<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 23, 1996
REGISTRATION NO. 333-8335
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CN BIOSCIENCES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 2833 33-0509785
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR
ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
------------------------
10394 PACIFIC CENTER COURT
SAN DIEGO, CALIFORNIA 92121
(619) 450-5500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
JAMES G. STEWART
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND SECRETARY
CN BIOSCIENCES, INC.
10394 PACIFIC CENTER COURT
SAN DIEGO, CALIFORNIA 92121
(619) 450-5500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
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PETER H. JAKES, ESQ. FREDERICK T. MUTO, ESQ.
WILLKIE FARR & GALLAGHER COOLEY GODWARD CASTRO HUDDLESON & TATUM
ONE CITICORP CENTER 4365 EXECUTIVE DRIVE
153 EAST 53RD STREET SAN DIEGO, CALIFORNIA 92121
NEW YORK, NEW YORK 10022 (619) 550-6000
(212) 821-8000
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / ---------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / ---------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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 THIS 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
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such State.
Subject to Completion, Dated August 23, 1996
PROSPECTUS
1,600,000 SHARES
LOGO
COMMON STOCK
------------------------
All of the 1,600,000 shares of Common Stock offered hereby are being sold
by CN Biosciences, Inc. ("CN
Biosciences" or the "Company"). Prior to this offering there has been no public
market for the Common Stock of the Company. It is currently estimated that the
initial public offering price will be between $12.50 and $13.50 per share. See
"Underwriting" for a discussion of the factors to be considered in determining
the initial public offering price.
The Common Stock has been approved for quotation on the Nasdaq National Market
under the symbol "CNBI," subject to official notice of issuance. The
Underwriters have reserved up to 80,000 shares of Common Stock offered hereby
for sale at the initial public offering price, less underwriting discounts and
commissions, to officers, directors, employees and other persons designated by
the Company who have expressed an interest in purchasing shares. See
"Underwriting."
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 6.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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Underwriting
Price to Discounts Proceeds to
Public and Commissions (1) Company (2)
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Per Share...................... $ $ $
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Total (3)...................... $ $ $
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</TABLE>
(1) For information regarding indemnification of the Underwriters, see
"Underwriting."
(2) Before deducting expenses of the offering payable by the Company estimated
at $750,000.
(3) The Company has granted the Underwriters an option, exercisable within 30
days from the date hereof, to purchase up to 240,000 additional shares of
Common Stock on the same terms as set forth above, solely to cover
over-allotments, if any. If such option is exercised in full, the total
Price to Public will be $ , the Underwriting Discounts and
Commissions will be $ and the Proceeds to Company will be
$ . See "Underwriting."
------------------------
The shares of Common Stock offered by the Underwriters are subject to prior
sale, receipt and acceptance by them and subject to the right of the
Underwriters to reject any order in whole or in part and to certain other
conditions. It is expected that delivery of such shares will be made through the
offices of UBS Securities LLC, 299 Park Avenue, New York, New York on or about
, 1996.
------------------------
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UBS SECURITIES DAIN BOSWORTH
Incorporated
, 1996
</TABLE>
<PAGE> 3
[COLOR PICTURE OF COMPANY CATALOGS SURROUNDING A CIRCLE WHICH SAYS "SIX
CATALOGS THAT NO LIFE SCIENTIST SHOULD BE WITHOUT" AND CAPTION WHICH READS "THE
COMPANY'S GENERAL AND SPECIALTY CATALOGS FEATURE IN EXCESS OF 7,000 PRODUCTS
USED WORLDWIDE IN DISEASE-RELATED LIFE SCIENCES RESEARCH".]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements,
including the notes thereto, appearing elsewhere in this Prospectus, including
the information under "Risk Factors." This Prospectus contains forward-looking
statements which involve risks and uncertainties. The Company's actual results
in the future could differ significantly from the results discussed in such
forward-looking statements. Factors that could cause or contribute to such a
difference include, but are not limited to, those discussed in "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business," as well as those discussed elsewhere in this
Prospectus.
THE COMPANY
CN Biosciences, Inc. ("CN Biosciences" or the "Company") is engaged in the
development, production, marketing and distribution of a broad array of products
used worldwide in disease-related life sciences research at pharmaceutical and
biotechnology companies, academic institutions and government laboratories. The
Company's products include biochemical and biological reagents, antibodies,
assays and research kits which it sells principally through its general and
specialty catalogs under its well-established brand names, including Calbiochem
and Novabiochem. With over 7,000 products, the Company offers scientists the
convenience of obtaining from a single source both innovative and fundamental
research products, many of which are instrumental to areas of research such as
cancer, cardiovascular disease, Alzheimer's and AIDS. The Company believes it
has established a long-standing reputation in the life sciences research
products market for product quality, product reliability, extensive technical
service and strong customer support.
Industry sources estimate that there are over 300,000 scientists worldwide
currently engaged in life sciences research who utilize specialty biochemical
products such as those offered by the Company. Recent advances in understanding
physiological processes at the molecular and cellular level, genomics and the
development of other basic life sciences technologies have increased the demand
for innovative product solutions designed to assist scientists in improving the
efficiency and quality of their research. Life sciences research can often
involve experimentation carried out over months or even years, and as a result
researchers seek quality products to minimize extraneous variables in their
research protocols. Research products range broadly in complexity, purity,
scarcity, cost and function, and their availability, consistency and quality are
often critical to a project's success. In its most recent industry survey
published in 1994, Frost & Sullivan estimated that $1.6 billion was spent
worldwide in 1992 on specialty biochemical products, such as those offered by
the Company for research in biochemistry, immunology, cellular biology and
molecular biology. According to Frost & Sullivan, the compounded annual growth
rate from 1992 through 1999 for the U.S. life sciences research products market
(which represents approximately one-third of the worldwide market) is estimated
to be approximately 13%.
The Company believes that it is strategically positioned with both the
breadth of research products and critical mass that are characteristic of the
industry's larger providers, as well as the innovative research and development
capabilities that are characteristic of the industry's smaller specialty
companies. The larger companies typically generate revenues from the sale of a
broad range of equipment, laboratory supplies and other products, including
research products which compete with many of the Company's product offerings.
The smaller companies, the majority of which are substantially smaller than the
Company, typically supply a highly focused product offering to very specific
markets. Based upon the Company's strategic positioning, it believes it can
establish itself as a leading supplier of higher margin research products for
selected emerging, high growth niche research markets by offering innovative
products through specialty catalogs. In recent years, the Company has
implemented its niche research market strategy in areas that the Company
believes to be particularly strong areas of growth. In 1994, the Company
published its first specialty catalog in the area of signal transduction, which
it followed with the introduction of its Apoptosis and Combinatorial Chemistry
specialty catalogs in February 1996.
3
<PAGE> 5
The life sciences research products industry is highly fragmented and may
offer opportunities for consolidation. One key element of the Company's strategy
is the selective acquisition of companies with research and development
capabilities and product offerings in areas targeted for future growth. In
August 1995, the Company significantly expanded its immunochemical and molecular
biology capabilities with the $6.2 million cash purchase of the Oncogene
Research Products business from Oncogene Science, Inc. ("OSI"), a publicly
traded biopharmaceutical company. The acquisition of this business enhanced the
depth and breadth of the Company's scientific resources, while providing a
complementary base of products and customers which has been successfully
integrated into the Company's operations and infrastructure. As a result of this
acquisition, the Company added over 700 new product offerings, many of which are
included in the Company's Apoptosis specialty catalog.
During 1995, the Company sold products to over 6,900 accounts, including
individual research scientists, institutions, companies and distributors, filled
over 70,000 orders in 46 countries and generated sales of $27.0 million and net
income of $1.0 million. The Company's numerous products, represented by over
13,000 stock keeping units (SKUs), are principally sold through its three
general catalogs and four specialty catalogs. The Company also develops and
distributes a variety of supporting publications designed to highlight its new
products and target specific market segments with selected product offerings.
These catalogs and supporting publications are distributed utilizing the
Company's proprietary database of more than 100,000 research scientists and
institutions. The Company's customers include many leading pharmaceutical and
biotechnology companies, academic institutions and government laboratories. The
Company continually adds new products and expects to introduce in excess of 800
products during 1996. Development, marketing and distribution activities are
supported by the Company's highly experienced scientific staff, which includes
40 professionals holding Ph.D.s in a variety of life sciences disciplines, as
well as other personnel located at seven facilities in the United States,
Europe, Japan and Australia.
The Company was incorporated by Warburg, Pincus Investors, L.P.
("Warburg"), ABS MB (C-N) Limited Partnership ("ABS") and certain current and
former members of management to acquire the businesses conducted by the
Company's subsidiaries. See "Certain Transactions." The Company was incorporated
under the laws of the State of Delaware on March 11, 1992 as
Calbiochem-Novabiochem International, Inc. and changed its name to CN
Biosciences, Inc. on July 17, 1996. The Company's principal executive offices
are located at 10394 Pacific Center Court, San Diego, California 92121, and its
telephone number is (619) 450-5500.
As used in this Prospectus, references to the "Company" and "CN
Biosciences" refer to CN Biosciences, Inc. and its direct and indirect
subsidiaries, unless otherwise indicated or the context otherwise requires. The
Company's subsidiaries, all of which are wholly owned, include a U.S. operating
subsidiary based in San Diego and international subsidiaries organized under the
local laws of their jurisdiction of operation. Calbiochem(R), Novabiochem(R) and
Clinalfa(R) are registered trademarks of the Company. References are made herein
to trademarks of companies other than the Company.
4
<PAGE> 6
THE OFFERING
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Common Stock Offered............................. 1,600,000 shares
Common Stock Outstanding after the Offering...... 4,856,905 shares (1)
Use of Proceeds.................................. Repayment of all amounts outstanding under the
Company's bank credit facility (approximately
$8.2 million), working capital, general corporate
purposes and possible acquisitions.
Nasdaq National Market Symbol.................... CNBI
</TABLE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
PERIOD FROM INCEPTION YEARS ENDED DECEMBER 31, JUNE 30,
(MARCH 11, 1992) TO --------------------------- -----------------
DECEMBER 31, 1992 1993 1994 1995 1995 1996
--------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS
DATA:
Sales..................................... $17,719 $22,771 $24,188 $26,966 $13,075 $16,565
Cost of sales............................. 9,691 14,195 13,183 13,185 6,691 7,602
------- ------- ------- ------- -------
Gross profit.............................. 8,028 8,576 11,005 13,781 6,384 8,963
------- ------- ------- ------- ------- -------
Operating expenses:
Research and development................ 290 462 736 1,338 488 1,065
Selling, general and administrative..... 7,742 10,292 10,343 10,608 4,802 6,185
------- ------- ------- ------- ------- -------
Total operating expenses.............. 8,032 10,754 11,079 11,946 5,290 7,250
------- ------- ------- ------- ------- -------
Income (loss) from operations............. (4) (2,178) (74) 1,835 1,094 1,713
Interest expense, net..................... 61 170 326 527 159 394
------- ------- ------- ------- ------- -------
Income (loss) before income taxes......... (65) (2,348) (400) 1,308 935 1,319
Provision (benefit) for income taxes...... 401 (195) 62 291 208 462
------- ------- ------- ------- ------- -------
Net income (loss)..................... $ (466) $(2,153) $ (462) $ 1,017 $ 727 $ 857
======= ======= ======= ======= ======= =======
Pro forma net income per share............ $ .30 $ .25
======= =======
Pro forma shares used in per share
computations (2)........................ 3,367 3,477
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996
-------------------------
ACTUAL AS ADJUSTED (3)
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CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents........................................................ $ 1,118 $11,545
Working capital.................................................................. 15,286 27,130
Total assets..................................................................... 32,228 42,655
Long-term debt and other obligations, net of current portion..................... 8,201 1,451
Redeemable preferred stock....................................................... 18,343 --
Common stockholders' equity (deficit)............................................ (184) 36,753
</TABLE>
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(1) Excludes (i) 393,914 shares of Common Stock, par value $.01 per share (the
"Common Stock"), issuable upon the exercise of outstanding stock options
issued under the Company's 1992 Stock Option Plan, as amended (the "Stock
Option Plan"), (ii) an additional 359,559 shares of Common Stock reserved
for future issuance under the Company's Stock Option Plan and (iii) 3,028
shares issuable upon the exercise of an outstanding warrant (the "Warrant").
(2) See Note 1 to notes to consolidated financial statements for an explanation
of the method used to determine the number of shares used to compute pro
forma share amounts.
(3) Adjusted to give effect to the conversion of all outstanding shares of the
Company's Series A Convertible Preferred Stock, par value $1.00 per share,
into 788,814 shares of Class A Common Stock and the subsequent conversion
into an equal number of shares of Common Stock, the exchange of all
outstanding shares of the Company's Series B Preferred Stock, par value
$1.00 per share, for 1,380,215 shares of Common Stock (at an assumed public
offering price of $13.00 per share), in each case upon the consummation of
the offering, the sale of 1,600,000 shares of Common Stock offered hereby,
and the receipt and application of the net proceeds therefrom. See "Use of
Proceeds" and "Capitalization."
------------------------
Except as otherwise specified, all information in this Prospectus assumes
no exercise of the Underwriters' over-allotment option and has been adjusted to
give effect to (i) a 2.36585-for-one stock split in the form of a stock dividend
effected on July 17, 1996, (ii) the conversion upon the consummation of this
offering of all outstanding shares of Series A Convertible Preferred Stock into
an aggregate of 788,814 shares of Class A Common Stock and subsequent conversion
into an equal number of shares of Common Stock and (iii) the exchange upon the
consummation of this offering of all outstanding shares of Series B Preferred
Stock into an aggregate of 1,380,215 shares of Common Stock. See "Description of
Capital Stock" and "Certain Transactions."
5
<PAGE> 7
RISK FACTORS
Prospective investors in the shares of Common Stock offered hereby should
carefully consider the following risk factors, in addition to the other
information appearing in this Prospectus. This Prospectus contains
forward-looking statements which involve risks and uncertainties. The Company's
actual results in the future could differ significantly from the results
discussed in such forward-looking statements. Factors that could cause or
contribute to such a difference include, but are not limited to, those discussed
in "Risk Factors" below, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business," as well as those discussed
elsewhere in this Prospectus.
Dependence on Research and Development Budgets and Government Research
Funding. The Company's customers include research scientists at pharmaceutical
and biotechnology companies, academic institutions and government and private
research laboratories. Fluctuations in the research and development budgets of
these companies and institutions can have a significant effect on the demand for
the Company's products. Such budgets are based on a wide variety of factors
including the resources available to make such expenditures, the spending
priorities among various types of research and the policies regarding such
expenditures during recessionary periods. Any decrease in life sciences research
and development expenditures by such companies and institutions could have a
material adverse effect on the Company's business, financial condition and
results of operations.
A significant portion of the Company's sales have been to research
scientists, universities, government research laboratories, private foundations
and other institutions whose funding is dependent on grants from government
agencies such as the U.S. National Institutes of Health ("NIH") and similar
domestic and international agencies. The funding associated with approved NIH
grants generally becomes available at particular times of the year, as
determined by the federal government, and may result in fluctuations in the
Company's operating results. Although research funding has increased during the
past several years, grants have, in the past, been frozen for extended periods
or have otherwise become unavailable to various institutions, sometimes without
advance notice. Furthermore, increasing political pressures to reduce or
eliminate budgetary deficits may result in reduced allocations to the NIH and
the other government agencies that fund research and development activities. If
government funding, especially NIH grants, were to become unavailable to
researchers for any extended period of time or if overall research funding were
to decrease, there could be a material adverse effect on the Company's business,
financial condition and results of operations.
Risks Inherent in Growth, Expansion and Acquisition Strategy. The Company
has sought and will continue to seek growth in sales and profitability primarily
through the internal development and acquisition of new product lines,
additional customers and new businesses. A significant portion of the Company's
historical revenue growth is attributable to internal product development,
sourcing of third-party products and, more recently, from its acquisition of the
Oncogene Research Products business. The ability of the Company to achieve its
expansion objectives and to manage its growth effectively depends upon a variety
of factors, including (i) the ability to internally develop products, (ii) the
ability to identify and license products sourced from third parties, (iii) the
ability to successfully position and market its products, (iv) the ability to
identify and consummate attractive acquisitions and (v) the ability to integrate
new businesses, facilities and personnel into existing operations. If the
Company is unable to manage growth effectively, there could be a material
adverse effect on the Company's business, financial condition and results of
operations.
The Company competes for acquisition and expansion opportunities with other
companies that have significantly greater financial and other resources than
those of the Company. There can be no assurance that suitable acquisition or
investment opportunities will be identified, consummated, or, if consummated,
integrated successfully and profitably into the Company's operations. Moreover,
there can be no assurance that the Company's historic rate of growth or
expansion will continue, or that further growth or expansion will result in
continued profitability.
Reliance on Niche Research Market Strategy. Key elements of the Company's
strategy include the targeting and penetration of emerging life sciences niche
research markets and the continued development of the niche research markets
currently served by the Company. If the Company is unable to successfully target
and penetrate these niche research markets or is unable to continue developing
the niche research markets currently served or if the Company's new products are
not accepted by research scientists, there could be a
6
<PAGE> 8
material adverse effect on the Company's business, financial condition and
results of operations. In addition, the Company currently benefits from its
participation in emerging niche research markets which, as they expand, may
attract the attention of the Company's competitors. Further, as these niche
research markets mature, products that were once innovative, thus commanding
higher margins, may become commodities.
Dependence on New Products; Rapid Technological Change. The life sciences
research products market is characterized by rapid technological change and
frequent product introductions. The Company's future success will depend, in
part, on its ability to develop and introduce, on a timely basis, products that
address the evolving needs of its customers. There can be no assurance that the
Company will not experience difficulties that could delay or prevent the
successful development, introduction and marketing of products. The Company has
experienced, and may in the future experience, delays in the development and
introduction of products, and there can be no assurance that the Company will
keep pace with the rapid rate of change in life sciences research, and will not
experience additional delays in the future. In addition, there can be no
assurance that new products will adequately meet the requirements of the
marketplace or achieve market acceptance. Factors affecting whether such
products will be accepted by the market include use of the product by research
scientists, citation of the product in published research, the timing of market
entry of the product relative to competitive products and general trends in life
sciences research. If the Company is unable, for technological or other reasons,
to develop and introduce products in a timely manner in response to changing
market environments or customer requirements, there could be a material adverse
effect on the Company's business, financial condition and results of operations.
Dependence on Licensing as a Source of Products. Many of the Company's
products are manufactured or sold pursuant to license agreements under which the
Company pays royalties to the patent holder based upon a percentage of the
product's sales. There can be no assurance that the Company will be able to
continue to successfully identify new products developed by others, and if
identified, to negotiate license agreements on favorable terms. Additionally,
there can be no assurance that the Company will be able to renew any existing
license agreements upon their expiration. See "Business -- Intellectual
Property."
Highly Competitive Market. The market for the Company's products is highly
competitive, and the Company expects competition to increase. Furthermore,
although the life sciences research products market continues to grow, its rate
of growth in recent years has been declining and may continue to decline. The
Company competes with many other life sciences research products suppliers, both
larger and smaller than the Company. Some of the Company's competitors,
including two of its largest competitors, Sigma-Aldrich Corporation
("Sigma-Aldrich") and Boehringer Mannheim GmbH ("Boehringer"), offer a broad
range of equipment, laboratory supplies and other products, including many of
the research products offered by the Company. To the extent that researchers
exhibit loyalty to the supplier that first supplies them with a particular
research product, the Company's competitors may have an advantage over the
Company with respect to products first developed by such competitors. In
addition, many of the Company's competitors have significantly greater research
and development, marketing, financial and other resources than the Company, and
therefore represent and will continue to represent significant competition in
the Company's existing and future markets. Because of their size and the breadth
of their product offerings, certain of these companies have been able to
establish managed accounts by which, through a combination of direct computer
links and volume discounts, they seek to gain a disproportionate share of orders
for research products from particular academic institutions or pharmaceutical or
biotechnology companies. Such managed accounts raise significant competitive
barriers for the Company. The Company currently benefits from its participation
in emerging niche research markets which, as they expand, may attract the
attention of the Company's competitors.
Reliance on Catalogs, Distributors and Direct Marketing Efforts; Limited
Sales Force. The Company sells its products principally through catalogs
distributed to research scientists and laboratories, and uses only a very
limited number of salespeople in certain of its markets. There can be no
assurance that the Company would be able to successfully establish other methods
of marketing and sales of its products should it become necessary or desirable
in the future. Additionally, the Company's catalogs are generally reissued every
12 to 24 months and price adjustments between catalog publication dates have
historically been infrequent. A significant portion of the Company's
international sales are made through independent distributors over which the
Company has no control and who also represent products of other companies.
Additionally, the Company
7
<PAGE> 9
recently entered into a joint distribution agreement relating to its Apoptosis
specialty catalog. The loss of any of these distribution methods could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business."
Volatility of Bulk Sales Business. In addition to sales of its core
products in standard laboratory quantity sizes (generally ranging from 100
nanograms to 100 grams), the Company offers certain products in bulk quantities
(generally up to ten kilograms) at discounts from catalog prices. Bulk sales,
which represented 23.5% of net sales in 1995, are generally characterized as
relatively high dollar sales made to a limited number of customers. Thus, the
absence or presence of a bulk sale could have a material impact on quarterly
results. Furthermore, the Company's bulk sales business fluctuates more and is
less predictable than its core business, and the uncertain timing and volatility
of bulk sales has in the past and may continue in the future to materially
affect the Company's business, financial condition and results of operations.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Significant Fluctuations in Quarterly Earnings. The Company's quarterly
operating results may vary significantly from quarter to quarter as a result of
a number of factors including new editions of existing catalogs, introduction of
additional specialty catalogs and bulk sales of the Company's products. Other
factors which may affect quarterly operating results include the timing of the
U.S. Government approval of the NIH budget, lower European and academic sales
during the summer months and various holiday breaks and fluctuations in weather.
The Company's current and planned expense levels are based in part upon its
expectations as to future revenues. Consequently, if revenues in a particular
quarter do not meet expectations, the Company may not be able to adequately
adjust operating expenses to compensate for the shortfall. Operating results may
therefore vary significantly from quarter to quarter and will not necessarily be
indicative of results in subsequent periods. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Quarterly Results."
Accumulated Deficit; Uncertainty of Future Operating Results. At June 30,
1996, the Company had an accumulated deficit of $1.2 million. Although the
Company has had net income for the past eighteen months, the Company incurred
net losses for the period from its inception (March 11, 1992) through December
31, 1992 and the years ended December 31, 1993 and 1994. Future operating
results will depend on many factors, including demand for the Company's
products, the levels and timing of government and private sector funding of life
sciences research and development activities, the timing of the introduction of
products and catalogs by the Company or its competitors, and the Company's
ability to control costs. Furthermore, the Company's gross margins can be
significantly affected by the presence or absence of bulk sales during any
particular period and quarterly fluctuations in sales relative to operating
expenses. There can be no assurance that the Company will be able to grow in
future periods or remain profitable. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
Risks Relating to International Sales and Operations. Historically, product
sales to customers outside the United States have accounted for approximately
50% of the Company's net sales, and the Company expects that international sales
will continue to account for a significant percentage of revenues in the future.
International sales and operations may be materially adversely affected by trade
restrictions, changes in tariffs and taxes, export license requirements,
difficulties in staffing and managing international operations, problems in
establishing or managing distributor relationships and general economic
conditions.
A majority of the Company's sales are denominated in U.S. dollars, with the
balance denominated in foreign currencies. Additionally, the Company publishes a
number of its catalogs priced in foreign currencies and price adjustments
between catalog publication dates to reflect fluctuations in the value of
foreign currencies relative to the U.S. dollar have historically been
infrequent. Consequently, fluctuations in the value of foreign currencies
relative to the U.S. dollar could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Risk of Patent Infringement. Because of the breadth of the Company's
product offerings and ambiguities in intellectual property law, the Company
periodically receives in the ordinary course of business notices of potential
infringement of patents held by others. Although the Company historically has
been able to
8
<PAGE> 10
satisfactorily resolve such claims and believes that any outstanding claims will
be satisfactorily resolved, there can be no assurance that the Company may not
be forced to discontinue the sale of one or more of its products, some or all of
which could be material. As the Company develops product offerings focused on
certain niche research markets, intellectual property rights of the Company or
others related to such markets may become increasingly important, and the
Company's failure to obtain and retain such rights may have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Business -- Intellectual Property."
Dependence on Key Personnel. The Company's future success depends in
significant part on the continued service of, and on the Company's continuing
ability to attract and retain, highly qualified technical, managerial and sales
personnel. Competition for such personnel is intense in the Company's industry
and geographic locations, and there can be no assurance that the Company will be
able to retain or attract such employees in the future. The loss of key
personnel or the inability to hire or retain qualified personnel could have a
material adverse effect on the Company's business, financial condition and
results of operations. The Company has entered into employment agreements with
Stelios B. Papadopoulos, its Chairman, Chief Executive Officer and President,
and Ben Matzilevich, its Vice President, Market Development -- Niche
Applications. See "Management."
Risk Relating to the Influence of the Internet on Marketing and
Catalogs. The Internet has begun to change marketing patterns in a wide variety
of industries. The high degree of personal computer usage within scientific
research organizations may lead to entirely new methods of marketing and sales
of research products. While the Company has established home pages on the
Internet for the Calbiochem and Novabiochem brands and is developing an Oncogene
Research Products brand home page, the Company may not be able to keep pace with
the rate of change in its markets brought about by the Internet and may invest
in catalogs or Internet-based projects which future changes may render obsolete.
Compliance with Government and Environmental Regulations. The Company is
subject to various forms of government regulations, including environmental and
safety laws and regulations and laws governing use and storage of hazardous
materials. The Company has in the past been notified of minor violations of
government and environmental regulations. The Company has promptly corrected
such violations without any material impact on the Company's operations. Any
future violation of, and the cost of compliance with, these laws and regulations
could have a material adverse effect on the Company's business, financial
condition and results of operations.
Because of the nature of its operations and the use of hazardous substances
in its ongoing manufacturing and research and development activities, the
Company is subject to stringent federal, state and local laws, rules,
regulations and policies governing the use, generation, manufacturing, storage,
air emission, effluent discharge, handling and disposal of certain materials and
wastes. Prior to the Company's inception, its U.S. subsidiary, at the time it
was owned by its former owners, was involved in two separate incidents related
to the release of hazardous materials into the environment at a leased facility
which is no longer occupied by the Company. The Company believes from a review
of correspondence from various regulatory agencies that these incidents were
investigated and remediated by the U.S. subsidiary's former owners. Although the
Company believes it is in material compliance with all applicable government and
environmental laws, rules, regulations, and policies, there can be no assurance
that the Company's business, financial condition and results of operations will
not be materially adversely affected by current or future environmental laws,
rules, regulations and policies or by liability arising out of any past or
future releases or discharges of materials that could be hazardous. See
"Business -- Government Regulation."
Product Liability Risk; Limited Insurance Coverage. Although the Company
does not sell products intended for use in humans, or, with the exception of its
Clinalfa products, sell products intended for use in human clinical trials, the
Company's business could expose it to potential liability risks. The Company
currently has only limited product liability insurance, and there can be no
assurance that it will be able to maintain such insurance or obtain additional
insurance on acceptable terms or that insurance will provide adequate coverage
against potential liabilities. A successful product liability claim or a series
of claims brought against the
9
<PAGE> 11
Company in excess of its insurance coverage limits could have a material adverse
effect on the Company's business, financial condition and results of operations.
Holding Company Structure. The Company is a holding company, the principal
assets of which are the capital stock of its subsidiaries, and has no
independent means of generating revenues. As a holding company, the Company
depends on dividends and other permitted payments from its subsidiaries,
including its international subsidiaries, to meet its cash needs. Under its
current bank credit facility, Calbiochem-Novabiochem Corporation, the Company's
U.S. operating subsidiary, is restricted from paying dividends and making loans
or advances to the Company, except in certain limited circumstances. These
restrictions will be eliminated upon the consummation of this offering. The
Company maintains cash balances at its various subsidiaries based upon local
results of operations. The amount of foreign-sourced earnings to be repatriated
to the United States is determined based upon foreign entity capitalization,
local cash needs, local and U.S. tax implications and requirements for cash in
the U.S. operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Control by Principal Stockholders. Upon consummation of the offering,
Warburg and ABS will beneficially own approximately 63.9%, of the Common Stock.
Because of such ownership, these stockholders will effectively control the
election of all members of the Board of Directors and determine all corporate
actions after the sale of the shares of Common Stock offered hereby.
Additionally, pursuant to an agreement with the Company, Warburg and ABS will
each have certain rights to nominate directors as long as they continue to own
specified percentages of the outstanding shares of Common Stock. See
"Management" and "Principal Stockholders."
Broad Discretion in Application of Net Proceeds. The net proceeds to the
Company from the sale of the shares of Common Stock offered hereby are estimated
to be approximately $18.6 million. The Company expects to use approximately $8.2
million to repay the outstanding indebtedness under its bank credit facility and
the balance for working capital, general corporate purposes and possible
acquisitions. The Company has not identified specific uses for the balance of
the proceeds at this time. The Company's management and Board of Directors will
have complete discretion with respect to the application of such proceeds. See
"Use of Proceeds."
No Prior Public Market; Possible Volatility of Stock Price. Prior to this
offering there has been no public market for the Company's Common Stock, and
although the Common Stock has been approved for quotation on the Nasdaq National
Market, subject to official notice of issuance, there can be no assurance that
an active public market for the Common Stock will develop or be sustained after
the offering. The initial public offering price will be negotiated between the
Company and the Representatives of the Underwriters and may not be indicative of
future market prices of the Common Stock. The trading price of the Company's
Common Stock could be subject to wide fluctuations in response to variations in
quarterly operating results, failure to meet expectations of, or a change in
recommendation by, securities analysts, announcements of technological
innovations or new products by the Company or its competitors, government policy
changes, general trends in life sciences research and other events or factors,
including factors outside the Company's control. In addition, as in the past,
stock market prices and volume may fluctuate significantly. These broad market
fluctuations may adversely affect the market price of the Company's Common
Stock. See "Shares Eligible for Future Sale" and "Underwriting."
Shares Eligible for Future Sale; Potential for Adverse Effect on Stock
Price; Registration Rights. Sales of a substantial number of shares of Common
Stock in the public market or the prospect of such sales could adversely affect
the market price of the Common Stock. The number of shares of Common Stock
available for sale in the public market is limited by restrictions under the
Securities Act of 1933, as amended (the "Securities Act"), and lock-up
agreements under which the directors, executive officers and principal
stockholders of the Company have agreed not to sell or otherwise dispose of any
of their shares of Common Stock for a period of 180 days from the date of this
Prospectus (the "Lock-Up Period") without the prior written consent of UBS
Securities LLC. UBS Securities LLC may, in its sole discretion and at any time
without notice, release all or any portion of the securities subject to lock-up
agreements. The Company has also agreed not to issue or sell any shares of
Common Stock for a period of 180 days from the date of this Prospectus, except
for the grant of
10
<PAGE> 12
additional options under the Stock Option Plan or the issuance of shares upon
the exercise of stock options or the Warrant. Upon completion of this offering,
in addition to the 1,600,000 shares offered hereby, approximately 8,043 shares
of Common Stock held by current stockholders will be eligible for immediate
sale. Commencing 90 days after the date of this Prospectus, 13,959 shares of
Common Stock issued upon the exercise of stock options will be eligible for sale
in reliance upon Rule 701 under the Securities Act ("Rule 701"). Upon expiration
of the Lock-Up Period, and subject to the limitations imposed by Rule 144 under
the Securities Act ("Rule 144"), 3,130,162 shares of Common Stock held by the
Company's directors, executive officers and principal stockholders will be
eligible for immediate sale. Promptly after the completion of this offering, the
Company intends to file a registration statement on Form S-8 under the
Securities Act covering approximately 393,914 shares of Common Stock reserved
for issuance pursuant to stock options outstanding as of June 30, 1996 and
359,559 shares of Common Stock reserved for future issuance under the Stock
Option Plan. Such registration statement will automatically become effective
upon filing. Accordingly, shares registered thereunder will, subject to Rule 144
volume limitations applicable to affiliates, be available for sale in the open
market, except to the extent that such shares are subject to vesting
restrictions with the Company or certain contractual restrictions on sale or
transfer. Holders of options to purchase 246,995 shares of Common Stock have
agreed not to sell or otherwise transfer their shares obtained upon exercise of
such options during the Lock-Up Period, 161,824 of which will be exercisable
upon the expiration of such Lock-Up Period. The holders of 3,211,179 shares of
Common Stock and the holder of the 3,028 shares of Common Stock issuable upon
the exercise of the Warrant are entitled to certain registration rights with
respect to such shares. If such holders, by exercising their registration
rights, cause a large number of shares to be registered and sold in the public
market, such sales could have an adverse effect on the market price of the
Common Stock. If the Company were required to include in a Company-initiated
registration shares held by such holders pursuant to the exercise of their
registration rights, such sales could have a material adverse effect on the
Company's ability to raise needed capital. See "Management -- Stock Option
Plan," "Description of Capital Stock -- Registration Rights" and "Shares
Eligible for Future Sale."
Immediate and Substantial Dilution. The initial public offering price is
substantially higher than the book value per share of the Common Stock.
Investors participating in this offering will incur immediate and substantial
dilution of $6.64 per share. To the extent that outstanding options to purchase
the Company's Common Stock are exercised, there will be further dilution to such
investors. See "Dilution."
No Intention to Pay Dividends. The Company has never paid a cash dividend
on the Common Stock and does not anticipate paying any cash dividends on the
Common Stock in the foreseeable future. The Company is a guarantor of its U.S.
subsidiary's bank credit agreement providing for term loans and a line of credit
(the "Credit Facility"). The Credit Facility restricts the payment of cash
dividends by the Company and also restricts the Company's U.S. subsidiary from
paying cash dividends and making loans or advances to the Company, except in
certain limited circumstances. These restrictions with respect to the U.S.
subsidiary will be eliminated upon the consummation of this offering, although
the restriction on the payment of cash dividends by the Company will continue.
See "Dividend Policy."
Anti-Takeover Effects of Certificate of Incorporation and Delaware
Law. Under the Company's Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation"), the Company's Board of Directors has the
authority to issue up to 5,000,000 shares of Preferred Stock and to determine
the price, rights, preferences and privileges of those shares without any
further vote or action by the stockholders. The rights of the holders of Common
Stock will be subject to, and may be adversely affected by, the rights of the
holders of any Preferred Stock that may be issued in the future. The issuance of
Preferred Stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of
making it more difficult for a third party to acquire a majority of the
outstanding voting stock of the Company. The Company has no present plans to
issue shares of Preferred Stock. In addition, the Company is subject to the
provisions of Section 203 of the Delaware General Corporation Law, an
anti-takeover law. See "Description of Capital Stock."
11
<PAGE> 13
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the shares
of Common Stock offered hereby are estimated to be $18.6 million ($21.5 million
if the Underwriters' over-allotment option is exercised in full), assuming a
public offering price of $13.00 per share and after deducting the estimated
underwriting discounts and commissions and expenses associated with the
offering. The Company intends to use the net proceeds (i) to repay all amounts
outstanding under the Credit Facility (approximately $8.2 million) and (ii) for
working capital, general corporate purposes and possible acquisitions. Pending
such uses, the net proceeds of this offering will be invested in short-term,
investment grade, interest-bearing securities. The debt to be repaid consists of
$500,000 outstanding under the Company's line of credit, which bears interest at
8.25% and matures in June 1998, and $7.7 million outstanding under term loans,
which bear interest at 8.625% and requires monthly payments of principal and
interest through August 2000. Borrowings under the line of credit were incurred
for working capital and general corporate purposes. Approximately $6.0 million
of the term loans was incurred to finance the Company's acquisition of the
Oncogene Research Products business, with the balance used to refinance the
Company's previous credit facility. Although the Company has from time to time
engaged in discussions with respect to possible acquisitions, it has no present
understandings, commitments or agreements, nor is it currently in negotiations
with respect to any acquisition.
DIVIDEND POLICY
The Company has never paid a cash dividend on the Common Stock and does not
anticipate paying any cash dividends on the Common Stock in the foreseeable
future. Instead, it intends to retain any earnings to finance the expansion of
its business and for working capital and general corporate purposes. Any payment
of dividends will be at the discretion of the Company's Board of Directors and
will depend upon earnings, financial condition, capital requirements, level of
indebtedness, contractual restrictions with respect to payment of dividends and
other factors. The Company is a holding company which conducts substantially all
of its operations through its subsidiaries. The Company is a guarantor under the
Credit Facility. The Credit Facility restricts the payment of cash dividends by
the Company and also restricts Calbiochem-Novabiochem Corporation, the Company's
U.S. subsidiary, from paying cash dividends and making loans or advances to the
Company, except in certain limited circumstances. These restrictions with
respect to the U.S. subsidiary will be eliminated upon the consummation of this
offering, although the restriction on the payment of cash dividends by the
Company will continue.
12
<PAGE> 14
CAPITALIZATION
The following table sets forth at June 30, 1996, the (i) actual
capitalization of the Company, (ii) pro forma capitalization of the Company
giving effect to the conversion of all outstanding shares of the Company's
Series A Convertible Preferred Stock, par value $1.00 per share (the "Series A
Convertible Preferred Stock"), into 788,814 shares of the Company's Class A
Common Stock, par value $.01 per share (the "Class A Common Stock"), and the
subsequent conversion into an equal number of shares of Common Stock and the
exchange of all outstanding shares of the Company's Series B Preferred Stock,
par value $1.00 per share (the "Series B Preferred Stock"), for 1,380,215 shares
of Common Stock (determined by dividing the aggregate liquidation preference of
the Series B Preferred Stock ($17,942,800) by the assumed initial public
offering price of $13.00 per share), in each case upon consummation of this
offering and (iii) capitalization as adjusted to give effect to the sale of
1,600,000 shares of Common Stock offered by the Company hereby at an assumed
public offering price of $13.00 per share and the application of the estimated
net proceeds therefrom and after deducting the estimated underwriting discounts
and commissions and other estimated offering expenses. See "Use of Proceeds."
This table should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the consolidated
financial statements of the Company and related notes included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1996
-------------------------------------
ACTUAL PRO FORMA AS ADJUSTED
------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Current portion of long-term debt.......................... $ 1,417 $ 1,417 $ --
======= ======= =======
Long-term debt and other obligations, net of current
portion.................................................. $ 8,201 $ 8,201 $ 1,451
Redeemable preferred stock (1)............................. 18,343 -- --
Stockholders' equity (deficit):
Preferred stock, $.01 par value, no shares authorized;
5,000,000 shares authorized and no shares issued and
outstanding actual, pro forma or as adjusted.......... -- -- --
Common stock, $.01 par value; 30,000,000 shares
authorized; 1,087,876 shares issued and outstanding
actual; 3,256,905 shares issued and outstanding pro
forma; 4,856,905 shares issued and outstanding as
adjusted (2).......................................... 11 33 49
Additional paid-in capital............................... 351 18,672 37,250
Accumulated deficit...................................... (1,207) (1,207) (1,207)
Foreign currency translation adjustment.................. 757 757 757
Note receivable from stockholder......................... (96) (96) (96)
------- ------- -------
Total stockholders' equity (deficit)............. (184) 18,159 36,753
------- ------- -------
Total capitalization............................. $26,360 $26,360 $38,204
======= ======= =======
</TABLE>
- ---------------
(1) Represents the outstanding shares of Series A Convertible Preferred Stock
and Series B Preferred Stock. See Note 5 of Notes to Consolidated Financial
Statements.
(2) Excludes (i) 393,914 shares of Common Stock issuable upon the exercise of
outstanding stock options under the Stock Option Plan and (ii) 3,028 shares
issuable upon the exercise of the Warrant.
13
<PAGE> 15
DILUTION
The pro forma net tangible book value of the Company as of June 30, 1996
was $12.3 million, or $3.77 per share. Pro forma net tangible book value per
share represents the tangible net worth (total tangible assets less total
liabilities) of the Company divided by the pro forma number of shares of Common
Stock outstanding prior to the offering. Assuming an initial offering price of
$13.00 per share, after giving effect to the offering (after deducting
underwriting discounts and commissions and estimated offering expenses), the pro
forma net tangible book value of the Company as of June 30, 1996 would have been
$30.9 million, or $6.36 per share, representing an immediate increase in net
tangible book value of $2.59 per share to existing stockholders and an immediate
dilution of $6.64 per share to the investors purchasing the shares of Common
Stock offered hereby.
The following table illustrates this dilution to new investors:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............ $13.00
Pro forma net tangible book value per share as of June 30,
1996..................................................... $ 3.77
Increase per share attributable to the offering............ 2.59
-----
Pro forma net tangible book value per share after the
offering................................................. 6.36
------
Dilution per share to new investors........................ $ 6.64
======
</TABLE>
The following table sets forth, on a pro forma basis as of June 30, 1996,
the number of shares of Common Stock acquired from the Company, the total
consideration paid to the Company and the average price per share paid by
existing stockholders and by the new investors:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- ----------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders............... 3,256,905 67.1% $18,886,724 47.6% $ 5.80
New investors....................... 1,600,000 32.9 20,800,000 52.4 13.00
--------- ----- ----------- -----
Total..................... 4,856,905 100.0% $39,686,724 100.0%
========= ===== =========== =====
</TABLE>
If the Underwriters' over-allotment option is exercised in full, the pro
forma net tangible book value of the Company as of June 30, 1996 would have been
$33.8 million, or $6.63 per share, representing an immediate increase in net
tangible book value of $2.86 per share to existing stockholders and an immediate
dilution of $6.37 per share to the investors purchasing the shares of Common
Stock offered hereby. The foregoing table excludes (i) 393,914 shares of Common
Stock issuable upon the exercise of outstanding stock options issued under the
Stock Option Plan at a weighted average exercise price of approximately $.54 per
share and (ii) 3,028 shares issuable upon the exercise of the Warrant at an
exercise price of $1.06 per share. Assuming all such outstanding stock options
and the warrant were exercised in full, the dilution per share of Common Stock
to new investors in the offering would be increased by $.44 per share to a total
of $7.08 per share.
14
<PAGE> 16
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements and the
related notes included elsewhere in this Prospectus. The consolidated statement
of operations data for each of the three years in the period ended December 31,
1995 and the consolidated balance sheet data at December 31, 1994 and 1995 are
derived from the Company's consolidated financial statements, which have been
audited by Ernst & Young LLP, independent auditors, included elsewhere in this
Prospectus. The consolidated statement of operations data for the period from
inception (March 11, 1992) through December 31, 1992 and the consolidated
balance sheet data at December 31, 1992 and 1993 are derived from the Company's
audited consolidated financial statements not included in this Prospectus. The
consolidated statement of operations data for the six months ended June 30, 1995
and 1996 and the consolidated balance sheet data at June 30, 1996 have been
derived from unaudited interim financial statements and include all adjustments
(consisting only of normal recurring adjustments) that the Company considers
necessary for a fair presentation of the financial position and results of
operations at that date and for such periods. The operating results for the six
months ended June 30, 1996 are not necessarily indicative of the results to be
expected for the full year or for any future period.
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS ENDED
PERIOD FROM INCEPTION DECEMBER 31, JUNE 30,
(MARCH 11, 1992) TO --------------------------- -----------------
DECEMBER 31, 1992 1993 1994 1995 1995 1996
--------------------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Sales................................... $17,719 $22,771 $24,188 $26,966 $13,075 $16,565
Cost of sales........................... 9,691 14,195 13,183 13,185 6,691 7,602
------- ------- ------- ------- ------- -------
Gross profit............................ 8,028 8,576 11,005 13,781 6,384 8,963
------- ------- ------- ------- ------- -------
Operating expenses:
Research and development.............. 290 462 736 1,338 488 1,065
Selling, general and administrative... 7,742 10,292 10,343 10,608 4,802 6,185
------- ------- ------- ------- ------- -------
Total operating expenses............ 8,032 10,754 11,079 11,946 5,290 7,250
------- ------- ------- ------- ------- -------
Income (loss) from operations........... (4) (2,178) (74) 1,835 1,094 1,713
Interest expense, net................... 61 170 326 527 159 394
------- ------- ------- ------- ------- -------
Income (loss) before income taxes....... (65) (2,348) (400) 1,308 935 1,319
Provision (benefit) for income taxes.... 401 (195) 62 291 208 462
------- ------- ------- ------- ------- -------
Net income (loss)................... $ (466) $(2,153) $ (462) $ 1,017 $ 727 $ 857
======= ======= ======= ======= ======= =======
Pro forma net income per share.......... $ .30 $ .25
======= =======
Pro forma shares used in per share
computations (1)...................... 3,367 3,477
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------------------------- --------
1992 1993 1994 1995 1996
------- ------- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 1,238 $ 1,839 $ 935 $ 1,203 $ 1,118
Working capital........................................... 13,000 12,946 13,017 15,424 15,286
Total assets.............................................. 23,980 24,046 23,495 31,197 32,228
Long-term debt and other obligations, net of current
portion................................................. 850 2,834 3,266 8,601 8,201
Redeemable preferred stock................................ 18,025 18,175 18,319 18,343 18,343
Common stockholders' equity (deficit)..................... (24) (2,291) (2,053) (544) (184 )
</TABLE>
- ---------------
(1) See Note 1 to notes to consolidated financial statements for an explanation
of the method used to determine the number of shares used to compute pro
forma share amounts.
15
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following analysis and discussion of the Company's financial condition
and results of operations should be read in conjunction with the Company's
consolidated financial statements and notes thereto included elsewhere in this
Prospectus. This analysis and discussion contains forward-looking statements
which involve risks and uncertainties. The Company's actual results in the
future could differ significantly from the results discussed in such
forward-looking statements. Factors that could cause or contribute to such a
difference include, but are not limited to, those discussed in "Risk Factors"
and "Business," as well as those discussed below.
OVERVIEW
CN Biosciences was formed in 1992 with the purchase of the Company's
subsidiaries, including the Calbiochem biochemical and immunochemical operations
headquartered in San Diego, California, and the Novabiochem peptide operations
headquartered in Laufelfingen, Switzerland, from Biodor Holding AG, Ixora
Holding AG and Biodor US Holding Corporation. During 1993, the Company hired its
current Chief Executive Officer and reorganized its worldwide operations to
better focus its business and corporate strategy on core products. In 1993, the
Company recorded a one-time charge of approximately $2.0 million principally
related to its European operations to reserve for costs of facilities no longer
required, impaired inventory and costs of terminating employees. From 1993 to
1995, the Company invested in excess of $3.2 million for capital expenditures,
principally for infrastructure upgrades to its facilities, automated fulfillment
systems and computer information systems. The Company also hired additional
scientific personnel, particularly employees holding Ph.D.s, to enable it to
expand its internal development and manufacturing capabilities. These
initiatives contributed to improved operating results, and in 1994 the Company
commenced its niche research market strategy with the introduction of the Signal
Transduction specialty catalog.
In August 1995, the Company expanded its immunochemical and molecular
biology capabilities with the purchase of the Oncogene Research Products
business from OSI for $6.2 million cash, which was funded by bank debt. Assets
acquired included primarily inventory and property and equipment. Approximately
30 employees, including four holding Ph.D.s, all of whom were previously
employed by OSI in the Oncogene Research Products business, joined the Company
upon the consummation of the acquisition. The acquisition and successful
integration of this business enhanced the depth and breadth of the Company's
scientific resources, while providing a complementary base of products and
customers. The Company believes that, due to the highly fragmented nature of the
life sciences research products industry, significant opportunities for
consolidation exist. Based on its experience with the acquisition of the
Oncogene Research Products business, the Company believes it can capitalize on
these opportunities, although no assurances can be given that the Company will
be able to identify and successfully consummate additional acquisitions.
The Company uses general and specialty catalogs to market a broad range of
brand-name research products to life sciences researchers worldwide at
pharmaceutical and biotechnology companies, academic institutions and government
laboratories. The Company invests significantly in producing each of its
catalogs, and associated costs are capitalized and amortized over the estimated
useful life of the catalog, generally 12 to 24 months. The Company believes that
researchers tend to purchase the Company's products as a result of exposure to
multiple catalogs, as well as the Company's numerous other periodic publications
and advertisements.
Since 1993, the Company has increasingly focused its strategy on its higher
margin core business of providing standard laboratory quantity sizes of products
(generally ranging from 100 nanograms to 100 grams), and has reduced the focus
on its bulk business. Bulk quantities (generally up to ten kilograms) are
generally offered at discounts to catalog prices, and bulk sales are
characterized as relatively high dollar sales made to a limited number of
customers. Thus, the absence or presence of bulk sales has had and could have a
material impact on results of operations in any individual period.
16
<PAGE> 18
The Company maintains significant levels of inventory relative to its net
sales in order to meet short delivery times required by researchers. In
addition, products manufactured internally are made in economic batch sizes
which often represent quantities sufficient to supply more than one year of
sales. The Company's products generally have a relatively long shelf life, often
in excess of five years, and quality and storage conditions are continually
monitored to ensure that quality products are delivered to customers. The
Company regularly evaluates the level and composition of inventory through the
analysis of recent sales history and forecasted product demand to ensure that
inventory reserve levels are adequate to properly reflect their net realizable
value. Fluctuations in inventory reserve levels, other than those related to
reserves recorded in 1993 for impaired inventory described above, have not been
material to the Company's financial position or results of operations.
The Company's reporting currency is the U.S. dollar. Historically, a
majority of the Company's sales have been denominated in U.S. dollars, with the
balance denominated in foreign currencies. These foreign currency sales have
been effected principally by the Company's international subsidiaries. In
accordance with U.S. accounting requirements, sales denominated in foreign
currencies are translated into the local functional currency and then into U.S.
dollars, at an average exchange rate in effect during the period. In addition,
the Company incurs manufacturing costs in Swiss Francs in connection with its
Swiss operations and also incurs operating expenses in local currencies at each
of its other international locations. Thus, changes from reporting period to
reporting period in the exchange rates between various foreign currencies and
the U.S. dollar have had, and will in the future continue to have, an impact on
revenues and expenses reported by the Company, and such effect may be material
in any individual reporting period.
To the extent that the Company incurs operating expenses in local
currencies at its foreign subsidiaries, the Company has a natural hedge against
a portion of the possible fluctuation in foreign currency exchange rates of
billings in such currencies. Although the Company does not engage in significant
amounts of foreign currency hedging transactions, the Company has, from time to
time, entered into forward contracts to hedge certain of its foreign currency
exposures, principally related to fixed expense commitments of its Japanese
subsidiary.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, items from the
Company's Consolidated Statements of Operations expressed as a percentage of
sales.
<TABLE>
<CAPTION>
PERCENTAGE OF SALES
-----------------------------------------------
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
------------------------- ---------------
1993 1994 1995 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Sales:
Core........................................... 67.7% 68.3% 76.5% 73.7% 81.8%
Bulk........................................... 32.3 31.7 23.5 26.3 18.2
----- ----- ----- ----- -----
Total sales...................................... 100.0 100.0 100.0 100.0 100.0
Cost of sales.................................... 62.3 54.5 48.9 51.2 45.9
----- ----- ----- ----- -----
Gross profit..................................... 37.7 45.5 51.1 48.8 54.1
Research and development....................... 2.0 3.0 5.0 3.7 6.4
Selling, general and administrative............ 45.2 42.8 39.3 36.7 37.3
----- ----- ----- ----- -----
Income (loss) from operations.................... (9.5) (0.3) 6.8 8.4 10.4
Interest expense, net............................ 0.8 1.4 2.0 1.2 2.4
----- ----- ----- ----- -----
Income (loss) before income taxes................ (10.3) (1.7) 4.8 7.2 8.0
Provision (benefit) for income taxes............. (0.9) 0.2 1.0 1.6 2.8
----- ----- ----- ----- -----
Net income (loss)........................... (9.4)% (1.9)% 3.8% 5.6% 5.2%
----- ----- ----- ----- -----
----- ----- ----- ----- -----
</TABLE>
17
<PAGE> 19
Six Months Ended June 30, 1996 and 1995
Sales. Sales increased 26.7% to $16.6 million for the six-month period
ended June 30, 1996 from $13.1 million for the comparable period in 1995. This
increase resulted primarily from a 40.5% increase in core product sales,
including sales of Oncogene Research Products brand products, offset by a
decrease in bulk sales of 12.1%. Oncogene Research Products sales during the
period included initial stocking orders of approximately $292,000, principally
to international distributors, in connection with the Company's new Apoptosis
specialty catalog issued in February 1996. Sales of core products during the
period, excluding Oncogene Research Products brand sales, grew by 8.9% as
compared to sales in the comparable prior period. These gains in sales were
achieved despite a general strengthening of the U.S. dollar which had the effect
of decreasing the dollar value of sales denominated in foreign currencies
recorded in the six months ended June 30, 1996. Additional factors which
management believes contributed to the increase in sales during the period
included the issuance of a new, updated Calbiochem general catalog in February
1996, increased recognition of the Company's specialty catalogs, and other
marketing initiatives, including advertising in various publications. The
decrease in bulk sales related primarily to the Company's decision to
discontinue sales of a product which had been provided in bulk form to the
veterinary industry in order to avoid subjecting the Company to increased costs
associated with a variety of regulatory requirements.
Gross Profit. The Company's gross profit percentage increased to 54.1% for
the six-month period ended June 30, 1996 from 48.8% for the comparable period in
1995. This increase was primarily the result of sales of the higher gross margin
Oncogene Research Products brand products, improved margins on the Company's
Calbiochem and Novabiochem brand products and a decrease in lower margin bulk
sales. Management believes that factors which contributed to improvements in
gross margins of Calbiochem and Novabiochem brand products include improved
operating efficiencies from increased volume and increased focus on higher
margin products directed to niche research markets, particularly those products
included in the Company's Signal Transduction, Apoptosis and Combinatorial
Chemistry specialty catalogs.
Research and Development. Research and development expenditures increased
118.2% to $1.1 million for the six-month period ended June 30, 1996 from
$488,000 for the comparable period in 1995. This increase resulted from
additional development activity related to Oncogene Research Products brand
products, research and development costs in connection with products included in
the Company's new Apoptosis specialty catalog launched during the period, and
increased research in the area of glycobiology. The Company anticipates
maintaining at least the current levels of spending for research and
development.
Selling, General and Administrative. Selling, general and administrative
expenditures increased 28.8% to $6.2 million for the six-month period ended June
30, 1996 from $4.8 million for the comparable period in 1995, and increased to
37.3% of sales for the period from 36.7% for the comparable period in 1995. The
dollar increase in expenses was primarily the result of incremental operational
costs relating to the Oncogene Research Products business, increased
administrative salaries and increased selling costs related to expanded
advertising programs and additional specialty catalogs launched during the
period. The increase in expenses as a percentage of sales reflected the
additional costs of increased specialty catalogs and upgraded advertising
programs, as the Company's strategy continued to emphasize expansion of its
focus on niche research markets in 1996. The Company anticipates a modest growth
in administrative expenses resulting from the Company's ongoing reporting
obligations and investor relations activities once the Common Stock becomes
publicly traded.
Interest Expense, Net. Interest expense, net increased to $394,000 for the
six-month period ended June 30, 1996 from $159,000 for the comparable period in
1995 primarily as a result of increased borrowings in connection with the
acquisition of the Oncogene Research Products business.
Income Taxes. Income tax expense increased to $462,000 for the six-month
period ended June 30, 1996 from $208,000 for the comparable period in 1995 as a
result of increased profitability and increased estimated tax rates having
utilized certain operating loss carryforwards generated in prior years.
Net Income. As a result of the above factors, net income increased 17.9% to
$857,000 for the six-month period ended June 30, 1996 from $727,000 for the
comparable period in 1995.
18
<PAGE> 20
Years Ended December 31, 1995 and 1994
Sales. Sales increased 11.5% to $27.0 million for 1995 from $24.2 million
for 1994. This increase resulted primarily from a 24.9% increase in core product
sales, including sales of Oncogene Research Products brand products, offset by a
decrease in bulk sales of 17.5%. Sales of core products during 1995, excluding
Oncogene Research Products brand products, increased by 13.5%, primarily as a
result of the continuing success of the Company's niche research market strategy
and growth in sales of amino acids, peptides, linkers and resins featured in the
Company's Novabiochem general catalog. The decrease in bulk sales was related
primarily to the Company's decision to discontinue sales of a product which had
been provided in bulk form to the veterinary industry in order to avoid
subjecting the Company to increased costs associated with a variety of
regulatory requirements. Gains in sales included the results of a general
weakening of the U.S. dollar which had the effect of increasing the dollar value
of sales denominated in foreign currencies recorded in 1995.
Gross Profit. The Company's gross profit percentage increased to 51.1% for
1995 from 45.5% for 1994. This increase was primarily the result of sales of the
higher gross margin Oncogene Research Products brand products for a portion of
the year and increased gross margins in the Company's core and bulk operations
as a result of continued improvement in operating efficiencies subsequent to the
Company's restructuring in 1993. In particular, the Company experienced
improvement in margins of certain products featured in the Company's Novabiochem
general catalog, many of which were manufactured by the Company's Swiss
subsidiary, which was substantially restructured in 1993.
Research and Development. Research and development expenditures increased
81.8% to $1.3 million for 1995 from $736,000 for 1994. This increase resulted
from increased research and development related to Oncogene Research Products
brand products for a portion of the year, and research and development costs of
products developed for inclusion in the Apoptosis specialty catalog being
prepared for launch in 1996. This increase included salaries of additional
scientific personnel, as well as increased costs of materials and expenses.
Selling, General and Administrative. Selling, general and administrative
expenditures increased 2.6% to $10.6 million for 1995 from $10.3 million for
1994, and decreased to 39.3% of sales for 1995 from 42.8% for 1994. The dollar
increase in selling, general and administrative was the result of adding the
Oncogene Research Products business' operations for a portion of the year,
offset by reductions in operating costs of the Company's Swiss subsidiary in
1995 compared to 1994. The decrease as a percentage of sales reflects the
continued results of the Company's 1993 restructuring and incremental sales
which did not result in comparable growth in expenses.
Interest Expense, Net. Interest expense, net increased to $527,000 for 1995
from $326,000 for 1994 primarily as a result of additional borrowings in
connection with the acquisition of the Oncogene Research Products business.
Income Taxes. Income tax expense increased to $291,000 for 1995 from
$62,000 for 1994 as a result of increased profitability in 1995.
Net Income (Loss). As a result of the above factors, net income increased
to $1,017,000 for 1995 from a net loss of $462,000 for 1994.
Years Ended December 31, 1994 and 1993
Sales. Sales increased 6.2% to $24.2 million for 1994 from $22.8 million
for 1993. This increase resulted primarily from a 7.1% increase in core product
sales, as well as an increase in bulk sales of 4.3%. The increase in core
products sales resulted primarily from the initial introduction of the Company's
Signal Transduction specialty catalog in March 1994. Gains in sales included the
results of a general weakening of the U.S. dollar which had the effect of
increasing the dollar value of sales denominated in foreign currencies recorded
in 1994.
Gross Profit. The Company's gross profit percentage increased to 45.5% for
1994 from 37.7% for 1993. This increase was primarily the result of the 1993
restructuring, a portion of which was included in 1993 cost of sales, and
improvements in operations, particularly at the Company's Swiss manufacturing
operation and the installation of automated order fulfillment and other systems.
19
<PAGE> 21
Research and Development. Research and development expenditures increased
59.3% to $736,000 for 1994 from $462,000 for 1993. This increase reflected the
Company's expansion of its scientific staff and product development operations,
particularly in San Diego, California.
Selling, General and Administrative. Selling, general and administrative
expenditures were $10.3 million for 1994 and 1993, but decreased to 42.8% of
sales for 1994 from 45.2% for 1993. This decrease in selling, general and
administrative as a percentage of sales reflects the results of the 1993
restructuring and incremental sales which did not result in comparable growth in
expenses.
Interest Expense, Net. Interest expense, net increased to $326,000 for 1994
from $170,000 for 1993 primarily as a result of equipment leases for the
Company's San Diego manufacturing facility, as well as additional bank
borrowings for working capital purposes.
Income Taxes. Income tax expense increased to $62,000 for 1994 from a
benefit of $195,000 for 1993 as a result of improved financial performance in
1994. Income tax expense represented minimum taxes due in the various taxing
jurisdictions.
Net Loss. As a result of the above factors, the net loss of $462,000 for
1994 improved from the net loss of $2.2 million for 1993.
QUARTERLY RESULTS
The following tables present the Company's unaudited quarterly consolidated
results of operations, in dollars and as a percentage of sales, for the ten
quarters ended June 30, 1996. This information has been prepared by the Company
on a basis consistent with the Company's audited consolidated financial
statements and, in the opinion of management, includes all adjustments,
consisting only of normal recurring accruals, necessary for a fair presentation
of the results for such periods.
<TABLE>
<CAPTION>
QUARTERS ENDED
----------------------------------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30,
1994 1994 1994 1994 1995 1995 1995 1995 1996 1996
--------- -------- --------- -------- --------- -------- --------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales:
Core.......... $ 4,030 $4,232 $ 4,150 $4,096 $ 4,813 $4,827 $ 5,293 $5,693 $ 6,597 $6,949
Bulk.......... 2,086 2,349 1,745 1,500 1,923 1,512 1,572 1,333 1,621 1,398
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total sales..... 6,116 6,581 5,895 5,596 6,736 6,339 6,865 7,026 8,218 8,347
Cost of sales... 3,380 3,503 3,144 3,156 3,508 3,183 3,224 3,270 3,794 3,808
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Gross profit.... 2,736 3,078 2,751 2,440 3,228 3,156 3,641 3,756 4,424 4,539
Research and
development... 192 147 186 211 218 270 401 449 541 524
Selling,
general and
administrative... 2,489 2,658 2,557 2,639 2,264 2,539 2,785 3,020 3,015 3,170
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income (loss)
from
operations.... 55 273 8 (410) 746 347 455 287 868 845
Interest
expense,
net........... 53 72 90 111 74 85 157 211 206 188
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income (loss)
before income
taxes......... 2 201 (82) (521) 672 262 298 76 662 657
Provision
(benefit) for
income
taxes......... 3 42 2 15 150 58 66 17 198 264
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net income
(loss).... $ (1) $ 159 $ (84) $ (536) $ 522 $ 204 $ 232 $ 59 $ 464 $ 393
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
20
<PAGE> 22
<TABLE>
<CAPTION>
QUARTERS ENDED
----------------------------------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30,
1994 1994 1994 1994 1995 1995 1995 1995 1996 1996
--------- -------- --------- -------- --------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales:
Core.......... 65.9% 64.3% 70.4% 73.2% 71.5% 76.1% 77.1% 81.0% 80.3% 83.3%
Bulk.......... 34.1 35.7 29.6 26.8 28.5 23.9 22.9 19.0 19.7 16.7
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total sales..... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales... 55.3 53.3 53.3 56.4 52.1 50.3 47.0 46.5 46.2 45.6
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Gross profit.... 44.7 46.7 46.7 43.6 47.9 49.7 53.0 53.5 53.8 54.4
Research and
development... 3.1 2.2 3.2 3.8 3.2 4.2 5.8 6.4 6.6 6.3
Selling,
general and
administrative... 40.7 40.4 43.4 47.1 33.6 40.1 40.6 43.0 36.7 38.0
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income (loss)
from
operations.... 0.9 4.1 0.1 (7.3) 11.1 5.4 6.6 4.1 10.5 10.1
Interest
expense,
net........... 0.9 1.1 1.5 2.0 1.1 1.3 2.3 3.0 2.5 2.2
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income (loss)
before income
taxes......... 0.0 3.0 (1.4) (9.3) 10.0 4.1 4.3 1.1 8.0 7.9
Provision
(benefit) for
income
taxes......... 0.0 0.6 0.0 0.3 2.2 0.9 0.9 0.3 2.4 3.2
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net income
(loss).... 0.0% 2.4% (1.4)% (9.6)% 7.8% 3.2% 3.4% 0.8% 5.6% 4.7%
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
The Company's quarterly operating results may vary significantly from
quarter to quarter as a result of a number of factors including new product
offerings, new editions of existing catalogs, introduction of additional
specialty catalogs and bulk sales. Other factors which may affect quarterly
operating results include the timing of the U.S. Government approval of the NIH
budget, lower European and academic sales during the summer months and various
holiday breaks and fluctuations in weather. The Company's current and planned
expense levels are based in part upon its expectations as to future revenues.
Consequently, if revenues in a particular quarter do not meet expectations, the
Company may not be able to adequately adjust operating expenses to compensate
for the shortfall. Operating results may therefore vary significantly from
quarter to quarter and will not necessarily be indicative of results in
subsequent periods.
In addition, sales of bulk products offered by the Company could cause
fluctuations in the level of bulk sales from quarter to quarter, and such sales
could have a significant impact on results of operations in any specific
quarter. For example, bulk sales in the quarter ended March 31, 1996 of $1.6
million were approximately 15.8% lower than bulk sales of $1.9 million in the
comparable quarter in the prior year and 23.1% higher than bulk sales of $1.3
million in the preceding quarter ended December 31, 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company used $239,000 of cash in operating activities in 1993 and
$29,000 of cash in operating activities in 1994. Since 1994, the Company has
financed its operations primarily from cash provided by operations, which
contributed $97,000 in the six months ended June 30, 1996 and $2.0 million in
1995. Cash used for operating activities in 1993 was less than the net loss due
to the fact that reserves were provided for impaired inventory, idled facilities
and terminated employees before the cash funds were actually expended, partially
offset by increased expenditures for inventories to replace those inventories
impaired during the period. Cash used for operating activities in 1994 was less
than the net loss primarily due to the liquidation of inventories offset by
increases in accounts receivable due to increased sales. Cash provided from
operating activities in 1995 resulted from positive operating results, which
were principally offset by catalog costs capitalized in other assets. Cash
provided from operating activities for the six months ended June 30, 1996 was
less than net income for the period primarily due to costs incurred related to
capitalized catalog costs.
Net cash used in investing activities was $158,000 in the six months ended
June 30, 1996, $6.8 million in 1995, $1.2 million in 1994 and $1.0 million in
1993. During 1995, the Company acquired the Oncogene Research Products business
in a purchase transaction requiring an investment of approximately $6.2 million.
Investing activities, other than the purchase of the Oncogene Research Products
business, consisted primarily of capital expenditures for property and
equipment, principally in connection with infrastructure upgrades.
21
<PAGE> 23
Net cash provided by financing activities was $2,000 in the six months
ended June 30, 1996, $5.1 million in 1995, $232,000 in 1994 and $2.0 million in
1993, consisting primarily of borrowings from financial institutions, offset by
repayments. During 1995, the Company incurred $6.0 million of additional debt in
connection with the purchase of the Oncogene Research Products business.
The Company is a holding company, the principal assets of which are the
capital stock of its subsidiaries, and has no independent means of generating
revenues. As a holding company, the Company depends on dividends and other
permitted payments from its subsidiaries, including its international
subsidiaries, to meet its cash needs. The Credit Facility restricts the payment
of cash dividends by the Company and also restricts the Company's U.S.
subsidiary from paying cash dividends and making loans or advances to the
Company, except in certain limited circumstances. These restrictions with
respect to the U.S. subsidiary will be eliminated upon the consummation of this
offering, although the restriction on the payment of cash dividends by the
Company will continue. The Company maintains cash balances at its various
subsidiaries based upon local results of operations. The amount of
foreign-sourced earnings to be repatriated to the United States is determined
based upon foreign entity capitalization, local cash needs, local and U.S. tax
implications and requirements for cash in the U.S. operations.
At June 30, 1996, the Company had cash of $1.1 million and working capital
of $15.3 million. Outstanding borrowings under the Credit Facility consist of
approximately $7.7 million of term debt, plus borrowings under a line of credit
of $500,000. The line of credit provides for borrowings up to a maximum of $2.0
million, based upon percentages of eligible accounts receivable and inventory.
At June 30, 1996, $1.5 million was available under this line of credit. The
Credit Facility, which is guaranteed by the Company and its Swiss subsidiary and
secured by the assets of Calbiochem-Novabiochem Corporation and the stock of the
Company's subsidiaries, requires, among other things, compliance with minimum
financial and operating covenants, and bank approval for certain mergers and
acquisitions, asset sales, the incurrence of debt, the making of loans and the
repurchase, redemption or other acquisition of shares of the Company's stock.
The line of credit expires in June 1998, and will convert to an unsecured $5.0
million line of credit upon the consummation of the offering. In addition to
releasing its collateral and eliminating the restrictions on the payment of cash
dividends, loans and advances by the Company's U.S. subsidiary to the Company,
the lender will modify certain financial covenants contained in the Credit
Facility to appropriately adjust for the increased equity resulting from this
offering. The general terms of the existing facility will otherwise continue.
See Note 4 of Notes to Consolidated Financial Statements. All bank borrowings
(approximately $8.2 million at June 30, 1996) are expected to be repaid out of
the net proceeds from this offering.
The Company believes that its existing capital resources together with the
anticipated net proceeds from this offering will be sufficient to fund its
operations through at least 1997. If, however, the Company were to undertake a
significant acquisition or if working capital or other capital requirements are
greater than currently anticipated, the Company could be required to seek
additional funds through sales of equity, debt or convertible securities or
increased credit facilities. There can be no assurance that additional financing
will be available or that, if available, the financing will be on terms
favorable to the Company and its stockholders.
22
<PAGE> 24
BUSINESS
THE COMPANY
CN Biosciences, Inc. ("CN Biosciences" or the "Company") is engaged in the
development, production, marketing and distribution of a broad array of products
used worldwide in disease-related life sciences research at pharmaceutical and
biotechnology companies, academic institutions and government laboratories. The
Company's products include biochemical and biological reagents, antibodies,
assays and research kits which it sells principally through its general and
specialty catalogs under its well-established brand names, including Calbiochem
and Novabiochem. With over 7,000 products, the Company offers scientists the
convenience of obtaining from a single source both innovative and fundamental
research products, many of which are instrumental to areas of research such as
cancer, cardiovascular disease, Alzheimer's and AIDS. The Company believes it
has established a long-standing reputation in the life sciences research
products market for product quality, product reliability, extensive technical
service and strong customer support.
The Company believes that it is strategically positioned with both the
breadth of research products and critical mass that are characteristic of the
industry's larger providers, as well as the innovative research and development
capabilities that are characteristic of the industry's smaller specialty
companies. Based upon this strategic positioning, the Company believes it can
establish itself as a leading supplier of higher margin research products to
selected emerging, high growth niche research markets by offering innovative
products through specialty catalogs. In recent years, the Company has
implemented its niche research market strategy in areas such as signal
transduction, apoptosis and combinatorial chemistry. The Company intends to
continue to penetrate emerging niche research markets through internal
development and the selective acquisitions of companies with products in areas
targeted for future growth. The Company's successful acquisition and integration
of the Oncogene Research Products business is an example of the implementation
of this strategy. As a result of this acquisition, the Company significantly
expanded its capabilities in molecular biology and immunology, and added over
700 new product offerings, many of which are included in the Company's Apoptosis
specialty catalog.
A key element of the Company's growth strategy is to leverage certain
existing assets of the Company including (i) its comprehensive general catalog
product offerings, customer base and reputation, (ii) its global manufacturing
and distribution infrastructure, including its highly automated order
fulfillment system and (iii) the scientific expertise of its staff in
immunochemistry, biochemistry, molecular biology and synthetic peptides. During
1995, the Company sold products to over 6,900 accounts, filled over 70,000
orders in 46 countries and generated sales of $27.0 million and net income of
$1.0 million. The Company's development, marketing and distribution activities
are supported by the Company's highly experienced scientific staff, which
includes 40 professionals holding Ph.D.s in a variety of life sciences
disciplines, as well as other personnel located at seven facilities in the
United States, Europe, Japan and Australia.
INDUSTRY OVERVIEW
The life sciences research industry has experienced dramatic advances in
biology and chemistry over the past three decades, particularly as they relate
to the understanding of the origin of diseases at the molecular and cellular
level. These advances have led to the rapid expansion of drug discovery programs
and the development of new methodologies of research. Industry sources estimate
that there are over 300,000 scientists worldwide currently engaged in life
sciences research. In 1995, U.S. pharmaceutical and biotechnology companies
spent over $18 billion on research and development. In addition, academic
institutions and government laboratories receive a portion of their research
funding from organizations such as the NIH, which had a budget for 1995
exceeding $11 billion. Over the past ten years, the NIH budget has grown at a
compounded annual rate of approximately 7.5%. In its most recent industry survey
published in 1994, Frost & Sullivan estimated that $1.6 billion was spent
worldwide in 1992 on specialty biochemical products, such as those offered by
the Company for research in biochemistry, immunology, cellular biology and
molecular biology. According to Frost & Sullivan, the compound annual growth
rate from 1992 through 1999 for the U.S. life sciences research products market
(which represents approximately one-third of the worldwide market) is estimated
to be approximately 13%. Furthermore, the Company believes that certain segments
of life sciences research, such as apoptosis, signal transduction and
combinatorial chemistry, are particularly strong areas of growth.
23
<PAGE> 25
Life sciences researchers utilize specialty biochemical products to conduct
their research. These research products range broadly in complexity, purity,
scarcity, cost and function, and their availability and quality are often
critical to a project's success. Furthermore, recent advances in understanding
physiological processes at the molecular and cellular level, genomics and the
development of other basic life sciences technologies have increased the demand
for innovative product solutions designed to assist scientists in improving the
efficiency and quality of their research. Examples of such solutions include
specific protein or peptide fragments, monoclonal antibodies or DNA probes
tailored to a given research protocol that would be too time consuming or
complex for a researcher to prepare at his or her own lab bench. Other examples
include kits designed to reduce complex multi-step procedures, thereby
shortening the time required for experiments, improving the quality of
information provided in many cases and ensuring repeatability of the experiment
in subsequent research. The Company believes that researchers are typically
concerned primarily with product performance, quality, rapid availability, time
savings and the value added by innovative products such as specialized assays
and research kits, and are relatively less sensitive to price. Because life
sciences research can often involve experimentation carried out over months or
even years, and because researchers seek to minimize extraneous variables in
their research protocols, the consistency of research products is essential. As
a result, the Company believes that researchers tend to exhibit loyalty to the
supplier that first supplies them with a particular research product.
The life sciences research products industry is highly fragmented. The
industry is comprised of several very large public companies and a large number
of smaller companies which are typically privately held. The larger companies
typically generate revenues from the sale of a broad range of equipment,
laboratory supplies and other products, including research products which
compete with many of the Company's product offerings. These larger suppliers
generally place greater emphasis on high-revenue generating products and on the
breadth of their product offering than on providing innovative products early to
market. The smaller companies, the majority of which are substantially smaller
than the Company, typically supply a highly focused product offering to very
specific market niches. These smaller companies generally specialize in
addressing the emerging needs of life sciences researchers by emphasizing
innovative products. Such smaller companies often lack the distribution network
and capital resources required to grow beyond providing a limited and highly
specialized offering to a relatively narrow market. As the market expands and
the need to cost-effectively distribute products to a larger, more
geographically diverse customer base increases, the Company believes that
customer access will be increasingly difficult for smaller companies lacking
significant marketing and distribution infrastructure. The Company believes that
the industry's fragmented structure and underlying dynamics may create
opportunities for consolidation.
STRATEGY
CN Biosciences' goal is to become a leading provider of innovative research
products to the life sciences research market. To achieve this goal, CN
Biosciences' strategy includes the following elements:
Target Emerging, High Growth Niche Research Markets. The Company seeks to
establish leading positions early in the evolution of the market's faster
growing, higher margin niche research markets. The Company identifies a
potentially attractive niche research market through a comprehensive review by
its scientific personnel and interaction with the Company's Technology Council
and network of other scientific advisers. In deciding which niche research
markets to pursue, the Company considers a number of factors, including
potential market size, synergies with existing areas of research, resources
required to develop both the product offering and related catalog and the
potential for establishing a leading position early in the market's development.
Once the Company has identified a niche research market, it assembles a targeted
product offering from its existing products, new products developed by its own
scientific staff and products sourced from third parties. These products are
then distributed primarily through specialty catalogs designed to provide
scientists working in a specific field with a single comprehensive source
integrating both innovative products often not found elsewhere and a broad range
of related products. During 1996, the Company introduced new specialty catalogs
for the niche research markets of apoptosis and combinatorial chemistry, and
issued an updated version of its Signal Transduction specialty catalog. The
Company expects to follow these specialty catalogs with product offerings to
researchers studying glycobiology and is investigating other niche research
24
<PAGE> 26
markets such as neuroimmunology. CN Biosciences seeks to be first to
comprehensively market products in each of its targeted niche research markets
and to be in a leading position early in such market's development.
Expand Product Offerings to Existing Customer Base. The Company intends to
expand sales through the introduction of new product offerings to its existing
customer base. The Company's new product development efforts, both for its
specialty and general catalogs, are supported by its significant commitment to
research and development. New product ideas are generated through active
dialogues among the Company, its customers and its extensive network of
scientific advisers, participation in national and international conferences,
and comprehensive reviews of selected scientific literature. The Company
believes that successfully penetrating further niche research markets will, in
addition to generating revenues from sales of products contained in its
specialty catalogs, also increase the number of research scientists and
institutions seeking to license their discoveries to the Company for production
and distribution, and generate increased sales of products in the Company's
comprehensive general catalogs.
Pursue Strategic Acquisitions. The Company intends to penetrate emerging
niche research markets and expand product offerings to existing customers
through the selective acquisition of companies with research and development
capabilities and product offerings in areas targeted for future growth. In
August 1995, the Company consummated the strategic acquisition of the Oncogene
Research Products business, which has enabled the Company to substantially
expand its offerings of assays, kits, monoclonal antibodies and polyclonal
antibodies. The Company believes that, due to the highly fragmented nature of
the life sciences research products industry, significant opportunities for
consolidation exist, although no assurances can be made that the Company will be
able to identify and successfully consummate additional acquisitions. The
Company believes that the industry's smaller companies are typically privately
held and individually generate less than $10 million in annual revenues, yet
conduct a significant portion of the industry's innovative research,
particularly in specific niche research markets. The Company has numerous
contacts with many of these smaller research products companies for which the
Company often acts as a distributor or licensee, and believes that these
relationships may facilitate both the identification and consummation of
acquisitions.
Maximize Operating Efficiencies. The Company's investment in and refinement
of its product sourcing, procurement, production, inventory management and order
fulfillment capabilities, as well as its worldwide distribution network and
computer systems will continue to enable the Company to operate more cost-
effectively and to achieve greater service efficiency at higher sales volumes.
Additionally, the Company believes that this infrastructure provides
opportunities for the Company to service and support increased net sales without
the need for commensurate increases in expenses. The Company utilizes a
"technology center" concept for each brand which allows for product development,
customer service, technical support and brand-specific marketing capabilities at
its manufacturing locations, while retaining centralization of many
administrative and routine operations at its San Diego headquarters.
CORE COMPETENCIES
The Company believes that its past success is attributable to a number of
factors, including:
Experienced Management Team, Scientific Staff and Network of Scientific
Advisers. The Company's executive officers have an average of over ten years of
experience in the research products industry. In addition, over the past three
years, the Company has expanded its scientific staff to include 40 professionals
holding Ph.D.s in a variety of life sciences disciplines. With its expanded
scientific staff and its particular expertise in immunochemistry, biochemistry,
molecular biology and synthetic peptides, the Company is able to offer a broad
range of products and to support such product offerings with both a high level
of scientific content in its catalogs and knowledgeable technical support
personnel. The Company regularly interacts with a network of scientific advisers
within the life sciences research industry including its four member Technology
Council, members of academic institutions with which the Company collaborates,
as well as its customers. These interactions have enabled the Company to
identify the specialized needs of researchers in several emerging fields of life
sciences research and to provide innovative product solutions to facilitate
research in these targeted areas.
25
<PAGE> 27
Merchandising and Marketing Expertise. The Company believes its skill in
positioning and merchandising its products has enabled it to expand its share of
the life sciences research products market. The Company employs a variety of
marketing techniques to enable it to produce catalogs that the Company believes
are more informative and more visually appealing than those of its competitors.
In structuring its catalog offerings, the Company effectively combines basic
product information with a significant amount of related scientific reference
data and technical advice. In addition, with each new edition of the Company's
catalogs, the Company has increased the level of indexes and cross
references -- by application, product category and individual product -- and
developed a variety of color coded reference aids, all of which are designed to
facilitate the ease with which a scientist can find the product needed to
conduct his or her research. Capitalizing on these skills, its established
catalog brand names and its comprehensive list of product offerings, the Company
has identified opportunities to target high growth emerging niche research
markets using specialty catalogs to more effectively bring its products to the
attention of research scientists.
Total Quality Management, Technical Service and Customer Support. Research
scientists require that the products used in their research conform to exacting
quality standards. The Company utilizes its Total Quality Management program to
ensure that customers receive consistent, high quality products which meet or
exceed customer requirements and catalog specifications. Quality control
functions designed to provide controls over the products distributed, whether
internally manufactured or externally sourced, have been fully integrated into
the Company's development and manufacturing process. In addition, the Company
provides extensive technical service to customers, primarily over the telephone,
in situations where customers have questions regarding complex product
applications, research protocols and background regarding use of the Company's
products. The Company also provides strong customer support through its customer
service staff of trained professionals at various worldwide locations, who are
primarily responsible for answering customer telephone inquiries, receiving
orders and following up on general product matters.
Highly Automated Order Fulfillment. The nature of life sciences research
and the rapid pace with which it is conducted is such that results achieved one
day may subtly change the course of the scientist's experiments for the next
day. As a result, research scientists will often require specific research
products delivered on short notice, and the speed and accuracy with which such
products are delivered can affect the success or failure of the researcher's
work. The Company has a highly automated order fulfillment system capable of
delivering substantially all customer orders worldwide on a next-day basis. The
Company believes that this system enables the Company to compete with its larger
competitors and gives it a competitive advantage over its smaller competitors,
while at the same time making the Company an attractive distribution outlet for
these smaller companies.
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<PAGE> 28
PRODUCTS
The Company sells over 7,000 products represented by over 13,000 stock
keeping units (SKUs). Through the ongoing efforts of its scientific and
technical staff, its contacts with researchers in academic and commercial
research laboratories and its open dialogue with scientific advisers, the
Company continually adds new products to its product offerings.
The broad categories of the Company's products include:
<TABLE>
<CAPTION>
PRODUCT CATEGORY DESCRIPTION OF PRODUCTS
------------------------------- ----------------------------------------------------
<S> <C>
Biochemicals................... Includes 25 major categories of products comprised
of enzymes, proteins, detergents, inhibitors,
antibiotics and others.
Immunochemicals................ Includes monoclonal and polyclonal antibodies,
antibodies to various receptor proteins, signaling
proteins, glycoproteins, proto-oncogenes, enzymes,
neurotoxins and others.
Amino Acids and Peptides....... Includes Fmoc and Boc amino acid derivatives and
hundreds of biologically active peptides.
Kits and Assays................ Includes a family of free radical marker ELISA kits
for oxidative stress research as well as a rapidly
growing line of ELISA kits for use in apoptosis
research such as NMP, Fas and cdk1.
Resins and Linkers............. Includes tentagel and polystyrene resins, together
with a variety of trityl linkers.
</TABLE>
The Company's products are marketed through four brands, each targeting
different segments of life sciences research, although some overlap exists
between the markets and products of each brand.
- Calbiochem. Calbiochem brand products target the immunology, cell biology
and biochemistry segments of life sciences research. Calbiochem has been
providing research products for over 40 years and is a well-recognized
name in the life sciences research industry.
- Novabiochem. The Company's Novabiochem brand covers products for the
biochemistry and peptide chemistry segments of life sciences research.
Novabiochem brand products have been offered since 1986.
- Oncogene Research Products. The Company currently co-brands Oncogene
Research Products with the Calbiochem brand. These products target the
immunology and molecular biology segments of life sciences research.
- Clinalfa. The Company's Clinalfa brand offers biologically active
peptides and related biological products for use in limited human trials
for research purposes. Clinalfa products are distributed principally in
Europe.
In addition to sales of its core products in standard laboratory quantity
sizes (generally from 100 nanograms to as large as 100 grams), the Company
offers certain products in bulk quantities (generally up to ten kilograms) at
discounts from catalog prices. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
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<PAGE> 29
PRODUCT POSITIONING AND MARKETING
The Company's products are principally sold through its three general and
four specialty catalogs. The Company also periodically distributes a number of
other publications to supplement its catalogs. The following table identifies
each of the Company's catalogs and gives the most recent publication dates, the
approximate number of copies published, the approximate number of products
included, the principal product focus and the brand names featured:
SUMMARY OF CATALOGS
<TABLE>
<CAPTION>
NUMBER OF APPROXIMATE
CATALOGS NUMBER
CATALOGS LAST PUBLISHED PUBLISHED OF PRODUCTS PRINCIPAL PRODUCT FOCUS BRAND NAMES
---------------------- --------------- --------- ----------- ----------------------- --------------------
<S> <C> <C> <C> <C> <C>
GENERAL
Calbiochem March 1996 158,000 3,070 Biochemicals and - Calbiochem
Immunochemicals - Novabiochem
- Oncogene Research
Products
Novabiochem September 1994 64,000 2,000 Peptides, Boc and Fmoc - Novabiochem
Amino Acids and Peptide
Synthesis Reagents
Oncogene Research March 1995 40,000 900 Antibodies, Markers, - Oncogene Research
Products Reagents and Kits Products
SPECIALTY
Signal Transduction April 1996 85,000 1,400 G Proteins, Kinases, - Calbiochem
Nitric Oxide, Calcium - Novabiochem
Metabolism and p53 - Oncogene Research
Products
Apoptosis February 1996 60,000 330 Antibodies, Assays, - Calbiochem
ELISAs, Kits and - Oncogene Research
Reagents Products
Combinatorial February 1996 20,000 110 Resins, Linkers, Fmoc - Novabiochem
Chemistry Amino Acids and Peptide
Synthesis Reagents
Clinalfa March 1996 8,000 40 Biologically Active - Clinalfa
Peptides
</TABLE>
General Catalogs
The Company utilizes general catalogs summarizing the complete product
offerings under each of its principal brands to reach a broad audience of life
sciences research scientists. The following is a brief summary of each of the
Company's three general catalogs:
- Calbiochem General Catalog. The Calbiochem general catalog has been
published since 1954. The March 1996 catalog summarizes the Company's
offering of approximately 3,070 biochemicals and immunochemicals,
including more than 700 products new to the catalog. Approximately
158,000 copies of the most recent edition of the catalog have been
published. The Calbiochem general catalog combines Calbiochem brand
products, along with selected Oncogene Research Products and Novabiochem
brand products, to provide a broad offering to research scientists.
Important product categories contained in this catalog include
G-proteins, calcium metabolism, protein kinases, nitric oxide and protein
phosphates.
- Novabiochem General Catalog. The Novabiochem general catalog summarizes
the Company's 2,000 item product offering of resins, amino acid
derivatives and reagents for peptide synthesis, as well as biologically
active peptides and enzyme substrates and inhibitors. Published since
1986, 64,000 copies of the last edition of the Novabiochem general
catalog were published in September 1994. The Novabiochem general catalog
is scheduled to be updated in the fourth quarter of 1996. The catalog
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<PAGE> 30
includes unique "synthesis notes" prepared by the Company which provide a
comprehensive and current review of solid phase peptide synthesis
methodology.
- Oncogene Research Products General Catalog. Approximately 900 products
are included in this catalog which focuses primarily on scientific
research in the areas of cancer, heart disease, signal transduction and
neurobiology. Approximately 40,000 copies of the March 1995 catalog have
been published. The Oncogene Research Products general catalog is
scheduled to be updated in the fourth quarter of 1996. Key products in
the catalog include antibodies, assays, kits, peptides and probes.
Specialty Catalogs
Commencing in 1994, with the publication of its first specialty catalog in
the area of signal transduction, the Company's strategy has included the
development of specialty catalogs focused on niche research markets to meet the
specific needs of researchers in newer, high growth areas of life sciences
research. One key element of this strategy has been to significantly increase
the scientific background data contained in its catalogs, so that researchers
view the Company's catalogs not only as compendiums of product listings, but
also as significant technical resources. A recent implementation of this
strategy is the Company's Apoptosis specialty catalog which contains text-book
quality descriptions, illustrations and schematics of central elements in the
current understanding of the phenomenon of apoptosis, as well as detailed
methods and protocols for some of the most commonly utilized procedures needed
to conduct research in this area.
- Signal Transduction Specialty Catalog. Approximately 1,400 products from
the Calbiochem, Novabiochem and Oncogene Research Products brands have
been integrated into this specialty catalog which addresses the needs of
researchers doing work in signal transduction. Approximately 85,000
copies of the Company's third edition of this catalog were published in
April 1996 and contained over 500 products new to the catalog focusing on
this growing area of scientific research. Over the past several years,
the level of signal transduction research has grown as scientists in many
disciplines have increasingly focused on the impact on their research of
both intercellular and intracellular communication. In addition to
detailed product listings, the catalog provides literature reviews,
product structures, molecular weights, application comments, technical
protocols and comparative tables of use to many signal transduction
researchers.
- Apoptosis Specialty Catalog. The newest of the Company's specialty
catalogs focuses on research in the area of apoptosis. Apoptosis, or
"programmed cell death," is a process whereby various stimuli activate a
genetic program to implement a specific series of events that culminate
in the death and efficient disposal of a cell with minimal damage to
surrounding cells or tissue. Apoptosis is essential for normal
development of cells, and disruption to the apoptotic process can lead to
a spectrum of defects thought by some researchers to be important to
various diseases including cancer, AIDS and Alzheimer's. The potential
for drugs that modulate the regulation of apoptosis provides a new and
growing opportunity for the treatment of many disease states, and the
Company anticipates continued growth in this area of research. The
February 1996 catalog combines existing Calbiochem and Oncogene Research
Products brand products with newly developed, innovative products focused
on addressing this new and growing area of scientific research.
Approximately 60,000 copies of the Apoptosis specialty catalog have been
published. The catalog includes extensive literature citations, materials
and methods, information and scientific diagrams to assist the researcher
working in this relatively new field of study. The Company's Apoptosis
specialty catalog is printed in two versions, one marketed exclusively
under the Calbiochem name and another marketed jointly under the
Calbiochem and Amersham International plc names.
- Combinatorial Chemistry Specialty Catalog. Combinatorial chemistry has
emerged as a powerful new tool used by pharmaceutical companies in the
drug discovery process. The Company's February 1996 Combinatorial
Chemistry catalog, 20,000 copies of which have been published, provides
approximately 110 products focused primarily on solid supports,
condensation reagents, resins and linkers of interest to companies
utilizing combinatorial chemistry techniques.
- Clinalfa Specialty Catalog. This catalog contains Clinalfa brand products
which capitalize upon existing strengths in the Company's manufacturing
capabilities to provide a selection of ultra-pure peptides of
29
<PAGE> 31
interest to a specialized group of researchers focused on human clinical
research applications, principally in the European market. Approximately
8,000 copies of the March 1996 Clinalfa specialty catalog have been
published. The Company's Clinalfa brand product offering is produced
under appropriate good manufacturing practices ("GMP") which meet the
requirements of government regulations and its clinical research
customers in this area.
Other Publications
In addition to its general and specialty catalogs, the Company utilizes its
internal staff in developing and distributing a variety of supporting
publications designed to highlight its new products and target specific market
segments with selected product offerings. These publications include:
- Biologics. The Calbiochem brand general biochemical and immunochemical
newsletter is published two to three times per year and is distributed to
the entire Calbiochem mailing list, including biochemists,
neurobiologists, biologists and immunologists. This broad-based
publication introduces new product offerings under the Calbiochem brand
(including inhibitors, enzymes and detergents) and also includes updated
scientific articles and references.
- Pathways. This Calbiochem brand publication is published one to two times
per year and is distributed to a targeted list of signal transduction
researchers. This publication introduces the Company's newest products
for various aspects of signal transduction research, including
G-proteins, calcium metabolism, protein kinases, protein phosphatases and
other product categories.
- Flagship Brochures. The Company's Flagship Brochures present the complete
product line of five areas within signal transduction that the Company
has singled out for special market emphasis, comprised of protein
kinases, calcium metabolism, G-proteins, nitric oxide and protein
phosphatases. The first of these brochures was introduced by the Company
in October 1995.
- Technical Bulletins. The Company maintains more than 50 Technical
Bulletins relating to Calbiochem brand products. These are two to six
page publications that focus on specific products and product lines,
including detergents, protease inhibitors, lipoproteins and ionophores.
These publications are used for targeted direct mailings as well as for
distribution at trade shows, scientific conferences and exhibitions.
- Letters, Innovations and Technical Notes. These are an interrelated trio
of support publications for Novabiochem brand products and are
distributed to customers interested in peptide synthesis and
combinatorial chemistry. Letters is published two to three times per year
to inform customers of the Company's new and innovative products being
developed for use in their drug discovery programs. Each edition features
new linkers, resins and amino acid derivative products useful for a
variety of peptide and small molecule synthesis techniques. Innovations
is published four to six times per year and provides a much more
expansive description of the products introduced in Letters. It includes
procedures for new product use along with up-to-date literature
references. Novabiochem Technical Notes are released one or two times per
year and are based on the most recent techniques used in solid phase
peptide synthesis or solid phase organic synthesis. Novabiochem Technical
Notes contain detailed descriptions, explanations and suggestions for
using certain Novabiochem brand products.
- Oncogene Research Products Publications. Oncogene Research Product
brand's New Product Guide is published one to two times per year and is
widely distributed to researchers studying cell cycle, cell
proliferation, apoptosis and signal transduction as well as to Oncogene
Research Products customers studying heart disease and metastasis, tumor
suppressor genes and neuroimmunology. A variety of applications brochures
and mailers focusing on the Oncogene Research Products brand are
distributed six to eight times per year, focusing on various new and
existing product portfolios applicable to select market segments,
including proteases, apoptosis kits, cdk1 and ELISAs.
30
<PAGE> 32
DEVELOPMENT OF NEW PRODUCTS
The Company maintains research and development centers in San Diego,
California, Cambridge, Massachusetts and Laufelfingen, Switzerland. The
Company's research scientists internally develop new products, source new
products from third parties and refine manufacturing techniques for existing
products. The Company introduced over 1,100 new products in 1995 including over
700 products introduced as a result of the acquisition of the Oncogene Research
Products business and expects to introduce in excess of 800 new products in
1996. The Company's historical experience indicates that a significant number of
its products have relatively long life cycles, often in excess of five years.
The Company identifies potential new products from many sources, including
through customer input, its Technology Council and extensive network of
scientific advisers, review of selected scientific literature, established
relationships with research institutes and universities and participation in
industry trade shows.
Product introductions are developed and monitored by the Company and
offered under one of the Company's brand names and through one or more of its
catalogs and supporting publications. The following table illustrates both the
breadth of the Company's product offerings from its 1996-1997 Calbiochem general
catalog published in March 1996 and the extent to which products not previously
offered through this catalog were added.
1996-1997 CALBIOCHEM GENERAL CATALOG PRODUCT OFFERINGS
<TABLE>
<CAPTION>
TOTAL NUMBER PRODUCTS
PRODUCT CLASS OF PRODUCTS NEW TO CATALOG
------------------------------------------------------------------- ------------ --------------
<S> <C> <C>
Amino Acids........................................................ 62 --
Antibiotics........................................................ 46 1
Antibodies (monoclonal and polyclonal)............................. 470 245
Buffers............................................................ 30 --
Carbohydrates...................................................... 57 --
Chromatography Reagents............................................ 7 --
Detergents......................................................... 92 4
Dyes, Stains and Probes............................................ 68 11
Enzyme Inhibitors.................................................. 369 106
Enzyme Substrates.................................................. 98 19
Enzymes............................................................ 204 29
Growth Factors and Cytokines....................................... 56 17
Hormones and Steroids.............................................. 18 --
Immunochemicals.................................................... 533 117
Ionophores and Channel Formers..................................... 40 12
Lipids and Phospholipids........................................... 43 --
Nucleotides and Bases.............................................. 94 --
Neurochemicals..................................................... 110 70
Neurotoxins........................................................ 100 13
Organics and Inorganics............................................ 42 --
Peptides........................................................... 171 31
Plant Biology Reagents............................................. 13 --
Protein and Nucleic Acid Modification Reagents..................... 35 5
Proteins and Derivatives........................................... 147 47
Signal Transduction Reagents....................................... 124 8
Vitamins and Coenzymes............................................. 20 --
Miscellaneous...................................................... 21 6
----- ---
Total...................................................... 3,070 741
============ ==============
</TABLE>
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SALES AND DISTRIBUTION
Catalogs and Supporting Publications. The Company markets its products
directly to its customers through the delivery of its catalogs and supporting
publications. The Company believes that the quality and presentation of its
catalogs represent a competitive advantage. The Company devotes significant
resources to creating and designing catalogs that have a high degree of
scientific and technical content and are, the Company believes, considerably
more visually appealing than those of its competitors. The Company's catalogs
generally are extensively indexed and cross referenced -- by application,
product category and individual product -- and contain a variety of color coded
reference aids which are designed to facilitate the ease with which a scientist
can find the product needed to conduct his or her research. In addition, new
product offerings are extensively highlighted. Catalogs generally contain
detailed technical information concerning the catalog's products, including
current citations to scientific research papers in which the products have been
used, as well as background information regarding focused areas of research in
which various subgroups of research products may be utilized. Catalogs are
published for distribution in the United States with pricing in U.S. dollars. In
addition, a number of the Company's catalogs and brochures are printed for
foreign distribution with pricing in local currencies.
