<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 4, 1996
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CERUS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
CALIFORNIA (PRIOR TO
REINCORPORATION)
DELAWARE (AFTER REINCORPORATION) 2836 68-0262011
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
2525 STANWELL DRIVE, SUITE 300
CONCORD, CA 94520
(510) 603-9071
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
STEPHEN T. ISAACS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CERUS CORPORATION
2525 STANWELL DRIVE, SUITE 300
CONCORD, CA 94520
(510) 603-9071
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
HOWARD G. ERVIN DAVID J. SEGRE
CYDNEY S. POSNER WILSON, SONSINI, GOODRICH & ROSATI,
COOLEY GODWARD CASTRO HUDDLESON & TATUM PROFESSIONAL CORPORATION
ONE MARITIME PLAZA, 20TH FLOOR 650 PAGE MILL ROAD
SAN FRANCISCO, CA 94111 PALO ALTO, CA 94304
(415) 693-2000 (415) 493-9300
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement becomes effective.
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please 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, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement number for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED PRICE(2) REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value............................. $34,500,000 $11,897
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Includes shares of Common Stock issuable upon exercise of the Underwriters'
over-allotment option.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457 under the Securities Act of
1933.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
CERUS CORPORATION
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(b) OF REGULATION S-K
SHOWING LOCATION IN PROSPECTUS OF INFORMATION
REQUIRED BY ITEMS OF FORM S-1
<TABLE>
<CAPTION>
ITEM NUMBER AND HEADING IN
FORM S-1 REGISTRATION STATEMENT LOCATION IN PROSPECTUS
------------------------------------------ ---------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus.... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages
of Prospectus............................. Inside Front Cover Page and Outside Back
Cover Page
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges........ Prospectus Summary; Risk Factors
4. Use of Proceeds........................... Use of Proceeds
5. Determination of Offering Price........... Outside Front Cover Page of Prospectus;
Underwriters
6. Dilution.................................. Dilution
7. Selling Security Holders.................. Not Applicable
8. Plan of Distribution...................... Outside Front Cover Page and Inside Front
Cover Page; Underwriters
9. Description of Securities to be
Registered................................ Prospectus Summary; Capitalization;
Description of Capital Stock
10. Interests of Named Experts and Counsel.... Experts
11. Information with Respect to the
Registrant................................ Outside Front and Inside Front Cover Pages;
Prospectus Summary; Risk Factors; Dividend
Policy; Capitalization; Selected Financial
Data; Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Business; Management; Certain
Transactions; Principal Stockholders;
Description of Capital Stock; Shares Eligible
for Future Sale; Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................... Not Applicable
</TABLE>
<PAGE> 3
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.
PROSPECTUS (Subject to Completion)
Issued September 4, 1996
Shares
Cerus Corporation
COMMON STOCK
------------------------
ALL OF THE SHARES OF COMMON STOCK OFFERED HEREBY ARE BEING SOLD BY CERUS
CORPORATION (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 PER SHARE WILL BE BETWEEN $ AND
$ . SEE "UNDERWRITERS" FOR A DISCUSSION OF THE FACTORS
CONSIDERED IN DETERMINING THE INITIAL PUBLIC OFFERING PRICE.
APPLICATION HAS BEEN MADE FOR QUOTATION OF THE COMMON STOCK ON THE
NASDAQ NATIONAL MARKET UNDER THE SYMBOL "CERS."
------------------------
CONTEMPORANEOUSLY WITH THIS OFFERING, SUBJECT TO CERTAIN CONDITIONS, BAXTER
HEALTHCARE CORPORATION ("BAXTER") HAS AGREED TO PURCHASE SHARES OF COMMON
STOCK DIRECTLY FROM THE COMPANY IN A PRIVATE PLACEMENT AT A PRICE PER
SHARE EQUAL TO THE PRICE TO PUBLIC LESS UNDERWRITING
DISCOUNTS AND COMMISSIONS FOR AN AGGREGATE PURCHASE PRICE OF $6.9
MILLION (ASSUMING A TOTAL PRICE TO PUBLIC OF $30 MILLION) (THE
"BAXTER PRIVATE PLACEMENT") PURSUANT TO AN EXISTING AGREEMENT WITH
THE COMPANY. SEE "BUSINESS -- ALLIANCE WITH BAXTER."
------------------------
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" COMMENCING 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.
------------------------
PRICE $ A SHARE
------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
--------------------- --------------------- ---------------------
<S> <C> <C> <C>
Per Share........................... $ $ $
Total(3)............................ $ $ $
</TABLE>
- ------------
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
(2) Before deducting expenses payable by the Company estimated at $ .
(3) The Company has granted to the Underwriters an option, exercisable
within 30 days of the date hereof, to purchase up to an aggregate of
additional Shares at the price to public less underwriting
discounts and commissions for the purpose of covering over-allotments,
if any. If the Underwriters exercise such option in full, the total
price to public, underwriting discounts and commissions and proceeds to
Company will be $ , $ and $ , respectively. See
"Underwriters."
