceutical and
biotechnology companies, academic research centers and other companies that rely
upon laboratory experimentation. Market acceptance will depend on many factors,
including our ability to demonstrate the advantages and potential economic value
of our LabChip systems over alternative well-established technologies and
products. We have not yet demonstrated these benefits and, if we cannot do so
within an acceptable time frame, our LabChip systems may not gain market
acceptance and we may be unable to generate future sales.
Because the products comprising our LabChip systems have been in operation
for a limited period of time, their accuracy, reliability, ease of use and
commercial value have not been fully established. In addition, potential
customers for our high throughput systems may wait for indications from our
three initial technology access program customers that our high throughput
systems work effectively and generate substantial benefits. We cannot assure you
that these customers' efforts to put our LabChip systems into use will continue
or will be expeditious or effective. Accordingly, if the initial HP 2100
Bioanalyzer customers or our initial technology access program customers do not
approve of our initial LabChip systems because these systems fail to generate
the quantities and quality of data they expect, are too difficult or costly to
use, or are otherwise deficient, market acceptance of these LabChip systems
would suffer. If this were to happen, it would reduce or eliminate our ability
to capitalize on first-mover advantages associated with the introduction of a
novel technology to the marketplace. Further, such non-acceptance by the market
of our initial LabChip systems could undermine not only those systems but
subsequent LabChip systems as well.
WE HAVE ONLY RECENTLY BEGUN SHIPPING OUR FIRST LABCHIP SYSTEMS, AND IF WE ARE
UNABLE TO SUCCESSFULLY MARKET THESE INITIAL SYSTEMS WE MAY NOT GENERATE REVENUE.
Our technologies are still in the early stages of development, and LabChip
systems incorporating these technologies have only recently been made
commercially available. The HP 2100 Bioanalyzer, launched in September 1999 by
our collaboration partner Hewlett-Packard, is the only LabChip instrument that
is widely available, and we currently have available for it LabChip kits for
only three applications. Initial versions of our high throughput systems have
been made available only through our technology access program and have been
delivered to only two of our three customers in this program. If we or Hewlett-
Packard are unable to successfully market our LabChip products, or if we are
unable to successfully complete development of and commercialize our high
throughput systems we may not generate revenue and become profitable.
WE HAVE A LARGE ACCUMULATED DEFICIT, WE EXPECT TO INCUR FUTURE LOSSES AND MAY
NOT ACHIEVE PROFITABILITY.
We have experienced significant operating losses each year since our
inception and expect these losses to continue for the foreseeable future. For
example, we experienced net losses of approximately $6.3 million in 1997, $3.0
million in 1998 and $8.1 million in the first nine months of 1999. As of
September 30, 1999, we had an accumulated deficit of approximately $28.3
million, which includes
6
<PAGE> 12
$5.7 million of accretion on redeemable convertible preferred stock. Our losses
have resulted principally from costs incurred in research and development and
from general and administrative costs associated with our operations. These
costs have exceeded our revenue and interest income which, to date, have been
generated principally from collaborative research and development agreements,
technology access fees, cash and investment balances and, to a lesser extent,
product sales and government grants. We expect to incur substantial additional
operating losses for the foreseeable future as a result of increases in expenses
for manufacturing capabilities, research and product development costs and
general and administrative costs. We may never achieve profitability.
OUR OPERATING RESULTS FLUCTUATE SIGNIFICANTLY AND ANY FAILURE TO MEET FINANCIAL
EXPECTATIONS MAY DISAPPOINT SECURITIES ANALYSTS OR INVESTORS AND RESULT IN A
DECLINE IN OUR STOCK PRICE.
Our quarterly operating results have fluctuated significantly in the past
and we expect they will fluctuate in the future as a result of several factors,
some of which are outside of our control. It is possible that in some future
quarter or quarters, our operating results will be below the expectations of
securities analysts or investors. In such event, the market price of our common
stock may fall abruptly and significantly. Because our revenue and operating
results are volatile and difficult to predict, we believe that period-to-period
comparisons of our results of operations are not a good indication of our future
performance.
If revenue declines in a quarter, whether due to a delay in recognizing
expected revenue or otherwise, our operating results will be adversely affected
because many of our expenses are relatively fixed. In particular, research and
development and general and administrative expenses do not change significantly
with variations in revenue in a quarter.
Our revenue may vary from period to period. Factors that could cause our
revenue to fluctuate from period to period include:
- market acceptance of our LabChip systems
- the volume and timing of orders for our LabChip systems
- the success and timing of signing new customers to our technology access
program, which has a lengthy sales cycle and large license and
subscription fees
- variations in revenue recognized under our technology access program
agreements, including initial non-refundable license fees, annual
subscription fees and development and support fees
- our announcement of, or perception by others that we will introduce, new
or upgraded products, which could delay customers from purchasing our
products that are then available
- the introduction of new products by our competitors
- the timing of commercial availability of new applications for our LabChip
systems
Our expenses may vary from period to period. Many of our expenses do not
vary with our revenue. Factors that could cause our expenses to fluctuate from
period to period include:
- the timing and extent of our research and development efforts
- the extent and magnitude of customer development and support services
necessary to successfully continue our technology access program
- the availability and cost of key components for our products
- the timing of personnel hiring
- variations in expenses incurred in connection with the operations of our
business, including legal fees, manufacturing facility scale-up costs and
capital expenditures
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If we incur additional expenses in a quarter in which we do not experience
comparable increased revenue, our operating results would be adversely affected.
WE ARE INVOLVED IN INTELLECTUAL PROPERTY LITIGATION WHICH MAY HURT OUR
COMPETITIVE POSITION, MAY BE COSTLY TO US AND MAY PREVENT US FROM SELLING OUR
PRODUCTS.
We have filed a suit against Aclara Biosciences, Inc. and our former patent
counsel alleging that they misappropriated our trade secrets, and that our
former patent counsel breached their duties to us as our attorneys. We may not
be successful in our lawsuit against them, in which case we will have incurred
substantial litigation costs that we will not recover.
In addition, subsequent to the filing of our suit, Aclara sued us claiming
we are infringing one of its patents with our LabChip systems that use
electrical charges to move fluids and chemicals through the channels of the
chip. We believe that we have meritorious defenses in this action. However,
litigation is unpredictable and we may not prevail with any of these defenses.
If we lose this case, we will need to obtain from Aclara a license to this
technology in order to continue to market our products that rely on
electrokinetic flow, including all products currently marketed by
Hewlett-Packard. This license could be expensive, or could require us to license
to Aclara some of our technology which would result in a partial loss of our
competitive advantage in the marketplace, each of which could seriously harm our
business, financial condition and results of operations. In addition, under our
collaboration agreement with Hewlett-Packard, Hewlett-Packard may elect at any
time to stop developing, manufacturing or distributing any product that it
reasonably determines, on the advice of counsel, poses a substantial risk of
infringing a third party patent. If Aclara is successful in its suit against us
and is unwilling to grant us a license, we will be required to discontinue
selling these products unless we can redesign them so they do not infringe
Aclara's patent, which we may be unable to do. In addition, if we lose the
patent suit, we could be required to pay Aclara damages, including treble
damages, which could seriously harm our business.
During the course of these lawsuits 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 these results to
be not entirely in our favor, it could have a substantial negative effect on the
trading price of our stock.
Whether or not we are successful in these lawsuits, we expect this
litigation to consume substantial amounts of our financial and managerial
resources. Further, because of the substantial amount of discovery required in
connection with this type of litigation, there is a risk that some of our
confidential information could be compromised by disclosure. For more
information on our litigation with Aclara, see "Business -- Legal Proceedings."
OUR PRODUCTS COULD INFRINGE ON THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS,
CAUSING COSTLY LITIGATION AND SERIOUSLY HARMING OUR BUSINESS
Third parties may assert infringement or other intellectual property claims
against us, such as in the Aclara litigation described above and under
"Business-Legal Proceedings." Even if such claims are without merit, defending a
lawsuit takes significant time, may be expensive and may divert management
attention from other business concerns. In addition, 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, we may be prohibited from selling our products absent the grant
of a license, which if available at all, may require us to pay substantial
royalties. Assertions of infringement by third parties could seriously harm our
business.
We are aware of third-party patents that may relate to our technology or
potential products, including microfluidic devices, methods of electrokinetic
material movement, detection methods and systems, cell-based assay methods and
nucleic acid sequencing and amplification methods and reagents. We may in the
future receive notices from third parties claiming infringement of their patent
rights, as well as invitations to take licenses under third-party patents. We
cannot assure you that we will not in the future be subject to patent
infringement proceedings or that we will not infringe these patents or other
patents or proprietary rights of third parties, or that we would be able to
obtain a license to such patents or proprietary rights on commercially
acceptable terms, if at all.
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Others have filed and in the future are likely to file patent applications
that are similar or identical to our patent applications or those of our
licensors. To determine the priority of inventions, we may have to participate
in interference proceedings declared by the United States Patent and Trademark
Office that could result in substantial cost to us. We have been notified that
third parties have attempted to provoke an interference with one issued U.S.
patent that we have exclusively licensed. We cannot assure you that others'
patent applications will not have priority over patent applications we have
filed or we have exclusively licensed. If our patent applications do not have
priority, we would lose these intellectual property rights.
There is a significant number of United States and foreign patents and
patent applications in our area of interest, and we believe that there will be
significant litigation in the industry regarding patent and other intellectual
property rights. Because of the substantial amount of discovery required in
connection with any intellectual property litigation, there is a risk that our
confidential information could be compromised by disclosure.
Any public announcements related to litigation or interference proceedings
initiated or threatened against us could cause our stock price to decline.
IF WE FAIL TO ADEQUATELY PROTECT OR ENFORCE OUR INTELLECTUAL PROPERTY RIGHTS, WE
MAY LOSE THESE RIGHTS AND OUR BUSINESS MAY BE SERIOUSLY HARMED.
We rely on patents to protect a large part of our intellectual property and
our competitive position. We operate in an industry that is new and in which a
substantial number of patent applications have been filed and patents have
issued. Many of these patent applications and issued patents contain claims on
similar technology. Patent law relating to the scope of claims in the technology
fields in which we operate is still evolving and, consequently, the patent
positions in our industry are generally uncertain. Resolution of patent issues
involve complex legal and factual questions, and we believe that there will be
significant litigation in the industry regarding patent and other intellectual
property rights. As a result, the extent of future protection for our
proprietary rights is uncertain, and we cannot guarantee:
- that any of our pending patent applications will result in issued
patents;
- that we will develop additional technologies that are patentable;
- that any patents issued to us will provide a basis for commercially
viable products;
- that any patents issued to us will provide us with any competitive
advantages;
- that any patents issued to us will not be challenged by third parties; or
- that any patents issued to us will not be invalidated.
In order to protect or enforce our patent rights, we may initiate patent
litigation against third parties, such as infringement suits or interference
proceedings. These lawsuits could be expensive, take significant time, and could
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 these third parties to
assert claims against us. 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 not to be entirely in our favor, it could have a
substantial negative effect on the trading price of our stock.
In addition to patents, we rely on a combination of trade secrets,
copyright and trademark laws, nondisclosure agreements and other contractual
provisions and technical measures to protect our intellectual property rights.
Nevertheless, such measures may not be adequate to safeguard the technology
underlying our products. 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
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<PAGE> 15
have adequate remedies for any such breach. We also may not be able to
effectively protect our intellectual property rights in certain countries. For a
variety of reasons, we may decide not to file for patent, copyright or trademark
protection outside of the United States. 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 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. For further information on our intellectual property
and the difficulties in protecting it, see "Business -- Intellectual Property."
We are party to various license agreements with third parties, which give
us rights to use technologies that are valuable in our business. For example, we
have licensed technology related to the control of movement of fluid and other
material through interconnected microchannels from Lockheed Martin Energy
Research Corporation. If we fail to perform under, or materially breach, these
agreements we may lose some or all of these rights. The failure to maintain some
or all of the rights to these technologies could seriously harm our business.
IF WE DO NOT SUCCESSFULLY INTRODUCE NEW PRODUCTS AND EXPAND THE RANGE OF
APPLICATIONS FOR OUR LABCHIP SYSTEMS, WE MAY EXPERIENCE A DECLINE IN REVENUE OR
SLOW REVENUE GROWTH AND OUR BUSINESS MAY BE SERIOUSLY HARMED.
We intend to develop LabChip systems with increasingly high throughput
capabilities and develop a broad range of applications for our LabChip
technology. If we are unable to do so, our LabChip systems may not become widely
used and we may experience a decline in revenue or slow revenue growth and may
not be able to achieve or maintain profitability.
In order for our high throughput systems to achieve the levels of
throughput necessary to meet customers' demands, we need to develop and
manufacture Sipper chips with more than one capillary, which we may not be able
to do. Our current high throughput systems operate with Sipper chips with only
one capillary, a small piece of glass tubing used to draw compounds into the
chip. In order to achieve the levels of throughput that our customers desire, we
will need to develop a LabChip system accommodating multiple capillaries, which
we may not be able to do. If we cannot cost-effectively deliver chips with
multiple capillaries, we may not be able to attract new customers to purchase
our high throughput systems, which would seriously harm our future prospects.
Further, our existing technology access program customers may decide not to
renew their annual access subscriptions, which would seriously harm our current
business.
We must develop new applications for existing LabChip instruments, which we
may not be able to do. The HP 2100 Bioanalyzer uses LabChip kits that we
specifically design for each application. We currently have LabChip kits
commercially available for only three applications relating to DNA and RNA
sizing and quantification. We currently are developing LabChip kits for other
applications. If we are unable to develop LabChip kits for specific applications
required by potential customers, those customers will not purchase the HP 2100
Bioanalyzer.
We must also continue to develop applications for our high throughput
systems. If we are not able to complete the development of these applications,
or if we experience difficulties or delays, we may lose our current technology
access program customers and may not be able to obtain new customers.
WE RELY HEAVILY ON HEWLETT-PACKARD TO MANUFACTURE, MARKET AND DISTRIBUTE THE HP
2100 BIOANALYZER. IF HEWLETT-PACKARD FAILS TO PERFORM UNDER OUR AGREEMENT OR
SUCCESSFULLY COMMERCIALIZE OUR COLLABORATIVE PRODUCTS, OUR BUSINESS WILL BE
SERIOUSLY HARMED.
Hewlett-Packard manufactures, markets and distributes the HP 2100
Bioanalyzer under an agreement we entered into in May 1998. Our primary
relationship is with Hewlett-Packard's Chemical Analysis Group, which we expect
to become a part of Agilent Technologies. We also rely on Hewlett-Packard for
significant financial and technical contributions in the development of products
covered by the agreement.
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Our ability to develop, manufacture and market these products successfully
depends significantly on Hewlett-Packard's performance under this agreement. If
Hewlett-Packard experiences manufacturing or distribution difficulties, does not
actively market the HP 2100 Bioanalyzer, or does not otherwise perform under
this agreement, our business will be seriously harmed. In addition,
Hewlett-Packard may terminate the agreement at their discretion at any time
after May 2001. If Hewlett-Packard terminates this agreement, we would need to
obtain development funding from other sources, and we may be required to find
one or more other collaborators for the development and commercialization of our
products. Our inability to enter into agreements with commercialization partners
or develop our own marketing, sales, and distribution capabilities would impede
the commercialization of our products, increase costs, and would seriously harm
our business.
WE HAVE LIMITED EXPERIENCE IN MANUFACTURING OUR PRODUCTS AND MAY ENCOUNTER
PROBLEMS OR DELAYS WHICH COULD RESULT IN LOST REVENUE.
Although Hewlett-Packard manufactures the HP 2100 Bioanalyzer, we
manufacture the chips used in this instrument and also currently manufacture
instruments and Sipper chips for our high throughput systems. We currently have
limited manufacturing capacity for our LabChip systems and products and
experience variability in manufacturing yields for chips, particularly Sipper
chips. If we fail to deliver chips and high throughput screening products in a
timely manner, our relationship with our customers, and our business, could be
seriously harmed. We currently have one manufacturing facility located in
Mountain View, California. The actual number of chips we are able to sell or use
depends in part upon the manufacturing yields for these chips. We have only
recently begun to perform quality control for significant numbers of Sipper
chips and are continuing to develop our quality control procedures for these
chips. In order to offer Sipper chips with multiple capillaries for ultra high
throughput applications, we will need to achieve consistently high yields in the
process of inserting capillaries. We cannot assure you that manufacturing or
quality control problems will not arise as we attempt to scale-up our production
of chips or that we can scale-up manufacture and quality control in a timely
manner or at commercially reasonable costs. If we are unable to consistently
manufacture Sipper chips or chips for the HP 2100 Bioanalyzer on a timely basis
because of these or other factors, our business will be seriously harmed. 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 Hewlett-Packard or other manufacturers.
IF A NATURAL DISASTER STRIKES OUR MANUFACTURING FACILITY WE WOULD EXPERIENCE
LOST REVENUE AND OUR BUSINESS WOULD BE SERIOUSLY HARMED.
We rely on a single manufacturing facility to produce our chips and high
throughput systems, and have no alternative facilities. The facility and some
pieces of manufacturing equipment are difficult to replace and could require
substantial replacement lead-time. This manufacturing facility is subject to
natural disasters such as earthquakes and floods. Earthquakes are of particular
significance since the manufacturing facility is located in an earthquake-prone
area. In the event our existing manufacturing facility or equipment is affected
by man-made or natural disasters, we would be unable to manufacture products for
sale, meet customer demands or sales projections. If our manufacturing
operations were curtailed or ceased, it would seriously harm our business.
WE EXPECT TO ENCOUNTER INTENSE COMPETITION IN THE MARKETS WE TARGET, WHICH COULD
SUBSTANTIALLY LIMIT THE VOLUME OF PRODUCTS THAT WE SELL.
Microfluidic technologies have undergone, and are expected to continue to
undergo, rapid and significant change. Our future success will depend in large
part on our ability to maintain a competitive position with respect to these and
future technologies, which we may not be able to do. Rapid technological
development may result in our products or technologies becoming obsolete.
Products offered by us could be made obsolete either by less expensive or more
effective products based on similar or other
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technologies. We expect to encounter intense competition from a number of
companies that offer products for laboratory experimentation. We anticipate that
our competitors will come from two sectors:
- companies providing products based on established technologies
- companies developing their own microfluidics or lab-on-a-chip
technologies
To compete effectively with established technologies, we must demonstrate
the advantages and potential economic value of our LabChip systems and products
over alternative established technologies. In order to compete with other
companies developing microfluidic technologies we must capitalize on our first
to market status and develop the enhancements to our technology necessary to
compete successfully with newly emerging technologies. If we are unable to do
these things, our business will be seriously harmed.
In many instances, our competitors have or will have substantially greater
financial, technical, research, and other resources and larger, more established
marketing, sales, distribution, and service organizations than we do. Moreover,
competitors may have greater name recognition than we do, and may offer
discounts as a competitive tactic. We cannot assure you that our competitors
will not succeed in developing or marketing technologies or products that are
more effective or commercially attractive than our products, or that would
render our technologies and products obsolete. Also, we may not have the
financial resources, technical expertise or marketing, distribution or support
capabilities to compete successfully in the future. Our success will depend in
large part on our ability to maintain a competitive position with respect to our
technologies.
In addition, there is the possibility that we may experience competition
from Hewlett-Packard if they, or we, terminate our agreement after May 2003.
Under the terms of our agreement, upon termination we will grant to
Hewlett-Packard a non-exclusive license to our LabChip technologies as then
developed for use in the research products field, subject to limitations. See
"Business -- Competition" for a further description of the competition we face.
BECAUSE A SMALL NUMBER OF CUSTOMERS AND HEWLETT-PACKARD HAVE ACCOUNTED FOR, AND
ARE LIKELY TO CONTINUE TO ACCOUNT FOR, A SUBSTANTIAL PORTION OF OUR REVENUE, OUR
REVENUE COULD DECLINE DUE TO THE LOSS OF ONE OF THESE CUSTOMERS OR THE
TERMINATION OF OUR AGREEMENT WITH HEWLETT-PACKARD.
Historically we have had very few customers and one commercial partner,
Hewlett-Packard, from which we have derived the majority of our revenue and, if
we were to lose any one of these, our revenue would decrease substantially.
Hewlett-Packard and three customers accounted for 91% of total revenue in the
nine months ended September 30, 1999, and two customers and Hewlett-Packard
accounted for 97% of total revenue in fiscal year 1998. We and Hewlett-Packard
introduced the HP 2100 Bioanalyzer system in September 1999 and have not yet
derived significant revenue from the sale of this product on a commercial scale.
Although we anticipate that the introduction of the HP 2100 Bioanalyzer system
will expand our revenue base, we expect that our reliance on our large customers
and on Hewlett-Packard for the majority of our revenue will continue for the
foreseeable future.
WE DEPEND UPON SEVERAL SUPPLIERS AS THE SOLE SOURCE OF MATERIALS FOR THE
MANUFACTURE OF OUR LABCHIP PRODUCTS AND, IF THEY ARE NOT ABLE OR ARE UNWILLING
TO DELIVER SUCH MATERIALS, WE MAY INCUR SUBSTANTIAL DELAYS IN DELIVERING OUR
PRODUCTS. THESE DELAYS COULD RESULT IN LOST REVENUE.
We rely on several companies as the sole source of the materials we use in
the manufacture of our LabChip products. We cannot guarantee that supply
arrangements and contracts with these suppliers will not be seriously
interrupted. Any extended interruption in the supply of these materials would
affect our ability to meet scheduled deliveries of our LabChip products to
customers, which could damage customer relationships and we could lose customers
and orders. We believe that there are alternative suppliers for these materials,
however, establishing a second source may take time and may result in the delay
in the delivery of customer orders.
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FAILURE TO RAISE ADDITIONAL CAPITAL OR GENERATE THE SIGNIFICANT CAPITAL
NECESSARY TO EXPAND OUR OPERATIONS AND INVEST IN NEW PRODUCTS COULD REDUCE OUR
ABILITY TO COMPETE AND RESULT IN LOWER REVENUE.
We anticipate that our existing capital resources and the net proceeds from
this offering will enable us to maintain currently planned operations through at
least the year 2000. However, we premise this expectation on our current
operating plan, which may change as a result of many factors. Consequently, we
may need additional funding sooner than anticipated. Our inability to raise
capital would seriously harm our business and product development efforts. In
addition, we may choose to raise additional capital due to market conditions or
strategic considerations even if we believe we have sufficient funds for our
current or future operating plans. To the extent that additional capital is
raised through the sale of equity or convertible debt securities, the issuance
of such securities could result in dilution to our stockholders.
We currently have no credit facility or other committed sources of capital
other than an equipment lease line with $1.7 million unused and available. To
the extent operating and capital resources are insufficient to meet future
requirements, we will have to raise additional funds to continue the development
and commercialization of our technologies. Such funds may not be available on
favorable terms, or at all. If adequate funds are not available on attractive
terms, we may be required to curtail operations significantly or to obtain funds
by entering into financing, supply or collaboration agreements on unattractive
terms.
WE HAVE LIMITED SALES, MARKETING AND TECHNICAL SUPPORT EXPERIENCE, WHICH MAY
HURT OUR PRODUCT SELLING EFFORTS AND RESULT IN LOWER REVENUE.
We are initially marketing our products and services to pharmaceutical and
biotechnology companies. We currently have a limited direct sales, marketing and
technical support organization and rely on Hewlett-Packard for the marketing and
sale of the HP 2100 Bioanalyzer system. Our existing organization and
relationships may not be sufficient, and we may be required to expand our
organization and enter into additional collaboration or distribution
arrangements, to commercialize our products both inside and outside the United
States. We cannot assure you that:
- we will be able to establish a sufficiently sized sales, marketing or
technical support organization;
- Hewlett-Packard will be successful in marketing and distributing the HP
2100 Bioanalyzer system; or
- we will be able to establish additional collaborative or distribution
arrangements to sell, market and service our products.
If we fail to develop our sales, marketing and technical support
capabilities our business could be seriously harmed and we could experience
lower revenue.
WE DEPEND ON CERTAIN KEY PERSONNEL, THE LOSS OF WHOM WOULD IMPAIR OUR ABILITY TO
COMPETE.
We are highly dependent on Daniel L. Kisner, M.D., our President and Chief
Executive Officer, and our three founding executive officers, Calvin Y. H. Chow,
Michael R. Knapp, Ph.D. and J. Wallace Parce, Ph.D., as well as the other
principal members of our management and scientific staff. The loss of services
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
business is located in Silicon Valley, California, where demand for such
personnel is extremely high and is likely to continue to be high for the
foreseeable future. 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 business, financial condition and
results of operations could be seriously harmed. The inability to retain and
hire qualified personnel could also hinder the planned expansion of our
business.
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WE MAY NEED TO OBTAIN GOVERNMENT REGULATORY APPROVAL OR CERTIFICATION FOR OUR
PRODUCTS IF WE ENTER THE DIAGNOSTICS MARKET. IF WE FAIL TO OBTAIN APPROVAL OR
CERTIFICATION WE COULD NOT SELL PRODUCTS IN THIS MARKET.
If we develop and sell LabChip systems for clinical diagnostic
applications, these products would be subject to government regulation. The
process of obtaining and maintaining required regulatory clearances and
approvals and otherwise complying with regulatory guidelines and laws in the
United States and other countries is lengthy, expensive, and uncertain.
Applicable laws would also require that we or our collaboration partners comply
with FDA regulations with respect to manufacturing facilities. Failure to comply
with FDA regulations or other applicable legal requirements could lead to
suspension of manufacturing, among other sanctions. We cannot assure you that
our operations will comply with FDA regulations, or other applicable legal
requirements or that we will not be required to incur substantial costs to
comply with such requirements. If we fail to meet these regulations our business
could be seriously harmed.
OUR OR THIRD PARTIES' COMPUTER SYSTEMS MAY FAIL IN THE YEAR 2000, WHICH WOULD
DELAY OUR PRODUCT DEVELOPMENT AND THE MANUFACTURING OF OUR PRODUCTS.
Failure of our computer systems could seriously harm our product
development processes and/or our ability to cost-effectively manage our business
during the time required to fix such problems. In addition, computer failures
could cause Hewlett-Packard to incur delays in manufacturing the HP 2100
Bioanalyzer, or our customers to postpone or cancel orders for our products. We
have assessed the readiness of our computer systems to handle dates beyond the
year 1999. We have not assessed the readiness of our suppliers or our customers.
Unforeseen problems may arise in our own computers, our products, and embedded
systems, and from customers, suppliers and other organizations with which we
conduct transactions worldwide. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Year 2000 Readiness" for more
information on the status of our preparation relating to this issue.
RISKS RELATED TO THIS OFFERING
WE WILL BE AT RISK OF SECURITIES CLASS ACTION LITIGATION DUE TO OUR EXPECTED
STOCK PRICE VOLATILITY.
In the past, securities class action litigation has often been brought
against a company following periods of volatility in the market price of its
securities. Due to the potential volatility of our stock price, which high
technology companies have experienced recently and which we expect to be the
case with our common stock, we may be the target of such litigation in the
future. Securities litigation could result in substantial costs and divert
management's attention and resources, which could seriously harm our business.
NEW INVESTORS IN OUR COMMON STOCK WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL
DILUTION.
The initial public offering price will be 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 $ in net
tangible book value per share of common stock, based on an assumed public
offering price of $ per share. In addition, the number of shares available
for issuance under our stock option and employee stock purchase plans will
automatically increase without stockholder approval. Investors will incur
additional dilution upon the exercise of outstanding stock options and warrants.
See "Dilution" for a more detailed discussion of the dilution new investors will
incur in this offering.
CONCENTRATION OF OWNERSHIP AMONG OUR EXISTING EXECUTIVE OFFICERS, DIRECTORS AND
PRINCIPAL STOCKHOLDERS MAY PREVENT NEW INVESTORS FROM INFLUENCING SIGNIFICANT
CORPORATE DECISIONS.
Following this offering our directors, entities affiliated with our
directors, and our executive officers will beneficially own, in the aggregate
approximately % of our outstanding common stock. These stockholders as a group
will be able to substantially influence the management and affairs of Caliper
and,
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if acting together, would be able to influence most matters requiring the
approval by our stockholders, including the election of directors, any merger,
consolidation or sale of all or substantially all of our assets and any other
significant corporate transaction. The concentration of ownership may also delay
or prevent a change of control of Caliper at a premium price if these
stockholders oppose it. See "Principal Stockholders" for details on our stock
ownership.
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 a change of control or changes in our
management. Such provisions could limit the price that certain investors might
be willing to pay in the future for shares of our common stock. These provisions
include, among others:
- the division of the board of directors into three separate classes
- the ability of the board of directors to issue up to 5,000,000 shares of
preferred stock, and to determine the price, rights, preferences,
privileges and restrictions, including voting rights, of those shares
without any further vote or action by the stockholders
- advance notice requirements for stockholders to nominate directors and
bring stockholder proposals to a vote
- the inability of stockholders to act by written consent
Furthermore, because we are incorporated in Delaware, we are subject to the
provisions of Section 203 of the Delaware General Corporation Law. These
provisions prohibit certain large stockholders, in particular those owning 15%
or more of the outstanding voting stock, from consummating a merger or
combination with a corporation unless:
- two-thirds of the shares of voting stock not owned by the large
stockholder approve the merger or combination; or
- the board of directors approves the merger or combination or the
transaction that resulted in the large stockholder owning 15% or more of
our outstanding voting stock.
THERE IS A LARGE NUMBER OF SHARES THAT MAY BE SOLD IN THE MARKET FOLLOWING THIS
OFFERING, WHICH MAY DEPRESS THE MARKET PRICE OF OUR COMMON STOCK.
Sales of a substantial number of shares of our common stock in the public
market following this offering could cause the market price of our common stock
to decline. The number of shares of common stock available for sale in the
public market is limited by restrictions under federal securities law and under
lock-up agreements that our stockholders have entered into with the underwriters
and with us. Those lock-up agreements restrict our stockholders from selling,
pledging our otherwise disposing of their shares for a period of 180 days after
the date of this prospectus without the prior written consent of Credit Suisse
First Boston Corporation. However, Credit Suisse First Boston Corporation may,
in its sole discretion, release all or any portion of the common stock from the
restrictions of the lock-up agreements. The following table indicates
approximately when the 24,655,168 shares of our common stock that are not being
sold in the offering but which were outstanding as of September 30, 1999 will be
eligible for sale into the public market:
<TABLE>
<CAPTION>
ELIGIBILITY OF
RESTRICTED SHARES FOR SALE
IN PUBLIC MARKET
--------------------------------
<S> <C>
On the date of this prospectus..................... 451,896
180 days after the date of this prospectus......... 24,075,572
At various times after the date of this
prospectus....................................... 127,700
</TABLE>
15
<PAGE> 21
Additionally, of the 2,605,031 shares issuable upon exercise of options to
purchase our common stock outstanding as of September 30, 1999, approximately
771,378 shares will be vested and eligible for sale 180 days after the date of
this prospectus. For a further description of the eligibility of shares for sale
into the public market following the offering, see "Shares Eligible for Future
Sale."
MANAGEMENT MAY APPLY THE PROCEEDS OF THIS OFFERING TO USES THAT DECREASE OUR
MARKET VALUE.
We intend to use the net proceeds from the sale of our common stock for
general corporate purposes, including capital expenditures, manufacturing
scale-up, product development and technology research. In addition, although we
do not have any current plans to do so, if an opportunity presents itself we
could use the net proceeds for the acquisition of or investment in companies,
technologies or assets that complement our business. We have not determined how
the proceeds will be allocated among the anticipated uses. Accordingly, our
management will have significant flexibility in applying the net proceeds of
this offering and investors will not have the opportunity, as part of your
investment decision, to assess whether the proceeds are being used
appropriately. The net proceeds may be used for corporate purposes that decrease
our market value. Until the proceeds are needed, we plan to invest them in
short-term, investment-grade, interest-bearing securities. The failure of
management to apply these funds effectively could harm our business.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. These statements
relate to future events or our future financial performance. In some cases, you
can identify forward-looking statements by terminology including "anticipates,"
"believes," "can," "continue," "could," "estimates," "expects," "intends,"
"may," "plans," "potential," "predicts," "should" or "will" or the negative of
these terms or other comparable terminology. These statements are only
predictions and involve known and unknown risks, uncertainties and other
factors, including the risks outlined under "Risk Factors," that may cause our
or our industry's actual results, levels of activity, performance or
achievements to be materially different from any future results, levels or
activity, performance or achievements expressed or implied by these
forward-looking statements.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. We are under no duty to update any of the
forward-looking statements after the date of this prospectus to conform these
statements to actual results, unless required by law.
16
<PAGE> 22
USE OF PROCEEDS
Our net proceeds from the sale of the shares of common stock we
are offering, at an assumed initial public offering price of $ per share,
are estimated to be approximately $ after deducting underwriting
discounts and commissions and estimated offering expenses payable by us. We
expect to use the net proceeds for general corporate purposes, including capital
expenditures, manufacturing scale-up, product development and technology
research.
The amounts and timing of our actual expenditures will depend upon numerous
factors, including the status of our product development and commercialization
efforts, the amount of proceeds actually raised in this offering, the amount of
cash generated by our operations, competition, and sales and marketing
activities. We may also use a portion of the proceeds for the acquisition of, or
investment in, companies, technologies or assets that complement our business.
However, we have no present understandings, commitments or agreements with
respect to any potential acquisitions and investments. Further, we have not
determined the amounts we plan to spend on any of the areas listed above or the
timing of these expenditures. As a result, our management will have broad
discretion to allocate the net proceeds from this offering. Pending application
of the net proceeds as described above, we intend to invest the net proceeds of
the offering in short-term, investment-grade, interest-bearing securities.
DIVIDEND POLICY
We have never paid any cash dividends on our capital stock. We currently
anticipate that we will retain earnings to support operations and to finance the
growth and development of our business and do not anticipate paying cash
dividends for the foreseeable future.
17
<PAGE> 23
CAPITALIZATION
The following table sets forth the following information:
- Our actual capitalization as of September 30, 1999
- Our pro forma capitalization after giving effect to the conversion of all
outstanding shares of preferred stock into common stock upon the closing
of this offering
- Our pro forma as adjusted capitalization after giving effect to the sale
of the shares of common stock offered by us at an assumed
initial public offering price of $ per share, less the underwriting
discounts and commissions and estimated offering expenses
This table should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our financial
statements and notes appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
--------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- ----------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Long-term obligations, less current portion............... $ 3,483 $ 3,483 $ 3,483
-------- -------- --------
Redeemable convertible preferred stock, $0.001 par value;
19,579,039 shares authorized, 18,257,756 shares issued
and outstanding, actual; no shares authorized or
outstanding pro forma and pro forma as adjusted......... 50,538 -- --
-------- -------- --------
Stockholders' equity (deficit):
Convertible preferred stock, $0.001 par value; 1,420,961
shares authorized, 1,293,462 shares issued and
outstanding, actual; 5,000,000 shares authorized, no
shares issued and outstanding pro forma and pro forma
as adjusted.......................................... 1 -- --
Common stock, $0.001 par value; 32,000,000 shares
authorized, 5,103,950 shares issued and outstanding,
actual; 70,000,000 shares authorized pro forma and
pro forma as adjusted, 24,655,168 shares issued and
outstanding pro forma, shares issued and
outstanding pro forma as adjusted.................... 5 25
Additional paid-in capital................................ 8,872 59,391
Deferred stock compensation............................... (5,858) (5,858) (5,858)
Accumulated deficit....................................... (28,282) (28,282) (28,282)
-------- -------- --------
Total stockholders' equity (deficit).................... (25,262) 25,276
-------- -------- --------
Total capitalization................................. $ 28,759 $ 28,759 $
======== ======== ========
</TABLE>
This table excludes the following shares:
- 2,605,031 shares issuable upon exercise of options outstanding as of
September 30, 1999 at a weighted average exercise price of $0.52 per
share
- 3,133,129 additional shares that we could issue under our stock option
plans, of which options to purchase 903,700 shares of common stock were
granted in October 1999 at an exercise price of $2.00 per share
- 450,000 shares that we could issue under our employee stock purchase plan
- 116,229 shares issuable upon exercise of warrants outstanding as of
September 30, 1999 at a weighted average exercise price of $0.78 per
share
18
<PAGE> 24
DILUTION
The pro forma net tangible book value of our common stock on September 30,
1999, after giving effect to the conversion of all outstanding shares of
preferred stock into shares of common stock upon the closing of this offering,
was approximately $25.3 million, or approximately $1.03 per share. Pro forma net
tangible book value per share represents the amount of our total tangible assets
less total liabilities divided by the number of shares of common stock
outstanding. Dilution in pro forma net tangible book value per share represents
the difference between the amount per share paid by purchasers of shares of
common stock in this offering and the net tangible book value per share of our
common stock immediately afterwards. Assuming our sale of shares of
common stock offered by this prospectus at an assumed initial public offering
price of $ per share, and after deducting estimated underwriting discounts
and commissions and estimated offering expenses, our net tangible book value at
September 30, 1999 would have been approximately $ million or $ per
share. This represents an immediate decrease in net tangible book value of
$ per share to new investors purchasing shares of common stock in this
offering. The following table illustrates this dilution on a per share basis:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share at
September 30, 1999.................................... $1.03
Increase per share attributable to new investors.......
-----
Pro forma net tangible book value per share after this
offering..................................................
--------
Dilution per share to new investors......................... $
========
</TABLE>
The following table summarizes, on a pro forma basis, as of September 30,
1999, the differences between the number of shares of common stock purchased
from us, the total consideration paid and the average price per share paid by
existing stockholders and by the new investors purchasing shares in this
offering. We have assumed an initial public offering price of $ per share,
and we have not deducted estimated underwriting discounts and commissions and
estimated offering expenses in our calculations.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
--------------------- ---------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders.................. 24,655,168 % $43,753,000 % $1.77
New investors..........................
---------- ----- ----------- -----
Total............................. 100.0% $ 100.0%
========== ===== =========== ===== =====
</TABLE>
The foregoing discussion and tables assume no exercise of any outstanding
stock options or warrants. The exercise of options outstanding under our stock
option plans or warrants having an exercise price less than the offering price
would increase the dilutive effect to new investors. See "Capitalization,"
"Management -- Employee Benefit Plans" and "Description of Capital Stock."
If the underwriters exercise their over-allotment in full, the following
will occur:
- the number of shares of common stock held by existing stockholders will
decrease to approximately % of the total number of shares of our
common stock outstanding
- the number of shares held by new investors will increase to
, or approximately % of the total number of our
common stock outstanding after this offering
19
<PAGE> 25
SELECTED FINANCIAL DATA
The statements of operations data for each of the years ended December 31,
1996, 1997 and 1998, and the balance sheet data as of December 31, 1997 and
1998, have been derived from our audited financial statements included elsewhere
in this prospectus which have been audited by Ernst & Young LLP, independent
auditors. The statements of operations data for the nine months ended September
30, 1998 and 1999, and the balance sheet data as of September 30, 1999, have
been derived from our unaudited financial statements included elsewhere in this
prospectus. The balance sheet data as of December 31, 1996 have been derived
from our audited financial statements not included in this prospectus. The
statements of operations data for the period from inception (July 26, 1995)
through December 31, 1995 and the balance sheet data at December 31, 1995 have
been derived from our unaudited financial statements not included in this
prospectus. Our historical results are not necessarily indicative of results to
be expected for any future period. The data set forth below have been derived
from financial statements that have been prepared in accordance with generally
accepted accounting principles and should be read in conjunction with our
financial statements, including the notes, and with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere in
this prospectus.
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION NINE MONTHS
(JULY 26, 1995) YEAR ENDED ENDED
THROUGH DECEMBER 31, SEPTEMBER 30,
DECEMBER 31, --------------------------- -----------------
1995 1996 1997 1998 1998 1999
--------------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenue....................................... $ -- $ 132 $ 2,266 $ 8,155 $ 4,425 $ 8,859
Costs and expenses:
Research and development.................... 406 2,734 7,200 9,584 7,232 12,228
General and administrative.................. 128 1,240 2,478 2,932 1,996 3,487
Amortization of deferred stock
compensation.............................. -- -- -- -- -- 1,997
Acquired in-process research and
development............................... -- 978 -- -- -- --
------ ------- ------- ------- ------- -------
Total costs and expenses...................... 534 4,952 9,678 12,516 9,228 17,712
------ ------- ------- ------- ------- -------
Operating loss................................ (534) (4,820) (7,412) (4,361) (4,803) (8,853)
Interest income (expense), net................ (2) 110 1,131 1,386 1,058 801
------ ------- ------- ------- ------- -------
Net loss...................................... (536) (4,710) (6,281) (2,975) (3,745) (8,052)
Accretion on redeemable convertible preferred
stock....................................... -- (262) (1,470) (2,174) (1,587) (1,822)
------ ------- ------- ------- ------- -------
Net loss attributable to common
stockholders................................ $ (536) $(4,972) $(7,751) $(5,149) $(5,332) $(9,874)
====== ======= ======= ======= ======= =======
Net loss per common share, basic and
diluted..................................... $(1.10) $ (2.50) $ (2.81) $ (1.53) $ (1.63) $ (2.36)
====== ======= ======= ======= ======= =======
Shares used in computing net loss per common
share, basic and diluted.................... 488 1,987 2,758 3,365 3,275 4,187
Pro forma net loss per share, basic and
diluted (unaudited)......................... $ (0.13) $ (0.34)
======= =======
Shares used in computing pro forma net loss
per share, basic and diluted (unaudited).... 22,381 23,738
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------- SEPTEMBER 30,
1995 1996 1997 1998 1999
----- ------- -------- -------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and marketable securities....... $ 40 $12,450 $ 26,549 $ 31,052 $ 27,820
Working capital........................................ 74 11,783 24,679 30,074 23,278
Total assets........................................... 83 13,112 29,107 35,730 34,658
Long-term obligations, less current portion............ -- 417 1,430 2,008 3,483
Redeemable convertible preferred stock................. -- 16,913 38,283 48,716 50,538
Total stockholders' deficit............................ (536) (4,986) (12,665) (17,654) (25,262)
</TABLE>
The increase in net loss attributable to common stockholders due to
accretion on redeemable convertible preferred stock will not occur after this
offering because all of the outstanding preferred stock will be converted to
common stock at the closing of the offering.
See Note 1 of notes to our financial statements for an explanation of the
determination of the number of shares used in computing per share data.
20
<PAGE> 26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
"Selected Financial Data" and our financial statements and notes included
elsewhere in this prospectus. The discussion in this prospectus contains
forward-looking statements that involve risks and uncertainties, such as
statements of our plans, objectives, expectations and intentions. The cautionary
statements made in this prospectus should be read as being applicable to all
related forward-looking statements wherever they appear in this prospectus. Our
actual results could differ materially from those discussed here. Factors that
could cause or contribute to such differences include those discussed in "Risk
Factors," as well as those discussed elsewhere herein. See "Risk Factors" and
"Special Note Regarding Forward-Looking Statements."
OVERVIEW
We are a leader in lab-on-a-chip technologies that miniaturize, integrate
and automate many laboratory processes. We develop, manufacture and sell our
proprietary LabChip systems to pharmaceutical and other companies. We believe
our LabChip systems have the potential to assemble the power and reduce the
scale of entire laboratories full of equipment and people. From inception in
July 1995 through September 1999, our operating activities were primarily
devoted to research and development of microfluidic technologies and first-
generation products, recruiting personnel, business development, raising capital
and acquiring assets. In the first half of 1999, we recognized revenue from our
first product sales when we sold initial versions of our high throughput system
for drug screening to two of our technology access program customers. In
addition, in September 1999, Hewlett-Packard, our commercial partner, introduced
our first LabChip system for use by individual researchers.
Since our inception, we have incurred significant losses and, as of
September 30, 1999, we had an accumulated deficit of $28.3 million, which
includes $5.7 million of accretion on redeemable convertible preferred stock.
Our losses have resulted principally from costs incurred in research and
development, manufacturing scale-up, and from general and administrative costs
associated with our operations. We expect to continue to incur substantial
research and development, manufacturing scale-up, and general and administrative
costs. As a result, we will need to generate significantly higher revenue to
achieve profitability.
Our quarterly operating results will depend upon many factors, including
market acceptance of our products, the success and timing of signing new
customers to our technology access program, the introduction of new products by
our competitors, the timing of commercial availability of new applications for
our LabChip technology, and the timing and extent of our research and
development efforts. For a more complete discussion of factors that could cause
our quarterly operating results to vary, see "Risk Factors -- Our operating
results fluctuate significantly and any failure to meet financial expectations
may disappoint securities analysts or investors and result in a decline in our
stock price."
Our revenue has been derived principally from contract revenue earned under
our collaboration agreement with Hewlett-Packard and from our technology access
program customers. To a lesser extent, we have derived revenue from the sale of
products and government grants. Although we are developing and plan to introduce
future products, we cannot assure you that we will be successful in these
efforts. To date, we have generated a substantial portion of our revenue from a
limited number of sources. Our three technology access program customers,
Hoffmann-La Roche, Amgen and Eli Lilly, and our commercial partner,
Hewlett-Packard, collectively accounted for 91% of our revenue in the nine
months ended September 30, 1999. Hoffmann-La Roche, Amgen and Hewlett-Packard
collectively accounted for 97% of our revenue in the year ended December 31,
1998, and Hoffman-La Roche alone accounted for 94% of our revenue in the year
ended December 31, 1997. Although we are seeking to expand our customer base, we
cannot assure you that these efforts will be successful.
Under our agreement, Hewlett-Packard funds our research and development
expenditures related to the collaboration, reimburses us for our costs of
supplying chips and reagents to Hewlett-Packard and pays us a share of the gross
margin earned on all components of LabChip systems they sell. We recognize
21
<PAGE> 27
revenue related to research and development funding received from
Hewlett-Packard as we actually conduct the related activities. We recognize
revenue related to the reimbursement of our costs of supplying chips and
reagents to Hewlett-Packard when we ship these products. We expect to recognize
revenue from our share of the gross margin earned on all components of LabChip
systems as Hewlett-Packard ships these products. Under our technology access
program agreements, we recognize as revenue non-refundable license fees upon the
transfer of a license, subscription fees over the term of the subscription,
product sales upon the transfer of title to the customer, and development and
support fees in the period in which the costs are incurred. Payments received in
advance under all of these agreements are recorded as deferred revenue until
earned. As of September 30, 1999, a total of $2.4 million of revenue was
deferred. We expect to recognize this deferred revenue through the third quarter
of year 2000.
RESULTS OF OPERATIONS
Nine Months Ended September 30, 1999 and 1998
Revenue. Revenue increased to $8.9 million for the nine months ended
September 30, 1999 from $4.4 million for the comparable period in 1998. The
increase is due to revenue derived from our technology access program customers,
each of which did not become a technology access program customer until after
the nine months ended September 30, 1998, and revenue resulting from our
collaboration with Hewlett-Packard, which began in May 1998.
Research and Development Expenses. Research and development expenses
consist primarily of salaries and related personnel costs, fees paid to
consultants and outside service providers, material costs for prototype and test
units, and other expenses related to the design, development, testing, and
enhancement of our products. We expense our research and development costs as
they are incurred. Research and development expenses increased to $12.2 million
during the nine months ended September 30, 1999 from $7.2 million in the
comparable period in 1998. The increase of $5.0 million was attributable to
continued growth of research and development activities, including $3.0 million
related to increased personnel and services to support our technology access
program and initial product launches, and $1.6 million related to higher
operating expenses as a result of our move to a larger facility in January 1999.
We expect research and development spending to increase significantly over the
next several years as we expand our research and product development efforts.
General and Administrative Expenses. General and administrative expenses
consist primarily of salaries and related expenses for executive, finance and
other administrative personnel, recruiting expenses, professional fees, and
other corporate expenses including business development and general legal
activities. General and administrative expenses increased to $3.5 million during
the nine months ended September 30, 1999 from $2.0 million in the comparable
period in 1998. The increase of $1.5 million was due to $790,000 related to
compensation for general and administrative personnel and $298,000 related to
higher operating expenses as a result of our move to a larger facility in
January 1999. We expect general and administrative expenses to continue to
increase over the next several years to support our growing business activities,
the commercialization of our products, and due to the costs associated with
operating a public company.
Amortization of Deferred Stock Compensation. Deferred stock compensation
represents the difference between the deemed fair value of our common stock for
accounting purposes and the exercise price of options at the date of grant.
During the year ended December 31, 1998 and the nine months ended September 30,
1999, we recorded deferred stock compensation totaling $7.9 million. We
anticipate that additional deferred compensation totalling $4.7 million will be
recorded for options granted in October 1999. These amounts are being amortized
over the respective vesting periods of the individual stock options using the
graded vesting method. We recorded amortization of deferred compensation of $2.0
million for the nine months ended September 30, 1999. We expect to record
amortization expense for deferred compensation as follows: $1.8 million during
the quarter ended December 31, 1999, $4.3 million during 2000, $2.4 million
during 2001, $1.4 million during 2002, $630,000 during 2003 and $112,000 during
2004. The amount of deferred
22
<PAGE> 28
compensation expense to be recorded in future periods may decrease if unvested
options for which deferred compensation has been recorded are subsequently
canceled.
Interest Income (Expense), Net. Net interest income consists of income
from our cash and investments offset by expenses related to our financing
obligations. Interest income decreased to $801,000 in the nine months ended
September 30, 1999 from net interest income of $1.1 million in the comparable
period of 1998. This decrease resulted from a declining cash and investment
balance due to cash used in operating activities and from higher financing
obligation balances.
Income Taxes. As of December 31, 1998, we had federal and California net
operating loss carryforwards of approximately $10.3 million and $1.4 million. We
also had federal research and development tax credit carryforwards of
approximately $700,000. The net operating loss and credit carryforwards will
expire at various dates beginning on 2002 through 2018, if not utilized.
Utilization of the net operating losses and credits may be subject to a
substantial limitation due to the change in ownership provisions of the Internal
Revenue Code of 1986 and similar state provisions. The annual limitation may
result in the expiration of net operating losses and credits before utilization.
As of December 31, 1998 and 1997, we had deferred tax assets of
approximately $6.3 million and $5.3 million. The net deferred tax asset has been
fully offset by a valuation allowance. The net valuation allowance increased by
$1 million during the year ended December 31, 1998. Deferred tax assets relate
primarily to net operating loss carryforwards, research credit carryforwards,
and capitalized research and development costs.
Years Ended December 31, 1998 and 1997
Revenue. Revenue increased to $8.2 million in 1998 from $2.3 million in
1997. The increase was primarily due to revenue received through the
collaboration agreement with Hewlett-Packard entered into in May 1998, and
revenue received through technology access program agreements with Hoffmann-La
Roche and Amgen, which we entered into at the end of 1998.
Research and Development Expenses. Our research and development expenses
increased to $9.6 million in 1998 from $7.2 million in 1997. The increase of
$2.4 million was due to $1.4 million related to compensation for additional
scientific personnel and $503,000 was due to supplies required to assemble,
build and test prototypes of LabChip systems.
General and Administrative Expenses. General and administrative expenses
increased to $2.9 million in 1998 from $2.5 million in 1997. The increase was
due to hiring of additional personnel to support our growing business
activities.
Interest Income (Expense), Net. Net interest income increased to $1.4
million in 1998 from $1.1 million in 1997. This increase was due to increases in
cash and investment balances as a result of our equity financing in May 1998.
Years Ended December 31, 1997 and 1996
Revenue. Revenue increased to $2.3 million in 1997 from $132,000 in 1996.
The increase was due primarily to increased efforts devoted to our previous
collaboration agreement with Hoffmann-La Roche that was executed in October 1996
and a research agreement with Perkin Elmer, each of which has since expired.
Research and Development Expenses. Our research and development expenses
increased to $7.2 million in 1997 from $2.7 million in 1996. The increase of
$4.5 million was due to $1.6 million in compensation for research and
development personnel, $1.5 million was due to sponsored research, and $554,000
was related to higher operating expenses as a result of our move to a larger
facility in May 1997.
General and Administrative Expenses. General and administrative expenses
increased to $2.5 million in 1997 from $1.2 million in 1996. The increase was
due to $933,000 in compensation and fees for additional general and
administrative personnel and consultants.
23
<PAGE> 29
Interest Income (Expense), Net. Net interest income increased to $1.1
million in 1997 from $110,000 in 1996. This increase was due to an increase in
our cash and investment balances from the proceeds of our equity financings in
the first half of 1997.
LIQUIDITY AND CAPITAL RESOURCES
We have financed our operations from inception primarily through private
sales of preferred stock, contract and milestone payments to us under our
collaboration and technology access program agreements, and equipment financing
arrangements. As of September 30, 1999, we had received net proceeds of $43.8
million from issuances of common and preferred stock and $21.4 million from
collaborations, technology access program customers and government grants. In
addition, through September 30, 1999 we had financed equipment purchases and
leasehold improvements totaling approximately $6.3 million. We have used leases
and loans to finance capital expenditures.
As of September 30, 1999, we had $27.8 million in cash, cash equivalents
and marketable securities, as compared to $31.1 million as of December 31, 1998.
We used $2.2 million for operations in the nine months ended September 30, 1999.
This consisted of the net loss for the period of $8.1 million offset in part by
non-cash charges of $2.9 million and working capital changes of $3.2 million. We
used $3.0 million in investing activities for the nine month period ended
September 30, 1999, which consisted of capital expenditures. We received $2.0
million from financing activities for the nine months ended September 30, 1999,
which consisted principally of proceeds from equipment financing of $2.5 million
offset by repayments of equipment financing arrangements of $821,000.
In January 1999 we entered into a $2.5 million financing arrangement for
the purchase of property and equipment. As of September 30, 1999, we had drawn
down approximately $752,000 and had $1.7 million remaining available under this
arrangement. As of September 30, 1999, we had $4.6 million in capitalized lease
obligations outstanding compared to $2.9 million at December 31, 1998.
Our capital requirements depend on numerous factors, including market
acceptance of our products, the resources we devote to developing and supporting
our products, and other factors. We expect to devote substantial capital
resources to continue our research and development efforts, to expand our
support and product development activities, and for other general corporate
activities. Although we believe that our current cash balances, together with
the net proceeds of this offering and revenue to be derived from our
collaboration with Hewlett-Packard and our technology access program agreements
will be sufficient to fund our operations at least through the year 2000, we may
require additional financing earlier than expected. Such additional funding may
not be available on terms acceptable to us or at all.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Financial
Instruments and for Hedging Activities" which provides a comprehensive and
consistent standard for the recognition and measurement of derivatives and
hedging activities. SFAS 133 is effective for fiscal years beginning after June
15, 1999 and is not anticipated to have an impact on our results of operations
or financial condition when adopted as we hold no derivative financial
instruments and do not currently engage in hedging activities.
In March 1998, the AICPA issued Statement of Position 98-1, "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use." SOP 98-1
requires that entities capitalize certain costs related to internal use software
once certain criteria have been met. We adopted the provisions of SOP 98-1 on
January 1, 1999. Through September 30, 1999, we had not capitalized any cost
related to internal use software.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The primary objective of our investment activities is to preserve principal
while at the same time maximizing the income we receive from our investments
without significantly increasing risk. Some of the
24
<PAGE> 30
securities that we invest in may be subject to market risk. This means that a
change in prevailing interest rates may cause the principal amount of the
investment to fluctuate. For example, if we hold a security that was issued with
a fixed interest rate at the then-prevailing rate and the prevailing interest
rate later rises, the principal amount of our investment will probably decline.
To minimize this risk in the future, we intend to maintain our portfolio of cash
equivalents and short-term investments in a variety of securities, including
commercial paper, money market funds, government and non-government debt
securities. The average duration of all of our investments in 1998 was less than
one year. Due to the short term nature of these investments, we believe we have
no material exposure to interest rate risk arising from our investments.
Therefore, no quantitative tabular disclosure is required.
We have operated primarily in the United States and all sales to date have
been made in U.S. dollars. Accordingly, we have not had any material exposure to
foreign currency rate fluctuations.
YEAR 2000 READINESS
The "Year 2000 issue" refers generally to the problems that some software
may have in determining the correct century for the year. For example, software
with date-sensitive functions that is not Year 2000 compliant may not be able to
distinguish whether "00" means 1900 or 2000, which may result in failures or the
creation of erroneous results.
We designed the HP 2100 Bioanalyzer to be Year 2000 compliant when
configured and used in accordance with the related documentation, and provided
that the underlying operating system of the host machine and any other software
used with or in the host machine or our product are Year 2000 compliant.
However, we have not exhaustively tested our other products for Year 2000
compliance. We continue to respond to customer questions about our products.
We have defined Year 2000 compliance as the ability to:
- correctly handle date information needed for the December 31, 1999 to
January 1, 2000 date change
- function according to the product documentation provided for this date
change, without changes in operation resulting from the advent of a new
century, assuming correct configuration
- respond to two-digit date input in a way that resolves the ambiguity as
to century in a disclosed, defined and predetermined manner
- store and provide output of date information in ways that are unambiguous
as to century if the date elements in interfaces and data storage specify
the century
- recognize year 2000 as a leap year
We are seeking assurances from our vendors that licensed software is Year
2000 compliant. To date, we have received assurances from some of our vendors as
to their Year 2000 compliance. Despite testing by us and current and potential
customers, and assurances from developers of products incorporated into our
products, our products may contain undetected errors or defects associated with
Year 2000 date functions. Known or unknown errors or defects in our product
could result in delay or loss of revenues, diversion of development resources,
damage to our reputation, increased service and warranty costs, or liability
from our customers, any of which could harm our business.
Some commentators have predicted significant litigation regarding Year 2000
compliance issues. Because of the unprecedented nature of this litigation, it is
uncertain whether or to what extent we may be affected by it. Congress recently
passed a law that is intended to limit liability for some failures to achieve
Year 2000 compliance. There can be no assurance that this bill will provide us
with any protection.
We have initiated an assessment of our material internal information
technology systems, including both our own software products and third-party
software and hardware technology. We are in the process of assessing our
non-information technology systems. We expect to complete our assessment and
testing and perform any needed remediation of these systems by December 1999. To
the extent that we are not
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<PAGE> 31
able to test the technology provided by third-party vendors, we are seeking
assurances from these vendors that their systems are Year 2000 compliant. We are
not currently aware of any material operational issues or costs associated with
preparing our internal information technology and non-information technology
systems for the Year 2000. However, we may experience material unanticipated
problems and costs caused by undetected errors or defects in the technology used
in our internal information technology and non-information technology systems.
We do not currently have any information concerning the Year 2000
compliance status of our customers. Our current or future customers may incur
significant expenses to achieve Year 2000 compliance. If our customers are not
Year 2000 compliant, they may experience material costs to remedy problems, or
they may face litigation costs. In either case, Year 2000 issues could reduce or
eliminate the budgets that current or potential customers could have for or
delay purchases of our products and services. As a result, our business could be
harmed.
We have funded our Year 2000 plan from operating cash flows and have not
separately accounted for these costs in the past. To date, these costs have not
been material. We will incur additional costs related to the Year 2000 plan for
administrative personnel to manage the project, outside contractor assistance,
technical support for our products, product engineering and customer
satisfaction. In addition, we may experience material problems and costs with
Year 2000 compliance that could harm our business.
We do not have a contingency plan to address situations that may result if
our critical operations are not Year 2000 compliant, and we do not anticipate
the need to do so. The cost of developing and implementing the plan may itself
be material. In addition, we are also subject to external forces that might
generally affect industry and commerce, including utility or transportation
company Year 2000 compliance failure interruptions.
Year 2000 issues affecting our business, if not adequately addressed by us,
our third party vendors or suppliers or our customers, could have a number of
"worst case" consequences. These include:
- claims from our customers asserting liability, including liability for
breach of warranties related to the failure of our product and services
to function properly, and any resulting settlements or judgments
- our inability to manage our own business
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<PAGE> 32
BUSINESS
OVERVIEW
We are a leader in lab-on-a-chip technologies. We believe our LabChip
systems can assemble the power and reduce the size of entire laboratories full
of equipment and people. Our LabChip systems miniaturize, integrate and automate
many laboratory processes, and put them on a chip that can fit in the palm of a
child's hand. Each chip contains a network of microscopic channels through which
fluids and chemicals are moved, using electricity or pressure, in order to
perform experiments. The chips are the key components of our LabChip systems,
which also include reagents as well as instruments and software that together
control and read the chips. We believe our LabChip systems have the potential to
revolutionize experimentation in a wide range of industries by enabling
individuals and organizations to perform laboratory experiments at a speed, cost
and scale previously unattainable. Our initial commercialization focus is the
pharmaceutical industry, where there is an urgent need to improve the efficiency
and reduce the cost of drug discovery and development. Future target industries
potentially include agriculture, clinical diagnostics, chemicals and consumer
products. We believe that we are the first company to sell and deliver
lab-on-a-chip products to customers. During 1999 we introduced our first two
LabChip systems, a personal laboratory system and a high throughput system.
INDUSTRY BACKGROUND
Laboratory Technology
The pharmaceutical, agriculture, clinical diagnostics and chemical
industries, among others, rely on laboratory experimentation to obtain important
information that can be used to discover and develop new products. Despite the
critical value of laboratory results to these industries, improvements to the
basic processes and tools used in laboratory experiments have only been
incremental and have not kept pace with technological advances in other
industries, including electronics and computing. Laboratory work still relies on
manual steps and tools, such as test tubes and beakers, and large pieces of
equipment that utilize technology that is decades old. These tools and processes
are expensive, labor-intensive and often imprecise, presenting significant
productivity and efficiency challenges for these industries.
New processes and tools are needed to enable individual researchers and
organizations to work more productively and efficiently. This need has been
recognized and some improvements have been made. In an attempt to increase speed
and reduce costs in many laboratory experiments, researchers have replaced test
tubes with 96-well plates designed to facilitate parallel experimentation.
Further attempts to reduce costs have led researchers to use miniaturization to
replace the 96-well plate with 384- and 1536-well plates. To enhance efficiency,
some suppliers have integrated multiple pieces of equipment into one large piece
of equipment. Organizations that perform high value, high volume experimentation
have attempted to automate processes by using liquid-handling robotics to
improve the quality and quantity of data achieved in centralized testing. While
these and other advances have helped researchers to work faster and more
efficiently, they still represent only incremental, not revolutionary,
improvements because they continue to rely on time-consuming, imprecise and
labor-intensive processes that can create bottlenecks throughout the entire
experimental process.
A Need for Better Laboratory Technology in the Pharmaceutical Industry
Industry experts predict that pharmaceutical companies will spend more than
$30 billion in the year 2000 for research and development of new
pharmaceuticals. Pharmaceutical companies have realized that to stay competitive
and meet their goals for growth they will have to increase significantly the
number of new drugs they introduce each year. To achieve this, pharmaceutical
companies have found that they will have to engage in experimentation on a
massive scale. Pharmaceutical companies' investment in genomics and
combinational chemistry are examples of this decision. These activities are
generating a wealth of potential targets and new compounds to be tested and
offer the opportunity to discover many new drugs. However, they also create a
technological quandary: how to perform significantly more experiments, in less
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<PAGE> 33
time, without unacceptable increases in research and development spending. We
believe that recent incremental advances in laboratory technology are not enough
to enable pharmaceutical companies to achieve their growth targets. New
technologies are needed to improve the volume and quality of information
generated in each stage of the drug discovery process, while simultaneously
reducing the cost of experimentation.
THE STAGES OF PHARMACEUTICAL DISCOVERY
Target identification involves acquiring knowledge about the role a particular
molecule, usually a protein, plays in the body in order to determine whether it
might be a good target for further investigation. Today, this activity is most
often initiated with genomics studies, in particular by DNA sequencing, RNA
analysis and genetic mapping.
Target validation is the demonstration that affecting the function of a
particular target has a positive effect on the course of a disease. Target
validation employs a variety of methods including RNA analysis, protein analysis
and cell biology.
Primary screening involves the large-scale testing of collections of chemical
compounds, or libraries, against validated targets. The goal is to find "hits,"
or individual members of the compound library that bind to, inhibit, or activate
a particular target. These libraries are tested using high throughput
biochemical or cellular assays. The major pharmaceutical companies are moving
towards screening up to 100 targets annually with libraries of up to one million
compounds.
Lead optimization involves sorting through the compounds that emerge from the
primary screen and conducting successive rounds of chemical alterations and
biological tests to find compounds likely to have appropriate drug properties.
Like target validation, lead optimization involves a variety of methods,
including protein analysis, cell biology, chemical synthesis, as well as high
throughput biochemical or cellular assays. This stage also involves the testing
of compounds for therapeutic activity in animal models of disease.
Preclinical development involves testing of compounds to assure that they are
safe, have appropriate distribution throughout the body and are appropriately
metabolized. Formulation tests to ensure convenient delivery to patients are
performed, as are tests to ensure that the compounds can be manufactured with
consistent quality.
Clinical development is the testing of pharmaceutical compounds in humans to
demonstrate their safety and efficacy. Because clinical trials are the most
expensive part of drug development, pharmaceutical companies are trying to
improve the outcomes of clinical trials by using "pharmacogenetics."
Pharmacogenetics entails understanding how genetic differences determine or
predict responsiveness or adverse reactions to particular drugs. In order to use
pharmacogenetics in a clinical trial, each patient in the trial will need his
genetic make-up analyzed. This could entail analysis of approximately 100,000
different sites in a patient's DNA. For a 1,000 patient trial, this would
require generating approximately 100 million data points.
The drug discovery process can be summarized by the six stages described
above. In each of these stages, researchers face many productivity bottlenecks
due to the limitations of current laboratory technologies. Individual
researchers conducting even the simplest, most common experiments must often
perform labor-intensive, time-consuming, multi-step processes on multiple pieces
of equipment. For example, to analyze DNA, researchers typically extract the DNA
from specimens, treat the DNA with chemical reagents, pour gels and mount them
in equipment to separate the DNA, load the samples into the gel, activate the
gel for a precise period of time, process the gel to reveal the location of the
DNA,
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<PAGE> 34
and image or scan the gel to see the results. The whole process takes
approximately half a day and produces only a few dozen data points of genetic
information. Thousands of pharmaceutical company researchers perform this
experiment on a routine basis.
Even "automated" experiments, such as high throughput screening, are still
laborious and time-consuming. For example, to perform one high throughput
screen, researchers typically need to remove thousands of compounds from
storage, transfer small amounts of compounds to hundreds of new plates, add
fluid to dilute them, transfer a portion of the diluted compound to another set
of plates, add other reagents, move the plates to an incubation station,
incubate the mixture for a precise period of time, transfer the plates to a
detection instrument, scan the plates to see the results, and then discard all
the plates. The whole process can take a team of researchers one to four weeks,
and has to be repeated to test the same compounds against the next
pharmaceutical target.
As currently performed, these processes are not well suited to the massive
scale-up we believe pharmaceutical companies are seeking. The number of people
and pieces of equipment required would be unmanageable. More importantly, data
quality has often suffered as companies have tried to implement higher
throughput versions of existing procedures, such as 384-well plates in place of
96-well plates. Pharmaceutical companies need a breakthrough in tools for
experimentation to free scientists from the limitations of current technology.
A Broad Need Across Industries for New Laboratory Technology
Other industries dependent upon biological and chemical information face
technology challenges similar to those facing the pharmaceutical industry. The
agricultural-biotechnology industry, for example, is adopting many of the same
research strategies used by the pharmaceutical industry, including genomics,
screening and combinatorial chemistry. In addition, the multi-billion dollar
clinical diagnostics industry continues to search for miniaturized and automated
equipment solutions that will facilitate patient point-of-care testing, as well
as high throughput, automated analysis platforms for use in centralized
reference laboratories. In these and other industries, technology for laboratory
experimentation is limiting the ability to access information about chemicals
and biochemicals, and therefore is limiting companies' ability to transform that
information into novel and commercially valuable products.
CALIPER SOLUTIONS
We believe that our LabChip technology represents a revolutionary advance
in laboratory experimentation needed by the pharmaceutical and other industries
today. The chips are the key components of our LabChip systems that also include
a particular LabChip instrument together with experiment-specific reagents and
software. Our chips contain a network of microscopic channels through which
fluids and chemicals are moved to perform experiments. A single type of chip
used with particular reagents and software to perform a particular experiment
make up one LabChip application. Depending on the chip format, reagents are
introduced either automatically or by the user. The chip is placed in the
instrument, which uses software to control the movement of fluids with pressure
or electricity. The instrument also has an optical system for detecting the
results. Because we have great flexibility in channel design and can exert
split-second computer control over fluid flow, we have the ability to create
chips for a multitude of experiments. Our LabChip systems miniaturize, integrate
and automate fluidic experimentation providing, we believe, the benefits of high
speed, reduced cost, expanded individual researcher capability, improved data
accuracy and improved enterprise-wide productivity.
Features of LabChip Systems
- Miniaturization. Conventional laboratory equipment typically uses about a
drop of fluid, or 50 to 100 microliters, to perform each experiment. In
some LabChip applications, this volume is reduced to 1 nanoliter, an
improvement of up to 100,000-fold over conventional systems.
- Integration. Integration is the compression of multiple processes into a
single process. Today most laboratory systems perform only one or two
steps of an experimental protocol. Our LabChip
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systems can integrate complete experiments involving half a dozen or more steps
into one continuous process performed on a single chip.
- Automation. Today most laboratory experiments are performed using
multiple instruments in combination with multiple manual steps. With our
LabChip systems, entire experiments can be automated and performed inside
a chip using one instrument. The same instrument is used with different
chips to perform other automated experiments.
MINIATURIZATION, INTEGRATION AND AUTOMATION ON A SIPPER CHIP
[This illustration is an actual schematic of a current Sipper chip that can be
used to prepare drug samples for analysis and to determine their potency, all on
the same high throughput chip. The specific functions that are part of this
experiment, and where they take place on the chip, are described in the
caption.]
Above is a schematic of a Sipper chip that can be used to prepare drug
samples for analysis and to determine their potency at high throughput.
This is an example of one of the many types of complicated experiments that
our chips can perform, which would normally be performed in a laboratory
full of people and equipment. Potency studies are done by diluting a drug
into different concentrations and testing each one for its effect on a
pharmaceutical target. Higher potency drugs will reduce target activity
even at low concentrations. Potency provides critical information for
determining the quality of a drug candidate. We expect to make this chip
commercially available in the first half of the year 2000.
A one nanoliter drug sample, 1/50,000th of a drop, is drawn into the chip
through a capillary attached at point (a). In assembly line fashion, a
different drug enters the chip every 30 seconds, and multiple experiments
are processed on the chip simultaneously. Each nanoliter is divided
sequentially into four portions (b), each of which contains ten times less
than the previous portion. Each portion is then diluted with an appropriate
solution to restore the original volume of sample and achieve four
different concentrations (c). Each of the four diluted drug samples is then
mixed with the target (d), and later, another reagent (e), and incubated
for precisely the same amount of time (f), to enable direct comparison of
the results which are detected on all reactions simultaneously (g).
Key Benefits of LabChip Systems
- High Speed. Our LabChip systems accelerate experiments as much as 10-fold
or more, depending on the application. Our customers can take advantage
of this to increase throughput or to complete experiments faster,
depending on their needs.
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- Reduced Cost. Our LabChip systems use only a small fraction of the normal
amount of expensive reagents, as little as 1/100,000th in some cases, and
also reduce labor involved in each experiment. Saving on reagent cost and
labor can enable pharmaceutical companies to expand the scale of
experimentation in ways that would otherwise not be feasible.
- Expanded Individual Researcher Capability. Because our LabChip systems
can collapse a multi-step, complex experiment into one step, individual
researchers can perform experiments previously outside their areas of
expertise.
- Improved Data Accuracy. Our LabChip systems generally produce more
accurate and consistent data by reducing human error and the variability
caused by the use of multiple instruments. With higher quality data, our
customers can make better decisions.
- Improved Enterprise-Wide Productivity. We believe our LabChip systems can
improve data quality to the point where researchers can rely on data
generated outside their laboratory or organization. This would improve
enterprise-wide productivity by supporting data sharing and reducing the
need to repeat experiments.
We believe that our LabChip systems have the potential to expand the
capabilities and improve the productivity of individual researchers and, on an
institutional level, to streamline and bring greater efficiency and speed to the
drug discovery and development process. Efficiency, speed and faster decision-
making provide critical competitive advantages. The faster pharmaceutical
companies can identify and validate targets, screen massive numbers of
compounds, optimize leads and identify promising compounds to take into clinical
development, the greater their chances of seeing a return on investment for
their research and development dollars. LabChip technology has the potential to
reduce the time it takes to discover and commercialize new drugs. In the future,
we believe we can bring similar benefits to other industries.
STRATEGY
Our objective is to be the leading lab-on-a-chip company. Key elements of
our strategy to achieve this objective include:
Focus on the Pharmaceutical Industry First. We are focusing on developing
our LabChip systems for the pharmaceutical industry, where the investment in
research and development is large and growing and the need for new technologies
to improve research and development efficiency is urgent. We are addressing the
need for enhanced productivity for individual pharmaceutical researchers with
our first LabChip personal laboratory system, featuring the HP 2100 Bioanalyzer,
developed in collaboration with Hewlett-Packard. We also have developed a high
throughput system for use by pharmaceutical companies for drug screening. We are
developing ultra high throughput systems and new chip applications to bring
greater efficiency to the drug discovery process.
Rapidly Build Our Installed Customer Base. We intend to take advantage of
our first-to-market position to rapidly build our installed customer base. Our
goal is to increase customer familiarity with lab-on-a-chip technology and to
establish our LabChip systems as the platform of choice. Our strategy is to
offer products for applications that are practiced widely and to bring LabChip
technology to market through the combination of a major commercialization
partnership and direct selling. Our first commercial collaborator,
Hewlett-Packard, is an established leader in analytical instrumentation and has
initiated a multi-faceted sales and marketing campaign designed to achieve wide
penetration. Our direct selling strategy is focused primarily on large
pharmaceutical companies and is designed to encourage early adoption of our
LabChip systems through our technology access program.
Leverage Our Installed Customer Base by Expanding the Menu of Chip
Applications. A significant portion of our internal research and development
efforts is dedicated to new chip applications development. We intend to expand
our menu of chip applications and sell them to customers that have already
purchased LabChip instruments. For example, we are developing LabChip
applications for genomics to bring significant advances in functionality to this
technology-hungry area. We also intend to expand current
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markets by implementing a LabChip instrumentation "operating system" strategy
that encourages other companies, such as reagent manufacturers, to develop
compatible products that can operate with our chips.
Generate Recurring Revenue From High-Value Chips. We expect to generate
recurring revenue from the sale of single-use chips for the HP 2100 Bioanalyzer.
In addition, we intend to value price the chips for our high throughput systems
to reflect the cost savings and other benefits that our customers may achieve,
possibly through per data point pricing. While we are focused on generating
revenues from the sale and use of our chips, we also will receive revenue from
the sale of the HP 2100 Bioanalyzer, software and reagents. We also intend to
generate recurring revenue from our technology access program through license
fees and ongoing subscription fees as well as through the sale of instruments.
Build a Substantial Intellectual Property Estate. We pursue an
intellectual property strategy of licensing important patents and pursuing
patent protection for our own inventions. As of September 30, 1999, we owned, or
held licenses to, 34 issued U.S. patents and 120 pending U.S. patent
applications. These patents and applications are directed to various
technological areas that we believe are valuable to our business. We believe
that maintaining a deep and broad intellectual property estate will be an
important competitive advantage.
Maintain Leadership in Chip Technology and Manufacturing. We believe that
our long-term success will derive from maintaining leadership in lab-on-a-chip
technology and chip manufacturing. We focus on improving the power and
capabilities of our chips to increase their value. We are also working to
enhance manufacturing processes to reduce our production costs.
Opportunistically Penetrate New Industries. We believe that LabChip
technology has the potential to transform the way that laboratory
experimentation is performed across multiple industries. We expect to
selectively pursue these other industries, leveraging our pharmaceutical
industry experience and products. We may pursue these opportunities alone or
with collaborators.
PRODUCTS AND SERVICES
We have developed two types of LabChip systems, personal laboratory systems
and high throughput systems, based on distinct chip formats. Our personal
laboratory systems use chips with reservoirs for the various chemical reagents,
which the user introduces manually. Our high throughput systems use our Sipper
chips that have a short glass tube, or capillary, that draws nanoliter volumes
of reagents into the chip.
Personal Laboratory Systems
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION STATUS
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
HP 2100 Bioanalyzer Desktop LabChip instrument and Marketed by Hewlett-
software Packard
- -----------------------------------------------------------------------------------------------
DNA 7500 LabChip Kit Chips and reagents for analyzing Marketed by Hewlett-
small DNA fragments Packard
- -----------------------------------------------------------------------------------------------
DNA 12000 LabChip Kit Chips and reagents for analyzing Marketed by Hewlett-
large DNA fragments Packard
- -----------------------------------------------------------------------------------------------
RNA 6000 LabChip Kit Chips and reagents for analyzing Marketed by Hewlett-
RNA samples Packard
- -----------------------------------------------------------------------------------------------
New LabChip Kits A series of kits containing In development
chips and reagents for
applications in molecular and
cell biology
- -----------------------------------------------------------------------------------------------
</TABLE>
HP 2100 Bioanalyzer System. Our first personal laboratory system is based
on the HP 2100 Bioanalyzer, a desktop instrument designed to perform a wide
range of everyday scientific applications using a menu of different LabChip
kits. Each kit contains a chip and reagents designed specifically for the
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application. This LabChip system brings the benefits of miniaturized, integrated
and automated experimentation to the researcher's desktop. Hewlett-Packard
launched this product in September 1999.
Hewlett-Packard is selling the HP 2100 Bioanalyzer with an initial menu of
three LabChip kits for DNA and RNA sizing and concentration analysis. For these
initial applications, we believe the system's principal advantages are that it:
- reduces analysis time from hours to minutes
- integrates several experimentation steps into one
- significantly reduces consumption of costly reagents
- produces higher quality data than conventional methods
Because these applications are among the most common experiments performed
in genetic research, the potential customer base for these applications includes
most pharmaceutical and biotechnology companies, as well as human genome
research centers and other academic laboratories.
We are developing new applications involving analysis of protein and cells,
as well as additional applications involving DNA and RNA analysis. We believe
that protein and cell applications on the HP 2100 Bioanalyzer may be
particularly attractive to researchers in those disciplines because their
existing tools are generally less advanced than those available to genetic
researchers.
High Throughput Systems
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION STATUS
<S> <C> <C>
- -----------------------------------------------------------------------------------------------
Caliper 110 Sipper System High throughput LabChip Direct sales to customers
instrument and software for
single capillary Sipper chips
- -----------------------------------------------------------------------------------------------
Fluorogenic Assay Sipper Sipper chip for screening Direct sales to customers
Chip certain types of enzyme and
protein receptor targets
- -----------------------------------------------------------------------------------------------
Mobility Shift Assay Sipper Sipper chip for screening other Direct sales to customers
Chip types of enzyme and protein
receptor targets
- -----------------------------------------------------------------------------------------------
Assay Development Station Instrument system and software Direct sales to customers
for developing LabChip
experimental methods
- -----------------------------------------------------------------------------------------------
Assay Development Chips Chips for use with the assay Direct sales to customers
development station
- -----------------------------------------------------------------------------------------------
Cell-based Assay Sipper Sipper chip for screening cell In development
Chip receptor targets
- -----------------------------------------------------------------------------------------------
Dilutor Sipper Chips Sipper chips that do sample In development
preparation and screening on the
same chip
- -----------------------------------------------------------------------------------------------
Caliper 220 Sipper System Ultra high throughput LabChip In development
instrument and software for
multiple capillary Sipper chips
- -----------------------------------------------------------------------------------------------
Multi-capillary Sipper Multiple capillary versions of In development
Chips the Sipper chips described above
- -----------------------------------------------------------------------------------------------
</TABLE>
Our high throughput systems are being designed to perform thousands or tens
of thousands of pharmaceutical experiments per day on each Sipper chip.
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Caliper 110 Sipper System. Our first high throughput system is based on
the Caliper 110, which uses a Sipper chip with a single capillary. Like the HP
2100 Bioanalyzer, the Caliper 110 is designed to perform a wide range of
experiments using a menu of different chips. We currently offer two Sipper chips
used for performing drug screening experiments for several classes of enzymes.
High throughput enzyme experiments are among the most common assays used in
primary drug screening. Some of the reagents used in these experiments are
expensive and it can take months to produce them in the quantities required for
conventional screening systems. We believe the principal advantages of the
Caliper 110 are that it:
- reduces costly reagent consumption up to 100,000-fold
- integrates multiple experimental functions
- reduces the need for user intervention
- produces higher data quality than conventional methods
We expect to add several more Sipper chips, enabling our technology access
program customers to use the Caliper 110 for a significant percentage of the
types of experiments they run. Another important advantage of the Caliper 110 is
that it can be used not only for primary screening but also for lead
optimization. Furthermore, the Caliper 110 is compact and could be placed in
locations outside the centralized screening group, allowing for more efficient
drug development efforts.
Caliper 220 Ultra High Throughput System. We expect to increase throughput
by increasing the number of channels and capillaries on each chip. We intend to
introduce chips with four and then eight or more capillaries per chip and to
enable customers to effectively utilize multiple instruments by providing
integrated plate handling capabilities. We are currently testing a prototype of
our Caliper 220 ultra high throughput instrument and expect to offer this
product to technology access program customers in 2000. In this way, we expect
to offer systems that can perform more than 100,000 experiments per day.
We are also working to integrate compound storage and sample preparation
into our screening systems. These activities represent major expenses for
pharmaceutical companies. We believe that our LabChip systems can offer dramatic
cost reductions in these areas. We intend to offer a Sipper chip which can
dilute compounds in assay buffer on the chip prior to performing the screening
assay. We expect that this will reduce the amount of expensive compounds used by
approximately 1,000-fold and eliminate the major expense of diluting thousands
of compounds in wells. The next integration step will be to enable researchers
to place entire compound libraries onto our proprietary LibraryCard reagent
array, and then dilute and access compounds using the capillary of our Sipper
chips. For a description of our LibraryCard reagent array program, see
"-- Research and Development."
We sell our current high throughput systems to technology access program
customers and provide training and support. We also develop initial assays for
them and offer some level of customization in order to integrate our systems
most effectively into each customer's production processes.
We sell assay development systems to our technology access program
customers so that they can modify experimental conditions used with our standard
assay chips to be suitable for each new pharmaceutical target. This process is
comparable to the assay development they already carry out with existing
screening systems, which typically takes several weeks to a few months. In fact,
we believe that the process likely will be accelerated and improved using
chip-based systems.
Services
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
SERVICE DESCRIPTION STATUS
<S> <C> <C>
- -----------------------------------------------------------------------------------------------
Value Added Screening Assay development, compound Direct sales to customers
Collaborations leasing and screening services
for customers' pharmaceutical
targets
- -----------------------------------------------------------------------------------------------
</TABLE>
We are using our high throughput systems internally to offer screening
services to pharmaceutical and biotechnology customers that prefer to outsource
this activity. Under our value added screening
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<PAGE> 40
collaboration program, we develop LabChip assays for targets selected by a
customer. We then screen the targets against the customer's compound library,
our own library, or both, and provide the data to the customer.
We believe that our screening services also add substantial value to our
product businesses. We deploy our most advanced high throughput screening
systems in our internal screening services operation. By making intensive use of
those systems in this business, we can provide critical feedback to our product
development groups. This accelerates development and enables us to deliver
better systems to our technology access program customers. We also intend to use
our screening services capability to demonstrate to potential technology access
program customers how our LabChip systems can streamline screening operations
and enhance productivity.
COMMERCIALIZATION
We currently are commercializing our first personal laboratory system, the
HP 2100 Bioanalyzer system, through our collaboration with Hewlett-Packard. We
are also directly selling our high throughput systems through our technology
access program and are providing high throughput screening services through our
value added screening collaboration program.
Strategic Alliance with Hewlett-Packard
We have established a broad relationship with Hewlett-Packard to create a
line of commercial research products based on our LabChip technologies. Our
primary relationship is with Hewlett-Packard's Chemical Analysis Group, which we
expect to become a part of Agilent Technologies. This relationship provides us
with the scale and expertise of a leading analytical instrumentation company to
bring these novel products to market. When this relationship was established in
May 1998, Hewlett-Packard and Caliper publicly stated their intention to invest
over $100 million collectively to create and commercialize this line of products
over the ensuing five years. In September 1999, Hewlett-Packard introduced the
HP 2100 Bioanalyzer with three different LabChip kits, our first LabChip
products under this agreement.
In this collaboration, Caliper primarily focuses on developing core
technology and LabChip applications. We also manufacture the chips and supply
the chips and reagents to Hewlett-Packard. If we elect, however, not to
manufacture chips for a LabChip application or we are unable to meet minimum
supply commitments to be mutually established in the future, Hewlett-Packard
would have the right to manufacture those chips. Hewlett-Packard primarily
focuses on developing instruments and software, manufacturing instruments, and
marketing, selling and supporting complete systems. Hewlett-Packard has the
contractual right to develop the marketing plan under the collaboration,
although to date we and Hewlett-Packard have made these decisions in a
collaborative manner.
Hewlett-Packard funds our product development efforts under the
collaboration, reimburses our costs of supplying chips and reagents, and pays us
a share of the gross margin on all components of LabChip systems. The gross
margin share varies depending on the type of collaboration product, whether we
or Hewlett-Packard manufacture the collaboration product, and whether such
collaboration product is sold during the collaboration or after the
collaboration has terminated. These financial arrangements allow us to offset a
portion of the substantial risks inherent in introducing novel technologies. At
the same time, they enable us to support a broad product development program and
to retain a substantial financial interest in the products we create.
Our agreement with Hewlett-Packard is mutually exclusive in the field of
lab-on-a-chip technologies for the research products market. It requires our
consent before Hewlett-Packard may offer products exceeding established sample
throughput limits, and it requires Hewlett-Packard's consent before we may offer
these products outside the collaboration in excess of established volume
limitations.
The term of the Hewlett-Packard agreement is eight years, beginning in May
1998. After three years, Hewlett-Packard may elect not to meet certain annual
funding requirements, in which case either party may terminate the agreement. In
any event either party may terminate the agreement after five years. If
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the agreement terminates after three years, we will continue to offer the
collaboration's products through Hewlett-Packard but Hewlett-Packard will have
no rights to our technologies for the development of new products. If either
party terminates the agreement after five years, we will grant Hewlett-Packard a
non-exclusive license to use the lab-on-a-chip technologies that we have
developed up to that time in order to develop new products in substantially the
same field that applied during the collaboration. We will also transfer chip
manufacturing know-how and receive royalties on Hewlett-Packard's sales of
systems that employ our patented technologies. Regardless of whether the
collaboration terminates after three or five years, both Caliper and
Hewlett-Packard will have the right to sell collaboration products, with
reciprocal supply arrangements.
Technology Access Program
Our technology access program is initially focused on high throughput
systems for drug screening. In this program, we work directly with
pharmaceutical company customers during the product development process to
create successive generations of products. We provide technology access program
customers with early access to new products, and offer technical training,
support and customization services. By working closely with these customers, we
focus our technology and product development efforts where we believe they can
have maximum impact for the pharmaceutical marketplace.
Our technology access program customers have non-exclusive access to all of
the high throughput screening products we offer during the term of the
agreement. These agreements generally provide for customers to pay an up-front
license fee and annual subscription fees, and to reimburse us for our costs of
providing development and support services. Instruments and chips are generally
sold separately on a product-by-product basis, although some agreements
establish prices for critical instruments or estimates of per data point charges
for Sipper chips. Our technology access program customers can terminate their
participation in the program and still have the right to purchase those products
that we offered to them during their participation in the program.
We currently have three technology access program customers for our high
throughput screening systems: Eli Lilly, Amgen, and Hoffmann-La Roche.
Eli Lilly. We signed our most recent technology access agreement with Eli
Lilly in August 1999. The term is three years, although Eli Lilly may
temporarily suspend its technology access program participation and later
reinitiate participation, during which time our support and assistance
obligations will also be suspended. Eli Lilly may terminate the agreement on any
anniversary.
Amgen. We entered into a technology access agreement with Amgen in
December 1998. Under this agreement, Amgen may delay payment of its second
annual subscription fee until we have delivered an initial ultra high throughput
system. The term of this agreement is three years, although Amgen may terminate
the agreement on any anniversary or if we fail to deliver the ultra high
throughput screening system in a timely manner.
Hoffmann-La Roche. We entered into a technology access agreement with
Hoffmann-La Roche in November 1998, which is due to expire in July 2000. This
agreement supersedes an earlier agreement under which Roche funded early
development of the high throughput screening technology in exchange for certain
exclusive rights to an ultra high throughput screening system. Roche now has
non-exclusive rights similar to other technology access program customers. We
did not receive an up-front license fee or annual subscription fee from
Hoffmann-La Roche.
Value Added Screening Collaboration Program
In our value added screening collaboration program we offer high throughput
screening services using our LabChip systems. This can enable smaller companies
that may not be able to afford to participate in our technology access program
to take advantage of our high throughput systems in the early phases of
commercialization. Our first value added screening collaboration agreement was
established with Neurocrine Biosciences in December 1998. We receive screening
fees on a per data point basis, preclinical
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milestones and royalties on Neurocrine products emerging from the collaboration.
This agreement has a three-year term, but may be terminated by either party
under certain circumstances after the first year.
TECHNOLOGY
We believe that we have established a leading position in three areas of
lab-on-a-chip technology.
Microfabrication
We create lab-on-a-chip microfluidic devices using the same
microfabrication manufacturing methods that are used to make microchips in the
computer industry. Microfabrication makes it possible to create intricate
designs of interconnected channels that are extremely small. Each pattern is
designed to produce the series of fluidic manipulations that will execute an
experiment. We use the principles of fluid dynamics, chemical and electrical
engineering and biophysics to create initial designs using computer-aided design
tools. Because we have designed, manufactured and tested hundreds of different
chips, we have developed proprietary design rules that make each round of chip
creation more predictable and likely to succeed. We design our chips to be
disposable and relatively inexpensive to manufacture. We place the more
expensive electronic controls and sensing capability in a separate instrument.
Once a design pattern is completed, we use advanced photolithographic or
injection molding processes so that the pattern is recreated as channels in a
sheet of quartz, glass or plastic. This process creates highly precise channels
with dimensions that can be varied with respect both to width and depth. A
typical channel is roughly 50 microns wide and 10 microns deep, approximately
the size of a strand of hair.
In the next step, a second sheet of quartz, glass or plastic with a precise
pattern of holes is fused to the first sheet using a proprietary process. This
covers the channels and converts them to closed microfluidic conduits. The end
of each channel connects to an open reservoir through which fluids are
introduced. The sheets are then diced into individual chips, which can be less
than one inch to a few inches on a side. The individual chips are then packaged
into plastic holders that make them easier for the user to handle.
We currently make two basic chip formats. In our planar chips, such as
those used in the HP 2100 Bioanalyzer, the user introduces all of the chemical
reagents into the reservoirs, including the various samples to be tested, using
pipets. In our Sipper chips, such as those used in the Caliper 110, a small
glass tube, or capillary, inserted into the chip draws a few nanoliters of each
sample into the channel network. In this way, minute quantities of a large
number of samples can be tested in a single chip. The samples are introduced
into the capillary one after the other, spaced by buffer solution. They proceed
through the channel network in a continuous flow, assembly-line fashion to
perform a complete experiment. We have an issued U.S. patent claiming this assay
technique.
Microfluidics
In our LabChip systems the microfluidics, or movement of fluid and
material, is actively controlled by computer programs. We use two different
methods of generating fluid motion in microchannels: electrokinetics and
pressure.
Electrokinetic flow is generated by placing in the reservoirs electrodes
which are attached to computer-driven power supplies. When current is induced
through the fluid by the power supply, fluids of the appropriate type will move
by a process known as "electro-osmosis." Typical flow rates within the channel
are about a millimeter per second and the flow rate can be controlled with a
high degree of precision. Programs can then be written to generate highly
specific and complex networks of flow. One key to designing complex systems is
controlling and directing the flow at intersections. Fundamental techniques for
accomplishing this were invented by Dr. J. Michael Ramsey, one of our
co-founders and a member of our Scientific Advisory Board, and are covered by a
series of issued and pending U.S. patent applications. We hold an exclusive
license to these patents for most applications and a non-exclusive license for
remaining applications.
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Another electrokinetic phenomenon known as "electrophoresis" occurs in the
channels. This is the movement of charged molecules or particles in an electric
field. Electrophoresis is often used in conventional laboratories for analyzing
molecules since they move differently according to their physical make-up.
Electrophoresis can be used to move molecules in solution, or to separate
molecules with very subtle differences. Electrophoresis and electro-osmosis
generally occur at the same time in channels. However, we have developed
proprietary techniques for minimizing either force while maintaining the other,
as appropriate, for a given application.
Pressure can also be used to move fluid in the channels. On the
microfluidic scale, small amounts of pressure produce highly predictable and
reproducible fluid flow. We use both computer-controlled pressure and
electrokinetic forces to gain precise control over fluid flow in the
microfluidic channel network. It is possible to use electrokinetic forces alone,
pressure forces alone, or a combination of the two methods.
Lab-on-a-Chip Applications Development
We have developed a large amount of expertise at discovering new functions
that microfluidic chips can perform. We have generated proprietary computer
models of how an experiment can be carried out. We store these functional
designs and we can incorporate them into new designs that simulate complete
experiment pathways. In this way, we believe the value of new microfluidic
inventions can be rapidly expanded across many application development projects.
We have also developed expertise at making experiments work in our chips.
Currently, all of our systems use fluorescent chemical reagents and optical
detection instruments to read experimental results. We often need to explore
chemical strategies for labeling relevant reagents that can reveal how different
molecular interactions take place. Another area of investigation addresses the
fact that in these small dimensions, the amount of channel surface material
relative to the amount of liquid is many times higher than in a test tube or
microwell plate. Because of this, the surface material can exert a chemical
influence on the biochemical reactions taking place. We have created strategies
to avoid the problems this can cause, or benefit from it if possible. We have
developed Sipper chips that perform and analyze enzyme reactions using part of
the channel design as a tiny, continuously operating electrophoresis machine.
Thus, reactions with one sample are going on in one area of the chip while
electrophoretic separation of the products of another sample is taking place in
a different part of the chip. We have also found that, in many cases, an optical
detection method called fluorescence polarization spectroscopy can be used to
read reaction results without needing to electrophoretically separate the
biochemicals. We have built this optical detection capability into our high
throughput systems. In general, our experience is that microfabrication and
microfluidics provide a rich tool set with which to create innovative new
applications.
RESEARCH AND DEVELOPMENT
We have made substantial investments in lab-on-a-chip research and product
development since our inception. We explored fundamental issues of lab-on-a-chip
technology as early as possible in order to find solutions to important
technical challenges and seek patent protection for our solutions. Today we are
supplementing these core technology research efforts with applied product
development efforts in several areas.
Technology Research
Our technology research activities fall into several classes.
Chemical Engineering. We are increasing our understanding of the design
rules guiding the development of new chips. Using the principles of chemical
engineering we create patterns of interconnected channels that permit execution
of the various common steps of experimentation. Designs from one chip can be
used for other chips needing similar fluidic functions for a different
application. Mathematics and computer models also help minimize the number of
iterations necessary to achieve new functional chip designs.
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Chip Manufacturing. We continue to seek ways to improve the yield and
decrease the cost of manufacturing our chips. We are exploring novel fabrication
techniques and the use of new materials that offer functional advantages, such
as manufacturing in quartz to take advantage of its superior optical features.
We have development programs in manufacturing technology for chips made of
plastic. Plastic devices potentially offer cost advantages and, in some cases,
offer favorable surface chemical features for certain applications. A major area
of development is micromachining technology for precisely attaching capillaries
to our Sipper chips to access reagents. In high throughput experimentation, the
number of capillaries and channels determines the level of throughput.
Accordingly we are developing high yield fabrication methods to enable us to
cost-effectively manufacture chips with many capillaries to perform ultra high
throughput experimentation.
Engineering and Software. We use the skills of electrical engineers,
optical engineers, mechanical engineers, product designers and software
engineers to create new instrumentation to run our chips. These instruments
control fluid movement inside the chip, present the reagents to the chip from
conventional fluid sources, and detect the results of biochemical or cell-based
experiments with optical methods. Software engineers write computer programs
that control the sources of fluid motion, communicate between different
instrument components and interpret signals from the detection system. Currently
we develop the software for our high throughput systems. We collaborate with
Hewlett-Packard to develop software for our personal laboratory systems.
Product Development
Our product development efforts are currently focused on new applications
and capabilities for
our existing instruments, our LibraryCard system, and high throughput genomic
systems.
Extensions of Existing Product Lines. For each of our first generation
instruments, we are expanding the menu of applications to address other stages
of the pharmaceutical development process. For the HP 2100 Bioanalyzer, we
intend to introduce new applications that address everyday productivity needs in
many areas of nucleic acids biochemistry, protein chemistry and cell biology. We
are broadening the application menu for high throughput systems as well to
include membrane receptor binding assays, DNA/protein binding assays,
protein/protein binding assays, and cell-based membrane potential assays. We are
also developing next generation instruments for each of these product lines.
LibraryCard System. We are developing a new format for storing and
accessing reagents, which we call the LibraryCard reagent array. We have learned
how to reconstitute very small quantities of dried reagents stored at high
density on a planar surface. We can conveniently access reagents stored in this
way using our Sipper chips. The LibraryCard reagent array could produce a
fundamental change in the way large libraries of reagents are used. Today, such
libraries are only accessible in centralized reference-style laboratories that
can conveniently work with automated warehouses of reagents. When libraries can
be reduced to the size of a postcard, high throughput experimentation involving
massive data acquisition can be decentralized. We believe that this will
increase the size of the market for applications that run on this type of
system. We believe this type of system could significantly impact several stages
of the pharmaceutical development process, particularly primary screening and
pharmacogenetic studies.
Genomics. Genomics is the high throughput analysis of nucleic acids.
Genomics applications include sequencing DNA and DNA genotyping. Genotyping is
the determination of the DNA sequence variation present at a particular site in
an individual's DNA. Like all experimentation processes, these applications are
a combination of various fluidic manipulations, biochemical reactions,
separations and detection. As such, we believe they can be performed on the same
basic high throughput platform we have built for other applications. In early
1999, we began a project, funded in part by the Advanced Technology Program of
the National Institute of Standards and Technology, to adapt the platform and
develop chips to run high throughput nucleic acids analyses. While the specific
aim of the program is to develop a diagnostics system, the first commercial
products to emerge from the technology could be genomics products, such as a
high throughput system for genotyping single nucleotide polymorphisms, or SNPs.
Our goal is to apply
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lab-on-a-chip technology to some of the most important areas of biology today,
including DNA sequencing, and emerging areas such as SNP genotyping for
pharmacogenetics.
Our research and development expenses for the first nine months of 1999,
and for the years ended 1998, 1997 and 1996, were approximately $12.2 million,
$9.6 million, $7.2 million, and $2.7 million, respectively. We intend to
increase our research and development budget and staffing levels during the
remainder of 1999 and into 2000. As of September 30, 1999, we had 70 employees
engaged in research and development, including 41 with advanced degrees.
MANUFACTURING
We manufacture our chips in-house and are currently manufacturing high
throughput instruments in limited volumes. We rely upon Hewlett-Packard to
manufacture the HP 2100 Bioanalyzer. Our high throughput instruments are
generally integrated with plate stacking and handling units offered commercially
by other companies. We contract with third parties to supply most reagents for
the research products business. We currently depend on suppliers to supply
prepared materials for use in the manufacture of chips. We intend to continue
and may extend the subcontracting of portions of our manufacturing processes to
subcontractors where we feel it best leverages the supplier's manufacturing
experience, costs, and/or improves our ability to meet customer demands. For a
discussion of the methods we use to manufacture our chips see "-- Technology"
and "-- Research and Development."
COMPETITION
Although we believe that we are currently the only company selling and
delivering lab-on-a-chip products to customers, we expect to encounter intense
competition from a number of companies that offer products for laboratory
experimentation. We anticipate that our competitors will come primarily from the
following two sectors:
- companies providing conventional products based on established
technologies
- companies developing their own microfluidics or lab-on-a-chip
technologies
In order to compete against vendors of conventional products, we will need
to demonstrate the advantages of our LabChip products over alternative
well-established technologies and products. We will also need to demonstrate the
potential economic value of our LabChip products relative to these conventional
technologies and products. Some of the companies that provide these products
include PE Corp., Hewlett-Packard, Beckman-Coulter, Amersham Pharmacia Biotech,
Bio-Rad Laboratories, Molecular Devices, and LJL BioSystems.
We will also need to compete effectively with companies developing their
own microfluidics or lab-on-a-chip technologies and products, such as Aclara
Biosciences and Orchid Biocomputer. Other companies known to have initiated
microfluidic programs include Motorola, 3M and PE Corp. Microfluidic
technologies have undergone and are expected to continue to undergo rapid and
significant change. Our future success will depend in large part on our ability
to establish and maintain a competitive position with respect to these and
future technologies.
In many instances, our competitors have or will have substantially greater
financial, technical, research, and other resources and larger, more established
marketing, sales, distribution, and service organizations than we do. Moreover,
competitors may have greater name recognition than we do, and may offer
discounts as a competitive tactic. We cannot assure you that our competitors
will not succeed in developing or marketing technologies or products that are
more effective or commercially attractive than our products, or that would
render our technologies and products obsolete. Also, we may not have the
financial resources, technical expertise or marketing, distribution or support
capabilities to compete successfully in the future. Our success will depend in
large part on our ability to maintain a competitive position with respect to our
technologies.
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INTELLECTUAL PROPERTY
We seek patent protection on our lab-on-a-chip technologies. As of
September 30, 1999, we owned or held licenses to 34 issued U.S. patents and 120
pending U.S. patent applications, some of which derive from a common parent
application. Our issued patents expire between 2012 and 2019. Foreign
counterparts of many of these patents and applications have been filed and/or
issued in one or more other countries, resulting in a total of more than 330
issued patents and pending patent applications in the United States and foreign
countries. These patents and applications are directed to various technological
areas which we believe are valuable to our business, including:
- control of movement of fluid and other material through interconnected
microchannels
- continuous flow high throughput screening assay methods and systems
- analytical and control instrumentation
- analytical system architecture
- chip based assay chemistries and methods
- chip compatible sample accession
- software for control of microfluidic based systems and data analysis
- chip manufacturing processes
We also rely upon copyright protection, trade secrets, know-how, continuing
technological innovation and licensing opportunities to develop and maintain our
competitive position. Our success will depend in part on our ability to obtain
patent protection for our products and processes, to preserve our copyrights and
trade secrets, to operate without infringing the proprietary rights of third
parties and to acquire licenses related to enabling technology or products used
with our lab-on-a-chip technology.
We are party to various exclusive and non-exclusive license agreements with
third parties which give us rights to use certain technologies. For example, we
have an exclusive license in the fields we are currently operating in from
Lockheed Martin Energy Research Corporation, relating to patents covering
inventions by Dr. J. Michael Ramsey. A failure to maintain some or all of the
rights to these technologies could seriously harm our business.
EMPLOYEES
As of September 30, 1999, we had a total of 101 employees, including 70 in
research and development, 14 in manufacturing and 17 in administration and
finance. None of our employees is represented by a collective bargaining
agreement, nor have we experienced any work stoppage. We consider our relations
with our employees to be good.
FACILITIES
Our principal research and development, manufacturing and administrative
facilities are currently located in approximately 53,000 square feet of leased
space in Mountain View, California. The lease for this space will expire in
December 2008. We believe that our current facilities are adequate for our needs
through the year 2000.
LEGAL PROCEEDINGS
On March 22, 1999, we filed a lawsuit in California Superior Court for the
County of Santa Clara (Case No. CV 780743), against Aclara Biosciences Inc., a
patent attorney named Bertram Rowland and the law firm of Flehr, Hohbach, Test,
Albritton and Herbert LLP, alleging that all three defendants misappropriated
our trade secrets and that Mr. Rowland and Flehr Hohbach committed a breach of
the duties they owed to us as our former attorneys. The suit seeks damages and
equitable remedies to prevent Aclara, Mr. Rowland and Flehr Hohbach from
benefiting from the alleged misappropriation and breach of
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duties. While we believe that our complaint is meritorious, we cannot assure you
that we will prevail in our action against any or all of the defendants, or that
if we prevail, the damages or equitable remedies awarded, if any, will be
commercially valuable. Furthermore, we have incurred and are likely to continue
to incur substantial costs and expend substantial personnel time in pursuing our
claims against Aclara, Mr. Rowland and Flehr Hohbach.
On April 23, 1999, Aclara Biosciences filed a lawsuit in United States
District Court for the Northern District of California (Case No. C-99-1968BZ)
alleging that we are making, using, selling or offering for sale microfluidic
devices that infringe United States Patent Number 5,750,015 in willful disregard
of Aclara's patent rights. The Aclara action seeks damages for past and future
reduced sales or lost profits based upon the making, using, selling and offering
for sale of our products and processes, and seeks to enjoin our continued
activities relating to these products. This action subjects us to potential
liability for damages, including treble damages, and could require us to cease
making, using or selling the affected products, or to obtain a license in order
to continue to manufacture, use or sell the affected products. While we believe
we have meritorious defenses to this action, we cannot assure you that we will
prevail in this action nor can we assure you that any license required would be
made available on commercially acceptable terms, if at all. Furthermore, we have
incurred and are likely to continue to incur substantial costs and expend
substantial personnel time in defending against the claims filed by Aclara.
Failure to successfully defend ourselves against the Aclara action could have a
material adverse effect on our business, financial condition and operating
results.
SCIENTIFIC ADVISORY BOARD
We have assembled a group of scientific advisors who are leaders in fields
related to microfluidics technology and systems. These advisors assist us in
formulating our research, development and commercialization strategy and
include:
George Whitesides, Ph.D., Chair, Mallinckrodt Professor of Chemistry at Harvard
University and Member of the National Academy of Sciences. Dr. Whitesides is the
Chairman of our Scientific Advisory Board.
J. Michael Ramsey, Ph.D., a co-founder of Caliper and Corporate Research Fellow
and Head of the Laser Spectroscopy and Microinstrumentation Group in the
Chemical and Analytical Sciences Division at Oak Ridge National Laboratory.
Robert H. Austin, Ph.D., Professor of Physics at Princeton University.
Charles P. Cantor, Ph.D., Professor of Biomedical Engineering and Biophysics at
Boston University, and Member of the National Academy of Sciences.
George Church, Ph.D., Senior Investigator at the Howard Hughes Medical Institute
at Harvard Medical School.
Jed Harrison, Ph.D., Professor of Analytical Chemistry at the University of
Alberta.
Richard Haugland, Ph.D., President and Corporate Research Director of Molecular
Probes, Inc.
James W. Jorgenson, Ph.D., Francis P. Venable Professor of Chemistry at the
University of North Carolina.
Barry Karger, Ph.D., James L. Waters Chair in Analytical Chemistry and Director
of the Barnett Institute of Chemical Analysis and Materials Science at
Northeastern University, Boston, Massachusetts.
Butrus T. Khuri-Yakub, Ph.D., Professor of Electrical Engineering at the E.L.
Ginzton Laboratory of Stanford University.
Andreas Manz, Ph.D., SmithKline Beecham Chair of Analytical Chemistry at the
Imperial College of Science, London.
Stephen D. Senturia, Ph.D., Barton L. Weller Professor of Electrical Engineering
at the Massachusetts Institute of Technology.
Christopher T. Walsh, Ph.D., Hamilton Kuhn Professor of Biological Chemistry and
Molecular Pharmacology at Harvard Medical School and Member of the National
Academy of Sciences.
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MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND FOUNDERS
The following presents information about our directors, executive officers
and co-founders as of September 30, 1999.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Daniel L. Kisner, M.D. ................... 52 President, Chief Executive Officer and Director
Calvin Y. H. Chow......................... 44 Chief Operating Officer and Co-founder
James L. Knighton......................... 45 Chief Financial Officer
Michael R. Knapp, Ph.D. .................. 47 Vice President of Science and Technology and
Co-founder
J. Wallace Parce, Ph.D. .................. 49 Vice President of Research and Co-founder
William M. Wright III..................... 51 Vice President of Operations
David V. Milligan, Ph.D.(1)(2)............ 59 Chairman of the Board of Directors
Anthony B. Evnin, Ph.D.(1)................ 58 Director
Charles M. Hartman(2)..................... 58 Director
Regis P. McKenna.......................... 60 Director
Robert T. Nelsen(2)....................... 36 Director
Michael Steinmetz, Ph.D.(1)............... 52 Director
Lawrence A. Bock.......................... 40 Co-founder
J. Michael Ramsey, Ph.D. ................. 47 Co-founder
</TABLE>
- ---------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
DANIEL L. KISNER, M.D., has served as our President and Chief Executive
Officer since February 1999 and as a Director since March 1999. From May 1994 to
January 1999, Dr. Kisner served as President and Chief Operating Officer of Isis
Pharmaceuticals, Inc., a biotechnology company. From February 1993 to May 1994,
Dr. Kisner served as Executive Vice President and Chief Operating Officer of
Isis Pharmaceuticals, Inc. From March 1991 to February 1993, he served as
Executive Vice President of Isis Pharmaceuticals, Inc. and was responsible for
business and product development, and manufacturing. From December 1988 to March
1991, Dr. Kisner served as Division Vice President of Pharmaceutical Development
for Abbott Laboratories. Dr. Kisner has held a tenured position in the Division
of Oncology at the University of Texas, San Antonio School of Medicine and is
certified by the American Board of Internal Medicine and certified in Medical
Oncology. Dr. Kisner holds a B.A. from Rutgers University and an M.D. from
Georgetown University.
CALVIN Y. H. CHOW, co-founded Caliper and has served as our Chief Operating
Officer since February 1998. Mr. Chow also served as our Vice President of
Development from September 1995 to February 1998. From October 1985 to September
1995, Mr. Chow served as Vice President of Engineering and Operations of
Molecular Devices Corporation, a bioanalytical instrumentation company, where he
was responsible for product development and company-wide manufacturing. Mr. Chow
holds a B.S. in Electrical Engineering from Illinois Institute of Technology and
an M.S. in Electrical Engineering from Stanford University.
JAMES L. KNIGHTON, has served as our Chief Financial Officer since
September 1999. From October 1998 to September 1999, Mr. Knighton served as
Senior Vice President and Chief Financial Officer of SUGEN, Inc., a
biotechnology company. From July 1997 to October 1998, Mr. Knighton served as
Vice President of Investor Relations and Corporate Communications at Chiron
Corporation, a biotechnology company. From 1985 to 1994, Mr. Knighton served in
various operations, planning and R&D functions at
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E. I. DuPont de Nemours Inc., a global, diversified chemical and life science
company. Mr. Knighton holds a B.S. in Biology from the University of Notre Dame,
an M.S. in Genetics from the University of Pennsylvania and an M.B.A. from the
Wharton School at the University of Pennsylvania.
MICHAEL R. KNAPP, PH.D., co-founded Caliper and has served as our Vice
President of Science and Technology since September 1995. From November 1994
through August 1995, Dr. Knapp was engaged in activities related to forming
Caliper, including securing our core technology license and procuring financing.
From October 1988 to October 1994, Dr. Knapp served as President and Scientific
Director at Molecular Tool, Inc., a genetics technology company he co-founded in
1988. Previously, Dr. Knapp was on the staff of the Center for Neurobiology and
Behavior at Columbia University and was a Scientific Director of Genetica SARL,
an affiliate of Rhone Poulenc SA in Paris, France. Dr. Knapp holds a B.S. in
Biology from Trinity College (Hartford) and a Ph.D. in Medical Microbiology from
Stanford University.
J. WALLACE PARCE, PH.D., co-founded Caliper and has served as our Vice
President of Research since October 1995. Prior to joining Caliper, Dr. Parce
spent 12 years with Molecular Devices Corporation as a founder, consultant,
Director of Research and Vice President of Research. From 1980 until 1984 he was
an Assistant Professor in the Department of Biochemistry at Wake Forest
University, from 1982 until 1987 an associate in the Department of Microbiology
and Immunology, and from 1984 until 1987, an Associate Professor of
Biochemistry. Dr. Parce received his B.A. in Chemistry from Western Maryland
College in 1972 and his Ph.D. in Biochemistry from Wake Forest University in
1976. From 1976 until 1980 Dr. Parce was a Post Doctoral Fellow in Chemistry at
Stanford University.
WILLIAM M. WRIGHT III, has served as our Vice President of Operations since
September 1998. From November 1995 to May 1998, Mr. Wright served as Vice
President of Operations of Biocircuits Corporation, a medical diagnostic
company, where he was responsible for instrument and immunoassay cartridge
manufacturing. From 1984 to 1995, Mr. Wright was Vice President of Site
Operations with Dade International Inc., formerly a division of Baxter
International, Inc., a medical products manufacturing company, where he assisted
in the start-up and launch of the Baxter International Paramax Analytical
Clinical Chemistry Business. Mr. Wright holds a B.S. in Industrial Technology
from California State University at Long Beach.