The Company's marketing communications group utilizes in-house desktop
publishing systems in coordination with the Company's management information
systems and databases to assist in the production of camera-ready masters of
certain catalogs and publications. This enables the Company to revise and
reprint certain catalogs in 12 to 18 month cycles and to distribute other
publications more frequently. To further differentiate its publications from
those of many of its competitors, the Company has increasingly shifted to high
quality four color printing for its catalogs and brochures, and utilizes its
internal staff to significantly increase their graphic content.
The Company directly distributes its catalogs and supporting publications
using its proprietary database containing profiles of more than 100,000 research
scientists and institutions. The Company believes that a substantial portion of
its revenue represents sales to repeat customers. During 1995, the Company sold
products to more than 6,900 accounts, with more than 70% of these customers
making purchases multiple times during the year. The Company also selectively
mails catalogs and other publications to potential customers, information about
whom is obtained from trade shows, responses to Company advertisements, foreign
distributors and sales representatives, and the Company's home pages on the
Internet. The Company also advertises its catalogs in scientific journals,
publicizes them at industry trade shows and other scientific functions and
utilizes its network of sales representatives, distributors and industry
contacts to attract additional potential customers whose profiles can then be
added to the Company's database.
Sales Offices and Customer Service Representatives. In addition to its San
Diego headquarters, the Company maintains sales and customer support offices in
Cambridge, Massachusetts, Switzerland, the United Kingdom, Germany, Australia
and Japan. The Company's staff of 22 customer service representatives receive
telephone orders directly from customers. The customer service representatives
utilize a computerized data-entry system which enables them to immediately
access detailed customer and product information, quote prices and check product
availability. The Company has the ability to process standing orders and to
schedule periodic shipments according to the needs of its customers. Orders are
also submitted by mail and fax. Standard payment terms are net 30 days, but the
Company also accepts Visa, MasterCard and American Express. The Company employs
a limited sales force of seven individuals, principally in the United States and
Europe, and has a network of 50 independent foreign distributors who resell the
Company's products to their customers in selected markets.
Technical Support. The Company employs a staff of 11 technical service
specialists throughout its worldwide locations who are available during business
hours to consult with research scientists concerning the use of the Company's
products. These service specialists (eight of which hold Ph.D.s) are actively
involved in the development and are knowledgeable about the use of the Company's
products. Technical support is also available through the Company's foreign
sales offices and distributors.
Internet. The Company maintains home pages on the Internet for the
Calbiochem and Novabiochem brands with information about the Company and its
products and catalogs and is developing an Oncogene
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Research Products brand home page. The Company believes that the Internet may
become an increasingly important channel of customer communication and intends
to further develop its Internet presence to keep pace with changes in technology
and the market for its products.
CUSTOMERS
During 1995 the Company sold products to over 6,900 accounts including
individual research scientists, institutions, companies and distributors
worldwide. No single account exceeded 10% of the Company's total sales for the
year ended December 31, 1995 or the six months ended June 30, 1996. The Company
maintains extensive local databases of current and potential customers which are
utilized for targeted mailings of catalogs and other publications. Selected
customers of the Company include research scientists at:
<TABLE>
<CAPTION>
GOVERNMENT AND OTHER
PHARMACEUTICAL BIOTECHNOLOGY ACADEMIC RESEARCH INSTITUTIONS
- ---------------------- ----------------------- --------------------------- -------------------------------
<S> <C> <C> <C>
Abbott Laboratories Amgen Columbia University Dana Farber Cancer Institute
Eli Lilly and Company Biogen Incorporated Harvard University Food and Drug Administration
GlaxoWellcome Chiron Corporation Johns Hopkins University Massachusetts General Hospital
Merck & Company Genentech Incorporated University of California Mayo Clinic
Pfizer & Company Genetics Institute University of Michigan National Institutes of Health
SmithKline Beecham Genzyme University of Pennsylvania The Scripps Research Institute
</TABLE>
Details regarding the Company's operations by geographic area are included
in Note 9 of Notes to Consolidated Financial Statements.
COLLABORATIONS
An important part of the Company's business is its many collaborations with
institutions and life sciences researchers. These collaborations range from
licensing and producing products discovered by a single research scientist to
joint marketing and distribution arrangements.
Amersham International plc. In connection with the Company's targeting of
the apoptosis niche research market, the Company entered into a distribution
agreement in March 1996 with Amersham International plc ("Amersham"), a U.K.
based health science company (total 1995 company-wide sales of over L350
million) which, among other things, supplies products to the life sciences
research market. In connection with this distribution agreement, the Company's
Apoptosis specialty catalog is printed in two versions, one marketed exclusively
by the Company under the Calbiochem name and another marketed jointly under the
Calbiochem and Amersham names. The Company believes that Amersham's worldwide
network of sales representatives with specialized knowledge of the assays and
kits markets will contribute to the Company's future success in the apoptosis
niche research market. In addition, the distribution agreement contemplates that
the Company and Amersham will enter into further collaborative agreements under
which the Company would add Amersham-developed products to the Apoptosis
specialty catalog, and the Company and Amersham would jointly develop new
products.
The Scripps Research Institute. In September 1995, the Company entered into
a sublicense agreement with The Scripps Research Institute which will allow it
to produce various enzymes, substrates and other products of interest to
research scientists working in the field of glycobiology, through the use of
recombinant technology. The availability of such products, which will be
manufactured and distributed by the Company on an exclusive basis in the
research products market, will be combined with additional products to provide
research scientists with cost-effective tools needed to study complex
carbohydrates. Recent publications have focused on the potential of glycobiology
in the area of pharmaceutical drug discovery research. The Company believes that
its offering of these important products through its general and a new specialty
catalog may establish the Company as a leader in the growing niche research
market of glycobiology.
Other. In addition to featuring products developed internally by the
Company's research and development staff, the Company offers products developed
through a wide range of sources. Accordingly, the identification of new and
useful products developed by others is an important part of its business.
Drawing on
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<PAGE> 35
its connections in the industry and its multi-disciplined expertise, the Company
is constantly evaluating and searching out these products. Once these products
are identified, the Company will either license the technology and distribution
rights and produce the products in its own manufacturing facilities or purchase
manufactured products wholesale and distribute such products to the Company's
customers. In either case, the end products will ultimately be sold under one of
the Company's brand names. Providers of these products generally will be
individual research scientists or specialty companies which lack adequate
manufacturing and distribution facilities. Through a collaboration with the
Company, these individuals and smaller companies achieve wider distribution of
their products while continuing to focus on developing innovative products.
TECHNOLOGY COUNCIL AND CONSULTING ARRANGEMENT
The Company has a Technology Council composed of a number of leading
research scientists in the areas of molecular biology, immunology, cell biology
and biochemistry. The primary purpose of the Technology Council is to provide
independent, external, scientific guidance to the Company, and assist in the
decision making process related to niche research market definition, areas of
product focus and development, and general trends in many areas of scientific
research. The Company's scientific and management staff consult with members of
the Technology Council frequently on an informal basis in the normal course of
operations to address current market trends, current trends in science, broad
strategic areas of Company, including its product offerings, and industry focus
and to review the Company's current view of the life sciences research market.
Each member of the Technology Council receives $500 for each formal Technology
Council meeting attended.
The members of the Company's Technology Council are:
William H. Beers, Ph.D., the Chairman of the Company's Technology Council,
has served as Senior Vice President and Chief Operating Officer of The Scripps
Research Institute since 1991. Prior to joining The Scripps Research Institute
in 1987 as a Member of the Departments of Cell Biology and Molecular Biology,
Dr. Beers was a Professor of Biology and Cell Biology at the New York University
Medical School for nine years. Dr. Beers also presently serves as Director of
the Foundation for Medical Research, Washington, D.C., Treasurer and Member of
the Board of Trustees for the Skaggs Institute for Research, member of the Board
of Scientific Advisors of Allegheny-Singer Research Institute, Pittsburgh,
trustee of National University, San Diego and Chairman of the Torrey Pines
Institute for Molecular Studies. Dr. Beers earned his Ph.D. in Biochemistry and
Pharmacology from Rockefeller University and obtained an A.B. in Biochemical
Sciences from Harvard University.
Dennis R. Burton, Ph.D., has served as a Member of the Departments of
Immunology and Molecular Biology at The Scripps Research Institute since 1991
and was a lecturer at Oxford University and the University of Sheffield for ten
years before joining The Scripps Research Institute. Dr. Burton earned his Ph.D.
in Physical Chemistry from University of Lund (Lund, Sweden) and obtained a B.S.
in Chemistry from Oxford University. Dr. Burton is the author of 140 published
scientific papers.
Norton B. Gilula, Ph.D., has served as the Dean of Graduate Studies and the
Chairman of the Department of Cell Biology at The Scripps Research Institute
since 1991. Prior to joining The Scripps Research Institute as a Member of the
Department of Molecular Biology, Dr. Gilula was a Professor of Cell Biology at
Baylor College of Medicine for six years. Dr. Gilula presently is the
Editor-in-Chief of the Journal of Cell Biology, an editor of Current Opinion in
Cell Biology and is on the Scientific Advisory Board of the Wills Foundation.
Dr. Gilula earned his Ph.D. in Physiology from the University of California,
Berkeley and earned a B.A. and M.A. in Physiology and Chemistry from Southern
Illinois University. Dr. Gilula is the author of over 100 published scientific
papers.
Chi-Huey Wong, Ph.D., has served as Chairman of the Department of Chemistry
at The Scripps Research Institute since 1989. Before joining The Scripps
Research Institute as a Member of the Department of Chemistry in 1989, Dr. Wong
served as an Assistant, Associate and then full Professor of Chemistry at Texas
A&M University for seven years. Dr. Wong presently is the Editor-in-Chief of the
Journal of Bioorganic and Medicinal Chemistry and is a founding scientist of
Combichem, a provider of combinatorial chemistry products. Dr. Wong earned his
Ph.D. in Organic Chemistry from the Massachusetts Institute of Technology
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<PAGE> 36
("MIT") and obtained his B.A. in Chemistry and Biochemical Science and M.S. in
Biochemical Science at the National Taiwan University. Dr. Wong is the author of
247 published scientific papers and one book and holds 34 patents.
When the Technology Council was formed in October 1993, each member of the
Technology Council, other than the Chairman, received options to purchase 11,829
shares of Common Stock at an exercise price of $.42 per share. At such time, the
Chairman of the Technology Council, Dr. Beers, received options to purchase
23,659 shares at an exercise price of $.42 per share.
In addition to formal and informal consultations with the members of the
Technology Council, the Company has extensive contacts throughout the life
sciences research industry who also provide guidance and feedback regarding many
aspects of the Company's business. These contacts include senior researchers at
a number of institutions including Cold Spring Harbor Laboratories, Dana Farber
Cancer Institute, Harvard University, MIT, University of California and the Salk
Institute. The Company also utilizes consultants with specific scientific
expertise, particularly in the area of new product development and trends in
specific areas of scientific research.
The Company currently has a consulting agreement with Robert A. Weinberg,
Ph.D. Dr. Weinberg is a Professor of Biology at MIT and a Member of the
Whitehead Institute for Biomedical Research in Cambridge, Massachusetts. Dr.
Weinberg is world renowned for his research in cancer biology and cell cycle. He
has received thirty-two individual awards and honors during his career. In
addition to his research and academic duties at MIT, Dr. Weinberg serves on the
Board of Scientific Advisors to Hoffman-LaRoche, Inc., as an honorary Director
of the American Cancer Society, on the Scientific and Academic Advisory
Committee at the Weitzmann Institute of Science, as an Awards Assembly Member of
the General Motors Cancer Research Foundation and on the Research Advisory
Board, Massachusetts General Hospital. Dr. Weinberg is the author of 250
published scientific papers. During 1996, Dr. Weinberg is providing guidance and
assistance to the Company, principally relating to the Oncogene Research
Products business, under a consulting agreement providing for compensation
aggregating $10,000.
MANUFACTURING AND QUALITY ASSURANCE
The Company has manufacturing facilities in San Diego, California,
Cambridge, Massachusetts and Laufelfingen, Switzerland. All products are
distributed from either the Company's North American distribution center in San
Diego or the Company's European distribution center in Nottingham, U.K. For the
twelve-month period ended June 30, 1996, the Company's level of total
outstanding product backorders averaged approximately $329,000, calculated by
averaging backorder amounts at each month end during the period. The Company
ships products in accordance with customer requests, generally next-day or
second-day delivery, using principally United Parcel Service and Federal
Express. Based on the Company's monthly shipping statistics, over 99% of
customer orders are accurately fulfilled.
The Company produces products through its internal manufacturing process
and selective sourcing of additional products that can be more cost effectively
included in the product offering by purchasing from outside suppliers. Initial
batches of externally sourced products may be subject to inspection by the
Company's quality control personnel, and subsequent purchases are monitored to
ensure consistent quality of supply. In substantially all cases, members of the
Company's scientific staff have physically visited the manufacturing facility of
suppliers from whom the Company purchases sourced product. In addition, periodic
inspections of supplier facilities may be performed in connection with the
Company's supplier management process. Based upon 1995 sales data, approximately
45% of the Company's sales were derived from internally manufactured products.
The level of manufacturing content in individual products produced internally
varies depending upon the state of raw materials purchased. In some cases, such
as the production of peptides, internally synthesized biochemicals and
antibodies, assays and kits produced at the Company's Cambridge, Massachusetts
facility, the entire manufacturing process is controlled by the Company. In
other cases, it is more cost effective for the Company to purchase materials in
various states of completion and provide "value-added" manufacturing processes
such as purification, lyophilization and subdivision/packaging prior to delivery
to customers.
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The Company's manufacturing activities consist primarily of antibody
production, synthesis of chemical compounds, synthesis of peptides and amino
acids and assembly of assays and kits. In the case of certain products provided
primarily to pharmaceutical and diagnostic customers from the Company's Swiss
manufacturing facility, appropriate GMP manufacturing guidelines are adhered to.
In addition, the Swiss facility has received ISO 9001 certification of policies
and procedures utilized in the procurement, manufacturing and distribution of
products. The Company also maintains a central quality assurance department in
its San Diego headquarters, with the principal focus of ensuring that quality
processes are maintained worldwide which ensure consistent, high quality product
is delivered in connection with all product offerings.
FULFILLMENT AND INTEGRATED INFORMATION SYSTEMS
The Company has a highly automated order fulfillment system capable of
delivering substantially all customer orders worldwide on a next-day basis. The
Company believes that this system enables the Company to compete with its larger
competitors and gives it a competitive advantage over its smaller competitors,
while at the same time making the Company an attractive distribution outlet for
these smaller companies.
The Company utilizes an Oracle-based relational database system to manage
substantially all operations of the Company's U.S. and international locations.
The Company's U.S., U.K., German and Swiss operations are part of a network that
is linked together through the use of leased phone lines with back-up
capabilities. The Company's information systems provide integrated on-line
automation of major business operations including purchasing, receiving,
production planning, inventory management, manufacturing, quality control, order
entry, shipping, sales analysis and all financial systems. This system allows
the Company to enter orders for any product brand from any of its networked
locations, and provides for invoicing of customers in any of the currencies
quoted in the various product catalogs. In addition, the Company has an
integrated software interface between the primary information system and the
computer software which organizes products to be picked from the automated
fulfillment system maintained at the Company's North American distribution
center in San Diego, California.
COMPETITION
The market for the Company's products is highly competitive, and the
Company expects competition to increase. Furthermore, although the life sciences
research products market continues to grow, its rate of growth in recent years
has been declining and may continue to decline. The Company competes with many
other life sciences research products suppliers, both larger and smaller than
the Company. Some of the Company's competitors, including two of its largest
competitors, Sigma-Aldrich and Boehringer, offer a broad range of equipment,
laboratory supplies and products, including many of the research products
offered by the Company. To the extent that researchers exhibit loyalty to the
supplier that first supplies them with a particular research product, the
Company's competitors may have an advantage over the Company with respect to
products first developed by such competitors. In addition, many of the Company's
competitors have significantly greater research and development, marketing,
financial and other resources than the Company, and therefore represent and will
continue to represent significant competition in the Company's existing and
future markets. Because of their size and the breadth of their product
offerings, certain of these companies have been able to establish managed
accounts by which, through a combination of direct computer links and volume
discounts, they seek to gain a disproportionate share of orders for research
products from a particular academic institution or pharmaceutical or
biotechnology company. Such managed accounts raise significant competitive
barriers for the Company. The Company currently benefits from its participation
in emerging niche research markets which, as they expand, may attract the
attention of the Company's competitors.
GOVERNMENT REGULATION
The Company is subject to governmental regulation under the Occupational
Safety and Health Act, the Environmental Protection Act, the Toxic Substances
Control Act, and other similar laws of general application, as to all of which
the Company believes itself to be in material compliance. The Company has in the
past been notified of minor violations of government and environmental
regulations. The Company has promptly corrected such violations, without any
material impact on the Company's operations. Any future violation of,
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<PAGE> 38
and the cost of compliance with, these laws and regulations could have a
material adverse effect on the Company's business, financial condition and
results of operations.
Because of the nature of its operations and the use of hazardous substances
in its ongoing manufacturing and research and development activities, the
Company is subject to stringent federal, state and local laws, rules,
regulations and policies governing the use, generation, manufacturing, storage,
air emission, effluent discharge, handling and disposal of certain materials and
wastes. Prior to the Company's inception, its U.S. subsidiary, at the time it
was owned by its former owners, was involved in two separate incidents related
to the release of hazardous materials into the environment at a leased facility
which is no longer occupied by the Company. The Company believes from a review
of correspondence from various regulatory agencies that these incidents were
investigated and remediated by the U.S. subsidiary's former owners. Although the
Company believes it is in material compliance with all applicable government and
environmental laws, rules, regulations and policies, there can be no assurance
that the Company's business, financial condition and results of operations will
not be materially adversely affected by current or future environmental laws,
rules, regulations and policies or by liability arising out of any past or
future releases or discharges of materials that could be hazardous.
The Company's products are generally sold for non-human research purposes
and do not subject the Company to the regulatory requirements of the U.S. Food
and Drug Administration (the "FDA"). In certain limited situations, the
Company's Clinalfa products are sold to U.S. customers involved in limited human
clinical research which requires that the Company's customer obtain FDA approval
of an Investigational New Drug application (IND). Products sold to such
customers are produced by the Company at its Swiss manufacturing facilities in
material compliance with appropriate GMPs. Clinalfa products supplied to non-
U.S. customers for similar human clinical research are also subject to
applicable regulatory requirements and production is also done in material
compliance with appropriate GMPs.
INTELLECTUAL PROPERTY
Although the Company owns certain patents and licenses patents from others,
none of these patents individually, nor in the aggregate, are material to the
Company's operations. Due to the rapid pace of technological change in the field
of biotechnology, the degree of protection that a patent provides is uncertain,
and requires the Company to continually develop and seek out new technologies.
The Company has obtained the rights to products and technologies under a number
of license agreements with academic institutions, private and public
foundations, biotechnology companies and others. The Company intends to continue
its current practice of licensing technologies and products as a supplement to
its own internally developed innovations.
A number of the Company's products, including Oncogene Research Products
antibodies, are manufactured under license agreements which provide for payment
of royalties based upon the product's sales. As of June 30, 1996, the Company
had in excess of 175 license agreements which provided for royalty payments
generally ranging from 5% to 7% of net sales of such products. During the year
ended December 31, 1995 and the six months ended June 30, 1996, the Company
expensed an aggregate of $112,000 and $159,000, respectively, in connection with
cash royalties owed pursuant to license agreements.
Because of the breadth of the Company's product offerings and ambiguities
in intellectual property law, the Company periodically receives in the ordinary
course of business notices of potential infringement of patents held by others.
Although the Company historically has been able to satisfactorily resolve such
claims and believes that any outstanding claims will be satisfactorily resolved,
there can be no assurance that the Company may not be forced to discontinue the
sale of one or more of its products, some or all of which could be material. As
the Company develops product offerings focused on certain niche research
markets, intellectual property rights of the Company or others related to such
markets may become increasingly important, and the Company's failure to obtain
and retain such rights may have a material adverse effect on the Company's
business, financial condition and results of operations.
The Company's significant registered trademarks are its Calbiochem,
Novabiochem and Clinalfa brand names. In connection with the Oncogene Research
Products acquisition, OSI granted the Company the right to use the phrase
"Oncogene Research Products" for a three-year period which will expire in August
1998. All
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<PAGE> 39
new Oncogene Research Products promotional materials, including the Apoptosis
specialty catalog, and all packaged products now identify Oncogene Research
Products as a product line of Calbiochem. The Company intends to develop a
strategy to transition its Oncogene Research Products brand and does not
anticipate that such transition will have an adverse effect on the Company's
business, financial condition and results of operations.
HUMAN RESOURCES
As of June 30, 1996, the Company employed 188 persons on a full-time and
part-time basis, including 40 employees who hold Ph.D.s. None of the Company's
employees are covered by a collective bargaining agreement, and the Company
considers relations with its employees to be good.
FACILITIES
The Company leases approximately 60,000 square feet of space in San Diego,
California, for use as its corporate headquarters, North American distribution
center and technology center (including manufacturing facilities) for the
Calbiochem brand. This lease expires in June 2008 and may be renewed for two
five-year terms at the option of the Company.
The Company also leases approximately 10,000 square feet of space in
Cambridge, Massachusetts for use as a technology center (including manufacturing
facilities) for the Oncogene Research Products brand. Such space is subleased
from OSI pursuant to a sublease agreement expiring in August 1998. The sublease
may be renewed, at the Company's option, for additional one-year terms through
2003. In connection with the OSI sublease, the Company entered into a Shared
Services Agreement which provides that OSI will share certain building
facilities with the Company, in exchange for the Company's contributing to the
costs of such shared facilities. The Company also leases approximately 3,000
square feet of additional laboratory space in Cambridge under a three-year
lease.
The Company leases approximately 7,500 square feet of space in Nottingham,
U.K., for use as its European distribution center and a sales office under a
lease expiring in February 2009. The Company leases approximately 2,100 square
meters of space in Laufelfingen, Switzerland. The Novabiochem brand technology
center (including manufacturing facilities) occupies 1,500 square meters of this
space under a lease expiring in June 2004. The remaining approximately 600
square meters has been unoccupied since the restructuring of the Company's Swiss
operations in 1993, and is under lease until June 2000. The Company also rents
space for sales offices in Australia, Japan and Germany on a short-term basis.
The Company believes that its properties are generally in good condition,
are well maintained, and are suitable and adequate to carry on its business.
LEGAL PROCEEDINGS
The Company is not currently a party to any legal proceedings.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information regarding the Company's
executive officers and directors as of August 15, 1996:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------- --- -----------------------------------------------------------------
<S> <C> <C>
Stelios B. Papadopoulos.... 55 Chairman of the Board; Chief Executive Officer and President
James G. Stewart........... 43 Vice President, Administration; Chief Financial Officer and
Secretary
John T. Snow............... 52 Vice President, New Business Development
Ben Matzilevich............ 48 Vice President, Market Development -- Niche Applications
Douglas J. Greenwold....... 54 Vice President, Sales and Marketing
Frederick L. 42 Director
Bryant(1)(3).............
Joseph P. Landy(1)(3)...... 35 Director
S. Joshua Lewis(2)......... 34 Director
Robert E. McGill, III(2)... 65 Director
</TABLE>
- ---------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
(3) Member of the Stock Option Committee.
Stelios B. Papadopoulos has served as Chairman of the Board, Chief
Executive Officer and President of the Company since January 1993. From June
1992 to December 1992, Mr. Papadopoulos served as President of Fisher Scientific
Worldwide Inc. (now Fisher Scientific International Inc.) ("Fisher") and was
responsible for the day-to-day operations of Fisher's worldwide organization
which provides equipment, laboratory supplies, and various other products to
customers in the life sciences research market. From May 1989 to June 1992, Mr.
Papadopoulos served as President of Fisher Scientific Company, the principal
operating unit of Fisher. Prior to joining Fisher Scientific Company, Mr.
Papadopoulos served in a number of companies involved in the life sciences
industry including Instrumentation Laboratory and Orion Research.
James G. Stewart has served as Vice President, Administration, Chief
Financial Officer and Secretary of the Company since June 1995. From April 1994
to April 1995, Mr. Stewart served as Vice President -- Finance and Chief
Financial Officer of Fightertown Entertainment, Inc., and from October 1988 to
April 1994, Mr. Stewart served as Vice President -- Finance and Chief Financial
Officer of VERTEQ, Inc. Mr. Stewart is a certified public accountant and a
former partner of Arthur Young & Company (now Ernst & Young LLP).
John T. Snow, Ph.D., has served as Vice President, New Business Development
of the Company since March 1992, and was Vice President, Marketing and Sales of
the Company from April 1989 until March 1992. Dr. Snow has been employed by the
Company and its predecessors in various other capacities since 1975 and is the
author and co-author of over 40 published scientific papers.
Ben Matzilevich has served as Vice President, Market Development -- Niche
Applications since joining the Company in April 1995, and has served as General
Manager of the Oncogene Research Products business since its acquisition in
August 1995. From August 1993 to March 1995, Mr. Matzilevich served as Vice
President -- Sales and Marketing with Endogen, Inc., a producer and seller of
research products for the study of cytokines. In November 1989, Mr. Matzilevich
co-founded Biosource International, Inc., a research products company, and
through August 1993, was primarily responsible for day-to-day operations,
product development and development of the sales and marketing organization.
Prior to founding Biosource, Mr. Matzilevich held various positions at
NEN/E. I. du Pont de Nemours and Company and acted as an industry consultant to
a number of research products companies serving the life sciences research
industry.
Douglas J. Greenwold has served as Vice President, Sales and Marketing of
the Company since January 1994. From 1990 to 1993, Mr. Greenwold was employed in
various capacities, including Vice President -- Sales and Marketing, Research
Products Americas at Life Technologies, Inc., a supplier of research products to
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<PAGE> 41
the life sciences research market. Prior to joining Life Technologies, Mr.
Greenwold held a number of sales and marketing positions at Survival Technology,
Inc., a supplier of cardiac monitoring and drug delivery technologies and Xerox
Corporation.
Frederick L. Bryant has served as a director of the Company since March
1992. Since December 1993, he has been principally employed as a General Partner
of ABS Partners, L.P., the general partner of ABS Capital Partners, L.P., a
private equity fund. For more than five years prior to that date, he was
principally employed as a Managing Director of Alex. Brown & Sons Incorporated,
investing private equity funds. Mr. Bryant serves on the Board of Directors as a
nominee of ABS. Mr. Bryant also serves as a director of Transaction Systems
Architects, Inc. and several privately held companies.
Joseph P. Landy has served as a director of the Company since March 1992.
Since January 1994, Mr. Landy has been a Managing Director of E.M. Warburg,
Pincus & Co., Inc., where he has been employed in various capacities since 1985.
Mr. Landy serves on the Board of Directors as a nominee of Warburg. Mr. Landy
also serves as a director of Level One Communications, Inc., Nova Corporation
and several privately held companies.
S. Joshua Lewis has served as a director of the Company since June 1995.
Mr. Lewis is a Vice President of E.M. Warburg, Pincus & Co., Inc. where he has
been employed in various capacities since 1989. Mr. Lewis serves on the Board of
Directors as a nominee of Warburg. Mr. Lewis also serves as a director of
Cambridge Neuroscience, Inc.
Robert E. McGill, III has served as a director of the Company since
November 1995. For more than the past five years, Mr. McGill has served as a
member of the Board of Managers of seven variable annuity managed separate
accounts and a Trustee of five mutual funds sponsored by The Travelers Insurance
Company. From 1989 to December 1994, Mr. McGill served as Executive Vice
President -- Finance and Administration of The Dexter Corporation, where he also
served as a director from 1983 to April 1995. Mr. McGill also serves as a
director of Connecticut Surety Corporation and Chemfab Corporation.
The Company's Board of Directors is currently composed of five directors,
one of whom is an employee of the Company. Directors serve until the next annual
stockholders' meeting or until their successors have been duly elected and
qualified. During 1995, the Board of Directors had six meetings. The Company
intends to add an additional independent director with life sciences industry
experience.
Warburg and ABS currently have certain rights with respect to the
nomination and election of directors to the Company's Board of Directors, which
rights, by their terms, terminate upon the consummation of the offering. To
induce Warburg and ABS to agree with the Company to exchange their shares of
Series B Preferred Stock for shares of Common Stock, the Company has agreed to
grant to Warburg and ABS the following rights which will become effective upon
the consummation of the offering: (i) for so long as Warburg owns beneficially
at least 20% of the outstanding shares of Common Stock, the Company will
nominate and use reasonable efforts to have two individuals designated by
Warburg and reasonably acceptable to the Company elected to the Company's Board
of Directors, and from the date that Warburg owns beneficially less than 20% of
the outstanding shares of Common Stock but for so long as it owns beneficially
at least 10% of the outstanding shares of Common Stock, the Company will
nominate and use reasonable efforts to have one individual designated by Warburg
and reasonably acceptable to the Company elected to the Company's Board of
Directors; and (ii) for so long as ABS owns beneficially at least 10% of the
outstanding shares of Common Stock, the Company will nominate and use reasonable
efforts to have one individual designated by ABS and reasonably acceptable to
the Company elected to the Company's Board of Directors.
COMMITTEES OF THE BOARD OF DIRECTORS
Compensation Committee. The Company has a Compensation Committee consisting
of Messrs. Bryant and Landy. The Compensation Committee provides recommendations
concerning salaries and incentive compensation for the Company's officers and
administers the Company's benefit plans, other than the Stock Option Plan.
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Audit Committee. The Company has an Audit Committee consisting of Messrs.
Lewis and McGill. The Audit Committee recommends to the Board of Directors the
engagement of the Company's independent public accountants and reviews the scope
and results of their audits and other services. The Audit Committee meets with
management and with the independent public accountants to review matters
relating to the quality of the Company's financial reporting and internal
accounting controls, including the nature, extent and results of the audits,
proposed changes to the Company's accounting principles and otherwise maintains
communications between the independent public accountants and the Board of
Directors.
Stock Option Committee. The Company has a Stock Option Committee consisting
of Messrs. Bryant and Landy. The Stock Option Committee determines grants under
and otherwise administers the Company's Stock Option Plan.
COMPENSATION OF DIRECTORS
Directors, other than Warburg's nominees, are reimbursed for expenses
incurred in attending meetings of the Board of Directors. In addition, Mr.
McGill, who is not an employee and not otherwise affiliated with a principal
stockholder of the Company, is paid $500 for each Board of Directors meeting
attended. At the time that Mr. McGill joined the Board of Directors, he was
granted options to purchase 11,829 shares of Common Stock at an exercise price
of $3.38 per share. Additionally, under an agreement with the Company, Mr.
McGill from time to time provides certain consulting services for which he is
compensated at the rate of $1,000 per day. During 1995, the Company paid Mr.
McGill a consulting fee of $1,000.
EXECUTIVE COMPENSATION
The following table sets forth information concerning compensation of the
Company's Chief Executive Officer and the five other most highly compensated
executive officers including the Company's former President (collectively, the
"Named Executive Officers") for the year ended December 31, 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
-------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY($) COMPENSATION($) OPTIONS(#) COMPENSATION($)
- --------------------------------------------- --------- --------------- ------------ ---------------
<S> <C> <C> <C> <C>
Stelios B. Papadopoulos (1)
Chief Executive Officer and President...... $ 204,327 $ 162,640 -- $ 2,112
Richard B. Slansky (2)
President.................................. 63,600 93,015 -- 147,190
Douglas J. Greenwold (3)
Vice President, Sales and Marketing........ 115,000 -- -- 3,352
John T. Snow (4)
Vice President, New Business Development... 110,021 -- -- 3,804
James G. Stewart (5)
Vice President, Administration, Chief
Financial Officer and Secretary............ 80,865 21,518(6) 47,317 45,471
Ben Matzilevich (7)
Vice President, Market Development -- Niche
Applications............................... 87,692 -- 23,659 --
</TABLE>
- ---------------
(1) Other annual compensation represents forgiveness of principal and interest
related to a note receivable from Mr. Papadopoulos in connection with his
purchase of capital stock of the Company pursuant to his employment
agreement. Other compensation includes $1,098 in premiums for personal
beneficiary life insurance in excess of non-taxable group limits, and $1,014
of Company matching 401(k) contributions.
(2) Resigned from the Company in June 1995. Other annual compensation represents
severance pay. Other compensation includes $144,460 of compensation from
exercise of non-qualified stock options and $2,730 of Company matching
401(k) contributions.
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<PAGE> 43
(3) Other compensation includes $580 in premiums for personal beneficiary life
insurance in excess of non-taxable group limits and $2,772 of Company
matching 401(k) contributions.
(4) Other compensation includes $1,035 in premiums for personal beneficiary life
insurance in excess of non-taxable group limits and $2,769 of Company
matching 401(k) contributions.
(5) Joined the Company in June 1995. Other compensation includes $39,231
relocation expense reimbursement, $4,680 of premiums for personal
beneficiary life insurance in excess of non-taxable group limits and $1,560
of Company matching 401(k) contributions.
(6) Represents tax reimbursement payments related to relocation.
(7) Joined the Company in April 1995.
The following table summarizes the number of shares and the terms of stock
options granted to the Named Executive Officers in 1995:
OPTION GRANTS DURING YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
NUMBER OF % OF TOTAL PRICE APPRECIATION
SECURITIES OPTIONS FOR OPTION
UNDERLYING GRANTED TO TERM($)(2)(3)
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION ---------------------
NAME GRANTED(#) FISCAL YEAR ($/SHARE)(1) DATE 5% 10%
- ---------------------------------- ---------- ------------ -------------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
James G. Stewart.................. 47,317 46.5% $.42 6/12/00 $ 5,526 $ 12,210
Ben Matzilevich................... 23,659 23.3 .42 7/03/00 2,763 6,105
</TABLE>
- ---------------
(1) The exercise price of options is equal to 100% of the fair market value of
the Common Stock as determined by the Company's Board of Directors on the
date of grant.
(2) The options have a five-year term, subject to earlier termination under
certain circumstances.
(3) The potential realizable value is calculated based on the term of the option
at its time of grant and is calculated by assuming that the stock price on
the date of grant as determined by the Board of Directors appreciates at the
indicated annual rate compounded annually for the entire term of the option
and that the option is exercised and sold on the last day of its term for
the appreciated price. The 5% and 10% assumed rates of appreciation are
derived from the rules of the Securities and Exchange Commission (the
"Commission") and do not represent the Company's estimate or projection of
the future market price of the Common Stock.
The following table summarizes options exercised in 1995 by the Named
Executive Officers, the number of unexercised options held by the Named
Executive Officers at the end of 1995, and their value at that date if they were
in-the-money.
AGGREGATED 1995 OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1995(#) DECEMBER 31, 1995($)(1)
ACQUIRED --------------------------- ---------------------------
NAME ON EXERCISE(#) VALUE REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------- -------------- ----------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stelios B. Papadopoulos.... -- -- 55,124 55,124 $ 167,061 $ 167,061
Richard B. Slansky......... 47,696 $ 144,460 -- -- -- --
Douglas J. Greenwold....... -- -- 18,927 28,390 57,360 86,040
John T. Snow............... -- -- -- 6,624 -- 20,076
James G. Stewart........... -- -- -- 47,317 -- 143,400
Ben Matzilevich............ -- -- -- 23,659 -- 71,700
</TABLE>
- ---------------
(1) Based on a value of $3.45 per share, the fair market value on December 31,
1995 as determined by the Board of Directors.
42
<PAGE> 44
EMPLOYMENT AGREEMENTS
The Company has employment agreements with Messrs. Papadopoulos and
Matzilevich currently providing for their employment at annual base salaries of
$225,000 and $124,000, respectively. Mr. Papadopoulos' employment agreement
provides that the Board of Directors will review his compensation at least once
each year and award such bonuses and effect such increases in base salary as the
Board of Directors, in its sole discretion, determines are merited, based upon
his performance and consistent with the Company's compensation policies. Mr.
Matzilevich's employment agreement provides that in addition to any annual
adjustment made to his salary, he is eligible for a bonus up to 35% of base
salary, based on the achievement of certain agreed-upon objectives. In addition,
both of these executives may participate in such fringe benefits as are
generally provided to the Company's executives.
Unless terminated earlier in accordance with their respective terms, Mr.
Papadopoulos' employment agreement terminates on January 4, 1998, and Mr.
Matzilevich's employment agreement terminates on April 3, 1998. In addition,
each of these agreements provides that the Company and the executive will, not
later than 90 days prior to the termination thereof, begin to negotiate in good
faith the terms of any extension of the employment agreement.
If Mr. Papadopoulos' employment is terminated without cause, if there is a
material change in his duties, or if the Company does not offer to continue his
employment with the Company after the agreement's expiration at a base salary at
least equal to his then most recent salary, Mr. Papadopoulos will be entitled to
receive salary continuation pay for the 12-month period from the date of such
termination equal to his base salary under the terms of his employment
agreement. In addition, Mr. Papadopoulos' employment agreement provides that
upon such a termination, any options to purchase Common Stock then held by him
will become exercisable to the full extent that they would otherwise have become
exercisable on January 4, 1998, without regard to certain restrictions or
deferrals of the right to exercise such options. In the event that Mr.
Matzilevich is terminated without cause, he will be entitled to continue to
receive compensation under his employment agreement for the remainder of its
term.
The Company maintains $1.0 million of key man life insurance on the lives
of Messrs. Papadopoulos and Matzilevich and Dr. Snow, naming the Company as
beneficiary.
Messrs. Stewart and Greenwold and Dr. Snow are eligible for incentive
bonuses up to approximately 35% of their base salaries, based on the achievement
of certain agreed-upon objectives, and are eligible for severance payments up to
six months of their base salary in the event they are terminated without cause.
STOCK OPTION PLAN
The Stock Option Plan, including all amendments, has been adopted by the
Board of Directors and approved by the Company's stockholders. The Stock Option
Plan authorizes the grant of both incentive stock options ("ISOs") within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), and nonqualified stock options ("NQSOs") to key employees, officers,
directors and consultants of the Company and its subsidiaries. ISOs, however,
may only be granted to participants who are employees of the Company or its
subsidiaries. Options to purchase an aggregate of 835,000 shares of Common Stock
are authorized under the Stock Option Plan. As of July 17, 1996, 78,073 ISOs and
315,841 NQSOs were outstanding under the Stock Option Plan, and 359,559 shares
were available for future awards.
The Stock Option Plan is presently administered by a committee (the "Stock
Option Committee") appointed by the Board of Directors. The Stock Option
Committee has the discretion to determine the key employees, officers, directors
and consultants to whom options are granted and the terms of such options,
including the exercise price, vesting provisions and expiration date. The
minimum exercise price for ISOs, however, must be the fair market value of the
Common Stock on the date of grant, as determined by the Company's Board of
Directors. Options granted under the Stock Option Plan may, at the Stock Option
Committee's discretion, provide for full vesting upon a "change in control" of
the Company. No options may be granted with a term longer than ten years.
All options granted under the Stock Option Plan are evidenced by a written
option agreement between the option holder and the Company. Option holders have
no voting, dividend or other rights of stockholders
43
<PAGE> 45
with respect to shares of Common Stock covered by their options prior to
exercising such options and becoming the holders of record of shares of Common
Stock.
The Board of Directors may at any time terminate the Stock Option Plan or
from time to time make such modifications or amendments to the Stock Option Plan
as it may deem advisable; provided that the Board of Directors may not, without
the approval of the Company's stockholders, increase the maximum number of
shares of Common Stock for which options may be granted under the Stock Option
Plan.
Federal Tax Consequences. Set forth below is a brief description of the
federal income tax consequences applicable to ISOs and NQSOs granted under the
Stock Option Plan.
ISOs. No taxable income is realized by the option holder upon the grant or
exercise of an ISO. If Common Stock is issued to an option holder pursuant to
the exercise of an ISO, and if no disqualifying disposition of such shares is
made by such option holder within the earlier of two years after the date of
grant or within one year after the exercise of such options, then (i) upon the
sale of such shares of Common Stock, any amount realized in excess of the option
price will be taxed to such option holder as a long-term capital gain and any
loss sustained will be taxed to such option holder as a long-term capital loss,
and (ii) no deduction will be allowed to the Company for federal income tax
purposes.
If the Common Stock acquired upon the exercise of an ISO is disposed of
prior to the expiration of either holding period described above, then generally
(i) the option holder will realize ordinary income in the year of disposition in
an amount equal to the excess, if any, of the fair market value of such shares
at the time of exercise (or, if less, the amount realized on the disposition of
such shares) over the option price paid for such shares, and (ii) the Company
will be entitled to deduct the same amount as compensation expense for federal
income tax purposes. Any further gain (or loss) realized by the option holder
will be taxed as short-term or long-term capital gain (or loss), as the case may
be, and will not result in any deduction by the Company.
NQSOs. With respect to NQSOs, (i) no income is realized by the option
holder at the time the option is granted, (ii) generally, upon exercise,
ordinary income is realized by the option holder in an amount equal to the
difference between the option price paid for the shares and the fair market
value of the shares, if unrestricted, on the date of exercise, and the Company
is generally entitled to a federal income tax deduction in the same amount as
compensation expense, subject to applicable withholding requirements and (iii)
at sale, appreciation (or depreciation) after the date of exercise is treated as
either short-term or long-term capital gain (or loss), depending on how long the
shares have been held.
The foregoing summary with respect to federal income taxation does not
purport to be complete and reference is made to the applicable provisions of the
Code.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No officer or employee of the Company currently serves as a member of the
Compensation Committee. Messrs. Landy and Bryant, the current members of the
Compensation Committee, have in the past served as officers of the Company,
including, in the case of Mr. Landy, during fiscal 1995. Messrs. Landy and
Bryant may be deemed to have an indirect pecuniary interest (within the meaning
of Rule 16a-1 under the Securities and Exchange Act of 1934, as amended (the
"Exchange Act"), in an indeterminate portion of the securities of the Company
beneficially owned by Warburg and ABS, respectively. See "Principal
Stockholders" and "Certain Transactions -- Acquisition of the Company."
LIMITATIONS ON DIRECTORS' AND OFFICERS' LIABILITY
The Certificate of Incorporation provides that, to the fullest extent
permitted by Delaware law, the Company's directors shall not be personally
liable to the Company and its stockholders for monetary damages for breach of
their fiduciary duties as directors, except for liability for (i) breach of the
directors' and officers' duty of loyalty, (ii) acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of the law,
(iii) the unlawful payment of a dividend or unlawful stock purchase or
redemption and (iv) any transaction from which the director derives an improper
personal benefit. Delaware law does not permit a corporation to eliminate a
director's duty of care, and this provision of the Company's Certificate of
Incorporation has no effect on the availability of equitable remedies, such as
injunction or rescission, based upon a director's breach of the duty of care.
44
<PAGE> 46
In addition, the Company's Certificate of Incorporation and By-Laws provide
that the Company shall indemnify its directors and officers to the fullest
extent permitted by Delaware law. The Company has entered into indemnification
agreements with certain of its directors and officers pursuant to which the
Company provides indemnification and contribution against expenses and losses
incurred for claims brought against them by reason of their being a director or
officer of the Company. Members of the Stock Option Committee are also
indemnified by the Company in connection with their administration of the Stock
Option Plan.
The Company believes that these provisions will assist the Company in
attracting and retaining qualified individuals to serve as directors and
officers.
45
<PAGE> 47
CERTAIN TRANSACTIONS
The following is a summary of certain transactions among the Company and
its directors, executive officers and principal stockholders:
CONVERSION OF SERIES A CONVERTIBLE PREFERRED STOCK AND EXCHANGE OF SERIES B
PREFERRED STOCK
The Company has agreed with Warburg that upon consummation of the offering
of Common Stock, Warburg will convert its 4,001 shares of Series A Convertible
Preferred Stock into 788,814 shares of Class A Common Stock. Promptly after such
conversion, Warburg will, in turn, make the requisite certification required
under the Certificate of Incorporation regarding its share ownership to the
Company and will convert such shares of Class A Common Stock into Common Stock.
See "Description of Capital Stock."
The Company has agreed with the holders of the Series B Preferred Stock
that upon consummation of this offering, each share of Series B Preferred Stock
will be exchanged for that number of shares of Common Stock as will be equal to
the liquidation preference of a share of Series B Preferred Stock ($100) divided
by the initial public offering price of the Common Stock set forth on the cover
page of this Prospectus. As as a result, at an assumed public offering price of
$13.00 per share of Common Stock, all of the shares of Series B Preferred Stock
will be converted into an aggregate of 1,380,215 shares. Warburg, ABS, Mr.
Papadopoulos and Dr. Snow are the holders of the Series B Preferred Stock,
holding 124,023 shares, 50,356 shares, 4,377 shares and 672 shares, respectively
and will, accordingly, be issued 954,023, 387,354, 33,669 and 5,169 shares of
Common Stock, respectively, upon such exchange.
Additionally, the Company has agreed that Warburg and ABS will each have
certain rights to nominate directors as long as they continue to own specified
percentages of the outstanding shares of Common Stock. See "Management."
ACQUISITION OF THE COMPANY
In March 1992, the Company acquired all of the issued and outstanding
capital stock, together with certain bank and intercompany indebtedness, of the
Company's subsidiaries from Biodor Holding AG, Ixora Holding AG and Biodor US
Holding Corporation. Warburg, ABS and certain current and former employees of
the Company provided the principal equity financing for these acquisitions by
purchasing from the Company 1,012,984 shares of Common Stock at $.42 per share,
4,001 shares of Series A Convertible Preferred Stock at $100 per share and
178,166 shares of Series B Preferred Stock at $100 per share, representing a
total investment of approximately $18.6 million. In addition, these investors
received certain registration rights. See "Description of Capital
Stock -- Registration Rights."
TRANSACTIONS WITH OFFICERS
On January 4, 1993, Mr. Papadopoulos, the Company's Chairman of the Board,
Chief Executive Officer and President, purchased 44,100 shares of Common Stock
at $.42 per share and 4,377 shares of Series B Preferred Stock at $100 per
share, in exchange for $4,000 and a $452,000 promissory note. The Company has
granted Mr. Papadopoulos certain registration rights for such shares of Common
Stock. See "Description of Capital Stock -- Registration Rights." This unsecured
note bore interest at the rate of 8% per annum and matured on January 4, 1996.
In accordance with the terms of the note, as a result of Mr. Papadopoulos'
continued employment with the Company, one-third of the principal amount,
together with accrued interest, was forgiven on each of the first three
anniversaries of the note.
Effective June 9, 1995, Richard B. Slansky, the former President and Chief
Operating Officer of the Company, resigned to pursue other business
opportunities. In connection therewith, the Company and Mr. Slansky entered into
an agreement which provided for the payment to Mr. Slansky of six months
severance pay and also provided for the sale by Mr. Slansky to the Company of
59,726 shares of Common Stock at a price of approximately $3.45 per share and
1,199 shares of Series B Preferred Stock at a price of $100 per share.
On January 31, 1996, Mr. Matzilevich, the Company's Vice President, Market
Development-Niche Applications, purchased 28,390 shares of Common Stock at $3.38
per share from the Company in exchange for a $96,000 promissory note. The note
bears interest at the rate of 5.65% per annum, matures on January 31, 1998, and
is secured by such shares of Common Stock. The Company has granted Mr.
Matzilevich certain registration rights for such shares of Common Stock. See
"Description of Capital Stock -- Registration Rights."
46
<PAGE> 48
PRINCIPAL STOCKHOLDERS
The following table presents certain information regarding beneficial
ownership of the Company's Common Stock as of August 15, 1996, by (i) each
person known by the Company to be the beneficial owner of more than 5% of the
outstanding shares of Common Stock, (ii) each director of the Company, (iii)
each Named Executive Officer and (iv) all directors and executive officers as a
group. Unless otherwise indicated, each person in the table has sole voting and
investment power as to the shares shown.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK SHARES OF COMMON STOCK
BENEFICIALLY OWNED PRIOR BENEFICIALLY OWNED
TO OFFERING(1) AFTER OFFERING(2)
------------------------------------- ------------------------------------
NAME NUMBER PERCENT NUMBER PERCENT
- --------------------------------------------------- ---------------------- ------------ --------------------- ------------
<S> <C> <C> <C> <C>
Warburg, Pincus Investors, L.P. (3)................ 618,901 49.9% 2,210,324 45.5%
466 Lexington Avenue
New York, New York 10017
ABS MB (C-N) Limited Partnership II (4)............ 507,342 46.6 894,696 18.4
135 East Baltimore Street
Baltimore, Maryland 21202
Stelios B. Papadopoulos (5)
10394 Pacific Center Court
San Diego, California 92121...................... 126,786 10.8 160,455 3.2
James G. Stewart (6)............................... 9,463 * 9,463 *
John T. Snow (7)................................... 33,221 3.0 38,390 *
Ben Matzilevich (8)................................ 33,122 3.0 33,122 *
Douglas J. Greenwold (6)........................... 18,927 1.7 18,927 *
Frederick L. Bryant (9)............................ 507,342 46.6 894,696 18.4
Joseph P. Landy (10)............................... 618,901 49.9 2,210,324 45.5
S. Joshua Lewis.................................... -- -- -- --
Robert E. McGill, III.............................. -- -- -- --
Richard B. Slansky................................. -- -- -- --
Directors and Executive Officers as a group (10
persons) (11).................................... 1,347,762 99.0 3,365,377 67.6
</TABLE>
- ---------------
* Less than 1%.
(1) Prior to giving effect to the conversion of the outstanding shares of
Series A Convertible Preferred Stock into shares of Class A Common Stock
and the exchange of the outstanding shares of Series B Preferred Stock for
shares of Common Stock.
(2) Gives effect to the conversion of all outstanding shares of Series A
Convertible Preferred Stock into an aggregate of 788,814 shares of Class A
Common Stock and the subsequent conversion into an equal number of shares
of Common Stock, and the exchange of all outstanding shares of Series B
Preferred Stock, based upon an assumed initial public offering price of
$13.00 per share, for an aggregate of 1,380,215 shares of Common Stock.
(3) The sole general partner of Warburg is Warburg, Pincus & Co., a New York
general partnership ("WP"). Lionel I. Pincus is the managing partner of WP
and may be deemed to control it. E.M. Warburg, Pincus & Company, a New York
general partnership that has the same partners as WP ("E.M. Warburg"),
manages Warburg. WP has a 20% interest in the profits of Warburg and,
through its wholly owned subsidiary, E.M. Warburg, Pincus & Co., Inc.
("EMW"), owns 1.13% of the limited partnership interests in Warburg. Mr.
Landy, a director of the Company, is a Managing Director of EMW and a
general partner of WP and E.M. Warburg. As such, Mr. Landy may be deemed to
have an indirect pecuniary interest (within the meaning of Rule 16a-1 under
the Exchange Act) in an indeterminate portion of the shares of Common Stock
beneficially owned by Warburg, EMW and WP. See Note (10) below. Shares
beneficially owned prior to the offering includes 151,414 shares of Common
Stock which may be acquired upon the conversion of shares of Series A
Convertible Preferred Stock into Class A Common Stock and the subsequent
conversion into Common Stock.
(4) The general partner of ABS is ABS MB Ltd. ("ABS Ltd."). Mr. Bryant, a
director of the Company, is a Vice President and a director of ABS Ltd. As
such, Mr. Bryant may be deemed to share voting and investment power over
the shares of Common Stock owned by ABS. Additionally, Mr. Bryant is a
direct and indirect limited partner of ABS, and as such, may be deemed to
have an indirect pecuniary interest (within the meaning of Rule 16a-1 under
the Exchange Act) in an indeterminate portion of the shares of Common Stock
beneficially owned by ABS and ABS Ltd. See Note (9) below.
(5) Includes 82,686 shares of Common Stock which may be acquired pursuant to
stock options exercisable within 60 days of June 30, 1996.
(6) Represents shares of Common Stock which may be acquired pursuant to stock
options exercisable within 60 days of June 30, 1996.
(7) Includes 6,624 shares of Common Stock which may be acquired pursuant to
stock options exercisable within 60 days of June 30, 1996.
(8) Includes 4,732 shares of Common Stock which may be acquired pursuant to
stock options exercisable within 60 days of June 30, 1996.
(9) All of the shares of Common Stock indicated as owned by Mr. Bryant are
owned directly by ABS and are included because of Mr. Bryant's affiliation
with ABS and ABS Ltd. Mr. Bryant disclaims "beneficial ownership" of these
shares within the meaning of Rule 13d-3 under the Exchange Act, except to
the extent of his indirect pecuniary interest. See Note (4).
(10) All of the shares of Common Stock indicated as owned by Mr. Landy are owned
directly by Warburg and are included because of Mr. Landy's affiliation
with Warburg, WP and E.M. Warburg. Mr. Landy disclaims "beneficial
ownership" of these shares within the meaning of Rule 13d-3 under the
Exchange Act, except to the extent of his indirect pecuniary interest. See
Note (3).
(11) Includes shares of Common Stock which may be acquired within 60 days of
August 15, 1996. See Notes (5), (6), (7), (8), (9) and (10).
47
<PAGE> 49
DESCRIPTION OF CAPITAL STOCK
The following summary does not purport to be complete and is subject to,
and qualified in its entirety by, the Certificate of Incorporation and the
By-Laws, which are included as exhibits to the registration statement of which
this Prospectus forms a part, and by the provisions of applicable law. The
Company intends to file an amended and restated certificate of incorporation
immediately following the consummation of the offering to eliminate the Series A
Convertible Preferred Stock and Series B Preferred Stock. Upon the consummation
of this offering and following such amendment and restatement, the authorized
capital stock of the Company will consist of 30,000,000 shares of Common Stock,
par value $.01 per share, 800,000 shares of Class A Common Stock, par value $.01
per share, and 5,000,000 shares of Preferred Stock, par value $.01 per share
(the "Preferred Stock").
COMMON STOCK
As of August 15, 1996, there were 1,087,876 shares of Common Stock
outstanding held of record by 19 persons. Upon the consummation of the offering
of shares of Common Stock offered hereby, there will be 4,856,905 shares of
Common Stock outstanding (5,096,905 shares if the Underwriters' over-allotment
option is exercised in full), including 1,380,215 shares of Common Stock
issuable upon the exchange of the outstanding shares of Series B Preferred
Stock, and 788,814 shares of Common Stock issuable upon conversion of the shares
of Class A Common Stock. An aggregate of 393,914 shares of Common Stock are
issuable upon the exercise of outstanding stock options and 359,559 shares of
Common Stock are reserved for future issuance under the Company's Stock Option
Plan.
Holders of Common Stock are entitled to one vote per share in all matters
to be voted on by the stockholders of the Company and do not have cumulative
voting rights. Subject to preferences that may be applicable to any Preferred
Stock outstanding at the time, holders of Common Stock are entitled to receive
ratably such dividends, if any, as may be declared from time to time by the
Board of Directors out of funds legally available therefor. See "Dividend
Policy." In the event of a liquidation, dissolution or winding up of the
Company, holders of Common Stock are entitled to share ratably in all assets
remaining after payment of the Company's liabilities and the liquidation
preference, if any, of any outstanding Preferred Stock. Holders of shares of
Common Stock have no preemptive, subscription, redemption or conversion rights.
There are no redemption or sinking fund provisions applicable to the Common
Stock. All of the outstanding shares of Common Stock are, and the shares offered
by the Company in this offering will be, when issued and paid for, fully paid
and non-assessable. The rights, preferences and privileges of holders of Common
Stock are, subject to, and may be adversely affected by, the rights of the
holders of shares of any series of Preferred Stock which the Company may
designate and issue in the future.
CLASS A COMMON STOCK
Following the conversion of all outstanding shares of Series A Convertible
Preferred Stock upon the consummation of this offering, there will be 788,814
shares of Class A Common Stock outstanding, all shares of which will be held by
Warburg. Except as otherwise provided by law, the holders of the Class A Common
Stock are not entitled to notice of, or to vote at, any meeting of the
stockholders of the Company nor to vote upon any matter relating to the business
or affairs of the Company. The dividend, liquidation and other rights of the
Class A Common Stock are identical to those of the Common Stock. Each share of
Class A Common Stock is convertible into one share of Common Stock at any time
provided that either (i) the holder thereof is not Warburg or any affiliate, or
(ii) upon such conversion and after giving effect thereto, such holder and all
affiliates will collectively own beneficially and of record no more than 50% of
the then outstanding shares of Common Stock. Warburg is expected to be able to
certify to the Company that it meets the latter requirement and, accordingly,
will convert all of its shares of Class A Common Stock into an equal number of
shares of Common Stock. The Company does not presently intend to issue any
additional shares of its Class A Common Stock following such conversion.
PREFERRED STOCK
As of the date of this Prospectus, there were no outstanding shares of
Preferred Stock, other than the 4,001 shares of Series A Convertible Preferred
Stock and the 179,428 shares of Series B Preferred Stock, all of the
48
<PAGE> 50
shares of which will be converted or exchanged for Class A Common Stock or
Common Stock upon the consummation of the offering. Following the conversion of
all outstanding shares of Series A Convertible Preferred Stock and the exchange
of all outstanding shares of Series B Preferred Stock, in each case upon the
consummation of this offering, there will be no shares of Series A Convertible
Preferred Stock or Series B Preferred Stock outstanding. See "Certain
Transactions -- Conversion of Series A Convertible Preferred Stock and Exchange
of Series B Preferred Stock."
The Board of Directors will have the authority, without any further vote or
action by the stockholders, to provide for the issuance of up to 5,000,000
shares of Preferred Stock from time to time in one or more series with such
designations, rights, preferences and limitations as the Board of Directors may
determine, including the consideration received therefor. The Board also will
have the authority to determine the number of shares comprising each series,
dividend rates, redemption provisions, liquidation preferences, sinking fund
provisions, conversion rights and voting rights without approval by the holders
of the Common Stock. Although it is not possible to state the effect that any
issuance of Preferred Stock might have on the rights of holders of Common Stock,
the issuance of Preferred Stock may have one or more of the following effects:
(i) restriction of Common Stock dividends if Preferred Stock dividends have not
been paid, (ii) dilution of the voting power and equity interest of holders of
Common Stock to the extent that any series of Preferred Stock has voting rights
or is convertible into Common Stock or (iii) prevention of current holders of
Common Stock from participating in the Company's assets upon liquidation until
any liquidation preferences granted to holders of Preferred Stock are satisfied.
In addition, the issuance of Preferred Stock may, under certain circumstances,
have the effect of discouraging a change in control of the Company by, for
example, granting voting rights to holders of Preferred Stock that require
approval by the separate vote of the holders of Preferred Stock for any
amendment to the Certificate of Incorporation or for any reorganization,
consolidation, merger or other similar transaction involving the Company. As a
result, the issuance of such Preferred Stock may discourage bids for the Common
Stock at a premium over the market price therefor, and could have a materially
adverse effect on the market value of the Common Stock. See "Risk
Factors -- Anti-Takeover Effects of Certificate of Incorporation and Delaware
Law."
WARRANT
As of the date of this Prospectus, there was an outstanding warrant to
purchase 3,028 shares of Common Stock (subject to adjustment upon certain
dilutive events) at an exercise price of $1.06 per share (the "Warrant"). The
Warrant is currently exercisable in whole or in part, and expires on July 28,
2000. The holder or holders of the shares of Common Stock issuable upon exercise
of the Warrant are entitled to certain registration rights. See
" -- Registration Rights."
REGISTRATION RIGHTS
Holders of 3,211,179 shares of Common Stock (the "Registrable Securities")
are entitled to certain rights with respect to the registration of such shares
under the Securities Act. In the event that the Company proposes to register any
of its securities under the Securities Act for its own account or otherwise on a
form which permits the registration of such Registrable Securities (other than
Form S-4 or Form S-8 or their successor forms), such holders are entitled to
include their Registrable Securities in such registrations, subject to certain
conditions and limitations. These limitations include the right of the managing
underwriter of any such offering to exclude some of the Registrable Securities
from such registration if it determines that marketing forces require a
limitation on the number of shares to be underwritten. All such holders have
agreed to not exercise any registration rights in connection with this offering
and until the expiration of the Lock-Up Period without the prior written consent
of UBS Securities LLC.
The holder or holders of in excess of 50% of the Registrable Securities
then outstanding are also entitled to request that the Company register at least
20% (or a lesser percent under certain circumstances) of the Registrable
Securities then outstanding ("Demand Registrations"), subject to certain
limitations. The Company is not obligated to effect more that three Demand
Registrations, and generally will bear all expenses incurred in connection with
the registration of Registrable Securities, other than underwriting discounts
and commissions. In addition, the holder or holders of shares of the 3,028
shares of Common Stock issuable upon exercise of the Warrant may include their
shares in Company-initiated registrations or Demand Registrations by other
holders of Registrable Securities.
49
<PAGE> 51
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law ("Section 203"). Under Section 203, certain "business
combinations" between a Delaware corporation whose stock is publicly traded or
held of record by more than 2,000 stockholders and an "interested stockholder"
are prohibited for a three-year period following the date that such stockholder
became an interested stockholder, unless (i) the corporation has elected in its
original certificate of incorporation not to be governed by Section 203 (the
Company did not make such an election), (ii) the business combination was
approved by the Board of Directors of the corporation before the other party to
the business combination became an interested stockholder, (iii) upon
consummation of the transaction that made it an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the commencement of the transaction (excluding voting stock owned
by directors who are also officers or held in employee benefit plans in which
the employees do not have a confidential right to tender or vote stock held by
the plan) or (iv) the business combination was approved by the Board of
Directors of the corporation and ratified by two-thirds of the voting stock
which the interested stockholder did not own. The three-year prohibition also
does not apply to certain business combinations proposed by an interested
stockholder following the announcement or notification of certain extraordinary
transactions involving the corporation and a person who was not an interested
stockholder during the previous three years or who became an interested
stockholder with the approval of the majority of the corporation's directors.
The term "business combination" is defined generally to include mergers or
consolidations between a Delaware corporation and an "interested stockholder,"
transactions with an "interested stockholder" involving the assets or stock of
the corporation or its majority-owned subsidiaries and transactions which
increase an "interested stockholder's" percentage ownership of stock. The term
"interested stockholder" is defined generally as a stockholder who, together
with its affiliates and associates, owns (or, within three years prior, did own)
15% or more of a Delaware corporation's voting stock. Section 203 could prohibit
or delay a merger, takeover or other change in control of the Company and
therefore could discourage attempts to acquire the Company.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is ChaseMellon
Shareholder Services, L.L.C.
50
<PAGE> 52
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have outstanding
4,856,905 shares of Common Stock (assuming no exercise of the Underwriters
over-allotment option). Of these shares, 1,600,000 shares sold in this offering
will be freely tradable without restriction or further registration under the
Securities Act unless purchased by "affiliates" of the Company as that term is
defined under Rule 144. The remaining 3,256,905 shares outstanding upon
completion of this offering will be "restricted securities" as that term is
defined under Rule 144 (the "Restricted Shares"). The Company's directors,
executive officers and principal stockholders, who in the aggregate hold
approximately 3,242,945 shares of Common Stock, have agreed not to sell or
otherwise dispose of any shares of Common Stock for a period of 180 days after
the date of this Prospectus without the prior written consent of UBS Securities
LLC. The Company has also agreed not to issue or sell any shares of Common Stock
for a period of 180 days from the date of this Prospectus, except for the grant
of additional options under the Stock Option Plan or the issuance of shares upon
the exercise of stock options or the Warrant. See "Underwriting." The number of
shares of Common Stock available for sale in the public market is further
limited by restrictions under the Securities Act.
Upon completion of this offering, in addition to the 1,600,000 shares
offered hereby, approximately 8,043 shares of Common Stock held by current
stockholders will be eligible for immediate sale. Commencing 90 days after the
date of this Prospectus, 13,959 shares of Common Stock issued upon the exercise
of options granted under the Stock Option Plan will be eligible for sale in
reliance on Rule 701. Upon expiration of the 180-day Lock-up Period, and subject
to the limitations imposed by Rule 144, 3,130,162 shares of Common Stock held by
the Company's directors, executive officers and principal stockholders will be
eligible for immediate sale. Promptly after the completion of the offering, the
Company intends to file a registration statement on Form S-8 under the
Securities Act covering approximately 393,914 shares of Common Stock reserved
for issuance pursuant to stock options outstanding as of June 30, 1996, and
359,559 shares of Common Stock reserved for future issuance under the Stock
Option Plan. See "Management -- Stock Option Plan." Such registration statement
will automatically become effective upon filing. Accordingly, shares registered
thereunder will, subject to Rule 144 volume limitations applicable to
affiliates, be available for sale in the open market, except to the extent that
such shares are subject to vesting restrictions or certain contractual
restrictions on sale or transfer. Holders of options to purchase 246,995 shares
have agreed not to sell or otherwise transfer shares obtained upon exercise of
such options during the Lock-Up Period, 161,824 of which will be exercisable
upon the expiration of such Lock-Up Period.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned Restricted Shares for at
least two years, including persons who may be deemed affiliates of the Company,
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 Common Stock then
outstanding or the average weekly trading volume of the Common Stock as reported
by the Nasdaq National Market during the four calendar weeks preceding the
filing of a Form 144 with respect to such sale. Sales under Rule 144 are also
subject to certain manner-of-sale provisions and notice requirements and to the
availability of current public information about the Company. In addition, a
person who is not deemed to have been an affiliate of the Company at any time
during the 90 days preceding a sale, and who has beneficially owned for at least
three years the shares proposed to be sold, would be entitled to sell such
shares under Rule 144(k) without regard to the requirements described above.
The Commission has proposed certain amendments to Rule 144 that would
reduce by one year the holding periods required for shares subject to Rule 144
to become eligible for resale in the public market. This proposal, if adopted,
would accelerate by one year the dates on which shares of Common Stock will
become eligible for resale described above. No assurance can be given concerning
whether or when the proposal will be adopted by the Commission.
Any employee, officer or director of or consultant to the Company who was
granted options or purchased his or her shares upon exercise of such options
pursuant to a written compensatory plan or contract ("Rule 701 Shares") is
entitled to rely upon the resale provisions of Rule 701. Rule 701 permits
non-affiliates to sell their Rule 701 Shares without having to comply with the
public information, holding period, volume limitation or notice provisions of
Rule 144 and permits affiliates to sell their Rule 701 Shares without having to
comply with the holding period restrictions of Rule 144, in each case commencing
90 days after the date of this Prospectus.
51
<PAGE> 53
After this offering, subject to the lock-up agreements described above,
holders of 3,211,179 shares of Common Stock, or their transferees, and the
holder or holders of the 3,028 shares of Common Stock issuable upon exercise of
the Warrant, are entitled to certain rights with respect to the registration of
such shares under the Securities Act. Registration of such shares under the
Securities Act would result in such shares becoming freely tradable without
restriction under the Securities Act (except for shares purchased by affiliates)
immediately upon the effectiveness of such registration. The holders of such
3,211,179 shares of Common Stock have agreed to not exercise any registration
rights in connection with this offering and until the expiration of the Lock-Up
Period without the prior written consent of UBS Securities LLC. See "Description
of Capital Stock -- Registration Rights."
52
<PAGE> 54
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
underwriters named below (the "Underwriters"), for whom UBS Securities LLC and
Dain Bosworth Incorporated are acting as representatives (the
"Representatives"), have agreed to purchase from the Company the following
respective number of shares of Common Stock:
<TABLE>
<CAPTION>
UNDERWRITERS SHARES
------------------------------------------------------------------ ----------
<S> <C>
UBS Securities LLC................................................
Dain Bosworth Incorporated........................................
-------
Total........................................................... 1,600,000
=======
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent, including the absence
of any material adverse change in the Company's business and the receipt of
certain certificates, opinions and letters from the Company and its counsel. The
nature of the Underwriters' obligation is such that they are committed to
purchase all shares of Common Stock offered hereby if any such shares are
purchased. The Underwriting Agreement contains certain provisions whereby if any
underwriter defaults in its obligation to purchase shares, and the aggregate
obligations of the Underwriters so defaulting do not exceed 10% of the shares
offered hereby, the remaining Underwriters, or some of them, must assume such
obligations.
The Representatives have advised the Company that the Underwriters propose
to offer the shares of Common Stock directly to the public at the offering price
set forth on the cover page of this Prospectus, and to certain dealers at such
price less a concession not in excess of $ per share. The Underwriters
may allow and such dealers may reallow a concession not in excess of $
per share to certain other dealers. After the public offering of the shares of
Common Stock, the offering price and other selling terms may be changed by the
Underwriters.
The Company has granted to the Underwriters an option, exercisable no later
than 30 days after the date of this Prospectus, to purchase up to 240,000
additional shares of Common Stock to cover over-allotments, if any, at the
public offering price set forth on the cover page of this Prospectus, less the
underwriting discounts and commissions. To the extent that the Underwriters
exercise this option, each of the Underwriters will have a firm commitment to
purchase approximately the same percentage thereof which the number of shares of
Common Stock to be purchased by it shown in the table above bears to the total
number of shares of Common Stock offered hereby. The Company will be obligated,
pursuant to the option, to sell such shares to the Underwriters.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act.
The executive officers, directors, and principal stockholders of the
Company who beneficially own an aggregate of 3,365,466 shares of Common Stock
outstanding immediately prior to this offering have agreed that they will not,
without the prior written consent of UBS Securities LLC, offer, sell or
otherwise dispose of any shares of Common Stock, options or warrants to acquire
shares of Common Stock or securities exchangeable for or convertible into shares
of Common Stock owned by them for a period of 180 days after the date of this
Prospectus. The Company has agreed that it will not, without the prior written
consent of
53
<PAGE> 55
UBS Securities LLC, offer, sell or otherwise dispose of any shares of Common
Stock, options or warrants to acquire shares of Common Stock for a period of 180
days after the date of this Prospectus, except that the Company may grant
additional options under the Stock Option Plan or issue shares upon the exercise
of stock options or the Warrant.
The Representatives have informed the Company that the Underwriters do not
intend to confirm sales to any accounts over which they exercise discretionary
authority.
At the request of the Company, the Underwriters have reserved up to 80,000
shares of Common Stock for sale at the public offering price, less underwriting
discounts and commissions, to certain officers, directors, employees and other
persons designated by the Company. The number of shares of Common Stock
available for sale to the general public will be reduced to the extent such
persons purchase such reserved shares. Any reserved shares not so purchased will
be offered by the Underwriters to the general public on the same basis as the
other shares offered hereby.
Prior to this offering, there has been no public market for the Common
Stock. The initial public offering price was determined through negotiations
among the Company and the Representatives. The material factors that will be
considered in determining the initial public offering price, in addition to
prevailing market and economic conditions, are certain financial information of
the Company, the history of, and the prospects for, the Company and the industry
in which it competes, an assessment of the Company's management, its past and
present operations, the prospects, and timing of, future revenues of the
Company, the present stage of the Company's development and the above factors in
relation to market values and various valuation measures of other companies
engaged in activities similar to the Company. The initial public offering price
set forth on the cover page of this Prospectus should not, however, be
considered an indication of the actual value of the Common Stock. Such price is
subject to change as a result of market conditions and other factors. There can
be no assurance that an active trading market will develop for the Common Stock
or that the Common Stock will trade in the public market subsequent to this
offering at or above the initial offering price.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Willkie Farr & Gallagher, New York, New York. Certain legal matters
relating to this offering will be passed upon for the Underwriters by Cooley
Godward Castro Huddleson & Tatum, San Diego, California.
EXPERTS
The financial statements of CN Biosciences, Inc. at December 31, 1994 and
1995, and for each of the three years in the period ended December 31, 1995
appearing in this Prospectus and Registration Statement have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein and in the Registration Statement, and are included
in reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
The Company acquired the Oncogene Research Products business effective
August 1, 1995, in a business combination which has been accounted for as a
purchase. The financial statements of the Oncogene Research Products business
for each of the two years ended September 30, 1993 and 1994 and the ten-month
period ended July 31, 1995 appearing in this Prospectus and Registration
Statement have been audited by KPMG Peat Marwick LLP, independent auditors, as
set forth in their report thereon appearing elsewhere herein and in the
Registration Statement, and are included in reliance upon such report given upon
the authority of such firm as experts in accounting and auditing.
54
<PAGE> 56
CHANGE IN ACCOUNTANTS
At a meeting held on November 10, 1995, (i) the Audit Committee and the
Board of Directors ratified the Company's dismissal on October 13, 1995 of
Coopers & Lybrand L.L.P. as the Company's independent auditors and (ii) the
Audit Committee recommended, and the Board of Directors approved, the engagement
of Ernst & Young LLP as the Company's independent auditors for the fiscal year
ending December 31, 1995.
The reports of Coopers & Lybrand L.L.P. on the Company's financial
statements for the years ended December 31, 1993 and 1994 did not contain
adverse opinions or disclaimers of opinions and were not qualified or modified
as to uncertainty, audit scope, or accounting principles.
In connection with the audit of the Company's financial statements for the
fiscal years ended December 31, 1993 and 1994, and at all times subsequent
thereto through the date of dismissal, there were no disagreements with Coopers
& Lybrand L.L.P. on any matters of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure which, if not resolved to
the satisfaction Coopers & Lybrand L.L.P., would have caused Coopers & Lybrand
L.L.P. to make a reference to the matter in their report.
ADDITIONAL INFORMATION
The Company has filed with the Commission under the Securities Act a
Registration Statement on Form S-1 with respect to the Common Stock offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement in accordance with the rules and regulations of the
Commission. For further information pertaining to the Company and the Common
Stock offered hereby, reference is made to the Registration Statement, including
the exhibits thereto and the financial statements, notes and schedules filed as
a part thereof. Statements contained in this Prospectus as to the contents of
any contract or other document are not necessarily complete and, in each
instance, reference is made to the copy of such contract or document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference. The Registration Statement may be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's Regional
Offices located in New York at Seven World Trade Center, New York, New York
10007 and in Chicago at Citicorp Center, Suite 1400, 500 West Madison Street,
Chicago, Illinois 60611. Copies of such material can be obtained from the public
reference section of the Commission at prescribed rates by writing to the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549. The Registration Statement may also be accessed electronically on the
Commission's World Wide Web site (http://www.sec.gov). Copies of the
Registration Statement may also be inspected at the offices of Nasdaq
Operations, 1735 K Street, N.W., Washington, D.C. 20006.
55
<PAGE> 57
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
CN BIOSCIENCES, INC.
Report of Independent Auditors....................................................... F-2
Consolidated Balance Sheets as of December 31, 1994 and 1995 and June 30, 1996
(Unaudited)........................................................................ F-3
Consolidated Statements of Operations for each of the three years in the period ended
December 31, 1995 and the six months ended June 30, 1995 and 1996 (Unaudited)...... F-4
Consolidated Statements of Stockholders' Equity (Deficit) for each of the three years
in the period ended December 31, 1995 and the six months ended June 30, 1996
(Unaudited)........................................................................ F-5
Consolidated Statements of Cash Flows for each of the three years in the period ended
December 31, 1995 and the six months ended June 30, 1995 and 1996 (Unaudited)...... F-6
Notes to Consolidated Financial Statements........................................... F-7
ONCOGENE SCIENCE, INC. RESEARCH PRODUCTS BUSINESS (A BUSINESS SECTOR OF ONCOGENE
SCIENCE, INC.)
Report of Independent Auditors....................................................... F-20
Statements of Operations for the years ended September 30, 1993 and 1994 and the ten
months ended July 31, 1995......................................................... F-21
Notes to Statements of Operations.................................................... F-22
CN BIOSCIENCES, INC. PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENT (UNAUDITED).... F-24
</TABLE>
F-1
<PAGE> 58
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
CN Biosciences, Inc.
We have audited the accompanying consolidated balance sheets of CN
Biosciences, Inc. as of December 31, 1994 and 1995 and the related consolidated
statements of operations, stockholders' equity (deficit) and cash flows for each
of the three years in the period ended December 31, 1995. 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 audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
CN Biosciences, Inc. at December 31, 1994 and 1995 and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
San Diego, California
July 16, 1996
F-2
<PAGE> 59
CN BIOSCIENCES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
PRO FORMA
REDEEMABLE
PREFERRED STOCK
AND
STOCKHOLDERS'
EQUITY AT
DECEMBER 31, JUNE 30, JUNE 30,
------------------------- ----------- ----------------
1994 1995 1996 1996
----------- ----------- ----------- ----------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................ $ 935,000 $ 1,203,000 $ 1,118,000
Accounts receivable, trade, net of
allowance for doubtful accounts of
$589,000 in 1994, $472,000 in 1995 and
$428,000 in 1996 (unaudited).......... 3,264,000 4,099,000 4,761,000
Inventories.............................. 12,292,000 14,443,000 14,372,000
Other current assets..................... 489,000 476,000 903,000
----------- ----------- -----------
Total current assets....................... 16,980,000 20,221,000 21,154,000
Property and equipment, net................ 3,655,000 4,030,000 3,838,000
Intangible assets, net..................... 2,096,000 6,067,000 5,874,000
Other assets............................... 764,000 879,000 1,362,000
----------- ----------- -----------
Total assets............................... $23,495,000 $31,197,000 $32,228,000
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Borrowings under lines of credit......... $ 569,000 $ -- $ --
Accounts payable, trade.................. 1,114,000 1,491,000 1,550,000
Accrued expenses......................... 665,000 1,556,000 1,596,000
Other current liabilities................ 1,115,000 583,000 1,305,000
Current portion of long-term debt........ 500,000 1,167,000 1,417,000
----------- ----------- -----------
Total current liabilities.................. 3,963,000 4,797,000 5,868,000
Long-term debt, net of current portion..... 1,667,000 7,000,000 6,750,000
Other liabilities.......................... 1,599,000 1,601,000 1,451,000
Commitments
Redeemable preferred stock, net of note
receivable from preferred stockholder of
$144,000 in 1994......................... 18,319,000 18,343,000 18,343,000 $ --
Stockholders' equity (deficit):
Preferred stock, $.01; 5,000,000 shares
authorized, none issued and
outstanding........................... -- -- -- --
Common stock, $.01 par value; 30,000,000
shares authorized, 1,060,869 shares in
1994, 1,058,065 in 1995 and 1,087,876
shares in 1996 issued and outstanding
(3,256,905 shares unaudited pro
forma)................................ 11,000 11,000 11,000 33,000
Additional paid-in capital............... 437,000 255,000 351,000 18,672,000
Accumulated deficit...................... (3,081,000) (2,064,000) (1,207,000) (1,207,000)
Foreign currency translation
adjustment............................ 586,000 1,254,000 757,000 757,000
Notes receivable from common
stockholder........................... (6,000) -- (96,000) (96,000)
----------- ----------- ----------- -----------
Total stockholders' equity (deficit)....... (2,053,000) (544,000) (184,000) $ 18,159,000
===========
----------- ----------- -----------
Total liabilities and stockholders'
equity................................... $23,495,000 $31,197,000 $32,228,000
=========== =========== ===========
</TABLE>
See accompanying notes.
F-3
<PAGE> 60
CN BIOSCIENCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
--------------------------------------- -------------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Sales.......................... $22,771,000 $24,188,000 $26,966,000 $13,075,000 $16,565,000
Cost of sales.................. 14,195,000 13,183,000 13,185,000 6,691,000 7,602,000
----------- ----------- ----------- ----------- -----------
Gross profit................... 8,576,000 11,005,000 13,781,000 6,384,000 8,963,000
Operating expenses:
Selling, general and
administrative............ 10,292,000 10,343,000 10,608,000 4,802,000 6,185,000
Research and development..... 462,000 736,000 1,338,000 488,000 1,065,000
----------- ----------- ----------- ----------- -----------
Total operating expenses....... 10,754,000 11,079,000 11,946,000 5,290,000 7,250,000
----------- ----------- ----------- ----------- -----------
Income (loss) from
operations................... (2,178,000) (74,000) 1,835,000 1,094,000 1,713,000
Interest expense, net.......... 170,000 326,000 527,000 159,000 394,000
----------- ----------- ----------- ----------- -----------
Income (loss) before income
taxes........................ (2,348,000) (400,000) 1,308,000 935,000 1,319,000
Provision (benefit) for income
taxes........................ (195,000) 62,000 291,000 208,000 462,000
----------- ----------- ----------- ----------- -----------
Net income (loss)......... $(2,153,000) $ (462,000) $ 1,017,000 $ 727,000 $ 857,000
=========== =========== =========== =========== ===========
Pro forma net income per
share........................ $ .30 $ .25
=========== ===========
Pro forma shares used in per
share computations........... 3,367,000 3,477,000
=========== ===========
</TABLE>
See accompanying notes.
F-4
<PAGE> 61
CN BIOSCIENCES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 AND THE SIX MONTHS ENDED JUNE 30,
1996 (UNAUDITED)
<TABLE>
<CAPTION>
FOREIGN NOTE
COMMON STOCK ADDITIONAL CURRENCY RECEIVABLE
------------------ PAID-IN ACCUMULATED TRANSLATION FROM COMMON
SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENT STOCKHOLDER TOTAL
--------- ------- ---------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1993................... 1,017,244 $10,000 $420,000 $ (466,000 ) $ 22,000 $ (10,000) $ (24,000)
Issuance of note receivable for common
stock...................................... 44,100 1,000 18,000 -- -- (19,000) --
Forgiveness of stockholder note receivable... -- -- -- -- -- 7,000 7,000
Cancellation of note receivable from
stockholder................................ (23,659) -- (10,000) -- -- 10,000 --
Exercise of stock options.................... 6,624 -- 2,000 -- -- -- 2,000
Net loss..................................... -- -- -- (2,153,000 ) -- -- (2,153,000)
Translation adjustment....................... -- -- -- -- (123,000) -- (123,000)
------- ------ -------- ----------- --------- -------- -----------
Balance at December 31, 1993................. 1,044,309 11,000 430,000 (2,619,000 ) (101,000) (12,000) (2,291,000)
Forgiveness of stockholder note receivable... -- -- -- -- -- 6,000 6,000
Exercise of stock options.................... 16,561 -- 7,000 -- -- -- 7,000
Net loss..................................... -- -- -- (462,000 ) -- -- (462,000)
Translation adjustment....................... -- -- -- -- 687,000 -- 687,000
------- ------ -------- ----------- --------- -------- -----------
Balance at December 31, 1994................. 1,060,870 11,000 437,000 (3,081,000 ) 586,000 (6,000) (2,053,000)
Forgiveness of stockholder note receivable... -- -- -- -- -- 6,000 6,000
Repurchase of stock.......................... (59,726) -- (206,000) -- -- -- (206,000)
Exercise of stock options.................... 56,922 -- 24,000 -- -- -- 24,000
Net income................................... -- -- -- 1,017,000 -- -- 1,017,000
Translation adjustment....................... -- -- -- -- 668,000 -- 668,000
------- ------ -------- ----------- --------- -------- -----------
Balance at December 31, 1995................. 1,058,066 11,000 255,000 (2,064,000 ) 1,254,000 (544,000)
Exercise of stock options (unaudited)........ 1,420 -- -- -- -- -- --
Issuance of note receivable for common stock
(unaudited)................................ 28,390 -- 96,000 -- -- (96,000) --
Net income (unaudited)....................... -- -- -- 857,000 -- -- 857,000
Translation adjustment (unaudited)........... -- -- -- -- (497,000) -- (497,000)
------- ------ -------- ----------- --------- -------- -----------
Balance at June 30, 1996 (unaudited)......... 1,087,876 $11,000 $351,000 $(1,207,000) $ 757,000 $ (96,000) $ (184,000)
======= ====== ======== =========== ========= ======== ===========
</TABLE>
See accompanying notes.
F-5
<PAGE> 62
CN BIOSCIENCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
YEARS ENDED DECEMBER 31, 30,
------------------------------------- -----------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)...................... $(2,153,000) $ (462,000) $ 1,017,000 $ 727,000 $ 857,000
Adjustments to reconcile net income
(loss) to net cash provided by (used
in) operations:
Depreciation and amortization........ 1,368,000 1,448,000 1,856,000 807,000 892,000
Additions to inventory reserve....... 1,744,000 192,000 317,000 150,000 20,000
Additions/(reductions) to allowance
for doubtful accounts............. 4,000 217,000 (129,000) 48,000 7,000
Loss on disposal of property and
equipment......................... 268,000 2,000 10,000 8,000 5,000
Forgiveness of note receivable from
stockholder....................... 152,000 150,000 150,000 -- --
Changes in assets and liabilities:
Accounts receivable, trade........ 574,000 (327,000) (409,000) (480,000) (868,000)
Inventories....................... (1,956,000) 709,000 (370,000) 134,000 (365,000)
Other current assets.............. (405,000) (12,000) 329,000 (23,000) (447,000)
Deferred income taxes............. (70,000) 42,000 26,000 -- --
Other assets...................... (112,000) (475,000) (1,153,000) (376,000) (753,000)
Accounts payable, trade........... 258,000 (784,000) 148,000 (174,000) 181,000
Accrued expenses.................. (281,000) (436,000) 781,000 235,000 44,000
Other current liabilities......... (62,000) (655,000) (590,000) (146,000) 294,000
Other liabilities................. 432,000 362,000 9,000 (184,000) 230,000
----------- ----------- ----------- ----------- ----------
Net cash provided by (used in)
operating activities................. (239,000) (29,000) 1,992,000 726,000 97,000
INVESTING ACTIVITIES
Purchases of property and equipment.... (994,000) (1,436,000) (805,000) (187,000) (164,000)
Proceeds from sale of property and
equipment............................ -- 51,000 22,000 -- 6,000
Purchase of business................... -- -- (6,213,000) -- --
Other.................................. -- 154,000 150,000 -- --
----------- ----------- ----------- ----------- ----------
Net cash used in investing
activities........................... (994,000) (1,231,000) (6,846,000) (187,000) (158,000)
----------- ----------- ----------- ----------- ----------
FINANCING ACTIVITIES
Proceeds from lines of credit.......... -- 258,000 809,000 484,000 700,000
Payments on lines of credit............ (216,000) (33,000) (1,404,000) (474,000) (200,000)
Proceeds from long-term debt........... 2,500,000 2,500,000 8,500,000 -- --
Payments on long-term debt............. (333,000) (2,500,000) (2,500,000) (250,000) (498,000)
Proceeds from sale of common stock..... 2,000 7,000 24,000 -- --
Proceeds from sale of redeemable
preferred stock...................... 4,000 -- -- -- --
Payments for repurchase of stock....... -- -- (326,000) -- --
----------- ----------- ----------- ----------- ----------
Net cash provided by (used in)
financing activities................. 1,957,000 232,000 5,103,000 (240,000) 2,000
----------- ----------- ----------- ----------- ----------
Effect of exchange rate changes on
cash................................. (123,000) 124,000 19,000 55,000 (26,000)
----------- ----------- ----------- ----------- ----------
Net increase (decrease) in cash and
cash equivalents..................... 601,000 (904,000) 268,000 354,000 (85,000)
Balance at beginning of period......... 1,238,000 1,839,000 935,000 935,000 1,203,000
----------- ----------- ----------- ----------- ----------
Balance at end of period............... $ 1,839,000 $ 935,000 $ 1,203,000 $1,289,000 $ 1,118,000
=========== =========== =========== =========== ==========
Supplemental cash flow information:
Interest paid during the period...... $ 530,000 $ 316,000 $ 548,000 $ 160,000 $ 420,000
=========== =========== =========== =========== ==========
Income taxes paid during the
period............................ $ 52,000 $ 86,000 $ 313,000 $ 52,000 $ 12,000
=========== =========== =========== =========== ==========
</TABLE>
See accompanying notes.
F-6
<PAGE> 63
CN BIOSCIENCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION SUBSEQUENT TO DECEMBER 31, 1995 AND PERTAINING TO JUNE 30, 1996
AND THE SIX-MONTH PERIODS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
CN Biosciences, Inc. (formerly known as Calbiochem-Novabiochem
International, Inc.) is engaged in the development, production, marketing and
distribution of a broad array of products used worldwide in disease-related life
sciences research at pharmaceutical and biotechnology companies, academic
institutions and government laboratories. The Company's products include
biochemical and biological reagents, antibodies, assays and research kits which
it sells principally through its general and specialty catalogs under its well
established brand names, such as Calibochem and Novabiochem. With over 7,000
products, the Company offers scientists the convenience of obtaining from a
single source both innovative and fundamental research products, many of which
are instrumental to research in areas such as cancer, cardiovascular disease,
Alzheimer's and AIDS.
Basis of Presentation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
Interim Financial Information (Unaudited)
The accompanying financial statements at June 30, 1996 and for the six
months ended June 30, 1995 and 1996 are unaudited but include all adjustments
(consisting of normal recurring adjustments) which, in the opinion of
management, are necessary for a fair statement of the financial position and the
operating results and cash flows for the interim date and periods presented.
Results for the interim periods are not necessarily indicative of results for
the entire year or future periods.
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.
Cash Equivalents
For purposes of financial statement preparation, the Company considers all
demand deposits with banks or other financial institutions and investments with
initial maturities of three months or less at the date of purchase as cash
equivalents.
Concentration of Credit Risk and Revenue Recognition
The Company deposits its cash in financial institutions. At times, such
deposits may be in excess of insured limits. To date, the Company has not
experienced any losses on its cash investments.
The Company records revenue upon shipment. Accounts receivable are derived
from sales which are generally for small amounts and denominated in various
currencies. The Company grants credit to its customers based on an evaluation of
the customer's financial condition and collateral is generally not required.
Management believes the allowance for doubtful accounts is sufficient to provide
for any future losses. Credit losses have traditionally been minimal and within
management's expectations.
F-7
<PAGE> 64
CN BIOSCIENCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION SUBSEQUENT TO DECEMBER 31, 1995 AND PERTAINING TO JUNE 30, 1996
AND THE SIX-MONTH PERIODS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
Inventories
Inventories are maintained to support customer deliveries worldwide, often
on a next-day or second-day basis, of many sizes and quantities of each brand of
catalog items. Based upon economic production runs for certain products, the
Company from time to time manufactures quantities of product in excess of a
one-year supply. Inventories are valued at the lower of cost (first-in,
first-out basis) or market, with costs including material, labor and
manufacturing overhead.
Property and Equipment
Property and equipment is stated at cost. Depreciation is provided under
the straight-line method over 3 to 5 years for equipment and office fixtures and
over the shorter of the remaining lease life or 15 years for leasehold
improvements.
Intangible Assets
Intangible assets represent the excess of the purchase price over the fair
market value of assets acquired. Intangibles are being amortized over 15 to 25
years.
The Company assesses the carrying value of the intangibles on a periodic
basis and if the facts indicate that the intangible assets are not recoverable,
as determined based on the undiscounted cash flows of the business over the
remaining amortization period, the carrying value is reduced to its estimated
fair value.
Deferred Charges
In accordance with Statement of Position No. 93-7, the Company expenses the
production costs of advertising the first time the advertising takes place,
except for direct-response advertising, the costs of which are capitalized and
amortized into advertising expense over the expected period of future benefits
which varies from one to two years.
Direct-response advertising consists of costs relating to the preparation,
printing and distribution of the Company's product catalogs. The capitalized
costs of direct-response advertising are included in other assets.
Foreign Currency Translation
The financial statements of foreign subsidiaries are translated to U.S.
dollars. All assets and liabilities are translated at year end exchange rates,
and stockholders' equity is translated at historical exchange rates. The
resulting translation adjustment is recorded as a separate component of
stockholders' equity. Sales and expense transactions are translated at average
exchange rates. Foreign currency gains and losses were not material during any
of the three years in the period ended December 31, 1995.
Income Taxes
The Company provides for income taxes in accordance with the provisions of
Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes
("SFAS 109"). SFAS 109 requires a company to recognize deferred tax liabilities
and assets for the expected future tax consequences of events that have been
recognized in a company's financial statements or tax returns. Under this
method, deferred tax liabilities and assets are determined based on the
difference between the financial statement carrying amounts and tax basis of
assets and liabilities using enacted tax rates in effect in the years in which
the differences are expected to reverse. Valuation allowances are established
when necessary to reduce deferred tax assets to the amounts
F-8
<PAGE> 65
CN BIOSCIENCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION SUBSEQUENT TO DECEMBER 31, 1995 AND PERTAINING TO JUNE 30, 1996
AND THE SIX-MONTH PERIODS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
expected to be realized. Income tax expense represents the tax payable for the
period and the change during the period in the deferred tax assets and
liabilities.
Net Income (Loss) Per Share
Historical net income (loss) per share is computed using the weighted
average number of shares of common stock and common stock equivalents
outstanding during the periods presented. Common share equivalents result from
outstanding options and warrants to purchase common stock. For loss periods,
common share equivalents were not included in computing net loss per share since
the effect would have been antidilutive. The Securities and Exchange Commission
requires stock issued during the twelve months immediately preceding the initial
public offering, plus the number of equivalent shares of common stock granted or
issued during the same period, be included in the calculation of shares used in
computing net income (loss) per share as if these shares were outstanding for
all periods presented (using the treasury stock method and the assumed initial
public offering price).
Historical net income (loss) per share information is as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
--------------------------- ---------------
1993 1994 1995 1995 1996
------ ------ ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net income (loss) per share....................... $(1.97) $ (.42) $ .51 $ .41 $ .41
====== ====== ===== ===== =====
Shares used in computing net income (loss) per
share (in thousands)............................ 1,094 1,104 1,987 1,763 2,097
====== ====== ===== ===== =====
</TABLE>
Supplemental earnings per share has been computed as described above and
also gives effect to the repayment of the Company's outstanding indebtedness
under the Company's U.S. subsidiary's bank credit facility, and resulting
reduction of interest expense, as if the proceeds, in an amount equal to the
outstanding balance under the credit facility, anticipated by this initial
public offering had been received at the original date of issuance of the credit
facility and the number of shares of Common Stock whose proceeds are to be used
to retire the debt were outstanding from that same date. (See Note 4).
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
1995 1996
------------ --------------
<S> <C> <C>
Supplemental net income per share................................. $ .60 $ .45
====== ======
Shares used in computing supplemental net income per share
(in thousands).................................................. 2,240 2,704
====== ======
</TABLE>
Pro Forma Net Income Per Share and Unaudited Pro Forma Stockholders' Equity
Pro forma net income per share has been computed as described above and
also gives effect to the conversion and exchange of the shares of preferred
stock upon completion of the Company's initial public offering using the
if-converted method from the original date of issuance.
As discussed in Note 5, the Company has 4,001 shares of Series A preferred
stock which is convertible into a total of 788,814 shares of common stock.
Additionally, the Company has 179,428 shares of Series B preferred stock
outstanding with a liquidation preference of $17,943,000. Upon the consummation
of the offering contemplated by this Prospectus, all of the Series A preferred
stock will be converted into Class A common stock and each outstanding share of
Series B preferred stock will be exchanged for a number of shares of common
stock based upon the initial public offering price for the common stock.
Unaudited pro forma stockholders' equity as of June 30, 1996 is adjusted for the
conversion and exchange of the preferred stock into common stock.
F-9
<PAGE> 66
CN BIOSCIENCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION SUBSEQUENT TO DECEMBER 31, 1995 AND PERTAINING TO JUNE 30, 1996
AND THE SIX-MONTH PERIODS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
Stock Options
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB 25") and related
Interpretations in accounting for its employee stock options. Under APB 25,
because the exercise price of the Company's employee stock options equals the
market price of the underlying stock on the date of grant, no compensation
expense is recognized.
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"), effective for
fiscal years beginning after December 15, 1995. SFAS 123 establishes the fair
value-based method of accounting for stock-based compensation arrangements,
under which compensation is determined using the fair value of the stock option
at the grant date and the number of options vested, and is recognized over the
periods in which the related services are rendered. The Company has made the
decision to continue with the current intrinsic value-based method, as allowed
by SFAS 123, and will be required to disclose the pro forma effect of adopting
the fair value-based method in future fiscal years beginning with the fiscal
year ending December 31, 1996.
Accounting Standard on Impairment of Long-Lived Assets
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121 "Accounting for Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of " ("SFAS 121") regarding the
impairment of the long-lived assets, identifiable intangibles and goodwill
related to those assets. SFAS 121 is effective for financial statements for
fiscal years beginning after December 15, 1995. The Company adopted this
standard effective January 1, 1996 and such adoption did not have a material
effect on the Company's financial position or results of operations.
2. ACQUISITION
On August 1, 1995, the Company acquired certain assets and assumed certain
liabilities of the Oncogene Research Products Business ("ORP") of Oncogene
Science, Inc., a biopharmaceutical company, in exchange for $5,932,000 in cash
plus acquisition costs of $281,000. The acquisition has been accounted for as a
purchase and, accordingly, the purchase price has been allocated to the assets
acquired and liabilities assumed based on the estimated fair values at the date
of acquisition. This allocation resulted in $4,335,000 of costs in excess of net
assets acquired which is being amortized over 15 years. ORP's results of
operations have been included in the consolidated results of the Company from
August 1, 1995.