------------------------
The Shares are offered, subject to prior sale, when, as and if accepted by
the Underwriters named herein and subject to approval of certain legal matters
by Wilson, Sonsini, Goodrich & Rosati, Professional Corporation, counsel for the
Underwriters. It is expected that the delivery of the Shares will be made on or
about , 1996, at the office of Morgan Stanley & Co. Incorporated,
New York, N.Y., against payment therefor in immediately available funds.
------------------------
MORGAN STANLEY & CO. ALEX. BROWN & SONS
Incorporated Incorporated
, 1996
<PAGE> 4
[INSERT PICTURE]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE> 5
NO PERSON IS AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY THE COMMON STOCK OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH
IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH OFFER OR SOLICITATION TO SUCH
PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL UNDER ANY CIRCUMSTANCES IMPLY THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
UNTIL , 1996 (25 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING),
ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT 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.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................................................................... 3
Risk Factors.......................................................................... 6
Use Of Proceeds....................................................................... 15
Dividend Policy....................................................................... 15
Capitalization........................................................................ 16
Dilution.............................................................................. 17
Selected Financial Data............................................................... 18
Management's Discussion And Analysis Of Financial Condition And Results Of
Operations.......................................................................... 19
Business.............................................................................. 23
Management............................................................................ 44
Certain Transactions.................................................................. 49
Principal Stockholders................................................................ 51
Description Of Capital Stock.......................................................... 53
Shares Eligible For Future Sale....................................................... 54
Underwriters.......................................................................... 56
Legal Matters......................................................................... 57
Experts............................................................................... 57
Additional Information................................................................ 58
Index To Financial Statements......................................................... F-1
</TABLE>
------------------------
The Company intends to furnish its stockholders with annual reports
containing audited financial statements examined by an independent public
accounting firm and quarterly reports for the first three quarters of each year
containing interim unaudited financial information.
------------------------
The Company's logo, Cerus Corporation(TM) and Cerus(TM) are trademarks of
the Company. Trade names and trademarks of other companies appearing in this
Prospectus are the property of their respective holders.
2
<PAGE> 6
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the financial statements and notes thereto appearing elsewhere
in this Prospectus. Except as set forth in the financial statements or as
otherwise indicated herein, information in this Prospectus gives effect to (i)
the anticipated reincorporation of the Company from California to Delaware to be
effected prior to the effective date of this offering, (ii) the for
split of the outstanding Common Stock to be effected prior to the
effective date of this offering, (iii) the conversion of each outstanding share
of Preferred Stock into shares of Common Stock, which will occur
automatically upon the closing of this offering, and assumes the exercise of
outstanding warrants to purchase 33,315 shares of capital stock (the "Warrant
Exercise"), which warrants expire upon the closing of this offering, and assumes
that the Underwriters' over-allotment option is not exercised. See "Description
of Capital Stock" and "Underwriters." This Prospectus contains forward-looking
statements that involve risks and uncertainties. The Company's actual results
could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including those set forth under "Risk
Factors" and elsewhere in this Prospectus.
THE COMPANY
Cerus Corporation ("Cerus" or the "Company") is developing systems designed
to improve the safety of blood transfusions by inactivating infectious pathogens
in blood components (platelets, fresh frozen plasma ("FFP") and red blood cells)
used for transfusion and inhibiting the leukocyte (white blood cell) activity
that is responsible for certain adverse immune and other transfusion-related
reactions. Preclinical studies conducted by the Company have indicated the
ability of these systems to inactivate a broad array of viral and bacterial
pathogens that may be transmitted in blood component transfusions and to inhibit
leukocyte activity. The Company believes that, as a result of the mechanism of
action of its proprietary technology, its systems also have the potential to
inactivate many new pathogens before they are identified and before tests have
been developed to detect their presence in the blood supply. Because the
Company's systems are being designed to inactivate rather than merely test for
pathogens, the Company's systems also have the potential to reduce the risk of
transmission of pathogens that would remain undetected by testing.
Despite recent improvements in testing and processing of blood, patients
receiving transfusions of blood components face a number of significant risks
from blood contaminants, as well as adverse immune and other transfusion-related
reactions induced by leukocytes. Viruses, such as hepatitis B (HBV), hepatitis C
(HCV), human immunodeficiency virus (HIV), cytomegalovirus (CMV) and human
T-cell lymphotropic virus (HTLV), can present life-threatening risks. In
addition, bacteria, the most common agents of transfusion-transmitted disease,
can cause complications such as sepsis, which can result in serious illness or
death. Although donor screening and diagnostic testing of donated blood have
been successful in reducing the incidence of transmission of many pathogens,
diagnostic testing has a number of limitations, such as the inability to detect
pathogens prior to the generation of antibodies, ineffectiveness in detecting
genetic variants of viruses, and the risk of clerical error. In addition,
emerging or unidentified pathogens for which no tests exist also represent a
threat to the blood supply. The continuing risk of transmission of serious
diseases through transfusion of contaminated blood components from both known
and unknown pathogens, together with the limitations of current approaches to
providing a safe blood supply, have created the need for a new approach to
blood-borne pathogen inactivation that is safe, easy to implement and
cost-effective.