DAVID V. MILLIGAN, PH.D., has been a Director since October 1996 and the
Chairman of the Board since April 1997. He has been a Vice President and Special
Limited Partner of Bay City Capital, Merchant Bank since 1997. From 1979 to
1996, Dr. Milligan served in a variety of management positions at Abbott
Laboratories, a healthcare products company. During his career at Abbott
Laboratories he led both the diagnostic products and pharmaceutical products
research and development organizations and was Senior Vice President and Chief
Scientific Officer when he retired at the end of 1996. He is also a director of
ICOS Corporation and Diametrics Medical, Inc. He is a member of the chemistry
department advisory boards of the University of California at Berkeley and
Princeton University. Dr. Milligan holds an A.B. in Chemistry from Princeton
University and an M.S. and a Ph.D. in Organic Chemistry from the University of
Illinois.
ANTHONY B. EVNIN, PH.D., has been a Director since June 1996. He has been a
General Partner of Venrock Associates, a venture capital partnership since 1975.
He is also a director of Centocor, Inc., Ribozyme Pharmaceuticals, Inc. and
Triangle Pharmaceuticals, Inc. Dr. Evnin holds an A.B. from Princeton University
and a Ph.D. in Chemistry from Massachusetts Institute of Technology.
CHARLES M. HARTMAN, has been a Director since June 1996. He has been a
General Partner of CW Group, a manager of medical venture capital funds since
April 1983. From 1966 to 1983, Mr. Hartman served in various positions at
Johnson & Johnson where he was responsible for identification, evaluation and
negotiation situations ranging from single product opportunities to company
acquisitions, both domestically and internationally. Mr. Hartman is a director
of The Hastings Center, a non-profit organization devoted to the study of
bioethical issues in medicine and the life sciences. Mr. Hartman holds a B.S. in
Chemistry from the University of Notre Dame and an M.B.A. from the University of
Chicago.
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<PAGE> 50
REGIS P. MCKENNA, has been a Director since September 1998. Mr. McKenna has
been Chairman of The McKenna Group, an international consulting firm
specializing in the application of information and telecommunications
technologies to business strategies since 1973. Mr. McKenna is on the board of
The Economic Strategies Institute and the Competitiveness Council. He is
Chairman of the Board of the Santa Clara University Center for Science,
Technology and Society and was a founding board member of Smart Valley. He is a
trustee at Santa Clara University and President of the Board of Trustees for The
New Children's Shelter of Santa Clara County. Mr. McKenna is on the board of
directors of a number of high technology start-up companies. Mr. McKenna holds a
B.A. from Duquesne University.
ROBERT T. NELSEN, has been a Director since September 1995. Since July
1994, Mr. Nelsen has served as a senior principal of various venture capital
funds associated with ARCH Venture Partners, including ARCH Venture Fund II,
L.P., ARCH Venture Fund III, L.P. and ARCH Venture Fund IV, L.P. From April 1987
to July 1994, Mr. Nelsen was Senior Manager at ARCH Development Corporation, a
company affiliated with the University of Chicago, where he was responsible for
new company formation. He holds a B.S. in Biology and Economics from the
University of Puget Sound and an M.B.A. from the University of Chicago.
MICHAEL STEINMETZ, PH.D., has been a Director since July 1997. He has been
a partner of MPM Asset Management LLC in Cambridge, MA, a venture capital firm
focusing on investments in private biotechnology companies in the U.S. and
Europe, since 1997. From 1997 to 1998, Dr. Steinmetz was also a partner of the
Bellevue Group in Zurich, Switzerland. From 1986 to 1997, Dr. Steinmetz worked
at Hoffmann-La Roche Inc. He headed the Biology Department in Basel and its
worldwide biotechnology research activities. He also was Vice President of
Preclinical Research and Preclinical Research and Development in Nutley, New
Jersey. Dr. Steinmetz was a member of the Board of Directors at Roche USA and
Millennium Pharmaceuticals. Dr. Steinmetz holds a Ph.D. in Natural Sciences from
the University of Munich, has lectured at the University of Basel and is Adjunct
Professor at Rutgers University.
LAWRENCE A. BOCK, co-founded Caliper and served as a director of Caliper
and acting Chief Executive Officer from inception until April 1997 and since
then has been an advisor to Caliper. He has been a General Partner of CW Group,
a medical venture capital fund since June 1998. From 1988 to 1998, Mr. Bock was
General Partner of Avalon Ventures, a seed stage venture capital firm, where he
founded such companies as Vertex Pharmaceuticals, Athena Neurosciences,
Pharmacopeia, Neurocrine Biosciences and Argonaut Technologies. He is a founder
and director of Illumina Inc. and FastTrack Systems, Inc. Mr. Bock holds a B.S.
in Biochemistry from Bowdoin College and an M.B.A. from the University of
California, Los Angeles.
J. MICHAEL RAMSEY, PH.D., co-founded Caliper and has served on our
Scientific Advisory Board since September 1995. Since February 1979 Dr. Ramsey
has served on the research staff at Oak Ridge National Laboratory where he is
presently a Corporate Research Fellow and Head of the Laser Spectroscopy and
Microinstrumentation Group. Dr. Ramsey holds a B.S. degree in Chemistry from
Bowling Green State University and a Ph.D. in Chemistry from Indiana University.
BOARD COMPOSITION
We currently have seven directors. Upon the closing of this offering the
terms of office of the board of directors will be divided into three classes. As
a result, a portion of our board of directors will be elected each year. The
division of the three classes, the initial directors and their respective
election dates are as follows:
- the class I directors will be Anthony B. Evnin, Ph.D. and Robert T.
Nelsen and their term will expire at the annual meeting of stockholders
to be held in 2000
- the class II directors will be Charles M. Hartman, David V. Milligan,
Ph.D. and Michael Steinmetz, Ph.D. and their term will expire at the
annual meeting of stockholders to be held in 2001
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- the class III directors will be Daniel L. Kisner, M.D. and Regis P.
McKenna and their term will expire at the annual meeting of stockholders
to be held in 2002
At each annual meeting of stockholders after the initial classification, the
successors to directors whose terms will then expire will be elected to serve
from the time of election and qualification until the third annual meeting
following election. In addition, the authorized number of directors may be
changed only by resolution of the board of directors. Any additional
directorships resulting from an increase in the number of directors will be
distributed among the three classes so that, as nearly as possible, each class
will consist of one-third of the directors. This classification of the board of
directors may have the effect of delaying or preventing changes in control or
management of Caliper.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1998, Mr. Hartman and Drs. Milligan and Steinmetz served as
members of the compensation committee of our board of directors. No member of
the compensation committee serves as a member of the board of directors or
compensation committee of any other entity that has one or more executive
officers serving as a member of our board of directors or compensation
committee. Prior to the formation of the compensation committee in June 1996,
our board of directors as a whole made decisions relating to compensation of our
executive officers.
BOARD COMMITTEES
Audit Committee. Our audit committee reviews our internal accounting
procedures and consults with, and reviews the services provided by, our
independent auditors. Current members of our audit committee are Drs. Evnin,
Milligan and Steinmetz.
Compensation Committee. Our compensation committee reviews and recommends
to the board of directors the compensation and benefits of all our officers and
reviews general policy relating to compensation and benefits of our employees.
The compensation committee also administers the issuance of stock options and
other awards under our stock plans. Current members of the compensation
committee are Messrs. Hartman and Nelsen and Dr. Milligan.
DIRECTOR COMPENSATION
Directors currently receive no cash compensation from us for their services
as members of the board or for attendance at committee meetings. Directors may
be reimbursed for certain expenses in connection with attendance at board of
directors and committee meetings.
In September of 1996, we granted Dr. Milligan, in connection with his
services as one of our directors, the right to purchase 30,000 shares of common
stock at $0.07 per share, subject to a right of repurchase that lapses in 60
equal monthly installments. In November 1997, we granted Dr. Milligan an
additional stock option to purchase 10,000 shares of common stock at an exercise
price of $0.40 per share. This option fully vested in September 1998. In April
1999, we granted Dr. Milligan an additional stock option to purchase 10,000
shares of common stock at an exercise price of $0.62 per share. This option
fully vested in September 1999. In October 1999, we granted Dr. Milligan an
additional stock option to purchase 10,000 shares of common stock at an exercise
price of $2.00. This option will fully vest in September 2000. In September
1998, we granted Mr. McKenna, in connection with his services as one of our
directors, a stock option to purchase 30,000 shares of common stock at an
exercise price of $0.62 per share. This option vests in 60 equal monthly
installments. In October 1999, we granted Mr. McKenna an additional stock option
to purchase 5,000 shares of common stock at an exercise price of $2.00 per
share. This option fully vests in September 2000. We have also entered into
consulting agreements with each of Dr. Milligan and Mr. McKenna. See "Certain
Transactions" for a description of these agreements.
In October 1999, we adopted the 1999 Non-Employee Directors' Stock Option
Plan to provide for the automatic grant of options to purchase shares of common
stock to our non-employee directors who are not employees of Caliper or of any
affiliate of Caliper. Any non-employee director elected after the closing of
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this offering will receive an initial option to purchase 30,000 shares of common
stock. Starting at the annual stockholder meeting in 2000, all non-employee
directors will receive an annual option to purchase 5,000 shares of common stock
and the chairman of the board will receive an annual option to purchase 10,000
shares of common stock. See "-- Employee Benefit Plans -- 1999 Non-Employee
Directors' Stock Option Plan" for a more detailed explanation of the terms of
these stock options.
LIMITATION OF DIRECTORS' AND OFFICERS' LIABILITY
Our bylaws provide that we will indemnify our directors and executive
officers and may indemnify our other officers, employees and other agents to the
fullest extent permitted by Delaware law. We are also empowered under our bylaws
to enter into indemnification contracts with our directors and officers and to
purchase insurance on behalf of any person we are required or permitted to
indemnify. Pursuant to this provision, we expect to enter into indemnification
agreements with each of our directors and executive officers.
We intend to obtain officer and director liability insurance with respect
to liabilities arising out of certain matters, including matters arising under
the Securities Act. In addition, our certificate of incorporation provides that,
to the fullest extent permitted by Delaware law, our directors will not be
liable for monetary damages for breach of the directors' fiduciary duty of care
to us and our stockholders. This provision in the certificate of incorporation
does not eliminate the duty of care, and in appropriate circumstances, equitable
remedies such as an injunction or other forms of non-monetary relief would
remain available under Delaware law. Under current Delaware law, a director's
liability to us or our stockholders may not be limited with respect to any
breach of the director's duty of loyalty to us or our stockholders, for acts or
omissions not in good faith or involving intentional misconduct, for knowing
violations of law, for any transaction from which the director derived an
improper personal benefit, for improper transactions between the director and us
and for improper distributions to stockholders and loans to directors and
officers. This provision also does not affect a director's responsibilities
under any other laws such as the federal securities laws or state or federal
environmental laws.
There is no pending litigation or proceeding involving a director or
officer of Caliper as to which indemnification is being sought, nor are we aware
of any pending or threatened litigation that may result in claims for
indemnification by any director or officer.
EXECUTIVE COMPENSATION
The following table sets forth summary information for the fiscal year
ended December 31, 1998, regarding the compensation of each of our most highly
compensated executive officers whose salary and bonus for 1998 were in excess of
$100,000. We did not have a Chief Executive Officer or Chief Financial Officer
during 1998. Dr. Daniel L. Kisner joined Caliper in February 1999 as our
President and Chief Executive Officer, and Mr. James L. Knighton joined Caliper
in September 1999 as our Chief Financial
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Officer. See "-- Employment Agreements" below for a description of Dr. Kisner's
and Mr. Knighton's employment arrangements.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL ------------
COMPENSATION SECURITIES
------------------- UNDERLYING
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS
- --------------------------- -------- ------- ------------
<S> <C> <C> <C>
Calvin Y. H. Chow......................................... $194,775 $38,000 100,000
Chief Operating Officer
Michael R. Knapp, Ph.D. .................................. 165,746 22,000 50,000
Vice President of Science and Technology
J. Wallace Parce, Ph.D. .................................. 186,200 22,000 50,000
Vice President of Research
</TABLE>
Mr. Chow's bonus figure includes $19,000 received in cash and 30,645 shares
of common stock received in lieu of cash. Dr. Knapp's bonus figure includes
$14,740 received in cash and 11,710 shares of common stock received in lieu of
cash. Dr. Parce's bonus figure includes $14,740 received in cash and 11,710
shares of common stock received in lieu of cash.
OPTION GRANTS IN FISCAL YEAR 1998
The following table sets forth each grant of stock options during the
fiscal year ended December 31, 1998, to each of the individuals listed in the
Summary Compensation Table.
The exercise price of each option was equal to the fair market value of our
common stock as valued by the board of directors on the date of grant. The
exercise price may be paid in cash, promissory notes, in shares of our common
stock valued at fair market value on the exercise date or through a cashless
exercise procedure involving a same-day sale of the purchased shares. The
options granted to Mr. Chow, Drs. Knapp and Parce vest as to 20% on September
16, 1999 and 1/60th per month thereafter.
The potential realizable value is calculated based on the ten-year term of
the option at the time of grant. Stock price appreciation of 5% and 10% is
assumed pursuant to rules promulgated by the Securities and Exchange Commission
and does not represent our prediction of our stock price performance. The
potential realizable values at 5% and 10% appreciation are calculated by:
- multiplying the number of shares of common stock subject to a given
option by the assumed initial public offering price of $ per share
- assuming that the aggregate stock value derived from that calculation
compounds at the annual 5% or 10% rate shown in the table until the
expiration of the options
- subtracting from that result the aggregate option exercise price
Percentages shown under "Percentage of Total Options Granted in 1998" are
based on an aggregate of 660,300 options granted to employees, consultants and
directors of Caliper under our stock option plans during 1998.
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<PAGE> 54
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
-------------------------------------------- ANNUAL RATES OF
NUMBER OF STOCK PRICE
SECURITIES APPRECIATION FOR
UNDERLYING PERCENTAGE OF TOTAL EXERCISE OPTION TERM
OPTIONS OPTIONS PRICE PER EXPIRATION ---------------------
NAME GRANTED GRANTED IN 1998 SHARE DATE 5% 10%
- ---- ---------- ------------------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Calvin Y. H. Chow............ 100,000 15.14% $0.62 09/16/08
Michael R. Knapp, Ph.D. ..... 50,000 7.57 0.62 09/16/08
J. Wallace Parce, Ph.D. ..... 50,000 7.57 0.62 09/16/08
</TABLE>
OPTION VALUES AT DECEMBER 31, 1998
The following table sets forth the number and value of securities
underlying unexercised options that are held by each of the individuals listed
in the Summary Compensation Table as of December 31, 1998. No shares were
acquired on the exercise of stock options by these individuals during the year
ended December 31, 1998.
Amounts shown under the column "Value of Unexercised In-the-Money Options
at December 31, 1998" are based on the assumed initial public offering price of
$ , without taking into account any taxes that may be payable in
connection with the transaction, multiplied by the number of shares underlying
the option, less the exercise price payable for these shares.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1998 DECEMBER 31, 1998
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Calvin Y. H. Chow.......................... 36,250 165,750
Michael R. Knapp, Ph.D..................... 47,839 115,750
J. Wallace Parce, Ph.D..................... 35,416 116,584
</TABLE>
EMPLOYMENT AGREEMENTS
In January 1999, we entered into an employment agreement with Daniel L.
Kisner, M.D. to serve as our President and Chief Executive Officer at a base
salary of $350,000 a year starting on February 28, 1999, with an annual
discretionary bonus of up to 50% of his base salary based upon specific
objectives to be agreed upon by Dr. Kisner and the board. Pursuant to the
employment agreement, Dr. Kisner received an option to purchase 1,000,000 shares
of our common stock at an exercise price of $0.62 per share. This option vests
over a period of five years in 60 equal monthly installments. In addition, Dr.
Kisner is entitled to a housing loan of up to $500,000 which may be forgiven
over time, and monthly mortgage assistance to support a $500,000 mortgage, plus
additional payments to compensate for the tax payable on such portions of his
compensation. The employment agreement is at-will and contains a
non-solicitation agreement. This agreement also provides that if Dr. Kisner is
terminated without cause or Dr. Kisner voluntarily terminates his employment
after a constructive termination, he will be paid his then current salary for 12
months in monthly installments or until he becomes employed, whichever is
earlier, and a portion of his options will be partially accelerated.
In September 1999, we entered into an employment agreement with James L.
Knighton to serve as our Chief Financial Officer at a base salary of $245,000 a
year starting in September, 1999, with a sign-on bonus of $50,000 and an annual
discretionary bonus set by the board based upon specific objectives to be
determined, with a minimum bonus of 30% of his base salary guaranteed during the
first 12 months of employment. In addition, Mr. Knighton will receive a stock
bonus equal to $100,000 divided by the initial public offering price at such
time as our common stock trades at or above 125% of the initial public offering
price for six consecutive months. Pursuant to the employment agreement, Mr.
Knighton received an option to purchase 420,000 shares of our common stock at an
exercise price of $2.00 per share, plus a bonus payable at the time of exercise
in the amount of $1.00 per share of stock exercised, plus an
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additional amount to cover taxes on the bonus. In addition, Mr. Knighton is
entitled to a housing loan of up to $500,000. The employment agreement is
at-will, and provides that if Mr. Knighton is terminated without cause or Mr.
Knighton voluntarily terminates his employment after a constructive termination,
he will be paid his base salary for 12 months in monthly installments or until
he becomes employed, whichever is earlier, and a portion of his options will be
partially accelerated.
EMPLOYEE BENEFIT PLANS
1999 Equity Incentive Plan
We adopted our 1999 equity incentive plan in October, 1999, subject to
stockholder approval. The incentive plan is an amendment and restatement of our
1996 stock incentive plan.
Administration. The board administers the incentive plan unless it
delegates administration to a committee. The board has the authority to
construe, interpret and amend the incentive plan as well as to determine:
- the grant recipients
- the grant dates
- the number of shares subject to the award
- the exercisability and vesting of the award
- the exercise price
- the type of consideration
- the other terms of the award
Share Reserve. We had reserved a total of 4,252,411 shares of our common
stock for issuance under the 1996 stock incentive plan. When we amended and
restated the 1996 stock incentive plan, we reserved an additional 2 million
shares for issuance under the incentive plan, subject to stockholder approval,
for a total of 6,252,411 shares. If the recipient of a stock award does not
purchase the shares subject to such stock award before the stock award expires
or otherwise terminates, the shares that are not purchased again become
available for issuance under the incentive plan.
On the day after each annual meeting of our stockholders for 10 years,
beginning in 2000, the number of shares in the reserve automatically will be
increased by the greater of:
- 5% of our outstanding shares on a fully-diluted basis; or
- that number of shares that have been made subject to awards granted under
the incentive plan during the prior 12-month period.
The automatic share reserve increase in the aggregate may not exceed 20 million
shares over the 10-year period.
Eligibility. The board may grant incentive stock options that qualify
under Section 422 of the Internal Revenue Code to our employees and to the
employees of our affiliates. The board also may grant nonstatutory stock
options, stock bonuses and restricted stock purchase awards to our employees,
directors and consultants as well as to the employees, directors and consultants
of our affiliates.
- A stock option is a contractual right to purchase a specified number of
our shares at a specified price, the exercise price, for a specified
period of time.
- An incentive stock option is a stock option that has met the requirements
of Section 422 of the Internal Revenue Code. Such an option is free from
regular tax at both the date of grant and the date of exercise. If two
holding period tests are met, two years between grant date and sale date
and one year between exercise date and sale date, the profit on the
option is long-term capital gain income. If the holding periods are not
met, there has been a disqualifying disposition, and a portion
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of any profit will be taxed at ordinary income rates. The difference
between the fair market value on date of exercise and the exercise price
is an item of alternative minimum tax unless there is a disqualifying
disposition in the year of exercise.
- A nonstatutory stock option is a stock option not meeting the Internal
Revenue Code criteria for qualifying incentive stock options and,
therefore, triggering a tax upon exercise. This type of option requires
payment of state and federal income tax and, if applicable, FICA/FUTA on
the difference between the exercise price and the fair market value on
the exercise date.
- A restricted stock purchase award is an offer to purchase shares at a
price either at or near the fair market value of the shares. A stock
bonus, on the other hand, is a grant of our shares at no cost to the
recipient in consideration for past services rendered. However, we may
reacquire the shares under either type of award at the original purchase
price, which is zero in the case of a stock bonus, if the recipient's
service to our affiliates and to us terminates before the shares vest.
The board may not grant an incentive stock option to any person who, at the
time of the grant, owns or is deemed to own stock possessing more than 10% of
our total combined voting power or the total combined voting power of an
affiliate of ours, unless the exercise price is at least 110% of the fair market
value of the stock on the grant date and the option term is five years or less.
Limits on Option Grants. There are limits on the number of shares that the
board may grant under an option.
- Section 162(m) of the Internal Revenue Code, among other things, denies a
deduction to publicly held corporations for compensation paid to the
chief executive officer and the four highest compensated officers in a
taxable year to the extent that the compensation for each such officer
exceeds $1,000,000. When we become subject to Section 162(m), in order to
prevent options granted under the incentive plan from being included in
such compensation, the board may not grant options under the incentive
plan to an employee person covering an aggregate of more than 3 million
shares in any calendar year.
- In addition, an employee may not receive incentive stock options that
exceed the $100,000 per year limitation set forth in Section 422(d) of
the Internal Revenue Code. In calculating the $100,000 per year
limitation, we determine the aggregate number of shares under all
incentive stock options granted to that employee that will become
exercisable for the first time during a calendar year. For this purpose,
we include incentive stock options granted under the incentive plan as
well as under any other stock plans that our affiliates or we maintain.
We then determine the aggregate fair market value of such stock as of the
grant date of the option. Taking the options into account in the order in
which they were granted, we treat only the options covering the first
$100,000 worth of stock as incentive stock options. We treat any options
covering stock in excess of $100,000 as nonstatutory stock options.
Option Terms. The board may grant incentive stock options with an exercise
price of 100% or more of the fair market value of a share of our common stock on
the grant date. It may grant nonstatutory stock options with an exercise price
as low as 85% of the fair market value of a share on the grant date.
The maximum option term is 10 years. The board may provide for exercise
periods of any length in individual option grants. However, generally an option
terminates three months after the optionholder's service to our affiliates and
to us terminates. If such termination is due to the optionholder's disability,
the exercise period generally is extended to 12 months. If such termination is
due to the optionholder's death or if the optionholder dies within three months
after his or her service terminates, the exercise period generally is extended
to 18 months following such death.
The board may provide for the transferability of nonstatutory stock options
but not incentive stock options. However, the optionholder may designate a
beneficiary to exercise either type of option following the optionholder's
death. If the optionholder does not designate a beneficiary, the optionholder's
option rights will pass by his or her will or by the laws of descent and
distribution.
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Terms of Other Stock Awards. The board determines the purchase price of
other stock awards, which may not be less than 85% of the fair market value of
our common stock on the grant date. However, the board may award stock bonuses
in consideration of past services without a purchase payment. Shares that we
sell or award under the incentive plan may, but need not be, restricted and
subject to a repurchase option in our favor in accordance with a vesting
schedule that the board determines. The board, however, may accelerate the
vesting of such restricted stock.
Other Provisions. Transactions not involving our receipt of consideration,
such as a merger, consolidation, reorganization, stock dividend, or stock split,
may change the class and number of shares subject to the incentive plan and to
outstanding awards. In that event, the board will appropriately adjust the
incentive plan as to the class and the maximum number of shares subject to the
incentive plan, to the cap on the number of shares available for incentive stock
options, and to the Section 162(m) limit. It also will adjust outstanding awards
as to the class, number of shares and price per share subject to such awards.
If we dissolve or liquidate, then outstanding stock awards will terminate
immediately prior to such event. However, we treat outstanding stock awards
differently in the following situations:
- a sale, lease or other disposition of all or substantially all of our
assets,
- a merger or consolidation in which we are not the surviving corporation,
or
- a reverse merger in which we are the surviving corporation but the shares
of our common stock outstanding immediately preceding the merger are
converted by virtue of the merger into other property.
In these situations, the surviving entity will either assume or substitute all
outstanding awards under the incentive plan. If it declines to do so, then
generally the vesting and exercisability of the awards will accelerate.
Stock Awards Granted. As of September 30, 1999, we had granted options to
purchase 3,944,250 shares under the incentive plan, and 833,129 shares remained
available for future grant. However, the number of shares remaining available
for future grant will increase by 2 million shares if the stockholders approve
the share reserve increase. The board has not granted any stock bonuses under
the 1999 equity incentive plan.
Plan Termination. The incentive plan will terminate in 2009 unless the
board terminates it sooner.
1996 Equity Incentive Plan
Our 1996 equity incentive plan was adopted by the board of directors in
January 1996 and approved by the stockholders in August 1996. The board
authorized and reserved an aggregate of 1,100,000 shares of Caliper common stock
for issuance under the 1996 equity incentive plan. The 1996 equity incentive
plan provides for the grant of incentive stock options to employees and
nonstatutory stock options to employees, directors and consultants of Caliper
and its affiliates. The 1996 equity incentive plan provides that it will be
administered by the board, or a committee appointed by the board, which
determines recipients and types of options to be granted, including number of
shares subject to the option and the exercisability of the shares.
The terms of stock options granted under the 1996 equity incentive plan may
not exceed ten years. The exercise price for a nonstatutory stock option granted
under the 1996 equity incentive plan cannot be less than 85% of the fair market
value of the common stock on the date of the option grant and the exercise price
for an incentive stock option granted under the 1996 equity incentive plan
cannot be less than 100% of the fair market value of the common stock on the
date of the option grant. However, options granted in substitution for other
options may be granted with a lower exercise price than that above. The options
may, but need not, contain provisions for early exercise and the right of first
refusal.
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Options granted under the 1996 equity incentive plan vest at the rate
specified in each optionee's option agreement. No stock option may be
transferred by the optionee other than by will or the laws of descent or
distribution or, for a nonstatutory stock option, upon the terms of the option
agreement. An optionee whose relationship with Caliper or any affiliate ceases
for any reason, other than by death or permanent and total disability, may
exercise options in a period not to exceed three months following such
cessation. When an optionee's relationship with Caliper and any affiliate ceases
due to death or disability, options may be exercised for between six and
eighteen months.
No incentive stock option may be granted to any person who, at the time of
the grant, owns, or is deemed to own, stock possessing more than 10% of the
total combined voting power of Caliper or any affiliate of Caliper, unless the
option exercise price is at least 110% of the fair market value of the stock
subject to the option on the date of grant, and the term of the option does not
exceed five years from the date of grant. No person shall be granted options
covering more than 250,000 shares of Caliper's common stock in any calendar
year.
Upon certain changes in control of Caliper, all outstanding options under
the 1996 equity incentive plan shall either be assumed or substituted by the
surviving entity. If the surviving entity determines not to assume, continue or
substitute such options, the time during which such options may be exercised
shall be accelerated. If the options are not exercised following the
acceleration, the options shall terminate.
As of September 30, 1999, under the 1996 equity incentive plan (a) options
to purchase 142,584 shares of common stock were outstanding and (b) options to
purchase 181,635 shares had been exercised. In July 1996, the board voted that
no additional grants would be made under the 1996 equity incentive plan.
1999 Non-Employee Directors' Stock Option Plan
We adopted the 1999 non-employee directors' stock option plan in October,
1999, subject to stockholder approval. The directors' plan provides for the
automatic grant to our non-employee directors of options to purchase shares of
our common stock.
Share Reserve. We have reserved a total of 300,000 shares of our common
stock for issuance under the directors' plan. On the day after each annual
meeting of our stockholders, for 10 years, starting in 2000, the share reserve
will automatically be increased by a number of shares equal to the greater of:
- 0.3% of our outstanding shares on a fully-diluted basis, or
- that number of shares subject to options granted under the directors'
plan during the prior 12-month period.
If an optionholder does not purchase the shares subject to such option
before the option expires or otherwise terminates, the shares that are not
purchased again become available for issuance under the directors' plan.
Administration. The board administers the directors' plan. The board has
the authority to construe, interpret and amend the directors' plan but the
directors' plan specifies the essential terms of the options, including:
- the option recipients
- the grant dates
- the number of shares subject to the option
- the exercisability and vesting of the option
- the exercise price
- the type of consideration
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<PAGE> 59
Eligibility. Each person who is first elected or appointed as a
non-employee director after this initial public offering will automatically
receive an option for 30,000 shares. The initial grant will be fully exercisable
upon date of grant and will vest monthly over 5 years.
In addition, on the day after each of our annual meetings of the
stockholders, starting with the annual meeting in 2000, each non-employee
director will automatically receive another option if the recipient has been a
non-employee director for at least the prior six months. The annual grant will
cover 10,000 shares for the chairman of the board and 5,000 shares otherwise,
will be fully exercisable upon date of grant and will vest in 12 months.
As long as the optionholder continues to serve with us or with an affiliate
of ours, whether in the capacity of a director, an employee or a consultant, the
option will continue to vest, and the optionholder may exercise the option
during its term.
Option Terms. Options have an exercise price equal to 100% of the fair
market value of our common stock on the grant date. The option term is 10 years
but it terminates 6 months after the optionholder's service terminates. If such
termination is due to the optionholder's disability, the post-termination
exercise period is extended to 12 months. If such termination is due to the
optionholder's death or if the optionholder dies within three months after his
or her service terminates, the post-termination exercise period is extended to
18 months following death.
The optionholder may transfer the option by gift to immediate family or for
estate-planning purposes. The optionholder also may designate a beneficiary to
exercise the option following the optionholder's death. Otherwise, the option
exercise rights will pass by the optionholder's will or by the laws of descent
and distribution.
Other Provisions. Transactions not involving our receipt of consideration,
such as a merger, consolidation, reorganization, stock dividend, or stock split,
may change the class and number of shares subject to the directors' plan and to
outstanding options. In that event, the board will appropriately adjust the
directors' plan as to the class and the maximum number of shares subject to the
directors' plan and to the automatic option grants. It also will adjust
outstanding options as to the class, number of shares and price per share
subject to such options.
If we dissolve or liquidate, then outstanding options will terminate
immediately prior to such event. However, we treat outstanding options
differently in the following situations:
- a sale, lease or other disposition of all or substantially all of our
assets;
- a merger or consolidation in which we are not the surviving corporation;
or
- a reverse merger in which we are the surviving corporation but the shares
of our common stock outstanding immediately before the merger are
converted by virtue of the merger into other property, such as securities
or cash.
In these situations, the surviving entity will either assume or replace all
outstanding options under the directors' plan. If it declines to do so, then
generally the vesting and exercisability of the options will accelerate.
However, if an option is assumed or replaced but the optionholder is not elected
to the board of directors of the acquiring or surviving corporation at the first
meeting of the board after the change in control, then the vesting of that
option will accelerate by 18 months.
Options Issued. The directors' plan will not be effective until the date
of this initial public offering of our stock. Therefore, we have not issued any
options under the directors' plan.
Plan Termination. The directors' plan will terminate in 2009 unless the
board terminates it sooner.
1999 Employee Stock Purchase Plan
We adopted the 1999 employee stock purchase plan in October, 1999, subject
to stockholder approval.
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<PAGE> 60
Administration. The board administers the purchase plan unless it
delegates administration to a committee. The board has the authority to
construe, interpret and amend the purchase plan as well as to determine the
terms of rights granted under the purchase plan.
Share Reserve. We authorized the issuance of 450,000 shares of our common
stock pursuant to purchase rights granted to eligible employees under the
purchase plan. On the day after each annual meeting of our stockholders for 10
years, beginning in 2000, the number of shares in the reserve automatically will
be increased by the greater of:
- 0.5% of our outstanding shares on a fully-diluted basis, or
- that number of shares that have been issued under the purchase plan
during the prior 12-month period.
The automatic share reserve increase in the aggregate may not exceed
4,500,000 shares over the 10-year period.
Eligibility. We intend to qualify the purchase plan as an employee stock
purchase plan within the meaning of Section 423 of the Internal Revenue Code.
The purchase plan provides a means by which eligible employees may purchase our
common stock through payroll deductions. We implement the purchase plan by
offerings of purchase rights to eligible employees. Generally, all of our
full-time employees and full-time employees of our affiliates incorporated in
the United States who have been employed for at least 10 days may participate in
offerings under the purchase plan. However, no employee may participate in the
purchase plan if immediately after we grant the employee a purchase right, the
employee has voting power over 5% or more of our outstanding capital stock. As
of the date hereof, no shares of common stock have been purchased under the
purchase plan.
Offerings. Under the purchase plan, the board may specify offerings of up
to 27 months. Unless the board otherwise determines, common stock is purchased
for accounts of participating employees at a price per share equal to the lower
of:
- 85% of the fair market value of a share on the first day of the offering,
or
- 85% of the fair market value of a share on the purchase date.
For the first offering, which will begin on the effective date of this
initial public offering, we will offer shares registered on a Form S-8
registration statement. The fair market value of the shares on the first date of
this offering will be the price per share at which our shares are first sold to
the public as specified in the final prospectus with respect to this initial
public offering. Otherwise, fair market value generally means the closing sales
price, rounded up where necessary to the nearest whole cent, for such shares, or
the closing bid, if no sales were reported, as quoted on the Nasdaq National
Market on the trading day prior to the relevant determination date, as reported
in The Wall Street Journal.
The board may provide that employees who become eligible to participate
after the offering period begins nevertheless may enroll in the offering. These
employees will purchase our stock at the lower of:
- 85% of the fair market value of a share on the day they began
participating in the purchase plan, or
- 85% of the fair market value of a share on the purchase date.
Participating employees may authorize payroll deductions of up to 10% of
their compensation for the purchase of stock under the purchase plan. Employees
may end their participation in the offering at any time up to 10 days before a
purchase period ends. Their participation ends automatically on termination of
their employment.
Other Provisions. The board may grant eligible employees purchase rights
under the purchase plan only if the purchase rights together with any other
purchase rights granted under other employee stock purchase plans established by
us or by our affiliates, if any, do not permit the employee's rights to purchase
our stock to accrue at a rate which exceeds $25,000 of fair market value of our
stock for each calendar year in which the purchase rights are outstanding.
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<PAGE> 61
Upon a change in control, the board may provide that the successor
corporation will assume or substitute for outstanding purchase rights.
Alternatively, the board may shorten the offering period and provide that our
stock will be purchased for the participants immediately before the change in
control.
Shares Issued. The purchase plan will not be effective until this initial
public offering of our stock is completed. Therefore, as of the date hereof, no
shares of common stock have been purchased under the purchase plan.
Plan Termination. The purchase plan has no set termination date. It will
terminate when all of the shares reserved thereunder have been issued unless the
board terminates it earlier.
401(k) Plan
We maintain a retirement and deferred savings plan for our employees that
is intended to qualify as a tax-qualified plan under the Internal Revenue Code.
The 401(k) Plan provides that each participant may contribute up to a statutory
limit, which is $10,000 in calendar year 1999.
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<PAGE> 62
CERTAIN TRANSACTIONS
The following executive officers, directors or holders of more than five
percent of our voting securities purchased securities in the amounts as of the
dates set forth below.
<TABLE>
<CAPTION>
SHARES OF PREFERRED STOCK
COMMON --------------------------------------------------------
STOCK SERIES B SERIES C SERIES D SERIES E
--------------- ------------- -------------- ------------ --------
<S> <C> <C> <C> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS
Daniel L. Kisner, M.D................. 100,000 -- -- -- --
Calvin Y. H. Chow..................... 340,361 -- -- -- --
Michael R. Knapp, Ph.D................ 328,015 31,948 8,333 -- --
J. Wallace Parce, Ph.D................ 301,426 -- -- -- --
William M. Wright III................. 16,000 -- -- -- --
David V. Milligan, Ph.D............... 150,000 -- -- -- --
Charles M. Hartman.................... 12,000 -- -- -- --
Regis P. McKenna...................... 30,000 -- -- 50,000 --
5% STOCKHOLDERS
Venrock Associates(1)................. 118,844 1,657,556 69,057 86,000 --
Venrock Associates II, L.P.(1)........ 72,841 1,018,336 103,585 114,000 --
CW Partners III, L.P.(2).............. 191,685 -- -- -- --
CW Ventures II, L.P.(2)............... -- 2,207,136 141,814 -- --
Lombard Odier & Cie................... -- 638,967 1,000,000 750,000 350,000
The Dow Chemical Company.............. -- -- -- 1,625,000 --
Hoffmann-La Roche Inc................. -- -- 1,333,333 -- --
BB BioVentures, L.P.(3)............... -- -- -- 1,250,000 --
Price Per Share....................... $0.001 to $0.62 $0.7825135 $3.00 $4.00 $6.00
Date(s) of Purchase................... 8/95 to 9/99 4/96 to 10/96 10/96 to 12/96 1/97 to 3/98 5/98
</TABLE>
- ---------------
(1) Anthony B. Evnin, Ph.D., one of our directors, is a general partner of
Venrock Associates.
(2) Charles M. Hartman, one of our directors, is a general partner of CW Group.
(3) Michael Steinmetz, Ph.D., one of our directors, is a partner of MPM Asset
Management LLC, the management advisor of BB BioVentures, L.P.
Amended and Restated Investors' Rights Agreement. Caliper and the
preferred stockholders described above have entered into an agreement, pursuant
to which these and other preferred stockholders will have registration rights
with respect to their shares of common stock following this offering. Upon the
completion of this offering, all shares of our outstanding preferred stock will
be automatically converted into common stock on a one for one basis. See
"Description of Capital Stock -- Registration Rights" for a further description
of the terms of this agreement.
Dow Chemical Agreement. On January 14, 1997, we entered into a development
agreement with The Dow Chemical Company to work together on polymer chip
manufacturing technologies. This work concluded in 1998. In consideration of
Dow's contribution under the development agreement, we issued 375,000 shares of
our Series D preferred stock to Dow. The remaining shares of Series D preferred
stock held by Dow were purchased with cash in connection with our Series D
financing.
MPM Capital Advisors LLC Agreement. On July 24, 1997, we entered into an
agreement with MPM Capital Advisors LLC. Under the terms of this agreement, MPM
agreed to develop a strategic overview and business plan for Caliper. In
consideration for these services we paid MPM $125,000 and issued 61,250 shares
of our common stock. This agreement was terminated on April 23, 1998.
David V. Milligan, Ph.D. Consulting Agreement. As part of our ongoing
program of research and development, we entered into a twelve-month consulting
agreement with Dr. David V. Milligan, our Chairman of the Board, effective April
30, 1997. The term of this agreement may be renewed annually for
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<PAGE> 63
up to five years. Under the terms of this agreement, Dr. Milligan has agreed to
provide consultation and advice concerning our core competitive strengths and
the development of optimal growth strategies. In exchange, we have agreed to pay
Dr. Milligan $80,000 per year and granted Dr. Milligan a stock option to
purchase 100,000 shares of our common stock at $0.30 per share. This option
vests monthly over a period of five years. This agreement has been renewed and
remains in effect. We have also granted Dr. Milligan stock options in connection
with his services as one of our directors. See "Management -- Director
Compensation."
Regis P. McKenna Consulting Agreement. We entered into a twelve-month
consulting agreement with Regis P. McKenna, one of our directors, on April 30,
1997. Under the terms of this agreement, Mr. McKenna agreed to provide
assistance in developing our technology and business strategies. In exchange,
Mr. McKenna was allowed to purchase 30,000 shares of common stock at $0.40 per
share. In July 1998, Mr. McKenna was granted a stock option for 30,000 shares of
common stock at $0.62 per share. In August 1999, Mr. McKenna was granted a stock
option for 30,000 shares of common stock at $0.62 per share. This option vests
in twelve equal monthly installments beginning in May 1999. This agreement has
been renewed and remains in effect. We have also granted Mr. McKenna stock
options in connection with his services as one of our directors. See
"Management -- Director Compensation."
Executive Employment Agreements. We have entered into employment contracts
with Daniel L. Kisner, M.D. our President and Chief Executive Officer, and James
L. Knighton, our Chief Financial Officer. See "Management -- Employment
Agreements."
Indemnification Agreements. We intend to enter into indemnification
agreements with our directors and officers for the indemnification of these
persons to the full extent permitted by law. We also intend to execute these
agreements with our future directors and officers.
Indebtedness of Management. In March 1997, we loaned Michael R. Knapp, our
Vice President of Science and Technology, $200,000 in connection with the
purchase of a residence. The interest on this loan is 6.61% per year and begins
to accrue on January 1, 2002. The principal and accrued interest is to be repaid
in five equal annual installments beginning June 30, 2002. The promissory note
will accelerate and become due and payable in the event Dr. Knapp's employment
with us is terminated for any reason. The promissory note is full recourse and
is secured by a deed of trust on the residence. In September 1999, we loaned
Daniel L. Kisner, M.D. our President and Chief Executive Officer, $425,000 in
connection with the purchase of a residence. The loan has a maximum term of six
years with an annual interest rate of 5.96%. The loan may be forgiven by our
board based upon Dr. Kisner's performance over five years.
Warrants. In October 1996, in consideration of having reached performance
milestones, we issued Michael R. Knapp, Ph.D. our Vice President of Science and
Technology, a warrant to purchase 30,000 shares of common stock at $0.78 per
share. This warrant is exercisable until October 11, 2006.
Stock Options. In October 1996, in connection with his services as a
consultant to us, we granted to Charles M. Hartman, one of our directors, a
stock option to purchase 12,000 shares of common stock at an exercise price
$0.30 per share.
We believe that all of the transactions set forth above were made on terms
no less favorable to Caliper than could have been obtained from unaffiliated
third parties. All future transactions, including loans, between Caliper and its
officers, directors, principal stockholders and their affiliates will be
approved by a majority of the board of directors, including a majority of the
independent and disinterested directors, and will continue to be on terms no
less favorable to Caliper than could be obtained from unaffiliated third
parties.
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<PAGE> 64
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of our common stock as of September 30, 1999, and as adjusted to
reflect the sale of our common stock offered by this prospectus, by:
- each of the individuals listed in the "Summary Compensation Table" above
- each of our directors
- each person, or group of affiliated persons, who is known by us to own
beneficially five percent or more of our common stock
- all current directors and executive officers as a group
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of common stock subject to options held by that person that are currently
exercisable or exercisable within 60 days of September 30, 1999 are deemed
outstanding. These shares, however, are not deemed outstanding for the purposes
of computing the percentage ownership of each other person.
Except as indicated in the footnotes to this table and pursuant to
applicable community property laws, each stockholder named in the table has sole
voting and investment power with respect to the shares shown as beneficially
owned by them. Percentage of ownership is based on 24,655,168 shares of common
stock outstanding on September 30, 1999 and shares of common stock
outstanding after completion of this offering. This table assumes no exercise of
the underwriters' over-allotment option. Unless otherwise indicated in the
footnotes, the address of each of the individuals named below is: c/o Caliper
Technologies Corp., 605 Fairchild Drive, Mountain View, California 94043.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
PRIOR TO OFFERING
---------------------------------
SHARES ISSUABLE
PURSUANT TO
OPTIONS AND
WARRANTS PERCENTAGE
EXERCISABLE BENEFICIALLY
NUMBER OF WITHIN OWNED
SHARES 60 DAYS OF --------------------
BENEFICIALLY SEPTEMBER 30, BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED 1999 OFFERING OFFERING
- ------------------------------------ ------------ ----------------- -------- --------
<S> <C> <C> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS
Daniel L. Kisner, M.D.(1).......................... 100,000 50,000 *
Calvin Y. H. Chow(2)............................... 340,361 8,384 1.4%
Michael R. Knapp, Ph.D.(3)......................... 368,296 46,717 1.7
J. Wallace Parce, Ph.D.(4)......................... 301,426 15,884 1.3
David V. Milligan, Ph.D.(5)........................ 150,000 -- *
Anthony B. Evnin, Ph.D.(6)......................... 3,240,219 -- 13.1
Charles M. Hartman(7).............................. 2,552,635 -- 10.4
Regis P. McKenna(8)................................ 80,000 52,000 *
Robert T. Nelsen(9)................................ 1,105,787 -- 4.5
Michael Steinmetz, Ph.D.(10)....................... 1,311,250 -- 5.3
5% STOCKHOLDERS
Venrock Associates(6).............................. 3,240,219 -- 13.1
Lombard Odier & Cie(11)............................ 2,738,967 -- 11.1
CW Group(7)........................................ 2,540,635 -- 10.3
The Dow Chemical Company(12)....................... 1,625,000 -- 6.6
Hoffmann-La Roche Inc.(13)......................... 1,333,333 -- 5.4
BB BioVentures, L.P.(10)........................... 1,311,250 -- 5.3
All directors and executive officers as a group (12
persons)(14)..................................... 9,565,974 175,651 39.2%
</TABLE>
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<PAGE> 65
- ---------------
* Represents beneficial ownership of less than 1 percent.
(1) Includes 60,000 shares held by The Kisner Revocable Trust u/a/d 9/23/99, of
which Dr. Kisner is a trustee, 20,000 shares held by The Jordan Renee
Kisner Exempt Irrevocable Trust u/a/d 9/23/99, of which Dr. Kisner is a
trustee and 20,000 shares held by The Griffin Daniel Kisner Exempt
Irrevocable Trust u/a/d 9/23/99, of which Dr. Kisner is a trustee.
(2) Includes 40,361 shares that are held by Tiffany Chow, 20,000 shares held by
Harrison Chow and 20,000 shares held by Stephanie Chow, the children of Mr.
Chow. Also includes 40,000 shares subject to repurchase by Caliper.
(3) Includes 7,500 shares subject to repurchase by Caliper.
(4) Includes 20,000 shares held by Charles Andrew Parce and 20,000 shares held
by Laura Marie Parce, the children of Dr. Parce. Also includes 44,000
shares subject to repurchase by Caliper.
(5) Includes 50,000 shares subject to repurchase by Caliper within 60 days of
September 30, 1999.
(6) Consists of 1,931,457 shares held by Venrock Associates, and 1,308,762
shares held by Venrock Associates II, L.P. Venrock Associates is located at
30 Rockefeller Plaza, Suite 5508, New York, NY 10112. Dr. Evnin is a
general partner of Venrock Associates and disclaims beneficial ownership of
these shares except to the extent of his proportionate partnership interest
in these shares.
(7) Includes 191,685 shares held by CW Partners III, L.P., and 2,348,950 shares
held by CW Ventures II, L.P. CW Group is located at 1041 Third Avenue, 2nd
Floor, New York, NY 10021. Mr. Hartman is a general partner of CW Ventures
and disclaims beneficial ownership of these shares except to the extent of
his proportionate partnership interest in these shares.
(8) Includes 50,000 shares held by The Regis P. and Dianne T. McKenna Trust, of
which Mr. McKenna is a trustee.
(9) Consists of 1,105,787 shares held by ARCH Venture Fund II, L.P., a limited
partnership managed by ARCH Management Partners II, L.P. ARCH Venture
Partners, L.P. is the general partner of ARCH Management Partners II, L.P.
Mr. Nelsen is a Managing Director of ARCH Venture Corporation, which is the
general partner of ARCH Venture Partners, L.P. ARCH Venture Fund II, L.P.
is located at 8725 W. Higgins Road, Suite 290, Chicago, Illinois 60631.
(10) Includes 1,250,000 shares held by BB BioVentures, L.P. BB BioVentures, L.P.
is located at One Cambridge Center, 9th Floor, Cambridge, MA 02142. Dr.
Steinmetz is a partner of MPM Asset Management LLC, the management advisor
of BB BioVentures, L.P. Dr. Steinmetz disclaims beneficial ownership of
these shares. Also includes 61,250 shares held by MPM Capital Advisors LLC,
a wholly owned subsidiary of MPM Capital L.P. MPM Capital L.P. also owns
51% of MPM Asset Management LLC. Dr. Steinmetz disclaims beneficial
ownership of these shares except to the extent of his proportional
partnership interest in these shares.
(11) Lombard Odier & Cie is located at 11, Rue de la Corraterie, 1204 Geneva,
Switzerland.
(12) The Dow Chemical Company is located at 2030 Dow Center, Midland, Michigan
48674.
(13) Hoffmann-La Roche Inc. is located at 340 Kingland Street, Nutley, New
Jersey 07110.
(14) Total number of shares includes 8,197,891 shares of common stock held by
entities affiliated with directors and executive officers. See footnotes 1
through 10 above.
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<PAGE> 66
DESCRIPTION OF CAPITAL STOCK
Upon completion of this offering, our authorized capital stock will consist
of 70,000,000 shares of common stock, $0.001 par value, and 5,000,000 shares of
undesignated preferred stock, $0.001 par value.
COMMON STOCK
As of September 30, 1999, there were 24,655,168 shares of common stock
outstanding held of record by 158 stockholders. The holders of common stock are
entitled to one vote for each share held of record on all matters submitted to a
vote of the stockholders. The holders of common stock are entitled to receive
ratably such dividends as may be declared by the board of directors out of funds
legally available therefore, subject to the rights of the holders of preferred
stock. See "Dividend Policy." In the event of a liquidation, dissolution or
winding up of Caliper, holders of the common stock are entitled to share ratably
in all assets remaining after payment of liabilities and amounts due to the
holders of preferred stock as described below. Holders of common stock have no
preemptive rights and no right to convert their common stock into any other
securities. There are no redemption or sinking fund provisions applicable to the
common stock. All outstanding shares of common stock are, and all shares of
common stock to be outstanding upon completion of this offering will be, fully
paid and non-assessable.
PREFERRED STOCK
The board of directors has the authority to issue up to 5,000,000 shares of
preferred stock in one or more series and to fix the rights, preferences,
privileges and restrictions granted to or imposed upon such preferred stock,
including dividend rights, conversion rights, terms of redemption, liquidation
preference, sinking fund terms and the number of shares constituting any series
or the designation of such series, without any further vote or action by the
stockholders. The board of directors, without stockholder approval, can issue
preferred stock with voting and conversion rights which could adversely affect
the voting power of the holders of common stock. The issuance of preferred stock
could have the effect of delaying, deferring or preventing a change in control
of Caliper. We have no present plan to issue any shares of preferred stock.
WARRANTS
As of September 30, 1999, one warrant to purchase 51,117 shares of Series B
preferred stock was outstanding at an exercise price of $0.78 per share. This
warrant expires upon the earlier of May 10, 2002 or three years after completion
of this offering. The warrant contains provisions for the adjustment of the
exercise price and the aggregate number of shares issuable upon the exercise of
the warrant in the event of stock dividends, stock splits, reorganizations and
reclassifications and consolidations. Upon the closing of this offering, the
warrant to purchase Series B preferred stock will become exercisable for common
stock at the rate of one share of common stock for each share of preferred stock
underlying the warrant.
As of September 30, 1999, three warrants to purchase a total of 65,112
shares of common stock were outstanding at an exercise price of $0.78 per share.
One of the warrants expires on the earlier of January 3, 2002 or the closing of
a merger or acquisition of Caliper. Two of the warrants expire on October 11,
2006. Each warrant contains provisions for the adjustment of the exercise price
and the aggregate number of shares issuable upon the exercise of the warrants in
the event of stock dividends, stock splits, reorganizations and
reclassifications and consolidations.
REGISTRATION RIGHTS
On the date 180 days after the completion of this offering, the holders of
18,509,995 shares of common stock or their transferees will be entitled to
rights to register these shares under the Securities Act of 1933. If we propose
to register any of our securities under the Securities Act, either for our own
account or for the account of other securityholders, the holders of these shares
will be entitled to notice of the registration and will be entitled to include,
at our expense, their shares of common stock. In addition, the holders of these
shares may require us, at our expense and on not more than two occasions at any
time
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<PAGE> 67
beginning approximately six months from the date of the closing of this
offering, to file a registration statement under the Securities Act with respect
to their shares of common stock, and we will be required to use our best efforts
to effect the registration. Further, the holders may require us at our expense
to register their shares on Form S-3 when this form becomes available. These
rights shall terminate on the earlier of five years after the effective date of
this offering, or when a holder is able to sell all its shares pursuant to Rule
144 under the Securities Act in any 90-day period. These registration rights are
subject to certain conditions and limitations, including the right of the
underwriters to limit the number of shares included in any such registration
under certain circumstances.
ANTI-TAKEOVER PROVISIONS OF DELAWARE LAW AND CHARTER PROVISIONS
Delaware Law
We are subject to Section 203 of the Delaware General Corporation Law. In
general, this statute prohibits a publicly held Delaware corporation from
engaging in any business combination with any interested stockholder for a
period of three years following the date that the stockholder became an
interested stockholder unless:
- prior to the date, the board of directors of the corporation approved
either the business combination or the transaction that resulted in the
stockholder becoming an interested stockholder;
- upon consummation of the transaction that resulted in the stockholder's
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding those shares owned by persons who
are directors and also officers, and employee stock plans in which
employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or
exchange offer; or
- on or subsequent to the date, the business combination is approved by the
board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at
least two-thirds of the outstanding voting stock that is not owned by the
interested stockholder.
Section 203 defines "business combination" to include:
- any merger or consolidation involving the corporation and the interested
stockholder;
- any sale, transfer, pledge or other disposition involving the interested
stockholder of 10% or more of the assets of the corporation;
- subject to exceptions, any transaction that results in the issuance or
transfer by the corporation of any stock of the corporation to the
interested stockholder; or
- the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation.
In general, Section 203 defines an interested stockholder as any entity or
person beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by the entity or person.
Charter Provisions
Our certificate of incorporation and bylaws include a number of provisions
that may have the effect of deterring hostile takeovers or delaying or
preventing changes in control or management of Caliper. First, our certificate
of incorporation provides that all stockholder actions upon completion of this
offering must be effected at a duly called meeting of holders and not by a
consent in writing. Second, our bylaws provide that special meetings of the
holders may be called only by the chairman of the board of directors, the chief
executive officer, or our board of directors pursuant to a resolution adopted by
a majority of the total number of authorized directors. Third, our certificate
of incorporation and the bylaws provide for a
62
<PAGE> 68
classified board of directors, in which approximately one-third of the directors
would be elected each year. Consequently, any potential acquiror would need to
successfully complete two proxy contests in order to take control of the board
of directors. Our certificate of incorporation includes a provision requiring
cumulative voting for directors only if required by applicable California law.
Under cumulative voting, a minority stockholder holding a sufficient percentage
of a class of shares may be able to ensure the election of one or more
directors. As a result of the provisions of the certificate of incorporation and
applicable California and Delaware law, unless we are subject to the California
Corporations Code, stockholders will not be able to cumulate votes for
directors. Finally, our bylaws establish procedures, including advance notice
procedures with regard to the nomination of candidates for election as directors
and stockholder proposals. These provisions of our certificate of incorporation
and bylaws could discourage potential acquisition proposals and could delay or
prevent a change in control or management of Caliper.
TRANSFER AGENT AND REGISTRAR
Norwest Bank Minnesota, N.A. has been appointed as the transfer agent and
registrar for our common stock.
NATIONAL MARKET LISTING
We have applied for listing of our common stock on the Nasdaq Stock
Market's National Market under the symbol "CLPR."
63
<PAGE> 69
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common
stock. Future sales of substantial amounts of our common stock in the public
market could adversely affect prevailing market prices. Furthermore, because a
large number of our shares of common stock outstanding will not be available for
sale shortly after this offering because of contractual and legal restrictions
on resale as described below, sales of substantial amounts of our common stock
in the public market after these restrictions lapse could adversely affect the
prevailing market price and our ability to raise equity capital in the future.
Upon completion of this offering, we will have outstanding an aggregate of
shares of common stock, assuming no exercise of the underwriters'
over-allotment option and no exercise of outstanding options or warrants. Of
these shares, all of the shares sold in this offering will be freely tradable
without restriction or further registration under the Securities Act, unless
these shares are purchased by affiliates. The remaining 24,655,168 shares of
common stock held by existing stockholders are restricted securities. Restricted
securities may be sold in the public market only if registered or if they
qualify for an exemption from registration described below under Rules 144,
144(k) or 701 promulgated under the Securities Act.
As a result of the contractual restrictions described below and the
provisions of Rules 144, 144(k) and 701, the restricted shares will be available
for sale in the public market as follows:
- 451,896 shares will be eligible for immediate sale on the date the
registration statement of which this prospectus is a part is declared
effective
- 127,700 shares will be eligible for sale 90 days from the date the
registration statement of which this prospectus is a part is declared
effective
- 24,075,572 shares will be eligible for sale upon the expiration of the
lock-up agreements, described below, 180 days after the date this
offering is declared effective
- 887,607 shares will be eligible for sale upon the exercise of vested
options and outstanding warrants 180 days after the date this offering is
declared effective
- 1,833,653 shares will be eligible for sale upon the exercise of unvested
options at various times on or after 180 days after the date this
offering is declared effective
Lock-Up Agreements
All of our officers and directors, and certain of our stockholders, warrant
holders and option holders, have agreed not to transfer or dispose of, directly
or indirectly, any shares of our common stock or any securities convertible into
or exercisable or exchangeable for shares of our common stock, for a period of
180 days after the date the registration statement of which this prospectus is a
part is declared effective. Transfers or dispositions can be made sooner with
the prior written consent of Credit Suisse First Boston Corporation.
Rule 144
In general, under Rule 144 as currently in effect, beginning 90 days after
the date the registration statement of which this prospectus is a part is
declared effective, a person or persons whose shares are aggregated, who has
beneficially owned restricted securities for at least one year, including the
holding period of any prior owner except an affiliate, would be entitled to sell
within any three-month period a number of shares that does not exceed the
greater of:
- 1% of the number of shares of our common stock then outstanding which
will equal approximately shares immediately after this
offering; or
- the average weekly trading volume of our common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to the sale.
64
<PAGE> 70
Sales under Rule 144 are also subject to manner of sale provisions and
notice requirements and to the availability of current public information about
Caliper.
Rule 144(k)
Under Rule 144(k), a person who is not deemed to have been one of our
affiliates at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years,
including the holding period of any prior owner except an affiliate, is entitled
to sell these shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144.
Rule 701
In general, under Rule 701 of the Securities Act as currently in effect,
any of our employees, consultants or advisors, other than affiliates, who
purchases or receives shares from us in connection with a compensatory stock
purchase plan or option plan or other written agreement will be eligible to
resell their shares beginning 90 days after the effective date of the
registration statement of which this prospectus is a part, subject only to the
manner of sale provisions of Rule 144, and by affiliates under Rule 144 without
compliance with its holding period requirements.
Registration Rights
Upon completion of this offering, the holders of 18,509,995 shares of our
common stock, or their transferees, will be entitled to rights with respect to
the registration of their shares under the Securities Act. Registration of their
shares under the Securities Act would result in the shares becoming freely
tradable without restriction under the Securities Act, except for shares
purchased by affiliates, immediately upon the effectiveness of this
registration.
Stock Options
Immediately after this offering, we intend to file a registration statement
under the Securities Act covering the shares of common stock reserved for
issuance under our stock option plans and employee stock purchase plan. The
registration statement is expected to be filed and become effective as soon as
practicable after the closing of this offering. Accordingly, shares registered
under the registration statements will, subject to Rule 144 volume limitations
applicable to affiliates, be available for sale in the open market, beginning
180 days after the effective date of the registration statement of which this
prospectus is a part.
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<PAGE> 71
UNDERWRITING
Under the terms and subject to the conditions contained in the underwriting
agreement dated , , we have agreed to sell to the
underwriters named below, for whom Credit Suisse First Boston Corporation, CIBC
World Markets Corp. and Hambrecht & Quist LLC are acting as representatives, the
following respective number of shares of common stock:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ---------
<S> <C>
Credit Suisse First Boston Corporation......................
CIBC World Markets Corp. ...................................
Hambrecht & Quist LLC.......................................
--------
Total.............................................
========
</TABLE>
The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in the offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.
We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to additional shares from us at the initial public
offering price less the underwriting discounts and commissions. This option may
be exercised only to cover any over-allotments of common stock.
The underwriters propose to offer the shares of common stock to the public
initially at the public offering price on the cover page of this prospectus and
to selling group members at that price less a concession of $ per share.
The underwriters and selling group members may allow a discount of $ per
share on sales to other broker/dealers. After the initial public offering, the
public offering price and concession and discount to broker/dealers may be
changed by the representatives.
The following table summarizes the compensation and estimated expenses we
will pay.
<TABLE>
<CAPTION>
PER SHARE TOTAL
-------------------------------- --------------------------------
WITHOUT WITH WITHOUT WITH
OVER-ALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Underwriting discounts and
commissions paid by us............. $ $ $ $
Expenses payable by us............... $ $ $ $
</TABLE>
The underwriters have informed us that they do not expect discretionary
sales to exceed 5% of the shares of common stock being offered.
We, our directors, officers and certain of our stockholders have agreed
that we and they will not offer, sell, contract to sell, announce our intention
to sell, pledge or otherwise dispose of, directly or indirectly, or file with
the Securities and Exchange Commission a registration statement under the
Securities Act of 1933 relating to, any additional shares of our common stock or
securities convertible into or exchangeable or exercisable for any of our common
stock without the prior consent of Credit Suisse First Boston Corporation for a
period of 180 days after the date of this prospectus, except in connection with
our stock option and employee stock purchase plans.
The underwriters have reserved for sale, at the initial public offering
price, up to shares of the common stock for employees, directors and
other persons associated with us who have expressed an interest in purchasing
common stock in the offering. The number of shares available for sale to the
general public in the offering will be reduced to the extent these persons
purchase these reserved shares. Any
66
<PAGE> 72
reserved shares not so purchased will be offered by the underwriters to the
general public on the same terms as the other shares.
We have agreed to indemnify the underwriters against liabilities under the
Securities Act of 1933 or to contribute to payments which the underwriters may
be required to make in that respect.
We have applied to list our shares of common stock on The Nasdaq Stock
Market's National Market under the symbol "CLPR."
Prior to this offering, there has been no public market for our common
stock. The initial public offering price will be determined by negotiation
between us and the underwriters. The principal factors to be considered in
determining the public offering price include:
- the information set forth in this prospectus and otherwise available to
the underwriters
- the history and the prospects for the industry in which we will compete
- the ability of our management
- the prospects for our future earnings
- the present state of our development and our current financial condition
- the general condition of the securities markets at the time of this
offering
- the recent market prices of, and the demand for, publicly traded common
stock of generally comparable companies
The representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation M
under the Securities Exchange Act of 1934.
- Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position.
- Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.
- Syndicate covering transactions involve purchases of the common stock in
the open market after the distribution has been completed in order to
cover syndicate short positions.
- Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by the
syndicate member is purchased in a stabilizing or syndicate covering
transaction to cover syndicate short positions.
These stabilizing transactions, syndicate covering transactions and penalty bids
may cause the price of the common stock to be higher than it would otherwise be
in the absence of these transactions. These transactions may be effected on The
Nasdaq Stock Market's National Market or otherwise and, if commenced, may be
discontinued at any time.
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<PAGE> 73
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are effected. Accordingly, any resale of the common stock
in Canada must be made in accordance with applicable securities laws which will
vary depending on the relevant jurisdiction, and which may require resales to be
made in accordance with available statutory exemptions or pursuant to a
discretionary exemption granted by the applicable Canadian securities regulatory
authority. Purchasers are advised to seek legal advice prior to any resale of
the common stock.
REPRESENTATIONS OF PURCHASERS
Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us and the dealer from whom the
purchase confirmation is received that (1) the purchaser is entitled under
applicable provincial securities laws to purchase the common stock without the
benefit of a prospectus qualified under these securities laws, (2) where
required by law, that the purchaser is purchasing as principal and not as agent,
and (3) the purchaser has reviewed the text above under "Resale Restrictions."
RIGHTS OF ACTION (ONTARIO PURCHASERS)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or recission or rights of action under the civil liability provisions of
the U.S. federal securities laws.
ENFORCEMENT OF LEGAL RIGHTS
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Canadian purchasers to effect service of process within Canada upon the
issuer or these persons. All or a substantial portion of the assets of the
issuer and these persons may be located outside of Canada and, as a result, it
may not be possible to satisfy a judgment against the issuer or these persons in
Canada or to enforce a judgment obtained in Canadian courts against the issuer
or these persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that the purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by the purchaser in this offering. This report must be in
the form attached to British Columbia Securities Commission Blanket Order BOR
#95/17, a copy of which may be obtained from Caliper. Only one report must be
filed in respect of common stock acquired on the same date and under the same
prospectus exemption.
TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of common stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the common
stock in their particular circumstances and with respect to the eligibility of
the common stock for investment by the purchaser under relevant Canadian
legislation.
68
<PAGE> 74
LEGAL MATTERS
The validity of the common stock offered by this prospectus will be passed
upon for us by Cooley Godward LLP, Palo Alto, California. As of the date of this
prospectus, partners and associates of Cooley Godward LLP own an aggregate of
approximately 29,166 shares of common stock through an investment partnership.
The underwriters have been represented by Mintz, Levin, Cohn, Ferris, Glovsky
and Popeo, P.C., Boston, Massachusetts.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our financial
statements at December 31, 1997 and 1998, and for each of the three years in the
period ended December 31, 1998, as set forth in their report. We have included
our financial statements in this prospectus and elsewhere in the registration
statement in reliance on Ernst & Young LLP's report, given on their authority as
experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act of 1933 with respect to the
shares of common stock offered by us. This prospectus, which constitutes a part
of the registration statement, does not contain all of the information set forth
in the registration statement, some items of which are contained in exhibits to
the registration statement as permitted by the rules and regulations of the
Commission. For further information with respect to Caliper and the common stock
offered, reference is made to the registration statement, including the
exhibits, and the financial statements and notes filed as a part of the
registration statement. A copy of the registration statement, including the
exhibits and the financial statements and notes filed as a part of it, may be
inspected without charge at the public reference facilities maintained by the
Securities and Exchange Commission in Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and copies of all or any part of the registration
statement may be obtained from the Securities and Exchange Commission upon the
payment of fees prescribed by it. The Securities and Exchange Commission
maintains a Web site at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding companies that file
electronically with it.
69
<PAGE> 75
CALIPER TECHNOLOGIES CORP.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Ernst & Young LLP, Independent Auditors........... F-2
Balance Sheets.............................................. F-3
Statements of Operations.................................... F-4
Statement of Redeemable Convertible Preferred Stock and
Stockholders' Equity (Deficit)............................ F-5
Statements of Cash Flows.................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 76
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Caliper Technologies Corp.
We have audited the accompanying balance sheets of Caliper Technologies Corp. as
of December 31, 1997 and 1998, and the related statements of operations,
redeemable convertible preferred stock and stockholders' equity (deficit), and
cash flows for each of the three years in the period ended December 31, 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Caliper Technologies Corp. at
December 31, 1997 and 1998, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1998, in conformity
with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Palo Alto, California
March 5, 1999
F-2
<PAGE> 77
CALIPER TECHNOLOGIES CORP.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
EQUITY
DECEMBER 31, (DEFICIT) AT
------------------- SEPTEMBER 30, SEPTEMBER 30,
1997 1998 1999 1999
-------- -------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 312 $ 5,158 $ 3,628
Marketable securities..................................... 26,237 25,894 24,192
Accounts receivable....................................... -- 1,082 390
Inventories............................................... -- -- 206
Prepaid expenses and other current assets................. 189 600 761
-------- -------- --------
Total current assets........................................ 26,738 32,734 29,177
Property and equipment, net................................. 2,050 2,796 4,856
Deposits and other assets................................... 119 -- --
Notes receivable............................................ 200 200 625
-------- -------- --------
Total assets................................................ $ 29,107 $ 35,730 $ 34,658
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.......................................... $ 148 $ 228 $ 912
Accrued compensation...................................... 283 432 690
Other accrued liabilities................................. 1,142 493 606
Deferred revenue.......................................... -- 626 2,399
Current portion of equipment financing.................... 486 881 1,292
-------- -------- --------
Total current liabilities................................... 2,059 2,660 5,899
Noncurrent portion of equipment financing................... 1,430 2,008 3,299
Deferred rent............................................... -- -- 184
Commitments
Redeemable convertible preferred stock, $0.001 par value,
issuable in series; 17,308,333 shares authorized in 1997
and 19,579,039 shares authorized in 1998 and 1999 (none
pro forma); 16,807,922 shares issued and outstanding in
1997, 18,257,756 shares issued and outstanding in 1998 and
1999 (none pro forma); aggregate liquidation preference of
$44,810 at December 31, 1998 and September 30, 1999 (none
pro forma)................................................ 38,283 48,716 50,538 $ --
Stockholders' equity (deficit):
Convertible preferred stock, $0.001 par value; 1,691,667
shares authorized in 1997, 1,420,961 shares authorized
in 1998 and 1999 (5,000,000 shares pro forma); 1,293,462
shares issued and outstanding in 1997, 1998, and 1999
(none pro forma); aggregate liquidation preference of
$1,009 at December 31, 1998 and September 30, 1999 (none
pro forma).............................................. 1 1 1 --
Common stock, $0.001 par value; 28,000,000 shares
authorized in 1997, 32,000,000 shares authorized in 1998
and 1999 (70,000,000 shares pro forma); 3,866,834,
4,324,926, and 5,103,950 shares issued and outstanding
in 1997, 1998, and 1999, respectively (24,655,168 shares
pro forma).............................................. 4 4 5 25
Additional paid-in capital................................ 589 1,249 8,872 59,391
Deferred stock compensation............................... -- (500) (5,858) (5,858)
Accumulated deficit....................................... (13,259) (18,408) (28,282) (28,282)
-------- -------- -------- --------
Total stockholders' equity (deficit)........................ (12,665) (17,654) (25,262) $ 25,276
-------- -------- -------- ========
$ 29,107 $ 35,730 $ 34,658
======== ======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE> 78
CALIPER TECHNOLOGIES CORP.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
--------------------------- -----------------
1996 1997 1998 1998 1999
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue.................................................... $ 132 $ 2,266 $ 8,155 $ 4,425 $ 8,859
Costs and expenses:
Research and development................................. 2,734 7,200 9,584 7,232 12,228
General and administrative............................... 1,240 2,478 2,932 1,996 3,487
Amortization of deferred stock compensation.............. -- -- -- -- 1,997
Acquired in-process research and development............. 978 -- -- -- --
------- ------- ------- ------- -------
Total costs and expenses................................... 4,952 9,678 12,516 9,228 17,712
------- ------- ------- ------- -------
Operating loss............................................. (4,820) (7,412) (4,361) (4,803) (8,853)
Interest income............................................ 179 1,191 1,581 1,183 1,076
Interest expense........................................... (69) (60) (195) (125) (275)
------- ------- ------- ------- -------
Net loss................................................... (4,710) (6,281) (2,975) (3,745) (8,052)
Accretion on redeemable convertible preferred stock........ (262) (1,470) (2,174) (1,587) (1,822)
------- ------- ------- ------- -------
Net loss attributable to common stockholders............... $(4,972) $(7,751) $(5,149) $(5,332) $(9,874)
======= ======= ======= ======= =======
Net loss per common share, basic and diluted............... $ (2.50) $ (2.81) $ (1.53) $ (1.63) $ (2.36)
======= ======= ======= ======= =======
Shares used in computing net loss per common share, basic
and diluted.............................................. 1,987 2,758 3,365 3,275 4,187
Pro forma net loss per share, basic and diluted
(unaudited).............................................. $ (0.13) $ (0.34)
======= =======
Shares used in computing pro forma net loss per share,
basic and diluted (unaudited)............................ 22,381 23,738
</TABLE>
See accompanying notes.
F-4
<PAGE> 79
CALIPER TECHNOLOGIES CORP.
STATEMENT OF REDEEMABLE CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARES)
<TABLE>
<CAPTION>
STOCKHOLDERS EQUITY (DEFICIT)
REDEEMABLE ----------------------------------------------------
CONVERTIBLE CONVERTIBLE
PREFERRED STOCK PREFERRED STOCK COMMON STOCK ADDITIONAL
-------------------- ------------------ ------------------ PAID-IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
---------- ------- --------- ------ --------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1995....... -- $ -- -- $-- 650,000 $1 $ --
Issuance of common stock for cash... -- -- -- -- 1,884,870 2 25
Issuance of common stock and Series
A convertible preferred stock in
exchange for all of the
outstanding common and preferred
stock of ChemCore Corporation..... -- -- 1,293,462 1 1,058,911 1 492
Issuance of Series B redeemable
convertible preferred stock for
cash.............................. 8,499,589 6,651 -- -- -- -- --
Issuance of Series C redeemable
convertible preferred stock for
cash.............................. 3,333,333 10,000 -- -- -- -- --
Accretion on redeemable convertible
preferred stock................... -- 262 -- -- -- -- --
Net loss and comprehensive net
loss.............................. -- -- -- -- -- -- --
---------- ------- --------- -- --------- -- -------
Balances at December 31, 1996....... 11,832,922 16,913 1,293,462 1 3,593,781 4 517
Issuance of Series D redeemable
convertible preferred stock for
cash.............................. 4,820,000 19,280 -- -- -- -- --
Issuance of Series D redeemable
convertible preferred stock for
services.......................... 155,000 620 -- -- -- -- --
Issuance of common stock upon
exercise of stock options......... -- -- -- -- 243,053 -- 60
Issuance of common stock for cash... -- -- -- -- 30,000 -- 12
Accretion on redeemable convertible
preferred stock................... -- 1,470 -- -- -- -- --
Net loss and comprehensive loss..... -- -- -- -- -- -- --
---------- ------- --------- -- --------- -- -------
Balances at December 31, 1997....... 16,807,922 38,283 1,293,462 1 3,866,834 4 589
Issuance of Series D redeemable
convertible preferred stock for
services.......................... 220,000 880 -- -- -- -- --
Issuance of Series E redeemable
convertible preferred stock for
cash.............................. 1,229,834 7,379 -- -- -- -- --
Issuance of common stock upon
exercise of stock options......... -- -- -- -- 299,277 -- 84
Issuance of common stock for
services.......................... -- -- -- -- 158,815 -- 76
Accretion on redeemable convertible
preferred stock................... -- 2,174 -- -- -- -- --
Deferred stock compensation......... -- -- -- -- -- -- 500
Net loss and comprehensive loss..... -- -- -- -- -- -- --
---------- ------- --------- -- --------- -- -------
Balances at December 31, 1998....... 18,257,756 48,716 1,293,462 1 4,324,926 4 1,249
Issuance of common stock upon
exercise of stock options
(unaudited)....................... -- -- -- -- 764,524 1 259
Issuance of common stock for
services (unaudited).............. -- -- -- 14,500 -- 9
Accretion on redeemable convertible
preferred stock (unaudited)....... -- 1,822 -- -- -- -- --
Deferred stock compensation
(unaudited)....................... -- -- -- -- -- -- 7,355
Amortization of deferred stock
compensation (unaudited).......... -- -- -- -- -- -- --
Net loss and comprehensive loss
(unaudited)....................... -- -- -- --
---------- ------- --------- -- --------- -- -------
Balances at September 30, 1999
(unaudited)....................... 18,257,756 $50,538 1,293,462 $1 5,103,950 $5 $ 8,872
========== ======= ========= == ========= == =======
<CAPTION>
STOCKHOLDERS EQUITY (DEFICIT)
--------------------------------------------
TOTAL
STOCKHOLDERS'
DEFERRED STOCK ACCUMULATED EQUITY
COMPENSATION DEFICIT (DEFICIT)
-------------- ----------- -------------
<S> <C> <C> <C>
Balances at December 31, 1995....... $ -- $ -- $ 1
Issuance of common stock for cash... -- -- 27
Issuance of common stock and Series
A convertible preferred stock in
exchange for all of the
outstanding common and preferred
stock of ChemCore Corporation..... -- -- 494
Issuance of Series B redeemable
convertible preferred stock for
cash.............................. -- -- --
Issuance of Series C redeemable
convertible preferred stock for
cash.............................. -- -- --
Accretion on redeemable convertible
preferred stock................... -- (262) (262)
Net loss and comprehensive net
loss.............................. -- (5,246) (5,246)
------- -------- --------
Balances at December 31, 1996....... -- (5,508) (4,986)
Issuance of Series D redeemable
convertible preferred stock for
cash.............................. -- -- --
Issuance of Series D redeemable
convertible preferred stock for
services.......................... -- -- --
Issuance of common stock upon
exercise of stock options......... -- -- 60
Issuance of common stock for cash... -- -- 12
Accretion on redeemable convertible
preferred stock................... -- (1,470) (1,470)
Net loss and comprehensive loss..... -- (6,281) (6,281)
------- -------- --------
Balances at December 31, 1997....... -- (13,259) (12,665)
Issuance of Series D redeemable
convertible preferred stock for
services.......................... -- -- --
Issuance of Series E redeemable
convertible preferred stock for
cash.............................. -- -- --
Issuance of common stock upon
exercise of stock options......... -- -- 84
Issuance of common stock for
services.......................... -- -- 76
Accretion on redeemable convertible
preferred stock................... -- (2,174) (2,174)
Deferred stock compensation......... (500) -- --
Net loss and comprehensive loss..... -- (2,975) (2,975)
------- -------- --------
Balances at December 31, 1998....... (500) (18,408) (17,654)
Issuance of common stock upon
exercise of stock options
(unaudited)....................... -- -- 260
Issuance of common stock for
services (unaudited).............. -- -- 9
Accretion on redeemable convertible
preferred stock (unaudited)....... -- (1,822) (1,822)
Deferred stock compensation
(unaudited)....................... (7,355) -- --
Amortization of deferred stock
compensation (unaudited).......... 1,997 -- 1,997
Net loss and comprehensive loss
(unaudited)....................... -- (8,052) (8,052)
------- -------- --------
Balances at September 30, 1999
(unaudited)....................... $(5,858) $(28,282) $(25,262)
======= ======== ========
</TABLE>
See accompanying notes.
F-5
<PAGE> 80
CALIPER TECHNOLOGIES CORP.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
1996 1997 1998 1998 1999
------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss.................................................. $(4,710) $ (6,281) $ (2,975) $ (3,745) $ (8,052)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................... 87 356 921 656 935
Amortization of deferred stock compensation............. -- -- -- -- 1,997
Acquired in-process research and development............ 978 -- -- -- --
Issuance of common and preferred stock for services..... -- 620 956 951 9
Changes in operating assets and liabilities:
Accounts receivable................................... -- -- (1,082) (158) 692
Notes receivable...................................... -- (200) -- -- (425)
Inventories........................................... -- -- -- -- (206)
Prepaid expenses and other assets..................... (58) (88) (411) (73) (161)
Deposits and other assets............................. -- (119) 119 100 --
Accounts payable and other accrued liabilities........ (674) 1,022 (569) (800) 797
Accrued compensation.................................. 75 208 149 69 258
Deferred revenue...................................... 275 (275) 626 77 1,773
Deferred rent......................................... -- -- -- -- 184
------- -------- -------- -------- --------
Net cash used in operating activities..................... (4,027) (4,757) (2,266) (2,923) (2,199)
------- -------- -------- -------- --------
INVESTING ACTIVITIES
Purchases of available-for-sale securities................ (5,050) (51,448) (39,996) (35,203) (16,610)
Proceeds from sales of available-for-sale securities...... -- -- 6,233 2,143 4,813
Proceeds from maturities of available-for-sale
securities.............................................. 147 30,114 34,106 29,283 13,499
Capital expenditures...................................... (648) (1,845) (1,667) (1,252) (2,995)
------- -------- -------- -------- --------
Net cash used in investing activities..................... (5,551) (23,179) (1,324) (5,029) (1,293)
------- -------- -------- -------- --------
FINANCING ACTIVITIES
Proceeds from equipment financing......................... 640 1,574 1,586 1,337 2,523
Payments of obligations under equipment financing......... (73) (225) (613) (404) (821)
Proceeds from issuance of common and preferred stock...... 16,678 19,352 7,463 7,423 260
Repayments of notes payable............................... (160) -- -- -- --
------- -------- -------- -------- --------
Net cash provided by financing activities................. 17,085 20,701 8,436 8,356 1,962
------- -------- -------- -------- --------
Net increase (decrease) in cash and cash equivalents...... 7,507 (7,235) 4,846 404 (1,530)
Cash and cash equivalents at beginning of period.......... 40 7,547 312 312 5,158
------- -------- -------- -------- --------
Cash and cash equivalents at end of period................ $ 7,547 $ 312 $ 5,158 $ 716 $ 3,628
======= ======== ======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid............................................. $ 69 $ 60 $ 195 $ 125 $ 275
======= ======== ======== ======== ========
SCHEDULE OF NONCASH TRANSACTIONS
Issuance of common and preferred stock upon acquisition of
ChemCore................................................ $ 494 $ -- $ -- $ -- $ --
======= ======== ======== ======== ========
Deferred stock compensation............................... $ -- $ -- $ 500 $ -- $ 7,355
======= ======== ======== ======== ========
</TABLE>
See accompanying notes.
F-6
<PAGE> 81
CALIPER TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION
Caliper Technologies Corp. ("Caliper") was incorporated in the state of
Delaware on July 26, 1995. Caliper develops lab-on-a-chip technologies and
manufactures LabChip systems. These systems perform laboratory experiments for
use in the pharmaceutical industry and other industries.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
INTERIM FINANCIAL INFORMATION
The financial information at September 30, 1999 and for the nine months
ended September 30, 1998 and 1999 is unaudited but, in the opinion of
management, has been prepared on the same basis as the annual financial
statements and includes all adjustments (consisting only of normal recurring
adjustments) that Caliper considers necessary for a fair presentation of the
financial position at such date and the operating results and cash flows for
such periods. Results for the nine months ended September 30, 1999 are not
necessarily indicative of the results to be expected for any subsequent period.
UNAUDITED PRO FORMA INFORMATION
If Caliper's initial public offering as described in Note 11 is
consummated, all of the preferred stock outstanding will automatically be
converted into common stock. The unaudited pro forma redeemable convertible
preferred stock and stockholders' equity at September 30, 1999 has been adjusted
for the assumed conversion of preferred stock based on the shares of preferred
stock outstanding at September 30, 1999.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and are depreciated using the
straight-line method over the estimated useful lives of the assets, generally
five years. Furniture and equipment acquired under equipment financing is
amortized over the shorter of the useful lives or the financing period.
Leasehold improvements are amortized over the shorter of the estimated useful
life of the assets or lease term.
IMPAIRMENT OF LONG-LIVED ASSETS
In accordance with the provisions of Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" ("SFAS 121"), Caliper reviews long-lived
assets, including property and equipment, for impairment whenever events or
changes in business circumstances indicate that the carrying amount of the
assets may not be fully recoverable. Under SFAS 121, an impairment loss would be
recognized when estimated undiscounted future cash flows expected to result from
the use of the asset and its eventual disposition is less than its carrying
amount. Impairment, if any, is assessed using discounted cash flows. Through
September 30, 1999, there have been no such losses.
F-7
<PAGE> 82
CALIPER TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH EQUIVALENTS AND MARKETABLE SECURITIES
Caliper considers all highly liquid investments with maturities of three
months or less from the date of purchase to be cash equivalents. Management
determines the appropriate classification of its cash equivalents and investment
securities at the time of purchase and reevaluates such determination as of each
balance sheet date. Management has classified Caliper's cash equivalents and
marketable securities as available-for-sale securities in the accompanying
financial statements. Available-for-sale securities are carried at fair value,
with unrealized gains and losses reported in a separate component of
stockholders' equity, when material. Realized gains and losses are included in
interest income. The cost of securities sold is based on the specific
identification method.
Caliper invests its excess cash in U.S. government and agency securities,
debt instruments of financial institutions and corporations, and money market
funds with strong credit ratings. Caliper has established guidelines regarding
diversification of its investments and their maturities which should maintain
safety and liquidity.
STOCK-BASED COMPENSATION
Caliper accounts for employee stock option grants in accordance with
Accounting Principles Board Opinion No. 25 ("APB 25"), "Accounting for Employee
Stock Issued to Employees." Stock option grants to nonemployees are accounted
for in accordance with Financial Accounting Standards Board Statement No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123") and Emerging Issues Task
Force Consensus No. 96-18.
REVENUE RECOGNITION
Revenues are earned from services performed pursuant to collaboration
agreements, technology access program agreements and government grants.
Non-refundable license fees under technology access programs are recognized as
revenues upon the transfer of the license to third parties and when no further
performance obligations exist. Subscription fees received under the technology
access programs are recognized ratably over the subscription period. Payments
received in advance under these arrangements are recorded as deferred revenue
until earned. Revenue from grants and development and support activities under
collaboration agreements and technology access programs are recorded in the
period in which the costs are incurred. Direct costs associated with these
contracts and grants are reported as research and development expense. Milestone
fees are recognized upon completion of specified milestones according to
contract terms. Product revenue is recognized upon the transfer of title to
customers and is recorded net of discounts, rebates and allowances.
INVENTORIES
Inventories are stated at the lower of standard cost (which approximates
actual cost) or market. At September 30, 1999, inventories consisted mainly of
raw materials.
COMPREHENSIVE INCOME (LOSS)
As of January 1, 1998, Caliper adopted Financial Accounting Standards Board
Statement No. 130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130
requires unrealized gains or losses on Caliper's available-for-sale securities
to be included in other comprehensive income. For the years ended December 31,
1997 and 1998 and for the nine months ended September 30, 1999, comprehensive
loss approximated net loss as other comprehensive income (loss) was not
material.
F-8
<PAGE> 83
CALIPER TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SEGMENT REPORTING
Effective in January 1998, Caliper adopted Statement of Financial
Accounting Standards No. 131, "Disclosure about Segments of an Enterprise and
Related Information" ("SFAS 131"). SFAS 131 establishes annual and interim
reporting standards for an enterprise's operating segments and related
disclosures about its products, services, geographic areas, and major customers.
Caliper has determined that it operates in only one segment. Accordingly, the
adoption of SFAS 131 had no impact on Caliper's financial statements.
NET LOSS PER SHARE
Basic earnings per share is calculated based on the weighted-average number
of common shares outstanding during the period. Diluted earnings per share would
give effect to the dilutive effect of common stock equivalents consisting of
stock options and warrants (calculated using the treasury stock method).
Potentially dilutive securities have been excluded from the diluted earnings per
share computations as they have an antidilutive effect due to Caliper's net
loss.
The computation of pro forma net loss per share includes shares issuable
upon the conversion of outstanding shares of convertible preferred stock (using
the as-if converted method) from the original date of issuance.
A reconciliation of shares used in the calculations is as follows (in
thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------- ------------------
1996 1997 1998 1998 1999
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Basic and diluted:
Net loss............................... $(4,710) $(6,281) $(2,975) $(3,745) $(8,052)
Accretion on redeemable convertible
preferred stock..................... (262) (1,470) (2,174) (1,587) (1,822)
------- ------- ------- ------- -------
Net loss attributable to common
stockholders........................... $(4,972) $(7,751) $(5,149) $(5,332) $(9,874)
======= ======= ======= ======= =======
Weighted-average shares of common stock
outstanding............................ 3,201 3,690 4,050 3,998 4,607
Less: weighted-average shares subject to
repurchase............................. (1,214) (932) (685) (723) (420)
------- ------- ------- ------- -------
Weighted-average shares used in basic and
diluted net loss per share............. 1,987 2,758 3,365 3,275 4,187
======= ======= ======= ======= =======
Pro forma basic and diluted:
Net loss............................... $(2,975) $(8,052)
======= =======
Shares used above........................ 3,365 4,187
Adjustment to reflect weighted-average
effect of assumed conversion of
preferred stock (unaudited)............ 19,016 19,551
------- -------
Weighted-average shares used in pro forma
basic and diluted net loss per share
(unaudited)............................ 22,381 23,738
======= =======
</TABLE>
F-9
<PAGE> 84
CALIPER TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The following outstanding options and warrants (prior to the application of
the treasury stock method), and convertible preferred stock (on an as-converted
basis) were excluded from the computation of diluted net loss per share as they
had an antidilutive effect (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------ -----------------------
1996 1997 1998 1998 1999
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Options and warrants................. 976 2,120 1,971 2,041 2,721
Convertible preferred stock.......... 13,126 18,101 19,551 19,551 19,551
</TABLE>
SIGNIFICANT CONCENTRATIONS
Financial instruments that potentially subject Caliper to concentrations of
credit risk primarily consist of cash equivalents and marketable securities (see
Note 4).
In 1996, two companies represented 66% and 34% of total revenues. In 1997,
one company represented 94% of total revenues. In 1998, three companies
represented 40%, 40%, and 17% of total revenues. For the nine months ended
September 30, 1998, two companies represented 51% and 45% of total revenues. For
the nine months ended September 30, 1999, four companies represented 50%, 17%,
13% and 11% of total revenues.
Caliper relies on several companies as the sole source of various materials
in its manufacturing process. Any extended interruption in the supply of these
materials could result in the failure to meet customer demand.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Financial
Instruments and for Hedging Activities" ("SFAS 133") which provides a
comprehensive and consistent standard for the recognition and measurement of
derivatives and hedging activities. SFAS 133 is effective for fiscal years
beginning after June 15, 1999 and is not anticipated to have an impact on
Caliper's results of operations or financial condition when adopted as Caliper
holds no derivative financial instruments and does not currently engage in
hedging activities.
In March 1998, the AICPA issued Statement of Position 98-1, "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use" ("SOP
98-1"). SOP 98-1 requires that entities capitalize certain costs related to
internal use software once certain criteria have been met. The Company adopted
the provisions of SOP 98-1 on January 1, 1999. Through September 30, 1999, the
Company has not capitalized any costs related to internal use software.
2. CONTRACTS AND GRANTS
Strategic Alliance with Hewlett-Packard
In May 1998, Caliper executed a collaboration agreement with
Hewlett-Packard Company ("Hewlett-Packard") to create a line of commercial
research products based on LabChip technologies. In this collaboration, Caliper
primarily focuses on developing core technology and LabChip applications.
Caliper also manufactures the chips and supplies the chips and reagents to
Hewlett-Packard. If Caliper elects, however, not to manufacture chips for a
LabChip application or is unable to meet minimum supply
F-10
<PAGE> 85
CALIPER TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
2. CONTRACTS AND GRANTS (CONTINUED)
commitments to be mutually established in the future, Hewlett-Packard would have
the right to manufacture those chips. Hewlett-Packard primarily focuses on
developing instruments and software, manufacturing instruments, and marketing,
selling and supporting complete systems.
Hewlett-Packard funds Caliper's product development efforts under the
collaboration, reimburses Caliper's costs of supplying chips and reagents, and
pays Caliper a share of the gross margin on all components of LabChip systems.
The gross margin share varies depending on the type of collaboration product,
whether Caliper or Hewlett-Packard manufacture the collaboration product, and
whether such collaboration product is sold during the collaboration or after the
collaboration has terminated. Under this agreement, Hewlett-Packard purchased
833,334 shares of Caliper's redeemable convertible preferred stock Series E with
an aggregate cost of $5.0 million. At December 31, 1998 this represented 3.5% of
Caliper's outstanding common and convertible preferred stock.
The term of the Hewlett-Packard agreement is eight years, beginning in May
1998. After three years, Hewlett-Packard may elect not to meet certain annual
funding requirements, in which case either party may terminate the agreement. In
any event either party may terminate the agreement after five years.
Technology Access Program
Caliper maintains a technology access program which provides customers with
early access to new products, and offers technical training, support and
customization services. Technology access program customers have non-exclusive
access to all of the high throughput screening products Caliper offers during
the term of the agreement. These agreements generally provide for customers to
pay an up-front license fee and annual subscription fees, and to reimburse
Caliper for its costs of providing development and support services. Instruments
and chips are generally sold separately on a product-by-product basis, although
some agreements establish prices for initial instruments or estimates of per
data point charges for Sipper chips.
Caliper currently has three technology access program customers for its
high throughput screening systems: Eli Lilly and Company ("Eli Lilly"), Amgen,
Inc. ("Amgen"), and Hoffmann-La Roche Inc. ("Roche").
Eli Lilly. Caliper signed a technology access agreement with Eli Lilly in
August 1999. The term is three years, although Eli Lilly may temporarily suspend
its technology access program participation and later reinitiate participation,
during which time Caliper's support and assistance obligations will also be
suspended. Eli Lilly may terminate the agreement on any anniversary.
Amgen. Caliper entered into a technology access agreement with Amgen in
December 1998. Under this agreement, Amgen may delay payment of its second
annual subscription fee until Caliper has delivered an initial ultra high
throughput system. The term of this agreement is three years, although Amgen may
terminate the agreement on any anniversary or if Caliper fails to deliver the
ultra high throughput screening system in a timely manner.
Hoffmann-La Roche. Caliper entered into a technology access agreement with
Hoffmann-La Roche in November 1998, which is due to expire in July 2000. This
agreement supersedes an earlier agreement under which Roche funded early
development of the high throughput screening technology in exchange for certain
exclusive rights to an ultra high throughput screening system. Under this
earlier agreement, Roche purchased 1,333,333 shares of Caliper's redeemable
convertible preferred stock Series C with an aggregate cost of $4.0 million. At
December 31, 1998, this represented 5.6% of Caliper's outstanding common and
convertible preferred stock. Roche now has non-exclusive rights similar to other
technology access program
F-11
<PAGE> 86
CALIPER TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
2. CONTRACTS AND GRANTS (CONTINUED)
customers. Caliper did not receive an up-front license fee or annual
subscription fee from Hoffmann-La Roche.
Caliper relies on several companies as the sole source of various materials
in its manufacturing process. Any extended interruption in the supply of these
materials could result in the failure to meet customer demand.
Value Added Screening Collaboration Program
Caliper's value added screening collaboration program offers high
throughput screening services using Caliper's LabChip systems. Caliper's first
value added screening collaboration agreement was established with Neurocrine
Biosciences in December 1998. Caliper receives screening fees on a per data
point basis, preclinical milestones and royalties on Neurocrine products
emerging from the collaboration. This agreement has a three-year term, but may
be terminated by either party under certain circumstances after the first year.
Caliper recognized approximately $132,000, $2.1 million, and $7.9 million
under the above agreements in 1996, 1997, and 1998, respectively, and $4.3
million and $8.2 million for the nine months ended September 30, 1998 and 1999,
respectively. Revenue earned from reimbursement of development and support
activities approximated actual costs incurred.
In September 1998, Caliper received a grant from the Advanced Technology
Program of the National Institute of Standards and Technology ("NIST") to
develop a Reference Laboratory DNA Diagnostics System based on Caliper's
"lab-on-a-chip" technology of approximately $2 million over three years. The
grant period began in January 1999.
3. ACQUISITION OF CHEMCORE CORPORATION
In February 1996, Caliper completed the acquisition of ChemCore Corporation
("ChemCore"), an early stage research and development entity. Caliper assumed
all of the liabilities of ChemCore and acquired all of the outstanding common
stock and Series A preferred stock of ChemCore in exchange for 1,058,911 shares
of Caliper's common stock and 1,293,462 shares of Series A preferred stock at an
exchange ratio of 0.862308 to 1.
The acquisition was accounted for using the purchase method. Under the
purchase method, the results of operations of acquired companies are included
prospectively from the date of acquisition, and the aggregate acquisition cost
is allocated to the acquiree's assets, liabilities, and intangibles, if any,
based upon the fair values on the date of acquisition. On the date of the
acquisition, ChemCore had no significant assets, liabilities of approximately
$484,000, an exclusive license under a sponsored research and development
agreement, and certain patents, most of which were pending. Caliper allocated
the aggregate purchase cost of $978,000 to in-process research and development.
The technology acquired had no alternative future uses.
F-12
<PAGE> 87
CALIPER TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
4. CASH EQUIVALENTS AND MARKETABLE SECURITIES
The following is a summary of cash equivalents and marketable securities at
December 31, 1997 and 1998:
<TABLE>
<CAPTION>
AMORTIZED COST AND
ESTIMATED FAIR VALUE
--------------------
1997 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Money market fund........................................ $ 312 $ 1,381
Bonds of the U.S. Government and its agencies............ 12,861 12,217
Commercial paper......................................... 12,355 17,454
Time deposits............................................ 1,021 --
------- -------
$26,549 $31,052
======= =======
Reported as:
Cash equivalents....................................... $ 312 $ 5,158
Marketable securities.................................. 26,237 25,894
------- -------
$26,549 $31,052
======= =======
</TABLE>
As of December 31, 1997 and 1998, the difference between the fair value and
the amortized cost of available-for-sale securities was immaterial. As of
December 31, 1997 and 1998, the average portfolio duration was less than one
year.
There were no material gross realized gains or losses from sales of
securities or material unrealized gains and losses on investments at December
31, 1997 and 1998.
5. NOTES RECEIVABLE
At December 31, 1998, Caliper held a note receivable of $200,000 from an
officer of Caliper. This note, which bears interest at 6.61% per year from
January 2002, is collateralized by certain personal assets of the officer and
has certain amortization schedules for periodic payments with the final payment
to be made at the end of 2006.
At September 30, 1999, in addition to the $200,000 note receivable, Caliper
held an unsecured promissory note of $425,000 in connection with a loan to a
second officer of Caliper. The note bears interest at 5.96% per year and is
repayable upon the earlier of July 29, 2005 or the voluntary termination of his
employment with Caliper.
F-13
<PAGE> 88
CALIPER TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
6. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1997 1998
------ -------
(IN THOUSANDS)
<S> <C> <C>
Machinery, equipment, and furniture....................... $2,207 $ 3,775
Leasehold improvements.................................... 286 385
------ -------
2,493 4,160
Accumulated depreciation and amortization................. (443) (1,364)
------ -------
Property and equipment, net............................... $2,050 $ 2,796
====== =======
</TABLE>
Property and equipment at December 31, 1997 and 1998 includes assets
acquired under capital leases of approximately $2.2 million and $3.8 million.
Accumulated amortization related to leased assets was approximately $441,000 and
$1.4 million at December 31, 1997 and 1998.
7. EQUIPMENT FINANCING AND RENTAL COMMITMENTS
As of December 31, 1998, Caliper had $3.8 million of property and equipment
financed through long-term obligations, and approximately $1.8 million unused
and available under an equipment financing credit line. The draw down period
under the equipment financing credit line expired on June 30, 1999. The
obligations under the equipment financings are secured by the equipment
financed, bear interest at a weighted-average fixed rate of approximately 9.5%,
and are due in monthly installments through December 2003. Under the terms of
one equipment financing agreement, ownership of the financed equipment may be
purchased by Caliper at fair value at the end of the financing term. Other
equipment financing agreements require a balloon payment at the end of each loan
term.
As of December 31, 1998, future minimum lease payments under operating and
capital leases and principal payments on equipment loans are as follows:
<TABLE>
<CAPTION>
CAPITAL LEASES
AND
OPERATING EQUIPMENT
LEASES LOANS
--------- --------------
(IN THOUSANDS)
<S> <C> <C>
Years ending December 31:
1999...................................................... $ 1,664 $1,004
2000...................................................... 1,669 925
2001...................................................... 1,674 672
2002...................................................... 1,722 280
2003...................................................... 1,765 216
Thereafter................................................ 9,116 --
------- ------
Total minimum lease and principal payments........ $17,610 3,097
=======
Amount representing interest................................ (208)
------
Present value of future payments............................ 2,889
Current portion of equipment financing...................... (881)
------
Noncurrent portion of equipment financing................... $2,008
======
</TABLE>
F-14
<PAGE> 89
CALIPER TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
7. EQUIPMENT FINANCING AND RENTAL COMMITMENTS (CONTINUED)
Rent expense relating to operating leases was approximately $97,000 in
1996, $525,000 in 1997, and $695,000 in 1998.
In December 1998, Caliper entered into a 10-year facility operating lease
agreement. Caliper also entered into a sublease agreement through November 1999
for a total amount of $198,000. The appropriate amount has been offset against
the operating lease commitment for 1999, as shown above.
In connection with the facility lease, Caliper has a $1 million standby
letter-of-credit arrangement with a bank expiring on October 20, 2008. Caliper
has pledged a certificate of deposit of $1 million as collateral to this letter
of credit.
In January 1999, Caliper entered into a $2.5 million financing agreement
with Transamerica Business Credit Corporation ("Transamerica") for the purchase
of property and equipment. The drawdown period under the equipment financing
credit line expires on June 30, 2000. During the nine months ended September 30,
1999, Caliper drew down the remaining $1.8 million balance of the equipment
financing credit line which existed as of December 31, 1998 and financed an
additional $752,000 of property and equipment purchases under the financing
agreement with Transamerica. These obligations will be repaid in monthly
installments through June 2004. As of September 30, 1999, Caliper has
approximately $1.7 million unused and available balance with Transamerica.
8. REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
CONVERTIBLE PREFERRED STOCK
Convertible preferred stock is issuable in series, with rights and
preferences designated by series. The shares designated and outstanding are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1998
-------------------------------------- --------------------------------------
REDEMPTION/ REDEMPTION/
ISSUED AND LIQUIDATION ISSUED AND LIQUIDATION
AUTHORIZED OUTSTANDING VALUE AUTHORIZED OUTSTANDING VALUE
---------- ----------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Convertible preferred
stock:
Series A........... 1,293,500 1,293,462 $ 1,008,900 1,293,462 1,293,462 $ 1,008,900
Undesignated
preferred
stock............ 398,167 -- -- 127,499 -- --
---------- ---------- ----------- ---------- ---------- -----------
1,691,667 1,293,462 1,008,900 1,420,961 1,293,462 1,008,900
---------- ---------- ----------- ---------- ---------- -----------
Redeemable
convertible
preferred stock:
Series B........... 8,600,000 8,499,589 7,157,964 8,550,706 8,499,589 7,515,862
Series C........... 3,333,333 3,333,333 10,600,864 3,333,333 3,333,333 11,130,907
Series D........... 5,375,000 4,975,000 20,524,486 5,195,000 5,195,000 22,460,607
Series E........... -- -- -- 2,500,000 1,229,834 7,608,461
---------- ---------- ----------- ---------- ---------- -----------
17,308,333 16,807,922 38,283,314 19,579,039 18,257,756 48,715,837
---------- ---------- ----------- ---------- ---------- -----------
Total.......... 19,000,000 18,101,384 $39,292,214 21,000,000 19,551,218 $49,724,737
========== ========== =========== ========== ========== ===========
<CAPTION>
SEPTEMBER 30, 1999
--------------------------------------
REDEMPTION/
ISSUED AND LIQUIDATION
AUTHORIZED OUTSTANDING VALUE
---------- ----------- -----------
<S> <C> <C> <C>
Convertible preferred
stock:
Series A........... 1,293,462 1,293,462 $ 1,008,900
Undesignated
preferred
stock............ 127,499 -- --
---------- ---------- -----------
1,420,961 1,293,462 1,008,900
---------- ---------- -----------
Redeemable
convertible
preferred stock:
Series B........... 8,550,706 8,499,589 7,796,935
Series C........... 3,333,333 3,333,333 11,547,172
Series D........... 5,195,000 5,195,000 23,300,572
Series E........... 2,500,000 1,229,834 7,892,996
---------- ---------- -----------
19,579,039 18,257,756 50,537,675
---------- ---------- -----------
Total.......... 21,000,000 19,551,218 $51,546,575
========== ========== ===========
</TABLE>
The holders of Series A, B, C, D, and E preferred stock are entitled to
receive noncumulative dividends at a rate of 5% of the original issue price, if
declared, prior to and in preference to the payment of dividends to holders of
common stock. At December 31, 1998, no such dividends had been declared.
F-15
<PAGE> 90
CALIPER TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
8. REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (CONTINUED)
Each share of Series A, B, C, D, and E preferred stock is convertible into
common stock at the option of the holder on a one-for-one basis, subject to
adjustments for antidilution purposes. Series A, B, C, D, and E preferred shares
are automatically converted into common stock at the earlier of (i) the closing
of Caliper's initial underwritten public offering which is at a price to the
public of at least $5.00 per share and which results in aggregate proceeds to
Caliper of $10 million, or (ii) a vote or written consent of a majority of the
shares of preferred stock then outstanding, voting together as a single class.
All preferred shares have voting rights equal to common stock on an
as-if-converted basis.
The holders of Series B preferred stock, voting as a separate class, are
entitled to elect four members of the board of directors. The holders of Series
A, B, C, D, and E preferred stock and common stock, voting together as a class,
are entitled to elect the remaining members to the board of directors.
At any time subsequent to February 19, 2001, Caliper shall, upon written
request from the holders of a majority of the then outstanding shares of Series
B, C, D, and E preferred stock, redeem in whole or in part the Series B, C, D,
and E preferred stock by paying in cash a sum equal to (i) the original issue
price per share, plus all declared but unpaid dividends on such shares, and (ii)
an amount equal to 5% of the original issue price per annum, compounded
annually, from the date such shares were originally issued through the
redemption date. The carrying amount of Series B, C, D, and E preferred stock
has been increased by periodic accretions so as to equal the redemption amount
at the redemption date.
Series B, C, D and E preferred stockholders are entitled to receive, upon
liquidation, a distribution of $0.78, $3.00, $4.00 and $6.00 per share,
respectively (subject to adjustment for a recapitalization) plus all declared
but unpaid dividends, in preference to series A preferred stockholders and
common stockholders. Following the distribution of liquidation preferences to
series B, C, D and E preferred stockholders, series A preferred stockholders are
entitled to receive a distribution of $0.78 per share in preference to the
common stockholders. Thereafter, the remaining assets and funds, if any, shall
be distributed ratably on a per share basis among all preferred and common
stockholders.
WARRANTS
In January 1996, in connection with an equipment financing agreement,
Caliper issued a warrant that entitles the holder to purchase 5,112 shares of
common stock at an exercise price of $0.78 per share. This warrant is
exercisable through the earlier of the effective date of a merger of Caliper or
January 3, 2002.
In May 1996, in connection with a capital lease agreement, Caliper granted
a warrant that entitles the holder to purchase 51,117 shares of Series B
preferred stock at an exercise price of $0.78 per share. This warrant is
exercisable through the earlier of three years after the effective date of
Caliper's initial public offering or May 10, 2002.
In October 1996, in connection with certain agreements, Caliper issued two
warrants that entitle the holders to purchase a total of 60,000 shares of common
stock at an exercise price of $0.78 per share. These warrants are exercisable
through October 11, 2006.
No amounts have been recorded by Caliper for the above warrant issuances,
as the amounts were determined to be immaterial at the time of issuance.
COMMON STOCK SUBJECT TO REPURCHASE
Common stock issued to founders of Caliper vest over varying periods at
varying percentages one year from the date of grant and on a monthly, pro rata
basis thereafter. From inception through December 31, 1998, the founders of
Caliper have purchased 2,664,870 shares of common stock, of which 531,250 shares
F-16
<PAGE> 91
CALIPER TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
8. REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (CONTINUED)
are unvested and remain subject to repurchase. Caliper has not repurchased any
shares in accordance with these rights.
STOCK OPTION PLANS
On August 31, 1996, Caliper's board of directors and stockholders adopted
the 1996 Stock Incentive Plan (the "Plan"). This Plan supersedes the 1996 Equity
Incentive Plan and provides for the issuance of common stock and the granting of
options to purchase common stock to employees, officers, directors, and
consultants of Caliper. Caliper grants shares of common stock for issuance under
the Plan at no less than the fair value of the stock (85% of fair value for
nonqualified options). Options granted under the Plan generally vest over 5
years at a rate of 20% one year from the grant date and 1/60 monthly thereafter.
Options canceled under the 1996 Equity Incentive Plan are not available for
future grants.
A summary of activity under the Plan is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING WEIGHTED-
------------------------- AVERAGE
OPTIONS NUMBER OF EXERCISE EXERCISE
AVAILABLE OPTIONS PRICE PRICE
---------- --------- ------------ ---------
<S> <C> <C> <C> <C>
Balance at inception (July 26, 1995)........... -- -- -- --
Authorized................................... 1,100,000 -- -- --
Granted...................................... (701,089) 701,089 $ 0.04-$0.30 $0.16
Exercised.................................... -- (39,000) $ 0.04-$0.30 $0.21
Canceled..................................... -- (10,000) $0.07 $0.07
---------- ---------
Balance at December 31, 1996................... 398,911 652,089 $ 0.04-$0.30 $0.16
Authorized................................... 1,500,000 -- -- --
Granted...................................... (1,388,500) 1,388,500 $ 0.30-$0.40 $0.33
Exercised.................................... -- (243,053) $ 0.04-$0.40 $0.24
Canceled..................................... 1,500 (1,500) $0.30 $0.30
---------- ---------
Balance at December 31, 1997................... 511,911 1,796,036 $ 0.04-$0.40 $0.27
Authorized................................... 2,000,000 -- -- --
Granted...................................... (660,300) 660,300 $ 0.40-$0.62 $0.55
Exercised.................................... -- (283,755) $ 0.04-$0.40 $0.29
Canceled..................................... 496,218 (509,588) $ 0.04-$0.40 $0.29
---------- ---------
Balance at December 31, 1998................... 2,347,829 1,662,993 $ 0.04-$0.62 $0.38
Granted (unaudited).......................... (1,541,950) 1,541,950 $0.62 $0.62
Exercised (unaudited)........................ -- (572,662) $ 0.04-$0.62 $0.38
Canceled (unaudited)......................... 27,250 (27,250) $ 0.40-$0.62 $0.42
---------- ---------
Balance at September 30, 1999 (unaudited)...... 833,129 2,605,031 $ 0.04-$0.62 $0.52
========== =========
</TABLE>
As part of the ChemCore merger in February 1996, Caliper exchanged, at the
ratio of 0.862308 to 1, outstanding options to purchase 240,499 shares of
ChemCore common stock at an exercise price of $0.20 for options to purchase
207,384 shares of Caliper's common stock at an exercise price $0.23 per share.
F-17
<PAGE> 92
CALIPER TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
8. REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (CONTINUED)
These options were initially granted at the fair value of ChemCore's common
stock and generally vest over five years at a rate of 20% per year.
A summary of activity of options assumed as part of the ChemCore merger is
as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
---------------------
NUMBER OF EXERCISE
OPTIONS PRICE
--------- --------
<S> <C> <C>
Balance at December 31, 1996 and 1997....................... 207,384 $0.23
Exercised................................................... (15,522) $0.23
--------
Balance at December 31, 1998................................ 191,862 $0.23
Exercised (unaudited)....................................... (191,862) $0.23
--------
Balance at September 30, 1999 (unaudited)................... --
========
</TABLE>
At December 31, 1998 and September 30, 1999, options to purchase 367,957
and 271,958 shares of common stock were exercisable at a weighted-average
exercise price of $0.26 and $0.41 per share.
At December 31, 1998 and September 30, 1999, the remaining contractual life
of outstanding options ranged from 5.00 to 9.13 years and 6.42 to 9.84 years,
respectively, with a weighted-average contractual life of 8.14 and 8.83 years,
respectively. The weighted-average fair value of options granted during 1996,
1997, 1998, and for the nine months ended September 30, 1999 was $0.03, $0.08,
$0.13, and $0.16, respectively.
STOCK BASED COMPENSATION
Pro forma information regarding net loss and net loss per share is required
by SFAS 123, and has been determined as if Caliper had accounted for its
employee stock options under the fair-value method of that Statement. The fair
value of these options was estimated at the date of grant using the minimum
value method and the following assumptions for 1996, 1997, and 1998: risk-free
interest rate of 6%, an expected life of five years, and no dividends.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the vesting period of the options using the
straight-line method. Caliper's pro forma net loss and net loss per share for
the years ended December 31, 1996, 1997 and 1998 are not materially different
from the net loss and net loss per share reported. The effects of applying SFAS
123 for pro forma disclosures are not likely to be representative of the effects
on reported net loss for future years.
Caliper has recorded deferred stock compensation of approximately $500,000
for the year ended December 31, 1998 and $7.4 million for the nine months ended
September 30, 1999, representing the difference between the exercise price of
the options granted and the deemed fair value of the common stock. These amounts
are being amortized by charges to operations over the vesting periods of the
individual stock options using the graded vesting method. Such amortization
expense amounted to approximately $2.0 million for the nine months ended
September 30, 1999.
F-18
<PAGE> 93
CALIPER TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
8. REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (CONTINUED)
RESERVED STOCK
As of December 31, 1998, Caliper had reserved shares of common stock for
future issuance as follows:
<TABLE>
<S> <C>
Stock options............................................ 4,202,684
Warrants................................................. 65,112
Preferred stock.......................................... 19,602,335
Stock agreement.......................................... 12,000
----------
23,882,131
==========
</TABLE>
In addition, Caliper has reserved 51,117 shares of Series B convertible
redeemable preferred stock for issuance upon exercise of warrants.
9. INCOME TAXES
As of December 31, 1998, Caliper had federal and California net operating
loss carryforwards of approximately $10.3 million and $1.4 million. Caliper also
had federal research and development tax credit carryforwards of approximately
$700,000. The net operating loss and credit carryforwards will expire at various
dates beginning on 2002 through 2018, if not utilized.
Utilization of the net operating losses and credits may be subject to a
substantial limitation due to the change in ownership provisions of the Internal
Revenue Code of 1986 and similar state provisions. The annual limitation may
result in the expiration of net operating losses and credits before utilization.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
Caliper's deferred tax assets and liabilities for federal and state income taxes
are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1998
------- -------
(IN THOUSANDS)
<S> <C> <C>
Net operating loss carryforwards......................... $ 2,600 $ 3,600
Research credit carryforwards............................ 500 1,000
Capitalized research and development..................... 1,700 1,600
Other, net............................................... 500 100
------- -------
Net deferred tax assets.................................. 5,300 6,300
Valuation allowance...................................... (5,300) (6,300)
------- -------
Total.......................................... $ -- $ --
======= =======
</TABLE>
Because of Caliper's lack of earnings history, the deferred tax assets have
been fully offset by a valuation allowance. The valuation allowance increased by
$2.1 million, $3.2 million, and $1 million, respectively during the years ended
December 31, 1996, 1997, and 1998.