The ORP purchase price allocation is summarized as follows:
<TABLE>
<S> <C>
Inventories...................................................... $1,507,000
Property and equipment........................................... 350,000
Other current assets............................................. 121,000
Costs in excess of net assets acquired........................... 4,335,000
----------
Total assets..................................................... 6,313,000
Liabilities assumed.............................................. (100,000)
----------
Net assets acquired.............................................. $6,213,000
==========
</TABLE>
The following unaudited pro forma information presents the combined results
of operations of the Company and ORP for the years ended December 31, 1994 and
1995 as though the acquisition had occurred January 1, 1994. The unaudited pro
forma information is included for comparative purposes only and is not
F-10
<PAGE> 67
CN BIOSCIENCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION SUBSEQUENT TO DECEMBER 31, 1995 AND PERTAINING TO JUNE 30, 1996
AND THE SIX-MONTH PERIODS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
necessarily indicative of the results of operations that would have occurred had
the acquisition been made on the date indicated or of future results of the
combined companies.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1994 1995
----------- -----------
<S> <C> <C>
Net sales................................................. $28,908,000 $29,937,000
Net income (loss)......................................... (332,000) 979,000
Historical net income (loss) per share.................... $ (.30) $ .49
</TABLE>
3. FINANCIAL STATEMENT DETAILS
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------------- -----------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Finished products............................... $12,728,000 $13,987,000 $13,898,000
Semi-finished products, raw materials and
supplies...................................... 3,131,000 3,958,000 3,794,000
Work-in-progress................................ 256,000 415,000 500,000
----------- ----------- -----------
16,115,000 18,360,000 18,192,000
Reserves for excess materials................... (3,823,000) (3,917,000) (3,820,000)
----------- ----------- -----------
$12,292,000 $14,443,000 $14,372,000
=========== =========== ===========
</TABLE>
Other current assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------------- -----------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Other........................................... $ 380,000 $ 394,000 $ 821,000
Deferred income taxes........................... 109,000 82,000 82,000
-------- -------- --------
$ 489,000 $ 476,000 $ 903,000
======== ======== ========
</TABLE>
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------------- -----------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Equipment and office fixtures................... $ 5,133,000 $ 6,365,000 $ 7,160,000
Leasehold improvements.......................... 912,000 1,131,000 1,274,000
----------- ----------- -----------
6,045,000 7,496,000 8,434,000
Accumulated depreciation........................ (2,390,000) (3,466,000) (4,596,000)
----------- ----------- -----------
$ 3,655,000 $ 4,030,000 $ 3,838,000
========== ========== ==========
</TABLE>
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------------- -----------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Intangible assets............................... $ 2,376,000 $ 6,561,000 $ 6,561,000
Accumulated depreciation........................ (280,000) (494,000) (687,000)
----------- ----------- -----------
$ 2,096,000 $ 6,067,000 $ 5,874,000
========== ========== ==========
</TABLE>
F-11
<PAGE> 68
CN BIOSCIENCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION SUBSEQUENT TO DECEMBER 31, 1995 AND PERTAINING TO JUNE 30, 1996
AND THE SIX-MONTH PERIODS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------------- -----------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
</TABLE>
Other assets consist of the following:
<TABLE>
<CAPTION>
Deferred charges................................ $ 547,000 $ 171,000 $ 658,000
<S> <C> <C> <C>
Other........................................... 217,000 708,000 704,000
----------- ----------- -----------
$ 764,000 $ 879,000 $ 1,362,000
========== ========== ==========
</TABLE>
Amortization of capitalized direct-response advertising for the years ended
December 31, 1993, 1994 and 1995 and the six months ended June 30, 1995 and 1996
was $429,000, $400,000, $714,000, $357,000 and $192,000, respectively.
4. BANK DEBT
The Company's U.S. subsidiary's credit agreement with a commercial bank
provides for borrowings under a revolving line of credit up to a maximum of
$2,000,000 based upon percentages of eligible accounts receivable (as defined)
and inventory. The facility provides that the Company can elect that borrowings
bear interest at the bank's prime rate or LIBOR plus 2.85% (8.50% at December
31, 1995). There were no borrowings outstanding under this facility at December
31, 1995.
Additionally, the credit agreement provides for $8,500,000 in term loans
which bear interest at the bank's prime rate plus .375% or LIBOR plus 3.22%,
with interest and principal payable monthly through July 2000. Borrowings
outstanding under the term loans at December 31, 1995 were $8,167,000 bearing
interest at 8.875%.
In June 1996, the Company's U.S. subsidiary's credit agreement was amended,
modifying the interest rates and extending the expiration date of the revolving
line of credit to June 1998. Upon consummation of the initial public offering
contemplated by this Prospectus, the bank credit facility will convert to an
unsecured $5 million line of credit. In addition to releasing its collateral and
eliminating the restrictions on the payment of cash dividends, loans and
advances to the Company, the lender will modify certain financial covenants
contained in the existing facility to appropriately adjust for the increased
equity resulting from this offering, but the general terms of the existing
facility will otherwise continue, including the restriction on the payment of
cash dividends by the Company.
Borrowings under the credit agreement are collateralized by all the assets
of the Company's U.S. subsidiary, guaranteed by the Company and the Company's
Swiss subsidiary and are secured by pledges of the stock of the Company's
subsidiaries. The credit facility requires, among other things, compliance with
minimum financial and operating covenants, and bank approval for certain mergers
and acquisitions, asset sales, the incurrence of debt, the making of loans and
the repurchase, redemption or other acquisition of shares of the Company's
stock. At December 31, 1995 the Company was in compliance with all restrictive
covenants. In addition to scheduled monthly payments, at the option of the
lender, the Company may be required to pay annually an amount equal to 25% of
excess cash flows (as defined) to further reduce outstanding indebtedness under
the term loans. The lender did not require any additional payments based on the
1995 cash flows.
F-12
<PAGE> 69
CN BIOSCIENCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION SUBSEQUENT TO DECEMBER 31, 1995 AND PERTAINING TO JUNE 30, 1996
AND THE SIX-MONTH PERIODS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
As of December 31, 1995, future annual minimum payments under the term loan
are as follows:
<TABLE>
<S> <C>
1996........................................................... $1,167,000
1997........................................................... 1,667,000
1998........................................................... 2,000,000
1999........................................................... 2,000,000
2000........................................................... 1,333,000
----------
$8,167,000
=========
</TABLE>
Interest expense charged against operations was $211,000 in 1993, $349,000
in 1994, $574,000 in 1995 and $179,000 and $412,000 for the six months ended
June 30, 1995 and 1996, respectively.
5. REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
In March 1992, the Company and certain of its current stockholders entered
into a Subscription and Shareholder Agreement (the "Shareholder Agreement") for
purposes of issuing redeemable preferred stock and common stock for a total
investment of approximately $18.6 million.
Redeemable Preferred Stock
The Series A redeemable preferred stock and Series B redeemable preferred
stock are referred to collectively as the "preferred stock" and the number of
authorized shares, number of issued and outstanding shares and the liquidation
preference by series is as follows:
<TABLE>
<CAPTION>
ISSUED AND
AUTHORIZED OUTSTANDING LIQUIDATION
SHARES SHARES PREFERENCE
---------- ----------- -----------
<S> <C> <C> <C>
Series A............................................ 5,000 4,001 $ 400,100
Series B............................................ 200,000 179,428 17,943,000
</TABLE>
The Series A preferred stock has a $100 per share, plus declared and unpaid
dividends, preference over common shares in liquidation and is entitled to
preferential non-cumulative dividends at the rate of $8 per share per annum,
when and if declared by the Board of Directors. The Series A preferred stock is
convertible at a rate of one share of Series A preferred stock for 197.1541
shares of Class A common stock, subject to adjustment for certain anti-dilution
provisions. The Series A preferred stock is convertible at any time at the
option of the holder into shares of Class A common stock (provided that such
holder has the consent of the holders of at least 50% of the then outstanding
shares of Series A preferred stock) or upon vote by a majority of the holders of
shares of Series A preferred stock. In addition, at any time, the Company has
the right to redeem at its option, with the consent of a majority of the holders
of the Series A preferred stock, any or all of the outstanding Series A
preferred stock provided that no redemption of the Series A preferred stock
shall be effected until all of the Series B preferred stock is first redeemed.
The Series B preferred stock is entitled to preferential non-cumulative
dividends at the rate of $10 per share per annum when and if declared by the
Board of Directors. In the event of liquidation, the Series B preferred stock is
entitled to receive $100 per share, plus declared and unpaid dividends, in
preference to any distribution to the Series A preferred stock. In addition, at
any time, the Company has the right to redeem at its option, with the consent of
a majority of the holders of the Series B preferred stock, any or all of the
outstanding Series B preferred stock.
F-13
<PAGE> 70
CN BIOSCIENCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION SUBSEQUENT TO DECEMBER 31, 1995 AND PERTAINING TO JUNE 30, 1996
AND THE SIX-MONTH PERIODS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
The preferred stock is subject to mandatory redemption at a price of $100
per share, plus all accrued and unpaid dividends in the year of redemption, 25%
annually beginning December 31, 1999 through December 31, 2002.
The Company has agreed with the holders of the preferred stock, that upon
consummation of the offering contemplated by this Prospectus, the holders of the
preferred stock will convert the 4,001 shares of the Series A preferred stock
into 788,814 shares of Class A common stock and exchange the Series B preferred
stock for shares of common stock based upon the initial public offering price
for the common stock.
Common Stock
In connection with the Shareholder Agreement, the Company issued 1,017,244
shares of common stock, $.01 par value, in exchange for $420,000 and a note for
$10,000. During 1993, the note was canceled (see Note 6). The Shareholder
Agreement contains certain restrictions on the sale of securities by
stockholders.
In January 1995, the Company authorized 500,000 shares, $.01 par value, of
nonvoting Class A common stock. Each share of Class A common stock is
convertible into one fully paid and nonassessable share of voting common stock
at any time at the election of the holder subject to certain terms and
conditions. Currently, no Class A common stock has been issued.
Stock Options
The Company has reserved 835,000 shares of common stock for grant or sale
to employees, officers, directors and consultants under the 1992 stock option
plan (the "Plan"). The following table summarizes stock option transactions for
each of the three years and the six months in the period ended June 30, 1996:
<TABLE>
<CAPTION>
EXERCISE
SHARES PRICE
------- ----------
<S> <C> <C>
Balance at January 1, 1993..................................... 192,817 $ .42
Granted...................................................... 242,736 .42
Exercised.................................................... (6,624) .42
Canceled..................................................... (45,945) .42
------- -----------
Outstanding at December 31, 1993............................... 382,984 .42
Granted...................................................... 23,659 .42
Exercised.................................................... (16,561) .42
Canceled..................................................... (10,410) .42
------- -----------
Outstanding at December 31, 1994............................... 379,672 .42
Granted...................................................... 101,732 .42-$3.38
Exercised.................................................... (56,922) .42
Canceled..................................................... (29,148) .42
------- -----------
Outstanding at December 31, 1995............................... 395,334 .42-$3.38
Exercised.................................................... (1,420) $.42
------- -----------
Outstanding at June 30, 1996................................... 393,914 $.42-$3.38
======= ===========
</TABLE>
The options vest over four or five years from the date of grant. All
outstanding options expire five years after the date of grant. As of June 30,
1996, options to acquire 182,289 shares of common stock were exercisable and
359,559 were available for future grant, after giving effect to the authorized
increase in reserved shares as described below.
F-14
<PAGE> 71
CN BIOSCIENCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION SUBSEQUENT TO DECEMBER 31, 1995 AND PERTAINING TO JUNE 30, 1996
AND THE SIX-MONTH PERIODS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
Warrants
During 1995, the Company issued a warrant to purchase 3,028 shares of the
Company's common stock at $1.06 per share. The value of the warrant on the date
of issuance was not considered significant. The warrant is currently exercisable
and expires in July 2000.
Stock Split and Increase in Shares Authorized
On July 16, 1996, the Board of Directors authorized a 2.36585 for 1 stock
split of all outstanding common stock. All share and per share amounts and stock
option data have been restated to retroactively reflect the stock split.
Additionally, on July 16, 1996, the Board of Directors modified the Company's
capital structure to authorize: 30,000,000 shares of common stock ($.01 par
value), 800,000 shares of Class A common stock ($1.00 par value), 5,000 shares
of Series A preferred stock ($1.00 par value), 200,000 shares of Series B
preferred stock ($1.00 par value) and 5,000,000 shares of preferred stock ($.01
par value). The shares reserved for issuance under the 1992 Stock Option Plan
were increased to 835,000.
6. TRANSACTIONS WITH EMPLOYEE/STOCKHOLDERS
In 1993, the Company entered into an employment agreement with the Chairman
and Chief Executive Officer of the Company. As part of this agreement, the
Company granted an option to purchase 110,249 shares of common stock at $.42 per
share. The options vest over four years and expire in January 1998. In addition,
the Company issued 44,100 shares of common stock at $.42 per share and 4,377
shares of Series B preferred stock at $100 per share in exchange for $4,000 in
cash and a note for $452,000. The note bears interest at 8% per annum, payable
annually. Amounts forgiven in 1993, 1994 and 1995 related to this note, charged
to current operations were $152,000, $150,000 and $150,000, respectively.
In 1993, an employee/stockholder resigned from the Company. As part of the
termination agreement, 23,659 shares of common stock and 2,348 shares of Series
B preferred stock were returned to the Company in exchange for the cancellation
of the related notes receivable from the employee/stockholder of $245,000. In
addition, options to purchase 42,396 shares of common stock were canceled.
Effective June 9, 1995, an officer/stockholder of the Company resigned and,
in connection therewith in October 1995, the Company entered into an agreement
to reacquire 59,726 shares of common stock at a price of $3.4515 per share and
1,199 shares of Series B preferred stock at a price of $100 per share, resulting
in a total cost of $326,000. The cost of the reacquired shares was applied
against preferred stock ($120,000) and paid-in-capital ($206,000).
In January 1996, the Company sold 28,390 shares of common stock to an
officer of the Company in exchange for a note receivable of $96,000 bearing
interest at 5.65%.
F-15
<PAGE> 72
CN BIOSCIENCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION SUBSEQUENT TO DECEMBER 31, 1995 AND PERTAINING TO JUNE 30, 1996
AND THE SIX-MONTH PERIODS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
7. INCOME TAXES
The significant components of the provision (benefit) for income taxes are
as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1993 1994 1995
--------- ------- --------
<S> <C> <C> <C>
Current:
Federal.......................................... $(148,000) $17,000 $ 52,000
State............................................ 13,000 2,000 17,000
--------- ------- --------
(135,000) 19,000 69,000
Deferred:
Federal.......................................... (36,000) 43,000 139,000
State............................................ (34,000) -- 36,000
--------- ------- --------
(70,000) 43,000 175,000
--------- ------- --------
(205,000) 62,000 244,000
Foreign............................................ 10,000 -- 47,000
--------- ------- --------
$(195,000) $62,000 $291,000
========= ======= ========
</TABLE>
Temporary differences and carryforwards which give rise to a significant
portion of the net deferred tax asset included in the accompanying consolidated
balance sheets at December 31, 1994 and 1995 are shown below. As of December 31,
1994 and 1995, a valuation allowance of $4,064,000 and $3,296,000 respectively,
has been recognized as an offset to the deferred tax assets related to the
jurisdictions in which realization of such assets is uncertain.
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1994 1995
----------- -----------
<S> <C> <C>
Deferred tax assets:
Inventory reserves...................................... $ 693,000 $ 548,000
Accounts receivable reserves............................ 84,000 65,000
Net operating losses.................................... 3,137,000 2,397,000
Deferred rent........................................... 114,000 102,000
Other................................................... 309,000 283,000
----------- -----------
Total deferred tax assets................................. 4,337,000 3,395,000
Valuation allowances...................................... (4,064,000) (3,296,000)
----------- -----------
273,000 99,000
Deferred tax liability:
Depreciation............................................ (164,000) (15,000)
----------- -----------
Net deferred tax assets................................... $ 109,000 $ 84,000
=========== ===========
</TABLE>
F-16
<PAGE> 73
CN BIOSCIENCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION SUBSEQUENT TO DECEMBER 31, 1995 AND PERTAINING TO JUNE 30, 1996
AND THE SIX-MONTH PERIODS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
Income tax expense (benefit) differs from the amount obtained by applying
the statutory federal income tax rate to earnings before tax as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Provision at federal statutory rate.............. $(798,000) $(136,000) $ 445,000
State income taxes, net of federal benefit....... (14,000) 1,000 56,000
Nondeductible expenses, including amortization of
costs in excess of net assets acquired......... 60,000 63,000 71,000
Change in valuation allowance, net of write-offs
and adjustments................................ 557,000 134,000 (298,000)
Other, net....................................... -- -- 17,000
--------- --------- ---------
Total income tax expense (benefit)............... $(195,000) $ 62,000 $ 291,000
========= ========= =========
</TABLE>
At December 31, 1995, the Company has state net operating loss
carryforwards of approximately $1,500,000 which begin to expire in 1998 unless
previously utilized. The Company also has approximately $1,318,000 and $568,000
of foreign net operating losses in Germany and the United Kingdom, respectively,
which are available indefinitely. Additionally, the Company has approximately
$6,185,000 and $4,965,000 of net operating losses for Swiss Federal and Cantonal
purposes, respectively. These loss carryforwards will begin to expire in 1997
and 1996, respectively, unless previously utilized.
For the six months ended June 30, 1995 and 1996, income taxes have been
provided based on the estimated annual effective tax rate applied to pretax
income for the interim period.
8. COMMITMENTS AND CONTINGENCIES
The Company leases certain facilities and equipment under various operating
leases. Lease expense on the facilities and equipment for the years ended
December 31, 1993, 1994 and 1995 was $1,369,000, $1,157,000 and $1,126,000,
respectively. Lease expense for the six months ended June 30, 1995 and 1996 was
$708,000 and $563,000, respectively.
The Company is party to a fifteen year lease agreement for premises which
were first occupied during 1993. The Company has two options to extend the term
of the lease for five years each.
In addition, the Company leases certain equipment under capital leases.
Cost and accumulated amortization of equipment under capital leases at December
31, 1994 were approximately $1,173,000 and $415,000, respectively, and at
December 31, 1995 were $1,514,000 and $587,000, respectively. Amortization of
assets held under capital leases is included with depreciation expenses.
F-17
<PAGE> 74
CN BIOSCIENCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION SUBSEQUENT TO DECEMBER 31, 1995 AND PERTAINING TO JUNE 30, 1996
AND THE SIX-MONTH PERIODS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
Future annual minimum payments under the operating and capital leases as of
December 31, 1995 are as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
----------- ---------
<S> <C> <C>
1996........................................................ $ 1,529,000 $ 367,000
1997........................................................ 1,483,000 307,000
1998........................................................ 1,329,000 112,000
1999........................................................ 1,157,000 67,000
2000........................................................ 1,098,000 24,000
Thereafter.................................................. 7,618,000 2,000
----------- ---------
$14,214,000 879,000
===========
---------
Less amounts representing interest.......................... (119,000)
---------
Present value of future minimum lease payments.............. 760,000
---------
Less current portion (included in other current
liabilities).............................................. (307,000)
---------
Capital lease obligation, net of current portion (included
in other liabilities)..................................... $ 453,000
=========
</TABLE>
9. CUSTOMER AND GEOGRAPHIC INFORMATION
The Company operates in one business segment, the development, production,
marketing and distribution of a broad array of products used in disease-related
life sciences research at pharmaceutical and biotechnology companies, academic
institutions and government laboratories. No single customer accounted for more
than 10% of total revenue during any of the three years in the period ended
December 31, 1995 or either of six month periods ended June 30, 1995 and 1996.
United States export sales, principally to Europe and Asia, aggregated
$1,857,000, $2,524,000 and $4,429,000, for the years ended December 31, 1993,
1994 and 1995, respectively, and $1,773,000 and $3,402,000 for the six months
ended June 30, 1995 and 1996, respectively.
Information with respect to the Company's operations by significant
geographic area is set forth below. Transfers between geographic areas have been
shown at the agreed upon transfer price, computed by applying discount
percentages to local currency list prices. All transactions denominated in
foreign currency have been translated at the average exchange rate during the
period.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1993
--------------------------------------------------------------
(IN THOUSANDS)
CONSOLIDATED
UNITED STATES EUROPE OTHER ELIMINATIONS TOTAL
------------- ------- ------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated customers............ $11,557 $ 9,242 $1,972 $ -- $ 22,771
Transfers between geographic areas......... 2,842 3,144 280 (6,266) --
------- ------- ------ ------- -------
Total revenue.............................. $14,399 $12,386 $2,252 $ (6,266) $ 22,771
======= ======= ====== ======= =======
Income (loss) before income taxes.......... $ 144 $(2,403) $ (15) $ (75) $ (2,349)
======= ======= ====== ======= =======
Identifiable assets........................ $15,220 $ 9,188 $ 412 $ (774) $ 24,046
======= ======= ====== ======= =======
</TABLE>
F-18
<PAGE> 75
CN BIOSCIENCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION SUBSEQUENT TO DECEMBER 31, 1995 AND PERTAINING TO JUNE 30, 1996
AND THE SIX-MONTH PERIODS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
--------------------------------------------------------------
(IN THOUSANDS)
CONSOLIDATED
UNITED STATES EUROPE OTHER ELIMINATIONS TOTAL
------------- ------- ------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated customers............ $12,554 $ 9,329 $2,305 $ -- $ 24,188
Transfers between geographic areas......... 2,996 3,581 701 (7,278) --
------- ------- ------ ------- -------
Total revenue.............................. $15,550 $12,910 $3,006 $ (7,278) $ 24,188
======= ======= ====== ======= =======
Income (loss) before income taxes.......... $ (251) $ (126) $ 67 $ (90) $ (400)
======= ======= ====== ======= =======
Identifiable assets........................ $15,624 $ 8,315 $ 395 $ (839) $ 23,495
======= ======= ====== ======= =======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
--------------------------------------------------------------
(IN THOUSANDS)
CONSOLIDATED
UNITED STATES EUROPE OTHER ELIMINATIONS TOTAL
------------- ------- ------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated customers............ $13,202 $11,353 $2,411 $ -- $ 26,966
Transfers between geographic areas......... 3,735 4,435 339 (8,509) --
------- ------- ------ ------- -------
Total revenue.............................. $16,937 $15,788 $2,750 $ (8,509) $ 26,966
======= ======= ====== ======= =======
Income before taxes........................ $ 211 $ 1,058 $ 36 $ 3 $ 1,308
======= ======= ====== ======= =======
Identifiable assets........................ $22,557 $ 8,978 $ 482 $ (820) $ 31,197
======= ======= ====== ======= =======
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1996
--------------------------------------------------------------
(IN THOUSANDS)
CONSOLIDATED
UNITED STATES EUROPE OTHER ELIMINATIONS TOTAL
------------- ------- ------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated customers............ $ 8,402 $ 6,364 $1,799 $ -- $ 16,565
Transfers between geographic areas......... 2,527 2,325 192 (5,044) --
------- ------- ------ ------- -------
Total revenue.............................. $10,929 $ 8,689 $1,991 $ (5,044) $ 16,565
======= ======= ====== ======= =======
Income (loss) before taxes................. $ 666 $ 631 $ 22 -- $ 1,319
======= ======= ====== ======= =======
Identifiable assets........................ $24,202 $ 8,352 $ 547 $ (873) $ 32,228
======= ======= ====== ======= =======
</TABLE>
10. EMPLOYEE BENEFIT PLAN
The Company sponsors a Defined Contribution Plan (the "Plan") which covers
substantially all domestic employees who meet certain age requirements.
Employees may contribute up to 15% of their compensation per year (subject to a
maximum limit imposed by federal tax law). The Company is obligated to make
matching contributions equal to a maximum of 30% of each participant's
contribution per year. The contributions charged to operations totaled $38,000,
$31,000 and $67,000 for the three years ended December 31, 1993, 1994 and 1995
and $24,000 and $51,000 for the six month periods ended June 30, 1995 and 1996,
respectively.
F-19
<PAGE> 76
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Oncogene Science, Inc.
We have audited the accompanying statements of operations of Oncogene
Science, Inc. Research Products Business (a business sector of Oncogene Science,
Inc.) (the Business) for each of the years in the two-year period ended
September 30, 1994 and for the ten-month period ended July 31, 1995. These
financial statements are the responsibility of the Business' 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 statements of operations referred to above present
fairly, in all material respects, the results of operations of Oncogene Science,
Inc. Research Products Business for each of the years in the two-year period
ended September 30, 1994 and for the ten-month period ended July 31, 1995 in
conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Jericho, New York
September 22, 1995
F-20
<PAGE> 77
ONCOGENE SCIENCE, INC.
RESEARCH PRODUCTS BUSINESS
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED TEN MONTHS
SEPTEMBER 30, ENDED
------------------------- JULY 31,
1993 1994 1995
---------- ---------- ----------
<S> <C> <C> <C>
Net sales.............................................. $4,743,740 $4,719,942 $4,108,910
Cost of goods sold..................................... 1,777,851 1,804,099 1,415,399
---------- ---------- ----------
Gross profit........................................... 2,965,889 2,915,843 2,693,511
Grant revenue.......................................... 133,360 45,539 --
3,099,249 2,961,382 2,693,511
---------- ---------- ----------
Operating expenses:
Selling, general and administrative.................. 2,460,117 2,520,767 2,076,922
Research and development............................. 658,508 310,949 255,737
---------- ---------- ----------
3,118,625 2,831,716 2,332,659
---------- ---------- ----------
Income (loss) before income taxes...................... (19,376) 129,666 360,852
Pro forma provision for income taxes................... -- 45,200 148,000
---------- ---------- ----------
Pro forma net income (loss)............................ $ (19,376) $ 84,466 $ 212,852
========= ========= =========
</TABLE>
See accompanying notes to statements of operations.
F-21
<PAGE> 78
ONCOGENE SCIENCE, INC.
RESEARCH PRODUCTS BUSINESS
NOTES TO STATEMENTS OF OPERATIONS
JULY 31, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
The financial statements of Oncogene Science, Inc. Research Products
Business (the Business) include the accounts of the research products operations
at Oncogene Science, Inc. ("Oncogene"). The Business has not operated as a
stand-alone company, thus certain allocations have been made to present the
financial statements of the Business as a separate entity. In general, salaries
and the related personnel costs of researchers and laboratory supplies are
allocated based on direct responsibilities and direct usage, respectively;
facility costs are allocated based on a percentage of square footage occupied;
and general and administrative expenses are allocated based on project salaries.
Management believes that the allocation methods used are reasonable.
The Business is engaged in the development and marketing of products for
the basic research and clinical research markets. The Business' research
products catalogue includes over 800 research reagent products, including
monoclonal and polyclonal antibodies, as well as a variety of
immunohistochemistry kits, DNA probes, quantitative immunoassays and accessory
reagents. The acquisition of the cancer business of Applied bioTechnology by
Oncogene in 1991 resulted in the expansion of the Business' research reagent
products lines. The financial statements for the ten months ended July 31, 1995,
and the fiscal years ended September 30, 1994 and 1993 include only the accounts
specifically related to the Research Products Business and allocations of such
business.
On June 26, 1995, Oncogene entered into an agreement to sell certain assets
of its Research Products business to CN Biosciences, Inc. (formerly
Calbiochem-Novabiochem International, Inc.), consisting primarily of
inventories, laboratory equipment, office furniture and office equipment, for
approximately $5.9 million in cash. The closing of the purchase agreement
occurred on August 2, 1995.
Revenue Recognition
Revenue from the sale of research reagent products is recognized at time of
shipment.
Research and Development Costs
Research and development costs are charged to operations as incurred and
include direct costs of research scientists and equipment and an allocation of
laboratory facility and administrative costs.
Grant Revenue
Grant revenues relate to National Cancer Institute funds awarded to the
Business of approximately $133,000 and $46,000 for the years ended September 30,
1993 and 1994, respectively.
Depreciation and Amortization
Depreciation of equipment is provided over the estimated useful lives of
the respective asset groups on a straight-line basis. Leasehold improvements are
amortized on a straight-line basis over the lesser of the estimated useful lives
or the remaining term of the lease.
Income Taxes
Effective October 1, 1993, Oncogene adopted the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109). SFAS 109 requires that Oncogene recognize deferred tax liabilities and
assets for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Under SFAS 109, deferred
tax liabilities and assets are determined on the basis of the difference between
the tax basis of assets and liabilities and their respective financial reporting
amounts (temporary differences) at enacted tax rates in effect for the years in
which the differences are expected to reverse.
F-22
<PAGE> 79
ONCOGENE SCIENCE, INC.
RESEARCH PRODUCTS BUSINESS
NOTES TO STATEMENTS OF OPERATIONS
JULY 31, 1995
The adoption of SFAS 109 did not have any impact on the financial position
of operations of Oncogene or the Business. Oncogene, in years prior to fiscal
1994, accounted for taxes in accordance with Accounting Principles Board Opinion
No. 11, "Accounting for Income Taxes". The Business' results of operations are
included in the consolidated tax returns of Oncogene. No provision for income
taxes has been provided by the Business since Oncogene has incurred operation
losses since inception and has established a valuation allowance equal to the
total deferred tax asset.
Assuming the business filed separate income tax returns, pro forma
provision for income taxes and the resulting pro forma net income/(loss) have
been presented in the accompanying statement of operations.
2. RELATED PARTY TRANSACTIONS
Oncogene's wholly-owned subsidiary, Oncogene Science S.A. (OSSA), was
established in France to distribute products to the French market. Sales by the
Business to OSSA were approximately $111,000, $237,000 and $140,000, for the
fiscal years ended September 30, 1993 and 1994 and the ten months ended July 31,
1995, respectively, with related costs of sales of approximately $33,000,
$69,000 and $51,000, respectively.
The Business also recognized expenses payable to OSSA in 1995 and 1994 in
connection with any marketing efforts performed by OSSA on behalf of the
Business. Expenses were $96,000 and $24,000, for the fiscal year ended September
30, 1994 and the ten months ended July 31, 1995, respectively.
The Business also had sales to Becton Dickinson, a party with whom Oncogene
has existing collaborative agreements, and CN Biosciences, the party purchasing
the Business from Oncogene (Note 1), during the ten months ended July 31, 1995
of approximately $152,000 and $21,000, respectively.
3. COMMITMENT
The Company leases office, operating and laboratory space under various
lease agreements.
Rent expense related to the Business' facility was $49,844, $98,000 and
$81,720 for the fiscal years ended September 30, 1993 and 1994 and for the ten
months ended July 31, 1995, respectively.
The following is a schedule by fiscal years of future minimum rental
payments relating to the Business' facilities required as of July 31, 1995,
assuming expiration of all lease agreements by December 31, 2003 for the
Business.
<TABLE>
<S> <C>
Two months ended September 30, 1995............................... $ 30,184
1996.............................................................. 90,950
1997.............................................................. 91,888
1998.............................................................. 95,781
1999.............................................................. 97,500
2000 and thereafter............................................... 421,781
--------
$828,084
========
</TABLE>
4. EMPLOYEE SAVINGS AND INVESTMENT PLAN
On September 16, 1987, the Company's Board of Directors adopted a Savings
and Investment Plan under Section 401(k) of the Internal Revenue Code effective
September 1, 1987. This plan allows employees to defer from 2% to 10% of their
income on a pre-tax basis through contributions into designated investment
funds. For each dollar the employee invests up to 6% of his or her earnings, the
Company will contribute an additional 50 cents into the funds. For the fiscal
years ended September 30, 1993 and 1994 and the ten months ended July 31, 1995,
the Business' expenses related to the plan were approximately $32,000, $35,000
and $31,000, respectively.
F-23
<PAGE> 80
CN BIOSCIENCES, INC.
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENT
The following unaudited pro forma condensed consolidated statement of
operations for the year ended December 31, 1995 gives effect to the acquisition
of Oncogene Science, Inc. Research Products Business as if it was acquired on
January 1, 1995.
The pro forma condensed consolidated financial statement is based on
historical financial statements of CN Biosciences, Inc. and Oncogene Science,
Inc. Research Products Business, giving effect to the acquisition applying the
purchase method of accounting and the assumptions and adjustments as discussed
in the accompanying notes to the pro forma condensed consolidated financial
statement. This pro forma condensed consolidated financial statement has been
prepared by the management of CN Biosciences, Inc. based upon the audited
consolidated financial statements of CN Biosciences, Inc., as of December 31,
1995 and for the year then ended, and the unaudited condensed statement of
operations of Oncogene Science, Inc. Research Products Business for the seven
months ended July 31, 1995. The unaudited pro forma condensed consolidated
financial statement should be read in conjunction with the historical financial
statements and notes thereto and narrative sections included elsewhere herein.
The pro forma condensed consolidated financial statement is not necessarily
indicative of what actual results of operations would have been for the periods
had the transactions occurred on the date indicated and do not purport to
indicate the results of future operations.
F-24
<PAGE> 81
CN BIOSCIENCES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
----------------------------
ONCOGENE PRO FORMA PRO FORMA
CN BIOSCIENCES, SCIENCE, ADJUSTMENTS REFLECTING
INC. INC. (NOTE 2) ACQUISITION
--------------- -------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Sales.................................... $26,966 $2,971 $ -- $29,937
Operating expenses....................... 25,131 2,710 --(a) 27,841
------- ------ ------ -------
Operating income......................... 1,835 261 -- 2,096
Interest expense, net.................... 527 -- 322(b) 849
------- ------ ------ -------
Income before income taxes............... 1,308 261 (322) 1,247
Provision for income taxes............... 291 -- (23)(c) 268
------- ------ ------ -------
Net income............................... $ 1,017 $ 261 $ 299 $ 979
======= ====== ====== =======
Net income per share..................... $ .49
=======
Shares used in computing net income per
share.................................. 1,987
=======
</TABLE>
See accompanying notes to Pro Forma Condensed Consolidated Statement of
Operations.
F-25
<PAGE> 82
CN BIOSCIENCES, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS (UNAUDITED)
DECEMBER 31, 1995
1. On August 1, 1995, CN Biosciences, Inc. (the "Company") acquired certain
assets and assumed certain liabilities of Oncogene Science, Inc. Research
Products Business ("Oncogene"). The purchase price was $6,213,000, including
acquisition costs of $281,000. The transaction was accounted for as a
purchase.
The purchase price has been allocated to the tangible and intangible assets
acquired and liabilities assumed based on their respective fair values on the
date of acquisition as follows:
<TABLE>
<S> <C>
Inventories...................................................... $1,507,000
Property and equipment........................................... 350,000
Other current assets............................................. 121,000
Cost in excess of net assets acquired............................ 4,335,000
----------
Total assets................................................... 6,313,000
Liabilities assumed.............................................. (100,000)
----------
Net assets acquired............................................ $6,213,000
==========
</TABLE>
2. The accompanying unaudited pro forma condensed consolidated statement of
operations for the year ended December 31, 1995 gives effect to the
acquisition of Oncogene as if it had occurred as of January 1, 1995.
The pro forma adjustments are summarized as follows:
(a) The increase in amortization expense of intangibles for the
goodwill related to the acquisition of Oncogene was entirely
offset by the elimination of the amortization of goodwill on the
books of Oncogene at the time of the acquisition by the Company.
(b) Increase interest expense for the debt incurred to complete the
acquisition.
(c) Adjust the provision for income taxes based on the consolidated
operations for all of 1995.
F-26
<PAGE> 83
INSIDE BACK COVER PAGE
[COLOR PICTURE OF TWO SCIENTISTS WORKING IN LABORATORY WITH CAPTION WHICH
READS "THE COMPANY'S SCIENTIFIC STAFF, INCLUDING OVER 40 PH.D.S, DEVELOPS AND
MANUFACTURES A LARGE ARRAY OF BIOCHEMICAL AND BIOLOGICAL REAGENTS, ANTIBODIES,
PEPTIDES, ASSAYS AND RESEARCH KITS."]
[COLOR PHOTO OF EMPLOYEE HOLDING BOTTLE OF BIOCHEMICAL PRODUCT WITH CAPTION
WHICH READS "CUSTOMER ORDERS ARE FULFILLED, GENERALLY WITH NEXT-DAY OR
SECOND-DAY SHIPMENTS, FROM THE SAN DIEGO, CA AND NOTTINGHAM, U.K. DISTRIBUTION
CENTERS"]
[COLOR PHOTO OF WORLD MAP WITH DOTS INDICATING LOCATIONS OF COMPANY
FACILITIES IN COUNTRIES WHERE THE COMPANY'S PRODUCTS ARE SOLD WITH CAPTION WHICH
READS "CUSTOMERS IN 46 COUNTRIES ARE SERVED BY THE COMPANY FROM ITS SEVEN
LOCATIONS."]
[COLOR PHOTO SHOWING AN ARRAY OF COMPANY PUBLICATIONS WITH CAPTION WHICH
READS "THE COMPANY INTRODUCES NEW PRODUCTS, PROVIDES TECHNICAL INFORMATION AND
REGULARLY COMMUNICATES WITH ITS CUSTOMERS THROUGH A BROAD ARRAY OF SUPPLEMENTAL
PUBLICATIONS."]
<PAGE> 84
No dealer, salesperson or any other person has been authorized to give any
information or make any representation not contained in this Prospectus in
connection with the offer made by this Prospectus and, if given or made, such
information or representation must not be relied upon as having been authorized
by the Company or the Underwriters. This Prospectus does not constitute an offer
to sell or a solicitation of an offer to buy any of the securities offered
hereby to anyone in any jurisdiction in which such offer or solicitation is not
authorized or in which the person making such offer or solicitation is not
qualified to do so or to anyone to whom it is unlawful to make such offer or
solicitation. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that the
information herein is correct as of any time subsequent to the date of this
Prospectus.
---------------------------
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 6
Use of Proceeds....................... 12
Dividend Policy....................... 12
Capitalization........................ 13
Dilution.............................. 14
Selected Consolidated Financial
Data................................ 15
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 16
Business.............................. 23
Management............................ 39
Certain Transactions.................. 46
Principal Stockholders................ 47
Description of Capital Stock.......... 48
Shares Eligible for Future Sale....... 51
Underwriting.......................... 53
Legal Matters......................... 54
Experts............................... 54
Change in Accountants................. 55
Additional Information................ 55
Index to Financial Statements......... F-1
</TABLE>
---------------------------
Until , 1996 (25 days after the date of this Prospectus), all
dealers effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
1,600,000 SHARES
LOGO
COMMON STOCK
---------------------------------
PROSPECTUS
,1996
---------------------------------
UBS SECURITIES
DAIN BOSWORTH
Incorporated
<PAGE> 85
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, all of which will be
paid solely by the Company. All the amounts shown are estimates, except the SEC
registration fee, the NASD filing fee and the Nasdaq National Market listing
fee:
<TABLE>
<CAPTION>
AMOUNT
--------
<S> <C>
SEC registration fee.............................................. $ 8,566
NASD filing fee................................................... 2,984
Nasdaq National Market listing fee................................ 30,243
Transfer agent and registrar fees and expenses.................... 1,500
Printing and engraving expenses................................... 100,000
Legal fees and expenses........................................... 350,000
Accounting fees and expenses...................................... 125,000
Directors' and officers' liability insurance...................... 100,000
Blue sky fees and expenses........................................ 15,000
Miscellaneous expenses............................................ 16,707
------
Total........................................................... $750,000
======
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Certificate of Incorporation and By-Laws provide that the
Company shall indemnify each person who is or was a director or officer of the
Company to the fullest extent permitted under Section 145 of the Delaware
General Corporation Law. Section 145 of the Delaware General Corporation Law
empowers a Delaware corporation to indemnify 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
(other than an action by or in the right of such corporation) by reason of the
fact that such person is or was a director, officer, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. A
corporation may indemnify such person against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. A corporation may, in advance of the final disposition of any
civil, criminal, administrative or investigative action, suit or proceeding, pay
the expenses (including attorneys' fees) incurred by any officer or director in
defending such action, provided that the director or officer undertakes to repay
such amount if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation.
A Delaware corporation may also indemnify officers and directors in an
action by or in the right of the corporation to procure a judgment in its favor
under the same conditions, except that no indemnification is permitted without
judicial approval if the officer or director is adjudged to be liable to the
corporation. Where an officer or director is successful on the merits or
otherwise in the defense of any action referred to above, the corporation must
indemnify him against the expenses (including attorneys' fees) which he actually
and reasonably incurred in connection therewith. The indemnification provided is
not deemed to be exclusive of any other rights to which an officer or director
may be entitled under any corporation's by-laws, agreements, vote or otherwise.
II-1
<PAGE> 86
The Certificate of Incorporation provides that a director of the Company
will not be personally liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability (i) for
any breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law, which concerns unlawful payments of dividends,
stock purchases or redemptions or (iv) for any transaction from which the
director derived an improper personal benefit.
While the Certificate of Incorporation provides directors with protection
from awards for monetary damages for breaches of their duty of care, it does not
eliminate such duty. Accordingly, the Certificate of Incorporation will have no
effect on the availability of equitable remedies such as an injunction or
rescission based on a director's breach of his or her duty of care. The
provisions of the Certificate of Incorporation described in the preceding
paragraph apply to an officer of the Company only if he or she is a director of
the Company and is acting in his or her capacity as director, and do not apply
to officers of the Company who are not directors.
Reference is made to the Underwriting Agreement (Exhibit 1) which provides
for indemnification of the Company, its directors, officers and controlling
persons.
The Company has entered into indemnification agreements with certain of its
directors and officers pursuant to which the Company provides indemnification
and contribution against expenses and losses incurred for claims brought against
them by reason of their being a director or officer of the Company. Members of
the Stock Option Committee are also indemnified by the Company in connection
with their administration of the Stock Option Plan. Additionally, the Company
intends to purchase directors' and officers' liability insurance.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The following information is furnished with regard to all securities sold
by the Company within the past three years which were not registered under the
Securities Act. Amounts have been restated to reflect a 2.36585- for-one stock
split effected by the Registrant in July 1996. These transactions were private
transactions not involving a public offering and were exempt from the
registration provisions of the Securities Act pursuant to Section 4(2) thereof.
All transactions did not involve an underwriter and certificates for shares of
Common Stock issued bear a restrictive legend permitting the transfer thereof
only upon registration or an exemption therefrom under the Securities Act. All
issuances of stock options were pursuant to the Registrant's 1992 Stock Option
Plan.
From July 1, 1993 to December 31, 1993, the Registrant issued stock options
to purchase 21,293 shares of Common Stock at $0.42 per share to an employee.
On October 20, 1993, the Registrant issued stock options to purchase 59,146
shares of Common Stock at $0.42 per share to members of its Technology Council.
On December 31, 1993, the Registrant issued stock options to purchase
47,317 shares of Common Stock at $0.42 per share to an executive officer.
From January 1, 1994 to December 31, 1994, the Registrant issued stock
options to purchase 23,658 shares of Common Stock at $0.42 per share to
employees.
From January 1, 1995 to December 31, 1995, the Registrant issued stock
options to purchase 70,976 shares of Common Stock at $0.42 per share to
executive officers.
On July 28, 1995, the Registrant issued a warrant to purchase 3,028 shares
of Common Stock at $1.06 per share to Silicon Valley Bank in connection with the
Registrant's bank credit facility.
On August 15, 1995, the Registrant issued stock options to purchase 18,928
shares of Common Stock at $1.06 per share to employees.
On November 10, 1995, the Registrant issued stock options to purchase
11,828 shares of Common Stock at $3.38 per share to a director.
II-2
<PAGE> 87
On January 31, 1996, the Registrant sold 28,390 shares of Common Stock for
$3.38 per share to an executive officer.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
------------- ----------------------------------------------------------------------------
<S> <C>
1 Form of Underwriting Agreement.
2(a)* Asset Purchase Agreement, dated as of June 26, 1995, by and among Oncogene
Science, Inc., Calbiochem-Novabiochem Corporation and Calbiochem-Novabiochem
International, Inc.
3(a) Amended and Restated Certificate of Incorporation of the Registrant.
3(b)* By-Laws of the Registrant.
4 Specimen of Registrant's Common Stock certificate.
5 Opinion of Willkie Farr & Gallagher as to the legality of Common Stock.
10(a) Agreement, dated as of March 1996, by and between Calbiochem-Novabiochem
International, Inc. and Amersham International plc.
10(b) Form of Agreement, dated as of August , 1996, by and among CN Biosciences,
Inc., Warburg, Pincus Investors, L.P., ABS MB (C-N) Limited Partnership,
Stelios B. Papadopoulos, John T. Snow and Ben Matzilevich.
10(c)(i) Commercial Lease, dated as of February 1, 1992, between LMP Properties, Ltd.
and Calbiochem Corporation.
10(c)(ii) First Amendment, dated as of April 1, 1992, to Commercial Lease, dated as of
February 1, 1992, between LMP Properties, Ltd. and Calbiochem Corporation.
10(c)(iii) Second Amendment, dated as of September 14, 1992, to Commercial Lease, dated
as of February 1, 1992, between LMP Properties, Ltd. and Calbiochem
Corporation.
10(c)(iv) Third Amendment, dated as of March 30, 1993, to Commercial Lease, dated as
of February 1, 1992, between LMP Properties, Ltd. and Calbiochem
Corporation.
10(d) Sublease Agreement, dated as of August 2, 1995, by and between Oncogene
Science, Inc. and Calbiochem-Novabiochem Corporation.
10(e)* Sublease Agreement, dated as of July 1996, by and between
Calbiochem-Novabiochem Corporation and DataWorks Corporation.
10(f )(i)* Registration Rights Agreement, dated as of March 13, 1992, by and among
Calbiochem-Novabiochem International, Inc. and each of the signatories
thereto.
10(f )(ii)* Amendment Agreement, dated as of January 4, 1993, among Warburg, Pincus
Investors, L.P., ABS MB (C-N) Limited Partnership, Richard Slansky, John T.
Snow, Georges Chappuis, Calbiochem-Novabiochem International, Inc. and
Stelios B. Papadopoulos.
10(g)(i)* Shared Services Agreement, dated as of August 2, 1995, by and between
Oncogene Science, Inc. and Calbiochem-Novabiochem Corporation.
10(g)(ii)* Trademark License Agreement, dated as of August 2, 1995, by and between
Oncogene Science, Inc. and Calbiochem-Novabiochem Corporation.
10(g)(iii)* Sublicense Agreement, dated as of August 2, 1995, by and between Oncogene
Science, Inc. and Calbiochem-Novabiochem Corporation.
10(g)(iv)* Shared Intellectual Property License Agreement, dated as of August 2, 1995,
by and between Oncogene Science, Inc. and Calbiochem-Novabiochem
Corporation.
10(h)* Letter Agreement, dated June 9, 1995, by and between Calbiochem-Novabiochem
International, Inc. and Richard B. Slansky.
</TABLE>
II-3
<PAGE> 88
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
------------- ----------------------------------------------------------------------------
<S> <C>
10(i)* Form of Director Indemnification Agreement.
10(j)* Form of Officer Indemnification Agreement.
10(k)* Calbiochem-Novabiochem International, Inc. 1992 Stock Option Plan, as
amended, including Form of Incentive Stock Option Agreement and Form of
Non-Qualified Stock Option Agreement.
10(l)* Employment Agreement, dated as of January 1, 1996, between Calbiochem-
Novabiochem International, Inc. and Stelios B. Papadopoulos.
10(m)(i)* Employment Agreement, dated as of February 23, 1996, between Calbiochem-
Novabiochem International, Inc. and Ben Matzilevich.
10(m)(ii)* Secured Recourse Promissory Note, dated January 31, 1996, issued to
Calbiochem-Novabiochem International, Inc. by Ben Matzilevich.
10(m)(iii)* Restricted Stock Purchase Agreement, dated as of January 31, 1996, between
Calbiochem-Novabiochem International, Inc. and Ben Matzilevich.
10(m)(iv)* Loan and Pledge Agreement, dated as of January 31, 1996, by and between
Calbiochem-Novabiochem International, Inc. and Ben Matzilevich.
10(n)(i)* Loan and Security Agreement, dated July 28, 1995 (including schedule), by
and between Calbiochem-Novabiochem Corporation and Silicon Valley Bank.
10(n)(ii)* Pledge Agreement, dated July 28, 1995, by and between Calbiochem-Novabiochem
Corporation and Silicon Valley Bank.
10(n)(iii)* Collateral Assignment, Patent Mortgage and Security Agreement, dated July
28, 1995, by and between Calbiochem-Novabiochem Corporation and Silicon
Valley Bank.
10(n)(iv)* Security Agreement, dated July 28, 1995, by and between
Calbiochem-Novabiochem International, Inc. and Silicon Valley Bank.
10(n)(v)* Pledge Agreement, dated July 28, 1995, by and between Calbiochem-Novabiochem
International, Inc. and Silicon Valley Bank.
10(n)(vi)* Cross-Corporate Continuing Guaranty, dated July 28, 1995, by and between
Calbiochem-Novabiochem International, Inc. and Silicon Valley Bank.
10(n)(vii)* Pledge Agreement, dated July 27, 1995, by and between Calbiochem-Novabiochem
AG and Silicon Valley Bank.
10(n)(viii)* Cross-Corporate Continuing Guaranty, dated July 28, 1995, by and between
Calbiochem-Novabiochem AG and Silicon Valley Bank.
10(n)(ix)* Subordination Agreement, dated July 28, 1995, by and among
Calbiochem-Novabiochem Corporation, Calbiochem-Novabiochem International,
Inc. and Silicon Valley Bank.
10(n)(x)* Antidilution Agreement, dated July 28, 1995, by and between
Calbiochem-Novabiochem International, Inc. and Silicon Valley Bank.
10(n)(xi)* Warrant to Purchase Stock, dated July 28, 1995, by and between Calbiochem-
Novabiochem International, Inc. and Silicon Valley Bank.
10(n)(xii)* Amendment to Loan Agreement, dated November 22, 1995, by and between Silicon
Valley Bank and Calbiochem-Novabiochem Corporation.
10(n)(xiii)* Amendment to Loan Agreement, dated January 24, 1996, by and between Silicon
Valley Bank and Calbiochem-Novabiochem Corporation.
10(n)(xiv)* Amendment to Loan Agreement, dated June 27, 1996, by and between Silicon
Valley Bank and Calbiochem-Novabiochem Corporation.
10(n)(xv) Schedule to Loan and Security Agreement, dated June 27, 1996, by and between
Silicon Valley Bank and Calbiochem-Novabiochem Corporation.
</TABLE>
II-4
<PAGE> 89
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
------------- ----------------------------------------------------------------------------
<S> <C>
10(o)(i) Real Property Leasing Contract, dated February 6, 1984, between LISCA
Leasing AG and Calbiochem-Novabiochem AG (formerly Novabiochem AG), as
amended on January 25, 1990, November 9, 1993 and July 5, 1994.
10(o)(ii) Lease Contract, dated April 3, 1990, between Balit AG and
Calbiochem-Novabiochem AG (formerly Novabiochem AG, as successor by merger
to Protogen AG) (together with Addendum No. 1), as amended by Letter
Agreement, dated January 10, 1992.
10(p) Lease, dated February 1994, between Wilson Bowden Properties Limited and
Calbiochem-Novabiochem (U.K.) Limited.
10(q) Consulting Agreement, dated March 26, 1996, between Calbiochem-Novabiochem
Corporation and Robert A. Weinberg, Ph.D.
10(r) Letter Agreement, dated November 11, 1993, between Calbiochem-Novabiochem
International, Inc. and Doug Greenwold.
10(s) Letter Agreement, dated July 15, 1994, between Calbiochem-Novabiochem
International, Inc. and Dr. John T. Snow.
10(t) Letter Agreement, dated May 26, 1995, between Calbiochem-Novabiochem
International, Inc. and James G. Stewart.
11* Computation of Earnings per Share.
16 Letter re Change in Certifying Accountant.
21* Subsidiaries of the Registrant.
23(a) Consent of Willkie Farr & Gallagher (included as part of Exhibit 5).
23(b) Consent of Ernst & Young LLP.
23(c) Consent of KPMG Peat Marwick LLP.
24* Power of Attorney.
27 Financial Data Schedule.
</TABLE>
- ---------------
* Previously filed.
(B) FINANCIAL STATEMENT SCHEDULES.
Schedule I -- Condensed Financial Information of Registrant.
Although this schedule is required under Rule 5-04(c) of Regulation S-X, it
has been omitted because the Company has received the agreement of its lender to
remove the restriction on the payment of dividends and the making of loans or
advances from Calbiochem-Novabiochem Corporation to the Company upon the
consummation of this offering.
Schedule II -- Valuation and Qualifying Accounts.
ITEM 17. UNDERTAKINGS.
(1) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnifica-
II-5
<PAGE> 90
tion by it is against public policy as expressed in the Act and will be governed
by the final adjudication of such issue.
(2) The undersigned Registrant hereby undertakes that:
(a) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(b) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new Registration Statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-6
<PAGE> 91
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized in the City of San
Diego, State of California, on August 23, 1996.
CN BIOSCIENCES, INC.
By: /s/ JAMES G. STEWART
------------------------------------
Name: James G. Stewart
Title: Vice President, Chief
Financial Officer
and Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ------------------------------- ----------------
<C> <S> <C>
* Chairman of the Board of August 23, 1996
- --------------------------------------------- Directors, Chief Executive
Stelios B. Papadopoulos Officer and President
(Principal executive officer)
/s/ JAMES G. STEWART Vice President, Chief Financial August 23, 1996
- --------------------------------------------- Officer and Secretary
James G. Stewart (Principal financial and
accounting officer)
* Director August 23, 1996
- ---------------------------------------------
Frederick L. Bryant
* Director August 23, 1996
- ---------------------------------------------
Joseph P. Landy
* Director August 23, 1996
- ---------------------------------------------
S. Joshua Lewis
* Director August 23, 1996
- ---------------------------------------------
Robert E. McGill, III
By: /s/ JAMES G.
STEWART
- ---------------------------------------------
James G. Stewart
Attorney-in-Fact
</TABLE>
II-7
<PAGE> 92
CN BIOSCIENCES, INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
(A) (B) (C) (D) (E)
- ---------------------------------- ----------- -------------------------- ---------- ----------
ADDITIONS
--------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS(1) DEDUCTIONS PERIOD
- ---------------------------------- ----------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Deducted from receivables:
Allowance for doubtful accounts
Year ended December 31,
1993....................... $ 368 $ 4 $ -- $ -- $ 372
Year ended December 31,
1994....................... 372 217 49 49 589
Year ended December 31,
1995....................... 589 (129) 51 39 472
Deducted from inventories:
Reserve for excess and obsolete
inventory
Year ended December 31,
1993....................... 2,121 1,744 -- 3,865
Year ended December 31,
1994....................... 3,865 192 379 613 3,823
Year ended December 31,
1995....................... 3,823 317 332 555 3,917
</TABLE>
- ---------------
(1) Represents amounts charged to foreign currency translation adjustment.
S-1
<PAGE> 93
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
------------ ------------------------------------------------------------------------ ----
<S> <C> <C>
1 Form of Underwriting Agreement..........................................
2(a)* Asset Purchase Agreement, dated as of June 26, 1995, by and among
Oncogene Science, Inc., Calbiochem-Novabiochem Corporation and
Calbiochem-Novabiochem International, Inc...............................
3(a) Amended and Restated Certificate of Incorporation of the Registrant.....
3(b)* By-Laws of the Registrant...............................................
4 Specimen of Registrant's Common Stock certificate.......................
5 Opinion of Willkie Farr & Gallagher as to the legality of Common
Stock...................................................................
10(a) Agreement, dated as of March 1996, by and between Calbiochem-Novabiochem
International, Inc. and Amersham International plc......................
10(b) Form of Agreement, dated as of August , 1996, by and among CN
Biosciences, Inc., Warburg, Pincus Investors, L.P., ABS MB (C-N) Limited
Partnership, Stelios B. Papadopoulos, John T. Snow and Ben
Matzilevich.............................................................
10(c)(i) Commercial Lease, dated as of February 1, 1992, between LMP Properties,
Ltd. and Calbiochem Corporation.........................................
10(c)(ii) First Amendment, dated as of April 1, 1992, to Commercial Lease, dated
as of February 1, 1992, between LMP Properties, Ltd. and Calbiochem
Corporation.............................................................
10(c)(iii) Second Amendment, dated as of September 14, 1992, to Commercial Lease,
dated as of February 1, 1992, between LMP Properties, Ltd. and
Calbiochem Corporation..................................................
10(c)(iv) Third Amendment, dated as of March 30, 1993, to Commercial Lease, dated
as of February 1, 1992, between LMP Properties, Ltd. and Calbiochem
Corporation.............................................................
10(d) Sublease Agreement, dated as of August 2, 1995, by and between Oncogene
Science, Inc. and Calbiochem-Novabiochem Corporation....................
10(e)* Sublease Agreement, dated as of July 1996, by and between Calbiochem-
Novabiochem Corporation and DataWorks Corporation.......................
10(f )(i)* Registration Rights Agreement, dated as of March 13, 1992, by and among
Calbiochem-Novabiochem International, Inc. and each of the signatories
thereto.................................................................
10(f )(ii)* Amendment Agreement, dated as of January 4, 1993, among Warburg, Pincus
Investors, L.P., ABS MB (C-N) Limited Partnership, Richard Slansky, John
T. Snow, Georges Chappuis, Calbiochem-Novabiochem International, Inc.
and Stelios B. Papadopoulos.............................................
10(g)(i)* Shared Services Agreement, dated as of August 2, 1995, by and between
Oncogene Science, Inc. and Calbiochem-Novabiochem Corporation...........
10(g)(ii)* Trademark License Agreement, dated as of August 2, 1995, by and between
Oncogene Science, Inc. and Calbiochem-Novabiochem Corporation...........
10(g)(iii)* Sublicense Agreement, dated as of August 2, 1995, by and between
Oncogene Science, Inc. and Calbiochem-Novabiochem Corporation...........
10(g)(iv)* Shared Intellectual Property License Agreement, dated as of August 2,
1995, by and between Oncogene Science, Inc. and Calbiochem-Novabiochem
Corporation.............................................................
10(h)* Letter Agreement, dated June 9, 1995, by and between
Calbiochem-Novabiochem International, Inc. and Richard B. Slansky.......
10(i)* Form of Director Indemnification Agreement..............................
10(j)* Form of Officer Indemnification Agreement...............................
</TABLE>
<PAGE> 94
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
------------ ------------------------------------------------------------------------ ----
<S> <C> <C>
10(k)* Calbiochem-Novabiochem International, Inc. 1992 Stock Option Plan, as
amended, including Form of Incentive Stock Option Agreement and Form of
Non-Qualified Stock Option Agreement....................................
10(l)* Employment Agreement, dated as of January 1, 1996, between Calbiochem-
Novabiochem International, Inc. and Stelios B. Papadopoulos.............
10(m)(i)* Employment Agreement, dated as of February 23, 1996, between Calbiochem-
Novabiochem International, Inc. and Ben Matzilevich.....................
10(m)(ii)* Secured Recourse Promissory Note, dated January 31, 1996, issued to
Calbiochem-Novabiochem International, Inc. by Ben Matzilevich...........
10(m)(iii)* Restricted Stock Purchase Agreement, dated as of January 31, 1996,
between Calbiochem-Novabiochem International, Inc. and Ben
Matzilevich.............................................................
10(m)(iv)* Loan and Pledge Agreement, dated as of January 31, 1996, by and between
Calbiochem-Novabiochem International, Inc. and Ben Matzilevich..........
10(n)(i)* Loan and Security Agreement, dated July 28, 1995 (including schedule),
by and between Calbiochem-Novabiochem Corporation and Silicon Valley
Bank....................................................................
10(n)(ii)* Pledge Agreement, dated July 28, 1995, by and between
Calbiochem-Novabiochem Corporation and Silicon Valley Bank..............
10(n)(iii)* Collateral Assignment, Patent Mortgage and Security Agreement, dated
July 28, 1995, by and between Calbiochem-Novabiochem Corporation and
Silicon Valley Bank.....................................................
10(n)(iv)* Security Agreement, dated July 28, 1995, by and between Calbiochem-
Novabiochem International, Inc. and Silicon Valley Bank.................
10(n)(v)* Pledge Agreement, dated July 28, 1995, by and between
Calbiochem-Novabiochem International, Inc. and Silicon Valley Bank......
10(n)(vi)* Cross-Corporate Continuing Guaranty, dated July 28, 1995, by and between
Calbiochem-Novabiochem International, Inc. and Silicon Valley Bank......
10(n)(vii)* Pledge Agreement, dated July 27, 1995, by and between Calbiochem-
Novabiochem AG and Silicon Valley Bank..................................
10(n)(viii)* Cross-Corporate Continuing Guaranty, dated July 28, 1995, by and between
Calbiochem-Novabiochem AG and Silicon Valley Bank.......................
10(n)(ix)* Subordination Agreement, dated July 28, 1995, by and among Calbiochem-
Novabiochem Corporation, Calbiochem-Novabiochem International, Inc. and
Silicon Valley Bank.....................................................
10(n)(x)* Antidilution Agreement, dated July 28, 1995, by and between Calbiochem-
Novabiochem International, Inc. and Silicon Valley Bank.................
10(n)(xi)* Warrant to Purchase Stock, dated July 28, 1995, by and between
Calbiochem-Novabiochem International, Inc. and Silicon Valley Bank......
10(n)(xii)* Amendment to Loan Agreement, dated November 22, 1995, by and between
Silicon Valley Bank and Calbiochem-Novabiochem Corporation..............
10(n)(xiii)* Amendment to Loan Agreement, dated January 24, 1996, by and between
Silicon Valley Bank and Calbiochem-Novabiochem Corporation..............
10(n)(xiv)* Amendment to Loan Agreement, dated June 27, 1996, by and between Silicon
Valley Bank and Calbiochem-Novabiochem Corporation......................
10(n)(xv) Schedule to Loan and Security Agreement, dated June 27, 1996, by and
between Silicon Valley Bank and Calbiochem-Novabiochem Corporation......
</TABLE>
<PAGE> 95
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
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<S> <C> <C>
10(o)(i) Real Property Leasing Contract, dated February 6, 1984, between LISCA
Leasing AG and Calbiochem-Novabiochem AG (formerly Novabiochem AG), as
amended on January 25, 1990, November 9, 1993 and July 5, 1994..........
10(o)(ii) Lease Contract, dated April 3, 1990, between Balit AG and Calbiochem-
Novabiochem AG (formerly Novabiochem AG, as successor by merger to
Protogen AG) (together with Addendum No. 1), as amended by Letter
Agreement, dated January 10, 1992.......................................
10(p) Lease, dated February 1994, between Wilson Bowden Properties Limited and
Calbiochem-Novabiochem (U.K.) Limited...................................
10(q) Consulting Agreement, dated March 26, 1996, between
Calbiochem-Novabiochem Corporation and Robert A. Weinberg, Ph.D.........
10(r) Letter Agreement, dated November 11, 1993, between
Calbiochem-Novabiochem International, Inc. and Doug Greenwold...........
10(s) Letter Agreement, dated July 15, 1994, between Calbiochem-Novabiochem
International, Inc. and Dr. John T. Snow................................
10(t) Letter Agreement, dated May 26, 1995, between Calbiochem-Novabiochem
International, Inc. and James G. Stewart................................
11* Computation of Earnings per Share.......................................
16 Letter re Change in Certifying Accountant...............................
21* Subsidiaries of the Registrant..........................................
23(a) Consent of Willkie Farr & Gallagher (included as part of Exhibit 5).....
23(b) Consent of Ernst & Young LLP............................................
23(c) Consent of KPMG Peat Marwick LLP........................................
24* Power of Attorney.......................................................
27 Financial Data Schedule.................................................
</TABLE>
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* Previously filed.
<PAGE> 1
1,600,000 Shares
CN BIOSCIENCES, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
September __, 1996
UBS Securities LLC
Dain Bosworth Incorporated
As Representatives of the Several Underwriters
c/o UBS Securities LLC
299 Park Avenue
New York, NY 10171
Ladies and Gentlemen:
CN Biosciences, Inc., a Delaware corporation (the "Company"), proposes
to issue and sell 1,600,000 shares (the "Firm Shares") of its authorized but
unissued Common Stock, $.01 par value per share (the "Common Stock"), to the
several Underwriters listed on SCHEDULE A to this Agreement (collectively, the
"Underwriters"). The Company also proposes to grant to the Underwriters an
option to purchase up to 240,000 additional shares (the "Option Shares") of
Common Stock on the terms and for the purposes set forth in Section 3(c). The
Firm Shares and the Option Shares are hereinafter collectively referred to as
the "Shares."
The Company wishes to confirm as follows its agreements with you (the
"Representatives") and the other Underwriters on whose behalf you are acting in
connection with the several purchases by the Underwriters of the Shares.
1. REGISTRATION STATEMENT. A registration statement on Form S-1 (File
No. 333-8335) including a prospectus relating to the Shares and each amendment
thereto has been prepared by the Company in conformity with the requirements of
the Securities Act of 1933, as amended (the "Act"), and the rules and
regulations (the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") thereunder, and has been filed with the
Commission. There have been delivered to you three signed copies of such
registration statement and amendments, together with three copies of each
exhibit filed therewith. Conformed copies of such registration statement
1.
<PAGE> 2
and amendments (but without exhibits) and of the related preliminary prospectus
have been delivered to you in such reasonable quantities as you have requested
for each of the Underwriters. If such registration statement has not become
effective, a further amendment to such registration statement, including a form
of final prospectus, necessary to permit such registration statement to become
effective will be filed promptly by the Company with the Commission. If such
registration statement has become effective, a final prospectus containing all
Rule 430A Information (as hereinafter defined) will be filed by the Company with
the Commission in accordance with Rule 424(b) of the Rules and Regulations on or
before the second business day after the date hereof (or such earlier time as
may be required by the Rules and Regulations).
The term "Registration Statement" as used in this Agreement shall mean
such registration statement at the time such registration statement becomes or
became effective and, in the event any post-effective amendment thereto becomes
effective prior to the Closing Date (as hereinafter defined), shall also mean
such registration statement as so amended; provided, however, that such term
shall also include all Rule 430A Information deemed to be included in such
registration statement at the time such registration statement becomes effective
as provided by Rule 430A of the Rules and Regulations. The term "Preliminary
Prospectus" shall mean the prospectus subject to completion in the form included
as part of the Registration Statement as originally filed, and as such
prospectus shall have been amended from time to time prior to the date of the
Prospectus, including any preliminary prospectus included in the Registration
Statement at the time it becomes effective that omits Rule 430A Information. The
term "Prospectus" as used in this Agreement shall mean the prospectus relating
to the Shares in the form in which it is first filed with the Commission
pursuant to Rule 424(b) of the Rules and Regulations or, if no filing pursuant
to Rule 424(b) of the Rules and Regulations is required, shall mean the form of
final prospectus included in the Registration Statement at the time such
registration statement becomes effective. The term "Rule 430A Information" means
information with respect to the Shares and the offering thereof permitted to be
omitted from the Registration Statement when it becomes effective pursuant to
Rule 430A of the Rules and Regulations.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants as follows:
(a) The Company has not received, and has no notice of, any order of
the Commission preventing or suspending the use of any Preliminary Prospectus,
or instituted proceedings for that purpose, and each Preliminary Prospectus, at
the time of filing thereof, conformed in all material respects to the
requirements of the Act and the Rules and Regulations. When the Registration
Statement became or becomes, as the case may be, effective (the "Effective
Date") and at all times subsequent thereto up to and at the Closing Date (as
hereinafter defined), any later date on which Option Shares are to be purchased
(the "Option Closing Date") and when any post-effective amendment to the
2.
<PAGE> 3
Registration Statement becomes effective or any amendment or supplement to the
Prospectus is filed with the Commission, (i) the Registration Statement and
Prospectus, and any amendments or supplements thereto, will contain all material
statements which are required to be stated therein by, and will comply in all
material respects with the requirements of, the Act and the Rules and
Regulations, and (ii) neither the Registration Statement nor the Prospectus, nor
any amendment or supplement thereto, will include any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading. The foregoing
representations and warranties in this section 2(a) do not apply to any
statements or omissions made in reliance on and in conformity with the
information in the last paragraph on the front cover page of the Prospectus, the
stabilization language on the inside front cover page of the Prospectus and the
information contained in the first (including the table), third and seventh
paragraphs of the section of the Prospectus entitled "Underwriting." The Company
has not distributed any offering material in connection with the offering or
sale of the Shares other than the Registration Statement, the Preliminary
Prospectus, the Prospectus or any other materials, if any, permitted by the Act.
(b) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of Delaware, with
full corporate power and authority to own, lease and operate its properties and
conduct its business as described in the Registration Statement. The Company is
duly qualified to do business as a foreign corporation in good standing in each
jurisdiction where the ownership or leasing of its properties or the conduct of
its business requires such qualification, except where the failure to so qualify
would not have a material adverse effect on the Company and its Subsidiaries (as
hereinafter defined), taken as a whole (a "Material Adverse Effect"). The
Company has no "significant subsidiaries" (as defined in the Rules and
Regulations) other than Calbiochem-Novabiochem Corporation,
Calbiochem-Novabiochem GmbH, Calbiochem-Novabiochem UK, Calbiochem-Novabiochem
AG and Clinalfa AG (collectively, the "Subsidiaries"). The Company beneficially
owns all of the outstanding common stock (or foreign equivalents) of the
Subsidiaries, except for nominal shareholdings by directors to meet director
qualifying share ownership requirements of foreign jurisdictions. Other than the
Subsidiaries, the Company does not own, directly or indirectly, any shares of
stock or any other equity or long-term debt securities of any corporation or
have any equity interest in any firm, partnership, joint venture, association or
other entity other than its ownership of subsidiaries which are not "significant
subsidiaries" (as defined above). Complete and correct copies of the
certificates of incorporation and of the bylaws or equivalent documents of the
Company and the Subsidiaries and all amendments thereto have been delivered to
the Representatives, and except as set forth in the exhibits to the Registration
Statement no changes therein will be made subsequent to the date hereof and
prior to the Closing Date or, if later, the Option Closing Date. Each Subsidiary
has been duly incorporated and is validly existing as a
3.
<PAGE> 4
corporation (or foreign equivalent) in good standing under the laws of the
jurisdiction of its incorporation, with full corporate power and authority to
own, lease and operate its properties and to conduct its business as described
in the Registration Statement. Each Subsidiary is duly qualified to do business
as a foreign corporation in good standing in each jurisdiction where the
ownership or leasing of the properties or the conduct of its business requires
such qualification, except where the failure to so qualify would not have a
Material Adverse Effect. All of the outstanding shares of capital stock (or
foreign equivalents) of each of the Subsidiaries have been duly authorized and
validly issued, are fully paid and nonassessable and are owned beneficially by
the Company subject to no security interest, other encumbrance or adverse claims
other than the liens held by Silicon Valley Bank in connection with the Credit
Facility (the "SVB Liens"), and except for nominal shareholdings by directors to
meet director qualifying share ownership requirements of foreign jurisdictions.
(c) The Company has full power and authority (corporate and
otherwise) to enter into this Agreement and to perform the transactions
contemplated hereby. This Agreement has been duly authorized, executed and
delivered by the Company and is a valid and binding agreement on the part of the
Company, enforceable against the Company in accordance with its terms, except as
rights to indemnity and contribution hereunder may be limited by applicable laws
or equitable principles and except as enforcement hereof may be limited by
applicable bankruptcy, insolvency, reorganization or other similar laws relating
to or affecting creditors' rights generally or by general equitable principles.
The performance of this Agreement by the Company and the consummation by the
Company of the transactions herein contemplated will not result in a breach or
violation of any of the terms and provisions of, or constitute a default under,
(i) any indenture, mortgage, deed of trust, loan agreement, bond, debenture,
note agreement or other evidence of indebtedness, or any material lease,
contract or other agreement or instrument to which the Company or any Subsidiary
is a party or by which its properties are bound, or (ii) the certificate of
incorporation or bylaws or equivalent documents of the Company or any
Subsidiary, or (iii) any law, order, rule, regulation, writ, injunction or
decree of any court or governmental agency or body to which the Company or any
Subsidiary is subject. The Company is not required to obtain or make (as the
case may be) any consent, approval, authorization, order, designation or filing
by or with any court or regulatory, administrative or other governmental agency
or body as a requirement for the consummation by the Company of the transactions
herein contemplated, except such as may be required under the Act, the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or under state
securities or blue sky ("Blue Sky") laws or under the rules and regulations of
the National Association of Securities Dealers, Inc. ("NASD").
(d) There is not pending or, to the Company's knowledge, threatened,
any action, suit, claim, proceeding or investigation against the Company or its
Subsidiaries or any of their respective officers (in their capacity as officers
of the
4.
<PAGE> 5
Company or its Subsidiaries) or any of the properties, assets or rights of the
Company or the Subsidiaries before any court or governmental agency or body or
otherwise which might result in a Material Adverse Effect, or prevent
consummation of the transactions contemplated hereby. There is not pending, or
to the Company's knowledge threatened, any action, suit, claim, proceeding or
investigation against the officers of the Company or the Subsidiaries that would
be required to be disclosed by the Act or the Rules and Regulations. There are
no statutes, rules, regulations, agreements, contracts, leases or documents that
are required to be described in the Prospectus, or to be filed as exhibits to
the Registration Statement, by the Act or by the Rules and Regulations that have
not been accurately described in all material respects in the Prospectus or
filed as exhibits to the Registration Statement.
(e) All outstanding shares of capital stock of the Company have been
duly authorized and validly issued and are fully paid and nonassessable, have
been issued in compliance with all federal and state securities laws, and were
not issued in violation of any preemptive right, resale right, right of first
refusal or similar right. The authorized and outstanding capital stock of the
Company at the consummation of the offering conforms in all material respects to
the description thereof contained in the Registration Statement and the
Prospectus (and such description correctly states the substance of the
provisions of the instruments defining the capital stock of the Company). The
Shares have been duly authorized for issuance and sale to the Underwriters
pursuant to this Agreement and, when issued and delivered by the Company against
payment therefor in accordance with the terms of this Agreement, will be duly
and validly issued and fully paid and nonassessable. No preemptive right,
co-sale right, registration right, right of first refusal or other similar
rights of securityholders exists with respect to any of the Shares or the issue
and sale thereof other than those that have been expressly waived prior to the
date hereof. No further approval or authorization of any security holder, the
Board of Directors or any duly appointed committee thereof or others is required
for the issuance and sale or transfer of the Shares, except as may be required
under the Act, the Exchange Act or under state securities or Blue Sky laws.
Except as disclosed in or contemplated by the Prospectus and the financial
statements of the Company, and the related notes thereto, included in the
Prospectus, and except as set forth in the Subscription and Shareholder
Agreement dated as of March 13, 1992, among the Company and the signatories
thereto, the Company does not have outstanding any options or warrants to
purchase, or any preemptive rights or other rights to subscribe for or to
purchase, any securities or obligations convertible into, or any contracts or
commitments to issue or sell, shares of its capital stock or any such options,
rights, convertible securities or obligations. The description of the Company's
stock option and other plans or arrangements, and the options or other rights
granted and exercised thereunder, set forth in the Prospectus accurately and
fairly presents, in all material respects, the information required to be shown
with respect to such plans, arrangements, options and rights.
5.
<PAGE> 6
(f) Ernst & Young LLP, who have examined the financial statements,
together with the related schedules and notes, of the Company filed with the
Commission as a part of the Registration Statement, which are included in the
Prospectus, are independent public accountants within the meaning of the Act and
the Rules and Regulations. The financial statements of the Company, together
with the related schedules and notes, forming part of the Registration Statement
and Prospectus, fairly present the financial position and the results of
operations of the Company at the respective dates and for the respective periods
to which they apply. All financial statements, together with the related
schedules and notes, filed with the Commission as part of the Registration
Statement have been prepared in accordance with generally accepted accounting
principles as in effect in the United States consistently applied throughout the
periods involved except as may be otherwise stated in the Registration
Statement. The selected and summary financial and statistical data included in
the Registration Statement present fairly the information shown therein and have
been compiled on a basis consistent with the financial statements presented
therein. No other financial statements or schedules are required by the Act or
the Rules and Regulations to be included in the Registration Statement.
(g) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, there has not been (i) any
material adverse change, or any development which in the Company's reasonable
judgment is likely to cause a material adverse change, in the business,
properties or assets described or referred to in the Registration Statement, or
the results of operations, condition (financial or otherwise), business or
operations of the Company and its Subsidiaries, taken as a whole, (ii) any
transaction which is material to the Company and its Subsidiaries, taken as a
whole, except transactions in the ordinary course of business, (iii) any
obligation, direct or contingent, which is material to the Company and its
Subsidiaries, taken as a whole, incurred by the Company or its Subsidiaries,
except obligations incurred in the ordinary course of business, (iv) any change
in the capital stock or outstanding indebtedness of the Company or its
Subsidiaries, other than as contemplated by the Prospectus and shares of Common
Stock that may be issued upon the exercise of outstanding stock options and
warrants, or (v) any dividend or distribution of any kind declared, paid or made
on the capital stock of the Company. Neither the Company nor its Subsidiaries
have any material contingent obligation which is not disclosed in the
Registration Statement.
(h) The Company and each Subsidiary have good and marketable title
to all material properties and assets described in the Prospectus as owned by
them, free and clear of any pledge, lien, security interest, charge,
encumbrance, claim, equitable interest, or restriction other than the SVB Liens,
(ii) the agreements to which the Company or any Subsidiary is a party described
in the Prospectus are valid agreements, enforceable against the Company or such
Subsidiary in accordance with their terms, except as enforcement may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting creditors' rights generally or by
6.
<PAGE> 7
general equitable principles, and, to the Company's knowledge, the other
contracting party or parties thereto are not in material breach or default under
any of such agreements and (iii) the Company and each Subsidiary have valid and
enforceable leases for the properties described in the Prospectus as leased by
it, and such leases conform in all material respects to the description thereof,
if any, set forth in the Registration Statement.
(i) The Company and each Subsidiary now hold and at the Closing Date
and any later Option Closing Date, as the case may be, will hold, all licenses,
certificates, approvals and permits from all state, United States, foreign and
other regulatory authorities, including but not limited to the United States
Food and Drug Administration (the "FDA") and any foreign regulatory authorities
performing functions similar to those performed by the FDA, necessary to the
conduct of their businesses (as such businesses are currently conducted), except
for such licenses, certificates, approvals and permits the failure of which to
hold would not have a Material Adverse Effect, all of which are valid and in
full force and effect, and there is no proceeding pending or, to the knowledge
of the Company, threatened which may cause any such license, certificate,
approval or permit to be withdrawn, cancelled, suspended or not renewed. Neither
the Company nor any Subsidiary is in violation of its certificate of
incorporation, bylaws or other charter documents, as applicable, or, except for
defaults or violations which would not have a Material Adverse Effect, in
default in the performance or observance of any obligation, agreement, covenant
or condition contained in any bond, debenture, note or other evidence of
indebtedness or in any contract, indenture, mortgage, loan agreement, joint
venture or other agreement or instrument to which it is a party or by which it
or any of its properties are bound, or in violation of any law, order, rule,
regulation, writ, injunction or decree of any court or governmental agency or
body, including, but not limited to, the FDA and any similar foreign
governmental agency.
(j) The Company and each Subsidiary have filed on a timely basis all
necessary federal, state and foreign income, franchise and other tax returns and
has paid all taxes shown thereon as due, and the Company has no knowledge of any
tax deficiency which has been or might be asserted against the Company or any
Subsidiary which might have a Material Adverse Effect. All material tax
liabilities are adequately provided for within the financial statements of the
Company.
(k) The Company and its Subsidiaries maintain insurance of the types
and in the amounts adequate for their business and consistent with insurance
coverage maintained by similar companies in similar businesses, including, but
not limited to, insurance covering product liability and real and personal
property owned or leased against theft, damage, destruction, acts of vandalism
and all other risks customarily insured against, all of which insurance is in
full force and effect.
7.
<PAGE> 8
(l) Neither the Company nor any of its Subsidiaries is involved in
any labor dispute or disturbance nor, to the knowledge of the Company, is any
such dispute or disturbance threatened.
(m) Except as described in the Prospectus, the Company and each
Subsidiary own or possess adequate licenses or other rights to use all patents,
patent applications, trademarks, trademark applications, service marks, service
mark applications, tradenames, copyrights, manufacturing processes, formulae,
trade secrets, know-how, franchises, and other material intellectual property
rights and assets (collectively, "Intellectual Property") necessary to the
conduct of their businesses substantially as now conducted and as proposed to be
conducted as described in the Prospectus. The Company has no knowledge that it
or any Subsidiary lacks or will be unable to obtain any rights or licenses to
use any of the Intellectual Property necessary to conduct the business
substantially as now conducted or proposed to be conducted by it as described in
the Prospectus. The Prospectus fairly and accurately describes the Company's
rights with respect to the Intellectual Property. Except as would not,
individually or in the aggregate, have a Material Adverse Effect, the Company
has not received any notice of infringement or of conflict with rights or claims
of others with respect to any Intellectual Property. The Company is not aware of
any patents of others which are infringed upon by potential products or
processes referred to in the Prospectus in such a manner as to result in a
Material Adverse Effect.
(n) The Company and each Subsidiary are conducting their businesses
in compliance with all of the laws, rules and regulations of the jurisdictions
in which it is conducting business, except where any such failure to be in
compliance would not have a Material Adverse Effect.
(o) The Company is not an "investment company," or a "promoter" or
"principal underwriter" for a registered investment company, as such terms are
defined in the Investment Company Act of 1940, as amended.
(p) Neither the Company nor any of its Subsidiaries has incurred any
liability for a fee, commission, or other compensation on account of the
employment of a broker or finder in connection with the transactions
contemplated by this Agreement other than the underwriting discounts and
commissions contemplated hereby.
(q) The Company and each of its Subsidiaries is (i) in compliance
with any and all applicable federal, foreign, state and local environmental
laws, rules, regulations, treaties, statutes and codes promulgated by any and
all governmental authorities relating to the protection of human health and
safety, the environment or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) has received all permits, licenses or
other approvals required of it under applicable Environmental Laws to conduct
its business as currently conducted, and (iii) is in
8.
<PAGE> 9
compliance with all terms and conditions of any such permit, license or
approval, except where such noncompliance with Environmental Laws, or failure to
receive required permits, licenses or other approvals would not, individually or
in the aggregate, have a Material Adverse Effect. No action, proceeding,
revocation proceeding, writ, injunction or claim is pending or threatened
relating to the Environmental Laws or to the Company's or its Subsidiaries'
activities involving Hazardous Materials. "Hazardous Materials" means any
material or substance (i) that is prohibited or regulated by any environmental
law, rule, regulation, order, treaty, statute or code promulgated by any
governmental authority, or any amendment or modification thereto, or (ii) that
has been designated or regulated by any governmental authority as radioactive,
toxic, hazardous or otherwise a danger to health, reproduction or the
environment.
(r) Except as disclosed in the Registration Statement, or except as
would not result in a Material Adverse Effect or would not otherwise be required
to be disclosed in the Registration Statement under the Act or the Rules and
Regulations, (i) neither the Company nor any of its Subsidiaries has engaged in
the generation, use, manufacture, transportation or storage of any Hazardous
Materials on any of the Company's or its Subsidiaries' properties or former
properties, except where such use, manufacture, transportation or storage is in
compliance with Environmental Laws; (ii) no Hazardous Materials have been
treated or disposed of on any of the Company's or its Subsidiaries' properties
or on properties formerly owned or leased by the Company or any Subsidiary
during the time of such ownership or lease, except in compliance with
Environmental Laws; and (iii) no spills, discharges, releases, deposits,
emplacements, leaks or disposal of any Hazardous Materials have occurred on or
under or have emanated from any of the Company's or its Subsidiaries' properties
or former properties.
(s) Neither the Company nor any of its Subsidiaries has at any
time during the last five years (i) made any unlawful contribution to any
candidate for foreign office, or failed to disclose fully any contribution in
violation of law, or (ii) made any payment to any foreign, United States or
state governmental officer or official, or other person charged with similar
public of quasi-public duties, other than payments required or permitted by the
laws of the United States.
(t) Company has filed a registration statement pursuant to Section
12(g) of the Exchange Act to register the Common Stock. The Shares have been
duly authorized for quotation on the National Association of Securities Dealers,
Inc. Automated Quotation System National Market System ("Nasdaq National
Market"). The Company has taken no action designed to, or likely to have the
effect of, terminating the registration of the Common Stock under the Exchange
Act or delisting the Common Stock from the Nasdaq National Market, nor has the
Company received any notification that the Commission or the Nasdaq National
Market is contemplating terminating such registration or listing.
9.
<PAGE> 10
(u) Neither the Company nor, to its knowledge, any of its officers,
directors or affiliates has taken, and at the Closing Date and at any later
Option Closing Date, neither the Company nor, to its knowledge, any of its
officers, directors or affiliates will have taken, directly or indirectly, any
action which has constituted, or might reasonably be expected to constitute, the
stabilization or manipulation of the price of sale or resale of the Shares.
3. PURCHASE OF THE SHARES BY THE UNDERWRITERS.
(a) On the basis of the representations and warranties and subject
to the terms and conditions herein set forth, the Company agrees to issue and
sell the Firm Shares to the several Underwriters, and each of the Underwriters
agrees to purchase from the Company, the respective aggregate number of Firm
Shares set forth opposite its name on SCHEDULE A, plus such additional number of
Firm Shares which such Underwriter may become obligated to purchase pursuant to
Section 3(b) hereof. The price at which such Firm Shares shall be sold by the
Company and purchased by the several Underwriters shall be $_____ per share. In
making this Agreement, each Underwriter is contracting severally and not
jointly; except as provided in paragraphs (b) and (c) of this Section 3, the
agreement of each Underwriter is to purchase only the respective number of Firm
Shares specified on SCHEDULE A.
(b) If for any reason one or more of the Underwriters shall fail or
refuse (otherwise than for a reason sufficient to justify the termination of
this Agreement under the provisions of Section 10 hereof) to purchase and pay
for the number of Shares agreed to be purchased by such Underwriter or
Underwriters, the non-defaulting Underwriters shall have the right within
twenty-four (24) hours after such default to purchase, or procure one or more
other Underwriters to purchase, in such proportions as may be agreed upon
between you and such purchasing Underwriter or Underwriters and upon the terms
herein set forth, all or any part of the Shares which such defaulting
Underwriter or Underwriters agreed to purchase. If the non-defaulting
Underwriters fail so to make such arrangements with respect to all such Shares
and portion, the number of Shares which each non-defaulting Underwriter is
otherwise obligated to purchase under this Agreement shall be automatically
increased on a pro rata basis (as adjusted by you in such manner as you deem
advisable to avoid fractional shares) to absorb the remaining shares and portion
which the defaulting Underwriter or Underwriters agreed to purchase; provided,
however, that the non-defaulting Underwriters shall not be obligated to purchase
the Shares and portion which the defaulting Underwriter or Underwriters agreed
to purchase if the aggregate number of such Shares exceeds 10% of the total
number of Shares which all Underwriters agreed to purchase hereunder. If the
total number of Shares which the defaulting Underwriter or Underwriters agreed
to purchase shall not be purchased or absorbed in accordance with the two
preceding sentences, the Company shall have the right, within twenty-four (24)
hours next succeeding the 24-hour period referred to above, to make arrangements
with other underwriters or purchasers reasonably satisfactory to
10.
<PAGE> 11
you for purchase of such Shares and portion on the terms herein set forth. In
any such case, either you or the Company shall have the right to postpone the
Closing Date determined as provided in Section 5 hereof for not more than seven
business days after the date originally fixed as the Closing Date pursuant to
said Section 5 in order that any necessary changes in the Registration
Statement, the Prospectus or any other documents or arrangements may be made. If
the aggregate number of Shares which the defaulting Underwriter or Underwriters
agreed to purchase exceeds 10% of the total number of Shares which all
Underwriters agreed to purchase hereunder, and if neither the non-defaulting
Underwriters nor the Company shall make arrangements within the 24-hour periods
stated above for the purchase of all the Shares which the defaulting Underwriter
or Underwriters agreed to purchase hereunder, this Agreement shall be terminated
without further act or deed and without any liability on the part of the Company
to any non-defaulting Underwriter and without any liability on the part of any
non-defaulting Underwriter to the Company. Nothing in this paragraph (b), and no
action taken hereunder, shall relieve any defaulting Underwriter from liability
in respect of any default of such Underwriter under this Agreement.
(c) On the basis of the representations, warranties and covenants
herein contained, and subject to the terms and conditions herein set forth, the
Company grants an option to the several Underwriters to purchase all or any
portion of the Option Shares from the Company at the same price per share as the
Underwriters shall pay for the Firm Shares. Said option may be exercised only to
cover over-allotments in the sale of the Firm Shares by the Underwriters and may
be exercised in whole or in part at any time (but not more than once) on or
before the 30th day after the date of this Agreement upon written or facsimile
notice by you to the Company setting forth the aggregate number of shares of the
Option Shares as to which the several Underwriters are exercising the option.
Delivery of certificates for the shares of Option Shares, and payment therefor,
shall be made as provided in Section 5 hereof. Each Underwriter will purchase
such percentage of the Option Shares as is equal to the percentage of Firm
Shares that such Underwriter is purchasing, the exact number of shares to be
adjusted by you in such manner as you deem advisable to avoid fractional shares.
4. OFFERING BY UNDERWRITERS.
(a) The terms of the initial public offering by the Underwriters of
the Shares to be purchased by them shall be as set forth in the Prospectus. The
Underwriters may from time to time change the public offering price after the
closing of the initial public offering and increase or decrease the concessions
and discounts to dealers as they may determine.
(b) You, on behalf of the Underwriters, represent and warrant that
(i) the information in the last paragraph on the front cover page of the
Prospectus, the stabilization language on the inside front cover page of the
Prospectus and the
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<PAGE> 12
information contained in the first (including the table), third and seventh
paragraphs of the section of the Prospectus entitled "Underwriting" in the
Registration Statement, any Preliminary Prospectus and the Prospectus relating
to the Shares (insofar as such information relates to the Underwriters)
constitutes the only information furnished by the Underwriters to the Company
for inclusion in the Registration Statement, any Preliminary Prospectus, and the
Prospectus, and that the statements made therein are correct and do not omit to
state any material fact required to be stated therein or necessary to make the
statements made therein in light of the circumstances under which they were made
not misleading, and (ii) the Underwriters have not distributed and will not
distribute prior to the Closing Date or on any Option Closing Date, as the case
may be, any offering material in connection with the offering and sale of the
shares other than the Preliminary Prospectus, the Prospectus, the Registration
Statement and other materials permitted by the Act.
5. DELIVERY OF AND PAYMENT FOR THE SHARES.
(a) Delivery of certificates for the Firm Shares and the Option
Shares (if the option granted pursuant to Section 3(c) hereof shall have been
exercised not later than 11:00 a.m., California time, on the date at least two
business days preceding the Closing Date), and payment therefor, shall be made
at the offices of Cooley Godward Castro Huddleson & Tatum, 4365 Executive Drive,
Suite 1100, San Diego, CA 92121-2128 at 6:00 a.m., California time, on the
fourth business day after the date of this Agreement (the "Closing Date").
(b) If the option granted pursuant to Section 3(c) hereof shall be
exercised after 11:00 a.m., California time, on the date two business days
preceding the Closing Date, and on or before the 30th day after the date of this
Agreement, delivery of certificates for the Option Shares, and payment therefor,
shall be made at the offices of Cooley Godward Castro Huddleson & Tatum, 4365
Executive Drive, Suite 1100, San Diego, CA 92121-2128 at 6:00 a.m., California
time, on the third business day after the exercise of such option.
(c) Payment for the Shares purchased from the Company shall be made
to the Company or its order, by wire transfer of funds or by one or more
certified or official bank check or checks in immediately available (same day)
funds. Such payment shall be made upon delivery of certificates for the Shares
to you for the respective accounts of the several Underwriters against receipt
therefor signed by you. Certificates for the Shares to be delivered to you shall
be registered in such name or names and shall be in such denominations as you
may request at least three business days before the Closing Date, in the case of
Firm Shares, and at least two business days prior to the Option Closing Date, in
the case of the Option Shares. Such certificates will be made available to the
Underwriters for inspection, checking and packaging at a location in New York,
New York, designated by the Underwriters not less than one full business day
prior
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<PAGE> 13
to the Closing Date or, in the case of the Option Shares, by 3:00 p.m., New York
time, on the business day preceding the Option Closing Date.
It is understood that you, individually and not on behalf of the
Underwriters, may (but shall not be obligated to) make payment to the Company
for shares to be purchased by any Underwriter whose check shall not have been
received by you on the Closing Date or any later Option Closing Date. Any such
payment by you shall not relieve such Underwriter from any of its obligations
hereunder.
6. FURTHER AGREEMENTS OF THE COMPANY. The Company covenants and agrees
as follows:
(a) The Company will use its best efforts to cause the Registration
Statement and any amendment thereof, if not effective at the time and date that
this Agreement is executed and delivered by the parties hereto, to become
effective as promptly as possible; it will notify you, promptly after it shall
receive notice thereof, of the time when the Registration Statement or any
subsequent amendment to the Registration Statement has become effective or any
supplement to the Prospectus has been filed. If the Company omitted information
from the Registration Statement at the time it was originally declared effective
in reliance upon Rule 430A(a), the Company will provide evidence satisfactory to
you that the Prospectus contains such information and has been filed, within the
time period prescribed, with the Commission pursuant to subparagraph (1) or (4)
of Rule 424(b) of the Rules and Regulations or as part of a post-effective
amendment to such Registration Statement as originally declared effective which
is declared effective by the Commission. If for any reason the filing of the
final form of Prospectus is required under Rule 424(b)(3) of the Rules and
Regulations, it will provide evidence satisfactory to you that the Prospectus
contains such information and has been filed with the Commission within the time
period prescribed. The Company will notify you promptly of any request by the
Commission for the amending or supplementing of the Registration Statement or
the Prospectus or for additional information. Promptly upon your request, it
will prepare and file with the Commission any amendments or supplements to the
Registration Statement or Prospectus which, in the reasonable opinion of counsel
to the several Underwriters ("Underwriters' Counsel"), may be necessary or
advisable in connection with the distribution of the Shares by the Underwriters.
The Company will promptly prepare and file with the Commission, and promptly
notify you of the filing of, any amendments or supplements to the Registration
Statement or Prospectus which may be necessary to correct any statements or
omissions, if, at any time when a prospectus relating to the Shares is required
to be delivered under the Act, any event shall have occurred as a result of
which the Prospectus or any other prospectus relating to the Shares as then in
effect would include an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. In case any
Underwriter is required to deliver a prospectus after the nine-month period
referred to in
13.
<PAGE> 14
Section 10(a)(3) of the Act in connection with the sale of the Shares, the
Company will prepare promptly upon request, but at the expense of such
Underwriter, such amendment or amendments to the Registration Statement and such
prospectus or prospectuses as may be necessary to permit compliance with the
requirements of Section 10(a)(3) of the Act. The Company will file no amendment
or supplement to the Registration Statement or Prospectus that shall not
previously have been submitted to you a reasonable time prior to the proposed
filing thereof or to which you shall reasonably object in writing or which is
not in compliance with the Act and Rules and Regulations or the provisions of
this Agreement.
(b) The Company will advise you, promptly after it shall receive
notice or obtain knowledge thereof of the issuance of any stop order by the
Commission suspending the effectiveness of the Registration Statement or the use
of the Prospectus or of the initiation or threat of any proceeding for that
purpose; and it will promptly use its best efforts to prevent the issuance of
any such stop order or to obtain its withdrawal at the earliest possible moment
if such stop order should be issued.
(c) The Company will cooperate with you in endeavoring to qualify
the Shares for offering and sale under the securities laws of such jurisdictions
as you may designate and to continue such qualifications in effect for so long
as may be required for purposes of the distribution of the Shares, except that
the Company shall not be required in connection therewith or as a condition
thereof to qualify as a foreign corporation, or to execute a general consent to
service of process in any jurisdiction, or to make any undertaking with respect
to the conduct of its business. In each jurisdiction in which the Shares shall
have been qualified, the Company will make and file such statements, reports and
other documents in each year as are or may be reasonably required by the laws of
such jurisdictions so as to continue such qualifications in effect for so long a
period as you may reasonably request for distribution of the Shares, or as
otherwise may be required by law.
(d) The Company will furnish to you, as soon as available, copies of
the Registration Statement (three of which will be signed and which will include
all exhibits), each Preliminary Prospectus, the Prospectus and any amendments or
supplements to such documents, including any prospectus prepared to permit
compliance with Section 10(a)(3) of the Act, all in such quantities as you may
from time to time reasonably request.
(e) The Company will make generally available to its stockholders as
soon as practicable, but in any event not later than the 45th day following the
end of the fiscal quarter first occurring after the first anniversary of the
effective date of the Registration Statement, an earnings statement (which will
be in reasonable detail but need not be audited) complying with the provisions
of Section 11(a) of the Act and Rule 158 of the Rules and Regulations and
covering a twelve-month period beginning after the
14.
<PAGE> 15
effective date of the Registration Statement, and will advise you in writing
when such statement has been made available.
(f) During a period of five years after the date hereof, the
Company, as soon as practicable after the end of each respective period, will
furnish to its stockholders annual reports (including financial statements
audited by independent certified public accountants) and will furnish to its
stockholders unaudited quarterly reports of operations for each of the first
three quarters of the fiscal year, and will, upon request, furnish to you and
the other several Underwriters hereunder (i) concurrently with making such
reports available to its stockholders, statements of operations of the Company
for each of the first three quarters in the form made available to the Company's
stockholders; (ii) concurrently with the furnishing thereof to its stockholders,
a balance sheet of the Company as of the end of such fiscal year, together with
statements of operations, of stockholders' equity and of cash flow of the
Company for such fiscal year, accompanied by a copy of the certificate or report
thereon of nationally recognized independent certified public accountants; (iii)
concurrently with the furnishing of such reports to its stockholders, copies of
all reports (financial or other) mailed to stockholders; (iv) as soon as they
are available, copies of all reports and financial statements furnished to or
filed with the Commission, any securities exchange or the Nasdaq National Market
by the Company (except for documents for which confidential treatment is
requested); and (v) every material press release and every material news item or
article in respect of the Company or its affairs which was generally released to
stockholders or prepared for general release by the Company. During such
five-year period, if the Company shall have any active subsidiaries, the
foregoing financial statements shall be on a consolidated basis to the extent
that the accounts of the Company are consolidated with any subsidiaries, and
shall be accompanied by similar financial statements for any significant
subsidiary that is not so consolidated.