The Company is designing its pathogen inactivation systems to provide
therapeutically functional platelets, FFP and red cells following the
inactivation treatment process. Pathogen inactivation systems being developed by
the Company employ proprietary small molecule compounds that act by preventing
the replication of nucleic acid (DNA or RNA); platelets, FFP and red blood cells
do not contain nuclear DNA or RNA. When the inactivation compounds are
introduced into the blood component for treatment, they cross bacterial cell
walls or viral membranes, then move into the interior of the nucleic acid
structure. When subsequently activated by an energy source, such as light, these
compounds bind to the nucleic acid of the viral or bacterial pathogen,
preventing its replication. A virus, bacteria or other pathogenic cell must
replicate in order to cause infection. The Company's compounds react in a
similar manner with the nucleic acid in leukocytes, thereby inhibiting the
leukocyte activity that is responsible for certain adverse immune and other
transfusion-related reactions.
3
<PAGE> 7
The Company is initially focusing its product development efforts on its
platelet pathogen inactivation system. Platelet transfusions are used to prevent
or control bleeding in platelet-deficient patients, such as those undergoing
cancer chemotherapy or bone marrow transplant. The Company estimates the annual
production of platelets in 1995 to be 1.8 million transfusion units in North
America, 1.2 million transfusion units in Western Europe and 800,000 transfusion
units in Japan. The Company's platelet pathogen inactivation system applies a
technology to prevent replication of nucleic acid that combines light and the
Company's proprietary inactivation compound, S-59, which is a synthetic small
molecule from a class of compounds known as psoralens. The Company completed its
Phase 1a clinical trial in March 1996 and is currently conducting a Phase 1b
clinical trial to assess the safety and tolerability of treated platelets in
healthy subjects.
The Company is also developing pathogen inactivation systems for use with
FFP, which is used to control bleeding, and red blood cells, which are
frequently administered to patients with anemia, trauma, surgical bleeding or
genetic disorders. The Company estimates the annual production of FFP and red
blood cells in 1995 to be 3.4 million and 13.7 million transfusion units,
respectively, in North America, 4.8 million and 14.3 million transfusion units,
respectively, in Western Europe and 2.0 million and 3.0 million transfusion
units, respectively, in Japan. The Company's FFP pathogen inactivation system is
being designed to employ the S-59 compound and other technology similar to that
used in the platelet system. The Company intends to submit an investigational
new drug application to the U.S. Food and Drug Administration to commence Phase
1 clinical trials for its FFP pathogen inactivation system in early 1997. The
red cell pathogen inactivation system being designed by the Company is based on
the Company's proprietary S-303 compound, which can bind to nucleic acid in a
manner similar to that of the compound used in the Company's other systems, but
without the need for the introduction of light.
The Company has entered into two development and commercialization
agreements with Baxter to develop, manufacture and market pathogen inactivation
systems for platelets, FFP and red blood cells. The agreements provide for
Baxter and the Company to share development expenses. Through July 31, 1996,
Baxter has purchased $7.0 million of equity in the Company and paid the Company
up-front license fees and milestone and development payments totaling $13.7
million under these agreements. These agreements provide for Baxter's exclusive
right and responsibility to market the systems worldwide and for the Company to
receive a share of the gross profits from the sale of the systems.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered........................... shares
Common Stock to be outstanding after the
offering..................................... shares(1)
Use of proceeds................................ For research and development activities,
including continuing clinical trials,
general and administrative support, capital
expenditures, working capital and general
corporate purposes. See "Use of Proceeds."
Proposed Nasdaq National Market symbol......... CERS
</TABLE>
- ---------------
(1) Based upon the number of shares outstanding as of July 31, 1996. Excludes,
as of July 31, 1996, (i) 284,891 shares of Common Stock subject to
outstanding options under the Company's 1996 Equity Incentive Plan and
381,864 shares reserved for future issuance thereunder, (ii) 150,000 shares
of Common Stock reserved for future issuance under the Company's Employee
Stock Purchase Plan and (iii) outstanding warrants to purchase 35,478
shares of Preferred Stock, which will convert into warrants to purchase
Common Stock upon the closing of this offering. See "Management -- Equity
Incentive Plans" and Notes 4 and 7 of Notes to Financial Statements.