F-19
<PAGE> 94
CALIPER TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
10. LITIGATION
On March 22, 1999, Caliper filed a lawsuit in California Superior Court for
the County of Santa Clara against Aclara Biosciences, Inc., and Caliper's former
patent counsel Bertram Rowland and the law firm of Flehr, Hohbach, Test,
Albritton and Herbert LLP, alleging that all three defendants misappropriated
certain of Caliper's trade secrets, and that Mr. Rowland and Flehr Hohbach
committed a breach of the duties they owed to Caliper as its former attorneys.
The suit seeks damages and equitable remedies to prevent Aclara, Mr. Rowland and
Flehr Hohbach from benefiting from the alleged misappropriation and breach of
duties. While Caliper believes that its complaint is meritorious, there can be
no assurance that Caliper will prevail in its action against any or all of the
defendants, or that if Caliper prevails, any damages or equitable remedies
awarded, if any, will be commercially valuable. Furthermore, Caliper has
incurred and is likely to continue to incur substantial costs and expend
substantial personnel time in pursuing its claims against Aclara, Mr. Rowland
and Flehr Hohbach.
On April 23, 1999, Aclara Biosciences filed a lawsuit in United States
District Court for the Northern District of California alleging that Caliper is
making, using, selling or offering for sale microfluidic devices that infringe
United States Patent Number 5,750,015 in willful disregard of Aclara's patent
rights. The Aclara action seeks damages for past and future reduced sales or
lost profits based upon the making, using, selling and offering for sale of
Caliper's products and processes, and seeks to enjoin Caliper's continued
activities relating to these products. This action subjects Caliper to potential
liability for damages and could require Caliper to cease making, using or
selling the affected products, or to obtain a license in order to continue to
manufacture, use or sell the affected products. While Caliper believes that it
has meritorious defenses in this action, there can be no assurance that Caliper
will prevail or that any license required would be made available on
commercially acceptable terms, if at all. Furthermore, Caliper has incurred and
is likely to continue to incur substantial costs and expend substantial
personnel time in defending against the claims filed by Aclara. Caliper's
failure to successfully defend itself against the Aclara action could have a
material adverse effect on Caliper's business, financial condition and operating
results.
11. SUBSEQUENT EVENTS (UNAUDITED)
In October 1999, the board of directors adopted, subject to stockholder
approval, the 1999 Equity Incentive Plan ("1999 Equity Plan"). The 1999 Equity
Plan amended and restated the 1996 Stock Incentive Plan and increased the shares
reserved for issuance by an additional 2 million shares. In addition, the 1999
Equity Plan provides for an automatic increase in the shares reserved for
issuance by the greater of 5% of outstanding shares on a fully-diluted basis or
the number of shares that have been made subject to awards granted under the
1999 Equity Plan during the prior 12-month period. The automatic share reserve
increase may not exceed 20 million shares in aggregate over the 10-year period.
On October 1, 1999, options to purchase 903,700 shares were granted
pursuant to the 1999 Equity Plan with an exercise price of $2.00 per share. The
Company estimates that additional deferred compensation of approximately $4.7
million will be recorded as a result of these option grants and amortized to
compensation expense in accordance with Caliper's policy.
In October 1999, the board of directors adopted, subject to stockholder
approval, the 1999 Non-Employee Directors' Stock Option Plan ("1999 Directors'
Plan") which provides for the automatic grant of options to non-employee
directors. A total of 300,000 shares of common stock has been reserved for
issuance under this plan. The number of shares reserved for issuance will
automatically increase by the greater of 0.3% of outstanding shares on a
fully-diluted basis or the number of shares subject to options granted under the
1999 Directors' Plan during the prior 12-month period. The automatic share
reserve increase may not exceed 3 million shares in aggregate over the 10-year
period.
F-20
<PAGE> 95
CALIPER TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
11. SUBSEQUENT EVENTS (UNAUDITED) (CONTINUED)
In October 1999, the board of directors adopted, subject to stockholder
approval, the 1999 Employee Stock Purchase Plan ("1999 Purchase Plan"). A total
of 450,000 shares of common stock has been reserved for issuance under the 1999
Purchase Plan. The number of shares reserved automatically increases by the
greater of 0.5% of outstanding shares on a fully-diluted basis or the number of
shares issued under the 1999 Purchase Plan during the prior 12-month period. The
automatic share reserve increase may not exceed 4,500,000 shares in aggregate
over the 10-year period. The 1999 Purchase Plan permits eligible employees to
acquire shares of Caliper's common stock through payroll deductions of up to 10%
of their base compensation. No employee may participate in the 1999 Purchase
Plan if immediately after the grant the employee has voting power over 5% or
more of the outstanding capital stock. Under the 1999 Purchase Plan, the board
may specify offerings of up to 27 months. Unless the board determines otherwise,
common stock may be purchased at the lower of 85% of the fair market value of
Caliper's common stock on the first day of the offering or 85% of the fair
market value of Caliper's common stock on the purchase date. The initial
offering period will begin on the effective date of the initial public offering.
In October 1999, Caliper's board of directors authorized management to file
a registration statement with the Securities and Exchange Commission to permit
Caliper to sell its common stock to the public. Upon completion of Caliper's
initial public offering, all of the outstanding preferred stock will be
converted into shares of common stock.
F-21
<PAGE> 96
[DESCRIPTION OF GRAPHICS]
Inside Back Cover: This picture was taken with a scanning electron microscope
at a resolution that permits the channels of a chip to be
visualized. The channels are approximately 30 microns wide
(a micron is approximately one millionth of a yard).
<PAGE> 97
[Caliper Technologies Corp. Logo]
<PAGE> 98
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by Caliper in connection with the sale of the
Common Stock being registered. All the amounts shown are estimates except for
the registration fee, the NASD filing fee and the Nasdaq National Market
application fee.
<TABLE>
<S> <C>
Registration fee............................................ $ 16,680
NASD filing fee............................................. 6,500
Nasdaq National Market application fee...................... 90,000
Blue sky qualification fee and expenses..................... 5,000
Printing and engraving expenses............................. 150,000
Legal fees and expenses..................................... 400,000
Accounting fees and expenses................................ 250,000
Transfer agent and registrar fees........................... 10,000
Miscellaneous............................................... 21,820
----------
Total.................................................. $ 950,000
==========
</TABLE>
ITEM 14. 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;
- under Section 174 of the Delaware General Corporation Law; or
- for any transaction from which the director derived an improper personal
benefit.
Our amended and restated certificate of incorporation further provides that
we must indemnify our directors and executive officers and may indemnify its
other officers and employees and agents to the fullest extent permitted by
Delaware law. We believe that indemnification under our amended and restated
certificate of incorporation covers negligence and gross negligence on the part
of indemnified parties.
We have entered into indemnification agreements with each of our directors
and officers. These agreements, among other things, require us to indemnify each
director and officer for some expenses including attorneys' fees, judgments,
fines and settlement amounts incurred by any of these persons in any action or
proceeding, including any action by or in the right of Caliper, arising out of
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 will provide for indemnification by the
underwriters of Caliper, 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> 99
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since January 1, 1996, Caliper has sold and issued the following
unregistered securities:
(1) From January 1996 to September 1999, Caliper has granted stock options
to purchase 4,291,839 shares of common stock, at a weighted average
exercise price of $0.4394, to employees, consultants and directors
pursuant to its 1996 Stock Incentive Plan and 1996 Equity Incentive
Plan. Of these stock options, 548,338 shares have been cancelled or
have lapsed without being exercised, 1,138,470 shares have been
exercised in common stock, no shares of which have been repurchased
and 2,605,031 shares remain outstanding.
(2) In February 1996, Caliper issued an aggregate of 1,293,462 shares of
Series A preferred stock and 1,058,911 shares of common stock to
shareholders of ChemCore Corporation in connection with the merger of
ChemCore with and into Caliper. Each share of ChemCore's Common stock
and Series A preferred stock were converted into 0.862308 shares of
Caliper's Common stock and Series A preferred stock, respectively.
Shares of Series A preferred stock are convertible into shares of
common stock at the rate of one share of common stock for each share
of Series A preferred stock outstanding. In addition, Caliper issued
options to purchase 207,384 shares of common stock at $0.23 per share,
which options were exercised from March 1998 through February 1999.
(3) From April 1996 to October 1996, Caliper issued an aggregate of
8,499,589 shares of Series B preferred stock to 13 purchasers at
$0.7825 per share, for an aggregate purchase price of $6,651,043. In
May 1996, Caliper issued a warrant to purchase 51,117 shares of Series
B preferred stock to Comdisco, Inc. at an exercise price of $0.7825
per share. Shares of Series B preferred stock are convertible into
shares of common stock at the rate of one share of common stock for
each share of Series B preferred stock outstanding.
(4) From January 1996 to October 1996, Caliper issued warrants to purchase
an aggregate of 65,112 shares of common stock to 3 purchasers at an
exercise price of $0.7825 per share.
(5) From October 1996 to December 1996, Caliper issued an aggregate of
3,333,333 shares of Series C preferred stock to 16 purchasers at $3.00
per share, for an aggregate purchase price of $9,999,999. Shares of
Series C preferred stock are convertible into shares of common stock
at the rate of one share of common stock for each share of Series C
preferred stock outstanding.
(6) From January 1997 to April 1998, Caliper issued an aggregate of
4,820,000 shares of Series D preferred stock to 17 purchasers at $4.00
per share, for an aggregate purchase price of $19,280,000. In this
period, Caliper issued an additional 375,000 shares of Series D
preferred stock to Dow Chemical Company as payment for services
rendered pursuant to the terms of a development agreement dated
January 14, 1997. Shares of Series D preferred stock are convertible
into shares of common stock at the rate of one share of common stock
for each share of Series D preferred stock outstanding.
(7) In May 1998, Caliper issued an aggregate of 1,229,834 shares of Series
E preferred stock to 6 purchasers at $6.00 per share, for an aggregate
purchase price of $7,379,004. Shares of Series E preferred stock are
convertible into shares of common stock at the rate of one share of
common stock for each share of Series E preferred stock outstanding.
(8) In January 1996, Caliper issued an aggregate of 735,000 shares of
common stock to 3 founders, at $0.001 per share.
(9) From January 1996 to April 1996, Caliper issued an aggregate of
697,500 shares of common stock to 10 scientific advisors and 1
consultant at $0.001 per share.
(10) From February 1996 to April 1996, Caliper issued an aggregate of
383,370 shares of common stock to 3 accredited investors in connection
with the Series B preferred stock financing, at $0.04 per share.
II-2
<PAGE> 100
(11) From October 1996 to September 1997, Caliper issued 30,000 shares of
common stock to one board member at $0.07 per share and 30,000 shares
of common stock to another board member at $0.40 per share.
(12) From January 1998 to July 1999, Caliper issued 119,250 shares of
common stock to 8 individuals for services rendered to Caliper, with
an aggregate value of $51,030.
(13) In September 1998, Caliper issued 54,065 shares of common stock to 3
officers of Caliper in lieu of cash, with an aggregate value of
$33,520.
The sales and issuances of securities described in paragraphs (1), (8),
(9), (11), (12) and (13) above were deemed to be exempt from registration under
the Securities Act by virtue of Rule 701 promulgated thereunder in that they
were offered and sold either pursuant to a written compensatory benefit plan or
pursuant to a written contract relating to compensation, as provided by Rule
701.
The sale and issuance of securities described in paragraphs (2) through (7)
and (10) above were deemed to be exempt from registration under the Securities
Act by virtue of Section 4(2), Regulation D or Regulation S promulgated
thereunder. With respect to the grant of stock options and restricted stock
awards described in paragraphs (1), (9), (11) and (13), an exemption from
registration was unnecessary in that none of the transactions involved a "sale"
or securities as this term is used in Section 2(3) of the Securities Act.
II-3
<PAGE> 101
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<S> <C>
1.1* Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation of
Caliper, filed May 19, 1998.
3.2 Amendment to Certificate of Incorporation.
3.3 Form of Certificate of Incorporation of Caliper to be filed
immediately following the closing of the offering.
3.4 Bylaws of Caliper.
4.1 Reference is made to Exhibits 3.1 through 3.4.
4.2* Specimen Stock Certificate.
5.1* Opinion of Cooley Godward LLP.
10.1 Lease Agreement, dated December 1, 1998, between Caliper and
605 East Fairchild Associates, L.P.
10.2* 1996 Equity Incentive Plan.
10.3* 1999 Equity Incentive Plan.
10.4* 1999 Employee Stock Purchase Plan.
10.5* 1999 Non-Employee Directors' Stock Option Plan.
10.6 Employment Agreement, dated January 18, 1999, between
Caliper and Daniel L. Kisner, M.D.
10.7 Promissory Note, dated July 29, 1999, between Caliper and
Daniel L. Kisner, Ph.D.
10.8 Amended and Restated Investor Rights Agreement, dated May 7,
1998, among Caliper and certain stockholders of Caliper.
10.9 Form of Indemnification Agreement entered into between
Caliper and its directors and executive officers.
10.10** Collaboration Agreement, dated May 2, 1998, between Caliper
and Hewlett-Packard Company.
10.11** Termination, Transition and Technology Access Program
Agreement, dated November 24, 1998, between Caliper and
Hoffmann-La Roche Inc.
10.12** Technology Access Agreement, dated December 21, 1998,
between Caliper and Amgen, Inc.
10.13** Technology Access Agreement, dated August 12, 1999, between
Caliper and Eli Lilly and Company.
10.14** Screening Collaboration Agreement, dated December 16, 1998,
between Caliper and Neurocrine Biosciences, Inc.
10.15** Sole Commercial Patent License Agreement, effective
September 1, 1995, between Lockheed Martin Energy Research
Corporation and Caliper, as amended (domestic).
10.16** Sole Commercial Patent License Agreement, effective
September 1, 1995, between Lockheed Martin Energy Research
Corporation and Caliper, as amended (international).
10.17 Consulting Agreement, dated April 30, 1997, between Caliper
and Dr. David V. Milligan.
10.18 Employment Agreement, dated September 23, 1999, between
Caliper and James L. Knighton.
10.19 Consulting Agreement, dated May 1, 1997, between Caliper and
Regis McKenna.
10.20* Promissory Note, dated March 25, 1997, between Caliper and
Michael R. Knapp, Ph.D.
23.1 Consent of Ernst & Young LLP, independent auditors.
23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit
5.1.
24.1 Power of Attorney. Reference is made to the signature page.
27.1 Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by amendment.
** Confidential treatment has been requested for a portion of this exhibit.
II-4
<PAGE> 102
(b) FINANCIAL STATEMENT SCHEDULES.
All schedules are omitted because they are not required, they are not
applicable or the information is already included in the financial statements or
notes thereto.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) That for purposes of determining any liability under the Securities
Act, the information omitted from the form of this 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.
(2) That for purposes 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 the securities at that
time shall be deemed to be the initial bona fide offering thereof.
(3) 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 provisions referenced in Item 15 of this
Registration Statement or otherwise, the Registrant has been advised
that in the opinion of the Securities and Exchange Commission this
indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against these 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 a 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 of whether the indemnification by
it is against public policy as expressed in the Securities Act of 1933,
and will be governed by the final adjudication of this issue.
(4) To provide to the Underwriters at the closing specified in the
Underwriting Agreement certificates in the denomination and registered
in the names required by the Underwriters to permit prompt delivery to
each purchaser.
II-5
<PAGE> 103
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Registrant has
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the County of Santa Clara, State of
California, on the 12th day of October, 1999.
CALIPER TECHNOLOGIES CORP.
By: /s/ DANIEL L. KISNER, M.D.
------------------------------------
Daniel L. Kisner, M.D.
President and Chief Executive
Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Daniel
L. Kisner, M.D. and James L. Knighton his or her true and lawful
attorney-in-fact and agent, each acting alone, with full power of substitution
and resubstitution, for him or her and in his or her name, place and stead, in
any and all capacities, to sign any or all amendments (including post-effective
amendments and registration statements filed pursuant to Rule 462) to the
Registration Statement on Form S-1, and to any registration statement filed
under Securities and Exchange Commission Rule 462, and to file the same, with
all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorney-in-fact and agent, or his or her
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ DANIEL L. KISNER, M.D. President, Chief Executive October 12, 1999
- --------------------------------------------------- Officer and Director
Daniel L. Kisner, M.D. (principal executive
officer)
/s/ JAMES L. KNIGHTON Chief Financial Officer October 12, 1999
- --------------------------------------------------- (principal financial and
James L. Knighton accounting officer)
/s/ DAVID V. MILLIGAN, PH.D. Chairman of the Board of October 12, 1999
- --------------------------------------------------- Directors
David V. Milligan, Ph.D.
/s/ ANTHONY B. EVNIN, PH.D. Director October 12, 1999
- ---------------------------------------------------
Anthony B. Evnin, Ph.D.
/s/ CHARLES M. HARTMAN Director October 12, 1999
- ---------------------------------------------------
Charles M. Hartman
/s/ REGIS P. MCKENNA Director October 12, 1999
- ---------------------------------------------------
Regis P. McKenna
/s/ ROBERT T. NELSEN Director October 12, 1999
- ---------------------------------------------------
Robert T. Nelsen
/s/ MICHAEL STEINMETZ, PH.D. Director October 12, 1999
- ---------------------------------------------------
Michael Steinmetz, Ph.D.
</TABLE>
II-6
<PAGE> 104
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<S> <C>
1.1* Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation of
Caliper, filed May 19, 1998.
3.2 Amendment to Certificate of Incorporation.
3.3 Form of Certificate of Incorporation of Caliper to be filed
immediately following the closing of the offering.
3.4 Bylaws of Caliper.
4.1 Reference is made to Exhibits 3.1 through 3.4.
4.2* Specimen Stock Certificate.
5.1* Opinion of Cooley Godward LLP.
10.1 Lease Agreement, dated December 1, 1998, between Caliper and
605 East Fairchild Associates, L.P.
10.2* 1996 Equity Incentive Plan.
10.3* 1999 Equity Incentive Plan.
10.4* 1999 Employee Stock Purchase Plan.
10.5* 1999 Non-Employee Directors' Stock Option Plan.
10.6 Employment Agreement, dated January 18, 1999, between
Caliper and Daniel L. Kisner, M.D.
10.7 Promissory Note, dated July 29, 1999, between Caliper and
Daniel L. Kisner, Ph.D.
10.8 Amended and Restated Investor Rights Agreement, dated May 7,
1998, among Caliper and certain stockholders of Caliper.
10.9 Form of Indemnification Agreement entered into between
Caliper and its directors and executive officers.
10.10** Collaboration Agreement, dated May 2, 1998, between Caliper
and Hewlett-Packard Company.
10.11** Termination, Transition and Technology Access Program
Agreement, dated November 24, 1998, between Caliper and
Hoffmann-La Roche Inc.
10.12** Technology Access Agreement, dated December 21, 1998,
between Caliper and Amgen, Inc.
10.13** Technology Access Agreement, dated August 12, 1999, between
Caliper and Eli Lilly and Company.
10.14** Screening Collaboration Agreement, dated December 16, 1998,
between Caliper and Neurocrine Biosciences, Inc.
10.15** Sole Commercial Patent License Agreement, effective
September 1, 1995, between Lockheed Martin Energy Research
Corporation and Caliper, as amended (domestic).
10.16** Sole Commercial Patent License Agreement, effective
September 1, 1995, between Lockheed Martin Energy Research
Corporation and Caliper, as amended (international).
10.17 Consulting Agreement, dated April 30, 1997, between Caliper
and Dr. David V. Milligan.
10.18 Employment Agreement, dated September 23, 1999, between
Caliper and James L. Knighton.
10.19 Consulting Agreement, dated May 1, 1997, between Caliper and
Regis McKenna.
10.20* Promissory Note, dated March 25, 1997, between Caliper and
Michael R. Knapp, Ph.D.
23.1 Consent of Ernst & Young LLP, independent auditors.
23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit
5.1.
24.1 Power of Attorney. Reference is made to the signature page.
27.1 Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by amendment.
** Confidential treatment has been requested for a portion of this exhibit.
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF CALIPER TECHNOLOGIES CORP.,
A DELAWARE CORPORATION
ARTICLE I.
The name of the corporation is CALIPER TECHNOLOGIES CORP.
ARTICLE II.
The address of the corporation's registered office in the State of
Delaware is 1013 Centre Road, City of Wilmington, County of New Castle. The name
of its registered agent at such address is The Prentice-Hall Corporation System,
Inc.
ARTICLE III.
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
Delaware.
ARTICLE IV.
CLASSES OF STOCK. This corporation is authorized to issue two classes of
stock to be designated, respectively, "Common Stock" and "Preferred Stock." The
total number of shares which the corporation is authorized to issue is
fifty-three million (53,000,000) shares, of which thirty-two million
(32,000,000) shares shall be Common Stock, par value $0.001 per share and
twenty-one million (21,000,000) shares shall be Preferred Stock, par value
$0.001 per share. The Preferred Stock shall be divided into series, namely
Series A Preferred Stock consisting of one million two hundred ninety-three
thousand four hundred sixty-two (1,293,462) shares (the "Series A Preferred
Stock"), Series B Preferred Stock consisting of eight million five hundred fifty
thousand seven hundred six (8,550,706) shares (the "Series B Preferred Stock"),
Series C Preferred Stock consisting of three million three hundred thirty-three
thousand three hundred thirty-three (3,333,333) shares (the "Series C Preferred
Stock"), Series D Preferred Stock consisting of five million one hundred
ninety-five thousand (5,195,000) shares (the "Series D Preferred Stock"), and
Series E Preferred Stock consisting of two million five hundred thousand
(2,500,000) shares (the "Series E Preferred Stock). The remaining one hundred
twenty-seven thousand four hundred ninety-nine (127,499) shares of Preferred
Stock shall be undesignated.
A. RIGHTS, PREFERENCES AND RESTRICTIONS OF PREFERRED STOCK. The rights,
preferences, restrictions and other matters relating to the Preferred Stock are
as follows:
1. DIVIDEND PROVISIONS. The holders of the shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock shall be entitled to receive pro
rata dividends out of any assets legally available therefor prior and in
preference to any declaration or payment of any dividend (payable other than in
Common Stock or other securities and rights convertible into or entitling the
holder thereof to receive, directly or indirectly, additional shares of Common
Stock of this corporation)
1.
<PAGE> 2
on the Common Stock of this corporation, at the rate of five percent (5%) of the
Original Issue Price, as defined below, per share of each outstanding share of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock and Series E Preferred Stock per annum or, if greater
(as determined on a per annum basis and an as converted basis for the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock), an amount equal to that paid on
any other outstanding shares of this corporation, payable quarterly when, as and
if declared by the Board of Directors. Such dividends shall not be cumulative.
2. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up of
this corporation, either voluntary or involuntary, the holders of the Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock shall be entitled to receive, prior and in preference to any
distribution of any of the assets, capital, surplus or earnings of this
corporation to the holders of Series A Preferred Stock or Common Stock by reason
of their ownership thereof, an amount per share (as adjusted for any stock
split, stock division or consolidation) equal to the sum of $.7825135 for each
outstanding share of Series B Preferred Stock (the "Original Issue Price" with
respect to such series), $3.00 for each outstanding share of Series C Preferred
Stock (the "Original Issue Price" with respect to such series), $4.00 for each
outstanding share of Series D Preferred Stock (the "Original Issue Price" with
respect to such series) and $6.00 for each outstanding share of Series E
Preferred Stock (the "Original Issue Price" with respect to such series), plus
an amount equal to declared but unpaid dividends on each such share of Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock (such amount of declared but unpaid dividends being referred to
as the "Premium" with respect to the Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock). If upon
the occurrence of such event, the assets and funds thus distributed among the
holders of the Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock shall be insufficient to permit the
payment to such holders of the full aforesaid preferential amounts, then the
entire assets and funds of the corporation legally available for distribution
shall be distributed ratably among the holders of Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock
in proportion to the aggregate Original Issue Price of the shares of such stock
owned by each such holder.
(b) Upon the completion of the distribution required by
subparagraph (a) of this Section 2, the holders of the Series A Preferred Stock
shall be entitled to receive, prior and in preference to any distribution of any
of the assets of this corporation to the holders of Common Stock by reason of
their ownership thereof, an amount per share (as adjusted for any stock split,
stock division or consolidation) equal to the sum of $.7825135 for each
outstanding share of Series A Preferred Stock (the "Original Issue Price" with
respect to such series) plus an amount equal to declared but unpaid dividends on
each such share of Series A Preferred Stock (such amount of declared but unpaid
dividends being referred to as the "Premium" with respect to the Series A
Preferred Stock). If upon the occurrence of such event, the assets and funds
thus distributed among the holders of the Series A Preferred Stock shall be
insufficient to permit the payment to such holders of the full aforesaid
preferential amounts, then the remaining assets and funds of the corporation
legally available for distribution shall be distributed ratably among the
2.
<PAGE> 3
holders of the Series A Preferred Stock in proportion to the amount of such
stock owned by each such holder.
(c) Upon the completion of the distribution required by
subparagraphs (a) and (b) of this Section 2, the remaining assets of the
corporation available for distribution to stockholders shall be distributed
among the holders of Series A Preferred Stock, Series B Preferred Stock, Series
C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Common
Stock pro rata based on the number of shares of Common Stock held by each
(assuming conversion of all such Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred
Stock).
(i) For purposes of this Section 2, a liquidation,
dissolution or winding up of this corporation shall be deemed to be occasioned
by, or to include, (A) the acquisition of the corporation by another entity by
means of any transaction or series of related transactions (including, without
limitation, any reorganization, merger or consolidation but, excluding any
merger effected exclusively for the purpose of changing the domicile of the
corporation); or (B) a sale of all or substantially all of the assets of the
corporation; unless the corporation's stockholders of record as constituted
immediately prior to such acquisition or sale will, immediately after such
acquisition or sale (by virtue of securities issued as consideration for the
corporation's acquisition or sale or otherwise) hold more than 50% of the voting
power of the surviving or acquiring entity.
(ii) In any of such events, if the consideration received by
the corporation is other than cash, its value will be deemed its fair market
value. Any securities shall be valued as follows:
(A) Securities not subject to investment letter or
other similar restrictions on free marketability:
(1) If traded on a securities exchange or through
the Nasdaq National Market, the value shall be deemed to be the average of the
closing prices of the securities on such exchange over the thirty-day period
ending three (3) days prior to the closing;
(2) If actively traded over-the-counter, the value
shall be deemed to be the average of the closing bid or sale prices (whichever
is applicable) over the thirty-day period ending three (3) prior to the closing;
and
(3) If there is no active public market, the value
shall be the fair market value thereof, as mutually determined by the
corporation and the holders of at least a majority of the voting power of all
then outstanding shares of Preferred Stock.
(B) The method of valuation of securities subject to
investment letter or other restrictions on free marketability (other than
restrictions arising solely by virtue of a stockholder's status as an affiliate
or former affiliate) shall be to make an appropriate fair market value
determined as above in (A) (1), (2) or (3) to reflect the approximate fair
market value thereof, as mutually determined by the corporation and the holders
of at least a
3.
<PAGE> 4
majority of the voting power of all then outstanding shares of Preferred Stock
voting together as a class.
(d) In the event the requirements of this Section 2 are not
complied with, this corporation shall forthwith either:
(i) cause such closing to be postponed until such time as
the requirements of this Section 2 have been complied with; or
(ii) cancel such transaction, in which event the rights,
preferences and privileges of the holders of the Preferred Stock shall revert to
and be the same as such rights, preferences and privileges existing immediately
prior to the date of the first notice referred to in subsection 2(e) hereof.
(e) The corporation shall give each holder of record of Preferred
Stock written notice of such impending transaction not later than twenty (20)
days prior to the stockholders meeting called to approve such transaction,
whichever is earlier, and shall also notify such holders in writing of the final
approval of such transaction. The first of such notices shall describe the
material terms and conditions of the impending transaction and the provisions of
this Section 2, and the corporation shall thereafter give such holders prompt
notice of any material changes. The transactions shall in no event take place
sooner than twenty (20) days after the corporation has given the first notice
provided for herein or sooner than ten (10) days after the corporation has given
notice of any material changes provided for herein; provided, however, that such
periods may be shortened upon the written consent of the holders of Preferred
Stock that are entitled to such notice rights or similar notice rights and that
represent at least a majority of the voting power of all then outstanding shares
of Preferred Stock voting together as a class.
3. REDEMPTION.
(a) Holders of shares of Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock shall
have the option, but not the obligation, at any time subsequent to February 19,
2001, to require the corporation to redeem the shares of Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred
Stock, outstanding as of February 19, 2001 (the "Redemption Shares"), at the
Redemption Price provided for below and otherwise pursuant to this Section 3, as
requested by the holders of at least 66-2/3% of the Redemption Shares upon
ninety (90) days prior written notice to the corporation (the "Redemption
Request"). The Redemption Request shall specify the effective date of such
redemption pursuant to this Section 3 (the "Redemption Date"). The price at
which shares of Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock shall be redeemed pursuant to this
Section 3 (the "Redemption Price") shall be the price per share, appropriately
adjusted for any stock dividends, combinations or splits or similar events with
respect to such shares, that is equal to the sum of (i) the Original Issue Price
per share, plus all declared but unpaid dividends on such shares, and (ii) an
amount equal to five percent (5%) of the Original Issue Price per annum,
compounded annually, from the date such shares were originally issued through
the Redemption Date or, if applicable, the actual date of redemption pursuant to
Section 3(d) below. The Redemption Price
4.
<PAGE> 5
shall be payable in cash. Notwithstanding the foregoing, the Redemption Price
per share to be paid to CIP Capital L.P. shall not be greater than that
permitted to be paid to a Small Business Investment Company under applicable
law.
(b) Within ten (10) days of receipt of any Redemption Request as
provided for in this Section 3, the corporation shall cause a copy thereof to be
mailed, first class postage prepaid, to each holder of record (at the close of
business on the business day next preceding the day on which such copy is
mailed) of the Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock other than the holders requesting
redemption pursuant to such Redemption Request, at the address last shown on the
records of the corporation for such holder. The corporation shall also include
with such copy a statement notifying such holder of the facts relating to the
redemption requested to be effected pursuant to this Section 3.
(c) At least fifteen (15) but no more than thirty (30) days prior to
the Redemption Date, written notice shall be mailed, first class postage
prepaid, to each holder of record (at the close of business on the business day
next preceding the day on which notice is given) of the Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred
Stock, at the address last shown on the records of the corporation for such
holder, notifying such holder of the redemption to be effected and specifying
the applicable Redemption Payment Dates, the Redemption Price, the place at
which payment may be obtained and calling upon such holder to surrender to the
corporation, in the manner and at the place designated, his certificate or
certificates representing the shares to be redeemed (the "Redemption Notice").
On or after the Redemption Date, each holder of Series B Preferred Stock, Series
C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock to be
redeemed shall surrender to this corporation the certificate or certificates
representing such shares, in the manner and at the place designated in the
applicable Redemption Notice, and thereupon the Redemption Price of such shares
shall be payable to the order of the person whose name appears on such
certificate or certificates as the owner thereof and each surrendered
certificate shall be canceled.
(d) From and after the Redemption Date, unless there shall have been
a default in payment of the Redemption Price, all rights of the holders of
shares of Series B Preferred Stock as holders of Series B Preferred Stock, the
holders of shares of Series C Preferred Stock as holders of Series C Preferred
Stock, the holders of shares of Series D Preferred Stock as holders of Series D
Preferred Stock, and the holders of shares of Series E Preferred Stock as
holders of Series E Preferred Stock (except the right to receive the Redemption
Price without interest upon surrender of their certificate or certificates)
shall cease with respect to such shares, and such shares shall not thereafter be
transferred on the books of the corporation or be deemed to be outstanding for
any purpose whatsoever. If the funds of the corporation legally available for
redemption of shares of Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock and Series E Preferred Stock on the Redemption Date are
insufficient to redeem the total number of shares of Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock
to be redeemed on such date, the maximum amount of funds which are legally
available will be used to redeem ratably among the holders of such shares to be
redeemed such number of shares determined based upon the aggregate number of
shares of Series B Preferred Stock, Series C Preferred Stock, Series D
5.
<PAGE> 6
Preferred Stock and Series E Preferred Stock held by such holders. For the
purpose of determining whether funds are legally available for redemption of
shares of Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock and Series E Preferred Stock as provided herein, the corporation shall
value its assets at the highest amount permissible under applicable law. The
shares of Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock and Series E Preferred Stock not redeemed shall remain outstanding and
entitled to all the rights and preferences provided herein. At any time
thereafter when additional funds of the corporation are legally available for
the redemption of shares of Preferred Stock, such funds will immediately be used
to redeem the balance of the shares which the corporation has become obliged to
redeem on any Redemption Date, but which it has not redeemed.
(e) On or prior to each Redemption Payment Date, the corporation
shall deposit the Redemption Price payable upon such Redemption Payment Date
with a bank or trust corporation having aggregate capital and surplus in excess
of $100,000,000 as a trust fund for the benefit of the respective holders of the
shares designated for redemption, with irrevocable instructions and authority to
the bank or trust corporation to pay the Redemption Price for such shares to
their respective holders on or after the applicable Redemption Payment Date upon
receipt of notification from the corporation that such holder has surrendered
his share certificate to the corporation pursuant to Section 3(c) above. From
and after the Redemption Date the shares so called for redemption shall be
redeemed and shall be deemed to be no longer outstanding, and the holders
thereof shall cease to be shareholders with respect to such shares and shall
have no rights with respect thereto except the rights to receive from the bank
or trust corporation payment of the Redemption Price of the shares, without
interest, upon surrender of their certificates therefor. Such instructions shall
also provide that any moneys deposited by the corporation pursuant to this
Section 3(e) for the redemption of shares thereafter converted into shares of
Common Stock pursuant to Section 4 hereof prior to the Redemption Date shall be
returned to the corporation forthwith upon such conversion. The balance of any
moneys deposited by the corporation pursuant to this Section 3(e) remaining
unclaimed at the expiration of six (6) months following the applicable
Redemption Payment Date shall thereafter be returned to the corporation upon its
request expressed in a resolution of its Board of Directors.
4. CONVERSION. The holders of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock shall have conversion rights as follows (the "Conversion
Rights"):
(a) RIGHT TO CONVERT. Each share of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and
Series E Preferred Stock shall be convertible, at the option of the holder
thereof, at any time after the date of issuance of such share at the office of
this corporation or any transfer agent for such stock, into such number of fully
paid and nonassessable shares of Common Stock as is determined by dividing the
Original Issue Price for each share of that series by the conversion price
applicable to such share, determined as hereafter provided, in effect on the
date the certificate is surrendered for conversion (the "Conversion Price"). The
initial Conversion Price per share for shares of Series A Preferred Stock shall
be the Original Issue Price for the Series A Preferred Stock; the initial
Conversion Price per share for shares of Series B Preferred Stock shall be the
Original Issue Price for the Series B Preferred Stock; the initial Conversion
Price per share for shares of Series C Preferred Stock shall be the Original
Issue Price for the Series C Preferred Stock; the
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initial Conversion Price per share for shares of Series D Preferred Stock shall
be the Original Issue Price for the Series D Preferred Stock; and the initial
Conversion Price per share for shares of Series E Preferred Stock shall be the
Original Issue Price for the Series E Preferred Stock; provided, however, that
the Conversion Price for the Series A Preferred Stock, the Series B Preferred
Stock, the Series C Preferred Stock, the Series D Preferred Stock and the Series
E Preferred Stock shall be subject to adjustment as set forth in subsection
4(d).
(b) AUTOMATIC CONVERSION. Each share of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and
Series E Preferred Stock shall automatically be converted into shares of Common
Stock at the Conversion Price at the time in effect for such Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock or Series E Preferred Stock immediately upon the earlier of (i) except as
provided below in subsection 4(c), the corporation's sale of its Common Stock in
a firm commitment underwritten public offering pursuant to a registration
statement on Form S-1 under the Securities Act of 1933, as amended (the "Act"),
at a public offering price per share which is not less than $5.00 (adjusted to
reflect subsequent stock dividends, stock splits or recapitalizations) and
resulting in aggregate proceeds to the corporation of at least $10,000,000, and
(ii) the date specified by written consent or agreement of the holders of a
majority of the then outstanding shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock voting together as a separate class (on an as-converted basis).
(c) MECHANICS OF CONVERSION. Before any holder of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock or Series E Preferred Stock shall be entitled to convert the same into
shares of Common Stock, such holder shall surrender the certificate or
certificates therefor, duly endorsed, at the office of this corporation or of
any transfer agent for the Preferred Stock of that series, and shall give
written notice to this corporation at its principal corporate office, of the
election to convert the same and shall state herein the name or names in which
the certificate or certificates for shares of Common Stock are to be issued.
This corporation shall, as soon as practicable thereafter, issue and deliver at
such office to such holder of such Preferred Stock, or to the nominee or
nominees of such holder, a certificate or certificates for the number of shares
of Common stock to which such holder shall be entitled as aforesaid. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the date of such surrender of the shares of Preferred Stock to be
converted, and the person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock as of such date. If the
conversion is in connection with an underwritten offering of securities
registered pursuant to the Act, the conversion will, unless otherwise notified
by the holders tendering the Preferred Stock for conversion, be conditioned upon
the closing with the underwriters of the sale of securities pursuant to such
offering, in which event the person(s) entitled to receive the Common Stock upon
conversion of the Preferred Stock shall not be deemed to have converted such
Preferred Stock until immediately prior to the closing of such sale of
securities.
(d) CONVERSION PRICE ADJUSTMENTS OF PREFERRED STOCK FOR CERTAIN
DILUTIVE ISSUANCES, SPLITS AND COMBINATIONS. The Conversion Price of the Series
A Preferred
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Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock and Series E Preferred Stock shall be subject to adjustment from time to
time as follows:
(i) (A) If the Corporation shall issue, after the date upon
which any shares of Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock or Series E Preferred Stock were first issued (the "Purchase
Date" with respect to such series), any Additional Stock (as defined below)
without consideration or for a consideration per share less than the Conversion
Price for such series in effect immediately prior to the issuance of such
Additional Stock, the Conversion Price for such series in effect immediately
prior to each such issuance shall forthwith (except as otherwise provided in
this clause (i)) be reduced, concurrently with such issue, to a price
(calculated to the nearest cent) determined by multiplying such Conversion Price
by a fraction, the numerator of which shall be the number of shares of Common
Stock outstanding immediately prior to such issue plus the number of shares of
Common Stock which the aggregate consideration received by the corporation for
the total number of Additional Stock so issued would purchase at such Conversion
Price in effect immediately prior to such issue, and the denominator of which
shall be the number of shares of Common Stock outstanding immediately prior to
such issue plus the number of such Additional Stock so issued; and provided
further that, for the purposes of this Section 4(d)(i)(A) all shares of Common
Stock issuable upon conversion of outstanding Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock shall be deemed to be Common Stock outstanding.
(B) No adjustment of the Conversion Price for the
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock or Series E Preferred Stock shall be made in an amount
less than one cent ($.01) per share, provided that any adjustments which are not
required to be made by reason of this sentence shall be carried forward and
shall be either taken into account in any subsequent adjustment made prior to 3
years from the date of the event giving rise to the adjustment being carried
forward, or shall be made at the end of 3 years from the date of the event
giving rise to the adjustment being carried forward. Except to the limited
extent provided for in subsections (E)(3) and (E)(4), no adjustment of such
Conversion Price pursuant to this subsection 4(d)(i) shall have the effect of
increasing the Conversion Price above the Conversion Price in effect immediately
prior to such adjustment.
(C) In the case of the issuance of Common Stock for
cash, the consideration shall be deemed to be the amount of cash paid therefor
before deducting any reasonable discounts, commissions or other expenses
allowed, paid or incurred by this corporation for any underwriting or otherwise
in connection with the issuance and sale thereof.
(D) In the case of the issuance of the Common Stock for
a consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair value thereof as determined in good
faith by the Board of Directors irrespective of any accounting treatment.
(E) In the case of the issuance (whether before, on or
after the applicable Purchase Date) of options to purchase or rights to
subscribe for Common Stock, securities by their terms convertible or
exchangeable for Common Stock or options to purchase
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or rights to subscribe for such convertible or exchangeable securities, the
following provisions shall apply for all purposes of this subsection 4(d)(i) and
subsection 4(d)(ii):
(1) The aggregate maximum number of shares of Common Stock
deliverable upon exercise (to the extent then exercisable) of such options to
purchase or rights to subscribe for Common Stock shall be deemed to have been
issued at the time such options or rights were issued and for a consideration
equal to the consideration (determined in the manner provided in subsections
4(d)(i)(C) and 4(d)(i)(D)), if any, received by the corporation upon the
issuance of such options or rights plus the minimum exercise price provided in
such options or rights (without taking into account potential antidilution
adjustments) for the Common Stock covered thereby.
(2) The aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange (to the extent then convertible or
exchangeable) for any such convertible or exchangeable securities or upon the
exercise of options to purchase or rights to subscribe for such convertible or
exchangeable securities and subsequent conversion or exchange thereof shall be
deemed to have been issued at the time such securities were issued or such
options or rights were issued and for a consideration equal to the
consideration, if any, received by the corporation for any such securities and
related options or rights (excluding any cash received on account of accrued
interest or accrued dividends), plus the minimum additional consideration, if
any, to be received by the corporation (without taking into account potential
antidilution adjustments) upon the conversion or exchange of such securities or
the exercise of any related options or rights (the consideration in each case to
be determined in the manner provided in subsections 4(d)(i)(C) and 4(d)(i)(D)).
(3) In the event of any change in the number of shares of
Common Stock deliverable or in the consideration payable to this corporation
upon exercise of such options or rights or upon conversions of or in exchange
for such from the antidilution provisions thereof, the Conversion Price of the
Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred
Stock, the Series D Preferred Stock and the Series E Preferred Stock to the
extent in any way affected by or computed using such options, rights or
securities, shall be recomputed to reflect such change, but no further
adjustment shall be made for the actual issuance of Common Stock or any payment
of such consideration upon the exercise of any such options or rights or the
conversion or exchange of such securities.
(4) Upon the expiration of any such options or rights, the
termination of any such rights to convert or exchange or the expiration of any
options or rights related to such convertible or exchangeable securities, the
Conversion Price of the Series A Preferred Stock, the Series B Preferred Stock,
the Series C Preferred Stock, the Series D Preferred Stock and the Series E
Preferred Stock, to the extent in any way affected by or computed using such
options, rights or securities or options or rights related to such securities,
shall be recomputed to reflect the issuance of only the number of shares of
Common Stock (and convertible or exchangeable securities which remain in effect)
actually issued upon the exercise of such options or rights, upon the conversion
or exchange of such securities or upon the exercise of the options or rights
related to such securities.
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(5) The number of shares of Common Stock deemed
issued and the consideration deemed paid therefor pursuant to subsections
4(d)(i)(E)(1) and 4(d)(i)(E)(2) shall be appropriately adjusted to reflect any
change, termination or expiration of the type described in either subsection
4(d)(i)(E)(3) or 4(d)(i)(E)(4).
(ii) "Additional Stock" shall mean any shares of Common
Stock issued (or deemed to have been issued pursuant to subsection 4(d)(i)(E))
or issuable by this corporation after the Purchase Date other than:
(A) Common Stock issued pursuant to a transaction
described in subsection 4(d)(iii) hereof;
(B) Common Stock issuable or issued to officers,
employees, consultants, directors or vendors (if in transactions with primarily
non-financing purposes) of this corporation directly or pursuant to a stock
option or stock purchase plan or restricted stock plan, to the extent all such
issuances do not exceed 4,600,000 shares of Common Stock, plus any additional
shares unanimously approved by the Board of Directors of this corporation.
(C) Common Stock issuable pursuant to exercise of any
warrants outstanding prior to the Purchase Date.
(D) Common Stock issued upon conversion of shares of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock or Series E Preferred Stock.
(E) The 2,661,667 shares of Series B Preferred Stock
issued pursuant to that certain Stock Purchase Agreement, dated April 26, 1996,
in the Second Closing (as defined therein).
(iii) In the event the corporation should at any time or
from time to time after the Purchase Date fix a record date for the effectuation
of a split or subdivision of the outstanding shares of Common Stock, or the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock, or other securities
or rights convertible into or entitling the holder thereof to receive directly
or indirectly, additional shares of Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon conversion or
exercise thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the Conversion
Price of the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock shall be
appropriately decreased so that the number of shares of Common Stock issuable on
conversion of each share of such series shall be increased in proportion to such
increase of the aggregate of shares of Common Stock outstanding and those
issuable with respect to such Common Stock Equivalents with the number of shares
issuable with respect to Common Stock Equivalents determined from time to time
in the manner provided for deemed issuances in subsection 4(d)(i)(E).
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(iv) If the number of shares of Common Stock outstanding at
any time after the Purchase Date is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date of such
combination, the Conversion Price for the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock shall be appropriately increased so that the number of shares of
Common Stock issuable on conversion of each share of such series shall be
decreased in proportion to such decrease in outstanding shares.
(e) OTHER DISTRIBUTIONS. In the event this corporation shall
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by this corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in subsection 4(d)(iii), then,
in each such case for the purpose of this subsection 4(e), the holders of the
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock and Series E Preferred Stock shall be entitled to a
proportionate share of any such distribution as though they were the holders of
the number of shares of Common Stock of the corporation into which their shares
of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock and Series E Preferred Stock are convertible as of the
record date fixed for the determination of the holders of Common Stock of the
corporation entitled to receive such distribution.
(f) RECAPITALIZATIONS. If at any time or from time to time there
shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 4 or Section 2) provisions shall be made so that the holders of the
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock and Series E Preferred Stock shall thereafter be
entitled to receive upon conversion of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock the number of shares of stock or other securities or property of
the corporation or otherwise to which a holder of Common Stock deliverable upon
conversion would have been entitled on such recapitalization. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section 4 with respect to the rights of the holders of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock after the recapitalization to the
end that the provisions of this Section 4 (including adjustment of the
Conversion Price then in effect and the number of shares purchasable upon
conversion of the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock) shall be
applicable after that event as nearly equivalent as may be practicable.
(g) NO IMPAIRMENT. This corporation will not by amendment of its
Certificate of Incorporation nor through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by this
corporation, but will at all times in good faith assist in the carrying out of
all the provisions of this Section 4 and in the taking of all such action as may
be necessary or appropriate in order to protect the Conversion Rights of the
holders of the Preferred Stock against impairment.
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(h) NO FRACTIONAL SHARES AND CERTIFICATE AS TO ADJUSTMENTS.
(i) No fractional shares shall be issued upon the conversion
of any share or shares of Preferred Stock and the number of shares of Common
Stock to be issued shall be rounded to the nearest whole share. Whether or not
fractional shares are issuable upon such conversion shall be determined on the
basis of the total number of shares of Preferred Stock the holder is at the time
converting into Common Stock and the number of shares of Common Stock issuable
upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or readjustment
of the Conversion Price of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock or Series E Preferred Stock
pursuant to this Section 4, this corporation, at its expense, shall promptly
compute such adjustment or readjustment in accordance with the terms hereof and
prepare and furnish to each holder of such series of Preferred Stock a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. This corporation
shall, upon the written request at any time of any holder of Preferred Stock,
furnish or cause to be furnished to such holder a like certificate setting forth
(A) such adjustment and readjustment, (B) the Conversion Price for such series
of Preferred Stock at the time in effect, and (C) the number of shares of Common
Stock and the amount, if any, of other property which at the time would be
received upon the conversion of a share of such series of Preferred Stock.
(i) NOTICES OF RECORD DATE. In the event of any taking by this
corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, this
corporation shall mail to each holder of Preferred Stock, at least twenty (20)
days prior to the date specified therein, a notice specifying the date on which
any such record is to be taken for the purpose of such dividend, distribution or
right, and the amount and character of such dividend, distribution or right.
(j) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. This
corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Preferred Stock, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of the Preferred Stock; and if at any time the number
of authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of all then outstanding shares of the Preferred Stock, in
addition to such other remedies as shall be available to the holder of such
Preferred Stock, this corporation will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purposes, including, without limitation, engaging in best efforts to obtain the
requisite stockholder approval of any necessary amendment to these articles.
(k) All shares of Common Stock which may be issued in connection
with the conversion provisions set forth herein will, upon issuance by this
corporation, be validly
12.
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issued, fully paid and nonassessable, not subject to any preemptive or similar
rights and free from all taxes, liens or charges with respect thereto created or
imposed by this corporation.
(l) This corporation shall pay all documentary, stamp or other
transactional taxes attributable to the issuance or delivery of shares of
capital stock of this corporation upon conversion of any shares of Preferred
Stock; provided, however, that this corporation shall not be required to pay any
taxes which may be payable in respect to any transfer involved in the issuance
or delivery of any certificate for such shares in a name other than that of the
Preferred Stockholder in respect of which such shares of Preferred Stock are
being issued.
(m) NOTICES. Any notice required by the provisions of this
Section 4 to be given to the holders of shares of Preferred Stock shall be
deemed given if deposited in the United States mail, postage prepaid and
addressed to each holder of record at his address appearing on the books of this
corporation.
5. VOTING RIGHTS.
(a) Except as otherwise set forth in Article VI, the holder of
each share of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock shall
have the right to one vote for each share of Common Stock into which such Series
A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock or Series E Preferred Stock could then be converted, and, with
respect to such vote, such holder shall have full voting rights and powers equal
to the voting rights and powers of the holders of Common Stock and shall be
entitled, notwithstanding any provision hereof, to notice of any stockholders
meeting in accordance with the bylaws of this corporation and shall be entitled
to vote, together with holders of Common Stock, with respect to any question
upon which holders of Common Stock have the right to vote. Fractional votes
shall not, however, be permitted and any fractional voting rights available on
an as-converted basis (after aggregating all shares into which shares of
Preferred Stock held by each holder could be converted) shall be rounded to the
nearest whole number (with one-half being rounded upward).
(b) The Board of Directors shall consist of six (6) members. The
holders of Series B Preferred Stock, voting as a separate class, shall be
entitled to elect four (4) members of the Board of Directors. The holders of the
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock, Series E Preferred Stock and Common Stock, voting
together as a class, shall be entitled to elect two (2) members of the Board of
Directors.
6. PROTECTIVE PROVISIONS.
(a) So long as shares of Series A Preferred Stock are
outstanding, this corporation shall not without first obtaining the approval (by
vote or written consent, as provided by law) of the holders of at least a
majority of the then outstanding shares of Series A Preferred Stock:
(i) increase the authorized number of shares of Series A
Preferred Stock other than an increase incident to a stock split; or
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(ii) amend or repeal any provision of this corporation's
Certificate of Incorporation if such action would alter or change the
preferences, rights, privileges, powers of or restrictions provided for the
benefit of Series A Preferred Stock.
(b) So long as any shares of Series B Preferred Stock are
outstanding, this corporation shall not without first obtaining the approval (by
vote or written consent, as provided by law) of the holders of at least a
majority of the then outstanding shares of Series B Preferred Stock:
(i) create or issue any security containing any rights,
preferences or privileges which are on a parity with or senior to the rights,
preferences or privileges of the Series B Preferred Stock
(ii) change or modify any of the rights, preferences or
privileges of the Series B Preferred Stock
(iii) permit any change of control of the corporation,
including without limitation any merger, consolidation or reorganization of the
corporation whereby the corporation's stockholders of record as constituted
immediately prior to such change of control do not hold more than fifty percent
(50%) of the voting power of the corporation immediately after such change in
control;
(iv) undertake any actions in which the holders of the
Series A Preferred Stock are entitled to a class vote under applicable law; or
(v) increase or decrease (other than by redemption pursuant
to Section 3 or conversion pursuant to Section 4) the total number of authorized
shares of Series B Preferred Stock.
(c) So long as any shares of Series C Preferred Stock are
outstanding, this corporation shall not without first obtaining the approval (by
vote or written consent, as provided by law) of the holders of at least a
majority of the then outstanding shares of Series C Preferred Stock:
(i) change or modify any of the rights, preferences or
privileges of the Series C Preferred Stock
(ii) undertake any actions in which the holders of the
Series A Preferred Stock are entitled to a class vote under applicable law; or
(iii) increase or decrease (other than by redemption
pursuant to Section 3 or conversion pursuant to Section 4) the total number of
authorized shares of Series C Preferred Stock.
(d) So long as any shares of Series D Preferred Stock are
outstanding, this corporation shall not without first obtaining the approval (by
vote or written consent, as provided by law) of the holders of at least a
majority of the then outstanding shares of Series D Preferred Stock:
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(i) change or modify any of the rights, preferences or
privileges of the Series D Preferred Stock; or
(ii) increase or decrease (other than by redemption pursuant
to Section 3 or conversion pursuant to Section 4) the total number of authorized
shares of Series D Preferred Stock.
(e) So long as any shares of Series E Preferred Stock are
outstanding, this corporation shall not without first obtaining the approval (by
vote or written consent, as provided by law) of the holders of at least
sixty-six and two-thirds percent (66-2/3%) of the then outstanding shares of
Series E Preferred Stock:
(i) change or modify any of the rights, preferences or
privileges of the Series E Preferred Stock;
(ii) undertake any actions in which the holders of the
Series A Preferred Stock are entitled to a class vote under applicable law; or
(iii) increase or decrease (other than by redemption
pursuant to Section 3 or conversion pursuant to Section 4) the total number of
authorized shares of Series E Preferred Stock.
(f) So long as any shares of Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock or Series E Preferred Stock are
outstanding, this corporation shall not without first obtaining the approval (by
vote or written consent, as provided by law) of the holders of at least
sixty-six and two thirds percent (66-2/3%) of the then outstanding shares of
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and
Series E Preferred Stock, voting together as a class:
(i) sell, abandon, transfer, lease or otherwise dispose of
all or substantially all of this corporation's assets; or
(ii) purchase, lease or otherwise acquire all or
substantially all of the assets of another entity engaged primarily in
pharmaceutical research;
(iii) except as otherwise required by this Amended and
Restated Certificate of Incorporation, declare or pay any dividend or make any
distribution with respect to shares of its capital stock (whether in cash,
shares of capital stock or other securities or property);
(iv) merge or consolidate with or into, or permit any
subsidiary to merge or consolidate with or into (other than with or into this
corporation), any other corporation or corporations or other entity or entities;
(v) voluntarily dissolve, liquidate or wind-up or carry out
any partial liquidation or distribution or transaction in the nature of a
partial liquidation or distribution;
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(vi) except as otherwise required by this Amended and Restated
Certificate of Incorporation or in any agreement approved by the Board of
Directors with a director, officer, employee, consultant or independent
contractor of or to this corporation providing for the repurchase of any of its
capital stock owned by such entities, redeem or otherwise repurchase any shares
of this corporation's outstanding capital stock;
(vii) alter or change the designations, powers, preferences,
rights, qualifications, limitations or restrictions of the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock or Series E Preferred Stock.
(viii) amend, alter or repeal any of the provisions of this
Amended and Restated Certificate of Incorporation, which amendment, alteration
or repeal materially and adversely affects the powers, preferences or rights
pertaining to the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock or Series E Preferred Stock.
(ix) issue or agree to issue any equity security of the
corporation for consideration valued at less than $3.00 per share (or, in the
case of Common Stock, at a price less than the fair market value of the Common
Stock as determined in good faith by the Board of Directors), or warrant,
convertible debt security or other right to purchase (other than stock options
or other rights pursuant to the corporation's stock option plans) shares of the
corporation's equity stock at an exercise or conversion price of less than $3.00
per share (or, in the case of Common Stock, at a price less than the fair market
value of the Common Stock as determined in good faith by the Board of
Directors); provided, however, that this subsection (d)(viii) shall not apply to
the issuance of the corporation's Common Stock in a firm commitment underwritten
public offering pursuant to a registration statement on Form S-1 under the Act.
(x) or issue or agree to issue any debt security which, together
with any other debt securities issued in the then current calendar year, exceeds
$2,500,000;
(xi) adopt or approve any stock option plan, or amend or modify
any existing stock option plan, of the corporation which adoption, approval,
amendment or modification will have the effect of increasing the total number of
shares of Common Stock issuable under all stock option plans of the corporation
in any calendar year by in excess of 333,333 shares of Common Stock; or
(xii) accelerate the vesting schedule or exercise date or dates of
any stock option agreement, or waive or modify the corporation's repurchase
rights with respect to any shares of the corporation's stock issuable pursuant
to any restricted stock purchase agreement, between the corporation and its
directors, officers, employees, consultants or independent contractors with
respect to, collectively in the aggregate in any calendar year, in excess of
333,333 shares of the corporation's Common Stock.
7. STATUS OF CONVERTED STOCK. In the event any shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock or Series E Preferred Stock shall be converted pursuant to
Section 4 hereof, the shares so converted shall be
16.
<PAGE> 17
canceled and shall not be issuable by the corporation. The Certificate of
Incorporation of this corporation shall be appropriately amended to effect the
corresponding reduction in the corporation's authorized capital stock.
B. COMMON STOCK.
1. DIVIDEND RIGHTS. Subject to the prior rights of holders of all
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of any assets of the corporation legally
available therefor, such dividends as may be declared from time to time by the
Board of Directors.
2. LIQUIDATION RIGHTS. Upon the liquidation, dissolution or winding up
of the corporation, the assets of the corporation shall be distributed as
provided in Section 2 of Division (B) of this Article III hereof.
3. REDEMPTION. The Common Stock is not redeemable.
4. VOTING RIGHTS. Except as otherwise set forth in Article VI, the
holder of each share of Common Stock shall have the right to one vote and shall
be entitled to notice of any stockholders meeting in accordance with the Bylaws
of this corporation, and shall be entitled to vote upon such matters and in such
manner as may be provided by law.
ARTICLE V.
Except as otherwise provided in this Certificate of Incorporation, in
furtherance and not in limitation of the powers conferred by statute, the Board
of Directors is expressly authorized to make, repeal, alter, amend and rescind
any or all of the Bylaws of the corporation.
ARTICLE VI.
At such time when no shares of Series B Preferred Stock shall continue to
be outstanding, the number of directors of the corporation shall be fixed from
time to time by a Bylaw or amendment thereof duly adopted by the Board of
Directors or by the stockholders.
In the event that this corporation is subject to Section 2115(b) of the
California Corporations Code at any time, or from time to time, then the
following shall apply:
(a) Every stockholder entitled to vote in any election of
directors of the corporation during such time the corporation is subject to
Section 2115(b) may cumulate such stockholder's votes and give one candidate a
number of votes equal to the number of directors to be elected multiplied by the
number of votes to which the stockholder's shares are otherwise entitled, or
distribute the stockholder's votes on the same principle among as many
candidates as such stockholder may so choose;
(b) No stockholder, however, may cumulate such stockholder's
votes for one or more candidates unless (i) the names of such candidates have
been properly placed in nomination, in accordance with the Bylaws of the
corporation, prior to the voting, (ii) the stockholder has given
17.
<PAGE> 18
advance notice to the corporation of the intention to cumulate votes pursuant to
the Bylaws, and (iii) the stockholder has given proper notice to the other
stockholders at the meeting, prior to the voting, of such stockholder's
intention to cumulate such stockholder's votes; and
(c) If any stockholder has given proper notice, all stockholders may
cumulate their votes for any candidates who have been properly placed in
nomination. The candidates receiving the highest number of votes of the shares
entitled to be voted for them up to the number of directors to be elected by
such shares shall be declared elected.
ARTICLE VII.
Elections of directors need not be by written ballot unless the Bylaws of
the corporation shall so provide.
ARTICLE VIII.
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the corporation.
ARTICLE IX.
To the fullest extent permitted by the General Corporation Law of Delaware,
as the same may be amended from time to time, a director of the Corporation
shall not be personally liable to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director. Any repeal or
modification of the foregoing provisions of this Article IX shall not adversely
affect any right or protection of a director of the Corporation with respect to
any acts or omissions of such director occurring prior to such repeal or
modification.
ARTICLE X.
The corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
18.
<PAGE> 1
EXHIBIT 3.2
CERTIFICATE OF AMENDMENT OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
CALIPER TECHNOLOGIES CORP.
Caliper Technologies Corp., a corporation organized and existing under
the General Corporation Law of the State of Delaware (the "Corporation"), DOES
HEREBY CERTIFY:
FIRST: The name of this Corporation is Caliper Technologies Corp.
SECOND: The original Certificate of Incorporation of Caliper
Technologies Corp. was filed with the Secretary of the State of Delaware on July
26, 1995. An Amended and Restated Certificate of Incorporation was filed with
the Secretary of State of the State of Delaware on May 19, 1998 (the "Amended
and Restated Certificate").
THIRD: The Board of Directors of the Corporation, acting in accordance
with the provisions of Sections 141 and 242 of the General Corporation Law of
the State of Delaware, adopted resolutions amending its Amended and Restated
Certificate as follows:
Article IV.A.5(b) shall be amended and restated to read in its
entirety as follows:
"The Board of Directors shall consist of seven (7) members. The
holders of Series B Preferred Stock, voting as a separate class,
shall be entitled to elect four (4) members of the Board of
Directors. The holders of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock, Series E Preferred Stock and Common Stock, voting
together as a class, shall be entitled to elect three (3)
members of the Board of Directors."
FOURTH: thereafter pursuant to a resolution of the Board of Directors,
this Certificate of Amendment was submitted to the stockholders of the
Corporation for their approval, and was approved, in accordance with Section 242
of the General Corporation Law of the State of Delaware.
FIFTH: All other provisions of the Amended and Restated Certificate
shall remain in full force and effect.
<PAGE> 2
IN WITNESS WHEREOF, Caliper Technologies Corp. has caused this
Certificate of Amendment to be signed by the President and Chief Executive
Officer and the Secretary this 29th day of March, 1999.
CALIPER TECHNOLOGIES CORP.
By: /s/ DANIEL L. KISNER
--------------------------------------
Daniel Kisner, M.D.
President and Chief Executive Officer
ATTEST:
/s/ ROBERT L. JONES
- -----------------------------
Robert L. Jones
Secretary
2.
<PAGE> 1
EXHIBIT 3.3
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF CALIPER TECHNOLOGIES CORP.,
A DELAWARE CORPORATION
ARTICLE I.
The name of the corporation is CALIPER TECHNOLOGIES CORP.
ARTICLE II.
The address of the corporation's registered office in the State of
Delaware is 1013 Centre Road, City of Wilmington, County of New Castle. The name
of its registered agent at such address is The Prentice-Hall Corporation System,
Inc.
ARTICLE III.
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of Delaware ("DGCL").
ARTICLE IV.
A. CLASSES OF STOCK. This corporation is authorized to issue two classes
of stock to be designated, respectively, "Common Stock" and "Preferred Stock."
The total number of shares which the corporation is authorized to issue is
fifty-five million (55,000,000) shares, of which fifty million (50,000,000)
shares shall be Common Stock, par value $0.001 per share, and five million
(5,000,000) shares shall be Preferred Stock, par value $0.001 per share.
B. RIGHTS, PREFERENCES AND RESTRICTIONS OF PREFERRED STOCK. The
Preferred Stock may be issued from time to time in one or more series. The Board
of Directors is hereby authorized, by filing a certificate (a "Preferred Stock
Designation") pursuant to the Delaware General Corporation Law, to fix or alter
from time to time the designation, powers, preferences and rights (voting or
otherwise) granted upon, and the qualifications, limitations or restrictions of,
any wholly unissued series of Preferred Stock, and to establish from time to
time the number of shares constituting any such series or any of them; and to
increase or decrease the number of shares of any series subsequent to the
issuance of shares of that series, but not below the number of shares of such
series then outstanding. In case the number of shares of any series shall be
decreased in accordance with the foregoing sentence, the shares constituting
such decrease shall resume the status that they had prior to the adoption of the
resolution originally fixing the number of shares of such series.
ARTICLE V.
For the management of the business and for the conduct of the affairs of
the corporation, and in further definition, limitation and regulation of the
powers of the corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
1.
<PAGE> 2
A. MANAGEMENT OF BUSINESS. The management of the business and the
conduct of the affairs of the corporation shall be vested in its Board of
Directors. The number of directors which shall constitute the whole Board of
Directors shall be fixed exclusively by one or more resolutions adopted by the
Board of Directors.
B. BOARD OF DIRECTORS.
1. Subject to the rights of the holders of any series of
Preferred Stock to elect additional directors under specified circumstances, the
directors shall be divided into three classes designated as Class I, Class II
and Class III, respectively. Directors shall be assigned to each class in
accordance with a resolution or resolutions adopted by the Board of Directors.
At the first annual meeting of stockholders following the closing of the initial
public offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended, covering the offer and sale of Common Stock
to the public (the "Initial Public Offering"), the term of office of the Class I
directors shall expire and Class I directors shall be elected for a full term of
three years. At the second annual meeting of stockholders following the Initial
Public Offering, the term of office of the Class II directors shall expire and
Class II directors shall be elected for a full term of three years. At the third
annual meeting of stockholders following the Initial Public Offering, the term
of office of the Class III directors shall expire and Class III directors shall
be elected for a full term of three years. At each succeeding annual meeting of
stockholders, directors shall be elected for a full term of three years to
succeed the directors of the class whose terms expire at such annual meeting.
During such time or times that the corporation is subject to Section 2115(b) of
the California General Corporation Law ("CGCL"), this Section B.1. of this
Article V shall become effective and be applicable only when the corporation is
a "listed" corporation within the meaning of Section 301.5 of the CGCL.
2. In the event that the corporation is subject to Section
2115(b) of the CGCL AND is not a "listed" corporation or ceases to be a "listed"
corporation under Section 301.5 of the CGCL, Section B.1. of this Article V
shall not apply and all directors shall be shall be elected at each annual
meeting of stockholders to hold office until the next annual meeting.
3. No person entitled to vote at an election for directors may
cumulate votes to which such person is entitled, unless, at the time of such
election, the corporation is subject to Section 2115(b) of the CGCL AND is not a
"listed" corporation or ceases to be a "listed" corporation under Section 301.5
of the CGCL. During this time, every stockholder entitled to vote at an election
for directors may cumulate such stockholder's votes and give one candidate a
number of votes equal to the number of directors to be elected multiplied by the
number of votes to which such stockholder's shares are otherwise entitled, or
distribute the stockholder's votes on the same principle among as many
candidates as such stockholder thinks fit. No stockholder, however, shall be
entitled to so cumulate such stockholder's votes unless (i) the names of such
candidate or candidates have been placed in nomination prior to the voting and
(ii) the stockholder has given notice at the meeting, prior to the voting, of
such stockholder's intention to cumulate such stockholder's votes. If any
stockholder has given proper notice to cumulate votes, all stockholders may
cumulate their votes for any candidates who have been properly placed in
nomination. Under cumulative voting, the candidates receiving the highest number
of votes, up to the number of directors to be elected, are elected.
2.
<PAGE> 3
Notwithstanding the foregoing provisions of this section, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
C. REMOVAL OF DIRECTORS.
1. During such time or times that the corporation is subject to
Section 2115(b) of the CGCL, the Board of Directors or any individual director
may be removed from office at any time without cause by the affirmative vote of
the holders of at least a majority of the outstanding shares entitled to vote on
such removal; provided, however, that unless the entire Board is removed, no
individual director may be removed when the votes cast against such director's
removal, or not consenting in writing to such removal, would be sufficient to
elect that director if voted cumulatively at an election which the same total
number of votes were cast (or, if such action is taken by written consent, all
shares entitled to vote were voted) and the entire number of directors
authorized at the time of such director's most recent election were then being
elected.
2. At any time or times that the corporation is not subject to
Section 2115(b) of the CGCL and subject to any limitations imposed by law,
Section C.1. above shall no longer apply and removal shall be as provided in
Section 141(k) of the DGCL.
D. VACANCIES.
1. Subject to the rights of the holders of any series of
Preferred Stock, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by the stockholders, except as
otherwise provided by law, be filled only by the affirmative vote of a majority
of the directors then in office, even though less than a quorum of the Board of
Directors, and not by the stockholders. Any director elected in accordance with
the preceding sentence shall hold office for the remainder of the full term of
the director for which the vacancy was created or occurred and until such
director's successor shall have been elected and qualified.
2. If at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
Delaware Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent (10%) of the total number of the
shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors then
in offices as aforesaid, which election shall be governed by Section 211 of the
DGCL.
3.
<PAGE> 4
3. At any time or times that the corporation is subject to Section
2115(b) of the CGCL, if, after the filling of any vacancy by the directors then
in office who have been elected by stockholders shall constitute less than a
majority of the directors then in office, then:
(a) Any holder or holders of an aggregate of five percent (5%)
or more of the total number of shares at the time outstanding having the right
to vote for those directors may call a special meeting of stockholders; or
(b) The Superior Court of the proper county shall, upon
application of such stockholder or stockholders, summarily order a special
meeting of stockholders, to be held to elect the entire board, all in accordance
with Section 305(c) of the CGCL. The term of office of any director shall
terminate upon that election of a successor.
E. BYLAW AMENDMENTS. Subject to paragraph (i) of Section 42 of the Bylaws,
the Bylaws may be altered or amended or new Bylaws adopted by the affirmative
vote of at least sixty-six and two-thirds percent (66-2/3%) of the voting power
of all of the then-outstanding shares of the voting stock of the corporation
entitled to vote. The Board of Directors shall also have the power to adopt,
amend, or repeal Bylaws.
F. BALLOTS. The directors of the corporation need not be elected by written
ballot unless the Bylaws so provide.
G. ACTION BY STOCKHOLDERS. No action shall be taken by the stockholders of
the corporation except at an annual or special meeting of stockholders called in
accordance with the Bylaws; no action shall be taken by the stockholders by
written consent.
H. ADVANCE NOTICE. Advance notice of stockholder nominations for the
election of directors and of business to be brought by stockholders before any
meeting of the stockholders of the corporation shall be given in the manner
provided in the Bylaws of the corporation.
I. SPECIAL MEETINGS OF STOCKHOLDERS. Special meetings of the stockholders
may be called only by the Chairman of the Board, the Chief Executive Officer, or
a majority of the members of the Board of Directors.
ARTICLE VI.
A. The liability of the directors for monetary damages shall be eliminated
to the fullest extent under applicable law.
B. This corporation is authorized to provide indemnification of agents (as
defined in Section 317 of the CGCL) for breach of duty to the corporation and
its shareholders through bylaw provisions or through agreements with the agents,
or through shareholder resolutions, or otherwise, in excess of the
indemnification otherwise permitted by Section 317 of the CGCL, subject, at any
time or times the corporation is subject to Section 2115(b) to the limits on
such excess indemnification set forth in Section 204 of the CGCL.
4.
<PAGE> 5
C. Any repeal or modification of this Article VI shall be prospective
and shall not affect the rights under this Article VI in effect at the time of
the alleged occurrence of any act or omission to act giving rise to liability or
indemnification.
ARTICLE VII.
A. The corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, except as provided in paragraph B of this
Article VII, and all rights conferred upon the stockholders herein are granted
subject to this reservation.
B. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the voting stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting
power of all of the then-outstanding shares of the voting stock, voting together
as a single class, shall be required to alter, amend or repeal Articles V, VI
and VII.
5.
<PAGE> 1
EXHIBIT 3.4
BYLAWS
OF
CALIPER TECHNOLOGIES CORP.
(A DELAWARE CORPORATION)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I OFFICES.....................................................................1
Section 1. Registered Office......................................................1
Section 2. Other Offices..........................................................1
ARTICLE II CORPORATE SEAL..............................................................1
Section 3. Corporate Seal.........................................................1
ARTICLE III STOCKHOLDERS' MEETINGS......................................................1
Section 4. Place Of Meetings......................................................1
Section 5. Annual Meetings........................................................1
Section 6. Special Meetings.......................................................4
Section 7. Notice Of Meetings.....................................................5
Section 8. Quorum.................................................................5
Section 9. Adjournment And Notice Of Adjourned Meetings...........................5
Section 10. Voting Rights..........................................................6
Section 11. Joint Owners Of Stock..................................................6
Section 12. List Of Stockholders...................................................6
Section 13. Action Without Meeting.................................................6
Section 14. Organization...........................................................7
ARTICLE IV DIRECTORS...................................................................8
Section 15. Number And Term Of Office..............................................8
Section 16. Powers.................................................................8
Section 17. Classes of Directors...................................................8
Section 18. Vacancies..............................................................9
Section 19. Resignation...........................................................10
Section 20. Removal...............................................................10
Section 21. Meetings..............................................................10
(a) Annual Meetings..............................................................10
(b) Regular Meetings.............................................................11
(c) Special Meetings.............................................................11
(d) Telephone Meetings...........................................................11
</TABLE>
i.
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
(e) Notice Of Meetings...........................................................11
(f) Waiver Of Notice.............................................................11
Section 22. Quorum And Voting.....................................................11
Section 23. Action Without Meeting................................................12
Section 24. Fees And Compensation.................................................12
Section 25. Committees............................................................12
(a) Executive Committee..........................................................12
(b) Other Committees.............................................................12
(c) Term.........................................................................13
(d) Meetings.....................................................................13
Section 26. Organization..........................................................13
ARTICLE V OFFICERS...................................................................14
Section 27. Officers Designated...................................................14
Section 28. Tenure And Duties Of Officers.........................................14
(a) General......................................................................14
(b) Duties Of Chairman Of The Board Of Directors.................................14
(c) Duties Of President..........................................................14
(d) Duties Of Vice Presidents....................................................14
(e) Duties Of Secretary..........................................................15
(f) Duties Of Chief Financial Officer............................................15
Section 29. Delegation Of Authority...............................................15
Section 30. Resignations..........................................................15
Section 31. Removal...............................................................15
ARTICLE VI EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES OWNED BY
THE CORPORATION............................................................16
Section 32. Execution Of Corporate Instruments....................................16
Section 33. Voting Of Securities Owned By The Corporation.........................16
ARTICLE VII SHARES OF STOCK............................................................16
Section 34. Form And Execution Of Certificates....................................16
</TABLE>
ii.
<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 35. Lost Certificates.....................................................17
Section 36. Transfers.............................................................17
Section 37. Fixing Record Dates...................................................17
Section 38. Registered Stockholders...............................................18
ARTICLE VIII OTHER SECURITIES OF THE CORPORATION........................................18
Section 39. Execution Of Other Securities.........................................18
ARTICLE IX DIVIDENDS..................................................................19
Section 40. Declaration Of Dividends..............................................19
Section 41. Dividend Reserve......................................................19
ARTICLE X FISCAL YEAR................................................................19
Section 42. Fiscal Year...........................................................19
ARTICLE XI INDEMNIFICATION............................................................19
Section 43. Indemnification Of Directors, Executive Officers, Other
Officers, Employees And Other Agents..................................19
(a) Directors And Executive Officers.............................................19
(b) Other Officers, Employees and Other Agents...................................20
(c) Expenses.....................................................................20
(d) Enforcement..................................................................20
(e) Non-Exclusivity Of Rights....................................................21
(f) Survival Of Rights...........................................................21
(g) Insurance....................................................................21
(h) Amendments...................................................................21
(i) Saving Clause................................................................21
(j) Certain Definitions..........................................................22
ARTICLE XII NOTICES....................................................................23
Section 44. Notices...............................................................23
(a) Notice To Stockholders.......................................................23
(b) Notice To Directors..........................................................23
(c) Affidavit Of Mailing.........................................................23
</TABLE>
iii.
<PAGE> 5
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
(d) Time Notices Deemed Given....................................................23
(e) Methods Of Notice............................................................23
(f) Failure To Receive Notice....................................................23
(g) Notice To Person With Whom Communication Is Unlawful.........................23
(h) Notice To Person With Undeliverable Address..................................24
ARTICLE XIII AMENDMENTS.................................................................24
Section 45. Amendments............................................................24
ARTICLE XIV LOANS TO OFFICERS..........................................................24
Section 46. Loans To Officers.....................................................24
</TABLE>
iv.
<PAGE> 6
BYLAWS
OF
CALIPER TECHNOLOGIES CORP.
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the corporation
in the State of Delaware shall be in the City of Wilmington, County of New
Castle.
SECTION 2. OTHER OFFICES. The corporation shall also have and maintain
an office or principal place of business at such place as may be fixed by the
Board of Directors, and may also have offices at such other places, both within
and without the State of Delaware as the Board of Directors may from time to
time determine or the business of the corporation may require.
ARTICLE II
CORPORATE SEAL
SECTION 3. CORPORATE SEAL. The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate
Seal-Delaware." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE III
STOCKHOLDERS' MEETINGS
SECTION 4. PLACE OF MEETINGS. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof.
SECTION 5. ANNUAL MEETINGS.
(a) The annual meeting of the stockholders of the corporation,
for the purpose of election of directors and for such other business as may
lawfully come before it, shall be held on such date and at such time as may be
designated from time to time by the Board of Directors. Nominations of persons
for election to the Board of Directors of the corporation and the proposal of
business to be considered by the stockholders may be made at an annual meeting
of stockholders: (i) pursuant to the corporation's notice of meeting of
stockholders; (ii) by or at the
1.
<PAGE> 7
direction of the Board of Directors; or (iii) by any stockholder of the
corporation who was a stockholder of record at the time of giving of notice
provided for in the following paragraph, who is entitled to vote at the meeting
and who complied with the notice procedures set forth in Section 5.
(b) At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. For
nominations or other business to be properly brought before an annual meeting by
a stockholder pursuant to clause (c) of Section 5(a) of these Bylaws, (i) the
stockholder must have given timely notice thereof in writing to the Secretary of
the corporation, (ii) such other business must be a proper matter for
stockholder action under the Delaware General Corporation Law ("DGCL"), (iii) if
the stockholder, or the beneficial owner on whose behalf any such proposal or
nomination is made, has provided the corporation with a Solicitation Notice (as
defined in this Section 5(b)), such stockholder or beneficial owner must, in the
case of a proposal, have delivered a proxy statement and form of proxy to
holders of at least the percentage of the corporation's voting shares required
under applicable law to carry any such proposal, or, in the case of a nomination
or nominations, have delivered a proxy statement and form of proxy to holders of
a percentage of the corporation's voting shares reasonably believed by such
stockholder or beneficial owner to be sufficient to elect the nominee or
nominees proposed to be nominated by such stockholder, and must, in either case,
have included in such materials the Solicitation Notice, and (iv) if no
Solicitation Notice relating thereto has been timely provided pursuant to this
section, the stockholder or beneficial owner proposing such business or
nomination must not have solicited a number of proxies sufficient to have
required the delivery of such a Solicitation Notice under this Section 5. To be
timely, a stockholder's notice shall be delivered to the Secretary at the
principal executive offices of the Corporation not later than the close of
business on the ninetieth (90th) day nor earlier than the close of business on
the one hundred twentieth (120th) day prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the event that the
date of the annual meeting is advanced more than thirty (30) days prior to or
delayed by more than thirty (30) days after the anniversary of the preceding
year's annual meeting, notice by the stockholder to be timely must be so
delivered not earlier than the close of business on the one hundred twentieth
(120th) day prior to such annual meeting and not later than the close of
business on the later of the ninetieth (90th) day prior to such annual meeting
or the tenth (10th) day following the day on which public announcement of the
date of such meeting is first made. In no event shall the public announcement of
an adjournment of an annual meeting commence a new time period for the giving of
a stockholder's notice as described above. Such stockholder's notice shall set
forth: (A) as to each person whom the stockholder proposed to nominate for
election or reelection as a director all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors in an election contest, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "1934 Act") and Rule 14a-11 thereunder (including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected); (B) as to any other business that the stockholder proposes
to bring before the meeting, a brief description of the business desired to be
brought before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such stockholder and
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the beneficial owner, if any, on whose behalf the proposal is made; and (C) as
to the stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made (i) the name and address of such
stockholder, as they appear on the corporation's books, and of such beneficial
owner, (ii) the class and number of shares of the corporation which are owned
beneficially and of record by such stockholder and such beneficial owner, and
(iii) whether either such stockholder or beneficial owner intends to deliver a
proxy statement and form of proxy to holders of, in the case of the proposal, at
least the percentage of the corporation's voting shares required under
applicable law to carry the proposal or, in the case of a nomination or
nominations, a sufficient number of holders of the corporation's voting shares
to elect such nominee or nominees (an affirmative statement of such intent, a
"Solicitation Notice").
(c) Notwithstanding anything in the second sentence of Section
5(b) of these Bylaws to the contrary, in the event that the number of directors
to be elected to the Board of Directors of the Corporation is increased and
there is no public announcement naming all of the nominees for director or
specifying the size of the increased Board of Directors made by the corporation
at least one hundred (100) days prior to the first anniversary of the preceding
year's annual meeting, a stockholder's notice required by this Section 5 shall
also be considered timely, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered to the Secretary at
the principal executive offices of the corporation not later than the close of
business on the tenth (10th) day following the day on which such public
announcement is first made by the corporation.
(d) Only such persons who are nominated in accordance with the
procedures set forth in this Section 5 shall be eligible to serve as directors
and only such business shall be conducted at a meeting of stockholders as shall
have been brought before the meeting in accordance with the procedures set forth
in this Section 5. Except as otherwise provided by law, the Chairman of the
meeting shall have the power and duty to determine whether a nomination or any
business proposed to be brought before the meeting was made, or proposed, as the
case may be, in accordance with the procedures set forth in these Bylaws and, if
any proposed nomination or business is not in compliance with these Bylaws, to
declare that such defective proposal or nomination shall not be presented for
stockholder action at the meeting and shall be disregarded.
(e) Notwithstanding the foregoing provisions of this Section 5,
in order to include information with respect to a stockholder proposal in the
proxy statement and form of proxy for a stockholder's meeting, stockholders must
provide notice as required by the regulations promulgated under the 1934 Act.
Nothing in these Bylaws shall be deemed to affect any rights of stockholders to
request inclusion of proposals in the corporation proxy statement pursuant to
Rule 14a-8 under the 1934 Act.
(f) For purposes of this Section 5, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the 1934 Act.
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SECTION 6. SPECIAL MEETINGS.
(a) Special meetings of the stockholders of the corporation may
be called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer, or (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
directorships at the time any such resolution is presented to the Board of
Directors for adoption)
At any time or times that the corporation is subject to Section 2115(b)
of the California General Corporation Law ("CGCL"), stockholders holding five
percent (5%) or more of the outstanding shares shall have the right to call a
special meeting of stockholders only as set forth in Section 18(c) herein.
(b) If a special meeting is properly called by any person or
persons other than the Board of Directors, the request shall be in writing,
specifying the general nature of the business proposed to be transacted, and
shall be delivered personally or sent by registered mail or by telegraphic or
other facsimile transmission to the Chairman of the Board of Directors, the
Chief Executive Officer, or the Secretary of the corporation. No business may be
transacted at such special meeting otherwise than specified in such notice. The
Board of Directors shall determine the time and place of such special meeting,
which shall be held not less than thirty-five (35) nor more than one hundred
twenty (120) days after the date of the receipt of the request. Upon
determination of the time and place of the meeting, the officer receiving the
request shall cause notice to be given to the stockholders entitled to vote, in
accordance with the provisions of Section 7 of these Bylaws. If the notice is
not given within one hundred (100) days after the receipt of the request, the
person or persons properly requesting the meeting may set the time and place of
the meeting and give the notice. Nothing contained in this paragraph (b) shall
be construed as limiting, fixing, or affecting the time when a meeting of
stockholders called by action of the Board of Directors may be held.
(c) Nominations of persons for election to the Board of
Directors may be made at a special meeting of stockholders at which directors
are to be elected pursuant to the corporation's notice of meeting (i) by or at
the direction of the Board of Directors or (ii) by any stockholder of the
corporation who is a stockholder of record at the time of giving notice provided
for in these Bylaws who shall be entitled to vote at the meeting and who
complies with the notice procedures set forth in this Section 6(c). In the event
the corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any such stockholder
may nominate a person or persons (as the case may be), for election to such
position(s) as specified in the corporation's notice of meeting, if the
stockholder's notice required by Section 5(b) of these Bylaws shall be delivered
to the Secretary at the principal executive offices of the corporation not
earlier than the close of business on the one hundred twentieth (120th) day
prior to such special meeting and not later than the close of business on the
later of the ninetieth (90th) day prior to such meeting or the tenth (10th) day
following the day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting. In no
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event shall the public announcement of an adjournment of a special meeting
commence a new time period for the giving of a stockholder's notice as described
above.
SECTION 7. NOTICE OF MEETINGS. Except as otherwise provided by law or
the Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting, such
notice to specify the place, date and hour and purpose or purposes of the
meeting. Notice of the time, place and purpose of any meeting of stockholders
may be waived in writing, signed by the person entitled to notice thereof,
either before or after such meeting, and will be waived by any stockholder by
his attendance thereat in person or by proxy, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Any stockholder so waiving notice of such meeting shall be
bound by the proceedings of any such meeting in all respects as if due notice
thereof had been given.
SECTION 8. QUORUM. At all meetings of stockholders, except where
otherwise provided by statute or by the Certificate of Incorporation, or by
these Bylaws, the presence, in person or by proxy duly authorized, of the
holders of a majority of the outstanding shares of stock entitled to vote shall
constitute a quorum for the transaction of business. In the absence of a quorum,
any meeting of stockholders may be adjourned, from time to time, either by the
chairman of the meeting or by vote of the holders of a majority of the shares
represented thereat, but no other business shall be transacted at such meeting.
The stockholders present at a duly called or convened meeting, at which a quorum
is present, may continue to transact business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum. Except as
otherwise provided by statute, the Certificate of Incorporation or these Bylaws,
in all matters other than the election of directors, the affirmative vote of the
majority of shares present in person or represented by proxy at the meeting and
entitled to vote on the subject matter shall be the act of the stockholders.
Except as otherwise provided by statute, the Certificate of Incorporation or
these Bylaws, directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the election of directors. Where a separate vote by a class or classes
or series is required, except where otherwise provided by the statute or by the
Certificate of Incorporation or these Bylaws, a majority of the outstanding
shares of such class or classes or series, present in person or represented by
proxy, shall constitute a quorum entitled to take action with respect to that
vote on that matter and, except where otherwise provided by the statute or by
the Certificate of Incorporation or these Bylaws, the affirmative vote of the
majority (plurality, in the case of the election of directors) of the votes cast
by the holders of shares of such class or classes or series shall be the act of
such class or classes or series.
SECTION 9. ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
casting votes. When a meeting is adjourned to another time or place, notice need
not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the
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adjourned meeting, the corporation may transact any business which might have
been transacted at the original meeting. If the adjournment is for more than
thirty (30) days or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
SECTION 10. VOTING RIGHTS. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the corporation on the record date, as provided in Section 12 of
these Bylaws, shall be entitled to vote at any meeting of stockholders. Every
person entitled to vote shall have the right to do so either in person or by an
agent or agents authorized by a proxy granted in accordance with Delaware law.
An agent so appointed need not be a stockholder. No proxy shall be voted after
three (3) years from its date of creation unless the proxy provides for a longer
period.
SECTION 11. JOINT OWNERS OF STOCK. If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety, or otherwise, or if two (2) or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect: (a) if only
one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the
majority so voting binds all; (c) if more than one (1) votes, but the vote is
evenly split on any particular matter, each faction may vote the securities in
question proportionally, or may apply to the Delaware Court of Chancery for
relief as provided in the DGCL, Section 217(b). If the instrument filed with the
Secretary shows that any such tenancy is held in unequal interests, a majority
or even-split for the purpose of subsection (c) shall be a majority or
even-split in interest.
SECTION 12. LIST OF STOCKHOLDERS. The Secretary shall prepare and make,
at least ten (10) days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at said meeting, arranged in alphabetical
order, showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not
specified, at the place where the meeting is to be held. The list shall be
produced and kept at the time and place of meeting during the whole time thereof
and may be inspected by any stockholder who is present.
SECTION 13. ACTION WITHOUT MEETING.
(a) Unless otherwise provided in the Certificate of
Incorporation, any action required by statute to be taken at any annual or
special meeting of the stockholders, or any action which may be taken at any
annual or special meeting of the stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action
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so taken, shall be signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted.
(b) Every written consent shall bear the date of signature of
each stockholder who signs the consent, and no written consent shall be
effective to take the corporate action referred to therein unless, within sixty
(60) days of the earliest dated consent delivered to the corporation in the
manner herein required, written consents signed by a sufficient number of
stockholders to take action are delivered to the corporation by delivery to its
registered office in the State of Delaware, its principal place of business or
an officer or agent of the corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to a
corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested.
(c) Prompt notice of the taking of the corporate action without
a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing. If the action which is consented
to is such as would have required the filing of a certificate under any section
of the DGCL if such action had been voted on by stockholders at a meeting
thereof, then the certificate filed under such section shall state, in lieu of
any statement required by such section concerning any vote of stockholders, that
written consent has been given in accordance with Section 228 of the DGCL.
(d) Notwithstanding the foregoing, no such action by written
consent may be taken following the closing of the initial public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "1933 Act"), covering the offer and sale of Common Stock
of the corporation (the "Initial Public Offering").
SECTION 14. ORGANIZATION.
(a) At every meeting of stockholders, the Chairman of the Board
of Directors, or, if a Chairman has not been appointed or is absent, the
President, or, if the President is absent, a chairman of the meeting chosen by a
majority in interest of the stockholders entitled to vote, present in person or
by proxy, shall act as chairman. The Secretary, or, in his absence, an Assistant
Secretary directed to do so by the President, shall act as secretary of the
meeting.
(b) The Board of Directors of the corporation shall be entitled
to make such rules or regulations for the conduct of meetings of stockholders as
it shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to stockholders of
record of the corporation and their duly authorized and constituted proxies and
such other persons as the chairman shall permit, restrictions on entry to
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the meeting after the time fixed for the commencement thereof, limitations on
the time allotted to questions or comments by participants and regulation of the
opening and closing of the polls for balloting on matters which are to be voted
on by ballot. Unless and to the extent determined by the Board of Directors or
the chairman of the meeting, meetings of stockholders shall not be required to
be held in accordance with rules of parliamentary procedure.
ARTICLE IV
DIRECTORS
SECTION 15. NUMBER AND TERM OF OFFICE. The authorized number of
directors of the corporation shall be fixed in accordance with the Certificate
of Incorporation. Directors need not be stockholders unless so required by the
Certificate of Incorporation. If for any cause, the directors shall not have
been elected at an annual meeting, they may be elected as soon thereafter as
convenient at a special meeting of the stockholders called for that purpose in
the manner provided in these Bylaws.
SECTION 16. POWERS. The powers of the corporation shall be exercised,
its business conducted and its property controlled by the Board of Directors,
except as may be otherwise provided by statute or by the Certificate of
Incorporation.
SECTION 17. CLASSES OF DIRECTORS.
(a) Subject to the rights of the holders of any series of
Preferred Stock to elect additional directors under specified circumstances,
following the closing of the Initial Public Offering, the directors shall be
divided into three classes designated as Class I, Class II and Class III,
respectively. Directors shall be assigned to each class in accordance with a
resolution or resolutions adopted by the Board of Directors. At the first annual
meeting of stockholders following the closing of the Initial Public Offering,
the term of office of the Class I directors shall expire and Class I directors
shall be elected for a full term of three years. At the second annual meeting of
stockholders following the Initial Public Offering, the term of office of the
Class II directors shall expire and Class II directors shall be elected for a
full term of three years. At the third annual meeting of stockholders following
the Initial Public Offering, the term of office of the Class III directors shall
expire and Class III directors shall be elected for a full term of three years.
At each succeeding annual meeting of stockholders, directors shall be elected
for a full term of three years to succeed the directors of the class whose terms
expire at such annual meeting. During such time or times that the corporation is
subject to Section 2115(b) of the CGCL, this Section 17(a) shall become
effective and apply only when the corporation is a "listed" corporation within
the meaning of Section 301.5 of the CGCL.
(b) In the event that the corporation (i) is subject to Section
2115(b) of the CGCL and (ii) is not a "listed" corporation or ceases to be a
"listed" corporation under Section 301.5 of the CGCL, Section 17(a) of these
Bylaws shall not apply and all directors shall be elected at each annual meeting
of stockholders to hold office until the next annual meeting.
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(c) No person entitled to vote at an election for directors may
cumulate votes to which such person is entitled, unless, at the time of such
election, the corporation (i) is subject to Section 2115(b) of the CGCL and (ii)
is not a "listed" corporation or ceases to be a "listed" corporation under
Section 301.5 of the CGCL. During this time, every stockholder entitled to vote
at an election for directors may cumulate such stockholder's votes and give one
candidate a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which such stockholder's shares are
otherwise entitled, or distribute the stockholder's votes on the same principle
among as many candidates as such stockholder thinks fit. No stockholder,
however, shall be entitled to so cumulate such stockholder's votes unless (i)
the names of such candidate or candidates have been placed in nomination prior
to the voting and (ii) the stockholder has given notice at the meeting, prior to
the voting, of such stockholder's intention to cumulate such stockholder's
votes. If any stockholder has given proper notice to cumulate votes, all
stockholders may cumulate their votes for any candidates who have been properly
placed in nomination. Under cumulative voting, the candidates receiving the
highest number of votes, up to the number of directors to be elected, are
elected.
Notwithstanding the foregoing provisions of this section, each director shall
serve until his successor is duly elected and qualified or until his death,
resignation or removal. No decrease in the number of directors constituting the
Board of Directors shall shorten the term of any incumbent director.
SECTION 18. VACANCIES.
(a) Unless otherwise provided in the Certificate of
Incorporation, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by stockholders, be filled only
by the affirmative vote of a majority of the directors then in office, even
though less than a quorum of the Board of Directors. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the director for which the vacancy was created or occurred and
until such director's successor shall have been elected and qualified. A vacancy
in the Board of Directors shall be deemed to exist under this Section 18 in the
case of the death, removal or resignation of any director.
(b) If at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
Delaware Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent (10%) of the total number of the
shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors then
in offices as aforesaid, which election shall be governed by Section 211 of the
DGCL.
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(c) At any time or times that the corporation is subject to
Section 2115(b) of the CGCL, if, after the filling of any vacancy, the directors
then in office who have been elected by stockholders shall constitute less than
a majority of the directors then in office, then
(1) Any holder or holders of an aggregate of five
percent (5%) or more of the total number of shares at the time outstanding
having the right to vote for those directors may call a special meeting of
stockholders; or
(2) The Superior Court of the proper county shall, upon
application of such stockholder or stockholders, summarily order a special
meeting of stockholders, to be held to elect the entire board, all in accordance
with Section 305(c) of the CGCL. The term of office of any director shall
terminate upon that election of a successor.
SECTION 19. RESIGNATION. Any director may resign at any time by
delivering his written resignation to the Secretary, such resignation to specify
whether it will be effective at a particular time, upon receipt by the Secretary
or at the pleasure of the Board of Directors. If no such specification is made,
it shall be deemed effective at the pleasure of the Board of Directors. When one
or more directors shall resign from the Board of Directors, effective at a
future date, a majority of the directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each Director so chosen shall hold office for the unexpired
portion of the term of the Director whose place shall be vacated and until his
successor shall have been duly elected and qualified.
SECTION 20. REMOVAL.
(a) During such time or times that the corporation is subject to
Section 2115(b) of the CGCL, the Board of Directors or any individual director
may be removed from office at any time without cause by the affirmative vote of
the holders of at least a majority of the outstanding shares entitled to vote on
such removal; provided, however, that unless the entire Board is removed, no
individual director may be removed when the votes cast against such director's
removal, or not consenting in writing to such removal, would be sufficient to
elect that director if voted cumulatively at an election which the same total
number of votes were cast (or, if such action is taken by written consent, all
shares entitled to vote were voted) and the entire number of directors
authorized at the time of such director's most recent election were then being
elected.
(b) Following any date on which the corporation is no longer
subject to Section 2115(b) of the CGCL and subject to any limitations imposed by
law, Section 20(a) above shall no longer apply and removal shall be as provided
in Section 141(k) of the DGCL.
SECTION 21. MEETINGS.
(a) ANNUAL MEETINGS. The annual meeting of the Board of
Directors shall be held immediately before or after the annual meeting of
stockholders and at the place where such
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meeting is held. No notice of an annual meeting of the Board of Directors shall
be necessary and such meeting shall be held for the purpose of electing officers
and transacting such other business as may lawfully come before it.
(b) REGULAR MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation, regular meetings of the Board of Directors may be
held at any time or date and at any place within or without the State of
Delaware which has been designated by the Board of Directors and publicized
among all directors. No formal notice shall be required for regular meetings of
the Board of Directors.
(c) SPECIAL MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation, special meetings of the Board of Directors may be
held at any time and place within or without the State of Delaware whenever
called by the Chairman of the Board, the President or any two of the directors.
(d) TELEPHONE MEETINGS. Any member of the Board of Directors, or
of any committee thereof, may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
by such means shall constitute presence in person at such meeting.
(e) NOTICE OF MEETINGS. Notice of the time and place of all
special meetings of the Board of Directors shall be orally or in writing, by
telephone, including a voice messaging system or other system or technology
designed to record and communicate messages, facsimile, telegraph or telex, or
by electronic mail or other electronic means, during normal business hours, at
least twenty-four (24) hours before the date and time of the meeting, or sent in
writing to each director by first class mail, charges prepaid, at least three
(3) days before the date of the meeting. Notice of any meeting may be waived in
writing at any time before or after the meeting and will be waived by any
director by attendance thereat, except when the director attends the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
(f) WAIVER OF NOTICE. The transaction of all business at any
meeting of the Board of Directors, or any committee thereof, however called or
noticed, or wherever held, shall be as valid as though had at a meeting duly
held after regular call and notice, if a quorum be present and if, either before
or after the meeting, each of the directors not present shall sign a written
waiver of notice. All such waivers shall be filed with the corporate records or
made a part of the minutes of the meeting.
SECTION 22. QUORUM AND VOTING.
(a) Unless the Certificate of Incorporation requires a greater
number and except with respect to indemnification questions arising under
Section 43 hereof, for which a quorum shall be one-third of the exact number of
directors fixed from time to time in accordance with the Certificate of
Incorporation, a quorum of the Board of Directors shall consist of a
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majority of the exact number of directors fixed from time to time by the Board
of Directors in accordance with the Certificate of Incorporation; provided,
however, at any meeting whether a quorum be present or otherwise, a majority of
the directors present may adjourn from time to time until the time fixed for the
next regular meeting of the Board of Directors, without notice other than by
announcement at the meeting.
(b) At each meeting of the Board of Directors at which a quorum
is present, all questions and business shall be determined by the affirmative
vote of a majority of the directors present, unless a different vote be required
by law, the Certificate of Incorporation or these Bylaws.
SECTION 23. ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
SECTION 24. FEES AND COMPENSATION. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor.
SECTION 25. COMMITTEES.
(a) EXECUTIVE COMMITTEE. The Board of Directors may appoint an
Executive Committee to consist of one (1) or more members of the Board of
Directors. The Executive Committee, to the extent permitted by law and provided
in the resolution of the Board of Directors shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the corporation, and may authorize the seal of the corporation to
be affixed to all papers which may require it; but no such committee shall have
the power or authority in reference to (i) approving or adopting, or
recommending to the stockholders, any action or matter expressly required by the
DGCL to be submitted to stockholders for approval, or (ii) adopting, amending or
repealing any bylaw of the corporation.
(b) OTHER COMMITTEES. The Board of Directors may, from time to
time, appoint such other committees as may be permitted by law. Such other
committees appointed by the Board of Directors shall consist of one (1) or more
members of the Board of Directors and shall have such powers and perform such
duties as may be prescribed by the resolution or resolutions creating such
committees, but in no event shall any such committee have the powers denied to
the Executive Committee in these Bylaws.
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(c) TERM. Each member of a committee of the Board of Directors
shall serve a term on the committee coexistent with such member's term on the
Board of Directors. The Board of Directors, subject to any requirements of any
outstanding series of preferred Stock and the provisions of subsections (a) or
(b) of this Bylaw, may at any time increase or decrease the number of members of
a committee or terminate the existence of a committee. The membership of a
committee member shall terminate on the date of his death or voluntary
resignation from the committee or from the Board of Directors. The Board of
Directors may at any time for any reason remove any individual committee member
and the Board of Directors may fill any committee vacancy created by death,
resignation, removal or increase in the number of members of the committee. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee, and, in addition, in the absence or disqualification of any
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.
(d) MEETINGS. Unless the Board of Directors shall otherwise
provide, regular meetings of the Executive Committee or any other committee
appointed pursuant to this Section 25 shall be held at such times and places as
are determined by the Board of Directors, or by any such committee, and when
notice thereof has been given to each member of such committee, no further
notice of such regular meetings need be given thereafter. Special meetings of
any such committee may be held at any place which has been determined from time
to time by such committee, and may be called by any director who is a member of
such committee, upon written notice to the members of such committee of the time
and place of such special meeting given in the manner provided for the giving of
written notice to members of the Board of Directors of the time and place of
special meetings of the Board of Directors. Notice of any special meeting of any
committee may be waived in writing at any time before or after the meeting and
will be waived by any director by attendance thereat, except when the director
attends such special meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. A majority of the authorized number of
members of any such committee shall constitute a quorum for the transaction of
business, and the act of a majority of those present at any meeting at which a
quorum is present shall be the act of such committee.
SECTION 26. ORGANIZATION. At every meeting of the directors, the
Chairman of the Board of Directors, or, if a Chairman has not been appointed or
is absent, the President (if a director), or if the President is absent, the
most senior Vice President (if a director), or, in the absence of any such
person, a chairman of the meeting chosen by a majority of the directors present,
shall preside over the meeting. The Secretary, or in his absence, any Assistant
Secretary directed to do so by the President, shall act as secretary of the
meeting.
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ARTICLE V
OFFICERS
SECTION 27. OFFICERS DESIGNATED. The officers of the corporation shall
include, if and when designated by the Board of Directors, the Chairman of the
Board of Directors, the Chief Executive Officer, the President, one or more Vice
Presidents, the Secretary, the Chief Financial Officer, the Treasurer and the
Controller, all of whom shall be elected at the annual organizational meeting of
the Board of Directors. The Board of Directors may also appoint one or more
Assistant Secretaries, Assistant Treasurers, Assistant Controllers and such
other officers and agents with such powers and duties as it shall deem
necessary. The Board of Directors may assign such additional titles to one or
more of the officers as it shall deem appropriate. Any one person may hold any
number of offices of the corporation at any one time unless specifically
prohibited therefrom by law. The salaries and other compensation of the officers
of the corporation shall be fixed by or in the manner designated by the Board of
Directors.
SECTION 28. TENURE AND DUTIES OF OFFICERS.
(a) GENERAL. All officers shall hold office at the pleasure of
the Board of Directors and until their successors shall have been duly elected
and qualified, unless sooner removed. Any officer elected or appointed by the
Board of Directors may be removed at any time by the Board of Directors. If the
office of any officer becomes vacant for any reason, the vacancy may be filled
by the Board of Directors.
(b) DUTIES OF CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman
of the Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors. The Chairman of the Board of Directors
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers, as the Board of Directors
shall designate from time to time. If there is no President, then the Chairman
of the Board of Directors shall also serve as the Chief Executive Officer of the
corporation and shall have the powers and duties prescribed in paragraph (c) of
this Section 28.
(c) DUTIES OF PRESIDENT. The President shall preside at all
meetings of the stockholders and at all meetings of the Board of Directors,
unless the Chairman of the Board of Directors has been appointed and is present.
Unless some other officer has been elected Chief Executive Officer of the
corporation, the President shall be the chief executive officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
corporation. The President shall perform other duties commonly incident to his
office and shall also perform such other duties and have such other powers, as
the Board of Directors shall designate from time to time.
(d) DUTIES OF VICE PRESIDENTS. The Vice Presidents may assume
and perform the duties of the President in the absence or disability of the
President or whenever the office of President is vacant. The Vice Presidents
shall perform other duties commonly incident to their
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office and shall also perform such other duties and have such other powers as
the Board of Directors or the President shall designate from time to time.
(e) DUTIES OF SECRETARY. The Secretary shall attend all meetings
of the stockholders and of the Board of Directors and shall record all acts and
proceedings thereof in the minute book of the corporation. The Secretary shall
give notice in conformity with these Bylaws of all meetings of the stockholders
and of all meetings of the Board of Directors and any committee thereof
requiring notice. The Secretary shall perform all other duties given him in
these Bylaws and other duties commonly incident to his office and shall also
perform such other duties and have such other powers, as the Board of Directors
shall designate from time to time. The President may direct any Assistant
Secretary to assume and perform the duties of the Secretary in the absence or
disability of the Secretary, and each Assistant Secretary shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time.
(f) DUTIES OF CHIEF FINANCIAL OFFICER. The Chief Financial
Officer shall keep or cause to be kept the books of account of the corporation
in a thorough and proper manner and shall render statements of the financial
affairs of the corporation in such form and as often as required by the Board of
Directors or the President. The Chief Financial Officer, subject to the order of
the Board of Directors, shall have the custody of all funds and securities of
the corporation. The Chief Financial Officer shall perform other duties commonly
incident to his office and shall also perform such other duties and have such
other powers as the Board of Directors or the President shall designate from
time to time. The President may direct the Treasurer or any Assistant Treasurer,
or the Controller or any Assistant Controller to assume and perform the duties
of the Chief Financial Officer in the absence or disability of the Chief
Financial Officer, and each Treasurer and Assistant Treasurer and each
Controller and Assistant Controller shall perform other duties commonly incident
to his office and shall also perform such other duties and have such other
powers as the Board of Directors or the President shall designate from time to
time.
SECTION 29. DELEGATION OF AUTHORITY. The Board of Directors may from
time to time delegate the powers or duties of any officer to any other officer
or agent, notwithstanding any provision hereof.
SECTION 30. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer.
SECTION 31. REMOVAL. Any officer may be removed from office at any time,
either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or
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superior officers upon whom such power of removal may have been conferred by the
Board of Directors.
ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES OWNED BY THE
CORPORATION
SECTION 32. EXECUTION OF CORPORATE INSTRUMENTS. The Board of Directors
may, in its discretion, determine the method and designate the signatory officer
or officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation.
All checks and drafts drawn on banks or other depositaries on funds to
the credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.
Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount.
SECTION 33. VOTING OF SECURITIES OWNED BY THE CORPORATION. All stock and
other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman of the Board of Directors, the Chief Executive Officer, the
President, or any Vice President.
ARTICLE VII
SHARES OF STOCK
SECTION 34. FORM AND EXECUTION OF CERTIFICATES. Certificates for the
shares of stock of the corporation shall be in such form as is consistent with
the Certificate of Incorporation and applicable law. Every holder of stock in
the corporation shall be entitled to have a certificate signed by or in the name
of the corporation by the Chairman of the Board of Directors, or the President
or any Vice President and by the Treasurer or Assistant Treasurer or the
Secretary or Assistant Secretary, certifying the number of shares owned by him
in the corporation. Any or all of the signatures on the certificate may be
facsimiles. In case any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent, or registrar before such certificate is
issued, it may be issued with the same effect as if he were such officer,
transfer agent, or registrar at the date of
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issue. Each certificate shall state upon the face or back thereof, in full or in
summary, all of the powers, designations, preferences, and rights, and the
limitations or restrictions of the shares authorized to be issued or shall,
except as otherwise required by law, set forth on the face or back a statement
that the corporation will furnish without charge to each stockholder who so
requests the powers, designations, preferences and relative, participating,
optional, or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights. Within a reasonable time after the issuance or transfer of
uncertificated stock, the corporation shall send to the registered owner thereof
a written notice containing the information required to be set forth or stated
on certificates pursuant to this section or otherwise required by law or with
respect to this section a statement that the corporation will furnish without
charge to each stockholder who so requests the powers, designations, preferences
and relative participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights. Except as otherwise expressly provided by law,
the rights and obligations of the holders of certificates representing stock of
the same class and series shall be identical.
SECTION 35. LOST CERTIFICATES. A new certificate or certificates shall
be issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or his legal
representative, to agree to indemnify the corporation in such manner as it shall
require or to give the corporation a surety bond in such form and amount as it
may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost, stolen,
or destroyed.
SECTION 36. TRANSFERS.
(a) Transfers of record of shares of stock of the corporation
shall be made only upon its books by the holders thereof, in person or by
attorney duly authorized, and upon the surrender of a properly endorsed
certificate or certificates for a like number of shares.
(b) The corporation shall have power to enter into and perform
any agreement with any number of stockholders of any one or more classes of
stock of the corporation to restrict the transfer of shares of stock of the
corporation of any one or more classes owned by such stockholders in any manner
not prohibited by the DGCL.
SECTION 37. FIXING RECORD DATES.
(a) In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which record date
shall, subject to applicable law, not be more than sixty (60) nor less than ten
(10) days before the date of such meeting. If no record date is fixed by the
Board of Directors, the
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record date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or if notice is waived, at the close
of business on the day next preceding the day on which the meeting is held. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
(b) In order that the corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than sixty (60)
days prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
SECTION 38. REGISTERED STOCKHOLDERS. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and shall not
be bound to recognize any equitable or other claim to or interest in such share
or shares on the part of any other person whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VIII
OTHER SECURITIES OF THE CORPORATION
SECTION 39. EXECUTION OF OTHER SECURITIES. All bonds, debentures and
other corporate securities of the corporation, other than stock certificates
(covered in Section 34), may be signed by the Chairman of the Board of
Directors, the President or any Vice President, or such other person as may be
authorized by the Board of Directors, and the corporate seal impressed thereon
or a facsimile of such seal imprinted thereon and attested by the signature of
the Secretary or an Assistant Secretary, or the Chief Financial Officer or
Treasurer or an Assistant Treasurer; provided, however, that where any such
bond, debenture or other corporate security shall be authenticated by the manual
signature, or where permissible facsimile signature, of a trustee under an
indenture pursuant to which such bond, debenture or other corporate security
shall be issued, the signatures of the persons signing and attesting the
corporate seal on such bond, debenture or other corporate security may be the
imprinted facsimile of the signatures of such persons. Interest coupons
appertaining to any such bond, debenture or other corporate security,
authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an
Assistant Treasurer of the corporation or such other person as may be authorized
by the Board of Directors, or bear imprinted thereon the facsimile signature of
such person. In case any officer who shall have signed or attested any bond,
debenture or other corporate security, or whose facsimile signature shall appear
thereon or on any such interest coupon, shall have ceased to be such officer
before the bond, debenture or other corporate security so signed or attested
shall have
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been delivered, such bond, debenture or other corporate security nevertheless
may be adopted by the corporation and issued and delivered as though the person
who signed the same or whose facsimile signature shall have been used thereon
had not ceased to be such officer of the corporation.
ARTICLE IX
DIVIDENDS
SECTION 40. DECLARATION OF DIVIDENDS. Dividends upon the capital stock
of the corporation, subject to the provisions of the Certificate of
Incorporation and applicable law, if any, may be declared by the Board of
Directors pursuant to law at any regular or special meeting. Dividends may be
paid in cash, in property, or in shares of the capital stock, subject to the
provisions of the Certificate of Incorporation and applicable law.
SECTION 41. DIVIDEND RESERVE. Before payment of any dividend, there may
be set aside out of any funds of the corporation available for dividends such
sum or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
ARTICLE X
FISCAL YEAR
SECTION 42. FISCAL YEAR. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.
ARTICLE XI
INDEMNIFICATION
SECTION 43. INDEMNIFICATION OF DIRECTORS, EXECUTIVE OFFICERS, OTHER
OFFICERS, EMPLOYEES AND OTHER AGENTS.
(a) DIRECTORS AND EXECUTIVE OFFICERS. The corporation shall
indemnify its directors and executive officers (for the purposes of this Article
XI, "executive officers" shall have the meaning defined in Rule 3b-7 promulgated
under the 1934 Act) to the fullest extent not prohibited by the DGCL or any
other applicable law; provided, however, that the corporation may modify the
extent of such indemnification by individual contracts with its directors and
executive officers; and, provided, further, that the corporation shall not be
required to indemnify any director or executive officer in connection with any
proceeding (or part thereof) initiated by
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such person unless (i) such indemnification is expressly required to be made by
law, (ii) the proceeding was authorized by the Board of Directors of the
corporation, (iii) such indemnification is provided by the corporation, in its
sole discretion, pursuant to the powers vested in the corporation under the DGCL
or any other applicable law or (iv) such indemnification is required to be made
under subsection (d).
(b) OTHER OFFICERS, EMPLOYEES AND OTHER AGENTS. The corporation
shall have power to indemnify its other officers, employees and other agents as
set forth in the DGCL or any other applicable law.
(c) EXPENSES. The corporation shall advance to any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that he is or was a director or
executive officer of the corporation, or is or was serving at the request of the
corporation as a director or executive officer of another corporation,
partnership, joint venture, trust or other enterprise, prior to the final
disposition of the proceeding, promptly following request therefor, all expenses
incurred by any director or executive officer in connection with such proceeding
upon receipt of an undertaking by or on behalf of such person to repay said
amounts if it should be determined ultimately that such person is not entitled
to be indemnified under this Section 43 or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to
paragraph (e) of this Section 43, no advance shall be made by the corporation to
an executive officer of the corporation (except by reason of the fact that such
executive officer is or was a director of the corporation in which event this
paragraph shall not apply) in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, if a determination is reasonably and
promptly made (i) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to the proceeding, or (ii) if such
quorum is not obtainable, or, even if obtainable, a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, that
the facts known to the decision-making party at the time such determination is
made demonstrate clearly and convincingly that such person acted in bad faith or
in a manner that such person did not believe to be in or not opposed to the best
interests of the corporation.