(g) Prior to or simultaneously with the execution and delivery of
this Agreement, the Company will obtain an agreement from each beneficial owner
of the Company's Common Stock listed on SCHEDULE B to this Agreement providing
that such person will not, commencing on the effective date of the Registration
Statement and continuing until the expiration of 180 days following the
effective date of the Registration Statement, without the prior written consent
of UBS Securities LLC: (i) offer, sell, contract to sell, pledge, grant any
option to sell or otherwise dispose of, directly or indirectly, any shares of
Common Stock or securities convertible into, or exchangeable for shares of
Common Stock, or warrants or other rights to purchase shares of Common Stock of
which such person is, or may in the future become, the beneficial owner (within
the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended);
or (ii) exercise any registration rights, whether held by such person as of the
date hereof or hereafter acquired, with respect to any shares of Common Stock.
15.
<PAGE> 16
(h) The Company shall not, during the 180 days following the
effective date of the Registration Statement, except with the prior written
consent of UBS Securities LLC, file a registration statement covering any of its
shares of capital stock, except that one or more registration statements on Form
S-8 may be filed at any time following the effective date of the Registration
Statement.
(i) The Company shall not, during the 180 days following the
effective date of the Registration Statement, except with the prior written
consent of UBS Securities LLC, issue, sell, offer or agree to sell, grant,
distribute or otherwise dispose of, directly or indirectly, any shares of Common
Stock, or any options, rights or warrants with respect to shares of Common
Stock, or any securities convertible into or exchangeable for Common Stock,
other than (i) the sale of Shares hereunder, (ii) the grant of options or the
issuance of shares of Common Stock under the Company's stock option plans or
stock purchase plan, as the case may be, existing on the date hereof, (iii) the
issuance of shares of Common Stock upon exercise of the currently outstanding
options or warrants described in the Registration Statement.
(j) The Company will apply the net proceeds from the sale of the
Shares being sold by it in the manner set forth under the caption "Use of
Proceeds" in the Prospectus.
(k) The Company will maintain a Transfer Agent and, if necessary
under the jurisdiction of incorporation of the Company, a Registrar (which may
be the same entity as the Transfer Agent) for its Common Stock.
(l) The Company will use its best efforts to maintain listing of its
shares of Common Stock on the Nasdaq National Market.
(m) The Company will in the future conduct its affairs in such a
manner so as to ensure that the Company will not be an "investment company"
within the meaning of the Investment Company Act of 1940, as amended, and the
rules and regulations thereunder.
(n) If at any time during the 180-day period after the Registration
Statement becomes effective, any rumor, publication or event relating to or
affecting the Company shall occur as a result of which in your reasonable
opinion the market price of the Common Stock has been or is likely to be
materially affected (regardless of whether such rumor, publication or event
necessitates a supplement to or amendment of the Prospectus), the Company will,
after written notice from you advising the Company to the effect set forth
above, consult with you in good faith regarding the necessity of disseminating a
press release or other public statement responding to or commenting on such
rumor, publication or event and, if the Company in its reasonable judgment
16.
<PAGE> 17
determines that such a press release or other public statement is appropriate,
the substance of any press release or other public statement.
7. EXPENSES.
The Company agrees with each Underwriter that:
(a) The Company will pay and bear all costs, fees and expenses in
connection with the preparation, printing and filing of the Registration
Statement (including financial statements, schedules and exhibits), Preliminary
Prospectuses and the Prospectus and any amendments or supplements thereto; the
reproduction of this Agreement, the Agreement Among Underwriters, the Selected
Dealer Agreement, the Preliminary Blue Sky Memoranda and any Supplemental Blue
Sky Memoranda and any instruments related to any of the foregoing; the issuance
and delivery of the Shares hereunder to the several Underwriters, including
transfer taxes, if any; the cost of all stock certificates representing the
Shares and Transfer Agents' and Registrars' fees; the fees and disbursements of
corporate and regulatory counsel for the Company; all fees and other charges of
the Company's independent public accountants; the cost of furnishing to the
several Underwriters copies of the Registration Statement (including appropriate
exhibits), Preliminary Prospectuses and the Prospectus, and any amendments or
supplements to any of the foregoing; NASD filing fees and expenses incident to
securing any required review and the cost of qualifying the Shares under the
laws of such jurisdictions within the United States as you may designate
(including filing fees and fees and disbursements of Underwriters' Counsel in
connection with such NASD filings and Blue Sky qualifications); listing
application fees of the Nasdaq National Market; and all other expenses directly
incurred by the Company in connection with the performance of its obligations
hereunder.
(b) If the transactions contemplated hereby are not consummated by
reason of any failure, refusal or inability on the part of the Company to
perform any agreement on its part to be performed hereunder or to fulfill any
condition of the Underwriters' obligations hereunder, the Company will, in
addition to paying the expenses described in clause (a) above, reimburse the
several Underwriters for all out-of-pocket expenses (including reasonable fees
and disbursements of Underwriters' counsel) incurred by the Underwriters in
reviewing the Registration Statement and the Prospectus and in otherwise
investigating, preparing to market or marketing the Shares. The Company will in
no event be liable to any of the several Underwriters for any loss of
anticipated profits from the sale by them of the Shares.
8. CONDITIONS OF UNDERWRITERS' OBLIGATIONS.
The obligations of the several Underwriters to purchase and pay for
the Shares, as provided herein, shall be subject to the accuracy, as of the date
hereof and the
17.
<PAGE> 18
Closing Date and any later Option Closing Date, as the case may be, of the
representations and warranties of the Company herein, to the performance by the
Company of its obligations hereunder and to the following additional conditions:
(a) The Registration Statement shall have become effective not later
than 7:00 a.m., California time, on the date following the date of this
Agreement, or such later time or date as shall be consented to in writing by
you. If the filing of the Prospectus, or any supplement thereto, is required
pursuant to Rule 424(b) and Rule 430A of the Rules and Regulations, the
Prospectus shall have been filed in the manner and within the time period
required by Rule 424(b) and Rule 430A of the Rules and Regulations. No stop
order suspending the effectiveness of the Registration Statement shall have been
issued and no proceeding for that purpose shall have been initiated or, to the
knowledge of the Company or any Underwriter, threatened by the Commission, and
any request of the Commission for additional information (to be included in the
Registration Statement or the Prospectus or otherwise) shall have been complied
with to the reasonable satisfaction of Underwriters' Counsel.
(b) All corporate proceedings and other legal matters in connection
with this Agreement, the form of Registration Statement and the Prospectus, and
the registration, authorization, issue, sale and delivery of the Shares shall
have been reasonably satisfactory to Underwriters' Counsel, and such counsel
shall have been furnished with such papers and information as they may
reasonably have requested to enable them to pass upon the matters referred to in
this subsection.
(c) You shall have received, at no cost to you, on the Closing Date
and on any later Option Closing Date, as the case may be, the opinions of (i)
Willkie Farr & Gallagher, corporate counsel to the Company (ii) Rutan & Tucker,
California counsel to the Company, (iii) ___________, Swiss counsel to the
Company, (iv) _____________, German counsel to the Company, (v) ____________,
United Kingdom counsel to the Company, and (vi) Keller and Heckman, regulatory
counsel to the Company, dated the Closing Date or such later Option Closing
Date, in the forms attached hereto on APPENDIX A, addressed to the Underwriters
and with reproduced copies of signed counterparts thereof for each of the
Representatives.
(d) You shall have received from Cooley Godward Castro Huddleson &
Tatum, Underwriters' Counsel, an opinion or opinions, dated the Closing Date or
on any later Option Closing Date, as the case may be, in form and substance
reasonably satisfactory to you, with respect to the sufficiency of all corporate
proceedings undertaken by the Company and other legal matters relating to this
Agreement and the transactions contemplated hereby as you may reasonably
require, and the Company shall have furnished to such counsel such documents as
it may have reasonably requested for the purpose of enabling it to pass upon
such matters.
18.
<PAGE> 19
(e) You shall have received on the Closing Date and on any later
Option Closing Date, as the case may be, a letter from Ernst & Young LLP
addressed to the Company and the Underwriters, dated the Closing Date or such
later Option Closing Date, as the case may be, confirming that it is an
independent certified public accountant with respect to the Company within the
meaning of the Act and the Rules and Regulations thereunder and based upon the
procedures described in its letter delivered to you concurrently with the
execution of this Agreement (herein called the "Original Letter"), but carried
out to a date not more than five days prior to the Closing Date or any such
later Option Closing Date, as the case may be, (i) confirming that the
statements and conclusions set forth in the Original Letter are accurate as of
the Closing Date or such later Option Closing Date, as the case may be; and (ii)
setting forth any revisions and additions to the statements and conclusions set
forth in the Original Letter that are necessary to reflect any changes in the
facts described in the Original Letter since the date of such letter, or to
reflect the availability of more recent financial statements, data or
information. The letter shall not disclose any change, or any development
involving a prospective change, in or affecting the business or properties of
the Company which, in your reasonable judgment, makes it impracticable or
inadvisable to proceed with the public offering of the Shares as contemplated by
the Prospectus. In addition, you shall have received from Ernst & Young LLP a
letter addressed to the Company and made available to you for the use of the
Underwriters stating that its review of the Company's system of internal
accounting controls, to the extent it deemed necessary in establishing the scope
of its latest examination of the Company's financial statements, did not
disclose any weaknesses in internal controls that it considered to be material
weaknesses. All such letters shall be in a form reasonably satisfactory to the
Representatives and their counsel.
(f) You shall have received on the Closing Date and on any later
Option Closing Date, as the case may be, a certificate of the President and the
Chief Financial Officer of the Company, dated the Closing Date or such later
date, to the effect that as of such date (and you shall be satisfied that as of
such date):
(i) The representations and warranties of the Company in this
Agreement are true and correct, as if made on and as of the Closing Date or any
later Option Closing Date, as the case may be; and the Company has complied with
all of the agreements and satisfied all of the conditions on its part to be
performed or satisfied at or prior to the Closing Date or any later Option
Closing Date, as the case may be;
(ii) The Registration Statement has become effective under the
Act and no stop order suspending the effectiveness of the Registration Statement
or preventing or suspending the use of the Prospectus has been issued, and no
proceedings for that purpose have been instituted or are pending or, to the best
of their knowledge, threatened under the Act;
19.
<PAGE> 20
(iii) They have carefully reviewed the Registration Statement
and the Prospectus and, when the Registration Statement became effective and at
all times subsequent thereto up to the delivery of such certificate, the
Registration Statement and the Prospectus and any amendments or supplements
thereto contained all statements and information required to be included therein
or necessary to make the statements therein not misleading and neither the
Registration Statement nor the Prospectus nor any amendment or supplement
thereto included any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading and, since the effective date of the Registration
Statement, there has occurred no event required to be set forth in an amended or
supplemented Prospectus that has not been so set forth; and
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus, there has
not been (A) any material adverse change in the properties or assets described
or referred to in the Registration Statement and the Prospectus or in the
condition (financial or otherwise), operations, business or prospects of the
Company and its Subsidiaries, (B) any transaction which is material to the
Company and its Subsidiaries, except transactions entered into in the ordinary
course of business, (C) any obligation, direct or contingent, incurred by the
Company or its Subsidiaries, which is material to the Company and its
Subsidiaries taken as a whole, (D) any change in the capital stock or
outstanding indebtedness of the Company or its Subsidiaries which is material to
the Company and its Subsidiaries taken as a whole, other than as contemplated by
the Prospectus, or (E) any dividend or distribution of any kind declared, paid
or made on the capital stock of the Company.
(g) The Company shall have furnished to you such further
certificates and documents as you shall reasonably request as to the accuracy of
the representations and warranties of the Company herein, as to the performance
by the Company of its obligations hereunder and as to the other conditions
concurrent and precedent to the obligations of the Underwriters hereunder.
(h) The Firm Shares and the Option Shares, if any, shall have been
approved for designation upon notice of issuance on the Nasdaq National Market.
All such opinions, certificates, letters and documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
to Underwriters' Counsel. The Company will furnish you with such number of
conformed copies of such opinions, certificates, letters and documents as you
shall reasonably request.
9. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person (including each partner or officer thereof) who
controls any
20.
<PAGE> 21
Underwriter within the meaning of Section 15 of the Act from and against any and
all losses, claims, damages or liabilities, joint or several, to which such
indemnified parties or any of them may become subject under the Act, the
Exchange Act, or the common law or otherwise, and the Company agrees to
reimburse each such Underwriter and controlling person for any legal or other
out-of-pocket expenses (including, except as otherwise hereinafter provided,
reasonable fees and disbursements of counsel) incurred by the respective
indemnified parties in connection with defending against any such losses,
claims, damages or liabilities or in connection with any investigation or
inquiry of, or other proceeding which may be brought against, the respective
indemnified parties, in each case arising out of or based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement (including the Prospectus as part thereof) or any
post-effective amendment thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, or (ii) any untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus or
the Prospectus (as amended or as supplemented if the Company shall have filed
with the Commission any amendment thereof or supplement thereto) or the omission
or alleged omission to state therein a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that (1) the indemnity agreement of the
Company contained in this paragraph (a) shall not apply to any such losses,
claims, damages, liabilities or expenses if such statement or omission is
contained in the last paragraph on the front cover page of the Prospectus, the
stabilization language on the inside front cover page of the Prospectus or the
information contained in the first (including the table), third and seventh
paragraphs of the section of the Prospectus entitled "Underwriting", and (2) the
indemnity agreement contained in this paragraph (a) with respect to any
Preliminary Prospectus shall not inure to the benefit of any Underwriter from
whom the person asserting any such losses, claims, damages, liabilities or
expenses purchased the Shares which is the subject thereof (or to the benefit of
any person controlling such Underwriter) if at or prior to the written
confirmation of the sale of such Shares a copy of the Prospectus (or the
Prospectus as amended or supplemented) was not sent or delivered to such person
and the untrue statement or omission of a material fact contained in such
Preliminary Prospectus was corrected in the Prospectus (or the Prospectus as
amended or supplemented) unless the failure to deliver such Prospectus is the
result of noncompliance by the Company with paragraph (a) of Section 6 hereof.
The indemnity agreement of the Company contained in this paragraph (a) and the
representations and warranties of the Company contained in Section 2 hereof
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any indemnified party and shall survive
the delivery of any payment for the Shares.
(b) Each Underwriter severally agrees to indemnify and hold harmless
the Company, each of its executive officers, each of its directors, each other
Underwriter
21.
<PAGE> 22
and each person (including each partner or officer thereof) who controls the
Company or any such other Underwriter within the meaning of Section 15 of the
Act, from and against any and all losses, claims, damages or liabilities, joint
or several, to which such indemnified parties or any of them may become subject
under the Act, the Exchange Act, or the common law or otherwise and to reimburse
each of them for any legal or other expenses including, except as otherwise
hereinafter provided, reasonable fees and disbursements of counsel) incurred by
the respective indemnified parties in connection with defending against any such
losses, claims, damages or liabilities or in connection with any investigation
or inquiry of, or other proceeding which may be brought against, the respective
indemnified parties, in each case arising out of or based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement (including the Prospectus as part thereof) or any
post-effective amendment thereto or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading or (ii) any untrue statement or alleged untrue
statement of a material fact contained in any Preliminary Prospectus or the
Prospectus (as amended or as supplemented if the Company shall have filed with
the Commission any amendment thereof or supplement thereto) or the omission or
alleged omission to state therein a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, if such statement or omission is contained in the last
paragraph on the front cover page of the Prospectus, the stabilization language
on the inside front cover page of the Prospectus or the information contained in
the first (including the table), third and seventh paragraphs of the section of
the Prospectus entitled "Underwriting." The indemnity agreement of each
Underwriter contained in this paragraph (b) shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of any
indemnified party and shall survive the delivery of and payment for the Shares.
(c) Each party indemnified under the provision of paragraphs (a) and
(b) of this Section 9 agrees that, upon the service of a summons or other
initial legal process upon it in any action or suit instituted against it or
upon its receipt of written notification of the commencement of any
investigation or inquiry of, or proceeding against it, in respect of which
indemnity may be sought on account of any indemnity agreement contained in such
paragraphs, it will promptly give written notice (a "Notice") of such service or
notification to the party or parties from whom indemnification may be sought
hereunder. No indemnification provided for in such paragraphs shall be available
to any party who shall fail so to give the Notice if the party to whom such
Notice was not given was unaware of the action, suit, investigation, inquiry or
proceeding to which the Notice would have related and was prejudiced by the
failure to give the Notice, but the omission so to notify such indemnifying
party or parties of any such service or notification shall not relieve such
indemnifying party or parties from any liability which it or they may have to
the indemnified party for contribution or otherwise than on account of such
22.
<PAGE> 23
indemnity agreement. Any indemnifying party shall be entitled at its own expense
to participate in the defense of any action, suit or proceeding against, or
investigation or inquiry of, an indemnified party. Any indemnifying party shall
be entitled, if it so elects within a reasonable time after receipt of the
Notice by giving written notice (the "Notice of Defense") to the indemnified
party, to assume (alone or in conjunction with any other indemnifying party or
parties) the entire defense of such action, suit, investigation, inquiry or
proceeding, in which event such defense shall be conducted, at the expense of
the indemnifying party or parties, by counsel chosen by such indemnifying party
or parties and reasonably satisfactory to the indemnified party or parties;
provided, however, that (i) if the indemnified party or parties reasonably
determine that there may be a conflict between the positions of the indemnifying
party or parties and of the indemnified party or parties in conducting the
defense of such action, suit, investigation, inquiry or proceeding or that there
may be legal defenses available to such indemnified party or parties different
from or in addition to those available to the indemnifying party or parties,
then counsel for the indemnified party or parties shall be entitled to conduct
the defense to the extent reasonably determined by such counsel to be necessary
to protect the interests of the indemnified party or parties and (ii) in any
event, the indemnified party or parties shall be entitled, at its or their own
expense, to have counsel chosen by such indemnified party or parties participate
in, but not conduct, the defense. It is understood that the indemnifying parties
shall not, in respect of the legal defenses of any indemnified party in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for (a) the fees and expenses of more than one separate firm (in
addition to any local counsel) for all of the Underwriters and each person, if
any, who controls any Underwriter within the meaning of Section 15 of the Act,
and (b) the fees and expenses of more than one separate firm (in addition to any
local counsel) for the Company, its directors, its officers who sign the
Registration Statement and each person, if any, who controls the Company within
the meaning of Section 15 of the Act. If, within a reasonable time after receipt
of the Notice, an indemnifying party gives a Notice of Defense and the counsel
chosen by the indemnifying party or parties is reasonably satisfactory to the
indemnified party or parties, the indemnifying party or parties will not be
liable under paragraphs (a) through (c) of this Section 9 for any legal or other
expenses subsequently incurred by the indemnified party or parties in connection
with the defense of the action, suit, investigation, inquiry or proceeding,
except that (A) the indemnifying party or parties shall bear the legal and other
expenses incurred in connection with the conduct of the defense as referred to
in clause (i) of the proviso to the preceding sentence and (B) the indemnifying
party or parties shall bear such other expenses as it or they have authorized to
be incurred by the indemnified party or parties. If, within a reasonable time
after receipt of the Notice, no Notice of Defense has been given, the
indemnifying party or parties shall be responsible for any legal or other
expenses incurred by the indemnified party or parties in connection with the
defense of the action, suit, investigation, inquiry or proceeding. The
indemnifying party or parties shall not be liable for any settlement of
23.
<PAGE> 24
any proceeding effected without its or their written consent, provided such
consent has not been unreasonably withheld.
(d) If the indemnification provided for in this Section 9 is
unavailable or insufficient to hold harmless an indemnified party under
paragraph (a) or (b) of this Section 9, then each indemnifying party shall, in
lieu of indemnifying such indemnified party, contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities referred to in paragraph (a) or (b) of this Section 9 (i) in such
proportion as is appropriate to reflect the relative benefits received by each
indemnifying party from the offering of the Shares or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of each indemnifying party in
connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities, or actions in respect thereof, as well as any
other relevant equitable considerations. The relative benefits received by the
Company, on the one hand, and the Underwriters, on the other, shall be deemed to
be in the same respective proportions as the total net proceeds from the
offering of the Shares received by the Company and the total underwriting
discount received by the Underwriters, as set forth in the table on the cover
page of the Prospectus, bear to the aggregate public offering price of the
Shares. Relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by each indemnifying party and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement or omission.
The parties agree that it would not be just and equitable if
contributions pursuant to this paragraph (d) were to be determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to in the first sentence of this paragraph
(d). The amount paid by an indemnified party as a result of the losses, claims,
damages or liabilities, or actions in respect thereof, referred to in the first
sentence of this paragraph (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigation, preparation to defend or defense against any action or claim
which is the subject of this paragraph (d). Notwithstanding the provisions of
this paragraph (d), no Underwriter shall be required to contribute any amount in
excess of the underwriting discount applicable to the Shares purchased by such
Underwriter. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations in this paragraph (d) to contribute are several in
proportion to their respective underwriting obligations and not joint.
24.
<PAGE> 25
Each party entitled to contribution agrees that upon the service of
a summons or other initial legal process upon it in any action instituted
against it in respect of which contribution may be sought, it will promptly give
written notice of such service to the party or parties from whom contribution
may be sought, but the omission so to notify such party or parties of any such
service shall not relieve the party from whom contribution may be sought from
any obligation it may have hereunder or otherwise (except as specifically
provided in paragraph (c) of this Section 9).
(e) The Company will not, without the prior written consent of each
Underwriter, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification may be sought hereunder (whether or not such Underwriter or any
person who controls such Underwriter within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act is a party to such claim, action, suit or
proceeding) unless such settlement, compromise or consent includes an
unconditional release of such Underwriter and each such controlling person from
all liability arising out of such claim, action, suit or proceeding.
(f) The parties to this Agreement hereby acknowledge that they are
sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof, including without limitation the
provisions of this Section 9, and are fully informed regarding said provisions.
They further acknowledge that the provisions of this Section 9 fairly allocate
the risks in light of the ability of the parties to investigate the Company and
its business in order to assure that adequate disclosure is made in the
Registration Statement and Prospectus as required by the Act and the Exchange
Act.
10. TERMINATION. This Agreement may be terminated by you at any time on
or prior to the Closing Date or on or prior to any later Option Closing Date, as
the case may be, (i) if the Company shall have failed, refused or been unable,
at or prior to the Closing Date, or on or prior to any later Option Closing
Date, as the case may be, to perform any agreement on its part to be performed,
or because any other condition of the Underwriters' obligations hereunder
required to be fulfilled by the Company is not fulfilled, or (ii) if trading on
the New York Stock Exchange, the American Stock Exchange or the Nasdaq National
Market shall have been suspended, or minimum or maximum prices for trading shall
have been fixed, or maximum ranges for prices for securities shall have been
required on the New York Stock Exchange, the American Stock Exchange or the
Nasdaq National Market, by such trading exchanges or by order of the Commission
or any other governmental authority having jurisdiction, or if a banking
moratorium shall have been declared by federal or New York authorities, or (iii)
if the Company shall have sustained a loss by strike, fire, flood, accident or
other calamity of such character as to have a Material Adverse Effect regardless
of whether or not such loss shall have been insured, or (iv) if there shall have
been a material adverse change in the general political or economic
25.
<PAGE> 26
conditions or financial markets in the United States as in the reasonable
judgment of the Representatives makes it inadvisable or impracticable to proceed
with the offering, sale and delivery of the Shares, or (v) if there shall have
occurred an outbreak or escalation of hostilities between the United States and
any foreign power or of any other insurrection or armed conflict involving the
United States or other national or international calamity, hostilities or crisis
or the declaration by the United States of a national emergency which, in the
reasonable judgment of the Representatives, adversely affects the marketability
of the Shares, or (vi) if since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there shall have
occurred any material adverse change or any development involving a prospective
material adverse change in or affecting the condition, financial or otherwise,
of the Company or the business affairs, management, or business prospects of the
Company, whether or not arising in the ordinary course of business, or (vii) if
any foreign, federal or state statute, regulation, rule or order of any court or
other governmental authority shall have been enacted, published, decreed or
otherwise promulgated which in the reasonable judgment of the Representatives
materially and adversely affects or will materially and adversely affect the
business or operations of the Company, or trading in the Common Stock shall have
been suspended, or (viii) there shall have occurred a material adverse decline
in the value of securities generally on the New York Stock Exchange, the
American Stock Exchange or the Nasdaq National Market or (ix) action shall be
taken by any foreign, federal, state or local government or agency in respect of
its monetary or fiscal affairs which, in the reasonable judgment of the
Representatives, has a material adverse effect on the securities markets in the
United States. If this Agreement shall be terminated in accordance with this
Section 10, there shall be no liability of the Company to the Underwriters and
no liability of the Underwriters to the Company; provided, however, that in the
event of any such termination the Company agrees to indemnify and hold harmless
the Underwriters from all costs or expenses incident to the performance of the
obligations of the Company under this Agreement, including all costs and
expenses referred to in Section 7.
If you elect to terminate this Agreement as provided in this Section
10, the Company shall be notified promptly by you by telephone, facsimile or
telegram, confirmed by letter.
11. REIMBURSEMENT OF CERTAIN EXPENSES.
(a) In addition to its other obligations under Section 9 of this
Agreement, the Company hereby agrees to reimburse on a quarterly basis the
Underwriters for all reasonable legal and other expenses incurred in connection
with investigating or defending any claim, action, investigation, inquiry or
other proceeding arising out of or based upon any statement or omission, or any
alleged statement or omission, described in paragraph (a) of Section 9 of this
Agreement, notwithstanding the absence of a judicial determination as to the
propriety and enforceability of the obligations under this Section 11 and the
possibility that such payments might later be
26.
<PAGE> 27
held to be improper; provided, however, that (i) to the extent any such payment
is ultimately held to be improper, the persons receiving such payments shall
promptly refund them and (ii) such persons shall provide to the Company, upon
request, reasonable assurances of their ability to effect any refund, when and
if due.
(b) In addition to their other obligations under Section 9 of this
Agreement, the Underwriters hereby agree to reimburse on a quarterly basis the
Company (and each of its executive officers and directors, as applicable) for
all reasonable legal and other expenses incurred in connection with
investigating or defending any claim, action, investigation, inquiry or other
proceeding arising out of or based upon any statement or omission, or any
alleged statement or omission, described in paragraph (b) of Section 9 of this
Agreement, notwithstanding the absence of a judicial determination as to the
propriety and enforceability of the obligations under this Section 11 and the
possibility that such payments might later be held to be improper; provided,
however, that (i) to the extent any such payment is ultimately held to be
improper, the Company shall promptly refund it and (ii) the Company, its
officers and directors shall provide to the Underwriters, upon request,
reasonable assurances of its ability to effect any refund, when and if due.
12. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall
inure to the benefit of the Company and the several Underwriters and, with
respect to the provisions of Section 9 hereof, the several parties (in addition
to the Company and the several Underwriters) indemnified under the provisions of
said Section 9, and their respective personal representatives, successors and
assigns. Nothing in this Agreement is intended or shall be construed to give to
any other person, firm or corporation any legal or equitable remedy or claim
under or in respect of this Agreement or any provision herein contained. The
term "successors and assigns" as herein used shall not include any purchaser, as
such purchaser, of any of the Shares from any of the several Underwriters.
13. NOTICES. Except as otherwise provided herein, all communications
hereunder shall be in writing or by telegraph and, if to the Underwriters, shall
be mailed, telegraphed or delivered to UBS Securities LLC, 299 Park Avenue, New
York, NY 10171, Attention: Mr. Robert C. Daum; and if to the Company, shall be
mailed, telegraphed or delivered to it at its office, 10394 Pacific Center
Court, San Diego, CA 92121, Attention: Stelios B. Papadopoulos. All notices
given by telegraph shall be promptly confirmed by letter.
14. MISCELLANEOUS. The reimbursement, indemnification and contribution
agreements contained in this Agreement and the representations, warranties and
covenants in this Agreement shall remain in full force and effect regardless of
(i) any investigation made by or on behalf of any Underwriter or controlling
person thereof, or by or on behalf of the Company or its respective directors of
officers, and (ii) delivery of and payment for the Shares under this Agreement.
27.
<PAGE> 28
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.
You will act as Representatives of the several Underwriters in all
dealings with the Company under this Agreement, and any action under or in
respect of this Agreement taken by you jointly or by UBS Securities LLC, as
Representatives, will be binding upon all of the Underwriters.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of New York.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
28.
<PAGE> 29
Please sign and return to the Company the enclosed duplicates of this
letter, whereupon this letter will become a binding agreement among the Company
and the several Underwriters in accordance with its terms.
Very truly yours,
CN BIOSCIENCES, INC.
By:______________________________
Stelios B. Papadopoulos
Chairman of the Board and
Chief Executive Officer
The foregoing Agreement
is hereby confirmed and
accepted as of the date
first above written.
UBS SECURITIES LLC
DAIN BOSWORTH INCORPORATED
By: UBS SECURITIES LLC
By: ______________________________
Title: ______________________________
Acting on behalf of the several
Underwriters, including themselves,
named on SCHEDULE A hereto.
29.
<PAGE> 30
SCHEDULE A
UNDERWRITERS
NUMBER OF SHARES
UNDERWRITERS TO BE PURCHASED
UBS Securities LLC............................
Dain Bosworth Incorporated....................
Total
============
<PAGE> 31
SCHEDULE B
LOCK-UP AGREEMENTS
<PAGE> 32
APPENDIX A
1. OPINION OF WILLKIE FARR & GALLAGHER
[To the extent applicable to the Company's Subsidiaries, conforming opinions
shall be provided by Rutan & Tucker, California counsel to the Company,
___________, Swiss counsel to the Company, _____________, German counsel to the
Company, and ____________, United Kingdom counsel to the Company.]
Willkie Farr & Gallagher shall opine to the effect that :
(a) The Company has been duly organized and is validly
existing as a corporation, and is in good standing under, the laws of the State
of Delaware, and each of the Company's Subsidiaries has been duly organized, is
validly existing and is in good standing under the laws of the jurisdiction in
which it operates;
(b) The Company and each of its Subsidiarties has the
corporate power and authority to own, lease and operate its properties and to
conduct its business as described in the Prospectus; the Company and each of its
Subsidiaries is duly qualified to do business as a foreign corporation and is in
good standing in all jurisdictions in which the ownership or leasing of its
properties or the conduct of its business requires such qualification, except
where the failure to so qualify would not have a Material Adverse Effect;
(c) Except for Calbiochem-Novabiochem Corporation,
Calbiochem-Novabiochem AG, Clinalfa AG, Calbiochem-Novabiochem GmbH and
Calbiochem-Novabiochem (UK) Limited, the Company does not own or control,
directly or indirectly, any "significant subsidiary" (as defined in the Rules
and Regulations). All of the outstanding shares of capital stock (or foreign
equivalents) of each of the Company's Subsidiaries have been duly authorized and
validly issued, are fully paid and nonassessable and, except for nominal
shareholdings by directors to meet director qualifying share ownership
requirements of foreign jurisdictions, are owned directly or indirectly by the
Company, in each case subject to no security interest, other encumbrance or
adverse claim other than the SVB liens;
(d) The authorized, issued and outstanding capital stock of
the Company is as set forth in the Registration Statement and the Prospectus
under the caption "Capitalization" as of the dates stated therein; the
authorized shares of the Company's Common Stock have been duly authorized; the
issued and outstanding shares of the Company's capital stock have been duly
authorized and validly issued and are fully paid and nonassessable, and to our
knowledge have not been issued in violation of any
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<PAGE> 33
preemptive right, co-sale right, registration right, right of first refusal or
other similar right;
(e) The Shares to be issued by the Company pursuant to this
Agreement have been duly authorized and will be, upon issuance and delivery
against payment therefor in accordance with the terms hereof, validly issued,
fully paid and nonassessable, and, to our knowledge, the stockholders of the
Company do not have any preemptive right, co-sale right, registration right,
right of first refusal or other similar right, which rights have not previously
been waived, in connection with the purchase or sale of any of the Shares;
(f) The Company has full corporate power and authority to
enter into this Agreement and to issue, sell and deliver to the Underwriters the
Firm Shares or the Option Shares, as the case may be, to be issued and sold by
it hereunder;
(g) This Agreement has been duly authorized by all necessary
corporate action on the part of the Company and has been duly executed and
delivered by the Company;
(h) The Registration Statement has become effective under the
Act and, to such counsel's knowledge, no stop order suspending the effectiveness
of the Registration Statement or suspending or preventing the use of the
Prospectus has been issued and no proceedings for that purpose have been
instituted or are pending or threatened under the Act; any required filing of
the Prospectus and any supplement thereto pursuant to Rule 424(b) of the Rules
and Regulations has been made in the manner and within the time period required
by such Rule 424(b);
(i) The Registration Statement, all Preliminary Prospectuses,
the Prospectus, and each amendment or supplement thereto (other than the
financial statements, and other financial and statistical data derived
therefrom, as to which such counsel need express no opinion), comply as to form
in all material respects with the requirements of the Act and the applicable
Rules and Regulations, and, to our knowledge, there are no agreements,
contracts, leases or documents of a character required to be described in, or
filed as an exhibit to, the Registration Statement which are not described or
filed as required by the Act and the applicable Rules and Regulations;
(j) The terms and provisions of the capital stock of the
Company conform to the description thereof contained in the Registration
Statement and the Prospectus, and the information in the Prospectus under the
caption "Description of Capital Stock," to the extent that it constitutes
matters of law or legal conclusions, has been reviewed by such counsel and is
correct in all material respects, and the form of
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<PAGE> 34
certificate evidencing the Common Stock complies with the applicable provisions
of Delaware law;
(k) The statements in the Registration Statement and the
Prospectus summarizing statutes, rules and regulations, including the Delaware
General Corporation Law and the description of the certificate of incorporation
and bylaws, are accurate and fairly and correctly present the information
required to be presented by the Act or the Rules and Regulations in all material
respects; and such counsel does not know of any statutes, rules or regulations
required to be described in the Registration Statement or the Prospectus that
are not described or referred to therein as required;
(l) The statements under the captions "Risk Factors - Shares
Eligible for Future Sale", "Management - Employment Agreements," "Management -
Stock Option Plans," "Management - Compensation Committee Interlocks and Insider
Participation" and "Certain Transactions" in the Prospectus, to the extent such
statements constitute a summary of documents referred to therein or matters of
law, are accurate summaries and fairly and correctly present, in all material
respects, the information called for with respect to such documents and matters;
provided that such counsel shall be entitled to rely on representations of the
Company with respect to certain factual matters contained in such statements,
and provided further that such counsel shall state that nothing has come to the
attention of such counsel which leads them to believe that such representations
are not true and correct in all material respects;
(m) The execution, delivery and performance of this Agreement
and the consummation of the transactions therein contemplated do not and will
not (a) conflict with or result in a breach of any of the terms or provisions
of, or constitute a default under, the certificate of incorporation or bylaws of
the Company or any of its Subsidiaries, any agreement or document filed as an
exhibit to the Registration Statement, or any statute, rule or regulation
applicable to the Company or any of its Subsidiaries (except that no opinion
need to be expressed with respect to compliance with federal and state
securities laws) or (b) to the knowledge of such counsel, result in the creation
or imposition of any lien or encumbrance upon any of the assets of the Company
or any of its Subsidiaries pursuant to the terms or provisions of, or result in
a breach or violation of any of the terms or provisions of, or constitute a
default or result in the acceleration of any obligation under, any indenture,
mortgage, deed of trust, loan agreement, bond, debenture, note agreement, other
evidence of indebtedness, lease, contract or other agreement or instrument to
which the Company or any of its Subsidiaries is a party or by which its property
or any of its Subsidiaries' property is bound or (c) to the knowledge of such
counsel, conflict with or result in a violation or breach of, or constitute a
default
A-3
<PAGE> 35
under, any applicable license, authorization, approval, permit, judgment,
franchise, order, writ or decree of any court or governmental agency or body;
(n) The Company and each of its Subsidiaries has the corporate
power and authority to own or lease all of the assets owned or leased by it and
to conduct its business, in each case as described in the Registration Statement
and the Prospectus, except where failure to have such power and authority would
not have a Material Adverse Effect, and, to the knowledge of such counsel, has
all licenses, permits, consents, orders, approvals and authorizations of any
federal or state government authority that are necessary to conduct its business
as described in the Registration Statement and the Prospectus, except where
failure to have such licenses, permits, consents, orders, approvals and
authorizations would not have a Material Adverse Effect;
(o) No authorization, approval, consent, order, designation or
declaration of or filing by or with any governmental authority or agency is
necessary in connection with the execution and delivery of this Agreement by the
Company and the consummation of the transactions therein contemplated, except
such as may have been obtained under the Act and the Rules and Regulations or
such as may be required under Canadian securities, state securities or Blue Sky
laws or by the bylaws and rules of the NASD in connection with the purchase and
distribution of the Shares by the Underwriters;
(p) Neither the Company nor any of its Subsidiaries is in
violation of its certificate of incorporation, bylaws or other charter
documents, as applicable, and to such counsel's knowledge, neither the Company
nor any of its Subsidiaries is in breach of or default with respect to any
provision of any agreement, mortgage, deed of trust, lease, franchise, license,
indenture, permit or other instrument by which it or any of its properties may
be bound or affected, except where such default would not have a Material
Adverse Effect and, to the best of such counsel's knowledge, the Company and
each of its Subsidiaries is in compliance with all laws, rules, regulations,
judgments, decrees, orders and statutes of any court or jurisdiction to which it
is subject, except where noncompliance would not have a Material Adverse Effect;
(q) To such counsel's knowledge, there are no pending or
threatened actions, suits, claims, proceedings or investigations that, if
successful, would have a Material Adverse Effect or would limit, revoke, cancel,
suspend, or cause not to be renewed any existing license, certificate,
registration, approval or permit from any state, federal or regulatory authority
that is material to the conduct of the business of the Company and its
Subsidiaries as presently conducted, or that is of a character otherwise
required to be disclosed in the Registration Statement or the Prospectus under
the Act or the applicable Rules and Regulations;
A-4
<PAGE> 36
(r) To such counsel's knowledge, except as set forth in the
Registration Statement and Prospectus, no holders of shares of Common Stock or
other securities of the Company have registration rights with respect to
securities of the Company and, except as set forth in the Registration Statement
and Prospectus, all holders of securities of the Company having registration
rights with respect to shares of Common Stock or other securities have, with
respect to the offering contemplated hereby, waived such rights or such rights
have otherwise been waived.
(s) No transfer taxes are required to be paid in connection
with the sale or delivery to the Underwriters of the Firm Shares or the Option
Shares;
(t) The Company will not, upon consummation of the
transactions contemplated by this Agreement, be an "investment company," or a
"promoter" or "principal underwriter" for, a "registered investment company," as
such terms are defined in the Investment Company Act of 1940, as amended;
In addition, such counsel shall include a statement to the effect that
such counsel has participated in conferences with officials and other
representatives of the Company, the Representatives, Underwriters' Counsel and
the independent public accountants of the Company, at which conferences the
contents of the Registration Statement and the Prospectus and related matters
were discussed, and although they have not verified the accuracy or completeness
of the statements contained in the Registration Statement or the Prospectus,
nothing has come to the attention of such counsel which caused them to believe
that, at the time the Registration Statement became effective, the Registration
Statement (other than the financial statements, and other financial and
statistical data derived therefrom, as to which such counsel need express no
opinion) contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or at the Closing Date or any later Option Closing Date,
as the case may be, the Registration Statement or the Prospectus (except as
aforesaid) contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
Such counsel need express no opinion relating to the statements in the
Registration Statement and Prospectus as to federal, state and foreign
regulatory matters including statements under the captions "Risk Factors --
Compliance with Government Regulations": and "Business -- Government
Regulation."
Counsel rendering the foregoing may rely (i) as to questions of law not
involving the laws of the United States or the General Corporation Law of the
State of Delaware
A-5
<PAGE> 37
upon opinions of local counsel, and (ii) as to questions of fact upon
representations or certificates of officers of the Company and of governmental
officials, as the case may be, in which case its opinion is to state that it is
so doing and that it has no actual knowledge of any material misstatement or
inaccuracy in such opinions, representations or certificates, and that they
believe that they and the Underwriters are justified in relying on such opinions
or certificates. Copies of any opinion, representation or certificate so relied
upon shall be delivered to you, as Representatives of the Underwriters, and to
Underwriters' Counsel.
A-6
<PAGE> 38
2. OPINION OF KELLER AND HECKMAN, FDA COUNSEL.
[TO COME]
A-7
<PAGE> 1
EXHIBIT 3(a)
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CALBIOCHEM-NOVABIOCHEM INTERNATIONAL, INC.
CALBIOCHEM-NOVABIOCHEM INTERNATIONAL, INC., a corporation
organized and existing under, and by virtue of, the General Corporation Law of
the State of Delaware, was incorporated by the filing of an original Certificate
of Incorporation with the Office of the Secretary of State of Delaware on March
11, 1992, which certificate was amended and restated by the filing of an Amended
and Restated Certificate of Incorporation on February 22, 1995 (collectively,
the "Amended Certificate of Incorporation").
This Amended and Restated Certificate of Incorporation
restates, integrates and amends the Amended Certificate of Incorporation and was
duly adopted pursuant to Sections 228, 242 and 245 of the General Corporation
Law of the State of Delaware.
ARTICLE I
The name of the corporation (the "Corporation") is:
CN BIOSCIENCES, INC.
ARTICLE II
The address of its registered office in the State of Delaware
is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington,
County of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
ARTICLE III
The nature of the business and purposes to be conducted or
promoted by the Corporation is to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of the State of
Delaware.
<PAGE> 2
ARTICLE IV
The total authorized capital stock of the Corporation shall be
36,005,000 shares consisting of 30,000,000 shares of Common Stock, par value
$.01 per share ("Voting Common Stock"), 800,000 shares of Class A Common Stock,
par value $.01 per share ("Class A Common Stock"), 5,000,000 shares of Preferred
Stock, par value $.01 per share ("Preferred Stock"), 5,000 shares of Series A
Convertible Preferred Stock, par value $1.00 per share ("Series A Preferred
Stock"), and 200,000 shares of Series B Preferred Stock, par value $1.00 per
share ("Series B Preferred Stock").
The relative powers, preferences and rights of, and the
qualifications, limitations and restrictions granted to and imposed upon, the
Voting Common Stock and the Class A Common Stock (collectively, the "Common
Stock"), the Preferred Stock, the Series A Preferred Stock and the Series B
Preferred Stock are as follows:
SECTION A: SERIES A PREFERRED STOCK AND SERIES B PREFERRED STOCK
(I) General Provisions.
The following provisions shall be applicable to all shares of
Series A Preferred Stock and Series B Preferred Stock regardless of series
designation:
(a) Preference. So long as any shares of Series A Preferred
Stock or Series B Preferred Stock remain outstanding, in no event shall any
dividend whatsoever, whether in cash or other property (other than shares of
Common Stock), be paid or declared or any distribution be made on the Common
Stock, nor shall any shares of the Common Stock be purchased, retired or
otherwise acquired for a consideration by the Corporation (except shares of
Class A Common Stock converted into shares of Voting Common Stock and shares of
Common Stock repurchased through the operation of vesting provisions of employee
incentive programs or agreements adopted by the Board of Directors) (i) unless
the full dividends of the Series A Preferred Stock and Series B Preferred Stock
for the then current fiscal year shall have been paid or declared and a sum set
apart sufficient for the payment thereof; and (ii) unless, if at any time the
Corporation is obligated to retire or redeem shares of the Series A Preferred
Stock or Series B Preferred Stock, all arrears, if any, in respect of the
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retirement of the Series A Preferred Stock or Series B Preferred Stock shall
have been made good. Subject to the foregoing provisions and not otherwise, such
dividends (payable in cash, stock or otherwise), as may be determined by the
Board of Directors, may be declared and paid on the Common Stock from time to
time out of the remaining funds of the Corporation legally available therefor,
and the Series A Preferred Stock and the Series B Preferred Stock shall not be
entitled to participate in any such dividend, whether payable in cash, stock or
otherwise.
(b) Redemption Procedure. In case of redemption of only part
of the shares of the Series A Preferred Stock or the Series B Preferred Stock at
any time outstanding, the Corporation shall redeem the shares pro rata among all
of the holders of such series (as closely pro rata as reasonably practical
without the creation of fractional share interests).
Notice of every redemption provided for in this Section A of
Article IV shall be given by mailing the same to every holder of record, any of
whose shares are then to be redeemed, not less than 15 nor more than 30 days
prior to the date fixed as the date of the redemption thereof, at the respective
addresses of such holders as the same shall appear on the stock transfer books
of the Corporation. The notice shall state that the shares specified in such
notice will be redeemed by the Corporation at the redemption price and on the
date specified in such notice upon the surrender for cancellation, at the places
designated in such notice, of the certificates representing the shares so to be
redeemed, properly endorsed in blank for transfer, or accompanied by proper
instruments of assignment and transfer in blank, bearing any necessary transfer
tax stamps thereto affixed and cancelled, or accompanied by cash or a certified
check in the amount of any stock transfer tax applicable to such transaction. On
and after the date specified in the notice described above, each holder of
shares called for redemption, upon presentation and surrender in accordance with
such notice of the certificates for shares held by such holder and called for
redemption, shall be entitled to receive therefor the applicable redemption
price. If the Corporation shall give notice of redemption as aforesaid (and
unless the Corporation shall fail to pay the redemption price of shares
presented for redemption in accordance with such notice), all shares called for
redemption shall be deemed to have been redeemed on the date specified in such
notice whether or not the certificates for such shares be surrendered for
redemption and cancellation, and such shares so called for redemption shall
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from and after such date cease to represent any interest whatever in the
Corporation or its property, and the holders thereof shall have no rights other
than the right to receive such redemption price but without any interest thereon
from or after such date.
(c) Cancellation of Redeemed Shares. All shares of the Series
A Preferred Stock or the Series B Preferred Stock purchased or redeemed by the
Corporation shall be forthwith retired and cancelled and shall not be reissued,
nor shall any other stock be issued in place thereof, but the Corporation may,
nevertheless, from time to time thereafter increase its capital stock in the
manner and to the extent permitted by law and by the Certificate of
Incorporation of the Corporation.
(d) Rights on Liquidation. (i) In the event of any
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, the holders of shares of Series A Preferred Stock and Series B
Preferred Stock then outstanding shall be entitled to receive, prior and in
preference to any distribution of any of the assets of the Corporation to the
holders of the Common Stock by reason of their ownership thereof, full payment
of any dividends declared and unpaid for the then current fiscal year on such
series and an amount equal to $100.00 per share for each of the shares of such
Series A Preferred Stock or Series B Preferred Stock. If upon the occurrence of
such event the assets thus distributed among the holders of the Preferred Stock
shall be insufficient to permit the payment to such holders of the full
preferential amount, the entire assets of this Corporation legally available for
distribution shall be distributed among the holders of the Series A Preferred
Stock and Series B Preferred Stock in such priority as hereinafter described.
After the payment or distribution to the holders of the Series A Preferred Stock
and Series B Preferred Stock of the full preferential amounts aforesaid, the
holders of the Common Stock then outstanding shall be entitled to receive
ratably all remaining assets of the Corporation to be distributed.
(ii) In the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the holders of
shares of Series B Preferred Stock then outstanding shall be entitled to
receive, prior and in preference to any distribution of any of the assets of the
Corporation to the holders of the Series A Preferred Stock by reason of their
ownership thereof, full payment of any dividends declared and unpaid for the
then current fiscal year on the
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Series B Preferred Stock, and an amount equal to $100.00 per share for each of
the shares of Series B Preferred Stock. If upon the occurrence of such event the
assets thus distributed among the holders of the Series B Preferred Stock shall
be insufficient to permit the payment to such holders of the full preferential
amount, the assets of this Corporation legally available for distribution shall
first be distributed ratably among the holders of the Series B Preferred Stock.
After the payment or distribution to the holders of the Series B Preferred Stock
of the full preferential amounts aforesaid, the holders of the Series A
Preferred Stock then outstanding shall be entitled to receive ratably all
remaining assets of the Corporation to be distributed up to the amount of the
liquidation preference of the Series A Preferred Stock.
(e) Consents. Except as otherwise provided below, so long as
any shares of Series A Preferred Stock or Series B Preferred Stock are
outstanding, the Corporation shall not, without the affirmative vote or written
consent of the holders of record of a majority of the shares of each series of
Preferred Stock then outstanding, voting or consenting, as the case may be,
separately as a class:
(i) alter or change any of the provisions of the
Certificate of Incorporation of the Corporation;
(ii) authorize any other class or series of capital
stock ranking prior to or on a parity with the Series A Preferred Stock or the
Series B Preferred Stock as to dividends or redemption or upon liquidation,
dissolution or winding up;
(iii) increase the authorized number of shares of
Series A Preferred Stock or the Series B Preferred Stock or authorize the
reissuance thereof after repurchase or redemption;
(iv) authorize any liquidation, dissolution, winding
up of the affairs of the Corporation, consolidation or merger of the Corporation
into or with another corporation or corporations, sale of all or substantially
all of the Corporation's assets or distribution of the Corporation's assets by
way of return of capital;
(v) authorize any public offering of any securities
of the Corporation;
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(vi) authorize the repurchase of any security issued
by the Corporation (other than through the operation of vesting provisions of
employee incentive programs or agreements adopted by the Board of Directors);
(vii) authorize any capital expenditures in the
aggregate in any fiscal year in excess of $100,000.00;
(viii) authorize the incurrence of any indebtedness
for borrowed money in an amount in excess of $250,000.00;
(ix) authorize the appointment or replacement of the
Corporation's chief executive or chief operating officer; or
(x) authorize any business acquisition through
purchase of assets, purchase of stock, licensing arrangement or otherwise.
(f) Events of Default. (1) The following shall
constitute an Event of Default:
(i) Failure by the Corporation to redeem any of the
Series A Preferred Stock or Series B Preferred Stock on the dates specified
herein, to convert any shares of Series A Preferred Stock in accordance with the
provisions hereof or to convert shares of Class A Common Stock in accordance
with the provisions hereof;
(ii) Default by the Corporation in the performance or
observance of any of the Corporation's obligations under the Subscription and
Shareholder Agreement between the Corporation and certain investors dated March
13, 1992;
(iii) Failure by the Corporation to obtain consents
of the holders of any series of the Series A Preferred Stock or Series B
Preferred Stock as required by the provisions hereof;
(iv) Default by the Corporation (1) in any payment of
principal of or interest on any obligation for borrowed money or for the
deferred purchase price of property beyond any period of grace provided with
respect thereto or (2) in the observance or performance of any other agreement,
term or condition contained in any such obligation or in any agreement
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relating thereto beyond any period of grace provided with respect thereto, if
the effect of such default is to cause, or to permit the holder or holders of
such obligation (or a trustee on behalf of such holder or holders) then to
cause, such obligation to become due prior to its stated maturity; or
(v) Dissolution or liquidation of the Corporation; or
the failure by the Corporation within sixty (60) days to lift any execution,
garnishment or attachment of such consequence as may impair its ability to carry
on its operations, or the failure by the Corporation generally to pay its debts
as they become due or the assignment by the Corporation of all or substantially
all of its assets for the benefit of creditors, or the commencement by the
Corporation (as the debtor) of a case under the Bankruptcy Code of 1986, as
amended (the "Bankruptcy Code") or any proceeding under any other insolvency
law; or the commencement of a case under the Bankruptcy Code or any proceeding
under any other insolvency law against the Corporation (as the debtor) and the
entry by a court having jurisdiction in the premises of a decree or order for
relief against the Corporation as the debtor in such case or proceeding, or the
consent by the Corporation to such case or proceeding, or the failure by the
Corporation to cause such case or proceeding to be dismissed within ninety (90)
days, or the consent by the Corporation to or the admission by the Corporation
of the material allegations against it in any such case or proceeding; or the
appointment or authorization of a trustee, receiver or agent of all or
substantially all of the property of the Corporation for the purpose of
enforcing a lien against such property or for the purpose of general
administration of such property for the benefit of creditors.
(2) If an Event of Default shall have occurred, the holders of
the Series A Preferred Stock and Series B Preferred Stock, shall have the right,
voting together as a single class, to elect a majority of the entire board of
directors (the "Special Voting Rights"). The Special Voting Rights of the
holders of the Preferred Stock shall continue until all Events of Default are no
longer continuing, whereupon all Special Voting Rights of the holders of the
Preferred Stock shall cease, subject to being again revived from time to time
upon the occurrence of an Event of Default. Failure by the holders of the Series
A Preferred Stock and the Series B Preferred Stock to exercise their Special
Voting Rights promptly upon the occurrence of an Event of Default shall not be
deemed to be a waiver of such
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rights, such rights being exercisable at any time that such Event of Default
shall have occurred or be continuing.
(3) Immediately upon the accrual of the Special Voting Rights
of the holders of Series A Preferred Stock and the Series B Preferred Stock, the
number of directors of the Corporation shall, ipso facto, be increased to the
extent necessary to enable the holders of the Series A Preferred Stock and the
Series B Preferred Stock to appoint a majority of the Board of Directors and the
directors of the Corporation shall thereupon be divided into two classes. One of
such classes shall consist of the directors appointed pursuant to the Special
Voting Rights who shall be known as the Preferred Directors and the other class
shall consist of the remaining Directors. The Preferred Directors shall be
elected only by vote of the holders of Series A Preferred Stock and the Series B
Preferred Stock, voting as a single class. Whenever the number of directors of
the Corporation shall have been so increased, the number as so increased may
thereafter be further increased or decreased in such manner as may be permitted
by the By-Laws, provided that no such action shall impair the right of the
holders of the Preferred Stock to elect the Preferred Directors. The holders of
the Series A Preferred Stock and the Series B Preferred Stock may at their
option at any time exercise the Special Voting Rights by written consent without
a meeting in accordance with the General Corporation Law of Delaware.
(4) The Preferred Directors shall serve for terms of one year
and until their successors are elected and qualified, or until the earlier
termination of the Special Voting Rights of the holders of the Series A
Preferred Stock and the Series B Preferred Stock. Upon the election of the
Preferred Directors, then so long as the holders of the Series A Preferred Stock
and the Series B Preferred Stock are entitled to the Special Voting Rights, the
presence of a majority of Preferred Directors shall be required for there to be
a quorum at all meetings of the Board of Directors of the Corporation, and of
the Executive Committee of the Corporation if there be such a committee, and the
affirmative vote of the Preferred Directors shall be required for any action to
be taken by the Board of Directors of the Corporation or the Executive
Committee. So long as the holders of the Series A Preferred Stock and the Series
B Preferred Stock are entitled to the Special Voting Rights, any vacancies in
the position of Preferred Directors may be filled only by the holders of the
Series A Preferred Stock and the Series B Preferred Stock.
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The Preferred Directors may, during their term of office, be removed at any
time, with or without cause, by and only by the affirmative votes, at a special
meeting of holders of the Series A Preferred Stock and the Series B Preferred
Stock called for such purpose, or the written consent, of the holders of record
of a majority of the outstanding shares of the Series A Preferred Stock and the
Series B Preferred Stock. Any vacancy created by such removal may also be filled
at such meeting or by such consent. Upon the termination of the Special Voting
Rights of the holders of the Series A Preferred Stock and the Series B Preferred
Stock, the term of office of the Preferred Directors shall forthwith terminate
and the number of directors of the Corporation shall thereupon be appropriately
decreased.
(II) Series A Convertible Preferred Stock.
The relative powers, preferences and rights of, and the
qualifications, limitations and restrictions granted to and imposed upon, the
Series A Preferred Stock are as follows:
(a) Designation. The series shall consist of 5,000 shares and
shall be known as the Series A Convertible Preferred Stock.
(b) Dividends. The holder of each share of the Series A
Preferred Stock shall be entitled to receive, when and as declared by the Board
of Directors, out of any funds legally available therefor, preferential
non-cumulative dividends in cash at the rate of $8.00 per annum per share, and
not more, payable quarterly on the last day of March, June, September and
December, commencing June 30, 1992.
Such dividends upon the Series A Preferred Stock which are
designated as "non-cumulative" shall be non-cumulative, whether or not in any
fiscal year there shall be net income or surplus available for the payment of
such dividends in such fiscal year, so that, if in any fiscal year or years,
such dividends in whole or in part are not paid upon the Series A Preferred
Stock, unpaid dividends shall not accumulate as against the holders of Common
Stock, so that no sums in any later years shall be paid to the holders of the
Series A Preferred Stock with respect to such dividends payable in any prior
year or years when such dividends were not paid.
(c) Mandatory Redemption. The Corporation shall redeem (to the
extent that such redemption shall not violate any
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applicable provisions of the laws of the State of Delaware) at a price of One
Hundred Dollars ($100) per share, plus an amount equal to any and all dividends
accrued and unpaid for the then current fiscal year, but without interest (the
"Series A Redemption Price"), on the 31st day of December (the "Series A
Redemption Date") of each of the years of 1999 through 2002 an amount of shares
equal to 25% of the shares of Series A Preferred Stock outstanding on the first
such Series A Redemption Date (or such lesser number as shall then be
outstanding). If the Corporation is unable on any Series A Redemption Date to
redeem any shares of Series A Preferred Stock then to be redeemed because such
redemption would violate the applicable laws of the State of Delaware, then the
Corporation shall redeem such shares as soon thereafter as redemption would not
violate such laws.
(d) Optional Redemption. The Corporation shall have the right
at its option, and with the affirmative vote or written consent of the holders
of record of a majority of the Series A Preferred Stock then outstanding to
redeem as a whole, or from time to time in part, shares of Series A Preferred
Stock at the Series A Redemption Price, provided, however, that no such
redemption shall be effected until all of the Series B Preferred Stock shall
first have been redeemed. The Corporation may credit against any mandatory
redemption specified in the preceding paragraph any shares of Series A Preferred
Stock redeemed pursuant to this paragraph or otherwise acquired by the
Corporation including shares of Series A Preferred Stock purchased by the
Corporation from former directors, officers or employees of the Corporation. Any
such credit shall be applied against mandatory redemptions in the inverse order
of the above-stated redemption requirements.
(e) Voting Rights. Except as provided in Section A(I)(f) above
and except as otherwise provided by law, the holders of Series A Preferred Stock
shall not be entitled to notice of, or to vote at, any meeting of the
stockholders of the Corporation nor to vote on any matter relating to the
business or affairs of the Corporation.
(f) Conversion. The holders of Series A Preferred Stock shall
have conversion rights as follows (the "Conversion Rights"):
(1) Optional Conversion. Each share of Series A Preferred
Stock may be converted at any time, at the option of
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the holder thereof but only with the consent of the holders of in excess of 50%
of the then outstanding shares of Series A Preferred Stock, in the manner
hereinafter provided, into fully paid and nonassessable shares of Class A Common
Stock at its then effective Conversion Price (as defined below), provided,
however, that on any redemption of any Series A Preferred Stock or any
liquidation of the Corporation, the right of conversion shall terminate at the
close of business on the business day preceding the date fixed for such
redemption or for the payment of any amounts distributable on liquidation to the
holders of Series A Preferred Stock. Conversion of a share of Series A Preferred
Stock shall constitute a waiver by the holder thereof of any accrued and unpaid
dividends for the then current fiscal year on such share of Series A Preferred
Stock.
(2) Mandatory Conversion. Each share of Series A Preferred
Stock shall automatically be converted into shares of Class A Common Stock at
its then effective Conversion Price upon the vote to so convert of the holders
of a majority of the shares of Series A Preferred Stock then outstanding. All
holders of record of shares of Series A Preferred Stock will be given at least
10 days' prior written notice of the date fixed and the place designated for
mandatory conversion of all of such shares of Series A Preferred Stock. On the
date fixed for conversion, all rights with respect to the Series A Preferred
Stock so converted will terminate (including without limitation the right to
receive accrued and unpaid dividends thereon for the then current fiscal year),
except only the rights of the holders thereof, upon surrender of their
certificate or certificates therefore, to receive certificates for the number of
shares of Class A Common Stock into which such Series A Preferred Stock has been
converted. Such notice will be sent by mail, first class, postage prepaid, to
each holder of record of shares of Series A Preferred Stock at such holder's
address appearing on the stock register. On or before the date fixed for
conversion each holder of shares of Series A Preferred Stock shall surrender his
or its certificate or certificates for all such shares to the Corporation at the
place designated in such notice, and shall thereafter receive certificates for
the number of shares of Class A Common Stock to which such holder is entitled
pursuant to this Section A(II)(f).
(3) Conversion Price. (i) The initial conversion rate for the
Series A Preferred Stock shall be 83.3333 shares of Class A Common Stock for
each one share of Series A Preferred
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Stock surrendered for conversion, representing an initial Conversion Price of
$1.20 per share of the Corporation's Class A Common Stock. The applicable
conversion rate and Conversion Price from time to time in effect is subject to
adjustment as provided in Section A(II)(g) hereof.
(ii) Whenever the conversion rate and Conversion
Price shall be adjusted as provided in Section A(II)(g) hereof, the Corporation
shall forthwith file at each office designated for the conversion of Series A
Preferred Stock, a statement, signed by the President and any Vice President or
Treasurer of the Corporation, showing in reasonable detail the facts requiring
such adjustment and the conversion rate that will be effective after such
adjustment. The Corporation shall also cause a notice setting forth any such
adjustments to be sent by mail, first class, postage prepaid, to each holder of
record of Series A Preferred Stock at his or its address appearing on the stock
register.
(iii) Upon any conversion, no adjustment to the
conversion rate shall be made for any accrued and unpaid dividends on the Series
A Preferred Stock surrendered for conversion or on the Class A Common Stock
delivered.
(4) Conversion Mechanics. (i) In order to exercise the
conversion privilege, the holder of any Series A Preferred Stock to be converted
shall surrender his or its certificate or certificates therefore to the
principal office of the transfer agent for the Series A Preferred Stock (or if
no transfer agent is at the time appointed, then the Corporation at its
principal office), shall give written notice to the Corporation at such office
that the holder elects to convert the Series A Preferred Stock represented by
such certificates, or any number thereof and shall furnish to the Corporation
the written consent to such conversion by the holders of in excess of 50% of the
then outstanding shares of Series A Preferred Stock. Such notice shall also
state the name or names (with address) in which the certificate or certificates
for shares of Class A Common Stock which shall be issuable on such conversion
shall be issued, subject to any restriction on transfer relating to shares of
the Series A Preferred Stock or shares of Class A Common Stock upon conversion
thereof. If so required by the Corporation, certificates surrendered for
conversion shall be endorsed or accompanied by written instrument or instruments
of transfer, in form satisfactory to the Corporation, duly authorized in
writing.
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In respect of all optional conversions, the date of receipt by the transfer
agent (or by the Corporation if the Corporation serves as its own transfer
agent) of the certificates and notice shall be the conversion date. As soon as
practicable after receipt of such notice and the surrender of the certificate or
certificates for Series A Preferred Stock as aforesaid, the Corporation shall
cause to be issued and delivered at such office to such holder, or on his or its
written order, a certificate or certificates for the number of full shares of
Class A Common Stock issuable on such conversion in accordance with the
provisions hereof and cash as provided in paragraph (ii) of this section in
respect of any fraction of a share of Class A Common Stock otherwise issuable
upon such conversion.
(ii) Unless otherwise determined by the Corporation,
it shall not issue fractional shares of Class A Common Stock upon conversion of
Series A Preferred Stock or scrip in lieu thereof. If any fraction of a share of
Class A Common Stock would, except for the provisions of this paragraph (ii), be
issuable upon conversion of any Series A Preferred Stock, the Corporation shall
in lieu thereof pay to the person entitled thereto an amount in cash equal to
the current value of such fraction as determined by the Board of Directors.
(iii) The Corporation shall at all times when the
Series A Preferred Stock shall be outstanding reserve and keep available out of
its authorized but unissued stock, for the purposes of effecting the conversion
of the Series A Preferred Stock, such number of its duly authorized shares of
Class A Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding Series A Preferred Stock. Before taking any action
which would cause an adjustment reducing the conversion price below the then par
value of the shares of Class A Common Stock issuable upon conversion of the
Series A Preferred Stock, the Corporation will take any corporate action which
may, in the opinion of its counsel, be necessary in order that the Corporation
may validly and legally issue fully paid and nonassessable shares of such Class
A Common Stock at such adjusted conversion price.
(iv) All shares of Series A Preferred Stock which
shall have been surrendered for conversion as herein provided shall no longer be
deemed to be outstanding and all rights with respect to such shares, including
the rights, if any, to receive notices and to vote, shall forthwith cease and
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terminate except only the right of the holder thereof to receive shares of Class
A Common Stock in exchange therefor.
(g) Anti-dilution Provisions. (1) In order to prevent dilution
of the rights granted hereunder, the Conversion Price shall be subject to
adjustment from time to time in accordance with this paragraph (g)(1). At any
given time the Conversion Price, whether as the initial Conversion Price ($1.20
per share) or as last adjusted, shall be that dollar (or part of a dollar)
amount the payment of which shall be sufficient at the given time to acquire one
share of the Corporation's Class A Common Stock upon conversion of shares of
Series A Preferred Stock. Upon each adjustment of the Conversion Price, the
holder of record of shares of Series A Preferred Stock shall thereafter be
entitled to acquire upon exercise, at the Conversion Price resulting from such
adjustment, the number of shares of the Corporation's Class A Common Stock
obtainable by multiplying the Conversion Price in effect immediately prior to
such adjustment by the number of shares of the Corporation's Class A Common
Stock acquirable immediately prior to such adjustment and dividing the product
thereof by the Conversion Price resulting from such adjustment.
(2) Except as provided in paragraph (g)(3) or (g)(6) below, if
and whenever on or after the date of initial issuance of the Series A Preferred
Stock (the "Initial Issuance Date"), the Corporation shall issue or sell, or
shall in accordance with subparagraphs (g)(2)(i) to (ix), inclusive, be deemed
to have issued or sold any shares of its Common Stock for a consideration per
share less than the Conversion Price in effect immediately prior to the time of
such issue or sale, then forthwith upon such issue or sale (the "Triggering
Transaction"), the Conversion Price shall, subject to subparagraphs (i) to (ix)
of this section, be reduced to the Conversion Price (calculated to the nearest
tenth of a cent) determined by dividing:
(A) an amount equal to the sum of (x) the product
derived by multiplying the Number of Shares Deemed Outstanding immediately prior
to such Triggering Transaction by the Conversion Price then in effect, plus (y)
the consideration, if any, received by the Corporation upon consummation of such
Triggering Transaction, by
(B) an amount equal to the sum of (x) the Number of
Common Shares Deemed Outstanding immediately prior to such
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Triggering Transaction plus (y) the number of shares of Common Stock issued (or
deemed to be issued in accordance with subparagraphs (g)(2)(i) to (ix)) in
connection with the Triggering Transaction.
For purposes of this Section (g), the term "Number of Common
Shares Deemed Outstanding" at any given time shall mean the sum of (x) the
number of shares of the Corporation's Class A Common Stock outstanding at such
time, (y) the number of shares of the Corporation's Class A Common Stock
issuable assuming conversion at such time of the Corporation's Series A
Preferred Stock and (z) the number of shares of the Corporation's Common Stock
deemed to be outstanding under subparagraphs (g)(2)(i) to (ix), inclusive, at
such time.
For purposes of determining the adjusted Conversion Price
under this paragraph (g)(2), the following subsections (i) to (ix), inclusive,
shall be applicable:
(i) In case the Corporation at any time shall in any
manner grant (whether directly or by assumption in a merger or otherwise) any
rights to subscribe for or to purchase, or any options for the purchase of,
Common Stock or any stock or other securities convertible into or exchangeable
for Common Stock (such rights or options being herein called "Options" and such
convertible or exchangeable stock or securities being herein called "Convertible
Securities"), whether or not such Options or the right to convert or exchange
any such Convertible Securities are immediately exercisable and the price per
share for which the Common Stock is issuable upon exercise, conversion or
exchange (determined by dividing (x) the total amount, if any, received or
receivable by the Corporation as consideration for the granting of such Options,
plus the minimum aggregate amount of additional consideration payable to the
Corporation upon the exercise of all such Options, plus, in the case of such
Options which relate to Convertible Securities, the minimum aggregate amount of
additional consideration, if any, payable upon the issue or sale of such
Convertible Securities and upon the conversion or exchange thereof, by (y) the
total maximum number of shares of Common Stock issuable upon the exercise of
such Options or the conversion or exchange of such Convertible Securities) shall
be less than the Conversion Price in effect immediately prior to the time of the
granting of such Option, then the total maximum amount of Common Stock issuable
upon the exercise of such Options or in the case of Options for Convertible
Securities, upon the
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conversion or exchange of such Convertible Securities shall (as of the date of
granting of such Options) be deemed to be outstanding and to have been issued
and sold by the Corporation for such price per share. No adjustment of the
Conversion Price shall be made upon the actual issue of such shares of Common
Stock or such Convertible Securities upon the exercise of such Options, except
as otherwise provided in subparagraph (iii) below.
(ii) In case the Corporation at any time shall in any
manner issue (whether directly or by assumption in a merger or otherwise) or
sell any Convertible Securities, whether or not the rights to exchange or
convert thereunder are immediately exercisable, and the price per share for
which Common Stock is issuable upon such conversion or exchange (determined by
dividing (x) the total amount received or receivable by the Corporation as
consideration for the issue or sale of such Convertible Securities, plus the
minimum aggregate amount of additional consideration, if any, payable to the
Corporation upon the conversion or exchange thereof, by (y) the total maximum
number of shares of Common Stock issuable upon the conversion or exchange of all
such Convertible Securities) shall be less than the Conversion Price in effect
immediately prior to the time of such issue or sale, then the total maximum
number of shares of Common Stock issuable upon conversion or exchange of all
such Convertible Securities shall (as of the date of the issue or sale of such
Convertible Securities) be deemed to be outstanding and to have been issued and
sold by the Corporation for such price per share. No adjustment of the
Conversion Price shall be made upon the actual issue of such Common Stock upon
exercise of the rights to exchange or convert under such Convertible Securities,
except as otherwise provided in subparagraph (iii) below.
(iii) If the purchase price provided for in any
Options referred to in subparagraph (i), the additional consideration, if any,
payable upon the conversion or exchange of any Convertible Securities referred
to in subparagraphs (i) or (ii), or the rate at which any Convertible Securities
referred to in subparagraph (i) or (ii) are convertible into or exchangeable for
Common Stock shall change at any time (other than under or by reason of
provisions designed to protect against dilution of the type set forth in
paragraphs (g)(2) or (g)(4)), the Conversion Price in effect at the time of such
change shall forthwith be readjusted to the Conversion Price which would have
been in effect at such time had such Options or Convertible Securities
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<PAGE> 17
still outstanding provided for such changed purchase price, additional
consideration or conversion rate, as the case may be, at the time initially
granted, issued or sold. If the purchase price provided for in any Option
referred to in subparagraph (i) or the rate at which any Convertible Securities
referred to in subparagraphs (i) or (ii) are convertible into or exchangeable
for Common Stock, shall be reduced at any time under or by reason of provisions
with respect thereto designed to protect against dilution, then in case of the
delivery of Common Stock upon the exercise of any such Option or upon conversion
or exchange of any such Convertible Security, the Conversion Price then in
effect hereunder shall forthwith be adjusted to such respective amount as would
have been obtained had such Option or Convertible Security never been issued as
to such Common Stock and had adjustments been made upon the issuance of the
shares of Common Stock delivered as aforesaid, but only if as a result of such
adjustment the Conversion Price then in effect hereunder is hereby reduced.
(iv) On the expiration of any Option or the
termination of any right to convert or exchange any Convertible Securities, the
Conversion Price then in effect hereunder shall forthwith be increased to the
Conversion Price which would have been in effect at the time of such expiration
or termination had such Option or Convertible Securities, to the extent
outstanding immediately prior to such expiration or termination, never been
issued.
(v) In case any Options shall be issued in connection
with the issue or sale of other securities of the Corporation, together
comprising one integral transaction in which no specific consideration is
allocated to such Options by the parties thereto, such Options shall be deemed
to have been issued without consideration.
(vi) In case any shares of Common Stock, Options or
Convertible Securities shall be issued or sold or deemed to have been issued or
sold for cash, the consideration received therefor shall be deemed to be the
amount received by the Corporation therefor. In case any shares of Common Stock,
Options or Convertible Securities shall be issued or sold for a consideration
other than cash, the amount of the consideration other than cash received by the
Corporation shall be the fair value of such consideration. In case any shares of
Common Stock, Options or Convertible Securities shall be issued in connection
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<PAGE> 18
with any merger in which the Corporation is the surviving corporation, the
amount of consideration therefor shall be deemed to be the fair value of such
portion of the net assets and business of the non-surviving corporation as shall
be attributable to such Common Stock, Options or Convertible Securities as the
case may be.
(vii) The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or for
the account of the Corporation, and the disposition of any shares so owned or
held shall be considered an issue or sale of Common Stock for the purpose of
this paragraph (g)(2).
(viii) In case the Corporation shall declare a
dividend or make any other distribution upon the stock of the Corporation
payable in Common Stock, Options, or Convertible Securities, such issuance shall
be covered by paragraph (g)(4) below.
(ix) For purposes of this paragraph (g)(2), in case
the Corporation shall take a record of the holders of its Common Stock for the
purpose of entitling them (x) to receive a dividend or other distribution
payable in Common Stock, Options or in Convertible Securities, or (y) to
subscribe for or purchase Common Stock, Options or Convertible Securities, then
such record date shall be deemed to be the date of the issue or sale of the
shares of Common Stock deemed to have been issued or sold upon the declaration
of such dividend or the making of such other distribution or the date of the
granting of such right or subscription or purchase, as the case may be.
(3) In the event the Corporation shall declare a dividend upon
the Common Stock (other than a dividend payable in Common Stock covered by
subparagraph (g)(2)(viii)) payable otherwise than out of earnings or earned
surplus, determined in accordance with generally accepted accounting principles,
including the making of appropriate deductions for minority interests, if any,
in subsidiaries (herein referred to as "Liquidating Dividends"), then as soon as
possible after the conversion of any Series A Preferred Stock, the Corporation
shall pay to the person converting such Series A Preferred Stock an amount equal
to the aggregate value at the time of such exercise of all Liquidating Dividends
(including but not limited to the Common Stock which would have been issued at
the time of such
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<PAGE> 19
earlier exercise and all other securities which would have been issued with
respect to such Common Stock by reason of stock splits, stock dividends, mergers
or reorganizations, or for any other reason). For the purposes of this paragraph
(g)(3), a dividend other than in cash shall be considered payable out of
earnings or earned surplus only to the extent that such earnings or earned
surplus are charged an amount equal to the fair value of such dividend as
determined in good faith by the Board of Directors of the Corporation.
(4) In case the Corporation shall at any time subdivide its
outstanding shares of Common Stock into a greater number of shares, or declare a
dividend or make any other distribution upon the stock of the Corporation
payable in Common Stock, Options or Convertible Securities, the Conversion Price
in effect immediately prior to such subdivision or dividend shall be
appropriately reduced, and, conversely, in case the outstanding shares of Common
Stock of the Corporation shall be combined into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination shall be
proportionately increased.
(5) If any capital reorganization or reclassification of the
capital stock of the Corporation, or consolidation or merger of the Corporation
with another corporation, or the sale of all or substantially all of its assets
to another corporation shall be effected in such a way that holders of Common
Stock shall be entitled to receive stock, securities, cash or other property
with respect to or in exchange for Common Stock, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, lawful and
adequate provision shall be made whereby the holders of the Series A Preferred
Stock shall have the right to acquire and receive upon conversion of the Series
A Preferred Stock, which right shall be prior to the rights of the holders of
Class A Common Stock (but after and subject to the rights of holders of
Preferred Stock senior to the Series A Preferred Stock, if any), such shares of
stock, securities, cash or other property issuable or payable (as part of the
reorganization, reclassification, consolidation, merger or sale) with respect to
or in exchange for such number of outstanding shares of the Corporation's Common
Stock as would have been received upon conversion of the Series A Preferred
Stock at the Conversion Price then in effect. The Corporation will not effect
any such consolidation, merger or sale, unless prior to the consummation thereof
the successor corporation (if
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other than the Corporation) resulting from such consolidation or merger or the
corporation purchasing such assets shall assume by written instrument mailed or
delivered to the holders of the Series A Preferred Stock at the last address of
each such holder appearing on the books of the Corporation, the obligation to
deliver to each such holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holder may be entitled to
purchase. If a purchase, tender or exchange offer is made to and accepted by the
holders of more than 50% of the outstanding shares of Common Stock of the
Corporation, the Corporation shall not effect any consolidation, merger or sale
with the person having made such offer or with any Affiliate of such person,
unless prior to the consummation of such consolidation, merger or sale the
holders of the Series A Preferred Stock shall have been given a reasonable
opportunity to then elect to receive upon the conversion of the Series A
Preferred Stock either the stock, securities or assets then issuable with
respect to the Common Stock of the Corporation or the stock, securities or
assets, or the equivalent, issued to previous holders of the Common Stock in
accordance with such offer. For purposes hereof the term "Affiliate" with
respect to any given person shall mean any person controlling, controlled by or
under common control with the given person.
(6) The provisions of this Section (g) shall not apply to any
Common Stock issued, issuable or deemed outstanding under subparagraphs
(g)(2)(i) to (ix) inclusive: (i) to any person pursuant to any stock option,
stock purchase or similar plan or arrangement for the benefit of employees,
consultants or directors of the Corporation or its subsidiaries in effect on the
Initial Issuance Date or thereafter adopted by the Board of Directors of the
Corporation, (ii) pursuant to options and warrants in existence on the Initial
Issuance Date, (iii) as a dividend on the Series A Preferred Stock, (iv) on
conversion of the Series A Preferred Stock, or (v) to any then current
shareholder of the Corporation or its affiliates in any round of financing for
the Corporation in which a purchaser or purchasers other than the then current
shareholders (or their affiliates) do not purchase at least ten percent (10%) of
such financing.
(7) In the event that:
(i) the Corporation shall declare any cash
dividend upon its Common Stock, or
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(ii) the Corporation shall declare any dividend upon
its Common Stock payable in stock or make any special dividend or other
distribution to the holders of its Common Stock, or
(iii) the Corporation shall offer for subscription
pro rata to the holders of its Common Stock any additional shares of stock of
any class or other rights, or
(iv) there shall be any capital reorganization or
reclassification of the capital stock of the Corporation, including any
subdivision or combination of its outstanding shares of Common Stock, or
consolidation or merger of the Corporation with, or sale of all or substantially
all of its assets to, another corporation, or
(v) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Corporation;
then, in connection with such event, the Corporation shall give to the holders
of the Series A Preferred Stock:
(a) at least 20 days prior written notice of the date on
which the books of the Corporation shall close or a
record shall be taken for such dividend, distribution
or subscription rights or for determining rights to
vote in respect of any such reorganization,
reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up; and
(b) in the case of any such reorganization,
reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up, at least 20
days prior written notice of the date when the same
shall take place. Such notice in accordance with the
foregoing clause (i) shall also specify, in the case
of any such dividend, distribution or subscription
rights, the date on which the holders of Common Stock
shall be entitled thereto, and such notice in
accordance with the foregoing clause (ii) shall also
specify the date on which the holders of Common Stock
shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such
reorganization, reclassification, consolidation,
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merger, sale, dissolution, liquidation or winding up,
as the case may be. Each such written notice shall be
given by first class mail, postage prepaid, addressed
to the holders of the Series A Preferred Stock at the
address of each such holder as shown on the books of
the Corporation.
(8) If at any time or from time to time on or after the
Initial Issuance Date, the Corporation shall grant, issue or sell any Options,
Convertible Securities or rights to purchase property (the "Purchase Rights")
pro rata to the holders of record of any class of Common Stock of the
Corporation and such grants, issuances or sales do not result in an adjustment
of the Conversion Price under paragraph (g)(2) hereof, then each holder of
Series A Preferred Stock shall be entitled to acquire (within 30 days after the
later to occur of the initial exercise date of such Purchase Rights or receipt
by such holder of the notice concerning Purchase Rights to which such holder
shall be entitled under paragraph (g)(8)) and upon the terms applicable to such
Purchase Rights either:
(i) the aggregate Purchase Rights which such holder could
have acquired if it had held the number of shares of
Class A Common Stock acquirable upon conversion of
the Series A Preferred Stock immediately before the
grant, issuance or sale of such Purchase Rights;
provided that if any Purchase Rights were distributed
to holders of Class A Common Stock without the
payment of additional consideration by such holders,
corresponding Purchase Rights shall be distributed to
the exercising holders of the Series A Preferred
Stock as soon as possible after such exercise and it
shall not be necessary for the exercising holder of
the Series A Preferred Stock specifically to request
delivery of such rights; or
(ii) in the event that any such Purchase Rights shall have
expired or shall expire prior to the end of said
30-day period, the number of shares of Common Stock
or the amount of property which such holder could
have acquired upon such exercise at the time or times
at which the Corporation granted, issued or sold such
expired Purchase Rights.
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<PAGE> 23
(9) If any event occurs as to which, in the opinion of the
Board of Directors of the Corporation, the provisions of this Section (g) are
not strictly applicable or if strictly applicable would not fairly protect the
rights of the holders of the Series A Preferred Stock in accordance with the
essential intent and principles of such provisions, then the Board of Directors
shall make an adjustment in the application of such provisions, in accordance
with such essential intent and principles, so as to protect such rights as
aforesaid, but in no event shall any adjustment have the effect of increasing
the Conversion Price as otherwise determined pursuant to any of the provisions
of this Section (g) except in the case of a combination of shares of a type
contemplated in paragraph (g)(4) and then in no event to an amount larger than
the Conversion Price as adjusted pursuant to paragraph (g)(4).
(III) Series B Preferred Stock.
The relative powers, preferences and rights of, and the
qualifications, limitations and restrictions granted to and imposed upon, the
Series B Preferred Stock are as follows:
(a) Designation. The series shall consist of 200,000 shares
and shall be known as the Series B Preferred Stock.
(b) Dividends. The holder of each share of the Series B
Preferred Stock shall be entitled to receive, when and as declared by the Board
of Directors, out of any funds legally available therefor, preferential
non-cumulative dividends in cash at the rate of $10.00 per annum per share, and
not more, payable quarterly on the last day of March, June, September and
December, commencing June 30, 1992.
Such dividends upon the Series B Preferred Stock which are
designated as "non-cumulative" shall be non-cumulative, whether or not in any
fiscal year there shall be net income or surplus available for the payment of
such dividends in such fiscal year, so that, if in any fiscal year or years,
such dividends in whole or in part are not paid upon the Series B Preferred
Stock, unpaid dividends shall not accumulate as against the holders of Common
Stock, so that no sums in any later years shall be paid to the holders of the
Series B Preferred Stock with respect to such dividends payable in any prior
year or years when such dividends were not paid.
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<PAGE> 24
(c) Mandatory Redemption. The Corporation shall redeem (to the
extent that such redemption shall not violate any applicable provisions of the
laws of the State of Delaware) at a price of One Hundred Dollars ($100) per
share, plus an amount equal to any and all dividends accrued and unpaid for the
then current fiscal year, but without interest (the "Series B Redemption
Price"), on the 31st day of December (a "Series B Redemption Date") of each of
the years of 1999 through 2002 an amount of shares equal to 25% of the shares of
Series B Preferred Stock outstanding on the first such Series B Redemption Date
(or such lesser number as shall then be outstanding). If the Corporation is
unable on any Series B Redemption Date to redeem any shares of Series B
Preferred Stock then to be redeemed because such redemption would violate the
applicable laws of the State of Delaware then the Corporation shall redeem such
shares as soon thereafter as the restrictions precluding such redemption shall
no longer be applicable.
(d) Optional Redemption. At any time, the Corporation shall
have the right at its option, and with the affirmative vote or written consent
of the holders of record of a majority of the shares of Series B Preferred Stock
then outstanding, to redeem as a whole, or from time to time in part, shares of
Series B Preferred Stock at the Series B Redemption Price. The Corporation may
credit against any mandatory redemption specified in the preceding paragraph any
shares of Series B Preferred Stock redeemed pursuant to this paragraph or
otherwise acquired by the Corporation including shares of Series B Preferred
Stock purchased by the Corporation from former directors, officers or employees
of the Corporation. Any such credit shall be applied against mandatory
redemptions in the inverse order of the above-stated redemption requirements.
(e) Voting Rights. Except as provided in Section A(I)(f) above
and except as otherwise provided by law, the holders of Series B Preferred Stock
shall not be entitled to notice of, or to vote at, any meeting of the
stockholders of the Corporation nor to vote on any matter relating to the
business or affairs of the Corporation.
SECTION B: PREFERRED STOCK
The Preferred Stock may be issued from time to time as herein
provided in one or more series. The designations, relative
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<PAGE> 25
rights, preferences and limitations of the Preferred Stock, and particularly of
the shares of each series thereof, may, to the extent permitted by law, be
similar to or differ from those of any other series. The Board of Directors of
the Corporation is hereby expressly granted authority, subject to the provisions
of this Article IV, to fix from time to time before issuance thereof the number
of shares in each series and all designations, relative rights, preferences and
limitations of the shares in each such series, including, but without limiting
the generality of the foregoing, the following:
(a) the designation of the series and the number of shares to
constitute each series;
(b) the dividend rate on the shares of each series, any
conditions on which and times at which dividends are payable, whether dividends
shall be cumulative, and the preference or relation (if any) with respect to
such dividends (including possible preferences over dividends on the Common
Stock or any other class or classes);
(c) whether the series will be redeemable (at the option of
the Corporation or the holders of such shares or both, or upon the happening of
a specified event) and, if so, the redemption prices and the conditions and
times upon which redemption may take place and whether for cash, property or
rights, including securities of the Corporation or another corporation;
(d) the terms and amount of any sinking, retirement or
purchase fund;
(e) the conversion or exchange rights (at the option of the
Corporation or the holders of such shares or both, or upon the happening of a
specified event), if any, including the conversion or exchange price and other
terms of conversion or exchange;
(f) the voting rights, if any (other than any voting rights
that the Preferred Stock may have as a matter of law);
(g) any restrictions on the issue or reissue or sale of
additional Preferred Stock;
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<PAGE> 26
(h) the rights of the holders upon voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation
(including preferences over the Common Stock or other class or classes or series
of stock);
(i) the preemptive rights, if any, to subscribe to additional
issues of stock or securities of the Corporation; and
(j) such other special rights and privileges, if any, for the
benefit of the holders of the Preferred Stock, as shall not be inconsistent with
provisions of this Amended and Restated Certificate of Incorporation.
All shares of Preferred Stock of the same series shall be
identical in all respects, except that shares of any one series issued at
different times may differ as to dates, if any, from which dividends thereon may
accumulate. All shares of Preferred Stock of all series shall be of equal rank
and shall be identical in all respects except that any series may differ from
any other series with respect to any one or more of the designations, relative
rights, preferences and limitations described or referred to in subparagraphs
2(a) to 2(j) inclusive above.
SECTION C: COMMON STOCK
(a) Dividends. Subject to the preferences and other rights of
the Preferred Stock as set out above, the holders of Common Stock shall be
entitled to receive dividends when and as declared by the Board of Directors out
of funds legally available therefor.
(b) Liquidation. In the event of any liquidation, dissolution
or winding up of the affairs of the Corporation, voluntary or involuntary, after
payment or provision for payment to the holders of Preferred Stock of the
amounts to which they may be entitled as set out above, the remaining assets of
the Corporation available to stockholders shall be distributed equally per share
to the holders of Common Stock.
(c) Voting Rights. The holders of Voting Common Stock shall be
entitled to one vote in respect of each share held on all matters submitted to a
vote of shareholders. Except as otherwise provided by law, the holders of Class
A Common Stock
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<PAGE> 27
shall not be entitled to notice of, or to vote at, any meeting of the
stockholders of the Corporation nor to vote upon any matter relating to the
business or affairs of the Corporation.
(d) No Pre-emptive Rights. No holder of Common Stock of the
Corporation shall, by virtue of this Amended and Restated Certificate of
Incorporation or Delaware law generally, have any pre-emptive right to subscribe
to any additional issue of stock of the Corporation of any or all classes or
series thereof or to any security convertible into such stock.
(e) Conversion of Class A Common Stock. (1) Each share of
Class A Common Stock shall be convertible into one fully paid and nonassessable
share of Voting Common Stock at any time at the election of the holder thereof
subject to the condition that the holder thereof delivers to the Corporation,
together with the notice of election so to convert and the applicable stock
certificates (as described below), a certificate of such holder (a "Conversion
Eligibility Certificate") to the effect that (i) such holder is a person other
than Warburg, Pincus Investors, L.P. ("Warburg") or any affiliate (as defined in
Rule 12b-2 promulgated under the Securities Exchange Act of 1934 and any
successor rule) of Warburg, or (ii) upon such conversion and after giving effect
thereto, such holder and all affiliates of such holder will collectively own
beneficially and of record no more than 50% of the then outstanding shares of
Voting Common Stock. The Corporation or its transfer agent shall rely on any
such certificate as accurately setting forth the facts therein stated, unless
the Corporation has actual knowledge of the falseness of any such statements of
fact.
(2) In order to exercise the foregoing conversion privilege, a
holder of Class A Common Stock shall surrender to the Corporation at its
principal offices, or to any transfer agent for the Corporation, a certificate
or certificates for Class A Common Stock to be converted together with (i) a
Conversion Eligibility Certificate and (ii) a written notice to the Corporation
that such holder has elected to convert such shares, or, if less than all shares
represented by such certificate are to be converted, the portion of the shares
represented thereby to be converted. Such notice shall also state the name or
names (with addresses) in which the certificates for shares of Voting Common
Stock issuable upon such conversion shall be issued. Class A Common Stock shall
be deemed converted for all purposes including without limitation the
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taking of a record date for a meeting of the stockholders of the Corporation,
upon receipt by the Corporation or its transfer agent of such certificates
evidencing such shares accompanied by a Conversion Eligibility Certificate and
such notice of election to convert.
(3) Upon conversion of any certificate evidencing Class A
Common Stock which is converted in part only, the Corporation shall cause to be
executed and delivered to the holder thereof, at the expense of the Corporation,
a new certificate evidencing the balance of the Class A Common Stock which was
not so converted.
(4) The Corporation shall not be required to issue or deliver
any certificate unless and until the holder of the shares so surrendered has
paid to the Corporation the amount of any tax which may be payable in respect of
any transfer involved in such issuance or shall establish to the satisfaction of
the Corporation that such tax has been paid.
(5) The Corporation shall at all times reserve and keep
available out of its authorized but unissued Voting Common Stock the full number
of shares of such stock into which all shares of Class A Common Stock from time
to time outstanding are convertible.
(6) Shares of Class A Common Stock which are converted into
shares of Voting Common Stock as provided herein shall not be reissued.
(7) In the event of any stock split, combination or other
reclassification of shares of Voting Common Stock and Class A Common Stock, each
share of Common Stock and Class A Common Stock shall be treated equally;
provided, however, that in any such transaction, only holders of Voting Common
Stock shall receive shares of Voting Common Stock and only holders of Class A
Common Stock shall receive shares of Class A Common Stock.
ARTICLE V
The Corporation is to have perpetual existence.
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ARTICLE VI
In furtherance and not in limitation of the powers conferred
by statute, the By-Laws of the Corporation may be made, altered, amended or
repealed by the stockholders or by the Board of Directors.
ARTICLE VII
The Corporation shall indemnify each person who is or was a
director or officer of the Corporation (including the heirs, executors,
administrators or estate of such person) or is or was serving at the request of
the Corporation as a director or officer of another corporation, partnership,
joint venture, trust or other enterprise to the fullest extent permitted under
and in accordance with the Delaware General Corporation Law or any successor
statute.
The indemnification provided by this Article VII shall not be
deemed exclusive of any other rights to which any of those seeking
indemnification or advancement of expenses may be entitled under any by-law,
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 such office, and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
ARTICLE VIII
Meetings of stockholders may be held within or without the
State of Delaware, as the By-Laws 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 By-Laws of the Corporation.
ARTICLE IX
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, except for liability (i) for any breach of the
director's duty of loyalty to
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<PAGE> 30
the Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any
transaction from which the director derived any improper personal benefit. If
the Delaware General Corporation Law is amended after the date of incorporation
of the Corporation to authorize corporate action further eliminating or limiting
the personal liability of Directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the Delaware General Corporation Law, as so amended.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
ARTICLE X
Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for the Corporation under the
provisions of Section 291 of Title 8 of the Delaware Code, or on the application
of trustees in dissolution or of any receiver or receivers appointed for the
Corporation under the provisions of Section 279 of Title 8 of the Delaware Code,
order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case may be,
to be summoned in such manner as said court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this Corporation, as the
case may be, agree to any compromise or arrangement and to any reorganization of
this Corporation as consequence of such compromise or arrangement, said
compromise or arrangement and said reorganization, if sanctioned by the court to
which the said application has been made, shall be binding on all the creditors
or class of creditors, and/or on all the stockholders or class of stockholders,
of this Corporation, as the case may be, and also on this Corporation.
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ARTICLE XI
The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Amended and Restated Certificate of
Incorporation, in any manner now or hereafter prescribed by statute, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
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<PAGE> 32
IN WITNESS WHEREOF, CALBIOCHEM-NOVABIOCHEM INTERNATIONAL, INC.
has caused this Amended and Restated Certificate of Incorporation to be signed
by Stelios B. Papadopoulos, its Chief Executive Officer, and attested by James
G. Stewart, its Secretary, this 17th day of July 1995.
CALBIOCHEM-NOVABIOCHEM INTERNATIONAL, INC.
By: /s/ Stelios B. Papadopoulos
---------------------------------
Stelios B. Papadopoulos
Chief Executive Officer
Attest:
By: /s/ James G. Stewart
----------------------------
James G. Stewart
Secretary
<PAGE> 33
CERTIFICATE OF CORRECTION
FILED TO CORRECT A CERTAIN ERROR IN THE
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CN BIOSCIENCES, INC.
FILED IN THE OFFICE OF THE SECRETARY OF STATE OF DELAWARE
ON JULY 17, 1996
CN BIOSCIENCES, INC. (formerly CALBIOCHEM-NOVABIOCHEM INTERNATIONAL,
INC., the "Corporation"), a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware DOES HEREBY
CERTIFY:
1. The name of the Corporation is CN BIOSCIENCES, INC.
2. An Amended and Restated Certificate of Incorporation was filed in
the office of the Secretary of State of Delaware on July 17, 1996, and said
Amended and Restated Certificate of Incorporation requires correction as
permitted by Section 103 of the General Corporation Law of the State of
Delaware.
3. The date that the Amended and Restated Certificate of Incorporation
was executed by the Corporation's Chief Executive Officer and attested by its
Secretary was July 17, 1996.
4. The execution and attestation of the Amended and Restated
Certificate of Incorporation is corrected as follows:
"IN WITNESS WHEREOF, CALBIOCHEM-NOVABIOCHEM INTERNATIONAL, INC.
has caused this Amended and Restated Certificate of Incorporation to
be signed by Stelios B. Papadopoulos, its Chief Executive Officer, and
attested by James G. Stewart, its Secretary, this 17th day of July
1996."
<PAGE> 34
IN WITNESS WHEREOF, CN BIOSCIENCES, INC. has caused this Certificate of
Correction to be signed by James G. Stewart, its Secretary, this 31st day of
July, 1996.
/s/ James G. Stewart
----------------------------
James G. Stewart
Secretary
-2-
<PAGE> 1
EXHIBIT 4
[SPECIMEN COMMON STOCK CERTIFICATE]
[FACE OF CERTIFICATE]
COMMON STOCK COMMON STOCK
NUMBER SHARES
[LOGO]
INCORPORATED UNDER THE LAWS OF SEE REVERSE FOR
THE STATE OF DELAWARE CERTAIN DEFINITIONS
CUSIP 125946 10 3
This Certifies that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK
OF THE PAR VALUE OF $.01 EACH OF
CN BIOSCIENCES, INC.
transferable only on the books of the Corporation by the holder hereof in
person or by duly authorized attorney upon surrender of this Certificate
properly endorsed.
This Certificate is not valid unless countersigned and registered by
the Transfer Agent and Registrar.
IN WITNESS WHEREOF, CN BIOSCIENCES, INC. has caused this Certificate to
be executed by the facsimile signatures of its duly authorized officers and has
caused a facsimile of its corporate seal to be hereunto affixed.
[SEAL]
Dated
<PAGE> 2
/s/ James G. Stewart /s/ Stelios B. Papadopoulos
Secretary Chairman, Chief Executive
Officer and President
Countersigned and Registered:
ChaseMellon Shareholder Services, L.L.C.
Transfer Agent and Registrar
Authorized Signature
<PAGE> 3
[BACK OF CERTIFICATE]
CN BIOSCIENCES, INC.
The Corporation will furnish without charge to each stockholder who so
requests, a statement of 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.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C> <C>
TEN COM - as tenants in common UNIF TRANS MIN ACT - ____________
(Cust)
TEN ENT - as tenants by the Custodian___________under Uniform
entireties (Minor)
JT TEN - as joint tenants with Transfers to Minors Act__________
right of survivorship (State)
not as tenants in common
</TABLE>
Additional abbreviations may also be used though not in the above list.
For Value received, ______________________________________ hereby sell,
assign and transfer unto__________________________________________________
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
[ ]
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------Shares
<PAGE> 4
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint _____________________________________________
Attorney to transfer the said stock on the books of the within-named
Corporation with full power of substitution in the premises.
Dated, __________________ X ___________________________________________________
X ___________________________________________________
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH
THE NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE, IN
EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT, OR ANY
CHANGE WHATEVER.
SIGNATURE GUARANTEED: __________________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION, (BANKS, STOCKBROKERS, SAVINGS AND
LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT
TO S.E.C. RULE 17Ad-15.