4
<PAGE> 8
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
----------------------------- -----------------------
1993 1994 1995 1995 1996
------- ------- --------- ------- -------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue............................................... $ 230 $ 4,796 $ 6,799 $ 2,735 $ 2,606
Operating expenses
Research and development............................ 2,485 5,680 8,125 4,963 5,982
General and administrative.......................... 1,210 1,194 1,517 627 1,009
------- ------- ------- ------- -------
Loss from operations.................................. (3,465) (2,078) (2,843) (2,855) (4,385)
Other income (expense), net........................... (50) 278 483 234 227
------- ------- ------- ------- -------
Net loss.............................................. (3,515) (1,800) (2,360) (2,621) (4,158)
======= ======= ======= ========= =======
Pro forma net loss per share(1)....................... $(0.55) $(0.93)
Shares used in computing pro forma net loss per
share(1)............................................ 4,314,045 4,491,454
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996
------------------------------------------
ACTUAL PRO FORMA(2) AS ADJUSTED(3)
-------- ------------ --------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents...................................... $ 8,761 $ 11,761
Working capital................................................ 6,479 9,479
Total assets................................................... 10,281 13,281
Accumulated deficit............................................ (14,156) (14,156)
Stockholders' equity........................................... 7,749 10,948
</TABLE>
- ---------------
(1) See Note 1 of Notes to Financial Statements for a description of the method
used in computing the pro forma net loss per share.
(2) Gives effect to (i) the sale on July 1, 1996 of 190,476 shares of Series E
Preferred Stock at a purchase price of $15.75 per share to Baxter (the "July
Baxter Purchase"), (ii) the Warrant Exercise and (iii) the conversion of all
outstanding shares of Preferred Stock into shares of Common Stock upon the
closing of this offering.
(3) As adjusted to reflect (i) the sale of shares of Common Stock
offered by the Company hereby at an assumed initial public offering price of
$ per share and receipt of the estimated net proceeds therefrom and
(ii) the Baxter Private Placement. See "Use of Proceeds."
The Company was incorporated under the laws of the State of California in
September 1991 as Steritech, Inc. In 1996, the Company's corporate
name was changed to Cerus Corporation. The Company intends to reincorporate in
Delaware prior to the closing of this offering. Unless the context otherwise
requires, references in this Prospectus to the "Company" or "Cerus" refer to
Cerus Corporation, a Delaware corporation, and its predecessor in California.
The Company's principal executive offices are located at 2525 Stanwell Drive,
Suite 300, Concord, California 94520, and its telephone number is (510)
603-9071.
5
<PAGE> 9
RISK FACTORS
This Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth in the following risk factors and elsewhere in this
Prospectus. In evaluating the Company's business, prospective investors should
carefully consider the following factors in addition to the other information
presented in this Prospectus.
Early Stage of Product Development. The Company's pathogen inactivation
systems are in the research and development stage and will require additional
preclinical and clinical testing prior to submission of any regulatory
application for commercial use. The Company currently does not expect to file a
product approval application with the United States Food and Drug Administration
(the "FDA") or corresponding regulatory filings in Europe for its platelet
pathogen inactivation system or for any of its other planned products prior to
1998. The estimated dates related to the Company's regulatory submissions set
forth herein and elsewhere in this Prospectus are forward-looking statements
that involve risks and uncertainties. There can be no assurance that these
regulatory submissions will not be delayed as a result of certain factors set
forth in this "Risk Factors" section and elsewhere in this Prospectus. The
Company's products are subject to the risks of failure inherent in the
development of pharmaceutical, biological and medical device products and
products based on new technologies. These risks include the possibility that the
Company's approach to pathogen inactivation will not be safe or effective, that
the Company's products will not be easy to use or cost-effective, that third
parties will develop and market superior or equivalent products, that any or all
of the Company's products will fail to receive any necessary regulatory
approvals, that such products will be difficult or uneconomical to manufacture
on a commercial scale, that proprietary rights of third parties will preclude
the Company from marketing such products and that the Company's products will
not achieve market acceptance. As a result of these risks, there can be no
assurance that the Company's research and development activities will result in
any commercially viable products. See "Business -- Products Under Development"
and "-- Government Regulation."