(d) ENFORCEMENT. Without the necessity of entering into an
express contract, all rights to indemnification and advances to directors and
executive officers under this Bylaw shall be deemed to be contractual rights and
be effective to the same extent and as if provided for in a contract between the
corporation and the director or executive officer. Any right to indemnification
or advances granted by this Section 43 to a director or executive officer shall
be enforceable by or on behalf of the person holding such right in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. The claimant in such enforcement action,
if successful in whole or in part, shall be entitled to be paid also the expense
of prosecuting his claim. In connection with any claim for indemnification, the
corporation shall be entitled to raise as a defense to any such action that the
claimant has not met the standards of conduct that make it permissible under the
DGCL or any other applicable law
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for the corporation to indemnify the claimant for the amount claimed. In
connection with any claim by an [executive] officer of the corporation (except
in any action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such executive officer is or was a
director of the corporation) for advances, the corporation shall be entitled to
raise a defense as to any such action clear and convincing evidence that such
person acted in bad faith or in a manner that such person did not believe to be
in or not opposed to the best interests of the corporation, or with respect to
any criminal action or proceeding that such person acted without reasonable
cause to believe that his conduct was lawful. Neither the failure of the
corporation (including its Board of Directors, independent legal counsel or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he has met the applicable standard of conduct set forth in the DGCL or
any other applicable law, nor an actual determination by the corporation
(including its Board of Directors, independent legal counsel or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that claimant has not
met the applicable standard of conduct.
(e) NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any
person by this Bylaw shall not be exclusive of any other right which such person
may have or hereafter acquire under any applicable statute, provision of the
Certificate of Incorporation, Bylaws, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding office. The corporation is
specifically authorized to enter into individual contracts with any or all of
its directors, officers, employees or agents respecting indemnification and
advances, to the fullest extent not prohibited by the Delaware General
Corporation Law, or by any other applicable law.
(f) SURVIVAL OF RIGHTS. The rights conferred on any person by
this Bylaw shall continue as to a person who has ceased to be a director,
officer, employee or other agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
(g) INSURANCE. To the fullest extent permitted by the DGCL or
any other applicable law, the corporation, upon approval by the Board of
Directors, may purchase insurance on behalf of any person required or permitted
to be indemnified pursuant to this Section 43.
(h) AMENDMENTS. Any repeal or modification of this Section 43
shall only be prospective and shall not affect the rights under this Bylaw in
effect at the time of the alleged occurrence of any action or omission to act
that is the cause of any proceeding against any agent of the corporation.
(i) SAVING CLAUSE. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director and executive officer to
the full extent not prohibited by any applicable portion of this Section 43 that
shall not have been invalidated, or by any other applicable law. If this Section
43 shall be invalid due to the application of the indemnification provisions of
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another jurisdiction, then the corporation shall indemnify each director and
executive officer to the full extent under any other applicable law.
(j) CERTAIN DEFINITIONS. For the purposes of this Bylaw, the following
definitions shall apply:
(1) The term "proceeding" shall be broadly construed and shall
include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of testimony in,
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative.
(2) The term "expenses" shall be broadly construed and shall
include, without limitation, court costs, attorneys' fees, witness fees, fines,
amounts paid in settlement or judgment and any other costs and expenses of any
nature or kind incurred in connection with any proceeding.
(3) The term the "corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the provisions
of this Section 43 with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
(4) References to a "director," "executive officer," "officer,"
"employee," or "agent" of the corporation shall include, without limitation,
situations where such person is serving at the request of the corporation as,
respectively, a director, executive officer, officer, employee, trustee or agent
of another corporation, partnership, joint venture, trust or other enterprise.
(5) References to "other enterprises" shall include employee
benefit plans; references to "fines" shall include any excise taxes assessed on
a person with respect to an employee benefit plan; and references to "serving at
the request of the corporation" shall include any service as a director,
officer, employee or agent of the corporation which imposes duties on, or
involves services by, such director, officer, employee, or agent with respect to
an employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this Section 43.
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ARTICLE XII
NOTICES
SECTION 44. NOTICES.
(a) NOTICE TO STOCKHOLDERS. Whenever, under any provisions of
these Bylaws, notice is required to be given to any stockholder, it shall be
given in writing, timely and duly deposited in the United States mail, postage
prepaid, and addressed to his last known post office address as shown by the
stock record of the corporation or its transfer agent.
(b) NOTICE TO DIRECTORS. Any notice required to be given to any
director may be given by the method stated in subsection (a), or by overnight
delivery service, facsimile, telex or telegram, except that such notice other
than one which is delivered personally shall be sent to such address as such
director shall have filed in writing with the Secretary, or, in the absence of
such filing, to the last known post office address of such director.
(c) AFFIDAVIT OF MAILING. An affidavit of mailing, executed by a
duly authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the stockholder or stockholders, or
director or directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall in the absence of fraud, be prima
facie evidence of the facts therein contained.
(d) TIME NOTICES DEEMED GIVEN. All notices given by mail or by
overnight delivery service, as above provided, shall be deemed to have been
given as at the time of mailing, and all notices given by facsimile, telex or
telegram shall be deemed to have been given as of the sending time recorded at
time of transmission.
(e) METHODS OF NOTICE. It shall not be necessary that the same
method of giving notice be employed in respect of all directors, but one
permissible method may be employed in respect of any one or more, and any other
permissible method or methods may be employed in respect of any other or others.
(f) FAILURE TO RECEIVE NOTICE. The period or limitation of time
within which any stockholder may exercise any option or right, or enjoy any
privilege or benefit, or be required to act, or within which any director may
exercise any power or right, or enjoy any privilege, pursuant to any notice sent
him in the manner above provided, shall not be affected or extended in any
manner by the failure of such stockholder or such director to receive such
notice.
(g) NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL.
Whenever notice is required to be given, under any provision of law or of the
Certificate of Incorporation or Bylaws of the corporation, to any person with
whom communication is unlawful, the giving of such notice to such person shall
not be required and there shall be no duty to apply to any governmental
authority or agency for a license or permit to give such notice to
23.
<PAGE> 29
such person. Any action or meeting which shall be taken or held without notice
to any such person with whom communication is unlawful shall have the same force
and effect as if such notice had been duly given. In the event that the action
taken by the corporation is such as to require the filing of a certificate under
any provision of the DGCL, the certificate shall state, if such is the fact and
if notice is required, that notice was given to all persons entitled to receive
notice except such persons with whom communication is unlawful.
(h) NOTICE TO PERSON WITH UNDELIVERABLE ADDRESS. Whenever notice
is required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve-month period, have been mailed addressed to such
person at his address as shown on the records of the corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required. Any action or meeting which shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given. If any such person shall deliver to the corporation a written notice
setting forth his then current address, the requirement that notice be given to
such person shall be reinstated. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the DGCL, the certificate need not state that notice was not given
to persons to whom notice was not required to be given pursuant to this
paragraph.
ARTICLE XIII
AMENDMENTS
SECTION 45. AMENDMENTS. Subject to paragraph (h) of Section 43 of the
Bylaws, the Bylaws may be altered or amended or new Bylaws adopted by the
affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the
voting power of all of the then-outstanding shares of the voting stock of the
corporation entitled to vote. The Board of Directors shall also have the power
to adopt, amend, or repeal Bylaws.
ARTICLE XIV
LOANS TO OFFICERS
SECTION 46. LOANS TO OFFICERS. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee or other assistance may
be with or without interest and may be unsecured, or secured in such manner as
the Board of Directors shall approve, including, without limitation, a pledge of
shares of stock of
24.
<PAGE> 30
the corporation. Nothing in these Bylaws shall be deemed to deny, limit or
restrict the powers of guaranty or warranty of the corporation at common law or
under any statute.
25.
<PAGE> 1
EXHIBIT 10.1
October 15, 1998
================================================================================
LEASE AGREEMENT
by and between
605 EAST FAIRCHILD ASSOCIATES, L.P.,
a California limited partnership
("LANDLORD")
and
CALIPER TECHNOLOGIES CORP.,
a Delaware corporation
("TENANT")
Dated as of October 15, 1998
================================================================================
<PAGE> 2
<TABLE>
<CAPTION>
BASIC LEASE INFORMATION
- --------------------------------------------------------------------------------
<S> <C>
Lease Date: October 15, 1998
LANDLORD: 605 East Fairchild Associates, L.P.,
a California limited partnership
Managing Agent: The Mozart Development Company
Landlord's and c/o The Mozart Development Company
Managing Agent's Address: 1068 East Meadow Circle
Palo Alto, CA 94303
TENANT: Caliper Technologies Corp.,
a Delaware corporation
Tenant's Address: FOR NOTICE:
605 East Fairchild Drive
Mountain View, CA 94043
Attn: Chief Operating Officer
FOR BILLING:
605 East Fairchild Drive
Mountain View, CA 94043
Attn: Accounts Payable
Premises: An existing two-story building located on
the Land (the "Building"), as shown on
Exhibit "A" attached hereto.
Building Address: 605 East Fairchild Drive, Mountain View,
California
Land: The real property described on Exhibit "A-1"
attached hereto.
Project: The Building, Land and other improvements
located in the area shown on Exhibit "A"
attached hereto.
Rentable Area of the Premises: 53,361 Rentable Square Feet ("Rentable
Area").
Tenant's Use of the Premises: Tenant may use the Premises for general
office, administration, light distribution,
and research and development, and may use an
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
BASIC LEASE INFORMATION
- --------------------------------------------------------------------------------
<S> <C>
area shown on Exhibit "H" attached hereto,
not to exceed 7,000 square feet of the
Premises, for light manufacturing that is
incidental to the other permitted uses
(excluding uses which involve the use of
Hazardous Substances as defined in Paragraph
40 [Hazardous Substance Liability] beyond
the levels and types allowed by Paragraph
40(d), and for no other purposes; provided,
however, any proposed use which involves the
use of Hazardous Substances beyond the
levels and types allowed by Paragraph 40(d)
shall be subject to Landlord's prior written
approval, which shall not be unreasonably
withheld so long as (i) the proposed use
does not involve any of the chemical
substances which have been associated with
the investigation and remediation of those
Hazardous Substances currently existing in
the soil and/or groundwater within the
general area of the Premises, and (ii)
Landlord is provided an indemnity from an
entity (which may include Tenant, a
subtenant of Tenant, or an affiliate of
either of the foregoing) acceptable to
Landlord and any mortgagees, and in all
other respects satisfactory to Landlord and
any mortgagees, indemnifying and defending
Landlord, its mortgagees, and all of their
successors and assigns, agents,
representatives, and affiliates from and
against any and all loss, cost, claim,
liability, or suit arising directly or
indirectly in connection with the use of
such Hazardous Substances.
Lease Term: Commencing on the Occupancy Date and ending
on the Expiration Date, with the right to
extend for an additional term of five (5)
years in accordance with Paragraph 43
[Option to Renew].
Scheduled Rent Commencement Date: December 1, 1998.
Outside Delivery Date: January 31, 1999.
Expiration Date: Ten (10) years after the Rent Commencement
Date.
Rent: Base Rent plus Additional Charges.
Monthly Base Rent: $2.35 per Rentable Square Foot of the
Rentable Area of the Premises.
Base Rent Adjustment: On each anniversary of the Rent Commencement
Date, the Monthly Base Rent shall increase
by three percent (3%) of the
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
BASIC LEASE INFORMATION
- --------------------------------------------------------------------------------
<S> <C>
Monthly Base Rent applicable to the month
immediately prior to the applicable
anniversary.
Security Deposit: Tenant shall provide and maintain a letter
of credit or cash collateral in the initial
amount of One Million Dollars ($1,000,000),
which amount may be reduced during the Term
in accordance with Paragraph 34 [Security
Deposit].
Guarantor of Lease: None
Landlord's Broker: None
Tenant's Broker: Cornish & Carey Commercial - Randy Scott
Broker's Fee or Commission Paid By: Landlord, in accordance with Paragraph 39.
</TABLE>
The foregoing Basic Lease Information is hereby incorporated into and made a
part of this Lease. Each reference in this Lease to any of the Basic Lease
Information shall mean the information hereinabove set forth and shall be
construed to incorporate all of the terms provided under the particular
paragraph pertaining to such information. In the event of any conflict between
any Basic Lease Information and any other portion of the Lease, the latter shall
control.
LANDLORD: 605 EAST FAIRCHILD ASSOCIATES, L.P.,
a California limited partnership
By: M-D Ventures, Inc.,
a California corporation,
Its General Partner
By: /s/
-------------------------------------
Steve Dostart
Its Vice President
TENANT: CALIPER TECHNOLOGIES CORP.,
a Delaware corporation
By: /s/
-------------------------------------
Calvin Y.H. Chow
Its Chief Operating Officer
<PAGE> 5
LEASE AGREEMENT
THIS LEASE AGREEMENT is made and entered into as of October 15, 1998, by
and between 605 East Fairchild Associates, L.P., a California limited
partnership (herein called "Landlord"), and Caliper Technologies Corp., a
Delaware corporation (herein called "Tenant").
1. LEASED PREMISES.
(a) PREMISES. Upon and subject to the terms, covenants and
conditions hereinafter set forth, Landlord agrees to lease to Tenant and Tenant
agrees to hire from Landlord those premises (the "Premises") comprising the
entire two-story building shown on Exhibit "A" attached hereto (the "Building").
The Building is located on the parcel or parcels of real property described on
Exhibit "A-1" (the "Land"). The Building, together with the Land and associated
improvements located on the Land, are collectively referred to as the "Project".
On the Occupancy Date, the Building will include certain interior improvements,
which shall be defined, collectively with the Building shell and core, as the
"Base Building".
(b) USE OF PROJECT. Tenant is hereby granted the
non-exclusive use of certain areas and facilities within the Project that are
not included in the Premises, including landscaped areas, service areas, parking
areas, recreation areas, trash enclosures, plaza, walkways, driveways,
sidewalks, access and perimeter roads, and the like, all subject to the Rules
and Regulations described in Paragraph 18.
2. OCCUPANCY AND USE. Tenant may use and occupy the Premises for
the purpose specified in the Basic Lease Information and for no other use or
purpose without the prior written consent of Landlord. Landlord may grant or
withhold consent to a proposed change of use in its sole discretion, except in
circumstances described in the Basic Lease Information where Landlord may not
unreasonably withhold its consent.
3. TERM AND POSSESSION.
(a) TERM; OCCUPANCY DATE; EXPIRATION DATE. The term of this
Lease (the "Term") shall commence on the Occupancy Date and, unless sooner
terminated pursuant to Paragraphs 3(d), 11(c), 20, 21(b), 22, or 23, shall
expire on the Expiration Date, provided that Tenant shall have an option to
extend the Term in accordance with the terms and conditions of Paragraph 43
[Option to Renew]. "Occupancy Date" shall mean the date on which Landlord has
tendered possession of the Premises to Tenant. Tenant shall accept the Premises
in an "as-is" condition. Landlord shall have been deemed to tender possession of
the Premises to Tenant if Landlord meets the following conditions: (a) Landlord
provides at least three (3) days advance written notice to Tenant of the date
that the Premises will be so tendered and (b) the Premises have been vacated by
any prior tenant and any such tenant?s personal property (eg. furniture systems,
furniture, trade fixtures, etc.) have been removed, subject to Tenant?s separate
agreement(s) with Vivus, Inc. concerning a sublease of a portion of the Premises
and purchase of
<PAGE> 6
personal property. However, in no case shall Tenant be required to accept
occupancy of the Premises prior to December 1, 1998. All of the rights and
obligations of the parties under this Lease shall commence on the Occupancy
Date. The dates upon which the Term shall actually commence and terminate with
respect to the entire Premises pursuant to this Paragraph 3(a) are herein called
the "Occupancy Date" and the "Expiration Date," respectively.
(b) OCCUPANCY BY TENANT. Tenant shall be deemed to occupy
the Premises from and after the Occupancy Date. This Paragraph 3(c) shall not be
construed as an obligation of Tenant to continuously occupy the Premises. Within
five (5) days after the Occupancy Date, Landlord shall deliver to Tenant a
certificate confirming the Occupancy Date and the Rent Commencement Date, in the
form of Exhibit "B" hereto. If Tenant does not agree with Landlord's
determination of the Occupancy Date, Tenant may submit such matter to
arbitration in accordance with Paragraph 41 [Arbitration of Disputes], provided
that prior to the resolution of such matter by arbitration, the parties shall
proceed under this Lease as if the Occupancy Date is the date designated by
Landlord, with any required adjustments to the Rent Commencement Date made after
the matter is ultimately determined by arbitration.
(c) RENT COMMENCEMENT DATE; CERTIFICATE OF OCCUPANCY.
Tenant's obligation to pay Base Rent and Additional Charges hereunder shall
commence on the later to occur of (i) the Scheduled Rent Commencement Date set
forth in the Basic Lease Information, or (ii) the Occupancy Date (such date
being defined as the "Rent Commencement Date").
(d) EXCLUSIVE REMEDIES FOR FAILURE OF LANDLORD TO DELIVER
POSSESSION. If Landlord has not delivered possession of the Premises to Tenant
by the "Outside Delivery Date" as specified in the Basic Lease Information,
Tenant shall have the right to terminate this Lease by written notice to
Landlord at any time within five (5) business days after Landlord's failure to
so deliver possession of the Premises. If Tenant does not exercise such right to
terminate within such five (5) business day period, Tenant shall waive such
right and this Lease shall continue in full force and effect. If Tenant
exercises this termination right, Tenant shall be entitled to the remedy
hereinbelow described, which shall be Tenant's sole and exclusive remedy with
respect to Landlord's failure to deliver the Premises. If Tenant exercises its
termination right pursuant to this Paragraph 3(d) and Landlord believes that
possession of the Premises had been delivered to Tenant prior to the Outside
Delivery Date, the parties agree to submit the dispute concerning Landlord's
failure to deliver possession of the Premises, and Tenant's resulting right to
terminate the Lease, to binding arbitration pursuant to the provisions of
Paragraph 41 [Arbitration of Disputes]. Notwithstanding any other provision of
this Lease, if Landlord fails to deliver possession of the Premises by the
Outside Delivery Date, Tenant's sole and exclusive remedy shall be to terminate
this Lease.
<PAGE> 7
4. RENT; RENT ADJUSTMENTS; ADDITIONAL CHARGES FOR EXPENSES AND
TAXES.
(a) MONTHLY BASE RENT.
(i) Commencing on the Rent Commencement Date, Tenant
shall pay to Landlord throughout the Term Base Rent in an amount equal to the
Monthly Base Rent rate specified in the Basic Lease Information multiplied by
the Rentable Area of the Premises, as specified in the Basic Lease Information
("Base Rent").
(ii) Base Rent shall be payable by Tenant in equal
monthly installments on or, at Tenant's election, before the first day of each
month, in advance, in lawful money of the United States (without any prior
demand therefor and without deduction or offset whatsoever, except for abatement
as may be expressly and specifically provided for in Paragraphs 22 [Damage and
Destruction] and 23 [Eminent Domain]), to Landlord at the address specified in
the Basic Lease Information or to such other firm or to such other place as
Landlord may from time to time designate in writing. Tenant shall pay all
charges and other amounts whatsoever as provided in this Lease ("Additional
Charges") to Landlord at the place where the Base Rent is payable, and Landlord
shall have the same remedies for a default in the payment of Additional Charges
as for a default in the payment of Base Rent. If the Rent Commencement Date
occurs on a day other than the first day of a calendar month, or the Expiration
Date occurs on a day other than the last day of a calendar month, then the Base
Rent and Additional Charges for such fractional month shall be prorated on a
daily basis. As used herein, the term "Rent" shall include all Base Rent and
Additional Charges (including, without limitation, Additional Charges pursuant
to Paragraph 25 [Right of Landlord to Perform]).
(b) ADJUSTMENTS IN BASE RENT. The Monthly Base Rent under
Paragraph 4(a) [Monthly Base Rent] shall be adjusted as provided in the Basic
Lease Information.
(c) ADDITIONAL CHARGES FOR EXPENSES AND TAXES.
(1) DEFINITIONS OF ADDITIONAL CHARGES: For purposes
of this Paragraph 4(c), the following terms shall have the meanings hereinafter
set forth:
(A) "TAX YEAR" shall mean each twelve (12)
consecutive month period commencing January 1st of the calendar year during
which the Rent Commencement Date of this Lease occurs.
(B) "REAL ESTATE TAXES" shall mean all
taxes, assessments and charges levied upon or with respect to the Project or any
personal property of Landlord used in the operation thereof, or Landlord's
interest in the Project or such personal property. Real Estate Taxes shall
include, without limitation, all general real property taxes and general and
special
<PAGE> 8
assessments, charges, fees or assessments for transit (including, without
limitation, shuttle fees and roadways), housing, police, fire, utilities,
sewers, emergency response or other governmental services or purported benefits
to the Project (provided, however, that any refunds of Real Estate Taxes paid by
Tenant shall be credited against Tenant's further obligation to pay Real Estate
Taxes during the Term or refunded to Tenant at the end of the Term), service
payments in lieu of taxes, and any tax, fee or excise on the act of entering
into this Lease, or any other lease of space in the Project, or on the use or
occupancy of the Project or any part thereof, or on the rent payable under any
lease or in connection with the business of renting space in the Project, that
are now or hereafter levied or assessed against Landlord by the United States of
America, the State of California, or any political subdivision, public
corporation, district or any other political or public entity, and shall also
include any other tax, fee or other excise, however described, that may be
levied or assessed as a substitute for, or as an addition to, in whole or in
part, any other Real Estate Taxes, whether or not now customary or in the
contemplation of the parties on the date of this Lease. Real Estate Taxes shall
not include franchise, transfer, inheritance or capital stock taxes or income
taxes measured by the net income of Landlord from all sources unless, due to a
change in the method of taxation, any of such taxes is levied or assessed
against Landlord as a substitute for, or as an addition to, in whole or in part,
any other tax that would otherwise constitute a Real Estate Tax. Additionally,
Real Estate Taxes shall not include any assessments or like charges to pay for
any remediation of contamination from any Hazardous Substances. Real Estate
Taxes shall also include reasonable legal fees, costs and disbursements incurred
in connection with proceedings to contest, determine or reduce Real Estate
Taxes. If any assessments are levied on the Project, Tenant shall have no
obligation to pay more than that amount of annual installments of principal and
interest that would become due during the Lease Term had Landlord elected to pay
the assessment in installment payments, even if Landlord pays the assessment in
full.
(C) "EXPENSES" shall mean the total costs
and reasonable expenses paid or incurred by Landlord in connection with the
management, operation, maintenance and repair of the Project, including, without
limitation, (i) the cost of fire, extended coverage, boiler, sprinkler,
commercial general liability, property, rent, earthquake, flood, and all other
insurance described in Paragraph 12(e) [Landlord's Insurance Obligations] or
otherwise obtained by Landlord in connection with the Project, including,
without limitation, insurance premiums and any deductible amounts paid by
Landlord; (ii) the cost of air conditioning, electricity, steam, heating,
mechanical, ventilating, water, gas, elevator systems and all other utilities,
the cost of supplies and equipment and maintenance and service contracts in
connection therewith, and the cost of refuse service, landscaping, parking lot
sweeping and similar maintenance services; (iii) the cost of repairs and general
maintenance and cleaning; (iv) fees, charges and other costs, including
consulting fees, legal fees and accounting fees, fees for any project engineer
for the Project, and fees of all independent contractors, engaged by Tenant and
related solely to the operation of the Project (or, if any such costs, fees or
charges are attributable to other property managed by Landlord, the portion of
such costs, fees and charges allocable to the Project, as reasonably determined
by Landlord); (v) the cost of any capital improvements made to the Building or
Project as permitted or required by this Lease; provided that any such
<PAGE> 9
capital improvement costs in excess of $12,807 per calendar year in the
aggregate shall be amortized over the useful life of the capital item in
question as determined in accordance with generally accepted accounting
principles ("GAAP"), together with interest on the unamortized balance at the
rate paid by Landlord on funds borrowed for the purpose of constructing such
capital improvements, or, if Landlord does not elect to borrow funds, at the
"prime rate" of interest announced by the Wall Street Journal for Union Bank
(or, if Union Bank ceases to exist, by another bank mutually acceptable to
Landlord and Tenant) (the "Interest Rate"), as reflected over the period the
funds are advanced, plus two percent (2%); (vi) a management fee for Landlord's
management and administrative services in connection with the Project in the
amount of two percent (2.0%) of Base Rent and Additional Charges (excluding the
management fee); and (vii) any other expenses of any other kind whatsoever
incurred in managing, operating, maintaining and repairing the Premises and/or
Project. Notwithstanding anything to the contrary herein contained, Expenses
shall not include, and in no event shall Tenant have any obligation to pay for
pursuant to this Paragraph 4(c) or Paragraph 9(b) [Repair and Maintenance;
Tenant's Obligations], (aa) the initial costs of constructing the Base Building
which were paid by Landlord; (bb) the cost of providing tenant improvements to
any other tenant in the Project; (cc) debt service (including, but without
limitation, interest and principal) required to be made on debt incurred by
Landlord and relating to the Project other than debt service and financing
charges imposed pursuant to Paragraph 4(c)(1)(C)(v) above; (dd) the portion of a
management fee paid to Landlord or an affiliate in excess of two percent (2.0%)
of the sum of Base Rent and Additional Charges (excluding the management fee);
(ee) the cost of special services, goods or materials provided to any other
tenant; (ff) depreciation; (gg) costs for which Landlord has a right to receive
reimbursement from others; (hh) costs occasioned by Landlord' fraud or willful
misconduct under applicable Laws; (ii) costs to correct any construction defects
in the original construction of the Base Building; (jj) costs arising from a
disproportionate use of any utility or service supplied by Landlord to any other
occupant of the Project to the extent that Landlord has the ability to charge
such other tenant for said costs under the terms of a lease comparable to terms
governing said costs in this Lease; (kk) environmental pollution related costs
(other than costs for which Tenant has indemnified Landlord pursuant to
Paragraph 40 [Hazardous Substance Liability]); (ll) any maintenance, repair or
replacement costs for which Landlord is responsible pursuant to Paragraph 9(a)
[Repair and Maintenance; Landlord's Obligations]; (mm) advertising or
promotional costs; (nn) leasing commissions; and (oo) reserves for expenses. All
costs and expenses shall be determined in accordance with generally accepted
accounting principles which shall be consistently applied (with accruals
appropriate to Landlord's business). Expenses shall not include specific costs
incurred for the account of, separately billed to and paid by specific tenants
in the Project.
(D) "EXPENSE YEAR" shall mean each twelve
(12) consecutive month period commencing January 1 of the calendar year during
which the Rent Commencement Date of the Lease occurs. Landlord, upon notice to
Tenant, may change the Expense Year from time to time to any other twelve (12)
consecutive month period, and, in the event of any such change, Expenses shall
be equitably adjusted for the Expense Years involved in any such change.
<PAGE> 10
(2) PAYMENT OF REAL ESTATE TAXES
(A) PAYMENT AS DUE: With reasonable
promptness after Landlord has received the tax bills for any Tax Year, Landlord
shall furnish Tenant with a statement (herein called "Landlord's Tax Statement")
setting forth the amount of Real Estate Taxes for such Tax Year. Unless
otherwise required pursuant to clause (B) below, Tenant shall pay to Landlord
actual Real Estate Taxes in installments, twice each Tax Year, no later than
fifteen (15) business days prior to the due date of each Real Estate Tax
installment.
(B) IMPOUNDS: Notwithstanding clause (A)
above, if required by any Mortgagee or, at Landlord's election, after any
default by Tenant in the timely payment of Real Estate Taxes, Tenant shall pay
to Landlord as Additional Charges one-twelfth (1/12th) of Real Estate Taxes for
each Tax Year on or before the first day of each month during such Tax Year, in
advance, in an amount reasonably estimated by Landlord and billed by Landlord to
Tenant. Landlord shall have the right initially to determine monthly estimates
and to revise such estimates from time to time. If the actual Real Estate Taxes
for such Tax Year (as shown on Landlord's Tax Statement) exceed the estimated
Real Estate Taxes paid by Tenant for such Tax Year, Tenant shall pay to Landlord
the difference between the amount paid by Tenant and the actual Real Estate
Taxes within fifteen (15) days after the receipt of Landlord's Tax Statement,
and if the total amount paid by Tenant for any such Tax Year shall exceed the
actual Real Estate Taxes for such Tax Year, such excess shall be credited
against the next installment of Real Estate Taxes due from Tenant to Landlord
hereunder. If it has been determined that Tenant has overpaid Real Estate Taxes
during the last year of the Lease Term, then Landlord shall reimburse Tenant for
such overage on or before the thirtieth (30th) day following the Expiration
Date.
(3) PAYMENT OF EXPENSES: Tenant shall pay to
Landlord as Additional Charges one-twelfth (1/12th) of the Expenses for each
Expense Year on or before the first day of each month of such Expense Year, in
advance, in an amount reasonably estimated by Landlord and billed by Landlord to
Tenant; provided, however, that all insurance premiums which are included in
Expenses shall be payable annually, in advance, by Tenant within twenty (20)
days after Tenant's receipt from Landlord of a copy of the invoice with respect
to such premiums. Landlord shall have the right initially to determine monthly
estimates and to revise such estimates from time to time. With reasonable
promptness after the expiration of each Expense Year, Landlord shall furnish
Tenant with a statement (herein called "Landlord's Expense Statement"), setting
forth in reasonable detail the Expenses for such Expense Year. If the actual
Expenses for such Expense Year exceed the estimated Expenses paid by Tenant for
such Expense Year, Tenant shall pay to Landlord the difference between the
amount paid by Tenant and the actual Expenses within thirty (30) days after the
receipt of Landlord's Expense Statement, and if the total amount paid by Tenant
for any such Expense Year shall exceed the actual Expenses for such Expense
Year, such excess shall be credited against the next installment of the
estimated Expenses due from Tenant to Landlord hereunder or if the Term has
ended it shall be returned to Tenant within thirty (30) days. If Tenant has
overpaid Expenses during the last year of the Lease Term, then Landlord shall
reimburse Tenant for such overage on or before the thirtieth (30th) day
following
<PAGE> 11
the later of the Expiration Date or the end of the last Expense Year. To the
extent any item of Expenses is payable by Landlord in advance of the period to
which it is applicable (e.g. insurance and tax escrows required by any
Mortgagee), or to the extent that prepayment is customary for the service or
matter, Landlord may (aa) include such items in Landlord's estimate for periods
prior to the date such item is to be paid by Landlord, and (bb) to the extent
Landlord has not collected the full amount of such item prior to the date such
item is to be paid by Landlord, Landlord may include the balance of such full
amount in a revised monthly estimate for Additional Charges.
(4) AUDIT RIGHTS: Within ninety (90) days after
receipt of any Landlord's Expense Statement or Landlord's Tax Statement, Tenant
shall have the right to audit, at Landlord's office located in the San Francisco
Bay Area, at Tenant's expense, Landlord's accounts and records relating to
Expenses and Real Estate Taxes. Such audit shall be conducted by a certified
public accountant approved by Landlord, which approval shall not be unreasonably
withheld. If such audit reveals that Landlord has overcharged Tenant, Tenant
shall notify Landlord within one hundred twenty (120) days after the date the
applicable Landlord's Expense Statement or Landlord's Tax Statement was received
by Tenant. Landlord may dispute such audit by arbitration pursuant to Paragraph
41 [Arbitration of Disputes]. If Landlord does not dispute such amount, or if
Tenant prevails in any such arbitration, the amount overcharged shall be paid to
Tenant within thirty (30) days thereafter, together with interest thereon at the
Interest Rate, from the date Landlord's Expense Statement or Landlord's Tax
Statement, as applicable, was delivered to Tenant until payment of the
overcharge is made to Tenant. In addition, if Landlord's Expense Statement or
Landlord's Tax Statement, as applicable, exceeds the actual Expenses and Real
Estate Taxes which should have been charged to Tenant by more than five percent
(5%), the cost of the audit, up to a maximum cost of Ten Thousand Dollars
($10,000), shall be paid by Landlord. If Tenant fails to object to any
Landlord's Expense Statement or Landlord's Tax Statement within one hundred
twenty (120) days after receipt thereof, such statement shall be final and shall
not be subject to any audit, challenge or adjustment.
(5) OTHER: If either the Rent Commencement Date or
the Expiration Date shall occur on a date other than the first day of a Tax Year
and/or Expense Year, Real Estate Taxes and Expenses for the Tax Year and/or
Expense Year in which the Rent Commencement Date or the Expiration Date occurs
shall be prorated.
(d) LATE CHARGES; DEFAULT RATE. Tenant recognizes that late
payment of any Base Rent or Additional Charges will result in administrative
expenses to Landlord, the extent of which additional expense is extremely
difficult and economically impractical to ascertain. Tenant therefore agrees
that if any Base Rent or Additional Charges remain unpaid ten (10) days after
such amount is due, the amount of such unpaid Base Rent or Additional Charges
shall be increased by a late charge to be paid to Landlord by Tenant in an
amount equal to five percent (5%) (or such greater amount not to exceed six
percent (6%) as may be charged by any Mortgagee for a late payment of a monthly
mortgage payment) of the amount of the delinquent Base Rent or Additional
Charges. In addition, any outstanding Base Rent, Additional Charges,
<PAGE> 12
late charges and other outstanding amounts shall accrue interest at an
annualized rate of the greater of 10% or The Ninth Circuit Federal Reserve
Discount Rate plus 5% (the "Default Rate"), until paid to Landlord. Tenant
agrees that such amount is a reasonable estimate of the loss and expense to be
suffered by Landlord as a result of such late payment by Tenant and may be
charged by Landlord to defray such loss and expense. The provisions of this
Paragraph 4(d) shall not relieve Tenant of the obligation to pay Base Rent or
Additional Charges on or before the date they are due, or affect Landlord's
remedies pursuant to Paragraph 21(b) [Landlord's Remedies] if any Base Rent or
Additional Charges are unpaid after they are due.
5. INTENTIONALLY DELETED.
6. RESTRICTIONS ON USE. Tenant shall not use or allow the Premises
or Project to be used for any unlawful purpose, nor shall Tenant cause or
maintain or permit any nuisance in, on or about the Premises or Project. Tenant
shall not commit or suffer the commission of any waste in, on or about the
Premises or Project.
7. COMPLIANCE WITH LAWS.
(a) TENANT'S COMPLIANCE OBLIGATIONS. Tenant shall promptly,
at its sole expense, maintain the Premises, any Alterations (as defined in
Paragraph 8(b) [Landlord's Consent to Tenant's Alterations]) permitted hereunder
and Tenant's use and operations thereon in strict compliance at all times with
all present and future laws, statutes, ordinances, resolutions, regulations,
proclamations, orders or decrees of any municipal, county, state or federal
government or other governmental or regulatory authority with jurisdiction over
the Project, or any portion thereof, whether currently in effect or adopted in
the future and whether or not in the contemplation of the parties hereto
(collectively, "Laws"). Such Laws shall include, without limitation, all Laws
relating to health and safety and disabled accessibility including, without
limitation, the Americans with Disabilities Act, 42 U.S.C. section 12101 et
seq., Hazardous Substances, and all present and future life safety, fire,
sprinkler, seismic retrofit, building code and municipal code requirements;
provided however, that Tenant's obligation to comply with Laws relating to
Hazardous Substances is subject to the terms and conditions of Paragraph 40
[Hazardous Substances Liability], and Tenant shall not be responsible for
compliance with clean-up provisions of any Laws with respect to Hazardous
Substances except to the extent of any release caused or permitted by the Tenant
Parties (as defined in Paragraph 12(b) [Tenant Indemnity]). Notwithstanding the
foregoing, Tenant shall not be required to make any structural alterations to
the Base Building in order to comply with Laws unless the requirement that such
alterations be made is triggered by any of the following (or if such requirement
results from the cumulative effect of any of the following when added to other
acts, omissions, negligence or events, to the extent such alterations are
required by any of the following): (i) the installation, use or operation of any
Alterations, or any of Tenant's trade fixtures or personal property; (ii) the
acts, omissions or negligence of Tenant, or any of its servants, employees,
contractors, agents or licensees; or (iii) the particular use or particular
occupancy or manner of use or occupancy of the Premises by Tenant, or any of its
servants, employees, contractors, agents or licensees. The
<PAGE> 13
parties acknowledge and agree that Tenant's obligation to comply with all Laws
as provided in this paragraph (subject to the limitations contained herein) is a
material part of the bargained-for consideration under this Lease. Tenant's
obligations under this Paragraph shall include, without limitation, the
responsibility of Tenant to make substantial or structural repairs and
alterations to the Premises (including the Base Building and any Alterations) to
the extent provided above, regardless of, among other factors, the relationship
of the cost of curative action to the Rent under this Lease, the length of the
then remaining Term hereof, the relative benefit of the repairs to Tenant or
Landlord, the degree to which the curative action may interfere with Tenant's
use or enjoyment of the Premises, and the likelihood that the parties
contemplated the particular Law involved. Tenant waives any rights now or
hereafter conferred upon it by any existing or future Law to terminate this
Lease, to receive any abatement, diminution, reduction or suspension of payment
of Rent, or to compel Landlord to make any repairs to comply with any such Laws,
on account of any occurrence or situation arising during the Term.
(b) INSURANCE REQUIREMENTS. Tenant shall not do or permit
anything to be done in or about the Project or bring or keep anything therein
which will cause a cancellation of any insurance on the Project or otherwise
violate any requirements, guidelines, conditions, rules or orders with respect
to such insurance. Tenant shall at its sole cost and expense promptly comply
with the requirements of the board of fire underwriters or other similar body
now or hereafter constituted relating to or affecting the condition, use or
occupancy of the Premises or Project (other than in situations where compliance
involves repair, maintenance or replacement of items that Landlord is expressly
required to repair, maintain or replace under this Lease).
(c) NO LIMITATION ON OBLIGATIONS. The provisions of this
Paragraph 7 shall in no way limit Tenant's maintenance, repair and replacement
obligations under Paragraph 9 [Repair and Maintenance], or Tenant's obligation
to pay Expenses under Paragraph 4(c) [Additional Charges for Expenses and
Taxes]. The judgment of any court of competent jurisdiction or the admission of
Tenant in an action against Tenant, whether Landlord is a party thereto or not,
that Tenant has so violated any such Law shall be conclusive of such violation
as between Landlord and Tenant.
8. ADDITIONAL ALTERATIONS.
(a) LANDLORD'S ALTERATIONS. Landlord shall not make or
suffer to be made any additional alterations, additions or improvements in, on
or to the Base Building or any part thereof without the prior written consent of
Tenant, except as may be required by Law or as expressly required or permitted
by this Lease.
(b) LANDLORD'S CONSENT TO TENANT'S ALTERATIONS. Tenant may
install a clean room, neutralizing facility, and related facilities, within the
area outlined on Exhibit H attached hereto (such improvements, the "Approved
Alterations"), without Landlord's prior consent, provided that upon the
expiration or sooner termination of the Term Tenant shall remove the Approved
Alterations and restore the Premises in accordance with Paragraph 9(e). Tenant
shall
<PAGE> 14
not make or suffer to be made any additional alterations, additions or
improvements ("Alterations") in, on or to the Premises or any part thereof,
without the prior written consent of Landlord. Failure of Landlord to give its
disapproval to any Alterations within ten (10) business days after receipt of
Tenant's written request for approval shall constitute approval by Landlord of
such Alterations so long as Tenant's request includes the following statement in
capitalized and boldfaced letters: BY FAILING TO RESPOND TO THIS REQUEST, YOU
WILL BE DEEMED TO HAVE APPROVED THE TENANT'S INSTALLATION OF THE ALTERATIONS
DESCRIBED IN THIS REQUEST. Any Alterations in, on or to the Premises, except for
Tenant's movable furniture and equipment, trade fixtures and Alterations which
may be removed without damage to the Premises, shall become the property of
Landlord upon their completion without compensation to Tenant. Landlord shall
not unreasonably withhold its consent to Alterations that (i) do not materially
affect the structure of the Building, the Building Systems (as defined in
Paragraph 9(b) below) or the Building's security or other systems, (ii) are not
visible from the exterior of the Building, (iii) are consistent with Tenant's
permitted use hereunder, (iv) comply with the CC&Rs and any Mortgage, and (v) do
not adversely affect the value or marketability of Landlord's reversionary
interest upon termination or expiration of this Lease.
(c) PERMITTED ALTERATIONS. Notwithstanding Paragraph 8(b),
Tenant may make Alterations to the Premises without Landlord's prior consent so
long as (x) such Alterations comply with items (i) through (v) in Paragraph 8(b)
[Landlord's Consent to Tenant's Alterations], and (y) the cost of each such
Alteration (or group of Alterations, if occurring substantially at the same time
and as part of a single project) does not exceed Fifty Thousand Dollars
($50,000) (with no more than thirty percent (30%) of such cost being for
demolition), and the cost of all such Alterations in any twelve (12) month
period during the Term in the aggregate does not exceed One Hundred Thousand
Dollars ($100,000) (any such Alterations being defined herein as "Permitted
Alterations").
(d) REQUIREMENTS FOR TENANT ALTERATIONS. Tenant shall make
any Alterations consented to or permitted under this Paragraph 8 at Tenant's
sole cost and expense, in compliance with the following requirements: (i)
Alterations (other than the Approved Alternations and Permitted Alterations)
shall be made in accordance with plans and specifications reasonably approved by
Landlord, and all Alterations shall be made in accordance with the requirements
of Paragraph 10 [Liens], (ii) any contractor or person selected by Tenant to
make Alterations (other than the Approved Alterations and Permitted Alterations)
must first be approved in writing by Landlord, in its reasonable discretion,
(iii) Alterations shall be made in compliance with all applicable Laws; and (iv)
Alterations shall not alter or interfere with the ceiling of the Building (all
partitions being below the ceiling grid, except in areas designated by Landlord
on plans and specifications), unless approved by Landlord in its sole
discretion; provided, however, that Tenant may make Alterations that do not
comply with the standards set forth in item (iv) above (subject to any other
applicable Landlord consent requirement) if Tenant agrees to reconfigure the
affected floor to such standard upon expiration or earlier termination of this
Lease. By making Alterations which do not comply with the standards set forth in
item (iv)
<PAGE> 15
above, Tenant shall be deemed to have agreed to reconfigure the Premises upon
expiration or termination of the Lease as provided above unless Landlord
specifically agrees otherwise in writing. Upon completion of any Alterations,
Tenant shall furnish Landlord with a complete set of final as-built plans and
specifications, at Tenant's cost and expense. With respect to items (i) and (ii)
above, failure of Landlord to give its disapproval to any plans and
specifications or general contractor within ten (10) business days after receipt
of Tenant's written request for approval shall constitute approval by Landlord
of such matters so long as Tenant's request includes the following statement in
capitalized and boldfaced letters: BY FAILING TO RESPOND TO THIS REQUEST, YOU
WILL BE DEEMED TO HAVE APPROVED THE PLANS AND SPECIFICATIONS AND/OR GENERAL
CONTRACTOR FOR TENANT'S ALTERATIONS DESCRIBED IN THIS REQUEST.
(e) REMOVAL OF ALTERATIONS AND RESTORATION. Upon the
expiration or sooner termination of the Term, Tenant shall upon demand by
Landlord, at Landlord's election and at Tenant's sole cost and expense,
forthwith and with all due diligence remove any Alterations made by or for the
account of Tenant that are designated by Landlord to be removed and restore the
Premises as required by Paragraph 26(b) [Delivery and Restoration of the
Premises]. Upon the written request of Tenant prior to installation of any
Alterations, Landlord shall notify Tenant of its election to require that such
Alterations be removed upon the expiration or sooner termination of this Lease,
so long as such written request clearly requests Landlord's election regarding
the removal of such Alterations. Landlord's failure to specifically notify
Tenant of Landlord's election shall be deemed Landlord's election to require
removal of the Alterations upon expiration of the Term, notwithstanding any
deemed approval by Landlord of the Alterations pursuant to this paragraph.
(f) REIMBURSEMENT OF LANDLORD'S REVIEW COSTS. Tenant shall
reimburse Landlord upon demand for any reasonable out-of-pocket expenses
incurred by Landlord in connection with the review of any Alterations made by
Tenant, including reasonable fees charged by Landlord's contractors or
consultants to review plans and specifications prepared by Tenant.
9. REPAIR AND MAINTENANCE.
(a) LANDLORD'S OBLIGATIONS. Landlord shall maintain, repair
and replace, at its sole cost and expense, the following, except as provided in
Paragraph 9(c) [Tenant's Obligations for Structural Maintenance]: (i) the
structural portions of the exterior, roof structure and structural portions of
the Building (including load bearing walls and foundations); and (ii) plumbing
and electricity (located on the Project and owned by Landlord) to the point of
entry into the Building. Landlord shall maintain, repair and replace, such costs
to be borne as specified in Paragraph 4(c)1(C), the parking areas, courtyards,
sidewalks, entry ways, lawns, landscaping and other similar facilities of the
Project. Landlord's obligations under Paragraph 9(a)(i) and (ii) with respect to
any particular repair, replacement or maintenance requirement, and its
obligations under Paragraph 9(a)(iii) with respect to any specific repair, shall
not commence until Tenant notifies Landlord in writing of any circumstances
which Tenant believes may trigger Landlord's
<PAGE> 16
obligations.
(b) TENANT'S OBLIGATIONS. Tenant shall maintain, repair and
replace, at its sole cost and expense, all portions of the Premises included in
the Project which are not Landlord's obligations under Section 9(a) [Landlord's
Obligations], including, without limitation, (i) the building systems for
electrical, mechanical, HVAC and plumbing and all controls appurtenant thereto
(collectively, "Building Systems"); and (ii) the interior portion of the
Building and any Alterations. At Tenant's election, Tenant may, by written
notice to Landlord delivered at any time after the tenth (10th) anniversary of
the Rent Commencement Date, cause Landlord to assume Tenant's maintenance
obligations with respect to the Building Systems under clause (i) above, which
assumption by Landlord shall be effective thirty (30) days after Landlord's
receipt of such notice. If Landlord assumes such obligations, all costs incurred
by Landlord in connection therewith shall be deemed Additional Charges payable
by Tenant in accordance with Paragraph 4(c) [Additional Charges for Expenses and
Taxes]. The Building shall at all times be maintained by Tenant in the condition
of a first-class office building. Tenant's obligations under this Paragraph 9
include, without limitation, the replacement, at Tenant's sole cost and expense,
of any portions of the Building which are not Landlord's express responsibility
under Paragraph 9(a) [Landlord's Obligations], if it would be commercially
prudent to replace, rather than repair, such portions of the Building,
regardless of whether such replacement would be considered a capital
expenditure; provided, however, that if Landlord has assumed Tenant's
maintenance obligations for Building Systems pursuant to this Paragraph 9(b),
any replacement of any portion of the Building Systems which would be considered
a capital expenditure and which is made at least one (1) year after Landlord
assumes such obligations shall be amortized over the useful life of the capital
item in question in accordance with Paragraph 4(c)(1)(C) [Expenses]. Tenant
hereby waives and releases its right to make repairs at Landlord's expense under
Sections 1941 and 1942 of the California Civil Code or under any similar law,
statute or ordinance now or hereafter in effect. In addition, Tenant hereby
waives and releases its right to terminate this Lease under Section 1932(1) of
the California Civil Code or under any similar law, statute or ordinance now or
hereafter in effect.
(c) TENANT'S OBLIGATIONS FOR STRUCTURAL MAINTENANCE.
Notwithstanding the provisions of Paragraph 9(a) [Landlord's Obligations] and
without limiting Tenant's other obligations hereunder, Tenant shall bear the
full cost of structural repairs or maintenance to preserve the Building in good
working order and condition, to the extent such structural repair and/or
maintenance is required due to the following (except to the extent any claims
arising from any of the following are reimbursed by insurance carried by
Landlord, are covered by the waiver of subrogation in Paragraph 13 [Waiver of
Subrogation] or are otherwise provided for in Paragraph 22 [Damage and
Destruction]): (i) the installation, use or operation of any Alterations or
other modification to the Premises made by Tenant; (ii) the installation, use or
operation of Tenant's property or fixtures; (iii) the moving of Tenant's
property or fixtures in or out of the Building or in and about the Project; or
(iv) the acts, omissions or negligence of Tenant, or any of its servants,
employees, contractors, agents or licensees, or the particular use or particular
occupancy or manner of use or occupancy of the Premises or Project by Tenant or
any such
<PAGE> 17
person. In addition, if at any time during the Term Hazardous Substances are
released, discharged, or disposed of on any portion of the Premises, or on any
portion of the Project, by any of the Tenant Parties, in violation of Tenant's
obligations hereunder, repairs of the plumbing to the point of entry into the
Building shall be excluded from Landlord's obligations under Section 9(a).
Tenant shall not cause or permit any disposal or release of Hazardous Substances
into the plumbing systems at the Project. Any Alterations required for Tenant to
comply with this Paragraph 9(c) shall be made in accordance with the provisions
of Paragraph 8(d) [Requirements for Tenant Alterations].
(d) MAINTENANCE SERVICE CONTRACTS. In connection with
Tenant's maintenance and repair obligations contained in this Paragraph 9,
Tenant shall, at its own cost and expense, enter into regularly scheduled
preventive maintenance service contracts with maintenance contractors approved
by Landlord, in its reasonable discretion, for servicing all hot and cold water,
heating, air conditioning and electrical systems, elevators and equipment within
the Building, and shall provide copies of such contracts to Landlord. At
Landlord's option at any time in which Tenant is in default hereunder,
maintenance service contracts shall be prepaid on an annual basis. Tenant will
use commercially reasonable efforts to ensure that each maintenance service
contract shall specifically name Landlord as a third party beneficiary, with the
right to receive copies of all notices delivered under such contract and the
ability to exercise Tenant's rights thereunder upon Tenant's default under this
Section 9 or upon Landlord's assumption of Tenant's maintenance obligations with
respect to Building Systems pursuant to Paragraph 9(e) [Cure Rights], at
Landlord's election.
(e) CURE RIGHTS. Tenant shall have a period of thirty (30)
days from the date of written notice from Landlord within which to cure any
failure to fulfill any of its obligations under this Paragraph 9; provided,
however, that if such failure is curable but cannot be cured within such thirty
(30) day period, Tenant shall have such additional time as may be reasonably
required to cure (not to exceed sixty (60) additional days, subject to delay by
casualty, natural disaster, acts of the Government, labor strikes, or other
similar causes outside the reasonable control of Landlord or Tenant, as
applicable ("Force Majeure Events")) so long as Tenant commences such cure
within the initial thirty (30) day period and diligently prosecutes such cure to
completion. If Tenant fails to cure such failure as provided above, or in the
event of an emergency which materially adversely affects the Project, Landlord
may, at Landlord's election, cure such failure, at Tenant's cost and expense,
and the expenses thereof incurred by Landlord shall be reimbursed as Additional
Charges within thirty (30) days after submission of a bill or statement
therefor. In addition, Landlord may elect, by delivery of written notice to
Tenant, to assume Tenant's maintenance obligations with respect to the Building
Systems under Paragraph 9(b)(i) [Tenant's Obligations] if Tenant does not cure
any breach of such obligations. If Landlord assumes such obligations, all costs
incurred by Landlord in connection therewith shall be deemed Additional Charges
payable by Tenant in accordance with Paragraph 4(c) [Additional Charges for
Expenses and Taxes]. The remedies described in this paragraph are cumulative and
in addition to any other remedies Landlord may have at law or under this Lease.
<PAGE> 18
(f) NO LIABILITY OF LANDLORD. There shall be no abatement of
Rent with respect to, and Landlord shall not be liable for any injury to or
interference with Tenant's business arising from, any repairs, maintenance,
alteration or improvement in or to any portion of the Project by any party,
except as expressly and specifically provided in Paragraph 22; provided,
however, that (i) Base Rent and Additional Charges may be abated during the
period of any interference to Tenant's business which exceeds ninety (90) days,
in proportion to the portion of the Premises Tenant is unable to use, only if
such interruption results from an insured casualty such that proceeds are
payable to Landlord under the rental interruption insurance carried by Landlord
pursuant to Paragraph 12(e) [Landlord's Insurance Obligations] and only to the
extent of such proceeds actually received by Landlord, and (ii) subject to the
limitations on Tenant's recourse against Landlord contained in Paragraph 21(d)
[Tenant's Remedies], Landlord shall be liable for any actual damage to Tenant to
the extent caused by Landlord's gross negligence or willful misconduct in
connection with any such repairs, maintenance, alteration or improvement.
10. LIENS. Tenant shall keep the Premises and Project free from any
liens arising out of any work performed, material furnished or obligations
incurred by Tenant. If Tenant does not, within thirty (30) days following the
imposition of any such lien, cause it to be released of record by payment or
posting of a proper bond (or such shorter period of time as may be required to
avoid a default under any Mortgage), Landlord shall have, in addition to all
other remedies provided herein and by law, the right, but not the obligation, to
cause it to be released by such means as Landlord deems proper, including
payment of the claim giving rise to such lien. All sums paid and expenses
incurred by Landlord in connection therewith shall be considered Additional
Charges and shall be payable to Landlord by Tenant on demand, with interest at
the Default Rate. Landlord shall have the right at all times to post and keep
posted on the Premises and Project any notices permitted or required by law or
by any Mortgagee, for the protection of Landlord, any Mortgagee, the Premises,
the Building, the Land, the Project, and any other party having an interest
therein, from mechanics' and materialmen's liens. Tenant shall give Landlord at
least five (5) business days' prior notice of commencement of any construction
on the Premises. This Paragraph 10 shall survive any termination of this Lease.
11. ASSIGNMENT AND SUBLETTING.
(a) RESTRICTION ON ASSIGNMENT AND SUBLEASING. Tenant shall
not directly or indirectly, voluntarily or by operation of law, sell, assign,
encumber, pledge or otherwise transfer or hypothecate all or any part of the
Premises or Tenant's leasehold estate hereunder (collectively, "Assignment"), or
permit the Premises to be occupied by anyone other than Tenant or sublet the
Premises or any portion thereof (collectively, "Sublease"), without Landlord's
prior written consent in each instance, which consent shall not be unreasonably
withheld or delayed by Landlord; provided, however, that Landlord may withhold
its consent, in its sole discretion, to any assignment of less than the entire
Lease, or any sublease which would result in more than two (2) occupants
(including Tenant and any subtenants or other occupants) on any floor in the
Building. Without otherwise limiting the criteria upon which Landlord may
withhold its consent
<PAGE> 19
to any proposed Sublease or Assignment, if Landlord withholds its consent where
either (i) the creditworthiness of the proposed Sublessee or Assignee is not
reasonably acceptable to Landlord or any Mortgagee, or (ii) the proposed
Sublessee's or Assignee's use of the Premises is not in compliance with the
allowed Tenant's Use of the Premises as described in the Basic Lease Information
or, in Landlord's judgment, would require or result in presence of Hazardous
Substances on the Premises and/or Project in excess of those described in
Paragraph 40(d) [Hazardous Substance Liability; Tenant's Covenants], such
withholding of consent shall be presumptively reasonable. If Landlord consents
to the Sublease or Assignment, Tenant may thereafter enter into a valid Sublease
or Assignment upon the terms and conditions set forth in this Paragraph 11.
(b) REQUIRED NOTICE. If Tenant desires at any time to enter
into an Assignment of this Lease or a Sublease of the Premises or any portion
thereof, it shall first give written notice to Landlord containing (i) the name
of the proposed assignee, subtenant or occupant; (ii) a description of the
proposed assignee's, subtenant's, or occupant's business to be carried on in the
Premises; (iii) the terms and provisions of the proposed Assignment or Sublease;
and (iv) such financial information as Landlord may reasonably request
concerning the proposed assignee, subtenant or occupant.
(c) LANDLORD'S RESPONSE TO PROPOSED ASSIGNMENT. Within ten
(10) business days after Landlord's receipt of the notice specified in Paragraph
11(b) [Required Notice] with respect to an Assignment of Tenant's interest under
this Lease, Landlord may by written notice to Tenant elect to (i) terminate this
Lease, (ii) consent to the Assignment, or (iii) disapprove the Assignment.
Notwithstanding anything in this Paragraph 11(c) to the contrary, Landlord shall
not have the right to terminate this Lease in connection with any "Permitted
Transfer" (as defined below).
(d) LANDLORD'S RESPONSE TO PROPOSED SUBLEASE. Within ten
(10) business days after Landlord's receipt of the notice specified in Paragraph
11(b) [Required Notice] with respect to a Sublease, Landlord may by written
notice to Tenant elect to (i) consent to the Sublease; or (ii) disapprove the
Sublease. Notwithstanding anything in this Paragraph 11(d) to the contrary,
Landlord shall not have the rights set forth in (i) and (ii) of this Paragraph
11(d) in connection with any Sublease to a "Strategic Partner" (as defined
below) in compliance with Paragraph 11(h) [Strategic Partners].
(e) BONUS RENT. If Landlord consents to any Assignment or
Sublease pursuant to Paragraph 11(c) [Landlord's Response To Proposed
Assignment] or Paragraph 11(d) [Landlord's Response To Proposed Sublease],
Tenant may within one hundred twenty (120) days after Landlord's consent, but
not later than the expiration of said one hundred twenty (120) days, enter into
such Assignment or Sublease of the Premises or portion thereof upon the terms
and conditions set forth in the notice furnished by Tenant to Landlord pursuant
to Paragraph 11(b) [Required Notice]. However, fifty percent (50%) of any rent
or other consideration realized by Tenant under any such Assignment or Sublease
in excess of the Base Rent and Additional
<PAGE> 20
Charges payable hereunder (or the amount thereof proportionate to the portion of
the Premises subject to such Sublease or Assignment) shall be paid to Landlord,
after deducting therefrom the unamortized value of Alterations installed by
Tenant which are located on the portion of the Premises subject to such Sublease
or Assignment as of the effective date of such Assignment or Sublease which are
attributable to and allocated in equal installments over the term of the
Sublease or Assignment, determined by assuming a useful life equal to fifteen
(15) years and amortization on a straight line basis (without interest), and
after deducting therefrom any customary brokers' commissions that Tenant has
incurred in connection with such Assignment or Sublease amortized on a straight
line basis (without interest) over the term of the Sublease or Assignment. In
such event, Tenant shall deliver evidence of the cost of the Alterations, which
shall be acceptable to Landlord in its reasonable discretion, for Landlord's use
as the basis for calculating the value of the Alterations for purposes of this
Paragraph 11(e). Failure by Landlord to either consent or refuse such consent to
a proposed Assignment or Sublease within the fifteen (15) day time period
specified above shall be deemed to be Landlord's consent thereto.
(f) EFFECT OF TRANSFER. Landlord's consent to any Assignment
or Sublease shall not relieve Tenant of any obligation to be performed by Tenant
under this Lease, whether arising before or after the Assignment or Sublease.
Landlord's consent to any Assignment or Sublease shall not relieve Tenant from
the obligation to obtain Landlord's express written consent to any other
Assignment or Sublease. Any Assignment or Sublease that is not in compliance
with this Paragraph 11 shall be void and, at the option of Landlord, shall
constitute a material default by Tenant under this Lease. The acceptance of Base
Rent or Additional Charges by Landlord from a proposed assignee or sublessee
shall not constitute the consent to such Assignment or Sublease by Landlord.
(g) PERMITTED TRANSFER. The following shall be deemed a
voluntary Assignment of Tenant's interest in this Lease: (i) any dissolution,
merger, consolidation, or other reorganization of Tenant; and (ii) if the
capital stock of Tenant is not publicly traded, the sale or transfer of stock to
one person or entity possessing more than fifty percent (50%) of the total
combined voting power of all classes of Tenant's stock issued, outstanding and
entitled to vote for the election of directors. Notwithstanding anything to the
contrary contained in this Paragraph 11, Tenant may enter into any of the
following transfers (a "Permitted Transfer") without Landlord's prior written
consent: (1) Tenant may assign its interest in the Lease to a corporation which
results from a merger, consolidation or other reorganization, so long as
immediately following such transaction the surviving corporation has a net
worth, and cash, cash equivalents or third party marketable securities with
liquidity of 90 to 360 days (collectively, "Liquid Assets"), equal to or greater
than the net worth and Liquid Assets of Tenant as of both the execution of this
Lease and the Occupancy Date; (2) Tenant may assign this Lease to a corporation
which purchases or otherwise acquires all or substantially all of the assets of
Tenant, so long as immediately following such transaction such acquiring
corporation has a net worth and Liquid Assets that are equal to or greater than
the net worth and Liquid Assets of Tenant as of both the date of execution of
this Lease and the Occupancy Date; and (3) Tenant may sublet a portion of the
Premises to Vivus, Inc.
<PAGE> 21
(h) STRATEGIC PARTNERS. Tenant may Sublease portions of the
Premises to Tenant's Strategic Partners (as defined below) without Landlord's
prior consent, subject to the following conditions: (1) after any such Sublease,
Tenant shall continue to directly occupy at least eighty percent (80%) of the
Rentable Area in the Premises; and (2) Tenant shall provide Landlord with
written notice at least thirty (30) days' prior to any such Sublease including
the name of the Strategic Partner, the location of the subleased space, the name
and address of the Strategic Partner's agent for service of process and delivery
of notices under this Lease, and a certification by an officer of Tenant that
the subtenant is a "Strategic Partner" as defined in this Paragraph 11(h). Any
Strategic Partner subleasing a portion of the Premises shall maintain an agent
for service of process and notice, and notify Landlord of any changes in such
agent, at all times during the term of such sublease. The term "Strategic
Partner" shall refer to any entity (i) in which Tenant holds an ownership
interest of at least ten percent (10%), (ii) that is engaged in a business which
Tenant believes to be of strategic importance to its own business, and (iii)
that Tenant determines, in its reasonable business judgment, would benefit
Tenant's business by conducting its own business within Tenant's Premises.
(i) ASSUMPTION BY TRANSFEREE. Each assignee, sublessee or
other transferee, other than Landlord, shall assume all obligations of Tenant
arising after the date of the transfer under this Lease, as provided in this
Paragraph 11(i), and shall be and remain liable jointly and severally with
Tenant for the payment of Base Rent and Additional Charges, and for the
performance of all the terms, covenants, conditions and agreements herein
contained on Tenant's part to be performed for the Term; provided, however, that
the assignee, sublessee, mortgagee, pledgee or other transferee shall be liable
to Landlord for rent only in the amount set forth in the Assignment or Sublease
and shall only be required to perform those obligations under the Lease to the
extent that they relate to the portion of the Premises subleased or interest in
the Lease assigned. Any Sublease or Assignment shall expressly provide that if
this Lease terminates, the subtenant or assignee will attorn to and become the
tenant of the Landlord at the option of Landlord if Landlord elects to recognize
such assignment or sublease upon such termination. No Assignment shall be
binding on Landlord unless the assignee or Tenant delivers to Landlord a
counterpart of the Assignment and an instrument that contains a covenant of
assumption by the assignee satisfactory in substance and form to Landlord,
consistent with the requirements of this Paragraph 11(i), but the failure or
refusal of the assignee to execute such instrument of assumption shall not
release or discharge the assignee from its liability as set forth above.
(j) EFFECT ON EXTENSION OPTION. Notwithstanding any other
provision of this Lease, Tenant may not enter into any Sublease (including,
without limitation, a Sublease to a Strategic Partner or an affiliate) with a
term which exceeds the Expiration Date unless (i) the conditions to Tenant's
right to extend the Term contained in Paragraph 43 [Option to Renew] have been
met at the commencement of such Sublease, and (ii) Tenant delivers its Exercise
Notice pursuant to Paragraph 43 [Option to Renew] at or prior to the
commencement of the Sublease.
<PAGE> 22
(k) ASSIGNMENT TO AFFILIATES. Tenant shall have the right,
without Landlord's consent but with written notice to Landlord at least thirty
(30) days prior thereto, to enter into an Assignment of Tenant's interest in the
Lease or a Sublease of all or any portion of the Premises to an Affiliate (as
defined below) of Tenant, and any such Assignment or Sublease shall be a
"Permitted Transfer", provided that (i) the Affiliate delivers to the Landlord
concurrent with such Assignment a written notice of the Assignment and an
assumption agreement whereby the affiliate assumes and agrees to perform,
observe and abide by the terms, conditions, obligations, and provisions of this
Lease, (ii) the entity remains an Affiliate throughout the term of this Lease,
and (iii) on the effective date of the Sublease or Assignment, such Affiliate
has a net worth and Liquid Assets that are equal to or greater than the net
worth and Liquid Assets of Tenant as of both the date of execution of this Lease
and the Occupancy Date. No Sublease or Assignment by Tenant made pursuant to
this Paragraph shall relieve Tenant of Tenant's obligations under this Lease. As
used in this paragraph, the term "Affiliate" shall mean and collectively refer
to a corporation or other entity which controls, is controlled by or is under
common control with Tenant, by means of an ownership of either (aa) more than
fifty percent (50%) of the outstanding voting shares of stock or (bb) stock or
partnership interests which provide the right to control the operations,
transactions and activities of the applicable entity.
12. INSURANCE AND INDEMNIFICATION.
(a) RELEASE OF LANDLORD. Landlord shall not be liable to
Tenant, and Tenant hereby waives all claims against Landlord Parties for any
injury or damage to any person or property in or about the Premises or Project
by or from any cause whatsoever (other than the gross negligence or willful
misconduct of Landlord or its agents, servants, contractors or employees
(collectively, including Landlord, "Landlord Parties")), and without limiting
the generality of the foregoing, whether caused by water leakage of any
character from the roof, walls, or other portion of the Building, or caused by
gas, fire, oil, electricity, or any cause whatsoever, in, on, or about the
Project or any part thereof (other than that caused by the gross negligence or
willful misconduct of Landlord Parties). Tenant acknowledges that any casualty
insurance carried by Landlord will not cover, and Landlord shall not be
responsible for, loss of income to Tenant or damage to the Alterations in the
Premises installed by Tenant or Tenant's personal property located within the
Premises. Tenant shall be required to maintain the insurance described in
Paragraph 12(c) [Tenant's Insurance Requirements] below during the Term. In the
event of a discrepancy between the terms of this paragraph and the terms of
Paragraph 40 [Hazardous Substance Liability], the later shall control. Nothing
in this Paragraph is intended to nor shall it be deemed to override the
provisions of Paragraph 13 [Waiver of Subrogation].
(b) TENANT INDEMNITY. Except to the extent caused by the
gross negligence or willful misconduct of the Landlord Parties, Tenant shall
indemnify and hold the Landlord Parties harmless from and defend the Landlord
Parties against any and all claims or liability for any injury or damage to any
person or property whatsoever occurring in or on the Premises. Tenant further
agrees to indemnify and hold the Landlord Parties harmless from, and defend the
Landlord Parties against, any and all claims, losses, or liabilities (including
damage to Landlord's
<PAGE> 23
property) arising from (x) any breach of this Lease by Tenant and/or (y) the
conduct of any work or business of Tenant, its agents, servants, employees, or
invitees (collectively, including Tenant, "Tenant Parties"), in or about the
Project.
(c) TENANT'S INSURANCE REQUIREMENTS. Tenant shall procure at
its cost and expense and keep in effect during the Term the following insurance:
(i) A policy of Commercial General Liability
insurance written on an occurrence form insuring Landlord, any Mortgagee and
Tenant against any liability arising out of the ownership, use, occupancy,
maintenance, repair or improvement of the Premises and as appurtenant thereto.
Such insurance shall provide $3,000,000 combined single limit for bodily injury
and property damage. The limits of said insurance shall not, however, limit the
liability of the Tenant hereunder, and Tenant is responsible for ensuring that
the amount of liability insurance carried by Tenant is sufficient for Tenant's
purposes. Tenant may carry said insurance under a blanket policy so long as "per
location" liability aggregate limit is maintained, satisfactory to Landlord. If
Tenant shall fail to procure and maintain said insurance, Landlord may, but
shall not be required to, procure and maintain same, but at the expense of
Tenant. Tenant shall deliver to Landlord prior to occupancy of the Premises
copies of policies of liability insurance required herein and certificates
evidencing the existence and amounts of such insurance which name Landlord and
any Mortgagee as additional insured with evidence satisfactory to Landlord of
payment of premiums. No policy shall be cancelable or subject to reduction of
coverage except after thirty (30) days' prior written notice to Landlord. Tenant
acknowledges and agrees that insurance coverage carried by Landlord will not
cover Tenant's property within the Premises and that Tenant shall be
responsible, at Tenant's sole cost and expense, for providing insurance coverage
for Tenant's movable equipment, furnishing, trade fixtures and other personal
property in or upon the Premises and for any alterations, additions or
improvements to or of the Premises or any part thereof made by Tenant, in the
event of damage or loss thereto from any cause whatsoever.
(ii) Business interruption and extra expense
insurance, insuring Tenant against losses arising from the interruption of
Tenant's business, and for lost profits, and charges and expenses which continue
but would have been earned if the business had gone on without interruption,
insuring against such perils, in such form as is reasonably satisfactory to
Landlord, in an amount up to One Million Dollars ($1,000,000). Such insurance
should be on an agreed amount basis with no coinsurance payable.
(iii) Tenant shall maintain a policy or policies of
fire and property damage insurance in "special" (also known as "all risk") form
with a sprinkler leakage endorsement insuring the personal property, inventory,
trade fixtures, and if applicable boiler and machinery, within the Premises for
the full replacement value thereof. The proceeds from any of such policies shall
be used for the repair or replacement of such items so insured.
<PAGE> 24
(iv) Tenant shall also maintain a policy or policies
of workers' compensation insurance and any other employee benefit insurance
sufficient to comply with all Laws.
Insurance required under this Paragraph 12(c) shall be in companies rated "A" X
or better in "Best's Insurance Guide." Tenant shall deliver policies of such
insurance or certificates thereof to Landlord on or before the Occupancy Date,
and thereafter at least thirty (30) days before the expiration dates of expiring
policies; and, in the event Tenant shall fail to procure such insurance, or to
deliver such policies or certificates, Landlord may, at its option, procure same
for the account of Tenant, and the cost thereof shall be paid to Landlord as
Additional Charges within fifteen (15) days after delivery to Tenant of bills
therefor.
(d) SURVIVAL. The provisions of this Paragraph 12 shall
survive the expiration or termination of this Lease with respect to any claims
or liability arising out of events occurring prior to such expiration or
termination.
(e) LANDLORD'S INSURANCE OBLIGATIONS. Landlord shall
purchase and keep in force a policy or policies of liability, fire and property
damage insurance including provision for the payment of deductibles and
pre-payment for coverage, up to one year, covering loss or damage to the
Premises and Project in the amount of the full replacement value thereof,
insuring direct physical loss or damage included within the "special form"
classification of coverage and flood and earthquake insurance, if available,
plus a policy of rental income insurance in the amount of twelve (12) months
Base Rent and Additional Charges (or such longer time as any Mortgagee may
require). Tenant shall pay to Landlord the cost of such policy or policies of
insurance pursuant to Paragraph 4(c) [Additional Charges for Expenses and
Taxes]. If such insurance cost is increased due to Tenant's use of the Premises,
Tenant agrees to pay to Landlord the full cost of such increase. Tenant shall
have no interest in nor any right to the proceeds of any insurance procured by
Landlord for the Premises or the Project. Notwithstanding the foregoing
obligations of Landlord to carry insurance, Landlord may modify the foregoing
coverages if and to the extent it is commercially reasonable to do so; provided,
however, that such coverages shall not be voluntarily reduced by Landlord
without Tenant's prior consent.
13. WAIVER OF SUBROGATION. Notwithstanding anything to the contrary
in this Lease, to the extent that this waiver does not invalidate or impair
their respective insurance policies, the parties hereto release each other and
their respective agents, employees, successors, contractors, subcontractors,
assignees and subtenants from all liability for injury to any person or damage
to any property that is caused by or results from a risk (i) which is actually
insured against, to the extent of receipt of payment under such policy (unless
the failure to receive payment under any such policy results from a failure of
the insured party to comply with or observe the terms and conditions of the
insurance policy covering such liability, in which event, such release shall not
be so limited), (ii) which is required to be insured against under this Lease,
or (iii) which would normally be covered by the standard ISO "special" form of
casualty insurance, without regard to the negligence or willful misconduct of
the entity so released. Landlord and Tenant shall each obtain, and shall cause
their respective contractors and
<PAGE> 25
subcontractors to obtain, from their respective insurers under all policies of
fire, theft and other property insurance maintained by either of them at any
time during the Term insuring or covering the Project or any portion thereof of
its contents therein, a waiver of all rights of subrogation which the insurer of
one party might otherwise, if at all, have against the other party, and Landlord
and Tenant shall each indemnify the other against any loss or expense, including
reasonable attorneys' fees, resulting from the failure to obtain such waiver.
14. SERVICES AND UTILITIES.
(a) LANDLORD'S RESPONSIBILITY. Landlord shall provide the
maintenance and repairs described in Paragraph 9(a) [Maintenance and Repairs;
Landlord's Obligations], except for damage caused by the acts or omissions of
the Tenant Parties, which damage shall be repaired by Landlord at Tenant's
expense.
(b) TENANT'S RESPONSIBILITY. Subject to the provisions
elsewhere herein contained and to the Rules and Regulations, Tenant shall be
responsible for arranging for, and direct payment of any and all cost of,
garbage pickup, recycling, janitorial, security, landscape maintenance within
the Premises, transportation management programs (including any commuter shuttle
program required under the City of Mountain View Transit Zone), water,
electricity, gas, telephone, cable and digital communications equipment, and any
and all other utilities and services, and Tenant shall provide the maintenance,
repair and replacement of Building Systems in connection with such utilities and
services as described in Section 9(b) [Repair and Maintenance; Tenant's
Obligations]. Landlord shall cooperate with Tenant's efforts to arrange all such
services. If Landlord assumes Tenant's maintenance obligations with respect to
the Building Systems pursuant to Paragraph 9(e) [Cure Rights], Tenant shall
cooperate fully with Landlord and abide by all the reasonable regulations and
requirements that Landlord may prescribe for the proper functioning and
protection of the Building Systems.
(c) NO EXCESSIVE LOAD. Tenant will not without the prior
written consent of Landlord, which consent shall not be unreasonably withheld or
delayed, use any apparatus or device in the Premises which, when used, puts an
excessive load on any Building or its structure or systems.
(d) NO LIABILITY OF LANDLORD. Landlord shall not be in
default hereunder or be liable for any damages directly or indirectly resulting
from, nor shall Rent be abated by reason of, (i) the installation, use or
interruption of use of any equipment in connection with the foregoing utilities
and services; (ii) failure to furnish or delay in furnishing any services to be
provided by Landlord when such failure or delay is caused by Force Majeure
Events, or by the making of repairs or improvements to the Project or any
portion thereof which are the responsibility of Landlord under this Lease; or
(iii) the limitation, curtailment, rationing or restriction on use of water or
electricity, gas or any other form of energy or any other service or utility
whatsoever serving the Project; provided, however, that (aa) Base Rent and
Additional Charges may be abated during the period of any total interruption of
utilities or services to the
<PAGE> 26
Premises which exceeds thirty (30) days only if such interruption results from
an insured casualty such that proceeds are payable to Landlord under the rental
interruption insurance carried by Landlord pursuant to Paragraph 12(e)
[Landlord's Insurance Obligations] and only to the extent of such proceeds
actually received by Landlord, and (bb) subject to the limitations on Tenant's
recourse against Landlord contained in Paragraph 21(d) [Tenant's Remedies],
Landlord shall be liable for any actual damage to Tenant's property to the
extent caused by Landlord's gross negligence or willful misconduct in connection
with the failure to furnish or delay in furnishing any services to be provided
by Landlord. Furthermore, Landlord shall be entitled to cooperate voluntarily in
a reasonable manner with the efforts of national, state or local governmental
agencies or utilities suppliers in reducing consumption of energy or other
resources, so long as Tenant's use of the Premises is not unreasonably impaired
thereby.
15. TENANT'S CERTIFICATES. Tenant, at any time and from time to
time, within ten (10) days after written request from Landlord, will execute,
acknowledge and deliver to Landlord and, at Landlord's request, to any
prospective purchaser, ground or underlying lessor or Mortgagee of any part of
the Project or any other party acquiring an interest in Landlord, a certificate
of Tenant substantially in the form attached as Exhibit "C", or in such other
commercially reasonable form as may be requested by any Mortgagee, prospective
purchaser or lessor. The certificate may also contain any other information
reasonably required by any such persons. It is intended that any certificate of
Tenant delivered pursuant to this Paragraph 15 may be relied upon by Landlord
and any prospective purchaser, ground or underlying lessor or Mortgagee of any
part of the Project or such other party. If requested by Tenant, Landlord shall
provide Tenant with a similar certificate.
16. HOLDING OVER. If Tenant (directly or through any
successor-in-interest of Tenant) remains in possession of all or any portion of
the Premises after the expiration or termination of this Lease without the
consent of Landlord, Tenant's continued possession shall be on the basis of a
tenancy at the sufferance of Landlord. In such event, Tenant shall continue to
comply with or perform all the terms and obligations of Tenant under this Lease,
except that the Monthly Base Rent during Tenant's holding over shall be the
greater of the then-fair market rent for the Premises (as reasonably determined
by Landlord) or one hundred twenty-five percent (125%) of the Monthly Base Rent
payable in the last full month prior to the termination hereof (and shall be
increased in accordance with Paragraph 4(b) [Adjustments in Base Rent]). In
addition to Rent, Tenant shall pay Landlord for all damages proximately caused
by reason of the Tenant's retention of possession. Landlord's acceptance of Rent
after such termination shall not constitute a renewal of this Lease, and nothing
contained in this provision shall be deemed to waive Landlord's right of
re-entry or any other right hereunder or at law. Tenant acknowledges that, in
Landlord's marketing and re-leasing efforts for the Premises, Landlord is
relying on Tenant's vacation of the Premises on the Expiration Date.
Accordingly, Tenant shall indemnify, defend and hold Landlord harmless from and
against all claims, liabilities, losses, costs, expenses and damages arising or
resulting directly or indirectly from Tenant's failure to timely surrender the
Premises, including (i) any loss, cost or damages suffered by any prospective
tenant of all or any part of the Premises, and (ii) Landlord's damages as a
result of such prospective tenant
<PAGE> 27
rescinding or refusing to enter into the prospective lease of all or any portion
of the Premises by reason of such failure of Tenant to timely surrender the
Premises.
17. SUBORDINATION. Without the necessity of any additional document,
this Lease shall be subject and subordinate at all times to: (i) all ground
leases or underlying leases that may now exist or hereafter be executed
affecting any portion of the Premises or Project; and (ii) the lien of any
mortgage or deed of trust that may now exist or hereafter be executed in any
amount for which any portion of the Premises or Project or any ground leases or
underlying leases, or Landlord's interest or estate in any of said items, is
specified as security (any such lien being herein defined as a "Mortgage" and
the holder of any Mortgage being a "Mortgagee"). Notwithstanding the foregoing,
Landlord shall have the right to subordinate or cause to be subordinated any
such ground leases or underlying leases or any Mortgage to this Lease. If any
ground lease or underlying lease terminates, or any Mortgage is foreclosed or a
conveyance in lieu of foreclosure is made, for any reason, Tenant shall,
notwithstanding any subordination, attorn to and become the Tenant of the
successor in interest to Landlord at the option of such successor in interest.
Notwithstanding anything to the contrary contained herein, this Lease shall not
be subject or subordinate to any ground or underlying lease or to any lien,
Mortgage, or other security interest affecting the Premises, and Tenant shall
not attorn to the ground lessor, Mortgagee or other holder of the interest to
which this Lease would be subordinated unless such ground lessor, Mortgagee or
holder executes a reasonable recognition and non-disturbance agreement which
provides that Tenant shall be entitled to continue in possession of the Premises
on the terms and conditions of this Lease if and for so long as Tenant fully
performs all of its obligations hereunder. Tenant shall execute and deliver upon
demand by Landlord, and in the form attached hereto as Exhibit "I", or in such
other form as may be requested by Landlord or any Mortgagee and reasonably
acceptable to Tenant, any additional documents evidencing the priority or
subordination of this Lease with respect to any such ground leases or underlying
leases or the lien of any such Mortgage. Tenant shall execute, deliver and
authorize recordation of any such documents within twenty (20) days after
Landlord's written request.
18. RULES AND REGULATIONS. Tenant shall faithfully observe and
comply with the rules and regulations attached to this Lease as Exhibit "D" and
all reasonable nondiscriminatory modifications thereof and additions thereto
from time to time put into effect by Landlord (the "Rules and Regulations"),
provided such rules and regulations do not unreasonably interfere with Tenant's
use of the Premises as contemplated by this Lease. In the event of an express
and direct conflict between the terms, covenants, agreements and conditions of
this Lease and those set forth in the rules and regulations, as modified and
amended from time to time by Landlord, this Lease shall control.
19. RE-ENTRY BY LANDLORD. Landlord reserves and shall at all
reasonable times have the right to re-enter the Premises upon reasonable prior
notice (except in the case of an emergency), and subject to Tenant's reasonable
security precautions and the right of Tenant to accompany Landlord at all times,
to inspect the same; to supply any service to be provided by Landlord to Tenant
hereunder (unless Tenant is supplying such service); to show the Premises to
<PAGE> 28
prospective purchasers, Mortgagees or tenants (as to prospective tenants other
than prospective tenants of any recaptured space, only during the last eighteen
(18) months of the initial Term or the last twenty-four (24) months of any
Extension Term); to post notices of nonresponsibility; to alter, improve or
repair the Premises and any portion thereof as required or allowed by this Lease
or by law (and Landlord may for that purpose erect, use, and maintain
scaffolding, pipes, conduits, and other necessary structures in and through the
Premises where reasonably required by the character of the work to be
performed); and to take, or allow other parties to take, any actions
contemplated by the CC&Rs. Landlord shall not be liable in any manner for any
inconvenience, disturbance, loss of business, nuisance or other damage arising
from Landlord's or any third party's (including without limitation pursuant to
the CC&Rs) entry and acts pursuant to this Paragraph 19 unless caused by
Landlord's gross negligence or willful misconduct. Tenant shall not be entitled
to an abatement or reduction of Base Rent or Additional Charges if Landlord
exercises any rights reserved in this paragraph. Tenant hereby waives any claim
for damages for any injury or inconvenience to or interference with Tenant's
business, any loss of occupancy or quiet enjoyment of the Premises, and any
other loss occasioned thereby, except to the extent caused by Landlord's gross
negligence or willful misconduct. For each of the aforesaid purposes, Landlord
shall have the right to use any and all means which Landlord reasonably
determines are necessary or proper to open doors on the Premises in an emergency
in order to obtain entry to any portion of the Premises. Any entry to the
Premises, or portion thereof obtained by Landlord by any of said means, or
otherwise, shall not under any emergency circumstances be construed or deemed to
be a forcible or unlawful entry into, or a detainer of, the Premises, or an
eviction, actual or constructive, of Tenant from the Premises or any portions
thereof. Landlord shall use best efforts during re-entry to not unreasonably
interfere with Tenant's use of the Premises or its business conducted therein.
20. INSOLVENCY OR BANKRUPTCY. The appointment of a receiver to take
possession of all or substantially all of the assets of Tenant, or an assignment
by Tenant for the benefit of creditors, or any action taken or suffered by
Tenant under any insolvency, bankruptcy, reorganization or other debtor relief
proceedings (each of the foregoing, an "Insolvency Proceeding"), whether now
existing or hereafter amended or enacted, shall, at Landlord's option,
constitute a breach of this Lease by Tenant, unless a petition in bankruptcy,
receiver attachment, or other remedy pursued by a third party is discharged
within sixty (60) days. Upon the happening of any such event (including the
expiration of such 60 day period, if applicable) or at any time thereafter, this
Lease shall terminate five (5) days after written notice of termination from
Landlord to Tenant. In no event shall this Lease be assigned or assignable by
operation of law (except as provided in Paragraph 11 [Assignment and
Subletting]) or by voluntary or involuntary bankruptcy proceedings or otherwise.
In no event shall this Lease or any rights or privileges hereunder be an asset
of Tenant under any bankruptcy, insolvency, reorganization or other debtor
relief proceedings.
21. DEFAULT.
(a) TENANT'S DEFAULT. The failure to perform or honor any
covenant,
<PAGE> 29
condition or representation made under this Lease shall constitute a "default"
hereunder by Tenant upon expiration of the appropriate grace period hereinafter
provided. Tenant shall have a period of three (3) business days from the date of
written notice from Landlord (which notice shall be in lieu of and not in
addition to the notice required by Section 1161 of the California Code of Civil
Procedure) within which to cure any default in the payment of Base Rent or
Additional Charges; provided, however, that Landlord shall not be required to
provide such notice more than twice during any four (4) year period during the
Term with respect to non-payment of Base Rent or Additional Charges, the third
such non-payment constituting default without requirement of notice. Tenant
shall have a period of thirty (30) days from the date of written notice from
Landlord (which notice shall be in lieu of and not in addition to the notice
required by Section 1161 of the California Code of Civil Procedure) within which
to cure any other curable default under this Lease; provided, however, that with
respect to any curable default other than the payment of Base Rent or Additional
Charges that cannot reasonably be cured within thirty (30) days, the default
shall not be deemed to be uncured if Tenant commences to cure within thirty (30)
days from Landlord's notice and continues to prosecute diligently the curing
thereof; provided that such cure period shall in no event extend beyond ninety
(90) days (subject to delay by Force Majeure Events) after Landlord's notice.
Notwithstanding the foregoing, if a shorter cure period is specified elsewhere
in this Lease with respect to any specific obligation of Tenant, such shorter
cure period shall apply with respect to a default of such obligation.
(b) LANDLORD'S REMEDIES. Upon an uncured default of this
Lease by Tenant, Landlord shall have the following rights and remedies in
addition to any other rights or remedies available to Landlord at law or in
equity:
(1) The rights and remedies provided by California
Civil Code, Section 1951.2, including but not limited to, recovery of the worth
at the time of award of the amount by which the unpaid Base Rent and Additional
Charges for the balance of the Term after the time of award exceeds the amount
of rental loss for the same period that the Tenant proves could be reasonably
avoided, as computed pursuant to subsection (b) of said Section 1951.2;
(2) The rights and remedies provided by California
Civil Code, Section 1951.4, that allows Landlord to continue this Lease in
effect and to enforce all of its rights and remedies under this Lease, including
the right to recover Base Rent and Additional Charges as they become due, for so
long as Landlord does not terminate Tenant's right to possession. Acts of
maintenance or preservation, efforts to relet the Premises or the appointment of
a receiver upon Landlord's initiative to protect its interest under this Lease
shall not constitute a termination of Tenant's rights to possession;
(3) The right to terminate this Lease by giving
notice to Tenant in accordance with applicable law;
(4) If Landlord elects to terminate this Lease, the
right and power to
<PAGE> 30
enter the Premises and remove therefrom all persons and property, and to store
such property in a public warehouse or elsewhere at the cost of and for the
account of Tenant, and to sell such property and apply such proceeds therefrom
pursuant to applicable California law.
(c) LANDLORD'S DEFAULT. Landlord shall have a period of
thirty (30) days from the date of written notice from Tenant to cure any default
by Landlord under this Lease; provided, however, that with respect to any
default that cannot reasonably be cured within thirty (30) days, the default
shall not be deemed to be uncured if Landlord commences to cure within thirty
(30) days from Tenant's notice and continues to prosecute diligently the curing
thereof. Tenant agrees to give any Mortgagee, by registered or certified mail, a
copy of any Notice of Default served upon the Landlord, provided that prior to
such notice Tenant has been notified in writing of the address of such
Mortgagee. If Landlord fails to cure such default within the time provided for
in this Lease, then the Mortgagee shall have an additional thirty (30) days
(provided that Tenant notifies Mortgagee concurrently with Tenant's notice to
Landlord at the beginning of Landlord's thirty (30) day period; otherwise
Mortgagee shall have thirty (30) days from the later of the date on which it is
noticed and the expiration of Landlord's cure period) within which to cure such
default. If such default cannot be cured by Mortgagee within the cure period,
Tenant may not exercise any of its remedies so long as Mortgagee has commenced
and is diligently pursuing the remedies necessary to cure such default
(including, but not limited to, commencement of foreclosure proceedings, if
necessary to effect such cure).
(d) TENANT'S REMEDIES. Subject to Paragraph 3(f) [Exclusive
Remedies], if any default hereunder by Landlord is not cured within the
applicable cure period provided in Paragraph 21(c) [Landlord's Default],
Tenant's exclusive remedies shall be an action for specific performance or
action for actual damages. Tenant hereby waives the benefit of any laws granting
it (A) the right to perform Landlord's obligation, or (B) the right to terminate
this Lease or withhold Rent on account of any Landlord default. Tenant shall
look solely to Landlord's interest in the Project for the recovery of any
judgment from Landlord. Landlord, or if Landlord is a partnership, its partners
whether general or limited, or if Landlord is a corporation, its directors,
officers or shareholders, shall never be personally liable for any such
judgment. Any lien obtained to enforce such judgment and any levy of execution
thereon shall be subject and subordinate to any Mortgage (excluding any Mortgage
which was created as part of an effort to defraud creditors, i.e. a fraudulent
conveyance); provided, however that any such judgement and any such levy of
execution thereon shall not be subject or subordinated to any Mortgage that is
created or recorded in the Official Records of Santa Clara County after the date
of the judgement giving rise to such lien.
22. DAMAGE AND DESTRUCTION
(a) RESTORATION. Subject to the termination rights set forth
in Paragraphs 22(c) [Casualty at End of Term] and Paragraph 22(d) [Mutual
Termination Option], if the Premises or any portion thereof are damaged or
destroyed by fire or other casualty, Tenant will promptly give written notice
thereof to Landlord, and:
<PAGE> 31
(1) Tenant, at Tenant's sole cost and expense, and
pursuant to the provisions of Paragraph 8 [Alterations], as applicable, will
promptly repair, restore and rebuild any Alterations as nearly as possible to
the condition they were in immediately prior to such damage or destruction or
with such changes or alterations as may be made pursuant to Paragraph 8
[Alterations]; and
(2) to the extent that any such damage or
destruction affects the Base Building, Landlord shall repair the same at
Landlord's cost.
(b) INSURANCE PROCEEDS. Subject to the provisions of
Paragraphs 22(e) [Destruction Where No Proceeds Are Available] and 22(f)
[Proceeds Upon Termination], all insurance proceeds recovered by the Landlord on
account of such damage or destruction, less the cost, if any, to the Landlord of
such recovery shall be applied by Landlord toward any repair to the Base
Building as may be required hereunder. The amount of available insurance
proceeds shall not limit Tenant's or Landlord's obligation to repair, restore
and rebuild any Alterations and the Base Building, respectively, in accordance
with this Paragraph 22.
(c) CASUALTY AT END OF TERM. Notwithstanding anything to the
contrary contained in this Lease, if, during the twelve (12) months prior to the
expiration of the Term, the entire Building or a substantial portion thereof is
damaged or destroyed by fire or other casualty, either Tenant or Landlord shall
have the option to terminate this Lease as of the date of such damage or
destruction by written notice to the other party given within thirty (30) days
after such damage or destruction, in which event the Landlord shall make a
proportionate refund to the Tenant of such Rent as may have been paid in
advance. For the purposes of this paragraph, a "substantial portion" of the
Building shall mean twenty percent (20%) or more of the Rentable Area thereof.
If neither party elects to terminate this Lease, Landlord and/or Tenant shall
repair, restore and rebuild the Premises in accordance with Paragraph 22(a)
[Restoration].
(d) MUTUAL TERMINATION OPTION; INSURED CASUALTY.
Notwithstanding anything to the contrary contained herein (but subject to
Paragraph 22(e) below), if at any time during the Term the Base Building shall
be damaged or destroyed to the extent that it cannot be reconstructed within
twelve (12) months following the date such reconstruction is commenced, either
Landlord or Tenant shall have the right to terminate this Lease as of the date
of such damage or destruction by written notice to the other party. Within
forty-five (45) days after any damage or destruction described in this Paragraph
22(d), Landlord shall notify Tenant whether or not in Landlord's reasonable
opinion (supported by reasonable written confirmation from a third party
architect or general contractor) such reconstruction can be made within twelve
(12) months after the date of such damage, and if reconstruction cannot be made
within twelve (12) months, whether or not Landlord elects to terminate the
Lease. If Tenant is so notified, but Landlord does not elect to terminate,
Tenant may terminate this Lease as of the date of such damage or destruction by
written notice to Landlord given within forty-five (45) days after receipt of
Landlord's notice. If Tenant disputes Landlord's determination that such
reconstruction can be
<PAGE> 32
completed within twelve (12) months, Tenant shall so notify Landlord within
forty-five (45) days after receipt of Landlord's notice (supported by reasonable
written confirmation from a third party architect or general contractor backing
Tenant's assertions), and if the parties are unable to reach agreement within
the ten (10) day period after Landlord's receipt of Tenant's notice, either
party may submit such dispute to arbitration pursuant to Paragraph 41
[Arbitration of Disputes], provided that Landlord may, at its sole election (but
shall not be obligated to), commence reconstruction of the Base Building while
such arbitration proceedings are pending. If neither party elects to terminate
this Lease, Landlord and/or Tenant shall repair, restore and rebuild the
Premises in accordance with Paragraph 22(a) [Restoration].
(e) DESTRUCTION WHERE NO PROCEEDS ARE AVAILABLE. In the
event of a total or partial destruction of the Building (i) by a casualty of a
type not required to be insured against by Landlord under the terms of this
Lease, or (ii) under circumstances where Landlord has been required by any
Mortgagee to utilize substantially all of the insurance proceeds to pay down the
Mortgage, which destruction exceeds five percent (5%) of the replacement cost of
the Base Building, this Lease shall automatically terminate, unless (x) Landlord
elects to reconstruct the Base Building, and (y) the damage can be reconstructed
within twelve (12) months following commencement of reconstruction (determined
as provided above). If Landlord elects to reconstruct, the cost incurred by
Landlord for such reconstruction shall be amortized over the useful life of the
Base Building and such amortization shall be reimbursed by Tenant to Landlord as
an Additional Charge together with interest at the Interest Rate; provided,
however, that Tenant shall not be obligated to pay for any portion of the useful
life of the Base Building which extends beyond the Expiration Date.
(f) PROCEEDS AND PAYMENTS UPON TERMINATION. If this Lease is
terminated under Paragraph 22(c) [Casualty at End of Term] or Paragraph 22(d)
[Mutual Termination Option; Insured Casualty], Landlord shall be entitled to
retain any and all insurance proceeds arising out of the damage or destruction,
except for proceeds of any policies carried by Tenant and specifically covering
its Alterations, personal property, equipment and trade fixtures. Upon any
termination, Tenant shall assign all of its rights to any insurance proceeds to
which it is entitled (except any portion specifically compensating Tenant for
the loss of its Alterations, personal property, equipment and trade fixtures) to
Landlord and shall pay to Landlord the amount of any deductible under any
insurance policy attributable to the casualty resulting in such termination.
(g) RENT ABATEMENT. In the event of an insured casualty, the
Base Rent and Additional Charges during the period from the date of the damage
or destruction until completion of the restoration, repair, replacement or
rebuilding shall be abated by an amount that is in the same ratio to the Base
Rent and Additional Charges as the area of the Premises rendered unusable for
the permitted use hereunder bears to the area of the Premises prior to the
damage or destruction, but only to the extent of the amount of proceeds payable
to Landlord (taking into account any applicable waiting period or deductibles)
under the rental interruption insurance required to be carried by Landlord
pursuant to Paragraph 12(e) [Landlord's Insurance
<PAGE> 33
Obligations].
(h) WAIVER OF STATUTORY PROVISIONS. Tenant hereby waives the
provisions of Section 1932.2, and Section 1933.4, of the Civil Code of
California, or any similar laws now or hereafter in effect, that would relieve
the Tenant from any obligation to pay Rent under this Lease due to any damage or
destruction.
23. EMINENT DOMAIN.
(a) ENTIRE BUILDING. If the entire Building is taken or
appropriated under the power of eminent domain or conveyed in lieu thereof (any
such event, a "Taking"), (i) this Lease and all right, title and interest of the
Tenant hereunder shall cease and come to an end on the date of vesting of title
pursuant to such Taking, and (ii) the Base Rent and Additional Charges payable
shall be apportioned as of the date of such vesting.
(b) PARTIAL BUILDING; TERMINATION. If there is a Taking of
less than the entire Building, this Lease shall terminate as to the portion of
the Building so taken upon vesting of title pursuant to such Taking, and if, but
only if, such Taking is so extensive that it renders the remaining portion of
the Building unsuitable for the use being made of the Building on the date
immediately preceding such Taking, either the Tenant or the Landlord may
terminate this Lease by written notice to the other party not later than thirty
(30) days after the date of such vesting, specifying as the date for termination
a date not later than thirty (30) days after such notice. On the date specified
in such notice, (i) the term of this Lease and all right, title and interest of
Tenant hereunder shall cease, and (ii) the Base Rent and Additional Charges
shall be apportioned as of the date of such termination.
(c) PARTIAL BUILDING; RESTORATION. If there is a Taking of
less than the entire Building and this Lease is not terminated with respect to
the Building as provided in (b) above, this Lease shall terminate as to the
portion of the Building so taken upon vesting of title pursuant to such Taking.
In any such case, Landlord shall restore the Base Building Improvements for the
portion of the Building continuing under this Lease at Landlord's cost and
expense; provided, however, that Landlord shall not be required to repair or
restore any injury or damage to the property of Tenant or to make any repairs or
restoration of any Alterations installed on the Premises by or at the expense of
Tenant. Tenant shall, at Tenant's sole cost and expense, promptly and pursuant
to the provisions of Paragraph 8 [Alterations], restore those portions of the
Alterations not so taken. Thereafter, the Base Rent and Additional Charges to be
paid under this Lease for the remainder of the Term shall be proportionately
reduced, such that thereafter the amounts to be paid by Tenant shall be in the
ratio that the portion of the Building not so taken bears to the total area of
the Building prior to such Taking.
(d) END OF TERM TAKING. If, during the twelve (12) months
prior to the expiration of the Term, there is a Taking of a portion of the
Building, both Landlord and Tenant shall have the option, exercisable by written
notice to the other party given within thirty (30) days
<PAGE> 34
after such vesting of title, of terminating this Lease as of the date of vesting
of title pursuant to the Taking, in which event Landlord shall make a
proportionate refund to Tenant of any Base Rent and Additional Rent that has
been paid in advance.
(e) TAKING OF PROJECT. If there is a Taking of any portion
of the Project other than the Premises which causes the Premises to violate
parking requirements, building setbacks or access requirements under any
applicable Laws, Landlord shall cure such non-compliance by any reasonable
means. If Landlord determines that such violation is not curable by reasonable
means, or if Landlord fails to commence such cure within sixty (60) days after
such Taking, both Landlord and Tenant shall have the option, exercisable by
written notice to the other party, of terminating this Lease as of the date of
vesting of title pursuant to the Taking, in which event Landlord shall make a
proportionate refund to Tenant of any Base Rent and Additional Rent that has
been paid in advance.
(f) AWARD. Landlord shall receive (and Tenant shall assign
to Landlord upon demand from Landlord) any income, rent, award or any interest
therein which may be paid in connection with any Taking, whether partial or
total, and whether or not either Landlord or Tenant exercises any right it may
have to terminate this Lease. Tenant shall have no claim against Landlord for
any part of such sum paid by virtue of the Taking, whether or not attributable
to the value of the unexpired term of this Lease, except that Tenant shall be
entitled to petition the condemning authority for the following: (i) the then
unamortized cost of any Alterations paid for by Tenant which Tenant is required
to remove upon termination of the Lease; (ii) the value of Tenant's trade
fixtures; (iii) Tenant's relocation costs; and (iv) Tenant's goodwill, loss of
business and business interruption.
(g) TEMPORARY TAKING. Notwithstanding anything to the
contrary contained in this Paragraph 23, if there is a Taking of the temporary
use or occupancy of any part of the Premises during the Term, this Lease shall
be and remain unaffected by such Taking and Tenant shall continue to pay in full
all Base Rent and Additional Charges payable hereunder by Tenant during the
Term. In such event, Tenant shall be entitled to receive that portion of any
award which represents compensation for the use or occupancy of the Premises
during the Term, and Landlord shall be entitled to receive that portion of any
award which represents the cost of restoration of the Premises and the use and
occupancy of the Premises after the end of the Term. Notwithstanding the
foregoing, if Landlord determines in its reasonable judgment that any Taking of
the temporary use or occupancy of any part of the Premises will continue until
the end of the Term, either party may elect to terminate this Lease by written
notice to the other party at any time after Landlord has made such determination
and delivered written notice thereof to Tenant, and Landlord shall be entitled
to receive the entire award for the Taking, except for that portion which
represents compensation for the use or occupancy of the Premises during the
period of time prior to such termination.
(h) WAIVER OF STATUTORY PROVISIONS. Landlord and Tenant
understand and agree that the provisions of this Paragraph 23 are intended to
govern fully the rights and
<PAGE> 35
obligations of the parties in the event of a Taking of all or any portion of the
Premises. Accordingly, the parties each hereby waives any right to terminate
this Lease in whole or in part under Sections 1265.120 and 1265.130 of the
California Code of Civil Procedure or under any similar Law now or hereafter in
effect.
24. SALE BY LANDLORD. If Landlord sells or otherwise conveys its
interest in all or any portion of the Premises, Landlord shall be relieved of
its obligations under the Lease with respect to the conveyed portion from and
after the date of sale or conveyance only when Landlord transfers the
proportionate amount of any security deposit of Tenant to its successor and the
successor assumes in writing the obligations to be performed by Landlord on and
after the effective date of the transfer, whereupon Tenant shall attorn to such
successor.
25. RIGHT OF LANDLORD TO PERFORM. All covenants and agreements to be
performed by Tenant under any of the terms of this Lease shall be performed by
Tenant at Tenant's sole cost and expense and without any abatement of Base Rent
or Additional Charges. If Tenant defaults in the payment of any sum of money,
other than Base Rent or Additional Charges, required to be paid by it hereunder
or fails to perform any other act on its part to be performed hereunder, and
such failure continues for ten (10) days after notice thereof by Landlord (or
such longer period as noted in Paragraph 9(e)[Cure Rights] or Paragraph 21(a)
[Tenant's Default], except in the event of emergency), Landlord may, but shall
not be obligated to, make any such payment or perform any such act on Tenant's
part to be made or performed as provided in this Lease without waiving or
releasing Tenant from any obligations of Tenant. All sums so paid by Landlord
and all reasonable and necessary incidental costs incurred by Landlord in
connection therewith, together with interest thereon at the Default Rate from
the date of such payment by Landlord, shall be payable to Landlord on demand as
Additional Charges.
26. OWNERSHIP OF IMPROVEMENTS; SURRENDER OF PREMISES.
(a) OWNERSHIP OF ALTERATIONS. Any Alterations constructed on
or affixed to the Premises by or on behalf of Tenant pursuant to the terms and
conditions of this Lease, except for Tenant's movable furniture and equipment,
trade fixtures and Alterations which can be removed without damage to the
Premises, shall become Tenant's property upon their completion, shall remain
Tenant's property throughout the Term of this Lease and shall become Landlord's
property upon the expiration or earlier termination of this Lease to the extent
they are not required or permitted to be removed by Tenant pursuant to the terms
of this Lease.
(b) DELIVERY AND RESTORATION OF PREMISES. At the end of the
Term or any renewal thereof or other sooner termination of this Lease, Tenant
will peaceably deliver to Landlord possession of the Premises, together with all
improvements or additions thereon (including, without limitation, the
Alterations which Landlord does not require Tenant to remove pursuant to
Paragraph 8 [Alterations]), in the same condition as received or first installed
subject to normal wear and tear but in the condition described on Exhibit "E"
attached hereto, subject to the terms of Paragraph 23 [Eminent Domain] and the
rights and obligations of Landlord and
<PAGE> 36
Tenant concerning casualty damage pursuant to Paragraph 22 [Damage and
Destruction]. Tenant may, upon the termination of this Lease, remove all movable
furniture, trade fixtures and equipment belonging to Tenant which is not an
integral part of any Building System, at Tenant's sole cost, provided that
Tenant repairs any damage caused by such removal. Property not so removed shall
be deemed abandoned by Tenant, and title to the same shall thereupon pass to
Landlord. In addition, Tenant shall remove and/or reconfigure, at Tenant's sole
cost and with all due diligence, any or all Alterations to the Premises
installed by or at the expense of Tenant which Tenant is required to remove
and/or reconfigure under Paragraph 8 [Alterations] of this Lease.
(c) NO MERGER. The voluntary or other surrender of this
Lease by Tenant, or a mutual cancellation thereof, shall not work a merger, and
shall, at the option of Landlord, terminate all or any existing subleases or
subtenancies, or may, at the option of Landlord, operate as an assignment to it
of any or all such subleases or subtenancies.
27. WAIVER. If either Landlord or Tenant waives the performance of
any term, covenant or condition contained in this Lease, such waiver shall not
be deemed to be a waiver of any subsequent breach of the same or any other term,
covenant or condition contained herein. Furthermore, the acceptance of Base Rent
or Additional Charges by Landlord shall not constitute a waiver of any preceding
breach by Tenant of any term, covenant or condition of this Lease, regardless of
Landlord's knowledge of such preceding breach at the time Landlord accepted such
Base Rent or Additional Charges. Failure by Landlord to enforce any of the
terms, covenants or conditions of this Lease for any length of time shall not be
deemed to waive or to decrease the right of Landlord to insist thereafter upon
strict performance by Tenant. Waiver by Landlord of any term, covenant or
condition contained in this Lease may only be made by a written document signed
by Landlord.
28. NOTICES. Except as otherwise expressly provided in this Lease,
any bills, statements, notices, demands, requests or other communications given
or required to be given under this Lease shall be effective only if rendered or
given in writing, sent by certified mail (return receipt requested), reputable
overnight carrier, or delivered personally, (i) to Tenant at Tenant's address
set forth in the Basic Lease Information; or (ii) to Landlord at Landlord's
address set forth in the Basic Lease Information; or (iii) to such other address
as either Landlord or Tenant may designate as its new address for such purpose
by notice given to the other in accordance with the provisions of this Paragraph
28. Any bill, statement, notice, demand, request or other communication shall be
deemed to have been rendered or given on the date the return receipt indicates
delivery of or refusal of delivery if sent by certified mail, the day upon which
recipient accepts and signs for delivery from a reputable overnight carrier or
on the date a reputable overnight carrier indicates refusal of delivery, or upon
the date personal delivery is made.
29. TAXES PAYABLE BY TENANT. Prior to delinquency Tenant shall pay
all taxes levied or assessed upon Tenant's equipment, furniture, fixtures and
other personal property
<PAGE> 37
located in or about the Premises. If the assessed value of Landlord's property
is increased by the inclusion therein of a value placed upon Tenant's equipment,
furniture, fixtures or other personal property, Tenant shall pay to Landlord,
upon written demand, the taxes so levied against Landlord, or the proportion
thereof resulting from said increase in assessment.
30. ABANDONMENT. Tenant shall not abandon the Premises and cease
performing its financial and maintenance obligations under this Lease at any
time during the Term. If Tenant abandons and ceases performing its financial and
maintenance obligations under this Lease, or surrenders the Premises or is
dispossessed by process of law or otherwise, any personal property belonging to
Tenant and left on the Premises shall, at the option of Landlord, be deemed to
be abandoned and title thereto shall thereupon pass to Landlord. Notwithstanding
anything to the contrary contained herein, Tenant may not vacate the Premises if
such would result in a termination of Landlord's insurance. Upon Tenant's
request, Landlord will ask its insurer if such vacation of the Premises would
result in termination of its current insurance policy. Solely for purposes of
this Paragraph 30, Tenant shall not be deemed to have abandoned the Premises
solely because Tenant is not occupying the Premises.
31. SUCCESSORS AND ASSIGNS. Subject to the provisions of Paragraphs
11 [Assignment and Subletting] and 24 [Sale by Landlord], the terms, covenants
and conditions contained herein shall be binding upon and inure to the benefit
of the parties hereto and their respective legal and personal representatives,
successors and assigns.
32. ATTORNEY'S FEES. If Tenant or Landlord brings any action for any
relief against the other, declaratory or otherwise, arising out of this Lease,
including any suit by Landlord for the recovery of Base Rent or Additional
Charges or possession of the Premises, the losing party shall pay to the
prevailing party a reasonable sum for attorney's fees, which shall be deemed to
have accrued on the commencement of such action and shall be paid whether or not
the action is prosecuted to judgment.
33. LIGHT AND AIR. Tenant covenants and agrees that no diminution of
light, air or view by any structure which may hereafter be erected (whether or
not by Landlord) shall entitle Tenant to any reduction of Rent under this Lease,
result in any liability of Landlord to Tenant, or in any other way affect this
Lease or Tenant's obligations hereunder.
34. SECURITY DEPOSIT.
(a) LETTER OF CREDIT. Concurrently with Tenant's execution
of this Lease, Tenant shall deliver to Landlord an unconditional, irrevocable,
transferable letter of credit, in the amount of One Million Dollars
($1,000,000), issued by a financial institution acceptable to Landlord in the
form attached hereto as Exhibit "F", with an original term of no less than one
year and automatic extensions through the end of the Term of this Lease and
sixty (60) days thereafter (the "Letter of Credit"). Tenant shall keep the
Letter of Credit, at its expense, in full force and effect until the sixtieth
(60th) day after the Expiration Date or other termination of this
<PAGE> 38
Lease, to insure the faithful performance by Tenant of all of the covenants,
terms and conditions of this Lease, including, without limitation, Tenant's
obligations to repair, replace or maintain the Premises. The Letter of Credit
shall provide thirty (30) days' prior written notice to Landlord of cancellation
or material change thereof, and shall further provide that, in the event of any
nonextension of the Letter of Credit at least thirty (30) days prior to its
expiration, the entire face amount shall automatically be paid to Landlord, and
Landlord shall hold the funds so obtained as the security deposit required under
this Lease. If for any reason such automatic payment does not occur in the event
of a nonextension at least thirty (30) days prior to expiration, Landlord shall
be entitled to present its written demand for payment of the entire face amount
of the Letter of Credit, and the funds so obtained shall be held as provided
above. Any unused portion of the funds so obtained by Landlord shall be returned
to Tenant upon replacement of the Letter of Credit or deposit of cash security
in the full amount required hereunder. If Landlord uses any portion of the cash
security deposit to cure any default by Tenant hereunder, Tenant shall replenish
the security deposit to the original amount within ten (10) days of notice from
Landlord. Tenant's failure to do so shall be a material breach of this Lease.
Landlord shall keep any cash security funds separate from its general funds, and
shall invest such cash security at Tenant's reasonable direction, and any
interest actually earned by Landlord on such cash security shall be paid to
Tenant quarterly. If an event of default occurs under this Lease, or if Tenant
is the subject of an Insolvency Proceeding, Landlord may present its written
demand for payment of the entire face amount of the Letter of Credit and the
funds so obtained shall become due and payable to Landlord. Landlord may retain
such funds to the extent required to compensate Landlord for damages incurred,
or to reimburse Landlord as provided herein, in connection with any such event
of default, and any remaining funds shall be held as a cash security deposit.
(b) ANNUAL REDUCTION OF LETTER OF CREDIT. The face amount of
the Letter of Credit may be reduced on each of the third through eighth
anniversaries of the Rent Commencement Date in the amount of One Hundred
Forty-Three Thousand Dollars ($143,000), and on the ninth anniversary of the
Rent Commencement Date in the amount of One Hundred Forty-Two Dollars
($142,000), so long as (i) Tenant is not in default (and no event has occurred
which, with the passage of time or giving of notice or both, would constitute a
default) under the Lease on such anniversary date, and (ii) Landlord has not
delivered a notice of default to Tenant hereunder during the previous calendar
year, regardless of whether such default was cured by Tenant within any
applicable grace or cure period; provided, however, that any such notice of
default relating to a non-monetary default which was disputed, in good faith, by
Tenant and ultimately determined (by agreement of the parties, arbitration or
judicial action) not to be a default shall not be considered for purposes of
determining whether such condition has been met.
(c) RETURN OF LETTER OF CREDIT. The Letter of Credit shall
be returned to Tenant, and Tenant's obligation to provide a security deposit to
Landlord under this Paragraph 34 shall terminate, at any time after the third
(3rd) anniversary of the Rent Commencement Date when Tenant can establish to
Landlord's reasonable satisfaction that as of the end of any fiscal
<PAGE> 39
year of Tenant following the third anniversary of the Rent Commencement Date,
Tenant has (i) annual net income in excess of Twenty-Five Million Dollars
($25,000,000) for the previous two consecutive years, (ii) shareholder equity in
excess of One Hundred Fifty Million Dollars ($150,000,000), and (iii) cash and
cash equivalents in excess of Fifty Million Dollars ($50,000,000), all as
determined in accordance with GAAP and as reflected on certified, audited
financial statements.