KEEP THIS CERTIFICATE IN A SAFE PLACE, IF IT IS LOST, STOLEN OR DESTROYED,
THE CORPORATION MAY REQUIRE A BOND OF INDEMNITY AS A CONDITION TO THE ISSUANCE
OF REPLACEMENT CERTIFICATE.
<PAGE> 1
EXHIBIT 5
[Letterhead of Willkie Farr & Gallagher]
August 23, 1996
CN Biosciences, Inc.
10394 Pacific Center Court
San Diego, CA 92121
Ladies and Gentlemen:
We are delivering this opinion in connection with the Registration Statement on
Form S-1 (File No. 333-8335) (the "Registration Statement") filed by CN
Biosciences, Inc. (the "Company"), on July 18, 1996, with the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the "Act"),
with respect to 1,840,000 shares, par value $.01 per share, of common stock of
the Company (the "Common Stock"). 1,600,000 of such shares of Common Stock are
to be sold by the Company in the public offering contemplated by the Prospectus
contained in the Registration Statement through the underwriters named therein
(the "Underwriters") pursuant to the underwriting agreement described in such
Prospectus (the "Underwriting Agreement"), and up to 240,000 of such shares of
Common Stock may be sold upon the exercise of an over-allotment option granted
to the Underwriters by the Company in the Underwriting Agreement as described in
such Prospectus. In addition, the Company's Board of Directors has authorized
the issuance of such additional number of shares of Common Stock as the Company
may elect to include in a registration statement filed under Rule 462(b) under
the Act increasing the size of the offering registered under the Registration
Statement, should the Company make such an election. All shares of Common Stock
registered under the Registration Statement and any registration statement filed
under Rule 462(b) relating to the same offering registered under the
Registration Statement (a "Rule 462(b) Registration Statement") are herein
called the "Shares."
We have examined and are familiar with originals or copies, certified or
otherwise identified to our satisfaction, of such documents, corporate records
and other instruments relating to the incorporation of the Company and to the
authorization and issuance of the Shares, and have made such investigations of
law, as we have deemed necessary and advisable. In such examination, we have
assumed the
<PAGE> 2
CN Biosciences, Inc.
August 23, 1996
Page 2
genuineness of all signatures, the authenticity of all documents
submitted to us as originals and the conformity to authentic originals of all
documents submitted to us as copies.
Based upon the foregoing, we are of the opinion that:
1. The Company is duly incorporated and validly existing under the laws of
the State of Delaware; and
2. The Shares have been duly authorized and, when issued, delivered and
sold by the Company and paid for by the Underwriters, as contemplated by
the Underwriting Agreement and as described in the Registration
Statement, will constitute duly authorized, validly issued, fully paid
and non-assessable shares of Common Stock of the Company.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement referred to above and to any Rule 462(b) Registration
Statement and to the reference to our firm under the heading "Legal Matters" in
the Prospectus included in the Registration Statement and in any Rule 462(b)
Registration Statement. We do not admit by giving this consent that we are in
the category of persons whose consent is required under Section 7 of the Act.
Very truly yours,
/s/ Willkie Farr & Gallagher
<PAGE> 1
EXHIBIT 10(a)
AGREEMENT
BETWEEN
AMERSHAM INTERNATIONAL PUBLIC LIMITED COMPANY
AND
CALBIOCHEM-NOVABIOCHEM INTERNATIONAL INC
<PAGE> 2
DISTRIBUTOR AGREEMENT - AMERSHAM as distributor
THIS AGREEMENT (reference number D3/R951215a) is made the day of
1996
BETWEEN
(1) CALBIOCHEM-NOVABIOCHEM INTERNATIONAL INC of 10394 Pacific Center Court,
San Diego, CA 92121, USA ("SUPPLIER") and
(2) AMERSHAM INTERNATIONAL public limited company of Amersham Place, Little
Chalfont, Buckinghamshire HP7 9NA, England ("Amersham").
WHEREAS
A. SUPPLIER is engaged in the manufacture and sale of products comprising
antibodies, DNA probes, assays and biochemicals as more particularly
referenced in Schedule 1 hereto or as amended or varied by agreement in
writing between the parties from time to time (the "PRODUCTS"); and
B. AMERSHAM desires to market SUPPLIER's PRODUCTS under SUPPLIER's own
label and labels of SUPPLIER's affiliated companies; and
C. SUPPLIER is willing to supply AMERSHAM with the PRODUCTS on the terms
and conditions hereinafter set out.
IT IS HEREBY AGREED AS FOLLOWS:
1. APPOINTMENT
1.1 SUPPLIER appoints AMERSHAM and AMERSHAM accepts the
appointment as exclusive distributor of the SUPPLIER's
Catalogue of PRODUCTS for resale worldwide either directly by
AMERSHAM or through its subsidiaries, distributors, affiliates
and/or agents. SUPPLIER has identified at Schedule 2, its
current representatives, who have prior to the Effective Date
of this Agreement been given rights to SUPPLIER's Catalogue of
PRODUCTS. In the event that SUPPLIER needs to replace a
representative listed in Schedule 2 for reasons of
performance, SUPPLIER will review any replacement candidate
with AMERSHAM before such an appointment is made.
1.2 During the term of this Agreement AMERSHAM shall purchase
PRODUCTS exclusively from SUPPLIER and shall not market any
identical or substitute products of its own or third party
manufacture so long as PRODUCTS are available from SUPPLIER at
a price competitive and of equal performance with any such
identical or substitute products (provided always that
AMERSHAM shall be free to sell any products sold by AMERSHAM
prior to the date of this Agreement).
-1-
<PAGE> 3
1.3 The parties intend to negotiate a further agreement whereby
AMERSHAM will appoint SUPPLIER distributor of appropriate
AMERSHAM products and a further agreement to carry out a joint
R&D programme for future products.
1.4 If AMERSHAM fails to meet the minimum purchases in any year as
described in Clause 4 below SUPPLIER shall be entitled by
written notice to make AMERSHAM's rights non-exclusive or at
its option to terminate this Agreement.
2. DURATION
This Agreement shall be deemed to have commenced on the 1st day of
January 1996 (the "Effective Date") and shall remain in effect subject
to the provisions of Clause 13 for an initial period of three (3) years
and thereafter shall continue from year to year provided that either
party may terminate this Agreement by giving to the other party not
less than six (6) months prior written notice in accordance with Clause
16 such notice not to expire before the end of the aforesaid initial
period.
3. PRODUCTS
3.1 The PRODUCTS shall be manufactured or sourced by SUPPLIER with
all necessary skill and expertise using properly qualified and
experienced personnel, so as to accord with the specifications
referred to in Schedule 1 attached and the provisions of
Clause 10.
3.2 From time to time the SUPPLIER may have available new
products, which will be offered to AMERSHAM upon the same
terms and conditions set forth in the Agreement and are
hereinafter included in the definition of the PRODUCTS.
3.3 During the term of the Agreement AMERSHAM may place orders
with SUPPLIER for the PRODUCTS and SUPPLIER undertakes to
supply AMERSHAM with the PRODUCTS specified in such orders in
accordance with the instructions as to place of delivery,
quantity and dates contained in the orders. SUPPLIER shall
deliver within one (1) month of first order placement and
AMERSHAM shall provide monthly a three month rolling forecast.
Initial stock order value shall be $25,000.
3.4 SUPPLIER will use its best endeavours to advise AMERSHAM six
(6) months before any product is deleted from the range of
PRODUCTS supplied hereunder. The parties will agree a
replacement of the deleted product and the time schedule of
the deletion.
-2-
<PAGE> 4
3.5 All PRODUCTS purchased under this Agreement shall be subject
to AMERSHAM's standard Conditions of Purchase in force at the
date of supply insofar as applicable except where such
conditions are inconsistent with the express terms of this
Agreement. A copy of the current conditions is attached as
Schedule 3.
3.6 In the event that supplies of the PRODUCTS are limited owing
to circumstances of force majeure (as defined in Clause 14)
SUPPLIER shall supply AMERSHAM from available stocks in the
proportion that AMERSHAM's orders bear to total orders
received by SUPPLIER for the PRODUCTS.
4. MINIMUM PURCHASES
4.1 AMERSHAM shall purchase the following minimum annual value
(i.e gross invoice price less credits) of PRODUCTS for each
year beginning with the Effective Date.
Year 1 $ 500,000
Year 2 $1,000,000
Year 3 $1,500,000
4.2 If AMERSHAM fails to purchase such minimum in a year, SUPPLIER
may at its option by written notice (but within one (1) month
of year end):
4.2.1 be entitled to have any third party resell the
PRODUCTS in the Territory (notwithstanding Clause 1.
1 and Schedule 1); or
4.2.2 terminate this Agreement forthwith.
5. PRICES AND PAYMENT
5.1 Prices for the PRODUCTS shall be fixed as set out in Schedule
4 for the first 12 (twelve) months from the Effective Date of
this Agreement.
5.2 For subsequent years of the Agreement prices may be changed by
agreement between the parties to reflect actual changes in
SUPPLIER's costs. In normal circumstances any price change
once agreed shall remain fixed for a minimum period of 12
(twelve) months. However in exceptional circumstances where
raw material or manufacturing costs have increased or
decreased the parties will agree further price changes.
5.3 Payment will be made by AMERSHAM to SUPPLIER within sixty (60)
days of date of invoice which should be sent to AMERSHAM at
its registered office.
-3-
<PAGE> 5
5.4 AMERSHAM shall be free to set resale prices for the PRODUCTS
in the Territory.
6. DELIVERY, RISK AND TITLE
6.1 The point of delivery shall be either Amersham International
plc, Amersham Laboratories, Building 29, White Lion Road,
Amersham, Buckinghamshire HP7 9LL England or Amersham Life
Science, Inc, 2636 South Clearbrook Drive, Arlington Heights,
IL 60005, USA, as specified in the order.
6.2 Unless otherwise agreed in writing, SUPPLIER will deliver the
PRODUCTS ordered on the date specified in each order for the
PRODUCTS.
6.3 All shipments to be prepaid with shipping, handling and
insurance to be added to SUPPLIER's invoice.
6.4 Risk and title shall pass to AMERSHAM on delivery CIP at the
place specified in Clause 6.1.
7. PACKAGING
7.1 SUPPLIER agrees to supply the PRODUCTS in its standard
packaging and shall not change such packaging or labelling
without giving AMERSHAM at least one (1) months prior written
notice.
7.2 SUPPLIER shall make available to AMERSHAM computer media
versions or hard copy of promotional pieces developed to
market the Catalogue of PRODUCTS where practicable, in order
to assist AMERSHAM in the promotion of sales of PRODUCTS.
8. TECHNICAL INFORMATION AND KNOW-HOW
8.1 SUPPLIER will have available to supply to AMERSHAM on request
on or before the date hereof and throughout the Agreement
sufficient information, know-how and documentation to enable
AMERSHAM to sell the PRODUCTS in a proper manner.
8.2 The information and documentation shall include, but shall not
be limited to, the following:
8.2.1 quality control of the finished PRODUCTS;
8.2.2 information (if any) received by all relevant
regulatory authorities.
8.3 The SUPPLIER will at AMERSHAM's request give all reasonable
assistance necessary to obtain any licences required by
AMERSHAM with respect to the selling or promotion of the
PRODUCTS.
-4-
<PAGE> 6
8.4 The SUPPLIER will at AMERSHAM's request provide all reasonable
assistance necessary to answer queries from AMERSHAM's
customers regarding quality, handling or technical matters. At
AMERSHAM's request a qualified employee of the SUPPLIER may
meet with AMERSHAM's representatives to discuss these matters.
Reasonable travelling and hotel expenses will be reimbursed by
AMERSHAM on receipt of appropriate invoices.
9. MARKETING
9.1 The parties shall meet quarterly to review AMERSHAM sales
performance for the PRODUCTS and related forecasts,
promotional plans and market feedback.
9.2 AMERSHAM shall provide sales data by country and by PRODUCT
group at such review to enable SUPPLIER's local managers to be
credited with AMERSHAM sales of the PRODUCTS.
10. QUALITY AND WARRANTY
10.1 SUPPLIER warrants as follows:
10.1.1 that all PRODUCTS manufactured and supplied under
this Agreement shall be of good marketable quality
and shall accord with the technical specifications
referred to in Schedule 1 or such other specification
as has been agreed in writing between the parties in
substitution therefore;
10.1.2 that prior to delivery all tests and quality control
procedures referred to in Schedule 1 or otherwise
agreed will have been carried out in relation to each
unit of the PRODUCTS with satisfactory results;
10.1.3 that all PRODUCTS will be adequately contained,
packaged and labelled, will comply with all
applicable regulatory requirements and/or codes of
practice required for the marketing and distribution
of the PRODUCTS and will also comply with any
relevant product licence.
10.2 Without prejudice to AMERSHAM's rights hereunder SUPPLIER will
immediately notify AMERSHAM's Quality Controller by rapid
means of communication (eg. Facsimile or Telephone) in the
event of any circumstance coming to their knowledge which may
lead to a claim being made against AMERSHAM, its subsidiaries,
affiliates, distributors, agents and their respective
employees relating to the PRODUCTS including but not limited
to events such as contamination of any PRODUCTS or of any
PRODUCTS' failure or difficulties disclosed by the quality
control tests carried out
-5-
<PAGE> 7
on the PRODUCTS or any continued stability testing or of
non-AMERSHAM customer complaints relating to the materials
comprised in its PRODUCTS or any other aspect thereof, the
details of such notification to be confirmed in writing.
10.3 SUPPLIER will disclose to AMERSHAM particulars of the results
of the quality control tests carried out on the PRODUCTS if
these particulars are requested by AMERSHAM and will at the
request of AMERSHAM permit a duly authorised representative of
AMERSHAM to visit the SUPPLIER's site and/or to review the
manufacturing, quality control and quality assurance
procedures of the SUPPLIER to the extent that the SUPPLIER
manufactures the PRODUCTS. In the event that the SUPPLIER does
not manufacture PRODUCTS distributed or sold under the terms
of this Agreement, SUPPLIER will, on a best efforts basis,
assist AMERSHAM to arrange visits to the source manufacturer
when requested.
10.4 Alterations in quality control procedures and technical
specifications may be introduced from time to time but
SUPPLIER will use its best endeavours to inform AMERSHAM of
any changes three (3) months in advance by written notice.
10.5 On receipt of any claim SUPPLIER will within 30 (thirty) days
provide AMERSHAM or its subsidiary, affiliate, distributor,
agent or customer with replacement PRODUCTS or parts thereof
to the extent necessary to meet SUPPLIER's warranties
contained in Clause 3.1 and this Clause 10 or to make good any
shortages or non-completed deliveries.
10.6 SUPPLIER will reimburse AMERSHAM for any reasonable, necessary
and documented expenses and losses incurred by AMERSHAM by
reason of the withdrawal or recall of the PRODUCTS or any
parts thereof from the market on the grounds of safety, health
or other hazard. However such expenses shall not include other
consequential damages incurred by AMERSHAM's customers.
11. INDEMNITY
11.1 Except to the extent AMERSHAM has been negligent in relation
to any claims referred to below, SUPPLIER shall indemnify and
hold AMERSHAM harmless against and assume the defence of any
and all product liability and other claims arising from or
relating to the PRODUCTS supplied to AMERSHAM. If AMERSHAM has
actual notice that such a claim shall be or has been made
against it involving the PRODUCTS, AMERSHAM shall immediately
inform SUPPLIER thereof and without prejudice to AMERSHAM's
rights may require SUPPLIER and its insurers to conduct the
defence of such claim, including possible negotiations for
settlement thereof. Such defence and
-6-
<PAGE> 8
negotiation shall be conducted in such a manner and on such
terms as AMERSHAM may specify at its own discretion.
11.2 SUPPLIER undertakes that to the best of its knowledge the use
and/or sale of the PRODUCTS by AMERSHAM does not and will not
infringe any patent, registered design, trade mark or other
intellectual property right of any third party and agrees to
indemnify AMERSHAM in respect of any claims, costs, losses,
expenses or damages it may incur as a result of the breach of
this undertaking.
11.3 In the event of an infringement occurring SUPPLIER shall use
best efforts either:
11.3.1 to procure the right for AMERSHAM to continue to sell
the infringing PRODUCTS; or
11.3.2 to replace the infringing PRODUCTS with suitable non-
infringing PRODUCTS.
12. CONFIDENTIAL INFORMATION
12.1 Save as may be required under this Agreement neither party
shall disclose or permit to be disclosed to any third party or
use any confidential information of the other during this
Agreement. For these purposes confidential information shall
include, but not be limited to, any specific requirements,
improvements or specifications with respect to the PRODUCTS
which AMERSHAM may have disclosed to SUPPLIER or any
manufacturing procedures, sources of supply, technical
know-how with respect to the PRODUCTS which the SUPPLIER may
have disclosed to AMERSHAM.
12.2 The provisions of Clause 12.1 shall not apply to:
12.2.1 information which at the time of disclosure is
published or otherwise generally available to the
public;
12.2.2 information which after disclosure by one party is
published or becomes generally available to the
public;
12.2.3 information which was in the possession of one party
at the time of disclosure and which was not acquired
directly or indirectly from the other;
12.2.4 information rightfully acquired by one party from a
third party who did not obtain it under pledge of
secrecy to the other.
-7-
<PAGE> 9
12.3 The obligations set out above shall survive the termination of
this Agreement by five (5) years.
13. TERM AND TERMINATION
13.1 This Agreement may be terminated by either party on giving 30
(thirty) days written notice to the other in the event of:
13.1.1 a breach of any of its material terms by the other
not having been remedied within 60 (sixty) days of
receiving written notice to do so;
13.1.2 the liquidation or insolvency of or the filing of
bankruptcy proceedings by the other except as part of
a bona fide scheme for reconstruction or
amalgamation;
13.1.3 either party ceasing to trade.
13.2 Such termination shall in all cases be without prejudice to
existing rights and obligations of both parties hereto.
14. FORCE MAJEURE
14.1 Neither party shall be liable for any failure to fulfil any
term or condition of this Agreement if fulfilment has been
delayed, hindered or prevented by any event of force majeure
including, but not limited to, any strike, lock out or other
industrial dispute, acts of the elements, compliance with
requirements of any government or international authority,
plant breakdown or failure of equipment, inability to gain
equipment, fuel, power, materials or transportation, or by any
circumstances whatsoever beyond its reasonable control.
14.2 Promptly following the date any event of force majeure
commences the party concerned shall advise the other party in
writing of the date and the nature of the event and upon
receipt of such notification the operation of the Agreement
(except obligations to make payment of invoices due) shall be
suspended until the event of force majeure ceases.
14.3 If an event of force majeure lasts for longer than three (3)
months then either party shall have the right to terminate
this Agreement upon fourteen (14) days written notice to the
other.
15. NON-ASSIGNMENT
Neither party to this Agreement shall have the right to assign,
transfer, sub-divide or otherwise deal with any obligations or benefit
under this Agreement without the written consent of the other save that
-8-
<PAGE> 10
AMERSHAM may at its option-assign the benefit or obligations to any of
its wholly owned subsidiaries.
16. NOTICES
All notices provided for in this Agreement shall be in writing and
shall be deemed validly sent when sent by first class post or air mail
postage prepaid or by facsimile transmission (fax), addressed to the
respective parties as follows:
If to AMERSHAM: If to SUPPLIER:
Attention: Company Secretary Attention: Company Secretary
Calbiochem-Novabiochem
Amersham International plc International Inc
Amersham Place 10394 Pacific Center Court
Little Chalfont San Diego, CA 92121, USA
Buckinghamshire
England HP7 9NA
Tel: 01494 544000 Tel: 001 619 450 9600
Fax: 01494 542266 Fax: 001 619 450 5522
with a copy to Nicola Scott.
17. DISTRIBUTOR STATUS
For the purpose of carrying out this Agreement AMERSHAM shall act as an
independent contractor and not as an agent and shall not bind nor
attempt to bind SUPPLIER to any contract.
18. MISCELLANEOUS
18.1 The failure of either party to enforce its rights under this
Agreement at any time for any period shall not be construed as
a waiver of such rights.
18.2 No changes or modification are to be made to this Agreement
unless evidenced in writing and signed for and on behalf of
both parties.
18.3 The clause headings herein are for convenience only and shall
not affect the construction or interpretation of this
Agreement
18.4 Except where the context otherwise permits or requires, the
singular number shall include the plural number and vice versa
and the masculine gender shall include either or both of the
feminine gender and the neuter gender and vice versa.
18.5 For the purposes of this Agreement, subsidiary means any
subsidiary or holding company of AMERSHAM as defined in
Section 736 of the UK Companies Act 1985 (as amended).
-9-
<PAGE> 11
18.6 For the purposes of this Agreement affiliate or affiliated
company means any company, partnership, joint venture, or
other entity which directly or indirectly controls, is
controlled by or is under common control with a party hereto
where control shall mean the possession of fifty percent (5O%)
or more of the voting stock or the power to direct or cause
the direction of the management and policies of the controlled
entity, whether through the ownership of voting rights, by
contract or otherwise.
19. LEGAL CONSTRUCTION
This Agreement shall be governed by and construed in accordance with
Illinois law and all claims, disputes and matters in difference shall
be decided by the Illinois Courts to which jurisdiction both parties
submit.
IN WITNESS WHEREOF the parties have set their hands the day and year first
before written.
Signed for and on behalf of Signed for and on behalf of
AMERSHAM INTERNATIONAL plc CALBIOCHEM-NOVABIOCHEM
INTERNATIONAL INC
Signature /s/ T.J. Nicholls Signature /s/ Stelios B Popadopoulos
--------------------------- ------------------------
Name (capitals) T.J. NICHOLLS Name: Stelios B Popadopoulos
---------------------
Position Commercial Director Position: Chairman & C.E.O.
---------------------------
Date 19/3/96 Date 3/29/96
-------------------------------- -----------------------------
GKM/14th March 1996
-10-
<PAGE> 12
SCHEDULE 1
The PRODUCTS
(referred to in Recital A)
The Products are listed in SUPPLIER's Apoptosis US Catalogue of Products for
1996 which contains the specification to be met by each Product, together with
updates supplied to AMERSHAM from time to time.
-11-
<PAGE> 13
SCHEDULE 2
List of other Representatives
(referred to in Clause 1.1)
1. Any company which is a "subsidiary" of the SUPPLIER within the meaning
given the term in section 736, UK Companies Act 1985.
2. The following representatives:
-12-
<PAGE> 14
<TABLE>
<CAPTION>
<S> <C> <C> <C>
AUSTRALIA AND NEW FRANCE KOREA TAIWAN
ZEALAND FRANCE BIOCHEM KORMED CORP. CASHMERE SCIENTIFIC CO.
CALBIOCHEM-NOVABIOCHEM PTY 85 Rue Henri Barbusse Rm. 500, Jin Building Immunological Division
12/17-21 Bowden Street 92190 Meudon 212-2, Nonhyun-Dong No 51, 7th Floor, Chiyuen 3rd Road
P.O. Box 140 FRANCE KangNam-Ku Taipei
Alexandria, NSW 2015 Tel: 331 4626 7870 Seoul 135-010 TAIWAN 112
AUSTRALIA Fax: 331 4534 2520 KOREA Tel: 886 2 541 6188
Tel: 61 2 318 0322 Tel: 82 5 540 4663 Fax: 886 2 562 7894
Free Call: 1 800 023 956 GERMANY Fax: 82 5 544 4539
Fax: 61 2 319 2440 dianova UNITED KINGDOM
Klein Fontenay I KORAM BIOTECH CORP. Cambridge BioScience
AUSTRIA 20354 Hamburg Koram Bldg. 664-31 24-25 Signet Court
R.U.P. MARGARITELLA Ges.m.b.H. GERMANY Yorksam-Dong Newmarket Road
BIO-TRADE Tel: 49 40 450670 Kang Nam-Ku Cambridge CB58LA
Breitenfurter Strasse 480 Fax: 49 40 45067490 Seoul 135-080 ENGLAND
1230 Wien-Rodaun KOREA Tel: 44 1223 316855
AUSTRIA CALBIOCHEM-NOVABIOCHEM Tel: 822 556 0311 Fax: 44 1223 360732
Tel: 431 889 1819 GMBH Fax: 822 556 0828 email: [email protected]
Fax: 431 889 181920 Lisztweg 1, D-65812 Bad Soden
P.O. Box 1167, D-65796 Bad Soden NETHERLANDS CALBIOCHEM-NOVABIOCHEM
BENELUX GERMANY OMNILABO INTERNATIONAL B.V. (UK) LTD.
SANBIO BV Tel: 49 6196 63955 or 56 Postbus 3939 Boulevard Industrial Park
Frontstraat 2A Fax: 49 6196 62361 4800 DX BREDA Padge Road
5405 PB Uden Takkebijsters 62 Beeston
NETHERLANDS ISRAEL 4817 BL BREDA Nottingham NG9 2JR
Tel: 31 413 251115 MEGAPHARM LTD. The NETHERLANDS UNITED KINGDOM
Fax: 31 413 266605 19, Hankin Street Tel: 06 099 77 75 (gratis) Tel: 44 1159 430 840
P.O. Box 519 076 5795 795 Fax: 44 1159 430 951
CANADA Hod Ha' Sharon 45105 Fax: 076 5876 236
CALBIOCHEM-NOVABIOCHEM ISRAEL UNITED STATES
INTERNATIONAL Tel: 972 990 4514 SPAIN CALBIOCHEM-NOVABIOCHEM
84 Rogers Street Fax: 972 990 4514 ITISA INTERNATIONAL
Cambridge, MA 02142 Pol Ind Valverde 84 Rogers Street
U.S.A. ITALY Anti Crta Burgos, KM 11, 5 Cambridge, MA 02142
Tel: 1 800 662 2616 INALCO S.P.A. 28049-Madrid U.S.A.
1 800 854-3437 Divisione Labo SPAIN Tel: 800 662 2616
617 577 9333 Via Calabiana 18 Tel: 34 1 358 9208 800 854 3417
Fax: 1 800 828 4871 20139 Milano Fax: 34 1 358 9754 617 577 9333
617 577 8015 ITALY 619 450 9600
Tel: 39 2 5521 3005 SWEDEN Fax: 1 800 828 4871
DENMARK Fax: 39 2 569 4518 LABKEMI AB 617 577 8015
BIE & BERNTSEN LTD. Telex: 332127 INALI Solkraftsvagen 14C
Sandbaekvej 7 135 70 Stockholm
Roedovre DK-2610 JAPAN SWEDEN
DENMARK CosmoBio Co Ltd Tel: 4631 49 0640
Tel: 4544 94 88 22 Toyo Ekimae Building Fax: 4631 47 7890
Fax: 4544 94 27 09 2 2 20 Toyo, Koto-ku
Tokyo 135 SWITZERLAND
JAPAN JURO SUPPLY AG
Tel: 81 3 5632 9620 Cysatstrasse 23A
Fax: 81 3 5632 9619 P.O. Box 5334
CH-6000 Lucerne 5
SWITZERLAND
Tel: 4141 01 651
Fax: 4141 04 564
</TABLE>
<PAGE> 15
SCHEDULE 3
AMERSHAM's Conditions of Purchase
(referred to in Clause 3.5)
-13-
<PAGE> 16
CONDITIONS OF PURCHASE
I DEFINITIONS
1.1 The "COMPANY" Shall mean AMERSHAM INTERNATIONAL public limited company.
1.2 The "SUPPLIER" shall mean the person, firm, company or other
organisation to whom the COMPANY's purchase order is issued.
1.3 The "GOODS" shall mean all items including services covered by the
COMPANY's purchase order.
1.4 The "CONTRACT" shall mean the agreement between the COMPANY and the
SUPPLIER consisting of the purchase order, these Conditions of Purchase and any
other documents or conditions specified or referred to in the purchase order.
2 GENERAL
All CONTRACTS entered into by the COMPANY are subject to and governed solely by
these Conditions which may only be varied by the COMPANY in writing and in any
event supply of the GOODS by the SUPPLIER shall constitute acceptance of these
Conditions.
3 DESCRIPTION
3.1 The GOODS shall be fit for the intended purpose of use where made known
to the SUPPLIER in writing and of the quality described in, and in accordance in
all respects with the terms of, the CONTRACT and any other relevant details
drawn to the SUPPLIER's attention prior to the CONTRACT.
3.2 Unless otherwise agreed in writing the GOODS shall be strictly in
accordance with the latest relevant British Standard Specification and/or codes
of practice.
3.3 The SUPPLIER shall ensure that the GOODS comply with all relevant
regulatory requirements and/or codes of practice of which it should reasonably
be aware including but not limited to those specifically notified to it by the
COMPANY in writing as part of the CONTRACT.
4 DELIVERY, RISK AND TITLE
4.1 The date of delivery shall be that specified in the CONTRACT.
4.2 Should the GOODS or any part of them not be delivered within the time
specified in the CONTRACT the COMPANY shall have the right to terminate the
CONTRACT either wholly or to the extent of the SUPPLIER's default.
4.3 Unless otherwise agreed in writing delivery of the GOODS shall be made by
the SUPPLIER at the place and in the manner specified in the CONTRACT.
4.4 Risk in and title to the GOODS shall pass to the COMPANY on delivery.
4.5 The COMPANY's order number stated overleaf must be clearly quoted on all
despatch documentation.
5 LOSS OR DAMAGE IN TRANSIT
5.1 The COMPANY shall advise the SUPPLIER of any damage, loss or non-delivery
of part of a properly documented consignment of GOODS within seven days of
delivery.
5.2 The SUPPLIER shall forthwith make good free of charge to the COMPANY any
loss or damage to the GOODS notified under Condition 5.1.
6 INSPECTION AND REJECTION
6.1 The COMPANY may inspect the GOODS during a reasonable period after
delivery has been made and shall then have the right to reject any GOODS which
do not conform with the provisions of Condition 3 by written notification to the
SUPPLIER.
6.2 The COMPANY shall have the right in respect of any GOODS rejected under
Condition 6.1 to purchase similar goods elsewhere and return the rejected GOODS
at the SUPPLIER's risk and expense but without prejudice to any other right the
COMPANY may have against the SUPPLIER.
6.3 Before exercising its right to purchase elsewhere under Condition 6.2 the
COMPANY shall allow the SUPPLIER a reasonable period at its own risk and expense
to remove the GOODS rejected by the COMPANY and replace them with GOODS which
comply with the provisions of the CONTRACT.
7 PRICE AND PAYMENT
7.1 The price for the GOODS shall be as specified in the CONTRACT.
7.2 Unless otherwise stated in the CONTRACT or unless the GOODS are rejected
under Condition 6 payment shall be made at the end of the calendar month
following the calendar month in which the COMPANY receives the GOODS or the date
of the SUPPLIER's invoice whichever is the later.
7.3 Value Added Tax where applicable shall be shown separately on all
invoices.
8 DOCUMENTS AND INFORMATION
8.1 All specifications, plans, drawings, process information, patterns,
designs and other information issued or communicated by the COMPANY to the
SUPPLIER in connection with the CONTRACT are confidential and shall not be used
by the SUPPLIER except for the purposes of the CONTRACT, nor be copied,
reproduced, published or disclosed to any third party without the consent in
writing of the COMPANY.
8.2 Title to all items referred to in Condition 8.1 shall remain with the
COMPANY at all times and such items shall be returned to the COMPANY on
fulfilment of the CONTRACT.
9 PACKAGING AND LABELLING
9.1 The SUPPLIER shall be responsible at its own expense for the safe and
suitable packaging of the GOODS.
9.2 The SUPPLIER undertakes to observe the requirements of all relevant
United Kingdom and international agreements and regulations relating to
the packaging, labelling and carriage of the GOODS.
9.3 The SUPPLIER shall ensure that all information held by or reasonably
available to it regarding any potential hazards known of believed to exist in
the transport, handling or use of the GOODS shall be received by the COMPANY in
writing prior to delivery of the GOODS.
10 ASSIGNMENT AND SUB-CONTRACTING
10.1 The CONTRACT shall not be assigned by the SUPPLIER nor sub-contracted
either in whole or in part except with the COMPANY's written consent. This shall
not be necessary in the case of sub-contracts for materials, or for minor items
or for any part of the work so specified in the CONTRACT.
10.2 The SUPPLIER shall be responsible for all work done or GOODS supplied by
any sub-contractor but shall ensure that the COMPANY has the right to approach
the sub-contractor direct and to inspect the GOODS at the sub-contractor's
premises at all reasonable times.
11 INDEMNITIES
Except to the extent that any claim arises as a result of the negligence of the
COMPANY or the manufacture of the GOODS in accordance with a design or
instruction furnished by the COMPANY, the SUPPLIER:
11.1 warrants that the sale and use of the GOODS by the COMPANY does not and
will not infringe any patent or other intellectual property rights of any third
party and undertakes to indemnify the COMPANY in respect of any loss, expense or
damage the COMPANY may incur as a result of a breach of this warranty.
11.2 undertakes to indemnify the COMPANY in respect of any loss, expense or
damage the COMPANY may incur if the use to which the GOODS are put constitutes a
breach of any United Kingdom or overseas safety legislation;
11.3 undertakes to indemnify the COMPANY and hold it harmless against and
assume the defence of any product liability and other third party claims
resulting from GOODS supplied under the CONTRACT.
12 FORCE MAJEURE
12.1 Neither party shall be liable for any failure to fulfil any term or
condition of the CONTRACT if fulfilment has been delayed, hindered or prevented
by circumstances beyond its reasonable control.
12.2 During any period of force majeure the party affected shall at all times
use its reasonable endeavours to minimise the adverse effects on the other
party.
12.3 If an event of force majeure exceeds a reasonable period either party
shall have the right to terminate the CONTRACT upon 14 days written notice to
the other.
13 INSOLVENCY
It the SUPPLIER becomes bankrupt or makes any arrangement with its creditors or
being a company goes into liquidation or has a receiver appointed or any
equivalent of these occurrences under foreign law the COMPANY may without
compensation forthwith terminate the CONTRACT by notice to the SUPPLIER without
prejudice to any other rights or remedies the COMPANY may have.
14 MISCELLANEOUS
14.1 The failure by the COMPANY to enforce its rights under the CONTRACT at
any time shall not be construed as a waiver of any such right.
14.2 Employees, agents and representatives of the SUPPLIER visiting any of
the COMPANY's sites shall be subject to such safety and security regulations as
may be in force on that site.
14.3 The COMPANY shall have the right to set off any amounts owed by it to
the SUPPLIER against unpaid invoices due from the SUPPLIER to the COMPANY.
14.4 In the event of any inconsistency between these Conditions of Purchase
and any additional conditions forming part of the CONTRACT the additional
conditions shall prevail.
15 GOVERNING LAW
This CONTRACT shall be governed by and construed in accordance with the Laws of
England.
<PAGE> 17
SCHEDULE 4
Prices
(referred to in Clause 5.1)
Prices for the Products shall be those prices quoted in SUPPLIER's US catalogue
for 1996, less the following discounts:-
Kits 50%: where SUPPLIER achieves a minimum 50% gross margin. If a 50%
gross margin is not achieved by the SUPPLIER a specific price
will be agreed in writing between the parties for such Kits.
Reagents 33%
Chemicals 20%
-14-
<PAGE> 1
EXHIBIT 10(b)
AGREEMENT
This Agreement is made and entered into as of this __ day of
August, 1996, by and among CN Biosciences, Inc., a Delaware corporation (the
"Company"), Warburg, Pincus Investors, L.P., a Delaware limited partnership
("Warburg"), ABS MB (C-N) Limited Partnership, a Maryland limited partnership
("ABS"), Stelios B. Papadopoulos ("Papadopoulos"), John T. Snow ("Snow") and Ben
Matzilevich ("Matzilevich").
WHEREAS, Warburg is the sole holder of the 4,001 outstanding shares of
the Company's Series A Convertible Preferred Stock, par value $1.00 per share
(the "Series A Convertible Preferred Stock");
WHEREAS, Warburg, ABS, Papadopoulos and Snow (collectively, the "Series
B Holders") are the holders of 124,023, 50,356, 4,377 and 672 shares of the
Company's Series B Preferred Stock, par value $1.00 per share (the "Series B
Preferred Stock"), constituting all of the outstanding shares of Series B
Preferred Stock;
WHEREAS, the Company is contemplating an initial public offering (the
"Offering") of its Common Stock, par value $.01 per share (the "Common Stock"),
and in connection therewith, the Company desires that the outstanding shares of
Series A Convertible Preferred Stock be converted into shares of the Company's
Class A Common Stock, par value $.01 per share (the "Class A Common Stock"), and
the outstanding shares of Series B Preferred Stock be exchanged for shares of
Common Stock;
WHEREAS, Warburg and ABS currently have certain rights with respect to
the nomination and election of directors to the Company's Board of Directors,
which rights, by their terms, will terminate upon the consummation of the
Offering; and
WHEREAS, to induce Warburg and ABS to enter into this Agreement and in
consideration of their agreement to exchange Series B Preferred Stock for shares
of Common Stock, the Company is willing to grant Warburg and ABS certain new
rights with respect to the nomination and election of directors on the terms set
forth herein.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions hereinafter set forth, the parties hereto hereby agree as follows:
<PAGE> 2
Section 1. Conversion of Series A Convertible Preferred Stock.
(a) On the closing date of the Offering (the "Consummation Date"), all
shares of Series A Convertible Preferred Stock shall automatically be converted
into shares of Class A Common Stock in accordance with the terms of the Series A
Convertible Preferred Stock. The execution of this Agreement by Warburg shall
constitute both the requisite notice to the Company of Warburg's intention to
convert its shares of Series A Convertible Preferred Stock and the consent of
the sole holder of the outstanding shares of Series A Convertible Preferred
Stock to such conversion as required by the terms of the Series A Convertible
Preferred Stock.
(b) As of the Consummation Date, the shares of Series A Convertible
Preferred Stock held by Warburg shall cease to exist and Warburg shall cease to
have any rights with respect thereto, except the right to receive the requisite
number of shares of Class A Common Stock provided by the terms of the Series A
Convertible Preferred Stock.
(c) On the Consummation Date, Warburg shall surrender to the Company
stock certificates representing all of the shares of Series A Convertible
Preferred Stock held by it, together with executed stock power assignments to
the Company. Upon conversion of the Series A Convertible Preferred Stock, the
Company shall promptly deliver to Warburg certificates in Warburg's name
representing 788,814 shares of Class A Common Stock.
Section 2. Exchange of Series B Preferred Stock.
(a) On the Consummation Date, all shares of Series B Preferred Stock
shall be exchanged for shares of Common Stock as determined in accordance with
Section 2(b) hereof.
(b) Each Series B Holder shall receive, in exchange for its shares of
Series B Preferred Stock, that number of shares of Common Stock as will be equal
to (i) the number of shares of Series B Preferred Stock held by such Series B
Holder multiplied by (ii) $100 (the liquidation preference of a share of Series
B Preferred Stock) divided by the initial public offering price of the Common
Stock as set forth on the cover page of the final prospectus relating to the
Offering. No fractional shares shall be issued. In the event that the this
calculation results in a fractional share amount, the number of shares of Common
Stock to be issued shall be rounded up to the next whole number if the fraction
is greater than or equal to one-half and rounded down to the next lesser whole
number if the fraction is less than one-half.
(c) As of the Consummation Date, all shares of Series B Preferred Stock
shall cease to exist and the holders thereof shall cease to have any rights with
respect thereto, except the
-2-
<PAGE> 3
right to receive shares of Common Stock in accordance with the terms of this
Agreement.
(d) On the Consummation Date, each Series B Holder shall surrender to
the Company stock certificates representing all of the shares of Series B
Preferred Stock held by it, together with executed stock power assignments to
the Company. Upon the exchange of the Series B Preferred Stock, the Company
shall promptly deliver to the Series B Holders certificates in their respective
names representing the requisite number of shares of Common Stock as determined
in accordance with Section 2(b) hereof.
Section 3. Termination of Subscription and Shareholder Agreement;
Rights to Nominate Directors.
(a) On the Consummation Date, that certain Subscription and Shareholder
Agreement, dated March 13, 1992, initially among the Company, Warburg, ABS,
Snow, Richard Slansky and Georges Chappuis, shall terminate and have no further
force or effect.
(b) From the Consummation Date and for as long as Warburg owns
beneficially at least 20% of the outstanding shares of Common Stock, the Company
shall nominate and use reasonable efforts to have two individuals designated by
Warburg and reasonably acceptable to the Company elected to the Company's Board
of Directors, and from the date that Warburg owns beneficially less than 20% of
the outstanding shares of Common Stock but for so long at it owns beneficially
at least 10% of the outstanding shares of Common Stock, the Company shall
nominate and use reasonable efforts to have one individual designated by Warburg
and reasonably acceptable to the Company elected to the Company's Board of
Directors. From the Consummation Date and for so long as ABS owns beneficially
at least 10% of the outstanding shares of Common Stock, the Company shall
nominate and use reasonable efforts to have one individual designated by ABS and
reasonably acceptable to the Company elected to the Company's Board of
Directors. For purposes hereof, beneficial ownership shall have the meaning
given to such term under Rule 13d-3 promulgated under the Securities Exchange
Act of 1934.
Section 4. Registration Rights.
With respect to the shares of Common Stock issuable (a) upon the
conversion of shares of Class A Common Stock, which are issuable upon the
conversion of the shares of Series A Convertible Preferred Stock contemplated by
Section 2 hereof, and (b) upon the exchanges of the shares of Series B Preferred
Stock contemplated by Section 3 hereof, such shares of Common Stock shall be
deemed to be "Registrable Securities" under the Registration Rights Agreement,
dated as of March 13, 1992, among the Company and certain holders of the
Company's securities, and the holders thereof shall be entitled to the rights
and subject to the obligations set
-3-
<PAGE> 4
forth therein as if such rights and obligations were set forth in full herein.
The execution of this Agreement by the parties hereto shall constitute a consent
(under such Registration Rights Agreement) to the grant of registration rights
hereby.
Section 5. Representations and Warranties.
(a) The Company represents and warrants to Warburg, ABS, Papadopoulos,
Snow and Matzilevich as follows:
(i) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware.
(ii) The Board of Directors of the Company has authorized the
execution, delivery and performance of this Agreement and each of the
transactions contemplated hereby. Any consents of third parties that may be
required to be obtained by the Company for the execution, delivery or
performance of the transactions contemplated hereby have been obtained.
(iii) This Agreement constitutes the valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms.
(iv) As of the date hereof, the Company's authorized, issued and
outstanding capital stock consists of the following: 30,000,000 shares of Common
Stock authorized, of which 1,087,875 shares are issued and outstanding; 800,000
shares of Class A Common Stock authorized, no shares of which are issued and
outstanding; 5,000 shares of Series A Convertible Preferred Stock authorized, of
which 4,001 shares are issued and outstanding; 200,000 shares of Series B
Preferred Stock authorized, of which 179,428 shares are issued and outstanding;
and 5,000,000 shares of Preferred Stock, par value $.01 per share, authorized,
no shares of which are issued and outstanding. The Company has previously issued
a warrant to purchase 3,028 shares of Common Stock and has granted options to
purchase an aggregate of 393,914 shares of Common Stock. An additional 359,559
shares of Common Stock are reserved for future issuances of options under the
Company's Amended and Restated 1992 Stock Option Plan. All outstanding shares of
capital stock of the Company have been duly authorized and validly issued and
are fully paid and nonassessable, and were not issued in violation of any
preemptive or similar rights.
(v) The shares of Common Stock and Class A Common Stock to be issued
in connection herewith, and the shares of Common Stock issuable upon conversion
of the shares of Class A Common Stock, when delivered for the applicable
-4-
<PAGE> 5
consideration, will be duly authorized, validly issued, fully paid and
nonassessable shares of the Company, and free of any preemptive or similar
rights.
(b) Each of Warburg, ABS, Papadopoulos and Snow severally represent and
warrant to the Company as follows, and Matzilevich represents and warrants to
the Company as to (b)(i) and (b)(ii) only:
(i) The execution, delivery and performance of this Agreement have
been duly authorized and all consents of third parties that may be required to
be obtained by such person for the consummation of the transactions contemplated
hereby have been obtained.
(ii) This Agreement constitutes the valid and binding obligation of
such person and is enforceable against such person in accordance with its terms.
(iii) The shares of Class A Common Stock or Common Stock, as
applicable, are being acquired for such person's own account for investment and
not with a view towards the resale, transfer or distribution thereof, nor with
any present intention of distributing such securities. No other person has any
right with respect to or interest in the Common Stock or Class A Common Stock,
as applicable, being acquired by such person, nor has such person agreed to give
any person any such interest or right in the future.
(iv) Such person understands that the shares of Class A Common Stock
or Common Stock, as applicable, being acquired in connection herewith have not
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), nor qualified under any state securities laws, and that they are being
offered and sold pursuant to an exemption from such registration and
qualification based in part upon the representations contained herein.
(v) Such person has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of the
investment(s) contemplated by this Agreement and is able to bear the economic
risk of investment in the Company (including a complete loss of investment).
(vi) Such person understands that absent registration under the
Securities Act and qualification under applicable state securities laws, the
shares of Class A Common Stock or Common Stock, as applicable, may not be
transferred without an opinion of counsel reasonably satisfactory to the Company
stating that an exemption from such registration and qualification is available,
and such person must otherwise bear the economic risk of this investment
indefinitely unless such person's securities are registered pursuant to the
Securities Act and qualified under
-5-
<PAGE> 6
applicable state securities laws or an exemption from qualification is
available.
Section 6. Covenants.
(a) Warburg, ABS, Papadopoulos and Snow each covenant that such person
will not sell or otherwise transfer the shares acquired hereunder (or, in the
case of Warburg, any shares of Common Stock acquired upon the conversion of the
Class A Common Stock) except pursuant to an effective registration under the
Securities Act or in a transaction which qualifies as an exempt transaction
under the Securities Act and the rules and regulations promulgated thereunder
and any applicable state securities laws.
(b) The certificates evidencing the shares of Common Stock and Class A
Common Stock issued hereunder shall bear the following legend:
"The securities evidenced hereby have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and may not
be transferred except pursuant to an effective registration under the
Securities Act or in a transaction which, in the opinion of counsel
reasonably satisfactory to the Company, qualifies as an exempt
transaction under the Securities Act and the rules and regulations
promulgated thereunder."
(c) Pending the closing of the transactions contemplated hereby, the
Company will not, without the prior written consent of the other parties hereto,
take any action which would result in any of the representations or warranties
contained in this Agreement not being true at and as of the time immediately
after such action, or result in any of the covenants contained in the Agreement
becoming incapable of performance. The Company will promptly advise such parties
of any action or event of which it becomes aware which has the effect of making
incorrect any of such representations or warranties or which has the effect of
rendering any of such covenants incapable of performance. Pending the closing of
the transactions contemplated hereby, the Company shall not issue any shares of
capital stock of the Company except pursuant to this Agreement, in connection
with the Offering and in connection with the exercise of outstanding stock
options and the outstanding warrant to purchase shares of Common Stock, and
Warburg, ABS, Papadopoulos and Snow shall not transfer any shares of Series A
Convertible Preferred Stock or Series B Preferred Stock, as applicable.
(d) Each of the parties shall execute such documents and other papers
and take such further actions as may be reasonably required or desirable to
carry out the provisions hereof and the transactions contemplated hereby.
-6-
<PAGE> 7
Section 7. Termination.
This Agreement shall terminate on December 31, 1996 if the Consummation
Date shall not have occured prior to such date.
Section 8. Notices.
All notices or other communications required or permitted to be given
hereunder or necessary in connection herewith shall be in writing and shall be
deemed to have been duly delivered upon delivery, if delivered personally, upon
the transmission thereof, if sent by facsimile transmission, on the second
business day after delivery to an air courier company for express delivery, or
on the seventh business day after mailing, if mailed, postage prepaid,
registered or certified mail. Such notices shall be delivered to such partys'
business address maintained on the books of the Company, or such other address
as such party shall have furnished to the other parties hereto.
Section 9. Miscellaneous.
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware without regard to choice of law
principles thereof.
(b) The share numbers contained herein give effect to the
2.36585-for-one stock split, effected in the form of a stock dividend of 1.36585
shares of Common Stock per share of Common Stock, declared by the Company's
Board of Directors on July 16, 1996.
(c) The headings of the sections of this Agreement are for convenience
only and shall not be deemed to constitute a part of this Agreement.
(d) This Agreement constitutes the entire understanding of the parties
hereto and supersedes all prior agreements or understandings among the parties
relating to the subject matter hereof. This Agreement may be amended, and the
observance of any term of this Agreement may be waived, with (and only with) the
written consent of all parties hereto.
(e) This Agreement may be executed in any number of counterparts, each
of which when so executed and delivered shall be deemed an original, and such
counterparts together shall constitute only one instrument.
-7-
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth above.
CN BIOSCIENCES, INC.
By:
---------------------------------
Name:
Title:
WARBURG, PINCUS INVESTORS, L.P.
By: Warburg, Pincus & Co., its
General Partner
By:
---------------------------------
Name:
Title:
ABS MB (C-N) LIMITED PARTNERSHIP
By: ABS MB Ltd., its
General Partner
By:
---------------------------------
Name:
Title:
------------------------------------
Stelios B. Papadopoulos
------------------------------------
John T. Snow
------------------------------------
Ben Matzilevich
-8-
<PAGE> 1
EXHIBIT 10(c)(i)
COMMERCIAL LEASE
BETWEEN
LMP PROPERTIES, LTD.
AND
CALBIOCHEM CORPORATION
Lot 27 PACIFIC CORPORATE CENTER
SAN DIEGO, CALIFORNIA
Dated: February 1, 1992
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Title Page
- ------- ----- ----
<S> <C> <C>
1. Basic Provisions 1
2. Premises 2
3. Term 4
4. Rent 6
5 Security Deposit 6
6. Use 7
7. Maintenance; Repairs;
Utility Installations;
Trade Fixtures and
Alterations 11
8. Insurance;Indemnity 16
9. Damage or Destruction 23
10. Real Property Taxes 30
11. Utilities 33
12. Assignment and Subletting 33
13. Default; Breach; Remedies 38
14. Condemnation 43
15. Broker's Fee 44
16. Tenancy Statement 44
17. Lessor's Liability 45
18. Severability 45
19. Interest on Past-Due
Obligations 45
20. Time of Essence 46
21. Rent Defined 46
22. No Prior or Other
Agreements; Broker
Disclaimer 46
23. Notices 46
24. Waivers 47
25. Recording 47
26. No Right To Holdover 47
27. Cumulative Remedies 48
28. Covenants and Conditions 48
29. Binding Effect; Choice
of Law 48
30. Subordination; Attornment;
Non-Disturbance 48
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
Section Title Page
- ------- ----- ----
<S> <C> <C>
31. Attorney's Fees 49
32. Lessor's Access; Showing
Premises; Repairs 50
31. Auctions 51
34. Termination; Merger 51
35. Consents, 51
36. Options 52
37. Multiple Buildings 54
38. Security Measures 54
39. Reservations 55
40. Performance Under Protest 55
41. Authority 55
42. Conflict 56
43. Offer 56
44. Amendments 56
45. Multiple Parties 56
46. Signage 56
47. Omitted 56
48. Addendum 56
ADDENDUM TO LEASE
-----------------
1.2 Premises 1
1.3 Term 1
1.4 Early Possession 1
1.5 Base Rent 1
2.2 Condition of Premises 1
1.7 Security Deposit 2
6.5 Additional Hazardous
Substance Provision 2
7.2.1 Replacement of Capital
Improvements 2
10. Additional Provisions
on Real Estate Taxes 3
12.1(b) Additional Assignment
Provisions 3
15. Broker's Fee 3
46. Signage 3
49. Additional Provisions
On Operating Expenses 4
50. Parking 4
</TABLE>
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<PAGE> 4
<TABLE>
<CAPTION>
Section Title Page
- ------- ----- ----
<S> <C> <C>
51. Letter of Credit 4
52. Indebtedness to Parent
Company 4
53. Sale of Premises 4
54. Lease Renewal Option 5
55. Expansion Option
5
56. Future Development of
Lot 27 6
57. Nondisturbance 6
58. Non-Competition 6
59. Tenant Improvements 6
60. Administration of Tenant
Improvement Allowance 7
61. Storage Facility 7
62. Related Parties 7
63. Background Documents 8
</TABLE>
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<PAGE> 5
COMMERCIAL LEASE
BETWEEN
LMP PROPERTIES, LTD.
AND
CALBIOCHEM CORPORATION
1. BASIC PROVISIONS ("Basic Provisions")
1.1 PARTIES. This Lease ("Lease"), dated for reference purposes
only, February 1, 1992, is made by and between LMP PROPERTIES, LTD., a
California Limited Partnership ("Lessor"), and CALBIOCHEM CORPORATION, a
California corporation ("Lessee") .
1.2 PREMISES. That certain real property, including all
improvements therein or to be provided by Lessor under the terms of this Lease,
and located in the County of San Diego, State of California and generally
described as the western portion of Lot 27 in the Pacific Corporate Center
including a storage facility (See Insert 1 of Addendum) ("Premises"). Attached
hereto marked Exhibit "A" and by this reference made a part hereof is a diagram
of Lot 27 depicting the location of the Premises, the common areas, and parking
areas referred to in Section 61 of the Addendum (collectively referred to as the
"Project") and of the tentative location of the two additional buildings to be
constructed on the remainder of Lot 27 by Lessor. The actual location of such
buildings will be substantially in accord with the location set forth on said
diagram.
1.3 TERM. Fifteen years and Forty-Five days ("Original Term")
commencing upon the substantial completion of the tenant improvements or
December 15, 1992, whichever date last occurs ("Commencement Date") and ending
Fifteen years and Forty-Five days thereafter ("Expiration Date"). (See Insert 2
of Addendum.)
1.4 EARLY POSSESSION. Upon substantial completion of tenant
improvements ("Early Possession Date"). (See Insert 3 of Addendum.)
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<PAGE> 6
1.5 BASE RENT. (See Insert 4 of Addendum) Base Rent shall be
payable on the first day of each month commencing Forty-Five days after the
Commencement Date of this Lease ("Rental Commencement Date").
1.6 BASE RENT PAID UPON EXECUTION. $ None.
-------
1.7 SECURITY DEPOSIT. $51,500 ("Security Deposit"). (See Paragraph
5 and Insert 6 of Addendum.)
1.8 PERMITTED USE. Manufacturing, production, assembly, storage
and any other legal purpose incidental to Lessee's business. The Premises is
zoned M-1-B. Lessor represents that to the best of Lessor's knowledge, Lessee's
intended use of the Premises does not violate any Applicable Laws. (See
Paragraph 6 for further provisions.)
1.9 ADDENDA. Attached hereto is an Addendum or Addenda consisting
of Inserts 1 through 14 all of which constitute a part of this Lease.
2. PREMISES.
2.1 LETTING. Lessor hereby leases to Lessee, and Lessee hereby
leases from Lessor, the Premises, for the term, at the rental, and upon all of
the terms, covenants and conditions set forth in this Lease. Unless otherwise
provided herein, any statement of square footage set forth in this Lease, or
that may have been used in calculating rental, is an approximation which Lessor
and Lessee agree is reasonable until such time that a final space plan has been
agreed to and the rental rate per square foot per month is not subject to
revision whether or not the actual square footage is more or less. (See Insert 4
of Addendum.)
2.2 CONDITION. Lessor shall deliver the Premises to Lessee clean
and free of debris on the Commencement Date and warrants to Lessee that the
existing plumbing, fire sprinkler system, lighting, air conditioning, heating,
electrical and all other building systems and loading doors, if any, and
Lessee's improvements to the Premises, other than those that were not
constructed by Lessor's contractor, shall be in good operating
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<PAGE> 7
condition on the Commencement Date. If a non-compliance with said warranty
exists as of the Commencement Date, Lessor shall, except as otherwise provided
in this Lease, within thirty (30) days after receipt of written notice from
Lessee setting forth with specificity the nature and extent of such
non-compliance, rectify same at Lessor's expense. If Lessee does not give Lessor
written notice of a non-compliance with this warranty within one year after
the Commencement Date, correction of that non-compliance shall be the
obligation of Lessee at Lessee's sole cost and expense. (See Insert 5 of
Addendum.)
2.3 COMPLIANCE WITH COVENANTS, RESTRICTIONS AND BUILDING CODE.
Lessor warrants to Lessee that the improvements on the Premises and the stated
use of the Premises by Lessee comply with all applicable covenants or
restrictions of record and applicable building and zoning codes, regulations or
ordinances in effect on the Commencement Date. If the Premises do not comply
with said warranty, Lessor shall, except as otherwise provided in this Lease,
promptly after receipt of written notice from Lessee setting forth with
specificity the nature and extent of such non-compliance, rectify the same at
Lessor's expense. If Lessee does not give Lessor written notice of a
non-compliance with this warranty within one year following the Commencement
Date, correction of that non-compliance shall be the obligation of Lessee at
Lessee's sole cost and expense. During the term of this Lease, Lessor agrees to
take all actions and pay all costs necessary to maintain the improvements on the
Premises (other than those which Lessee is responsible to construct) in
compliance with all Applicable Laws.
2.4 ACCEPTANCE OF PROMISES. Upon Lessee moving in and occupying
the Premises, Lessee shall acknowledge: (a) that it has been advised by the
Brokers to satisfy itself with respect to the condition of the Premises
(including but not limited to the electrical and fire sprinkler systems,
security, environmental aspects, compliance with Applicable Law, as defined in
Paragraph 6.3) and the present suitability of the Premises for Lessee's
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<PAGE> 8
intended use, (b) that Lessee has made such investigation as it deems necessary
with reference to such matters and assumes all responsibility therefor as the
same relate to Lessee's occupancy of the Premises and/or the term of this Lease
except as otherwise contemplated by this Lease or caused by the negligence or
intentional misconduct of Lessor, and (c) that neither Lessor, nor any of
Lessor's agents, has made any oral or written representations or warranties with
respect to the condition and suitability of the Premises other than as set forth
in this Lease.
3. TERM.
3.1 TERM. The Commencement Date, Expiration Date and Original Term
of this Lease are as specified in Paragraph 1.3.
3.2 EARLY POSSESSION. If Lessee totally or partially occupies the
Premises prior to the Commencement Date, the obligation to pay Base Rent shall
be abated for the period of such early possession. All other terms of this
Lease, however, (including but not limited to the obligations to pay Real
Property Taxes and insurance premiums and to maintain the Premises) shall be in
effect during such period. Any such early possession shall not affect nor
advance the Expiration Date of the original Term.
3.3 DELAY IN POSSESSION. If Lessor has not obtained building
permits for both the shell construction and the tenant improvements by August 1,
1992 either party hereto may terminate this Agreement. In the event Lessor
terminates this Lease, Lessor will pay for the costs incurred in connection with
the tenant improvement plans; and, conversely, if Lessee terminates this Lease,
it shall pay such costs. In either event, Lessor shall pay any other costs
incurred by Lessor with respect to the Project.
Except as hereinafter provided, if for any reason possession of the
Premises cannot be delivered to Lessee as substantially complete by June 15,
1993, Lessee may at its option, by notice in writing to Lessor, within any time
during the twenty (20) days
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<PAGE> 9
thereafter, cancel this Lease, in which event the parties shall be discharged
from all obligations hereunder; provided, however, that if such written notice
by Lessee is not received by Lessor within said twenty (20) day period, Lessee
shall be deemed to have waived its termination right as herein provided.
Notwithstanding the foregoing, Lessee shall not have the right to terminate this
Lease to the extent that the delay in completion is caused by the negligence or
intentional misconduct of Lessee. The date herein above specified, June 15,
1993, shall be extended by that number of days representing the period, if any,
between the date that Lessee is to deliver to Lessor the Tenant Improvement
plans as specified in Section 59.4 of the Addendum attached to this Lease and
the date such plans are delivered to Lessor, together with any period of delay
caused by force majeure.
"Force majeure" for the purpose of this Agreement shall be deemed to be
labor disputes causing work stoppages not within the control of Landlord or
Bailey Building Corporation ("Bailey"), adverse weather conditions not
reasonably anticipated, unavoidable casualties or other causes beyond the
control of Lessor or Bailey Building Corporation, the contractor. If, for any
reason, the Premises are not substantially complete and possession of the
Premises cannot be delivered to Lessee by February 1, 1993, Lessor shall pay to
Lessee for each month or portion thereof that possession of the substantially
complete Premises thereof is not so tendered a sum equivalent to the difference
between the monthly rental hereunder and the monthly rental paid by Lessee in
its present location. Such payment shall continue until June 15, 1993 or such
earlier date that possession is tendered to Lessee. Lessee represents and
warrants that the current rent is $72,760.16. The monthly rental in Lessee's
existing location as of February 1, 1993 shall be $72,760.16 plus a CPI
adjustment plus any holdover increases in aggregate not to exceed $80,000 per
month. Notwithstanding the foregoing Lessor shall have no obligation to pay such
rental to the extent that the delay in completion is caused by Lessee. For the
purpose of this paragraph the term "Monthly Rental Hereunder"
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<PAGE> 10
shall mean, the sum of $51,500 plus 1/12th of the real Property Tax on the
Premises and 1/12th of the common area expenses.
4. RENT.
4.1 BASE RENT. Lessee shall cause payment of Base Rent and other
rent or charges, as the same may be adjusted from time to time, to be received
by Lessor in lawful money of the United States, without offset or deduction, on
or before the day on which it is due:under the terms of this Lease. Base Rent
and all other rent and charges for any period during the term hereof which is
for less than one (1) full calendar month shall be prorated based upon the
actual number of days of the calendar month involved. Payment of Base Rent and
other charges shall be made to Lessor at Lessor's address stated herein or to
such other person or at such other addresses as Lessor may from time to time
designate in writing to Lessee.
5. SECURITY DEPOSIT. (See Insert 6 of Addendum) Lessee shall deposit with
Lessor upon execution hereof the Security Deposit set forth in Paragraph 1.7 as
security for Lessee's faithful performance of Lessee's obligations under this
Lease. If Lessee fails to pay Base Rent or other rent or charges due hereunder,
or otherwise Defaults under this Lease (as defined in Paragraph 13.1), Lessor
may use, apply or retain all or any portion of said Security Deposit for the
payment of any amount due Lessor or to reimburse or compensate Lessor for any
liability, cost, expense, loss or damage (including attorneys' fees) which
Lessor may suffer or incur by reason thereof. If Lessor uses or applies all or
any portion of said Security Deposit, Lessee shall within ten (10) days after
written request therefor deposit moneys with Lessor sufficient to restore said
Security Deposit to the full amount required by this Lease. Lessor shall not be
required to keep all or any part of the Security Deposit separate from its
general accounts. Lessor shall, within ten (10) days after the earlier to occur
of (a) the end of the sixtieth (60th) month of the Lease, provided that Lessee
is not then in default; or (b) termination of this Lease for any reason other
than a default by Lessee, return to Lessee (or, at Lessor's option, to the last
assignee, if any, of Lessee's interest herein), that portion of
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<PAGE> 11
the Security Deposit not used or applied by Lessor. Unless otherwise expressly
agreed in writing by Lessor, no part of the Security Deposit shall be considered
to be held in trust, to bear interest or other increment for its use or to be
prepayment for any moneys to be paid by Lessee under this Lease.
6. USE.
6.1 USE. Lessee shall use and occupy the Premises only for the
purposes set forth in Paragraph 1.8, or any other use which is comparable
thereto and for no other purpose. Lessee shall not use or permit the use of the
Premises in a manner that creates waste or a nuisance that violates any
Applicable Laws, or that disturbs owners and/or occupants of, or causes damage
to, neighboring premises or properties.
6.2 HAZARDOUS SUBSTANCES.
(a) REPORTABLE USES REQUIRE CONSENT. The term "Hazardous
Substance" as used in this Lease shall mean any product, substance, chemical,
material or waste whose presence, nature, quantity and/or intensity of
existence, use, manufacture, disposal, transportation, spill, release or effect,
either by itself or in combination with other materials expected to be on the
Premises, is either: (i) injurious to the public health, safety or welfare, the
environment or the Premises, (ii) regulated or monitored by any governmental
authority, or (iii) a basis for liability of Lessor or Lessee to any
governmental agency or third party under any applicable statute or common law
theory. Hazardous Substance shall include, but not be limited to, hydrocarbons,
petroleum, gasoline, crude oil or any products, by-products or fractions
thereof. Lessee shall not engage in any activity in or on the Premises which
constitutes a Reportable Use (as hereinafter defined) of Hazardous Substances
except in compliance in a timely manner (at Lessee's sole cost and expense) with
all Applicable Law (as defined in Paragraph 6.3). "Reportable Use" shall mean
(i) the installation or use of any above or below ground storage tank, (ii) the
generation, possession, storage, use, transportation, or disposal of a Hazardous
Substance that requires a permit from, or with respect to which a report,
notice, registration or business plan is
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<PAGE> 12
required to be filled with, any governmental authority. Reportable Use shall
also include Lessee's being responsible for the presence in, on or about the
Premises of a Hazardous Substance with respect to which any Applicable Law
requires that a notice be given to persons entering or occupying the Premises or
neighboring properties. Notwithstanding the foregoing, Lessee may, without
Lessor's prior consent, but in compliance with all Applicable Laws, use any
ordinary and customary materials reasonably required to be used by Lessee in
the normal course of Lessee's business permitted on the Premises, so long as
such use is not a Reportable Use and does not expose the Premises or neighboring
properties to any meaningful risk of contamination or damage or expose Lessor
to any liability therefor. In addition, Lessor may (but without any obligation
to do so) condition its consent to the use or presence of any Hazardous
Substance, activity or storage tank by Lessee upon Lessee's giving Lessor such
additional assurances as Lessor, in its reasonable discretion, deems necessary
to protect itself, the public, the Premises and the environment against damage,
contamination or injury and/or liability therefrom or therefor, including, but
not limited to, the installation (and removal on or before Lease expiration or
earlier termination) of reasonably necessary protective modifications to the
Premises (such as concrete encasements). Lessor shall not engage in, or allow
any person or entity other than Lessee to engage in, any activity on any
property in which Lessor has an interest that might reasonably impact upon the
Premises which constitutes a Reportable Use of Hazardous Substances without the
express prior written consent of Lessee and compliance in a timely manner (at
Lessor's sole cost and expense) with all Applicable Laws.
(b) DUTY TO INFORM LESSOR OR LESSEE. If Lessee or Lessor
knows, or has reasonable cause to believe, that a Hazardous Substance, or a
condition involving or resulting from same, has come to be located in, on or
under the Premises, other than as previously consented to by Lessor or Lessee,
Lessor or Lessee, as the case may be, shall immediately give written notice of
such fact to the other. On an annual basis Lessee or Lessor
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<PAGE> 13
shall also immediately give to the other party a copy of any statement, report,
notice, registration, application, permit, business plan, license, claim, action
or proceeding given to, or received from, any governmental authority or private
party, or other persons entering or occupying the Premises, concerning the
presence, spill, release, discharge of, or exposure to, any Hazardous Substance
or contamination in or on the Premises in violation of Applicable Laws,
including but not limited to all such documents ad may be involved in any
Reportable Uses involving the Premises.
(c) INDEMNIFICATION. Lessee shall indemnify, protect, defend
and hold Lessor, its agents, employees, lenders and ground lessor, if any, and
the Premises, harmless from and against any and all loss of rents and/or
damages, liabilities, judgments, costs, claims, liens, expenses, penalties,
permits and attorney's and consultant's fees arising out of or involving any
Hazardous Substance or storage tank brought onto the Premises by or for Lessee
or under Lessee's control. Lessee's obligations under this Paragraph 6
shall include, but not be limited to, the effects of any contamination or injury
to person, property or the environment created or suffered by Lessee, and the
cost of investigation (including consultant's and attorney's fees and testing),
removal, remediation, restoration and/or abatement thereof, or of any
contamination therein involved, and shall survive the expiration or earlier
termination of this Lease. No termination, cancellation or release agreement
entered into by Lessor and Lessee shall release Lessee from its obligations
under this Lease with respect to Hazardous Substances or storage tanks, unless
specifically so agreed by Lessor in writing at the time of such agreement. The
foregoing indemnifications shall not apply to the extent that any liability is
caused by Lessor, any other party not related to Lessee, or any conditions
coming on the Premises prior to or following the expiration of this Lease.
6.3 LESSEE'S COMPLIANCE WITH LAW. Except as otherwise provided in
this Lease, Lessee, shall, at Lessee's sole cost and expense, fully, diligently
and in a timely manner, comply with all "Applicable Laws", which term is used in
this Lease to
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<PAGE> 14
include all laws, rules, regulations, ordinances, directives, covenants, design
guidelines, easements and restrictions of record, permits, the requirements of
any applicable fire insurance underwriter or rating bureau, and the
recommendations of Lessor's engineers and/or consultants, relating in any manner
to the Premises (including but not limited to matters pertaining to (i)
industrial hygiene, (ii) environmental conditions on, in or under the Project,
including soil and groundwater conditions, and (iii) the use, generation,
manufacture, production, installation, maintenance, removal, transportation,
storage, spill or release of any Hazardous Substance or storage tank), now in
effect or which may hereafter come into effect, and whether or not reflecting a
change in policy from any previously existing policy. Lessee shall, within five
(5) days after receipt of Lessor's written request, provide Lessor with copies
of all documents and information, including, but not limited to, permits,
registrations, manifests, applications, reports and certificates, evidencing
Lessee's compliance with any Applicable Law specified by Lessor, and shall
immediately upon receipt, notify Lessor in writing (with copies of any documents
involved) of any threatened or actual claim, notice, citation, warning,
complaint or report pertaining to or involving failure by Lessee or the Premises
to comply with any Applicable Law. The obligations under this Section 6.3 shall
also apply to Lessor to the extent that Lessor's use of other property owned by
Lessor may have an impact on the Premises. Notwithstanding anything in this
Lease to the contrary, Lessor shall promptly take all actions and pay all costs
necessary to bring the structural components of the Premises into compliance
with all Applicable Laws except to the extent that any noncompliance is caused
by negligence or intentional misconduct of Lessee.
6.4 INSPECTION; COMPLIANCE. Lessor and Lessor's Lender(s) (as defined
in Paragraph 8.3(a) shall have the right to enter the Premises at any time, in
the case of any emergency, and otherwise upon eight (8) hours prior verbal
notice, for the purpose of inspecting the condition of the Premises and for
verifying compliance by Lessee with this Lease and all Applicable Laws (as
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<PAGE> 15
defined in Paragraph 6.3), and to employ experts and/or consultants in
connection therewith and/or to advise Lessor with respect to Lessee's
activities, including but not limited to the installation, operation, use,
monitoring, maintenance, or removal of any Hazardous Substance or storage tank
on or from the Premises. The costs and expenses of any such inspections shall be
paid by the party requesting same, unless a Default or Breach of this Lease,
violation of Applicable Law, or a contamination, caused or materially
contributed to by Lessee is found to exist or be imminent, or unless the
inspection is requested or ordered by a governmental authority as the result of
any such existing or imminent violation or contamination. In any such case, if
Lessee is found in violation of any Applicable Laws, Lessee shall upon request
reimburse Lessor or Lessor's Lender, as the case may be, for the costs and
expenses of such inspections. (See Insert 7 of Addendum.)
7. MAINTENANCE; REPAIRS; UTILITY INSTALLATIONS; TRADE FIXTURES AND
ALTERATIONS.
7.1 LESSEE'S OBLIGATIONS.
(a) Subject to the provisions of Paragraphs 2.2 (Lessor's
warranty as to condition), 2.3 (Lessor's warranty as to compliance with
covenants, etc.), 7.2 (Lessor's obligations to repair), 9 (damage and
destruction), and 14 (condemnation), Lessee shall, at Lessee's sole cost and
expense and at all times, keep the Premises and every non-structural part
thereof in good order, condition and repair, (reasonable wear and tear excepted)
(whether or not such portion of the Premises requiring repair, or the means of
repairing the same, are reasonably or readily accessible to Lessee, and whether
or not the need for such repairs occurs as a result of Lessee's use, any prior
use, the elements or the age of such portion of the Premises), including,
without limiting the generality of the foregoing (and subject to Landlord's
obligation as set forth in Section 7.2, hereof), all equipment or facilities
serving the Premises, such as plumbing, heating, air conditioning, ventilating,
electrical, lighting facilities, boilers, fired or unfired pressure vessels,
fire sprinkler and/or standpipe and hose or other automatic fire
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extinguishing system, including fire alarm and/or smoke detection systems and
equipment, fixtures, interior walls, refuse collection, ceilings, floors,
windows, doors, and plate glass. Lessee shall not cause or permit any Hazardous
Substance to be spilled or released in, on, or under the Premises (including
through the plumbing or sanitary sewer system) and shall promptly, at Lessee's
expense, take all investigatory and/or remedial action reasonably recommended,
whether or not formally ordered or required, for the cleanup of any
contamination of, and for the maintenance, security and/or monitoring of
Premises, the elements surrounding same, or neighboring properties, that was
caused or materially contributed to by Lessee, or pertaining to or involving any
Hazardous Substance and/or storage tank brought onto the Premises by or for
Lessee or under its control. Lessee, in keeping the Premises in good order,
condition and repair, shall exercise and perform customary maintenance
practices. Lessee's obligations shall include restorations, replacements or
repairs when necessary to keep the Premises and all non-structural improvements
thereon or a part thereof in good order, condition and state of repair,
reasonable wear and tear excepted. Lessor will repaint the exterior of the
buildings on the Premises as reasonably required.
(b) Lessee shall, at Lessee's sole cost and expense, procure
and maintain contracts, with copies to Lessor at both its Los Angeles and San
Diego address, in customary form and substance for, and with contractors
specializing and experienced in, the inspection, maintenance and service of the
following equipment and improvements, if originally installed by Lessor at
Lessor's expense, located on the Premises: (i) heating, air conditioning and
ventilation equipment, (ii) boiler, fired or unfired pressure vessels, and (iii)
fire sprinkler and/or standpipe and hose or other automatic fire extinguishing
systems, including fire alarm and/or smoke detection.
7.2 LESSOR'S OBLIGATIONS. In addition to the warranties and agreements
of Lessor contained in Paragraphs 2.2 (relating to condition of the Premises),
2.3 (relating to compliance with covenants, restrictions and building code), 9
(relating to
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<PAGE> 17
destruction of the Premises) and 14 (relating to condemnation of the Premises),
it is intended by the Parties hereto that Lessor shall maintain or cause to be
maintained in good order, condition and repair the structural portions of the
Project including the foundation, exterior walls, and exterior roof of the
building and the under ground utility and sewer pipes outside the exterior walls
of the building. Lessor shall maintain all portions of the common areas. Lessor
shall have no obligation, in any manner whatsoever, to repair and maintain the
non-structural portions of the Premises, the improvements located thereon, or
the equipment therein, all of which obligations are intended to be that of the
Lessee under Paragraph 7.1 hereof except to the extent that damage to those
non-structural portions is caused by Lessor. It is the intention of the Parties
that the terms of this Lease govern the respective obligations of the Parties as
to maintenance and repair of the Premises. Lessee and Lessor expressly waive the
benefit of any statute now or hereafter in effect to the extent it is
inconsistent with the terms of this Lease with respect to, or which affords
Lessee the right to make repairs at the expense of Lessor or to terminate this
Lease by reason of any needed repairs. Notwithstanding the foregoing Lessee does
not waive its rights of quiet enjoyment and possession. (See Insert 8 of
Addendum.)
7.3 UTILITY INSTALLATIONS; TRADE FIXTURES; ALTERATIONS.
(a) DEFINITIONS; CONSENT REQUIRED. The term "Utility
Installations" is used in this Lease to refer to all carpeting, window
coverings, air lines, power panels, electrical distribution, security, fire
protection systems, communication systems, lighting fixtures, heating,
ventilating, and air conditioning equipment, plumbing and fencing in, on or
about the Premises. The term "Trade Fixtures" shall mean Lessee's machinery and
equipment that can be removed without doing material damage to the Premises. The
term "Alterations" shall mean any modification of the improvements on the
Premises from that which are provided by Lessor under the terms of this Lease,
other than Utility Installations or Trade Fixtures, whether by addition or
deletion. "Lessee Owned Alterations and/or Utility
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<PAGE> 18
Installations" are defined as Alterations and/or Utility Installations made by
Lessee that are not yet owned by Lessor as defined in Paragraph 7.4(a). Lessee
shall not make any structural Alterations or Utility Installations in, on, under
or about the Premises without Lessor's prior written consent. Lessee may,
however, make non-structural Alterations or Utility Installations to the
interior of the Premises (excluding the roof), as long as they are not visible
from the outside, do not involve puncturing, relocating or removing the roof or
any existing walls, and the cost per incident thereof during the term of this
Lease as extended does not exceed $25,000. Repair and maintenance of the
Premises, including Utility Installations and Trade Fixtures is governed by
Sections 7.1 and 7.2 hereof.
(b) CONSENT. Any Alterations or Utility Installations
that Lessee shall desire to make and which require the consent of the Lessor
shall be presented to Lessor in written form with proposed detailed plans. All
consents given by Lessor, whether by virtue of Paragraph 7.3(a) or by subsequent
specific consent, shall be deemed conditioned upon: (i) Lessee's acquiring all
applicable permits required by governmental authorities, (ii) the furnishing of
copies of such permits together with a copy of the plans and specifications for
the Alteration or Utility Installation to Lessor prior to commencement of the
work thereon, and (iii) the compliance by Lessee with all conditions of said
permits in a prompt and expeditious manner. Any Alterations or Utility
Installations by Lessee during the term of this Lease shall be done in a good
and workmanlike manner, with good and sufficient materials, and in compliance
with all Applicable Laws. Lessee shall promptly upon completion thereof furnish
Lessor with as-built plans and specifications therefor. Lessor may (but without
obligation to do so) condition its consent to any requested Alteration or
Utility Installation that costs $10,000 or more upon Lessee's providing Lessor
with a lien and completion bond in an amount equal to one and one-half times the
estimated cost of such Alteration or Utility Installation.
(c) INDEMNIFICATION. Lessee shall pay, when due, all
claims for labor or materials furnished or alleged to have been
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furnished to or for Lessee at or for use on the Premises, which claims are or
may be secured by any mechanic's or materialmen's lien against the Premises or
any interest therein and shall furnish Lessee with copies of lien releases from
all material and Labor suppliers. Lessee shall give Lessor not less than ten
(10) days' notice prior to the commencement of any work in, on or about the
Premises, and Lessor shall have the right to post notices of non-responsibility
in or on the Premises as provided by law. If Lessee shall, in good faith,
contest the validity of any such lien, claim or demand, then Lessee shall, at
its sole expense defend and protect itself, Lessor and the Premises against the
same and shall pay and satisfy any such adverse judgment that may be rendered
thereon before the enforcement thereof against the Lessor or the Premises. If
Lessor shall require, Lessee shall furnish to Lessor a surety bond satisfactory
to Lessor in an amount equal to one and one-half times the amount of such
contested lien claim or demand, indemnifying Lessor against liability for the
same, as required by law for the holding of the Premises free from the effect of
such lien or claim. In addition, Lessor may require Lessee to pay Lessor's
reasonable and actual attorney's fees and costs in participating in such action
if Lessor shall decide it is in its best interest to do so.
7.4 OWNERSHIP; REMOVAL; SURRENDER AND RESTORATION.
(a) OWNERSHIP. Subject to Lessor's right to require their
removal or become the owner thereof as hereinafter provided in this Paragraph
7.4, all Alterations and Utility Additions made to the Premises by Lessee shall
be the property of and owned by Lessee, but considered a part of the Premises.
At the time that Lessor approves any Alterations or Utility Additions, Lessor
must designate whether those Alterations or Utility Additions shall become
Lessor's property at the termination of the Lease. Any Alterations or Utility
Additions not so designated at the time of such approval shall continue to be
the property of Lessee at the end of the Lease. Unless otherwise instructed per
subparagraph 7.4(b) hereof, all Lessee Owned Alterations and Utility
Installations shall, at the expiration or earlier termination of
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this Lease, become the property of Lessor and remain upon and be surrendered by
Lessee with the Premises.
(b) REMOVAL. At the time that Lessor approves any
Alterations or Utility Additions, Lessor must designate whether Lessor will
require that those Alterations or Utility Additions be removed at the
termination of the Lease. Lessee shall only be required to remove those
Alterations or Utility Additions that Lessor does not so designate at the time
of such approval as remaining with the Premises upon termination of the Lease.
(c) SURRENDER/RESTORATION. Lessee shall surrender the
Premises by the end of the last day of the Lease term or any earlier termination
date, with all of the improvements, parts and surfaces thereof clean and free of
debris and in good operating order, condition and state of repair, ordinary wear
and tear accepted. "Ordinary wear and tear" shall not include any damage or
deterioration that would have been prevented by good maintenance practice or by
Lessee performing all of its obligations under this Lease. Except as otherwise
agreed or specified in writing by Lessor, the Premises, as surrendered, shall
include the Utility Installations. The obligation of Lessee shall include the
repair of any damage occasioned by the installation, maintenance or removal of
Lessee's Trade Fixtures, furnishings, equipment, and Alterations and/or Utility
Installations, as well as the removal of any storage tank installed by or for
Lessee and the removal, replacement or remediation of any soil, material or
ground water contaminated by Lessee, all as may then be required by Applicable
Law and/or good practice. Lessee's Trade Fixtures shall remain the property of
Lessee and shall be removed by Lessee subject to its obligation to repair and
restore the Premises per this Lease.
8. INSURANCE; INDEMNITY.
8.1 PAYMENT FOR INSURANCE. Regardless of whether the Lessor or
Lessee is the Insuring Party, Lessee shall pay for all insurance required under
this Paragraph 8 except to the extent of the cost attributable to liability
insurance carried by Lessor in excess of one million dollars ($1,000,000) per
occurrence. The limits of any insurance hereunder shall not limit the liability
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of any Party hereunder. Premiums for policy periods commencing prior to or
extending beyond the Lease term shall be prorated to correspond to the Lease
term. Payment shall be made by Lessee to Lessor within three (3) days of when
due as indicated in the invoice and support documentation for any amount due.
Notwithstanding anything contained to the contrary in this Section 8, Lessor
shall have the option to maintain any or all of the insurance specified in this
Section 8 in which event Lessor shall bill Lessee for Lessee's share of such
insurance, as specified in this Section 8. Any insurance maintained by Lessor
under this Section 8 shall be in types and amounts reasonably consistent with
insurance for similar buildings in similar projects. Lessee shall have the
right, at Lessee's sole cost and expense, to purchase earthquake insurance for
the Project and Lessee's improvements. Lessor shall not obtain earthquake
insurance without Lessee's prior written approval. Notwithstanding Lessee's
disapproval Lessor shall have the right to maintain such earthquake insurance at
Lessor's own cost and expense.
8.2 LIABILITY INSURANCE.
(a) CARRIED BY LESSEE. Lessee shall obtain and keep in force during the
term of this Lease a Commercial General Liability policy of insurance protecting
Lessee and Lessor (as an additional insured) against claims for bodily injury,
personal injury and property damage based upon, involving or arising out of the
ownership, use, occupancy or maintenance of the Premises and all areas
appurtenant thereto. Such insurance shall be on an occurrence basis providing
single limit coverage in an amount not less than $1,000,000 per occurrence with
an "Additional Insured-Managers or Lessors of Premises" Endorsement and contain
the "Amendment of the Pollution Exclusion" for damage caused by heat, smoke or
fumes from a hostile fire. The policy shall not contain any intra-insured
exclusions as between insured persons or organizations, but shall include
coverage for liability assumed under this Lease as an "insured contract" for the
performance of Lessee's indemnity obligations under this Lease. The limits of
said insurance required by this Lease or as carried by Lessee
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shall not, however, limit the liability of Lessee nor relieve Lessee of any
obligation hereunder. All insurance to be carried by Lessee shall be primary
to and not contributory with any similar insurance carried by Lessor, whose
insurance shall be considered excess insurance only. Lessor shall pay for any
increase in the cost of insurance caused by any acts or omissions of Lessor,
including the construction of other improvements around but not belonging to
the Premises.
(b) CARRIED BY LESSOR. In the event Lessor is the Insuring
Party, Lessor shall also maintain liability insurance described in Paragraph
8.2(a), above, in addition to, and not in lieu of, the insurance required to be
maintained by Lessee. Lessee shall not be named as an additional insured
therein.
8.3 PROPERTY INSURANCE - BUILDING, IMPROVEMENTS AND RENTAL VALUE.
(a) BUILDING AND IMPROVEMENTS. The Insuring Party shall
obtain and keep in force during the term of this Lease a policy or policies in
the name of Lessor, with loss payable to Lessor and to the holders of any
mortgages, deeds of trust or ground leases on the Premises ("Lender(s)"),
insuring loss or damage to the Premises; provided however, such Lenders shall
only be insured if they have given written notice to the insuring party. The
amount of such insurance shall be equal to the full replacement cost of the
Premises, as the same shall exist from time to time, or the amount required by
Lenders, but in no event, more than the commercially reasonable and available
insurable value thereof if, by reason of the unique nature or age of the
improvements involved, such latter amount is less than full replacement cost.
If Lessor is the Insuring Party, however, Lessee Owned Alterations and Utility
Installations shall be insured by Lessee under Paragraph 8.4 rather than by
Lessor. If the coverage is available and commercially appropriate, such policy
or policies shall insure against all risks of direct physical loss or damage
(except the perils of flood and/or earthquake), including coverage for any
additional costs resulting from debris removal and reasonable amounts of
coverage for the enforcement of any ordinance or law regulating the
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reconstruction or replacement of any undamaged sections of the Premises required
to be demolished or removed by reason of the enforcement of any building,
zoning, safety or land use laws as the result of a covered cause of loss. Said
policy or policies shall also contain an agreed valuation provision in lieu of
any coinsurance clause, waiver of subrogation, and inflation guard protection
causing an increase in the annual property insurance coverage amount by a factor
of not less than the adjusted U.S. Department of Labor Consumer Price Index for
All Urban Consumers for the city nearest to where the Premises are located or
more than five percent (5%) of any increase in that index. If such insurance
coverage has a deductible clause, the deductible amount shall not exceed $10,000
per occurrence, and Lessee shall be liable for such deductible amount in the
event of an insured Loss, as defined in Paragraph 9.1(c). Lessee shall not be
liable for the deductible to the extent that the insured loss was caused by
Lessor in which event Lessor shall be liable for such deductible.
(b) RENTAL VALUE. The Insuring Party shall, in addition, obtain
and keep in force during the term of this Lease a policy or policies in the name
of Lessor, with loss payable to Lessor and Lender(s), insuring the loss of the
full rental and other charges payable by Lessee to Lessor under this Lease for
one (1) year (including all real estate taxes, insurance costs, and any
scheduled rental increases). Said insurance shall provide that in the event the
Lease is terminated by reason of an insured loss, the period of indemnity for
such coverage shall be extended beyond the date of the completion of repairs or
replacement of the Premises, to provide for one full year's loss of rental
revenues from the date of any such loss. Said insurance shall contain an agreed
valuation provision in lieu of any coinsurance clause, and the amount of
coverage shall be adjusted annually to reflect the projected rental income,
property taxes, insurance premium costs and other expenses, if any, otherwise
payable by Lessee, for the next twelve (12) month period. Lessee shall be liable
for any deductible amount in the event of such loss.
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(c) ADJACENT PREMISES. (Omit)
(d) TENANT'S IMPROVEMENTS. If the Lessor is the Insuring
Party, the Lessor shall not be required to insure Lessee Owned Alterations and
Utility Installations unless the item in question has become the property of
Lessor under the terms of this Lease. If Lessee is the Insuring Party, the
policy carried by Lessee under this Paragraph 8.3 shall insure Lessee Owned
Alterations and Utility Installations.
8.4 LESSEE'S PROPERTY INSURANCE. Subject to the requirements of
Paragraph 8.5, Lessee at its cost shall either by separate policy or, at
Lessor's option, by endorsement to a policy already carried, maintain insurance
coverage on all of Lessee's personal property, Lessee Owned Alterations and
Utility Installations in, on, or about the Premises similar in coverage to that
carried by the Insuring Party under Paragraph 8.3. Such insurance shall be full
replacement cost coverage with a deductible of not to exceed $10,000 per
occurrence. The proceeds from any such insurance shall be used by Lessee for the
replacement of personal property or the restoration of Lessee Owned Alterations
and Utility Installations. Lessee shall be the Insuring Party with respect to
the insurance required by this Paragraph 8.4 and shall provide Lessor with
written evidence that such insurance is in force.
8.5 INSURANCE POLICIES. Insurance required hereunder shall be in
companies duly licensed to transact business in the state where the Premises are
located, and maintaining during the policy term a "General Policyholders Rating"
of at least A-VI, or such other rating as may be required by a Lender having a
lien on the Premises, as set forth in the most current issue of "Best's
Insurance Guide". Neither party shall do or permit to be done anything which
shall invalidate the insurance policies referred to in this Paragraph 8. The
Insuring Party shall cause to be delivered to the other party certified copies
of policies of such insurance or certificates evidencing the existence and
amounts of such insurance with the insureds and loss payable clauses as required
by this Lease. No such policy shall be cancelable or subject to modification
except after thirty (30) days' prior
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written notice to both parties. The Insuring Party shall at least thirty (30)
days prior to the expiration of such policies, furnish the other party with
evidence of renewals or "insurance binders" evidencing renewal thereof, or the
other party may order such insurance and charge the cost thereof to the Insuring
Party, which amount shall be payable by the Insuring Party to the other
party upon demand. If the Insuring Party shall fail to procure and maintain the
insurance required to be carried by the Insuring Party under this Paragraph 8,
the other Party may, but shall not be required to, procure and maintain the
same, but at Lessee's expense. In the event Lessor is the insuring party, Lessor
shall name Lessee as an additional insured on all of Lessor's insurance policies
relating to the Premises and this Lease.
8.6 WAIVER OF SUBROGATION. Without affecting any other rights or
remedies, Lessee and Lessor ("Waiving Party") each hereby release and relieve
the other, and waive their entire right to recover damages (whether in contract
or in tort) against the other, for loss of or damage to the Waiving Party's
property arising out of or incident to the perils required to be insured against
under Paragraph 8, solely to the extent fully compensated by insurance proceeds.
Both parties shall notify their respective insurers of the mutual waivers, and
have the insurance policies required under this Lease properly endorsed, if
necessary, to prevent the invalidation of said insurance coverage by reason of
said waivers.
8.7 INDEMITY.
(a) Except for Lessor's negligence and/or breach of
express warranties, Lessee shall indemnify, protect, defend and hold harmless
the Premises, Lessor and its agents, Lessor's master or ground lessor, partners
and Lenders, from and against any and all claims, loss of rents and/or damages,
costs, liens, judgments, penalties, permits, attorney's and consultant's fees,
expenses and/or liabilities arising out of, involving, or in dealing with, the
occupancy of the Premises by Lessee, the conduct of Lessee's business, any act,
omission or neglect of Lessee, its agents, contractors, employees or invitees,
and out of any Default or Breach by Lessee in the performance in a timely
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manner of any obligation on Lessee's part to be performed under this Lease. The
foregoing shall include, but not be limited to, the defense or pursuit of any
claim or any action or proceeding involved therein, and whether or not (in the
case of claims made against Lessor) litigated and/or reduced to judgment, and
whether well founded or not. In case any action or proceeding be brought against
Lessor by reason of any of the foregoing matters, Lessee upon notice from Lessor
shall defend the same at Lessee's expense by counsel reasonably satisfactory to
Lessor and Lessor shall cooperate with Lessee in such defense. Lessor need not
have first paid any such claim in order to be so indemnified.
(b) Except for Lessee's negligence and/or breach of
express warranties, Lessor shall indemnify, protect, defend and hold harmless
the Premises, Lessee and its agents, from and against any and all claims, loss
of rents and/or damages, costs, liens, judgments, penalties, permits, attorney's
and consultant's fees, expenses and/or liabilities occurring (a) in connection
with activities conducted by Lessor or its related parties or property owned by
Lessor outside the Premises regardless of the cause; (b) any place on or about
the Premises to the extent caused by Lessor or its related parties; or (c) any
act, omission or neglect of Lessor, its agents, contractors, employees or
invitees, and out of any Default or Breach by Lessor in the performance in a
timely manner of any obligation on Lessor's part to be performed under this
Lease. The foregoing shall include, but not be limited to, the defense or
pursuit of any claim or any action or proceeding involved therein, and whether
or not (in the case of claims made against Lessee) litigated and/or reduced to
judgment, and whether well founded or not. In case any action or proceeding be
brought against Lessee by reason of any of the foregoing matters, Lessor upon
notice from Lessee shall defend the same at Lessor's expense by counsel
reasonably satisfactory to Lessee and Lessee shall cooperate with Lessor in such
defense. Lessee need not have first paid any such claim in order to be so
indemnified.
8.8 EXEMPTION OF LESSOR FROM LIABILITY. Except to the extent
caused by Lessor or its related parties, Lessor shall not
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be liable for injury or damage to the person or goods, wares, merchandise or
other property of Lessee, Lessee's employees, contractors, invitees, customers,
or any other person in or about the Premises, whether such damage or injury is
caused by or results from fire, steam, electricity, gas, water or rain, or from
the breakage, leakage, obstruction or other defects of pipes, fire sprinklers,
wires, appliances, plumbing, air conditioning or lighting fixtures, or from any
other cause, whether the said injury or damage results from conditions arising
upon the Premises or upon other portions of the building of which the Premises
are a part, or from other sources or places, and regardless of whether the cause
of such damage or injury or the means of repairing the same is accessible or
not. Except to the extent caused by Lessor or its related parties, Lessor shall
not be liable for any damages arising from any act or neglect of any other
tenant of Lessor. Except to the extent caused by Lessor or its related parties
(as defined in Section 62), Lessor shall under no circumstances be liable for
injury to Lessee's business or for any loss of income or profit therefrom.
9. DAMAGE OR DESTRUCTION.
9.1 DEFINITIONS.
(a) "Premises Partial Damage" shall mean damage or
destruction to the improvements on the Premises, other than Lessee Owned
Alterations and Utility Installations, the repair cost of which damage or
destruction is less than 50% of the then Replacement Cost of the Premises
immediately prior to such damage or destruction, excluding from such calculation
the value of the land and Lessee Owned Alterations and Utility Installations.
(b) "Premises Total Destruction" shall mean damage or
destruction to the Premises, other than Lessee Owned Alterations and Utility
Installations the repair cost of which damage or destruction is 50% or more of
the then Replacement Cost of the Premises immediately prior to such damage or
destruction, excluding from such calculation the value of the land and Lessee
Owned Alterations and Utility Installations.
(c) "Insured Loss" shall mean damage or destruction to
improvements on the Premises, other than Lessee Owned Alterations
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and Utility Installations, which was caused by an event required to be covered
by the insurance described in Paragraph 8.3(a), irrespective of any
deductible amounts or coverage limits involved.
(d) "Replacement Cost" shall mean the cost to repair or
rebuild the improvements owned by Lessor at the time of the occurrence to their
condition existing immediately prior thereto, including demolition debris
removal and upgrading required by the operation of applicable building codes,
ordinances or laws, and without deduction for depreciation.
(e) "Hazardous Substance Condition" shall mean the
occurrence or discovery of a condition involving the presence of, or a
contamination by, a Hazardous Substance as defined in Paragraph 6.2(a), in, on,
or under the Premises.
9.2 PARTIAL DAMAGE - INSURED LOSS. If a Premises Partial Damage
that is an Insured Loss occurs, then Lessor shall, at Lessor's expense, repair
such damage (but not Lessee's Trade Fixtures or Lessee Owned Alterations and
Utility Installations) as soon as reasonably possible and this Lease shall
continue in full force and effect. Notwithstanding the foregoing, if the
required insurance was not in force or the insurance proceeds are not sufficient
to effect such repair, the Insuring Party shall promptly contribute the shortage
in proceeds (except as to the deductible which is Lessee's responsibility) as
and when required to complete said repairs. In the event, however, the shortage
in proceeds was due to the fact that, by reason of the unique nature of the
improvements, full replacement cost insurance coverage was not commercially
reasonable and available, the Insuring Party shall have no obligation to pay for
the shortage in insurance proceeds and Lessor shall have no obligation (except
to the extent that damage was caused by Lessor) to fully restore the unique
aspects of the Premises unless Lessee provides Lessor with the funds to cover
same, or adequate assurance thereof, within twenty (20) days following receipt
of written notice of such shortage and request therefor. If Lessor receives said
funds or adequate assurance thereof within said twenty (20) day period, the
party responsible for making the repairs shall complete them
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as soon as reasonably possible and this Lease shall remain in full force and
effect. If Lessor does not receive such funds or assurance within said period,
Lessor may nevertheless elect by written notice to Lessee within twenty (20)
days thereafter to make such restoration and repair as is commercially
reasonable with Lessor paying any shortage in proceeds, in which case this Lease
shall remain in full force and effect. If in such case Lessor does not so elect,
then this Lease shall terminate sixty (60) days following the occurrence of the
damage or destruction. Unless otherwise agreed, Lessee shall in no event have
any right to reimbursement from Lessor for any funds contributed by Lessee to
repair any such damage or destruction. Premises Partial Damage due to flood or
earthquake shall be subject to Paragraph 9.3 rather than Paragraph 9.2,
notwithstanding that there may be some insurance coverage, but the net proceeds
of any such insurance shall be made available for the repairs if made by either
Party.