Uncertainty Associated with Preclinical and Clinical Testing. The
regulatory process includes preclinical and clinical testing of each product to
establish its safety and efficacy, and may include post-marketing studies
requiring expenditure of substantial resources. The results from preclinical
studies and early clinical trials conducted by the Company may not be predictive
of results obtained in later clinical trials, and there can be no assurance that
clinical trials conducted by the Company will demonstrate sufficient safety and
efficacy to obtain the requisite approvals or that marketable products will
result. The rate of completion of the Company's clinical trials may be delayed
by many factors, including slower than anticipated patient enrollment or any
other adverse event occurring during the clinical trials. Completion of testing,
studies and trials may take several years, and the length of time varies
substantially with the type, complexity, novelty and intended use of the
product. Data obtained from preclinical and clinical activities are susceptible
to varying interpretations, which could delay, limit or prevent regulatory
approval. In addition, delays or rejections may be encountered based upon many
factors, including changes in regulatory policy during the period of product
development. The Company's products require significant additional research and
development efforts. No assurance can be given that any of the Company's
development programs will be successfully completed, that any further
investigational new drug applications ("IND") will become effective or that
additional clinical trials will be allowed by the FDA or other regulatory
authorities, that clinical trials will commence as planned, that required United
States or foreign regulatory approvals will be obtained on a timely basis, if at
all, or that any products for which approval is obtained will be commercially
successful. As a result of FDA reviews or complications that may arise in any
phase of the clinical trial program, there can be no assurance that the proposed
schedules for IND and clinical protocol submissions to the FDA, initiations of
studies and completions of clinical trials can be maintained. Any delays in the
Company's clinical trials or failures to obtain required regulatory approvals
would have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business -- Products Under
Development" and "-- Government Regulation."
No Assurance of Market Acceptance; Concentrated Market. The Company
believes that market acceptance of the Company's pathogen inactivation systems
will depend, in part, on the Company's ability to
6
<PAGE> 10
provide acceptable evidence of the safety, efficacy and cost-effectiveness of
its products, as well as the ability of blood centers to obtain FDA approval and
adequate reimbursement for such products. The Company believes that market
acceptance of its pathogen inactivation systems also will depend upon the extent
to which physicians, patients and health care payors perceive that the benefits
of using blood components treated with the Company's systems justify the
additional costs and processing requirements in a blood supply that has become
safer in recent years. While the Company believes that its pathogen inactivation
systems are able to inactivate pathogens up to concentrations that the Company
believes are present in contaminated blood components when the blood is donated,
there can be no assurance that contamination will never exceed such
concentrations. The Company does not expect that its planned products will be
able to inactivate all known and unknown infectious pathogens, and there can be
no assurance that the inability to inactivate certain pathogens will not affect
the market acceptance of its products. There can be no assurance that the
Company's pathogen inactivation systems will gain any significant degree of
market acceptance among blood centers, physicians, patients and health care
payors, even if clinical trials demonstrate safety and efficacy and necessary
regulatory approvals and health care reimbursement approvals are obtained.
The Company's target customers are the limited number of national and
regional blood centers, which collect, store and distribute blood and blood
components. In the United States, the American Red Cross collects and
distributes approximately 45% of the nation's supply of blood and blood
components. Other major United States blood centers include the New York Blood
Center and United Blood Services, each of which distributes approximately 6% of
the nation's supply of blood and blood components. In Western Europe and Japan,
various national blood transfusion services or Red Cross organizations collect,
store and distribute virtually all of their respective nations' blood and blood
components supply. As a result, the failure to penetrate even a small number of
these customers could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business -- Marketing, Sales
and Distribution."
Reliance on Baxter. Under the terms of the Company's agreements with
Baxter, the Company relies on Baxter for significant funding, product
development support, the manufacture and supply of certain system components and
the marketing of its planned products. See "Business -- Alliance with Baxter."
The Baxter agreements provide for joint development by Baxter and the
Company of pathogen inactivation systems that include the Company's proprietary
compounds and processes and Baxter's blood collection, processing and storage
technology, as well as the instrument technology of each party. The development
programs under the Baxter agreements may be terminated by Baxter on 90 days'
notice. If the Company's agreements with Baxter were terminated or if Baxter's
product development efforts were unsuccessful, the Company may need to obtain
additional funding from other sources and would be required to devote additional
resources to the development of its products, delaying the development of its
products. Any such delay would have a material adverse effect on the Company's
business, financial condition and results of operations. There can be no
assurance that disputes will not arise in the future with respect to the Baxter
agreements. Possible disagreements between Baxter and the Company could lead to
delays in the research, development or commercialization of certain planned
products or could require or result in time-consuming and expensive litigation
or arbitration and would have a material adverse effect on the Company's
business, financial condition and results of operations.
Under the terms of the Baxter agreements, Baxter is responsible for
manufacturing the disposable units, such as blood storage containers and related
tubing, as well as any devices associated with the inactivation processes. If
the Company's agreements with Baxter were terminated or if Baxter otherwise
failed to deliver an adequate supply of components, the Company would be
required to identify other third-party component manufacturers. There can be no
assurance that the Company would be able to identify such manufacturers on a
timely basis or enter into contracts with such manufacturers on reasonable
terms, if at all. Any delay in the availability of devices or disposables from
Baxter could affect the timely submission of products for regulatory approval or
the market introduction and subsequent sales of such products and would have a
material adverse effect on the Company's business, financial condition and
results of operations. Moreover, the inclusion of components manufactured by
others could require the Company to seek new approvals from government
regulatory authorities, which could result in delays in product delivery. There
can be no assurance that the Company would receive any such required regulatory
approvals. Any such delay would have a material
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adverse effect on the Company's business, financial condition and results of
operations. See "Business -- Manufacturing and Supply."