(d) SUBSTITUTION OF CASH COLLATERAL. In lieu of, or in
replacement of, the Letter of Credit, Tenant may deliver to Landlord at any time
during the Term a cash deposit in the face amount required of the Letter of
Credit, provided that Landlord shall have no additional liability or reduced
benefits from that which Landlord would have if Tenant provided a Letter of
Credit. All terms, conditions and requirements with respect to the Letter of
Credit contained in this Paragraph 34, including, without limitation,
application of proceeds, reduction of amount, return of deposit, and investment
requirements for cash collateral, shall apply to any such cash collateral.
(e) CONVERSION OF DEPOSIT TO LOAN. Landlord and Tenant
acknowledge and agree that, if Tenant defaults under this Lease and fails to
fully cure such default within the applicable cure period and Landlord elects to
pursue its remedies under California Civil Code Section 1951.2 or under this
Lease to terminate this Lease (any such event, a "Landlord Action"), (i)
Landlord will incur certain damages, costs and expenses, including, without
limitation, marketing costs, commissions, relocation costs, tenant improvement
costs, and carrying costs in connection with releasing the Premises, in addition
to the other damages, costs and expenses Landlord may incur as a result of such
default and/or other defaults under this Lease (all of the foregoing
collectively, "Default Damages"); (ii) Landlord has no assurance of a source of
funds to cover such Default Damages other than the proceeds of the Letter of
Credit (or cash collateral); and (iii) the proceeds of the Letter of Credit (or
cash collateral) should be available to Landlord to apply to Default Damages,
even if the amount thereof exceeds that amount to which Landlord is ultimately
determined to be entitled under this Lease and pursuant to applicable law.
Accordingly, at Landlord's sole election, Landlord shall be entitled to draw the
full amount of the Letter of Credit (or the full amount of cash collateral shall
be released to Landlord) which is then existing (after any previous application
of funds by Landlord and/or replenishment by Tenant pursuant to Paragraph 34(a)
above), simultaneously with commencement of a Landlord Action or at any time
thereafter. All proceeds thereof in excess of amounts applied (pursuant to
Paragraph 34(a)) to Default Damages incurred by Landlord prior to commencement
of the Landlord Action shall be deemed a loan from Tenant to Landlord (the
"Default Loan"). The Default Loan shall be unsecured and shall not bear
interest, and repayment thereof shall be limited to the terms and conditions set
forth in this paragraph. Any sums to which Landlord from time to time becomes
entitled hereunder and pursuant to law as a result of Tenant's default and any
previous defaults of the Lease, to which the Letter of Credit (or cash
collateral) has not previously been applied pursuant to Paragraph 34(a), shall
be offset against the principal balance of the Loan. The amount of the Default
Loan remaining, if any, after such offset shall be referred to herein as the
"Excess Amount". The Excess Amount shall be payable
<PAGE> 40
by Landlord to Tenant from, and only from, first any proceeds from the Letter of
Credit (or cash collateral) which have not been applied to Default Damages
incurred by Landlord after the same are finally determined (the "Remaining
Proceeds"), and then Excess Rent. The Remaining Proceeds shall be paid by
Landlord to Tenant promptly upon final determination after the entire Premises
are leased to a third party or parties. If Tenant disputes the amount of
Remaining Proceeds paid by Landlord, Tenant may submit such dispute to
arbitration in accordance with Paragraph 41 [Arbitration of Disputes] of this
Lease. "Excess Rent" shall mean the amount by which (x) rent received by
Landlord (from the tenant or tenants leasing all or any portion of the Premises
after Tenant's default) in any month exceeds (y) the amount of rent that would
have been payable under this Lease for such month if this Lease had not been
terminated. Landlord shall pay Tenant one-half of the Excess Rent until the
earlier of (A) the date the Excess Amount is fully repaid or (B) the date that
would have been the Expiration Date (excluding any Renewal Term) of this Lease.
Any remaining balance of the Default Loan on such date shall be deemed forgiven.
If the Default Loan is insufficient to cover all Default Damages, Tenant shall
pay Landlord any such shortfall immediately upon demand by Landlord, and
Landlord shall have all rights and remedies available at law or elsewhere in the
Lease with respect to such shortfall.
35. FINANCIAL INFORMATION. Tenant will furnish to the Landlord
within one hundred twenty (120) days after the end of each calendar year, copies
of audited, consolidated financial statements, which shall include, without
limitation, balance sheets, statements of income and expenses and sources and
uses of funds of the Tenant and its subsidiaries for such calendar year, all in
reasonable detail and stating in comparative form the figures as of the end of
and for the previous calendar year and including appropriate footnotes, prepared
in accordance with generally accepted accounting principles, and certified and
audited by independent public accountants of recognized standing reasonably
satisfactory to the Landlord; provided, however, that so long as Tenant is a
publicly traded corporation, in lieu of the foregoing Tenant shall provide
Landlord with copies of Tenant's annual report and 10K Filing when such
documents are released to the public. Tenant hereby covenants and warrants to
Landlord that all financial information and other descriptive information
regarding Tenant's business, which has been or shall be furnished to Landlord,
is and shall be accurate and complete at the time of delivery to Landlord.
36. PARKING. Subject to the Rules and Regulations, Tenant shall have
the exclusive right to use the parking situated on the Land; provided, however,
that other than marking parking spaces situated on the Land as designated for
Tenant's use (at Tenant's request), Landlord shall not be obligated to enforce
such exclusive right.
37. MISCELLANEOUS.
(a) DEFINED TERMS. The paragraph headings herein are for
convenience of reference and shall in no way define, increase, limit or describe
the scope or intent of any provision of this Lease. The term "Landlord" shall
include Landlord and its successors and assigns. In any case where this Lease is
signed by more than one person, the obligations
<PAGE> 41
hereunder shall be joint and several. The term "Tenant" shall include Tenant and
its successors and assigns.
(b) OTHER TERMS. Time is of the essence of this Lease and
all of its provisions. This Lease shall in all respects be governed by the laws
of the State of California. This Lease, together with its exhibits, contains all
the agreements of the parties hereto and supersedes any previous negotiations.
There have been no representations made by the Landlord or understandings made
between the parties other than those set forth in this Lease and its exhibits.
This Lease may not be modified except by a written instrument by the parties
hereto.
(c) QUIET ENJOYMENT. Upon Tenant paying the Base Rent and
Additional Charges and performing all of Tenant's obligations under this Lease,
Tenant may peacefully and quietly enjoy the Premises during the Term as against
all persons or entities lawfully claiming by or through Landlord; subject,
however, to the provisions of this Lease.
(d) SURVIVAL OF INDEMNITIES; IMMEDIATE OBLIGATION TO DEFEND.
All indemnities contained herein shall survive the expiration or earlier
termination of this Lease. With respect to each of the indemnities contained in
this Lease, the indemnitor has an immediate and independent obligation to defend
the indemnitee from any claim which actually or potentially falls within the
indemnity provision, which obligation arises at the time such claim is tendered
to the indemnitor by the indemnitee and continues at all times thereafter.
38. REPRESENTATIONS AND WARRANTIES.
(a) LANDLORD'S REPRESENTATIONS AND WARRANTIES. Landlord
represents and warrants to Tenant that, to Landlord's best knowledge, (i) the
Premises are not now in violation of any applicable Laws other than Laws with
respect to Hazardous Substances; and (ii) the zoning requirements currently
applicable to the Premises permit the permitted use under this Lease. For
purposes of this Section 38, the term "to Landlord's best knowledge" shall mean
the current actual conscious knowledge of Steve Dostart after reasonably
appropriate and diligent inquiry. Landlord hereby represents that Steve Dostart
is the representative of Landlord with supervisory responsibilities concerning
the Premises who would, in the ordinary course of his responsibilities, receive
notice from persons or entities of any of the matters described in the
representations and warranties in this Lease.
(b) TENANT'S REPRESENTATIONS AND WARRANTIES. Tenant
represents and warrants to Landlord that, to Tenant's best knowledge, Tenant's
use of the Premises will not be in violation of any applicable Laws. For
purposes of this Section 38, the term "to Tenant's best knowledge" shall mean
the current actual conscious knowledge of Tenant's Vice President of Operations
after reasonably appropriate and diligent inquiry. Tenant hereby represents that
Tenant's Vice President of Operations is the representative of Tenant with
supervisory responsibilities concerning the Premises and this Lease who would,
in the ordinary course of his responsibilities, receive notice from persons or
entities of any of the matters described in the
<PAGE> 42
representations and warranties in this Lease.
39. REAL ESTATE BROKERS.
(a) LANDLORD'S PAYMENT OBLIGATION. Landlord shall pay a
brokerage fee, in the total amount of $4.50 per rentable square foot of the
Premises to the party identified as "Tenant's Broker" in the Basic Lease
Information, in accordance with the terms and conditions of separate
agreement(s) with such parties.
(b) NO OTHER BROKERS. Each party represents that it has not
had dealings with any real estate broker, finder or other person with respect to
this Lease in any manner, except for Tenant's Broker named in the Basic Lease
Information, whose fees or commission, if earned, shall be paid as provided in
Paragraph 39(a). Each party shall hold harmless the other party from all damages
resulting from any claims that may be asserted against the other party by any
other broker, finder or other person with whom the other party has or
purportedly has dealt, or for any amounts in excess of the amount for which
Landlord is responsible under Paragraph 39(a) which are claimed by any broker,
finder or other person with whom the other party has or purportedly has dealt.
40. HAZARDOUS SUBSTANCE LIABILITY. Tenant has received from Landlord
a copy of the following reports: (the "Environmental Reports"): Phase I and
Phase II Environmental Assessment, Former RMC Lonestar Facility, 605 Fairchild
Drive, Mountain View, California, dated December 26, 1996 by McLaren Hart
Environmental Engineering Corporation.
(a) DEFINITION OF HAZARDOUS SUBSTANCES. For the purposes of
this Lease, "Hazardous Substances" shall be defined, collectively, as oil,
flammable explosives, asbestos, radioactive materials, hazardous wastes, toxic
or contaminated substances or similar materials, including, without limitation,
any substances which are "hazardous substances," "hazardous wastes," "hazardous
materials" or "toxic substances" under applicable environmental laws, ordinances
or regulations.
(b) TENANT INDEMNITY. Tenant releases Landlord from any
liability for, waives all claims against Landlord and shall indemnify, defend
and hold harmless Landlord, its employees, partners, agents, subsidiaries and
affiliate organizations against any and all claims, suits, loss, costs
(including costs of investigation, clean up, monitoring, restoration and
reasonably attorney fees), damage or liability, whether foreseeable or
unforeseeable, by reason of property damage (including diminution in the value
of the property of Landlord), personal injury or death directly arising from or
related to Hazardous Substances released, manufactured, discharged, disposed,
used or stored on, in, or under the Land or Premises during the initial Term and
any extensions of this Lease by Tenant or its employees, agents or contractors.
The provisions of this Tenant Indemnity regarding Hazardous Substances shall
survive the termination of the Lease.
<PAGE> 43
(c) LANDLORD INDEMNITY. Landlord releases Tenant from any
liability for, waives all claims against Tenant and shall indemnify, defend and
hold harmless Tenant, its officers, employees, and agents to the extent of
Landlord's interest in the Project, against any and all actions by any
governmental agency for clean up of Hazardous Substances on or under the Land
(including, without limitation, any groundwater contamination) including costs
of legal proceedings, investigation, clean up, monitoring, and restoration,
including reasonable attorney fees, and Landlord also releases Tenant from any
liability for, waives all claims against Tenant and shall indemnify, defend and
hold harmless Tenant, its officers, employees and agents from and against any
and all actions for damages to property instituted by any third parties, if, and
to the extent, in either case, arising from the presence of Hazardous Substances
on, in or under the Land or Premises, except to the extent caused by the
release, disposal, use or storage of Hazardous Substances in, on or about the
Premises by Tenant, its employees, agents, sublessees, assignees, or
contractors. The provisions of this Landlord Indemnity regarding Hazardous
Substances shall survive the termination of the Lease.
(d) TENANT COVENANTS. Tenant has informed Landlord that,
except for very immaterial amounts of toxic materials incidental to office use
(e.g. copier toner, typical janitorial cleaning materials, petroleum products in
cars) and those materials listed on Exhibit "G" in substantially the amounts
indicated on such Exhibit, as such exhibit may be revised from time to time by
Tenant as provided in this Paragraph 40(d) below, Tenant will not use or store
any Hazardous Substances within the Premises without Landlord's prior written
consent, and shall comply with any applicable Laws to the extent that it does
use any Hazardous Substances. Without limiting the foregoing, with respect to
the Hazardous Substances listed on Exhibit "G" or any other Hazardous Substances
that may be used or stored on the Premises upon Landlord's consent, (i) Tenant
shall provide to Landlord a copy of Tenant's Hazardous Materials Management Plan
("HMMP"), as approved by the local fire department and any other appropriate
regulatory agencies, and any amendments thereto, (ii) Tenant shall provide
Landlord with a revised Exhibit "G" upon any significant change in the types
and/or quantities of Hazardous Substances used at the Premises, but in any event
on each anniversary of the Rent Commencement Date, for Landlord's review and
approval (not to be unreasonably withheld or delayed); and (iii) Landlord
reserves the right at any time, and from time to time, to conduct site audits of
the Premises to verify the information contained in Exhibit "G" and Tenant's
HMMP. Tenant shall immediately notify Landlord if and when Tenant learns or has
reason to believe there has been any release of Hazardous Substances in, on or
about the Project during the Term.
41. ARBITRATION OF DISPUTES.
ANY CONTROVERSY OR CLAIM ARISING OUT OF PARAGRAPHS 3(b) [OCCUPANCY DATE], 3(d)
[EXCLUSIVE REMEDIES], 4(c)(2)(4) [AUDIT], 7 [COMPLIANCE WITH LAWS], 8
[ALTERATIONS], 9 [REPAIRS AND MAINTENANCE], 14 [SERVICES AND UTILITIES], 22(d)
[MUTUAL TERMINATION RIGHT; INSURED CASUALTY] WITH RESPECT TO LENGTH OF TIME TO
<PAGE> 44
RESTORE, 26 [DELIVERY AND RESTORATION OF PREMISES], AND 43(e) [CONVERSION OF
DEPOSIT TO LOAN] WITH RESPECT TO THE AMOUNT OF REMAINING PROCEEDS, OF THIS
LEASE, OR A BREACH OF SUCH PARAGRAPHS SOLELY BETWEEN LANDLORD AND TENANT, BUT
NOT INCLUDING A DEFAULT WITH RESPECT TO THE TIMELY PAYMENT OF BASE RENT AND
ADDITIONAL CHARGES, SHALL BE SETTLED BY ARBITRATION IN ACCORDANCE WITH THE RULES
OF THE AMERICAN ARBITRATION ASSOCIATION, AND JUDGMENT ON THE AWARD RENDERED BY
THE ARBITRATOR(S) MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. THE
PREVAILING PARTY IN SUCH ARBITRATION SHALL BE ENTITLED TO ATTORNEYS' FEES AND
COSTS.
NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY
DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES"
PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND YOU
ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A
COURT OR JURY TRIAL. BY INITIALING IN THE SPACE BELOW YOU ARE GIVING UP YOUR
JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS THOSE RIGHTS ARE SPECIFICALLY
INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION. IF YOU REFUSE TO SUBMIT TO
ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE
UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO
THIS ARBITRATION PROVISION IS VOLUNTARY.
WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES
ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION
TO NEUTRAL ARBITRATION.
CONSENT TO NEUTRAL ARBITRATION BY:
/s/ (LANDLORD): /s/ (TENANT):
- --------------------------------- ----------------------------------------
42. SIGNAGE. Subject to (a) compliance with all applicable
governmental requirements and subject to (b) Landlord's approval of the exact
size, location and materials thereof (which approval shall not be unreasonably
withheld, conditioned or delayed, and with the understanding that Tenant's logo
is approved), Tenant shall have the right to install exterior monument signage
adjacent to entrances to the Building and the Project and on the exterior of the
Building, but in not more than two (2) locations on the exterior of the
Building. Tenant shall be responsible for the costs related to such signage.
43. OPTION TO RENEW. Tenant shall have the right to extend the Term
for one (1) period of five (5) years ("Extension Term") following the initial
Expiration Date, by giving written notice ("Exercise Notice") to Landlord at
least eighteen (18) months prior to the
<PAGE> 45
Expiration Date, subject to the following conditions: (i) no event of default is
continuing under this Lease at the time of the Exercise Notice or at the
commencement of the Extension Term; and (ii) Landlord has not delivered a notice
of default to Tenant hereunder during the twenty-four (24) month period
immediately preceding the Exercise Notice, regardless of whether any such
default was cured by Tenant within any applicable grace or cure period;
provided, however, that any such notice of default relating to a non-monetary
default which was disputed, in good faith, by Tenant and ultimately determined
(by agreement of the parties, arbitration or judicial action) not to be a
default shall not be considered for purposes of determining whether such
condition has been met.
44. RENT DURING EXTENSION TERM. The Monthly Base Rent during the
seven-year Extension Term shall be the greater of the Base Rent paid during the
last month of the immediately preceding Term or the Fair Market Rental Value for
the Premises as of the commencement of the option term as determined below:
(a) Within the later of thirty (30) days after receipt of
Tenant's Exercise Notice or eleven (11) months prior to the Expiration Date,
Landlord shall notify Tenant of Landlord's estimate of the Fair Market Rental
Value for the Premises, as determined below, for determining Monthly Base Rent
during the ensuing Extension Term. Within fifteen (15) days after receipt of
such notice from Landlord, Tenant shall notify Landlord in writing that it (i)
agrees with such Fair Market Rental Value or (ii) disagrees with such Fair
Market Rental Value. No response shall constitute disagreement. If Tenant
disagrees with Landlord's estimate of Fair Market Rental Value for the Premises,
then the parties shall meet and endeavor to agree within fifteen (15) business
days after Landlord receives Tenant's notice described in the immediately
preceding sentence. If the parties cannot agree upon the Fair Market Rental
Value within said fifteen (15) day period, Tenant may make written demand upon
Landlord for arbitration in accordance with the following paragraph. The
judgment or the award rendered in any such arbitration may be entered in any
court having jurisdiction and shall be final and binding between the parties.
The arbitration shall be conducted and determined in the City of Palo Alto in
accordance with the then prevailing rules of the American Arbitration
Association or its successor for arbitration or commercial disputes, except to
the extent the procedures mandated by said rules shall be modified as follows:
(i) Tenant shall, by the applicable date specified
therefor in this Lease, make written demand upon Landlord pursuant to this Lease
for arbitration, specifying therein the name and address of the person to act as
the arbitrator on Tenant's behalf. The arbitrator shall be qualified as a real
estate appraiser, with at least five (5) years experience in appraising major
commercial property in Santa Clara County and a member of a recognized society
of real estate appraisers, who would qualify as an expert witness over objection
to give opinion testimony addressed to the issue in a court of competent
jurisdiction. Failure on the part of Tenant to make a timely and proper demand
for such arbitration (specifying the arbitrator to act on Tenant's behalf, as
aforesaid) shall constitute a waiver of the right thereto. Within ten (10)
business days after receipt of Tenant's demand for arbitration, Landlord shall
give written notice to Tenant
<PAGE> 46
pursuant to this Lease, specifying the name and address of the person designated
by Landlord to act as arbitrator on its behalf who shall be similarly qualified.
If Landlord fails to notify Tenant of the appointment of its arbitrator, within
or by the time above specified, then the arbitrator appointed by Tenant shall be
the arbitrator to determine the issue. Notwithstanding the foregoing, upon
receipt of Tenant's demand for arbitration Landlord may, in its sole discretion,
deliver a revised estimate of the Fair Market Value of the Premises, and within
fifteen (15) days after receipt of such notice from Landlord, Tenant shall
notify Landlord in writing that it (i) agrees with such revised Fair Market
Rental Value, or (ii) disagrees with such revised Fair Market Rental Value, with
no response constituting agreement. If Tenant disagrees with Landlord's Fair
Market Value, then within ten (10) business days after receipt of Tenant's
notice of such disagreement Landlord shall give Tenant written notice specifying
Landlord's designated arbitrator as provided in this paragraph above.
(ii) If two (2) arbitrators are chosen pursuant to
paragraph (1) above, the arbitrators so chosen shall meet within ten (10)
business days after Landlord notifies Tenant of the appointment of Landlord's
arbitrator as aforesaid. If the two appraisers reach agreement on the Fair
Market Rental Value, that value shall be binding and conclusive upon the
parties. If within ten (10) business days after such first meeting the two
arbitrators shall be unable to agree upon a determination of Fair Market Rental
Value, they, themselves, shall appoint a third arbitrator, who shall be a
competent and impartial person with qualifications similar to those required of
the first two arbitrators pursuant to Paragraph (1). If the first two
arbitrators are unable to agree upon such appointment within five (5) business
days after expiration of said ten (10) days period, the third arbitrator shall
be selected by Landlord and Tenant, if they can agree thereon, within a further
period of ten (10) business days. If Landlord and Tenant do not so agree, then
either party, on behalf of both, may request appointment of such a qualified
person by the then Chief Judge of the United States District Court having
jurisdiction over the City and county of San Francisco, and the other party
shall not raise any question as to such Judge's full power and jurisdiction to
entertain the application for and make the appointment. The three (3)
arbitrators shall decide the dispute if it has not previously been resolved by
following the procedure set forth in the following paragraph.
(iii) If an issue cannot be resolved by agreement
between the two arbitrators selected by Landlord and Tenant or settlement
between Landlord and Tenant during the course of arbitration, the issue shall be
resolved by the three arbitrators in accordance with the following procedures.
Within ten (10) business days after appointment of the third arbitrator, each of
the two arbitrators selected by Landlord and Tenant shall state in writing his
determination of the Fair Market Rental Value supported by the reasons therefor
with counterpart copies to each party. The arbitrators shall arrange for a
simultaneous exchange of such proposed resolutions. The role of the third
arbitrator shall be to select, within ten (10) business days after submission to
the third arbitrator of the two proposed resolutions, which of the two proposed
resolutions most closely approximates the third arbitrator's determination of
Fair Market Rental Value. The third arbitrator shall have no right to propose a
middle ground or any modification of either of the two proposed resolutions. The
resolution he chooses as most closely approximating
<PAGE> 47
his determination shall constitute the decision of the arbitrators and be final
and binding upon the parties.
(iv) If any arbitrator fails, refuses or is unable to
act, his successor shall be appointed by the party who originally appointed him,
but in the case of the third arbitrator, his successor shall be appointed in the
same manner as provided for appointment of the third arbitrator. Landlord and
Tenant shall each pay the fees and expenses of its respective arbitrator, if
any, and shall each pay half of the fees and expenses of the third arbitrator,
if any. The attorneys' fees and expenses of counsel for the respective parties
and of witnesses shall be paid by the respective party engaging such counsel or
calling such witnesses.
(v) The arbitrators shall have the right to consult
experts and competent authorities with factual information or evidence
pertaining to a determination of Fair Market Rental Value, but any such
consultation shall be made in the presence of both Landlord and Tenant with full
right on their part to cross-examine. The arbitrators shall render their
decision and award in writing with counterpart copies to Landlord and Tenant.
The arbitrators shall have no power to modify the provisions of this Lease.
(b) Wherever used throughout this Paragraph 44 [Rent during
Extension Term] the term "Fair Market Rental Value" shall mean the fair market
rental value of the Premises, using as a guide the rate of monthly base rent
which would be charged during the Extension Term (including periodic increases
during the Extension Term, if any) in the South Bay Area for comparable
commercial space in comparable condition, of comparable quality, as of the time
that the Extension Term commences, with appropriate adjustments regarding taxes,
insurance and operating expenses as necessary to insure comparability to this
Lease, as the case may be, and also taking into consideration amount and type of
parking, location, existing leasehold improvements (regardless of who paid for
them and assuming they are useful to Tenant), proposed term of lease, amount of
space leased, extent of service provided or to be provided, and any other
relevant terms or conditions.
(c) If binding arbitration has not been completed prior to
the expiration of any preceding period for which Monthly Base Rent has been
determined, Tenant shall pay Monthly Base Rent at the greater of the Base Rent
paid during the last month of the immediately preceding Term or the Fair Market
Rental Value estimated by Landlord, with an adjustment to be made once Fair
Market Rental Value is ultimately determined by binding arbitration. Such
adjustment shall not result in a decrease of the Monthly Base Rent for the
Premises below the amount payable by Tenant as of the period immediately
preceding the ensuing Extension Term.
(d) From and after the commencement of the Extension Term,
all of the other terms, covenants and conditions of the Lease shall also apply;
provided, however, that Tenant shall have no further rights to extend the Term.
45. SATELLITE ANTENNAS. During the Term, Tenant shall have the
right,
<PAGE> 48
subject to relevant regulatory approvals and Landlord's consent, such consent
not to be unreasonably withheld or delayed, to install one or more satellite
antennas (each, an "Antenna") on the roof of the Building in a location
satisfactory to both Landlord and Tenant. Without otherwise limiting the
criteria upon which Landlord may withhold its consent to any proposed Antenna,
if Landlord withholds its consent due to concerns regarding the appearance of
the Antenna or the impact on structural aspects of the Building, such
withholding of consent shall be presumptively reasonable. Tenant shall not be
charged any rent for roof space. Prior to submitting any plans to the City of
Mountain View or proceeding with any installation of an Antenna, Tenant shall
submit to Landlord elevations and specifications for the Antenna. Tenant shall
install any approved Antennas at its sole expense and shall be responsible for
any damage caused by the installation of the Antennas or related to the
Antennas. At the end of the Term, Tenant shall remove the Antennas from their
locations and repair any damage caused by such removal.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of
the date first above written.
LANDLORD: 605 EAST FAIRCHILD ASSOCIATES, L.P.,
a California limited partnership
By: M-D Ventures, Inc.,
a California corporation,
Its General Partner
By: /s/ STEVE DOSTART
-------------------------------------
Steve Dostart
Its Vice President
TENANT: CALIPER TECHNOLOGIES CORP.,
a Delaware corporation
By: /s/ CALVIN CHOW
-------------------------------------
Calvin Chow
Its Chief Operating Officer
<PAGE> 49
LIST OF EXHIBITS
EXHIBIT "A" MAP OF PROJECT (INCLUDING THE BUILDING)
EXHIBIT "A-1" DESCRIPTION OF LAND
EXHIBIT "B" CERTIFICATE ESTABLISHING OCCUPANCY DATE AND RENT COMMENCEMENT DATE
EXHIBIT "C" ESTOPPEL CERTIFICATE
EXHIBIT "D" RULES & REGULATIONS
EXHIBIT "E" REQUIRED CONDITION OF PREMISES UPON SURRENDER
EXHIBIT "F" FORM OF LETTER OF CREDIT
EXHIBIT "G" TENANT'S HAZARDOUS SUBSTANCES DISCLOSURES
EXHIBIT "H" APPROVED ALTERATIONS AREA
EXHIBIT "I" SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
<PAGE> 50
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
Defined Term Paragraph
- ----------------------
<S> <C>
Additional Charges.....................................................4(a)(ii)
Affiliate.................................................................11(k)
Alterations................................................................8(b)
Approved Alterations.......................................................8(b)
Assignment................................................................11(a)
Antenna......................................................................45
Base Building..............................................................1(a)
Base Rent...............................................................4(a)(i)
Building.........................................Basic Lease Information & 1(a)
Building Systems...........................................................9(b)
Default Damages...........................................................34(e)
Default Loan..............................................................34(e)
Default Rate...............................................................4(d)
Environmental Reports........................................................40
Excess Amount.............................................................34(e)
Expenses.............................................................4(c)(1)(C)
Expense Year.........................................................4(c)(1)(D)
</TABLE>
<PAGE> 51
<TABLE>
<CAPTION>
Defined Term Paragraph
- ----------------------
<S> <C>
Exercise Notice..............................................................43
Expiration Date............................................................3(a)
Extension Term...............................................................43
Fair Market Rental Value..................................................44(b)
Force Majeure Events.......................................................9(e)
GAAP..............................................................3(c)(1)(C)(v)
Hazardous Substances......................................................40(a)
Insolvency Proceeding........................................................20
Interest Rate........................................................3(c)(1)(C)
Land.............................................Basic Lease Information & 1(a)
Landlord.......................................................Recitals & 37(a)
Landlord Action...........................................................34(e)
Landlord Parties..........................................................12(a)
Landlord's Expense Statement............................................4(c)(3)
Landlord's Tax Statement.............................................4(c)(2)(A)
Laws.......................................................................7(a)
Letter of Credit..........................................................34(a)
Liquid Assets.............................................................11(g)
Monthly Base Rent.......................................Basic Lease Information
Mortgage.....................................................................17
Mortgagee....................................................................17
</TABLE>
<PAGE> 52
<TABLE>
<CAPTION>
Defined Term Paragraph
- ----------------------
<S> <C>
Occupancy Date.............................................................3(a)
Permitted Alterations......................................................8(c)
Permitted Transfer........................................................11(g)
Premises...................................................................1(a)
Project....................................................................1(a)
Real Estate Taxes....................................................4(c)(1)(B)
Rent...................................................................4(a)(ii)
Rent Commencement Date.....................................................3(c)
Rentable Area...........................................Basic Lease Information
Rules & Regulations..........................................................18
Strategic Partner.........................................................11(h)
Sublease..................................................................11(a)
Taking....................................................................23(a)
Tax Year.............................................................4(c)(1)(A)
Tenant.........................................................Recitals & 37(a)
Tenant Parties............................................................12(b)
Tenant's Broker.........................................Basic Lease Information
Term.......................................................................3(a)
</TABLE>
<PAGE> 1
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
This Agreement, by and between DANIEL KISNER, M.D. ("Employee") and
Caliper Technologies Corp. (the "Company"), is made as of January 18, 1999.
In consideration of the mutual covenants contained in this Agreement, and
in consideration of the employment of Employee by the Company, the parties agree
as follows:
1. Duties and Scope of Employment
(a) Position. The Company agrees to employ Employee under the terms of
this Agreement in the position of President and Chief Executive
Officer beginning on February 28, 1999 (the "Start Date"). As
President and Chief Executive Officer, Employee shall be the
principal executive officer of the Company, shall have full
responsibility for managing the Company, and shall report directly
to the Board of Directors of the Company.
(b) Obligations. Employee shall devote his efforts full time to the
Company, and shall not engage in any outside activities that
interfere or conflict with Employee's responsibilities to the
Company or are inconsistent with the Company's policies as
established by the Board of Directors from time to time.
Notwithstanding the foregoing, nothing shall preclude Employee from
serving with prior notice to and approval of the Board, on the
boards of directors of a reasonable number of other corporations.
(c) Director. Upon joining the Company, Employee shall become a member
of the Company's Board of Directors. As long as Employee serves as
Chief Executive Officer, Employee shall be nominated to serve on the
Board of Directors in connection with any meeting to elect the same.
Employee agrees to submit immediately his resignation as a director
if Employee ceases to be President and Chief Executive Officer.
2. Compensation
(a) Base Salary. Beginning on the Start Date, Employee shall be paid a
base salary of $350,000 per year, payable semi-monthly in accordance
with the Company's payroll policies and subject to standard payroll
deductions and withholdings. The Board of Directors shall review
Employee's performance and the Company's financial and operating
results on at least an annual basis, and may increase Employee's
base salary as in its reasonable discretion deems appropriate based
on such review.
(b) Annual Bonuses. Within the first 60 days following the Start Date,
the Board and Employee shall prepare and agree on a reasonable bonus
plan setting forth reasonable performance goals in various areas,
such as delivering research contracts, defining company strategy and
goals, preparing annual budgets,
1.
<PAGE> 2
developing strategic relationships and developing products, to be
achieved in calendar year 1999. The intent of the bonus plan is that
Employee's complete achievement of such goals shall result in a
bonus equaling 50% of Employee's Base Salary.
During the 1999 annual performance review (which shall occur on or
before January 31, 2000), the Board shall determine the extent to
which performance goals have been achieved and shall award Employee
the appropriate bonus based on the bonus plan. If a bonus is
awarded, the bonus shall be delivered to Employee within 60 days of
the date that Employee is provided with his annual performance
review.
For each subsequent fiscal year the Company, Employee shall
participate in any annual incentive plan or program of the Company
at a level commensurate with his positions and responsibilities at
the Company. Under such plans and programs, Employee shall have an
on-plan target bonus opportunity each year of at least 50% of his
then current annualized Base Salary, payable in that amount if the
performance goals established for the relevant year are completely
met. If such performance goals are not completely met, Employee
shall receive a lesser amount (or nothing) as determined in
accordance with applicable guidelines. Employee shall receive his
annual bonus payment no later than other senior executives receive
their annual bonus payments.
3. Equity and Housing Loan Forgiveness
(a) Employee will be granted an incentive stock option which shall be
incentive stock options to the maximum extent permitted by law to
purchase 1,000,000 shares of Common Stock of the Company at the fair
market value of such shares on the Start Date. The fair market value
of common shares on December 15, 1998 was $0.62. The shares subject
to the option will vest over a five-year period vesting at a rate of
1/60th of the shares per month of employment, except as otherwise
provided in Sections 3 and 8. The option will be granted pursuant to
the Company's 1996 Stock Incentive Plan and the Company's standard
form of stock option agreement except as such standard form of
agreement is modified by the terms of this agreement. Such shares
will represent approximately 3.3% of the approximately 30 million
shares of Common and Preferred Stock outstanding.
(b) If any Adjustments Upon Changes in Stock are made under Section 13
of the Company's 1996 Stock Incentive Plan, such adjustments shall
apply to Employee as they do to all other employees of the Company
except that the eighteen (18) month accelerated vesting mentioned in
subsection 13(b) shall be replaced for Employee by twenty-four (24)
months if a Change of Control is to be completed for a transaction
price that is greater than $200 million and by thirty (30) months if
a Change of Control is completed for a transaction price that is
greater than $300 million. Such adjustments shall apply to the Stock
Award granted in subsection 3(a) of this Employment Agreement and to
any other Stock Awards granted to Employee. If the Change of Control
occurs within twenty-four (24)
2.
<PAGE> 3
months of the Start Date and either 18 months or 24 months or 30
months accelerated vesting is granted, then either 18 or 24 or 30
months, respectively, of the Housing Loan described in Section 4(f)
will be forgiven at the rate of 1/60th of the housing loan per
month. Such forgiveness shall not be grossed up for tax purposes.
4. Employee Benefits- Closing Costs- Attorney Fees, Housing Loan
(a) Employee shall be entitled to the full benefits for which Employee
is eligible under the employee benefit plans and executive
compensation programs maintained by the Company, including medical,
dental, disability and life insurance benefits.
(b) Employee shall be reimbursed for normal real estate commissions,
closing costs and reasonable packing, shipping, storage, unpacking
and insurance expenses in connection with selling his current
residence and obtaining new permanent living quarters near the
Company. Employee shall also be reimbursed for up to two points on a
mortgage on the new permanent residence.
(c) Employee shall be reimbursed for normal temporary housing costs
incurred by the employee in connection with signing this Employment
Agreement for up to six months.
(d) Employee and his immediate family shall be reimbursed for normal
travel and living expenses for two weekend trips to the Palo Alto
area for the purpose of purchasing a new principal residence.
(e) Employee shall be reimbursed for normal travel expenses for two
weekend trips per month to the San Diego area from the Start Date to
the earlier of August 31, 1999 or the moving of his family to the
Palo Alto area.
(f) Employee shall be entitled to a housing loan of up to $500,000 in
connection with retaining living quarters near the Company. Such
loan will be made to the Employee by the Company with a maximum term
of six (6) years (with the due date for full repayment accelerated
upon voluntary termination of employment to such date of
termination) at an annual interest rate of 4.64%, compounded
annually, (or such higher interest as shall be necessary to avoid
imputed income to Employee under all applicable sections of the
Code). Portions of such loan and interest due may be forgiven by the
Board of Directors based upon annual Employee performance reviews
each year. Any forgiveness granted will be grossed up for tax
purposes by paying Employee an additional 75% of the amount of the
debt forgiveness to assist with the payment of tax liability for
such forgiveness. A minimum of 10% of the total loan will be
forgiven each year if Employee is retained into the coming year. It
is the intent, but not the obligation, of the Board to forgive this
loan based upon good performance over five years.
(g) Employee shall be entitled to a monthly mortgage assistance payment
to support up to $500,000 of mortgage principal on a 30 year
mortgage. Such payment shall
3.
<PAGE> 4
be grossed up for tax purposes by paying Employee an additional 75%
of the amount of the mortgage assistance payment to assist with the
payment of tax liability for such mortgage assistance payment. Such
grossed up payment shall start with the first month such payment is
due and shall continue for twelve months at 100% of the payment,
shall continue for the next twelve months at 80% of the payment, for
the next twelve months at 60% of the payment, for the next twelve
months at 40% of the payment and for the next twelve months at 20%
of the payment, at which time such payments shall end. Such payments
shall also end at the termination of Employee's employment at
Caliper.
5. Proprietary Information Agreement
Employee agrees to sign and comply with the Company's Proprietary
Information and Inventions Agreement.
6. Employment at Will: Limitation of Remedies
The Company and Employee acknowledge that Employee's employment is at will
and can be terminated by either party at any time with or without cause.
Except as provided in Section 9, if Employee's employment terminates for
any reason, Employee shall not be entitled to any payments, benefits,
damages, awards or compensation other than as provided by this Agreement.
This at-will relationship supersedes any previous written or oral
statements by the parties and cannot be changed except in writing signed
by Employee and duty authorized officer of the Company.
7. Term of Employment
(a) Voluntary Termination by Employee. Employee may terminate his
employment voluntarily giving the Company 30 days' advance notice in
writing. No compensation or payments will be paid or provided
following the date when such a termination is effective. In lieu of
continuing to employ Employee through the date when such a
termination is effective, the Company shall have the option to
terminate Employee's employment immediately upon receipt of such
notice, provided that the Company shall be obligated to continue to
pay Employee his base salary, benefits and vacation accruals through
the date termination otherwise would have been effective had the
Company not exercised such option. Termination by the Company
pursuant to this Section 7(a) shall not be deemed to be termination
without Cause.
(b) Termination by the Company. The Company may terminate Employee's
employment at any time, for any reason or for no reason.
(i) Termination for Cause. If the Company terminates Employee's
employment for Cause, no compensation or payments will be
provided to Employee following the date when such a
termination of employment is effective. Any remaining housing
loan shall be converted to a five year note at prime plus
1.0%, compounded annually, and the first payment shall begin
one year from the termination date.
4.
<PAGE> 5
(ii) Termination Without Cause. If the Company terminates
Employee's employment without Cause, the provisions of Section
8 and the Definitions of Section 9 shall apply. Any remaining
housing loan shall be converted to a five year note at prime
plus 1.0%, compounded annually, and the first payment shall
begin one year from the termination date.
8. Payment Upon Termination Pursuant to Termination Without Cause and
Constructive Termination
(a) If Employee's employment is terminated without Cause, or voluntarily
by Employee within three months following a Constructive
Termination, Employee shall be entitled to receive the following:
(i) Severance Payment. The Company shall continue to pay to
Employee his then current salary for twelve months in monthly
installments, and benefits, following the date when such a
termination of employment is effective, provided that: (A) the
Company's obligation to continue to pay such base salary shall
cease as of the date Employee commences full-time employment
with another business entity (and Employee agrees to provide
notice of such employment within three business days of
accepting such an offer); and (B) Employee executes a waiver
and release of claims substantially in the form set forth in
Exhibit A hereto.
(ii) Acceleration of Stock Vesting. If such termination without
Cause or voluntary termination following a Constructive
Termination shall occur after the six month anniversary of the
Start Date, all of the shares that would become vested within
twelve months of such date of termination under the terms of
the options described in Section 3 and any other options
granted to Employee in the future will be deemed to have
vested provided Employee executes a waiver and release of
claims substantially in the form set forth in Exhibit A
hereto.
(b) If Employee's employment is terminated without Cause within thirteen
months after a Change in Control, or is voluntarily terminated by
Employee following a Constructive Termination within thirteen months
after a Change of Control, Employee shall be entitled to receive the
following:
(i) Severance Payment. The Survivor shall continue to pay to
Employee his then current salary for twelve months in monthly
installments, and benefits, following the date when such a
termination of employment is effective, provided that: (A) the
Survivor's obligation to continue to pay such base salary
shall cease as of the date Employee commences full-time
employment with another business entity (and Employee agrees
to provide notice of such employment within three business
days of accepting such an offer); and (B) Employee executives
a waiver and release of claims substantially in the form set
forth in Exhibit A hereto.
5.
<PAGE> 6
(ii) Acceleration of Stock Vesting and Housing Loan Forgiveness
after a Change of Control if the Survivor assumes the Stock
Awards or substitutes similar Stock Awards. If such
termination without Cause or voluntary termination following a
Constructive Termination shall occur, all of the shares that
would become vested within twenty-four (24) months (thirty
(30) months if a Change of Control is completed for a
transaction price that is greater than $300 million) of the
Termination Date under the terms of the options described in
Section 3 and any other options granted to Employee in the
future, will be deemed to have vested. If the Change of
Control occurs within twenty-four (24) months of the Start
Date and either 24 months or 30 months accelerated vesting is
granted then either 24 or 30 months, respectively, of the
Housing Loan described in Section 4(f) will be forgiven at the
rate of 1/60th of the housing loan per month provided Employee
executes a waiver and release of claims substantially in the
form set forth in Exhibit A hereto. Such forgiveness shall not
be grossed up for tax purposes.
9. Parachute Payment
Anything in this Agreement to the contrary nonwithstanding, if the
aggregate of the amounts due Employee under this Agreement and any other
plan, program, or arrangement of the Company or its Affiliates constitutes
a "Parachute Payment" as such term is defined in Section 280G of the
Internal Revenue Code of 1986 (the "Code"), and the amount of the
Parachute Payment, reduced by all Federal, state and local taxes
applicable to such payments which are considered to be contingent on a
Change in Control, including the excise tax imposed pursuant to Section
4999 of the Code, is less than the amount Employee would receive, after
taxes, if he were paid only a dollar amount equal to three times his Base
Amount as defined in Section 280G(b)(3) of the Code less $1.00, then the
payments made to Employee under this Agreement which are contingent on a
Change of Control shall be reduced to an amount which, when added to the
aggregate of all other payments to Employee which are contingent on a
Change of Control, will make the total fair market value of such payments
equal to three times his Base Amount less $1.00, all as determined under
Section 280G of the Code.
10. Definition
As used in this Agreement, the following definitions shall apply
(a) "Cause" shall mean the occurrence of any of the following: (i)
Employee engages in conduct that constitutes willful gross neglect
or willful gross misconduct in carrying out his duties under this
Agreement, resulting, in either case, in material economic harm to
the company, unless Employee believed in good faith that such
conduct was in, or not opposed to, the best interests of the
Company; (ii) any unjustified refusal to follow reasonable
directives duly adopted by the Board; or (iii) conviction of a
felony crime involving moral turpitude. Written notice shall be
provided and Employee shall have a 30-day period to correct.
6.
<PAGE> 7
(b) "Change in Control" shall mean (i) any merger or consolidation of
the Company with, or any sale of all or substantially all of the
Company's assets to any other unaffiliated corporation or entity,
unless as a result of such merger, consolidation or sale of assets
the holders of the Company's voting securities prior thereto hold at
least 50 percent of the total voting power in the surviving or
successor corporation or entity, or (ii) the acquisition by any
Person (other than any employee benefit plan, or related trust,
sponsored or maintained by the Company or an affiliate of the
Company) as Beneficial Owner (as such terms are defined in the
Securities Exchange Act of 1934, as amended, or the rules and
regulations thereunder), directly or indirectly, of securities of
the Company representing 50 percent or more of the total voting
power represented by the Company's then outstanding voting
securities. For purposes of this section 10(b), the term "affiliate"
shall mean any person which controls the Company, which is
controlled by the Company, or which is under common control with the
Company within the meaning of Rule 144(a)(1) promulgated under the
Securities Act of 1933, as amended. Notwithstanding any provision in
this agreement to the contrary, the term "affiliate" shall not
include the Hewlett-Packard Company or Dow Corning Corporation or
any subsidiary of either company.
(c) "Constructive Termination" shall mean either (i) a substantial
reduction in Employee's duties, responsibilities or position or (ii)
any substantial downward change in Employee's compensation or
benefits, except for compensation and benefit changes which are
consistent with downward changes for all Company executives.
11. Other Agreements
Employees represents and warrants the Employee's performance of his duties
for the Company will not violate any agreements, obligations or
understandings that he may have with any third party or prior employer.
Employee agrees not to make any unauthorized disclosure or use, on behalf
of the Company, of any confidential information belonging to any of
Employee's former employers. Employee also represents that he is not in
authorized possession of any materials containing a third party's
confidential and proprietary information. During Employee's employment
with the Company, Employee may make use of information general known and
used by persons with training and experience comparable to Employee's own,
and information which is common knowledge in the industry or is otherwise
legally available in the public domain.
12. Governing Law
This Agreement shall be governed by the laws of the State of California as
applied to agreements and entered into by California residents and to be
performed entirely within the State of California.
13. Expiration of Offer
7.
<PAGE> 8
This offer of employment expires at midnight on January 31, 1999.
14. Entire Agreement
This Agreement constitutes the complete, final exclusive embodiment of the
entire agreement between Employee and the Company with respect to the
terms and conditions of Employee's employment. Employee represents and
warrants that he is entering into this Agreement voluntarily, and without
reliance upon any promise, warranty or representation, written or oral,
other than those expressly contained herein. This Agreement supersedes any
other such promises, warranties, representations or agreements. This
Agreement may not be amended or modified except by a written instrument
signed by Employee and duly authorized officer of the Company.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth above.
CALIPER TECHNOLOGIES CORP.
/s/ DAVID MILLIGAN
--------------------------------------
DAVID MILLIGAN
CHAIRMAN
/s/ DANIEL KISNER, M.D.
- ----------------------------------
DANIEL KISNER, M.D.
8.
<PAGE> 9
EMPLOYMENT AGREEMENT AND RELEASE
Exhibit A
Except as otherwise set forth in this Employee Agreement and Release (the
"Agreement") and Section 9 of that certain Employment Agreement, dated as of
January 1, 1999 between the undersigned and Caliper Technologies Corp. (the
"Company"), I hereby release, acquit and forever discharge the company, its
parents and subsidiaries, and their officers, directors, agents, servants,
employees, attorneys, shareholders, successors, assigns and affiliates, of and
from any and all claims, liabilities, demands, causes of action, costs,
expenses, attorneys fees, damages, indemnities and obligations of every kind and
nature, in law, equity, or otherwise, known and unknown, suspected and
unsuspected, disclosed and undisclosed, arising out of or in any way related to
agreements, events, acts or conduct at any time prior to and including the
execution date of this Agreement, including but not limited to: all such claims
and demands directly or indirectly arising out of or in any way connected with
my employment with the Company or the termination of that employment; claims or
demands related to salary, bonuses, commissions stock, stock options, or any
other ownership interests in the company, vacation pay, fringe benefits, expense
reimbursements, severance pay, or any other form of compensation; claims
pursuant to any federal, state or local law, statute, or cause of action
including, but not limited to, the federal civil rights Act of 1964, as amended;
the federal Americans with Disabilities ("ADEA"); the California Fair Employment
and Housing Act, as amended; tort law; contract law; wrongful discharge;
discrimination; harassment; fraud; defamation; emotional distress; and breach of
the implied covenants of good faith and fair dealing.
I acknowledge that I am knowingly and voluntarily waiving and releasing
any rights I may have under ADEA. I also acknowledge that the consideration
given for the waiver and release in the preceding paragraph hereof is in
addition to anything of value to which I was already entitled. I further
acknowledge that I have been advised by this writing, as required by the ADEA,
that; (a) my waiver and release do not apply to any rights or claims that may
arise after the execution date of this Agreement; (b) I have been advised hereby
that I have the right to consult with an attorney prior to executing this
Agreement; (c) I have twenty-one (21) days to consider this Agreement (although
I may choose to voluntarily execute this Agreement earlier); (d) I have seven
(7) days following the execution of this Agreement by the parties to revoke the
Agreement; and (e) this Agreement shall not be effective until the date upon
which the revocation period had expired, which shall be the eighth day after
this Agreement is executed by me.
In giving this release, which includes claims which may be unknown to me
at present, I acknowledge that I have read and understand Section 1542 of the
California Civil Code which reads as follows: "A GENERAL RELEASE DOES NOT EXTEND
TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT
THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY
AFFECTED HIS SETTLEMENT WITH THE DEBTOR." I hereby expressly waive and
relinquish all rights and benefits under that section and any law of any
jurisdiction of similar effect with respect to my release of any claims I may
have against the Company.
Date: January 18, 1999 By: /s/ DANIEL KISNER, M.D.
-------------------------------
DAN KISNER, M.D.
9.
<PAGE> 1
Exhibit 10.7
PROMISSORY NOTE
$425,000.00 July 29, 1999
Mountain View, California
FOR VALUE RECEIVED, DANIEL KISNER, M.D. ("Employee"), an employee of
Caliper Technologies Corp. ("Company"), hereby unconditionally promises to pay
to the order of Company, in lawful money of the United States of America and in
immediately available funds, the principal sum of Four Hundred Twenty Five
Thousand Dollars ($425,000) (the "Loan") due and payable on the date and in the
manner set forth below.
1. Intent. It is the intent of the parties that the purpose of this Note
is not for consumer, family or household purposes.
2. Principal Repayment. The outstanding principal amount of the Loan
shall be due and payable on the earlier of the following (the "Maturity Date"):
(a) July 29, 2005; or (b) the date on which Employee voluntarily terminates his
employment relationship with Company.
3. Interest Rate. Employee further promises to pay interest on the
outstanding principal amount hereof from the date hereof until payment in full,
which interest shall be payable at the rate of 5.96% per annum or the maximum
rate permissible by law (which under the laws of the State of California shall
be deemed to be the laws relating to permissible rates of interest on commercial
loans), whichever is less, compounded annually. Interest shall be due and
payable on the Maturity Date and shall be calculated on the basis of a 360 day
year for the actual number of days elapsed.
4. Place of Payment; Prepayment. All amounts payable hereunder shall be
payable at the office of Company unless another place of payment shall be
specified in writing by Company. Prepayment is permitted.
5. Application of Payments. Payment on this Note shall be applied first
to accrued interest, if any, and thereafter to the outstanding principal balance
hereof.
6. Default. Each of the following events shall be an "Event of Default"
hereunder:
(a) Employee fails to pay timely any of the principal amount due
under this Note on the date the same becomes due and payable or any accrued
interest or other amounts due under this Note, if any, on the date the same
becomes due and payable, or fails to perform any other obligations hereunder;
(b) Employee files a petition or action for relief under any
bankruptcy, insolvency or moratorium law or any other law for the relief of, or
relating to, debtors, now or
<PAGE> 2
hereafter in effect, or makes any assignment for the benefit of creditors or
takes any action in furtherance of any of the foregoing;
(c) An involuntary petition is filed against Employee (unless such
petition is dismissed or discharged within sixty (60) days) under any bankruptcy
statute now or hereafter in effect, or a custodian, receiver, trustee, assignee
for the benefit of creditors (or other similar official) is appointed to take
possession, custody or control of any property of Employee; or
(d) Employee's employment by or association with the Company is
terminated for any reason or no reason, including, without limitation, death of
Employee.
Upon the occurrence of an Event of Default hereunder, all unpaid principal,
accrued interest and other amounts owing hereunder, if any, shall, at the option
of Company, and, in the case of an Event of Default pursuant to (b) or (c)
above, automatically, be immediately due, payable and collectible by Company
pursuant to applicable law. Notwithstanding the foregoing, if an Event of
Default has occurred under (d) above due to the Company's termination of
Employee employment with the Company with or without cause, this Note shall be
converted to a five (5) year note at an interest rate equal to the Prime Rate
plus one percent (1%), compounded annually, and the principal shall be payable
in five equal annual installments, together with interest thereon payable in
arrears calculated on the basis of a 360 day year for the actual number of days
elapsed, beginning one year from such date of termination of employment. The
Prime Rate shall mean the variable rate of interest, per annum, most recently
published in the Money Rate Section of the New York Edition of The Wall Street
Journal, as the "prime rate". The Company shall have all rights and may exercise
any remedies available to it under law, successively or concurrently. Employee
expressly acknowledges and agrees that Company shall have the right to offset
any obligations of Employee hereunder against salaries, bonuses or other amounts
that may be payable to Employee by Company.
7. Waiver. Employee waives presentment and demand for payment, notice of
dishonor, protest and notice of protest of this Note, and shall pay all costs of
collection when incurred, including, without limitation, reasonable attorneys'
fees, costs and other expenses.
The right to plead any and all statutes of limitations as a defense to any
demands hereunder is hereby waived to the full extent permitted by law.
8. Governing Law. This Note shall be governed by, and construed and
enforced in accordance with, the laws of the State of California, excluding
conflict of laws principles that would cause the application of laws of any
other jurisdiction.
2
<PAGE> 3
9. Successors and Assigns. The provisions of this Note shall inure to the
benefit of and be binding on any successor to Employee and shall extend to any
holder hereof. Employee shall not, without the prior written consent of holder,
assign any of its rights or obligations hereunder.
Dated: July 29, 1999
/s/ DANIEL KISNER, M.D.
----------------------------------
Daniel Kisner, M.D.
3
<PAGE> 1
EXHIBIT 10.8
CALIPER TECHNOLOGIES CORP.
AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
MAY 7, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. REGISTRATION RIGHTS......................................................................1
1.1 Definitions..................................................................1
1.2 Request for Registration.....................................................3
1.3 Company Registration.........................................................5
1.4 Obligations of the Company...................................................5
1.5 Expenses of Demand Registration..............................................6
1.6 Expenses of Company Registration.............................................7
1.7 Underwriting Requirements....................................................7
1.8 Delay of Registration........................................................8
1.9 Indemnification..............................................................8
1.10 Reports Under Securities Exchange Act of 1934...............................10
1.11 Form S-3 Registration.......................................................11
1.12 Assignment of Registration Rights...........................................12
1.13 Limitations on Subsequent Registration Rights...............................12
1.14 "Market Stand-Off" Agreement................................................12
1.15 Termination of Registration Rights..........................................13
2. COVENANTS OF THE COMPANY................................................................13
2.1 Financial Statements........................................................13
2.2 Inspection..................................................................14
2.3 Termination of Information and Inspection Covenants.........................14
2.4 Right of First Offer........................................................14
3. MISCELLANEOUS...........................................................................16
3.1 Successors and Assigns......................................................16
3.2 Governing Law...............................................................16
3.3 Counterparts................................................................16
3.4 Titles and Subtitles........................................................16
3.5 Notices.....................................................................16
3.6 Amendments and Waivers......................................................17
3.7 Severability................................................................17
3.8 Aggregation of Stock........................................................17
3.9 Entire Agreement............................................................17
</TABLE>
i.
<PAGE> 3
EXHIBIT 10.7
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
THIS AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT (the "Agreement")
is made as of the 7th of May, 1998, by and between CALIPER TECHNOLOGIES CORP., a
Delaware corporation (the "Company"), and the holders of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock and Series E Preferred Stock of the Company listed on Schedule A hereto
(the "Stockholders").
RECITALS
WHEREAS, the Company and certain of the Stockholders (the "Investors")
have entered into that certain Series E Preferred Stock Purchase Agreement,
dated as of even date herewith (the "Series E Agreement"), or will enter into
the Series E Agreement pursuant to Section 1.3 thereof, pursuant to which such
Investors shall purchase up to two million five hundred thousand (2,500,000)
shares of Series E Preferred Stock; and
WHEREAS, the Stockholders (other than the Investors who are not
currently stockholders of the Company) possess certain registration rights,
rights of first offer and other rights pursuant to that certain Amended and
Restated Investors' Rights Agreement dated May 7, 1997 (the "Prior Agreement")
among the Company and such Stockholders;
WHEREAS, the Stockholders and the Company desire to amend and restate
the Prior Agreement in its entirety and to accept the rights and obligations
created pursuant to this Agreement in lieu of the rights and obligations granted
to each of them under the Prior Agreement; and
WHEREAS, in order to induce the Company and the Investors to consummate
the transactions contemplated by the Series E Agreement, the Stockholders and
the Company hereby agree that this Agreement shall govern the rights of the
Stockholders to cause the Company to register shares of Common Stock issuable to
the Investors and the Stockholders and certain other matters as set forth
herein, and the Stockholders and the Company hereby agree that the Prior
Agreement is hereby amended and restated in its entirety by this Agreement.
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. REGISTRATION RIGHTS. The Company covenants and agrees as
follows:
1.1 DEFINITIONS. For purposes of this Section 1:
(a) The term "Act" means the Securities Act of 1933,
as amended.
(b) The term "Form S-3" means such form under the
Act as in effect on the date hereof or any registration form under the Act
subsequently adopted by the SEC
<PAGE> 4
which permits inclusion or incorporation of substantial information by
reference to other documents filed by the Company with the SEC.
(c) The term "Holder" means any person owning or
having the right to acquire Registrable Securities or any assignee thereof in
accordance with Section 1.12 hereof.
(d) The term "1934 Act" shall mean the Securities
Exchange Act of 1934, as amended.
(e) The term "Participating Holder" shall mean with
respect to a public offering of securities of the Company, a Holder
participating in such public offering.
(f) The term "Preferred Stockholder" shall mean,
collectively, the Series A Stockholders, Series B Stockholders, Series C
Preferred Stock, Series D Stockholders and Series E Stockholders.
(g) The term "Preferred BCDE Stockholder" shall
mean, collectively, the Series B Stockholders, the Series C Stockholders, the
Series D Stockholders and the Series E Stockholders, excluding in all cases,
however, with respect to the right of first offer in Section 2.4 hereof, any
Series B Stockholder, Series C Stockholder, Series D Stockholder or Series E
Stockholder (other than the Investors who purchased Series E Stock subsequent to
the date of this Agreement pursuant to Section 1.3 of the Series E Agreement)
that acquired all of its shares of Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock and/or Series E Preferred Stock in a transaction
or series of transactions in which the right of first offer was not assigned or
transferred in accordance with Section 2.4(e) hereof.
(h) The term "register," "registered," and
"registration" refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with the Act, and the
declaration or ordering of effectiveness of such registration statement or
document.
(i) The term "Registrable Securities" means (i) the
Common Stock issuable or issued upon conversion of the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock or
Series E Preferred Stock of the Company, and (ii) any Common Stock of the
Company issued as (or issuable upon the conversion or exercise of any warrant,
right or other security which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of the shares referenced
in (i) above, excluding in all cases, however, any securities which were
formerly Registrable Securities and which sold by a person in a transaction in
which his rights under this Section 1 are not assigned.
(j) The number of shares of "Registrable Securities
then outstanding" shall mean the sum of the number of shares of Common Stock
outstanding which are Registrable Securities and the number of shares of Common
Stock issuable pursuant to then exercisable or convertible securities which are
Registrable Securities.
(k) The term "SEC" shall mean the Securities and
Exchange Commission.
2.
<PAGE> 5
(l) The term "Series A Stockholder" shall mean the
holders of the Company's Series A Preferred Stock or Common Stock issued upon
conversion of the Series A Preferred Stock.
(m) The term "Series B Stockholder" shall mean the
holders of the Company's Series B Preferred Stock or Common Stock issued upon
conversion of the Series B Preferred Stock.
(n) The term "Series C Stockholder" shall mean the
holders of the Company's Series C Preferred Stock or Common Stock issued upon
conversion of the Series C Preferred Stock.
(o) The term "Series D Stockholder" shall mean the
holders of the Company's Series D Preferred Stock or Common Stock issued upon
conversion of the Series D Preferred Stock.
(p) The term "Series E Stockholder" shall mean the
holders of the Company's Series E Preferred Stock or Common Stock issued upon
conversion of the Series E Preferred Stock.
1.2 REQUEST FOR REGISTRATION.
(a) If the Company shall receive at any time after
the earlier of (i) April 26, 1999 or (ii) three (3) months after the effective
date of the first registration statement for a public offering of securities of
the Company (other than registration statement on Form S-3 or a registration
statement relating either to the sale of securities to employees of the Company
pursuant to a stock option, stock purchase or similar plan or a Rule 145
transaction), a written request from the holders of at least twenty-five percent
(25%) of the Registrable Securities then outstanding that the Company file a
registration statement under the Act covering the registration of Registrable
Securities where the anticipated aggregate offering price to the public, net of
underwriting discounts and commissions, of which would be in excess of
$10,000,000, then the Company shall:
(i) within ten (10) days of the receipt
thereof, give written notice of such request to all Holders; and
(ii) file as soon as practicable, and in any
event within sixty (60) days of the receipt of such request, a registration
statement under the Act covering all Registrable Securities which the Holders
request to be registered, subject to the limitations of subsection 1.2(b).
(b) If the Holders initiating the registration
requested hereunder ("Initiating Holders") intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall so
advise the Company as a part of their request made pursuant to subsection 1.2(a)
and the Company shall include such information in the written notice referred to
in subsection 1.2(a). The underwriter will be selected by the Company and shall
be reasonably acceptable to a majority in interest of the
3.
<PAGE> 6
Initiating Holders. If the underwriter selected by the Company is not reasonably
acceptable to a majority in interest of the Initiating Holders, the Company
shall select a different underwriter, which shall be reasonably acceptable to a
majority in interest of the Initiating Holders. If such underwriter is not
reasonably acceptable to the majority in interest of the Initiating Holders, a
majority in interest of the Initiating Holders shall select the underwriter. In
such event, the right of any Holder to include his Registrable Securities in
such registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder) to the extent provided herein. All Holders
proposing to distribute their securities through such underwriting shall
(together with the Company as provided in subsection 1.4(e)) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting. Notwithstanding any other provision of this
Section 1.2, if the underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Initiating Holders shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares of Registrable Securities that may be included in the
underwriting shall be allocated among all Holders thereof, including the
Initiating Holders, in proportion (as nearly as practicable) to the amount of
Registrable Securities of the Company owned by each Holder; provided, however,
that in no event shall any securities of the Company held by Series A
Stockholders be included in such registration and underwriting to the extent
other Holders desire to include Registrable Securities therein.
(c) Notwithstanding the foregoing, if the Company
shall furnish to Holders requesting a registration statement pursuant to this
Section 1.2, a certificate signed by the Chief Executive Officer of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its stockholders
for such registration statement to be filed and it is therefore essential to
defer the filing of such registration statement, the Company shall have the
right to defer taking action with respect to such filing for a period of not
more than 120 days after receipt of the request of the Initiating Holders;
provided, however, that the Company may not utilize this right more than once in
any twelve-month period.
(d) In addition, the Company shall not be obligated
to effect, or to take any action to effect, any registration pursuant to this
Section 1.2:
(i) After the Company has effected two
registrations pursuant to this Section 1.2 and such registrations have been
declared or ordered effective;
(ii) During the period starting with the date
sixty (60) days prior to the Company's good faith estimate of the date of filing
of and ending on a date one hundred eighty (180) days after the effective date
of, a registration subject to Section 1.3 hereof; provided that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective; or
(iii) If the Initiating Holders propose to
dispose of shares of Registrable Securities that may be immediately registered
on Form S-3 pursuant to a request made pursuant to Section 1.11 below.
4.
<PAGE> 7
1.3 COMPANY REGISTRATION. If (but without any obligation to
do so) the Company proposes to register (including for this purpose a
registration effected by the Company for stockholders other than the Holders)
any of its stock or other securities under the Act in connection with the public
offering of such securities solely for cash (other than a registration relating
solely to the sale of securities to participants in a Company stock plan, a
registration on any form which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Registrable Securities or a registration in which the
only Common Stock being registered is Common Stock issuable upon conversion of
debt securities which are also being registered), the Company shall, at such
time, promptly give each Holder written notice of such registration. Upon the
written request of each Holder given within twenty (20) days after mailing of
such notice by the Company in accordance with Section 3.5, the Company shall,
subject to the provisions of Section 1.7, cause to be registered under the Act
all of the Registrable Securities that each such Holder has requested to be
registered.
1.4 OBLIGATIONS OF THE COMPANY. Whenever required under this
Section 1 to effect the registration of any Registrable Securities, the Company
shall as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become effective and, upon the request
of the Holders of a majority of the Registrable Securities registered
thereunder, keep such registration statement effective for a period of up to one
hundred twenty (120) days or until the distribution contemplated in the
Registration Statement has been completed; provided, however, that (i) such
120-day period shall be extended for a period of time equal to the period the
Holder refrains from selling any securities included in such registration at the
request of an underwriter of Common Stock (or other securities) of the Company;
and (ii) in the case of any registration of Registrable Securities on Form S-3
which are intended to be offered on a continuous or delayed basis, such 120-day
period shall be extended, if necessary, to keep the registration statement
effective until all such Registrable Securities are sold, provided that Rule 415
or any successor rule under the Act permits an offering on a continuous or
delayed basis and provided further that applicable rules under the Act governing
the obligation to file a post-effective amendment permit, in lieu of filing a
post-effective amendment which (I) includes any prospectus required by Section
10(a)(3) of the Act or (II) reflects facts or events representing a material or
fundamental change in the information set forth in the registration statement,
the incorporation by reference of information required to be included in (I) and
(II) above to be contained in periodic reports filed pursuant to Section 13 or
15(d) of the 1934 Act in the registration statement.
(b) Prepare and file with the SEC such amendments
and supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply with
the provisions of the Act with respect to the disposition of all securities
covered by such registration statement.
(c) Furnish to the Holders such numbers of copies of
a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such
5.
<PAGE> 8
other documents as they may reasonably request in order to facilitate the
disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such state and other
securities laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions, unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Act.
(e) In the event of any underwritten public
offering, enter into and perform its obligations under an underwriting agreement
in usual and customary form with the managing underwriter of such offering. Each
Holder participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities
covered by such registration statement at any time when a prospectus relating
thereto is required to be delivered under the Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Cause all such Registrable Securities registered
pursuant hereunder to be listed on each securities exchange on which similar
securities issued by the Company are then listed.
(h) Provide a transfer agent and registrar for all
Registrable Securities registered pursuant hereunder and a CUSIP number for all
such Registrable Securities, in each case not later than the effective date of
such registration.
(i) Furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Section 1, on the date
that such Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Section 1, if such securities
are being sold through underwriters, or, if such securities are not being sold
through underwriters, on the date that the registration statement with respect
to such securities becomes effective, (i) an opinion, dated such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities and (ii) a letter dated such date, from
the independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities.
1.5 EXPENSES OF DEMAND REGISTRATION. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 1.2, including
(without limitation) all registration, filing and qualification
6.
<PAGE> 9
fees, printers' and accounting fees, fees and disbursements of counsel for the
Company and the reasonable fees and disbursements of one counsel for the selling
Holders shall be borne by the Company; provided, however, that the Company shall
not be required to pay for any expenses of any registration proceeding begun
pursuant to Section 1.2 if the registration request is subsequently withdrawn at
the request of the Holders of a majority of the Registrable Securities to be
registered (in which case all Participating Holders shall bear such expenses),
unless the Holders of a majority of the Registrable Securities agree to forfeit
their right to one demand registration pursuant to Section 1.2; provided
further, however, that if at the time of such withdrawal, the Holders have
learned of a material adverse change in the condition, business, or prospects of
the Company from that known to the Holders at the time of their request and have
withdrawn the request with reasonable promptness following disclosure by the
Company of such material adverse change, then the Holders shall not be required
to pay any of such expenses and shall retain their rights pursuant to Section
1.2.
1.6 EXPENSES OF COMPANY REGISTRATION. The Company shall bear
and pay all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Holder (which right may be assigned as provided
in Section 1.12) including (without limitation) all registration, filing, and
qualification fees, printers and accounting fees relating or apportionable
thereto and the fees and disbursements of one counsel for the selling Holders
selected by them, but excluding underwriting discounts and commissions relating
to Registrable Securities.
1.7 UNDERWRITING REQUIREMENTS. In connection with any
offering involving an underwriting of shares of the Company's capital stock, the
Company shall not be required under Section 1.3 to include any of the Holders'
Registrable Securities in such underwriting unless the Participating Holders
accept the terms of the underwriting as agreed upon between the Company and the
underwriters selected by it (or by other persons entitled to select the
underwriters), and then only in such quantity as the underwriters determine in
their sole discretion will not jeopardize the success of the offering by the
Company. Notwithstanding any other provision of this Section 1.7, if the
underwriter determines that marketing factors require a limitation on the number
of shares to be underwritten, the securities of the Company (other than
Registrable Securities) held by the holders of Common Stock shall be excluded
from such registration to the extent so required by such limitation; and if a
limitation on the number of shares is still required, the Holders of Series A
Preferred Stock shall be excluded from such registration to the extent so
required by such limitation; and if a limitation on the number of shares is
still required, the number of Registrable Securities that may be included in the
registration and underwriting shall be allocated among all remaining Holders on
a pro rata basis; provided, however, that if such registration is other than the
first registered offering of the sale of the Company's securities to the public,
the underwriter may limit the number of Registrable Securities to be included in
the registration and underwriting to not less than thirty percent (30%) of the
securities included therein (based on aggregate market values). The Company
shall so advise all holders of securities requesting registration, and the
number of shares of securities that are entitled to be included in the
registration and underwriting shall be allocated among all Participating Holders
in proportion, as nearly as practicable, to the respective amounts of
Registrable Securities and other securities which they own at the time of filing
the registration statement. If any Participating Holder of Registrable
Securities disapproves of the terms of any such underwriting, he may elect to
withdraw therefrom by written notice to the Company and the
7.
<PAGE> 10
underwriter. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration. For
purposes of the foregoing, for any Holder which is a partnership or corporation,
the partners, retired partners, stockholders and affiliates of such Holder, or
the estates and family members of any such partners and retired partners and any
trusts for the benefit of any of the foregoing persons shall be deemed to be a
single "Holder", and any pro-rata reduction with respect to such "Holder" shall
be based upon the aggregate amount of shares carrying registration rights owned
by all entities and individuals included in such "Holder," as defined in this
sentence.
1.8 DELAY OF REGISTRATION. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 1.
1.9 INDEMNIFICATION. In the event any Registrable Securities
are included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, any underwriter (as defined in the Act)
for such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Act or the 1934 Act, against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the Act, the 1934 Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"): (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) 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 (iii) any violation or alleged
violation by the Company of the Act, the 1934 Act, any state securities law or
any rule or regulation promulgated under the Act, the 1934 Act or any state
securities law; and the Company will pay to each such Holder, underwriter or
controlling person, as incurred, any legal or other expenses reasonably incurred
by them in connection with investigating or defending any such loss, claim,
damage, liability, or action; provided, however, that the indemnity agreement
contained in this subsection 1.9 (a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, liability, or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each
Participating Holder will indemnify and hold harmless the Company, each of its
directors, each of its officers who has signed the registration statement, each
person, if any, who controls the Company within the meaning of the Act, any
underwriter, any other Participating Holder and any controlling person of any
such underwriter or other Participating Holder against any losses, claims,
damages or liabilities (joint or several) to which any of the foregoing persons
may become subject under the
8.
<PAGE> 11
Act, the 1934 Act or other federal or state law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereto) arise out of or are based
upon any Violation, in each case to the extent (and only to the extent) that
such Violation occurs in reliance upon and in conformity with written
information furnished by such Participating Holder expressly for use in
connection with such registration; and each such Participating Holder will pay,
as incurred, any legal or other expenses reasonably incurred by any person
intended to be indemnified pursuant to this subsection 1.9(b), in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the indemnity agreement contained in this
subsection 1.9(b) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Participating Holder, which consent shall not be unreasonably
withheld; provided, that, in no event shall any Participating Holder's
cumulative aggregate liability under this Section 1.9(b) or under Section
1.9(d), or under such sections together exceed the gross proceeds from the
offering received by such Participating Holder.
(c) Promptly after receipt by an indemnified party
under this Section 1.9 of notice of the commencement of any action (including
any governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 1.9,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel
with the fees and expenses to be paid by the indemnifying party if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if materially prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 1.9, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 1.9.
(d) If the indemnification provided for in this
Section 1.9 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage or expense
referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such loss, liability, claim, damage or
expense in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the statements or omissions that resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations; provided, however, that in no event shall any Participating
Holders cumulative aggregate liability under Section 1.9(b) or this Section
1.9(d) or under such sections together exceed the gross proceeds from the
offering received by such Holder. The relative fault of the indemnifying party
and of the indemnified party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission to
9.
<PAGE> 12
state a material fact relates to information supplied by the indemnifying party
or by the indemnified party and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent
that the provisions on indemnification and contribution contained in the
underwriting agreement entered into in connection with the underwritten public
offering are in conflict with the foregoing provisions, the provisions in the
underwriting agreement shall control.
(f) The obligations of the Company and Holders under
this Section 1.9 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.10 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a
view to making available to the Holders the benefits of Rule 144 promulgated
under the Act ("Rule 144") and any other rule or regulation of the SEC that may
at any time permit a Holder to sell securities of the Company to the public
without registration or pursuant to a registration on Form S-3, the Company
agrees to:
(a) make and keep public information available, as
those terms are understood and defined in Rule 144, at all times after ninety
(90) days after the effective date of the first registration statement filed by
the Company for the offering of its securities to the general public;
(b) take such action, including the voluntary
registration of its Common Stock under Section 12 of the 1934 Act, as is
necessary to enable the Holders to utilize Form S-3 for the sale of their
Registrable Securities, such action to be taken as soon as practicable after the
end of the fiscal year in which the first registration statement filed by the
Company for the offering of its securities to the general public is declared
effective;
(c) file with the SEC in a timely manner all reports
and other documents required of the Company under the Act and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder
owns any Registrable Securities, forthwith upon request (i) a written statement
by the Company that it has complied with the reporting requirements of Rule 144
(at any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Act and the 1934 Act (at any
time after it has become subject to such reporting requirements) or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
10.
<PAGE> 13
1.11 FORM S-3 REGISTRATION. In the event the Company shall
receive a written request from the Holders of no less than twenty-five percent
(25%) of the then outstanding Registrable Securities that the Company effect a
registration on Form S-3 and any related qualification or compliance with
respect to all or a part of the Registrable Securities owned by such Holders,
the Company will:
(a) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other Holders;
and
(b) as soon as practicable, effect such registration
and all such qualifications and compliances as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within 15
days after receipt of such written notice from the Company; provided, however,
that the Company shall not be obligated to effect any such registration,
qualification or compliance, pursuant to this Section 1.12: (1) if Form S-3 is
not available for such offering by the Holders; (2) if the Holders, together
with the holders of any other securities of the Company entitled to inclusion in
such registration, propose to sell Registrable Securities and such other
securities (if any) at an aggregate price to the public (net of any
underwriters' discounts or commissions) of less than $500,000; (3) if the
Company shall furnish to the Holders a certificate signed by the President of
the Company stating that in the good faith judgment of the Board of Directors of
the Company, it would be seriously detrimental to the Company and its
stockholders for such Form S-3 Registration to be effected at such time, in
which event the Company shall have the right to defer the filing of the Form S-3
registration statement for a period of not more than 60 days after receipt of
the request of the Holders under this Section 1.11; provided, however, that the
Company shall not utilize this right more than once in any twelve month period;
(4) if the Company has, within the twelve (12) month period preceding the date
of such request, already effected two registrations on Form S-3 for the Holders
pursuant to this Section 1.11; or (5) in any particular jurisdiction in which
the Company would be required to qualify to do business or to execute a general
consent to service of process in effecting such registration, qualification or
compliance.
(c) Subject to the foregoing, the Company shall file
a registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after receipt of
the request or requests of the Holders. All expenses incurred in connection with
the registrations requested pursuant to Section 1.11, including (without
limitation) all registration, filing, qualification, printer's and accounting
fees and the reasonable fees and disbursements of counsel for the selling Holder
or Holders and counsel for the Company, but excluding any underwriters'
discounts or commissions associated with Registrable Securities, shall be borne
by the Company. Registrations effected pursuant to this Section 1.11 shall not
be counted as demands for registration or registrations effected pursuant to
Sections 1.2 or 1.3, respectively.
11.
<PAGE> 14
1.12 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause
the Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder (i) to an affiliate
of such Holder or (ii) a transferee or assignee of such securities who, after
such assignment or transfer, holds at least 500,000 shares of Registrable
Securities (subject to appropriate adjustment for stock splits, stock dividends,
combinations and other recapitalizations), provided in each case that: (a) the
Company is, within a reasonable time after such transfer, furnished with written
notice of the name and address of such transferee or assignee and the securities
with respect to which such registration rights are being assigned; (b) such
transferee or assignee agrees in writing to be bound by and subject to the terms
and conditions of this Agreement, including without limitation the provisions of
Section 1.13 below; and (c) such assignment shall be effective only if
immediately following such transfer the further disposition of such securities
by the transferee or assignee is restricted under the Act. For the purposes of
determining the number of shares of Registrable Securities held by a transferee
or assignee, the holdings of transferees and assignees of a partnership who are
partners or retired partners of such partnership (including spouses and
ancestors, lineal descendants and siblings of such partners or spouses who
acquire Registrable Securities by gift, will or intestate succession) shall be
aggregated together and with the partnership; provided that all assignees and
transferees who would not qualify individually for assignment of registration
rights shall have a single attorney-in-fact for the purpose of exercising any
rights, receiving notices or taking any action under this Section 1.
1.13 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and
after the date of this Agreement, the Company shall not, without the prior
written consent of the Holders of a majority of the outstanding Registrable
Securities, enter into any agreement with any holder or prospective holder of
any securities of the Company which would allow such holder or prospective
holder (a) to include such securities in any registration filed under Section
1.2 hereof, unless under the terms of such agreement, such holder or prospective
holder may include such securities in any such registration only to the extent
that the inclusion of his securities will not reduce the amount of the
Registrable Securities of the Holders which is included or (b) to make a demand
registration which could result in such registration statement being declared
effective prior to the earlier of either of the dates set forth in subsection
1.2(a) or within one hundred twenty (120) days of the effective date of any
registration effected pursuant to Section 1.2.
1.14 "MARKET STAND-OFF" AGREEMENT. Each Preferred Stockholder
hereby agrees that, during the period of duration specified by the Company and
an underwriter of common stock or other securities of the Company, following the
effective date of a registration statement of the Company filed under the Act,
it shall not, to the extent requested by the Company and such underwriter,
directly or indirectly sell, offer to sell, contract to sell (including, without
limitation, any short sale), grant any option to purchase or otherwise transfer
or dispose of (other than to donees who agree to be similarly bound) any
securities of the Company held by it at any time during such period except
common stock included in such registration; provided, however, that:
12.
<PAGE> 15
(a) such agreement shall be applicable only to the
first two such registration statements of the Company which covers common stock
(or other securities) to be sold on its behalf to the public in an underwritten
offering; and
(b) all officers and directors of the Company and
all other persons with registration rights (whether or not pursuant to this
Agreement) enter into similar agreements; and
(c) such market stand-off time period shall not
exceed 180 days. In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Registrable Securities of
each holder of Registrable Securities (and the shares or securities of every
other person subject to the foregoing restriction) until the end of such period.
Notwithstanding the foregoing, the obligations described in this Section
1.14 shall not apply to a registration relating solely to employee benefit plans
on Form S-1 or Form S-8 or similar forms which may be promulgated in the future,
or a registration relating solely to a Rule 145 transaction on Form S-14 or Form
S-15 or similar forms which may be promulgated in the future.
1.15 TERMINATION OF REGISTRATION RIGHTS. The registration
rights granted hereunder shall terminate as to any Holder upon the earlier of
(i) five (5) years following the consummation of the sale of securities pursuant
to a registration statement filed by the Company under the Act in connection
with the initial firm commitment underwritten offering of its securities to the
general public, (ii) the closing of the first Company-initiated registered
public offering of Common Stock of the Company if all shares of Registrable
Securities held or entitled to be held upon conversion by such Holder may
immediately be sold under Rule 144 during any 90-day period, and (iii) on such
date after the closing of the first Company-initiated registered public offering
of Common Stock of the Company as all shares of Registrable Securities held or
entitled to be held upon conversion by such Holder may immediately be sold under
Rule 144 during any 90-day period.
2. COVENANTS OF THE COMPANY.
2.1 FINANCIAL STATEMENTS.
(a) DELIVERY OF FINANCIAL STATEMENTS. The Company
shall deliver to each Preferred BCDE Stockholder, as soon as practicable, but in
any event within ninety (90) days after the end of each fiscal year of the
Company, an income statement for such fiscal year, a balance sheet of the
Company and statement of stockholder's equity as of the end of such year, and a
schedule as to the sources and applications of funds for such year, such
year-end financial reports to be in reasonable detail, prepared in accordance
with generally accepted accounting principles ("GAAP"), and audited and
certified by independent public accountants of nationally recognized standing
selected by the Company;
(b) The Company shall deliver to each Preferred BCDE
Stockholder for so long as such Preferred BCDE Stockholder (together with its
respective affiliates) holds at least an aggregate of 250,000 shares of
Registrable Securities (a "Major Investor"):
13.
<PAGE> 16
(i) as soon as practicable, but in any event
within forty-five (45) days after the end of each of the first three (3)
quarters of each fiscal year of the Company, an unaudited profit or loss
statement, a schedule as to the sources and application of funds for such fiscal
quarter and an unaudited balance sheet as of the end of such fiscal quarter and
a statement showing the number of shares of each class and series of capital
stock and securities convertible into or exercisable for shares of capital stock
outstanding at the end of the period, the number of common shares issuable upon
conversion or exercise of any outstanding securities convertible or exercisable
for common shares and the exchange ratio or exercise price applicable thereto,
all in sufficient detail as to permit the Major Investor to calculate its
percentage equity ownership in the Company; and
(ii) as soon as practicable, but in any event
thirty (30) days prior to the end of each fiscal year, a budget and business
plan for the next fiscal year, prepared on a monthly basis, including balance
sheets and sources and applications of funds statements for such months and, as
soon as prepared, any other budgets or revised budgets prepared by the Company;
and
(iii) with respect to the financial statements
called for in subsections (b)(i) of this Section 2.1, an instrument executed by
the Chief Financial Officer or President of the Company and certifying that such
financials were prepared in accordance with GAAP consistently applied with prior
practice for earlier periods (with the exception of footnotes that may be
required by GAAP) and fairly present the financial condition of the Company and
its results of operation for the period specified, subject to year-end audit
adjustment.
2.2 INSPECTION. The Company shall permit each Major Investor
(other than Hewlett-Packard Company, which the Company may in its sole
discretion permit), at such Major Investor's expense, to visit and inspect the
Company's properties, to examine its books of account and records and to discuss
the Company's affairs, finances and accounts with its officers, all at such
reasonable times as may be requested by the Major Investor; provided, however,
that the Company shall not be obligated pursuant to this Section 2.2 to provide
access to any information which it reasonably considers to be a trade secret or
similar confidential information.
2.3 TERMINATION OF INFORMATION AND INSPECTION COVENANTS. The
covenants set forth in Sections 2.1 and 2.2 shall terminate as to Preferred BCDE
Stockholders and be of no further force or effect when the sale of securities
pursuant to a registration statement filed by the Company under the Act in
connection with the firm commitment underwritten offering of its securities to
the general public is consummated or when the Company first becomes subject to
the periodic reporting requirements of Sections 12(g) or 15(d) of the 1934 Act,
whichever event shall first occur.
2.4 RIGHT OF FIRST OFFER. Subject to the terms and
conditions specified in this paragraph 2.4, the Company hereby grants to each
Preferred BCDE Stockholder a right of first offer with respect to future sales
by the Company of its Shares (as hereinafter defined). A Preferred BCDE
Stockholder shall be entitled to apportion the right of first offer hereby
granted it among itself and its partners and affiliates in such proportions as
it deems appropriate.
14.
<PAGE> 17
Each time the Company proposes to offer any shares of, or securities
convertible into or exercisable for any shares of, any class of its capital
stock ("Shares"), the Company shall first make an offering of such Shares to
each Preferred BCDE Stockholder in accordance with the following provisions:
(a) The Company shall deliver a notice by certified
mail ("Notice") to the Preferred BCDE Stockholders stating (i) its bona fide
intention to offer such Shares, (ii) the number of such Shares to be offered,
and (iii) the price and terms, if any, upon which it proposes to offer such
Shares.
(b) Within 20 calendar days after receipt of the
Notice, each Preferred BCDE Stockholder may elect to purchase or obtain, at the
price and on the terms specified in the Notice, up to that portion of such
Shares which equals the proportion that the number of shares of Common Stock
issued and held, or issuable upon conversion of the Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock and/or Series E Preferred
Stock then held, by such Preferred BCDE Stockholder bears to the total number of
shares of Common Stock issued and held, or issuable upon conversion of the
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock
and/or Series E Preferred Stock then held, by all Preferred BCDE Stockholders.
The Company shall promptly, in writing, inform each Preferred BCDE Stockholder
which purchases all the shares available to it ("Fully-Exercising Purchaser") of
any other Preferred BCDE Stockholder's failure to do likewise. During the
ten-day period commencing after receipt of such information, each
Fully-Exercising Purchaser shall be entitled to obtain that portion of the
Shares not subscribed for by the Preferred BCDE Stockholders which is equal to
the proportion that the number of shares of Common Stock issued and held, or
issuable upon conversion of Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock and Series E Preferred Stock then held, by such
Fully-Exercising Purchaser bears to the total number of shares of Common Stock
issued and held, or issuable upon conversion of the Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock
then held, by all Fully-Exercising Purchasers who wish to purchase some of the
unsubscribed shares.
(c) If all Shares referred to in the Notice are not
elected to be obtained as provided in subsection 2.4(b) hereof, the Company may,
during the 30-day period following the expiration of the period provided in
subsection 2.4(b) hereof, offer the remaining unsubscribed portion of such
Shares to any person or persons at a price not less than and upon terms no more
favorable to the offeree than those specified in the Notice. If the Company does
not enter into an agreement for the sale of the Shares within such period or if
such agreement is not consummated within 30 days of the execution thereof, the
right provided hereunder shall be deemed to be revived and such Shares shall not
be offered unless first reoffered to the Preferred BCDE Stockholders in
accordance herewith.
(d) The right of first offer in this paragraph 2.4
shall not be applicable to: (i) the issuance or sale of shares of Common Stock
(or options therefor) to employees, officers, directors and consultants for the
primary purpose of soliciting or retaining their services; (ii) a bona fide,
firm commitment underwritten public offering of shares of Common Stock,
registered under the Act pursuant to a registration statement on Form S-1; (iii)
any issuance of securities following the consummation of an offering described
in (ii) above; (iv) the issuance of
15.
<PAGE> 18
securities pursuant to the conversion or exercise of convertible or exercisable
securities; (v) the issuance of securities in connection with a bona fide
business acquisition of or by the Company, whether by merger, consolidation,
sale of assets, sale or exchange of stock or otherwise; or (vi) the issuance of
stock, warrants or other securities or rights to persons or entities with which
the Company has business relationships provided such issuances are for other
than primarily equity financing purposes and provided that at the time of any
such issuance, the aggregate of such issuance and similar issuances in the
preceding twelve month period do not exceed one percent (1%) of the then
outstanding Common Stock of the Company (assuming full conversion and exercise
of all convertible and exercisable securities). Notwithstanding anything to the
contrary set forth in this Section 2.4, with respect solely to Hoffmann-La Roche
Inc. ("Roche"), The Dow Chemical Company and Hewlett-Packard Company, the right
of first offer in this Paragraph 2.4 shall not be applicable to the issuance of
Shares to any person or entity with which the Company has or is concurrently
entering into a strategic relationship.
(e) The right of first offer set forth in this
Section 2.4 may not be assigned or transferred, except that: (i) such right is
assignable by each Preferred BCDE Stockholder to any wholly owned subsidiary or
parent of, or to any corporation or entity that is, within the meaning of the
Act, controlling, controlled by or under common control with, any such Preferred
BCDE Stockholder and (ii) such right is assignable between and among any of the
Preferred BCDE Stockholders.
3. MISCELLANEOUS.
3.1 SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties
(including transferees of any shares of Registrable Securities). Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
3.2 GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of California as applied to agreements
among California residents entered into and to be performed entirely within
California.
3.3 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
3.4 TITLES AND SUBTITLES. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
3.5 NOTICES. Unless otherwise provided, any notice required
or permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office by registered or certified mail,
postage prepaid and addressed to the party to be notified at the
16.
<PAGE> 19
address indicated for such party on the signature page hereof, or at such other
address as such party may designate by ten (10) days' advance written notice to
the other parties.
3.6 AMENDMENTS AND WAIVERS. Any term of this Agreement may
be amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Registrable Securities then outstanding; provided, however,
that without the consent of Roche, no term of this Agreement may be amended, nor
may the observance of any term of this Agreement be waived, if such amendment or
waiver shall materially and adversely affect the benefits intended to be
conferred upon Roche under this Agreement; provided further, however, that
amendments to this Agreement for the purpose of adding additional parties to
this Agreement, whether pursuant to additional purchases of shares of an
existing series of Preferred Stock or pursuant to issuances of one or more
additional series of Preferred Stock, shall not be deemed to materially or
adversely affect the benefits intended to be conferred upon Roche under this
Agreement. Any amendment or waiver effected in accordance with this paragraph
shall be binding upon each Holder of any Registrable Securities then
outstanding, each future holder of all such Registrable Securities, and the
Company.
It is the intent of the Stockholders that each Investor purchasing
Series E Preferred in a subsequent closing pursuant to Section 1.3 of the Series
E Agreement shall become a Stockholder by executing this Agreement, and that
such execution shall not constitute an amendment to this Agreement requiring the
consent of the other parties hereto. Should any such additional Investors
execute this Agreement, the Company shall prepare and distribute to the
Stockholders a revised Schedule A to this Agreement reflecting the addition of
such Investor as a Stockholder.
3.7 SEVERABILITY. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision
shall be excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
3.8 AGGREGATION OF STOCK. All shares of Registrable
Securities held or acquired by affiliated entities or persons shall be
aggregated together for the purpose of determining the availability of any
rights under this Agreement.
3.9 ENTIRE AGREEMENT. This Agreement constitutes the full
and entire understanding and agreement between the parties with regard to the
subjects hereof. The Prior Agreement is hereby amended and restated in its
entirety by this Agreement, and the Company and the Stockholders agree that this
Agreement shall superseded and replace the rights and obligations of the
Preferred Stockholders that the Company granted to them under the Prior
Agreement, including the obligations of transferees of Preferred Stock as noted
on Schedule A attached hereto.
17.
<PAGE> 20
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
CALIPER TECHNOLOGIES CORP.
By: /s/ CALVIN Y.H. CHOW
-------------------------------------
Calvin Y.H. Chow
Chief Operating Officer
1275 California Avenue
Palo Alto, CA 94304
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 21
SCHEDULE A
PREFERRED STOCKHOLDERS
<TABLE>
<CAPTION>
SERIES A SERIES B SERIES C SERIES D SERIES E
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Venrock Associates II, L.P. -- 1,021,039 103,585 114,000 --
Venrock Associates -- 1,665,908 69,057 86,000 --
CW Ventures II, L.P. -- 2,207,136 141,814 -- --
CIP Capital L.P. 431,154 383,380 24,633 -- --
Falcon Technology Partners, L.P. -- 576,022 37,011 -- --
Aspen Venture Partners, L.P. 431,154 63,896 4,105 -- --
Arch Venture Fund II, L.P. -- 898,083 57,704 -- --
Lombard Odier & Cie -- 638,967 1,000,000 750,000 350,000
Michael R. Knapp -- 31,948 8,333 -- --
Hoffmann-La Roche Inc. -- -- 1,333,333 -- --
Comdisco, Inc. -- -- 33,333 62,500 --
QED Technologies L.P. -- 34,078 -- -- --
The Perkin-Elmer Corporation 431,154 -- -- -- --
Caduceus Capital, L.P. -- -- 108,335 -- --
Caduceus Capital, Ltd. -- -- -- 125,000 --
State Farm Mutual Automobile -- -- 333,333 250,000 --
GC&H Investments -- -- 16,666 12,500 --
Novartis Pharmaceuticals Corporation -- 161,391 27,172 -- --
The Dow Chemical Company -- -- -- 1,625,000 --
PHARM/wHEALTH -- -- -- 375,000 --
AEOW 96, LLC -- -- -- 100,000 5,500
The Regis P. & Dianne T. McKenna Trust -- -- -- 50,000 --
</TABLE>
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 22
<TABLE>
<CAPTION>
SERIES A SERIES B SERIES C SERIES D SERIES E
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Lawrence Alan Bock & Diane Birnie Bock TTEES FBO -- -- -- 2,500 --
Bock 1996 Charitable Trust dated 12/16/96
John Stuelpnagel -- -- -- 5,000 --
Tredegar Investments, Inc. -- -- -- 250,000 --
John D. Gottwald -- -- -- 125,000 --
BB BioVentures, L.P. -- -- -- 1,250,000 --
Alan P. Marsden -- -- -- 12,500 12,500
Hewlett-Packard Company -- -- -- -- 833,334
Ray S. Abuzayyad -- -- -- -- 25,000
R. Randolph Scott -- -- -- -- 3,500
TOTAL 1,293,462 7,681,848 3,298,414 5,195,000 1,229,834
</TABLE>
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 23
In May 1997, Avalon Medical Partners, L.P., a Preferred Stockholder and Common
Stockholder, and Avalon BioVentures II, L.P., a Preferred Stockholder, both
parties to the Amended and Restated Investors' Rights Agreement dated January
14, 1997 (the "Prior Agreement"), distributed Preferred Stock and Common Stock
of the Company to certain transferees listed below (the "Transferees") thereby
imposing obligations on the Transferees but not granting any rights under the
Prior Agreement to the Transferees. The Transferees are not parties to this
Agreement but remain obligated under this Agreement.
<TABLE>
<CAPTION>
SERIES A SERIES B SERIES C SERIES D
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Institutional Venture Partners VI -- 315,350 -- --
Institutional Venture Management VI -- 6,436 -- --
Kevin J. Kinsella, as Trustee of the Kevin -- 76,502 4,303 --
Kinsella Trust, November 1994
John T. Hendrick -- 76,503 4,303 --
Marsha Bakko -- 15,784 886 --
Marianne Anderson -- 9,664 543 --
Lawrence A. Bock -- 299,891 16,866 --
Frances Ferreira -- 4,832 271 --
Novartis Pharmaceuticals Corporation -- 161,391 27,172 --
TOTAL -- 966,353 54,344 --
</TABLE>
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 24
In October 1997, the Bock Family Partnership, a Preferred Stockholder, a party
to the Amended and Restated Investors' Rights Agreement dated May 7, 1997 (the
"Prior Agreement"), distributed Preferred Stock and Common Stock of the Company
to certain transferees listed below (the "Transferees") thereby imposing
obligations on the Transferees but not granting any rights under the Prior
Agreement to the Transferees. The Transferees are not parties to this Agreement
but remain obligated under this Agreement.
<TABLE>
<CAPTION>
SERIES A SERIES B SERIES C SERIES D
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Lawrence A. Bock -- 10,213 4,079 --
John A. Stuelpnagel -- 1,283 2,334 --
William H. Birnie and Barbara P. Birnie, TTEES -- 1,283 1,334 --
FBO The Birnie Trust U/A dated 08/01/89
TOTAL -- 12,779 7,747 --
</TABLE>
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 1
EXHIBIT 10.9
INDEMNITY AGREEMENT
THIS AGREEMENT is made and entered into this _____ day of ________________,
1999 by and between CALIPER TECHNOLOGIES CORP., a Delaware corporation (the
"Corporation"), and __________ ("Agent").
RECITALS
WHEREAS, Agent performs a valuable service to the Corporation in his
capacity as _______ of the Corporation;
WHEREAS, the stockholders of the Corporation have adopted bylaws (the
"Bylaws") providing for the indemnification of the directors, officers,
employees and other agents of the Corporation, including persons serving at the
request of the Corporation in such capacities with other corporations or
enterprises, as authorized by the Delaware General Corporation Law, as amended
(the "Code");
WHEREAS, the Bylaws and the Code, by their non-exclusive nature, permit
contracts between the Corporation and its agents, officers, employees and other
agents with respect to indemnification of such persons; and
WHEREAS, in order to induce Agent to continue to serve as _________ of the
Corporation, the Corporation has determined and agreed to enter into this
Agreement with Agent;
NOW, THEREFORE, in consideration of Agent's continued service as ________
after the date hereof, the parties hereto agree as follows:
AGREEMENT
1. SERVICES TO THE CORPORATION. Agent will serve, at the will of the
Corporation or under separate contract, if any such contract exists, as
__________ of the Corporation or as a director, officer or other fiduciary of an
affiliate of the Corporation (including any employee benefit plan of the
Corporation) faithfully and to the best of his ability so long as he is duly
elected and qualified in accordance with the provisions of the Bylaws or other
applicable charter documents of the Corporation or such affiliate; provided,
however, that Agent may at any time and for any reason resign from such position
(subject to any contractual obligation that Agent may have assumed apart from
this Agreement) and that the Corporation or any affiliate shall have no
obligation under this Agreement to continue Agent in any such position.
2. INDEMNITY OF AGENT. The Corporation hereby agrees to hold harmless and
indemnify Agent to the fullest extent authorized or permitted by the provisions
of the Bylaws and the Code, as the same may be amended from time to time (but,
only to the extent that such
1.
<PAGE> 2
amendment permits the Corporation to provide broader indemnification rights than
the Bylaws or the Code permitted prior to adoption of such amendment).
3. ADDITIONAL INDEMNITY. In addition to and not in limitation of the
indemnification otherwise provided for herein, and subject only to the
exclusions set forth in Section 4 hereof, the Corporation hereby further agrees
to hold harmless and indemnify Agent:
(a) against any and all expenses (including attorneys' fees), witness
fees, damages, judgments, fines and amounts paid in settlement and any other
amounts that Agent becomes legally obligated to pay because of any claim or
claims made against or by him in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative (including an action by or in the right of the
Corporation) to which Agent is, was or at any time becomes a party, or is
threatened to be made a party, by reason of the fact that Agent is, was or at
any time becomes a director, officer, employee or other agent of Corporation, or
is or was serving or at any time serves at the request of the Corporation as a
director, officer, employee or other agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise; and
(b) otherwise to the fullest extent as may be provided to Agent by the
Corporation under the non-exclusivity provisions of the Code and the Bylaws.
4. LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity pursuant to Section 3
hereof shall be paid by the Corporation:
(a) on account of any claim against Agent solely for an accounting of
profits made from the purchase or sale by Agent of securities of the Corporation
pursuant to the provisions of Section 16(b) of the Securities Exchange Act of
1934 and amendments thereto or similar provisions of any federal, state or local
statutory law;
(b) on account of Agent's conduct that is established by a final
judgment as knowingly fraudulent or deliberately dishonest or that constituted
willful misconduct;
(c) on account of Agent's conduct that is established by a final
judgment as constituting a breach of Agent's duty of loyalty to the Corporation
or resulting in any personal profit or advantage to which Agent was not legally
entitled;
(d) for which payment is actually made to Agent under a valid and
collectible insurance policy or under a valid and enforceable indemnity clause,
bylaw or agreement, except in respect of any excess beyond payment under such
insurance, clause, bylaw or agreement;
(e) if indemnification is not lawful (and, in this respect, both the
Corporation and Agent have been advised that the Securities and Exchange
Commission believes that indemnification for liabilities arising under the
federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication); or
Exhibit 10.8
2.
<PAGE> 3
(f) in connection with any proceeding (or part thereof) initiated by
Agent, or any proceeding by Agent against the Corporation or its directors,
officers, employees or other agents, unless (i) such indemnification is
expressly required to be made by law, (ii) the proceeding was authorized by the
Board of Directors of the Corporation, (iii) such indemnification is provided by
the Corporation, in its sole discretion, pursuant to the powers vested in the
Corporation under the Code, or (iv) the proceeding is initiated pursuant to
Section 9 hereof.
5. CONTINUATION OF INDEMNITY. All agreements and obligations of the
Corporation contained herein shall continue during the period Agent is a
director, officer, employee or other agent of the Corporation (or is or was
serving at the request of the Corporation as a director, officer, employee or
other agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise) and shall continue thereafter so long as Agent
shall be subject to any possible claim or threatened, pending or completed
action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative, by reason of the fact that Agent was serving in
the capacity referred to herein.
6. PARTIAL INDEMNIFICATION. Agent shall be entitled under this Agreement to
indemnification by the Corporation for a portion of the expenses (including
attorneys' fees), witness fees, damages, judgments, fines and amounts paid in
settlement and any other amounts that Agent becomes legally obligated to pay in
connection with any action, suit or proceeding referred to in Section 3 hereof
even if not entitled hereunder to indemnification for the total amount thereof,
and the Corporation shall indemnify Agent for the portion thereof to which Agent
is entitled.
7. NOTIFICATION AND DEFENSE OF CLAIM. Not later than thirty (30) days after
receipt by Agent of notice of the commencement of any action, suit or
proceeding, Agent will, if a claim in respect thereof is to be made against the
Corporation under this Agreement, notify the Corporation of the commencement
thereof; but the omission so to notify the Corporation will not relieve it from
any liability which it may have to Agent otherwise than under this Agreement.
With respect to any such action, suit or proceeding as to which Agent notifies
the Corporation of the commencement thereof:
(a) the Corporation will be entitled to participate therein at its own
expense;
(b) except as otherwise provided below, the Corporation may, at its
option and jointly with any other indemnifying party similarly notified and
electing to assume such defense, assume the defense thereof, with counsel
reasonably satisfactory to Agent. After notice from the Corporation to Agent of
its election to assume the defense thereof, the Corporation will not be liable
to Agent under this Agreement for any legal or other expenses subsequently
incurred by Agent in connection with the defense thereof except for reasonable
costs of investigation or otherwise as provided below. Agent shall have the
right to employ separate counsel in such action, suit or proceeding but the fees
and expenses of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of Agent unless (i)
the employment of counsel by Agent has been authorized by the Corporation, (ii)
Agent shall
Exhibit 10.8
3.
<PAGE> 4
have reasonably concluded, and so notified the Corporation, that there is an
actual conflict of interest between the Corporation and Agent in the conduct of
the defense of such action or (iii) the Corporation shall not in fact have
employed counsel to assume the defense of such action, in each of which cases
the fees and expenses of Agent's separate counsel shall be at the expense of the
Corporation. The Corporation shall not be entitled to assume the defense of any
action, suit or proceeding brought by or on behalf of the Corporation or as to
which Agent shall have made the conclusion provided for in clause (ii) above;
and
(c) the Corporation shall not be liable to indemnify Agent under this
Agreement for any amounts paid in settlement of any action or claim effected
without its written consent, which shall not be unreasonably withheld. The
Corporation shall be permitted to settle any action except that it shall not
settle any action or claim in any manner which would impose any penalty or
limitation on Agent without Agent's written consent, which may be given or
withheld in Agent's sole discretion.
8. EXPENSES. The Corporation shall advance, prior to the final disposition
of any proceeding, promptly following request therefor, all expenses incurred by
Agent in connection with such proceeding upon receipt of an undertaking by or on
behalf of Agent to repay said amounts if it shall be determined ultimately that
Agent is not entitled to be indemnified under the provisions of this Agreement,
the Bylaws, the Code or otherwise.
9. ENFORCEMENT. Any right to indemnification or advances granted by this
Agreement to Agent shall be enforceable by or on behalf of Agent in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. Agent, in such enforcement action, if
successful in whole or in part, shall be entitled to be paid also the expense of
prosecuting his claim. It shall be a defense to any action for which a claim for
indemnification is made under Section 3 hereof (other than an action brought to
enforce a claim for expenses pursuant to Section 8 hereof, provided that the
required undertaking has been tendered to the Corporation) that Agent is not
entitled to indemnification because of the limitations set forth in Section 4
hereof. Neither the failure of the Corporation (including its Board of Directors
or its stockholders) to have made a determination prior to the commencement of
such enforcement action that indemnification of Agent is proper in the
circumstances, nor an actual determination by the Corporation (including its
Board of Directors or its stockholders) that such indemnification is improper
shall be a defense to the action or create a presumption that Agent is not
entitled to indemnification under this Agreement or otherwise.
10. SUBROGATION. In the event of payment under this Agreement, the
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Agent, who shall execute all documents required and shall
do all acts that may be necessary to secure such rights and to enable the
Corporation effectively to bring suit to enforce such rights.
11. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on Agent by this
Agreement shall not be exclusive of any other right which Agent may have or
hereafter acquire under any statute, provision of the Corporation's Certificate
of Incorporation or Bylaws, agreement, vote of
Exhibit 10.8
4.
<PAGE> 5
stockholders or directors, or otherwise, both as to action in his official
capacity and as to action in another capacity while holding office.
12. SURVIVAL OF RIGHTS.
(a) The rights conferred on Agent by this Agreement shall continue
after Agent has ceased to be a director, officer, employee or other agent of the
Corporation or to serve at the request of the Corporation as a director,
officer, employee or other agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise and shall inure to the
benefit of Agent's heirs, executors and administrators.
(b) The Corporation shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Corporation, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform if no such succession
had taken place.
13. SEPARABILITY. Each of the provisions of this Agreement is a separate
and distinct agreement and independent of the others, so that if any provision
hereof shall be held to be invalid for any reason, such invalidity or
unenforceability shall not affect the validity or enforceability of the other
provisions hereof. Furthermore, if this Agreement shall be invalidated in its
entirety on any ground, then the Corporation shall nevertheless indemnify Agent
to the fullest extent provided by the Bylaws, the Code or any other applicable
law.
14. GOVERNING LAW. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Delaware.
15. AMENDMENT AND TERMINATION. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless in writing signed by
both parties hereto.
16. IDENTICAL COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
but all of which together shall constitute but one and the same Agreement. Only
one such counterpart need be produced to evidence the existence of this
Agreement.
17. HEADINGS. The headings of the sections of this Agreement are inserted
for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction hereof.
18. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given (i)
upon delivery if delivered by hand to the party to whom such communication was
directed or (ii) upon the third business day after the date on which such
communication was mailed if mailed by certified or registered mail with postage
prepaid:
(a) If to Agent, at the address indicated on the signature page
hereof.
Exhibit 10.8
5.
<PAGE> 6
(b) If to the Corporation, to:
CALIPER TECHNOLOGIES CORP.
605 Fairchild Drive
Mountain View, CA 94043-2234
or to such other address as may have been furnished to Agent by the Corporation.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and
as of the day and year first above written.
CALIPER TECHNOLOGIES CORP.
By:
-------------------------------------
Daniel L. Kisner, M.D.
President and Chief Executive Officer
AGENT
By:
-------------------------------------
Name:
---------------------------------
Address:
------------------------------
------------------------------
6.
<PAGE> 1
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
EXHIBIT 10.10
COLLABORATION AGREEMENT
THIS COLLABORATION AGREEMENT (the "Agreement") is entered into as of
May 2, 1998 (the "Effective Date"), by and between CALIPER TECHNOLOGIES CORP., a
corporation organized under the laws of the State of Delaware ("Caliper"), and
HEWLETT-PACKARD Company, a corporation organized under the laws of the State of
California, acting through its Chemical Analysis Group ("HP").
RECITALS
A. Caliper is a company engaged in the development of new technology
and products in microfluidics and related areas that can be used to improve the
chemical and biochemical analysis activities of pharmaceutical and other types
of companies.
B. HP is a multinational company which through its Chemical Analysis
Group is a leading worldwide developer and supplier of instrumentation, supplies
and services to customers in pharmaceutical and other industries.
C. HP and Caliper wish to form a collaboration to develop and
commercialize products based on Caliper's microfluidics technology and HP's
instrumentation technology for use in the field of chemical and biochemical
research and analysis, and to provide a business infrastructure for the
manufacture, sale, distribution and support of those products.
THE PARTIES THEREFORE AGREE:
1. DEFINITIONS
Each of the capitalized terms in this Agreement shall have the
meaning as defined below. Terms defined in singular form shall include the
plural form and vice versa.
"AFFILIATES" shall mean any company or entity controlled by,
controlling, or under common control with a party hereto and shall include
without limitation any company more than fifty percent (50%) of whose voting
stock or participating profit interest is owned or controlled, directly or
indirectly, by a party, and any company which owns or controls, directly or
indirectly, more than fifty percent (50%) of the voting stock of a party.
"AFM" shall mean HP's Accounting and Finance Manual which is intended
to provide financial policy guidelines and specific instructions concerning HP's
accounting and reporting processes in effect as of the Effective Date and as
updated from time to time provided Caliper has been furnished with such updates
and afforded a reasonable opportunity to object to its use
<PAGE> 2
with this Agreement. Where applicable and mutually agreed, the AFM will be
extended to provide guidelines and specific instructions for the collaboration.
"ALLOWABLE EXPENSE" shall mean those expenses incurred by a party
consisting of [ * ], and any other amounts on which the parties agree from time
to time to the extent such amounts are not included in Cost of Sales.
"APPLICATION" means a particular task, experiment or biochemical or
chemical manipulation, or series thereof, that a potential user of a
Collaboration Product wishes or needs to perform.
"APPLICATION KIT" shall mean a set of Components that are sold
together as a package to System users for purposes of performing a specific
Application, including without limitation, LabChips, Reagents and the
Application-specific portion of System Software.
"BUSINESS PLAN" shall mean the Collaboration business plan
established by the parties pursuant to Article 3, in accordance with the HP Ten
Step Planning Process.
"CALIPER DEVELOPMENT EXPENSES" shall mean [ * ] activities under the
Product Plan for Collaboration Products calculated as [ * ]. All these expenses
shall be applicable to such activities, beginning from the time a Component is
placed on the Development Plan.
"CALIPER KNOW-HOW" shall mean all scientific, technical and
engineering information which Caliper owns or controls or to which Caliper has a
license including the right of sublicense as of the Effective Date or during the
term of the Collaboration, which Caliper uses reasonable efforts to protect as a
trade secret, and which is not publicly accessible in an issued patent or
otherwise.
"CALIPER OPERATING EXPENSES" shall mean all monies applied by Caliper
and its Third Party collaborators to [ * ] relating to Lab-on-a-Chip Technology
or systems utilizing Lab-on-a-Chip Technology, to the extent that such [ * ] are
relevant to [ * ] as reasonably determined by Caliper, except to the extent that
[ * ], and excluding any amounts provided to Caliper by HP under Section 7.2,
consisting of but not limited to, [ * ].
"CALIPER PATENTS" shall mean (i) all patents, including, without
limitation, any substitutions, extensions, reissues, renewals, supplementary
protection certificates and inventors' certificates, which have not been held
invalid or unenforceable by a non-appealable or non-appealed decision of a court
of competent jurisdiction, and (ii) all patent applications filed in any
jurisdiction, including, without limitation, any provisionals, divisionals,
continuations, continuations-in-part, which in each case Caliper owns, controls
or has a license to (with the right to sublicense) as of the Effective Date or
during the term of the Collaboration.
"CALIPER TECHNOLOGY" shall mean Caliper Patents and Caliper Know-How
relating to Lab-on-a-Chip Technology. Rights to Caliper Technology under this
Agreement shall be subject to any restrictions or obligations (including payment
obligations) contained in agreements between Caliper and a Third Party.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
2
<PAGE> 3
"CLASS A PRODUCTS" shall mean LabChips; Reagents [ * ].
"CLASS B PRODUCTS" shall mean Instruments [ * ].
"CLASS C PRODUCTS" shall mean general purpose products that are sold
separately by HP or Third Parties for end use separate from LabChip-based
Systems. This is in contrast to components or devices embedded in Instruments.
Examples of Class C Products include [ * ].
"COLLABORATION" shall mean all activities relating to Collaboration
Products conducted by the parties pursuant to this Agreement.
"COLLABORATION MANAGERS" shall mean the persons assigned by each
party to the management of the Collaboration as further described in Section
3.2(b) below.
"COLLABORATION PRODUCTS" shall mean the Systems in the Field of
Interest that the parties put on a Product Plan and all Components that make up
such Systems. "Collaboration Products" shall include HP Collaboration Products
(as defined below). For purposes of Article 10 only, "Collaboration Products"
shall only include such [ * ] during the Collaboration.
"COMPONENT" shall mean one of the elements of a complete System,
including but not limited to, the LabChip, the Instrument, the System Software
or a Reagent.
"CONFIDENTIAL INFORMATION" shall mean any trade secret information
disclosed by one party to the other in connection with activities under this
Agreement, including but not limited to scientific, technical and engineering
information, reports exchanged between the parties, marketing and other business
plans, information relating to a party's products, sales, financial and
corporate affairs, suppliers, customers, employees, or investors, and other
comparable information; provided, that information will be "Confidential
Information" only if it is marked as confidential at the time of disclosure or,
if the material is not in written form (e.g. orally disclosed), it is treated as
confidential at the time of disclosure and is designated as confidential in a
written memorandum sent to the recipient within thirty days of disclosure,
summarizing the confidential information sufficiently for identification.
"COST OF SALES" shall mean [ * ]. Notwithstanding the AFM, as used in
this Agreement the term Cost of Sales does not include [ * ].