9.3 PARTIAL DAMAGE - UNINSURED LOSS. If a Premises Partial Damage
that is not an Insured Loss occurs, unless caused by a negligent or willful act
of either party (in which event that party shall make the repairs at that
party's expense and this Lease shall continue in full force and effect, but
subject to Lessor's rights under Paragraph 13), Lessor may at Lessor's option,
either: (i) repair such damage as soon as reasonably possible at Lessor's
expense, in which event this Lease shall continue in full force and effect, or
(ii) give written notice to Lessee within thirty (30) days after receipt by
Lessor of knowledge of the occurrence of such damage of Lessor's desire to
terminate this Lease as of the date of the occurrence of such damage. In the
event Lessor elects to give such notice of Lessor's intention to terminate this
Lease, Lessee shall have the right within ten (10) days after the receipt of
such notice to give written notice to Lessor of Lessee's commitment to pay for
the repair of such damage totally at Lessee's expense and without reimbursement
from Lessor. Lessee shall provide Lessor with the required funds or satisfactory
assurance thereof within thirty (30) days following Lessee's said commitment. In
such event this
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Lease shall continue in full force and effect, and Lessor shall proceed to make
such repairs as soon as reasonably possible and the required funds are
available. If Lessee does not give such notice and provide the funds or
assurance thereof within the times specified above, this Lease shall terminate
as of the date specified in Lessor's notice of termination.
9.4 TOTAL DESTRUCTION. Notwithstanding any other provision hereof,
if a Premises Total Destruction occurs (including any destruction required by
any authorized public authority), this Lease shall terminate as of the date of
such Premises Total Destruction, whether or not the damage or destruction is an
Insured Loss or was caused by a negligent or willful act of either party. In
the event, however, that the damage or destruction was caused by Lessee or
Lessor, the other party shall have the right to recover its damages from the
causing party except as released and waived in Paragraph 8.6.
9.5 DAMAGE NEAR END OF TERM. If at any time during the last six
(6) months of the term of this Lease there is damage for which the cost to
repair exceeds two (2) months' Base Rent, whether or not an Insured Loss, Lessor
or Lessee may, at either party's option, terminate this Lease effective as of
last day of the month following the date of occurrence of such damage by giving
written notice to the other party of its election to do so within thirty (30)
days after the date of occurrence of such damage. Provided, however, if Lessee
at that time has an exercisable option to extend this Lease or to purchase the
Premises, then Lessee may preserve this Lease by, within twenty (20) days
following the occurrence of the damage, or before the expiration of the time
provided in such option for its exercise, whichever is earlier ("Exercise
Period"), exercising such option provided such damage is classified as
"Premises, partial destruction - Insurance Loss". If Lessee duly exercises such
option during said Exercise Period, Lessor shall, at Lessor's expense commence
to repair such damage within thirty (30) days of Lessee's exercise of such
option and this Lease shall continue in full force and effect. If Lessee fails
to exercise such option then Lessor may at Lessor's option terminate this Lease
as of the
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date of the occurrence of such damage by giving written notice to Lessee of
Lessor's election do so within ten (10) days after the expiration of the
Exercise Period, notwithstanding any term or provision in the grant of option to
the contrary.
9.6 ABATEMENT OF RENT; LESSEE'S REMEDIES.
(a) In the event of damage described in Paragraph 9.2
(Partial Damage - Insured), whether or not Lessor or Lessee repairs or restores
the Premises, the Base Rent, Real Property Taxes, insurance premiums, and other
charges, if any, payable by Lessee hereunder for the period during which such
damage, its repair or the restoration continues shall be abated in proportion to
the degree to which Lessee's use of the Premises and parking areas is impaired.
The parties hereto shall mutually agree on the proportion to which Lessee's use
of the Premises is impaired. In the event the parties cannot agree upon such
proportion, each party agrees that the insurance adjuster shall determine the
proportion to which Lessee's use of the Premises is impaired. If the damages are
not adjusted by an adjuster, then each party shall select an adjuster to make
such determination. If such adjusters cannot agree upon such proportion, then
they shall appoint a third adjuster to determine such proportion. A majority of
the adjusters so selected shall determine the proportion to which Lessee's use
of the Premises is impaired. Except for abatement of Base Rent, Real Property
Taxes, insurance premiums, and other charges, if any, as aforesaid, all other
obligations of Lessee hereunder shall be performed by Lessee, and Lessee shall
have no claim against Lessor for any damage suffered by reason of any such
repair or restoration, unless attributable to the negligence or intentional
misconduct of Lessor, its agents or contractors.
(b) If Lessor shall be obligated to repair or restore the
Premises under the provisions of this Paragraph 9 and shall not commence, in a
substantial and meaningful way, the repair or restoration of the Premises within
sixty (60) days after such obligation shall accrue, Lessee may, at any time
prior to the commencement of such repair or restoration give written notice to
Lessor and to any Lenders of which Lessee has actual notice of
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Lessee's election to terminate this Lease on a date not less than thirty (30)
days following the giving of such notice. If Lessee gives such notice to Lessor
and such Lenders, and such repair or restoration is not commenced within thirty
(30) days after receipt of such notice, Lessee shall have the option to
terminate this Lease as of the date specified in said notice. If Lessor or a
Lender commences the repair or restoration of the Premises within thirty (30)
days after receipt of such notice, this Lease shall continue in full force and
effect. "Commence" as used in this Paragraph shall mean either the
unconditional written authorization of the preparation of the required plans,
or the beginning of the actual work on the Premises, whichever first occurs.
(c) Notwithstanding anything to the contrary contained in
this Lease, in the event that the damage to the Premises cannot be reasonably
repaired within six (6) months from the date of such damage and the damage has a
material adverse affect on Lessee's use and occupancy of the Premises, Lessee
may elect, by written notice to Lessor, to be exercised within sixty (60) days
from the date on which Lessee receives written notice that the repair time will
exceed six (6) months, to terminate the Lease effective as of the date Lessee
delivers such notice to Lessor.
9.7 HAZARDOUS SUBSTANCE CONDITIONS. If a Hazardous Substance
Condition occurs, unless Lessee is legally responsible therefor (in which case
Lessee shall make the investigation and remediation thereof required by
Applicable Laws and this Lease shall continue in full force and effect, but
subject to Lessor's rights under Paragraph 13), Lessor may at Lessor's option
either (i) investigate and remediate such Hazardous Substance Condition, if
required, as soon as reasonably possible at Lessor's expense, in which event
this Lease shall continue in full force and effect, or (ii) if the estimated
cost to investigate and remediate such condition exceeds eighteen (18) times the
then monthly Base Rent or $100,000, whichever is greater, give written notice to
Lessee within thirty (30) days after receipt by Lessor of knowledge of the
occurrence of such Hazardous Substance condition of Lessor's desire to terminate
this Lease as of the
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date sixty (60) days following the giving of such notice. In the event Lessor
elects to give such notice of Lessor's intention to terminate this Lease, Lessee
shall have the right within ten (10) days after the receipt of such notice to
give written notice to Lessor of Lessee's commitment to pay for the
investigation and remediation of such Hazardous Substance Condition totally at
Lessee's expense and without reimbursement from Lessor except to the extent of
an amount equal to eighteen (18) times the then monthly Base Rent or $100,000,
whichever is greater. Lessee shall provide Lessor with the funds required of
Lessee or satisfactory assurance thereof within thirty (30) days following
Lessee's said commitment. In such event this Lease shall continue in full force
and effect, and Lessor shall proceed to make such investigation and remediation
as soon as reasonably possible and the required funds are available. If Lessee
does not give such notice and provide the required funds or assurance thereof
within the times specified above, this Lease shall terminate as of the date
specified in Lessor's notice of termination. If a Hazardous Substance Condition
occurs for which Lessee is not legally responsible, there shall be abatement of
Lessee's obligations under this Lease to the same extent as provided in
Paragraph 9.6(a), and upon agreement of Lessor and Lessee the Lease term shall
be extended for the period of such abatement. If the Hazardous Substance
Condition is caused by Lessor, Lessor shall promptly take all actions and pay
all costs necessary to correct that condition to the reasonable satisfaction of
Lessee.
9.8 TERMINATION - ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to this Paragraph 9, an equitable adjustment shall be made concerning
advance Base Rent and any other advance payments made by Lessee to Lessor.
Lessor shall, in addition, return to Lessee so much of Lessee's Security Deposit
as has not been, or is not then required to be, used by Lessor under the terms
of this Lease.
9.9 WAIVE STATUTES. Lessor and Lessee agree that the terms of this
Lease shall govern the effect of any damage to or destruction of the Premises
with respect to the termination of
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this Lease and hereby waive the provisions of California Civil Code Sections
1932 and 1933. The foregoing waiver is not intended to waive Lessee's implied
covenant of quiet enjoyment of the Premises and right to terminate the Lease for
a breach thereof.
10. REAL PROPERTY TAXES. (See Insert 9 of Addendum)
10.1 (a) PAYMENT OF TAXES. Lessee shall pay the Real Property
Taxes, as defined in Paragraph 10.2, applicable to the Premises during the term
of this Lease. Subject to Paragraph 10.1(b), all such payments shall be made at
least five (5) days prior to the delinquency date of the applicable installment.
Lessee shall promptly furnish Lessor with satisfactory evidence that such taxes
have been paid. If any such taxes to be paid by Lessee shall cover any period of
time prior to or after the expiration or earlier termination of the term hereof,
Lessee's share of such taxes shall be equitably prorated to cover only the
period of time within the tax fiscal year this Lease is in effect, and Lessor
shall reimburse Lessee for any overpayment after such proration. If Lessee shall
fail to pay any Real Property Taxes required by this Lease to be paid by Lessee,
Lessor shall have the right to pay the same, and Lessee shall reimburse Lessor
therefor upon demand. At any time during the term hereof Lessee shall have the
right to protest the amount of any Real Property Taxes in which event Lessor
will cooperate with Lessee in connection with such protest; provided, however no
such protest shall relieve Lessee from making payment of any taxes assessed as
herein provided before the due date of such payment.
(b) ADVANCE PAYMENT. In order to insure payment when due and
before delinquency of any or all Real Property Taxes, in the event that Lessee
is delinquent more than one time in the payment of any or all Real Property
Taxes, Lessor shall have the right, at Lessor's option, to estimate the current
Real Property Taxes applicable to the Premises, as well as Lessee's
proportionate share of Real Property taxes on the common area and to require
such current year's Real Property Taxes to be paid in advance to Lessor by
Lessee, either: (i) in a lump sum amount equal to the installment due, at least
twenty (20) days prior to
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the applicable delinquency date, or (ii) monthly in advance with the payment of
the Base Rent. If Lessor elects to require payment monthly in advance, the
monthly payment shall be that equal monthly amount which, over the number of
months remaining before the month in which the applicable tax installment would
become delinquent (and without interest thereon), would provide a fund large
enough to fully discharge before delinquency the estimated installment of taxes
to be paid. When the actual amount of the applicable tax bill is known, the
amount of such equal monthly advance payment shall be adjusted as required to
provide the fund needed to pay the applicable taxes before delinquency. If the
amounts paid to Lessor by Lessee under the provisions of this Paragraph are
insufficient to discharge the obligations of Lessee to pay such Real Property
Taxes as the same become due, Lessee shall pay to Lessor, upon Lessor's demand,
such additional sums as are necessary to pay such obligations. All moneys paid
to Lessor under this Paragraph may be intermingled with other moneys of Lessor
and shall not bear interest.
(c) If at any time that Lessor does collect an advance
payment, Lessor expressly covenants to pay all Real Property Taxes in a timely
manner and does hereby indemnify Lessee for any late charges, penalties or other
costs (including attorneys' fees) resulting from Lessor's failure to pay the
Real Property Taxes in full or in a timely manner. Lessor agrees to promptly
refund to Lessee any portions of the advance payments in excess of the actual
Real Property Taxes paid. Lessee shall not pay for increases in Real Property
Taxes due to sale, transfer or improvement of the property on which the Premises
are located other than for improvements expressly authorized by Lessee.
10.2 DEFINITION OF "REAL PROPERTY TAXES". (See Insert 10 of
Addendum.) As used herein, the term "Real Property Taxes" shall include any form
of real estate tax or assessment, general, special, ordinary or extraordinary,
and any license fee, improvement bond or bonds, levy or tax (other than
inheritance, personal income or estate taxes) imposed upon the Premises by any
authority having the direct or indirect power to tax, including
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any city, state or federal government, or any school, agricultural, sanitary,
fire, street, drainage or other improvement district thereof, levied against any
legal or equitable interest of Lessor in the Premises or in the real property of
which the Premises are a part. The term "Real Property Taxes" shall also include
any tax, fee, levy, assessment or charge, or any increase therein, imposed by
reason of events occurring, or changes in applicable law taking effect, during
the term of this Lease, including but not limited to a change in the ownership
of the Premises or in the improvements thereon, the execution of this Lease, or
any modification, amendment or transfer thereof, and whether or not contemplated
by the Parties. Real Property Taxes to be paid by Lessee shall be amortized over
the largest period of time allowed by law.
10.3 JOINT ASSESSMENT. If the Premises are not separately assessed,
Lessee's liability shall be an equitable proportion of the Real Property Taxes
for all of the land and improvements included within the tax parcel assessed,
such proportion to be determined by Lessor from the respective valuations
assigned in the assessor's work sheets or such other information as may be
reasonably available. Lessor's reasonable determination thereof, in good faith,
shall be conclusive.
10.4 PERSONAL PROPERTY TAXES. Lessee shall pay prior to delinquency
all taxes assessed against and levied upon Lessee Owned Alterations, Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee contained in the Premises or elsewhere. When possible, Lessee shall
cause its Trade Fixtures, furnishings, equipment and all other personal property
to be assessed and billed separately from the real property of Lessor. If any of
Lessee's said personal property shall be assessed with Lessor's real property,
Lessee shall pay Lessor the taxes attributable to Lessee within ten (10) days
after receipt of a written statement setting forth the taxes applicable to
Lessee's property or, at Lessors option, as provided in Paragraph 10.1(b).
Nothing herein contained shall be construed to require Lessee to pay any
personal property tax on
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any of Lessor's personal property unless such property is utilized by Lessee.
11. UTILITIES. (See Insert 14, Sections 49.1 and 49.2) Lessee shall pay for
all water, gas, heat, light, power, telephone, trash disposal and other
utilities and services supplied and separately metered to the Premises, as
well as Lessee's proportionate share of the utilities supplied to the common
area together with any taxes thereon. If any such services are not separately
metered to Lessee, Lessee shall pay a reasonable proportion, to be determined by
Lessor, of all charges jointly metered with other premises.
12. ASSIGNMENT AND SUBLETTING.
12.1 LESSOR'S CONSENT REQUIRED.
(a) Lessee shall not voluntarily or by operation of law
assign, transfer, mortgage or otherwise transfer or encumber (collectively,
"assignment") or sublet all or any part of Lessee's interest in this Lease or in
the Premises without Lessor's prior written consent given under and subject to
the terms of Paragraph 12.2, hereof. Lessor will notify Lessee within ten (10)
business days after receipt of Lessee's notice of its intent to assign or sublet
all or a portion of the Premises. Lessor's failure to respond within said ten
(10) business days will be deemed as acceptance of the proposed assignee or
sublessee.
(b) A change in the control of Lessee shall constitute an
assignment requiring Lessor's consent. The transfer, on a cumulative basis, of
fifty percent (50%) or more of the voting control of Lessee shall constitute a
change in control for this purpose. (See Insert 11 of Addendum.)
(c) The voluntary involvement of Lessee or its assets in
any transaction, or series of transactions (by way of merger, sale, acquisition,
financing, refinancing, transfer, leveraged buy-out or otherwise), whether or
not a formal assignment or hypothecation of this Lease or Lessee's assets
occurs, which results or will result in a reduction of the Net Worth of Lessee,
as hereinafter defined, by an amount equal to or greater than twenty-five
percent (25%) of such Net Worth of Lessee as it was
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represented to Lessor at the time of the execution by Lessor of this Lease shall
be considered an assignment of this Lease by Lessee to which Lessor may
reasonably withhold its consent. "Net worth of Lessee" for purposes of this
Lease shall be the net worth of Lessee (excluding any guarantors) established
under generally accepted accounting principles consistently applied.
(d) An assignment or subletting of Lessee's interest in
this Lease without Lessor's specific prior written consent shall be a Default
curable after notice per Paragraph 13.1(d). If Lessee fails to cure such Default
per Paragraph 13.1(d), Lessor shall have the right to either, (i) terminate this
Lease, or (ii) upon thirty (30) days written notice ("Lessor's Notice"),
increase the monthly Base Rent to fair market rental value or one hundred ten
percent (110%) of the Base Rent then in effect, whichever is greater. Pending
determination of the new fair market rental value, if disputed by Lessee, Lessee
shall pay the amount set forth in Lessor's Notice, with any overpayment credited
against the next installment(s) of Base Rent coming due, and any underpayment
for the period retroactively to the effective date of the adjustment being due
and payable immediately upon the determination thereof. Further, in the event of
such Breach and market value adjustment, (i) the purchase price of any option to
purchase the Premises held by Lessee shall be subject to similar adjustment to
the then fair market value (without the Lease being considered an encumbrance or
any deduction for depreciation or obsolescence, and considering the Premises at
its highest and best use and in good condition), or one hundred ten percent
(110%) of the price previously in effect, whichever is greater, (ii) any
index-oriented rental or price adjustment formulas contained in this Lease shall
be adjusted to require that the base index be determined with reference to the
index applicable to the time of such adjustment, and (iii) any fixed rental
adjustments scheduled during the remainder of the Lease term shall be increased
in the same ratio as the new market rental bears to the Base Rent in effect
immediately prior to the market value adjustment.
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12.2 TERMS AND CONDITIONS APPLICABLE TO ASSIGNMENT AND SUBLETTING.
(a) Regardless of Lessor's consent, any assignment or
subletting shall not: (i) be effective without the express written assumption by
such assignee or sublessee of the obligations of Lessee under this Lease, (ii)
release Lessee of any obligations hereunder, or (iii) alter the primary
liability of Lessee or the payment of Base Rent and other sums due Lessor
hereunder or for the performance of any other obligations to be performed by
Lessee under this Lease.
(b) Lessor may accept any rent or performance of Lessee's
obligations from any person other than Lessee pending approval or disapproval of
an assignment. Neither a delay in the approval or disapproval of such assignment
nor the acceptance of any rent or performance shall constitute a waiver or
estoppel of Lessor's right to exercise its remedies for the Default or Breach by
Lessee of any of the terms, covenants or conditions of this Lease.
(c) The consent of Lessor to any assignment or subletting
shall not constitute a consent to any subsequent assignment or subletting by
Lessee or to any subsequent or successive assignment or subletting by the
sublessee. However, Lessor may consent to subsequent sublettings and assignments
of the sublease or any amendments or modifications thereto without notifying
Lessee or anyone else liable on the Lease or sublease and without obtaining
their consent, and such action shall not relieve such persons from liability
under this Lease or sublease.
(d) In the event of any Default or Breach of Lessee's
obligations under this Lease, Lessor may proceed directly against Lessee, or any
one else responsible for the performance of the Lessee's obligations under this
Lease, without first exhausting Lessor's remedies against any other person or
entity responsible therefor to Lessor, or any security held by Lessor or Lessee.
(e) Each request for consent to an assignment or
subletting shall be in writing, accompanied by information relevant to Lessor's
determination as to the financial and operational responsibility and
appropriateness of the proposed
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assignee or sublessee including but not limited to the intended use and/or
required modification of the Premises, if any, together with a non-refundable
deposit of $500 as reasonable consideration for Lessor's considering and
processing the request for consent. Lessee agrees to provide Lessor with such
other or additional information and/or documentation as may be reasonably
requested by Lessor.
(f) Any assignee of, or sublessee under, this Lease
shall, by reason of accepting such assignment or entering into such sublease, be
deemed for the benefit of Lessor, to have assumed and agreed to conform and
comply with each and every term, covenant, condition and obligation herein to be
observed or performed by Lessee during the term of said assignment or sublease,
other than such obligations as are contrary to or inconsistent with provisions
of an assignment or sublease to which Lessor has specifically consented in
writing.
12.3 ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO SUBLETTING. The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of
Lessee's interest in all rentals and income arising from any sublease of all or
a portion of the Premises heretofore or hereafter made by Lessee, and Lessor may
collect such rent and income and apply same toward Lessee's obligations under
this Lease; provided, however, that until a Breach (as defined in Paragraph
13.1) shall occur in the performance of Lessee's obligations under this Lease,
Lessee may, except as otherwise provided in this Lease receive, collect and
enjoy the rents accruing under such sublease. Lessor shall not, by reason of
this or any other assignment of such sublease to Lessor, nor by reason of the
collection of the rents from a sublessee, be deemed liable to the sublessee for
any failure of Lessee to perform and comply with any of Lessee's obligations to
such sublessee under such sublease. Lessee hereby authorizes any such sublessee,
upon receipt of a written notice from Lessor after prior written
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notification has been, made to Lessee stating that a Breach exists in the
performance of Lessee's obligations under this Lease which Lessee has been
allowed all applicable periods to cure, to pay to Lessor the rents and other
charges due and to become due under the sublease. Lessee shall have no right or
claim against said sublessee, or, until the Breach has been cured, against
Lessor, for any such rents and other charges so paid by said sublessee to
Lessor.
(b) In the event of a Breach by Lessee in the performance
of its obligations under this Lease, Lessor, at its option and without any
obligation to do so, may require any sublessee to attorn to Lessor, in which
event Lessor shall undertake the obligations of the sublessor under such
sublease from the time of the exercise of said option to the expiration of such
sublease; provided, however, Lessor shall not be liable for any prepaid rents or
security deposit paid by such sublessee to such sublessor or for any other prior
Defaults or Breaches of such sublessor under such sublease.
(c) Omitted
(d) No sublessee shall further assign or sublet all or
any part of the Premises without Lessor's prior written consent, unless such
transfer is to an affiliate under the same conditions as are applicable to
Lessee, hereunder.
(e) Lessor shall deliver a copy of any notice of Default
or Breach by Lessee to the sublessee, who shall have the right to cure the
Default of Lessee within the grace period, if any, specified in such notice. The
sublessee shall have a right of reimbursement and offset from and against Lessee
for any such Defaults cured by the sublessee.
12.4 LESSOR'S TRANSFER. Lessor shall not transfer this Lease
without Lessee's consent until after Lessor tenders occupancy of the Premises to
Lessee. Such consent shall not be unreasonably withheld so long as on the date
of transfer, the proposed transferee is as financially strong as the Lessor as
of the date of this Lease. After the Premises are tendered to Lessee, Lessor
shall have the right to transfer this Lease without the consent of Lessee.
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13. DEFAULT; BREACH; REMEDIES.
13.1 DEFAULT; BREACH. A "Default" is defined as a failure by the
Lessee to observe, comply with or perform any of the material terms, covenants,
conditions or rules applicable to Lessee under this Lease. A "Breach" is defined
as the occurrence of any one or more of the following Defaults, and, where a
grace period for cure after notice is specified herein, the failure by Lessee to
cure such Default prior to the expiration of the applicable grace period, and
shall entitle Lessor to pursue the remedies set forth in Paragraphs 13.2 and/or
13.3:
(a) Omitted.
(b) Except as expressly otherwise provided in this Lease,
the failure by Lessee to make any payment of Base Rent within five (5) business
days following Lessee's receipt of written notice that the Base Rent is past due
or any other monetary payment required to be made by Lessee hereunder, which is
not paid within fifteen (15) days following Lessee's receipt of written notice
that it is past due whether to Lessor or to a third party, as and when due, the
failure by Lessee to provide Lessor with reasonable evidence of insurance or
surety bond required under this Lease, or the failure of Lessee to fulfill any
obligation under this Lease which endangers or threatens life or property, where
such failure continues for a period of five (5) days following written notice
thereof by or on behalf of Lessor to Lessee.
(c) Except as expressly otherwise provided in this Lease,
the failure by Lessee to provide Lessor with reasonable written evidence (in
duly executed original form, if applicable) of (i) compliance with Applicable
Laws per Paragraph 6.3, (ii) the inspection, maintenance and service contracts
required under Paragraph 7.1(b), (iii) the rescission of an unauthorized
assignment or subletting per Paragraph 12.1(b), (iv) a Tenancy Statement per
Paragraph 16, (v) the subordination or non-subordination of this Lease per
Paragraph 30, (vi) the execution of any document requested under Paragraph 39
(easements), or (vii) any other documentation or information which Lessor may
reasonably require of Lessee under the terms of this Lease, which
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any such failure continues for a period of thirty (30) days following written
notice by or on behalf of Lessor to Lessee.
(d) A Default by Lessee as to the terms, covenants,
conditions or provisions of this Lease, that are to be observed, complied with
or performed by Lessee, other than those described in subparagraphs (a), (b) or
(c), above, where such Default continues for a period of thirty (30) days after
written notice thereof by or on behalf of Lessor to Lessee; provided, however,
that if the nature of Lessee's Default is such that more than thirty (30) days
are reasonably required for its cure, then it shall not be deemed to be a Breach
of this Lease by Lessee if Lessee commences such cure within said thirty (30)
day period and thereafter diligently prosecutes such cure to completion.
(e) The occurrence of any of the following events: (i)
The voluntary or involuntary making by Lessee of any general arrangement or
assignment for the benefit of creditors unless the same is rectified within
ninety (90) days following notice thereof; (ii) Lessee's becoming a "debtor" as
defined in 11 U.S.C. Section 101 or any successor statute thereto (unless, in
the case of a petition filed against Lessee, the same is dismissed within
ninety (90) days); (iii) the appointment of a trustee or receiver to take
possession of substantially all of Lessee's assets located at the Premises or
of Lessee's interest in this Lease, where possession is not restored to Lessee
within ninety (90) days; or (iv) the attachment, execution or other judicial
seizure of substantially all of Lessee's assets located at the Premises or of
Lessee's interest in this Lease, where such seizure is not discharged within
ninety (90) days; provided, however, in the event that any provision of this
subparagraph (e) is contrary to any Applicable Laws, such provision shall be
of no force or effect, and not affect the validity of the remaining provisions.
(f) The discovery by Lessor that any financial statement
given to Lessor by Lessee of Lessee's obligations hereunder prior to the
execution of this Lease was materially false.
13.2 REMEDIES. If Lessee fails to perform any affirmative duty or
obligation of Lessee under this Lease, within the cure
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periods set forth in this Lease, Lessor may at its option (but without
obligation to do so), perform such duty or obligation on Lessee's behalf,
including but not limited to the obtaining of reasonably required bonds,
insurance policies, or governmental licenses, permits or approvals. The costs
and expenses of any such performance by Lessor shall be due and payable by
Lessee to Lessor upon invoice therefor accompanied by reasonable supporting
documentation. If any check given to Lessor by Lessee shall not be honored by
the bank upon which it is drawn, Lessor, at its option, may require all future
payments to be made under this Lease by Lessee to be made only by cashier's
check. In the event of a Breach of this Lease by Lessee, as defined in Paragraph
13.1, with or without further notice or demand and without limiting Lessor in
the exercise of any right or remedy which Lessor may have by law by reason of
such Breach, Lessor may:
(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease and the term hereof shall terminate and
Lessee shall immediately surrender possession of the Premises to Lessor. In such
event Lessor shall be entitled to recover from Lessee: (i) the worth at the time
of the award of the unpaid rent which had been earned at the time of
termination; (ii) the worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that the Lessee proves could have
been reasonably avoided; (iii) the worth at the time of award of the amount by
which the unpaid rent for the balance of the term after the time of award
exceeds the amount of such rental loss that the Lessee proves could be
reasonably avoided; and (iv) any other amount necessary to compensate Lessor for
all the detriment proximately caused by the Lessee's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, including the cost of recovering possession of the
Premises, expenses of reletting, including necessary renovation and alteration
of the Premises, actual and reasonable attorneys' fees, and that portion of the
leasing commission paid by Lessor applicable to the unexpired
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term of this Lease. The worth at the time of award of the amount referred to in
provision (iii) above shall be computed by discounting such amount at the
discount rate of the Federal Reserve Bank of San Francisco at the time of award
plus two percent. Efforts by Lessor to mitigate damages caused by Lessee's
Default or Breach of this Lease shall not waive Lessor's right to recover
damages under this Paragraph. If termination of this Lease is obtained through
the provisional remedy of unlawful detainer, Lessor shall have the right to
recover in such proceeding the unpaid rent and damages as are recoverable
therein, or Lessor may reserve therein the right to recover all or any part
thereof in a separate suit for such rent and/or damages. If a notice and grace
period required under subparagraphs 13.1(b), (c) or (d) was not previously
given, a notice to pay rent or quit, or to perform or quit, as the case may be,
given to Lessee under any statute authorizing the forfeiture of leases for
unlawful detainer shall also constitute the applicable notice for grace period
purposes required by subparagraphs 13.1(b), (c) or (d). In such case, the
applicable grace period under subparagraphs 13.1(b), (c) or (d) and under the
unlawful detainer statute shall run concurrently after the one such statutory
notice, and the failure of Lessee to cure the Default within the greater of the
two such grace periods shall constitute both an unlawful detainer and a Breach
of this Lease entitling Lessor to the remedies provided in this Lease and/or by
said statute.
(b) Continue the Lease and Lessee's right to possession in effect
(in California under California Civil Code Section 1951.4) after Lessee's Breach
and abandonment and recover the rent as it becomes due, provided Lessee has the
right to sublet or assign, subject only to reasonable limitations. See Paragraph
12 for the limitations on assignment and subletting which limitations Lessee and
Lessor agree are reasonable. Acts of maintenance or preservation, efforts to
relet the Premises, or the appointment of a receiver to protect the Lessor's
interest under the Lease, shall not constitute a termination of the Lessee's
right to possession.
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(c) Pursue any other remedy now or hereafter available to Lessor
under the laws or judicial decisions of the state wherein the Premises are
located.
(d) The expiration or termination of this Lease and/or the
termination of Lessee's right to possession shall not relieve Lessee from
liability under any indemnity provisions of this Lease as to matters occurring
or accruing during the term hereof or by reason of Lessee's occupancy of the
Premises.
13.3 INDUCEMENT RECAPTURE IN EVENT OF BREACH. (Omitted).
13.4 LATE CHARGES. Lessee hereby acknowledges that late payment by
Lessee to Lessor of rent and other sums due hereunder will cause Lessor to incur
costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed upon
Lessor by the terms of any ground lease, mortgage or trust deed covering the
Premises. Accordingly, if any installment of rent or any other sum due from
Lessee shall not be received by Lessor or Lessor's designee within ten (10) days
after Lessee's receipt of written notice that such amount is past due, (in
addition to the notice referred to in Paragraph 13.1) then, without any
requirement for further notice to Lessee, Lessee shall pay to Lessor a late
charge equal to six percent (6%) of such overdue amount. The parties hereby
agree that each late charge is a one-time charge for each delinquency and
represents a fair and reasonable estimate of the costs Lessor will incur by
reason of late payment by Lessee. Acceptance of such late charge by Lessor shall
in no event constitute a waiver of Lessee's Default or Breach with respect to
such overdue amount, nor prevent Lessor from exercising any of the other rights
and remedies granted hereunder. In the event that a late charge is payable
hereunder, whether or not collected, for three (3) consecutive installments of
Base Rent, then notwithstanding Paragraph 4.1 or any other provision of this
Lease to the contrary, Base Rent shall, at Lessor's option, become due and
payable quarterly in advance. Interest shall not accrue on the late payment
charges.
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13.5 BREACH BY LESSOR. Lessor shall not be deemed in breach of this
Lease unless Lessor fails as soon as reasonably possible to perform an
obligation required to be performed by Lessor. For purposes of this Paragraph
13.5, a reasonable time shall in no event be less than ten (10) business days
after receipt by Lessor, and by the holders of any ground lease, mortgage or
deed of trust covering the Premises whose name and address shall have been
furnished Lessee in writing for such purpose, of written notice specifying
wherein such obligation of Lessor has not been performed; provided, however,
that if the nature of Lessor's obligation is such that more than thirty (30)
days after such notice are reasonably required for its performance, then Lessor
shall not be in breach of this Lease if performance is commenced within such
thirty (30) day period and thereafter diligently pursued to completion. Except
as otherwise provided in this Lease, Lessee shall have all rights accorded to
Lessees under California law.
14. CONDEMNATION. If the Premises or any portion thereof are taken under
the power of eminent domain or sold under the threat of the exercise of said
power (all of which are herein called "condemnation"), this Lease shall
terminate as to the part so taken as of the date the condemning authority takes
title or possession, whichever first occurs. If more than ten percent (10%) of
the floor area of the Premises, or more than twenty-five percent (25%) of the
land area adjacent to the Premises not occupied by any building (the "Land
Area"), is taken by condemnation, Lessee may, at Lessee's option, to be
exercised in writing within thirty (30) days after Lessor shall have given
Lessee written notice of such taking (or in the absence of such notice, within
thirty (30) days after the condemning authority shall have taken possession)
terminate this Lease as of the date the condemning authority takes such
possession. If Lessee does not terminate this Lease in accordance with the
foregoing, this Lease shall remain in full force and effect as to the portion of
the Premises remaining, except that the Base Rent shall be reduced in the same
proportion as the rentable floor area of the Premises taken and the square
footage of the parking area taken
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bears to the total rentable floor area of the building located on the Premises
and total square footage of the parking lot that serves the building located on
the Premises. No reduction of Base Rent shall occur if the only portion of the
Project taken is Land Area as defined above. Any award for the taking of all or
any part of the Premises under the power of eminent domain or any payment made
under threat of the exercise of such power shall be the property of Lessor,
whether such award shall be made as compensation for diminution in value of the
leasehold or for the taking of the fee, or as severance damages; provided,
however, that Lessee shall be entitled to any compensation, separately awarded
to Lessee as relocation expenses and/or loss of Lessee's Trade Fixtures. In the
event that this Lease is not terminated by reason of such condemnation, Lessor
shall to the extent of its net severance damages received, over and above the
legal and other expenses incurred by Lessor in the condemnation matter, repair
any damage to the Premises caused by such condemnation, except to the extent
that Lessee has been reimbursed therefor by the condemning authority. Lessee
shall be responsible for the payment of any amount in excess of such net
severance damages required to complete such repair. Nothing herein contained
shall prevent Lessee from seeking an award from the condemning authority for its
loss of leasehold value. To the extent that the condemning authority makes a
separate award for loss of leasehold value, Lessor shall assign to Lessee any
award received for loss of leasehold value.
15. BROKER'S FEE. (See Insert 12 of Addendum.)
16. TENANCY STATEMENT.
16.1 Each Party (as "Responding Party") shall within fifteen (15)
days after written notice from the other Party (the "Requesting Party") execute,
acknowledge and deliver to the Requesting Party a statement in writing in form
similar to the then most current "Tenancy Statement" form published by the
American Industrial Real Estate Association, plus such additional information,
confirmation and/or statements as may be reasonably requested by the Requesting
Party.
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16.2 If Lessor desires to finance, refinance, or sell the Premises,
any part thereof, or the building of which the Premises are a part, Lessee shall
deliver no more than once in any twelve (12) month period to any potential
lender or purchaser designated by Lessor, such financial statements of Lessee
as may be reasonably required by such lender or purchaser, including but not
limited to Lessee's current financial statements. All such financial statements
shall be received by Lessor and such lender or purchaser in confidence and
shall be used only for the purposes herein set forth.
17. LESSOR'S LIABILITY. The term "Lessor" as used herein shall
mean the owner or owners at the time, in question of the fee title to the
Premises, or, if this is a sublease, of the Lessee's interest in the prior
lease. In the event of a transfer of Lessor's title or interest in the Premises
or in this Lease, Lessor shall deliver to the transferee or assignee (in cash or
by credit) any unused Security Deposit held by Lessor at the time of such
transfer or assignment. Except as provided in Paragraph 15, upon written
notification to, and received by, Lessee of such transfer or assignment and
delivery of the Security Deposit, as aforesaid, the prior Lessor shall be
relieved of all liability with respect to the obligations and/or covenants under
this Lease thereafter to be performed by the Lessor. Subject to the foregoing,
the obligations and/or covenants in this Lease to be performed by the Lessor
shall be binding only upon the Lessor as hereinabove defined.
18. SEVERABILITY. The invalidity of any provision of this Lease,
as determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.
19. INTEREST ON PAST-DUE OBLIGATIONS. Any monetary payment due
Lessor hereunder, other than late charges and accrued interest, not received by
Lessor within thirty (30) days following Lessee's receipt of written
notification that it is past due plus the expiration of the cure period
associated with such notification, shall bear interest from the thirty-first
(31st) day after the expiration of the thirty (30) notice period due at the rate
of
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12% per annum, but not exceeding the maximum rate allowed by law, in addition to
the late charge provided for in Paragraph 13.4.
20. TIME OF ESSENCE. Time is of the essence with respect to the performance
of all obligations to be performed or observed by the Parties under this Lease.
21. RENT DEFINED. All monetary obligations of Lessee to Lessor under the
terms of this Lease are deemed to be rent.
22. NO PRIOR OR OTHER AGREEMENTS; BROKER DISCLAIMER. This Lease and the
written agreements executed contemporaneously herewith contain all agreements
between the Parties with respect to any matter mentioned herein, and no other
prior or contemporaneous agreement or understanding shall be effective.
23. NOTICES.
23.1 All notices required or permitted by this Lease shall be in
writing and may be delivered in person (by hand or by messenger or courier
service) or may be sent by regular, certified or registered mail or U.S. Postal
Service Express Mail, with postage prepaid, or by facsimile transmission, and
shall be deemed sufficiently given if served in a manner specified in this
Paragraph 23. The addresses noted adjacent to a Party's signature on this Lease
shall be that Party's address for delivery or mailing of notice purposes. Either
Party may by written notice to the other specify a different address for notice
purposes, except that upon Lessee's taking possession of the Premises, the
Premises shall constitute Lessee's address for the purpose of mailing or
delivering notices to Lessee. A copy of all notices required or permitted to be
given to Lessor hereunder shall be concurrently transmitted to such party or
parties at such addresses as Lessor may from time to time hereafter designate by
written notice to Lessee.
23.2 Any notice sent by registered or certified mail, return
receipt requested, shall be deemed given on the date of delivery shown on the
receipt card, or if no delivery date is shown one day thereafter, the postmark
thereon. If sent by regular mail the notice shall be deemed given seventy-two
(72) hours after the same is addressed as required herein and mailed with
postage prepaid. Notices delivered by United States Express Mail or
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overnight courier which guarantees next day delivery shall be deemed given
twenty-four (24) hours after delivery of the same to the United States Postal
Service or courier. If any notice is transmitted by facsimile transmission or
similar means, the same shall be deemed served or delivered upon telephone
confirmation of receipt of the transmission thereof, provided a copy is also
delivered via delivery or mail. If notice is received on a Sunday or legal
holiday, it shall be deemed received on the next business day.
24. WAIVERS. No waiver by Lessor or Lessee of the Default or Breach of any
term, covenant or condition hereof, shall be deemed a waiver of any other term,
covenant or condition hereof, or of any subsequent Default or Breach of the same
or of any other term, covenant or condition hereof. Either party's consent to,
or approval of, any act shall not be deemed to render unnecessary the obtaining
of that party's consent to, or approval of, any subsequent or similar act by the
other party, or be construed as the basis of an estoppel to enforce the
provision or provisions of this Lease requiring such consent. Regardless of
Lessor's knowledge of a Default or Breach at the time of accepting rent, the
acceptance of rent by Lessor shall not be a waiver of any preceding Default or
Breach by Lessee of any provision hereof, other than the failure of Lessee to
pay the particular rent so accepted. Any payment given Lessor by Lessee may be
accepted by Lessor on account of moneys or damages due Lessor, notwithstanding
any qualifying statements or conditions made by Lessee in connection therewith,
which such statements and/or conditions shall be of no force or effect
whatsoever unless specifically agreed to in writing by Lessor at or before the
time of deposit of such payment.
25. RECORDING. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording purposes. The Party requesting recordation shall be
responsible for payment of any fees or taxes applicable thereto.
26. NO RIGHT TO HOLDOVER. Lessee has no right to retain possession of the
Premises or any part thereof beyond the
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expiration or earlier termination of this Lease without Lessor's prior consent
which shall not be unreasonably withheld. In the event of such holdover with
Lessor's consent, this Lease shall govern and Lessee shall pay rent for three
(3) months in the same amount as Lessee paid at the expiration of the term.
After three (3) months of holdover, if Lessee continues to holdover, Lessee
shall pay rent at one hundred fifty percent (150%) of the previous rent).
27. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
28. COVENANTS AND CONDITIONS. All-provisions of this Lease to be observed
or performed by Lessee or Lessor are both covenants and conditions.
29. BINDING EFFECT: CHOICE OF LAW. This Lease shall be binding upon the
parties, their personal representatives, successors and assigns and be governed
by the laws of the State in which the Premises are located. Any litigation
between the Parties hereto concerning this Lease shall be initiated in the
county in which the Premises are located.
30. SUBORDINATION; ATTORNMENT; NON-DISTURBANCE.
30.1 SUBORDINATION. This Lease and any Option granted hereby shall
be subject and subordinate to any ground lease, mortgage, deed of trust, or
other hypothecation or security device (collectively, "Security Device"), now or
hereafter placed by Lessor upon the real property of which the Premises are a
part, to any and all advances made on the security thereof, and to all renewals,
modifications, consolidations, replacements and extensions thereof. Lessor
represents to Lessee that, as of the date this Lease is executed, there are no
known security devices recorded against the Project. Lessee agrees that the
Lenders holding any such Security Device shall have no duty, liability of
obligation to perform any of the obligations of Lessor under this Lease, but
that in the event of Lessor's default with respect to any such obligation,
Lessee will give any Lender whose name and address have been furnished Lessee in
writing for such purpose notice of Lessor's default and allow such Lender
fifteen (15)
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days following receipt of such notice for the cure of said default before
invoking any remedies Lessee may have by reason thereof. If any Lender shall
elect to have this Lease and/or any Option granted hereby superior to the lien
of its Security Device and shall give written notice thereof to Lessee, this
Lease and such Options shall be deemed prior to such Security Device,
notwithstanding the relative dates of the documentation or recordation thereof.
30.2 ATTORNMENT. Subject to the non-disturbance provisions of
Paragraph 30.3, Lessee agrees to attorn to a Lender or any other party who
acquires ownership of the Premises by reason of a foreclosure of a Security
Device.
30.3 NON-DISTURBANCE. With respect to Security Devices entered into
by Lessor after the execution of this Lease, Lessee's subordination of this
Lease shall be subject to receiving assurance (a "non-disturbance agreement")
from the Lender that Lessee's possession and this Lease, including any options
to extend the term hereof, will not be disturbed so long as Lessee is not in
breach hereof and attorns to the record owner of the Premises. (See Section 60
of Insert 14 of Addendum.)
30.4 SELF-EXECUTING. The agreements contained in this Paragraph 30
shall be effective without the execution of any further documents; provided,
however, that, upon written request from Lessor or a Lender in connection with a
sale, financing or refinancing of the Premises, Lessee and Lessor shall execute
such further writings as may be reasonably required and are reasonably
acceptable to the parties to separately document any such subordination or
non-subordination, attornment and/or non-disturbance agreement as is provided
for herein.
31. ATTORNEYS' FEES. Lessor and Lessee agree that if an attorney is
consulted by Lessor in connection with a Lessee Default or Breach (as herein
defined), $350.00 is a reasonable minimum sum per such occurrence for legal
services and costs in the preparation and service of a notice of Default, and
that Lessor may include the cost of such services and costs in said notice as
rent due and payable to cure said Default. If any Party or Broker brings an
action or proceeding to enforce the
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terms hereof or declare rights hereunder, the prevailing Party (as hereafter
defined) or Broker in any such proceeding, action, or appeal thereon, shall be
entitled to actual and reasonable attorneys' fees. Such fees may be awarded in
the same suit or recovered in a separate suit, whether or not such action or
proceeding is pursued to decision or judgement. The term, "Prevailing Party"
shall include, without limitation, a Party who substantially obtains or defeats
the relief sought, as the case may be, whether by compromise, settlement,
judgment, or the abandonment by the other party of its claim or defense. The
attorneys' fee award shall not be computed in accordance with any court fee
schedule, but shall be such as to fully reimburse all attorneys' fees actually
and reasonably incurred. Lessor and Lessee shall be entitled to attorneys' fees,
costs and expenses incurred in the preparation and service of notices of Default
and consultations in connection therewith, whether or not a legal action is
subsequently commenced in connection with such Default or resulting Breach.
32. LESSOR'S ACCESS; SHOWING PREMISES; REPAIRS. Lessor and Lessor's agents
shall have the right to enter the Premises at any time, in the case of an
emergency, and otherwise upon eight hours prior verbal notice for the purpose of
showing the same to prospective purchasers, lenders, or lessees after Lessee has
elected not to extend the term, and making such alterations, repairs,
improvements or additions to the Premises or to the building of which they are a
part, as Lessor may reasonably deem necessary. Lessor shall indemnify, protect,
defend and hold harmless Lessee from any and all liability, claims, damages,
costs, liens, judgments, attorneys' fees arising out of or in connection with
such access of Lessor and Lessor's agents to the Premises except to the extent
caused by Lessee's intentional misconduct or negligence. Lessor may at any time
after unsuccessful negotiations with Lessee to sell the building, place on or
about the Premises or building any ordinary "For Sale" signs and Lessor may at
any time during the last one hundred twenty (120) days of the term hereof
provided Lessee has elected not to extend the term place on or about Premises
any ordinary
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"For Lease" signs. Any such activities of Lessor shall be without abatement of
rent or liability of Lessee.
33. AUCTIONS. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises without first having
obtained Lessor's prior written consent. Notwithstanding anything to the
contrary in this Lease, Lessor shall not be obligated to exercise any standard
of reasonableness in determining whether to grant such consent.
34. TERMINATION; MERGER. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises; provided, however, Lessor shall, in the event of any such surrender,
termination or cancellation, have the option to continue any one or all of any
existing subtenancies. Lessor's failure within ten (10) days following any such
event to make election to the contrary by written notice to the holder of any
such lesser interest, shall constitute Lessor's election to have such event
constitute the termination of such interest.
35. CONSENTS.
(a) Except for Paragraph 33 hereof (Auctions) or as otherwise
provided herein, wherever in this Lease the consent or approval of a Party is
required to an act by or for the other Party, such consent or approval shall not
be unreasonably withheld or delayed or conditioned. In the event either party
fails to approve or consent or disapprove or withhold consent relative to any
request from the other party for more than ten (10) days following delivery of a
written request for that approval or consent, the non-responding party's silence
shall be deemed its approval or consent to the action requested and the other
party may rely upon that approval or consent in the same manner as though it had
been given in writing. Either party's actual reasonable costs and expenses
(including but not limited to architects', attorneys', engineers', or other
consultants' fees) incurred in the consideration of, or response to, a request
by the other party for any consent or approval pertaining to this
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Lease or the Premises, including but not limited to consents to an assignment, a
subletting or the presence or use of a Hazardous Substance, practice or storage
tank, shall be paid by the party requesting such consent or approval to the
party who shall give such consent or approval upon receipt of an invoice and
supporting documentation therefor. Subject to Paragraph 12.2(e) (applicable to
assignment or subletting), Lessor may, as a condition to considering any such
request by Lessee, require that Lessee deposit with Lessor an amount of money
(in addition to the Security Deposit held under Paragraph 5) reasonably
calculated by Lessor to represent the cost that will be incurred in considering
and responding to that request. Except as otherwise provided, any unused portion
of said deposit shall be refunded to Lessee without interest. Lessor's consent
to any act, assignment of this Lease or subletting of the Premises by Lessee
shall not constitute an acknowledgment that no Default or Breach by Lessee of
this Lease exists, nor shall such consent be deemed a waiver of any then
existing Default or Breach, except as may be otherwise specifically stated in
writing by Lessor at the time of such consent.
(b) All conditions to consent or approval authorized by this Lease
are acknowledged by both Lessor and Lessee as being reasonable. The failure to
specify herein any particular condition to Lessor's or Lessee's consent shall
not preclude the imposition by Lessor or Lessee, as the case may be, at the time
of consent of such further or other conditions as are then reasonable with
reference to the particular matter for which consent is being given.
36. OPTIONS.
36.1 DEFINITION. As used in this Paragraph 36 the word "Option" has
the following meaning: (a) the right to extend the term of this Lease or to
renew this Lease or to extend or renew any lease that Lessee has on other
property of Lessor; (b) the right of first refusal to lease the Premises or the
right of first offer to lease the Premises or the right of first refusal to
lease other property of Lessor or the right of first offer to lease other
property of Lessor; (c) the right to purchase the
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Premises, or the right of first refusal to purchase the Premises, or the right
of first offer to purchase the Premises, or the right to purchase other property
of Lessor, or the right of first refusal to purchase other property of Lessor,
or the right of first offer to purchase other property of Lessor.
36.2 OPTIONS PERSONAL TO ORIGINAL LESSEE. Each Option granted to
Lessee in this Lease is personal to the original Lessee named in Paragraph 1.1
hereof, and cannot be voluntarily or involuntarily assigned or exercised by any
person or entity other than said original Lessee while the original Lessee is in
full and actual possession of the Premises and without the intention of
thereafter assigning or subletting. Lease Options, if any, herein granted to
Lessee are assignable, provided that such assignment is in accordance with
Section 12 herein. Otherwise, the Lease and Sale Options, if any, are not
assignable, either as a part of an assignment of this Lease or separately or
apart therefrom, and no Option may be separated from this Lease in any manner,
by reservation or otherwise.
36.3 MULTIPLE OPTIONS. In the event that Lessee has any multiple
Options to extend or renew this Lease, a later option cannot be exercised unless
the prior Options to extend or renew this Lease have been validly exercised.
36.4 EFFECT OF DEFAULT ON OPTIONS.
(a) Lessee shall have no right to exercise an option,
notwithstanding any provision in the grant of Option to the contrary: (i) during
the period commencing with the giving of any notice of Default under Paragraph
13.1 and continuing until the noticed Default is cured, or (ii) during the
period of time any monetary obligation due Lessor from Lessee is unpaid and in
default (without regard to whether notice thereof is given Lessee), or (iii)
during the time Lessee is in Breach of this Lease, or (iv) in the event that
Lessor has given to Lessee three (3) or more notices of Default under Paragraph
13.1, whether or not the Defaults are cured, during the twelve (12) month period
immediately preceding the exercise of the Option.
(b) The period of time within which an Option may be
exercised shall not be extended or enlarged by reason of Lessee's
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inability to exercise an Option because of the provisions of Paragraph 36.4(a).
(c) All rights of Lessee under the provisions of either (i) any
unexercised Option or (ii) any exercised Option, in which the Option Term has
not commenced, shall terminate and be of no further force or effect,
notwithstanding Lessee's due and timely exercise of the Option, if, after such
exercise and during the term of this Lease, (i) Lessee fails to pay to Lessor a
monetary obligation of Lessee for a period of thirty (30) days after such
obligation becomes due (without any necessity of Lessor to give notice thereof
to Lessee), or (ii) Lessor gives to Lessee three or more notices of Default
under Paragraph 13.1 during any twelve (12) month period, whether or not the
Defaults are cured, or (iii) if Lessee commits an uncured breach of this Lease.
37. MULTIPLE BUILDINGS. If the Premises are part of a group of buildings
controlled by Lessor, Lessee agrees that it will abide by, keep and observe all
reasonable rules and regulations which Lessor may make from time to time for the
management, safety, care, and cleanliness of the grounds, the parking and
unloading of vehicles and the preservation of good order, as well as for the
convenience of other occupants or tenants of such other buildings and their
invitees, and that Lessee will pay its fair share of common expenses incurred in
connection therewith. Lessee acknowledges that Lessor has not yet adopted any
Rules and Regulations. If at any time Lessor proposes to adopt such Rules and
Regulations Lessor covenants that such Rules and Regulations shall be reasonable
in comparison with similar buildings in the area, and such Rules and Regulations
shall be equally and fairly enforced uniformly against all tenants. So long as
Lessee is the only tenant in a group of buildings controlled by Lessor and to
which those Rules and Regulations apply, Lessee shall have the right to approve
the Rules and Regulations before they become binding upon Lessee.
38. SECURITY MEASURES. Lessee hereby acknowledges that the rental payable
to Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall
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have no obligation whatsoever to provide same. Lessee assumes all
responsibility for the protection of the Premises, Lessee, its agents and
invitees and their property from the acts of third parties.
39. RESERVATIONS. Lessor reserves to itself the right, from time to time,
to grant, without the consent or joinder of Lessee, such easements, rights and
dedications that Lessor deems reasonably necessary, and to cause the recordation
of parcel maps and restrictions, so long as such easements, rights, dedications,
maps and restrictions do not unreasonably interfere with the use of the Premises
by Lessee. Lessee agrees to sign any documents reasonably requested by Lessor to
effectuate any such easement rights, dedications, maps or restrictions. Lessor
shall not place any easements, rights or dedications on the Project that would
adversely affect Lessee's use of the Premises or the common area.
40. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to
any amount or sum of money to be paid by one Party to the other under the
provisions hereof, the Party against whom the obligation to pay the money
is asserted shall have the right to make payment "under protest" and such
payment shall not be regarded as a voluntary payment and there shall survive the
right on the part of said Party to institute suit for recovery of such sum. If
it shall be adjudged that there was no legal obligation on the part of said
Party to pay such sum or any part thereof, said Party shall be entitled to
recover such sum or so much thereof plus interest as it was not legally required
to pay under the provisions of this Lease.
41. AUTHORITY. If either Party hereto is a corporation, trust, or general
or limited partnership, each individual executing this Lease of behalf of such
entity represents and warrants that he or she is duly authorized to execute and
deliver this Lease on its behalf. If Lessee is a corporation, trust or
partnership, Lessee shall, within thirty (30) days after request by Lessor,
deliver to Lessor evidence satisfactory to Lessor of such authority.
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42. CONFLICT. Any conflict between the printed provisions of this Lease and
the typewritten or handwritten provisions shall be controlled by the typewritten
or handwritten provisions.
43. OFFER. Preparation of this Lease by Lessor or Lessor's agent and
submission of same to Lessee shall not be deemed an offer to lease to Lessee.
This Lease is not intended to be binding until executed by all parties hereto.
44. AMENDMENTS. This Lease may be modified only in writing, signed by the
parties in interest at the time of the modification. The parties shall mutually
amend this Lease from time to time to reflect any adjustments that are made to
the Base Rent or other rent payable under this Lease. As long as they do not
materially change Lessee's obligations hereunder, Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by an institutional, insurance company, or pension plan lender in
connection with the obtaining of normal financing or refinancing of the property
of which the Premises are a part.
45. MULTIPLE PARTIES. Except as otherwise expressly provided herein, if
more than one person or entity is named herein as either Lessor or Lessee, the
obligations of such multiple parties shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee.
46. SIGNAGE. Lessee shall have the right to install signage on subject
building. This shall be at Lessee's sole expense. Lessee shall submit a plan of
sign design to Lessor for approval prior to installation of said signage. (See
Insert 13 of Addendum.)
47. OMITTED.
48. ADDENDUM. Additional paragraphs are included in Addendum to this Lease.
The Addendum to this Lease is incorporated herein by this reference and is made
a part hereof. In the event of any conflict between the terms of this Lease and
the Addendum, the terms of the Addendum shall govern the parties.
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The parties hereto have executed this Lease at the place on the dates specified
above to their respective signatures.
Executed at Los Angeles, CA Executed at La Jolla, CA
------------------------- -----------------
on April 22, 1992 on APRIL 22, 1992
---------------------------------- ---------------------------
By: LESSOR: By: LESSEE:
LMP PROPERTIES, LTD., A CALBIOCHEM CORPORATION,
California Limited Partnership a California corporation
By: Mesa Pacifica,
Its General Partner
By: /s/ Richard D. Keesling By: /s/ Richard B. Slansky
------------------------------------ --------------------------
Its: One of its General Partners Its: President
-------------------------
Los Angeles address: Address:
c/o Brown, Kraft & Co. Calbiochem Corporation
P.O. Box 49032 10933 North Torrey Pines Road
Los Angeles, California 90049 La Jolla, California 92037
San Diego address:
c/o Brown, Kraft & Co.
8445 Camino Santa Fe, Suite 215
San Diego, California 92121
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ADDENDUM TO LEASE
Insert 1
1.2 The Premises shall initially consist of approximately fifty
thousand (50,000) square feet in a single story twenty-four (24) feet minimum
clear height building located at the west end of Lot 27 which will be
constructed in accordance with the plans and specifications provided by Ware &
Malcomb Architects, dated October 23, 1991, which will incorporate the following
amenities:
(a) Concrete tilt-up with continuous horizontal glass
bonds at office areas;
(b) Twenty-four (24) foot minimum height throughout;
(c) Four (4) ply bonded roof with two percent (2%)
operable skylights in the warehouse area;
(d) Four (4) roll up truck doors at grade level; and
(e) The items set forth in Section 59.1 below.
Insert 2
1.3 Lessor shall notify Lessee in writing fifteen (15) days prior
to such time that the Tenant Improvements will be substantially completed.
Insert 3
1.4 Upon such completion and prior to the rent commencement date,
Lessee shall have the right to commence moving its personnel into the Premises
on a staggered basis and may commence installation of Tenant's fixtures and
equipment. Upon moving in, Lessee shall provide Lessor and contractor with a
"punch list" of items that require further attention and correction and Lessor
shall commence, prior to the rent commencement date such corrections as are
reasonably required by the "punch list" and shall use its best efforts to
diligently make such corrections in a timely manner.
Insert 4
1.5 If the rental commencement date is not the first day of the
month Lessee shall pay to Lessor prior to such date the pro rata rent for the
portion of the month representing the period between the rental commencement
date and the end of such month. rent shall be calculated as follows:
<TABLE>
<CAPTION>
Rate Per Square
Years Foot/Month Annual Rent
<S> <C> <C>
Years 1 - 3: 1.03 $618,000
Years 4 - 6: 1.23 $738,000
Years 7 - 9: 1.33 $798,000
Years 10-12: 1.43 $858,000
Years 13-15: 1.53 $918,000
</TABLE>
Insert 5
2.2 Condition. (continued)
2.2.1. Lessor represents and warrants to Lessee as follows
with respect to the condition of the Premises:
(a) Except as provided in Insert 8, Paragraph
7.2.1, Lessor shall be responsible for any defects of the structural integrity
of the Premises, including slabs, foundations, roof and load bearing walls and
subsurface failure or subsidence of asphalt and walkways in the common area and
any necessary structural repairs arising solely from such defects.
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(b) Lessor has clear title to the Premises and
agrees to provide satisfactory evidence of clear title if requested by Lessee.
(c) The Premises will be in good condition at
the time possession of the Premises is delivered to Lessee.
2.2.2. Lessor agrees to assign to Lessee any third party
warranties, including, without limitation, warranties by the general contractor
or any subcontractors to the extent that they are assignable by Lessor.
Insert 6
1.7 Security Deposit. Upon the execution of this Lease, Lessee
shall pay the security deposit referred to in Section 1.7, hereof, to Lessor
which sum Lessor shall return to Lessee after the sixtieth (60th) month of the
Lease, provided that Lessee is not then in default of any terms of this Lease.
Any interest earned on the security deposit may be retained by Lessor.
Insert 7
6.5 Lessor represents that there are no environmental conditions
or Hazardous Substances in, at or affecting the Premises which violate any
federal, state of local law, ordinance, rule or legislation. Lessor shall
provide Lessee with a Phase I environmental site assessment of Lot 27 no later
than 30 days following execution of the Lease by all parties thereto. In the
event that Lessee disapproves the environmental condition of the Premises based
upon that assessment, Lessee shall have the right to terminate the Lease and
receive back from Lessor any deposits and payments made by Lessee. Lessee shall
approve or disapprove the Phase I report within ten (10) days of its receipt
thereof.
Lessor hereby indemnifies, protects, defends and holds Lessee, its
officers, directors, shareholders, employees, guarantors, agents, successors and
assigns and the Premises harmless from and against any and all damages,
liabilities, costs, claims, liens, expenses, penalties, permits and attorneys'
and consultants' fees arising out of or involving any Hazardous Substances or
storage tank brought onto the Premises or property in which Lessor has an
interest at that time where that property affects the Premises by or for Lessor
or under Lessor's control, or existing prior to commencement of the Lease Term
or after termination of the Lease, or caused by other tenants or third parties
at any time. Lessor's obligations under this Paragraph 6 include, but are not
limited to, the effects of any contamination or injury to person, property or
environment created or suffered by Lessee or third parties and the cost of
investigation (including reasonable consultants' and attorneys' fees and
testing) removal, remediation, restoration and/or abatement thereof, or of any
contamination therein involved and shall survive the expiration or earlier
termination of this Lease. Lessor's indemnification in this Section 6.5 shall
survive any termination or transfer of the Lease for any reason.
Insert 8
7.2.1 With regard to replacement of capital improvements
(e.g., the roof), so long as Lessee was not at fault, and such capital
improvements needed to be replaced, Lessee shall not be obligated to pay for
capital improvements being replaced. However, to the extent that Lessee's
negligent actions result in a need for the roof to be replaced then Lessee shall
pay such costs. If the roof needed to be replaced because of a structural defect
in the roof which was not worsened by Lessee's actions or omissions, then Lessor
would pay 100% of such costs pursuant to Insert 5 above.)
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Insert 9
10.1.1. Lessor shall advise Lessee prior to the due date of any real
estate taxes Lessee's proportionate share of taxes on Lot 27 and Lessee shall
pay its share of taxes to Lessor prior to the due date of such taxes.
Insert 10
10.2.1 Lessee shall not be responsible for payment of increased Real
Property Taxes arising from a reassessment based upon the sale, refinance, or
transfer of ownership of the property unless such sale is to Lessee during the
Original Term or Option Term, if applicable.
Insert 11
12.1(b). Lessee may assign this Lease or sublease the Premises with
notice to Lessor, but without Lessor's consent, to any subsidiary or any
corporation which controls, is controlled by or is under common control with
Lessee, or to any corporation resulting from the merger of or consolidation with
Lessee ("Lessee's Affiliate"). In such case, any Lessee's Affiliate shall assume
in writing all of Lessee's obligations under this Lease and Lessee shall
provide such relevant financial data to Lessor at the time Lessee provides
notice of the transfer in order to allow Lessor to verify the financial
condition of Lessee's Affiliate as compared to the financial condition of
Lessee.
Insert 12
15. Broker's Fee. Lessor and Lessee represent and warrant to one
another that, except for Lessor's Broker and Lessee's Broker identified below,
they each have not employed the services of any other finder or broker in regard
to this transaction, and hereby hold harmless the other from any claims of any
nature, including but not limited to, attorneys' fees arising from any breach of
this warranty and representation. Lessor shall be responsible for payment of the
commission due Lessor's Broker and Lessee's Broker in regard to this transaction
including commissions on all expansions or options exercised by Lessee during
the Original Term and Option Term. Lessor's Broker is Business Real Estate
Brokerage Company and Lessee's Real Estate Broker is Langdon Rieder Corporation.
Lessor shall pay as a Broker's fee in connection with this Lease a sum
equivalent to the commission schedule outlined in the Business Real Estate
Commission Agreement with Lessor.
Insert 13
46. Signage.
46.1 Lessor grants Lessee exclusive building signage to
include, without limitation, such exterior building signage as used by similar
anchor tenants in similar buildings, exterior directional signage, exterior
signage designating the Premises as non-smoking, and interior lobby signage. The
cost for such signage shall be an eligible expense that may be charged against
the tenant improvement allowance. Lessee shall have the right to place a
monument sign on Pacific Center Court Road.
46.2 All signage shall comply with the requirements for
signage then in effect for the City of San Diego, or other appropriate
governmental authority. Any license, use or
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permitting fees charged for installation by a governmental authority shall be
paid by Lessor, as a charge against the tenant improvement allowance. Any
license, use or permitting fees charged subsequent to installation by any
governmental authority shall be paid by Lessee.
Insert 14
49.1 All building operating expenses and utilities shall
be the responsibility, and except as otherwise provided herein, shall be under
the direct control of Lessee. Lessor grants Lessee the right to directly
control, bid out and approve all categories of operating expenses related to the
Premises. Lessor and Lessee shall execute such documents as may be necessary to
transfer the utilities in the Premises to Lessee's name.
49.2 Lessor will bill Lessee on a pro rata basis for
actual operating expenses, excluding those costs listed on Exhibit B attached
hereto and by this reference made a part hereof, utilities, and insurance
premiums for the common area of Lot 27. Lessee shall make payment on such bills
to Lessor within fifteen (15) business days of receipt of Lessor's invoice. The
common area excludes any undeveloped land, proposed building sites or retail
pads. Initially, Lessee's pro rata portion of the common area expenses shall be
5/12ths of such expenses. Lessor will use its best efforts to cause the
remaining two buildings to contain 70,000 feet. Lessor estimates that Lessee's
share of common area expenses during the first year of the Lease, exclusive of
Real Estate Taxes and Insurance but including, association assessments shall not
exceed the sum of $12,877 per year.
49.3 Lessor shall be an additional insured on Lessee's
insurance policies pertaining to standard casualty and property insurance for
the Premises.
50. Parking. Lessor shall provide free of charge for the Original
Term and Extension Terms Lessee with 3.5 parking spaces per 1,000 square feet of
leased space (175) spaces of which twenty (20) spaces shall be reserved at a
location designated by Lessee.
51. Omitted
52. Indebtedness to Parent Company. Lessee represents and warrants
that it is presently indebted to CALBIOCHEM NOVABIOCHEM INTERNATIONAL INC., its
parent company in the approximate sum of Three Million Eight Hundred Thousand
Dollars ($3,800,000.00). Lessee undertakes and agrees to cause CALBIOCHEM
NOVABIOCHEM INTERNATIONAL INC. by separate letter agreement to agree that it
will not accept and Lessee agrees to refrain from paying said indebtedness until
on or after January 1, 1996.
53. Sale of Premises. Lessee shall have the First Right to
Negotiate for the purchase of the Premises, at such time as the Premises is
offered for sale. Lessor shall act reasonably in setting the terms of the sale.
If Lessor and Lessee are unable to agree on terms of sale within forty-five (45)
days from Lessor's notice, then in such event Lessor shall be free to offer the
Premises to unrelated third parties. Lessor shall include in such notice all
provisions generally contained in agreements for the sale of commercial
property, including provisions requiring
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Lessor to obtain a Parcel Map if the Premises are to be sold separate from the
remainder of Lot 27. If on the other hand the negotiation between Lessor and
lessee is successfully concluded with a written agreement within forty-five (45)
days, but the Lessee is unable to obtain financing within sixty (60) days
thereafter, Lessor is free to offer the subject facility to a third party, for
sale to any interested party; and Lessee shall have no further right to acquire
the subject facility, provided, however, if at any time Lessor proposes to sell
the subject facility at a price and on terms that are lower than that had been
agreed to by Lessee, Lessor shall re-offer to Lessee at the new price. Lessee
shall have fifteen (15) business days in which to accept Lessor's new offer and
Lessee must obtain any necessary financing within thirty (30) business days
thereafter.
54. Lease Renewal Option.
54.1 Lessor shall grant two (2) options to renew for five
(5) year terms (the "Option Term") , each.
54.2 Each option shall be exercised, if at all, by written
notice from Lessee to Lessor, no later than one hundred eighty (180) days before
the end of the Original Term or Option Term, whichever is applicable. Upon
receipt by Lessor of Lessee's notice of its exercise of its option to renew,
Lessor and Lessee shall commence negotiations regarding the rental rate for the
Option Term. The rental rate for the first Option Term shall be eighty-five
percent (85%) of the then prevailing market rate for comparable buildings in the
Pacific Corporate Center and the rental rate for the Second Option Term shall be
ninety percent (90%) of such prevailing rate. If Lessor and Lessee cannot agree
on such prevailing rate within sixty (60) days after Lessee's written notice of
exercise then either party shall have the right to terminate the Lease.
54.3 Lessor may, in its sole discretion, require Lessee to
submit its most recent financial information, and, depending on the information
contained in such financial information, require a security deposit from Lessee
as a material condition to the terms and conditions for the Option Term.
55. Expansion Option.
55.1 Lessee shall have the right during the term of this
Lease, or during any option term if exercised by Lessee, to construct a
Mezzanine within the Premises, subject to the review by Lessor and approval by
Lessor of the plans and specifications with respect thereto, which such approval
shall not be unreasonably withheld. Construction thereof shall be subject to the
terms and provisions of this Lease and all costs thereof shall be the sole
responsibility of Lessee. There will be no rental adjustment by virtue thereof
except Lessee shall be responsible for any real estate tax increase by reason
thereof.
55.2 With respect to the remainder of Lot 27 and the
development thereof, the parties hereto agree as follows:
(a) In the event Lessor elects to improve the
remainder of Lot 27, then in such event Lessee shall have a right of first
refusal to lease up to 20,000 square feet of space in such new building or
buildings. Upon Lessor's election so to do, Lessor shall notify Lessee in
writing of such election and set forth substantially all of the terms and
provisions to be incorporated into a lease for such structure. Upon receipt
thereof, the parties shall negotiate in good faith for a period not to exceed
thirty (30) days. In the event the parties cannot agree to a definitive lease
within said period, then for a period of one hundred twenty (120) days from
Lessor's notice to Lessee, referred to above, and in the event Lessor receives a
bona fide offer on terms more favorable than those offered to Lessee and if
Lessor is willing to accept such offer, Lessee shall have the
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right of first refusal to lease the Premises on such terms as may be submitted
by Lessor which reflect a bona fide offer from a third party to lease such
Premises. Lessee shall have fifteen (15) days after receipt of such notice in
which to exercise its right of first refusal. The Lease for such Premises
pursuant to this paragraph (a) or subparagraph (b), hereof shall be
substantially in the same form as this Lease, including the Options as herein
contained.
(b) At any time prior to receipt by Lessee of
the notice referred to in Subparagraph (a) hereof, but no later than six (6)
years following the rent commencement date, upon request so to do by Lessee,
Lessor will construct one or more buildings on Lot 27, consisting of 40,000
square feet in the aggregate, provided that Lessor and Lessee enter into Lease
for a minimum of eight (8) years, or the length of term then remaining on this
Lease, whichever is greater, at a rental rate to be negotiated in good faith
between Lessor and Lessee. Said Lease shall provide for a minimum of 20,000
square feet to be leased by Lessee.
56. Future Development of Lot 27. Prior to the execution of this
Lease, Lessor shall provide Lessee with a schematic drawing showing the future
development of the remainder of Lot 27. Lessor will use its best efforts, at the
time of such development, to locate the proposed structures substantially in
accord with such schematic drawing. Lessor shall advise Lessee from time to
time with respect to its plan for development of the remainder of Lot 27.
57. Non-Disturbance. In the event at any time Lessor elects to
place a deed of trust on the demised Premises, Lessor shall secure and deliver
to Lessee a non-disturbance agreement for the benefit of Lessee.
58. Non-Competition. During the original Term and Extension Term,
if any, Lessor shall not lease any space on the remainder of Lot 27 to any
company or entity that is in direct competition of Lessee without the prior
written consent of Lessee, which will not be unreasonably withheld or delayed.
59. Tenant Improvements.
59.1 Construction of Shell. Lessor shall complete the
shell construction as well as the Tenant Improvement requested by Tenant. For
the purposes of this Section 59, "shell construction" shall mean "construction
of
(i) the four (4) walls;
(ii) the roof;
(iii) the concrete floor;
(iv) the front, and electrical to the building
consisting of 1500/208 amps;
(v) a gas service and meter of one and one-half
(1-1/2) inches;
(vi) one water service meter;
(vii) main sewer service with six (6) inch sewer
lines; and
(viii) the items set forth in Section 1.2 above."
59.2 Tenant Improvement Allowance. For the "tenant
improvements" as herein defined, Lessor shall provide Lessee with a tenant
improvement allowance of Forty Seven Dollars and Fifty Cents ($47.50) per
rentable square foot. Lessee acknowledges that it is financially responsible for
tenant improvements in
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excess of the tenant improvement allowance of Forty Seven Dollars and Fifty
Cents ($47.50) per rentable square foot. Lessee shall deposit with Lessor before
the contractor commences work on the tenant improvements the difference between
the estimated cost and the tenant improvement allowance. Within thirty (30) days
following execution of the Lease, Lessor and Lessee shall mutually approve and
execute a work letter (the "Work Letter") for construction of tenant
improvements. The Work Letter shall contain a definition of "substantial
completion" of the building shell and the tenant improvements and provisions for
change orders and punchlist items. Bailey Building Corporation, the contractor
performing the construction of the tenant improvements shall deliver to Lessor
and Lessee its estimate of the construction cost of the tenant improvements
prior to the commencement of construction of the tenant improvements. The term
"tenant improvements" is hereby defined as "all costs incident to the
construction of all improvements other than the shell construction."
59.3. Rental Adjustment. In the event the actual costs are
less then $47.50 times the rentable square footage of the Premises, then in such
event Lessor shall give Lessee a rental credit towards the first rent becoming
due hereunder in an amount equivalent to such difference. By way of example and
assuming the Premises consist of 50,000 square feet and the actual cost of
construction of the tenant improvements is $46.50, then in such event Lessee
shall receive a rental credit toward the first rentals due hereunder in the sum
of Fifty Thousand Dollars ($50,000.00).
59.4. Space Planning. Lessee shall select the space
planning firm to complete all drawings, permittings, etc. necessary to complete
the tenant improvements. Cost for space planning work shall be included in the
tenant improvements allowance. Lessee shall retain a designer of its choice to
design the tenant improvements but will give due consideration to the Building
Architect, Ware and Malcomb. In addition, Lessee shall have the right to select
a firm which specializes in lab design to work in conjunction with the firm
selected to design the tenant improvements. Lessee shall cause all tenant
improvement plans to be completed and delivered to Lessor prior to thirty (30)
days following the execution and delivery of this Lease by all parties hereto.
60. Administration of Tenant Improvement Allowance. Lessor agrees
to maintain an account during the construction period and all disbursements for
payment of Tenant Improvements will be made from such account. All disbursements
shall be subject to review and approval of Lessee and Lessor; provided, however,
that (a) Lessee and Lessor shall approve, within five (5) business days after
receipt, any particular disbursement; and (b) if either party fails to approve
or disapprove, within five (5) business days, such disbursement, it will be
deemed approved by the nonresponding party.
61. Storage Facility. Lessor undertakes and agrees to designate a
five hundred (500) square feet area to the rear and away from the building,
which said area will be used by Lessee as a ground storage facility. At the
request of Lessee, Lessor will fence the area and the cost thereof will be
charged to the Tenant Improvement Allowance referred to in Section 59.2 hereof.
Lessee will maintain said storage facility and will keep the same free
and clear at all times of any Hazardous Substances as the same is more
particularly referred to in Section 6.2 of the Lease.
62. Related Parties. For purposes of this Lease, the term "related
parties" of an entity shall mean all past, present and future employees,
officers, directors, shareholders, contractors, subcontractors, invitees,
customers, partners, joint venturers,
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agents, successors, assigns, heirs, representatives, administrators, parent
entities, subsidiaries and affiliates of that entity.
63. Background Documents. Prior to the execution of this Lease,
Lessor supplied Lessee with numerous documents respecting Lessor and the
Premises including the following (collectively, the "Background Documents"): (a)
ALTA Survey dated September 19, 1989, by Reginald D. Harvey, Jr.; (b) Parcel
Maps Nos. 15121, 11954 and 11651; (c) ALTA Owner's Title Policy No. 995886-6
issued on November 22, 1989 and all documents referenced therein; (d)
Environmental Assessment Survey Report dated July 5, 1989 prepared Ninyo & Moore
along with a letter dated January 6, 1992, by Ninyo & Moore to Bailey Building
Corporation (collectively, the "Environmental Assessment"); and other documents
relating to the entitlements associated with the Project.
Lessor understands that Lessee is relying upon the truth, completeness
and accuracy of the Background Documents in entering into this Lease. To the
best of Lessor's knowledge, Lessor hereby represents and warrants to Lessee as
follows as of the date that the Lease is fully executed: (a) The Background
Documents are accurate, true and complete; (b) The Background Documents
accurately reflect the true and complete condition and nature of Lessor and the
Premises; (c) The Environmental Assessment accurately depicts the true and
complete environmental condition of the Premises and common areas.
CALBIOCHEM CORPORATION, LMP PROPERTIES, LTD.
A California corporation A California limited
partnership
By MESA PACIFICA
By: /s/ Richard B. Slansky By: /s/ Richard D. Keesling
----------------------------- ------------------------------
PRESIDENT One Of its General Partners
<PAGE> 70
EXHIBIT "A"
[SITE MAP]
<PAGE> 71
EXHIBIT "B"
Standard Excluded Costs and Expenses from Lease
1. Principal or interest payments or other financing charges on
any mortgages, deeds of trust or other financing encumbrances.
2. Rental payments (including percentage rent and increases in
base rent) made under any ground lease.
3. Leasing commissions payable by Lessor.
4. Deductions for any non-cash items such as depreciation for the
Project.
5. Expenditures of a capital nature, including without limitation
capital improvements, capital repairs and capital equipment, with the
determination of whether an item is of a capital nature to be made in accordance
with generally accepted accounting principles.
6. The costs and expenses of special services or utilities
separately chargeable to individual tenants of the Project.
7. Costs and expenses incurred by Lessor in respect of services
furnished to other tenants in the Project which are not also furnished to
Lessee.
8. The costs and expenses of initial construction of the Project,
including without limitation the cost or expense to correct defective work.
9. Costs and expenses of administration, management and oversight
of operations incurred by Lessor (including without limitation the personnel
costs of any employee above the grade of building superintendent, building
manager or chief engineer).
10. Except as otherwise provided herein, costs and expenses
incurred by landlord in connection with damage or condemnation.
11. The costs and expenses incurred by Lessor (i) in connection
with negotiations or disputes with tenants, other occupants or prospective
tenants or other occupants; (ii) due to any violation by Lessor or any tenant or
occupant of the terms of any lease or occupancy agreement; or (iii) any fines or
penalties incurred due to violations by Lessor of any applicable governmental
statute, rule or regulation.
1
<PAGE> 72
12. Advertising and promotional expenditures associated with
marketing of vacant space in the Project.
13. Costs and expenses incurred in the acquisition of sculpture,
paintings or other objects of art.
14. Costs and expenses incurred in connection with the operation
of any parking garage in the Project or any other parking concession.
15. Costs and expenses of constructing any tenant improvements.
16. Costs associated with any penalties incurred by Lessor for
failure to make filing in a timely fashion, pay amounts due or otherwise.
17. Tax increases or assessments due to any transfer of the
property associated with the Lease.
18. Any costs incurred due to the negligence or intentional
misconduct of Lessor or Lessor's agents.
19. Any compensation paid to clerks, attendants or other persons
in commercial concessions operated by Lessor.
20. Any other costs that under generally accepted accounting and
practices would not be considered an expense associated with the Project.
Furthermore, Lessor shall not collect in excess of 100% of all Project
Operating Costs, shall make no profit in connection with the Project Operating
Costs; and shall not recover any Project Operating Cost items more than once.
2
<PAGE> 73
EXHIBIT "C"
WORK LETTER AGREEMENT
You (hereinafter called "Lessee" ) and we (hereinafter called "Lessor")
are executing simultaneously with this Work Letter Agreement, a written lease
(the "Lease") covering those certain premises more particularly described in
Section 1.2 of the Lease (hereinafter referred to as "Premises").
To induce Lessee to enter into the Lease and in considerations of the
mutual covenants hereinafter contained, Lessor and Lessee mutually agree as
follows:
1. PLANS AND SPECIFICATIONS FOR THE PREMISES.
(a) Lessee agrees to cooperate with Ware and Malcomb Architects,
Inc. (architect) and Lessor's engineers, who shall prepare detailed space plans
and specifications for the Premises which shall include, but shall not be
limited to, locations of doors, partitioning, reflected ceiling, electrical
fixtures, outlets and switches, telephone outlets, plumbing fixtures,
extraordinary floor loads, and other special requirements, and Lessee shall
approve such space plans in writing on or before the Space Plan Approval Date
below. All working drawings shall be prepared by architect and Lessor's
engineer. The working drawings shall include architectural, mechanical,
electrical and structural engineering drawings for the Building Standard Work as
described in Paragraph 2 hereof.
(b) Lessee may require work (hereinafter referred to as
"Nonstandard Work") different from or in addition to Standard Work as defined in
Section 2, below. In such event, any architectural, mechanical, electrical and
structural engineering drawings, plans and specifications required shall be
prepared by architect and Lessor's engineer at Lessee's expense and shall be
subject to the approval of Lessor.
(c) All plans, specifications and drawings referred to in
Subparagraph (a) of this Paragraph 1 are subject to Lessor's approval, which
approval shall not be unreasonably withheld.
(d) Lessee's plans and specifications shall not be in conflict
with the building codes for the City in which the Premises are located. All
plans and specifications shall be in a form satisfactory to appropriate
governmental authorities responsible for issuing permits and licenses required
for construction.
<PAGE> 74
Page 2
2. STANDARD WORK AT LANDLORD'S COST AND EXPENSE.
Lessor agrees to furnish and install tenant improvements as shown on
Lessee's Final Space Plan in accordance with current applicable codes ("Standard
Work"). Lessee will at its option review the subcontractor bids to verify cost.
3. NONSTANDARD WORK AT TENANT'S COST AND EXPENSE
Provided Lessee's plans and specifications are approved or furnished
not later than the time provided on the Schedule of Approvals below, Lessor
shall cause Lessee's Nonstandard Work to be installed by Lessor's contractor,
but at Lessee's sole cost and expense. Prior to commencing any such Nonstandard
Work, Lessor shall submit to Lessee a written estimate of the cost thereof,
including the cost of installation and associated delay in substantial
completion. If Lessee approves such estimate, it shall notify in writing within
the time limit specified on the Schedule of Approvals below and, at the time,
pay Lessor in full the cost of such work. Lessee shall approve or disapprove
such terms within the time limit specified on the Schedule of Approvals below
and Lessor's contractor shall proceed with such work. If Lessee shall fail to
approve any such estimate in writing within the time limit specified on the
Schedule of Approvals below, Lessor shall not proceed with such work or the
Standard Work affected thereby. It is understood that Lessee shall thereupon be
liable for the delay and increased cost, if any, in completing the affected
Standard Work. Lessee shall also be responsible for the design, function and
maintenance of such special improvements.
4. SUBSTITUTIONS AND CREDITS DURING CONSTRUCTION.
(a) Lessee may select different materials (hereinafter
"substituted materials") in place of materials which would otherwise be
initially furnished and installed by Landlord in the interior of the Premises
under the provisions of this Work Letter, provided such selection is indicated
in writing by Richard Slansky and approved by Lessor. If Lessee shall make any
such selection and if the cost of the substituted materials shall exceed
Lessor's cost of materials thereby replaced. Lessee shall pay to Lessor, as
hereinafter provided, the difference between the cost of the substituted
materials and the credit given by costs resulting from such substitution. Lessee
shall approve or disapprove such terms within the time limit specified on the
Schedule of Approvals below.
<PAGE> 75
Page 3
(b) No substituted materials shall be furnished and installed
until Lessor has submitted to Richard Slansky a written estimate of the
increased cost thereof, including the cost of installation and associated delay
in substantial completion of the Premises, if any. If Lessee approves such
estimate, it shall notify Lessor in writing within the time limit specified in
the Schedule of Approvals below and, at the same time, pay Lessor in full, the
amount of such estimate and Lessor's contractor shall proceed with such work. If
Lessee shall fail to approve such estimate within said time limit, such failure
is deemed a disapproval thereof and Lessor's contractor shall not proceed with
the proposed substituted work or with the Standard Work affected thereby. Lessee
shall thereupon also be liable for the delay and increased cost, if any, in
completing the affected Standard Work.
(c) All amounts payable by Lessee to Lessor pursuant to this
Paragraph 4 shall be paid by Lessee as set forth above or, at Lessor's option,
promptly after rendering of bills therefore by Lessor or its contractor to
Lessee, it being understood that such bills may be rendered during the progress
of the performance of the work and/or the furnishing and installation of the
materials to which such bills relate. Any substituted materials shall be
surrendered by Lessee to Lessor at the end of the initial or other expiration of
the term of the Lease. No credit shall be granted for the omission of materials
where no replacement in kind is made. There shall be credits only for
substitutions in kind, e.g., a lighting fixture credit may be supplied only
against the cost of another type of lighting fixture.
5. COMPLETION AND RENTAL COMMENCEMENT DATE.
It is agreed that the term of the Lease shall commence March 1, 1993,
extended day for day for every documented day of delay attributed to Force
Majeure Delays as defined below.
6. SCHEDULE OF APPROVALS.
Tenant shall approve those matters listed in the Event column of
Schedule of Approvals attached hereto by the corresponding time specified in the
Time column of said schedule.
<PAGE> 76
Page 4
7. LIQUIDATED DAMAGES; FORCE MAJEURE DELAYS.
(a) As specified in the Lease, Lessor and Lessee understand and
agree that should the Premises not be substantially completed for Lessee's,
occupancy by March 1, 1993, Lessee will incur additional costs and penalties the
exact amount of which are extremely difficult to ascertain. Accordingly, if
Lessor is unable to deliver possession of the Premises substantially completed
to Lessee on or before March 1, 1993, plus any additional days caused by Lessee
Delays as specified in the Lease and this paragraph and Force Majeure Delays as
defined below, then Lessor shall pay to Lessee an amount equal to $2,400.00 per
day for every day of said delay. For the purposes of this Agreement, the term
"substantially completed" shall mean the approval by the City of San Diego to
occupy the Building, as evidenced by the Building Inspector's signature on the
inspection record card.
(b) For purposes of the Work Letter "Lessee's Delays" shall mean
the following:
(i) Lessee's failure to approve or furnish its space
plans and specifications by the time specified in the Schedule
of Approvals below, or
(ii) Delays of any nature, whether or not within Lessee's
control, resulting from Lessee's decision to use any
materials, finishes or installations other than Building
Standard Work, or
(iii) Lessee's changes in its space plans and
specifications after the approval or submission thereof to
Lessor, or
(iv) A delay in performance of Standard Work as a result
of Lessee's failure to approve written estimates of the costs
of Nonstandard work or substituted materials in accordance
with Paragraph 3 and 4 hereof,
(c) For purposes of this Work Letter, "Force Majeure Delays" shall
mean any actual delay beyond the reasonable control of Lessor in the
construction of the Premises, which is caused by, any one or more of the
following:
(i) Strikes or labor disturbances;
(ii) War;
(iii) Fire;
(iv) Earthquake, flood or other natural disaster;
<PAGE> 77
Page 5
(v) Any days beyond the date six weeks from the date
that plans for the tenant improvements are submitted
to the City of San Diego for permits, to the date
that permits are actually issued for construction.
TENANT: LANDLORD:
Calbiochem Corporation LMP Properties, Ltd.
By /s/ Richard B. Slansky By /s/ Richard D. Keesling
----------------------- ------------------------
Its President Its General Partner
---------------------- -----------------------
Date April 22, 1992 Date April 23, 1992
--------------------- ----------------------
The undersigned agrees to be bound by the foregoing Agreement and as
between LMP Properties, Ltd. and the undersigned, the undersigned shall be
responsible for the payment of the liquidated damages specified in Paragraph 7,
hereof.
Bailey Building Company
By /s/ S. Bailey
-------------------------------
Its President
------------------------------
Date 23 April 1992
-----------------------------
<PAGE> 78
Page 6
SCHEDULE OF APPROVALS
<TABLE>
<CAPTION>
EVENT TIME
----- ----
<S> <C>
a) Presentation to Lessor of
preliminary space plan with June 1, 1992
information and specification
adequate for Lessor to prepare
cost estimates.
b) Lessor provides estimates of total June 21, 1992
construction cost and subcontractor
bids and identification of costs in
excess of the allowance (if any).
c) Lessee agrees to excess cost (if any) June 30, 1992
and method of payment or meets with
space planner and Lessor
to revise plan.
d) Deadline for Final Space Plan approval July 15, 1992
by Lessor and Lessee and submittal
to City of San Diego.
</TABLE>
OTHER APPROVALS
All other approvals or responses required by either Lessor or Lessee by the
provisions of the Work Letter Agreements not identified above shall occur within
five (5) business days.
<PAGE> 1
EXHIBIT 10(c)(ii)
AMENDMENT TO
COMMERCIAL LEASE
BETWEEN LMP PROPERTIES, LTD. AND CALBIOCHEM CORPORATION
DATED FEBRUARY 1, 1992
THIS AMENDMENT TO COMMERCIAL LEASE (the "Amendment") is entered into as
of April 1, 1992 by and between LMP PROPERTIES, LTD., a California limited
partnership, ("Lessor") and CALBIOCHEM CORPORATION, a California corporation
("Lessee") and shall amend the Commercial Lease between LMP Properties, Ltd. and
Calbiochem Corporation dated February 1, 1992 (the "Lease") and the Addendum
attached thereto (the "Addendum") as follows:
1. The following provisions shall be added to Paragraph 1.5 of
Insert 4 of the Addendum:
"1.5 (continued) The lease commencement date shall be March 1,
1993, extended day for day for every documented day of delay attributed
to Force Majeure Delay as defined in Paragraph 3.3 herein. Lessee shall
pay no Base Rent for the months of March and April 1993. The rental
commencement date shall be May 1, 1993. From the rental commencement
date until March 1, 1994, Lessee shall pay the Base Rent specified in
this Section 1.5. From March 1, 1994 until December 1, 1994, Lessee
shall pay one-half the Base Rent specified in this Section 1.5."
2. Paragraph 3.3 shall be deleted in its entirety and replaced
with the following:
"If Lessor has not obtained building permits for both the
shell construction and the tenant improvements by October 1, 1992,
either party hereto may terminate this Agreement. In the event Lessor
terminates this Lease, Lessor will pay for the costs incurred in
connection with the tenant improvement plans; and, conversely, if
Lessee terminates this Lease, it shall pay such costs. In either event,
Lessor shall pay any other costs incurred by Lessor with respect to the
Project.
1
<PAGE> 2
Except as hereinafter provided, if for any reason possession of the
Premises cannot be delivered to Lessee as substantially complete by June 15,
1993, Lessee may, at its option, by notice in writing to Lessor within any time
during the twenty (20) days thereafter, cancel this Lease, in which event the
parties shall be discharged from all obligations hereunder; provided, however,
that if such written notice by Lessee is not received by Lessor within said
twenty (20) day period, Lessee shall be deemed to have waived its termination
right as herein provided.
Notwithstanding the foregoing, Lessee shall not have the right to
terminate this Lease to the extent that the delay in completion of the Premises
is caused by the negligence or intentional misconduct of Lessee. The date
hereinabove specified, June 15, 1993, shall be extended by that number of days
representing the period, if any, between the date that Lessee is to deliver to
Lessor the Tenant Improvement Plans as specified in Section 59.4 of the Addendum
attached to this Lease and the date such plans are delivered to Lessor,
together with any period of delay caused by Force Majeure Delay as defined
below.
"Force Majeure Delays" for the purposes of this Agreement shall be
deemed to be: (i) strikes or labor disputes; (ii) war; (iii) fire; (iv)
earthquake, flood or other natural disaster; and (v) any days beyond the date
six weeks from the date plans for tenant improvements are submitted to the City
of San Diego for permits, to the date that permits for construction are actually
issued.
"Lessee's Delays" for the purposes of this Agreement shall be deemed to
be: (i) Lessee's failure to approve or furnish its space plans and
specifications by the time specified in the Schedule of Approvals in the Work
Letter; (ii) delays of any nature, whether or not within Lessee's control,
resulting from Lessee's decision to use any materials, finishes or installations
other than Building Standard Work, as defined in the Work Letter; (iii) Lessee's
changes in its space plans and specifications after the approval or submission
thereof to Lessor; or (iv) a delay in performance of Standard Work, as defined
in the Work Letter; as a result of Lessee's failure to approve written estimates
of the costs of Nonstandard Work or substituted materials in accordance with the
Work Letter.
2
<PAGE> 3
If the Premises are not substantially completed and possession
of the Premises cannot be delivered to Lessee by March 1, 1993, then
for each day thereafter until possession of the Premises can be delivered
to Lessee, Lessor shall pay Lessee Two Thousand Four Hundred Dollars
($2,400.00) per day. The date hereinabove specified, March 1, 1993, shall
be extended day for day for every documented day of delay attributable to
Force Majeure Delays as defined in Paragraph 3.3 herein. The liquidated
damage provision in the Work Letter is intended to be the same as, and
not in addition to, the liquidated damages provision contained herein."
For the purposes of this Lease and Amendment, "substantially
completed" shall mean the approval by the City of San Diego to occupy the
Building as evidenced by the building inspector's signature on the
inspection record.
3. Paragraph 7.2.1 of Insert 8 shall be deleted in its entirety and
replaced with the following:
"7.2.1 With regard to replacement of capital improvements (e.g.,
the roof), so long as Lessee was not at fault, and such capital
improvements needed to be replaced, Lessee shall not be obligated to pay
for capital improvements being replaced. However, to the extent that
Lessee's negligent actions result in a need for the capital improvement
to be replaced then Lessee shall pay such costs. If the capital
improvement needed to be replaced because of a structural defect in the
capital improvement which was not worsened by Lessee's actions or
omissions, then Lessor would pay 100% of such costs pursuant to Insert 5
above.
4. The last sentence of subparagraph (b) of Section 7.3 shall be deleted
in its entirety and replaced with the following:
" ... Lessor may (but without obligation to do so) condition its consent
to any requested Alteration or Utility Installation that costs $25,000 or
more upon Lessee's providing Lessor with a lien and completion bond in an
amount equal to one and one-half times the estimated cost of such
Alteration or Utility Installation."
5. Section 7.4 shall be amended by deleting the term "Utility Additions"
wherever such term appear and replacing each such appearance of the term with
the term "Utility Installations."
3
<PAGE> 4
6. Paragraph 52 of Insert 14 of the Addendum shall deleted in their
entirety and replaced with the following:
52. Lessee represents and warrants that it is presently indebted
to the successor-in-interest of Biodor Holding, A.G., its parent company,
(the "Successor") in the approximate sum of Three Million Eight Hundred
Dollars ($3,800,000.00). Lessee undertakes and agrees to cause Successor
by separate letter agreement to agree that it will not accept and Lessee
agrees to refrain from paying said indebtedness until on or after January
1, 1996."
7. Paragraph 59.2 is deleted in its entirety and replaced with the
following:
"59.2 For the "tenant improvements" as herein defined, Lessor
shall provide Lessee with a tenant improvement allowance of Forty Seven
Dollars and Fifty Cents ($47.50) per rentable square foot. Lessee
acknowledges that it is financially responsible for tenant improvements
in excess of the tenant improvement allowance of Forty Seven Dollars and
Fifty Cents ($47.50) per rentable square foot. Lessee shall deposit with
Lessor before Bailey commences work on the tenant improvements the
difference between the estimated cost and the tenant improvement
allowance. Lessor shall enter into an agreement with Bailey for
construction of the tenant improvements. Bailey shall deliver to Lessor
and Lessee its estimate of the construction cost of the tenant
improvements within twenty (20) days after receipt of the plans from the
Architect. The term "tenant improvements" is hereby defined as "all costs
incident to the construction of all improvements other than the shell
construction."
8. The following Paragraph 64 shall be added to the Lease and Addendum:
"64. Lessor represents and warrants that the external building
design for the Premises will be in substantial accord with the Artist
Rendering hereinbefore delivered to Lessee and outline specifications of
the shell building as prepared by Ware and Malcomb Architects, Inc. dated
January 1992."
4
<PAGE> 5
All other terms and conditions of the Lease and Addendum shall remain
the same.
LESSEE LESSOR
CALBIOCHEM CORPORATION LMP PROPERTIES, LTD.,
a California corporation a California limited
partnership
By MESA PACIFICA, a
California general
By: /s/ Richard B. Slansky partnership
Its: President
By: /s/ Richard D. Keesling
Its: General Partner
MJB/mjb (April 2, 1992)
5
<PAGE> 1
EXHIBIT 10(c)(iii)
SECOND AMENDMENT TO LEASE
This Second Amendment to Lease, dated September 14, 1992 by and between
LMP Properties, Ltd. ("Lessor" herein) and Calbiochem Corporation ("Lessee"
herein) is made with reference to the following facts:
1. Lessor and Lessee have heretofore entered into that certain Lease and
Lease Addendum, dated February 1, 1992, together with that certain Amendment to
Lease of even date, herein called the "Lease".
2. Paragraph 55 of the Lease, entitled "Expansion Option" sets forth the
terms and provisions inter alia with respect to the right of Lessee to construct
a mezzanine within the "Premises" (as such term is defined in the Lease).
3. Lessor and Lessee have agreed that Lessor rather than Lessee will
construct the Mezzanine and the rent under the Lease will be adjusted
accordingly.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and conditions herein contained the parties hereto agree as
follows:
A. Notwithstanding the provisions of Section 55 of the Lease
Addendum, Lessor at its cost and expense shall cause the construction of the
Mezzanine for a total cost of One Hundred Fifty Two Thousand One Hundred Thirty
Three Dollars and Thirty-Five Cents ($152,133.35) consisting of the following
elements:
(1) Construction Cost: $127,520.00
(2) Architectural and
Engineering Fees 7,800.00
(3) City of San Diego Permit
Fees 16,813.35
-----------
$152,133.35
Lessor, upon receipt from Lessee of documentary evidence that it has
paid the permit fees referred to in Paragraph (3) above, Lessor shall reimburse
Lessee for such fees. With respect to the balance of such costs, Lessor shall
advance the cost thereof as and when such advances are required.
B. The costs of construction of the mezzanine as reflected
herein have been agreed upon between Lessee and Bailey Building Corporation by
Letter Agreement, dated August 26, 1992. In the event Lessee requires any
changes from and after the date hereof the cost of such changes shall be borne
by Lessee.