If appropriate regulatory approvals are received, Baxter will be
responsible for the marketing, sales and distribution of the Company's pathogen
inactivation systems for blood components worldwide. The Company does not
currently maintain, nor does it intend to develop, its own marketing and sales
organization but instead expects to rely on Baxter to market and sell its
pathogen inactivation systems. There can be no assurance that the Company will
be able to maintain its relationship with Baxter or that such marketing
arrangements will result in payments to the Company. Revenues to be received by
the Company through any marketing and sales arrangement with Baxter will be
dependent on Baxter's efforts, and there can be no assurance that the Company
will benefit from Baxter's present or future market presence or that such
efforts will otherwise be successful. If the Company's agreements with Baxter
were terminated or if Baxter's marketing efforts were unsuccessful, the
Company's business, financial condition and results of operations would be
materially adversely affected. See "Business -- Marketing, Sales and
Distribution."
There can be no assurance that Baxter will not elect to pursue alternative
technologies or product strategies, or that its corporate interests and plans
will remain consistent with those of the Company. Under the terms of the
agreement covering the development of pathogen inactivation systems for FFP and
red blood cells, Baxter has reserved the right to market competing products not
within the field of psoralen or Anchor-Linker-Effector ("ALE") inactivation. The
Company is aware that Baxter is developing an alternative pathogen inactivation
system for FFP based on a compound known as methylene blue. Other companies are
currently marketing methylene blue-based pathogen inactivation systems for FFP
in Europe. The development and commercialization of the Company's pathogen
inactivation systems could be materially adversely affected by competition with
Baxter or by Baxter's election to pursue alternative strategies or technologies
in lieu of those of the Company. See "Business -- Competition."
Government Regulation. All of the Company's products under development and
anticipated future products are or will be subject to extensive and rigorous
regulation by the federal government, principally the FDA, and state, local and
foreign governments. Such regulations govern, among other things, the
development, testing, manufacturing, labeling, storage, pre-market clearance or
approval, advertising, promotion, sale and distribution of such products. The
process of obtaining regulatory approvals or clearances is generally lengthy,
expensive and uncertain. To date, none of the Company's products has been
approved for sale in the United States or any foreign market. Satisfaction of
pre-market approval or clearance or other regulatory requirements of the FDA, or
similar requirements of foreign regulatory agencies, typically takes several
years, and may take longer, depending upon the type, complexity, novelty and
intended purpose of the product. There can be no assurance that the FDA or any
other regulatory agency will grant approval or clearance for any product being
developed by the Company on a timely basis, if at all. The Company believes
that, in deciding whether a pathogen inactivation system is safe and effective,
the FDA is likely to take into account whether it adversely affects the
therapeutic efficacy of blood components as compared to the therapeutic efficacy
of blood components not treated with the system, and that the FDA will weigh the
safety and other risks against the benefits of using the system in a blood
supply that has become safer in recent years.
The Company's clinical development plan assumes that only data from in
vitro studies, not from human clinical studies, will be required to demonstrate
the system's efficacy in inactivating pathogens and that human clinical studies
will instead focus on demonstrating therapeutic efficacy, safety and
tolerability of blood components treated with the system. Although the Company
has had discussions with the FDA concerning the Company's proposed clinical
plan, there can be no assurance that these means of demonstrating safety and
efficacy will ultimately be acceptable to the FDA or that the FDA will continue
to believe that this clinical protocol is appropriate. Moreover, even if the FDA
considers these means of demonstrating safety and efficacy to be acceptable in
principle, there can be no assurance that the FDA will find the data submitted
sufficient to demonstrate safety and efficacy. In particular, there can be no
assurance that the FDA will consider in vitro data an appropriate means of
demonstrating efficacy of pathogen inactivation, and any requirement to provide
other than in vitro data would adversely affect the timing and could affect the
success of the Company's efforts to obtain regulatory approval.
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If regulatory approval of a product is granted, such approval may impose
limitations on the indicated uses for which a product may be marketed. For
example, the Company does not believe that it will be able to make any labeling
claims that the Company's pathogen inactivation systems may inactivate any
pathogens for which it does not have in vitro data supporting such claims.