"DATA ACQUISITION SOFTWARE" shall mean software that sends data
measured by the Instrument to a file, database or memory. Such data set is used
for generating the measurement information from an Application or for displaying
status information of the Application in the user interface of the System
Software or the Instrument.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
3
<PAGE> 4
"DATA INTERPRETATION SOFTWARE" shall mean software that evaluates
data measured by the Instrument according to algorithms with Distinct
Functionality for a particular Application. Parameters for the Data
Interpretation Software are defined in the Experimental Method and are entered
through the user interface component of the Data Interpretation Software module
of the System Software. For example, Data Interpretation Software could use a
pattern recognition algorithm to interpret the data generated by an Application.
"DEVELOPMENT PLAN" shall mean the component of the Product Plan that
sets forth a detailed plan for the development of a particular Collaboration
Product as described in Section 3.2(b) below.
"DISTINCT FUNCTIONALITY" shall mean functionality of a Component or
System that [ * ]. For example, a [ * ] would not have Distinct Functionality.
"ENGINEERING RESPONSIBILITY" shall mean ultimate responsibility for
deciding upon final specifications and for developing the manufacturing
processes for meeting such specifications.
"EXECUTIVE SPONSOR" shall mean the persons assigned by each party to
the oversight of the Collaboration between the parties created by this
Agreement, and responsible for dispute resolution as further described in
Section 3.2(a) below.
"EXPERIMENTAL METHOD" shall mean a set of data or instructions, not
necessarily in the form of software, used to control the Components of a System,
which Components may be common to multiple Applications, for performance of a
particular Application. For a particular Application, for example, the
Experimental Method performs control of Instruments (e.g., control chip voltages
and detector setpoints) and defines the particular data interpretation
algorithm, information presentation or information management routines in the
System Software.
"FIRMWARE" shall mean software that physically resides in the
Instrument. Firmware controls the hardware functions of the Instrument,
communicates with other functional modules in the System and executes the
Instrument control part of the Experimental Method for a particular Application.
"FDA" shall mean the United States Food and Drug Administration, and
any successor thereto.
"FIELD OF INTEREST" shall have the meaning provided in Section 2.2
below.
"GROSS MARGIN" shall mean [ * ].
"GROSS REVENUES" shall mean [ * ]. Handling of bundling will be set
forth in Article 7.
"HP COLLABORATION PRODUCT" shall have the meaning set forth in
Section 4.2(d).
"HP KNOW-HOW" shall mean all scientific, technical and engineering
information which HP owns or controls or to which HP has a license including the
right of sublicense as of the
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
4
<PAGE> 5
Effective Date or during the term of the Collaboration, which HP uses reasonable
efforts to protect as a trade secret, which HP elects to incorporate into or use
in the design, development or manufacturing of Collaboration Products during the
course of the Collaboration, and which is not publicly accessible in an issued
patent or otherwise.
"HP OPERATING EXPENSES" shall mean the expenses incurred by HP [ * ],
consisting of but not limited to, [ * ].
"HP PATENTS" shall mean (i) all patents, including, without
limitation, any substitutions, extensions, reissues, renewals, supplementary
protection certificates and inventors' certificates, which have not been held
invalid or unenforceable by a non-appealable or non-appealed decision of a court
of competent jurisdiction, and (ii) all patent applications filed in any
jurisdiction, including, without limitation, any provisionals, divisionals,
continuations, continuations-in-part, which in each case HP owns, controls or
has a license to (with the right to sublicense) as of the Effective Date or
during the term of the Collaboration.
"HP TECHNOLOGY" shall mean HP Patents and HP Know-How. Rights to HP
Technology under this Agreement shall be subject to any restrictions or
obligations (including payment obligations) contained in Third Party agreements.
"INFORMATION MANAGEMENT SOFTWARE" shall mean software that manages
data, including the Experimental Method-, measured- or results data for a
particular Application. The functions of such software include, but are not
limited to, archiving, retrieving, searching for or mailing information. Such
tasks are initiated through a user interface component of this functional module
of the System Software.
"INFORMATION PRESENTATION SOFTWARE" shall mean software that
visualizes or saves evaluated data through various media (e.g., display, disc,
printer). Other software tools may also be used for reporting or accessing the
results (e.g., standard office software packages like MS WinWord(TM),
Browsers(TM)). Specific parameters for Information Presentation Software are
defined in the Experimental Method and are entered through the user interface
component of the Information Presentation Software functional module.
"INSTRUMENT" shall mean all hardware in a System, excluding [ * ].
"INSTRUMENT CONTROL SOFTWARE" shall mean software that communicates
data to and from the Instrument through the appropriate instrument driver and
physical link driver, including but not limited to, Scripts. Such data is either
entered through the user interface of the System or System Software or received
and saved in the Experimental Method data file or database. Data received can
also be shown by other means, e.g., a display on the Instrument.
"LABCHIP" shall mean a chip, based on Caliper Technology, which is
designed to perform an Application or portion thereof when used in a System. As
of the Effective Date, such chips typically consist of [ * ].
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
5
<PAGE> 6
"LAB-ON-A-CHIP TECHNOLOGY" shall mean microfluidic systems, methods,
devices, and structures which have microfluidic processing elements that have
[ * ] as further defined in Exhibit A to this Agreement.
"MANUFACTURING PLAN" shall mean the component of the Product Plan
that sets forth a detailed plan for the manufacturing of a Collaboration Product
as set forth in Section 5.2(a) below.
"MARKETING PLAN" shall mean the component of the Product Plan that
sets forth a detailed plan for the marketing, distribution and support of a
Collaboration Product.
"NET REVENUES" shall mean [ * ].
"NEW PRODUCT" shall mean a Component or a System in the Field of
Interest, having Distinct Functionality compared to a Collaboration Product,
that is developed independently by either party after the termination or
expiration of the Collaboration.
"NON-COLLABORATION PRODUCT" shall mean any product that includes HP
Technology or Caliper Technology and does not fall within the definition of a
Collaboration Product.
"OEM" stands for original equipment manufacturer.
"PATENT COSTS" shall mean the fees and expenses paid to outside
counsel and other Third Parties, direct costs of in-house counsel, and filing
and maintenance fees and expenses, incurred in connection with the establishment
and maintenance of rights under patents, including costs of patent interference,
opposition, reissue, reexamination or other proceedings before the USPTO or
other patent offices. In-house counsel costs shall be determined on the basis of
time actually spent on patents applicable to Collaboration Products.
"PMA" shall mean a Premarket Approval Application filed with the FDA,
or foreign equivalent, as applicable.
"PRODUCT PROGRAM MANAGER" shall mean the persons assigned by each
party to the management of the development of a Collaboration Product as further
described in Section 3.2(c).
"PRODUCT PLAN" shall mean the plan established by the parties
pursuant to Article 3 of this Agreement. The Product Plan shall include the
following components for each Collaboration Product: the Development Plan, the
Manufacturing Plan and the Marketing Plan, in accordance with CAG's Project
Lifecycle.
"REAGENT" shall mean a chemical or biochemical substance to be used
with a LabChip for a particular Application.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
6
<PAGE> 7
"SCRIPT" shall mean a set of instructions (typically, a software
file) that is sent to the Instrument to control the LabChip environment and
fluidic manipulations inside the LabChip, including but not limited to [ * ].
Typically there will be a [ * ].
"STANDARD COST" shall mean [ * ]. Such costs include but are not
limited to [ * ]. Overhead Expenses include [ * ]. All of these Overhead Expense
items consist of, but are not limited to, [ * ]. These Standard Costs for a
Collaboration Product are [ * ].
"SYSTEM" shall mean a complete set of chips, hardware, software and
reagents that makes use of Caliper Technology to perform a single Application,
excluding Class C Products.
"SYSTEM SOFTWARE" shall mean all software used in a System. System
Software defines and executes the Experimental Method for a particular
Application and includes, but is not limited to, Instrument Control Software,
Data Acquisition Software, Data Interpretation Software, Information
Presentation Software, Information Management Software and Firmware.
"THIRD PARTY" shall mean any individual or entity other than Caliper,
HP or Affiliates of either.
"TRANSFER PRICE" shall mean the price HP pays to Caliper for any
Collaboration Products that are manufactured by Caliper and sold to HP. This
price is equal to [ * ].
"U.S. GAAP" shall mean `Generally Accepted Accounting Principles' and
refers to accounting policies and procedures that are widely used in the U.S.
"VAR" stands for value added reseller.
2. LICENSES AND EXCLUSIVITY
2.1 LICENSES TO HP
(a) COLLABORATION PRODUCTS. Subject to the terms and conditions
of this Agreement, Caliper hereby grants to HP a worldwide license, co-exclusive
with Caliper, under the Caliper Technology to develop, manufacture for
Commercial Sale, market, distribute, sell and support Collaboration Products.
Notwithstanding, HP, except as provided in Sections 4.2(d) and 5.1(c), is not
granted a license to develop or manufacture LabChips. Caliper represents that it
has not heretofore granted any licenses under the Caliper Technology that would
grant the licensee the right to develop, manufacture for Commercial Sale,
market, distribute, sell or support Collaboration Products, except as heretofore
disclosed.
(b) SUBLICENSING. HP may sublicense the manufacturing rights
granted to it under subsection 2.1(a) under the procedures set forth in Section
5.1(b), and HP may sublicense the distribution rights as provided in Section 6.3
of this Agreement. No other license rights under subsection 2.1(a) may be
sublicensed or transferred except by mutual written agreement.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
7
<PAGE> 8
(c) [ * ].
(d) RESTRICTIONS ON USE OF CALIPER KNOW-HOW. HP acknowledges that
the use of Caliper Know-How under the licenses to HP set forth above in this
Section 2.1 is limited to use of such Caliper Know-How solely in the Field of
Interest. HP agrees to use reasonable business efforts to avoid use of the
Caliper Know-How outside the Field of Interest by HP, its Affiliates or
sublicensees, and to avoid disclosure of such Caliper Know-How by HP or its
Affiliates and sublicensees to any party who does not have a need to know such
Caliper Know-How for purposes of the Collaboration. HP agrees that if it
discovers at any time that Caliper Know-How is being used by any such person
outside the Field of Interest, it will promptly disclose such use to Caliper and
the parties will confer in order to determine a reasonable and effective means
of addressing such unauthorized use.
(e) SOFTWARE.
(i) Subject to the terms and conditions of this Agreement,
Caliper hereby grants HP a non-exclusive, non-transferable license under Caliper
Technology and any applicable copyright to reproduce, create derivative works,
publicly distribute, publicly perform and publicly display System Software (both
source and object code) for use in Collaboration Products; provided, that HP may
not disclose any source code provided by Caliper to Third Parties except to
contractors under duty of confidentiality to HP. Caliper will provide updates to
source and object code and available documentation from time to time upon
request of HP. Under this license HP may sublicense manufacturing and
distribution rights to the same extent as HP may sublicense other Caliper
Technology under section 2.1(b).
(ii) Caliper hereby grants HP a royalty-free, non-exclusive
license including the right of sublicense under Caliper Technology and any
applicable copyright to reproduce, create derivative works, publicly distribute,
publicly perform and publicly display any improvements to software originally
created by HP (both source and object code) for use in all fields. Caliper will
provide updates to any such improvements from time to time upon request of HP.
(f) RETAINED RIGHTS. All rights in Caliper Technology not
expressly granted to HP in this Agreement are retained exclusively by Caliper.
2.2 FIELD OF INTEREST. The term "Field of Interest" shall mean
Commercial Sale of Limited Through-Put products for research, development,
analytical or manufacturing Applications, including [ * ] but not other
Diagnostic Products, and excluding [ * ], which products are designed (i) to
introduce and prepare chemical, biochemical and biological samples, (ii) to
perform assays, synthesis and other reactions, or (iii) to perform physical
separations and detection.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE> 9
(a) THROUGH-PUT LIMITS.
(i) "Limited Through-Put" as used herein shall mean sample
throughput per System not exceeding the volume limits set forth below based on
operation of the product for [ * ]:
<TABLE>
<CAPTION>
<S> <C> <C>
Years [ * ] [ * ]
Years [ * ] [ * ]
Years [ * ] [ * ]
Years [ * ] [ * ]
Years [ * ] [ * ]
[ * ].
</TABLE>
(ii) The parties intend to develop Collaboration Products
that will have a leading edge relative to the competition. The parties will
strive to maintain a leading edge by proactively reviewing the state of
competitors' development and commercial efforts, to the extent information is
available. If at any time the through-put limits set forth above would prevent a
Collaboration Product from having a leading edge with regard to a particular
Application over competing products being actively developed or marketed for
Commercial Sale by Third Parties, then the parties will review such limits and
reasonably discuss potential changes in good faith with regard to the particular
Application, subject to any existing Third Party commitments.
(iii) The parties acknowledge that customers may purchase
multiple Systems for certain Applications in order to increase their through-put
capacity, and that it may be beneficial to the Collaboration for HP to assist
such customers in these efforts. Accordingly, HP is authorized to [ * ] .
Notwithstanding the foregoing, the parties agree that all Systems that are
developed and commercialized under this Collaboration shall be [ * ].
(b) "COMMERCIAL SALE" as used herein shall mean sale of
Collaboration Products in volumes of [ * ]. A proposed Collaboration Product
will be considered to be for "Commercial Sale" provided there is a reasonable
projection in the Product Plan that it will be sold in such quantity [ * ]. The
parties recognize that sales volume projections are inexact. HP will retain
rights to Instruments, System Software and related Systems that do not actually
meet these sales projections, provided the volume estimates were reasonable
throughout the development process for such Instruments, System Software and
related Systems. "Commercial Sale" does not include the use of Caliper
Technology to commercialize [ * ], but Collaboration Products offered for
Commercial Sale may be used by customers for such purposes. "Commercial Sale"
does not include the use of Caliper Technology to provide [ * ].
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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(i) The parties acknowledge that HP may introduce
Instruments to selected customers on a limited basis [ * ] prior to general
commercial introduction, for the purpose of obtaining customer feedback prior to
introduction, and that such beta testing shall not be considered general
commercial introduction.
(ii) Caliper may, acting independently or in collaboration
with others, develop, make and distribute to Third Parties any System. However,
Caliper may only do this if Caliper limits actual sales of Systems to [ * ].
Systems must have Distinct Functionality to be counted separately under this
Subsection. Caliper may sell any number of LabChips, Reagents and other
consumables for use on such Systems. Caliper will label such Instruments "not
for resale," [ * ].
(c) "DIAGNOSTIC PRODUCTS" as used herein shall mean products that
are subject to regulatory approval requirements under applicable law,
regulations or policies of regulatory agencies (i.e., PMA or 510(k), or foreign
equivalent) and are useful for chemical or biochemical analysis of human samples
in a health care setting, such as a reference laboratory, hospital laboratory,
hospital, clinic, doctor's office or at home, and veterinary products utilizing
similar technology to the above products. HP will not be prohibited from selling
Collaboration Products designed for research, development, analytical or
manufacturing use to such customers, provided all products are labeled in
accordance with Section 6.4. Caliper will not be prohibited from introducing
products designed for diagnostic use by such customers while Caliper is in the
course of pursuing FDA approval on such a product, or from transferring such
rights to any Third Party.
2.3 EXCLUSIVITY
(a) During the Collaboration, the relationship will be mutually
exclusive with respect to the application of Lab-on-a-Chip Technology to the
Field of Interest, meaning that [*].
(b) Caliper acknowledges that HP has been and will continue to be
engaged in [ * ], and that this Section does not prohibit HP from (i) pursuing
its internally developed [ * ], outside the Field of Interest, such as
diagnostics; or (ii) working with any Third Party [ * ]. To the extent that
these activities constitute application of Lab-on-a-Chip Technology to the Field
of Interest, they will be subject to the provisions of Section 2.3(a). Caliper
will not be free to use HP [ * ] disclosed under confidentiality for any purpose
outside the Collaboration (except as otherwise expressly licensed under this
Agreement), and HP will not be free to use Caliper [ * ] disclosed under
confidentiality for any purpose outside the Collaboration (except as otherwise
expressly licensed under this Agreement). HP and Caliper will use all reasonable
business efforts to manage their collaborative and independent activities so as
to foster an environment of open communication for collaborative purposes while
protecting the integrity of independent activities.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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2.4 LICENSES TO CALIPER
(a) HP Know-How License. Subject to the terms and conditions of
this Agreement, HP hereby grants to Caliper a worldwide, fully-paid,
non-exclusive, license, with the right to grant sub-licenses, to develop, make,
use, import and sell all Non-Collaboration Products that make use of Caliper
Technology for use in all fields during and after the term of the Agreement,
using all HP Know-How, excluding any HP Confidential Information directed to
HP's [ * ]. Upon request from Caliper, HP will use reasonable business efforts
to provide such HP Know-How or to allow Caliper access to such HP Know-How in a
reasonable format.
(b) HP Patent License. HP will notify Caliper in writing at the
time HP proposes to incorporate subject matter claimed in an HP Patent that was
first applied for prior to or during the Collaboration into a Collaboration
Product, or to practice such an HP Patent in the development or manufacture of a
Collaboration Product, or at the time HP learns that such an HP Patent covers a
Collaboration Product. HP hereby grants Caliper a [ * ] license to any such HP
Patent (except to the extent such HP Patent covers HP's [ * ]) subject to
agreement of the parties on [ * ]. Such license includes:
(i) a license under such HP Patent to develop
Non-Collaboration Products that include Caliper Technology for use in all fields
during and after the term of the Agreement; and
(ii) a license under such HP Patent including the right of
sublicense to make, have made, use, sell, offer for sale and import
Non-Collaboration Products that include Caliper Technology for use in all fields
during and after the term of the Agreement.
(c) HP SOFTWARE LICENSE. HP hereby grants Caliper a license under
HP Technology and any applicable copyright to any System Software (both source
and object code) subject to agreement of the parties on [ * ]; provided, that
Caliper may not disclose the source code to Third Parties except to contractors
under duty of confidentiality to Caliper. HP will provide updates to source and
object code and available documentation from time to time upon request of
Caliper. Such license includes:
(i) a non-exclusive, worldwide license under such System
Software to create derivative works for use in Non-Collaboration Products that
make use of Caliper Technology for use in all fields during and after the term
of the Agreement; and
(ii) a non-exclusive, worldwide license including the right
of sublicense under such System Software to reproduce, publicly distribute,
publicly perform and publicly display Non-Collaboration Products that make use
of Caliper Technology for use in all fields during and after the term of the
Agreement.
(d) SOFTWARE IMPROVEMENTS. HP hereby grants Caliper a
royalty-free, non-exclusive license including the right of sublicense under HP
Technology and any applicable copyright to reproduce, create derivative works,
publicly distribute, publicly perform and publicly display any improvements to
software originally created by Caliper (both source and
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object code) for use in all fields. HP will provide updates to any such
improvements from time to time upon request of Caliper.
(e) PURCHASE OF PARTS. Caliper shall have the right to purchase
from HP for use in any Non-Collaboration Product any part manufactured or
supplied by HP that is incorporated into a Collaboration Product in development
or on the market, if Caliper cannot or elects not to manufacture such part or
have it manufactured. HP will identify such parts in HP's product design
documentation. Upon notification by HP, Caliper may elect to purchase such parts
from HP at any time during and after the term of this Agreement so long as such
parts are not obsolete. If Caliper elects to purchase such HP parts, promptly
after Caliper notifies HP of such election the parties shall agree on [ * ]. The
sale by HP of such parts shall be subject to HP's standard terms and conditions
of sale and service.
(f) LIMITED LICENSE FOR COLLABORATION PRODUCTS. Subject to the
terms and conditions of this Agreement, HP hereby grants to Caliper a worldwide,
fully-paid, non-exclusive, license, to develop, make, use, import and sell
Collaboration Products in accordance with Section 2.2(b)(ii), under HP
Technology, excluding any HP Confidential Information directed to HP's [ * ].
(g) ROYALTY CAP. The compensation due from Caliper to HP in
consideration for all HP intellectual property licensed to Caliper under
Sections 2.4(b) and 2.4(c) above shall not exceed royalties of [ * ]. The rates
set forth in this Section 2.4 are subject to adjustment as provided in Section
10.4(f). Payments due under this Section 2.4 shall be subject to the same terms
and conditions applicable to Gross Margin share payments on Collaboration
Products under Sections 7.6, 7.7 and 7.9. If any such product does not clearly
fall into one of the above classifications, the parties shall mutually agree on
an appropriate classification for such product prior to commercial introduction.
(h) RETAINED RIGHTS. All rights in HP Technology not expressly
granted to Caliper in this Agreement are retained exclusively by HP.
2.5 THIRD PARTY LICENSES
(a) EXISTING THIRD PARTY LICENSES. [ * ]. Each party acknowledges
that it is subject to the terms and conditions of any existing third party
licenses of the other party that it practices under this Agreement, so long as
such other party has provided a copy of the license agreement.
(b) FUTURE THIRD PARTY LICENSES. After the Effective Date, if
either HP or Caliper believes that additional intellectual property or
technology controlled by a Third Party ("Third Party Technology") is required or
desirable in order to proceed with the development or commercialization of one
or more Collaboration Products for use in the Field of Interest, then the
parties will discuss the situation in good faith [ * ].
2.6 MAJOR TRANSACTIONS. During the Collaboration, neither party may
enter into any agreement or arrangement respecting Collaboration Products [ * ]
for distribution or for the
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purpose of [ * ], unless the other party gives written consent, which consent
will not be unreasonably withheld.
3. COLLABORATION MANAGEMENT
3.1 COLLABORATION PLANNING. The process of business planning will be
based upon Hewlett-Packard's Ten-Step Business Planning and Review Process. This
process is documented in various HP publications which have been made available
to Caliper at the Effective Date (Ref.: Booklet "Ten-Step Business Planning
Fundamentals" Hewlett-Packard Corporate Education Oct. 1997). The Business Plan
will include an assessment of customer needs and the competitive situation in
the markets addressed, a detailed 15-months Product Development Roadmap
including a 5-Year Product Development Vision, Marketing/Distribution and
Support, and Manufacturing Plans covering these periods and other elements as
deemed necessary by the parties. The parties will use reasonable business
efforts to complete the initial Business Plan at the end of the third month
following the Effective Date. The Business Plan will be at least reviewed on an
annual basis, revisions of the Business Plan being due at [ * ] of each year
during the term of the Collaboration. The process will be managed by the
Collaboration Managers of both parties, who designate Business Planning Teams
representing the functional areas of Marketing/Sales/Support, Research and
Development, Manufacturing and Finance.
3.2 COLLABORATION MANAGEMENT. The purpose of the Collaboration
management structure set forth below is to coordinate and expedite development
and commercialization of Collaboration Products. The activities of the parties
under this Agreement shall be managed in this structure only to the extent set
forth herein. Each party shall assign individuals from within their respective
organizations to each of the following positions. Each party may, in its sole
discretion, may replace the assigned individuals at any time as necessary.
(a) EXECUTIVE SPONSORS.
(i) APPOINTMENT; MEETINGS. Within thirty (30) days of the
Effective Date, each party shall appoint one (1) individual to be its Executive
Sponsor for the Collaboration. Each party's Executive Sponsor shall be a senior
executive of such party with the authority to make decisions on behalf of such
party.
(ii) RESPONSIBILITIES. The Executive Sponsors shall have the
following specific responsibilities:
(1) approving the Business Plan,
(2) settling disputes or disagreements that are
unresolved by the Collaboration Managers; and
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COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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(3) performing such other functions as appropriate to
further the purposes of this Agreement as determined by the parties.
(iii) DECISION-MAKING. The Executive Sponsors shall make
decisions by unanimous vote. Whenever the Executive Sponsors are unable to reach
a consensus on a particular issue, such issue shall be discussed [ * ].
(b) COLLABORATION MANAGERS.
(i) APPOINTMENT; MEETINGS. Within thirty (30) days of the
Effective Date, each party shall appoint one (1) individual to be its
Collaboration Manager. The Collaboration Managers shall meet monthly during the
term of the Agreement, unless otherwise mutually agreed by the parties. Meetings
of the Collaboration Managers will be held alternately at the facilities of the
parties in Palo Alto or Waldbronn or by teleconference. Each party shall
promptly report to the Collaboration Managers on all material issues relating to
the development or commercialization of the Collaboration Products. Minutes of
the meetings of the Collaboration Managers shall be prepared alternately by the
parties and such minutes shall be provided to the Executive Sponsors for review.
(ii) RESPONSIBILITIES. In addition to having the general
responsibility of conducting the business planning and review process of the
Collaboration in order to achieve the goal of the parties to develop and market
Collaboration Products, the Collaboration Managers shall have the following
specific responsibilities:
(1) directing the process of preparing the Business Plan
and the Product Plans. The first complete Business Plan will be prepared by the
Collaboration Managers within ninety (90) days of the Effective Date;
(2) updating and revising the Business Plan annually or
as mutually agreed;
(3) monitoring and reviewing the progress of research,
development, manufacturing, marketing, distribution and finance activities in
order to ensure that satisfactory progress is being made with respect to the
Business Plan and the Product Plans;
(4) discussing and agreeing upon remedial measures if
the Collaboration Managers determine that the progress for a particular project
covered by a Product Plan is unsatisfactory;
(5) settling disputes or disagreements that are
unresolved by the Product Program Managers;
(6) performing such other functions as appropriate to
further the purposes of this Agreement as determined by the parties.
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COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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(iii) DECISION-MAKING. Decisions of the Collaboration
Managers shall be made by unanimous vote. If the Collaboration Managers become
deadlocked on an issue, the issue shall be presented to the Executive Sponsors
for resolution.
(c) PRODUCT PROGRAM MANAGERS. Each party shall appoint one of its
employees as a Product Program Manager for each System included in the Product
Plan. Such Product Program Manager will be responsible for overseeing the
day-to-day operations of such party with respect to such System and for
facilitating the achievement of agreed development milestones. A Product Program
Manager may be responsible for more than one such System.
(d) PROJECT TEAMS. Wherever practical, the Collaboration Managers
will consider teaming employees from one party to assist the other in areas
where those employees have relevant experience, provided that any disagreements
regarding staffing that cannot be resolved between the Collaboration Managers
will be resolved by [ * ].
4. DEVELOPMENT COLLABORATION
4.1 SCOPE. HP and Caliper will jointly develop Collaboration Products
in the Field of Interest during the term of the Collaboration. The activities
under the Collaboration will be governed by the Business Plan established
jointly by the parties. The parties agree to use the CAG Project Lifecycle
(Revision of October 1997 and future revisions) as the management tool for
establishing detailed Product Plans, Development Plans, Marketing/Sales/Support
Plans and Manufacturing Plans and for managing the execution and review of these
plans in a consistent and logical process framework. A copy of the CAG Project
Lifecycle will be provided to Caliper as reference material.
4.2 ALLOCATION OF DEVELOPMENT RESPONSIBILITIES.
(a) CALIPER RESPONSIBILITIES. Caliper will have Engineering
Responsibility for development of LabChips, [ * ]. With respect to LabChips,
this includes responsibility for development of processes for the manufacture of
LabChips.
(b) HP RESPONSIBILITIES. HP will have Engineering Responsibility
for Instruments. HP will have Engineering Responsibility for [ * ], subject to
Caliper's Engineering Responsibility as described in Section 4.2(a). The parties
expect that work on software will be particularly collaborative, with Caliper
generally focusing on the [ * ] portion of System Software and HP generally
focusing on [ * ]. HP will have responsibility for the overall system
integration of Collaboration Products, meaning that HP will make recommendations
to the party with Engineering Responsibility for each element regarding the
performance characteristics of such element that are necessary to ensure that
all elements function as a complete System when assembled.
(c) ALLOCATION OF FURTHER RESPONSIBILITIES IN THE DEVELOPMENT
PLANS. If Engineering Responsibility for an element of a Collaboration Product
is not specified by Sections 4.2(a) and 4.2(b) above, such responsibility will
be specified in the Development Plan. The
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Collaboration Managers may mutually agree to assign Engineering Responsibility
differently than provided in Sections 4.2(a) and 4.2(b) above on a case-by-case
basis.
(d) POTENTIAL DEVELOPMENT BY HP. If HP proposes to develop a
System within the Field of Interest and if after joint discussion, Caliper
declines to develop the LabChip, [ * ] for such System, HP will have the right
to develop such LabChip, [ * ]; provided, however, HP's right to perform such
development is subject to HP's compliance with the provision under Section 7.2.
If HP develops such Collaboration Products, they shall be "HP Collaboration
Products" for purposes of this Agreement. In the event that HP elects to develop
an HP Collaboration Product, Caliper will provide [ * ].
4.3 EXCHANGE OF INFORMATION. Each party will share with the other
party relevant information in its possession that is necessary or useful for the
development of Collaboration Products. The parties will foster a spirit of
uninhibited exchange of information with the goal of creating an attitude of
joint project ownership in the parties' employees engaged in the development of
Collaboration Products.
4.4 DUE DILIGENCE. Each party shall use [ * ] efforts to carry out
development of each Collaboration Product in accordance with the mutually agreed
Product Plans, including applying the level of resources specified in such
plans; provided that Caliper's efforts are subject to HP providing funding under
Section 7.2. Any verification of such efforts will be performed by independent
auditors applying U.S. GAAP.
5. MANUFACTURING
5.1 MANUFACTURING RESPONSIBILITIES
(a) MANUFACTURE BY CALIPER. Except as set forth in Section 5.1(c)
below, Caliper shall be responsible for manufacturing and supplying all LabChips
[ * ] included in the Collaboration Products. Caliper may engage Third Parties
to manufacture and supply LabChips [ * ], provided that Caliper retains ultimate
responsibility for the final LabChips [ * ], and subject to Section 5.1(c).
(b) MANUFACTURE BY HP. HP shall be responsible for manufacturing
and supplying all Instruments, [ * ] included in the Collaboration Products. HP
may engage Third Parties to manufacture and supply Components, provided that HP
retains ultimate responsibility for the final Instruments, [ * ]. If HP supplies
Caliper with Instruments for use outside the Field of Interest or
post-Collaboration, the applicable supply document will provide that HP will not
make engineering changes after the manufacturing release of a product without
notification of Caliper.
(c) CONTINGENT MANUFACTURING RIGHT OF HP FOR LABCHIPS.
(i) If Caliper elects not to manufacture LabChips for a
System included on the Product Plan, or if Caliper fails to meet minimum supply
commitments to be
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agreed upon in future supply agreements under Section 5.2(b), HP shall have the
option to manufacture the LabChips not being supplied by Caliper.
(ii) If HP exercises its contingent manufacturing right for
LabChips as set forth under Section 5.1(c)(i), Caliper will provide HP [ * ]. If
HP develops new manufacturing processes and technology in the course of
manufacturing such LabChips, HP will provide Caliper [ * ].
(III) [ * ].
5.2 PRODUCTION PLANNING
(a) ESTABLISHMENT OF MANUFACTURING CAPACITY. The Collaboration
Managers shall develop a manufacturing plan (the "Manufacturing Plan") as part
of the Product Plan for each Collaboration Product, which shall be designed to
ensure sufficient supply of all Collaboration Products to satisfy market demand.
(b) LABCHIP SUPPLY AGREEMENTS. The sale of LabChips by Caliper to
HP will be governed by the terms and conditions of the OEM Purchase Agreement,
as outlined in Exhibit B hereto. In addition to the terms set forth in Exhibit
B, the following key terms are agreed to herein by the parties: (a) transfer
pricing will be as determined by and set forth in this Agreement, including
[ * ]; and (b) HP shall be obligated to buy, and Caliper shall be obligated to
sell, all of HP's requirements for such LabChips during the term of the
Collaboration. HP may revise any forecasts as set forth in the OEM Purchase
Agreement.
5.3 DUE DILIGENCE. Each party will use [ * ] business efforts in
manufacturing the Collaboration Products for which such party has manufacturing
responsibility.
6. MARKETING OF COLLABORATION PRODUCTS
6.1 SCOPE. HP will have the exclusive right to, and responsibility
for, marketing, selling, distributing and supporting Collaboration Products at
HP's expense in accordance with the terms of this Agreement and the Product
Plans jointly developed and agreed to by the parties as provided in Article 3,
except as otherwise specifically provided in this Agreement.
6.2 BRANDING.
(a) Caliper will mark LabChips supplied by Caliper with
appropriate "Caliper" and "LabChip" trademarks. Subject to HP's internal
trademark clearance procedures and Corporate Identity standards, Caliper will
also mark LabChips, or permit HP to mark LabChips, with the HP company and
product trademarks as a prominent sub-brand.
(b) Subject to HP's internal trademark clearance procedures and
Corporate Identity standards relating to co-branding, HP will mark, or allow
Caliper to mark, all System
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Components including Instruments, Reagents and Software with appropriate
"Caliper" and "LabChip" trademarks as a prominent sub-brand.
6.3 DISTRIBUTORS. [ * ]
6.4 PACKAGING AND LABELING. The Collaboration Products for commercial
sale under this Agreement shall be packaged and labeled consistent with the
requirements of the applicable laws of the countries where a Collaboration
Product is sold.
(a) The parties agree to discuss patent marking on a case-by-case
basis prior to product introduction in accordance with HP internal guidelines on
patent marking to preserve patent rights or protect the product from
infringement. If applicable, such patent marking shall identify HP and Caliper
as the manufacturers of such Collaboration Product.
(b) The parties agree to label Collaboration Products in a way
that makes it clear that no license is granted for diagnostic use but that does
not hurt marketing efforts.
6.5 ADVERTISING, PROMOTIONAL AND EDUCATIONAL MATERIALS. The parties
shall mutually establish guidelines for the use of HP's and Caliper's corporate
names, logos and trademarks in written sales, promotional, educational and
advertising materials relating to Collaboration Products. All such written and
visual materials and all documentary information and promotional materials will
portray HP, Caliper and their respective corporate names, logos and trademarks
in a manner consistent with their respective roles under this Agreement.
6.6 CUSTOMER SUPPORT. HP shall manage the customer interface and
shall provide a first level of service and support to end-user customers for all
Collaboration Products. Caliper will use reasonable business efforts to provide
backup technical support to HP. The Collaboration Managers will agree on a
mechanism by which Caliper will provide such backup technical support and obtain
direct end-user customer feedback regarding Collaboration Products. [ * ].
6.7 DUE DILIGENCE. HP will [ * ]. HP shall use [ * ] efforts in
marketing, promoting, selling and supporting the Collaboration Products.
7. FINANCIAL AND COMMERCIAL TERMS
7.1 EQUITY INVESTMENT. Within three days after the Effective Date,
the parties shall enter into a Preferred Stock Purchase Agreement, pursuant to
which HP shall pay to Caliper a total amount of [ * ].
7.2 DEVELOPMENT FUNDING.
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(a) MINIMA. HP will provide projects for development of
Collaboration Products by Caliper sufficient to meet the funding minima set
forth in this section. HP will pay Caliper Development Expenses for such
projects in the minimum amount of [ * ] dollars during [ * ], provided Caliper
actually incurs that amount of Caliper Development Expenses. HP will pay Caliper
Development Expenses for such projects in the minimum amount of [ * ] dollars in
the aggregate during years [ * ], provided Caliper actually incurs that amount
of Caliper Development Expenses. HP will pay Caliper Development Expenses for
such projects in the minimum amount of [ * ] dollars per year during years
[ * ], provided Caliper actually incurs that amount of Caliper Development
Expenses.
(b) CHANGES IN FUNDING LEVEL. Subject to the requirements of
subparagraph 7.2(a) above, at the start of year [ * ] HP may reduce or increase
the amount of Caliper Development Expenses that HP will pay for during year
[ * ] as compared with the actual funding in year [ * ] by any amount up to
[ * ], or a larger amount with Caliper's advance consent. Similarly, at the
start of year [ * ] HP may reduce or increase the amount of Caliper Development
Expenses that HP will pay for during year [ * ] as compared with the actual
funding in year [ * ] by any amount up to [ * ], or a larger amount with
Caliper's advance written consent. At the start of any subsequent year HP may
increase the amount of Caliper Development Expenses that HP will pay for during
such year as compared with the actual funding in the previous year by [ * ]
percent [ * ], or a larger amount with Caliper's advance written consent.
(c) HP will advance funds to Caliper on a monthly basis
sufficient to pay for the Caliper Development Expenses estimated and agreed to
for work to be conducted during each year under the Product Plan. Such payments
will be independent of any goals or milestones set forth in the Product Plan.
(d) Caliper will report actual incurred Caliper Development
Expenses by project to HP quarterly, not later than thirty days after the end of
each quarter. The report will include the information specified in the
definition of "Caliper Development Expenses".
(e) Deviations between amounts advanced by HP and actual incurred
Caliper Development Expenses at the end of each quarter will be carried over to
the next quarter and will reduce or increase the estimated funding payments for
the following month. Deviations at the end of any year will be carried over to
the following year.
(f) [ * ] used in calculating Caliper Development Expenses will
be reviewed annually and [ * ] will be adjusted by mutual agreement. The [ * ]
includes but is not necessarily limited to [ * ].
7.3 HP OPERATING EXPENSES
(a) YEARS [ * ]. HP shall expend not less than [ * ] in HP
Operating Expenses during the first [ * ] of the Agreement, including at least
[ * ] in Caliper Development Expenses funded by HP pursuant to Section 7.2.
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(b) YEARS [ * ]. If HP desires to continue the Collaboration
after the [ * ] anniversary of the Effective Date, HP shall expend at least
[ * ] dollars [ * ] in HP Operating Expenses in the [ * ] year of the Agreement
and at least [ * ] dollars [ * ] in HP Operating Expenses in the [ * ] year of
the Agreement, again including Caliper Development Expenses funded by HP. HP
shall notify Caliper in writing at least one hundred and thirty five (135) days
prior to the [ * ] of the Effective Date, respectively, whether it will or will
not meet its spending requirements for Caliper Development Expenses and HP
Operating Expenses for the following year. In the event HP does not make such
spending commitments for [ * ] either party may terminate the Collaboration,
pursuant to Section 10.5.
(c) YEARS [ * ]. At the beginning of year [ * ] of the
Collaboration, the parties shall initiate discussions regarding the appropriate
level of HP Operating Expenses or alternative performance criteria which HP must
meet in each of the [ * ] years of the Collaboration.
(d) CREDIT FOR EXCESS SPENDING. If HP expends HP Operating
Expenses in excess of the amounts required in a particular year of the
Collaboration, such excess amounts shall be carried forward and applied against
the HP Operating Expense requirement in any subsequent year up to the end of
year [ * ]. In no event, however, may funding for Caliper Development Expenses
be reduced below the minima provided in Section 7.2.
(e) CERTIFICATION BY HP. Within forty five (45) days after the
last day of each year of the Collaboration, HP shall provide to Caliper (i)
written certification by an appropriate HP financial officer that HP has
expended the minimum amounts for HP Operating Expenses to date and (ii) a report
of the cumulative HP Operating Expenses as of the last day of the applicable
year.
7.4 CALIPER OPERATING EXPENSES
(a) YEARS [ * ]. Caliper together with its Third Party
collaborators shall expend not less than [ * ] dollars [ * ] in Caliper
Operating Expenses during the first [ * ] years of the Agreement.
(b) YEARS [ * ]. The parties intend that the Caliper Operating
Expenses will be at least [ * ] dollars [ * ] in the [ * ] year of the Agreement
and at least [ * ] dollars [ * ] in the [ * ] year of the Agreement. However,
Caliper's expenditure of such amounts is at Caliper's sole discretion. Caliper
will notify HP in writing at least [ * ] days prior to the anniversary of the
Effective Date in years [ * ] whether it will or will not meet its spending
requirements for Caliper Operating Expenses for such years. If Caliper notifies
HP that it will not meet such spending requirements for either year [ * ], then
HP shall not be required to meet the HP Operating Expense requirements of
Section 7.3 for such year. HP's obligations under Section 7.2 shall not be
affected however. All other terms of this Agreement shall continue in such
event, and neither party shall have the right to terminate this Agreement
pursuant to Article 10.
(c) YEARS [ * ]. At the beginning of the [ * ] year of the
Collaboration, the parties shall initiate discussions regarding the appropriate
level of Caliper Operating Expenses or
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COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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alternative performance criteria which Caliper must meet in each of the [ * ]
years of the Collaboration. Such obligations shall be determined in view of the
[ * ], and other reasonable criteria which either party may wish to discuss in
good faith.
(d) CREDIT FOR EXCESS SPENDING. If Caliper expends Caliper
Operating Expenses in excess of the amounts required in a particular year of the
Collaboration, such excess amounts shall be carried forward and applied against
the Caliper Operating Expense requirement in any subsequent year up to the end
of year [ * ].
(e) CERTIFICATION BY CALIPER. Within forty five (45) days after
the last day of each year of the Collaboration, Caliper shall provide to HP (i)
written certification by an appropriate Caliper financial officer that Caliper
has expended the appropriate amounts for Caliper Operating Expenses to date and
(ii) a report of the cumulative Caliper Operating Expenses as of the last day of
the applicable year.
(f) [ * ], such Caliper Operating Expenses will be recognized in
full only when such [ * ] is no longer [ * ] and provided such [ * ] is relevant
to the Field of Interest as reasonably determined by Caliper.
7.5 GROSS MARGIN SHARING
(a) COLLABORATION PRODUCTS. During the term of the Collaboration,
HP and Caliper will share the Gross Margin on all Collaboration Products as
follows, on a product-by-product basis:
Class A Products [ * ] [ * ]
Class B Products [ * ] [ * ]
Class C Products [ * ].
If any product does not clearly fall into one of the above classifications, or
there is disagreement between the parties as to which category a particular
product falls into, the parties shall mutually agree on an appropriate Gross
Margin sharing rate for such product in connection with Product Plan
discussions, before commercial manufacture begins.
That portion of the Gross Margin generated by System Software which will be
considered to be attributable to a Class A Product will be calculated by [ * ].
That portion of the Gross Margin generated by System Software which will be
considered to be attributable to a Class B Product will be calculated by [ * ].
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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(b) HP COLLABORATION PRODUCTS. If Caliper elects not to develop a
LabChip and HP performs the development of such LabChip as set forth in Section
4.2(d), then HP and Caliper will share Gross Margin on the System in which the
LabChip is used as follows:
(i) if Caliper elects to manufacture the LabChip:
Class A Products [ * ] [ * ]
Class B Products [ * ] [ * ]
Class C Products [ * ].
(ii) if Caliper elects not to manufacture the LabChip:
Class A Products [ * ] [ * ]
Class B Products [ * ] [ * ]
Class C Products [ * ].
(c) ADJUSTMENTS. The parties acknowledge that the Gross Margin
share percentages set forth above have been negotiated based in part upon the
assumption that the average discount (as per the AFM) for Collaboration
Products, treated as a class, will be similar to the average discount for HP
Chemical Analysis Group's non-Collaboration Products. Accordingly, the parties
will review the average discount for all Collaboration Products on the [ * ]
anniversary of the Effective Date, and [ * ] thereafter, in each case reviewing
the previous [ * ] period. If the average discount for Collaboration Products in
any such [ * ] period is more than [ * ] percent [ * ] above or below the
average discount for non-Collaboration Products in such period, then the parties
shall meet and reasonably discuss in good faith corresponding changes to the
Gross Margin share percentages and HP Operating Expense commitments.
(d) TRANSFER OF PRODUCTS: All Collaboration Products supplied by
Caliper and shipped to HP will be invoiced to HP at Caliper's Transfer Price and
HP will pay against such invoice. This price will be part of HP's Cost of Sales
and therefore part of the Gross Margin calculation.
(e) INTEGRATED [ * ] PRODUCTS. Where HP's [ * ] technology is
integrated into a Collaboration Product, the parties will mutually agree, prior
to entry into the laboratory prototype phase, on a Gross Margin sharing rate
that reflects the proportional value of HP's [ * ] technology to the value of
the Caliper Technology. The Gross Margin share rate applicable to the value of
HP's [ * ]. Where the [ * ] qualifies as a Class C Product, [ * ].
7.6 BUNDLING AND PRICING. HP will establish prices for Components
that reflect in good faith the [ * ]. Furthermore, the parties understand that
certain Collaboration Products may be sold together as a kit or separately, as
customers may require from time to time. The Gross Margin of Collaboration
Products sold together in a kit shall be shared pursuant to the Gross
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COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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Margin share rules set forth in Section 7.5 based on [ * ]. If [ * ], the
parties shall mutually agree on an appropriate Gross Margin sharing rate for
such Collaboration Product in connection with Product Plan discussions, before
[ * ]. HP will individually price such bundled Collaboration Products in
accordance with [ * ] calculated as set forth in this Section 7.6. After the
initial sale of bundles consisting of [ * ], the [ * ] will be sold at prices
that are [ * ]. [ * ].
7.7 CASH FLOW
(a) Payment for Caliper Development Expenses will be made monthly
in advance on the first workday of the month.
(b) Caliper's Gross Margin share will be paid not later than the
last workday of the month following the shipment month of the Collaboration
Product.
(c) Royalty payments for New Products will be paid quarterly
(based on HP's fiscal year quarter) not later than the last workday of the month
following the shipment quarter.
(d) Payment for all products supplied by Caliper and shipped to
HP will be made in accordance with the applicable OEM contract.
7.8 COST OF SALES
(a) REVISION OF TRANSFER PRICE. The Transfer Price will reflect
[ * ]. The Transfer Price will be revised at least twice a year [ * ]. If the
[ * ], the Transfer Price must also be revised prospectively (per interim
revision rules of the AFM).
(b) EXCESS CAPACITY COSTS. Excess capacity costs (machinery and
personnel) will [ * ]. In the event that manufacturing capacity extensions
result in excess capacity, then [ * ]. The maximum capacity achievable through
said capacity extension and its related impact on [ * ] will be mutually agreed
to in advance.
(c) EXCESS AND OBSOLETE INVENTORY. Excess and obsolete inventory
will [ * ].
7.9 ACCOUNTING AND AUDIT
(a) HP will follow HP's standard financial practices, processes
and procedures as listed in the AFM. Caliper will follow the U.S.GAAP and will
make reasonable efforts to follow HP's standard financial practices, processes
and procedures as listed in the AFM. HP will disclose the AFM and any other
appropriate information to Caliper as necessary to enable Caliper to do this.
(b) All Gross Margin share and royalty payments made pursuant to
this Agreement will be accompanied by a report detailing the calculation of such
payments. Each party will keep adequate records regarding the basis for such
calculations in accordance with its standard practices but in no event for less
than three years.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
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(c) Each party may audit the financial records of the other party
for the limited purpose of ensuring compliance with the financial obligations of
that other party under this Agreement. Such an audit may be conducted not more
often than annually, during regular business hours, and on reasonable advance
notice. Such audit will be conducted by an independent auditor which will be
obligated to keep strictly confidential the audited party's financial records
and other information. The auditor will disclose such information to the
auditing party only to the extent necessary to establish compliance or
non-compliance with the audited party's financial obligations and, if the
latter, the magnitude of any discrepancy. The auditing party will pay the costs
of such audit unless the audit shows that the audited party is more than [ * ]
percent [ * ] delinquent in its obligations for the period of the audit as of
the end of such period, in which case the audited party will pay the costs of
the audit.
8. INTELLECTUAL PROPERTY MATTERS
8.1 REPRESENTATIONS AND WARRANTIES. Each party warrants that it has
the right to grant the licenses set forth in Section 2 of this Agreement.
Neither party: (a) makes any other representations or warranties, express or
implied, (b) assumes any liability with respect to any infringement of patents
or other rights of third parties due to the other party's operation under the
licenses granted herein, (c) assumes any responsibility for enforcement of its
Licensed Patents against third parties; or (d) assumes any responsibility for
continued maintenance of any Licensed Patent.
8.2 OWNERSHIP OF TECHNOLOGY
(a) Caliper shall retain all right, title and interest in and to
the Caliper Technology, and to any and all software, inventions, discoveries and
information made or developed solely by Caliper in the course of the
Collaboration, subject only to the licenses expressly granted to HP hereunder.
(b) HP shall retain all right, title and interest in and to the
HP Technology, and to any and all software, inventions, discoveries and
information made or developed solely by HP in the course of the Collaboration,
subject only to the licenses expressly granted to Caliper hereunder.
(c) The parties will jointly own all Joint Inventions (the term
"Joint Inventions" is defined in Section 8.3(b)). The parties shall each have
full rights of joint ownership of such Joint Inventions without restriction to
the Field of Interest. Each party may exploit patents on any Joint Inventions
[ * ]. In particular, each party may use a Joint Invention or a patent thereon
[ * ].
8.3 PATENT PROSECUTION AND MAINTENANCE
(a) SOLE INVENTIONS.
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(i) A "Sole Invention" is an invention or improvement
conceived entirely by one or more employees of Caliper or by one or more
employees of HP in the course of the Collaboration.
(ii) Each party shall have the right, but not the obligation,
at its expense and using patent counsel of its choice, to file, prosecute and
maintain patent applications claiming its Sole Inventions.
(iii) [ * ].
(b) JOINT INVENTIONS.
(i) A "Joint Invention" is an invention or improvement
conceived jointly by one or more employees of Caliper and one or more employees
of HP in the course of the Collaboration. The determination of whether an
invention or improvement is conceived "jointly" will be made under United States
law by assuming all the inventors were United States citizens and were located
within the territorial limits of the United States at the time of conception,
regardless of the actual nationality of the inventors or the actual location
where the invention was conceived.
(ii) The parties shall confer to determine how to allocate
responsibility and expenses for filing, prosecuting and maintaining patent
applications claiming any Joint Inventions. Unless the parties mutually agree
otherwise, Caliper shall have the right to file, prosecute and maintain patent
applications claiming Joint Inventions relating primarily to Lab-on-a-Chip
Technology and HP shall have the right to file, prosecute and maintain patent
applications claiming Joint Inventions relating primarily to Instruments. If the
party determined to be responsible elects not to file and prosecute applicable
patent applications on such Joint Inventions, the other party may undertake such
prosecution at its own expense in both parties' names. Each party is responsible
for compliance with any inventor law provisions and for any legally required
inventor compensation of its employees
(c) MUTUAL DISCLOSURE OF PATENT APPLICATIONS. If either party
files a patent application covering a Sole or Joint Invention, the filing party
will promptly disclose such patent application to the other party. The filing
party will keep the other party reasonably informed of the course of patent
prosecution or other proceedings with regard to such patent applications and
will provide reasonable advance notice to the other party of all filings and
correspondence with patent authorities regarding such patent applications,
including without limitation office actions, responses to office action,
amendments, restrictions, elections, requests for terminal disclaimer, and
requests for reissue or reexamination of any patent issuing from such
application, and any election to discontinue prosecution or maintenance thereof.
The other party will have an opportunity to review and comment on such filings
and correspondence prior to any applicable filing deadline.
(d) LICENSED PATENTS. Each party will promptly inform the other
if it elects to discontinue prosecution or maintenance of any patent or patent
application licensed hereunder.
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COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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8.4 THIRD PARTY PATENTS
(a) PATENT REVIEW. [ * ]. The parties agree to proactively review
relevant Third Party patents on a periodic basis and discuss any such Third
Party patents that represent a material risk of such infringement. Either party
may elect at any time to cease developing, manufacturing or distributing any
Collaboration Product that it reasonably determines on the advice of counsel
poses a substantial risk of infringing a third party patent.
(b) NOTICE OF CLAIMS. If the use, manufacture or sale of
Collaboration Products within the Field of Interest results in a claim, suit or
action, or an overt threat of same, (collectively, "Claims") against either or
both parties for patent infringement or for inducing or contributing to patent
infringement, the party first having notice of such Claim shall promptly notify
the other. The notice shall set forth the facts of such Claim in reasonable
detail.
(c) DEFENSE OF CLAIMS. Upon notice of a Claim, the parties shall
jointly confer regarding [ * ].
(d) NO ESCROW. No payments under this Agreement shall be subject
to escrow or otherwise delayed or waived by reason of any patent litigation.
8.5 INFRINGEMENT CLAIMS AGAINST THIRD PARTIES
(a) NOTIFICATION. If a Third Party infringes or misappropriates
any Caliper Technology or HP Technology by commercializing products in the Field
of Interest, the party to this Agreement first having knowledge of such
infringement or misappropriation shall promptly notify the other in writing. The
notice shall set forth the available facts of such infringement or
misappropriation in reasonable detail. The parties shall discuss the matter
[ * ].
(b) PROSECUTION OF INFRINGEMENT ACTIONS. The owner of the patent
or trade secret that is the subject of infringement or misappropriation shall
have the primary right, but not the obligation, to institute, prosecute and
control any action or proceeding with respect to infringement or
misappropriation of such patent or technology by counsel of its own choice. If
an infringement action infringes on both Caliper Technology and HP Technology,
the parties shall coordinate their prosecution with respect to such
infringement. The parties shall confer to determine which party shall have the
primary responsibility to institute, prosecute and control any action or
proceeding with respect to misappropriation of trade secrets or infringement of
patents claiming Joint Inventions.
(c) DECISION NOT TO PROSECUTE. [ * ].
(d) EXPENSES AND RECOVERY. If the parties mutually agree to
prosecute an enforcement action, then they will also agree [ * ].
9. CONFIDENTIALITY
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9.1 CONFIDENTIALITY. Except to the extent expressly authorized by
this Agreement or otherwise agreed in writing by the party who originally
disclosed such Confidential Information (the "Disclosing Party"), the party to
whom such Confidential Information was disclosed (the "Recipient") agrees to
keep the Disclosing Party's Confidential Information strictly confidential, as
if it were its own, for five years from the date of disclosure. Furthermore,
neither party shall use Confidential Information for any purpose other than for
performing its obligations or exercising its rights under this Agreement, except
that general business information may be used (but not disclosed) in the
ordinary course of business.
9.2 EXCEPTIONS. The above obligations of non-disclosure and non-use
shall not apply to information of which the recipient can document that:
(a) it was in the public domain at the time it was communicated
to the recipient by the disclosing party;
(b) it entered the public domain subsequent to the time it was
communicated to the recipient by the disclosing party through no fault of the
recipient;
(c) it was in the recipient's possession free of any obligation
of confidence at the time it was communicated to the recipient by the disclosing
party;
(d) it was rightfully communicated to the recipient free of any
obligation of confidence subsequent to the time it was communicated to the
recipient by the disclosing party;
(e) it was independently developed by employees or agents of the
recipient who had no knowledge of any Confidential Information communicated to
the recipient by the disclosing party;
(f) the communication was in response to a valid order by a court
or other governmental body, was otherwise required by law, or was necessary to
establish the rights of either party under this Agreement.
9.3 AUTHORIZED DISCLOSURES
(a) Notwithstanding Sections 9.1 and 9.2 above, the parties
hereby acknowledge each other's right to disclose Confidential Information to
Third Parties with whom they have entered into agreements for the purpose of
developing and commercializing Collaboration Products. If either party desires
to disclose any of the other's Confidential Information for the purposes set
forth in the preceding sentence, the parties shall meet to review such planned
disclosure and shall mutually agree on the Confidential Information, if any, to
be so disclosed prior to any such disclosure by either party.
(b) Notwithstanding Sections 9.1 and 9.2 above, each party may
disclose Confidential Information belonging to the other party to Affiliates and
sublicensees who agree to be bound by terms of confidentiality at least as
stringent as those in this Article 9. In addition, each party may disclose
Confidential Information of the other party to the extent such disclosure
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is reasonably necessary to: (i) comply with applicable securities laws and
regulations and other applicable governmental regulations, (ii) file or
prosecute patents relating to Sole Inventions or Joint Inventions, and (iii)
prosecute or defend litigation relating to Collaboration Products.
Notwithstanding the foregoing, in the event a party is required to make a
disclosure of Confidential Information as provided in this Section 9.3, it will,
except where impracticable, give reasonable advance notice to the other party of
such disclosure and use reasonable business efforts to maintain the information
as confidential or to secure confidential treatment of such information. In any
event, the parties agree to take all reasonable action to avoid disclosure of
Confidential Information hereunder.
9.4 COMMUNICATION AND PUBLICITY
(a) Promptly after the Effective Date, the parties may announce
the establishment of the Collaboration under this Agreement and its key terms in
a mutually agreed press release issued simultaneously by both parties. Subject
to the further provisions of this Section, no party shall originate any
subsequent written publicity, news release, or other announcement relating to
this Agreement or to performance hereunder or the existence of an arrangement
between the parties (collectively, "Written Disclosure"), without the prior
prompt review and written approval of the other. Once specific information has
been approved for disclosure, that information may be reiterated in any
subsequent Written Disclosure without further approval.
(b) Notwithstanding the foregoing provisions of this Article 9,
any party may make any public Written Disclosure it believes in good faith based
upon the advice of counsel is required by applicable law or any listing or
trading agreement concerning its publicly traded securities, provided that prior
to making such Written Disclosure, the disclosing party shall provide the other
party with a copy of the materials proposed to be disclosed and provide such
party with an opportunity to review and comment on the proposed Written
Disclosure.
(c) The terms of this Agreement may be disclosed to Third Parties
so long as such disclosure is made under a binder of confidentiality and so long
as material financial terms are not disclosed.
10. TERM AND TERMINATION
10.1 TERM.
(a) The term of the Collaboration will commence on the Effective
Date and will expire on the eighth (8th) anniversary of the Effective Date (the
"Expiration Date") unless earlier terminated pursuant to this Article 10.
(b) This Agreement will become effective upon the Effective Date
and continue until the last to expire payment obligation of either party, unless
terminated earlier pursuant to this Article 10.
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10.2 TERMINATION FOR BREACH.
(a) Either party may terminate this Agreement for material breach
of the Agreement by the other party on [ * ] written notice. The notice will
describe the breach in detail, and the allegedly breaching party will have [ * ]
in which to cure such breach.
(b) If during the Collaboration Caliper fails to cure a material
breach within such [ * ] period, HP at its option may terminate this Agreement
or may continue the Agreement in force. If HP elects to continue this Agreement
in force, HP may [ * ] for the remaining term of the Agreement.
(c) If during the Collaboration HP fails to cure a material
breach within such [ * ] period, Caliper at its option may terminate this
Agreement or may continue the Agreement in force. If Caliper elects to continue
this Agreement in force, Caliper may [ * ] for the remaining term of the
Agreement.
(d) If HP terminates the Agreement due to a Clear and Serious
Breach by Caliper (as described below), which breach remains uncured after the [
* ] day cure period, then upon termination the rights and obligations set forth
below in Section 10.4 for early termination after year five and beyond will
apply. For purposes of this Section, a "Clear and Serious Breach" shall mean
that Caliper materially breaches the Agreement by either (i) failing to apply at
least [ * ] percent [ * ] of the Caliper resources set forth in applicable
Product Plans in any year or (ii) willfully selling products that are clearly
within HP's exclusive rights in the Field of Interest as set forth in Article 2
above, either directly or through Third Parties, [ * ]. The rights and
obligations set forth in Section 10.4 shall not apply if the alleged breach is
the subject of a dispute resolution proceeding under Section 12.2 or if the
failure to perform results from Force Majeure as set forth in Section 13.2.
(e) The remedies set forth in subsections (b), (c) and (d) above
are in addition to any other remedies to which the parties may be entitled.
10.3 TERMINATION FOR CONVENIENCE. Either party may terminate the
Collaboration for any reason or no reason with at [ * ] prior written notice,
such termination to be effective at any time after the fifth anniversary of the
Effective Date. The date on which the termination takes effect is referred to
herein as the "Termination Date".
10.4 EFFECT OF EXPIRATION OR TERMINATION. If the Collaboration
expires at the end of its eight-year term, or if the Collaboration is terminated
for breach under Section 10.2(d) or for convenience under Section 10.3, then:
(a) PAYMENTS. Any outstanding payment obligations must be
satisfied as of the Termination or Expiration Date. Any overpayment must be
returned forthwith.
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(b) RESEARCH AND DEVELOPMENT. All joint research and development
under the Collaboration and HP funding of such research and development will end
on the Termination or Expiration Date.
(c) SUPPLY OF PRODUCTS BY CALIPER. For [ * ] years following the
Termination or Expiration Date, HP will have the option to have Caliper continue
to supply HP with all Collaboration Products being supplied by Caliper as of the
Termination or Expiration Date. Whether or not HP elects to have Caliper supply
such Collaboration Products, the financial terms will be as set forth in Section
10.4(h) below, subject to Section 10.4(f).
(d) SUPPLY OF PRODUCTS BY HP. For [ * ] years following the
Termination or Expiration Date, HP will supply all of Caliper's requirements for
Collaboration Products being supplied by HP as of the Termination or Expiration
Date. Pricing and other terms shall be [ * ].
(e) TRAINING. During the [ * ] after any notice of termination is
given pursuant to this Article 10, or during the first [ * ] after the fifth
anniversary of the Effective Date if such notice is given before the fifth
anniversary of the Effective Date, the party manufacturing and supplying a
Component will [ * ] to instruct and train personnel of the other party so that
the other party will [ * ] manufacture and supply such Components in a similar
manner. Additional instruction and training will be provided upon reasonable
request during the ensuing [ * ] period, provided the requesting party
reimburses the other party's [ * ]. If the Collaboration is terminated for Clear
and Serious Breach, such training will be given during the [ * ] period after
such termination becomes effective, and not during the pendency of any dispute
resolution proceeding respecting such termination.
(f) [ * ].
(g) RIGHTS TO COMMERCIALIZE COLLABORATION PRODUCTS. After the
Termination or Expiration Date, HP shall have a worldwide, non-exclusive,
non-transferable license under Caliper Technology and software to market, sell
and support Collaboration Products in the Field of Interest. Caliper shall also
have the right to market, sell and support Collaboration Products, independently
or with Third Parties; provided, however, that if the Termination Date occurs
within a period of time that begins [ * ] years after the Effective Date and
ends [ * ] years and [ * ] months after the Effective Date, Caliper may not
market, sell or support Collaboration Products in the Field of Interest during
such period. Notwithstanding the foregoing, neither party may enter into an
agreement [ * ] for the sale of the Collaboration Products during the [ * ]
months following the Expiration or Termination Date. After such [ * ] month
period, either party may enter into any agreement with any Third Party
(h) PAYMENTS ON COLLABORATION PRODUCTS AFTER TERMINATION. After
the Termination or Expiration Date, HP shall pay Caliper the percentage of the
Gross Margin from sales of all Class A and Class B Collaboration Products during
the respective time periods as follows and shall [ * ] for Collaboration
Products supplied by Caliper. The rates set forth below
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are subject to the adjustment as provided in Section 10.4(f). These payments
will be made on the same schedule and terms as during the Collaboration under
Article 7 and will continue [ * ].
<TABLE>
<CAPTION>
PRODUCT [ * ] MONTHS [ * ] MONTHS FOLLOWING MORE THAN [ * ] MONTHS
FOLLOWING TERMINATION FOLLOWING TERMINATION FOLLOWING TERMINATION
<S> <C> <C> <C>
CLASS A PRODUCTS
Collaboration Products [ * ] [ * ] [ * ]
other than HP
Collaboration Products
HP Collaboration Products; [ * ] [ * ] [ * ]
LabChip manufactured by
Caliper*
HP Collaboration Products; [ * ] [ * ] [ * ]
LabChip manufactured by
HP*
CLASS B PRODUCTS [ * ] [ * ] [ * ]
</TABLE>
- -----------------
*These Gross Margin rates only apply if Caliper elects not to develop a LabChip
and HP performs the development of such LabChip as set forth in Section 4.2(d).
That portion of the Gross Margin generated by System Software which will be
considered to be attributable to a Class A Product will be calculated by [ * ].
That portion of the Gross Margin generated by System Software which will be
considered to be attributable to a Class B Product will be calculated by [ * ].
(i) COMMERCIALIZATION OF NEW PRODUCTS.
(i) HP RIGHTS. In the event of expiration or termination of the
Collaboration pursuant to Section 10.4, Caliper agrees to grant to HP a
non-transferable (except to a successor in interest to the HP Chemical Analysis
Group), royalty-bearing, worldwide, non-exclusive license under certain of the
Caliper Technology specified in this Section to develop, manufacture, market,
sell and support products in the Field of Interest. The products developed
pursuant to this license and covered by Caliper Patents will be "New Products,"
as defined in Article 1. Such license will be subject to the following potential
adjustments over time.
(1) The through-put limits applicable to this license will
continue to be subject to adjustment to ensure a leading edge relative to the
competition pursuant to Section 2.2(a)(ii) as applied to Collaboration Products,
and New Products which HP may
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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develop, after the Collaboration ends. In addition, the through-put limits
applicable to this license will be proactively adjusted as follows to maintain
parity with programs established by Caliper or its other licensees to develop
products utilizing Caliper Technology with higher through-put for sale on the
market in the Field of Interest. If Caliper [ * ], or if Caliper grants any
Third Party the right [ * ], then in either of such events Caliper shall
promptly notify HP in writing of such fact and the nature of the Application(s)
[ * ], and the through-put limits applicable to HP's license will automatically
be adjusted to [ * ] with respect to such Application(s).
(2) On the [ * ] anniversary of the Termination or Expiration
Date, HP will deliver to Caliper a written notice that lists the patents and
patent applications within the Caliper Technology that HP intends to use in New
Products for which [ * ]. Any patents or patent applications within the Caliper
Technology not listed in the notice will then be removed from the non-exclusive
license granted to HP under this Section 10.4(i)(i).
(3) On the [ * ] anniversary of the Termination or Expiration
Date, HP will deliver to Caliper a written notice that lists the patents and
patent applications within the Caliper Technology from the list provided under
clause (i) above that HP still intends to use in New Products for which [ * ].
Any patents or patent applications within the Caliper Technology not listed in
the notice will then be removed from the non-exclusive license granted to HP
under this Section 10.2(i)(i).
(4) Upon the [ * ] anniversary of the Termination or
Expiration Date, the patents and patent applications within the Caliper
Technology subject to the non-exclusive license granted under this Section
10.4(i)(i) shall be limited to the patents and patent applications listed as
aforesaid and actually utilized [ * ] prior to that date.
(ii) CALIPER RIGHTS. In the event of expiration or termination of
the Collaboration pursuant to Section 10.4, Caliper will retain exclusive rights
(except for the non-exclusive license granted to HP under Section 10.4(i)(i)
above) under Caliper Technology to make, use and sell products for all uses in
the Field of Interest. Caliper will retain all licenses to HP Technology granted
under the Collaboration and will continue to have access to HP Patents, System
Software and parts as provided in Section 2.4. Caliper will be free to develop
and market new systems that are compatible with all Collaboration Products.
(iii) ROYALTIES ON NEW PRODUCTS. HP shall pay royalties to
Caliper on all Net Revenues from the sale of New Products in Class A and Class B
as set forth below, provided that and for so long as the manufacture, use or
sale of at least one Component in the applicable class (Class A or Class B) is
claimed in a Caliper Patent in the country of manufacture, use or sale,
respectively. The royalty rates [ * ]. All of the rates set forth in this
Section 10.4(i)(iii) are subject to adjustment as provided in Section 10.4(f).
ROYALTY RATE [ * ] CLASS A PRODUCTS [ * ] CLASS B PRODUCTS
(PERCENT OF NET REVENUES)
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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<TABLE>
<CAPTION>
<S> <C> <C>
[ * ] [ * ] [ * ]
[ * ] [ * ] [ * ]
[ * ] [ * ] [ * ]
[ * ] [ * ] [ * ]
[ * ] [ * ] [ * ]
</TABLE>
Class C Products [ * ].
That portion of the royalty arising from System Software which will be
considered to be attributable to a Class A Product will be calculated by [ * ].
That portion of the royalty arising from System Software which will be
considered to be attributable to a Class B Product will be calculated by [ * ].
If any New Product does not clearly fall into one of the above classifications,
the parties shall mutually agree on an appropriate royalty rate for such New
Product prior to commercial introduction.
[ * ].
By way of example, [ * ].
Payments due under this Section 10.4(i)(iii) shall be subject to the same terms
and conditions applicable to Gross Margin share payments on Collaboration
Products under Sections 7.6, 7.7 and 7.9.
Where HP's [ * ] technology is integrated into a New Product, the parties will
mutually agree, prior to commercial launch, on a royalty rate that reflects the
proportional value of HP's [ * ] technology to the value of the Caliper
Technology. The royalty rate applicable to the value of HP's [ * ] will be [ * ]
percent and the rate applicable to the value of the Caliper Technology will be
the [ * ] under this Agreement. Where the [ * ] qualifies as a Class C Product,
[ * ].
(iv) ACCESS TO DISTRIBUTION CHANNELS. After any notice of
termination is given by either party, each party will review all its
relationships with Third Parties who had sales of Collaboration Products in the
previous year consisting of more than [ * ]. If there are any agreements or
arrangements with such Third Parties that would make it commercially impractical
for Caliper to sell Collaboration Products or New Products through such Third
Parties after the Collaboration ends, then the parties will agree in good faith
on practical means to ensure Caliper such ability.
10.5 TERMINATION OF COLLABORATION PRIOR TO THE FIFTH YEAR.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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(a) Either party may terminate the Collaboration, with at least [ * ]
written notice, at any time if HP does not commit in writing to Caliper to meet
the HP Operating Expense commitments as provided in Section 7.3 or actually
fails to meet any such commitment. If Caliper delivers such termination notice
to HP, HP may cure by meeting the required HP Operating Expense commitment
within [ * ] of such notice.
(b) If the Collaboration is terminated pursuant to Section 10.5(a),
all of the terms under Section 10.4 will apply, except that:
(i) HP shall not have a license under Caliper Technology to
develop, manufacture or sell New Products; and
(ii) With regard to Collaboration Products,
(1) Caliper shall have the right to contract with any
company, including [ * ], at any time;
(2) Caliper may cease taking supply from HP for some or all
of Caliper's Instrument requirements before the end of the [ * ] year period
described in Section 10.4(c);
(3) Caliper may elect to continue to supply HP's requirements
for LabChips [ * ] for longer than the [ * ] year period described in Section
10.4(c). Caliper will not be required to train HP in LabChip manufacture as
provided in Section 10.4(e), and HP will not have rights to manufacture
LabChips, unless and until Caliper notifies HP that it intends to cease
supplying HP's requirements for LabChips. Any such notice must be delivered at
least [ * ] months in advance of ceasing supply; and
(4) HP shall continue to make Gross Margin share payments to
Caliper on all Collaboration Products at the rates applicable during the
Collaboration [ * ]. These payments will be made on the same schedule and terms
as during the Collaboration under Article 7.
11. INDEMNIFICATION AND LIMITATION OF LIABILITY
11.1 INDEMNIFICATION BY CALIPER. Caliper shall indemnify HP, its
Affiliates, and all their officers, directors, employees and agents, for any
reasonable out-of-pocket costs and expenses (including court and arbitration
costs and reasonable attorneys' fees), non-appealed or non-appealable judicial
or arbitration damage awards, and settlement payments, payable or owed by HP in
connection with any demands, law suits and other legal actions by Third Parties
("Third Party Claim") against HP arising from any negligent actions or willful
misconduct by Caliper, its Affiliates, agents or sublicensees.
11.2 INDEMNIFICATION UNDERTAKING BY HP. HP shall indemnify Caliper,
its Affiliates and sublicensees, and all their officers, directors, employees
and agents, for any reasonable out-of-pocket costs and expenses (including court
and arbitration costs and reasonable attorneys'
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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fees), non-appealed or non-appealable judicial or arbitration damage awards, and
settlement payments agreed with the Third Party claimants payable or owed by
Caliper in connection with any Third Party Claim against Caliper arising from
any negligent actions or willful misconduct by HP, its Affiliates, or agents.
11.3 CONDITIONS AND LIMITATIONS OF INDEMNIFICATION OBLIGATION.
(a) In order to maintain the right to be indemnified by the other
party ("Indemnitor"), the party claiming indemnification ("Indemnitee") must:
(i) notify the Indemnitor promptly after learning of a Third
Party Claim;
(ii) allow the Indemnitor to manage and control (by way of
intervention or otherwise) the defense and settlement of any such Third Party
Claim against the Indemnitee;
(iii) cooperate with the Indemnitor in the defense or the
settlement negotiations of Third Party Claims as reasonable required by the
Indemnitor; and
(iv) abstain from making any statements or taking any actions
which damage the defense against a Third Party Claim (including, without
limitation, any statements against the interest of the Indemnitee or admissions
of causation or guilt).
(b) The Indemnitor shall not agree to any settlement that
adversely affects the Indemnitee's rights or interest without the Indemnitee's
prior written approval (which approval shall not be unreasonably withheld).
(c) The Indemnitor shall have no obligation to indemnify the
Indemnitee to the extent that a Third Party Claim results from the negligence or
willful misconduct of the Indemnitee.
11.4 LIMITATION OF LIABILITY. Subject to the indemnification
obligation set forth above and unless otherwise expressly stated in this
Agreement, neither party will be liable to the other for any indirect,
consequential, special, or punitive damages regardless of whether such damages
are based on tort, warranty, contract or any other legal theory, even if advised
of the possibility of such damages.
12. GOVERNING LAW; DISPUTE RESOLUTION
12.1 GOVERNING LAW. This Agreement shall be governed by California
law, excluding its choice of law rules.
12.2 DISPUTE RESOLUTION
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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(a) RISK OF FAILURE. The parties recognize that risk is inherent
in development efforts such as those being undertaken in this collaboration.
Both parties voluntarily assume this risk. Accordingly, a failure of any HP
Technology, Caliper Technology or Collaboration Product developed under this
Agreement to perform as desired despite the reasonable efforts of the
responsible party or parties will not be deemed to be a breach of this
Agreement.
(b) NOTICE OF DISPUTE.
(i) If a purported breach has not been cured to the
satisfaction of both parties within the cure period, either party may give
notice to the other that there is a Dispute between them specifying the matter
in dispute. The Dispute will be resolved according to the Dispute Resolution
Procedure set forth in this Section 12.
(ii) The parties recognize that disagreements may occur
between them in the absence of any breach. If such a disagreement occurs
respecting the parties' rights and obligations under this Agreement, the parties
will meet and confer at the working level in a reasonable attempt to resolve the
disagreement. If the parties are unable to resolve the disagreement at the
working level, either may give notice to the other that there is a Dispute
between them specifying the matter in dispute. The Dispute will be resolved
according to the Dispute Resolution Procedure set forth in this Section 12.
(c) DISPUTE RESOLUTION PROCEDURE.
(i) Within thirty days after receipt of a notice of Dispute,
the Executive Sponsors will meet and confer using reasonable efforts to resolve
the Dispute. If they are unable to resolve the Dispute within thirty days,
either party may give notice of escalation to the other that the Dispute is
being escalated to the Senior Executive level.
(ii) Within thirty days after delivery of the notice of
escalation, each party will designate a Senior Executive having the rank of Vice
President or higher. The Senior Executives of the parties will meet and engage
in good faith efforts to resolve the Dispute.
(iii) If the Senior Executives are unable to resolve the
Dispute within thirty days, either party may by notice to the other request a
conference to determine a procedure for resolving the Dispute. Within thirty
days after delivery of the notice, the parties will meet and confer using
reasonable efforts to determine a mutually agreeable procedure for resolving the
Dispute, taking into consideration the relative advantages, disadvantages and
costs of such procedures as mediation, arbitration, mini-trials, or other
alternative dispute resolution mechanisms. The parties will have thirty days to
agree on a procedure for resolving the Dispute.
(iv) No other remedy may be sought by either party until all
the steps of this Dispute Resolution Procedure have first been used. Neither
party may bring an action in a court of law against the other respecting any
issue arising under this Agreement unless the issue has been the subject of a
Dispute and the parties have been unable to resolve such Dispute even after
following all the steps of the Dispute Resolution Procedure set forth above.
Neither party may refuse to perform its obligations under this Agreement because
of any breach purportedly
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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committed by the other unless the purported breach has been the subject of a
Dispute and parties have been unable to resolve such dispute even after
following all the steps of the Dispute Resolution Procedure.
(v) Any applicable statute of limitations will be tolled
during the Dispute Resolution Procedure.
13. MISCELLANEOUS
13.1 EFFECTS OF BANKRUPTCY. The parties understand and agree that the
rights and licenses granted under or pursuant to this Agreement by one party to
the other are, for all purposes of Section 365(n) of Title 11 of the United
States Code, licenses of rights to "intellectual property" as defined in Title
11, and that each party, as licensee of such rights under this Agreement shall
retain and may fully exercise all of its rights and elections under Title 11.
13.2 FORCE MAJEURE. Neither party shall lose any rights hereunder or
be liable to the other party for damages or losses on account of failure of
performance by the defaulting party if the failure is occasioned by government
action, war, fire, earthquake, explosion, flood, strike, lockout, embargo, act
of God, or any other similar or dissimilar cause beyond the control of the
defaulting party, provided that the party claiming force majeure has exerted all
reasonable efforts to avoid or remedy such force majeure.
13.3 NO RECRUITING. Neither party shall solicit or seek to employ any
person who is an employee of the other party during the term of this Agreement
and for one (1) year thereafter. However, this clause does not prevent either
party from engaging in recruiting activities directed to the community at large
and not targeted specifically at employees of the other, even if such activities
result in recruiting an employee of the other. This shall not preclude either
party from receiving and accepting unsolicited applications from such employees.
13.4 ASSIGNMENT.
(a) Except as expressly permitted by this Agreement, neither
party may assign any of its rights or obligations under this Agreement to a
Third Party except in connection with a merger, acquisition or similar
reorganization or the sale of all or substantially all of its assets, or
otherwise with the prior written consent of the other party. This Agreement
shall survive any such merger, acquisition or reorganization of either party
with or into, or such sale of assets to, another party and no consent for such
merger, acquisition, reorganization or sale shall be required hereunder;
provided, that in the event of such merger, acquisition, reorganization or sale,
no intellectual property rights of the acquiring corporation shall be included
in the technology licensed hereunder. With regard to HP, this Section shall
refer to HP's Chemical Analysis Group and not the mother ship.
(b) This Agreement shall be binding upon and inure to the benefit
of the successors and permitted assigns of the parties. Any assignment not in
accordance with this Agreement shall be void.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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13.5 SEVERABILITY. If any term, condition or provision of this
Agreement is held to be unenforceable for any reason, it shall, if possible, be
interpreted rather than voided, in order to achieve the intent of the parties to
this Agreement to the extent possible. In any event, all other terms, conditions
and provisions of this Agreement shall be deemed valid and enforceable to the
full extent.
13.6 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be an original and all of which shall
constitute together the same document.
13.7 ENTIRE AGREEMENT; AMENDMENTS IN WRITING. This Agreement and the
Stock Purchase Agreement described in Section 7.1 together comprise the entire
understanding between the parties with respect to their subject matter and
supersede any previous communications, representations, or agreements, whether
oral or written, including without limitation the Draft Outline of Principal
Terms dated March 5, 1998. All information heretofore exchanged between the
parties pursuant to the Confidentiality Agreement heretofore entered into
between the parties will henceforth be subject to the applicable provisions of
this Agreement. For purposes of construction, this Agreement will be deemed to
have been drafted by both parties. No modification of this Agreement will be
binding on either party unless in writing and signed by an authorized
representative of each party.
13.8 NOTICE. Any notice or other communication required or permitted
to be given to either party hereto shall be in writing and shall be deemed to
have been properly given and to be effective on the date of delivery if
delivered in person, by facsimile or by nationally recognized express courier,
or effective fourteen (14) days after mailing by U.S. Postal Service, postage
prepaid, as Registered or Express Mail, postage paid, to the other party at the
following address:
<TABLE>
<CAPTION>
<S> <C> <C>
Caliper: Caliper Technologies Corp. with copy to:
1275 California Avenue Cooley Godward LLP
Palo Alto CA 94304 Five Palo Alto Square
Attention: Chief Executive Officer 3000 El Camino Real
Palo Alto, CA 94306
Fax: (650) 857-0663
Attn: Brian C. Cunningham
HP: Hewlett-Packard GmbH with copy to:
Waldbronn Analytical Division Hewlett-Packard Company
Hewlett-Packard Strasse 8 Office of General Counsel
76337 Waldbronn 3000 Hanover Street
Germany Palo Alto CA 94304
Attention: General Manager
</TABLE>
Either party may change its address for communications by a notice to
the other party in accordance with this section.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first set forth above.
CALIPER TECHNOLOGIES CORP. HEWLETT PACKARD COMPANY
By: /s/ Calvin Chow By: /s/ Mark J. Hawkins
----------------------------------- ----------------------------
Calvin Chow, Chief Operating Officer Mark Hawkins, Controller
Chemical Analysis Group
By: /s/ K. Bruderle
----------------------------
Karlheinz Bruderle,
General Manager
Waldbronn Analytical Division
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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EXHIBIT A
LAB ON A CHIP TECHNOLOGY
General Description: see "Definitions" section of Agreement
The following are examples of what's included in the above-referenced
definition:
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
The following are examples of what's not included in the above-referenced
definition:
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
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COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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EXHIBIT B
Outline of selected terms of OEM Agreement
The parties agree to use reasonable business efforts to execute a formal OEM
agreement [ * ] including the following terms:
1. A [ * ] rolling forecast using reasonable forecasting processes.
2. Orders will become firm [ * ] prior to scheduled delivery.
3. A [ * ] target supply response time (SRT).
4. Caliper will use reasonable business efforts to maintain stable target SRT
and if greater than [ * ] then the parties agree to meet and agree on a
correction plan. If the SRT is greater than [ * ], then Caliper agrees to
enable HP to manufacture chips. However, this clause will not become
effective until after the [ * ].
5. The parties will mutually agree to the [ * ] and will use reasonable business
efforts to accelerate such date.
6. Caliper will not make engineering changes after the manufacturing release of
a product without notification of HP.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE> 1
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
EXHIBIT 10.11
TERMINATION, TRANSITION AND
TECHNOLOGY ACCESS PROGRAM AGREEMENT
THIS TERMINATION, TRANSITION, AND TECHNOLOGY ACCESS PROGRAM AGREEMENT
("Agreement") dated as of November 24, 1998 (the "Effective Date") is entered
into by and between CALIPER TECHNOLOGIES CORP., a Delaware corporation
("Caliper"), having a place of business located at 1275 California Avenue, Palo
Alto, California 94304 and HOFFMANN-LA ROCHE INC., a New Jersey corporation
("Roche"), having a place of business located at 340 Kingsland Street, Nutley,
New Jersey 07110-1199.
RECITALS:
WHEREAS, Caliper and Roche entered into a Collaborative Development
Agreement dated October 11, 1996 (the "Collaborative Development Agreement")
wherein Roche provided substantial development funding to Caliper to develop an
ultra high through-put screening system and as a result of such funding Roche
was granted exclusive rights to such ultra high through-put screening system;
and
WHEREAS, the parties wish to terminate the Collaborative Development
Agreement as provided for hereinbelow under Article 2; and
WHEREAS, the parties wish to enter into a Technology Access Program (as
defined hereinbelow) which involves reduced funding by Roche and non-exclusive
rights to a broader range of high throughput screening technologies under terms
provided for in this Agreement; and
WHEREAS, the parties wish to provide for a transition period between
termination of the Collaborative Development Agreement and Roche's entry into
the Technology Access Program as provided for hereinbelow under Article 2;
<PAGE> 2
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants contained in this Agreement, the parties agree as follows:
1. DEFINITIONS
The following terms shall have the following meanings in this Agreement:
1.1 "AFFILIATES" shall mean any company or entity controlled by,
controlling, or under common control with a party hereto, and shall include
without limitation, any company fifty percent (50%) or more of whose voting
stock, participating profit, or other interest is owned or controlled, directly
or indirectly, by a party, and any company which owns or controls, directly or
indirectly, fifty percent (50%) or more of the voting stock or otherwise of a
party.
For the purposes of this Agreement, Genentech, Inc. ("Genentech"), a
Delaware corporation, shall not be considered an Affiliate of Roche, unless
Roche, in its sole discretion, notifies Caliper that Genentech shall be so
considered an Affiliate, and Genentech agrees to be bound by the terms and
obligations of this Agreement.
1.2 "DATA HANDLING SOFTWARE" means software supplied by Caliper which
permits the retrieval of raw data collected by the Hardware Unit Software for
differential analysis such that results for the potential pharmaceutical agents
can be determined and presented, including at a minimum the ability to correlate
results to a particular well on any multi-well plate.
1.3 "HARDWARE UNIT SOFTWARE" means software supplied by Caliper which
controls the Hardware Unit such that the Hardware Unit can perform at least the
following tasks: process a multi-well plate containing potential pharmaceutical
agents through the dilutor; align the multi-well plate to the LabChip
support/manipulator; activate the LabChip to start evaluation of the compounds
from the multi-well plate; detect reaction of the compounds on the LabChip
through the detection system; and collect and store raw data from the detector
system for further analysis.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
2.
<PAGE> 3
1.4 "HARDWARE UNIT" shall mean a unit supplied by Caliper which
comprises at least a compound plate handling system capable of manipulating a
test plate both prior to and after evaluation of potential pharmaceutical agents
from the plates, a dilutor capable of diluting wells on a multi-well plate, a
LabChip support/manipulator which physically positions the LabChip to accept
potential pharmaceutical agents from the plate, a system to detect reactions on
a LabChip, and electronic means for controlling the movement and operation of
each of the foregoing steps, said means being under the control of Hardware Unit
Software.
1.5 "HIGH THROUGHPUT SCREENING" or "HTS" shall mean screening potential
pharmaceutical agents against a pharmaceutically-relevant target (e.g., an
enzyme, receptor or cell type) to determine each agent's potential utility as a
human pharmaceutical at a minimum of [ * ] assays per machine day and the
results of each assay are determined and reported as discreet data points. As
used herein, a machine day shall be from [ * ] hours ("Machine Day").
1.6 "INSTRUMENT" shall mean a combination of a Hardware Unit, Hardware
Unit Software, and Data Handling Software offered by Caliper to TAP participants
to perform High Throughput Screening or Ultra High Through-put Screening using
LabChips.
1.7 "LABCHIP" shall mean a chip which is sold or supplied by Caliper to
Roche, other TAP participants, or otherwise made commercially available by
Caliper for use on an Instrument. A LabChip typically consists of a glass or
polymer base with microchannels, bonded to a cover with reservoirs, together
with an attached pipettor capillary, but may include other components.
1.8 "LABCHIP HTS ASSAY" or "LABCHIP UHTS ASSAY" shall mean a particular
combination of a LabChip, a set of reagents and Hardware Unit Software, all
designed for assessing the interaction of a potential pharmaceutical agent
against a pharmaceutically relevant target on one or more types of Instruments
for a particular pharmaceutically-relevant target.
1.9 "LABCHIP IMPROVEMENT INVENTIONS" shall mean [ * ] improvements to
the Screening Technology or to LabChip-based microfluidic systems, [ * ].
LabChip Improvement
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
3.
<PAGE> 4
Inventions shall not include screening data, potential pharmaceutical compounds
identified through the use of the Screening Technology, [ * ].
1.10 "SCREENING TECHNOLOGY" shall mean Instruments, Hardware Units,
Hardware Unit Software, Data Handling Software, LabChip HTS Assays, LabChip UHTS
Assays, and LabChips for HTS or UHTS that Caliper offers for commercial sale to
TAP participants.
1.11 "TECHNOLOGY ACCESS PROGRAM" or "TAP" shall mean Caliper's program
for developing HTS Instruments, UHTS Instruments, LabChip HTS Assays, and
LabChip UHTS Assays and providing these systems to customers who are engaged in
the screening of potential pharmaceutical agents against a pharmaceutically
relevant target to determine each agent's potential utility as a human
pharmaceutical.
1.12 "UHTS" or "ULTRA HIGH THROUGH-PUT SCREENING" shall mean the process
of screening potential pharmaceutical agents against a pharmaceutically-relevant
target (e.g., an enzyme, receptor or cell type) to determine each agent's
potential utility as a human pharmaceutical, at a minimum of [ * ] assays per
Machine Day, on an Instrument. The results of each assay shall be determined and
reported as discreet data points.
2. TERMINATION OF COLLABORATIVE DEVELOPMENT AGREEMENT; TRANSITION AGREEMENT
2.1 TERMINATION OF COLLABORATIVE DEVELOPMENT AGREEMENT. Caliper and
Roche hereby agree to terminate the Collaborative Development Agreement as of
the Effective Date of this Agreement. Notwithstanding the foregoing, the parties
agree that Roche's obligation to fund development work under Section 4.1 of the
Collaborative Development Agreement shall be deemed terminated effective as of
July 1, 1998.
2.2 PURPOSE OF TRANSITION AGREEMENT. Because of the relationship which
existed between the parties pursuant to the Collaborative Development Agreement,
the parties agree to a transition period between the termination of the
Collaborative Development Agreement and
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
4.
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Roche's entry into the TAP. The parties agree that during this transition
period, Caliper will deliver an Instrument to Roche, and Roche will make certain
payments, including the purchase price for said Instrument.
2.3 TERM OF TRANSITION PERIOD. The transition period will begin as of
the Effective Date as first written above and end on the date that Roche pays
the second transition payment as provided in Section 2.5 or the invoice for the
Instrument as provided for in Section 2.3, whichever is later.
2.4 TRANSITION PAYMENTS. Roche shall make a first transition payment to
Caliper in the amount of [ * ] within thirty (30) days after the Effective Date
and receipt of an invoice for that amount. Roche shall make a second transition
payment to Caliper in the amount of [ * ] within thirty (30) days after delivery
of the Instrument specified in Art. 2.5 below and receipt of an invoice for that
amount.
2.5 DELIVERY OF AN INSTRUMENT; PURCHASE PRICE. Caliper will deliver to
Roche's Nutley, New Jersey facility an Instrument that is based on the
instrument and software developed under the Collaborative Development Agreement.
The purchase price for this first Instrument shall be [ * ]; subsequent
Instruments may be priced differently. Caliper will invoice Roche for this
amount upon delivery of the Instrument to Roche; payment will be due within
thirty (30) days of delivery of the Instrument. Upon payment of the invoice,
Roche shall take ownership of the Instrument. Caliper will provide reasonable
technical support for the Instrument, Hardware Unit Software, and Data Handling
Software pursuant to Section 3.2. Such technical support will include, but not
be limited to, [ * ].
3. TECHNOLOGY ACCESS PROGRAM AGREEMENT
3.1 SUBSCRIPTION. Roche shall become a TAP participant under the terms
and conditions as found in Articles 1, 3, 4, 5, 6, and 7. As part of Roche
becoming a TAP participant,
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
5.
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Caliper hereby grants to Roche the non-exclusive right to purchase all Screening
Technology that Caliper offers for commercial sale to other TAP participants as
part of the TAP during the term set forth in Art. 3.4(a) below. Caliper will
notify Roche when Caliper is prepared to offer each Instrument or LabChip HTS
Assay or LabChip UHTS Assay to TAP participants, together with commercial terms.
3.2 ASSAY DEVELOPMENT AND SYSTEM CUSTOMIZATION. Roche may call upon
Caliper to develop customized versions of the Screening Technology for its
operations, or to develop LabChip HTS Assays or LabChip UHTS Assays for
pharmaceutical targets nominated by Roche, or to provide training, service or
support for Screening Technology, subject in each case to Caliper's reasonable
approval regarding technical feasibility. For LabChip HTS Assay or LabChip UHTS
Assay development, Caliper will develop the LabChip and software to carry out
the assay, and the parties will collaborate on appropriate reagents. Roche shall
reimburse Caliper for its participation in such custom development activities or
LabChip HTS Assay or LabChip UHTS Assay development activities at [ * ]. From
time to time, Caliper and Roche may mutually establish development plans and
budgets to coordinate such activities. Caliper will not be required to provide
more than [ * ] full-time equivalents at any time for Roche development
activities under this Agreement, unless the parties mutually agree otherwise.
Should Caliper develop for Roche customized versions of Screening Technology or
develop LabChip HTS Assays or LabChip UHTS Assays for pharmaceutical compounds
selected by Roche, any screening data generated, or potential pharmaceutical
compounds identified, as a result of a program under this Article shall be owned
by Roche and shall not fall within the definition of LabChip Improvement
Inventions or within Article 4.2.
3.3 RESTRICTIONS ON USE OF SCREENING TECHNOLOGY. Roche agrees that it
will use all Screening Technology only for the purpose of screening in its and
its Affiliate's in-house drug discovery programs. Specifically, Roche shall not
(i) transfer any Screening Technology to any third party except that Roche can
transfer the Screening Technology to any of its Affiliates, (ii) provide
screening services on behalf of any third party using any Screening Technology
except that Roche can provide screening services for its Affiliates or where
such screening services are part of a collaboration between Roche and/or its
Affiliates and a third party to develop products
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
6.
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for sale by Roche and/or its Affiliates, or (iii) allow a third party to use any
Screening Technology except that Roche can allow its Affiliates to use the
Screening Technology.
3.4 TERM AND TERMINATION OF THE TECHNOLOGY ACCESS PROGRAM.
(a) The term of the TAP shall commence upon the expiration of the
transition period as provided for in Art. 2.3 hereinabove and, unless terminated
earlier pursuant to this Article 3, shall expire one (1) year from date that the
Instrument is delivered to Roche as provided for under Article 2.5. The term may
be renewed by mutual agreement of the parties. Should the term of the TAP be
extended, Roche shall pay no initiation or subscription fees or payments for
access to Screening Technology offered under the TAP prior to the expiration or
termination of this Agreement.
(b) Either party may terminate this Agreement upon any material
breach of this Agreement by the other party if the other party has not cured
such breach within thirty (30) days after written notice thereof by the
non-breaching party. All other rights and obligations under this Agreement shall
terminate except as otherwise provided herein.
(c) Roche shall have the right to terminate its participation in
the TAP, after the transition period has expired pursuant to Art. 2.3, upon
[ * ] written notice to Caliper for any reason.
(d) Caliper shall notify Roche in writing of its intention to
file a voluntary petition in bankruptcy or of another's intention, of which
Caliper is aware, to file an involuntary petition in bankruptcy, said written
notice to be received by Roche at least thirty (30) days prior to filing such
petition. Upon such notice, Roche can terminate this Agreement within thirty
(30) days. Any filing without conforming to this requirement shall be deemed a
material, pre-petition incurable breach and shall have the effect of
automatically terminating this Agreement prior to the filing of such petition
without the need for written notice.
This Agreement shall terminate automatically (a) in the event
that Caliper attempts to or enters into any scheme with its creditors or makes
an unauthorized assignment for the
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
7.
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benefit of its creditors; (b) in the event that the assets of Caliper are seized
or attached in conjunction with any action against it by any third party; or (c)
in the event that Caliper is dissolved other than in connection with a change in
control permitted under Art. 7.4.
(e) No expiration or termination of this Agreement shall relieve
either party of any obligation accruing prior to such expiration or termination.
The provisions of Sections 2.1, 3.3, 3.4 and 3.5, and Articles 4, 5, 6, and 7
shall survive the expiration or termination of this Agreement.
3.5 POST-TERMINATION ACCESS. Following expiration of this Agreement,
Roche may continue to purchase Instruments and LabChip HTS Assays and LabChip
UHTS Assays that it purchased prior to the expiration of its TAP subscription
for so long as Caliper continues to offer such items for commercial sale to TAP
participants. Otherwise, rights to purchase Caliper Screening Technology shall
expire with the expiration of this Agreement.
3.6 TAP PARTICIPANT MEETINGS. Caliper agrees to conduct [ * ] meetings
for all TAP participants for the purpose of informing the TAP participants of
new Screening Technology developments. Each TAP participant will receive an
invitation to each [ * ] meeting as long as that TAP participant has not
breached its TAP agreement. Participation in such [ * ] meetings will be
strictly voluntary on the part of the TAP participants. At each meeting, each of
the TAP participants may elect, but will be under no obligation, to discuss
their experiences and findings using the Screening Technology.
3.7 MOST FAVORED LICENSEE. If Caliper enters into a future TAP agreement
with a third party and such third party TAP agreement contains terms or
conditions which in the aggregate are more favorable to the third party than the
terms and conditions of this Agreement are to Roche excluding consideration of
Art. 2, Caliper agrees to notify Roche of such terms and conditions. Roche and
Caliper agree to [ * ]. Should Roche extend its participation in the TAP
pursuant to Art. 3.4(a), the parties agree that this Art. 3.7 will be subject to
review at the time the TAP is extended.
4. PROPERTY RIGHTS.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
8.
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4.1 PATENTS. Except as provided in Section 4.2, below, each party shall
own inventions conceived or reduced to practice solely by its employees and/or
consultants during the course of the Technology Access Program. Caliper and
Roche shall jointly own inventions conceived or reduced to practice jointly by
employees and/or consultants of both parties during the course of the Technology
Access Program. Each party shall execute all documents and take all actions
reasonably necessary to perfect such ownership rights in the other and to file
patent applications under the Paris Convention. Inventorship shall be determined
under U.S. patent laws.
4.2 LABCHIP IMPROVEMENT INVENTIONS. [ * ] Notwithstanding the foregoing,
[ * ].
5. CONFIDENTIALITY
5.1 CONFIDENTIAL INFORMATION. During the term of this Agreement, and for
a period of five (5) years following the expiration or termination of this
Agreement, each party shall maintain in confidence any and all information
disclosed to it by the other party (the "Confidential Information"). Each party
further agrees that it shall not use for any purpose not authorized under this
Agreement or disclose the Confidential Information to any third party, except
that either party may disclose Confidential Information under a similar
obligation of confidentiality and non-use and on a need-to-know basis to its
directors, officers, employees, consultants, agents or Affiliates, or as
required by law, order or regulation of a governmental agency. The disclosing
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
9.
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party shall provide written notice to the other party of any such disclosure
required by law, order or regulation of a governmental agency.
5.2 RELIEF. Each party shall be relieved of any and all obligations
under Section 5.1 regarding Confidential Information which:
(a) was already known to the receiving party or its Affiliates,
other than under an obligation of confidentiality, at the time of disclosure by
the other party;
(b) was generally available to the public or otherwise part of
the public domain at the time of its disclosure to the receiving party;
(c) became generally available to the public or otherwise part of
the public domain after its disclosure through no fault attributable to the
receiving party;
(d) was disclosed to the receiving party or its Affiliates, other
than under an obligation of confidentiality to a third party, by a third party
who had no obligation to the disclosing party not to disclose such information
to others; or
(e) was independently discovered or developed by the receiving
party or its Affiliates without the use of Confidential Information belong to
the disclosing party.
5.3 PRESS RELEASE/NON-USE. Neither party shall (a) issue a press release
or make any other public statement that references this Agreement or the
contents thereof, or (b) use the other party's or its Affiliates' name or
trademarks for publicity or advertising purposes, except with prior written
consent of the other party or as required by law, order or regulation of a
governmental agency.
6. WARRANTIES AND INDEMNIFICATION.
6.1 DISCLAIMER CONCERNING TECHNOLOGY. CALIPER MAKES NO REPRESENTATION
AND EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR
NONINFRINGEMENT OF THE INTELLECTUAL
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
10.
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PROPERTY RIGHTS OF THIRD PARTIES, WITH RESPECT TO ANY CALIPER TECHNOLOGY,
SCREENING TECHNOLOGY OR OTHER PRODUCTS DEVELOPED OR PROVIDED PURSUANT TO THIS
AGREEMENT.
6.2 DISCLAIMER CONCERNING ROCHE COMPOUNDS AND ASSAYS. Caliper
understands that Roche will be supplying compounds and assays (including their
reagents) to Caliper as part of the Technology Access Program. Caliper accepts
these compounds and assays (including their reagents) with the knowledge that
they are experimental biological materials and agrees to comply with all laws
and regulations for the handling and use thereof. BECAUSE THESE COMPOUNDS AND
ASSAYS (INCLUDING THEIR REAGENTS) ARE EXPERIMENTAL IN NATURE, AND ARE FURNISHED
WITHOUT CHARGE, THEY ARE BEING SUPPLIED TO CALIPER WITH NO WARRANTIES, EXPRESS
OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR WARRANTY OF NONINFRINGEMENT.
6.3 INDEMNIFICATION. Caliper shall indemnify, defend and hold Roche and
its Affiliates (and their respective directors, officers, employees, and agents)
harmless against any and all liabilities, loss, cost or damage, together with
all reasonable costs and expenses related thereto (including legal and
accounting fees and expenses), arising from, relating to, or connected with
[ * ].
7. MISCELLANEOUS
7.1 NOTICES. Any consent, notice or report required or permitted to be
given or made under the Agreement by one party to the other party shall be in
writing, delivered personally or by facsimile, first class mail postage prepaid,
courier nationally-recognized delivery service, and addressed to the other party
at is address indicated below, or to such other address as the addressee shall
have last furnished in writing to the addresser. Except as otherwise provided in
the Agreement, such consent, notice or report shall be effective upon receipt by
the addressee.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
11.
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If to Caliper: Caliper Technologies Corp.
1275 California Avenue
Palo Alto, California 94304
Attention: Chief Operating Officer
Facsimile: (650) 842-1970
If to Roche: Hoffmann-La Roche Inc.
340 Kingsland Street
Nutley, New Jersey 07110-1199
Attention: Corporate Secretary
Facsimile: (973) 235-3500
7.2 GOVERNING LAW. The Agreement shall be governed by and construed in
accordance with the laws of [ * ], without regard to the conflicts of law
principles thereof.
7.3 EXTENSION OF BENEFITS AND OBLIGATIONS. Roche shall have the right to
extend the benefits and obligations of this Agreement with respect to countries
outside the United States, to its Affiliate, F. Hoffmann-La Roche Ltd, a Swiss
corporation.
7.4 ASSIGNMENT. This Agreement is personal in its character, and neither
party shall assign its rights or obligations under this Agreement, in whole or
in part, without the prior written consent of the other party; provided,
however, that either party may assign this Agreement to any of its Affiliates or
to any successor by merger or sale of substantially all of the business assets
of the party. This Agreement shall be binding on and inure to the benefit of the
successors or permitted assigns of the parties hereto, and all entities
controlled by them.
7.5 WAIVERS AND AMENDMENTS. No change, modification, extension or waiver
of this Agreement, or any of the provisions herein contained, shall be valid
unless made in writing and signed by duly authorized representatives of the
parties hereto.
7.6 ENTIRE AGREEMENT. This Agreement, together with Exhibit A and
Exhibit B, embodies the entire understanding between the parties and supersedes
any prior understanding
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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and agreements between and among Caliper and Roche with respect to the subject
matter hereof, including without limitation the Collaborative Development
Agreement. All payments made hereunder shall be non-refundable and
non-creditable against any future payments.
7.7 SEVERABILITY. If a court of competent jurisdiction declares any
provision of this Agreement invalid or unenforceable, or if any government or
other agency having jurisdiction over either party deems any provision to be
contrary to any laws, then that provision shall be severed and the remainder of
the Agreement shall continue in full force and effect. To the extent possible,
the parties shall revise such invalidated provision in a manner that will render
such provision valid without impairing the parties' original intent.
7.8 NO WAIVER. The failure of a party in any one or more instances to
insist upon strict performance of any of the terms and conditions of this
Agreement shall not constitute a waiver or relinquishment, to any extent, of the
right to assert or rely upon any such terms or conditions on any future
occasion.
7.9 DISCLAIMER OF AGENCY. The relationship between Caliper and Roche is
that of independent contractors. Roche and Caliper are not joint venturers,
partners, principal and agent, master and servant, employer or employee, and
have no other relationship other than independent contracting parties. Neither
party shall have the right or authority to assume, create, or incur any third
party liability or obligation of any kind, express or implied, against or in the
name of or on behalf of another except as expressly set forth in this Agreement.
7.10 COUNTERPARTS. The Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
CALIPER TECHNOLOGIES CORP. HOFFMANN-LA ROCHE INC.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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By: /s/ Calvin Chow By: /s/ Lee E. Babiss
------------------------------- -------------------------------
Name: Calvin Y. H. Chow Name: Lee E. Babiss
--------------------------- ----------------------------
Title: Chief Operating Officer Title: Vice President, Preclinical R&D
------------------------------- -------------------------------
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
14.
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CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 133, AS AMENDED.
EXHIBIT 10.12
TECHNOLOGY ACCESS
AGREEMENT
THIS TECHNOLOGY ACCESS AGREEMENT ("Agreement") dated as of December 21,
1998 (the "Effective Date") is entered into by and between AMGEN INC. having an
address at One Amgen Center Drive, Thousand Oaks, California 91320-1799
("Amgen") and CALIPER TECHNOLOGIES CORP. ("Caliper") having offices at 1275
California Avenue, Palo Alto, California 94304.
RECITALS:
WHEREAS, Caliper has developed proprietary microfluidics and
miniaturization technology applicable to high throughput screening;
WHEREAS, Caliper and Amgen desire to establish a technology access
program to implement high throughput screening capabilities utilizing Caliper
technology at Amgen's facilities;
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants contained in this Agreement, the parties agree as follows:
1. DEFINITIONS
1.1 "AFFILIATE" shall mean (i) any corporation or other entity
which directly or indirectly owns or controls at least fifty percent (50%) of
the outstanding voting securities of a party (a "Parent"), (ii) any corporation
or other entity in which a party directly or indirectly owns or controls at
least fifty percent (50%) of the outstanding voting securities, and (iii) any
corporation or other entity in which a Parent of a party owns or controls at
least fifty percent (50%) of the outstanding voting securities.
1.1 "AMGEN COLLABORATOR" shall mean any third party with which Amgen
or its Affiliates is collaborating to develop a pharmaceutical product as part
of Amgen's in-house drug discovery programs.
1.2 "AMGEN TECHNOLOGY" shall mean any and all (i) [ * ] provided by
Amgen to Caliper pursuant to this Agreement (together with [ * ] provided by
Amgen to Caliper (except to the extent such
<PAGE> 2
information is not confidential under Section 5.2) [ * ], and (iii) any and all
[ * ] developed solely by either party or jointly by the parties with respect to
any and all of the foregoing in connection with the TAP and any and all other
activities contemplated by this Agreement.
1.4 "CALIPER KNOW-HOW" shall mean all discoveries, materials,
techniques, procedures, data, trade secrets and other technical information
which Caliper owns, controls or has any interest capable of being licensed (with
rights to license to Amgen hereunder) and treats as confidential or proprietary
as of the Effective Date or during the Term. Caliper Know-How does not include
Caliper Patents.
1.5 "CALIPER PATENTS" shall mean any and all Patents which Caliper
owns, controls or has any interest capable of being licensed (with rights to
license to Amgen hereunder) as of the Effective Date or during the Term.
1.6 "CALIPER TECHNOLOGY" shall mean, collectively, the Caliper
Patents and the Caliper Know-How.
1.7 "CONFIDENTIAL INFORMATION" shall mean this Agreement and the
contents hereof and any and all information owned and provided by one party to
the other party pursuant to this Agreement, including, without limitation,
Materials (as defined in Section 4.3), data, knowledge, practices, processes,
ideas, Amgen know-how, Caliper Know-How, research plans, engineering designs and
drawings, research data, manufacturing processes and techniques, scientific,
manufacturing, marketing, and business plans, financial or personnel matters
relating to the party, its present or future products, sales, suppliers,
customers, employees, investors or business.
1.8 "FTE" or full-time equivalent, shall mean one or more Caliper
person(s), whether employees, contractors or consultants, working on activities
under this Agreement for the equivalent of one full-time employee's time
(assuming a 40 hour work week) over the course of one year.
1.9 "INSTRUMENT" shall mean the hardware component(s) of a system
offered for sale by Caliper to develop or use LabChips, including but not
limited to [ * ].
1.10 "LABCHIP" shall mean a chip offered for sale by Caliper to
perform microfluidic or miniaturization experimentation.
1.11 "LABCHIP ASSAY" shall mean a Screening assay for [ * ]
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 133, AS AMENDED.
2
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designed to run on a Caliper Screening Product system, consisting of [ * ].
1.12 "LABCHIP IMPROVEMENTS" shall mean [ * ] developed solely by
either party or jointly by the parties with respect to (i) any and all Screening
Products and [ * ] provided by Caliper to Amgen pursuant to this Agreement, and
(ii) [ * ] provided by Caliper to Amgen with respect to the foregoing (except to
the extent such information is not confidential under Section 5.2) in connection
with the TAP and any and all other activities contemplated by this Agreement. By
way of example, such technologies include but are not limited to [ * ].
1.13 "PATENTS" shall mean any and all patents and patent applications
and any substitutions, extensions, reissues, and renewals thereof, any
supplementary protection certificates relating thereto, and any inventors'
certificates, which have not been held invalid or unenforceable by a
non-appealable or non-appealed decision of a court of competent jurisdiction,
issuing from patent applications or patents filed in any jurisdiction and any
provisionals, divisionals, continuations, and continuations-in-part of such
applications or patents.
1.14 "SCREENING" shall mean the process of screening potential
pharmaceutical agents or compounds against a pharmaceutically-relevant target
(e.g., an [ * ]. For purposes of this Agreement, Screening shall include, but
not be limited to, primary, [ * ].
1.15 "SCREENING PRODUCTS" shall mean all Instruments, LabChips and
other hardware, software or reagents that Caliper offers during the Term for
general commercial sale to third parties or for sale to TAP members for use in
Screening.
1.16 "TARGETS" shall mean the pharmaceutically relevant molecules,
complexes or cell lines (such as [ * ]) nominated by Amgen for LabChip Assay
development in accordance with Section 2.3.
1.17 "TECHNOLOGY ACCESS PROGRAM" OR "TAP" shall mean
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 133, AS AMENDED.
3
<PAGE> 4
the program described in this Agreement for developing Screening Products and
implementing them at Amgen.
1.18 "TERM" shall mean the period of three (3) years commencing on the
Effective Date, unless earlier terminated pursuant to Section 8 or modified by
mutual written agreement of the parties.
2. TECHNOLOGY ACCESS PROGRAM.
2.1 LICENSE GRANT.
(a) Caliper hereby grants to Amgen and its Affiliates a
non-exclusive, non-transferable (except as provided in Section 9.3),
royalty-free license, with no right to sublicense, under Caliper Technology to
use Screening Products provided by Caliper to Amgen pursuant to this Agreement
for any purpose in [ * ] (the "product license"). (Throughout this Agreement,
references to Amgen's [ * ]). With respect to each of the Screening Products
described on Exhibit A, the product license shall immediately become fully-paid,
irrevocable and perpetual upon Caliper's receipt of the [ * ]. With respect to
Screening Products offered in 2000 and beyond, the product license shall
immediately become fully-paid, irrevocable and perpetual upon Caliper's receipt
of the [ * ].
(b) Caliper also hereby grants to Amgen a non-exclusive,
non-transferable (except as provided in Section 9.3), royalty-free, irrevocable,
perpetual license, with no right to sublicense, to use Caliper Know-How provided
pursuant to this Agreement [ * ] (the "know-how license").
(c) Caliper specifically permits Amgen under the licenses
granted above to [ * ]. Caliper agrees to supply chips [ * ]. If Caliper and its
licensee are not ready, willing and able to supply to Amgen, then Caliper will
promptly so notify Amgen and [ * ]. In such event, [ * ] such products shall be
covered by the licenses under Caliper Technology granted above. Otherwise, the
licenses granted hereunder shall not include rights to [ * ], if the [ * ] would
infringe any Caliper Patent. Should Caliper develop products [ * ] and offer
such products through other technology access programs or other commercial
arrangements, Amgen shall not be deemed to have rights to such products solely
by reason of this section.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 133, AS AMENDED.
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(d) Each of these licenses is subject to the terms and
conditions set forth in this Agreement and other reasonable terms and
conditions, if any, mutually agreed upon at the time each Screening Product is
sold to Amgen. Following expiration or termination of this Agreement, such
licenses shall continue as further provided in Section 8.5.
2.2 PROGRAM LEADERS AND PLAN. Caliper and Amgen shall each designate
a program leader. The program leaders shall jointly coordinate the activities
carried out under this Agreement and monitor the progress of such activities on
a periodic BASIS. From time to time, the program leaders shall mutually prepare
and update a program plan describing (i) goals in terms of milestones and
deliverables, (ii) the tasks and budget for Amgen support to be provided by
Caliper personnel under Section 2.3, and (iii) such other matters as the program
leaders may agree upon. The plan for 1999 is attached as Exhibit A (which shall
be amended or modified only by mutual agreement of the parties). Plans for each
subsequent year shall be mutually agreed by the parties not later than thirty
(30) days prior to each such year (and thereafter shall be amended or modified
only by mutual agreement of the parties). The dates set forth on the program
plan for completion of tasks shall be good faith projections provided by Caliper
and agreed to by Amgen. Caliper shall apply commercially reasonable efforts to
achieve such objectives by such date and at all times thereafter until the
objectives are achieved.
[ * ] days prior to the end of each quarter, Caliper shall
notify Amgen of its ability or inability to achieve that quarter's objectives
within [ * ] days of the end of the quarter. If Caliper notifies Amgen that it
is unable to satisfy that quarter's objectives within [ * ] days after the end
of the quarter, or Caliper otherwise fails to satisfy such objectives within
[ * ] days after the end of the quarter, then [ * ]. If Caliper fails to deliver
within [ * ] days after the end of the [ * ] quarter of [ * ] the Multi Sipper
Instrument scheduled to be delivered that quarter, then, in addition to the
foregoing, Amgen's subscription under the TAP for 1999 shall automatically
extend until [ * ] days following Amgen's purchase and receipt of the same or
its written notice to Caliper of its election not to purchase the same (which
purchase or notice shall occur not later than [ * ] days after Caliper notifies
Amgen that such Multi Sipper Instrument is available for purchase). If Amgen
elects to renew its subscription for 2000 (which election must be made prior to
the expiration of the extended term of the 1999 subscription described in the
foregoing sentence), then it must pay to Caliper the full year 2000 subscription
fee of [ * ] prior to the expiration of the extended term of the 1999
subscription.