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<PAGE> 2
C. In consideration of Lessor advancing the costs referred to in
Paragraph A hereof Lessee undertakes and agrees that the square foot rental rate
for the mezzanine space shall be 20 cents a square foot and applied to the 9,630
square feet of mezzanine the total annual rent for the mezzanine space shall be
the sum of $23,112. Because the amortization is based upon the sum of $157,000
Lessee shall receive an additional credit towards its tenant improvement
allowance reflected in Section 59.2 of the Addendum to Lease in the sum of
$4,866.65.
D. Section 1.2 of the Addendum to Lease shall be deemed amended
by inserting after the word "feet" in the second line thereof the phrase "plus
9,630 square feet of mezzanine space".
E. Section 1.5 of the Addendum to Lease and Section 1 of the
Amendment to Lease are hereby amended and supplemented as follows:
"In addition to the base rent specified in the Lease, Lessee
shall pay additional rental for the mezzanine of 20 cents per
square foot for each month during the term of this Lease for a
total payment for the mezzanine of $1,926 each month.
Accordingly, giving due regard to the rental allowances set
forth in the Amendment the actual rental payable hereunder
shall be as reflected in Exhibit "A" attached hereto and by
this reference made a part hereof."
Except as herein amended, all other terms and conditions of the Lease,
the Lease Addendum and the Amendment to Lease shall remain the same.
LESSEE LESSOR
CALBIOCHEM CORPORATION LMP PROPERTIES, LTD.,
a California corporation a California limited
partnership
By MESA PACIFICA, a
California general
partnership
By: /s/ Richard B. Slansky By: /s/ Richard D. Keesling
Its: President Its: General Partner
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<PAGE> 1
EXHIBIT 10(c)(iv)
THIRD AMENDMENT TO LEASE
This Third Amendment to Lease, dated March 30, 1993, by and between LMP
Properties, Ltd. ("Lessor" herein) and Calbiochem Corporation ("Lessee" herein)
is made with reference to the following facts:
1. Lessor and Lessee have heretofore entered into that certain Lease and
Lease Addendum, dated February 1, 1992, together with that certain Amendment to
Lease of even date, herein called the "Lease".
2. On or about September 14, 1992, Lessor and Lessee entered into a
Second Amendment to Lease.
3. Pursuant to said Second Amendment to Lease, the parties set forth the
terms and provisions upon which Lessor at its cost and expense is to construct
the mezzanine upon the terms and provisions more particularly set forth in said
Second Amendment to Lease.
4. Lessor and Lessee have agreed that with respect to tenant
improvements to be constructed in the mezzanine, Lessor shall advance to Lessee
the cost thereof.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and conditions herein contained the parties hereto agree as
follows:
A. Notwithstanding the provisions of Section 55 of the Lease Addendum
and in addition to the costs to be extended by Lessor pursuant to the Second
Amendment to Lease, Lessor agrees to cause Bailey Building Corporation to
construct certain tenant improvements with respect to the mezzanine and in
connection therewith the parties agree that the cost thereof shall be the sum of
$194,200.00. Said costs of construction of the improvements have been agreed
upon between Lessee and Bailey Building Corporation. In the event Lessee
requires any changes from and after the date hereof, the cost of such changes
shall be borne by Lessee.
B. In consideration of Lessor advancing the costs referred to in
Paragraph A hereof Lessee undertakes and agrees to pay additional rent for the
first ten (10) years of this Lease, the monthly sum of $2,587.00 which said
payment shall commence on the rental commencement date, and continue on the
first day of each month thereafter during said ten (10) year period.
C. Section 1.3 of the Lease is hereby amended by striking the words
"forty-five days" on Line 1 and Line 4 of said paragraph and inserting in their
place the words "sixty days".
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<PAGE> 2
D. Paragraph 1.5 is hereby amended by striking the words "forty-five" on
the second line thereof and by inserting in its place the word "sixty".
E. Attached hereto marked Exhibit "A" and by this reference made a part
hereof is a revised Rental Schedule reflecting the rent to be paid pursuant to
the Lease as amended.
Except as herein amended, all of the terms and conditions of the Lease,
the Lease Addendum, the Amendment to Lease and Second Amendment to Lease shall
remain in full force and effect.
LESSEE LESSOR
CALBIOCHEM CORPORATION LMP PROPERTIES, LTD.,
a California corporation a California limited partnership
By MESA PACIFIC, a
California general
partnership
By: /s/ Richard B. Slansky By: /s/ Richard D. Keesling
----------------------- ------------------------
Its: President Its: General Partner
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<PAGE> 1
EXHIBIT 10(d)
SUBLEASE
THIS SUBLEASE is made as of this 2nd day of August, 1995, by and between
ONCOGENE SCIENCE, INC., a Delaware corporation (successor to Applied
bioTechnology Inc., formerly named AbT Acquisition Corp.) having an office at 80
Rogers Street, Cambridge, Massachusetts 02142 ("Sublessor"), and
CALBIOCHEM-NOVABIOCHEM CORPORATION, a California corporation having an office at
10394 Pacific Center Court, San Diego, California 92121 ("Sublessee").
WITHNESSETH:
WHEREAS, by lease, dated as of October 1991, between the Trustees of the
East Cambridge Trust ("Landlord"), as landlord, and AbT Acquisition Corp.,
predecessor in interest to Sublessor, as tenant (said lease, as the same has
been amended by First Amendment dated as of April 2, 1993 and by Second
Amendment executed in connection with the execution and delivery of this
Sublease, and as the same may be hereafter amended from time to time, being
referred to herein as the "Lease"), Landlord leased to Sublessor the buildings
known as 80 Rogers Street and 129 Binney Street and a portion of the building
known as 84 Rogers Street, Cambridge, Massachusetts (the "Leased Premises"); and
WHEREAS, Sublessor desires to sublet to Sublessee and Sublessee desires
to sublet and hire from Sublessor that portion of the Leased Premises located
at 80 and 84 Rogers Street more particularly shown on the floor plan attached
hereto and made a part hereof as Exhibit A (the "Sublet Premises") and all of
Sublessor's right, title and interest therein and/or appurtenant thereto, all on
the terms, covenants and conditions set forth herein;
NOW, THEREFORE, the Sublessor and Sublessee hereby agree to the
foregoing and as follows:
1. Term.
a. Sublessor hereby leases to Sublessee and Sublessee hereby
leases and hires from Sublessor the Sublet Premises upon and subject to all of
<PAGE> 2
the terms, covenants and conditions provided for in this Sublease. The term of
this Sublease shall commence on the date hereof (the "Commencement Date"), and,
subject to Section 1(b) below, shall expire on the date which is one day prior
to the third anniversary of the Commencement Date (the "Expiration Date"),
unless such term shall expire, be cancelled or terminate on an earlier date
pursuant to the terms of this Sublease or the Lease, in which event such earlier
date shall be deemed to be the Expiration Date. The period from and including
the Commencement Date to and including the Expiration Date is herein called the
"Term".
b. Sublessee shall have the option to extend the Term of this Sublease
for one year from the scheduled Expiration Date, and thereafter to further
extend the Term of this Sublease for additional periods of one year each (except
that in no event shall any such extension period extend beyond the day before
the expiration of the term of the Lease), provided that in connection with each
such extension: (i) Sublessee shall have given Sublessor not less than nine (9)
months' prior written notice thereof; (ii) this Sublease shall not have been
previously terminated; and (iii) at the time of its giving of such notice and on
the Expiration Date of the then current Term, no default under this Sublease by
Sublessee shall have occurred and be continuing beyond all applicable notice and
cure periods. Any renewal option may be exercised with respect to the entire
Sublet Premises only.
2. Rent.
a. Sublessee shall pay to Sublessor annual rent (hereinafter "Fixed
Rent") in amounts equal to 50% of the aggregate Annual Fixed Rent described in
Section 1 of the Lease (including, without limitation, the CPI increases
described therein).
b. All Fixed Rent shall be paid in lawful money of the United
-2-
<PAGE> 3
States at the office of Sublessor set forth above, or at such other place as
sublessor may designate in writing, without any notice, demand, set-off or
deduction whatsoever, and shall be payable in advance on the first day of each
and every month during the Term. Sublessee shall pay the first monthly
installment of Fixed Rent in full upon the execution hereof.
c. If the Commencement Date is on other than the first day of a calendar
month, the second installment of Fixed Rent shall be adjusted appropriately to
reflect payment of Fixed Rent for the number of days then remaining in said
first month from and including the Commencement Date.
d. In addition to Fixed Rent, Sublessee shall pay to Sublessor as
additional rent, Sublessee's Proportionate Share (as defined herein) of the
amounts payable by Sublessor in respect of "Real Estate Taxes" and "Operating
Expenses" pursuant to Section 6.2 of the Lease on account of periods occurring
during the Term. "Sublessee's Proportionate Share" shall mean fifty (50%)
percent or, if the Leased Premises are increased or decreased, the percentage
equal to a fraction, the numerator of which is 50% of the rentable square feet
of the Leased Premises as the same are presently constituted and the denominator
of which is the then number of square feet of rentable area of the Leased
Premises as the same may be constituted following such increase or decrease.
e. Upon receipt by Sublessor of any refund, adjustment or credit
attributable to escalations under Section 6.2 of the Lease, Sublessee shall be
entitled to receive from Sublessor Sublessee's Proportionate Share of such
refund, adjustment or credit, based on the portion of, and in no event to
exceed, such escalations attributable to any payment made by Sublessee under
this Article, but net of Sublessor's reasonable, out-of-pocket expenses, if any,
incurred in obtaining the same.
f. Sublessee shall pay to Sublessor 50% of the expenses
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<PAGE> 4
incurred by Sublessor with respect to the following items relating to the Leased
Premises: (i) property management; (ii) electricity; (iii) gas; (iv) facility
maintenance; (v) trash removal; (vi) office cleaning and laundry; (vii) water
and sewer charges; (viii) security/fire system; (ix) pest control; (x) building
permits; and (xi) amortization of leasehold improvements; provided, however,
that with respect to each such item, such 50% shall be subject to periodic
review and equitable adjustment based on the then current utilization of such
item by each of the parties. Each party shall have the right to install, at its
own cost and expense, one or more meters to segregate the measurement of that
party's utilities usage and pay the charges incurred in connection therewith
directly to the utility provider and remove the cost thereof from the list of
shared expenses set forth above. It is understood and agreed that Sublessor has
no control over the supply of electrical energy or the quality, quantity or
character of electrical energy supplied to the Sublet Premises. Unless caused by
the negligence or willful misconduct of Sublessor (or any party for whom
Sublessor is legally responsible), Sublessor shall not be liable or responsible
to Sublessee for any loss, damage or expense that Sublessee may sustain or incur
due to any diminution or abatement in the quantity of electrical energy or any
change in the quality or character of such electrical energy or if such service
is no longer available or suitable for Sublessee's requirements.
g. All sums payable under Sections 2(d) and (f) hereof shall be
hereinafter referred to collectively as "Additional Rent". All payments of
Additional Rent under the terms of this Sublease shall be paid by Sublessee in
lawful money of the United States at the office of Sublessor set forth above, or
at such other place as Sublessor may designate in writing, without any notice,
demand, setoff or deduction whatsoever. Sublessor shall provide Sublessee, from
time to time, with statements specifying the amount and payment
-4-
<PAGE> 5
dates for the installments of Additional Rent due hereunder, accompanied by
copies of any related statements delivered to Sublessor by Landlord under the
Lease and such other evidence of such expenses as Sublessee may reasonably
request, and Sublessee shall pay such Additional Rent in the amounts and on the
dates so specified. Sublessor's, failure to render such statement with respect
to any Additional Rent shall not prejudice Sublessor's right to thereafter
render such statement with respect to such Additional Rent or with respect to
any subsequent Additional Rent.
h. If any item of Fixed Rent or Additional Rent is not paid within five
(5) days of the due date of such payment, Sublessee shall pay to Sublessor a
late charge of a sum equal to two (2%) percent per annum above the then current
prime rate charged by Citibank, N.A. or its successor of the amount unpaid
computed from and including the date such payment was due up to but not
including the date of payment. Such late charge shall be paid as liquidated
damages and not as interest or a penalty payment. In addition, such charge shall
be construed as Additional Rent and shall be due and payable with the next
monthly installment of Fixed Rent. The payment of such charge on the part of the
Sublessee or the acceptance thereof by Sublessor shall not be deemed a waiver of
any other remedies available to Sublessor in connection therewith under the
provisions of this Sublease.
i. All amounts payable by Sublessee to Sublessor pursuant to this
Sublease, including, without limitation, Fixed Rent and Additional Rent, shall
be deemed to be and shall constitute rent for all purposes hereunder and, in the
event of any non-payment thereof, Sublessor shall have all of the rights and
remedies provided herein, at law or in equity for non-payment of rent.
j. The provisions of this Article 2 shall survive the expiration or
earlier termination of this Sublease, but only to the extent that
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<PAGE> 6
such provisions apply to the period beginning on the Commencement Date and
ending on the date of such expiration or earlier termination.
k. The parties shall prepare and deliver to Landlord at the end of each
year of Sublessee's occupancy pursuant to this Sublease a statement setting
forth in line item detail all amounts paid by Sublessee to Sublessor pursuant to
this Sublease. The purpose of such statements shall be to enable Landlord to
determine if Landlord is entitled to receive any portion of such payments
pursuant to Section 8.9 of the Lease. By consenting to this Sublease, Landlord
has acknowledged that payments of Sublessor's amortization of leasehold
improvements pursuant to Section 2(f) (xi) hereof do not constitute profit to
Sublessor.
3. Subordination
a. A true and correct copy of the Lease is attached hereto and made a
part hereof as Exhibit B. Sublessee acknowledges that this Sublease is subject
and subordinate to, and Sublessee accepts this Sublease subject to all of the
terms, covenants and provisions of, the Lease and, to the extent that the Lease
is also subject and subordinate to such instruments, this Sublease shall be
subject and subordinate to all ground and underlying leases and all mortgages
which might now or hereafter affect such leases, the leasehold estate or estates
thereby created or the real property of which the Sublet Premises forms a part,
and to any and all renewals, modifications, consolidations, replacements and
extensions of the Lease and such ground or underlying leases and mortgages. The
provisions of this Section shall be self-operative and no further instrument of
subordination shall be required to effect such subordination. Sublessor's
execution of any certificate or other instrument of subordination which may be
requested to confirm or further effect such subordination shall also be
sufficient to confirm the same subordination of this Sublease. Notwithstanding
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<PAGE> 7
the foregoing, Sublessee shall promptly execute any certificate or other
instrument of subordination which may be requested to confirm or further effect
such subordination.
b. It is hereby agreed that Sublessor leases the Sublet Premises to
Sublessee upon all of the terms and conditions of the Lease with respect to the
Sublet Premises. Sublessee acknowledges that prior to executing this Sublease it
has received a copy of and read the Lease and is familiar with the contents
thereof. Sublessee covenants and agrees (i) to perform and observe all of the
terms, covenants, agreements and conditions of the Lease on the part of the
tenant thereunder to be performed and observed with respect to the Sublet
Premises to the extent the same are not modified or amended by this Sublease,
(ii) that Sublessee will not do or cause to be done or suffer or permit any act
or thing to be done which is not permitted hereunder and would or might cause
the Lease or the rights of Sublessor, as tenant thereunder, to be cancelled,
terminated or forfeited or which would make Sublessor liable for any damages,
claim or penalty and (iii) to indemnify and hold Sublessor harmless from and
against any and all actions, claims, demands, damages, liabilities and expenses
(including, without limitation, reasonable attorneys' fees and disbursements and
expenses of defense) asserted against, imposed upon or incurred by Sublessor by
reason of (a) any violation caused, suffered or permitted by Sublessee, its
agents, servants, employees or invitees, of any of the terms, covenants and
conditions of the Lease or this Sublease or (b) any damage or injury to persons
or property occurring upon or in connection with Sublessee's use or occupancy of
the Sublet Premises and/or the buildings in which the Leased Premises are
located (the "Buildings"), except to the extent any of the same may be caused by
any act or omission of Sublessor, its agents or representatives.
c. All of the terms, covenants, conditions and agreements of
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<PAGE> 8
the Lease are incorporated herein as if Sublessor were the "Landlord" thereunder
(except that where applicable, such references shall also be deemed include a
reference to Landlord), Sublessee were the "Tenant" thereunder and the Sublet
Premises were the "Premises" thereunder, except to the extent the terms of the
Lease are inconsistent herewith or are otherwise inapplicable and except that
the following provisions of the Sublease shall not be binding on Sublessor and
Sublessee: Article 1 (Reference Data) (except to the extent the same describes
"Permitted Uses"), Section 2.1 (Premises), Section 3.1 (Condition and Delivery
of the Premises), Section 3.4 (regarding CPI Increases, as described in the
First Amendment) [by this deletion it is intended only that the Fixed Rent
payable by Sublessee pursuant to Section 2(a) hereof (which includes a
calculation incorporating the CPI Increase) shall not be further increased by
the CPI Increase], Section 6.1 (Annual Fixed Rent), Section 6.4 (Security
Deposit), Section 7.1 (Landlord's Duties), Section 7.3 (Tenant to Pay for All
Utilities), Section 8.9 (Assignment and Subletting), Section 8.12 (Tenant's
Financial Statements), the first sentence of Section 10.1 (Repair and
Restoration of Casualty Loss), the second sentence of Section 10.3 (Termination
for Major Damage or if Damage at End of Term), the second sentence of Section
10.4 (Eminent Domain), Section 14.1 (Notices), Section 14.3 (Limitation of
Landlord's Liability), Section 14.8 (No Broker), Sections 14.12 and 14.13
(regarding Therion Biologics Corporation), Exhibit 1 (Premises), Exhibit 3
(Tenant's Work) and Exhibit 4 (Tenant's Property), Exhibit A to the First
Amendment (Premises) and Exhibit B to the First Amendment (Tenant's Work). In
addition, the following provisions of the Sublease shall be changed as follows:
Section 6.2 (Additional Rent; Taxes and Operating Expenses) shall be modified as
described in Article 2 hereof; the second sentence in Section 10.1 shall only
apply to improvements made by Sublessee; references in Article 10 to Landlord's
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obligation to repair or restore the Premises shall be deemed only to refer to
Landlord, and not to Sublessor; Sublessor shall have no obligation to pay for
any of Sublessee's moving expenses pursuant to Sections 14.15 or 14.16; rather,
Sublessee shall only be entitled to receive Sublessee's Proportionate Share of
any such amounts received by Sublessor from Landlord. Any lengths of time set
forth in the Lease for the doing of acts (as opposed to the payment of any
monies) are changed for the purposes of this Sublease so that the time of
Sublessor is three (3) days more than the time of Landlord and the time of
Sublessee is three (3) days less than the time of Sublessor, as landlord and
tenant, respectively, under the Lease, but in no event shall any such time
period be shortened to less than three (3) days.
d. Sublessee agrees that notwithstanding anything contained in this
Sublease to the contrary, except in connection with any negligent or intentional
act or omission by Sublessor or its agents or representatives, Sublessor shall
not be obligated to perform any service of any nature whatsoever (including,
without limitation, the furnishing of heat, electrical energy, air conditioning,
elevator service, cleaning, window washing or rubbish removal services), nor
shall Sublessor be obligated to make any repairs, alterations or improvements
in, on or about the Sublet Premises or to comply with any violations of law with
respect thereto, nor shall Sublessor be required to restore the Sublet Premises
following the occurrence of a fire or other casualty, nor shall Sublessor be
liable to Sublessee under any representation or warranty made by the Landlord in
the Lease, it being understood, and Sublessee hereby so agrees, that subject to
the provisions of this Article 3, Sublessee shall look solely to the Landlord
for the performance of any and all such services, the making of all repairs,
alterations or improvements, the compliance with violations of law, the
restoration of the Sublet Premises
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following fire or other casualty, and compliance with all such representations
and warranties, subject in each case to the terms of the Lease and this
Sublease.
e. Notwithstanding the provisions of Section 3(d) above, if at any time
during the Term the services or other obligations required to be provided or
performed by Landlord under the Lease are not furnished or performed or are
improperly furnished or performed, upon receipt of written request from
Sublessee specifying the service or obligation as to which the Landlord is in
default, Sublessor shall cooperate with Sublessee in seeking Landlord's
compliance with its obligations under the Lease with respect to the Sublet
Premises, provided that (i) the Landlord's failure to furnish the service or to
perform the obligation in question does not result from any act of Sublessee or
by reason of any other cause or event which, under the terms of the Lease or
this Sublease, would excuse the Landlord from the furnishing or performance
thereof, and (ii) Sublessor's cooperation with Sublessee will not cause
Sublessor to be in default under the Lease. It is further agreed that Sublessor
shall not be responsible if said efforts of Sublessor shall be unsuccessful
unless Landlord's failure to comply with its obligations under the Lease results
from Sublessor's being in default under the Lease or from Sublessor's negligence
or willful misconduct. Sublessee shall indemnify and reimburse Sublessor for any
and all reasonable out of pocket costs and expenses, including without
limitation reasonable attorneys' fees, incurred by Sublessor in connection
therewith. If Landlord shall default in any of its obligations to Landlord with
respect to the Sublet Premises, Sublessee shall also be entitled to enforce
Sublessor's rights with respect thereto under the Lease directly against
Landlord.
f. Whenever in the Lease it is provided that the consent of
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<PAGE> 11
the landlord therein (Landlord herein) is required for any action on the part of
the tenant, for the purposes of this Sublease the consent of both Sublessor and
Landlord shall be required. Sublessor's refusal to consent to or approve
anything hereunder shall not be deemed unreasonable if Landlord has refused and
is required to give a corresponding consent or approval under the Lease.
g. Notwithstanding anything to the contrary contained in this Sublease
or in the Lease, (i) Sublessee shall not be deemed to have assumed, and
Sublessee shall not be obligated to perform, any of Sublessor's obligations
under the Lease which obligations are required to be performed during any period
before the Commencement Date or after the Expiration Date of this Sublease or
which are attributable to any period prior to the Commencement Date or
subsequent to the Expiration Date of this Sublease, (ii) except as otherwise
expressly provided in this Sublease, no representation or warranty made by
Sublessor as tenant under the Lease shall be deemed a representation or warranty
of Sublessee, and (iii) in no event shall Sublessee be liable for, or be
required to indemnify, defend or hold Sublessor harmless from or against any
claim, cost, expense, liability, loss or damage arising by reason of any event,
act or omission of any person other than Sublessee or any other party for whom
Sublessee is legally responsible, occurring before the Commencement Date or
after the Expiration Date of this Sublease.
h. Sublessor hereby represents and warrants that (i) it is not and, to
the best of its knowledge, the Landlord is not, in default in the performance of
any of their respective obligations under the Lease; (ii) except as reflected in
Exhibit B attached hereto, the Lease has not been amended or modified in any
respect and is in full force and effect; (iii) Sublessor has not received any
notice from the Landlord of any default by Sublessor of any of its obligations
as tenant under the Lease or from any person of a violation with
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<PAGE> 12
respect to the Buildings or the Sublet Premises of any law or requirement of any
public authority except violations or defaults which have been cured; and (iv)
on or before the Commencement Date, Sublessor has complied with all requirements
of the Lease which are conditions precedent to this Sublease.
4. Condition of Premises; Alterations; Surrender.
a. Sublessee agrees that it enters into this Sublease without
any representations or warranties, express or implied, by Sublessor, its agents,
representatives, employees, servants, brokers or any other person, as to the
present or future condition of the Sublet Premises or the appurtenances thereto
or any improvements therein or thereon. In connection therewith, Sublessee
represents that it has made a thorough examination and inspection of the Sublet
Premises and is familiar with the conditions thereof and accepts the Sublet
Premises in its "as is" condition on the date hereof, reasonable wear and tear
excepted, and that Sublessor shall not be obligated to make any repairs or
alterations thereto in preparation for Sublessee's occupancy.
b. Sublessee shall make no installations, alterations or
improvements without the prior written consent of Sublessor and the Landlord or
any other party whose consent is required under the Lease. Sublessor shall not
unreasonably withhold its consent thereto provided Landlord and any other party
whose consent is required shall have consented in writing to such installation,
alterations or improvements. Sublessor shall use its best efforts to obtain
Landlord's consent to any alterations, installations and improvements proposed
by Sublessee with respect to the Sublet Premises that have been approved by
Sublessor. All such installations, alterations or improvements shall, at
Sublessee's expense, be made in compliance with and subject to Sections 4.1 and
7.6 of the Lease and shall be performed so as to minimize interference with any
other occupant of the balance of the Leased Premises and the Buildings.
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<PAGE> 13
c. Upon the expiration or earlier termination of the Term,
Sublessee shall quit and surrender to Sublessor the Sublet Premises, broom
clean, in good order and condition, ordinary wear and tear excepted. If
Sublessee shall not quit and surrender the Sublet Premises as required hereby by
the last date of the Term, then it shall indemnify and hold Sublessor harmless
from and against all claims, liabilities, damages and costs (including without
limitation reasonable attorneys' fees but not including consequential damages)
incurred by Sublessor by reason of such failure so to quit and surrender the
Sublet Premises. In addition, Sublessee agrees that if possession of the Sublet
Premises is not surrendered to Sublessor within twenty-four (24) hours after the
date of the expiration or sooner termination of the Term, then Sublessee shall
pay to Sublessor as liquidated damages for each month and for each portion of
any month during which Sublessee holds over in the Sublet Premises after the
expiration or sooner termination of the Term, a sum equal to 150% of the sum of
(i) the Fixed Rent payable under this Sublease during the last month of the Term
and (ii) the average monthly aggregate of Additional Rent which was payable
under this Sublease during the last six (6) months of the Term. Sublessee's
obligation to observe or perform this covenant shall survive the expiration or
earlier termination of the Term.
5. Insurance
a. Sublessee shall provide at the Sublessee's sole cost and
expense, and keep in full force, at all times during the Term of this Sublease,
the insurance required under Article 9 of the Lease, naming Sublessor, Sublessee
and Landlord as insured parties, including without limitation (i) personal
liability insurance and (ii) casualty insurance, but only with respect to the
contents of the Subleased Premises. Sublessee further covenants and agrees, at
its expense, to take out and maintain at all times all necessary workmen's
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<PAGE> 14
compensation insurance covering all persons employed by the Sublessee in and
about the Sublet Premises.
b. Sublessor shall maintain all other insurance required under the
Lease, except that Sublessor shall not be responsible for insuring Sublessee's
personalty and shall name Sublessee as an additional insured thereunder.
c. Sublessor and Sublessee agree to use their best efforts to obtain
from their respective insurance companies insuring them against damage by fire
or other casualty to the Buildings and Sublet Premises, as the case may be,
and/or the contents thereof, appropriate endorsements on their insurance
policies pursuant to which the insurance companies waive their rights of
recovery by way of subrogation or agree that such policies shall not be
invalidated should the insured waive in writing, prior to a loss, any or all
right of recovery against any parties for losses covered by such policies, and
so long as such endorsements remain in effect on the respective insurance
policies and do not invalidate such insurance policies, Sublessor and Sublessee
hereby each waive any right of recovery against the other for any loss or damage
to its respective property or the property of others covered by such insurance.
If such waivers of recovery by way of subrogation are not available or are only
available at an additional premium, then the party benefitting therefrom may
waive such requirement, or pay any such additional premium.
d. The Sublessee shall deliver to the Sublessor upon the execution of
this Sublease, a copy of the policies of insurance required pursuant to this
Article, together with proof of payment of the annual premium therefor. Each
policy maintained by Sublessor or Sublessee pursuant to the terms hereof shall
contain an agreement whereby the insurer agrees that such policy may not be
cancelled without at least ten (10) days' prior written notice
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<PAGE> 15
to Sublessee or Sublessor and Landlord, as appropriate. Each party shall deliver
to the other certificates evidencing the renewal of such insurance policies (or
new policies) not less than ten (10) days prior to the expiration date of each
such policy. All such insurance shall be maintained by Sublessor or Sublessee
with an insurer reasonably satisfactory to the other party.
6. Notices.
a. All notices, demands, requests and other communications
(collectively "Notices") which either party may desire or be required to give to
the other hereunder shall be in writing and shall be served personally, by
overnight mail service, or mailed by registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
To Sublessor at:
Oncogene Science, Inc.
80 Rogers Street
Cambridge, Massachusetts 02412
Attention: Steven Peltzman
with copies to:
Oncogene Science Inc.
106 Charles Lindbergh Boulevard
Uniondale, New York 11553
Attention: Robert Van Nostrand
and
Squadron, Ellenoff, Plesent & Sheinfeld, LLP
551 Fifth Avenue
New York, New York 10176
Attention: Joel I. Papernik, Esq.
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<PAGE> 16
and
The Trustees of The Cambridge East Trust
c/o Beal And Company Inc.
177 Milk Street
Boston, Massachusetts 02109
Attention: Robert L. Beal
To Sublessee at:
Calbiochem-Novabiochem Corporation
10394 Pacific Center Court
San Diego, California 92121
Attention: Stelios B. Papadopoulos
with copies to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Attention: Peter H. Jakes, Esq.
and
The Trustees of The Cambridge East Trust
c/o Beal And Company Inc.
177 Milk Street
Boston, Massachusetts 02109
Attention: Robert L. Beal
Notices mailed as aforesaid shall be deemed received three (3) days
after being deposited in the United States mail. Notices personally delivered
shall be deemed received upon such delivery. Notices sent by overnight mail
service shall be deemed received the day after delivery to such overnight mail
service. Either party may change its address for the receipt of Notices by
giving Notice to the other party in the manner aforesaid. Each of Sublessor and
Sublessee shall, within two (2) days after receipt of any notice served upon it
by Landlord pursuant to the terms of the Lease, deliver a copy of such notice to
the other party.
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<PAGE> 17
7. Assignment.
a. Sublessee shall not have the right (i) to assign or otherwise
transfer this Sublease, (ii) to sublet the Sublet Premises or any portion
thereof whether by operation of law or otherwise, (iii) to mortgage, pledge or
encumber this Sublease or the Sublet Premises or any part thereof or (iv) to
advertise or authorize a broker or agent to advertise for a subtenant or
assignee without, in each instance, the prior written consent of Sublessor
(which may be withheld in the sole and absolute discretion of Sublessor) and of
Landlord. Sublessee covenants and agrees that it shall not submit any request
for any such approval to Landlord without first having received Sublessor's
prior written consent. Notwithstanding the fact that the terms and provisions of
Section 8.9 have not been incorporated into this Sublease, it is acknowledged
and agreed that each assignment or subletting under this Article shall be
subject to all of the terms, covenants, agreements and conditions of this
Sublease and the Lease. The consent by Sublessor and Landlord to an assignment
or subletting shall not be construed to relieve Sublessee from obtaining the
express written consent of Sublessor and Landlord to any further assignment or
subletting. No assignment or sublease shall release Sublessee from primary
liability under this Sublease.
b. Sublessor shall not have the right to assign or otherwise transfer
the Lease, or to sublet any portion of the Leased Premises in which the
Sublessee shall have any rights at the time of such transaction pursuant to that
certain Shared Services Agreement or that certain Transitional Services
Agreement, each dated the date hereof and each being between Sublessor and
Sublessee, whether by operation of law or otherwise, without, in each instance,
the prior written consent of Sublessee as to the identity of such assignee or
subtenant (which shall not be unreasonably withheld or delayed, and which
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<PAGE> 18
consent may not be withheld on the basis of the creditworthiness, net worth or
other similar factors in respect of such party) and, except as otherwise
expressly provided in the Lease, of Landlord. The consent by Sublessee to such
an assignment or subletting shall not be construed to relieve Sublessor from
obtaining the express written consent of Sublessee to any further assignment or
subletting.
c. Each of the parties hereby agrees that in the event such party (the
"Offeror") wants to assign the Lease (in the case of Sublessor) or this Sublease
(in the case of Sublessee), or to sublet all or any portion of its space in the
Buildings, the Offeror shall not so assign or sublet, or offer to any person the
right to so acquire or sublease, unless and until the Offeror shall have made a
"ROFO Offer" (as hereinafter defined) to the other party (the "Offeree") and the
Offeree shall have had the opportunity to accept such ROFO Offer as set forth
below. A "ROFO Offer" is a written offer given by the Offeror to the Offeree
stating that the Offeror desires to assign its Lease or Sublease or sublet all
or a designated portion of its space for a specified period of time. An
assignment of the Lease or the Sublease pursuant to a ROFO Offer shall be for no
consideration, and a sublease of any space pursuant to a ROFO Offer shall be at
the same rent and on the same terms as those specified herein, pro rated as
appropriate. The Offeree shall then have the right to accept the ROFO Offer by
giving the Offeror written notice of such acceptance within fifteen (15) days
after its receipt of the ROFO Offer. If the Offeree shall so accept the ROFO
Offer, then the parties shall diligently and in good faith document such
transaction and seek to obtain such consents as may be necessary. If the Offeree
rejects or fails to timely respond to the ROFO Offer, then the Offeror shall
have the right to seek to so assign or sublet, subject in all respects to the
provisions of Sections 7(a) and (b) above. If the
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<PAGE> 19
Offeror shall not complete such transaction within six (6) months from the date
of the Offeree's rejection, then the provisions of this Section shall again be
operable with respect to any such transaction. The parties acknowledge that any
assignment or sublease to Sublesee pursuant to a ROFO Offer shall be subject to
Section 8.9 of the Lease. By consenting to this Sublease, Landlord has
acknowledged that any assignment or sublease to Sublessor pursuant to a ROFO
Offer such that Sublessor is restored to possession of all or any portion of the
Sublet Premises shall not require Landlord's consent and shall not be subject to
Section 8.9 of the Lease.
8. No Waiver.
All rights and remedies of Sublessor and Sublessee enumerated herein and
in the Lease shall be cumulative, shall not exclude any other right or remedy
allowed at law or in equity, and said rights or remedies may be exercised and
enforced concurrently. No waiver by Sublessor or Sublessee of any breach or any
agreement or provision herein contained shall be deemed a waiver of any
preceding or succeeding breach thereof or of any other agreement or provision
herein contained. No extension by Sublessor of time for performance of any
obligations or acts shall be deemed an extension of time for performance of any
other obligations or acts.
9. Quiet Enjoyment.
If and so long as Sublessee is not in default beyond all applicable
notice and cure periods of any of its obligations of this Sublease on its part
to be performed, Sublessee shall quietly have and enjoy the Sublet Premises
during the Term of this Sublease without hindrance or molestation by anyone
claiming by, through or under Sublessor, subject, however, to the exceptions,
reservations and conditions hereof. Sublessor covenants and agrees that, at all
times during the Term of this Sublease, Sublessor shall fully and
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<PAGE> 20
faithfully comply with and perform the terms and conditions of the Lease on its
part to be performed. Sublessor further covenants and agrees that it shall not
do anything that would or could cause the Lease to be canceled, terminated,
forfeited, surrendered or modified so as to (a) adversely affect (i) the rights
or obligations of Sublessor thereunder or in and to the Leased Premises or (ii)
the rights or obligations of Sublessee under this Sublease or in and to the
Sublet Premises, or (b) cause an interruption in any of the services to be
provided by the Landlord pursuant to the Lease. Sublessor covenants and agrees
to indemnify and hold Sublessee harmless from and against any and all actions,
claims, demands, damages, liabilities and expenses (including, without
limitation, reasonable attorneys' fees, disbursements and expenses of defense)
asserted against, imposed upon or incurred by Sublessee by reason of (a) any
violation caused, suffered or permitted by Sublessor, its agents, servants,
employees or invitees, of any of the terms, covenants and conditions of the
Lease or this Sublease or (b) any damage or injury to persons or property
occurring upon or in connection with Sublessor's use or occupancy of the Leased
Premises and/or the Buildings, except to the extent any of the same may be
caused by any act or omission of Sublessee, its agents or representatives.
10. Successors and Assigns.
The provisions of this Sublease shall be binding upon and inure
to the benefit of the parties hereto and, subject to the restrictions above set
forth in respect of Sublessee, their respective successors and assigns.
11. Sublessor.
The term "Sublessor" used in this Sublease shall mean only the
tenant in possession of the Lease so that in the event of any assignment or
transfer of the Lease, the party so assigning or transferring the Lease shall,
provided that its immediate successor shall have a net worth at least equal to
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the remaining obligations of the tenant under the Lease in respect of Annual
Fixed Rent less the remaining obligations of Sublessee in respect of Fixed Rent
hereunder, be and hereby is entirely freed and relieved of all covenants and
obligations of Sublessor hereunder thereafter occurring and it shall be deemed
and construed as a covenant running with the land without further agreement
between the parties and the assigns or transferees of the Lease, that said
assignee or transferee had assumed and agreed to perform any and all covenants
and obligations of Sublessor hereunder thereafter.
12. [INTENTIONALLY OMITTED]
13. Sublessor's Right to Cure.
a. If Sublessee shall at any time fail to make any payment or
perform any act on its part required to be made or performed by the terms
hereof, or if Sublessor shall receive a notice of default from the Landlord,
which default arises out of or in connection with Sublessee's actions or failure
to act under this Sublease, then Sublessor, after five (5) days' written notice
to Sublessee and without waiving or releasing Sublessee from any obligation of
Sublessee contained in this Sublease, may (but shall be under no obligation to)
make any such payment or perform any such act on Sublessee's part to be made or'
performed as in this Sublease provided or in order to cure the default under the
Lease and may enter upon the Sublet Premises for that purpose and take all such
other actions as may be necessary therefor.
b. Any and all sums so paid by Sublessor and all costs and
expenses reasonably incurred by Sublessor in connection with the performance of
any such act, including without limitation reasonable attorneys' fee, together
with interest thereon at the rate of 2% per annum above the then current prime
rate charged by Citibank, N.A. or its successor from the respective dates of
Sublessor's making of each such payment or incurring of each such cost and
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<PAGE> 22
expense shall constitute Additional Rent payable by Sublessee under this
Sublease and shall be paid by Sublessee to Sublessor within five (5) days after
rendition of a bill or statement to Sublessee therefor.
14. Leasehold Estate.
Sublessor cannot grant or convey any greater estate, rights or
interest by virtue of this Sublease than Sublessor has received under the terms
of the Lease, and Sublessee acknowledges that it has not received and cannot
receive any greater estate, rights or interest pursuant to this Sublease than
Sublessor has received under the Lease.
15. Broker.
a. Each of Sublessor and Sublessee warrants and represents to
the other that it has not dealt with any broker or agent in connection with this
Sublease. Each party agrees to indemnify and hold the other harmless from and
against any and all claims, costs, liabilities and expenses (including without
limitation reasonable attorneys' fees) which may be imposed upon or incurred by
or asserted against such other party by any broker or agent alleging to have
dealt with the party making such indemnification in connection with this
Sublease. The provisions of this Article shall survive the expiration or earlier
termination of this Sublease.
16. Use of the Sublet Premises.
Sublessee shall use the Sublet Premises only in accordance with
the uses set forth in Article 1 of the Lease. Sublessee shall obtain, at its
sole cost and expense, all permits, licenses, consents and approvals required
for the operation of its business at the Sublet Premises.
17. Certificates.
Each Party shall, within thirty (30) days after demand, furnish
to the other a certificate, duly acknowledged, certifying (a) that this Sublease
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<PAGE> 23
is in full force and effect, (b) that it knows of no default hereunder on the
part of the other party or, if it has reason to believe that such a default
exists, the nature thereof in reasonable detail, (c) the amount of the Fixed
Rent and Additional Rent being paid, (d) that this Sublease has not been
modified or, if it has been modified, setting forth the terms and dates of such
modifications, (e) as to the form and content of this Sublease by annexing a
copy hereof to such certificate and (f) to such other matters as may be
reasonably requested by the other party.
18. Condemnation.
If the whole or substantially all of the Sublet Premises or the
access thereto shall be taken or condemned by any competent authority for any
public or quasi-public use this Sublease shall cease and terminate on the date
of taking of possession in such proceeding. If the Lease is terminated pursuant
to Section 10-4 thereof, this Sublease shall cease and terminate on the date the
Lease terminates. Upon a partial taking, unless this Sublease is terminated as
above provided, this Sublease shall continue in force as to the remainder of the
Sublet Premises, and the Fixed Rent and Additional Rent shall be diminished by
the same proportion which rental allocable to the Sublet Premises under the
terms of this Sublease shall abate under the Lease.
19. Damage or Destruction of the Sublet Premises.
If the Lease shall be terminated by either the Landlord or
Sublessor pursuant to Section 10.3 of the Lease, this Sublease shall cease and
terminate on the effective date of the termination of the Lease. Sublessee shall
forthwith vacate and surrender the Sublet Premises on or before said date and
the Fixed Rent and Additional Rent (or the portion thereof, if any, not abated
from the date of the damage or destruction) shall be apportioned as of said
termination date. Sublessee's right to an abatement or apportionment of
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Fixed Rent and Additional Rent or to repairs shall be dependent upon whether or
not Sublessor is entitled to the same under Section 10.3 of the Lease.
20. Operating Agreement.
Sublessor hereby represents and warrants that no portion of the
Sublet Premises constitute any of the Shared Facilities as defined in that
certain Operating Agreement, dated as of October 4, 1991 (the "Operating
Agreement") between AbT Acquisition Corp. (Sublessor's predecessor in interest)
and Therion Biologics Corporation ("Therion"), and that Therion shall have no
rights whatsoever in respect of the Sublet Premises pursuant to such Agreement
or otherwise. Notwithstanding the foregoing to the contrary, this Sublease is
subject and subordinate to the Operating Agreement.
21. Miscellaneous
a. All provisions of this Sublease and any variations thereof
shall be deemed to refer to the masculine, feminine, neuter, singular or plural,
as the identity of the person or persons may require.
b. If any of the terms and provisions of this Sublease are in
violation of or prohibited by any law, statute or ordinance, or such terms or
provisions are found to be unenforceable by any court of competent jurisdiction,
then such terms or provisions shall be of no force and effect; provided,
however, that all of the other terms and provisions of this Sublease shall
continue in full force and effect.
c. The captions or headings of each Article hereof are inserted
only as a matter of convenience and for reference and shall in no way define,
limit or describe the scope of this Sublease or of any Article or section hereof
or the intent of any provision hereof. The use of this Sublease of such words as
"hereof", "hereunder", "herein" and "hereby" are deemed to be references to this
Sublease as a whole.
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<PAGE> 25
d. This Sublease contains the entire agreement between the parties, and
any agreement hereafter made shall be ineffective to change, modify or discharge
it in whole or in part unless such agreement is in writing and signed by the
party against whom enforcement of the change, modification or discharge is
sought. This Sublease shall bind and inure to the benefit of the parties hereto
and their respective successors and, subject to this Sublease, their respective
assigns.
e. This Sublease shall be governed by and construed in accordance with
the laws of the State of Massachusetts without regard to conflicts of law
principles.
f. Sublessor and Sublessee hereby mutually waive, to the extent
permitted by law, the right to a jury trial in any action or legal proceeding
between the parties arising out of this Sublease or Sublessee's occupancy of the
Sublet Premises.
g. Wherever in this Sublease Sublessor's consent or approval is
required, if Sublessor shall delay or refuse such consent or approval, Sublessee
in no event shall be entitled to make, nor shall Sublessee make, any claim, and
Sublessee hereby waives any claim, for money damages (including, without
limitation, by set-off, counterclaim or defense) based upon any claim or
assertion by Sublessee that Sublessor unreasonably withheld or delayed its
consent or approval. Sublessee's sole remedy shall be an action or proceeding to
enforce any such provisions, for specific performance, injunction or declaratory
judgment.
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<PAGE> 26
IN WITNESS WHEREOF, Sublessor and Sublessee have executed this Sublease
as of the date and year first above written.
SUBLESSOR:
ONCOGENE SCIENCE, INC.
BY: /s/ STEVE M. PELTZMAN
---------------------------
Name: STEVE M. PELTZMAN
Title: President
SUBLESSEE:
CALBIOCHEM-NOVABICHEM CORPORATION
BY: /s/ STELIOS B. PAPADOPOULOS
---------------------------
Name: STELIOS B. PAPADOPOULOS
Title: Chairman and CEO
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EXHIBIT 10(n)(xv)
[SILICON VALLEY BANK LOGO]
SCHEDULE TO
LOAN AND SECURITY AGREEMENT
BORROWER: CALBIOCHEM-NOVABIOCHEM CORPORATION
ADDRESS: 10394 PACIFIC CENTER COURT
SAN DIEGO, CALIFORNIA 92121
DATE: JUNE 27, 1996
THIS SCHEDULE is an integral part of the Loan and Security Agreement
between Silicon Valley Bank ("Silicon") and the above-named borrower
("Borrower") of even date.
CREDIT LIMIT
(Section 1.1): PRIOR TO THE EFFECTIVENESS OF THE IPO
CONSUMMATION:
The sum of (A), (B) and (C) below:
(A) Revolving Loan Facility. An amount
not to exceed the lesser of (i) or (ii):
(i) $2,000,000 at any one time
outstanding; or (ii) (a) 80% of the Net
Amount of Borrower's accounts, which
Silicon in its discretion deems eligible
for borrowing plus (b) 10% of the Value
of Borrower's inventory, which Silicon
in its discretion deems eligible for
borrowing, up to a maximum of $500,000
total at any one time outstanding with
respect to inventory (Loans under
(ii)(a) above with respect to accounts
are referred to as "Accounts Loans";
Loans under (ii)(b) above with respect
to inventory are referred to as
"Inventory Loans" and together with the
Accounts Loans are collectively referred
to as the "Revolving Loans"; and the
loan facility under this subsection (A)
is referred to as the "Revolving Loan
Facility");
PLUS
(B) Working Capital Term Loan Facility.
The amount under the Working Capital
Term Loan Facility (as defined below);
PLUS
(C) Acquisition Term Loan Facility.
The amount under the Acquisition Term
Loan Facility (as defined below).
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SILICON VALLEY BANK AMENDMENT TO LOAN AGREEMENT
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"Net Amount" of an account means the gross amount of
the account, minus all applicable sales, use, excise
and other similar taxes and minus all discounts,
credits and allowances of any nature granted or
claimed. "Value" of inventory means the lower of cost
or wholesale market value. Without limiting the fact
that the determination of which accounts are eligible
for borrowing is a matter of Silicon's discretion,
the following will not be deemed eligible for
borrowing: accounts outstanding for more than 90
days from the invoice date, accounts subject to any
contingencies, accounts owing from the United States
or any department, agency or instrumentality of the
United States or any state, city or municipality*,
accounts owing from an account debtor outside the
United States (unless pre-approved by Silicon in its
discretion, or backed by a letter of credit
satisfactory to Silicon, or FCIA insured satisfactory
to Silicon), accounts owing from one account debtor
to the extent they exceed 25% of the total eligible
accounts outstanding, accounts owing from an
affiliate of Borrower, and accounts owing from an
account debtor to whom Borrower is or may be liable
for goods purchased from such account debtor or
otherwise. In addition, if more than 50% of the
accounts owing from an account debtor are outstanding
more than 90 days from the invoice date or are
otherwise not eligible accounts, then all accounts
owing from that account debtor will be deemed
ineligible for borrowing.
*TO THE EXTENT SUCH ACCOUNTS EXCEED 20% OF THE TOTAL
ELIGIBLE ACCOUNTS OUTSTANDING ON AND AFTER THE
EFFECTIVENESS OF THE IPO CONSUMMATION:
ON AND AFTER THE EFFECTIVENESS OF THE IPO
CONSUMMATION:
An amount not to exceed $5,000,000 at any one time
outstanding (the "Revolving Loans" and the loan
facility is referred to as the "Revolving Loan
Facility").
LETTER OF CREDIT SUBLIMIT: Silicon, in its reasonable discretion, will from time
to time during the term of this Agreement issue
letters of credit for the account of the Borrower
("Letters of Credit"), in an aggregate amount at any
one time outstanding not to exceed $500,000, upon the
request of the Borrower, provided that, on the date
the Letters of Credit are to be issued, Borrower has
availability under the Revolving Loan Facility
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SILICON VALLEY BANK AMENDMENT TO LOAN AGREEMENT
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in an amount equal to or greater than the face amount
of the Letters of Credit to be issued. Prior to the
issuance of any Letters of Credit, Borrower shall
execute and deliver to Silicon Applications for
Letters of Credit and such other documentation as
Silicon shall specify (the "Letter of Credit
Documentation"). Fees for the Letters of Credit shall
be as provided in the Letter of Credit Documentation.
Letters of Credit may have a maturity date up to
twelve months beyond the Maturity Date in effect from
time to time, provided that if on the Maturity Date,
or on any earlier effective date of termination,
there are any outstanding letters of credit issued by
Silicon or issued by another institution based upon
an application, guarantee, indemnity or similar
agreement on the part of Silicon, then on such date
Borrower shall provide to Silicon cash collateral in
an amount equal to the face amount of all such
letters of credit plus all interest, fees and costs
due or to become due in connection therewith, to
secure all of the Obligations relating to said
letters of credit, pursuant to Silicon's then
standard form cash pledge agreement. The Credit Limit
set forth above regarding the Revolving Loan Facility
and the Loans available thereunder at any time shall
be reduced by the face amount of Letters of Credit
from time to time outstanding.
FOREIGN EXCHANGE
CONTRACT SUBLIMIT Up to $3,000,000 (the "Contract Limit") may be
utilized for spot and future foreign exchange
contracts (the "Exchange Contracts"). The Credit
Limit regarding the Revolving Loan Facility available
at any time shall be reduced by the following amounts
(the "Foreign Exchange Reserve") on each day (the
"Determination Date"): (i) on all outstanding
Exchange Contracts on which delivery is to be
effected or settlement allowed more than two business
days from the Determination Date, 10% of the gross
amount of the Exchange Contracts; plus (ii) on all
outstanding Exchange Contracts on which delivery is
to be effected or settlement allowed within two
business days after the Determination Date, 100% of
the gross amount of the Exchange Contracts. In lieu
of the Foreign Exchange Reserve for 100% of the gross
amount of any Exchange Contract, the Borrower may
request that Silicon debit the Borrower's bank
account with Silicon for such amount, provided
Borrower has immediately available funds in such
amount in its bank account.
Silicon may, in its discretion, terminate the
Exchange Contracts at any time (a) that an Event of
Default occurs or (b) that there is not sufficient
availability under the Credit Limit and Borrower does
not have available funds in its bank account to
satisfy the Foreign Exchange Reserve. If either
Silicon or Borrower terminates the Exchange
Contracts, and without limitation of the FX Indemnity
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SILICON VALLEY BANK AMENDMENT TO LOAN AGREEMENT
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Provisions (as referred to below), Borrower agrees to
reimburse Silicon for any and all fees, costs and
expenses relating thereto or arising in connection
therewith.
Borrower shall not permit the total gross amount of
all Exchange Contracts on which delivery is to be
effected and settlement allowed in any two business
day period to be more than $500,000 (the "Settlement
Limit"), nor shall Borrower permit the total gross
amount of all Exchange Contracts to which Borrower is
a party, outstanding at any one time, to exceed the
Contract Limit.
Notwithstanding the above, however, the amount which
may be settled in any two (2) business day period
may, in Silicon's sole discretion, be increased above
the Settlement Limit up to, but in no event to
exceed, the amount of the Contract Limit (the
"Discretionary Settlement Amount") under either of
the following circumstances (the "Discretionary
Settlement Circumstances"):
(i) if there is sufficient availability
under the Credit Limit regarding the
Revolving Loan Facility in the amount of the
Foreign Exchange Reserve as of each
Determination Date, provided that Silicon in
advance shall reserve the full amount of the
Foreign Exchange Reserve against the Credit
Limit regarding the Revolving Loan Facility;
or
(ii) if there is insufficient availability
under the Credit Limit regarding the
Revolving Loan Facility as to settlements
within any two (2) business day period if
Silicon is able to: (A) verify good funds
overseas prior to crediting Borrower's
deposit account with Silicon (in the case of
Borrower's sale of foreign currency); or (B)
debit Borrower's deposit account with
Silicon prior to delivering foreign currency
overseas (in the case of Borrower's purchase
of foreign currency);
Provided that it is expressly understood that
Silicon's willingness to adopt the Discretionary
Settlement Amount is a matter of Silicon's sole
discretion and the existence of the Discretionary
Settlement Circumstances in no way means or implies
that Silicon shall be obligated to permit the
Borrower to exceed the Settlement Limit in any two
business day period.
In the case of Borrower's purchase of foreign
currency, Borrower in advance shall instruct Silicon
upon settlement either to treat the settlement amount
as an advance under the Credit Limit regarding the
Revolving Loan Facility, or to debit Borrower's
account for the amount settled.
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SILICON VALLEY BANK AMENDMENT TO LOAN AGREEMENT
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The Borrower shall execute all standard form
applications and agreements of Silicon in connection
with the Exchange Contracts, and without limiting any
of the terms of such applications and agreements, the
Borrower will pay all standard fees and charges of
Silicon in connection with the Exchange Contracts.
Without limiting any of the other terms of this Loan
Agreement or any such standard form applications and
agreements of Silicon, Borrower agrees to indemnify
Silicon and hold it harmless, from and against any
and all claims, debts, liabilities, demands,
obligations, actions, costs and expenses (including,
without limitation, attorneys' fees of counsel of
Silicon's choice), of every nature and description,
which it may sustain or incur, based upon, arising
out of, or in any way relating to any of the Exchange
Contracts or any transactions relating thereto or
contemplated thereby (collectively referred to as the
"FX Indemnity Provisions").
The Exchange Contracts shall have maturity dates no
later than the Maturity Date.
WORKING CAPITAL TERM
LOAN FACILITY An amount up to $2,500,000 (such Loan is the "Working
Capital Term Loan" and the loan facility relating
thereto is the "Working Capital Term Loan Facility")
which was utilized by the Borrower in connection with
the closing of the Acquisition (as defined below).
Once amounts under the Working Capital Term Loan
Facility are repaid, such amounts may not be
reborrowed.
Borrower shall repay to Silicon the outstanding
aggregate principal amount of the Working Capital
Term Loan in 60 consecutive monthly installments on
the first day of each month commencing September 1,
1995 of which the first 59 installments shall each be
in the amount of $41,666.67, and the last installment
shall be in the amount of the entire unpaid balance
of the Working Capital Term Loan, provided that the
entire amount of the Working Capital Term Loan, all
accrued and unpaid interest thereon and all other
Obligations relating thereto shall be paid in full no
later than August 1, 2000, subject, however, to
repayments as required pursuant to the Excess Cash
Flow Repayment Covenant (as defined in paragraph 4 of
the section hereof entitled "Other Covenants"
(Section 4.1)).
Borrower hereby further promises to pay interest to
Silicon on the unpaid principal balance of the
Working Capital Term Loan at the Interest Rate (as
defined below). Such interest shall be paid each
month in accordance with the terms of the Loan
Agreement.
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SILICON VALLEY BANK AMENDMENT TO LOAN AGREEMENT
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ACQUISITION TERM
LOAN FACILITY An amount up to $6,000,000 (such Loan is the
"Acquisition Term Loan" and the loan facility
relating thereto is the "Acquisition Term Loan
Facility") which was utilized by the Borrower for the
purpose of financing the assets acquired by
Borrower pursuant to the Asset Purchase Agreement
dated as of June 26, 1995 (the "Purchase Agreement")
by and among Oncogene Science, Inc., as seller,
Borrower, as buyer, and Calbiochem-Novabiochem
International, Inc. ("Parent"). The acquisition and
related transactions contemplated by the Purchase
Agreement are collectively referred to as the
"Acquisition". Once amounts under the Acquisition
Term Loan Facility are repaid, such amounts may not
be reborrowed.
Borrower hereby further promises to pay interest to
Silicon on the unpaid principal balance of the
Acquisition Term Loan at the Interest Rate (as
defined below). Such interest shall be paid each
month in accordance with the terms of the Loan
Agreement.
Borrower shall repay to Silicon the outstanding
aggregate principal amount of the Acquisition Term
Loan in 60 consecutive monthly installments on the
first day of each month commencing September 1, 1995
as follows:
(A) The first installment through and including the
twelfth installment shall each be in the amount of
$41,666.67;
(B) The thirteenth installment through and including
the twenty-fourth installment shall each be in the
amount of $83,333.33; and
(C) The twenty-fifth installment through and
including the sixtieth installment shall each be in
the amount of $125,000;
Provided that the entire principal amount of the
Acquisition Term Loan, all accrued and unpaid
interest thereon and all other Obligations relating
thereto shall be paid in full no later than August 1,
2000; subject, however, to repayments as required
pursuant to the Excess Cash Flow Repayment Covenant.
SUPPLEMENT: The Supplement to Schedule to Loan Agreement (the
"Supplement") as attached to the original Schedule to
Loan Agreement, as amended by the Amendment to Loan
Agreement of even date herewith, is incorporated into
and forms a part of this Schedule and this Loan
Agreement.
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SILICON VALLEY BANK AMENDMENT TO LOAN AGREEMENT
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INTEREST RATE
(Section 1.2): Interest on the Loans shall be paid at the applicable
Interest Rate (as defined in the Supplement).
Interest shall be calculated on the basis of a
360-day year for the actual number of days elapsed.
"Prime Rate" means the rate announced from time to
time by Silicon as its "prime rate;" it is a base
rate upon which other rates charged by Silicon are
based, and it is not necessarily the best rate
available at Silicon. The interest rate applicable to
the Prime Rate-based Obligations shall change on each
date there is a change in the Prime Rate.
LOAN ORIGINATION FEE
(Section 1.3): Revolving Loan Facility: 50 basis points per annum of
the maximum amount available thereunder.
MATURITY DATE
(Section 5.1): The Maturity Date shall be considered to be JUNE __,
1998 for all purposes hereof other than with respect
to the maturities of the Working Capital Term Loan
and the Acquisition Term Loan, which shall have
maturities as set forth in Section 1.1 above.
PRIOR NAMES OF BORROWER
(Section 3.2): CALBIOCHEM CORPORATION; CBC ACQUISITION CORPORATION
TRADE NAMES OF BORROWER
(Section 3.2): NONE
OTHER LOCATIONS AND ADDRESSES
(Section 3.3): BOULEVARD INDUSTRIAL PARK, PADGE ROAD, BEESTON,
NOTTINGHAM UNITED KINGDOM NG9 2JR; 80-84 ROGERS
STREET, CAMBRIDGE, MASSACHUSETTS.
MATERIAL ADVERSE LITIGATION
(Section 3.10): NONE
NEGATIVE COVENANTS-EXCEPTIONS
(Section 4.6): Without Silicon's prior written consent, Borrower may
do the following, provided that, after giving effect
thereto, no Event of Default has occurred and no
event has occurred which, with notice or passage of
time or both, would constitute an Event of Default,
and provided that the following are done in
compliance with all applicable laws, rules and
regulations: (i) Borrower may upstream funds to the
Parent in order to permit the Parent to repurchase
shares of Parent's stock pursuant to any employee
stock purchase or benefit plan, provided that the
total amount that the Borrower
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SILICON VALLEY BANK AMENDMENT TO LOAN AGREEMENT
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upstreams for such purpose does not exceed $100,000
in any fiscal year, provided, the Borrower is also
permitted on a one-time basis to upstream funds to
the Parent in order to permit the Parent to
repurchase shares of Parent's stock owned by
Richard B. Slansky as long as such additional
amount that the Borrower upstreams for such purpose
does not exceed $400,000; and (ii) Borrower may
loan funds to the Parent in an aggregate amount not
to exceed $500,000 at any one time outstanding for
the purpose of the Parent's financing of
Calbiochem-Novabiochem AG.
FINANCIAL COVENANTS
(Section 4.1): Borrower shall cause the Parent to comply with all of
the following covenants on a consolidated basis
effective with the month ending March 31, 1996.
Compliance shall be determined as of the end of each
month, except as otherwise specifically provided
below:
QUICK ASSET RATIO: Parent shall maintain a ratio of "Quick Assets" to
current liabilities of not less than .80 to 1.
TANGIBLE NET WORTH: Parent shall maintain a tangible net worth of not
less than $10,200,000, excluding the amount of the
foreign currency translation account, provided that
on and after the IPO Consummation, Parent shall
maintain a tangible net worth of not less than
$25,000,000, excluding the amount of the foreign
currency translation account.
DEBT TO TANGIBLE
NET WORTH RATIO: Parent shall maintain a ratio of total liabilities to
tangible net worth of not more than 1.50 to 1,
provided that on and after the IPO Consummation,
Parent shall maintain a ratio of total liabilities to
tangible net worth of not more than 1.00 to 1.
DEBT SERVICE RATIO: Parent shall maintain a Debt Service Ratio (as
referred to below) of 1.65 to 1 as of the end of each
fiscal quarter."
CLEAN-UP PERIOD: During the period commencing on the date of the IPO
Consummation and ending one year later, and during
each successive annual period thereafter, there shall
be period of 30 days when no Loans shall be
outstanding.
DEFINITIONS: "Current assets," and "current liabilities" shall
have the meanings ascribed to them in accordance with
generally accepted accounting principles.
"Tangible net worth" means the excess of total assets
over total liabilities, determined in accordance with
generally accepted accounting principles, excluding
however all assets which would be classified as
intangible assets under generally accepted accounting
principles, including without limitation goodwill,
licenses, patents,
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SILICON VALLEY BANK AMENDMENT TO LOAN AGREEMENT
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trademarks, trade names, copyrights, capitalized
software and organizational costs, licences and
franchises.
"Quick Assets" means cash on hand or on deposit in
banks, readily marketable securities issued by the
United States, readily marketable commercial paper
rated "A-1" by Standard & Poor's Corporation (or a
similar rating by a similar rating organization),
certificates of deposit and banker's acceptances, and
accounts receivable (net of allowance for doubtful
accounts).
"Debt Service Ratio" means the ratio of (a)
consolidated net income of Parent before interest,
taxes, depreciation and other non-cash amortization
expenses and other non-cash expenses of the Parent,
determined in accordance with generally accepted
accounting principles, consistently applied, to (b)
the consolidated amount of Parent's obligations
relating to payment of interest and current
maturities of principal on Parent's outstanding
indebtedness, determined in accordance with generally
accepted accounting principles, consistently applied.
DEFERRED REVENUES: For purposes of the above quick asset ratio, deferred
revenues shall not be counted as current liabilities.
For purposes of the above debt to tangible net worth
ratio, deferred revenues shall not be counted in
determining total liabilities but shall be counted in
determining tangible net worth for purposes of such
ratio. For all other purposes deferred revenues shall
be counted as liabilities in accordance with
generally accepted accounting principles.
SUBORDINATED DEBT: "Liabilities" for purposes of the foregoing covenants
do not include indebtedness which is subordinated to
the indebtedness to Silicon under a subordination
agreement in form specified by Silicon or by language
in the instrument evidencing the indebtedness which
is acceptable to Silicon.
OTHER COVENANTS
(Section 4.1): Borrower shall at all times comply with all of the
following additional covenants:
1. BANKING RELATIONSHIP. Borrower shall at all times
maintain its primary banking relationship with
Silicon.
2. MONTHLY BORROWING BASE CERTIFICATE AND LISTING.
Within 20 days after the end of each month, Borrower
shall provide Silicon with a Borrowing Base
Certificate in such form as Silicon shall specify,
and an aged listing of Borrower's accounts
receivable.
3. WARRANTS. Borrower shall continue in effect the
Warrant to Purchase Stock and related documents it
entered into with Silicon in connection with the
original execution of the Loan Agreement.
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SILICON VALLEY BANK AMENDMENT TO LOAN AGREEMENT
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4. EXCESS CASH FLOW REPAYMENT COVENANT. Borrower
shall cause to be paid to Silicon, within 90 days
after the end of each fiscal year of Parent, 25% of
the Excess Cash Flow (as defined below) relating to
such prior fiscal year, to be applied in inverse
order of maturity to the outstanding principal
balance of each of the Working Capital Term Loan and
the Acquisition Term Loan, pro rata, based on the
proportion that each such Loan bears to the sum of
both such Loans (collectively referred to as the
"Excess Cash Flow Repayment Covenant").
As used herein the term "Excess Cash Flow" means for
each fiscal year of Parent, on a consolidated basis,
(a) the Parent's net income (after taxes), plus (b)
depreciation and amortization (including amortizing
finance charges), plus (c) non-cash interest charges,
minus (d) all capital expenditures (including any
capitalization of software), minus (e) scheduled
principal payments on all of Parent's indebtedness
for the succeeding twelve month period, (f) if there
has been an increase in the Parent's net Working
Capital since the end of the prior fiscal year, then
plus the amount of any such increase, and (g) if
there has been an decrease in the Parent's net
Working Capital (as defined below) since the end of
the prior fiscal year, then minus the amount of any
such decrease, with all of the foregoing determined
in accordance with generally accepted accounting
principles, consistently applied.
As used herein the term "Working Capital" means the
amount represented by the difference between Parent's
current assets and current liabilities, determined in
accordance with generally accepted accounting
principles, consistently applied.
5. GUARANTY BY PARENT; PLEDGE; SECURITY AGREEMENT.
Parent shall continue in effect the following: (a)
the continuing guaranty of the Obligations it entered
into with Silicon in connection with the original
execution of the Loan Agreement, (b) the general
security agreement collateralizing such guaranty
obligations it entered into with Silicon in
connection with the original execution of the Loan
Agreement and (c) the pledge agreement it entered
into with Silicon in connection with the original
execution of the Loan Agreement.
6. GUARANTY BY CALBIOCHEM-NOVABIOCHEM AG; PLEDGE.
Calbiochem- Novabiochem AG continue in effect: (a)
the continuing guaranty of the Obligations it entered
into with Silicon in connection with the original
execution of the Loan Agreement, and (b) the pledge
agreement it entered into with Silicon in connection
with the original execution of the Loan Agreement.
7. PLEDGE BY BORROWER. Borrower shall continue in
effect the pledge agreement it entered into with
Silicon in connection with the original execution of
the Loan Agreement.
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SILICON VALLEY BANK AMENDMENT TO LOAN AGREEMENT
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8. SUBORDINATION AGREEMENT. Parent shall continue in
effect the subordination agreement it entered into
with Silicon in connection with the original
execution of the Loan Agreement.
9. SWISS LOAN FACILITY; REPRESENTATION REGARDING
TERMINATION; ETC. Calbiochem-Novabiochem AG
previously entered into a loan facility with
Basellandschaftliche Kantonalbank (the "Swiss Loan
Facility"). Borrower hereby represents and warrants
to Silicon that the Swiss Loan Facility has been
terminated.
10. UNUSED LINE FEE. Borrower shall pay to Silicon a
quarterly unused line fee equal to .125% per annum
calculated upon the amount by which the Credit Limit
regarding Revolving Loans exceeds the average daily
principal balance of the outstanding Revolving Loans
and Letters of Credit during the immediately
preceding quarter (or part thereof) while this
Agreement is in effect and for so long thereafter as
any of the Obligations are outstanding, which fee
shall be payable on the first day of each quarter in
arrears.
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SILICON VALLEY BANK AMENDMENT TO LOAN AGREEMENT
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IN WITNESS WHEREOF, the undersigned have caused this
Agreement to be executed by their duly authorized
representatives.
BORROWER:
CALBIOCHEM-NOVABIOCHEM CORPORATION
BY /s/ James G. Stewart
----------------------------------------
PRESIDENT OR VICE PRESIDENT
BY /s/ Arthur E. Roke
----------------------------------------
SECRETARY OR ASS'T SECRETARY
SILICON:
SILICON VALLEY BANK
BY /s/ Rita Pirkl
------------------------
TITLE Senior Vice President
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<PAGE> 1
EXHIBIT 10(o)(i)
The following is a fair and accurate English translation of a German language
document, filed pursuant to Rule 306 of Regulation S-T. Upon request, the
original language document will be provided to the Commission or the Staff.
CN Biosciences, Inc.
By: /s/ James G. Stewart
---------------------------
Vice President, Secretary
and Chief Financial Officer
LISCA LEASING AG, CENTRAL ADMINISTRATION [logo]
Lagerstrasse 47, P.O. Box, 8021 Zurich
Tel. 01/295 97 97, Fax 01/242 82 43
EINSCHREIBEN
Calbiochem-Novabiochem AG
Messrs. A. Muller and W. Herrmann
Weidenmattweg 4
P.O. Box
4448 Laufelfingen
Zurich, July 5, 1994
BG/ga
RE: REAL PROPERTY LEASING CONTRACT NO. 80051
Gentlemen:
Pursuant to section III.3.1 of the leasing contract, rent is adjusted to changed
conditions on the capital market at the beginning of the 11th lease year, i.e.,
on July 1, 1994.
The existing quarterly rent of Fr. 73,337.00 was based on the 5.75% interest
rate for five-year cash deposit certificates at Basellandschaftliche
Kantonalbank which was in effect at the time of most recent adjustment.
On July 1, 1994, we charged the sum of Fr. 68,003.00 against your account using
the direct debit collection procedure for Swiss banks. This sum would have
corresponded to quarterly rent at a base interest rate of 4.75%. But since,
according to the communication by Basellandschaftliche Kantonalbank, the
relevant interest rate for five-year cash deposit certificates is 5.0%, we have
recalculated the rent. The new rent is
FR. 69,342.00 PER QUARTER.
<PAGE> 2
The Fr. 1,339.00 difference from the already debited amount will be charged
against your account in the middle of this month.
The next adjustment of rent will take place on July 1, 1999.
The new rents are calculated in such a manner that the purchase prices
applicable for purposes of the exercise of the purchase right will remain
unchanged:
Fr. 1,903,000.00 in the case of exercise on 6/30/1999,
Fr. 1,005,000.00 in the case of exercise on 6/30/2004.
<PAGE> 3
LISCA LEASING AG, CENTRAL ADMINISTRATION [logo]
Lagerstrasse 47, P.O. Box, 8021 Zurich
Tel. 01/295 97 97, Fax 01/242 82 43
- 2 -
For this reason, the quarterly rent payments will be:
Fr. 70,626.00 from 7/1/1999 through 6/30/2004,
assuming a constant base interest rate of 5.0% at the time of the next
adjustment.
This letter shall constitute an integrated component of the leasing contract. We
therefore ask that you confirm your agreement for us by signing the enclosing
duplicate of this letter.
We thank you for your outstanding cooperation thus far and look forward to a
continued pleasant lease relationship.
Sincerely yours,
LISCA LEASING AG
/s/ B. Grieder /s/ B. Muller
----------------- ------------------
B. Grieder B. Muller
Duplicate of letter
Return envelope
<PAGE> 4
[logo]
BASEL-LANDSCHAFT [BASEL DEMICANTON]
PUBLIC DOCUMENT
[stamp]
SISSACH CLERK'S OFFICE
NOTARIAL OFFICE
relating to an addendum
to the real property leasing contract
officially certified on February 6, 1984,
and the addendum officially certified on
January 25, 1990
The undersigned notarial officer, Fritz Emmel, District Clerk in Sissach, hereby
certifies:
LISCA LEASING AG, headquartered at Lagerstrasse 47, Zurich, represented pursuant
to power of attorney by Hanspeter Laubli, born July 28, 1950 in Seengen AG,
Hohenweg 7, 4419 Lupsingen,
LEASING COMPANY,
and
CALBIOCHEM-NOVABIOCHEM AG, headquartered at Weidenmattweg 4, Laufelfingen,
represented pursuant to power of attorney by Willy Herrmann, Prokurist [holder
of statutory representative authority], Basel, in 4455 Zunzgen,
LESSEE,
hereby enter into an additional addendum to the above-captioned public
documents.
The leasing contract, which relates to parcel no. 219 in the Laufelfingen land
register and which was officially certified on February 6, 1984, and the
addendum, which was officially certified on January 25, 1990, are hereby
modified as a consequence of an extension of the contract term for a period of
five years. The text set forth in the following sections shall replace the
earlier version of those sections in their entirety.
1. SECTION I.3. (TRANSFER OF POSSESSION FOR USE)
Leasing Company hereby transfers to Lessee possession of real property
parcel no. 219, along with the renovated building and constructed
additions (Lease Object), for the intended use for a term of 20 years.
<PAGE> 5
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2. SECTION I.4. (LESSEE'S RIGHT TO PURCHASE)
Lessee shall have a right to purchase the Lease Object which may be
exercised at the end of the 15th and 20th year of the lease.
3. CONCERNING SECTION III.2 (CONTRACT TERM)
The lease term began in July 1, 1984, and shall end on June 30, 2004.
4. CONCERNING SECTION III.3.1. (RENT)
On the basis of the 4.75% interest rate for five-year cash deposit
certificates at Basellandschaftliche Kantonalbank, the quarterly rent
was:
-Fr. 59,950.00 from July 1, 1984, through June 30, 1986
-Fr. 67,730.00 from July 1, 1986, through June 30, 1988
-Fr. 74,870.00 from July 1, 1988, through June 30, 1989.
On the basis of the 5.75% interest rate for five-year cash deposit
certificates at Basellandschaftliche Kantonalbank, the quarterly rent
was:
-Fr. 87,405.00 from July 1, 1989, through June 30, 1990
-Fr. 93,461.00 from July 1, 1990, through June 30, 1991
-Fr. 98,830.00 from July 1, 1991, through June 30, 1992
-Fr. 103,739.00 from July 1, 1992, through September 30, 1993.
Starting on October 1, 1993, the rent shall be Fr. 73,337.00 per
quarter.
At the beginning of the 11th and 16th lease year (i.e., on July 1,
1994, and July 1, 1999), rent shall be adjusted by Leasing Company to
reflect the changed conditions in the capital market and shall then
remain fixed for the following five years. The 5.75% interest rate (or
the respective interest rate at the time of the new adjustment) for
five-year cash deposit certificates at Basellandschaftliche
Kantonalbank shall serve as the basis.
Leasing Company shall inform Lessee of the reset rent amount no later
than 30 days after it goes into effect.
<PAGE> 6
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5. CONCERNING SECTION III.3.3. (AMORTIZATION)
After twenty years, the amortization contained in the rent payments
will reduce the relevant investment costs to a residual value of Fr.
1,005,000.00 (one million five hundred thousand francs) (section B.2 of
the Standard Contract Terms).
6. SECTION IV.2. (LESSEE'S PURCHASE RIGHT--EXERCISE)
The purchase right may be exercised at the end of the 15th and 20th
lease years, calculated from July 1, 1994, i.e., it may be exercised on
June 30, 1999, and June 30, 2004 (performance deadlines). The
declaration to Leasing Company announcing exercise shall be submitted
by registered mail by no later than one year prior to the performance
deadline. Benefits and burdens shall begin on the day of the
performance deadline.
7. SECTION IV.3. (PURCHASE PRICE)
The purchase price corresponds to total investment costs, less the
amortization contained in the rent payments. Based on Fr. 3,367,962.28,
the purchase price is:
FR. 1,903,000.00 (one million nine hundred thousand francs) in the
event of exercise of the purchase right at the end
of the fifteenth year of the lease (6/30/1999);
FR. 1,005,000.00 (one million five thousand francs) in the event of
exercise of the purchase right at the end of the
twentieth year of the lease (6/30/2004).
The timely payment of rent is presumed.
The purchase price shall be paid to Leasing Company in cash or bank
check simultaneously with the land register application for transfer of
title. Starting on the entry date, the purchaser would assume any
debts, including accrued interest, secured by the property--in an
amount not to exceed the purchase price--subject to the terms and
conditions existing at that time and would offset said obligations
against the purchase price.
<PAGE> 7
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8. CONTRACT DATED FEBRUARY 6, 1984, AND ADDENDUM DATED
JANUARY 25, 1990
This addendum shall be attached to the contract which was officially
certified on February 6, 1984, and the addendum which was officially
certified on January 25, 1990. The remaining portions of said documents
shall remain fully in effect.
9. CONTRACT COSTS
Lessee shall bear all costs and fees related to the conclusion of this
addendum.
--------------------
<PAGE> 8
- 5 -
After being read by the contracting parties and/or their representatives, this
document is approved as correct, complete and drafted in accordance with their
intent and signed personally in their name. The document shall then be signed by
the notarial officer, and an official seal shall be affixed.
The contracting parties and/or their representatives have documented their
identity by presenting official identification documents.
The certification is taking place in the office of the undersigned notarial
official at the Sissach District Clerk Office.
SISSACH, NOVEMBER 9 (NINTH), 1993 (NINETEEN HUNDRED NINETY-THREE).
The contracting parties:
For LISCA Leasing AG,
pursuant to power of attorney:
/s/ Laubli
For Calbiochem-Novabiochem AG,
pursuant to power of attorney:
/s/ W. Herrmann
[seal] The District Clerk in Sissach
THE DISTRICT REGISTRAR acting as notarial officer
IN SISSACH
/s/ Fritz Emmel
-----------------------
Fritz Emmel
<PAGE> 9
[logo]
BASEL-LANDSCHAFT [BASEL DEMICANTON]
PUBLIC DOCUMENT
relating to an addendum
to the leasing contract dated February 6, 1984
The undersigned notarial officer for Sissach hereby certifies:
LISCA LEASING AG, headquartered at Morgartenstrasse 6, Zurich, represented
pursuant to power of attorney by Beat Grieder-Hausermann, born 1945, business
employee, from Thurnen, residing at Zwischenbachen 12, 8048 Zurich,
"Leasing Company,"
and
NOVABIOCHEM AG, headquartered at Weidenmattweg 4, 4448 Laufelfingen, represented
pursuant to power of attorney by Felix Puschmann, born 1961, single, business
administrator, from and residing in 4132 Muttenz, Bahnhofstrasse 43,
"Lessee,"
hereby enter into an addendum to the leasing contract concerning parcel no. 219
in the Laufelfingen land register which was concluded by and between the parties
and officially certified on February 6, 1984.
Whereas the partial renovation and expansions of the existing building on parcel
no. 219 have been completed and the Leasing Company has closed the construction
account which had been maintained for construction costs--and given the changed
capital market conditions between the beginning of the lease and the beginning
of the sixth year thereof--the parties hereby provide by way of supplement to
the leasing contract:
1. Concerning section II. 5.
The total investment costs relevant to the calculation of rent under
the lease pursuant to section III. 3.1 and to the purchase price definitively
total Fr. 3,367,962.28.
2. Concerning section III. 2.
The lease term began on July 1, 1984, and shall end on June 10, 1999.
1
<PAGE> 10
3. Concerning section III. 3.1
The quarterly rent was:
Fr. 59,950.00 per quarter starting July 1, 1984 (1st and 2nd lease
years),
Fr. 67,730.00 per quarter starting July 1, 1986 (3rd and 4th lease
years),
Fr. 74,870.00 per quarter starting July 1, 1988 (5th lease year),
on the basis of the interest rate of 4.75% for five-year cash deposit
certificates at Basellandschaftliche Kantonalbank.
The rent under the lease shall be:
Fr. 87,405.00 per quarter starting July 1, 1989 (6th lease year),
Fr. 93,461.00 per quarter starting July 1, 1990 (7th lease year),
Fr. 98,830.00 per quarter starting July 1, 1991 (8th lease year),
Fr. 103,739.00 par quarter starting July 1, 1992 (9th through 15th
lease years).
At the beginning of the 11th lease year (i.e., on July 1, 1994), rent
shall be adjusted by Leasing Company to reflect the changed conditions in the
capital market and shall then remain fixed for the following five years. The
interest rate of 5.75% (or the prevailing interest rate at the time of the new
adjustment) for five-year cash deposit certificates at Basellandschaftliche
Kantonalbank shall serve as the basis.
Leasing Company shall inform Lessee of the reset rent amount no later
than 30 days after it goes into effect.
4. Concerning section III. 3.3
After 15 years, the amortization contained in the rent payments shall
reduce the relevant investment costs to a residual value of Fr. 1,005,000.00
(one million five hundred thousand francs) (B.2 of the "Standard Contract
Terms").
5. Concerning section IV. 2.
The right of purchase may be exercised at the end of the tenth and
fifteenth lease years, calculated from the entry of the leasing project
according to section III. 2., i.e. June 30, 1994, and June 30, 1999 (performance
deadlines). The declaration to Leasing Company announcing exercise shall be
submitted in writing by no later than one year prior to the performance
deadline. Benefits and burdens shall begin on the day of the performance
deadline.
2
<PAGE> 11
Lessee shall be entitled to submit the land register application.
Documentation of payment of the purchase price shall be attached to land
register application. The land register application shall be made either by June
30, 1994, or June 30, 1999.
6. Concerning section IV. 3.
The purchase price corresponds to the total investment costs determined
in section II. 5, less the amortization contained in the rent payments. Based on
relevant investment costs of Fr. 3,367,962.28, the purchase price is:
Fr. 2,410,000.00 (two million four hundred ten thousand francs) in the
event of exercise of the purchase right at the end of the tenth lease year;
Fr. 1,005,000.00 (one million five thousand francs) in the event of
exercise of the purchase right at the end of the fifteenth lease year;
the timely payment of rent is presumed.
The purchase price shall be paid to Leasing Company in cash or bank
check simultaneously with the land register application for transfer of title.
7. Contract dated February 6, 1984
This addendum shall be attached to the lease contract which was
officially certified on February 6, 1984, whose remaining portions shall remain
fully in effect.
8. Contract costs
Lessee shall bear all costs and fees arising from this addendum.
3
<PAGE> 12
After being read by the contracting parties and/or their representatives, this
document shall be approved as correct, complete and drafted in accordance with
their intent and signed personally in their name. The document shall then be
signed by the notarial officer, and an official seal shall be affixed.
The contracting parties and/or their representatives have documented their
identity by presenting official identification documents.
The certification is taking place in the office of the undersigned notarial
official at the Sissach District Clerk Office.
Sissach, January 25 (twenty-fifth), 1990 (nineteen hundred ninety).
The contracting parties:
For LISCA Leasing AG, pursuant to power of attorney:
/s/ Grieder
For Novabiochem AG, pursuant to power of attorney:
/s/ F. Puschmann
fe/ed
[seal] The notarial officer:
DISTRICT CLERK'S OFFICE,
SISSACH SISSACH DISTRICT CLERK'S OFFICE
NOTARIAL OFFICE
/s/ F. Emmel
4
<PAGE> 13
[logo]
BASEL-LANDSCHAFT [BASEL DEMICANTON]
PUBLIC DOCUMENT
relating to a leasing contract
The undersigned notarial officer, the district clerk for Sissach, hereby
certifies:
The following contract is hereby concluded by and between
LISCA Leasing AG, headquartered at Morgartenstrasse 6, Zurich, represented by
Hugo Anton Konrad, born 1948, from Remetschwil AG, residing in Pfaffikon ZH,
director, and Alexander Moritzi, born 1934, from Chur GR, residing in Greifensee
ZH, who hold joint signatory authority,
"Leasing Company"
and
Novabiochem AG, headquartered at Weidenmattweg 4, Laufelfingen, represented by
Paul Schaub, from Diegten, residing in Binningen, management board president,
and Max Sutz, from Kellen ZH, residing in Wettingen AG, management board member,
who hold joint signatory authority,
"Lessee"
I. Intent of the parties
1. Acquisition of the lease object or construction site property
Leasing Company shall acquire from Balit AG, Basel, the following piece of real
property pursuant to a purchase contract publicly certified today:
In the Laufelfingen land register
No. 219 13 a 88 square meters
building no. 2, 4, courtyard,
Moosmatt,
Cadaster estimate Fr. 493,400.00
Fire warehouse estimate Fr. 192,590.00
Easements and encumbrances
b. Servitude: Building prohibition and prohibition against storage of
goods and materials in favor of no. 217, 800,
c. Servitude: Pedestrian and vehicular right of way for no. 800.
1
<PAGE> 14
Notes
b. Servitude: Water line belonging to Laufelfingen Water Supply.
Notices
None recorded.
Real property security interests
According to entry in land register.
Real property owner
Balit AG, headquartered in Basel.
The separately concluded purchase contract shall constitute a component of this
document. A copy of said purchase contract shall be attached to the leasing
contract.
2. Partial renovation of the existing building, demolition of the annex
structures and creation of an addition
In accordance with the construction agreement in section II, Leasing
Company shall cause the existing building to be renovated, and shall cause the
demolition of both annex structures and the creation of an addition.
3. Leasing
Leasing Company shall lease the parcel no. 219 real property with
the building which is to be renovated, along with the additions which are to be
created (hereinafter described as Lease Object), to Lessee for a term of 15
years.
4. Lessee's right of purchase
Lessee shall have a right to purchase the Lease Object which may be
exercised at the end of the 10th and 15th lease years.
The rights and duties of the contracting parties shall be governed
by the following specific provisions and the attached "Standard Contract Terms".
II. Construction agreement
1. Contractual bases
Leasing Company shall cause the partial renovation of the existing
building and the creation of additions.
2
<PAGE> 15
The following contractual bases which have been signed by both
contracting parties shall govern in this connection:
- cost estimate of Lisca Leasing AG, Zurich, dated December
1983,
- project plans (situation, floor plans, facades, cross-
sections, scale 1:50).
It is hereby declared that these bases shall constitute an
integrated component of this contract.
2. Beginning of construction
Leasing Company, in agreement with Lessee, shall initiate the start
of construction immediately, provided that the requirements pursuant to Art. 1
of the Standard Contract Terms are met.
3. Duration of construction
According to the plan, the entire Object is to be ready for
occupation on July 1, 1984 (the primary building will be occupied on April 1,
1984).
4. Construction interest
Charges to the construction account shall bear net interest of 7.25%
per annum. This interest rate is based on the currently prevailing interest
rates for five-year cash obligations at Basellandschaftliche Kantonalbank (4.5%
per annum). A change in this rate shall result in a change in the construction
interest rate.
5. Basis for the calculation of rent under the lease and the purchase
price
Total investment costs for the lease object, including renovation
and additions, is estimated as follows:
Fr. 915,000.00 purchase price for parcel no. 219
Fr. 2,435,000.00 partial renovation, demolition, costs for additions
and ancillary costs
Fr. 3,350,000.00 TOTAL
III. Lease contract
1. Lease object
Leasing Company shall lease the Lease Object to Lessee. A sublease
shall require the consent of Leasing Company.
3
<PAGE> 16
2. Term of lease
Entry of the Lease Object shall take place on the date of readiness
for occupation. Thereafter the lease shall last 15 years. As mentioned in
section II. 3, readiness for occupation is tentatively planned for July 1, 1984.
The structure shall be deemed ready for occupation when the work
required for the intended use has been completed. Completion work and finishing
surrounding work, including planting, may be undertaken after readiness for
occupation.
3. Rent under the lease
3.1 Rent under the lease
The rent under the lease shall be
Fr. 57,617.00 per quarter (1.720% of total investment
costs) in the 1st and 2nd lease years
Fr. 65,357.00 per quarter (1.951% of total investment
costs) in the 3rd and 4th lease years
Fr. 72,501.00 per quarter (2.164% of total investment
costs) in the 5th lease year
Fr. 81,270.00 per quarter (2.425% of total investment
costs) in the 6th lease year
Fr. 87,486.00 per quarter (2.612% of total investment
costs) in the 7th lease year
Fr. 93,106.00 per quarter (2.779% of total investment
costs) in the 8th lease year
Fr. 99,505.00 per quarter (2.970% of total investment
costs) in the 9th through 15th lease years.
The rent under the lease is fixed under the current basis of
4.5%, the interest rate for 5-year cash deposit certificates at
Basellandschaftliche Kantonalbank. Leasing Company may adjust the rent at the
beginning of the 6th and 11th lease year, calculated from the entry of the Lease
Object, to reflect the changed conditions in the capital market. The interest
rate of 4.5% (or the prevailing interest rate at the time of the new adjustment)
for five-year cash deposit certificates at Basellandschaftliche Kantonalbank
shall serve as the basis.
Leasing Company shall inform Lessee of the reset rent amount
no later than 30 days after it goes into effect.
4
<PAGE> 17
3.2 Due date
Rent under the lease shall be due and payable in advance
on the first of the quarter.
3.3 Amortization
After 15 years, the amortization contained in the rent
payments shall reduce the relevant investment costs to a residual value of Fr.
1,000,000.00 (B.3 of the Standard Contract Terms).
IV. Right of purchase
1. Subject matter
Provided that Lessee properly satisfies the lease contract in
accordance with section III, it shall have a non-transferable right of purchase
with respect to the Lease Object (Laufelfingen land register no. 219).
2. Eligibility for exercise
The right of purchase may be exercised at the end of the 10th
and 15th lease years, calculated from the entry of the leasing project according
to section III. 2., i.e. June 30, 1994, and June 30, 1999 (performance
deadlines). The declaration to Leasing Company announcing exercise shall be
submitted in writing by no later than one year prior to the performance
deadline. Benefits and burdens shall begin on the day of the performance
deadline.
Lessee shall be entitled to make the land register
application. Documentation of payment of the purchase price shall be attached to
land register application. The land register application shall be made either by
June 30, 1994, or June 30, 1999.
3. Purchase price
The purchase price corresponds to total investment costs
determined in section II. 5, less the amortization contained in the rent
payments. Based on relevant investment costs of Fr. 3,350,000.00, the purchase
price is:
Fr. 2,385,100.00 (two million three hundred eighty-five
thousand francs 00/00)
in the event of exercise of the purchase right at the end of
the tenth lease year;
5
<PAGE> 18
Fr. 1,000,000.00 (one million francs 00/00)
in the event of exercise of the purchase right at the end of
the fifteenth lease year;
the timely payment of rent is presumed.
The purchase price shall be paid to Leasing Company in cash or
by bank check simultaneously with the land register application for transfer of
title.
4. Performance deadlines
If the right of purchase is exercised, the application with
the land register for transfer of title must be made on the date of expiration
of the lease contract.
After the performance deadline, the delaying party shall be in
default, and a deadline of 20 days for remedying performance shall be imposed on
that party pursuant to Art. 107 par. 1 OR [Swiss Law of Obligations]. If
performance has still not been rendered by the end of said deadline period, the
creditor shall be entitled to proceed pursuant to Art. 107 par. 2 OR.
V. Joint contractual unity
1. Conclusion fee
The conclusion fee shall be Fr. 8,375.00 in accordance with
C.1 of the Standard Contract Terms.
2. Insurance
Leasing Company shall conclude the following insurance
contracts in accordance with C.2.5 of the Standard Contract Terms:
- premises liability insurance,
- building insurance for fire and storm damage.
3. Integration of the Standard Contract Terms
The attached Standard Contract Terms shall constitute an
integrated component of this leasing contract.
4. Duty to obtain approval pursuant to the BBGE [Federal Resolution on
the Acquisition of Real Property by Persons Abroad]
The contracting parties are aware of the Federal Resolution of
March 23, 1961, on the Acquisition of Real Property by Persons Abroad and the
regulations of December 21, 1983, with amendments dated February 11, 1976,
particularly the criminal consequences of a violation of the federal resolution.
6
<PAGE> 19
They hereby declare that this transaction satisfies the
requirements for approval. In the event that the right of purchase is exercised,
Lessee shall provide the land register with a valid resolution of the approval
authority prior to the submission of the application with the land register for
the transfer of title.
5. Contract costs
Lessee shall assume all costs and fees arising from this
contract.
7
<PAGE> 20
This document shall be given to the contracting parties to
read, and shall be approved by them as correct, complete and drafted in
accordance with their intent and signed personally in their name. The document
shall then be signed by the notarial officer, and his official seal shall be
affixed.
To the extent that they are not personally known by the
notarial officer, the contracting parties have documented their identity by
presenting official identification documents.
The certification is taking place in the office of the
undersigned notarial official at the Sissach District Clerk's Office.
Sissach, February sixth, nineteen hundred eighty-four.
Sissach, February 6, 1984.
The contracting parties:
For LISCA Leasing AG, pursuant to power of attorney:
/s/ Konrad /s/ Moritzi
For Novabiochem AG, pursuant to power of attorney:
/s/ Schaub /s/ Sutz
[illegible seal] The notarial officer:
SISSACH DISTRICT CLERK'S OFFICE
[signature illegible]
8
<PAGE> 21
Certification:
It is hereby certified that this 7 page photocopy
fully matches the original:
Sissach, June 24, 1985
Sissach District Clerk's Office
Notarial officer
[signature illegible]
9
<PAGE> 1
EXHIBIT 10(o)(ii)
The following is a fair and accurate English translation of a German language
document, filed pursuant to Rule 306 of Regulation S-T. Upon request, the
original language document will be provided to the Commission or the Staff.
CN Biosciences, Inc.
By: /s/ James G. Stewart
--------------------------
Vice President, Secretary
and Chief Financial Officer
LEASE CONTRACT
Lessor: Balit AG
Steinenring 19
4011 Basel
Represented by:
Lessee: Protogen AG
Weidenmattweg 4
4448 Laufelfingen
Property: Alte Hauensteinerstrasse 48
4448 Laufelfingen
<PAGE> 2
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TABLE OF CONTENTS
1. Lease object
2. Beginning of lease, lease term and termination
3. Rent
4. Rent adjustment
5. Heating and ancillary costs
6. Use of lease object
7. Transfer of possession of lease object
8. Structural changes
9. Advertising signs
10. Lessee's maintenance duty
11. Sublease, assignment of lease contract
12. Right to monitor and right of access
13. Duty of care
14. Authorizations
15. Insurance
16. Keys
17. Surrender of lease object
18. Right of retention
19. Contractual modifications
20. Place of venue
21. Additional provisions
<PAGE> 3
- 3 -
1. Lease object
1.1 Lessor hereby delivers to Lessee the following premises in its
real property for use in accordance with the lease:
- 602 square meters laboratories/offices and ancillary rooms
- 9 outside spaces (total 19 PP/10 PP Biodor Holding AG)
1.2 The leased premises are sketched in red in the attached copies
of the plan (scale 1:100). These copies of the plan shall
constitute an integrated component of this lease contract.
1.3 Lessee's equipment shall remain under its ownership, provided
that it has not been fixed to portions of the building. At the
end of the lease, Lessor may, in any event, demand the removal
of such equipment and restoration of the original condition at
Lessee's expense.
2. Beginning of lease, lease term and termination
2.1 The lease relationship is concluded starting on 7/1/1990 for a
fixed term of 10 years (i.e., through 6/30/2000). It may be
terminated by either party no earlier than said date upon
compliance with a 12-month notice period. If the contract is
not terminated, it shall automatically be extended for 12
month terms and may by terminated by either party upon 6
months' notice effective at the end of the relevant year.
Termination shall be deemed to have been effected in a timely
manner if it has been delivered to a Swiss post office no
later than the last day prior to the beginning of the
termination deadline period. Art. 3.4 of this lease contract
shall remain reserved.
2.2 Lessee may record the lease contract in the land register at
its own expense. Lessor hereby authorizes the land registry to
make the necessary entry.
3. Rent
3.1 The annual rent for the first year shall
be Fr. 102,340.00
==============
- 602 square meters x Fr. 170.00/square meter p.a.
payable in quarterly installments of Fr. 25,585.00
plus:
a) heating costs account Fr.
b) hot water account Fr. 4,000.00
<PAGE> 4
c) ancillary costs account Fr.
(pursuant to Art. 5)
d) janitor account Fr.
Total payable in advance Fr. 29,585.00
<PAGE> 5
-4-
3.2 Rent shall be payable in advance, no later than the first day of the
quarter (due date).
3.3 The right to offset counterclaims--including those arising out of the
lease relationship or a rescission of the contract--against rent
payments is hereby barred.
3.4 If Lessee is in default with respect to a rent payment which is due,
Lessor may impose a deadline period of 30 days with the threat that the
lease contract will be rescinded if the outstanding rent has not been
paid within said deadline period (Art. 265 OR [Swiss Law of
Obligations]).
4. Rent adjustment
4.1 The annual rent set forth in Art. 3.1 is based on the national
index of consumer prices as of June 1990. If this basis
changes, the contracting parties shall each have the annual
right to demand a change in rent on January 1--starting on
January 1, 1991. The rent change shall be reassessed on the
basis of the national index for consumer prices for September
of the preceding year.
4.2 It shall not be possible to fall below the basis rent of Fr.
102,340.00 starting on 7/1/1990.
5. Heating and ancillary costs
5.1 Ancillary costs shall consist of:
- heating costs/hot water
- water fee and waste water treatment facility fee
- waste fee.
5.2 The operating and maintenance costs for the heating system
shall be allocated to the participating lessees according to
the cubic content of the heatable rooms. Lessee shall make
quarterly account payments, which Lessor shall settle with
Lessee annually. Heating cost billing shall be deemed to have
been acknowledged unless a written objection is made within 30
days of receipt. In the event of substantial cost increases,
Lessor may, upon compliance with a three-month notice period,
reasonably increase the quarterly account payment at the
beginning a given quarter.
5.3 Lessee shall make a quarterly contribution to the costs of hot
water preparation; upon compliance with a three-month notice
period, Lessor may increase said
<PAGE> 6
contribution at the beginning of a given quarter, as soon as the
additional costs can no longer be met by the lessee contributions.
5.4 Lessee shall bear a pro rata share of the costs for the
janitor. It is intended that the janitorial service be ensured
by the appropriate artisans at Novabiochem AG. Agreements
shall be reached directly between Lessee and Novabiochem AG.
<PAGE> 7
- 5 -
5.5 Water consumption and the fees for waste water treatment
equipment shall be charged to Lessee via the operating cost
statement according to the quantity price IWB.
5.6 Lessee shall bear the cost of operating and maintaining its
own equipment and facilities (for example, power consumption
in the leased rooms and illuminated letters and other
advertising devices).
5.7 Lessee shall bear fees and taxes which are incurred
exclusively as a result of Lessee's business operation, even
if they were assessed against Lessor.
6. Use of lease object
6.1 The leased space shall be available to Lessee for use as
laboratory and office premises.
6.2 Lessee hereby promises not to use the lease object for any
purpose other than the contractually intended purpose. Any
modification shall require the written consent of Lessor.