Further, even if regulatory approval is obtained, later discovery of previously
unknown problems with a product may result in restrictions on the product,
including withdrawal of the product from the market. The policies of the FDA and
foreign regulatory bodies may change, and additional regulations may be
promulgated, which could prevent or delay regulatory approval of the Company's
planned products. Delay in obtaining or failure to obtain regulatory approvals
could have a material adverse effect on the Company's business, financial
condition and results of operations. Among the conditions for FDA approval of a
pharmaceutical, biologic or device is the requirement that the manufacturer's
quality control and manufacturing procedures conform to current Good
Manufacturing Practices ("cGMP"), which must be followed at all times. The FDA
enforces cGMP requirements through periodic inspections. There can be no
assurance that the FDA will determine that the facilities and manufacturing
procedures of Baxter or any other third-party manufacturer of the Company's
planned products will conform to cGMP requirements. See
"Business -- Manufacturing and Supply."
Blood centers and others that ship blood and blood products interstate will
likely be required to obtain approved license supplements from the FDA before
shipping products processed with the Company's pathogen inactivation systems.
This requirement and/or FDA delays in approving such supplements may deter some
blood centers from using the Company's products, and blood centers that do
submit supplements may face disapproval or delays in approval that could provide
further disincentives to use the systems. The regulatory impact on potential
customers could have a material adverse effect on the Company's business,
financial condition and results of operations.
In addition, transfusion units of random donor platelets, which currently
represent approximately one-half of the platelets transfused in the United
States, contain platelets pooled from six different donors. Because of the risk
of bacterial growth, current FDA rules require that pooled platelets be
transfused within four hours of pooling and, as a result, most pooling occurs at
hospitals. However, the Company's platelet pathogen inactivation system is being
designed to be used at blood centers, not at hospitals, and requires a
processing time of approximately eight hours. Therefore, in order for the
Company's platelet pathogen inactivation system to be effectively implemented
and accepted at blood centers as planned, the FDA-imposed limit on the time
between pooling and transfusion would need to be lengthened or eliminated for
blood products treated with the Company's system, which are being designed to
inactivate bacteria that would otherwise contaminate pooled platelets. There can
be no assurance, however, that the FDA will change this requirement and, if such
a change is not made, the Company's business, financial condition and results of
operations would be materially adversely affected. See "Business -- Government
Regulation."
Rapid Technological Change; Significant Competition. The biopharmaceutical
field is characterized by rapid and significant technological change.
Accordingly, the Company's success will depend in part on its ability to respond
quickly to medical and technological changes through the development and
introduction of new products. Product development involves a high degree of
risk, and there can be no assurance that the Company's product development
efforts will result in any commercially successful products. Technological
developments may result in the Company's products becoming obsolete or
non-competitive before the Company is able to generate any significant revenue.
Any such occurrence could have a material adverse effect on the Company's
business, financial condition and results of operations.
The Company expects to encounter competition in the sale of products it may
develop. If regulatory approvals are received, the Company's products may
compete with other approaches to blood safety currently in use, as well as with
future products developed by biotechnology and pharmaceutical companies,
hospital supply companies, national and regional blood centers, certain
governmental organizations and agencies. Companies that may be competitors or
potential competitors have substantially greater financial and other resources
than the Company and may have greater experience in preclinical testing, human
clinical trials and other regulatory approval procedures. The Company's ability
to compete successfully will depend, in part, on its ability to develop
proprietary products, develop and maintain products that reach the market first,
are technologically superior to and/or are of lower cost than other products on
the market, attract and retain
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<PAGE> 13
scientific personnel, obtain patent or other proprietary protection for its
products and technologies, obtain required regulatory approvals, and
manufacture, market and sell any product that it develops. In addition, other
technologies or products may be developed that have an entirely different
approach or means of accomplishing the intended purposes of the Company's
products, or that might render the Company's technology and products
uncompetitive or obsolete. Furthermore, there can be no assurance that the
Company's competitors will not obtain patent protection or other intellectual
property rights that would limit the Company's ability to use the Company's
technology or commercialize products that may be developed.
Several companies are developing technologies which are, or in the future
may be, the basis for products that will directly compete with or reduce the
market for the Company's pathogen inactivation systems. A number of companies
are specifically focusing on alternative strategies for pathogen inactivation in
various blood components. Under the terms of the agreement covering the
development of pathogen inactivation systems for FFP and red blood cells, Baxter
has reserved the right to market competing products not within the field of
psoralen or ALE inactivation. The Company is aware that Baxter is developing an
alternative pathogen inactivation system for FFP based on a compound known as
methylene blue. Other companies are currently marketing methylene blue-based
pathogen inactivation systems for FFP in Europe. Other groups are developing
synthetic blood product substitutes or products to stimulate the growth of
platelets. If any of these technologies is successfully developed, it could have
a material adverse effect on the Company's business, financial condition and
results of operations. See "Business -- Alliance with Baxter" and
"-- Competition."