2.3 AMGEN SUPPORT.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 133, AS AMENDED.
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(a) GENERAL. In addition to describing milestones and
deliverables, the program plan prepared by the program leaders shall also plan
and budget for activities of Caliper personnel specifically directed to [ * ].
Such activities may include (i) [ * ]. Funding for such Caliper personnel shall
be provided pursuant to Section 3.2 below. Amgen's program leader shall propose
priorities and tasks for Caliper to support Amgen. Caliper's program leader will
determine the necessary personnel resources, provide estimates of the projected
time needed to perform relevant tasks and provide estimates of the technical
feasibility of various tasks. Based on this information, the project leaders
will mutually agree on an appropriate plan and budget for Amgen support
activities utilizing up to the number of FTEs of Caliper time agreed upon at the
beginning of the year as provided in Section 3.2 [ * ]. Requests for more than [
* ] FTEs of support at any time shall be subject to mutual agreement.
(b) ASSAY DEVELOPMENT. LabChip Assays for Amgen's Targets will
be developed collaboratively by the parties or by Amgen independently, as
determined by Amgen. In general, Amgen will [ * ]. Initially, Caliper will be
primarily responsible for adapting the assay to the LabChip format. Over time,
the parties expect that Amgen will [ * ].
(c) TRAINING AND SUPPORT. At Amgen's request, some of the
Caliper FTEs shall provide training and support for Amgen employees in [ * ].
This training will be in addition to customary introductory set-up and training
provided [ * ]. Amgen personnel will have access to information concerning all
Caliper Technology relevant to Screening throughout the Term and may regularly
or periodically communicate (by telephone, e mail, fax, etc.) or visit Caliper's
facilities for such purposes at mutually arranged times.
(d) CORE SCREENING PRODUCT OFFERINGS; CUSTOM DEVELOPMENT.
Caliper intends to consult all of its TAP participants as it decides on core
Screening Product offerings, and Caliper will include Amgen in such discussions.
From time to time, Caliper will notify Amgen of the particular Screening
Products that Caliper has decided to develop for general commercial sale. Such
products will be based upon the technical suggestions and
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 133, AS AMENDED.
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contributions and the funding anticipated to be provided by all TAP
participants. Upon Amgen's request (but in no event more frequently than [ * ]),
Caliper will provide Amgen with written reports summarizing the progress of the
TAP and the development of the Screening Products. If Amgen is interested in
having Caliper develop additional products, or accessories to core products,
then Amgen may elect to apply a portion of the Amgen support FTEs to such custom
development efforts. If such projects would cause the aggregate Amgen support to
exceed [ * ] FTEs at any time, then Caliper's agreement to the project will be
required.
2.4 NON-EXCLUSIVE PROGRAM. The TAP is a mutually non-exclusive
collaboration anticipated to involve Caliper and multiple pharmaceutical
companies. Amgen and Caliper are each free to work with any other company in any
area. Amgen acknowledges that other customers, independently or together with
Caliper, may develop LabChip Assays [ * ]; subject in all cases to Sections 5.1
and 5.2 and the other terms of this Agreement. Similarly, Caliper acknowledges
that Amgen will [ * ]; subject in all cases to Sections 5.1 and 5.2 and the
other terms of this Agreement.
2.5 RESTRICTIONS ON USE OF SCREENING PRODUCTS. Amgen agrees that it
will use all Screening Products only in its and its Affiliate's [ * ].
Specifically, Amgen shall not (i) transfer for valuable consideration or resell
any Screening Products or screening data generated therefrom to any third party
other than Affiliates or Amgen Collaborators, (ii) use any Screening Products to
provide services on behalf of any third party, except that Amgen can provide
services for its Affiliates or an Amgen Collaborator, or (iii) allow a third
party other than an Affiliate or an Amgen Collaborator to use any Screening
Products. Caliper agrees to supply Instruments and replacement parts for use
with LabChips purchased by Amgen, and LabChips for use with Instruments and
replacement parts purchased by Amgen, [ * ]. If Caliper and its licensees are
not ready, willing and able to supply Amgen with such products, then Caliper
will promptly so notify Amgen [ * ]. In such event, [ * ] such products shall be
covered by the licenses under Caliper Technology granted in Section 2.
Otherwise, the licenses granted hereunder shall not include rights to [ * ], if
the [ * ] would infringe any Caliper Patent.
2.6 COMMERCIALIZATION OF SCREENING PRODUCTS. Caliper acknowledges
that a portion of the value of this Agreement to Amgen comes from [ * ].
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 133, AS AMENDED.
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Caliper represents to Amgen that as of the Effective Date [ * ]. If Caliper
should [ * ], then the parties shall mutually agree in good faith on [ * ].
2.7 NO CALIPER RIGHTS. Caliper, its employees, agents and/or
consultants shall have no rights, claims or interests whatsoever (including but
not limited to any intellectual property rights) with respect to any [ * ]
developed in connection with, relating to, or resulting from the Screening
Products provided to Amgen hereunder or otherwise in connection with the
technology access provided to Amgen by this Agreement.
3. FINANCIAL TERMS.
3.1 TECHNOLOGY ACCESS FEES.
(a) UP-FRONT LICENSE FEE. Amgen shall pay to Caliper a
non-refundable up-front license fee of [ * ].
(b) ANNUAL SUBSCRIPTION FEES. Amgen shall pay to Caliper a
non-refundable annual subscription fee of [ * ] for each year of the TAP, as
follows:
(i) The subscription fee for the year 1999 shall be
paid as follows. Amgen shall pay Caliper [ * ]. The balance of [ * ] shall be
paid in installments based upon [ * ], without regard to [ * ]. Each installment
payment shall be invoiced by Caliper to Amgen and due within thirty (30) days of
the receipt of invoice.
(ii) Unless Amgen terminates this Agreement early under
Section 8.2, or except as otherwise provided in Section 2.2, Amgen shall pay
Caliper the annual subscription fee for 2000 and 2001 on or before [ * ].
3.2 AMGEN SUPPORT FUNDING.
(a) Amgen shall provide funding for Amgen support activities
provided by Caliper under Section 2.3 at the rate of [ * ] per FTE per year. For
1999, Caliper agrees to provide, and Amgen agrees to fund, [ * ] FTEs for Amgen
support activities. Prior to the beginning of each subsequent year, the parties
shall mutually agree on a schedule for Amgen support personnel to be provided by
Caliper and funded by Amgen; provided, however that this shall be
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 133, AS AMENDED.
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determined quarterly for the period of time, if any, that the Multi Sipper
Instrument scheduled to be delivered in the [ * ] quarter of [ * ] has not yet
been delivered. [ * ] of FTEs shall apply after 1999 unless the parties mutually
agree otherwise, and Caliper shall not be obliged to provide more than [ * ]
FTEs in any such year unless the parties mutually agree otherwise.
(b) Amgen support funding shall be paid [ * ]. The funding for
each quarter shall be based on the number of Amgen support FTEs scheduled in the
program plan for such quarter. Caliper shall deliver quarterly reports to Amgen
describing the actual time applied to Amgen support tasks. The project leaders
may adjust the Amgen support FTEs scheduled for subsequent quarters based on
such reports. In any event, the parties will reconcile any discrepancy between
funding and actual FTE time provided once per year, after the last quarter's
report has been delivered to Amgen. If actual FTE time is less than the funding
provided, Caliper shall refund the difference or credit it towards the next
year's funding, [ * ]. If actual FTE time exceeds the funding provided, [ * ].
3.3 SCREENING PRODUCTS.
(a) Caliper will notify Amgen when Caliper is prepared to
offer each Screening Product for sale to Amgen, together with standard
commercial terms to be established by Caliper including price, warranty, set-up
and training, et cetera. The parties agree, however, that the purchase price
(excluding tax and shipping) for the following initial deliverables set forth in
the program plan shall be as set forth below:
[ * ] [ * ]
[ * ] [ * ]
[ * ] [ * ]
[ * ] [ * ]
(b) Amgen hereby agrees to take delivery of and to pay for the
Instruments listed under [ * ] on Exhibit A. The purchase price of [ * ] for the
[ * ] and [ * ] shall be paid on or before [ * ]; provided that [ * ]. Orders
for the Screening Products for 1999 described in Exhibit A shall be considered
firm unless and until otherwise provided in Section 2.2. Amgen shall pay the
purchase price for the other deliverables within thirty (30) days of receipt by
Amgen of the invoice for the deliverable, which will be sent at the time the
product is shipped. Amgen shall pay standard sales taxes applicable to each
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 133, AS AMENDED.
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sale of Screening Products.
(c) [ * ].
4. INTELLECTUAL PROPERTY.
4.1 AMGEN TECHNOLOGY. Amgen shall have all right, title and interest
in and to the Amgen Technology. Caliper hereby assigns to Amgen all of its
right, title and interest, if any, in and to all Amgen Technology discovered,
invented (inventions conceived or reduced to practice) or developed in
connection with the TAP and any and all other activities contemplated by this
Agreement. Caliper agrees to cooperate with Amgen to execute any documents or
take any other actions necessary or desirable to effect such assignment and
perfect such ownership rights in Amgen, at Amgen's expense. Caliper shall use
reasonable efforts to notify Amgen of any new Amgen Technology (Amgen Technology
not specifically provided by Amgen to Caliper under this Agreement). Any such
new Amgen Technology for which no patent application is filed shall be treated
as Amgen's Confidential Information. The intent of this Section 4.1 is to vest
in Amgen all intellectual property rights, if any, resulting from or in
connection with the working relationship created by this Agreement which relate
to its business - research, development and commercialization of pharmaceutical
products and in the event of question or issue regarding intellectual property
rights this principle shall be followed.
4.2 CALIPER TECHNOLOGY. Caliper shall have all right, title and
interest in and to the Caliper Technology and LabChip Improvements. Amgen hereby
assigns to Caliper all of its right, title and interest (except the licenses
granted to Amgen under this Agreement), if any, in and to all Caliper Technology
and LabChip Improvement discovered, invented (inventions conceived or reduced to
practice) or developed in connection with the TAP and any and all other
activities contemplated by this Agreement; provided, however, that Amgen shall
have a non-exclusive, royalty-free, irrevocable and perpetual license to such
Caliper Technology and LabChip Improvements for the use by it, its Affiliates
and Amgen Collaborators for any purpose in Amgen's [ * ]. Amgen agrees to
cooperate with Caliper to execute any documents or take any other actions
necessary or desirable to effect such assignment and perfect such ownership
rights in Caliper, at Caliper's expense. Amgen shall use reasonable efforts to
notify Caliper of any new Caliper Technology or LabChip Improvements (Caliper
Technology or LabChip Improvements not specifically provided by Caliper to Amgen
under this Agreement). Any such new Caliper Technology or LabChip Improvements
for which no patent application is filed shall be treated as Caliper's
Confidential Information. The intent of this Section 4.2 is to vest in Caliper
all intellectual property rights, if any, resulting from or in
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 133, AS AMENDED.
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connection with the working relationship created by this Agreement which relate
to its business - research, development, manufacture and commercialization of
chip-based microfluidic systems, and in the event of question or issue regarding
intellectual property rights this principle shall be followed.
4.3 AMGEN MATERIALS. Amgen may provide to Caliper pursuant to this
Agreement certain [ * ] and other materials (collectively, the "Materials"),
which are and shall be the sole property of Amgen. The provision of Materials to
Caliper under this Agreement does not grant Caliper any license or other right
to Amgen Technology, except the limited right to use the Materials for the sole
purpose of satisfying its obligations to Amgen under this Agreement and for no
other purpose, including without limitation other research purposes. Caliper
understands that some Materials may have unpredictable or unknown biological
and/or chemical properties and that they should be used with caution. Upon
termination of this Agreement, Caliper shall promptly return the Materials to
Amgen.
5. CONFIDENTIALITY; PUBLICITY; USE OF NAME.
5.1 CONFIDENTIAL INFORMATION. During the term of this Agreement, and
for a period of five (5) years following the expiration or termination of this
Agreement, each party shall maintain in confidence any and all Confidential
Information. Each party further agrees that it shall not use for any purpose not
authorized under this Agreement or disclose the Confidential Information to any
third party, except that either party may disclose Confidential Information
under a similar obligation of confidentiality and non-use on a need-to-know
basis to its directors, officers, employees, consultants, agents and Affiliates.
Notwithstanding the foregoing, this Agreement and the contents hereof may be
disclosed under a similar obligation of confidentiality and non-use on a
need-to-know basis to investors and their representatives in a private financing
transaction, potential acquirers or targets and their representatives in an
acquisition transaction, or as required by law (including but not limited to as
an exhibit to a registration statement filed with the Securities and Exchange
Commission), order or regulation of a governmental agency. The disclosing party
shall provide written notice to the other party of any such disclosure required
by law, order or regulation of a governmental agency, reasonably in advance if
practical. If Caliper intends to file this Agreement with the Securities and
Exchange Commission, Caliper agrees to provide Amgen with a copy of the proposed
filing for review and comment reasonably in advance of the filing date. Upon
termination of this Agreement, each party shall return to the other party
Confidential Information received from the other in tangible form.
5.2 RELIEF. Each party shall be relieved of any and all obligations
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 133, AS AMENDED.
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under Section 5 regarding Confidential Information which:
(a) was already known to the receiving party or its
Affiliates, other than under an obligation of confidentiality, at the time of
disclosure by the other party;
(b) was generally available or known to the public or
otherwise part of the public domain at the time of its disclosure to the
receiving party;
(c) became generally available or known to the public or
otherwise part of the public domain after its disclosure through no fault
attributable to the receiving party;
(d) was disclosed to the receiving party or its Affiliates,
other than under an obligation of confidentiality to a third party, by a third
party who had no obligation to the disclosing party not to disclose such
information to others; or
(e) was independently discovered or developed by the receiving
party or its Affiliates without the use of Confidential Information belonging to
the disclosing party.
5.3 PUBLICITY. Neither party shall originate any news release or
other public announcement relating to this Agreement or the contents hereof
without the prior written approval of the other party, which approval shall not
be unreasonably withheld or delayed for longer than five (5) working days.
5.4 USE OF NAME. Except as otherwise provided in Section 5.1, neither
party shall use the name or logo of the other party without the prior written
consent of such other party.
6. REPRESENTATIONS AND WARRANTIES AND COVENANTS.
6.1 CORPORATE POWER. Each party represents and warrants to the other
that as of the Effective Date it is duly organized and validly existing under
the laws of its state of incorporation, and has full corporate power and
authority to enter into this Agreement and to carry out the provisions hereof.
6.2 DUE AUTHORIZATION. Each party represents and warrants to the
other that as of the Effective Date it is duly authorized to execute and deliver
this Agreement and to perform its obligations hereunder, and the person
executing this Agreement on its behalf has been duly authorized to do so by all
requisite corporate action.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 133, AS AMENDED.
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6.3 BINDING AGREEMENT. This Agreement is legally binding upon it and
enforceable in accordance with its terms. The execution, delivery and
performance of this Agreement by it does not breach any agreement to which it is
a party, nor violate any law or regulation of any court, governmental body or
administrative or other agency having jurisdiction over it, in each case in any
material respect. The parties agree that this covenant shall be applicable on
the Effective Date and throughout the Term.
7. INDEMNIFICATION; DISCLAIMER; LIMITATION OF LIABILITY.
7.1 INDEMNIFICATION BY CALIPER. Amgen shall be entitled to the quiet
enjoyment of the Screening Products and therefore, subject to Section 7.4 below,
Caliper shall defend, indemnify and hold harmless Amgen and its Affiliates and
all their officers, directors, employees and agents from and against any and all
damages, awards, costs and expenses (including court and arbitration costs,
witness fees and reasonable attorneys' fees) incurred by Amgen or any such
person or entity arising from or in connection with [ * ].
7.2 INDEMNIFICATION BY AMGEN. Amgen shall defend, indemnify and hold
harmless Caliper, its Affiliates and sublicensees, and all their officers,
directors, employees and agents from any damages, awards, costs and expenses
(including court and arbitration costs, witness fees and reasonable attorneys'
fees) incurred by Caliper and/or any such person or entity arising from or in
connection with [ * ].
7.3 INDEMNIFICATION PROCEDURE. The party seeking indemnification
under this Article 7 (the "Indemnified Party") shall (i) give the other party
(the "Indemnifying Party") notice of the relevant claim and the related facts
with reasonable promptness after becoming aware of same, (ii) reasonably
cooperate with the Indemnifying Party, at the Indemnifying Party's expense, in
the defense of such claim, and (iii) give the Indemnifying Party the ability to
control the defense and settlement of any such claim, except that the
Indemnifying Party shall not enter into any settlement that materially adversely
affects the Indemnified Party without the Indemnified Party's prior written
approval. The Indemnified Party shall have no authority to settle any claim on
behalf of the Indemnifying Party.
7.4 INTELLECTUAL PROPERTY. Caliper' obligation to indemnify Amgen for
claims under Section 7.1 above shall be subject to the following conditions.
Caliper shall determine which Screening Products to offer and when
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 133, AS AMENDED.
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they will be offered. Caliper may impose reasonable restrictions upon the use of
any Screening Product for intellectual property reasons, provided it notifies
Amgen of such restriction at the time of sale. Following sale of any product, if
Caliper determines that third party intellectual property concerns warrant,
Caliper may, in its sole discretion, [ * ]. In the event of (iii), Amgen may
elect to have [ * ]. Caliper shall not be obligated to indemnify Amgen for
claims arising out of [ * ] resulting from Amgen's combination of such Screening
Product with technology other than the Caliper Technology, Amgen's use of such
Screening Product in a manner not authorized by Caliper at the time of sale,
Amgen's misuse or mishandling of such Screening Product, Amgen's unauthorized
modification of such Screening Product or Amgen's continued use of such
Screening Product notwithstanding termination of Amgen's right to use such
Screening Product pursuant to this Section 7.4.
7.5 CALIPER DISCLAIMER. Caliper makes no representation and extends
no warranties of any kind, either express or implied, including warranties of
merchantability or fitness for a particular purpose, with respect to any caliper
technology, screening product or other products developed or provided pursuant
to this agreement. Amgen acknowledges that the Screening Products to be provided
to Amgen pursuant to this Agreement are prototype units, and as such are neither
equipped with standard safety features nor completely tested for defects. Amgen
acknowledges that such products require a greater degree of caution than other
standard laboratory equipment. Caliper shall not be liable to Amgen for any
personal injury or property damage resulting from use of such equipment in a
manner other than that recommended by Caliper at the time of sale.
7.6 AMGEN DISCLAIMER. AMGEN MAKES NO REPRESENTATION AND EXTENDS NO
WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO ANY AMGEN
TARGETS OR OTHER MATERIALS OR TECHNOLOGY DEVELOPED OR PROVIDED PURSUANT TO THIS
AGREEMENT.
7.7 LIMITATION OF LIABILITY. IN NO EVENT SHALL EITHER PARTY BE LIABLE
TO THE OTHER FOR ANY INDIRECT OR CONSEQUENTIAL DAMAGES (INCLUDING WITHOUT
LIMITATION, LOST PROFITS), EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE
POSSIBILITY THEREOF. Each party acknowledges that the foregoing limitations are
an essential element of the Agreement between the parties and that in the
absence of such limitations the pricing and other terms set forth in this
Agreement would be substantially different.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 133, AS AMENDED.
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8. TERM AND TERMINATION.
8.1 TERM. The term of this Agreement shall commence on the Effective
Date and, unless terminated earlier pursuant to this Section 8, shall expire
December 31, 2001. The Agreement may be extended by mutual written agreement of
the parties hereto.
8.2 TERMINATION BY AMGEN. Amgen may terminate this Agreement, with or
without cause, effective on January 1 of any year after January 1, 1999, with at
least [ * ] days prior written notice; provided, however, that Amgen may also
terminate this Agreement if Caliper has not delivered within [ * ] days of the
end of the [ * ] quarter of [ * ] the Multi Sipper Instrument scheduled to be
delivered that quarter by providing Caliper with written notice at any time
prior to the expiration of the extended term of the 1999 subscription described
in Section 2.2. All rights and obligations applicable under this Agreement
through the effective date of termination shall continue to apply until such
date irrespective of any delivery of notice of termination, including but not
limited to [ * ].
8.3 TERMINATION FOR MATERIAL BREACH. Either party may terminate this
Agreement upon any material breach of this Agreement by the other party if the
other party has not cured such breach within sixty (60) days after written
notice thereof by the non-breaching party.
8.4 SURVIVING OBLIGATIONS. No expiration or termination of this
Agreement shall relieve either party of any obligation accruing prior to such
expiration or termination. The provisions of Sections 2.1(a) (third and fourth
sentences), 2.1(b), 2.1(c), 2.1(d), 2.4, 2.5, 2.7, 3.1(b)(i), 3.3(c ), 4, 5, 7,
8.4, 8.5 and 9 shall survive the expiration or termination of this Agreement.
8.5 POST-TERM LICENSE. Following expiration or termination of this
Agreement, the product license granted to Amgen under Section 2.1 shall continue
to be fully-paid, irrevocable and perpetual and, in addition, Amgen shall be
entitled to continue to purchase such Instruments, LabChips and other Screening
Products for so long as Caliper continues to offer such items for sale to third
parties. Caliper will notify Amgen before ceasing production of any Screening
Product which Amgen has purchased in the [ * ] period before production is due
to cease. The know-how license granted under Section 2.1 shall continue to be
fully-paid, irrevocable and perpetual with respect to Caliper Know-How provided
to Amgen during the Term. The non-exclusive license granted to Amgen under
Section 4.2 shall continue to be royalty-free, irrevocable and perpetual with
respect to Caliper Technology and LabChip Improvements covered thereby.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 133, AS AMENDED.
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9. MISCELLANEOUS
9.1 NOTICES. Any consent, notice or report required or permitted to
be given or made under the Agreement by one party to the other party shall be in
writing, delivered personally or by confirmed facsimile, first class mail
postage prepaid, courier, or nationally-recognized delivery service, and
addressed to the other party at its address indicated below, or to such other
address as the addressee shall have last furnished in writing to the addresser.
Such consent, notice or report shall be effective upon delivery to the
addressee.
If to Caliper: Caliper Technologies Corp.
605 Fairchild Drive
Mountain View, California 94043
ATTENTION: CHIEF OPERATING OFFICER
If to Amgen: Amgen Inc.
One Amgen Center Drive
Thousand Oaks, California 91320-1799
Attention: Senior Vice President, General Counsel and
Secretary
Copy to: Senior Vice President, Research
Facsimile: (805) 499-8011
9.2 GOVERNING LAW. The Agreement shall be governed by and construed
in accordance with the laws of the State of California, without regard to the
conflicts of law principles thereof. With respect to any dispute under this
Agreement, the parties submit to the exclusive jurisdiction of the courts of the
State of California (both state and federal).
9.3 ASSIGNMENT. This Agreement is personal in its character, and
neither party shall assign its rights or obligations under this Agreement, in
whole or in part, without the prior written consent of the other party;
provided, however, that either party may assign this Agreement (i) to any
successor by merger or sale of substantially all of the business assets of the
party or (ii) to any Affiliate so long as such Affiliate expressly agrees to be
bound by the terms of this Agreement. This Agreement shall be binding on and
inure to the benefit of the successors or permitted assigns of the parties
hereto, and all entities controlled by them.
9.4 WAIVERS AND AMENDMENTS. No change, modification, extension or
waiver of this Agreement, or any of the provisions herein contained, shall be
valid unless made in writing and signed by duly authorized representatives of
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 133, AS AMENDED.
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the parties hereto.
9.5 ENTIRE AGREEMENT. This Agreement embodies the entire
understanding between the parties and supersedes any prior understanding and
agreements between and among Caliper and Amgen with respect to the subject
matter of this Agreement.
9.6 SEVERABILITY. If a court of competent jurisdiction declares any
provision of this Agreement invalid or unenforceable, or if any government or
other agency having jurisdiction over either party deems any provision to be
contrary to any laws, then that provision shall be severed and the remainder of
the Agreement shall continue in full force and effect. To the extent possible,
the parties shall revise such invalidated provision in a manner that will render
such provision valid without impairing the parties' original intent.
9.7 NO WAIVER. The failure of a party in any one or more instances to
insist upon strict performance of any of the terms and conditions of this
Agreement shall not constitute a waiver or relinquishment, to any extent, of the
right to assert or rely upon any such terms or conditions on any future
occasion.
9.8 DISCLAIMER OF AGENCY. The relationship between Caliper and Amgen
is that of independent contractors. Caliper and Amgen are not joint venturers,
partners, principal and agent, master and servant, employer or employee, and
have no other relationship other than independent contracting parties. Neither
party shall have the right or authority to assume, create, or incur any third
party liability or obligation of any kind, express or implied, against or in the
name of or on behalf of another except as expressly set forth in this Agreement.
9.9 COUNTERPARTS. The Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.10 USE OF TERMS. As used in Sections 1.3, 1.12, 2.7 and 4, the terms
"Amgen", "Caliper", "party" or "parties" shall also include it and their
employees, consultants, agents and Affiliates.
9.11 MISCELLANEOUS. In order for each party to fulfill its obligations
hereunder with respect to intellectual property and Confidential Information,
each party has or will have each of its relevant employees, consultants, agents
or Affiliates to execute agreements providing for the assignment of intellectual
property rights and for the protection of Confidential Information.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 133, AS AMENDED.
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IN WITNESS WHEREOF, the parties have executed the Agreement as of the
date first set forth above.
CALIPER TECHNOLOGIES CORP. AMGEN INC.
By: /s/ Calvin Chow By: /s/ Gordon M. Binder
-------------------------- ---------------------------------------
Title: Chief Operating Officer Title: Chairman and Chief Executive Officer
----------------------- ------------------------------------
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 133, AS AMENDED.
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EXHIBIT A
1999 PROGRAM PLAN
The following program plan describes the experimental systems scheduled for
delivery and the technology developments scheduled to be demonstrated during
1999. [ * ].
[ * ]
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 133, AS AMENDED.
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CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
EXHIBIT 10.13
TECHNOLOGY ACCESS AGREEMENT
THIS TECHNOLOGY ACCESS AGREEMENT ("Agreement"), dated as of August 12,
1999 (the "Effective Date"), is entered into by and between ELI LILLY AND
COMPANY, having offices at Lilly Corporate Center, Indianapolis, Indiana 46285
("Lilly") and CALIPER TECHNOLOGIES CORP. ("Caliper"), having offices at 605
Fairchild Drive, Mountain View, California 94043-2234.
RECITALS
WHEREAS, Lilly is in the business of discovering, developing,
manufacturing and marketing actual or potential pharmaceutical, therapeutic,
animal health and agricultural agents, compounds and products (collectively,
"Lilly Products"); and
WHEREAS, Lilly uses Screening techniques in its business activities; and
WHEREAS, Caliper has developed proprietary microfluidics and
miniaturization technology applicable to Screening techniques; and
WHEREAS, Caliper and Lilly desire to establish a technology access
program to implement Screening capabilities utilizing Caliper Technology at
Lilly's facilities;
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants contained in this Agreement, the parties agree as follows:
1. DEFINITIONS
1.1 "AFFILIATE" shall mean, with respect to any Person, any other
Person controlling, controlled by or under common control with,
such Person. For purposes of this definition, the term "control"
means the possession, directly or indirectly, of the power to
direct the management or policies of a Person, whether through
the ownership of voting securities, by contract or otherwise.
1.2 "ANNUAL SUBSCRIPTION FEE" shall have the meaning specified in
Section 3.1.2.
1.3 "CALIPER KNOW-HOW" shall mean [ * ],
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and (b) Caliper treats as confidential or proprietary. Caliper
Know-How does not include Caliper Patents.
1.4 "CALIPER PATENTS" shall mean any and all Patents that either as
of the Effective Date or during the Term Caliper owns or
controls, or in which Caliper has an interest that it is not
legally or contractually prohibited from licensing or
sublicensing to Lilly.
1.5 "CALIPER SCREENING SYSTEM" shall mean a system for performing
Screening that consists of [ * ].
1.6 "CALIPER TECHNOLOGY" shall mean, collectively, the Caliper
Patents and the Caliper Know-How.
1.7 "CONFIDENTIAL INFORMATION" of a party shall mean all information
provided by such party to the other party either in connection
with the discussions and negotiations pertaining to this
Agreement or in the course of performing this Agreement, which
information is considered to be proprietary and confidential by
the disclosing party, including without limitation, data;
knowledge; practices; processes; ideas; research plans; chemical
compounds; engineering designs and drawings; research data;
manufacturing processes and techniques; scientific,
manufacturing, marketing and business plans; and financial and
personnel matters relating to the disclosing party or to its
present or future products, sales, suppliers, customers,
employees, investors or business. Notwithstanding the foregoing,
information shall not be deemed Confidential Information for
purposes of this Agreement if such information:
(a) was already known to the receiving party or its
Affiliates, other than under an obligation of
confidentiality, at the time of disclosure by the
disclosing party;
(b) was generally available or known to the public or
otherwise part of the public domain at the time of its
disclosure to the receiving party;
(c) became generally available or known to the public or
otherwise part of the public domain after its disclosure
to the receiving party through no fault of the receiving
party;
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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(d) was disclosed to the receiving party or its Affiliates,
other than under an obligation of confidentiality to a
third party, by a third party who had no obligation to
the disclosing party not to disclose such information to
others; or
(e) was independently discovered or developed by the
receiving party or its Affiliates without the use of
Confidential Information belonging to the disclosing
party.
[ * ].
1.8 "CONTRACT YEAR" shall mean a period of one year commencing on
the Effective Date or on any anniversary of the Effective Date.
1.9 "EFFECTIVE DATE" shall have the meaning stated in the
introductory paragraph of this Agreement.
1.10 "FTE" shall mean one or more Caliper full-time equivalent
person(s), whether employees, contractors or consultants,
engaged in activities on Lilly's behalf under this Agreement for
the equivalent of one full-time employee's time (assuming a
40-hour workweek).
1.11 "INSTRUMENT" shall mean any hardware component of a system
offered for sale by Caliper to develop LabChip Assays or perform
Screening.
1.12 "LABCHIP" shall mean a chip offered for sale by Caliper [ * ].
LabChip(tm) is a Caliper trademark but is printed without the
trademark designation (tm) in this Agreement for convenience.
1.13 "LABCHIP ASSAY" shall mean a Screening assay for a particular
Target designed to be performed on a Caliper Screening System.
1.14 "LABCHIP IMPROVEMENTS" [ * ].
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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1.15 "LICENSE" shall mean the license granted to Lilly and its
Affiliates by Caliper in Section 2.1 of this Agreement.
1.16 "LICENSE FEE" shall have the meaning specified in Section 3.1.1.
1.17 "LILLY PRODUCTS" shall have the meaning specified in the
Recitals.
1.18 "LILLY PROGRAM" [ * ].
1.19 "MATERIALS" shall have the meaning specified in Section 4.3.
1.20 "PARTICIPANT" shall mean a Person participating in the
Technology Access Program under the terms and conditions of an
agreement such as this Agreement.
1.21 "PATENTS" shall mean any and all patents, together with any
substitutions, reissues, renewals, divisions, continuations,
continuations-in-part, reexaminations, patent term restorations,
patents of additions and extensions thereof, any supplementary
protection certificates relating thereto, and any inventors'
certificates, which have not been held invalid or unenforceable
by a non-appealable or non-appealed decision of a court of
competent jurisdiction, issuing from patent applications filed
in any jurisdiction and any provisionals, divisionals,
continuations, and continuations-in-part of such applications.
1.22 "PERSON" shall mean an individual, partnership, firm,
corporation, limited liability company, joint venture,
association, trust or other entity, or any governmental agency
or political subdivision thereof.
1.23 "PROGRAM COLLABORATOR" shall mean a third party participant in a
Lilly Program.
1.24 "PROGRAM LEADER" shall have the meaning specified in Section
2.2.
1.25 "PROGRAM PLAN" shall have the meaning specified in Section 2.2.
1.26 "REINSTATEMENT ELECTION" shall have the meaning specified in
Section 7.6.4.
1.27 "REINSTATEMENT PAYMENT" shall have the meaning specified in
Section 7.6.4.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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1.28 "SCREENING" shall mean the process of [ * ]. For purposes of
this Agreement, Screening shall include, but not be limited to,
[ * ].
1.29 "SCREENING DATA" shall have the meaning specified in Section
4.4.
1.30 "SCREENING PRODUCTS" shall mean all Instruments, LabChips and
other hardware, software or reagents that Caliper offers in
writing during the Term for sale to Participants for use in
Screening.
1.31 "SUSPENSION" shall have the meaning specified in Section 7.6.
1.32 "SUSPENSION PERIOD" shall have the meaning specified in Section
7.6.
1.33 "SUSPENSION YEAR" shall have the meaning specified in Section
7.6.
1.34 "TARGETS" shall mean [ * ] for LabChip Assay development in
accordance with Section 2.3.
1.35 "TECHNOLOGY ACCESS PROGRAM" or "TAP" shall mean Caliper's
program for providing access to its evolving line of Screening
Products in the context of an ongoing, renewable business
relationship. In addition to sales of finished products, this
relationship involves customer input into development, early
access to prototypes and substantial training and support.
1.36 "TERM" shall mean the period commencing on the Effective Date
and ending on the third anniversary of the Effective Date,
unless extended or earlier terminated pursuant to Section 7 or
modified by mutual written agreement of the parties pursuant to
Section 9.4.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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2. TECHNOLOGY ACCESS PROGRAM
2.1 LICENSE GRANT. Caliper hereby grants to Lilly and its Affiliates
a worldwide, nonexclusive, nontransferable (except as provided
in Section 9.3) license, with no right to sublicense, under
Caliper Technology:
(a) to use Screening Products to develop LabChip Assays and
to perform Screening, for itself or for Program
Collaborators, in Lilly Programs; and
(b) to carry out any and all activities contemplated from
time to time pursuant to this Agreement or the Program
Plan.
With respect to each of the Screening Products offered for sale
by Caliper in the first Contract Year, this license shall become
[ * ] upon Caliper's receipt of [ * ]. With respect to Screening
Products offered in each subsequent Contract Year, this license
shall become [ * ]. For the avoidance of doubt, the parties
intend that Lilly shall have a [ * ] with respect to [ * ].
Accordingly, as provided in Section 7.5, [ * ], this license, [
* ], shall survive in perpetuity despite the expiration or
termination of this Agreement.
2.2 PROGRAM LEADERS AND PLAN. Caliper and Lilly shall each designate
a TAP leader (each, a "Program Leader") who shall jointly
coordinate the activities carried out under this Agreement and
monitor the progress of such activities on a periodic basis. The
initial Program Leader of Lilly shall be [ * ], and the initial
Program Leader of Caliper shall be Steven A. Sundberg, Ph.D.
From time to time, the Program Leaders shall jointly prepare and
update a program plan (the "Program Plan") describing Lilly's
goals as a Participant, the tasks for Lilly support to be
provided by Caliper personnel under Section 2.3, and such other
matters as the Program Leaders determine to be appropriate. The
initial Program Plan is attached hereto as Exhibit A. Either
party, in its sole discretion, may change its Program Leader by
delivering written notice of the name and qualifications of the
proposed successor Program Leader to the other party. If the
other party questions the qualifications of the proposed
successor, then the parties shall consult with one another in
good faith for the purpose of resolving any issues. In the event
of a change in Program Leader, a reasonable transition period
shall be
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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allowed for, if possible, in order to maximize continuity of
Lilly's participation in the TAP.
2.3 LILLY SUPPORT.
2.3.1. GENERAL. [ * ] Caliper shall provide to Lilly, up to the
limits set forth below, assistance and support in
implementing the Program Plan and otherwise carrying out
the activities contemplated by this Agreement. Such
activities may include, without limitation, (i) assay
development for Lilly Targets, (ii) training and support
for Lilly personnel developing LabChip Assays or using
Screening Products, and (iii) custom development
projects requested by Lilly (each discussed further
below). The Program Leaders will jointly propose
priorities and tasks to be accomplished by the FTEs
assigned by Caliper to provide such assistance and
support to Lilly. Caliper's Program Leader will
determine the necessary personnel resources, and provide
estimates (in writing, if requested) of the projected
time needed to perform relevant tasks and the technical
feasibility of various tasks. Based on this information,
the Program Leaders will update the Program Plan to
include the applicable tasks for Lilly support
activities. Absent Caliper's agreement to the contrary,
the amount of assistance and support shall not exceed
[ * ] FTEs in any calendar quarter. Administrative
activities of the Caliper Program Leader shall not be
counted toward this limit. The Program Leaders shall
attempt to schedule the activities of the FTEs in order
to avoid significant fluctuations in the number of
Caliper personnel devoted to Lilly support over the
course of the Contract Year. [ * ]. The parties expect
that the skills, experience, training and qualifications
required of such FTEs will vary from time to time during
the Term. Caliper will use its best efforts at all times
to assign FTEs with the proper skills, experience,
training and qualifications, and will not assign FTEs to
whom Lilly reasonably objects on the grounds of improper
skills, experience, training and qualifications. In
addition, Caliper agrees [ * ]. Caliper shall deliver
quarterly reports to Lilly describing the actual time
applied by its FTEs to Lilly support tasks. The Program
Leaders may adjust the Lilly support FTEs scheduled for
subsequent quarters based on such reports.
2.3.2. LABCHIP ASSAY DEVELOPMENT. LabChip Assays for Lilly's
Targets will be developed collaboratively by the parties
or solely by Lilly, as determined by Lilly. In general,
Lilly will [ * ]. Initially, Caliper will be primarily
responsible for [ * ].
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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Over time, the parties expect that Lilly will [ * ].
2.3.3. TRAINING AND SUPPORT. At Lilly's request, [ * ] or more
of the Caliper FTEs shall provide training and support
for Lilly employees in development of LabChip Assays and
use of Screening Products, with the intended result of
making Lilly independent in its use of Caliper
Technology. The parties will schedule such training and
support at mutually convenient times and locations,
including a reasonable number of visits to Lilly's
facilities in Indiana, North Carolina or elsewhere.
2.3.4. CORE SCREENING PRODUCT OFFERINGS; CUSTOM DEVELOPMENT.
Caliper will consult with Lilly with respect to the
Screening Products it offers during each Contract Year.
From time to time, Caliper will notify Lilly of the
particular Screening Products that Caliper has decided
to develop and offer to Participants. If Lilly is
interested in having Caliper develop additional
products, or accessories to core products, then Lilly
may elect to apply a portion of the Lilly support FTEs
to such custom development efforts.
2.4 NON-EXCLUSIVITY. The TAP is a mutually non-exclusive
collaboration. Lilly and Caliper are each free to work with any
third party in any area. Screening Products developed by
Caliper, independently or jointly with Lilly, will be sold on a
non-exclusive basis (subject to Section 5.1). Lilly acknowledges
that other customers, independently or together with Caliper,
may develop LabChip Assays for the same or similar targets as
those pursued by Lilly or pursue development of drugs that may
compete with drugs Lilly is developing or commercializing,
subject in all cases to Section 5.1 and the other terms of this
Agreement. Similarly, Caliper acknowledges that Lilly may
continue to perform Screening on non-Caliper systems and may
collaborate with third parties on [ * ]; subject in all cases to
Section 5.1 and the other terms of this Agreement.
2.5 SPECIAL PROJECTS. Lilly may propose to Caliper special product
development projects that combine Lilly proprietary technology
and Caliper Technology and that could involve a period of [ * ].
In such case, the parties shall discuss in good faith
alternative business arrangements, including a period of [ * ],
which would accomplish the objectives of such special projects.
In the first Contract Year, however, the parties intend to focus
on core technology implementation and do not expect to initiate
special projects.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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2.6 USE AND TRANSFER OF SCREENING PRODUCTS. Caliper authorizes Lilly
and its Affiliates to use Screening Products to pursue all
activities within the scope of the License. Caliper authorizes
Lilly and its Affiliates to transfer or resell Screening
Products among themselves. Subject to the foregoing, Lilly shall
not transfer or resell Screening Products to others, use
Screening Products to provide services to others (except in the
context of a Lilly Program), or authorize others to use
Screening Products. Lilly's use of information and data derived
from its use of Screening Products is governed by Section 4.4 of
this Agreement and not by this Section.
2.7 COMMERCIALIZATION OF SCREENING PRODUCTS. Caliper represents and
warrants to Lilly that, as of the Effective Date, [ * ];
however, Caliper reserves the right to do so should Caliper
determine that technical or business reasons warrant such a
change in plans. However, with respect to [ * ], then (a) the
parties shall mutually agree in good faith on [ * ], and (b) the
parties shall mutually agree on a [ * ], from which Lilly may
thereafter [ * ].
2.8 OTHER PRODUCTS. During the course of this Agreement, [ * ].
Terms related to such transactions will be agreed upon
separately or established for all customers by Caliper and
Hewlett-Packard and are not intended to be included under the
scope of this Agreement.
3. FINANCIAL TERMS
3.1 TECHNOLOGY ACCESS FEES.
3.1.1. LICENSE FEE. Lilly shall pay to Caliper a non-refundable
(except as provided in Section 2.7) license fee of [ * ]
Dollars [ * ] within [ * ] (the "License Fee").
3.1.2. ANNUAL SUBSCRIPTION FEES. Lilly shall pay to Caliper a
non-refundable (except as provided in Section 2.7)
annual subscription fee of [ * ] Dollars [ * ] for each
Contract Year of the TAP (each, an "Annual Subscription
Fee"). Each Annual Subscription Fee shall be due within
[ * ] of the commencement of the applicable Contract
Year, except that, with respect to the Annual
Subscription Fee payable with respect to the first
Contract Year, [ *
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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] Dollars [ * ] of such Annual Subscription Fee shall be
payable within thirty (30) days of the commencement of
the first Contract Year, [ * ] Dollars [ * ] of such
Annual Subscription Fee shall be payable [ * ] pursuant
to this Agreement. For purposes of clarity, [ * ] shall
not be deemed to constitute [ * ].
3.2 SCREENING PRODUCTS AVAILABLE FOR PURCHASE. Exhibit B-1 sets
forth the complete list of Screening Products available for
purchase by Lilly as of the Effective Date. Exhibit B-2 sets
forth a list of additional Screening Products that Caliper
expects to make available for purchase by Lilly during the first
Contract Year.
3.3 LABCHIP PRICING. Caliper estimates that when commercially
available, LabChips will be priced at between [ * ] per data
point measured. Both parties recognize that this cost is an
estimate based only on preliminary information. This estimate
applies to LabChips for the LabChip Assays described on Exhibit
B-1 when run on Instruments with the functionality described on
Exhibit B-1.
3.4 PRODUCT SALES. Caliper will notify Lilly in writing when Caliper
is prepared to offer each Screening Product for sale to Lilly,
together with standard commercial terms and conditions to be
established by Caliper, such as price, warranty, service
arrangements and the like. Throughout the Term, Lilly shall have
the right to purchase [ * ]. Notwithstanding the foregoing,
during the first Contract Year, [ * ]. Caliper agrees [ * ].
3.5 MINIMUM WARRANTY AND SERVICE. The specific warranty terms and
service arrangements relating to Screening Products will be
stated in a supply agreement or other documents governing the
purchase and sale thereof. However, the parties expect that, at
a minimum, Caliper will warrant to Lilly, in connection with
each sale of a LabChip to Lilly, that the LabChip will [ * ].
Each Instrument purchased by Lilly under the TAP (other than
Instruments designated by Caliper in writing as development
stage Instruments) will carry a [ * ] warranty that will be
passed through to Lilly. Caliper will cause reasonable service
arrangements to be made available to Lilly for all Screening
Products sold by Caliper hereunder.
3.6 PRODUCT DELIVERY AND ALLOCATION. At the time Caliper offers any
Screening Product for sale to Lilly, unless Caliper has advised
Lilly in writing that such Screening Product is in the
development stage, Caliper shall [ * ]. If Caliper is unable to
satisfy the demand for a Screening Product within a [ * ] time
frame [ * ], then Lilly's orders for such Screening Product will
be [ * ]. Notwithstanding the foregoing, during the first
Contract Year, [ * ].
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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4. INTELLECTUAL PROPERTY
4.1 OWNERSHIP OF INVENTIONS. Except as provided in Section 4.2,
below, each party shall own all inventions, whether patentable
or not, conceived or reduced to practice solely by its employees
and/or consultants during the course of the Technology Access
Program. Caliper and Lilly shall jointly own inventions
conceived or reduced to practice jointly by employees and/or
consultants of both parties during the course of the Technology
Access Program. Each party shall execute all documents and take
all actions reasonably necessary to perfect such ownership
rights of the other party and to enable the filing of patent
applications. Inventorship shall be determined under U.S. patent
laws.
4.2 LABCHIP IMPROVEMENTS. To the extent Lilly owns a LabChip
Improvement:
4.2.1. [ * ].
4.2.2. [ * ].
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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4.3 LILLY MATERIALS. Lilly and/or its Affiliates may provide to
Caliper pursuant to this Agreement certain [ * ] (collectively,
the "Materials"), which are and shall remain the sole property
of Lilly. Any information provided in connection with the
Materials shall be treated as Confidential Information. The
provision of Materials to Caliper under this Agreement does not
grant Caliper any license or other right to such Materials,
except the limited right to use the Materials for the sole
purpose of satisfying its obligations to Lilly under this
Agreement and for no other purpose. [ * ] Upon request by Lilly,
Caliper shall promptly return to Lilly or destroy any remaining
Materials.
4.4 SCREENING DATA. Subject to Sections 4.1 and 4.2, Lilly shall own
all information and data resulting from or arising out of its
Screening activities (collectively, "Screening Data") and all
discoveries and Lilly Products based on or resulting from such
Screening Data. [ * ].
5. CONFIDENTIALITY; PUBLICITY
5.1 CONFIDENTIAL INFORMATION. During the Term, and for a period of
[ * ] years following the expiration or termination of this
Agreement, each party shall maintain in confidence any and all
Confidential Information received from the other party. Each
party further agrees that it shall not use for any purpose not
authorized under this Agreement or disclose to any third party
the Confidential Information of the other party, except that
either party may disclose Confidential Information of the other
party on a need-to-know basis to its directors, officers,
employees, consultants, agents, Affiliates and third-party
collaborators if it shall have first required such recipients to
undertake an obligation of confidentiality and non-use similar
to this Section 5.1. Upon request from the disclosing party, the
receiving party shall return to the disclosing party any
Confidential Information of the disclosing party received from
it in tangible form.
5.2 PUBLICITY. Neither party shall originate any news release or
other public announcement relating to the contents of this
Agreement without the prior written approval of the other party,
which approval shall not be unreasonably withheld or delayed for
longer than [ * ]. Notwithstanding the foregoing,
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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either party may disclose the existence and/or the provisions of
this Agreement, under standard obligations of confidentiality
and non-use on a need-to-know basis, to investors and their
representatives in a private or public financing transaction, to
potential acquirers or targets and their representatives in a
corporate change of control transaction, or as required by law
(including but not limited to the filing of this Agreement as an
exhibit to a document filed with the Securities and Exchange
Commission), order or regulation of a governmental agency;
provided, however, that no such disclosure shall be permitted to
the extent it would constitute a violation of Section 5.1. The
disclosing party shall provide written notice to the other party
of any such disclosure required by law, order or regulation of a
governmental agency, reasonably in advance if practical. If
Caliper intends to file this Agreement with the Securities and
Exchange Commission, Caliper agrees to provide Lilly with a copy
of the proposed filing for review and comment at least ten days
in advance of the filing date. Caliper shall not unreasonably
withhold its acceptance of any comments made by Lilly.
5.3 PUBLICATIONS. Subject to their obligations under Section 5.1,
Caliper and Lilly shall have the right to publish data they
acquire in the course of the TAP, provided that the publishing
party will provide the other party with [ * ] to review and
approve any publication disclosing subject matter involving the
other party. Approval of such publications shall not be
unreasonably withheld. For the avoidance of doubt, the use and
disclosure of any Confidential Information shall remain subject
to Section 5.1. In addition, if the reviewing party determines
that a patent application should be filed in advance of
publication, the reviewing party shall have an additional [ * ]
days in order to file an application.
6. INDEMNIFICATION; DISCLAIMERS; LIMITATION OF LIABILITY
6.1 INDEMNIFICATION BY CALIPER. Caliper shall defend, indemnify and
hold harmless Lilly and its Affiliates and all of their
officers, directors, employees and agents (collectively, the
"Lilly Indemnitees") from and against any and all damages,
awards, costs and expenses (including court and arbitration
costs, witness fees and reasonable attorneys' fees) incurred by
any Lilly Indemnitee in connection with any claim, demand,
lawsuit or other legal action by any third party against such
Lilly Indemnitee:
(a) [ * ]
(b) [ * ]
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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(c) [ * ]; provided, however, that no such indemnification
shall apply with respect to any such damages, awards,
costs or expenses arising primarily as a result of (i)
Lilly's use of Screening Products in violation of this
Agreement or in violation of any reasonable restrictions
on use imposed by Caliper in accordance with Section 6.4
below, (ii) Lilly's combination of Screening Products
with technology other than Caliper Technology, (iii)
Lilly's unauthorized modification of Screening Products,
or (iv) Lilly's continued use of Screening Products
notwithstanding termination of Lilly's right to use such
Screening Products pursuant to Section 6.4 below.
6.2 INDEMNIFICATION BY LILLY. Lilly shall defend, indemnify and hold
harmless Caliper and its Affiliates and all of their officers,
directors, employees and agents (collectively, the "Caliper
Indemnitees") from any damages, awards, costs and expenses
(including court and arbitration costs, witness fees and
reasonable attorneys' fees) incurred by any Caliper Indemnitee
in connection with any claim, demand, lawsuit or other legal
action by any third party against such Caliper Indemnitee
arising out of:
(a) [ * ]; or
(b) [ * ]; or
(c) [ * ].
6.3 INDEMNIFICATION PROCEDURE. Promptly after receipt by a Lilly
Indemnitee or Caliper Indemnitee (in either case, the
"Indemnified Party") of notice of any pending or threatened
third-party claim against it (a "Third-Party Claim") with
respect to which it asserts a claim for indemnification under
this Article 6, such Indemnified Party shall give written notice
to the Person against whom it asserts its claim for
indemnification (the "Indemnifying Party") of the existence and
nature of the Third-Party Claim; provided, however, that [ * ].
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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Thereafter, the Indemnified Party shall deliver to the
Indemnifying Party, within [ * ] after the Indemnified Party's
receipt thereof, copies of all notices and documents (including
court papers) received by the Indemnified Party relating to the
Third-Party Claim. The Indemnifying Party will be entitled to
participate in the defense of such Third-Party Claim and, if it
chooses, to assume the defense thereof with counsel selected by
the Indemnifying Party. Should the Indemnifying Party so elect
to assume the defense of a Third-Party Claim, the Indemnifying
Party will not be liable to the Indemnified Party for [ * ]. If
the Indemnifying Party assumes such defense, the Indemnified
Party shall have the right to participate in the defense thereof
and to employ counsel, at its own expense, separate from the
counsel employed by the Indemnifying Party, it being understood
that the Indemnifying Party shall control such defense. The
Indemnifying Party shall be liable for the fees and expenses of
counsel employed by the Indemnified Party for any period during
which the Indemnifying Party has not assumed the defense thereof
(other than any period during which the Indemnified Party shall
have failed to give notice of the Third-Party Claim).
Notwithstanding an Indemnifying Party's election to assume the
defense of any such Third-Party Claim, the Indemnified Party
shall have the right to employ separate counsel and to
participate in the defense of such Third-Party Claim, and the
Indemnifying Party shall bear the reasonable fees, costs and
expenses of such separate counsel if: [ * ]. If the Indemnifying
Party chooses to defend or prosecute a Third-Party Claim, all
the parties thereto shall cooperate in the defense or
prosecution thereof. Such cooperation shall include the
retention and (upon the Indemnifying Party's request) the
provision to the Indemnifying Party of records and information
that are reasonably relevant to such Third-Party Claim, and
making employees available on a mutually convenient basis to
provide additional
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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information and explanation of any material provided hereunder.
If the Indemnifying Party chooses to defend or prosecute any
Third-Party Claim, the Indemnified Party will consent to [ * ].
If the Indemnifying Party shall have assumed the defense of a
Third-Party Claim, the Indemnified Party shall not [ * ] without
the Indemnifying Party's prior written consent, which consent
shall not be unreasonably withheld or delayed. If the
Indemnifying Party does not assume the defense of the
Third-Party Claim, then the Indemnified Party may investigate
and defend such Third-Party Claim without the assistance of the
Indemnifying Party; provided that the Indemnifying Party shall
have no liability for indemnification under this Article 6 with
respect to [ * ].
6.4 INTELLECTUAL PROPERTY. Caliper shall determine which Screening
Products to offer and when they will be offered. Caliper may
impose, in writing, reasonable restrictions upon the use of any
Screening Product for intellectual property reasons, provided it
notifies Lilly of such restriction at the time of sale.
Following sale of any product, if Caliper determines that third
party intellectual property concerns warrant, Caliper may, in
its sole discretion, [ * ]. However, if in spite of such
efforts, Caliper determines to [ * ].
6.5 CALIPER DISCLAIMER. EXCEPT AS SET FORTH IN ARTICLE 8, THE
PROVISIONS OF THIS AGREEMENT SHALL NOT BE CONSTRUED AS A PRODUCT
WARRANTY BY CALIPER OF ANY KIND, EITHER EXPRESS OR IMPLIED,
INCLUDING WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE, WITH RESPECT TO ANY CALIPER TECHNOLOGY,
SCREENING PRODUCT OR OTHER PRODUCTS DEVELOPED OR PROVIDED
PURSUANT TO THIS AGREEMENT. Lilly acknowledges that some of the
Screening Products to be provided to Lilly pursuant to this
Agreement are prototype units, and as such are neither equipped
with standard safety features nor completely tested for defects.
Lilly acknowledges that such products require a greater degree
of caution than other standard laboratory equipment. Caliper
shall not be liable to Lilly for any personal injury or property
damage resulting from use of such equipment in a manner other
than that recommended by Caliper, except in the case of
negligence by Caliper.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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6.6 LILLY DISCLAIMER. EXCEPT AS SET FORTH IN ARTICLE 8, THE
PROVISIONS OF THIS AGREEMENT SHALL NOT BE CONSTRUED AS A
WARRANTY BY LILLY OF ANY KIND, EITHER EXPRESS OR IMPLIED,
INCLUDING WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE, WITH RESPECT TO ANY LILLY TARGETS OR OTHER
MATERIALS OR TECHNOLOGY DEVELOPED OR PROVIDED PURSUANT TO THIS
AGREEMENT. Caliper acknowledges that some of the Targets and/or
Materials to be provided to Caliper pursuant to this Agreement
are for research purposes. Caliper acknowledges that such
Targets and/or Materials can carry risks and must be handled
appropriately. Lilly shall not be liable to Caliper for any
personal injury or property damage resulting from the improper
handling of such Targets and/or Materials, except in the case of
negligence by Lilly.
6.7 LIMITATION OF LIABILITY. IN NO EVENT SHALL EITHER PARTY BE
LIABLE TO THE OTHER FOR ANY INDIRECT OR CONSEQUENTIAL DAMAGES
(INCLUDING WITHOUT LIMITATION, LOST PROFITS), EVEN IF SUCH PARTY
HAS BEEN ADVISED OF THE POSSIBILITY THEREOF. Each party
acknowledges that the foregoing limitations are an essential
element of the Agreement between the parties and that in the
absence of such limitations the pricing and other terms set
forth in this Agreement would be substantially different.
7. TERM AND TERMINATION; SUSPENSION
7.1 TERM. The Term of this Agreement shall commence on the Effective
Date and, unless extended or terminated earlier pursuant to this
Section 7, shall expire on the third anniversary of the
Effective Date. The Term also may be modified by mutual written
agreement of the parties pursuant to Section 9.4.
7.2 TERMINATION BY LILLY. Lilly may terminate this Agreement, with
or without cause, effective on any anniversary of the Effective
Date, with at least [ * ] prior written notice to Caliper. All
rights and obligations applicable under this Agreement through
the date of termination shall continue to apply until such date
irrespective of any delivery of notice of termination.
7.3 TERMINATION BY EITHER PARTY. Either party may terminate this
Agreement prior to the expiration of the Term in accordance with
one of the following paragraphs:
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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(a) Either party may terminate this Agreement upon written
notice to the other party in the event of a material
breach of this Agreement by such other party; provided,
however, that prior to any such termination the
terminating party shall have provided the breaching
party with written notice of the circumstances
constituting such breach and the breaching party shall
have failed to cure such breach within a period [ * ]
days thereafter.
(b) Either party may terminate this Agreement immediately
upon written notice to the other party if the other
party:
(1) is dissolved;
(2) fails or is unable to pay its debts generally as
they become due;
(3) commences a voluntary case in bankruptcy or any
other action or proceeding for any other relief
under any law affecting creditors' rights that
is similar to a bankruptcy law (collectively, a
"Bankruptcy Proceeding") or makes an assignment
for the benefit of creditors;
(4) consents by answer or otherwise to the
commencement against it of any involuntary
Bankruptcy Proceeding; or
(5) a court having jurisdiction in the premises
enters an order for relief or a decree in
respect of such party in any involuntary
Bankruptcy Proceeding, or a receiver, trustee or
similar official is appointed in respect of such
party or any of its property, and that order or
decree is not dismissed or stayed, or that
appointment is not terminated, on or before the
sixtieth (60th) day after the entry of the order
or decree or after the appointment (as the case
may be), or any such dismissal or stay ceases to
remain in effect.
7.4 SURVIVING OBLIGATIONS. No expiration or termination of this
Agreement shall relieve either party of any obligation accruing
prior to such expiration or termination. The provisions of
Sections 2.4, 2.6, 7.4, 7.5, 9.3 and Articles 4, 5, 6 and 8,
together with any provisions required for their interpretation
or enforcement, shall survive the expiration or termination of
this Agreement.
7.5 POST-TERM LICENSE. Following expiration or termination of this
Agreement, the License shall continue with respect to the
Screening Products for which the License has been fully-paid
pursuant to Section 3.1. Lilly shall be entitled to
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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continue to purchase such Instruments, LabChips and other
Screening Products for so long as Caliper continues to offer
such items for sale to third parties. Caliper will notify Lilly
in writing at least [ * ] before ceasing production of any
Screening Product which Lilly has purchased in the [ * ] period
before production is due to cease.
7.6 OPTION TO SUSPEND PARTICIPATION. Notwithstanding any other
provision of this Agreement, Lilly shall be entitled, in its
sole discretion, to suspend its participation in the TAP during
the [ * ] Contract Year of the Term (a "Suspension") by giving
written notice to Caliper of its election to do so no later than
[ * ] to which the suspension applies (the "Suspension Year"). A
Suspension shall not constitute a termination of this Agreement
or an interruption of the Term, and, except as expressly
provided in this Section 7.6, all of the terms and provisions of
this Agreement shall continue to apply during the period from
the first day of the Suspension Year until Lilly exercises its
Reinstatement Election or such Suspension Year ends, whichever
comes first (the "Suspension Period"). Lilly shall be permitted
a maximum of [ * ] Suspension.
7.6.1. ANNUAL SUBSCRIPTION FEE. Lilly shall not be required to
pay an Annual Subscription Fee for the Suspension Year
unless and until Lilly exercises its Reinstatement
Election.
7.6.2. STATUS OF LICENSE DURING SUSPENSION PERIOD. During the
Suspension Period, the License shall continue in effect
as to all Screening Products offered for sale by Caliper
in prior Contract Years but shall not extend to
Screening Products first offered for sale by Caliper
during the Suspension Year unless and until Lilly
exercises its Reinstatement Election. Caliper shall
disclose to Lilly during the Suspension Year all new
Screening Products offered by Caliper during such year.
Such disclosure shall be made to Lilly at the same time
it is made to other Participants and shall include the
same information provided to the other Participants with
respect to such Screening Products.
7.6.3. STATUS OF LILLY SUPPORT DURING SUSPENSION PERIOD. During
the Suspension Period, Caliper shall not be obligated to
provide to Lilly assistance and support as contemplated
by Section 2.3.
7.6.4. REINSTATEMENT ELECTION. If Lilly shall have initiated a
Suspension, it shall be entitled, in its sole
discretion, to elect to reinstate its participation in
the TAP by giving written notice to Caliper of such
election (a "Reinstatement Election") no later than
[ * ]. If Lilly exercises the Reinstatement Election:
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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(a) Lilly shall pay to Caliper, concurrent with
delivery of the Reinstatement Election, [ * ]
(the "Reinstatement Payment").
(b) Upon payment of the Reinstatement Payment, the
License shall become fully-paid, irrevocable and
perpetual with respect to all Screening Products
offered for sale by Caliper in the Suspension
Year.
(c) If Lilly exercises the Reinstatement Election
during the [ * ] Contract Year, the Term
automatically shall be extended by [ * ] on the
same terms applicable to the [ * ] Contract
Years, subject to earlier termination as
provided for in this Section 7.
(d) If Lilly exercises the Reinstatement Election,
Caliper shall resume providing to Lilly
assistance and support as contemplated by
Section 2.3 effective as of the date of the
Reinstatement Election; provided, however, that
Lilly recognizes that Caliper may require a
reasonable period of time, not to exceed [ * ]
days, to reassign FTEs to work on Lilly
assistance and support activities pursuant to
this Agreement. Caliper agrees to use
commercially reasonable efforts to minimize this
period of time.
If Lilly does not exercise the Reinstatement Election,
then the Term shall expire as of the last day of the
Suspension Year.
8. REPRESENTATIONS AND WARRANTIES
8.1 MUTUAL REPRESENTATIONS. Each of the parties represents and
warrants to the other as follows:
8.1.1. DUE ORGANIZATION, GOOD STANDING AND POWER. It is a
corporation duly organized, validly existing and, if
relevant in its jurisdiction of incorporation, in good
standing under the laws of its jurisdiction of
incorporation, and has the power and authority to own,
lease and operate its assets and to conduct the business
now being conducted by it. It has all requisite power
and authority to enter into this Agreement and to
perform its obligations hereunder.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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8.1.2. AUTHORIZATION AND VALIDITY OF AGREEMENT. The execution,
delivery and performance by it of this Agreement, and
the consummation by it of the transactions contemplated
hereby, have been duly authorized and approved by all
necessary corporate action on its part. This Agreement
has been duly executed and delivered by it and
constitutes its legal, valid and binding obligation,
enforceable against it in accordance with its terms,
except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or
other laws relating to or affecting creditors' rights
generally and by general equity principles.
8.1.3. ABSENCE OF CONFLICTS. The execution, delivery and
performance by it of this Agreement and the consummation
by it of the transactions contemplated hereby do not and
will not (i) violate any federal, state or local laws,
ordinances, rules, regulations or requirements or any
judgments, orders, writs, rulings, decrees, awards or
similar directives of any arbitrator or any governmental
or regulatory agency or authority, (ii) conflict with,
or result in the breach of any provision of, its charter
or bylaws or (iii) violate, conflict with or result in
the breach or termination of, or otherwise give any
third party the right to terminate, or constitute a
default under the terms of, any license, permit,
contract or agreement to which it is party or by which
its properties or businesses are bound.
8.1.4. NO MISSTATEMENTS OR OMISSIONS. No representation or
warranty by it set forth herein contains any untrue
statement of a material fact, or omits to state a
material fact necessary to make the statements or facts
contained therein not misleading.
8.1.5. CONSENTS. No authorization, consent or approval of, or
notice to or filing by it with, any governmental
authority is required for the execution, delivery and
performance by it of this Agreement.
8.2 CALIPER REPRESENTATIONS. Caliper hereby represents and warrants
to Lilly that, as of the Effective Date:
8.2.1. NO PROCEEDINGS. [ * ] or (b) [ * ]. This representation
and warranty includes, without limitation, [ * ].
8.2.2. OWNERSHIP OF CALIPER TECHNOLOGY. Caliper owns all of the
Caliper Technology, free and clear of all liens or
encumbrances, subject to existing license grants. The
consummation of the transactions contemplated by this
Agreement will not result in the loss or impairment of
Caliper's rights
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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to own or use any of the Caliper Technology, nor will it
require the consent of any third party in respect of any
Caliper Technology.
8.2.3. NO CLAIM OF INFRINGEMENT. Except in connection with the
[ * ], neither Caliper nor any of its Affiliates has
received written notice from any third party regarding
any actual or potential infringement by Caliper or any
of its Affiliates of any intellectual property of such
third party.
8.2.4. NO CHALLENGE TO VALIDITY OF CALIPER TECHNOLOGY. Neither
Caliper nor any of its Affiliates has received written
notice from any third party regarding any assertion or
claim challenging the validity of any issued Caliper
Patent, except for an opposition to [ * ]. The
opposition was denied and is currently on appeal.
8.2.5. RIGHT TO GRANT LICENSES. Caliper has all requisite right
and authority to grant to Lilly the License.
9. MISCELLANEOUS
9.1 NOTICES. Any consent, notice or report required or permitted to
be given or made under this Agreement by one party to the other
party shall be in writing, delivered personally or by confirmed
facsimile, first class mail postage prepaid, courier, or
nationally-recognized delivery service, and addressed to the
other party at its address indicated below, or to such other
address as the addressee shall have last furnished in writing to
the addresser. Such consent, notice or report shall be effective
upon delivery to the addressee.
If to Caliper: Caliper Technologies Corp.
605 Fairchild Drive
Mountain View, California 94043-2234
Attention: Chief Executive Officer
If to Lilly: Eli Lilly and Company
Lilly Corporate Center
Indianapolis, Indiana 46285
Attention: General Counsel
9.2 GOVERNING LAW. The Agreement shall be governed by and construed
in accordance with the laws of the State of Indiana, without
regard to the conflicts of law principles thereof.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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9.3 ASSIGNMENT. This Agreement is personal in its character, and
neither party shall assign its rights or obligations under this
Agreement, in whole or in part, without the prior written
consent of the other party; provided, however, that either
party, without the consent of the other, may assign this
Agreement to any Affiliate of such party so long as such
Affiliate expressly agrees to be bound by the terms of this
Agreement and the assigning party continues to be obligated to
perform all of its duties and obligations hereunder. If either
party merges into another Person or sells to another Person all
or substantially all of its assets comprising the line of
business to which this Agreement relates, then such party shall
seek the consent of the other party to the assignment of this
Agreement to the successor Person. The party whose consent was
requested shall not unreasonably withhold or delay such consent
but shall be permitted to deny such consent if it concludes, in
the exercise of its reasonable business judgment, that the
proposed successor Person is not an appropriate technology
collaborator for such party for purposes of this Agreement. This
Agreement shall be binding on and inure to the benefit of the
successors or permitted assigns of the parties hereto, and all
entities controlled by them.
9.4 WAIVERS AND AMENDMENTS. No waiver shall be deemed to have been
made by any party hereto of any of its rights under this
Agreement unless such waiver is in writing and is signed on
behalf of such party by its duly authorized officer. Any such
waiver shall constitute a waiver only with respect to the
specific matter described in such writing and shall in no way
impair the rights of the waiving party in any other respect or
at any other time. No change or modification of this Agreement,
or any of the provisions herein contained, shall be valid unless
made in writing and signed by duly authorized representatives of
the parties hereto.
9.5 ENTIRE AGREEMENT. This Agreement embodies the entire
understanding between the parties, and supersedes any prior
understanding or agreement between them, with respect to the
subject matter of this Agreement.
9.6 SEVERABILITY. If a court of competent jurisdiction declares any
provision of this Agreement invalid or unenforceable, or if any
government or other agency having jurisdiction over either party
deems any provision to be contrary to any laws, then that
provision shall be severed and the remainder of this Agreement
shall continue in full force and effect. To the extent possible,
the parties shall revise such invalidated provision in a manner
that will render such provision valid without impairing the
parties' original intent.
9.7 NO WAIVER. The failure of a party in any one or more instances
to insist upon strict performance of any of the terms or
conditions of this Agreement shall not
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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constitute a waiver or relinquishment, to any extent, of the
right to assert or rely upon any such terms or conditions on any
future occasion.
9.8 DISCLAIMER OF AGENCY. The relationship between Caliper and Lilly
is that of independent contractors. Caliper and Lilly are not
joint venturers, partners, principal and agent, master and
servant, or employer and employee, and have no relationship
other than independent contracting parties. Neither party shall
have the right or authority to assume, create, or incur any
third party liability or obligation of any kind, express or
implied, against or in the name of or on behalf of the other
party except as expressly set forth in this Agreement.
9.9 NON-SOLICITATION. Neither party may actively solicit or induce
any employee of the other party to leave the employ of that
party during the Term. If either party receives an unsolicited
employment inquiry from an employee of the other party, it shall
not make any written offer of employment to such individual
without notifying the other party in writing at least five (5)
days before making such an offer.
9.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
9.11 LABELS AND HEADINGS. The labels and headings contained in this
Agreement are for the convenience of the parties only and shall
in no way affect the meaning or interpretation of this
Agreement.
9.12 THIRD-PARTY RIGHTS. This Agreement is not intended to confer any
benefit upon, or create any right in favor of, any Person other
than the parties hereto and, where expressly provided, their
Affiliates and the respective Indemnified Parties.
9.13 CONSTRUCTION OF AGREEMENT. This Agreement was prepared as a
result of negotiation and mutual agreement between the parties.
Accordingly, no provision of this Agreement shall be construed
against any party on the basis that such party drafted this
Agreement or such provision.
9.14 FURTHER ASSURANCES. The parties covenant and agree that,
subsequent to the execution and delivery of this Agreement, and
without any additional consideration therefor, each party shall
execute and deliver any further legal instruments and perform
any further acts that are or may become necessary to effectuate
the purposes of this Agreement.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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IN WITNESS WHEREOF, the parties have executed the Agreement as of the
date first set forth above.
CALIPER TECHNOLOGIES CORP. ELI LILLY AND COMPANY
By: /s/ Calvin Chow By: /s/ August Watanabe
----------------------------- ------------------------------
Name: Calvin Chow Name: August M. Watanabe M.D.
--------------------------- ----------------------------
Title: Chief Operating Officer Title: Executive Vice President
-------------------------- ---------------------------
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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EXHIBIT A
WORK PLAN FOR YEAR ONE
[ * ]
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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EXHIBIT B-1
SCREENING PRODUCTS OFFERED
AS OF THE EFFECTIVE DATE
[ * ]
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
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EXHIBIT B-2
SCREENING PRODUCTS IN DEVELOPMENT
FOR CONTRACT YEAR ONE
[ * ]
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
EXHIBIT 10.14
SCREENING COLLABORATION AGREEMENT
THIS AGREEMENT ("AGREEMENT") is entered into as of the 16th day of
December, 1998 ("EFFECTIVE DATE") by and between CALIPER TECHNOLOGIES CORP., a
Delaware corporation ("CALIPER"), and NEUROCRINE BIOSCIENCES, INC.
("NEUROCRINE"), a Delaware corporation.
RECITALS
WHEREAS, Caliper has developed proprietary microfluidics technology
which has application in high throughput screening activities; and
WHEREAS, Neurocrine has and will continue to identify targets against
which it plans to screen chemical compounds, which screening activities would
benefit from Caliper's high throughput screening systems; and
WHEREAS, Neurocrine and Caliper possess and/or will acquire libraries of
compounds which may have potential therapeutic pharmaceutical utility for such
targets; and
WHEREAS, Caliper and Neurocrine desire to establish a relationship
whereby Caliper and Neurocrine will develop assays for such targets in Caliper's
LabChip format, and Caliper will screen compound libraries in such assays; and
WHEREAS, Neurocrine intends to develop and commercialize compounds
directed against targets screened in this program, [ * ];
NOW, THEREFORE, in consideration of the foregoing and the covenants and
promises contained herein, the parties agree as follows:
ARTICLE 1
DEFINITIONS
As used herein, the following terms shall have the following meanings:
1.1 "AFFILIATE" shall mean (i) any corporation or other entity which
directly or indirectly owns or controls at least fifty percent (50%) of the
outstanding voting securities of a party (a "Parent"), (ii) any corporation or
other entity in which a party owns or controls at least fifty percent (50%)
equity interest, and (iii) any corporation or other entity in which a Parent of
a party owns or controls at least fifty percent (50%) equity interest.
<PAGE> 2
1.2 "CALIPER COMPOUNDS" shall mean those compounds which Caliper owns or
possesses and has the right to make available to Neurocrine for screening as of
the Effective Date or during the Screening Term. For purposes of this Agreement,
Caliper Compounds shall not include the Neurocrine Compounds transferred to
Caliper pursuant to Sections 2.5(a) and 3.4.
1.3 "CALIPER KNOW-HOW" shall mean all discoveries, materials,
techniques, procedures, data and other technical information which Caliper
possesses and treats as confidential as of the Effective Date or during the
Screening Term, excluding Screening Data. Caliper Know-How does not include
Caliper Patents.
1.4 "CALIPER PATENTS" shall mean any and all patents, including, without
limitation, any substitutions, extensions, reissues, renewals, supplementary
protection certificates and inventors' certificates, which have not been held
invalid or unenforceable by a non-appealable or non-appealed decision of a court
of competent jurisdiction, issuing from patent applications filed in any
jurisdiction, including, without limitation, any provisionals, divisionals,
continuations, and continuations-in-part, which Caliper owns or has a license to
(with the right to sublicense to Neurocrine) as of the Effective Data or during
the Screening Program.
1.5 "CALIPER ROYALTY COMPOUND" shall mean a Royalty Compound which is
derived from, a Caliper Compound screened under this Agreement.
1.6 "CALIPER TECHNOLOGY" shall mean, collectively, the Caliper Patents,
the Caliper Know-How, and the Caliper Compounds.
1.7 "CONFIDENTIAL INFORMATION" shall mean all information provided by
one party to the other during the Screening Term, including, without limitation,
Neurocrine Know-How, Caliper Know-How, Screening Data, research plans,
engineering designs and drawings, research data, manufacturing processes and
techniques, scientific, manufacturing, marketing, and business plans, financial
or personnel matters relating to the party, its present or future products,
sales, suppliers, customers, employees, investors or business.
1.8 "DATA POINT" shall mean the experimental measurement reported to
Neurocrine from a high throughput LabChip Assay of a single discrete volume of
liquid (e.g., from a single well on a microtiter plate) containing a single
Neurocrine Compound, Neurocrine Limited Compound or Caliper Compound or a "pool"
of such compounds.
1.9 "FDA" shall mean the United States Food and Drug Administration.
1.10 "GLP TOXICOLOGY STUDIES" shall mean preclinical toxicology studies
carried out in accordance with Good Laboratory Practices described in the U.S.
Federal Register dated December 22, 1988, as amended, which are intended to
enable the filing of an IND.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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1.11 "IND" stands for "Investigational New Drug Application" and shall
mean an application for permission from the FDA, or comparable non-U.S.
regulatory authorities, to commence human clinical testing of a new drug.
1.12 "INSTRUMENT" shall mean an instrument designed to actuate fluid
manipulations on LabChips and to detect the results of such manipulations. An
Instrument may also perform other functions, such as introducing samples into
LabChips.
1.13 "LABCHIP" shall mean a Caliper chip, which typically consists of a
glass or polymer base with microchannels, bonded to a cover with reservoirs, and
which may have an attached pipettor capillary.
1.14 "LABCHIP ASSAY" shall mean a particular combination of a LabChip, a
set of reagents and software, all designed for use on one or more types of
Instruments to perform a high throughput screening assay for a particular
Target.
1.15 "LABCHIP IMPROVEMENT INVENTIONS" shall mean [ * ] by an employee or
contractor of Neurocrine, solely or jointly with others, in the course of the
Screening Program during the term of this Agreement and that specifically relate
to improvements to the Screening Technology or to chip-based microfluidic
systems, [ * ]. LabChip Improvement Inventions specifically shall not include
Screening Data or potential pharmaceutical compounds identified as hits in the
Screening Program.
1.16 "NET SALES" shall mean, with respect to a Product, and on a
country-by-country basis, the gross invoice price of all Products sold by
Neurocrine, its Affiliates, and sublicensees to independent third party
customers after deducting, if not already deducted in the amount invoiced (a)
trade, quantity and cash discounts actually taken, (b) returns and rebates, (c)
duties, sales and excise taxes and (d) transportation and insurance costs
charged to the customer. Product transfers among Neurocrine and its Affiliates
or sublicensees shall not be deemed sales; the sale shall be deemed to take
place upon transfer to a bona fide customer. Products shall be considered sold
when invoiced.
1.17 "NEUROCRINE COMPOUNDS" shall mean those compounds which Neurocrine
owns or possesses and has the right to use in the Screening Program as of the
Effective Date.
1.18 "NEUROCRINE KNOW-HOW" shall mean all discoveries, materials,
techniques, procedures, data and other technical information which Neurocrine
possesses and treats as confidential as of the Effective Date or during the
Screening Term, excluding Screening Data. Neurocrine Know-How does not include
Neurocrine Patents.
1.19 "NEUROCRINE LIMITED COMPOUND" shall mean any compound which
Neurocrine acquires after the Effective Date and which Neurocrine elects to
provide to Caliper to enter into the Screening Program.
1.20 "NEUROCRINE PATENTS" shall mean any and all patents, including,
without limitation, any substitutions, extensions, reissues, renewals,
supplementary protection certificates
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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and inventors' certificates, which have not been held invalid or unenforceable
by a non-appealable or non-appealed decision of a court of competent
jurisdiction, issuing from patent applications filed in any jurisdiction,
including, without limitation, any provisionals, divisionals, continuations, and
continuations-in-part, which Neurocrine owns or has a license to (with the right
to sublicense to Caliper) as of the Effective Date or during the Screening Term.
1.21 "NEUROCRINE ROYALTY COMPOUND" shall mean a Royalty Compound which
is, or is derived from, a Neurocrine Compound or Neurocrine Limited Compound
screened under this Agreement.
1.22 "NEUROCRINE TECHNOLOGY" shall mean, collectively, the Neurocrine
Patents, the Neurocrine Know-How, the Neurocrine Compounds and the Neurocrine
Limited Compounds.
1.23 "PRODUCT" shall mean any product, including all formulations, line
extensions or modes of administration thereof, which contains a Royalty Compound
as an active ingredient.
1.24 "ROYALTY COMPOUND" shall mean a compound that is selected for
[ * ], which compound either is, or is derived from, a Caliper Compound,
Neurocrine Compound or Neurocrine Limited Compound for which Screening Data was
provided and [ * ]. For purposes of this definition, "derivatives" of a Caliper
Compound, Neurocrine Compound or Neurocrine Limited Compound will include direct
derivatives and all subsequent derivatives of derivatives.
1.25 "SCREENING COMMITTEE" shall mean that committee formed pursuant to
Section 2.2 hereof.
1.26 "SCREENING DATA" shall mean all Data Points delivered to Neurocrine
pursuant to instructions from the Screening Committee, as described in Section
2.6(b).
1.27 "SCREENING PROGRAM" shall mean the collaborative LabChip Assay
development and high throughput screening program described in Article 2.
1.28 "SCREENING TECHNOLOGY" shall mean the Instruments, LabChips,
reagents and software, and associated Caliper Patents and Caliper Know-how,
utilized by Caliper for high throughput screening activities under this
Agreement, excluding Caliper Compounds.
1.29 "SCREENING TERM" shall mean the period of three (3) years
commencing on the Effective Date, unless modified by mutual agreement of the
parties.
1.30 "TARGETS" shall mean the pharmaceutically relevant molecules,
complexes or cell lines nominated by Neurocrine for LabChip Assay development
and screening in accordance with Section 2.3, such as enzymes, binding proteins,
receptors, transporters, or ion channels.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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ARTICLE 2
SCREENING PROGRAM
2.1 CONDUCT OF THE SCREENING PROGRAM. Caliper and Neurocrine will
conduct the Screening Program under the direction of the Screening Committee.
2.2 SCREENING COMMITTEE.
(a) The Screening Committee shall consist of an equal number of
not less than two members from each of Neurocrine and Caliper, appointed and
substituted by each party as necessary from time to time. All decisions of the
Screening Committee shall be unanimous.
(b) The Screening Committee shall meet at such times as shall be
mutually agreed upon by the parties and at a site alternating between Caliper's
and Neurocrine's place of business, or as otherwise mutually agreed. Neurocrine
and Caliper shall each bear the travelling expenses and accommodation charges of
its own members attending meetings of the Screening Committee.
(c) The Screening Committee shall coordinate the activities
carried out under the Screening Program and monitor the progress of the
Screening Program. The Screening Committee shall conduct the Screening Program
as necessary to achieve the overall goals of developing LabChip Assays for the
Targets, screening the LabChip Assays, and discovering Royalty Compounds.
2.3 NOMINATION OF TARGETS.
(a) Neurocrine shall nominate Targets for LabChip Assay
development. The Screening Committee will determine whether the Target and
proposed assay conditions are appropriate for LabChip Assay development. The
Screening Committee will also prioritize Targets for LabChip Assay development
and screening. In the event that development work upon any molecule, complex, or
cell line nominated as a Target pursuant to this Section 2.3(a) is abandoned by
Neurocrine, or LabChip development or screening efforts are discontinued by the
Screening Committee, such molecule, complex, or cell line shall no longer
constitute a Target.
(b) Neurocrine agrees to provide [ * ] Targets for screening
under this Agreement during the Screening Term; provided that [ * ] for LabChip
Assay development and screening.
(c) Caliper shall not be responsible for conducting due diligence
regarding third party intellectual property rights applicable to the Targets.
[ * ]. If Neurocrine is aware of any published or issued third party patent
which it believes applies to
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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such Target, it shall notify Caliper in writing referencing such patent(s)
before LabChip Assay development commences for such Target.
2.4 ASSAY DEVELOPMENT.
(a) The Screening Committee will allocate responsibilities
between the parties for specific assay development tasks. In general, Neurocrine
will develop the appropriate biochemical and/or cellular reagents for the assay
and provide necessary quantities to Caliper for LabChip Assay development and
screening. Initially, Caliper will direct work to adapt the assay into the
LabChip format. Over time, the parties expect that Neurocrine will assume an
increasing role in LabChip Assay development. The parties will arrange for
Neurocrine scientists to train in LabChip Assay development at Caliper and/or
for certain LabChip Assay development tools to be provided to Neurocrine. The
Screening Committee will determine, or establish criteria for others to
determine, when a LabChip Assay is ready for screening on Caliper's high
throughput system.
(b) Caliper and Neurocrine shall each use commercially reasonable
efforts to collaboratively develop LabChip Assays for the Targets selected by
the Screening Committee. The parties intend to [ * ]. Therefore, the parties
have [ * ]. The parties may mutually agree to pursue such research for certain
Targets, but Caliper shall not be required under this Agreement to [ * ].
2.5 COMPOUND LIBRARIES.
(a) Neurocrine shall provide its chemical library of Neurocrine
Compounds to Caliper promptly following the Effective Date. The timing and
details will be mutually agreed, but the library will consist of approximately
[ * ] discrete compounds plated in 96 well master plates of [ * ]. Each plate
will contain [ * ] of compound at a concentration of [ * ] in 100% DMSO. SDF
files will be provided containing structural information and plate mapping.
Neurocrine agrees to provide to Caliper all data in Neurocrine's possession
concerning the library of Neurocrine Compounds including (a) the criteria
utilized by Neurocrine in selecting compounds, (b) commercial or academic
sources of compounds, and (c) chemical structures of all compounds (and records
of tests performed to determine the chemical structures). Caliper will have
rights to use the library of Neurocrine Compounds as further provided in Section
3.4. If Neurocrine modifies its library after this initial transfer, it may
elect at its sole option to update the collection held at Caliper for use in
screening Neurocrine's Targets pursuant to Section 2.5(b).
(b) Neurocrine may at any time during the Screening Term in its
sole discretion elect to provide Neurocrine Limited Compounds to Caliper for use
in the Screening Program, in reasonable quantities and format to be mutually
agreed. Neurocrine Limited Compounds shall only be used by Caliper within the
Screening Program hereunder unless agreed in writing in advance by the parties.
(c) Neurocrine will determine which compounds it elects to have
screened in each LabChip Assay. However, if Caliper has previously screened
certain Caliper Compounds
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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against the Target of such LabChip Assay on behalf of a third party, then
Caliper may [ * ], provided that Caliper shall not [ * ]. Otherwise, Caliper
will provide available information concerning the structures represented in the
Caliper Compound library to facilitate Neurocrine's determination of whether or
not to screen Caliper Compounds. If Caliper elects to screen Caliper Compounds,
the parties may mutually agree on terms on which such data may be provided to
Neurocrine, provided that if either Neurocrine of Caliper elects to have Caliper
Compounds screened against a Target, then Neurocrine shall have the right of
first refusal to purchase such Screening Data. If Neurocrine declines to
purchase such Screening Data, Caliper shall not thereafter [ * ] unless Caliper
provides Neurocrine with [ * ] days written notice of such intent [ * ]. Caliper
shall not utilize any Neurocrine Know-How or data that is subject to non-use
obligations under Section 6.2 or data developed in the Screening Program that is
specific to such Target in [ * ] on behalf of a third party [ * ]. Caliper shall
not disclose any data generated for Neurocrine Targets against Caliper Compounds
to any third party except as may be permitted under Section 3.3. Neurocrine
acknowledges that [ * ].
(d) During the term of this Agreement, the parties may agree to
acquire new libraries of compounds to screen hereunder and to split the compound
supplies and share the cost of acquiring such compounds. Such compounds acquired
by both parties would be deemed to be Neurocrine Compounds for purposes of the
payment provisions of this Agreement.
2.6 SCREENING.
(a) Caliper shall use commercially reasonable efforts to
establish internal screening operations using its Screening Technology as soon
as practicable. As of the Effective Date, [ * ].
(b) All screening will be conducted at Caliper's facility, unless
the parties mutually agree otherwise as discussed in subparagraph (d) below.
Neurocrine will provide the necessary reagents, and Caliper will run the high
throughput screens, according to protocols established by the Screening
Committee. The Screening Committee will determine how the Screening Data will be
processed and presented, along with relevant reaction parameters such as
temperature, currents, concentrations and data for reference or control
compounds. The Screening Committee will also establish any procedures necessary
to validate the Screening Data prior to commencement of actual screening.
Screening Data will be conveyed to Neurocrine and also retained by Caliper, all
in accordance with the rights described in Article 3 below and the payment
provisions of Article 4. Caliper will provide all available information
concerning hit compounds, such as [ * ]. Caliper will not be required to provide
[ * ].
(c) The parties may mutually agree to perform other experiments
in addition to high throughput primary screening, such as [ * ]. Financial and
other business terms for such activities will be negotiated in good faith in
writing in advance and are not included in this Agreement.
(d) Caliper acknowledges that Neurocrine has expressed an
interest in having Caliper transfer screening Instruments to Neurocrine. [ * ].
Caliper will use commercially reasonable efforts to [ * ]. The parties will
confer from time to time regarding the [ * ]. [ * ],
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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Caliper agrees to [ * ]. In any event, Caliper will retain the exclusive right
to supply LabChips for use on all screening systems that practice Caliper
Technology.
2.7 NON-EXCLUSIVE COLLABORATION. The Screening Program is a mutually
non-exclusive collaboration. Neurocrine and Caliper are each free to work with
any other company in any area, provided that the Screening Data is used by each
company in accordance with Article 3 below and each party complies with the
other terms of this Agreement, including but not limited to Section 2.5(c).
Neurocrine acknowledges that Caliper may use, or allow third parties to use, the
Screening Technology and Caliper Compounds, to (i) pursue development of drugs
that may compete with drugs Neurocrine is developing, or (ii) develop assays and
screen the same and similar targets as those pursued by Neurocrine, in each case
subject to Section 2.5(c) (Compound Libraries), Article 6 (Confidentiality) and
the other terms of this Agreement. Caliper acknowledges that Neurocrine may
elect to screen certain targets in its own facility rather than in the Screening
Program, and that Neurocrine may collaborate with third parties for screening,
again subject to Article 6 (Confidentiality) and the other terms of this
Agreement.
ARTICLE 3
INTELLECTUAL PROPERTY; SCREENING DATA
3.1 INTELLECTUAL PROPERTY.
(a) Except as expressly provided elsewhere in this Agreement, all
patent applications and issued patents claiming inventions made in the course of
the Screening Program shall be owned by the inventing party, or jointly if
invented jointly. Inventorship shall be determined under U.S patent laws.
(b) Except as expressly provided elsewhere in this Agreement, all
non-patented know-how, including but not limited to discoveries, materials,
techniques, procedures, data and other technical information, that is created in
the course of the Screening Program shall be owned by (for physical materials)
or deemed Confidential Information of (for information) the party that generated
such know-how.
(c) Neurocrine shall retain all of its rights in Neurocrine
Technology and Caliper shall have no rights in any Neurocrine Technology except
the rights expressly granted in this Agreement. Caliper shall retain all of its
rights in Caliper Technology and Neurocrine shall have no rights in any Caliper
Technology except the rights expressly granted in this Agreement.
3.2 NEUROCRINE DRUG DISCOVERY RIGHTS.
(a) Neurocrine shall have the exclusive (even as to Caliper),
worldwide right to use the Screening Data delivered to Neurocrine for each
LabChip Assay to discover, develop and commercialize Products directed against
the Target of such LabChip Assay, subject to the terms of this Agreement.
Neurocrine may assign or sublicense any or all such rights to third parties,
provided all assignees and sublicensees agree in writing to be bound by the
terms of this Agreement as they apply to the transferred rights. Neurocrine will
notify Caliper of any transaction involving such rights within thirty (30) days
of such transaction. If the use of
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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Screening Data to discover, develop or commercialize a Product would require the
practice of a Caliper Patent claiming the Target or compounds screened, Caliper
agrees to grant to Neurocrine a [ * ] license under such Caliper Patent for such
use, [ * ]. If Neurocrine wishes to receive [ * ] to any Caliper Patent, or to
have Caliper [ * ], then such matters shall be the subject of good faith
negotiations regarding a separate agreement.
(b) In addition to the exclusive rights described above,
Neurocrine shall also have the non-exclusive, worldwide right to use the
Screening Data in drug discovery efforts directed against all Targets and
pharmaceutical targets other than the Targets screened in the Screening Program.
Neurocrine may sublicense such rights along with other rights to Neurocrine
Technology in connection with agreements to develop or commercialize
Neurocrine's drug products, but may not otherwise assign, sublicense or transfer
such rights.
3.3 CALIPER USE OF SCREENING DATA. Neurocrine grants to Caliper the
exclusive (but for Neurocrine, per Section 3.2) worldwide right to use the data
generated for each LabChip Assay pursuant to this Agreement in drug discovery
efforts directed against pharmaceutical targets other than the Target of such
LabChip Assay, including [ * ], provided that such grant shall not be effective
unless and until [ * ] of this Agreement. The parties recognize that Caliper's
use or disclosure of the Screening Data could [ * ], and Caliper acknowledges
that Neurocrine may [ * ], and in no event shall Neurocrine be required to
[ * ]. Accordingly, the parties shall negotiate in good faith in an effort to
[ * ]. If the parties cannot agree on [ * ], (i) Caliper may elect to [ * ], or
(ii) either party may elect to terminate this Agreement under Section 7.4.
3.4 NEUROCRINE COMPOUNDS. Caliper shall be free to use the Neurocrine
Compounds to be shipped to Caliper pursuant to Section 2.5(a) [ * ]; provided,
however, that the restrictions set forth in Section 2.5(c) with respect to
screening Caliper Compounds against third party targets shall also apply to the
Neurocrine Compounds. In no event may Neurocrine Compounds [ * ] as defined in
Section 2.5(c). Neurocrine represents and warrants to Caliper as of the
Effective Date that (i) it is the sole owner of all of the Neurocrine Compounds
samples provided to Caliper, (ii) Neurocrine has not entered into any agreement
in which a third party retains rights or any economic interest pertaining to any
such compounds, and (iii) there are no Neurocrine Patents or, to Neurocrine's
knowledge without having conducted any investigations, any third party
intellectual property rights, that would be infringed by Caliper's use of the
compounds as described above. No interest in any Neurocrine Patent Rights is
conveyed to Caliper under this Section 3.4.
3.5 LABCHIP IMPROVEMENT INVENTIONS. Neurocrine hereby assigns to Caliper
all right, title and interest in all LabChip Improvement Inventions. If
requested by Caliper, Neurocrine agrees to cooperate in patenting activities for
LabChip Improvement Inventions and to execute any documents necessary to effect
such assignment, at Caliper's expense. Neurocrine also agrees to notify Caliper
of any significant non-patentable improvements Neurocrine may make to the
Screening Technology or to chip-based microfluidic systems during the term of
this
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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Agreement, and agrees that Caliper may use such developments in its business
without restriction and transfer or sublicense such knowledge in connection with
the development or commercialization of Caliper's technologies and products.
Caliper hereby grants to Neurocrine a royalty-free, non-exclusive, license to
use LabChip Improvement Inventions for Neurocrine's drug discovery and
development programs, including the right to sublicense such rights in
connection with such programs. This license shall not be construed as conferring
on Neurocrine any license to any other Caliper Patents or Screening Technology.
ARTICLE 4
FINANCIAL TERMS
4.1 SCREENING FEES. Neurocrine shall pay to Caliper the following
amounts within thirty (30) days of receiving an invoice from Caliper, which will
be delivered concurrent with delivery of the Screening Data:
[ * ]/Data Point for the [ * ] LabChip Assays or [ * ], whichever comes
first.
[ * ]/Data Point for each LabChip Assay or Data Point thereafter up to a
total of [ * ] LabChip Assays (including the [ * ] LabChip Assays).
If the parties agree to develop and screen more than [ * ] LabChip
Assays, they will mutually agree on screening fees, milestones, royalties and/or
other financial terms for such work.
4.2 DEVELOPMENT MILESTONES.
(a) Neurocrine shall pay to Caliper the following amounts for
each Royalty Compound within thirty (30) days of the achievement of the
following milestone events by Neurocrine, its Affiliate, sublicensee or other
transferee of rights to a Royalty Compound:
<TABLE>
<CAPTION>
Milestone Event Amount
--------------- ------
Neurocrine Caliper
Royalty Compound Royalty Compound
---------------- ----------------
<S> <C> <C>
[ * ] [ * ] [ * ]
[ * ] [ * ] [ * ]
</TABLE>
(b) If Neurocrine develops a Neurocrine Royalty Compound that
acts on a Target [ * ] for such Neurocrine Royalty Compound.
(c) Neurocrine shall keep Caliper informed regarding the status
of development efforts directed at each Target screened in a LabChip Assay by
means of semi-
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE> 11
annual written reports due January 30 and July 30 each year. Such reports will
continue so long as compounds against any such Targets are being developed.
4.3 ROYALTIES. Neurocrine shall pay to Caliper a royalty on all Net
Sales of Products by Neurocrine, its Affiliates, sublicensees, or other
transferees of rights to a Product as follows, [ * ]:
<TABLE>
<CAPTION>
PRODUCT ROYALTY RATE
<S> <C>
Products containing a Caliper Royalty Compound [ * ]
Products containing a Neurocrine Royalty Compound (and no
Caliper Royalty Compound) [ * ]
</TABLE>
4.4 ROYALTY PAYMENTS.
(a) Neurocrine will notify Caliper in writing when regulatory
filings are made and when approvals are received to market a Product in each
country, in addition to the semi-annual reports described in Section 4.2(b).
Each payment of royalties shall be accompanied by a statement detailing the
calculation of the amount of royalties due in such period.
(b) Royalty payments and reports for the sale of Products shall
be made for each three month period ending on the last day of March, June,
September and December and shall be due within forty-five (45) days of the end
of each such month. For the purpose of calculating royalties on Net Sales
generated in currencies other than U.S. dollars, such Net Sales shall be
converted into U.S. dollars at the rate of exchange on the last business day of
the relevant royalty period, established by the Wall Street Journal. All royalty
payments owed under this Agreement shall be made by means of wire transfer to
Caliper's account in a bank in the United States to be designated by Caliper.
(c) If Caliper does not receive payment of any sum on the date it
is due, simple interest shall thereafter accrue on the sum due to Caliper until
the date of payment at the per annum rate of three percent (3%) over the then
current prime rate of Citibank in New York City, which rate shall vary
concurrently with any change in the prime rate.
(d) Any withholding tax levied at source relating to the
royalties payable to Caliper under Section 4.3 shall be borne by Caliper.
Neurocrine shall reasonably assist Caliper in obtaining a tax credit under the
applicable taxation treaties and laws, including by providing appropriate
evidence of Caliper's payment of the withholding tax.
4.5 RECORDS AND AUDIT.
(a) During the term of this Agreement and for a period of three
(3) years thereafter, Neurocrine shall keep complete and accurate records
pertaining to the achievement of milestones and the sale or other disposition of
the Products commercialized by it, in sufficient
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE> 12
detail to permit Caliper to confirm the accuracy of all payments due hereunder.
In the event Neurocrine grants sublicenses to others to use or sell Products,
Neurocrine shall require the sublicensee and any subsequent sublicensees to
retain records and account for and report achievement of milestones and Net
Sales of Products on the same basis as if such sales were Net Sales of Products
by Neurocrine, and Neurocrine shall pay royalties to Caliper as if such sales
were Net Sales of Products by Neurocrine
(b) Caliper shall have the right to cause an independent,
certified public accountant to audit all records reasonably necessary to confirm
Neurocrine's Net Sales and royalty payments; provided, however, that such
auditor shall not disclose Neurocrine's confidential information to Caliper,
except to the extent such disclosure is necessary to verify the amount of
royalties due under this Agreement.
(c) Such audits may be exercised once a year, within three (3)
years after the royalty period to which such records relate, upon notice to
Neurocrine and during normal business hours.
(d) Caliper shall bear the full cost of such audit unless such
audit discloses an understatement of more than five percent (5%) from the amount
of the Net Sales or royalties previously paid during any payment period. In such
case, Neurocrine shall bear the full cost of such audit and pay the difference
with interest as provided in Section 4.4(c). If such audit discloses an
overpayment of royalties by Neurocrine, such overpayment shall be refunded to
Neurocrine.
ARTICLE 5
DISCLAIMERS; INDEMNIFICATION
5.1 CALIPER DISCLAIMER. THE CALIPER TECHNOLOGY, INCLUDING THE CALIPER
COMPOUNDS, PROVIDED HEREUNDER, IS PROVIDED "AS IS" AND CALIPER EXPRESSLY
DISCLAIMS ANY AND ALL WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING
WITHOUT LIMITATION THE WARRANTIES OF DESIGN, MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, NONINFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF THIRD
PARTIES OR ARISING FROM A COURSE OF DEALING, USAGE OR TRADE PRACTICES, IN ALL
CASES WITH RESPECT THERETO. Without limiting the generality of the foregoing,
Caliper expressly does not warrant (i) the success of any study or test
commenced pursuant to the Screening Program, or (ii) the safety or usefulness
for any purpose of Caliper Technology.
5.2 NEUROCRINE DISCLAIMER. THE NEUROCRINE TECHNOLOGY, INCLUDING THE
NEUROCRINE COMPOUNDS AND TARGETS, PROVIDED HEREUNDER ARE PROVIDED "AS IS" AND
NEUROCRINE EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES OF ANY KIND, EXPRESS OR
IMPLIED, INCLUDING WITHOUT LIMITATION THE WARRANTIES OF DESIGN, MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT OF THE INTELLECTUAL PROPERTY
RIGHTS OF THIRD PARTIES OR ARISING FROM A COURSE OF DEALING, USAGE OR
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE> 13
TRADE PRACTICES, IN ALL CASES WITH RESPECT THERETO, EXCEPT AS EXPRESSLY PROVIDED
IN SECTIONS 2.3(c) OR 3.4. Without limiting the generality of the foregoing,
Neurocrine expressly does not warrant the safety or usefulness for any purpose
of the Neurocrine Technology or any Target or any compound developed as a result
of the Screening Program.
5.3 INDEMNIFICATION.
(a) INDEMNIFICATION BY NEUROCRINE.
(i) Neurocrine shall defend, indemnify and hold harmless
Caliper, its Affiliates and sublicensees, and all their officers, directors,
employees and agents from any costs and expenses (including court and
arbitration costs, witness fees and reasonable attorneys' fees), non-appealed or
non-appealable judicial or arbitration damage awards, and settlement payments
agreed with third party claimants payable or owed by Caliper in connection with
any demand, law suits or other legal actions by third parties arising from the
possession, development, manufacture, use, sale or administration of Targets,
compounds, Royalty Compounds or Products by Neurocrine or Neurocrine's
Affiliates or sublicensees.
(ii) In order to maintain the right to be defended,
indemnified and held harmless by Neurocrine, Caliper will:
(iii) notify Neurocrine promptly after learning of a
third party claim;
(iv) allow Neurocrine to manage and control (by way of
intervention or otherwise) the defense and settlement of any such third party
claim against the Caliper, with input from Caliper; and
(v) cooperate with Neurocrine in the defense or the
settlement negotiations of third party claims as reasonable required by
Neurocrine.
(vi) Neurocrine shall not take any position in the
dispute, or agree to any settlement, that adversely affects Caliper's rights or
interest without Caliper's prior written approval (which approval shall not be
unreasonably withheld).
(vii) Neurocrine shall have no obligation to indemnify
Caliper to the extent that a third party claim results from the negligence or
willful misconduct of Caliper.
(b) INDEMNIFICATION BY CALIPER.
(i) Caliper shall defend, indemnify and hold harmless
Neurocrine, its Affiliates and sublicensees, and all their officers, directors,
employees and agents from any costs and expenses (including court and
arbitration costs, witness fees and reasonable attorneys' fees), non-appealed or
non-appealable judicial or arbitration damage awards, and settlement payments
agreed with third party claimants payable or owed by Neurocrine in connection
with any demand, law suits or other legal actions by third parties arising from
Caliper's [ * ].
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE> 14
(ii) In order to maintain the right to be defended,
indemnified and held harmless by Caliper, Neurocrine will:
(iii) notify Caliper promptly after learning of a third
party claim;
(iv) allow Caliper to manage and control (by way of
intervention or otherwise) the defense and settlement of any such third party
claim against the Neurocrine, with input from Neurocrine; and
(v) cooperate with Caliper in the defense or the
settlement negotiations of third party claims as reasonable required by Caliper.
(vi) Caliper shall not take any position in the dispute,
or agree to any settlement, that adversely affects Neurocrine's rights or
interest without Neurocrine's prior written approval (which approval shall not
be unreasonably withheld).
(vii) Caliper shall have no obligation to indemnify
Neurocrine to the extent that a third party claim results from the negligence or
willful misconduct of Neurocrine.
ARTICLE 6
CONFIDENTIALITY
6.1 DISCLOSURE OF CONFIDENTIAL INFORMATION. Confidential Information
disclosed by one party to the other pursuant to and during the term of this
Agreement shall be subject to the confidentiality obligations set forth below:
(a) if disclosed in writing and marked "confidential" or
"proprietary" by the disclosing party prior to or at the time of the disclosure
thereof; or
(b) if within 30 days after disclosure of Confidential
Information, the disclosing party informs the receiving party in writing of the
confidential nature of the disclosed information, describing such information
and referencing the place and date of the oral, visual or written disclosure and
the names of the employees or officers of the receiving party to whom such
disclosure was made.
6.2 CONFIDENTIALITY AND NON-USE. Except to the extent expressly
authorized by this Agreement or unless otherwise agreed in writing by the
parties, each party agrees that, during the Screening Term and for five (5)
years thereafter, it shall keep confidential and shall not publish or otherwise
disclose and shall not use for any purpose other than as provided for in this
Agreement any Confidential Information received from the other party, unless the
receiving party can demonstrate by competent proof that such Confidential
Information:
(a) was already known to the receiving party, other than under an
obligation of confidentiality, at the time of disclosure by the other party;
(b) was generally available to the public or otherwise part of
the public domain at the time of its disclosure to the receiving party;
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE> 15
(c) became generally available to the public or otherwise part of
the public domain after its disclosure and other than through any act or
omission of the receiving party in breach of such Agreements;
(d) is obtained by the receiving party from a third party who is
lawfully in possession of such Confidential Information and is not subject to an
obligation of confidentiality or non-use owed to the disclosing party; or
(e) was independently discovered or developed by the receiving
party without the use of Confidential Information belonging to the disclosing
party.
6.3 AUTHORIZED DISCLOSURE.
(a) Each party may disclose Confidential Information received
from the other party to Affiliates, sublicensees and other commercial partners
for the purpose of exercising rights provided under this Agreement, provided
such recipients agree to be bound by similar terms of confidentiality. In
addition, each party may disclose Confidential Information of the other party to
the extent such disclosure is reasonably necessary to (i) comply with applicable
securities laws and regulations and other applicable governmental regulations,
(ii) file or prosecute patents, or (iii) prosecute or defend litigation.
Notwithstanding the foregoing, Caliper shall have no right to disclose
Confidential Information that could [ * ], and Neurocrine shall have no right to
disclose Confidential Information specific to [ * ].
(b) Notwithstanding the foregoing, in the event a party is
required to make a disclosure of the other party's Confidential Information
pursuant to subparagraph (a) above, it will, except where impracticable, give
reasonable advance notice to the other party of such disclosure and use best
efforts to secure confidential treatment of such information. In any event, the
parties agree to take all reasonable action to avoid disclosure of Confidential
Information hereunder.
6.4 PUBLICITY. Except as otherwise provided herein or required by law,
no party shall originate any publication, news release or other public
announcement, written or oral, whether in the public press, or stockholders'
reports, or otherwise, relating to the material terms of or the performance
under this Agreement, without the prior written approval of the other party,
which approval shall not be unreasonably withheld, but in no case shall be
withheld for longer than fifteen (15) days; provided, however, that each party
may disclose the existence of and the general nature of this Agreement.
ARTICLE 7
TERM; TERMINATION
7.1 TERM. This Agreement shall commence upon the Effective Date and
expire upon the completion of the Screening Term. This Agreement may not be
terminated unilaterally by either party except pursuant to Sections 7.2 and 7.3
below.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE> 16
7.2 TERMINATION FOR MATERIAL BREACH. If either party materially breaches
this Agreement, and the breaching party has not within sixty (60) days of notice
of breach from the non-breaching party (i) cured the breach or (ii) initiated
good faith efforts to cure such breach to the reasonable satisfaction of the
non-breaching party, the non-breaching party may terminate this Agreement upon
expiration of such sixty (60)-day period.
7.3 TERMINATION FOR TECHNICAL REASONS. Either party may terminate this
Agreement upon [ * ] written notice to the other party at any time after the
first anniversary of this Agreement if it becomes reasonably apparent that
technical constraints of LabChip Assay development and Caliper's screening
capacity will make it commercially impractical or impossible to perform LabChip
Assay development and screening [ * ] Targets in accordance with the terms of
this Agreement.
7.4 TERMINATION UNDER SECTION 3.3. Either party may terminate this
Agreement upon sixty (60) days written notice to the other party if the parties
are unable to reach agreement under Section 3.3.
7.5 EFFECT OF TERMINATION. In the event this Agreement is terminated by
either party before Screening Data is delivered for the [ * ] LabChip Assay, the
parties shall negotiate in good faith the terms and conditions under which
Caliper may retain a portion of the Neurocrine Compounds. In the event the
parties are unable to reach an agreement after sixty (60) days from the date of
termination, [ * ].
7.6 SURVIVING RIGHTS. The obligations and rights of the parties under
Article 3 and Sections 4.2 through 4.5, 5.3, 6.2, 6.3, 7.4, 7.5, 8.3 and 8.5
shall survive expiration or termination of this Agreement.
ARTICLE 8
MISCELLANEOUS
8.1 WAIVER. No waiver by either party hereto of any breach or default of
any of the covenants or agreements herein set forth shall be deemed a waiver as
to any subsequent or similar breach or default.
8.2 ASSIGNMENT. Neither party shall assign any of its rights and
obligations hereunder except (i) as incident to the merger, consolidation,
reorganization or acquisition of stock affecting actual voting control or of
substantially all of the assets of the assigning party or the line of business
to which this Agreement relates, or (ii) to an Affiliate; or (iii) after
termination or expiration of the Screening Term, Caliper may assign its rights
to receive milestone and royalty payments to any third party who is not a
competitor of Neurocrine; provided, however, that in no event shall either
party's rights and obligations hereunder be assigned without prior written
notice to the other party. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their permitted successors and assigns.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE> 17
8.3 NOTICES. Any notice or other communication required or permitted to
be given to either party hereto shall be in writing and shall be deemed to have
been properly given and to be effective on the date of delivery if delivered in
person or by facsimile or fourteen (14) days after mailing by registered or
certified airmail, postage paid, to the other party at the following address:
In the case of Caliper: Caliper Technologies Corp.
1275 California Avenue
Palo Alto, CA 94304
Fax: (650) 842-1970
Attention: Chief Operating Officer
In the case of Neurocrine: Neurocrine Biosciences, Inc.
10555 Science Center Drive
San Diego, CA 92121
Fax: (619) 658-7605
Attention: Chief Executive Officer
8.4 AMENDMENT. No amendment or modification hereof shall be valid or
binding upon the parties unless made in writing and signed by authorized
representatives of both parties.
8.5 CHOICE OF LAW; RESOLUTION OF DISPUTES.
(a) This Agreement shall be governed exclusively by and construed
according to the laws of California, U.S.A., excluding its choice of law
provisions.
(b) All disputes which may arise between the parties hereto in
relation to the interpretation or administration of this Agreement shall be
first referred to the Screening Committee for resolution. Any disputes which the
Screening Committee is unable to resolve within a reasonable period of time
shall be referred to the Chief Executive Officers or the Presidents of the
respective parties, whether before or after termination or expiration of this
Agreement. If such officers are unable to resolve the matter, either party may
elect to pursue any available dispute resolution forum.
8.6 FORCE MAJEURE. Any delays in performance by any party under this
Agreement shall not be considered a breach of this Agreement if and to the
extent caused by occurrences beyond the reasonable control of the party
affected, including but not limited to acts of God, embargoes, governmental
restrictions, strikes or other concerted acts of workers, fire, earthquake,
flood, or explosion. The party suffering such occurrence shall immediately
notify the other party as soon as practicable and any time for performance
hereunder shall be extended by the actual time of delay caused by the
occurrence.
8.7 INDEPENDENT CONTRACTORS. In making and performing this Agreement,
Neurocrine and Caliper are, and shall act at all times as independent
contractors and nothing contained in this Agreement shall be construed or
implied to create an agency, partnership or employer and employee relationship
between Caliper and Neurocrine. At no time shall one party make commitments or
incur any charges or expenses for or in the name of the other party.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE> 18
8.8 SEVERABILITY. If any term, condition or provision of this Agreement
is held to be unenforceable for any reason, it shall, if possible, be
interpreted rather than voided, in order to achieve the intent of the parties to
this Agreement to the extent possible. In any event, all other terms, conditions
and provisions of this Agreement shall be deemed valid and enforceable to the
full extent.
8.9 CUMULATIVE RIGHTS. The rights, powers and remedies hereunder shall
be in addition to, and not in limitation of, all rights, powers and remedies
provided at law or in equity, or under any other agreement between the parties.
All of such rights, powers and remedies shall be cumulative, and may be
exercised successively or cumulatively.
8.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be an original and all of which shall
constitute together the same document.
8.11 ENTIRE AGREEMENT. This Agreement embodies the final and complete
understanding of the parties with respect to the subject matter hereof and shall
supersede all previous communications, representations or understandings, either
oral or written, between the parties relating to the subject matter hereof.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE> 19
IN WITNESS WHEREOF, both parties have executed this Agreement, in
duplicate originals, by their respective officers hereunto duly authorized, as
of the day and year set forth in the introductory paragraph of this Agreement.
CALIPER TECHNOLOGIES CORP. NEUROCRINE BIOSCIENCES, INC.
By: /s/ Calvin Chow By: /s/ Gary Lyons
--------------------------- ----------------------------
Name: Calvin Chow Name: Gary Lyons
Title: Chief Operating Officer Title: CEO
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE> 1
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
EXHIBIT 10.15
AMENDMENT B TO PATENT LICENSE AGREEMENT (U.S.)
THIS AMENDMENT B TO PATENT LICENSE AGREEMENT (U.S.) ("Amendment B") is
made and entered into effective as of June 16, 1997 (the "Amendment B Date"), by
and between CALIPER TECHNOLOGIES CORP., a Delaware corporation having its
principal place of business at 1275 California Avenue, Palo Alto, California
94304 ("Licensee"), and LOCKHEED MARTIN ENERGY RESEARCH CORPORATION ("LMER"), a
Delaware corporation whose address for notices is Post Office Box 2009, Oak
Ridge, Tennessee 37831-8242. Capitalized terms used in this Amendment B that are
not otherwise defined herein shall have the same meanings as such terms are
defined in the Prior Agreement (as defined below).
RECITALS
A. Licensee and LOCKHEED MARTIN ENERGY SYSTEMS, INC. ("Energy Systems")
entered into a Patent License Agreement dated September 1, 1995 and Amendment A
to Patent License Agreement (U.S.) dated May 1, 1996 (collectively, the "Prior
Agreement"), under which Energy Systems granted to Licensee a sole commercial
license in the United States to manufacture, use, sell, or offer for sale
Products.