6.3 In using the leased property, Lessee shall show the greatest
degree of consideration for fellow lessees and the neighbors.
6.4 The structural elements of the building shall be taken into
account when machines and heavy furniture are brought in.
Lessee shall ascertain the permissible floor bearing capacity
in advance. Generally speaking, Lessee shall be obligated to
take all reasonable measures which serve to prevent or reduce
noise, shock, odor, etc., and protect the leased property
against damage. Lessor shall be instructed in writing
concerning such matters. In the absence of Lessor's consent,
Lessee shall be liable for resulting damage.
6.5 In using the equipment, such as elevators, the operating
instructions given by the manufacturers shall be observed.
7. Delivery of the lease object
7.1 Lessor shall deliver possession of the lease object in a
clean, user-ready condition in accordance with local custom.
7.2 Lessee shall report defects which are detected to Lessor by
registered mail within 30 days from the beginning of the
lease. If Lessee fails to do so, it shall be
<PAGE> 8
assumed that it received the lease object in a condition which is in
conformity with the contract.
7.3 Lessee shall have no right to compensatory damages for
activities in the course of renovations or completion work
after the beginning of the lease.
<PAGE> 9
- 6 -
8. Structural modifications
8.1 Modifications to and in the leased rooms, the installation of
facilities, modifications of existing facilities, the
attachment of roller blinds, company signs or advertising
devices, etc., shall be permissible only with the written
consent of Lessor.
8.2 At the request of Lessor, Lessee must remove equipment and
apparatuses which it personally brings in (or assumes from its
predecessor) and restore the original condition. If such
equipment and apparatuses remain in the leased rooms, Lessee
shall not be entitled to claims for compensatory damages.
9. Advertising signs
9.1 The attachment of advertising signs and advertising boards
should be adapted to the lease object and the surrounding
area.
9.2 Plans and drafts shall be presented to Lessor for approval.
9.3 Lessee shall be personally obligated to obtain any official
permits.
9.4 In the event of maintenance or modification of the building
facade or other walls, Lessee shall remove and reattach the
signs and letters at its own expense.
10. Lessee's maintenance duty
10.1 The improvement and repair work--of any kind--which becomes
necessary as a result of normal use and which does not exceed
Fr. 500.00 shall be charged to Lessee. Repairs charged to
Lessee for purposes of the foregoing shall specifically
include:
The replacement of straps for blinds, jalousies or sun blinds,
electric safety latches and shattered windows, the maintenance
of electric switches and outlets, gas and water valves and
door locks. This shall also be the case if there is damage
resulting from third parties.
10.2 Defects which Lessee is not responsible to remedy shall be
reported to Lessor immediately. In the event of failure to
report, Lessee shall be liable for the resulting damage.
10.3 At all times, Lessor shall be entitled to act in an unimpeded
manner in performing repairs and renovations
<PAGE> 10
in the lease object and on the appurtenant equipment, as well as in the
common rooms, and on facades and the roof. More extensive renovations
and new installations shall be announced to Lessee early.
11. Sublease, assignment of lease contract
Subleasing of the leased premises and assignment of the lease contract
shall be barred without the written approval of Lessor. Consent may be
refused for good cause (such as income and capital base insufficient
for compliance with contractual obligations, irreconcilability with
the good reputation of the property, etc.).
<PAGE> 11
- 7 -
12. Right to monitor and right of access
12.1 Lessor or its representatives shall be entitled to enter the
lease object to protect its rights during ordinary business
hours.
12.2 If Lessee is absent, the keys shall be kept available.
12.3 For purposes of re-leasing the premises, Lessor shall have a
right of access starting from the time of termination, even in
the case of non-contractual termination.
13. Duty of care
13.1 Lessee shall exercise proper care in its use of the lease
object (Art. 261 OR).
13.2 Lessee shall be fully liable to provide compensation for
damage which arises in violation of this duty of care.
13.3 Moreover, Lessor shall have the right to rescind the contract
immediately and claim compensatory damages if Lessee breaches
the lease contract or building by-laws in spite of written
warning.
13.4 The building by-laws shall constitute an integrated component
of this lease contract.
14. Authorizations
Lessee shall obtain all authorizations necessary in connection with
Lessee's business operation.
15. Insurance
15.1 Lessor shall enter into the compulsory fire insurance
contract, as well as a liability and water damage insurance
contract.
15.2 Lessee shall bear the risk of damage or loss of its personal
property. The conclusion of appropriate insurance
contracts--including insurance against the breakage of glass
panes belonging to the leased rooms--is therefore recommended
to Lessee.
16. Keys
16.1 When the lease object is occupied, the necessary keys shall be
delivered to Lessee in exchange for a separate receipt.
<PAGE> 12
16.2 Lessee may have additional keys made only with written consent
of Lessor.
16.3 At the time of moving out, all keys, including additional keys
made at Lessee's expense, shall be returned to Lessor without
compensation.
<PAGE> 13
- 8 -
17. Surrender of lease object
17.1 The leased property shall be fully vacated, cleaned and
surrendered to Lessor, along with all keys, by no later than
the last day of the lease.
17.2 In principle, Lessee shall surrender the lease object in the
condition in which it maintained it. It shall not be liable
for wear resulting from contractual use.
17.3 The repair and cleaning work which Lessee must perform shall
be started in a timely manner, such that it is completed at
the end of the lease relationship or at the time of early
surrender of the lease object.
17.4 In the event of early departure, Lessee shall completely
vacate and clean the leased property and assign it to Lessor
without compensation and without delay.
17.5 If Lessee leaves the leased rooms early, it shall be liable
for rent and ancillary costs until the expiration of the
contract.
17.6 Upon the request of Lessor, Lessee shall make payment or post
security prior to departure for the rent which will fall due
prior to the next regular termination deadline.
18. Right of retention
Lessor's right to retain Lessee's equipment and furniture shall take
precedence over all claims third-party claims.
19. Contractual modifications
All contractual modifications must be in writing.
20. Place of venue
The place in which the leased property is located shall be the place of
venue for all disputes arising from this lease contract.
<PAGE> 14
- 9 -
21. Additional provisions
21.1 Transfer of rights and duties: Each party shall transfer all
rights and duties arising from this contract to any legal
successors.
21.2 The agreement governing use compensation for operating
equipment paid for by the Lessor is attached to this lease
contract as appendix no. 1.
The foregoing lease contract is issued and signed in 3 copies.
Place: Basel Date: 4/3/90
Lessor: Lessee:
BALIT AG PROTOGEN AG
/s/ P. Glaser /s/ D. Leder [signature /s/ G. Chappuis
- -------------- --------------- ------------- ----------------
P. Glaser D. Leder illegible] G. Chappuis
Attachments
Addendum no. 1
Copy of plan
<PAGE> 15
ADDENDUM No. 1
to the lease contract dated 4/3/90
between
Lessor: Balit AG
Steinenring 19
4011 Basel
Lessee: Protogen AG
Weidenmattweg 4
4448 Laufelfingen
Property: Alte Hauensteinerstrasse 48
4448 Laufelfingen
<PAGE> 16
- 2 -
Use compensation for operating equipment
1. Lessor financed specific operating equipment for Lessee. This financing
shall be repaid by Lessee through the payment of use compensation.
2. According to the cost estimate, Lessor's investment consists of the
following items:
<TABLE>
<S> <C>
BKP 311 Master builder work Fr. 23,000.00
BKP 330 Electric installations Fr. 110,000.00
BKP 344 Source exhaust, ventilation
cold chamber, room ventilation Fr. 120,000.00
BKP 353 Distributions, drain-offs Fr. 90,000.00
BKP 390 Fees, include technical specialist
fees Fr. 147,000.00
--------------
Total Fr. 490,000.00
==============
</TABLE>
3. The amount of the use compensation shall be computed as follows:
3.1 Amortization 10 years
<TABLE>
<S> <C>
- Fr. 490,000.00: 10 years Fr. 49,000.00
</TABLE>
3.2 Interest on capital
<TABLE>
<S> <C>
- Fr. 490,000.00 x 7% Fr. 17,150.00
------------------- --------------
2
</TABLE>
<TABLE>
<S> <C>
3.3 Total Fr. 66,150.00
==============
</TABLE>
4. The use compensation shall be payable during the term of the lease
relationship:
<TABLE>
<S> <C>
- quarterly on 1/1, 4/1, 7/1, 10/1,
first time on 7/1/90 Fr. 16,537.50
==============
</TABLE>
<PAGE> 17
- 3 -
5. After the expiration of the lease contract, the operating equipment
described in Art. 2 shall remain under Lessor's ownership.
6. Maintenance and repair of the operating equipment shall be charged to
Lessee.
Basel, Laufelfingen
Lessor: Lessee:
BALIT AG PROTOGEN AG
/s/ P. Glaser /s/ D. Leder [signature /s/ G. Chappuis
- --------------- --------------- --------------- ------------------
P. Glaser D. Leder illegible] G. Chappuis
<PAGE> 18
[logo]
BALIT AG
New starting on 4/22/91
Tel: 061/272 97 97
Fax: 061/272 98 41
Novabiochem AG
Attn: Mr. A. Muller
P.O. Box
4448 Laufelfingen
Basel, January 10, 1992 PG/ma
Merger of Protogen AG with Novabiochem AG
Dear Mr. Muller:
We thank you for your letter dated January 7, 1992.
For the sake of form, we hereby confirm for you that we are prepared to transfer
to Novabiochem AG, Weidenmattweg 4, 4448 Laufelfingen, the lease contract dated
April 3, 1990, between Balit AG (as lessor) and Protogen AG (as lessee) as of
January 1, 1992. At the same time, we ask you to take notice of the already
announced rent increase set forth in our letter to Protogen AG dated January 6,
1992.
As evidence of your agreement with the transfer of the lease contract, we ask
that you have the attached duplicate letter signed by Novabiochem AG,
Laufelfingen, in a legally effective manner.
Sincerely yours,
BALIT AG
/s/ P. Glaser /s/ D. Leder Maillard
---------------- ----------------------
P. Glaser D. Leder Maillard
Enclosure:
- - copy of our letter to Protogen AG dated January 6, 1992
AGREED: Laufelfingen, 1/16/91 STAMP/SIGNATURE
[stamp]
Novabiochem
[signature illegible] [signature illegible]
<PAGE> 1
EXHIBIT 10(p)
H.M. LAND REGISTRY
LAND REGISTRATION ACTS 1925 - 1971
County and District Nottinghamshire: Nottingham/
Broxtowe
Title Number NT 205919
Property Unit C2A Boulevard Industrial
Park Beeston Nottingham
T H I S L E A S E made on the day of
One thousand nine hundred and ninety four
B E T W E E N :-
(1) The Landlord WILSON BOWDEN PROPERTIES LIMITED
having its Registered Office at
Leicester Road Ibstock in the County of
Leicester (registered number 1442184)
(2) The Tenant CALBIOCHEM-NOVABIOCHEM (U.K.)
LIMITED of 3 Heathcote Building
Highfields Science Park University
Boulevard Nottingham NG7 2QJ
(registered number 2154136)
1
<PAGE> 2
W I T N E S S E T H as follows :-
1. DEFINITIONS
In this Lease :-
(1) Unless the context otherwise requires the following words and
expressions shall have the meanings assigned to them hereunder :-
Words and exressions Meanings
-------------------- --------
"the Landlord" Includes its successors in title entitled to the
reversion immediately expectant on the
determination of the term and all superior
landlords and all rights reservations and
permissions in favour of the Landlord shall also
be for the benefit of any superior landlord to
the intent that any superior landlord shall be
entitled to exercise the same in addition to the
Landlord and where the consent of the Landlord
is required under any covenant or condition
herein contained the same covenant or condition
shall be subject to the consent of any superior
landlord to the intent that the Landlord shall
have the right to require the consent of any
superior
2
<PAGE> 3
landlord shall be as a condition precedent to
the grant by the Landlord of any consent
(provided that any such consent shall not be
unreasonably withheld or delayed under the
provisions hereof and nor shall the Landlord
create any further mortgage or lease where any
such consents can be unreasonably withheld or
delayed) and that the Landlord may require the
Tenant to discharge the reasonable and proper
costs charges and expenses of any superior
landlord in respect of any such consent save
where that consent is unreasonably withheld or
delayed
"the Tenant" shall where the context so admits include its
successors in title and assigns
"the perpetuity the period of Eighty years from the date hereof
period" which shall be the perpetuity period applicable
hereto
"Plan 1" the drawing numbered 326(52)O1C annexed hereto
"Plan 2" the drawing numbered E147/57/E annexed hereto
3
<PAGE> 4
"the Estate" the land at Boulevard Industrial Park Beeston
Nottingham together with the buildings and works
from time to time erected or standing thereon
"the demised premises" the premises known as Unit Number C2A Boulevard
Industrial Park Beeston Nottingham and more
fully described in Part I of the First Schedule
"the Primary Use" Use within the meaning of Classes B1 and B8 of
the Town and Country Planning (Use Classes)
Order 1987 as enacted at the date hereof
"the estate roads" the roads and paths as are now existing on the
Estate shown for identification purposes edged
brown on Plan 2
"the service media" the ventilating and other ducts cisterns tanks
radiators channels tubes motors valves traps
switches watercourses water supply pipes waste
water pipes soil pipes drains sewers gutters
downpipes gas pipes fuel pipes oil pipes
electricity cables telephone cables flues wires
pumping stations and cables together with any
other media for the provision of services but
shall not
4
<PAGE> 5
include any wires cables or apparatus belonging
to any public utility or supply authority where
the maintenance of the same is the
responsibility of such authority
"the insured risks" the risks in respect of loss or damage by fire
lightning storm tempest impact explosion
aircraft (other than hostile aircraft) and other
aerial devices and articles dropped therefrom
subsidence earthquake riot and civil commotion
and malicious damage (and if such cover can be
reasonably obtained by the Landlord labour
disturbance) bursting or overflowing of boilers
water tanks apparatus or pipes flood
public liability insurance of the Landlord and
such other risks as the Landlord may reasonably
from time to time require to be insured against
subject to such exclusions and limitations as
are imposed by the reputable Insurers Provided
Always that if the Landlord shall be unable to
obtain insurance cover against any one or more
of the said
5
<PAGE> 6
risks (other than for fire for which the
Landlord's liability to insure shall be
absolute) the Tenant shall be immediately
notified and such risk or risks shall for the
purpose of this clause be deemed to be excluded
from the expression of "the insured risks"
"the Landlord's Surveyor" The Landlord's Surveyor for the time being who
shall be either an Associate or Fellow of the
Royal Institution of Chartered Surveyors
"Rent Payment Days" The usual quarter days in every year
"The Planning Acts" The Planning Acts as defined in Section 336 of
The Town and Country Planning Act 1990 and any
statutory extension or modification or
re-enactment thereof
"the term" The term of years created by clause 2 hereof
(2) Words importing the neuter gender only shall include the masculine or
feminine gender (as the case may be) and words importing the masculine
gender only shall include the feminine gender and vice versa.
6
<PAGE> 7
(3) Words importing the singular number only shall include the plural number and
vice versa and where there are two or more persons included in the expressions
"the Landlord" or "the Tenant" covenants expressed to be made by the Landlord or
the Tenant (as the case may be) shall be deemed to be made by such persons
jointly and severally
(4) Words importing persons shall include firms companies and corporations and
vice versa
(5) The word "development" shall have the meaning ascribed thereto by the
Planning Acts
(6) Any reference to any Act of Parliament (but not The Town and County Use
Classes Order 1987) shall include any modification or re-enactment thereof for
the time being in force and shall include all instruments orders plans
regulations permissions and directions for the time being made or given
thereunder or deriving validity therefrom
2. OPERATIVE PART
The Landlord in consideration of the rents and the covenants on the part of the
Tenant hereinafter reserved and contained HEREBY DEMISES unto the Tenant ALL
THAT the demised premises TOGETHER WITH the rights and easements (in common with
the Landlord and all others from time to time entitled thereto) specified in
Part 2 of the First Schedule EXCEPT AND RESERVING to the Landlord its tenants
and owners and occupiers for the time being of each and every part of the Estate
and all others entitled thereto the rights specified in Part 3 of the First
Schedule SUBJECT TO the several matters specified irt clause 3(30) so far as
the same relate to or affect the demised premises and are still subsisting and
capable of taking effect and being enforced TO HOLD the same
7
<PAGE> 8
(except and reserved and subject as aforesaid) unto the Tenant for a term of
Fifteen years commencing on the _________________ day of __________________
One thousand nine hundred and ninety four YIELDING AND PAYING therefor
during the term to the Landlord the respective rents following that is to say :-
(1) During the first five years of the term yearly and proportionately for any
fraction of a year the rent of Thirty thousand pounds ((Pound)30000.00) by equal
quarterly payments in advance on the Rent Payment Days the first payment in
respect of the period commencing on the date hereof or the date of occupation
whichever shall be the sooner and ending on the day preceding the Rent Payment
Day next following being paid on the day of _________ One thousand nine hundred
and ninety four AND thereafter in the years 1999 and 2004 and on the
anniversaries respectively in such years of the commencement of the term a
yearly rent equal to the Review Rent defined and ascertained in accordance with
the provisions of the Second Schedule and
(2) Such additional sums as may from time to time be payable pursuant to the
Second Schedule and
(3) A sum or sums of money in each year of the term equal to the amount or
amounts (including any increased premiums payable by reason of any act neglect
or default of the Tenant or servants agents or visitors of the Tenant) which
the Landlord shall expend in eacb year in or in respect of effecting or
maintaining insurance in accordance with the covenants on the part of the
8
<PAGE> 9
Landlord hereinafter contained at Clause 4(1) (or if the demised premises are
insured jointly with other premises such sum or sums properly attributable to
the demised premises as shall be determined by the insurers or (if the insurers
shall refuse to make such determination) as shall be reasonably determined by
the Landlord's Surveyor and such determination in either case shall be final and
binding (save in the case of manifest error or matter of law) on the Tenant)
such sum or sums to be paid within 14 days of receipt by the Tenant from the
Landlord of a proper written demand supported by due evidence of payment on
demand at any time; and
(4) On demand all interest payable in accordance with clause 5
(2) hereof
3. TENANT'S COVENANTS
The Tenant HEREBY COVENANTS with the Landlord for itself and its permitted
successors and assignees to observe and perform throughout the term the
following conditions and obligations :-
(1) TO pay the reserved rents on the days and in manner all as specified
in clause 2 without any deduction whatsoever by the Tenant for the time being
(2) To pay and discharge all existing and future rate taxes duties levies
charges assessments impositions and outgoings whatsoever whether parliamentary
county municipal parochial local or of any other description and whether of the
nature of capital or revenue which are now or may at any time hereafter be taxed
assessed charged or imposed upon the demised premises or on the owner Landlord
Tenant or occupier in respect thereof except only such as the owner or Landlord
is by law bound to pay or which may
9
<PAGE> 10
arise from dealings with the reversionary interest of the Landlord or any title
paramount notwithstanding any contract to the contrary
(3) From time to time and at all times during the term (so that all work
carried out shall be done to the reasonable satisfaction of the Landlord's
Surveyor) well and substantially to repair maintain cleanse and keep in good and
substantial repair and condition the whole of the demised premises including all
foundations roofs walls fences roads paths forecourts and every part thereof
lying wholly within the demised premises and the Landlord's fixtures and
fittings as contained in the Fourth Schedule therein and the appurtenances
thereof and all additions alterations and improvements thereto or replacements
thereof and all service media serving the demised premises and to replace and
such items as aforesaid as shall from time to time become necessary AND to keep
any part of the demised premises not covered by buildings or structures
including all hardstanding and landscaped areas therein in a neat and tidy
condition and in a good and substantial state of repair to the reasonable
satisfaction of the Landlord's Surveyor Provided that the obligations of the
Tenant herein shall not extend to making good damage occasioned by any of the
insured risks unless the insurance of the demised premises (either alone or
jointly with other adjoining premises) shall have been rendered void or payment
of the policy moneys shall have been refused or withheld in whole or part in
consequence of any act or default on the part of the Tenant or of the servants,
agents or invitees; of the Tenant
10
<PAGE> 11
(4) (1) As often as may be reasonably necessary but not more frequently than
once in every third year of the term and also (but not so as to require
redecoration in consecutive years) during the last three months of the term
(whether determined by effluxion of time or otherwise) to paint or otherwise
treat as the case may be the whole of the outside woodwork iron work metal work
or cement (if any) and other external parts of the buildings on the demised
premises usually or requiring to be painted or otherwise treated with two coats
of good quality undercoat and one coat of good quality gloss paint or other
suitable material of good quality in a proper and workmanlike manner and
(without prejudice to the generality of the foregoing) to clean and treat in a
suitable manner for its maintenance in good condition all the exterior hard wood
and metal and other work not required to be painted as aforesaid PROVIDED THAT
such decorating in the last year of the term or sooner determination thereof
shall be carried out in colours tints or patterns first approved in writing by
the Landlord or the Landlord's Surveyor such approval not to be unreasonably
withheld or delayed
(2) As often as may be reasonably necessary but not more frequently than
once in every five years of the term and also (but not so as to require
redecoration in consecutive years) in the last three months of the term
(whether determined by effluxion of time or otherwise) to paint paper varnish or
otherwise treat as the case may be all interior parts of the buildings on the
demised premises and all additions and fixtures thereto usually or requiring to
be painted papered varnished or otherwise treated with not less than two coats
of good quality
11
<PAGE> 12
paint or other suitable material of good quality in a proper and workmanlike
manner PROVIDED ALWAYS that the internal painting and decorating in the last
year of the term or sooner determination thereof (unless determined by
forfeiture) shall be carried out in colours tints and patterns first approved in
writing by the Landlord or the Landlord's Surveyor such approval not to be
unreasonably withheld or delayed
(3) To clean the windows of the demised premises as often as occasion
shall require
(4) To keep all the Landlord's fixtures and fittings specified in the
Fourth Schedule hereto in good working order repair and condition to the
reasonable satisfaction of the Landlord or the Landlord's Surveyor
(5) To comply with all requirements of the Local Authority and the Fire
Service relating to the installation of fire sprinklers and fire alarm systems
and other appliances in any part of the demised premises and to ensure that any
such systems installed pursuant to these requirements are at all times
adequately serviced and maintained and to produce within fourteen days of demand
therefor to the Landlord or the Landlord's Surveyor copies of all appropriate:
certificates and authorisations issued relative thereto by the appropriate
authorities or service contractors
(5) At the expiration or sooner determination of the term quietly to yield up
the demised premises in such good and substantial repair and condition as shall
be in accordance with the covenants on the part or the Tenant herein contained
together
12
<PAGE> 13
with all additions and improvements made thereto and all fixtures and
alterations (other than trade or tenant's fixtures which may be removed or
alterations carried out by the Tenant and for which the Landlord has served
written request upon the Tenant earlier than 3 calendar months before
determination of the term for the Tenant to reinstate subject to the Tenant
making good all damage caused by such removal to the reasonable satisfaction of
the Landlord or the Landlord's Surveyor)
(6) To permit the Landlord upon forty eight hours prior written notice (except
in case of emergency) and the Landlord's Surveyor and Agent with or without
workmen and others and appliances at all reasonable hours during daytime in the
term (or at any time in case of emergency) but without undue frequency to enter
the demised premises or any part thereof to view the state and condition or user
of the same or for inspecting any works in progress or for taking inventories of
the fixtures and things to be surrendered at the expiry of this Lease and of
all defects wants of reparation and breaches of covenants there and there found
for which the Tenant is liable hereunder the Landlord may give notice in writing
to the Tenant and within three months after every such notice the Tenant shall
proceed diligently to repair and make good the same according to such notice
and the covenants in that behalf herein contained to the reasonable satisfaction
of the Landlord or the Landlord's Surveyor AND if the Tenant shall fail to
comply with such notice in all respects it shall be lawful (but without
prejudice to the right of re-entry and forfeiture hereinafter contained) for the
Landlord or the Landlord's agents servants and workmen to enter upon the
13
<PAGE> 14
demised premises and to carry out or cause to be carried out all or any of the
works referred to in such notice and the proper and reasonable cost of so doing
and all expenses thereby properly incurred with interest thereon (at the rate
referred to in clause 5 (2) hereof) from a date seven days after the date of
written demand supported by evidence of expenditure by the Landlord shall be
paid by the Tenant to the Landlord on demand and shall be recoverable as rent
in arrear
(7) Without prejudice to the provisions of sub-clause 3(12) and subject as
hereinafter in this sub-clause provided
(1) Not at any time during the term without obtaining the previous
consent in writing of the Landlords Surveyor (such consent not to be
unreasonably withheld or delayed) to make or permit or suffer to be made any
addition or alteration to the demised premises (including without prejudice to
the generality of the foregoing alterations or changes in the construction
height design elevation or external appearance of any building or buildings
thereon) or construct any new or additional buildings thereon Provided always
that any addition or alteration for which consent as aforesaid shall be given
shall be carried out in accordance with plans elevations sections and
specifications previously submitted and approved in writing by the Landlord or
the Landlord's Surveyor (such approval not to be unreasonably withheld or
delayed) or the Landlord's Surveyor and in accordance with any relevant terms
and conditions and regulations of the Institute of Electrical Engineers and the
Electricity and Water Supply Authorities or any other statutory authority
14
<PAGE> 15
(2) Not at any time during the term to make or permit or suffer to be
made any new accesses to adjoining roads without obtaining the previous consent
in writing of the Landlord or the Landlord's Surveyor (such consent not to be
unreasonably withheld or delayed)
PROVIDED ALWAYS that the Tenant may instal alter or remove a mezzanine floor
and/or any demountable non-structural partitions and not being a Landlord's
fixture and fitting wholly within the demised premises (or permit the same to be
done) without obtaining such consent as aforesaid but so that
(i) the installation alteration or removal of such demountable
non-structural partitions shall be carried out in a good and workmanlike manner
and so as to avoid nuisance inconvenience or annoyance to third parties
(ii) the Tenant shall give notice to the Landlord or the Landlord's
Surveyor and to any insurers of the demised premises before the installation
alteration or removal of such demountable non-structural partitions and shall
comply or cause to be complied with the reasonable requirements of such
insurers and
(iii) the Tenant shall make good or cause to be made good without delay
any damage caused by the installation alteration or removal of such demountable
non-structural partitions
(4) AND if the Tenant shall make any addition or alteration to the
demised premises then at the expiration or sooner determination of the tenancy
the Tenant will if so required by the Landlord by notice served upon the Tenant
at least 3 months prior to the determination of the term at the Tenant's own
cost reinstate and make good to the reasonable satisfaction of the
15
<PAGE> 16
Landlord's Surveyor the demised premises and restore the same to the plan and
design as if such addition or alteration (or such of them as may be specified
by the Landlord) had not been made PROVIDED that if the Tenant shall construct
offices above the existing ground floor offices in accordance with the terms of
this Lease then the Landlord shall not require re-instatement of such offices
(8) (1) To the reasonable satisfaction of the Landlord and within the time
limit laid down by law or by any notice requiring the same to be done or if no
such time limit is laid down within a reasonable time to do and execute all such
works and things and comply with all such requirements as under or by virtue of
any Act of Parliament already or hereafter to be passed and every order
regulation and bye-law made under or in pursuance thereof or by any local or
other authority have been or shall be directed to be done executed or complied
with in respect of the demised premises or the user thereof or the person or
persons or any fixture machinery plant or chattel for the time being therein
whether by the owner or occupier thereof including (but without prejudice to the
generality of the foregoing) the provisions of the Offices Shops and Railway
Premises Act 1963 the Factories Acts and the Health and Safety at Work etc. Act
1974 and to indemnify the Landlord at all times against all proper costs charges
and expenses of or incidental to the execution of any works or the provision and
maintenance of any arrangements so directed or required as aforesaid
16
<PAGE> 17
(2) To observe all statutory and other provisions and regulations
(including those in any policy of insurance relating to the demised premises of
which the Tenant has been notified) with regard to the storage and use of any
inflammable fuel oils or substances in or upon the demised premises
(9) Forthwith to give full particulars to the Landlord of any :-
(1) permission notice order or proposal for a notice or order relevant
to the use or condition of the demised premises made given or issued by any
Government Department Local or Public Authority or by virtue of any statutory
powers and if so reasonably required by the Landlord or the Landlord's Surveyor
to produce copies of such permission notice order or proposal for a notice or
order to the Landlord or the Landlord's Surveyor as the case may be AND ALSO at
the expense of the parties in proportion to their respective interests in the
demised premises at the date of receipt of the notice or order without delay to
take all reasonable steps to comply (so far as the Landlord or the Tenant is
liable so to do) with any such notice or order
(2) damage or destruction of the demised premises or any part thereof
whether caused by the occurrence of any of the insured risks as soon as
practical once the Tenant becomes aware of such damage or destruction
(10) In relation to the Planning Acts :-
(1) at all times during the term to comply in all respects with the
provisions and requirements of the Planning Acts and all licences consents
permissions and conditions (if any) granted or imposed thereunder in relation to
any permission implemented by
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the Tenant or under any enactment repealed thereby so far as the same
respectively relate to or affect the demised premises or any part thereof or any
operations works acts or things already or hereafter to be carried out executed
done or omitted thereon or the use thereof for any purpose and
(2) during the term so often as occasion shall require free of all
expense to the Landlord to obtain or procure to be obtained all such licences
consents and permissions as may be required for the carrying out by the Tenant
of any operation on the demised premises or the institution or continuance by
the Tenant thereon of any use thereof which may constitute development within
the meaning of the Planning Acts but so that the Tenant shall not make any
application for planning permission without the previous written consent of the
Landlord (such consent not to be unreasonably withheld or delayed)
(3) to pay and satisfy or cause to be paid and satisfied any charge
that may hereafter be imposed under the Planning Acts in respect of the carrying
out or maintenance by the Tenant of any such operations or the institution or
continuance by the Tenant of any such use as aforesaid and
(4) notwithstanding any consent which may be granted by the Landlord
under this Lease not to carry out or make any alteration or addition to the
demised premises or any change of use thereof before all necessary planning
permissions therefor have been produced to the Landlord and acknowledged in
writing by the Landlord or the Landlord's Surveyor as aforesaid as satisfactory
to it such acknowledgment not to be unreasonably withheld or delayed but so
that the Landlord or the Landlord's Surveyor may
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refuse to express its satisfaction with any such planning permission on the
ground that the period thereof or anything contained therein or omitted
therefrom in the reasonable opinion of the Landlord's Surveyor would be or
likely to be prejudicial to the interest of the Landlord in the demised premises
during the term
(5) unless the Landlord or the Landlord's Surveyor shall otherwise
direct to carry out before the expiration or sooner determination of the term
any works stipulated to be carried out to the demised premises by a date
subsequent to such expiration or sooner determination as a condition of any
planning permission which may have been granted and implemented by the Tenant
during the term
(6) if and when called upon so to do to produce to the Landlord or the
Landlord's Surveyor all such plans documents and other evidence as the
Landlord may reasonably require in order to satisfy itself that the provisions
of this covenant have been complied with in all respects
(7) not at any time during the term without the licence in writing of
the Landlord first obtained such licence not to be unreasonably withheld or
delayed to enter into any agreement with a Local Planning Authority under
Section 106 of the Town and Country Planning Act 1990
(11) (1) At all times during the term to comply with all requirements and
recommendations from time to time of any appropriate authority and all
reasonable requirements and recommendations of the insurers of the demised
premises of which the Tenant has been notified in relation to fire precautions
affecting the demised premises
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(2) to keep or procure to be kept the demised premises sufficiently
supplied and equipped with such fire fighting and extinguishing appliances as
shall from time to time be required by law or by the local or other competent
authority and such appliances shall be open to inspection and shall be
maintained to the reasonable satisfaction of the appropriate authorities and of
the reputable insurers of the demised premises and also not to obstruct or
permit or suffer to be obstructed the access to or means of working
such appliances or the means of escape from the demised premises in the case of
fire
(12) to permit the Landlord upon the giving of at least forty eight hours prior
notice (except in the case of emergency) and the Landlord's Surveyor or agent
with or without workmen and appliances at all reasonable times in the daytime
and during normal business hours (or at any time in the case of emergency)
during the term :-
(1) To enter the demised premises with or without the tenants owners
and occupiers of adjoining or neighbouring premises for the purpose of executing
repairs or alterations to or upon any adjoining or neighbouring premises or any
service media or services belonging to or used in connection with the same where
such work are impossible without such entry but causing as little noise dust
damage and inconvenience as possible and forthwith making good in a reasonable
manner all damage to the demised premises and the Tenant's goods and those
under its control thereby occasioned to the reasonable satisfaction of the
Tenant
(2) To enter upon the demised premises for any other reasonable purpose
connected with the interest of the Landlord in
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the demised premises in relation to the disposal or charging of their respective
interests Provided that such persons are accompanied by the Landlord's agent
(13) Not at any time to use the demised premises or any part thereof or allow
the same to be used for
(i) betting and gaming
(ii) any public exhibition or entertainment
(iii) any noisy noxious dangerous or offensive trade business
manufacture or occupation whatsoever
(iv) residential purposes or
(v) any illegal immoral or improper purpose and not to hold or permit
to be held any auction on the demised premises
(14) Not to use or permit or suffer the buildings on the demised premises or any
part thereof to be used for any purpose other than for the Primary Use (as
specified above) with ancillary offices and as to the remainder thereof as
service and amenity areas ancillary to the said buildings
(15) Not to do or permit or suffer to be done in or about or in connection with
the demised premises or any part thereof or on any neighbouring property over
which the Tenant (by virtue of its tenancy of the demised premises) exercises
rights any act deed or thing which shall or may be or become a nuisance
(whether indictable or not) or which may be or foreseeably grow or lead to the
damage inconvenience annoyance danger or disturbance of the Landlord or the
owners lessees or occupiers of any adjoining or neighbouring premises or the
Public Local or any other Authority.
(16) (1) Not to make any claim against the Landlord in respect of interference
to reception of wireless radio or television
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transmissions or to the operation of any appliance except for telephone and
computer equipment in or upon the demised premises suffered or alleged to be
suffered by reason of the use of electrical or other apparatus including power
lines on any adjoining or neighbouring property of the Landlord
(2) Not to cause or knowingly permit or suffer to be caused interference
to others by any radio or electro magnetic signal emitted by the use of
apparatus operated or installed in the demised premises
(17) (1) Not to affix or exhibit or permit or suffer to be affixed or
exhibited to or upon any buildings for the time being erected on the demised
premises or any other part of the demised premises any aerial hoarding placard
poster signboard or other advertisement whether illuminated or not (other than
placards posters or advertisements which are not ordinarily visible from
outside the building in question) except with the previous consent in writing
of the Landlord (such consent not to be unreasonably withheld or delayed)
PROVIDED THAT the consent aforesaid shall not be required in respect of any
notice which may be required by law to be affixed or exhibited on the demised
premises or stating the name of the Tenant or which has deemed or specific
consent pursuant to the Town and Country Planning (Control of Advertisements)
Regulations 1992 or any replacement regulations
(2) At its own expense to comply with the Town and Country Planning
(Control of Advertisements) Regulations 1969 or any regulation or other
statutory provision replacing or amending the same
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(3) on the expiration or sooner determination of the term (if required
by the Landlord) to remove or efface any such signboard or nameplate as
aforesaid
(18) (1) Not to assign sub-let or charge or part with possession of
the whole or any part or parts of the demised premises (except as hereinafter
permitted) nor to share the whole or part of the demised premises with any
other person or persons (except as hereinafter permitted)
(2) Not to assign the whole of the demised premises without obtaining
the written consent of the Landlord (which consent shall not be unreasonably
withheld or delayed) PROVIDED THAT :-
(i) it shall be a condition precedent to the granting by the Landlord of
any such consent that the proposed assignee enters into a direct covenant with
the Landlord to observe and perform the covenants on the part of the Tenant and
conditions contained in this Lease for so long as the assignee is a tenant of
the Landlord such covenant to be in a form reasonably required by the Landlord
and to be prepared and completed at the expense of the Tenant
(ii) If the proposed assignee is a company not being a public company
the Landlord shall if it is reasonable in all the circumstances be entitled to
require as a condition precedent to the granting of any consent that two of the
directors of such company or a corporate third party shall join in the
Assignment as sureties and such sureties for the assignee shall (in
consideration of the consent being granted at their request) covenant (where
appropriate jointly and severally) with the Landlord in substantially the same
terms (mutatis mutandis) as are contained in the Third Schedule hereto
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(3) Not to sub-let the whole of the demised premises to any other person
firm or company without obtaining the written consent of the Landlord (which
consent shall not be unreasonably withheld or delayed) PROVIDED THAT any
sub-lease granted out of this Lease shall contain :-
(i) an unqualified covenant on the part of the sub-tenant not to assign
sub-let charge or part with the possession of part only of the demised premises
nor to part with possession of the whole thereof nor to share the whole or part
of the demised premises with any other person or persons
(ii) a covenant on the part of the sub-tenant that the sub-tenant will
not assign or sub-underlet the whole of the demised premises without obtaining
the written consent of the Landlord under this present Lease (which consent
shall not be unreasonably withheld or delayed)
(4) Nothing in this paragraph 3(19) contained shall prevent the Tenant
without the consent of the Landlord (but subject to notification thereof being
given to the Landlord prior to occupation) from sharing the whole or any part or
parts of the demised premises with any company which is for the time being a
subsidiary of the Tenant or the holding company of the Tenant or which is
another subsidiary of the Tenant's holding company or a subsidiary of the
company which is the holding company of the Tenant's holding company (in each
case within the meaning of Section 736 of the Companies Act 1985) Provided that
(i) no tenancy within the meaning of the Landlord and Tenant Act 1954 is
thereby created
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(ii) such subsidiary or holding company shall only occupy all or part of
the demised premises whilst such relationship subsists
(5) The Tenant shall not be party or privy to any agreement or
arrangement for commutation in whole or in part of any annual rent to be
reserved and made payable on any underletting or of any part thereof
inconsideration of the payment of a lump sum of money or otherwise
(6) Not to permit or suffer any breach by the sub-tenant of any of the
provisions of paragraphs 3(18)(3)(i) and 3(18)(3)(ii) contained in a sub-lease.
and at all times strictly to enforce the same
(19) (1) within fourteen days of every assignment assent transfer sub-lease
assignment of sub-lease or mortgage or charge of or relating to the demised,
premises or any part thereof or any other dispositions whether mediate or
immediate of or relating to the demised premises or any part thereof to give
notice thereof in writing with particulars thereof to the Solicitor of the
Landlord and supply a certified copy thereof and to pay the Solicitors of the
Landlord a reasonable sum as a registration fee (being in each case not less
than Ten pounds) in respect of each such instrument
(2) Within one month after any order of Court or private or local Act
of Parliament affecting the demised premises or any part thereof (and of which
the Tenant shall have actual notice) to give notice thereof in writing to the
Landlord and the Landlord's Surveyor and to produce to the Landlord a certified
copy of the relevant instrument (if the original or a certified copy shall be
in the Tenant's possession)
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(20) Not to overload or permit to be overloaded the structure or any part of the
demised premises or impose any excessive weight thereon
(21) (1) Not to have or keep or permit to be kept upon the demised premises or
any part thereof any substance of an explosive or of an especially inflammable
or dangerous nature (other than fuel in tanks of vehicles) or such as might
increase the risk of fire or explosion or which might attach or in any way
injure by percolation corrosion or otherwise the demised premises or the
keeping or using whereof may contravene any statute or local regulation or
bye-law Provided always that the Primary Use shall not be a breach of this
covenant
(2) Not to instal or suffer to be installed in the demised premises any
machinery which shall be noisy or which may cause dangerous vibration or be a
nuisance to the Landlord or to occupiers of adjoining or neighbouring premises
(3) Not to overload or permit or suffer so far as it is possible for the
Tenant to do so to be overloaded the service media of or serving the demised
premises or any of them
(4) Not to hang exhibit place put deposit or expose outside any part of
the buildings comprised in the demised premises any goods articles or things for
sale hire or rent and not to permit or suffer any of the aforesaid things to be
done
(5) Not to commit or permit or suffer to be committed any waste whether
permissive voluntary or ameliorative in or upon the demised premises
(6) Not to discharge or permit or suffer to be discharged from the
demised premises into any surface water drain anything other than surface water
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(7) Not to bring or keep or suffer to be brought or kept upon the
demised premises anything which in the reasonable opinion of the Landlord's
Surveyor is or may forseeably become unclean unsightly or detrimental to the
demised premises or to the general amenity of the development
(8) Not at any time to place exhibit store or sell any goods on or from
the adjoining roads or other common parts
(22) Not to knowingly allow to pass into the sewers drains pipes or watercourses
of or serving the demised premises any noxious or deleterious effluent or other
substance whatsoever which may cause an obstruction in or injure the said sewers
drains pipes or watercourses and in the event of any such obstruction or injury
caused by the Tenant to make good as soon as practicable any damage caused to
the reasonable satisfaction of the Landlord's Surveyor and the drainage
authority
(23) (1) Except as shall be permitted by Clause 5(ii) of Part 2 of the First
Schedule hereto not to park or permit to be parked any vehicle upon any other
part of the Estate (except for the demised premises) and the estate roads and in
particular not to park or permit to be parked any such vehicle on nor so as to
cause any obstruction or damage to the estate roads or any access way pedestrian
amenity or landscaped area
(2) Subject to the provisions of Clause 5(ii) of Part 2 of the First
Schedule hereto to ensure that all goods arriving at or despatched from the
demised premises shall be loaded or Unloaded as the case may be within the
demised, premises in such a way that no obstruction of access to any
adjoining or neighbouring property is thereby caused
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(3) to ensure that all vehicles of the Tenant its sub-tenants servants
agents visitors suppliers and contractors entering and leaving the development
do so only at the vehicular access points constructed for that purpose
(4) Except as is permitted by Clause 5(ii) of Part 2 of the First
Schedule hereto not to obstruct or permit to be obstructed the service yard
shown hatched blue on Plan 1
(5) (i) not to deposit or permit or suffer to be deposited (except in
receptacles provided for that purpose) any rubbish refuse scrap or waste
material upon any part of the demised premises or any part of the Estate except
in the area edged green on Plan 1 and not to burn any rubbish scrap or waste
material thereon
(ii) To use its reasonable endeavours to ensure that all rubbish refuse
scrap and waste material is removed from the demised premises and the said area
edged green on Plan 1
(6) Not otherwise to cause any obstruction or annoyance to the Landlord
or to the owners tenants or occupiers of any adjoining or neighbouring
premises
(24) (1) Not to stop up or obstruct or knowingly permit to be stopped up or
obstructed any of the windows or lights belonging to the demised premises nor
knowingly permit any new window light opening doorway passage drain or other
encroachment or easement to be made into against upon or over the demised
premises or any part thereof AND in case any encroachment or easement
whatsoever
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shall be attempted to be made or acquired by any person or persons whomsoever to
give notice thereof in writing to the Landlord and the Landlord's Surveyor
immediately the same shall come to the notice of the Tenant and at the request
of the Landlord or the Landlord's Surveyor and at the cost of the Landlord to do
all such things as may reasonably be required by the Landlord or the Landlord's
Surveyor for preventing any encroachment or easement being made or acquired
(2) If the Tenant shall omit or neglect forthwith to adopt such means or
take such actions as aforesaid it shall be lawful for the Landlord or its
Surveyor or its employees agents and workmen to enter upon the demised premises
and to do the same causing as little disturbance to the Tenant as possible and
making good all damage caused
(3) To use its reasonable endeavours to prevent any easement or right
belonging to or used with the demised premises from being obstructed or lost
(4) Not to give to any third party any acknowledgment that the Tenant
enjoys the access of light to any of the windows or openings in the demised
premises by the consent of such third party nor to pay to such third party any
sum of money nor to enter into any agreement with such third party for the
purpose of inducing or binding such third party to abstain from obstructing the
access of light to any of such windows or openings and in the event of any of
the owners of adjacent or neighbouring land or buildings doing or threatening to
do anything which obstructs the access of light to any of the windows or
openings in the demised premises to notify the same forthwith to the Landlord as
soon as
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the same shall come to the notice of the Tenant and to permit the Landlord if
necessary to bring all such actions as it may think fit in the name of the
Landlord and at the Landlord's cost against any of the owners of the adjacent or
neighbouring land or buildings in respect of the obstruction of the access of
light to any of the windows or openings in the demised premises PROVIDED ALWAYS
that the Landlord bringing such actions shall indemnify the Tenant against all
actions losses expenses costs or damages which the Tenant may suffer by reason
of any act or actions which the Landlord may do or bring under this sub-clause
(25) To pay to the Landlord on demand all reasonable costs and expenses
(including legal costs stamp duty on any consents licences or duplicates
bailiff's fees and fees payable to a surveyor or other professional advisor and
any value added tax thereon for which a proper value added tax invoice is
produced) which may be properly incurred by the Landlord in :-
(1) Any proceedings under Section 146 or 147 of the Law of Property Act 1925
(notwithstanding that forfeiture is avoided otherwise than by relief granted by
the Court) and
(2) Any notice relating to the repair or decoration of the demised premises in
connection with the delivery up thereof at the expiration or sooner
determination of the term and
(3) The recovery of arrears of rent payable hereunder and proceedings in
connection therewith and
(4) The grant or refusal of consent upon any application by the Tenant
pursuant to the provisions of this Lease (including cases where the application
is withdrawn) save where such refusal is an unreasonable refusal or delay
on the part of the Landlord
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(26) (1) Not to do or permit to be done anything whereby :-
(i) any policy or policies of insurance for the time being in force
effected by the Landlord
(ii) any other policy or policies of insurance for the time being in
force in respect of the demised premises (including any policy or policies of
insurance against loss of rental income and against third party and property
owners' liability risks of the demised premises)
(2) To reimburse to the Landlord on demand any expenses incurred by the
Landlord in the renewal of any such policy or policies rendered necessary by a
breach of the Tenant's obligations under paragraph 3(26)(1) to pay to the
Landlord on written demand supported by due evidence of payment of the
additional premium aforesaid
(3) In the event of the demised premises or any adjoining premises of
the Landlord or any part thereof being destroyed or damaged by any peril
against which the Landlord shall have insured and the insurance money under any
insurance against the same effected thereon by the Landlord being wholly or
partly irrecoverable by reason solely or in part of any act or default of the
Tenant or the Tenant's servants employees or agents in performance of their
respective duties or liabilities to the Tenant then and in every such case the
Tenant will forthwith pay to the Landlord the irrecoverable insurance money
(27) To permit the Landlord and its agents at any time within six calendar
months next before the expiration or sooner determination of the term to enter
upon the demised premises and to fix and retain without interference upon any
suitable part or
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parts of the demised premises or the exterior thereof a notice board for
reletting or disposing of the same (but not so as to restrict or interfere
unreasonably with the access of light and air to the demised premises and not so
as to obscure the Tenant's trade sign) and not to remove or obscure the same and
to permit all persons by order in writing of the Landlord or the Landlord's
Surveyor or of its agents and if accompanied by the Landlord's agents to view
the demised premises at reasonable times in the usual business hours in the
daytime upon at least Forty eight hours prior written notice without
interruption unless the Tenant shall have made a valid Court application under
Section 24 of the Landlord and Tenant Act 1954
(28) To keep the Landlord fully and effectually indemnified from and against all
expenses proceedings proper costs claims damages demands and any liability
whatsoever arising out of :-
(1) The state of repair and condition of or any defect in the demised
premises any alteration thereto or the user thereof or works carried out or in
course of being carried out to the demised premises and
(2) Anything now or hereafter attached to or projecting from the demised
premises and
(3) Claims under Section 4 of the Defective Premises Act 1972 and
(4) Any breach by the Tenant of any of its obligations under this Lease
and
(5) All damage occasioned to any adjacent or neighbouring premises or
the services thereof or to any person or chattel (whether or not upon the
demised premises) caused by any act
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default or negligence of the Tenant or the servants agents licensees or invitees
of the Tenant
(29) Upon making any application or request in connection with the demised
premises or the provisions of this Lease to disclose to the Landlord or the
Landlord's Surveyor such information as the Landlord may reasonably require and
request promptly
(30) To perform and observe the covenants agreements and other provisions
contained or referred to in :-
(a) Clause 4(i) of the Third Schedule of a Conveyance dated the Second day of
December one thousand nine hundred and eighty three and referred to in Note 2 of
the Property Register of title number NT 205919
(b) Clause 1 (f) (ii) of the Fifth Schedule of a Conveyance dated the Thirty
first day of March One thousand nine hundred and eighty seven and referred to in
entry number 4 of the Charges Register of title number NT 205919 so far as the
same require to be performed and observed by the owner or occupier of the
demised premises and relate thereto or any part thereof and are still subsisting
and capable of taking effect and to indemnify and keep indemnified the Landlord
against all actions proceedings costs damages claims demands expenses and
liability whatsoever by reason of or on account of the breach non-performance or
non-observance of either of the same AND IN PARTICULAR (but without prejudice to
the generality of the foregoing) :-
(a) Not to use the demised premises for retail or residential purposes
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(b) Not to make or cause to be made any application for planning permission to
change the use of the demised premises for residential or retail or retail
warehousing purposes
(c) To enter into a Deed of Covenant direct with British Railways Board in the
terms set out in covenant 1 (f) (ii) of the Fifth Schedule of the said
Conveyance dated the Thirty first day of March One thousand nine hundred and
eighty seven as identified in Entry number 4 in the Charges Register of the
title above referred to
(31) The Tenant shall in addition to the rents charges fees and other payments
which are or shall be reserved or may become payable pursuant to the provisions
of this Lease (hereinafter in this sub-clause called "the Payments") by or on
behalf of the Tenant pay any Value Added Tax which is or may become payable in
respect of the Payments provided proper Value Added Tax invoices are delivered
to the Tenant and in default of payment the same shall be recoverable by action
or by distress as rent in arrear
(32) To pay to the Landlord or to whom the Landlord may from time to time direct
within Twenty one days of written demand thirty per cent of the cost reasonably
and properly incurred by the Landlord or other the tenant or lessee of the
adjoining premises known as Unit C2B Boulevard Industrial Park shown
edged purple on Plan 1 (and certified as such by their respective surveyors) in
repairing and keeping in good repair and condition and where appropriate
replacing maintaining cleansing rebuilding and re-surfacing :-
(i) the whole of the premises shown edged purple on Plan I which are
not covered by buildings
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(ii) any and all things the use of which is common to or capable of being
used in common with the premises shown edged in purple on Plan 1
4. LANDLORD'S COVENANTS
THE Landlord HEREBY COVENANTS with the Tenant as follows :-
(1) (1) To insure and keep insured the demised premises against loss or damage
by the insured risks in some insurance office of repute in the full re-
instatement value thereof from time to time making such allowance as the
Landlord's Surveyor thinks fit for inflation during the period of insurance and
the replanning and re-instatement period plus such sum as the Landlord's
Surveyor reasonably considers sufficient to cover Architects' Surveyors' and
other professional fees and expenses incidental thereto and demolition shoring
up and site clearance and similar expenses PROVIDED ALWAYS that the Landlord
shall not be obliged to insure any fixtures which may be installed by the Tenant
and which may become Landlord's fixtures until the Tenant has notified the
Landlord in writing of the re-instatement value thereof
(2) To insure and keep insured in some insurance office of repute a sum
equal to three years rental income of the demised premises (exclusive of
insurance rents but inclusive of Value Added Tax) receivable by the Landlord and
taking into account the Landlord's Surveyors reasonable estimate of potential
increases receivable by the Landlord consequent upon renewals or rent review
provisions against any loss arising out of destruction or damage to the demised
premises by the insured risks and
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(3) To insure and keep insured in some insurance office of repute
against the third party risks and property owners' liability of the Landlord in
respect of the demised premises And to make all payments necessary for the above
purposes relevant in sub-clauses (1)(2) and (3) of this Clause 4(1) within
fourteen days after the same shall respectively become payable
(2) As often as the demised premises or any part thereof shall be destroyed or
damaged by any of the insured risks to apply as soon as practicable (the
Landlord using its best endeavours to do so expeditiously) all policy moneys
received by the Landlord under or by virtue of any such insurance as aforesaid
(other than money received in respect of insurance against loss of potential
rental income and professional fees) in rebuilding repairing and re-instating
the demised premises in a good and substantial manner in accordance with all
necessary planning and other consents and the then existing bye-laws building
regulations and other regulations affecting the same of any competent authority
and in the event of such policy moneys received as aforesaid being insufficient
to cover the costs of re-instatement to make up the difference from the
Landlord's own moneys
(3) That the Tenant paying the rents hereby reserved and observing and
performing the covenants and agreements on the part of the Tenant hereinbefore
contained shall and may peaceably hold and enjoy the demised premises during the
term without any interruption by the Landlord or any person or persons lawfully
claiming under or in trust for it
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(4) To indemnify the Tenant against :-
(a) any costs claims or demands arising out of the maintenance and
adoption of the estate roads and the foul and surface water sewers
constructed thereunder or in any part of the Estate (other than the
demised premises)
(b) any costs claims or demands arising out of a breach
non-observance or non-performance of any of the covenants contained in
the Landlord's freehold title registered at the date hereof under title
number NT205919 (except for clause 1 (f)(ii) of the Fifth.Schedule of
the Conveyance dated the Thirty first day of March One thousand nine
hundred and eighty seven referred to in entry 4 of the Charges Register
of title number NT205919)
(5) Until adoption by the local or other competent authority to maintain the
estate roads and the foul and surface water sewers referred to in sub-clause (6)
(a) hereof in good repair and condition
(6) Not to obstruct or permit to be obstructed the service yard shown hatched
blue on Plan 1
(7) That it will (or there being a Tenant of the adjoining property being Unit
C2A will procure) that such Tenant will keep any part of the said adjoining
property known as Unit C2A not covered by buildings or structures
including all hardstanding and landscaped areas therein in a neat and tidy
condition and in a good and substantial state of repair to the reasonable
satisfaction of the Tenant's Surveyor Provided that the obligations of the
Landlord herein shall not extend to making good damage occasioned by any of
the insured risks unless the
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insurance (either alone or jointly with other adjoining premises) shall have
been rendered void or payment of the policy moneys shall have been refused or
withheld in whole or part in consequence of any act or default on the part of
the Tenant or of the servants agents or invitees of the Tenant
5. PROVIDED ALWAYS and IT IS HEREBY AGREED AND DECLARED and these presents are
made upon the express condition that :-
(1) if the said rents or any part thereof shall be unpaid for twenty one days
after any of the days hereinbefore appointed for payment thereof (whether in
the case of the rent first hereinbefore reserved the same shall have been
formally demanded or not) or if the Tenant while the demised premises or any
part thereof remain vested in it (being a Company) shall be wound up
compulsorily or voluntarily (except for a reconstruction or amalgamation) or
shall have a receiver appointed or shall have an Administrator appointed under
the Insolvency Act 1986 or (being an individual or if more than one individual
then any one of then) shall become bankrupt or shall have a receiving order
made or shall make an assignment for the benefit of creditors or make any
arrangements with creditors for the liquidation of debts by composition or
otherwise or shall suffer any distress or execution to be levied on the Tenant's
goods (which is not paid out within seven days) or if any covenant on the
Tenant's part therein contained shall not be materially performed or observed
then and in any of the said cases and thenceforth it shall be lawful for the
Landlord or any person or persons duly authorised by the Landlord in that
behalf at any time thereafter to re-enter the demised premises or any part
thereof in the name of the whole
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<PAGE> 39
and thereupon this demise shall absolutely determine without prejudice to any
right of action or remedy of either party in respect of any antecedent
breach of any of the covenants by any other party herein contained
(2) If the rents hereby reserved or made payable or any part thereof or the
payments referred to in Clause 4(32) hereof shall not be discharged on or within
twenty one days after the date when they become payable (whether in the case of
the rent hereinbefore reserved formally demanded or not) then in addition and
without prejudice to the right of re-entry in paragraph 5(1) of this clause or
to any other remedy herein contained or by law vested in the Landlord the
Landlord shall be entitled to charge interest on the unpaid rent from the date
on which it became due to the date on which the arrears are paid in full or
until the date on which re-entry is effected (as the case may be) at a rate
three per cent per annum above Lloyds Bank PLC base lending rate for the time
being in force (or above any comparable rate of a member of the London
Committee of Clearing Banks which may replace the same)
(3) Nothing in this clause shall be deemed to create or constitute a building
or letting scheme
(4) The Tenant shall not be or become entitled to any right of
light or air to the demised premises or to any other right easement or
quasi-easement whatsoever (other than those expressly hereby granted) which
would or might restrict or interfere with the use for building or any other
purposes of any land or buildings of the Landlord forming part of the Boulevard
Industrial Park
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<PAGE> 40
(5) In addition to any other prescribed mode of service any notices required to
be served hereunder shall be validly served if served in accordance with Section
196 of the Law of Property Act 1925 (as amended by the Recorded Delivery Service
Act 1962) or (in the case of the Tenant) if left addressed to it (or if there be
more than one then to any one of them) on the demised premises or sent to it or
any of them by recorded delivery post (in the case of a company) to its
registered office and in the case of an individual by recorded delivery post at
the last known address or addresses of it or any of them in England
(6) Other than expressly herein contained nothing herein contained or implied
shall give the Tenant the benefit of or the right to enforce or to have enforced
or to prevent the release or modification of any covenant agreement or condition
entered into by any purchaser from or by any lessee or tenant of the Landlord in
respect of any property not comprised in this Lease
(7) Nothing in this lease contained shall imply or warrant or be deemed to imply
or warrant that the demised premises may in accordance with the Planning Acts
be used for the purpose herein authorised and the Tenant hereby acknowledges
and admits that neither has the Landlord given or made at any time any
representation or warranty that any such use is or will be or will remain a
permitted use under the Planning Acts
(8) The Tenant's covenants herein contained shall remain in full force both at
law and in equity notwithstanding that the Landlord shall have waived or
released temporarily or permanently revocably or irrevocably or otherwise
howsoever a similar covenant or similar covenants affecting adjoining or
neighbouring premises belonging to the Landlord
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(9) Unless due to the negligence or default of the Landlord or its servants and
save to the extent that the Landlord may be liable under the provisions of the
Defective Premises Act 1972 the Landlord shall not be responsible to the Tenant
or the Tenant's licensees servants agents or other persons in the demised
premises or calling upon the Tenant for any accident happening or injury
suffered or damage to or loss of any chattel or property sustained on the
demised premises or on any property over which the Tenant exercises rights (10)
If the demised premises or any part thereof shall at any time during the term be
destroyed or damaged as the result of an insured risk so as to be unfit for
occupation or use the rent reserved by Clause 2 (1) hereof or a fair proportion
of the said rent according to the nature and extent of the damage sustained
shall be suspended from the date of the destruction or damage until the demised
premises shall again be rendered fit for occupation or use PROVIDED THAT
there shall be no cesser of rent if any or to such extent as any insurance
policy effected or procured to be effected by the Landlord shall have been
rendered void in whole or in part through or by reason of any act neglect or
default of the Tenant or of the servants agents or visitors of the Tenant
PROVIDED ALWAYS that any dispute as to the proportion (if any) of rent which
should be suspended or as to the period of such suspension which may arise under
this clause 5(10) shall be referred to the decision of some competent person
(acting as an expert and not as an arbitrator) to be agreed upon by the
Landlord and by the Tenant or (in the event of failure to so agree) to be
nominated by the President for the time being of the
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<PAGE> 42
Royal Institution of Chartered Surveyors on the application of either the
Landlord or the Tenant and the decision of such person (including as well any
determination as to the cost of such decision) shall be made in writing and when
so made shall be final and binding on the Landlord and the Tenant (11) If the
demised premises shall be so destroyed or damaged by an insured risk as to be
materially unfit for occupation and use and shall not have been reinstated or
rendered properly fit for occupation and use within two years from the date of
destruction or damage then either party shall be entitled by one month's notice
in writing to the other to terminate this Lease ("the determination Notice") and
upon the expiry of the determination Notice this Lease shall determine without
prejudice to any rights or remedies which may then have accrued to either party
against the other in respect of any breach of any of the covenants and
conditions contained in this Lease and in such circumstances the insurance
moneys shall be apportioned between and paid to the parties proportionately to
the value of their respective interests in the demised premises on the date
upon which the damage or destruction occurred and if the parties shall fail to
agree upon the apportionment within three months of the date upon which this
Lease is terminated by frustration or by notice as aforesaid such apportionment
shall be determined by arbitration under the terms of this Lease
(12) The wall separating the demised premises from the adjoining premises of
the Landlord known as Unit C2B Boulevard Industrial Estate aforesaid shall be
treated as a party wall and shall be maintained as such
42
<PAGE> 43
(13) The Tenant shall be entitled to determine this lease at the expiration of
the fifth or tenth years of the term by giving to the Landlord not less than
twelve months previous notice in writing and upon the date of determination of
this lease paying to the Landlord the rent payable (as reviewed in accordance
with the provisions of this lease) for the period of six months commencing at
the expiration of the fifth or tenth years (as appropriate) of the term together
with all other rents and payments due to the expiry of the fifth year if the
option to break is exercised at the end of the fifth year or to the expiry of
the tenth year if the option to break is exercised at the end of the tenth year
IN WITNESS whereof the parties hereto have caused their respective common seals
to be hereunto affixed to this deed the day and year first before written
THE FIRST SCHEDULE
Part I : The demised premises
ALL THAT the land for the purpose of identification shown edged red on
Plan 1 being part of the Estate together with the building from time to time
erected thereon and known as Unit Number C2A Boulevard Industrial Park Beeston
Nottingham and all the Landlord's fixtures and fittings therein and the
appurtenances thereof and all additions alterations and improvements thereto
or replacements thereof and the service media exclusively serving such land and
buildings
43
<PAGE> 44
Part 2 Rights and Easements granted to the Tenant
1. The free passage of water soil electricity gas telephone and other services
to and from the demised premises through the service media from time to time
serving the demised premises
2. The full right of lateral and subjacent support and protection for the
benefit of the demised premises as is now enjoyed from other parts of the Estate
3. A right of way at all times and for all purposes with or without vehicles
over and along the estate roads until adopted by the Highway Authority for the
district of which the Estate falls and forms part
4. The right to enter after reasonable notice in writing (except in the case of
emergency) upon such part of the Landlord's adjoining land as may be necessary
so to do with all necessary workmen Contractors servants plant machinery and
materials for the purposes of repairing renewing and inspecting the demised
premises but causing as little noise dust damage and inconvenience as possible
and forthwith making good in a reasonable manner all damage to the Landlord's
adjoining land and any buildings thereon thereby occasioned
5. Subject to the payments mentioned in Clause 4(32) hereof :-
(i) a right to use the fourteen car parking spaces shown edged yellow on
Plan I
(ii) a right to load and unload delivery vehicles immediately in front of the
roller shutter door indicated by the letter 'A' on Plan 1
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<PAGE> 45
(iii) a right of way at all times and for the purposes of securing access to
and egress from the demised premises and the aforementioned fourteen car
parking spaces over and along and across the service yard hatched blue
on Plan 1
(iv) a right to use the area shown edged green on Plan 1 for the storage of
rubbish bins
6. A right on foot in emergency only from the demised premises over and across
such part of the Estate as is edged purple on Plan 1 by the most safe and direct
and convenient route
Part 3: Exceptions and Reservations
1. The free passage of water soil electricity gas telephone and other services
over and through the service media now or within the perpetuity period running
through over or under the demised premises to and from any adjoining or
neighbouring land and buildings
2. Full right of lateral and subjacent support and protection for any adjoining
or neighbouring land and buildings of the Landlord
3. The full right with all necessary workmen materials and appliances to enter
(after reasonable notice except in case of emergency) upon the demised premises
at all reasonable times in the daytime in normal business hours (except in
emergency) for the purpose of rebuilding connecting inspecting repairing
cleansing maintaining altering replacing relaying or renewing such of the
Landlord's adjoining premises known as Unit C2A and any service media serving
the same where such works cannot be carried out without such entry the person or
persons exercising
45
<PAGE> 46
such right causing no unreasonable disturbance and making good to the reasonable
satisfaction of the Tenant all damage to the demised premises thereby occasioned
4. All such rights to enter on the demised premises and other rights powers
and privileges of whatsoever kind as are expressed to be conferred on or
excepted or reserved to the Landlord under the covenants on the part of the
Tenant and the provision in this Lease contained subject to any qualifications
attached to such covenants or provisions
5. The full right at any time or times hereafter to build rebuild or alter or
permit or suffer to be built or re-built or altered any buildings or erections
upon any adjoining or neighbouring land of the Landlord and to alter the Estate
layout including all service media (other than those forming part of the
demised premises or into which the same may connect) notwithstanding that the
access of light and air to the demised premises or any part thereof is thereby
reduced but not so as to interfere with or diminish any rights granted to the
Tenant
THE SECOND SCHEDULE
Rent Review
1. For the purposes of this Schedule the following expressions shall bear the
following respective meanings :-
(1) "The Review Date" means each of them the anniversaries of the
commencement of the term in the years 1999 and 2004
(2) "The Review Rent" means the greater of the annual rent firstly
payable hereunder during the period immediately prior to the Review Date in
question and such sum as shall represent the yearly rack rental value of the
demised premises on the open
46
<PAGE> 47
market on a lease without any fine or premium on the Review Date in question for
a term of years commencing on that Review Date equivalent to the term hereby
granted ascertained as between a willing landlord and a willing tenant with
vacant possession on the terms of this Lease (including this schedule but save
as to the amount of rent then payable) and upon the supposition (whether or not
it is a fact) that the Tenant has complied with its obligations under this Lease
and that the demised premises are in good and substantial repair and that if
the demised premises shall have been damaged or destroyed in whole or in part
the same shall have been re-instated and that no work has been carried out to
the demised premises which has diminished or could potentially diminish the rent
at which the demised premises could be let in the open market but disregarding
the following namely :-
(1) Any effect on rent of the fact that the Tenant has been in
occupation of the demised premises and
(2) Any goodwill attached to the demised premises by reason of the
carrying on thereat of the business of the Tenant or any sub-tenant and
(3) Any effect on rent of any improvement (being an improvement effected
or completed within the Twenty one years preceding the Review Date in
question) carried out during or before the term other than any
improvement effected at the expense of the Landlord or in pursuance of
any obligation to the Landlord whether under this Lease or otherwise
AND references to the Review Date and to the Review Rent shall where the context
admits be taken respectively to refer to a
47
<PAGE> 48
particular Review Date and to each particular Review Date as the case may be and
to the Review Rent at that Review Date and at each particular Review Date as the
case may be
2. The Landlord and the Tenant may seek to agree upon the Review Rent as at a
Review Date
3. (a) So long as any such agreement has not been reached (whether sought or
not) and either before or after (but not more than one month before) the Review
Date either the Landlord or the Tenant after written notice to the other of its
intention so to do may request the President for the time being of the Royal
Institution of Chartered Surveyors to appoint a competent person to act as an
expert and not as an arbitrator which procedure shall be repeated if the person
so appointed shall die or be incapable of acting to determine the Review Rent as
at that Review Date and the decision of such person shall be made in writing and
when so made shall be final and binding on the Landlord and the Tenant who shall
bear in such proportion the costs of such person so appointed as the said person
shall direct.
(b) The competent person so appointed shall afford the Landlord and the
Tenant an opportunity to make representations to him who shall consider and take
such representations into consideration
4. In respect of the period of time (hereinafter called "the said interval")
beginning with the Review Date and ending on such of the Rent Payment Days as
shall immediately follow the date on which the Landlord and the Tenant shall
agree the Review Rent or (failing agreement) the date on which the decision of
such expert
48
<PAGE> 49
as aforesaid shall have been made and communicated to the Landlord and the
Tenant the rent payable hereunder shall continue to be paid at the rate payable
immediately before the Review Date in question
5. At the expiration of the said interval there shall be due as outstanding rent
payable by the Tenant to the Landlord a sum of money equal to the amount (if
any) whereby the Review Rent so agreed or determined as aforesaid shall exceed
the yearly rent payable immediately before the Review Date in question but
duly apportioned on a daily basis in respect of the said interval together with
interest thereon for the said interval calculated at the rate per cent equal to
Lloyds Bank PLC base lending rate for the time being in force (or any rate which
may replace the same)
6. Forthwith after each Review Rent has been so agreed or determined the
Landlord and the Tenant shall execute in duplicate a Memorandum under hand (to
be prepared by the Landlord's Solicitors) recording the amount of the Review
Rent and the Review Date to which it relates
7. If at any Review Date the Landlord shall be obliged legally or otherwise to
comply with an enactment (which expression shall include any Act of Parliament
now or hereafter in force and any instrument regulation or order made thereunder
dealing with the control of rent and which shall restrict or modify the
Landlord's right to ascertain and/or thereafter to recover from the Tenant the
Review Rent in accordance with the terms of this Lease) then the Landlord shall
on each occasion that any such enactment is removed relaxed or modified be
entitled to introduce an
49
<PAGE> 50
intermediate Review Date which shall be the date of such removal relaxation or
modification and the Review Rent payable hereunder from an intermediate Review
Date to the next succeeding Review Date shall be determined in like manner as
the Review Rent from each Review Date as hereinbefore provided PROVIDED that
nothing herein shall be construed as varying any subsequent Review Dates except
any Review Dates where the Landlord shall be prevented from reviewing the rent
as contemplated herein in which event the provisions of this paragraph shall
apply
THE THIRD SCHEDULE
THE SURETY COVENANTS with and GUARANTEES to the Landlord such covenant only to
bind the Surety until the date of completion of an assignment permitted by the
Landlord under the terms of this Lease that the Tenant will at all times during
the continuance of the Lease pay the rents reserved by the Lease on the days and
in manner therein appointed for payment thereof and will duly perform and
observe the several covenants conditions and stipulations contained in the Lease
and on the part of the Tenant to be observed and performed and that in case of
default in such payment of rents or in the performance or observance of such
covenants conditions and stipulations the Surety will pay and make good to the
Landlord on demand all losses damages costs and expenses thereby arising or
incurred by the Landlord PROVIDED ALWAYS and it is hereby agreed that any
neglect or forbearance of the Landlord in endeavouring to obtain payment of the
said rents as and when the same become payable or to enforce performance or
observance of the said covenants conditions and stipulations on the part of the
Tenant in the Lease contained and any time which
50
<PAGE> 51
may be given to the Tenant by the Landlord or any compromise or arrangement made
by the Landlord with the Tenant shall not release or exonerate or in any way
affect the liability of the Surety under the guarantee on its part hereinbefore
contained THE SURETY COVENANTS with the Landlord that upon disclaimer of this
Lease by or on behalf of the Tenant under any statutory or other power or if the
Landlord shall secure the forfeiture of the Lease then if the Landlord shall
within three months after such disclaimer or forfeiture give notice in writing
to the Surety to that effect the Surety will within three months after the date
of such notice being given accept from the Landlord at the cost of the Surety a
Lease (hereinafter called "the New Lease") of the premises demised by this
Lease for a term equal in duration to the residue which if there had been no
disclaimer or forfeiture would have remained of the term granted by this Lease
at the same rents as shall be payable under this Lease immediately prior to such
disclaimer or forfeiture (with provision for the review of rent at the times
and in manner contained in this Lease) such New Lease to contain the like
Landlord's and Tenant's covenants respectively and the like provisos and
conditions in all respects (including the proviso for re entry but excluding
any covenant by guarantors) as are contained in this Lease such New Lease and
the rights and liabilities thereunder to take effect as from the date of such
disclaimer or forfeiture and in such case the Surety shall execute and deliver
to the Landlord a counterpart of the New Lease
51
<PAGE> 52
THE FOURTH SCHEDULE
(Landlord's fixtures and fittings)
1. Sanitary Ware
2. Hot Water System
3. Personnel and Fire Escape Doors
THE COMMON SEAL of WILSON BOWDEN )
PROPERTIES LIMITED was hereunto )
affixed to this deed in the )
presence of :- )
Director
Secretary
THE COMMON SEAL of CALBIOCHEM- )
NOVABIOCHEM (U.K.) LIMITED was )
hereunto affixed in the presence of :- )
Director /s/ Richard B. Slansky
[SEAL]
Secretary /s/ [SIGNATURE ILLEGIBLE]
<PAGE> 1
EXHIBIT 10(q)
[Letterhead of Calbiochem-Novabiochem International, Inc.]
Robert A. Weinberg, Ph.D. March 26, 1996
25 Copley Street
Brookline, MA 02146
Dear Dr. Weinberg:
This letter confirms the agreement reached between the
ONCOGENE RESEARCH PRODUCTS division of CALBIOCHEM-NOVABIOCHEM CORPORATION
(hereinafter designated CNC) and you with regard to CNC's retention of you as a
Scientific Advisor upon the terms and conditions set forth in this letter
agreement on such projects and in such fields, defined as, the identification,
development, manufacture and quality control of research products (the "Field")
as the ONCOGENE RESEARCH PRODUCTS division of CNC may request.
(1) Your consulting services will be under the direction and supervision of
Mr. Ben Matzilevich or his designee, and your responsibilities shall
include:
a. advising and informing of developments within the field;
b. assisting in solving research, development and other problems
within the field;
c. making suggestions and recommendations for new products and
for improvements of existing products related to the field;
d. advising and informing of potential new hire, scientific
personnel;
e. advising and informing concerning other scientific business
ventures;
f. presenting scientific lectures to third parties at CNC's
request.
You agree that you will be available for consultation by correspondence or
telephone calls and, when necessary, by meeting at mutually agreed times and
locations. It is understood that your principal employment is with MIT,
Whitehead Institute and that you will give preference to your principal
employment in the event unavoidable scheduling conflicts arise.
(2) The terms of this agreement shall be from March 1, 1996 to December 31,
1996 but may be extended for additional 12 month periods by mutual
agreement of CNC and you.
<PAGE> 2
(3) In consideration of your services hereunder, CNC agrees to pay you a
fee of $1,000 per month for consulting service provided. Consulting
fees shall be payable after the end of the month in which the services
to which they relate were performed.
(4) In addition to the compensation of your consulting services provided in
Paragraph 3, CNC will reimburse you for travel and living expenses
incurred by you at CNC's request, upon submission of a statement to CNC
documenting the expenses incurred.
(5) In providing your consulting services to CNC, you may acquire from CNC
confidential information with respect to business plans, strategies,
finances, customers, materials, compounds, formulation processes,
methods, devices, apparatus, preparations, results from ongoing
investigations by others, results from negotiations with governmental
agencies, and present and future plans of CNC. With respect to any
confidential information which you acquire from CNC or develop as a
result of providing consulting services to CNC, you agree that you will
not divulge such information to any third party without CNC's prior
written consent and that you will not use such information for any
purpose not specifically agreed upon with CNC during the terms of this
agreement and for a period of ten (10) years from the termination, for
any reason, of this agreement, unless or until:
a. the information shall be or become a matter of public knowledge
in a single written publication through no fault of yours; or
b. the information shall have in its entirety been known to you as
shown by written records prior to its receipt from CNC; or
c. the information shall be disclosed to you in its entirety by a
third party having a legal right to disclose the information.
(6) You agree that if, during the term of agreement and for a period of ten
(10) years from the termination, for any reason, of this agreement, you
wish to public scientific articles or papers concerning your own
research work in the field the content of which is based on
confidential information first received from CNC, you will submit such
proposed articles and papers to CNC for its review and possible action
to protect its patent rights at least three (3) months prior to your
proposed publication or disclosure date. CNC will review promptly your
proposed publications. If CNC can do so without compromising its
present or potential patent rights, CNC will waive all or a portion of
this three-month period. CNC further agrees to review
-2-
<PAGE> 3
portions of proposed publications as you make such portions available,
and to conduct its review for such portions in a manner comparable to
its review of complete proposed publications.
It is understood and agreed that, to the extent you have any invention rights
and subject to any rights of your present employer or the Government of the
United States or any third party, any invention or discovery, whether or not
patentable, which you conceive or make during the term of this agreement:
(i) which is directly related to any questions or problem with
respect to which CNC has utilized your services under this
agreement, or
(ii) which results from your knowledge of confidential information
received from CNC,
shall be and remain the sole and exclusive property of CNC. You further agree
that you will, upon request by CNC, and at their expense, promptly execute all
applications, assignments or other instruments which CNC shall deem necessary in
order to apply for and obtain Letters Patent in the United States and foreign
countries on any such invention or discovery and in order to assign and convey
to CNC the sole and exclusive right, title and interest in and to said invention
or discovery and any patent application or patent based thereon. It is
understood that CNC will bear the entire cost of preparing and filing any such
applications in the United States Patent Office and in the patent offices of
foreign countries.
(8) You agree that during the term of this agreement, you will not enter
into any private consulting agreement with a third party within the
Field. It is understood that this does not prevent you, as an employee
of MIT, Whitehead Institute from undertaking research work within the
field sponsored by not for profit research organizations.
(9) This agreement may be terminated at any time by either CNC or the
Consultant upon thirty (30) days' prior written notice. In addition to
the foregoing, CNC may, at its option, terminate this agreement at any
time without prior notice in the event the Consultant for any reason is
no longer affiliated with MIT, Whitehead Institute.
(10) You warrant that you are permitted to enter into this agreement and
that the terms of this agreement are not inconsistent with your present
employment or other contractual obligations.
(11) CNC hereby agrees to defend you and MIT, Whitehead Institute at its
sole expense, and to indemnify and hold you and MIT, Whitehead
Institute harmless from any claims or suits by a third party against
you or MIT, Whitehead Institute or any
-3-
<PAGE> 4
liabilities or judgments based hereon either arising directly from your
consulting with CNC or arising from any CNC products which result from
your consulting services.
(12) Your relationship with CNC shall be that of any independent contractor,
and you will not be an employee of CNC for any purpose whatsoever.
If the foregoing is acceptable, please indicate your acceptance by signing both
copies of this letter agreement and returning both signed copies to me. We will
then send a fully executed agreement.
Very truly yours,
CALBIOCHEM-NOVABIOCHEM
CORPORATION
By /s/ Stelios B. Papadopoulos
-----------------------------------------
Stelios B. Papadopoulos
Chairman and CEO
ACCEPTED AND AGREED TO
/s/ Robert A. Weinberg
-----------------------------------------
Robert A. Weinberg, Ph.D.
Date: 3/30/96
SS # ###-##-####
-4-
<PAGE> 1
EXHIBIT 10(r)
[Letterhead of Calbiochem-Novabiochem Corporation]
November 11, 1993
Mr. Doug Greenwold
11612 Split Rail Court
Rockville, MD 20852
Dear Doug,
Calbiochem-Novabiochem International, Inc. is extremely pleased to extend an
offer of employment to you as Vice President of Sales and Marketing Worldwide.
This position reports to the Chairman and CEO of CNI. Reporting to this position
are all pertinent departments which are necessary to conduct CNI's Marketing and
Sales activities on a global basis. Please refer to the attached Organization
Charts.
Your offer of employment entails the following:
A base salary of $115,000.00 per annum.
Stock options in the amount of 20,000 shares, exercisable over a five
year period from the official date of your employment. The amounts that
can be exercised each year from this starting date represent 4,000
shares per year. A complete stock option agreement will be forwarded to
your attention in the early part of 1994.
An annual bonus potential of 35% of base. The bonus achievement is
reviewed by CNI's Compensation Committee following our audit report
which occurs in the later part of February following the close of each
fiscal year. The earn out potential is premised on achievement of
Corporate goals and objectives which are outlined between us at the
start of each fiscal year.
All CN Corporation Medical, Dental and Life Insurance benefits start as
of your first day of employment, December 31, 1993. You will be
eligible to enroll in CN Corporation's 401-K program effective on
January 1, 1994. I have asked Lee Hart to provide you with the
appropriate enrollment forms. The customary 90 day period with respect
to the Medical, Dental and Life Insurance benefits is therefore waived.
With respect to your real estate and relocation expenses, CNI is
prepared to compensate you and your family for the following expenses:
<PAGE> 2
Doug Greenwold
November 11, 1993
Page two of three
The real estate commission costs associated with the sale of your
property in Maryland.
The normal real estate closing costs associated with the purchase of
your home in California.
The moving costs associated with your household goods from Maryland to
California.
A "gross up" of Federal and State withholding tax amounts for the
taxable income obligations created by CNI's reimbursement of relocation
and interim living expenses consisting of temporary housing and
automobile expenses. The computation of this "gross up" amount, shall
be net of normally allowable state and federal deductions. This "gross
up" amount will be reimbursed to you by CNI but will take the form of a
loan without interest which will be forgiven by the Company after two
years of employment from your start date. Should you elect to
voluntarily leave the CNI Organization prior to this two year period,
such loan would become due and payable within 30 days from the
termination date.
Finally, we will authorize two trips to California for your wife in
order to secure real estate. Since you expressed to me that your family
may not be in a position to relocate until early Summer 1994, we will
coordinate your trips back home in combination with business travel at
a reasonable frequency level.
CNI will authorize your continued participation in Mahler's Executive
Development program with associated travel and lodging expenses. The tuition
payment is to be provided by you.
Four weeks of annual vacation leave.
Interim living expenses through mid 1994 in the form of apartment rental and
automotive transportation. In the event of involuntary termination for other
than "cause", you will be eligible for salary and benefit continuation as
outlined below:
Within the first year of employment - 3 months
By the second year of employment - 4 months
By the third year of employment - 5 months
By the fourth year of employment and beyond - 6 months.
<PAGE> 3
Doug Greenwold
November 11, 1993
Page three of three
Your start date will be December 31, 1993 for compensation and benefit
purposes. You will make the following weeks available in order to jump
start your involvement with the Organization:
November 29 - December 3, 1993
December 13 - 17, 1993.
The first six days from these two weeks will be used to offset December 31, 1993
and the first week in 1994. The remaining four days will be compensated at a
linear salary rate and paid in early January 1994. Your report to work date will
be January 10, 1994.
Doug, I believe that the above properly represents the discussions that we have
had for the past few days. I truly look forward to working with you and have no
doubts that this opportunity will be challenging but yet rewarding. If
acceptable, please sign in the space provided. My best regards,
/s/ Stelios B. Papadopoulos
- ------------------------------------
S. B. Papadopoulos
Chairman and Chief Executive Officer
/s/ Douglas J. Greenwold
- ------------------------------------
Doug Greenwold
<PAGE> 1
EXHIBIT 10(s)
[Letterhead of Calbiochem-Novabiochem International, Inc.]
July 15, 1994
Dr. John T. Snow
Calbiochem-Novabiochem
International, Inc.
10394 Pacific Center Court
San Diego, California 92121
Re: Severance Pay
Dear Dr. Snow:
This is to inform you that Calbiochem-Novabiochem International, Inc. (the
"Company") will provide current officers of the Company with severance pay and
benefits under certain terms and conditions. Upon the expiration of the
Employment Agreement dated March 13, 1992 (the "Employment Agreement") between
you and the Company, the Company will no longer be obligated to make certain
payments to you. The Company will not seek to enter a new Employment Agreement
or extension of the expired one. However, the Company will provide six (6)
months severance pay and benefits if the Company decides to discharge you
without cause, as defined below. The terms of the severance pay are set out in
the following Sections I and II.
I.
At the expiration of your Employment Agreement, you, like the other officers and
employees, are "at will" employees. The Company may, at its election, subject to
the payment described below, terminate your employment as follows:
(a) Upon 30 days notice if you become physically or mentally
incapacitated, or are injured so that you are unable to perform the
services required, and such inability to perform continues for a period
in excess of 180 days and is continuing at the time of such notice; or
(b) For "Cause" upon notice of such termination to you. For
purposes of this Agreement, the Company shall have "Cause" to terminate
its obligations hereunder upon (i) the determination by the Board of
Directors of the Company (the "Board") that you have ceased to perform
your duties hereunder (other than as a result of his
<PAGE> 2
Dr. John T. Snow
July 15, 1994
Page two of four
incapacity due to physical or mental illness or injury), which failure
amounts to an intentional and extended neglect of your duties
hereunder, (ii) the Board's determination that you have engaged or are
about to engage in conduct materially injurious to the Company, (iii)
your conviction of a felony, or (iv) your participation in activities
prescribed by the employee policy manual; or
(c) Without Cause upon notice of such termination to you; or
(d) Upon your death.
II.
The severance benefits you will receive after March 13, 1995, in each
of the above circumstances, follow:
(a) If this Agreement is terminated pursuant to paragraph I(a)
above, you shall receive an amount equal to your Base Salary, reduced
by applicable payroll taxes and further reduced by the amount received
by you during such period under any Company-maintained disability
insurance policy or plan or under Social Security or similar laws. In
other words, the Company will pay the difference between any disability
benefits provided by the company's insurance or state insurance and
your then-Base Salary. Such payments shall be paid periodically on the
same schedule as the payment of salary, or in a lump sum within ten
(10) days following notice in writing to the Company.
(b) If this Agreement is terminated pursuant to paragraph I(b)
or I(d) above, you shall receive no salary continuation pay or
severance pay.
(c) If your employment is terminated pursuant to paragraph
I(c) above, you shall receive as severance pay an amount equal to one
hundred eighty (180) days salary at your then-Base Salary, regardless
of the amount of
<PAGE> 3
Dr. John T. Snow
July 15, 1994
Page three of four
advance notice of termination that may be provided pursuant to
paragraph I(c). Such severance pay (less applicable payroll taxes and
other charges) shall be paid periodically on the same schedule as
payment of salary and commencing at the date that you cease employment
(such period of payments is referred to below as the "Severance Pay
Period"), or in a lump sum within ten (10) days following notice in
writing to the Company.
During the Severance Pay Period, the Company also shall
maintain your group health insurance benefits as existing on date of
termination ("Benefits"). Except as otherwise set forth in your current
Employment Agreement with the Company and this agreement, the Company
will not be obligated to provide any other severance pay or any other
benefits of any kind other than the severance pay and Benefits
referenced above. In calculating the amount of severance pay, the Base
Salary will be presumed to be payable over 360 calendar days.
It is a condition to payment of any severance pay referenced
in this Section II(c) that you execute and deliver to the Company the
General Release attached to this amendment as "Attachment A" within
three (3) days of the notice of termination (of, if you are ADEA
eligible, such longer period as may then be required by the ADEA with
respect to the time period to consider executing and revoking a waiver
as described in the General Release). If you fail to execute and
deliver such General Release in a timely manner, the Company shall have
no obligation to provide any severance payments upon termination.
During the severance pay period, you shall be under no
obligation to mitigate the costs to the Company of the severance pay
payments, and, provided that you are not in breach of your job
performance obligations, no compensation that you may receive from
another employer during the Severance Pay
<PAGE> 4
Dr. John T. Snow
July 15, 1994
Page four of four
Period shall be offset against amounts owed to you.
Please let me know if you have any questions.
CALBIOCHEM-NOVABIOCHEM
INTERNATIONAL, INC.
BY: /s/ Stelios B. Papadopoulos
-----------------------------------------
Title: Chairman and Chief Executive Officer
The undersigned acknowledges that he has received, read and understands this
Severance Pay Notice.
EMPLOYEE:
/s/ John T. Snow
---------------------------------------------
Dr. John T. Snow
<PAGE> 5
ATTACHMENT TO LETTER REGARDING SEVERANCE PAY
GENERAL RELEASE
RECITALS
A. The parties to this General Release are
Calbiochem-Novabiochem International, Inc., a Delaware corporation (the
"Company") and Dr. John T. Snow ("Employee"). Company provided Employee with a
Notice Regarding Severance Pay, dated [DATE] (the "Notice").
B. Company has discharged Employee from his position(s) with
the Company and (if applicable), Calbiochem-Novabiochem Corporation, a
California corporation ("Calbiochem-Novabiochem Corporation"), and wishes to
provide severance pay and benefits to Employee.
C. Employee wishes to receive severance compensation and to
release the Company from any and all claims, demands and causes of action, he
may have against it, including, but not limited to, those claims related to the
employment relationship.
AGREEMENT
1. Effective on [DATE] , Employee is discharged from all
positions which he holds with the Company or Calbiochem-Novabiochem Corporation
and released from all obligations, except those set forth in paragraph 5, below.
2. In consideration of payment of the severance pay in the
aggregate amount of $ referenced in Section II(c) of the Notice, and for
other good and valuable consideration, the receipt of which is acknowledged by
Employee, Employee generally releases and forever discharges the Company and
Calbiochem-Novabiochem Corporation, their present and former agents, servants,
officers, directors, employees, shareholders, principals, predecessors, alter
egos, partners, parent corporations, subsidiaries, attorneys, insurers,
reinsurers, sureties, heirs, executors, administrators, trustees, successors and
assignees, from any and all claims, arising out of the acts or dealings between
the parties, including, without limitation, and all claims, demands, or causes
of action arising out of or related to Employee's employment relationship.
Employee additionally releases and waives any and all legal or administrative
claims arising under any express or implied contract, law, rule, regulation, or
ordinance, including, but not limited to, Title VII of the Civil Rights Act of
1964, the Americans With Disabilities Act, the California Fair Employment and
Housing Act, or the Age Discrimination in Employment Act of 1967, as amended or
related legislation ("ADEA").
<PAGE> 6
3. Employee acknowledges (a) that he was advised in writing to
consult with an attorney prior to executing this Release and (b) that he was
given a 21-day period in which to consider entering into the release of the ADEA
claims, if applicable. In addition, if he is ADEA eligible, Employee
acknowledges that he has been informed that he may revoke a signed waiver of the
ADEA claims for up to seven days after executing this Release.
4. Employee acknowledges that he has had the opportunity to
receive independent legal advice with respect to the advisability of executing
this Release and expressly waives any rights or benefits he otherwise might have
under California Civil Code Section 1542, which provides:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH
THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN
HIS/ITS FAVOR AT THE TIME OF EXECUTING THE RELEASE,
WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED
HIS/ITS SETTLEMENT WITH THE DEBTOR.
5. Employee agrees that he has a continuing obligation not to
use or disclose any information known or learned as a consequence of employment
with the Company, which is not generally known in the industry about the
Company, its processes, services, facilities and programs, including information
relating to research, development, customers, pricing inventions, and
manufacturing procurement, accounting, personnel, engineering, strategic
planning, marketing, and/or merchandising. This confidentiality provision shall
not be construed as a non-competition clause. The Employee acknowledges his
obligation to return all Company property within three working days from
execution of this Release.
6. Each party will execute all such further and additional
documents as shall be reasonable, convenient, necessary or desirable, to carry
out the provisions of this Release.
7. Each party expressly denies any liability of any kind to
the other, and nothing contained herein shall be construed as an admission by
either party of any liability of any kind to the other.
8. In the event suit is brought to enforce or interpret any
part of this Release, the prevailing party shall be entitled to recover as an
element of the costs of suit, and not as to damages, reasonable attorney fees
actually incurred. The "prevailing party" shall be the party who is entitled to
recover costs of suit, regardless whether the suit proceeds to compromise,
arbitration or final judgment. A party not entitled to recover costs shall not
recover attorney fees. No sum for
-2-
<PAGE> 7
attorney fees shall be counted in calculating the amount of award or a judgment
for purposes of determining whether a party is entitled to recover costs or
attorney fees.
9. This Release shall be deemed to have been executed and
delivered within the State of California, and the rights and obligations of the
parties shall be construed and enforced in accordance with and governed by the
laws of the State of California.
Dated:
---------------------------- ------------------------------------
Dr. John T. Snow
-3-
<PAGE> 1
EXHIBIT 10(t)
[Letterhead of Calbiochem-Novabiochem Corporation]
May 26, 1995
Mr. James G. Stewart
9552 Drumbeat Drive
Huntington Beach, CA 92646
Dear Jim,
I truly enjoyed our discussions the other day and would look forward to us
working together in building Calbiochem-Novabiochem International, Inc. (CNI)
into a substantial Life Science Company.
CNI is extremely pleased to extend an offer of employment to you as Chief
Financial Officer and V.P. of Administration. This position will report to the
Chairman and Chief Executive Officer of CNI. Reporting to this position are all
worldwide Financial Departments and functions, which includes several
subsidiaries and Foreign Sales Centers, as well as Management Information
Systems and Human Resources functions. As you know, we plan to expand the CNI
platform over time, thus continuing to expand the responsibilities of this role
as we move forward.
Your offer of employment entails the following:
A base salary of $145,000 per annum. CNI's payroll is established on a
semi-monthly basis.
Stock options in the amount of 20,000 shares or approximately 2% of the
common stock, exerciseable over a five year period from the official
date of your employment. A stock option agreement will accompany this
offer letter once agreed upon. The exercise price will be at $1.00 per
share, which represents an attractive entry price.
An annual bonus potential of 35% of base salary. The bonus achievement
is reviewed by CNI's Compensation Committee following our audit report,
which occurs by the end of February, following the close of our fiscal
year. The earn out potential is predicated on achievement of Corporate
and personal goals and objectives which are outlined between us at the
start of your employment and at the beginning of each subsequent fiscal
year.
All C-N Corporation Medical, Dental and Life Insurance Benefits will
start as of your first day of employment. You will be eligible to
enroll in CN Corporation's 401K program
<PAGE> 2
effective on the first day of your employment. The customary 90 day
period is therefore being waived on your behalf.
You will receive four weeks of annual vacation leave. CN Corporation
has instituted a CAL-TIME program which allows employees to manage
their total allotment of time. In your case the total comprises: 20
days of vacation, 5 days of sick leave and 11 days of fixed and
floating holidays, or 36 days of time available that you and your
family can manage at your discretion. This is a feature that has been
applauded by our employees.
With respect to your potential real estate relocation, CNI is prepared
to compensate you and your family for the following expenses:
All closing costs associated with the sale of your current
home.
The loan fees associated with the purchase of your new house.
The moving costs associated with the transportation of your
household goods from Huntington Beach to San Diego.
A "gross up" of Federal and State withholding tax amounts for the
taxable income obligations created by CNI's reimbursement of
relocation. The computation of this "gross up" amount shall be net of
normally allowable state and federal deductions. We will calculate the
gross up amounts over four years but pay the total amount due to you
over two years in two installments, so as to avoid a perpetual
computation over time.
In the event of involuntary termination for other than "cause," you
will be eligible for salary and benefit continuation as follows:
Within the first year of employment - 4 months
By the second year of employment - 5 months
By the third year and thereafter - 6 months
Jim, I believe that this is an excellent opportunity for you to apply the many
skills you already possess and to develop additional ones under the coaching of
an Operating type, who carries a few scars after rehabilitating seven businesses
in as
-2-
<PAGE> 3
many industries. In addition, our investor groups are solid citizens with
patience and good business sense.
Finally, our chemistries mix well and we will have fun doing it. If the above is
acceptable, please acknowledge with your signature.
My best regards,
/s/ Stelios B. Papadopoulos
- -----------------------------
S.B. Papadopoulos
Chairman and Chief Executive Officer
ACCEPTED:
/s/ James G. Stewart 6-1-95
- ------------------------- --------------------
James G. Stewart Date
-3-
<PAGE> 1
EXHIBIT 16
August 22, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Gentlemen:
We have read the statements made by CN Biosciences, Inc. (formerly
Calbiochem-Novabiochem International, Inc.) under the caption "Change in
Accountants" in the Registration Statement on Form S-1, which we understand will
be filed with the Commission. We agree with the statements concerning our Firm
in such Registration Statement.
Very truly yours,
Coopers & Lybrand L.L.P.
<PAGE> 1
EXHIBIT 23(B)
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected
Consolidated Financial Data" and "Experts" and to the use of our report dated
July 16, 1996 in this Amendment No. 1 to Registration Statement on Form S-1 and
related Prospectus of CN Biosciences, Inc. for the registration of 1,840,000
shares of its common stock.
Our audits also included Schedule II -- Valuation and Qualifying Accounts
of CN Biosciences, Inc. for the three years ended December 31, 1995 listed in
Item 16(b). This schedule is the responsibility of CN Biosciences, Inc.'s
management. Our responsibility is to express an opinion based on our audits. In
our opinion, the financial statement schedule referred to above, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
ERNST & YOUNG LLP
San Diego, California
August 22, 1996
<PAGE> 1
EXHIBIT 23(c)
CONSENT OF KPMG PEAT MARWICK LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated September 22, 1995 on Oncogene Science, Inc.
Research Products Business in this Amendment No. 1 to Registration Statement on
Form S-1 and related Prospectus of CN Biosciences, Inc. for the registration of
shares of its common stock.
KPMG PEAT MARWICK LLP
Jericho, New York
August 22, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED
DECEMBER 31, 1995 AND AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 JUN-30-1996
<EXCHANGE-RATE> 1 1
<CASH> 1,203 1,118
<SECURITIES> 0 0
<RECEIVABLES> 4,571 5,189
<ALLOWANCES> 472 428
<INVENTORY> 14,443 14,372
<CURRENT-ASSETS> 20,221 21,154
<PP&E> 7,496 8,434
<DEPRECIATION> (3,466) 4,596
<TOTAL-ASSETS> 31,197 32,228
<CURRENT-LIABILITIES> 4,797 5,868
<BONDS> 0 0
18,343 18,343
0 0
<COMMON> 11 11
<OTHER-SE> (555) (195)
<TOTAL-LIABILITY-AND-EQUITY> 31,197 32,228
<SALES> 26,966 16,565
<TOTAL-REVENUES> 26,966 16,565
<CGS> 13,185 7,602
<TOTAL-COSTS> 11,946 7,250
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 527 394
<INCOME-PRETAX> 1,308 1,319
<INCOME-TAX> 291 462
<INCOME-CONTINUING> 1,017 857
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,017 857
<EPS-PRIMARY> 0.30<F1> 0.25<F1>
<EPS-DILUTED> 0.30 0.25<F1>
<FN>
<F1>EARNINGS PER SHARE IS CALCULATED BASED UPON PRO FORMA SHARES OUTSTANDING, SEE
NOTE 1 TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