B. Energy Systems, by virtue of an assignment dated February 14, 1997,
did assign its undivided right, title, and interest in the Proprietary Rights to
LMER.
C. The parties desire to amend the terms of the Prior Agreement to
replace Energy Systems with LMER as licensor, to establish royalty rates on
Products as contemplated in Exhibit B1 of the Prior Agreement; to alter the
terms of Sublicense Royalties under Exhibit B2 of the Prior Agreement; to revise
Section 6 pertaining to patent prosecution and reimbursement of patent costs;
and to make one correction. The Prior Agreement, as amended by this Amendment B,
shall constitute the "Agreement."
NOW, THEREFORE, the parties agree as follows:
1. AMENDMENT OF THE PRIOR AGREEMENT
The parties hereby agree to amend the terms of the Prior Agreement as of
the Amendment B Date as provided below.
1.1 ROYALTIES. The second paragraph of Exhibit B1 of the Prior
Agreement is hereby deleted and shall be replaced by the
following provisions:
<PAGE> 2
"Licensee shall pay to LMER earned royalties on Net Sales of Products in
the following amounts:
(a) Licensee shall pay to LMER a [ * ] royalty on Net Sales of Chips;
provided, however that if Licensee must pay royalties to one or
more third parties on sales of Chips ("Third Party Payments"),
then the royalty to LMER on Chips shall be reduced by [ * ] of
the Third Party Payments, but not lower than a minimum of [ * ]
of Net Sales of Chips in any quarter. "Chips" shall mean chips
consisting of a glass or polymer base with reservoirs,
microchannels or similar features and a glass or polymer cover,
which chips are covered by one or more Claims of the Proprietary
Rights licensed hereunder.
(b) Licensee shall pay to LMER a [ * ] royalty on Net Sales of
Products other than Chips.
1.2 SUBLICENSE ROYALTIES. Exhibit B2 of the Prior Agreement is hereby
amended to delete the last sentence of the first paragraph, so
such paragraph will read in its entirety as follows:
"In order to maximize the commercialization of the
"Products" and LMER's overall income from this Agreement, Licensee may grant
sublicenses to third parties under which Licensee agrees to pay LMER a
"Sublicensee Royalty" of [ * ] percent [ * ] of the total "Sublicensing Revenue"
owed Licensee under said sublicenses."
1.3 PATENT PROSECUTION AND COSTS. Article 6 of the Prior Agreement is
hereby amended to read in its entirety as follows:
"6. PATENT PROSECUTION.
6.1 LMER shall, during the term of this Agreement, seek
patent protection for the Proprietary Rights listed in Exhibit A. The
securing of patent protection for all Proprietary Rights shall be the
sole responsibility and at the sole discretion of LMER; provided,
however that (i) Licensee shall have a reasonable opportunity to review
and comment on patent filings in advance and to consult and cooperate
with LMER in securing patent protection, and (ii) LMER will timely keep
Licensee advised of the status of such prosecution and maintenance by
providing Licensee with copies of all official communications,
amendments and responses with respect to the patent applications and
patents contained in the Proprietary Rights. Licensee may request and
LMER, at its sole discretion, may seek patent extension for patents
licensed under the Proprietary Rights listed in Exhibit A, under such
applicable laws and regulations where such patent extension rights are
available currently or are available in the future. In the event that
LMER elects to abandon a patent application included in the Proprietary
Rights or elects not to seek an extension of a patent included in the
Proprietary Rights, it will so notify Licensee at least ninety (90) days
prior to any
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE> 3
applicable deadline. Upon receipt of such notice, and to the extent
allowed by the LMER Prime Contract with DOE, Licensee may, following
written notice to LMER, seek, at its own expense, a waiver from DOE to
continue the prosecution of such application or extend such application
at Licensee's expense.
6.2 [ * ], relating to the securing of patent protection
for the Proprietary Rights after the Amendment B Date ("Patent Costs")
shall be the responsibility of Licensee. LMER shall bill Licensee for
[ * ], and Licensee shall [ * ] LMER within thirty (30) days of receipt
of the invoice."
1.4 CORRECTIONS. In the Prior Agreement, replace every occurrence of
the term "Lockheed Martin Energy Systems, Inc." with the term
"Lockheed Martin Energy Research Corporation".
In the Prior Agreement, replace every occurrence of the term "Energy
Systems, Inc." with the term "LMER".
In the Prior Agreement, replace every occurrence of the term with the
term "DE-AC05-84OR21400" with the term "DE-AC05-96OR22464."
In the first line of Section 7.3 of the Prior Agreement, the cross
reference to Section 6.2 is hereby amended to refer to Section 7.2 instead.
2. MISCELLANEOUS
2.1 NO OTHER CHANGES. Except as expressly provided in this Amendment
B, all terms of the Prior Agreement shall remain in full force
and effect.
2.2 COUNTERPARTS. This Amendment B may be executed in two or more
counterparts, each of which shall be deemed an original, but both
of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment B in
duplicate originals by their authorized officers as of the date and year first
above written.
LOCKHEED MARTIN ENERGY RESEARCH CORPORATION
By: /s/ William R. Martin
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Date: 6/16/97
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
3
<PAGE> 4
CALIPER TECHNOLOGIES CORPORATION
By: /s/ Michael R. Knapp
-----------------------------------------
Name: Michael R. Knapp
Title: VP Science & Technology
Date: 6-23-97
LOCKHEED MARTIN ENERGY SYSTEMS, INC.
By: /s/ William R. Martin
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Name:
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Title:
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Date: 6/16/97
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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AMENDMENT A TO PATENT LICENSE AGREEMENT (U.S.)
This Amendment A, made effective on this first day of May 1996, by and
between LOCKHEED MARTIN ENERGY SYSTEMS, INC. (formerly Martin Marietta Energy
Systems), and CALIPER TECHNOLOGIES, CORP., with both hereinafter referred to as
the "Parties."
WITNESSETH:
WHEREAS, the Parties have entered into a Patent License Agreement having an
effective date of September 1, 1995.
WHEREAS, the parties hereby desire to amend said Agreement.
NOW THEREFORE, the Parties agree to this Amendment A as follows:
Exhibit A, add the following paragraph:
[ * ]
IN WITNESS WHEREOF, the Parties hereto have caused this Amendment A to
be duly executed in their respective names by their duly authorized
representatives.
LOCKHEED MARTIN ENERGY SYSTEMS, INC.
By: /s/ William R. Martin
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Name: (Typed) William R. Martin
Title: Vice President, Technology Transfer
Date: 4/17/91
CALIPER TECHNOLOGIES, CORP.
By: /s/ Lawrence A. Bock
Name: (Typed) Lawrence A. Bock
Title: Chief Executive Officer
Date: 4/17/96
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SOLE COMMERCIAL PATENT LICENSE AGREEMENT
THIS AGREEMENT, made effective on the 1st day of September, 1995, by and
between LOCKHEED MARTIN ENERGY SYSTEMS, INC., (hereinafter "Energy Systems"), a
corporation organized and existing under the laws of the State of Delaware and
whose address for notices is Post Office Box 2009, Oak Ridge, Tennessee
37831-8242, and CALIPER TECHNOLOGIES, CORP. (hereinafter "Licensee"), a
corporation organized and existing under the laws of the State of Delaware and
whose address for notices is 1020 Prospect Street, Suite 405, La Jolla,
California 92037. Energy Systems and Licensee are herein after referred to as
the "Party" or "Parties."
W I T N E S S E T H:
A. Energy Systems, pursuant to Contract No. DE-AC05-84OR21400
(hereinafter "Prime Contract") with the United States Government as represented
by the Department of Energy (hereinafter "DOE") has developed and/or obtained
rights to Proprietary Rights relating to Products, as defined below, subject to
the DOE non-exclusive, nontransferable, irrevocable, paid-up license for the
United States Government and certain march-in rights and any other conditions of
waivers granted by the DOE; and
B. Licensee desires to obtain rights, in the United States, under Energy
Systems' Proprietary Rights.
C. This Agreement supersedes the patent license agreement between Energy
Systems and Caliper Microanalytic Systems, Inc., effective February 14, 1995,
and any obligations contained in said agreement.
THEREFORE, in consideration of the foregoing premises, covenants and
agreements contained herein, the Parties hereto agree to be bound as follows:
1. DEFINITIONS
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1.1 "Affiliate" shall mean any entity which controls, is controlled by or is
under common control with Licensee, where "control" means beneficial ownership
of more than fifty percent (50%) of the outstanding shares or securities.
1.2 "Proprietary Rights" shall mean all inventions or discoveries covered by the
claims and specifications in the Energy Systems U.S. patent application listed
in Exhibit A attached hereto and hereby incorporated into this Agreement by
reference and any and all patents issuing on any such patent application,
including, without limitation, all continuations, continuations-in-part,
divisions, reissues, reexaminations and temporal extensions of any of the
foregoing.
1.3 "Products" shall mean any and all products manufactured, used, sold or
transferred by Licensee, or manufactured, used or sold by Licensee's Affiliates
or "Sublicensee(s)," covered by one or more Claims, including Dominant Claims as
defined below, of the Proprietary Rights licensed hereunder.
1.4 "Dominant Claims" shall mean claims [ * ] of the patent application set
forth in Exhibit A and included in the Proprietary Rights, pending on the date
of execution of this Agreement.
1.5 "Other Field" shall mean the field of "Analysis of Nucleic Acids for
Diagnostic Applications and Non-Electrophoretic Means of Gene Discovery."
1.6 "Net Sales" shall mean the total amounts received by Licensee and its
Affiliates for the commercial sale of Products by Licensee or its Affiliates,
less allowances for returns of Products, discounts, commissions, allowances
actually granted (including any allowances for bad debt), transportation and
delivery charges, including insurance premiums, and excise or other taxes on
Products. Net Sales in the case of Products used or transferred by Licensee
shall mean the fair market value of Products as if they were sold to an
unrelated third party in similar quantities. It is the Parties' intention that
"Net Sales" will not include any transfer of Products to any Affiliate, unless
the Affiliate is the end user of such Products.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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With respect to any product that is developed and sold by Licensee or
its Affiliates and is comprised in part of one or more Products and of one or
more other products or parts which could be sold separately (a "Combination
Product"), Net Sales shall be determined by multiplying the amounts received by
Licensee or its Affiliates attributable to Combination Products by a fraction,
the numerator of which is the fair market value of the Product included in the
Combination Product, and the denominator of which is the sum of the fair market
value of such Product and the fair market value of the products or parts which
are not Products. Whenever possible, the fair market value of the Product
included in the Combination Product will be the market price at which such
Product is sold on a stand-alone basis; provided that fair market value shall be
determined reasonably and in good faith by Licensee in the event that no market
price is available.
1.7 "New Developments" shall mean any improvements based on the Proprietary
Rights, and any inventions or discoveries in the field of miniaturization of
instrumentation for analysis and synthesis by the inventor of the Proprietary
Rights, which are designed to be used in combination with Products based on the
Proprietary Rights herein. These do not include improvements, inventions or
discoveries for which the title to same may be elected by another company under
existing Energy Systems policies, unless such rights revert to Energy Systems
and are applicable to the definition of "New Developments" as defined in this
paragraph.
1.8 "Sublicensee" shall mean third parties (other than Affiliates) to whom
Licensee has granted a sublicense.
1.9 "Sublicensing Revenue" shall mean the amount actually paid to Licensee by a
Sublicensee, in consideration for the sublicense, including any license fees,
royalties and milestone payments. Sublicensing Revenue shall not mean research
and development support payments (other than in consideration for the
Proprietary Rights) and any payments
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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to Licensee by a Sublicensee to compensate Licensee for the grant of rights to
any other intellectual property of Licensee.
1.10 "Claim" shall mean a pending claim of the patent application within the
Proprietary Rights or a claim of an issued and unexpired patent within the
Proprietary Rights that has not been held unenforceable, unpatentable, or
invalid by a decision of a court of competent jurisdiction, and that has not
been admitted to be invalid or unenforceable through reissue, disclaimer or
otherwise.
2. GRANTS
2.1 Subject to the terms and conditions of this Agreement, Energy Systems hereby
grants to Licensee and its Affiliates, in the United States, the exclusive
(non-governmental) commercial right and license to manufacture, use, sell or
offer for sale Products, with the right to grant sublicenses in all fields,
excluding the "Other Field" as defined herein under the same non-financial terms
and conditions as this license for a Sublicense Royalty as provided in Exhibit
B2 hereof. Licensee agrees to provide Energy Systems a copy of each sublicense
granted prior to the effective date thereof.
2.2 For a period of [ * ] from the time Energy Systems notifies Licensee, in
writing, of any New Development (as limited by the definition in 1.7 above),
Licensee shall have the right of first refusal to negotiate in good faith, with
Energy Systems, the same right and license for any New Development. During this
period, the Parties will exclusively negotiate with each other. If the Parties
are unable to reach agreement during this period, Energy Systems will have the
right, during an additional [ * ] period, to execute a license with a third
party or parties, on terms which are no more favorable than those last offered
to Licensee by Energy Systems during the initial period. If a license agreement
is not reached with a third party or parties by Energy Systems for any New
Development, Energy Systems agrees to offer Licensee more favorable terms than
those initially offered.
2.3 In the event that [ * ], Energy Systems shall so notify Licensee, and
Licensee shall have the right to [ * ], upon payment to Energy Systems of an
amount equal to [ * ], and, by
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COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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amendment of Exhibit B, the [ * ] agreed to in this Agreement by Licensee. Such
[ * ] shall occur to the extent that the [ * ].
2.4 Energy Systems hereby agrees not to grant to any other party right and
license to Proprietary Rights in accordance with the three above paragraphs, as
long as Licensee abides by the terms and conditions of this Agreement, unless
required to so grant such right and license in accordance with Federal Statutory
or Regulatory enactments conditioning the waiver of rights to Energy Systems by
the DOE, particularly as set forth in 41 CFR 9-9.109-(6)i; 10 CFR Part 781; or
37 CFR Part 404.
2.5 Licensee agrees that any Products for use or sale in the United States shall
be manufactured substantially in the United States.
2.6 Licensee agrees to affix appropriate markings of the applicable Energy
Systems Proprietary Rights (and the fact that Energy Systems was the source of
these rights) upon or in association with Licensee's Products and Licensee
agrees to use its best efforts to follow any guidance from Energy Systems
concerning such markings.
2.7 Should Licensee fail to meet the developmental commitments described in
Exhibit C, Energy Systems shall have the option, to be exercised on [ * ]
written notice to Licensee at any time during the [ * ] period following the
date that such developmental commitment was to be achieved, to convert this
license grant to a non-exclusive license. Energy Systems agrees to negotiate
with Licensee, in good faith, a lower royalty rate for such non-exclusive
license, than the rate contained in Exhibit B. Furthermore, such royalty rate
shall [ * ].
3. ROYALTIES AND COMMERCIALIZATION PLAN
3.1 In consideration of the right and license granted herein, Licensee agrees to
the provisions of Exhibit B and Exhibit C attached hereto and hereby
incorporated herein by reference.
3.2 No royalties shall be owing on any Products produced for or under any
Federal governmental agency contract pursuant to the DOE non-exclusive license
for Federal governmental purposes but only to the extent that Licensee can show
that the Federal
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COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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government received a discount on Product sales which discount is equivalent to
or greater than the amount of any such royalty that would otherwise be due. Any
sales for Federal governmental purposes shall be reported under the Records and
Reports Section herein below by providing: (a) a Federal government contract
number; (b) identification of the Federal government agency; and (c) a
description as to how the benefit of the royalty-free sale was passed onto the
Federal government.
3.3 The royalty provisions of Exhibit B shall be [ * ].
3.4 Upon termination of this Agreement for any reason whatsoever, any royalties
that remain unpaid, and any pro-rata portion that is due Energy Systems per
Article 10.6, shall be properly reported and paid to Energy Systems within
thirty (30) days of any such termination.
4. RECORDS AND REPORTS
4.1 Licensee agrees to keep adequate records of Licensee, its Affiliates and
Sublicensees in sufficient detail to enable royalties and Sublicensing Revenue
payable hereunder to be determined and to provide such records for inspection by
authorized representatives of Energy Systems, with reasonable notice, at any
time during regular business hours of Licensee up to a maximum of two times per
calendar year. Licensee agrees that any additional records of Licensee, its
Affiliates and Sublicensees as Energy Systems may reasonably determine are
necessary to verify the above records, shall also be provided to Energy Systems
for inspection. If the audit discloses that Energy Systems was underpaid
royalties by at least five percent (5.0%) for any calendar half-year, then
Licensee shall reimburse Energy Systems for any documented and reasonable Energy
Systems costs associated with the audit, together with an amount equal to the
additional royalties to which Energy Systems is entitled as disclosed by the
audit.
4.2 Beginning in calendar year 1997, and within thirty (30) calendar days after
the close of each calendar half-year during the term of this Agreement (i.e.,
January 31 and July 31), Licensee will furnish Energy Systems a written report
providing: (a) all United States Net
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COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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Sales in U.S. Dollars during the preceding calendar half-year period, including
any Federal governmental agency under section 3.2 herein above, if none so
indicate; (b) amount of royalties due in U.S. Dollars for the preceding calendar
half-year period pursuant to the provisions hereof; and (c) payment of the
royalties due in U.S. Dollars payable to the order of Lockheed Martin Energy
Systems, Inc., pursuant to the report to be transmitted in accordance with the
"Notices" section of this Agreement herein below.
4.3 Should Licensee fail to make any payment to Energy Systems within the time
period prescribed for such payment, then the unpaid amount shall bear interest
at the rate of one and one half percent (1.5%) per month from the date when
payment was due until payment in full, with interest, is made.
5. TECHNICAL ASSISTANCE
5.1 Energy Systems agrees, upon the written request of Licensee, to assist
Licensee in obtaining necessary DOE approvals for technical assistance at Energy
Systems' facilities under appropriate agreements. The cost of such technical
assistance shall be paid for by the Licensee.
5.2 Energy Systems agrees to permit its employees, within Energy Systems'
corporate policy guidelines then in effect and subject to DOE requirements then
in effect, to provide consulting services to Licensee with reference to
Licensee's use and commercial exploitation of the Proprietary Rights as
contemplated herein. Licensee shall make payment directly to the individual
consultant(s) for all such services.
6. PATENT PROSECUTION
6.1 Energy Systems shall have full control over prosecution and maintenance of
the patent applications and patents contained in the Proprietary Rights. Energy
Systems will use, at its sole discretion, reasonable efforts to establish patent
protection for the information, inventions and discoveries included in the
Proprietary Rights and will timely keep Licensee advised of the status of such
prosecution and maintenance by providing Licensee with copies of all official
communications, amendments and responses with respect to the patent
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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applications and patents contained in the Proprietary Rights. In addition, with
respect to New Developments which are licensed by Energy Systems to Licensee,
Licensee may offer, at its own expense, assistance to Energy Systems in the
drafting of claims and specifications. In the event that Energy Systems elects
to abandon a patent application included in the Proprietary Rights, it will so
notify Licensee within ninety (90) days of its proposed abandonment. Upon
receipt of such notice, and to the extent allowed by the Energy Systems Prime
Contract with DOE, Licensee may, following written notice to Energy Systems,
seek, at its own expense, a waiver from DOE to continue the prosecution of such
application at Licensee's expense.
7. INFRINGEMENT BY THIRD PARTIES
7.1 Licensee shall give notice of any discovered or threatened third-party
infringement of Proprietary Rights to Energy Systems. In the event that Energy
Systems does not take appropriate action to stop or prevent such infringement
[ * ] after receiving such notice and diligently pursue such action, Licensee
has the right to take appropriate action to stop and prevent the infringement,
including the right to file suit.
7.2 Except for any liability resulting from any negligent acts or omissions of
Energy Systems, in the event that Licensee files suit to stop infringement or
defends any action against the validity of the patent, [ * ].
7.3 Licensee may, however, [ * ] under the terms of this Agreement at such time
as [ * ] are reported to Energy Systems in accordance with the Records and
Reports Section herein above.
7.4 All recoveries, damages and awards, [ * ]. To the extent Licensee's
recoveries, damages and awards [ * ]. In such event, Licensee will provide
[ * ].
7.5 The Parties hereby agree to cooperate with each other in the prosecution of
any such legal actions or settlement actions undertaken under this section and
each will provide to the other all pertinent data in its possession which may be
helpful in the prosecution of such
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COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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actions; provided, however, that [ * ] in providing data and other information
necessary to the conduct of the action.
7.6 The Party having filed such action [ * ], except that any settlement which
affects or admits issues of patent validity shall require the advance written
approval of Energy Systems.
7.7 In the event any Product becomes the subject of a claim for patent or other
proprietary-right infringement anywhere in the world by virtue of the
incorporation of the Proprietary Rights herein, the Parties shall promptly give
notice to the other and meet to consider the claim and the appropriate course of
action. Licensee shall have the right to conduct the defense of any such suit
brought against Licensee and shall have the sole right and authority to settle
any such suit, [ * ]. Energy Systems shall cooperate with Licensee, as
reasonably requested by Licensee, in connection with defense of such claim, at
Licensee's expense.
8. REPRESENTATIONS AND WARRANTIES
8.1 Energy Systems represents and warrants that Exhibit A contains a complete
and accurate listing of all the Proprietary Rights licensed and that Energy
Systems has the right to grant the rights, licenses, and privileges granted
herein.
8.2 Energy Systems represents and warrants that there are no claims of
infringement filed against Energy Systems for practicing the Exhibit A
Proprietary Rights anywhere in the world.
8.3 Except as set forth herein above, Energy Systems makes NO REPRESENTATIONS OR
WARRANTIES, express or implied, with regard to the infringement of proprietary
rights of any third party.
8.4 Licensee acknowledges that the export of any of the Proprietary Rights from
the United States or the disclosure of any of the Proprietary Rights to a
foreign national may require some form of license from the U.S. Government.
Failure to obtain any required
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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export licenses by Licensee may result in Licensee subjecting itself to criminal
liability under U.S. laws.
9. DISCLAIMERS
9.1 Neither Energy Systems, the DOE, nor persons acting on their behalf will be
responsible for any injury to or death of persons or other living things or
damage to or destruction of property or for any other loss, damage, or injury of
any kind whatsoever resulting from Licensee's manufacture, use, or sale of
materials, information, or Proprietary Rights hereunder. In no event will Energy
Systems, the DOE, or any person acting on behalf of any of them be liable for
any incidental, special or consequential damages resulting from the license
granted pursuant to this Agreement or the use or commercial development of the
Proprietary Rights.
9.2 EXCEPT AS SET FORTH HEREINABOVE, NEITHER ENERGY SYSTEMS, THE DOE, NOR
PERSONS ACTING ON THEIR BEHALF MAKE ANY WARRANTY, EXPRESS OR IMPLIED: (1) WITH
RESPECT TO THE MERCHANTABILITY, ACCURACY, COMPLETENESS, OR USEFULNESS OF ANY
SERVICES, MATERIALS, OR INFORMATION FURNISHED HEREUNDER; (2) THAT THE USE OF ANY
SUCH SERVICES, MATERIALS, OR INFORMATION WILL NOT INFRINGE PRIVATELY OWNED
RIGHTS; (3) THAT THE SERVICES, MATERIALS, OR INFORMATION FURNISHED HEREUNDER
WILL NOT RESULT IN INJURY OR DAMAGE WHEN USED FOR ANY PURPOSE; OR (4) THAT THE
SERVICES, MATERIALS, OR INFORMATION FURNISHED HEREUNDER WILL ACCOMPLISH THE
INTENDED RESULTS OR ARE SAFE FOR ANY PURPOSE, INCLUDING THE INTENDED OR
PARTICULAR PURPOSE. FURTHERMORE, ENERGY SYSTEMS AND THE DOE HEREBY SPECIFICALLY
DISCLAIM ANY AND ALL WARRANTIES, EXPRESS OR IMPLIED, FOR ANY PRODUCTS
MANUFACTURED, USED, OR SOLD BY LICENSEE. NEITHER ENERGY SYSTEMS NOR THE DOE
SHALL BE LIABLE FOR CONSEQUENTIAL OR INCIDENTAL DAMAGES IN ANY EVENT.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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9.3 Licensee agrees to indemnify Energy Systems, the DOE, and persons acting on
their behalf for all damages, costs, and expenses, including attorneys' fees,
arising from, but not limited to [ * ].
10. TERM OF AGREEMENT AND EARLY TERMINATION
10.1 This Agreement shall extend from the effective date of this Agreement to
the date of expiration of the last-to-expire of the United States patents which
arise from the Proprietary Rights of Exhibit A. This Agreement is subject to
early termination as set forth herein below and the terms and conditions set
forth in Exhibit B and Exhibit C attached hereto and hereby incorporated into
this Agreement by reference thereto.
10.2 Either Party shall have the right to terminate this Agreement without
judicial resolution upon written notice to the other after a breach of any
provision by the other Party has gone uncorrected for sixty (60) days after the
other Party has been notified in writing of such breach. Practice of the
licensed Proprietary Rights outside the scope of the grant by Licensee, its
Affiliates, and Sublicensees shall be an uncorrectable breach of this Agreement
and this Agreement may be terminated upon written notice thereof by Energy
Systems.
10.3 This Agreement shall terminate automatically upon the extinguishment of all
of the Exhibit A Proprietary Rights, for any reason, but only after the time for
appealing said extinguishment has expired.
10.4 Licensee shall provide notice to Energy Systems of its intention to file a
voluntary petition in bankruptcy or of another party's intention to file an
involuntary petition in bankruptcy for Licensee, said notice to be received by
Energy Systems at least thirty (30) days prior to filing such a petition.
Licensee's failure to provide such notice to Energy Systems of such intentions
shall be deemed a material, pre-petition, incurable breach of this Agreement.
10.5 Licensee agrees that this Agreement shall automatically terminate upon any
attempt by Licensee to offer Licensee's rights under this Agreement as
collateral to a third party.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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10.6 Licensee may terminate this Agreement without further payment upon written
notice to Energy Systems, if such notice is received by Energy Systems on or
before December 31, 1995. On any decision to terminate, made after December 31,
1995, Licensee agrees to pay Energy Systems the pro rata portion of the next
payment obligation that is due. Such portion of the next payment obligation due
shall be based on a period which ends sixty days after Licensee submits, to
Energy Systems, a written notice of termination.
10.7 Termination under any of the provisions of this Article of the license
granted to Licensee in this Agreement shall terminate all sublicenses which may
have been granted by Licensee, provided that any Sublicensee may elect to
continue its sublicense by advising Energy Systems in writing, within sixty (60)
days of the Sublicensee's receipt of written notice of such termination, of its
election, and of its agreement to assume, in respect to Energy Systems, all the
obligations (including obligations for payment) contained in its sublicensing
agreement with Licensee. Any sublicense granted by Licensee shall contain
provisions corresponding to those of this paragraph respecting termination and
the conditions of continuance of sublicenses.
11. RIGHTS OF PARTIES AFTER TERMINATION
11.1 Neither Party shall be relieved of any obligation or liability under this
Agreement arising from any act or omission committed prior to the effective date
of such termination. In the event of expiration of this Agreement or termination
of this Agreement for any reason whatsoever, the rights and obligations of the
Parties under Sections 8.1, 8.2, 10 and 12 shall survive any expiration or
termination of this Agreement.
11.2 From and after any termination of this Agreement, Licensee shall have the
right to sell any Products that Licensee had already manufactured prior to
termination, provided that all royalties and reports required herein above shall
be timely submitted to Energy Systems.
11.3 From and after any termination of this Agreement, Licensee shall not
manufacture, nor have manufactured any Products pursuant to this Agreement.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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11.4 The rights and remedies granted herein, and any other rights or remedies
which the Parties may have, either at law or in equity, are cumulative and not
exclusive of others. On any termination, Licensee shall duly account to Energy
Systems and transfer to it all rights to which Energy Systems may be entitled
under this Agreement.
12. CONFIDENTIALITY
12.1 The Parties agree that during the term of this Agreement and for a period
of three (3) years after it terminates, a Party receiving information of the
other Party, which is marked "confidential," will not use or intentionally
disclose such confidential information to any third party without prior written
consent of the disclosing Party, except to those necessary to enable the Parties
to perform under this Agreement or as may be required by the Energy Systems
Prime Contract with the DOE under the same restrictions as set forth herein.
12.2 A Party shall have no obligations with respect to any portion of such
confidential information of the other Party which:
a) is publicly disclosed through no fault of any Party hereto, either before or
after it becomes known to the receiving Party; or
b) was known to the receiving Party prior to the date of this Agreement which
knowledge was acquired independently and not from the other Party; or
c) is subsequently disclosed to the receiving Party in good faith by a third
party which has a right to make such a disclosure; or
d) has been published by a third party as a matter of right; or
e) is subsequently independently invented or discovered by the receiving Party
without reference to the other Party's confidential information.
13. FORCE MAJEURE
13.1 No failure or omission by Energy Systems or by Licensee in the performance
of any obligation under this Agreement shall be deemed a breach of this
Agreement or create any liability if the same shall arise from acts of God, acts
or omissions of any government or agency thereof, compliance with requests,
recommendations, rules, regulations, or orders of
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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any governmental authority or any office, department, agency, or instrumentality
thereof, fire, storm, flood, earthquake, accident, acts of the public enemy,
war, rebellion, insurrection, riot, sabotage, invasion, quarantine, restriction,
transportation embargoes, or failures or delays in transportation.
14. NOTICES
14.1 All notices and reports shall be addressed to the Parties hereto as
follows:
If to Energy Systems:
Business Manager, Technology Transfer Facsimile No.:
Lockheed Martin Energy Systems, Inc. (615) 576-9465
701 Scarboro Road Verify No.:
Oak Ridge, Tennessee 37831-8242 (615) 574-4193
If to Licensee:
President Facsimile No.
Caliper Technologies Corp. (619) 454-5329
1020 Prospect Street, Suite 405 Verify No.:
La Jolla, California 92037 (619) 454-3803
14.2 All minimum and royalty payments due Energy Systems shall be sent to:
Lockheed Martin Energy Systems, Inc.
Department 888058
Knoxville, Tennessee 37995-8058
14.3 Any notice, report or any other communication required or permitted to be
given by one Party to the other Party by this Agreement shall be in writing and
either (a) served personally on the other Party, (b) sent by express, registered
or certified first-class mail, postage prepaid, addressed to the other Party at
its address as indicated above, or to such other address as the addressee shall
have previously furnished to the other Party by proper
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
14
<PAGE> 20
notice, (c) delivered by commercial courier to the other Party, or (d) sent by
facsimile to the other Party at its facsimile number indicated above or to such
other facsimile number as the Party shall have previously furnished to the other
Party by proper notice, with machine confirmation of transmission.
15. NON-ABATEMENT OF ROYALTIES
15.1 Energy Systems and Licensee acknowledge that certain of the Proprietary
Rights may expire prior to the conclusion of the term of this Agreement;
however, Energy Systems and Licensee agree that the royalty rates provided for
herein above shall be uniform and undiminished except pursuant to this
Agreement.
16. WAIVERS
16.1 The failure of either Party at any time to enforce any provisions of this
Agreement or to exercise any right or remedy shall not be construed to be a
waiver of such provisions or of such rights or remedy or the right of either
Party thereafter to enforce each and every provision, right or remedy.
17. MODIFICATIONS
17.1 It is expressly understood and agreed by the Parties hereto that this
instrument contains the entire agreement between the Parties with respect to the
subject matter hereof and that all prior representations, warranties, or
agreements relating hereto have been merged into this document and are thus
superseded in totality by this Agreement. This Agreement may be amended or
modified only by a written instrument signed by the duly authorized
representatives of both of the Parties.
18. HEADINGS
18.1 The headings for the sections set forth in this Agreement are strictly for
the convenience of the parties hereto and shall not be used in any way to
restrict the meaning or interpretation of the substantive language of this
Agreement.
19. LAW
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
15
<PAGE> 21
19.1 This Agreement shall be construed according to the laws of the State of
Tennessee and the United States of America.
20. ASSIGNMENT
20.1 Upon timely written approval by Energy Systems, not to be unreasonably
withheld, Licensee may assign this Agreement and the rights of Licensee
thereunder to any of its Affiliates, any purchaser of all or substantially all
of its assets or to any successor corporation, including a successor corporation
resulting from any merger or consolidation of Licensee with or into such
corporation. Any assignee of Licensee must abide by the terms and conditions of
this Agreement, in conformance with all Energy Systems obligations to DOE under
the Prime Contract. Upon written notice to Licensee, Energy Systems may transfer
its Administration of this Agreement to DOE or its designee, and Energy Systems
shall have no further responsibilities except for the confidentiality and/or
non-disclosure obligations of this Agreement.
21. SEVERABILITY
21.1 If any term, condition or provision of this Agreement is held to be
unenforceable other than as provided in Article 13, all other terms, conditions,
and provisions of this Agreement shall be deemed valid and enforceable to the
extent possible.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE> 22
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
duly executed in their respective names by their duly authorized
representatives.
"ENERGY SYSTEMS"
LOCKHEED MARTIN ENERGY SYSTEMS, INC.
By: /s/ William R. Martin
----------------------------------------
Name (typed): Mr. William R. Martin
Title: Vice President, Technology Transfer
Date: 1 Sept 95
"LICENSEE"
CALIPER TECHNOLOGIES, CORP.
By: /s/ Lawrence A. Bock
----------------------------------------
Name (typed): Lawrence A. Bock
Title: President
Date: September 1, 1995
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE> 23
EXHIBIT A, PROPRIETARY RIGHTS
[ * ]
Initials:
Energy Systems: /s/ WRM
---------
Date: 1 Sept 95
Licensee: /s/ LAB
Date: September 1, 1995
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE> 24
EXHIBIT B 1, EXECUTION FEE, ROYALTIES AND
MINIMUM ANNUAL ROYALTIES AMOUNTS
In consideration of the rights and licenses granted herein, Licensee
agrees to pay Energy Systems an up-front fee of [ * ], with a payment of [ * ]
on execution of the Agreement, and [ * ] on the six-month anniversary date of
execution.
The royalty rate shall not exceed [ * ] Percent [ * ] of Net Sales of
Products. Energy Systems agrees to negotiate with Licensee in good faith, a
lower royalty rate, provided adequate and documented justification for a lower
royalty rate is supplied to Energy Systems by Licensee. Such royalty rate shall
not be less than [ * ] Percent [ * ] of Net Sales of Products.
The minimum annual royalties shall be calculated as follows:
If, by the third anniversary date of execution, the royalties on Net
Sales of Products shall not equal the minimum annual royalty amount of [ * ]
U.S. Dollars [ * ], then Licensee shall pay the difference between the amount of
actual royalties paid and the minimum annual royalty within thirty (30) days of
said anniversary date.
If, by the [ * ] anniversary date of execution, and each anniversary
date thereafter, a U.S. Patent with Dominant Claims [ * ], based on the
Proprietary Rights of Exhibit A, has issued, Licensee shall pay Energy Systems
the minimum annual royalty amount of [ * ] or royalties on actual Net Sales of
Products, whichever amount is greater. If such U.S. patent issuance does not
occur by the [ * ] anniversary date of execution, the minimum annual royalty
amount will remain at [ * ]. Such a payment requirement will automatically
increase to a [ * ] annual minimum royalty amount, due on yearly anniversary
dates, beginning with
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
19
<PAGE> 25
the execution anniversary date of the year in which such patent issuance, with
the issuance of Dominant claims [ * ], occurs.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
20
<PAGE> 26
EXHIBIT B2, SUBLICENSE ROYALTIES
In order to maximize the commercialization of the "Products" and Energy
Systems' overall income from this Agreement, Licensee may grant sublicenses to
third parties under which Licensee agrees to pay Energy Systems a "Sublicense
Royalty" of [ * ] percent [ * ] of the total "Sublicensing Revenue" owed
Licensee under said sublicenses. In no event shall the sum of "Sublicensing
Royalty" and royalty on Licensee's Net Sales paid to Energy Systems by Licensee
be less than the royalty Energy Systems would have received from Licensee's Net
Sale of Products.
N O T I C E
THIS EXHIBIT CONTAINS FINANCIAL AND COMMERCIAL INFORMATION THAT IS
BUSINESS CONFIDENTIAL AND THE PARTIES HEREBY AGREE NOT TO USE OR DISCLOSE THIS
EXHIBIT TO ANY THIRD PARTY WITHOUT THE ADVANCE WRITTEN APPROVAL OF THE OTHER
PARTY HERETO, EXCEPT TO THOSE NECESSARY TO ENABLE THE PARTIES TO PERFORM UNDER
THIS AGREEMENT OR AS MAY BE REQUIRED BY THE ENERGY SYSTEMS CONTRACT WITH THE DOE
THE SAME RESTRICTIONS AS SET FORTH HEREIN.
Initials:
Energy Systems: /s/ WRM
---------
Date: 1 Sept 95
Licensee: /s/ LAB
Date: September 1, 1995
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
21
<PAGE> 27
EXHIBIT C, DEVELOPMENT AND COMMERCIALIZATION PLAN
Licensee agrees to invest in the development of technology and markets
for Products by committing Licensee's resources in accordance with the
following:
For expenditures associated with [ * ]
For expenditures associated with [ * ]
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
22
<PAGE> 28
EXHIBIT C., CONTINUED
Progress and substantiation of Licensee meeting these requirements shall
be provided to Energy Systems in the form of an annual written report submitted
to Energy Systems by Licensee or at a meeting between the Parties to be held at
the mutual convenience of said Parties, but no later than December 31, 1996 and
each anniversary thereafter.
N O T I C E
THIS EXHIBIT CONTAINS FINANCIAL AND COMMERCIAL INFORMATION THAT IS
BUSINESS CONFIDENTIAL AND THE PARTIES HEREBY AGREE NOT TO USE OR DISCLOSE THIS
EXHIBIT TO ANY THIRD PARTY WITHOUT THE ADVANCE WRITTEN APPROVAL OF THE OTHER
PARTY HERETO, EXCEPT TO THOSE NECESSARY TO ENABLE THE PARTIES TO PERFORM UNDER
THIS AGREEMENT OR AS MAY BE REQUIRED BY THE ENERGY SYSTEMS CONTRACT WITH THE DOE
UNDER THE SAME RESTRICTIONS AS SET FORTH HEREIN.
Initials:
Energy Systems: /s/ WRM
---------
Date: 1 Sept 95
Licensee: /s/ LAB
Date: September 1, 1995
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
23
<PAGE> 1
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
EXHIBIT 10.16
AMENDMENT A TO
PATENT LICENSE AGREEMENT (INTERNATIONAL)
THIS AMENDMENT A TO PATENT LICENSE AGREEMENT (INTERNATIONAL) ("AMENDMENT
A") is made and entered into effective as of June 16, 1997 (the "Amendment A
Date"), by and between CALIPER TECHNOLOGIES CORP., a Delaware corporation having
its principal place of business at 1275 California Avenue, Palo Alto, California
94304 ("Licensee"), and LOCKHEED MARTIN ENERGY RESEARCH CORPORATION ("LMER"), a
Delaware corporation whose address for notices is Post Office Box 2009, Oak
Ridge, Tennessee 37831-8242. Capitalized terms used in this Amendment A that are
not otherwise defined herein shall have the same meanings as such terms arc
defined in the Prior Agreement (as defined below).
RECITALS
A. Licensee and LOCKHEED MARTIN ENERGY SYSTEMS, INC. ("Energy Systems")
entered into a Patent License Agreement dated September 1, 1995 (the "Prior
Agreement"), under which Energy Systems granted to Licensee a sole commercial
license outside the United States to manufacture, use, sell, or offer for sale
Products.
B. Energy Systems, by virtue of an assignment dated February 14, 1997, did
assign its undivided right, title, and interest in the Proprietary Rights to
LMER.
C. The parties desire to amend the terms of the Prior Agreement to replace
Energy Systems with LMER as licensor, to establish royalty rates on Products as
contemplated in Exhibit B1 of the Prior Agreement; to alter the terms of
Sublicense Royalties under Exhibit B2 of the Prior Agreement; to revise Section
6 pertaining to patent prosecution and reimbursement of patent costs; and to
make one correction. The Prior Agreement, as amended by this Amendment A, shall
constitute the "Agreement."
NOW, THEREFORE, the parties agree as follows:
I. AMENDMENT OF THE PRIOR AGREEMENT.
The parties hereby agree to amend the terms of the Prior Agreement as of
the Amendment A Date as provided below.
1.1 ROYALTIES. The second paragraph of Exhibit B 1 of the Prior
Agreement is hereby deleted and shall be replaced by the following provisions:
"Licensee shall pay to LMER earned royalties on Net Sales of
Products in the following amounts:
(a) Licensee shall pay to LMER a [*] royalty on Net Sales of
Chips; provided, however that if Licensee must pay royalties to one or
more third parties on sales of
<PAGE> 2
Chips ("Third Party Payments"), then the royalty to LMER on Chips shall be
reduced by [*] of the Third Party Payments, but not lower than a minimum
of [*] of Net Sales of Chips in any quarter. "Chips" shall mean chips
consisting of a glass or polymer base with reservoirs, microchannels or
similar features and a glass or polymer cover, which chips are covered by
one or more Claims of the Proprietary Rights licensed hereunder.
(b) Licensee shall pay to LMER a [*] royalty on Net Sales of
Products other than Chips.
1.2 SUBLICENSE ROYALTIES. Exhibit B2 of the Prior Agreement is
hereby amended to delete the last sentence of the first paragraph, so such
paragraph will read in its entirety as follows:
"In order to maximize the commercialization of the "Products"
and LMER's overall income from this Agreement, Licensee may grant
sublicenses to third parties under which Licensee agrees to pay LMER a
"Sublicense Royalty" of [*] percent [*] of the total "Sublicensing
Revenue" owed Licensee under said sublicenses."
1.3 PATENT PROSECUTION AND COSTS. Article 6 of the Prior Agreement
is hereby amended to read in its entirety as follows:
"6. PATENT PROSECUTION.
6.1 LMER shall, during the term of this Agreement, seek
patent protection for the Proprietary Rights listed in Exhibit A. The
securing of patent protection for all Proprietary Rights shall be the sole
responsibility and at the sole discretion of LMER; provided, however that
(i) Licensee shall have a reasonable opportunity to review and comment on
patent filings in advance and to consult and cooperate with LMER in
securing patent protection, and (ii) LMER will timely keep Licensee
advised of the status of such prosecution and maintenance by providing
Licensee with copies of all official communications, amendments and
responses with respect to the patent applications and patents contained in
the Proprietary Rights. Licensee may request and LMER, at its sole
discretion, may seek patent extension for patents licensed under the
Proprietary Rights listed in Exhibit A, under such applicable laws and
regulations where such patent extension rights are available currently or
are available in the future. In the event that LMER elects to abandon a
patent application included in the Proprietary Rights or elects not to
seek an extension of a patent included in the Proprietary Rights, it will
so notify Licensee at least ninety (90) days prior to any applicable
deadline. Upon receipt of such notice, and to the extent allowed by the
LMER Prime Contract with DOE, Licensee may, following written notice to
LMER, seek, at its own expense, a waiver from DOE to continue the
prosecution of such application or extend such application at Licensee's
expense.
6.2 [*], relating to the securing of patent protection
for the Proprietary Rights after the Amendment A Date ("Patent Costs")
shall be the responsibility of Licensee. LMER shall bill Licensee for [*],
and Licensee shall [*] LMER within thirty (30) days of receipt of the
invoice."
1.4 CORRECTIONS.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE> 3
In the Prior Agreement, replace every occurrence of the term "Lockheed
Martin Energy Systems, Inc." with the term "Lockheed Martin Energy Research
Corporation".
In the Prior Agreement, replace every occurrence of the term "Energy
Systems, Inc." with the term "LMER".
In the Prior Agreement, replace every occurrence of the term
"DE-AC05-84OR21400" with the term "DE-AC05-96OR22464."
In the first line of Section 7.3 of the Prior Agreement, the cross
reference to Section 6.2 is hereby amended to refer to Section 7.2 instead.
II. MISCELLANEOUS.
2.1 NO OTHER CHANGES. Except as expressly provided in this Amendment
A, all terms of the Prior Agreement shall remain in full force and effect.
2.2 COUNTERPARTS. This Amendment A may be executed in two or more
counterparts, each of which shall be deemed an original, but both of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment A in
duplicate originals by their authorized officers as of the date and year first
above written.
LOCKHEED MARTIN ENERGY RESEARCH CORPORATION
By: /s/ William R. Martin
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
Date: 6/16/97
-------------------------------------
CALIPER TECHNOLOGIES CORPORATION
By: /s/ Michael R. Knapp
-------------------------------------
Name: Michael R. Knapp
-------------------------------------
Title: VP Science & Technology
-------------------------------------
Date: 6-23-97
-------------------------------------
LOCKHEED MARTIN ENERGY SYSTEMS,
INCORPORATION
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE> 4
By: /s/ William R. Martin
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
Date: 6/16/97
-------------------------------------
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE> 5
SOLE COMMERCIAL PATENT LICENSE AGREEMENT
THIS AGREEMENT, made effective on the 1st day of September, 1995, by and
between LOCKHEED MARTIN ENERGY SYSTEMS, INC., (hereinafter "Energy Systems"), a
corporation organized and existing under the laws of the State of Delaware and
whose address for notices is Post Office Box 2009, Oak Ridge, Tennessee
37831-8242, and CALIPER TECHNOLOGIES, CORP. (hereinafter "Licensee"), a
corporation organized and existing under the laws of the State of Delaware and
whose address for notices is 1020 Prospect Street, Suite 405, La Jolla,
California 92037. Energy Systems and Licensee are herein after referred to as
the "Party" or "Parties."
WITNESS:
A. Energy Systems, pursuant to Contract No. DE-AC05-84OR21400 (hereinafter
"Prime Contract") with the United States Government as represented by the
Department of Energy (hereinafter "DOE") has developed and/or obtained rights to
Proprietary Rights relating to Products, as defined below, subject to the DOE
non-exclusive, nontransferable, irrevocable, paid-up license for the United
States Government and certain march-in rights and any other conditions of
waivers granted by the DOE; and
B. Licensee desires to obtain rights, outside the United States, under
Energy Systems' Proprietary Rights.
C. This Agreement supersedes the patent license agreement between Energy
Systems and Caliper Microanalytic Systems, Inc., effective February 14, 1995,
and any obligations contained in said agreement.
THEREFORE, in consideration of the foregoing premises, covenants and
agreements contained herein, the Parties hereto agree to be bound as follows:
1. DEFINITIONS
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
1
<PAGE> 6
1.1 "Affiliate" shall mean any entity which controls, is controlled by or is
under common control with Licensee, where "control" means beneficial ownership
of more than fifty percent (50%) of the outstanding shares or securities.
1.2 "Proprietary Rights" shall mean all inventions or discoveries covered by the
claims and specifications in the Energy Systems PCT filing listed in Exhibit A
attached hereto and hereby incorporated into this Agreement by reference and any
and all patents issuing on any such patent application, including, without
limitation, all continuations, continuations-in-part, divisions, reissues,
reexaminations and temporal extensions of any of the foregoing.
1.3 "Products" shall mean any and all products manufactured, used, sold or
transferred by Licensee, or manufactured, used or sold by Licensee's Affiliates
or "Sublicensee(s)," covered by one or more Claims, including Dominant Claims as
defined below, of the Proprietary Rights licensed hereunder.
1.4 "Dominant Claims" shall mean claims [*] of the PCT filing set forth in
Exhibit A and included in the Proprietary Rights, pending on the date of
execution of this Agreement.
1.5 "Other Field" shall mean the field of "Analysis of Nucleic Acids for
Diagnostic Applications and Non-Electrophoretic Means of Gene Discovery."
1.6 "Net Sales" shall mean the total amounts received by Licensee and its
Affiliates for the commercial sale of Products by Licensee or its Affiliates,
less allowances for returns of Products, discounts, commissions, allowances
actually granted (including any allowances for bad debt), transportation and
delivery charges, including insurance premiums, and excise or other taxes on
Products. Net Sales in the case of Products used or transferred by Licensee
shall mean the fair market value of Products as if they were sold to an
unrelated third party in similar quantities. It is the Parties' intention that
"Net Sales" will not include any transfer of Products to any Affiliate, unless
the Affiliate is the end user of such Products.
With respect to any product that is developed and sold by Licensee or its
Affiliates and is comprised in part of one or more Products and of one or more
other products or parts which could be sold separately (a "Combination
Product"), Net Sales shall be determined by
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE> 7
multiplying the amounts received by Licensee or its Affiliates attributable to
Combination Products by a fraction, the numerator of which is the fair market
value of the Product included in the Combination Product, and the denominator of
which is the sum of the fair market value of such Product and the fair market
value of the products or parts which are not Products. Whenever possible, the
fair market value of the Product included in the Combination Product will be the
market price at which such Product is sold on a stand-alone basis; provided that
fair market value shall be determined reasonably and in good faith by Licensee
in the event that no market price is available.
1.7 "New Developments" shall mean any improvements based on the Proprietary
Rights, and any inventions or discoveries in the field of miniaturization of
instrumentation for analysis and synthesis by the inventor of the Proprietary
Rights, which are designed to be used in combination with Products based on the
Proprietary Rights herein. These do not include improvements, inventions or
discoveries for which the title to same may be elected by another company under
existing Energy Systems policies, unless such rights revert to Energy Systems
and are applicable to the definition of "New Developments" as defined in this
paragraph.
1.8 "Sublicensee" shall mean third parties (other than Affiliates) to whom
Licensee has granted a sublicense.
1.9 "Sublicensing Revenue" shall mean the amount actually paid to Licensee by a
Sublicensee, in consideration for the sublicense, including any license fees,
royalties and milestone payments. Sublicensing Revenue shall not mean research
and development support payments (other than in consideration for the
Proprietary Rights) and any payments to Licensee by a Sublicensee to compensate
Licensee for the grant of rights to any other intellectual property of Licensee.
1.10 "Claim" shall mean a pending claim of the patent application within the
Proprietary Rights or a claim of an issued and unexpired patent within the
Proprietary Rights that has not
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE> 8
been held unenforceable, unpatentable, or invalid by a decision of a court of
competent jurisdiction, and that has not been admitted to be invalid or
unenforceable through reissue, disclaimer or otherwise.
2. GRANTS
2.1 Subject to the terms and conditions of this Agreement, Energy Systems hereby
grants to Licensee and its Affiliates, outside the United States, the exclusive
(non-governmental) commercial right and license to manufacture, use, sell or
offer for sale Products, with the right to grant sublicenses in all fields,
excluding the "Other Field" as defined herein under the same non-financial terms
and conditions as this license for a Sublicense Royalty as provided in Exhibit
B2 hereof. Licensee agrees to provide Energy Systems a copy of each sublicense
granted prior to the effective date thereof.
2.2 For a period of [*] from the time Energy Systems notifies Licensee, in
writing, of any New Development (as limited by the definition in 1.7 above),
Licensee shall have the right of first refusal to negotiate in good faith, with
Energy Systems, the same right and license for any New Development. During this
period, the Parties will exclusively negotiate with each other. If the Parties
are unable to reach agreement during this period, Energy Systems will have the
right, during an additional [*] period, to execute a license with a third party
or parties, on terms which are no more favorable than those last offered to
Licensee by Energy Systems during the initial period. If a license agreement is
not reached with a third party or parties by Energy Systems for any New
Development, Energy Systems agrees to offer Licensee more favorable terms than
those initially offered.
2.3 In the event that [*]. Energy Systems shall so notify Licensee, and Licensee
shall have the right to [*], upon payment to Energy Systems of an amount equal
to [*], and, by amendment of Exhibit B, the [*] agreed to in this Agreement by
Licensee. Such [*] shall occur to the extent that the [*].
2.4 Energy Systems hereby agrees not to grant to any other party right and
license to Proprietary Rights in accordance with the three above paragraphs, as
long as Licensee abides
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE> 9
by the terms and conditions of this Agreement, unless required to so grant such
right and license in accordance with Federal Statutory or Regulatory enactments
conditioning the waiver of rights to Energy Systems by the DOE, particularly as
set forth in 41 CFR 9-9.109-(6)i; 10 CFR Part 781; or 37 CFR Part 404.
2.5 Licensee agrees that any Products for use or sale in the United States shall
be manufactured substantially in the United States.
2.6 Licensee agrees to affix appropriate markings of the applicable Energy
Systems Proprietary Rights (and the fact that Energy Systems was the source of
these rights) upon or in association with Licensee's Products and Licensee
agrees to use its best efforts to follow any guidance from Energy Systems
concerning such markings.
2.7 Should Licensee fail to meet the developmental commitments described in
Exhibit C, Energy Systems shall have the option, to be exercised on [*] written
notice to Licensee at any time during the [*] period following the date that
such developmental commitment was to be achieved, to convert this license grant
to a non-exclusive license. Energy Systems agrees to negotiate with Licensee, in
good faith, a lower royalty rate for such non-exclusive license, than the rate
contained in Exhibit B. Furthermore, such royalty rate shall [*].
3. ROYALTIES AND COMMERCIALIZATION PLAN
3.1 In consideration of the right and license granted herein, Licensee agrees to
the provisions of Exhibit B and Exhibit C attached hereto and hereby
incorporated herein by reference.
3.2 No royalties shall be owing on any Products produced for or under any
Federal governmental agency contract pursuant to the DOE non-exclusive license
for Federal governmental purposes but only to the extent that Licensee can show
that the Federal government received a discount on Product sales which discount
is equivalent to or greater than the amount of any such royalty that would
otherwise be due. Any sales for Federal governmental purposes shall be reported
under the Records and Reports Section herein below by providing: (a) a Federal
government contract number; (b) identification of the
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE> 10
Federal government agency; and (c) a description as to how the benefit of the
royalty-free sale was passed onto the Federal government.
3.3 The royalty provisions of Exhibit B shall be [*].
3.4 Upon termination of this Agreement for any reason whatsoever, any royalties
that remain unpaid, and any pro-rata portion that is due Energy Systems per
Article 10.6, shall be properly reported and paid to Energy Systems within
thirty (30) days of any such termination.
3.5 In the event Licensee is required to withhold taxes under the laws of any
foreign country for the account of Energy Systems, then such payments will be
made by Licensee on behalf of Energy Systems to the appropriate governmental
authority, and Licensee shall furnish proof of payment of such tax together with
official or other appropriate evidence issued by the appropriate government
authority. Any such tax actually paid on Energy Systems' behalf shall be
deducted from royalty payments then due and owing Energy Systems.
4. RECORDS AND REPORTS
4.1 Licensee agrees to keep adequate records of Licensee, its Affiliates and
Sublicensees in sufficient detail to enable royalties and Sublicensing Revenue
payable hereunder to be determined and to provide such records for inspection by
authorized representatives of Energy Systems, with reasonable notice, at any
time during regular business hours of Licensee up to a maximum of two times per
calendar year. Licensee agrees that any additional records of Licensee, its
Affiliates and Sublicensees as Energy Systems may reasonably determine are
necessary to verify the above records, shall also be provided to Energy Systems
for inspection. If the audit discloses that Energy Systems was underpaid
royalties by at least five percent (5.0%) for any calendar half-year, then
Licensee shall reimburse Energy Systems for any documented and reasonable Energy
Systems costs associated with the audit, together with an amount equal to the
additional royalties to which Energy Systems is entitled as disclosed by the
audit.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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4.2 Beginning in calendar year 1997, and within thirty (30) calendar days after
the close of each calendar half-year during the term of this Agreement (i.e.,
January 31 and July 31), Licensee will furnish Energy Systems a written report
providing: (a) all Net Sales outside of the United States in U.S. Dollars during
the preceding calendar half-year period, including any Federal governmental
agency under section 3.2 herein above, if none so indicate; (b) amount of
royalties due in U.S. Dollars for the preceding calendar half-year period
pursuant to the provisions hereof; and (c) payment of the royalties due in U.S.
Dollars payable to the order of Lockheed Martin Energy Systems, Inc., pursuant
to the report to be transmitted in accordance with the "Notices" section of this
Agreement herein below.
4.3 Should Licensee fail to make any payment to Energy Systems within the time
period prescribed for such payment, then the unpaid amount shall bear interest
at the rate of one and one half percent (1.5%) per month from the date when
payment was due until payment in full, with interest, is made.
5. TECHNICAL ASSISTANCE
5.1 Energy Systems agrees, upon the written request of Licensee, to assist
Licensee in obtaining necessary DOE approvals for technical assistance at Energy
Systems' facilities under appropriate agreements. The cost of such technical
assistance shall be paid for by the Licensee.
5.2 Energy Systems agrees to permit its employees, within Energy Systems'
corporate policy guidelines then in effect and subject to DOE requirements then
in effect, to provide consulting services to Licensee with reference to
Licensee's use and commercial exploitation of the Proprietary Rights as
contemplated herein. Licensee shall make payment directly to the individual
consultant(s) for all such services.
6. PATENT PROSECUTION
6.1 Energy Systems shall have full control over prosecution and maintenance of
the patent applications and patents contained in the Proprietary Rights. Energy
Systems will use, at its sole discretion, reasonable efforts to establish patent
protection for the information,
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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inventions and discoveries included in the Proprietary Rights and will timely
keep Licensee advised of the status of such prosecution and maintenance by
providing Licensee with copies of all official communications, amendments and
responses with respect to the patent applications and patents contained in the
Proprietary Rights. In addition, with respect to New Developments which are
licensed by Energy Systems to Licensee, Licensee may offer, at its own expense,
assistance to Energy Systems in the drafting of claims and specifications. In
the event that Energy Systems elects to abandon a patent application included in
the Proprietary Rights, it will so notify Licensee within ninety (90) days of
its proposed abandonment. Upon receipt of such notice, and to the extent allowed
by the Energy Systems Prime Contract with DOE, Licensee may, following written
notice to Energy Systems, seek, at its own expense, a waiver from DOE to
continue the prosecution of such application at Licensee's expense.
6.2 Energy Systems agrees to expend up to [*] U.S. Dollars [*] for foreign
patenting expenses associated with the Proprietary Rights of Exhibit A.
Additional expenditures associated with such expenses will be incurred by
Licensee by reimbursement to Energy Systems within 30 days of Licensee's receipt
of such documented and previously agreed upon foreign patenting expenses by
Energy Systems.
7. INFRINGEMENT BY THIRD PARTIES
7.1 Licensee shall give notice of any discovered or threatened third-party
infringement of Proprietary Rights to Energy Systems. In the event that Energy
Systems does not take appropriate action to stop or prevent such infringement [
* ] after receiving such notice and diligently pursue such action, Licensee has
the right to take appropriate action to stop and prevent the infringement,
including the right to file suit.
7.2 Except for any liability resulting from any negligent acts or omissions of
Energy Systems, in the event that Licensee files suit to stop infringement or
defends any action against the validity of the patent, [*].
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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7.3 Licensee may, however, [*] under the terms of this Agreement at such time as
[*] are reported to Energy Systems in accordance with the Records and Reports
Section herein above.
7.4 All recoveries, damages and awards, [*]. To the extent Licensee's
recoveries, damages and awards [*]. In such event, Licensee will provide [*].
7.5 The Parties hereby agree to cooperate with each other in the prosecution of
any such legal actions or settlement actions undertaken under this section and
each will provide to the other all pertinent data in its possession which may be
helpful in the prosecution of such actions; provided, however, that [*] in
providing data and other information necessary to the conduct of the action.
7.6 The Party having filed such action [*], except that any settlement which
affects or admits issues of patent validity shall require the advance written
approval of Energy Systems.
7.7 In the event any Product becomes the subject of a claim for patent or other
proprietary-right infringement anywhere in the world by virtue of the
incorporation of the Proprietary Rights herein, the Parties shall promptly give
notice to the other and meet to consider the claim and the appropriate course of
action. Licensee shall have the right to conduct the defense of any such suit
brought against Licensee and shall have the sole right and authority to settle
any such suit, [ * ]. Energy Systems shall cooperate with Licensee, as
reasonably requested by Licensee, in connection with defense of such claim, at
Licensee's expense.
8. REPRESENTATIONS AND WARRANTIES
8.1 Energy Systems represents and warrants that Exhibit A contains a complete
and accurate listing of all the Proprietary Rights licensed and that Energy
Systems has the right to grant the rights, licenses, and privileges granted
herein.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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8.2 Energy Systems represents and warrants that there are no claims of
infringement filed against Energy Systems for practicing the Exhibit A
Proprietary Rights anywhere in the world.
8.3 Except as set forth herein above, Energy Systems makes NO REPRESENTATIONS OR
WARRANTIES, express or implied, with regard to the infringement of proprietary
rights of any third party.
8.4 Licensee acknowledges that the export of any of the Proprietary Rights from
the United States or the disclosure of any of the Proprietary Rights to a
foreign national may require some form of license from the U.S. Government.
Failure to obtain any required export licenses by Licensee may result in
Licensee subjecting itself to criminal liability under U.S. laws.
9. DISCLAIMERS
9.1 Neither Energy Systems, the DOE, nor persons acting on their behalf will be
responsible for any injury to or death of persons or other living things or
damage to or destruction of property or for any other loss, damage, or injury of
any kind whatsoever resulting from Licensee's manufacture, use, or sale of
materials, information, or Proprietary Rights hereunder. In no event will Energy
Systems, the DOE, or any person acting on behalf of any of them be liable for
any incidental, special or consequential damages resulting from the license
granted pursuant to this Agreement or the use or commercial development of the
Proprietary Rights.
9.2 EXCEPT AS SET FORTH HEREINABOVE, NEITHER ENERGY SYSTEMS, THE DOE, NOR
PERSONS ACTING ON THEIR BEHALF MAKE ANY WARRANTY, EXPRESS OR IMPLIED: (1) WITH
RESPECT TO THE MERCHANTABILITY, ACCURACY, COMPLETENESS, OR USEFULNESS OF ANY
SERVICES, MATERIALS, OR
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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INFORMATION FURNISHED HEREUNDER; (2) THAT THE USE OF ANY SUCH SERVICES,
MATERIALS, OR INFORMATION WILL NOT INFRINGE PRIVATELY OWNED RIGHTS; (3) THAT THE
SERVICES, MATERIALS, OR INFORMATION FURNISHED HEREUNDER WILL NOT RESULT IN
INJURY OR DAMAGE WHEN USED FOR ANY PURPOSE: OR (4) THAT THE SERVICES, MATERIALS,
OR INFORMATION FURNISHED HEREUNDER WILL ACCOMPLISH THE INTENDED RESULTS OR ARE
SAFE FOR ANY PURPOSE, INCLUDING THE INTENDED OR PARTICULAR PURPOSE. FURTHERMORE,
ENERGY SYSTEMS AND THE DOE HEREBY SPECIFICALLY DISCLAIM ANY AND ALL WARRANTIES,
EXPRESS OR IMPLIED, FOR ANY PRODUCTS MANUFACTURED, USED, OR SOLD BY LICENSEE.
NEITHER ENERGY SYSTEMS NOR THE DOE SHALL BE LIABLE FOR CONSEQUENTIAL OR
INCIDENTAL DAMAGES IN ANY EVENT.
9.3 Licensee agrees to indemnify Energy Systems, the DOE, and persons acting on
their behalf for all damages, costs, and expenses, including attorneys' fees,
arising from, but not limited to, [*].
10. TERM OF AGREEMENT AND EARLY TERMINATION
10.1 This Agreement shall extend from the effective date of this Agreement to
the date of expiration of the last-to-expire of the patents which arise from the
Proprietary Rights of Exhibit A, on a country-by-country basis. This Agreement
is subject to early termination as set forth herein below and the terms and
conditions set forth in Exhibit B and Exhibit C attached hereto and hereby
incorporated into this Agreement by reference thereto.
10.2 Either Party shall have the right to terminate this Agreement without
judicial resolution upon written notice to the other after a breach of any
provision by the other Party has gone uncorrected for sixty (60) days after the
other Party has been notified in writing of such breach. Practice of the
licensed Proprietary Rights outside the scope of the grant by Licensee, its
Affiliates, and Sublicensees shall be an uncorrectable breach of this Agreement
and this Agreement may be terminated upon written notice thereof by Energy
Systems.
10.3 This Agreement shall terminate automatically upon the extinguishment of all
of the Exhibit A Proprietary Rights, for any reason, but only after the time for
appealing said extinguishment has expired.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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10.4 Licensee shall provide notice to Energy Systems of its intention to file a
voluntary petition in bankruptcy or of another party's intention to file an
involuntary petition in bankruptcy for Licensee, said notice to be received by
Energy Systems at least thirty (30) days prior to filing such a petition.
Licensee's failure to provide such notice to Energy Systems of such intentions
shall be deemed a material, pre-petition, incurable breach of this Agreement.
10.5 Licensee agrees that this Agreement shall automatically terminate upon any
attempt by Licensee to offer Licensee's rights under this Agreement as
collateral to a third party.
10.6 Licensee may terminate this Agreement without further payment upon written
notice to Energy Systems, if such notice is received by Energy Systems on or
before December 31, 1995. On any decision to terminate, made after December 31,
1995, Licensee agrees to pay Energy Systems the pro rata portion of the next
payment obligation that is due. Such portion of the next payment obligation due
shall be based on a period which ends sixty days after Licensee submits, to
Energy Systems, a written notice of termination.
10.7 Termination under any of the provisions of this Article of the license
granted to Licensee in this Agreement shall terminate all sublicenses which may
have been granted by Licensee, provided that any Sublicensee may elect to
continue its sublicense by advising Energy Systems in writing, within sixty (60)
days of the Sublicensee's receipt of written notice of such termination, of its
election, and of its agreement to assume, in respect to Energy Systems, all the
obligations (including obligations for payment) contained in its sublicensing
agreement with Licensee. Any sublicense granted by Licensee shall contain
provisions corresponding to those of this paragraph respecting termination and
the conditions of continuance of sublicenses.
11. RIGHTS OF PARTIES AFTER TERMINATION
11.1 Neither Party shall be relieved of any obligation or liability under this
Agreement arising from any act or omission committed prior to the effective date
of such termination. In the event of expiration of this Agreement or termination
of this Agreement for any reason
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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whatsoever, the rights and obligations of the Parties under Sections 8.1, 8.2,
10 and 12 shall survive any expiration or termination of this Agreement.
11.2 From and after any termination of this Agreement, Licensee shall have the
right to sell any Products that Licensee had already manufactured prior to
termination, provided that all royalties and reports required herein above shall
be timely submitted to Energy Systems.
11.3 From and after any termination of this Agreement, Licensee shall not
manufacture, nor have manufactured any Products pursuant to this Agreement.
11.4 The rights and remedies granted herein, and any other rights or remedies
which the Parties may have, either at law or in equity, are cumulative and not
exclusive of others. On any termination, Licensee shall duly account to Energy
Systems and transfer to it all rights to which Energy Systems may be entitled
under this Agreement.
12. CONFIDENTIALITY
12.1 The Parties agree that during the term of this Agreement and for a period
of three (3) years after it terminates, a Party receiving information of the
other Party, which is marked "confidential," will not use or intentionally
disclose such confidential information to any third party without prior written
consent of the disclosing Party, except to those necessary to enable the Parties
to perform under this Agreement or as may be required by the Energy Systems
Prime Contract with the DOE under the same restrictions as set forth herein.
12.2 A Party shall have no obligations with respect to any portion of such
confidential information of the other Party which:
a) is publicly disclosed through no fault of any Party hereto, either before or
after it becomes known to the receiving Party; or
b) was known to the receiving Party prior to the date of this Agreement which
knowledge was acquired independently and not from the other Party; or
c) is subsequently disclosed to the receiving Party in good faith by a third
party which has a right to make such a disclosure; or
d) has been published by a third party as a matter of right; or
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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e) is subsequently independently invented or discovered by the receiving Party
without reference to the other Party's confidential information.
13. FORCE MAJEURE
13.1 No failure or omission by Energy Systems or by Licensee in the performance
of any obligation under this Agreement shall be deemed a breach of this
Agreement or create any liability if the same shall arise from acts of God, acts
or omissions of any government or agency thereof, compliance with requests,
recommendations, rules, regulations, or orders of any governmental authority or
any office, department, agency, or instrumentality thereof, fire, storm, flood,
earthquake, accident, acts of the public enemy, war, rebellion, insurrection,
riot, sabotage, invasion, quarantine, restriction, transportation embargoes, or
failures or delays in transportation.
14. NOTICES
14.1 All notices and reports shall be addressed to the Parties hereto as
follows:
If to Energy Systems:
Business Manager, Technology Transfer Facsimile No.:
Lockheed Martin Energy Systems, Inc. (615) 576-9465
701 Scarboro Road Verify No.:
Oak Ridge, Tennessee 37831-8242 (615) 574-4193
If to Licensee:
President Facsimile No.
Caliper Technologies Corp. (619) 454-5329
1020 Prospect Street, Suite 405 Verify No.:
La Jolla, California 92037 (619) 454-3803
14.2 All minimum and royalty payments due Energy Systems shall be sent to:
Lockheed Martin Energy Systems, Inc.
Department 888058
Knoxville, Tennessee 37995-8058
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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14.3 Any notice, report or any other communication required or permitted to be
given by one Party to the other Party by this Agreement shall be in writing and
either (a) served personally on the other Party, (b) sent by express, registered
or certified first-class mail, postage prepaid, addressed to the other Party at
its address as indicated above, or to such other address as the addressee shall
have previously furnished to the other Party by proper notice, (c) delivered by
commercial courier to the other Party, or (d) sent by facsimile to the other
Party at its facsimile number indicated above or to such other facsimile number
as the Party shall have previously furnished to the other Party by proper
notice, with machine confirmation of transmission.
15. NON-ABATEMENT OF ROYALTIES
15.1 Energy Systems and Licensee acknowledge that certain of the Proprietary
Rights may expire prior to the conclusion of the term of this Agreement;
however, Energy Systems and Licensee agree that the royalty rates provided for
herein above shall be uniform and undiminished except pursuant to this
Agreement.
16. WAIVERS
16.1 The failure of either Party at any time to enforce any provisions of this
Agreement or to exercise any right or remedy shall not be construed to be a
waiver of such provisions or of such rights or remedy or the right of either
Party thereafter to enforce each and every provision, right or remedy.
17. MODIFICATIONS
17.1 It is expressly understood and agreed by the Parties hereto that this
instrument contains the entire agreement between the Parties with respect to the
subject matter hereof and that all prior representations, warranties, or
agreements relating hereto have been merged into this document and are thus
superseded in totality by this Agreement. This Agreement may be amended or
modified only by a written instrument signed by the duly authorized
representatives of both of the Parties.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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18. HEADINGS
18.1 The headings for the sections set forth in this Agreement are strictly for
the convenience of the parties hereto and shall not be used in any way to
restrict the meaning or interpretation of the substantive language of this
Agreement.
19. LAW
19.1 This Agreement shall be construed according to the laws of the State of
Tennessee and the United States of America.
20. ASSIGNMENT
20.1 Upon timely written approval by Energy Systems, not to be unreasonably
withheld, Licensee may assign this Agreement and the rights of Licensee
thereunder to any of its Affiliates, any purchaser of all or substantially all
of its assets or to any successor corporation, including a successor corporation
resulting from any merger or consolidation of Licensee with or into such
corporation. Any assignee of Licensee must abide by the terms and conditions of
this Agreement, in conformance with all Energy Systems obligations to DOE under
the Prime Contract. Upon written notice to Licensee, Energy Systems may transfer
its Administration of this Agreement to DOE or its designee, and Energy Systems
shall have no further responsibilities except for the confidentiality and/or
non-disclosure obligations of this Agreement.
21. SEVERABILITY
21.1 If any term, condition or provision of this Agreement is held to be
unenforceable other than as provided in Article 13, all other terms, conditions,
and provisions of this Agreement shall be deemed valid and enforceable to the
extent possible.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
duly executed in their respective names by their duly authorized
representatives.
"ENERGY SYSTEMS"
LOCKHEED MARTIN ENERGY SYSTEMS, INC.
By: /s/ William R. Martin
------------------------------------
Name (typed): Mr. William R. Martin
-----------------------------
Title: Vice President, Technology Transfer
------------------------------------
Date: 1 Sept 95
------------------------------------
"LICENSEE"
CALIPER TECHNOLOGIES, CORP.
By: /s/ Lawrence A. Bock
------------------------------------
Name (typed): Lawrence A. Bock
-----------------------------
Title: President
------------------------------------
Date: September 1, 1995
------------------------------------
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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EXHIBIT A, PROPRIETARY RIGHTS
[*].
Initials:
Energy Systems: /s/ WRM
---------------------------
Date: 1 Sept 95
---------------------------
Licensee: /s/ LAB
---------------------------
Date: September 1, 1995
---------------------------
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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EXHIBIT B1, EXECUTION FEE, ROYALTIES AND
MINIMUM ANNUAL ROYALTIES AMOUNTS
In consideration of the rights and licenses granted herein, Licensee
agrees to pay Energy Systems an up-front fee of [*] U.S. Dollars [*], with a
payment of [*] on execution of the Agreement, and [*] on the six-month
anniversary date of execution.
The royalty rate shall not exceed [*] Percent [*] of Net Sales of
Products. Energy Systems agrees to negotiate with Licensee in good faith, a
lower royalty rate, provided adequate and documented justification for a lower
royalty rate is supplied to Energy Systems by Licensee. Such royalty rate shall
not be less than [*] Percent [*] of Net Sales of Products.
Licensee shall be entitled to credit [*] percent [*] of any royalty paid
to a non-Affiliate third party by Licensee in order for Licensee to be able to
make, use, and sell Products against the royalty payable in this Exhibit B
herein above; provided that in no event will the royalty payable in this Exhibit
B herein above be reduced by more than [*] percent [*] in any quarter as a
result of the credit available to Licensee under this paragraph.
The minimum annual royalties shall be calculated as follows:
If, by the third anniversary date of execution, the royalties on Net Sales
of Products shall not equal the minimum annual royalty amount of [*] U.S.
Dollars [*], then Licensee shall pay the difference between the amount of actual
royalties paid and the minimum annual royalty within thirty (30) days of said
anniversary date.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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If, by the [*] anniversary date of execution, and each anniversary date
thereafter, a U.S. Patent with Dominant Claims [*], based on the Proprietary
Rights of Exhibit A, has issued, Licensee shall pay Energy Systems the minimum
annual royalty amount of [*] or royalties on actual Net Sales of Products,
whichever amount is greater. If such U.S. patent issuance does not occur by the
[*] anniversary date of execution, the minimum annual royalty amount will remain
at [*]. Such a payment requirement will automatically increase to a [ * ] annual
minimum royalty amount, due on yearly anniversary dates, beginning with the
execution anniversary date of the year in which such patent issuance, with the
issuance of Dominant claims [*], occurs.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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EXHIBIT B2, SUBLICENSE ROYALTIES
In order to maximize the commercialization of the "Products" and Energy
Systems' overall income from this Agreement, Licensee may grant sublicenses to
third parties under which Licensee agrees to pay Energy Systems a "Sublicense
Royalty" of [*] percent [*] of the total "Sublicensing Revenue" owed Licensee
under said sublicenses. In no event shall the sum of "Sublicensing Royalty" and
royalty on Licensee's Net Sales paid to Energy Systems by Licensee be less than
the royalty Energy Systems would have received from Licensee's Net Sale of
Products.
NOTICE
THIS EXHIBIT CONTAINS FINANCIAL AND COMMERCIAL INFORMATION THAT IS
BUSINESS CONFIDENTIAL AND THE PARTIES HEREBY AGREE NOT TO USE OR DISCLOSE THIS
EXHIBIT TO ANY THIRD PARTY WITHOUT THE ADVANCE WRITTEN APPROVAL OF THE OTHER
PARTY HERETO, EXCEPT TO THOSE NECESSARY TO ENABLE THE PARTIES TO PERFORM UNDER
THIS AGREEMENT OR AS MAY BE REQUIRED BY THE ENERGY SYSTEMS CONTRACT WITH THE DOE
THE SAME RESTRICTIONS AS SET FORTH HEREIN.
Initials:
Energy Systems: /s/ WRM
---------------------------
Date: 1 Sept 95
---------------------------
Licensee: /s/ LAB
---------------------------
Date: September 1, 1995
---------------------------
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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EXHIBIT C, DEVELOPMENT AND COMMERCIALIZATION PLAN
Licensee agrees to invest in the development of technology and markets for
Products by committing Licensee's resources in accordance with the following:
For expenditures associated with [*]
[*]
[*]
[*]
[*]
[*]
For expenditures associated with [*]
[*]
[*]
[*]
[*]
[*]
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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EXHIBIT C., CONTINUED
Progress and substantiation of Licensee meeting these requirements shall
be provided to Energy Systems in the form of an annual written report submitted
to Energy Systems by Licensee or at a meeting between the Parties to be held at
the mutual convenience of said Parties, but no later than December 31, 1996 and
each anniversary thereafter.
NOTICE
THIS EXHIBIT CONTAINS FINANCIAL AND COMMERCIAL INFORMATION THAT IS
BUSINESS CONFIDENTIAL AND THE PARTIES HEREBY AGREE NOT TO USE OR DISCLOSE THIS
EXHIBIT TO ANY THIRD PARTY WITHOUT THE ADVANCE WRITTEN APPROVAL OF THE OTHER
PARTY HERETO, EXCEPT TO THOSE NECESSARY TO ENABLE THE PARTIES TO PERFORM UNDER
THIS AGREEMENT OR AS MAY BE REQUIRED BY THE ENERGY SYSTEMS CONTRACT WITH THE DOE
UNDER THE SAME RESTRICTIONS AS SET FORTH HEREIN.
Initials:
Energy Systems: /s/ WRM
---------------------------
Date: 1 Sept 95
---------------------------
Licensee: /s/ LAB
---------------------------
Date: September 1, 1995
---------------------------
23
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE> 1
Exhibit 10.17
CALIPER TECHNOLOGIES CORP.
CONSULTING AGREEMENT
THIS AGREEMENT is made and entered into as of the 30th day of April, 1997
(the "Effective Date") by and between CALIPER TECHNOLOGIES CORP., a Delaware
corporation (the "Company"), and DR. DAVID MILLIGAN ("Contractor").
RECITAL
As part of its ongoing program of research and development, the Company
desires to engage individuals with business and scientific expertise to assist
the Company from time to time in projects involving business strategy and the
research and development of the Company's proposed products. Contractor is
qualified and willing to provide such services. Therefore, the Company and
Contractor desire to enter into this Agreement.
AGREEMENT
In consideration of the mutual covenants set forth below, the parties
hereby agree as follows:
1. ENGAGEMENT OF SERVICES.
Contractor, pursuant to the provisions of this Agreement, is hereby engaged
by the Company to provide services to the Company as described on Exhibit A
attached hereto (the "Services"). The Services will be provided relating to the
field described in Exhibit B hereto (the "Field"). Contractor shall perform
Services as requested by the Company from time to time to the best of his
ability, such Services to be performed at such place or places and at such times
as mutually agreed upon by the Company and Contractor. Contractor shall provide
up to four (4) days per month in person or by telephone (in addition to six days
per year for Board meetings provided in Contractor's capacity of Chairman of the
Board of the Company) for twelve (12) months from the date of this Agreement.
The Company recognizes that Contractor may be unavailable to perform Services
for certain limited amounts of time due to other commitments. Contractor shall
notify the Company in advance of any such expected periods of unavailability in
person or by telephone, which shall not be considered a breach of this Agreement
unless the duration of any such period of unavailability extends for more than
thirty (30) consecutive days.
2. COMPENSATION.
2.1 As consideration for Contractor's Services and for the discharge of
all Contractor's obligations hereunder, the Company shall (i) pay Contractor
$80,000, such amount to be paid by the Company monthly in twelve equal
installments beginning on the last business day of May 1997, and (ii) grant
Contractor a non-qualified stock option to purchase 100,000 shares (the
"Shares") of the Company's Common Stock at the current fair market value of $.30
per share under the Company's 1996 Stock Incentive Plan (the "Plan"), which
Shares shall vest over a five year period at a rate of 1,667 shares per month at
the end of each month, beginning
<PAGE> 2
with the month of May 1997, whether or not the Company requests Services. If
Contractor shall cease to be a director, officer, employee or consultant to the
Company prior to the vesting of all of the Shares, for any reason, the vesting
of the Shares shall immediately cease and any Shares which are unvested on the
date the Agreement is terminated shall remain unvested shares.
2.2 In addition to such compensation, the Company will reimburse
Contractor for travel and other out-of-pocket costs reasonably incurred by him
in the course of performing Services under this Agreement; provided however,
that the Company shall not be obligated hereunder unless (a) the Company has
agreed in advance to reimburse such costs, and (b) Contractor provides the
Company with appropriate receipts or other relevant documentation for all such
costs as part of any submission by Contractor for reimbursement.
3. INDEPENDENT CONTRACTOR.
It is understood and agreed that Contractor is an independent contractor
and not an agent or employee of the Company. Contractor has no authority to act
on behalf of the Company pursuant to this Agreement, or to obligate the Company
by contract or otherwise. Contractor will not be eligible for any employee
benefits, nor will the Company make deductions from Contractor's fees for taxes.
The payment of any taxes related to Contractor's provision of Services under
this Agreement shall be the sole responsibility of Contractor.
4. ADDITIONAL ACTIVITIES.
4.1 During the period in which Contractor provides Services to the Company
under this Agreement (the "Contracting Period"), Contractor will not directly or
indirectly (whether for compensation or without compensation), provide services
relating to the Field to any corporation or other entity which is engaged in
research in the Field, other than to those corporations or other entities to
which Contractor provides services on the date of this Agreement; provided,
however, that the foregoing shall not prevent Contractor from engaging in any
academic research, teaching or related activity in the Field.
4.2 During the Contracting Period, and for an amount of time thereafter
equal in length to the lesser of (a) two years or (b) the length of the
Contracting Period, Contractor will not, directly or indirectly (whether for
compensation or without compensation):
(i) recruit, solicit or induce, or attempt to induce, any employee or
employees of the Company to terminate their employment with, or otherwise cease
their relationship with, the Company; or
(ii) induce any other contractor, or the employee of any other
contractor to terminate its or its contractual relationship with the Company; or
(iii) solicit, divert or take away, or attempt to divert or to take
away, the business or patronage of any of the clients, customers or accounts, or
prospective clients, customers or accounts, if any, of the Company that were
contacted, solicited or served by Contractor during the Contracting Period.
2
<PAGE> 3
4.3 The restrictions set forth in paragraphs 4.1 and 4.2 are considered by
the parties to be reasonable for the purposes of protecting the business of the
Company. However, if any such restriction is found by any court of competent
jurisdiction to be unenforceable because it extends for too long a period of
time or over too great a range of activities or in too broad a geographic area,
it shall be interpreted to extend only over the maximum period of time, range of
activities or geographic area as to which it may be enforceable.
5. ESTABLISHMENT OF CONFIDENTIAL RELATIONSHIP.
Contractor recognizes that the Company is engaged in a continuous program
of research and development respecting its present and future business
activities. Contractor understands that:
5.1 As part of Contractor's Services performed for the Company, Contractor
will be involved in discussions that relate to the Company's technology and
business strategy, and, in the course of providing Services to the Company, may
develop new ideas or inventions or make other contributions of value to the
Company.
5.2 This Agreement creates a relationship of trust and confidence between
Contractor and the Company with respect to any information which is:
(i) applicable to the business of the Company or any client or
customer of the Company; and
(ii) is made known to Contractor by the Company or by any client or
customer of the Company, or is learned by Contractor while performing Services
for the Company.
5.3 The Company possesses and will continue to possess information: (i)
that has been created, discovered, developed, or otherwise become known to the
Company; or (ii) in which property rights have been assigned or otherwise
conveyed to the Company by another entity, which information has commercial
value in the business in which the Company is engaged and is treated by the
Company as confidential. All such information is hereinafter referred to as
"Proprietary Information." By way of illustration, but not limitation,
Proprietary Information includes: (a) inventions, developments, designs,
applications, improvements, trade secrets, formulae, ideas, know-how, methods or
processes, discoveries, techniques and data (hereinafter collectively referred
to as "Inventions"); and (b) plans for research, development, new products,
marketing and selling, information regarding business plans, budgets and
unpublished financial statements, licenses, prices and costs, information
concerning suppliers and customers and information regarding the skills and
compensation of employees of the Company. Notwithstanding the above, nothing
received by Contractor will be considered to be Proprietary Information if: (a)
it has been published or is otherwise readily available to the public other than
by a breach of this Agreement; (b) it has been rightfully received by Contractor
from a third party without confidential limitations; (c) it has been
independently developed for Contractor by personnel or agents having no access
to the Proprietary Information; or (d) it was known to Contractor prior to its
first receipt from the Company.
3
<PAGE> 4
Certain specific obligations of Contractor arising out of Contractor's
confidential relationship with the Company are set forth in Sections 6 and 7 of
this Agreement.
6. RECOGNITION OF COMPANY'S RIGHTS; NONDISCLOSURE.
6.1 All Proprietary Information shall be the sole property of the Company
and its assigns, and the Company and its assigns shall be the sole owner of all
patents, copyrights and other rights in connection with such Proprietary
Information.
6.2 Contractor agrees to abide by the Company's document control procedure
established by the Company to ensure accurate maintenance and controls in
accessibility of all documents and information relating to the Company's
business. The Company will provide a copy of such policies to Contractor.
6.3 At all times, both during the term of this Agreement and after its
termination, Contractor will keep in confidence and trust all Proprietary
Information and shall not use or disclose to any third party any Proprietary
Information or anything related to such information without the written consent
of the Company, except as may be required in the ordinary course of performing
Services for the Company pursuant to this Agreement.
7. NONDISCLOSURE OF THIRD-PARTY INFORMATION.
Contractor understands that the Company has received and in the future will
receive from third parties information that is confidential or proprietary
("Third-Party Information") subject to a duty on the part of the Company to
maintain the confidentiality of such information and to use it only for certain
limited purposes. During the term of this Agreement and thereafter, Contractor
will hold Third-Party Information in the strictest confidence and will not
disclose or use Third-Party Information except as permitted by the agreement
between the Company and such third party, unless expressly authorized to act
otherwise by an officer of the Company in writing.
8. NO CONFLICTING OBLIGATION.
8.1 Contractor represents that his performance of all of the terms of this
Agreement and provision of Services as a contractor to the Company do not and
will not breach any agreement to keep in confidence any proprietary information
of another entity acquired by Contractor in confidence or in trust prior to the
date of this Agreement.
8.2 Contractor has not entered into, and hereby agrees not to enter into,
any agreement either written or oral in conflict with this Agreement, provided
that, absent a conflict of interest, Contractor is free to provide services to
any other entity during the performance of this Agreement.
9. NO IMPROPER USE OF MATERIALS.
Contractor agrees not to bring to the Company or to use in the performance
of Services any materials or documents of a present or former employer of
Contractor or of Contractor's
4
<PAGE> 5
employee, or any materials or documents obtained by Contractor under a binder of
confidentiality imposed by reason of another of Contractor's contracting
relationships, unless such materials or documents are generally available to the
public or Contractor has authorization from such present or former employer or
client for the possession and unrestricted use of such materials. Contractor
understands that Contractor is not to breach any obligation of confidentiality
that Contractor has to present or former employers or clients, and agrees to
fulfill all such obligations during the term of this Agreement.
10. TERM AND TERMINATION.
10.1 Unless previously terminated as set forth in Sections 10.2 or 10.3
below, the term of this Agreement shall commence on the Effective Date and shall
terminate twelve (12) months thereafter (the "Initial Term") unless extended by
mutual agreement of both parties hereto, which extension or extensions, if made,
shall be for an additional twelve months and which in the aggregate may extend
the term of this Agreement to up to five years from the Effective Date.
10.2 Either party may terminate this Agreement in the event of a material
breach by the other party of this Agreement, if such breach continues uncured
for a period of thirty (30) days after written notice of such breach by the
nonbreaching party.
10.3 The Company may terminate this Agreement if at any time Contractor
shall cease to be a director of the Company.
11. EFFECT OF TERMINATION.
11.1 Upon the expiration or termination of this Agreement, each party shall
be released from all obligations and liabilities to the other occurring or
arising after the date of such termination, except that any termination of this
Agreement shall not relieve Contractor of Contractor's obligations under
Sections 4, 5, 6 and 7 hereof, nor shall any such termination relieve Contractor
or the Company from any liability arising from any breach of this Agreement.
11.2 Upon termination of this Agreement for any reason whatsoever,
Contractor shall promptly surrender and deliver to the Company all documents,
notes and other materials of any nature pertaining to Contractor's work with the
Company, and any documents or data of any description (or any reproduction of
any documents or data) containing or pertaining to any Proprietary Information.
12. ASSIGNMENT.
The rights and liabilities of the parties hereto shall bind and inure to
the benefit of their respective successors, assigns, heirs, executors and
administrators, as the case may be; provided that Contractor may not assign or
delegate Contractor's obligations under this Agreement either in whole or in
part without the prior written consent of the Company.
13. LEGAL AND EQUITABLE REMEDIES.
5
<PAGE> 6
Because Contractor's services are personal and unique and because
Contractor may have access to and become acquainted with the Proprietary
Information of the Company, the Company shall have the right to enforce this
Agreement and any of its provisions by injunction, specific performance or other
equitable relief without prejudice to any other rights and remedies that the
Company may have for a breach of this Agreement.
14. GOVERNING LAW; SEVERABILITY.
This Agreement shall be governed by the laws of the State of California as
those laws are applied to contracts entered into and to be performed entirely in
California by California residents. If one or more of the provisions in this
Agreement are deemed unenforceable by law, then such provision will be deemed
stricken from this Agreement and the remaining provisions will continue in full
force and effect.
15. COMPLETE UNDERSTANDING; MODIFICATION.
This Agreement and all other documents mentioned herein, with the exception
of that certain Consulting Agreement dated as of September 11, 1996 between the
Company and Contractor and all stock option agreements between the Company and
Contractor, constitute the final, exclusive and complete understanding and
agreement of the parties hereto and supersedes all prior understandings and
agreements, and is entered into without reliance upon any representation,
whether oral or written, not stated herein. Any waiver, modification or
amendment of any provision of this Agreement shall be effective only if in
writing and signed by a Company officer.
16. NOTICES.
Any notices required or permitted hereunder shall be given to the
appropriate party at the address specified below or at such other address as the
party shall specify in writing. Such notice shall be deemed given upon personal
delivery to the appropriate address or sent by certified or registered mail,
three days after the date of mailing.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the Effective Date.
CALIPER TECHNOLOGIES CORP. CONTRACTOR
By: DAVID K. LAM By: DAVID MILLIGAN
----------------------------- ------------------------------
Dr. David Milligan
Title: PRESIDENT AND CEO Address:
--------------------------- -------------------------
-------------------------
-------------------------
6
<PAGE> 7
EXHIBIT A
SERVICES
Consultation and advice concerning:
1. the on-going review of Caliper's core competitive strengths;
2. the review and development of optimal growth strategies, in particular
partnering relationships; and
3. the identification and development of product and partnership strategies,
particularly in pharmaceuticals and diagnostics.
<PAGE> 8
EXHIBIT B
THE FIELD
The following fields, excluding the development of miniature chemical or
biochemical systems for the analysis of DNA or RNA:
a. microfabrication and micromachining as these disciplines apply to the
development of miniature chemical or biochemical systems for analysis
or synthesis;
b. analytical chemistry or biochemistry as these disciplines apply to the
development of miniature chemical or biochemical systems for analysis
or synthesis;
c. chemical or biochemical detection methods as they apply to the use of
these technologies in the development of miniature chemical or
biochemical systems for analysis or synthesis.
d. molecular separations sciences as it applies to the development of
miniature chemical or biochemical systems for analysis; and
e. biological, biochemical or chemical assays as they apply to the
development of miniature chemical or biochemical systems for analysis
or synthesis.
<PAGE> 1
EXHIBIT 10.18
September 23, 1999
Mr. James Knighton
153 Terrace Drive
San Francisco, CA 94127
Re: Caliper Technologies Corp.
Dear Jim:
The purpose of this letter is to set forth the terms of your employment with
Caliper Technologies Corp. (the "Company").
Position: Chief Financial Officer
Reporting: Daniel L. Kisner, M.D.
Duties: Supervision of Finance, Investor Relations and Public Relations
Compensation: Your compensation package would include the following:
Base Salary: $20,417 per month (equivalent to $245,004 per annum), subject
to standard payroll deductions and withholdings. Sign-on Bonus: $50,000
payable with the first paycheck following your date of hire. Performance
Bonus: Based on performance goals to be determined, with a minimum of 30%
of base salary guaranteed during the first 12 months of employment payable
annually. Stock Grant: At such time as the closing price for Caliper
Technologies Corp. trades at or above 125% of the initial public offering
price for six consecutive months you will be granted shares of the company
equal in value to $100,000 based on the IPO closing price.
Equity: Subject to the Board of Directors' approval, you will be granted an
option to purchase 420,000 shares of Common Stock of the Company at the
fair market value as established by the Board of Directors. The shares
subject to the option will vest over a five-year period with 20% of the
shares vesting one (1) year from your start date, and thereafter the shares
shall vest at a rate of 1/60th of the shares per month at the end of each
of the remaining 48 months. The options will be granted pursuant to the
Company's 1996 Stock Option Plan.
In addition to the forward vesting provisions stated in the Company's 1996
Stock Option Plan you would also be eligible for forward vesting of 12
months if your employment was involuntarily terminated or 24 months if
following a change of control the plan forward vesting qualification event
were to occur and your employment was involuntarily or constructively
terminated.
Stock Option Related Cash Bonus: You will receive a cash bonus payable at
exercise of your options equal to the difference between the exercise price
and $1.00 per share. The resulting income to you from the award of this
grant will be grossed up to cover your taxes.
<PAGE> 2
James Knighton
Terms of Employment
September 23, 1999
Benefits:You will receive all the employment benefits available to full time,
regular exempt employees of Caliper Technologies Corp. Currently, given
your base salary, the life insurance coverage provided is limited to a
guaranteed limit of $235,000 with a maximum coverage limit of $300,000
based on proof of insurability. Our AD&D coverage is limited to $300,000.
The current Long Term Disability plan provides for 66.7% of your monthly
base salary to a limit of $10,000 per month. We are currently in the
process of soliciting quotes to change these three benefits. We will be
raising our life insurance and AD&D maximum benefits levels to $500,000. We
will be changing both the maximum limit on our LTD to a more acceptable
monthly maximum as well as changing the premium funding arrangement for
more positive taxation of any disability benefit.
Relocation: See attached Caliper Technologies Corp. Relocation Coverage. Your
relocation must occur within four years of date of employment.
Loan: You shall be eligible for a housing loan of up to $500,000 in connection
with the purchase of a primary residence near the Company. This loan will
be made to you by the Company with a maximum term of five years (with the
due date for full repayment accelerated upon voluntary termination of
employment to such date of termination) at such interest rate as shall be
necessary to avoid imputed income to you under all applicable sections of
the IRS Code. Interest on this loan will be paid on a monthly basis through
automatic payroll deduction. The repayment of the principle will be due in
full five years from the date of the loan.
Severance Pay: If your employment with Caliper Technologies Corp. is terminated
involuntarily severance payments are agreed as follows: Termination for
Cause, No severance; Constructive discharge or involuntary termination,
base salary for 12 months or until you are employed by another company as a
regular employee or full-time consultant, whichever is less; or change of
control followed by involuntary termination, Base salary for 12 months or
until you are employed by another company as a regular employee or
full-time consultant, whichever is less.
Employment at Will: Your employment will be at will, which means it may be
terminated at any time by you or the Company.
Start Date: September 30, 1999
Definitions:
"Cause" shall mean the occurrence of any of the following: (i) Employee
engages in conduct that constitutes willful gross neglect or willful gross
misconduct in carrying out his duties, resulting, in either case, in
material economic harm to the company, unless Employee believed in good
faith that such conduct was in, or not opposed to, the best interest of the
Company; (ii) any unjustified refusal to follow reasonable directives by
the CEO or duly adopted by the Board; or (iii) conviction of a felony crime
involving moral turpitude. Written notice shall be provided and the
Employee shall have a 30-day period to correct.
"Change of control" shall mean (i) any merger or consolidation of the
Company with, or any sale of all or substantially all of the Company's
assets to any other unaffiliated corporation or entity, unless as a result
of such merger, consolidation or sale of assets the holders of the
Company's voting securities prior thereto hold at least 50 percent of the
total voting power in the surviving or successor corporation or entity, or
(ii) the acquisition by any Person (other than any employee benefit plan,
or related trust, sponsored or maintained by the Company or any affiliate
of the Company) as Beneficial Owner (as such terms are defined in the
Securities Exchange Act of 1934, as amended, or the rules and regulations
there under), directly or indirectly, of securities of the Company
representing 50 percent or more of the total voting power represented by
the company's then outstanding voting securities. For purposes of this
definition, the term "affiliate" shall mean any person which controls the
Company, which is controlled by the Company, or which is under common
control with the Company within the meaning of Rule 144(a)(1) promulgated
under the Securities Act of 1933, as amended. Notwithstanding any
Page 2 of 4
<PAGE> 3
James Knighton
Terms of Employment
September 23, 1999
provision in this agreement to the contrary, the term "affiliate" shall not
include the Hewlett-Packard Company or Dow Corning Corporation or any
subsidiary of either company.
"Constructive Termination" shall mean either (i) a substantial reduction in
Employee's duties, responsibilities or position or (ii) any substantial
downward change in Employee's compensation or benefits, except for
compensation and benefits changes which are consistent with downward
changes for all Company executives.
As a condition of employment, you also agree to sign and comply with the
Company's Proprietary Information and Inventions Agreement. In compliance with
federal immigration law, you will be required to provide documentary evidence of
your identity and eligibility of employment in the United States.
This letter contains the complete, final and exclusive embodiment of the terms
of your employment with the Company. This letter shall be governed by California
law without regard to conflict of laws principles.
We believe we are far along in the process of assembling a world class team and
a broad and deep technology portfolio. We hope that you will join us in building
a preeminent company. If the foregoing accurately reflects our agreement, please
so indicate by signing where indicated below and returning the enclosed
duplicate copy of this letter to me.
This offer will remain open until September 24, 1999.
Sincerely,
/s/ DANIEL L. KISNER
----------------------------
Daniel L. Kisner, M.D.
Chief Executive Officer & President
Caliper Technologies Corp.
The foregoing is agreed and accepted.
/s/ JAMES KNIGHTON 9/24/1999
- ----------------------------- --------------------
Mr. James Knighton Date
Page 3 of 4
<PAGE> 4
September 24, 1999
Mr. James Knighton
153 Terrace Drive
San Francisco, CA 94127
Re: Addendum to offer of employment from Caliper Technologies Corp.
Dear Jim:
In addition to the terms and conditions stated in our offer of employment dated
September 23, 1999, we add the following.
Reporting: Your reporting relationship is further defined as: the position of
Chief Financial Officer reports to the President and Chief Executive
Officer.
Resolution of Disputes: Any dispute, controversy or claim arising out of or
related to your employment with Caliper Technologies Corp. or any
termination of such employment shall be resolved by binding confidential
arbitration, to be held in Santa Clara County, California, in accordance
with the Commercial Arbitration Rules of the American Arbitration
Association. Judgment upon the award rendered by the arbitrator(s) may be
entered in any court having jurisdiction thereof. Each party will be
responsible for their own costs and expenses, including attorney's fees,
incurred in resolving any such claim.
Please be aware that this offer continues to be valid until 5 PM today,
September 24, 1999. If you need to contact me this weekend you can reach me at
my home number 650-508-8516.
Regards,
/s/ RICHARD C. BUTTS
----------------------------
Richard C. Butts
Senior Director, Human Resources
Caliper Technologies Corp.
ACCEPTED:
/s/ JAMES L. KNIGHTON 9/24/99
---------------------- -------
James L. Knighton Date
<PAGE> 1
Exhibit 10.19
CALIPER TECHNOLOGIES CORP.
CONSULTING AGREEMENT
THIS AGREEMENT is made and entered into as of the 1st day of May, 1997 (the
"Effective Date") by and between CALIPER TECHNOLOGIES CORP., a Delaware
corporation (the "Company"), and REGIS MCKENNA ("Contractor").
RECITAL
As part of its ongoing program of research and development, the Company
desires to engage individuals with business and marketing expertise to assist
the Company in various matters from time to time. Contractor is qualified and
willing to provide such services. Therefore, the Company and Contractor desire
to enter into this Agreement.
AGREEMENT
In consideration of the mutual covenants set forth below, the parties
hereby agree as follows:
1. ENGAGEMENT OF SERVICES.
Contractor, pursuant to the provisions of this Agreement, is hereby engaged
by the Company to provide advice in marketing strategies and other matters to
the Company as set forth in Exhibit A hereto (the "Services"). Contractor shall
perform Services as requested by the Company from time to time to the best of
his ability, such Services to be performed at such place or places and at such
times as mutually agreed upon by the Company and Contractor. Contractor shall
provide an average of two (2) days per month for twelve (12) months from the
date of this Agreement. The Company recognizes that Contractor may be
unavailable to perform Services for certain limited amounts of time due to other
commitments. Contractor shall notify the Company in advance of any such expected
periods of unavailability, which shall not be considered a breach of this
Agreement unless the duration of any such period of unavailability extends for
more than twenty (20) consecutive days.
2. COMPENSATION.
2.1 As consideration for Contractor's Services and for the discharge of
all Contractor's obligations hereunder, the Company shall grant Contractor a
right to purchase 30,000 shares of the Company's Common Stock at the current
fair market value of $.40 per share, which shares shall be subject to a right of
repurchase by the Company which shall lapse over a twelve month period at a rate
of 2,500 shares per month at the end of each month, beginning with the month of
May 1997, whether or not the Company requests Services. If Contractor shall
cease to be a director, officer, employee or consultant to the Company prior to
the lapse of the repurchase right of the Company with respect to all of the
shares under the aforementioned grant, for any reason, the lapse of the
repurchase right of the Company shall
1
<PAGE> 2
immediately cease and any shares which remain subject to the repurchase right of
the Company on the date the Agreement is terminated shall remain subject to the
repurchase right of the Company.
2.2 In addition to such compensation, the Company will reimburse
Contractor for travel and other out-of-pocket costs reasonably incurred by him
in the course of performing Services under this Agreement; provided however,
that the Company shall not be obligated hereunder unless (a) the Company has
agreed in advance to reimburse such costs, and (b) Contractor provides the
Company with appropriate receipts or other relevant documentation for all such
costs as part of any submission by Contractor for reimbursement.
3. INDEPENDENT CONTRACTOR.
It is understood and agreed that Contractor is an independent contractor
and not an agent or employee of the Company. Contractor has no authority to act
on behalf of the Company, or to obligate the Company by contract or otherwise.
Contractor will not be eligible for any employee benefits, nor will the Company
make deductions from Contractor's fees for taxes. The payment of any taxes
related to Contractor's provision of Services under this Agreement shall be the
sole responsibility of Contractor.
4. ADDITIONAL ACTIVITIES.
4.1 During the period in which Contractor provides Services to the Company
under this Agreement (the "Contracting Period"), Contractor will not directly or
indirectly (whether for compensation or without compensation), provide services
relating to the Field (as described in Exhibit B hereto) to any corporation or
other entity which is engaged in research in the Field, other than to those
corporations or other entities to which Contractor provides services on the date
of this Agreement; provided, however, that the foregoing shall not prevent
Contractor from engaging in any academic research, teaching or related activity
in the Field.
4.2 During the Contracting Period, and for an amount of time thereafter
equal in length to the lesser of (a) two years or (b) the length of the
Contracting Period, Contractor will not, directly or indirectly (whether for
compensation or without compensation):
(i) recruit, solicit or induce, or attempt to induce, any employee or
employees of the Company to terminate their employment with, or otherwise cease
their relationship with, the Company; or
(ii) induce any other contractor, or the employee of any other
contractor to terminate its or its contractual relationship with the Company; or
(iii) solicit, divert or take away, or attempt to divert or to take
away, the business or patronage of any of the clients, customers or accounts, or
prospective clients, customers or accounts, if any, of the Company that were
contacted, solicited or served by Contractor during the Contracting Period.
4.3 The restrictions set forth in paragraphs 4.1 and 4.2 are considered by
the parties to be reasonable for the purposes of protecting the business of the
Company. However, if any such
2
<PAGE> 3
restriction is found by any court of competent jurisdiction to be unenforceable
because it extends for too long a period of time or over too great a range of
activities or in too broad a geographic area, it shall be interpreted to extend
only over the maximum period of time, range of activities or geographic area as
to which it may be enforceable.
5. ESTABLISHMENT OF CONFIDENTIAL RELATIONSHIP.
Contractor recognizes that the Company is engaged in a continuous program
of research and development respecting its present and future business
activities. Contractor understands that:
5.1 As part of Contractor's Services performed for the Company, Contractor
will be involved in discussions that relate to the Company's technology and
business strategy, and, in the course of providing Services to the Company, may
develop new ideas or inventions or make other contributions of value to the
Company.
5.2 This Agreement creates a relationship of trust and confidence between
Contractor and the Company with respect to any information which is:
(i) applicable to the business of the Company or any client or
customer of the Company; and
(ii) is made known to Contractor by the Company or by any client or
customer of the Company, or is learned by Contractor while performing Services
for the Company.
5.3 The Company possesses and will continue to possess information: (i)
that has been created, discovered, developed, or otherwise become known to the
Company; or (ii) in which property rights have been assigned or otherwise
conveyed to the Company by another entity, which information has commercial
value in the business in which the Company is engaged and is treated by the
Company as confidential. All such information is hereinafter referred to as
"Proprietary Information." By way of illustration, but not limitation,
Proprietary Information includes: (a) inventions, developments, designs,
applications, improvements, trade secrets, formulae, ideas, know-how, methods or
processes, discoveries, techniques and data (hereinafter collectively referred
to as "Inventions"); and (b) plans for research, development, new products,
marketing and selling, information regarding business plans, budgets and
unpublished financial statements, licenses, prices and costs, information
concerning suppliers and customers and information regarding the skills and
compensation of employees of the Company. Notwithstanding the above, nothing
received by Contractor will be considered to be Proprietary Information if: (a)
it has been published or is otherwise readily available to the public other than
by a breach of this Agreement; (b) it has been rightfully received by Contractor
from a third party without confidential limitations; (c) it has been
independently developed for Contractor by personnel or agents having no access
to the Proprietary Information; or (d) it was known to Contractor prior to its
first receipt from the Company.
Certain specific obligations of Contractor arising out of Contractor's
confidential relationship with the Company are set forth in Sections 6 and 7 of
this Agreement.
6. RECOGNITION OF COMPANY'S RIGHTS; NONDISCLOSURE.
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<PAGE> 4
6.1 All Proprietary Information shall be the sole property of the Company
and its assigns, and the Company and its assigns shall be the sole owner of all
patents, copyrights and other rights in connection with such Proprietary
Information.
6.2 Contractor agrees to abide by the Company's document control procedure
established by the Company to ensure accurate maintenance and controls in
accessibility of all documents and information relating to the Company's
business. The Company will provide a copy of such policies to Contractor.
6.3 At all times, both during the term of this Agreement and after its
termination, Contractor will keep in confidence and trust all Proprietary
Information and shall not use or disclose to any third party any Proprietary
Information or anything related to such information without the written consent
of the Company, except as may be required in the ordinary course of performing
Services for the Company pursuant to this Agreement.
7. NONDISCLOSURE OF THIRD-PARTY INFORMATION.
Contractor understands that the Company has received and in the future will
receive from third parties information that is confidential or proprietary
("Third-Party Information") subject to a duty on the part of the Company to
maintain the confidentiality of such information and to use it only for certain
limited purposes. During the term of this Agreement and thereafter, Contractor
will hold Third-Party Information in the strictest confidence and will not
disclose or use Third-Party Information except as permitted by the agreement
between the Company and such third party, unless expressly authorized to act
otherwise by an officer of the Company in writing.
8. NO CONFLICTING OBLIGATION.
8.1 Contractor represents that his performance of all of the terms of this
Agreement and provision of Services as a contractor to the Company do not and
will not breach any agreement to keep in confidence any proprietary information
of another entity acquired by Contractor in confidence or in trust prior to the
date of this Agreement.
8.2 Contractor has not entered into, and hereby agrees not to enter into,
any agreement either written or oral in conflict with this Agreement, provided
that, absent a conflict of interest, Contractor is free to provide services to
any other entity during the performance of this Agreement.
9. NO IMPROPER USE OF MATERIALS.
Contractor agrees not to bring to the Company or to use in the performance
of Services any materials or documents of a present or former employer of
Contractor or of Contractor's employee, or any materials or documents obtained
by Contractor under a binder of confidentiality imposed by reason of another of
Contractor's contracting relationships, unless such materials or documents are
generally available to the public or Contractor has authorization from such
present or former employer or client for the possession and unrestricted use of
such materials. Contractor understands that Contractor is not to breach any
obligation of
4
<PAGE> 5
confidentiality that Contractor has to present or former employers or clients,
and agrees to fulfill all such obligations during the term of this Agreement.
10. TERM AND TERMINATION.
10.1 Unless previously terminated as set forth in Section 10.2 below, the
term of this Agreement shall commence on the Effective Date and shall terminate
twelve (12) months thereafter (the "Initial Term").
10.2 Either party may terminate this Agreement upon thirty (30) days prior
written notice to the other party.
11. EFFECT OF TERMINATION.
11.1 Upon the termination of this Agreement, each party shall be released
from all obligations and liabilities to the other occurring or arising after the
date of such termination, except that any termination of this Agreement shall
not relieve Contractor of Contractor's obligations under Sections 4, 5, 6 and 7
hereof, nor shall any such termination relieve Contractor or the Company from
any liability arising from any breach of this Agreement.
11.2 Upon termination of this Agreement for any reason whatsoever,
Contractor shall promptly surrender and deliver to the Company all documents,
notes and other materials of any nature pertaining to Contractor's work with the
Company, and any documents or data of any description (or any reproduction of
any documents or data) containing or pertaining to any Proprietary Information.
12. ASSIGNMENT.
The rights and liabilities of the parties hereto shall bind and inure to
the benefit of their respective successors, assigns, heirs, executors and
administrators, as the case may be; provided that Contractor may not assign or
delegate Contractor's obligations under this Agreement either in whole or in
part without the prior written consent of the Company.
13. LEGAL AND EQUITABLE REMEDIES.
Because Contractor's services are personal and unique and because
Contractor may have access to and become acquainted with the Proprietary
Information of the Company, the Company shall have the right to enforce this
Agreement and any of its provisions by injunction, specific performance or other
equitable relief without prejudice to any other rights and remedies that the
Company may have for a breach of this Agreement.
14. GOVERNING LAW; SEVERABILITY.
This Agreement shall be governed by the laws of the State of California as
those laws are applied to contracts entered into and to be performed entirely in
California by California residents. If one or more of the provisions in this
Agreement are deemed unenforceable by law, then such provision will be deemed
stricken from this Agreement and the remaining provisions will continue in full
force and effect.
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<PAGE> 6
15. COMPLETE UNDERSTANDING; MODIFICATION.
This Agreement, and all other documents mentioned herein, constitute the
final, exclusive and complete understanding and agreement of the parties hereto
and supersedes all prior understandings and agreements, and is entered into
without reliance upon any representation, whether oral or written, not stated
herein. Any waiver, modification or amendment of any provision of this Agreement
shall be effective only if in writing and signed by a Company officer.
15. NOTICES.
Any notices required or permitted hereunder shall be given to the
appropriate party at the address specified below or at such other address as the
party shall specify in writing. Such notice shall be deemed given upon personal
delivery to the appropriate address or sent by certified or registered mail,
three days after the date of mailing.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the Effective Date.
CALIPER TECHNOLOGIES CORP. CONTRACTOR
By: /s/ DAVID LAM By: /s/ REGIS MCKENNA
------------------------------ ------------------------------
Title: President and Regis McKenna
Chief Executive Officer
---------------------------
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<PAGE> 7
EXHIBIT A
THE SERVICES
1. Assist in Caliper's position strategy;
2. Strategy review on market model;
3. Partnering and alliances;
4. Preparing the company for initial public offering of its common stock; and
5. Assist in the product launches process.
<PAGE> 8
EXHIBIT B
THE FIELD
The following fields:
a. microfabrication and micromachining as these disciplines apply to the
development of miniature chemical or biochemical systems for analysis or
synthesis;
b. analytical chemistry or biochemistry as these disciplines apply to the
development of miniature chemical or biochemical systems for analysis or
synthesis;
c. chemical or biochemical detection methods as they apply to the use of
these technologies in the development of miniature chemical or biochemical
systems for analysis or synthesis.
d. molecular separations sciences as it applies to the development of
miniature chemical or biochemical systems for analysis; and
e. biological, biochemical or chemical assays as they apply to the
development of miniature chemical or biochemical systems for analysis or
synthesis.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Selected Financial
Data" and "Experts" and to the use of our report dated March 5, 1999, in the
Registration Statement (Form S-1) and related Prospectus of Caliper Technologies
Corp. for the registration of shares of its common stock.
/s/ ERNST & YOUNG LLP
Palo Alto, California
October 11, 1999
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