Dependence on Key Employees. The Company is highly dependent on the
principal members of its management and scientific staff. The loss of the
services of one or more of these employees could have a material adverse effect
on the Company's business, financial condition and results of operations. The
Company believes that its future success will depend in large part upon its
ability to attract and retain highly skilled scientific and managerial
personnel. Competition for such personnel is intense. There can be no assurance
that the Company will be successful in attracting and retaining such personnel
and the failure to do so could have a material adverse effect on the Company's
business, financial condition and results of operations. In addition, a
substantial portion of the stock options currently held by many of the Company's
key employees are vested and may be fully vested over the next several years
before the Company achieves significant revenues or profitability. The Company
intends to grant additional options and provide other forms of incentive
compensation to attract and retain such key personnel. See "Management."
Patent and License Uncertainties. The Company's success depends in part on
its ability to obtain patents, to protect trade secrets, to operate without
infringing upon the proprietary rights of others and to prevent others from
infringing on the proprietary rights of the Company. The Company's policy is to
seek to protect its proprietary position by, among other methods, filing United
States and foreign patent applications related to its proprietary technology,
inventions and improvements that are important to the development of its
business. Proprietary rights relating to the Company's planned and potential
products will be protected from unauthorized use by third parties only to the
extent that they are covered by valid and enforceable patents or are effectively
maintained as trade secrets. There can be no assurance that any patents owned
by, or licensed to, the Company will afford protection against competitors or
that any pending patent applications now or hereafter filed by, or licensed to,
the Company will result in patents being issued. In addition, the laws of
certain foreign countries do not protect the Company's intellectual property
rights to the same extent as do the laws of the United States.
The patent positions of biopharmaceutical companies involve complex legal
and factual questions and, therefore, their enforceability cannot be predicted
with certainty. There can be no assurance that any of the Company's patents or
patent applications, if issued, will not be challenged, invalidated or
circumvented, or that the rights granted thereunder will provide proprietary
protection or competitive advantages to the Company against competitors with
similar technology. Furthermore, there can be no assurance that others will not
independently develop similar technologies or duplicate any technology developed
by the Company. Because of the extensive time required for development, testing
and regulatory review of a potential product, it is possible that, before any of
the Company's products can be commercialized, any related patent may expire or
remain in existence for only a short period following commercialization, thus
reducing any advantage of the patent.
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<PAGE> 14
Because patent applications in the United States are maintained in secrecy
until patents issue and because publication of discoveries in the scientific or
patent literature often lag behind actual discoveries, the Company cannot be
certain that it was the first to make the inventions covered by each of its
issued or pending patent applications or that it was the first to file patent
applications for such inventions. There can be no assurance the Company's
planned or potential products will not be covered by third-party patents or
other intellectual property rights, in which case continued development and
marketing of such products would require a license under such patents or other
intellectual property rights. There can be no assurance that such required
licenses will be available to the Company on acceptable terms, if at all. If the
Company does not obtain such licenses, it could encounter delays in product
introductions while it attempts to design around such patents, or could find
that the development, manufacture or sale of products requiring such licenses is
foreclosed. Litigation may be necessary to defend against or assert such claims
of infringement, to enforce patents issued to the Company, to protect trade
secrets or know-how owned by the Company or to determine the scope and validity
of the proprietary rights of others. In addition, interference proceedings
declared by the United States Patent and Trademark Office may be necessary to
determine the priority of inventions with respect to patent applications of the
Company. Litigation or interference proceedings could result in substantial
costs to and diversion of effort by the Company, and could have a material
adverse effect on the Company's business, financial condition and results of
operations. There can be no assurance that these efforts by the Company would be
successful.
The Company may rely, in certain circumstances, on trade secrets to protect
its technology. However, trade secrets are difficult to protect. The Company
seeks to protect its proprietary technology and processes, in part, by
confidentiality agreements with its employees and certain contractors. There can
be no assurance that these agreements will not be breached, that the Company
will have adequate remedies for any breach, or that the Company's trade secrets
will not otherwise become known or be independently discovered by competitors.
To the extent that the Company's employees or its consultants or contractors use
intellectual property owned by others in their work for the Company, disputes
may also arise as to the rights in related or resulting know-how and inventions.
See "Business -- Patents, Licenses and Proprietary Rights."
Limited Operating History; History of Losses and Expectation of Future
Losses. The Company's net losses in fiscal years 1992, 1993, 1994 and 1995 and
in the six months ended June 30, 1996 were $2.3 million, $3.5 million, $1.8
million, $2.4 million and $4.2 million, respectively. As of June 30, 1996, the
Company had an accumulated deficit of approximately $14.2 million. The Company
has not received any revenues from product sales, and all revenues recognized by
the Company to date have resulted from the Company's agreements with Baxter and
federal research grants. All of the Company's planned pathogen inactivation
systems are in the research and development stage. The Company will be required
to conduct significant research, development, testing and regulatory compliance
activities on these products that, together with anticipated general and
administrative expenses, are expected to result in substantial losses at least
through 1998. The estimates above and elsewhere in this Prospectus of the period
during which the Company expects to incur continuing losses are forward-looking
statements that involve risks and uncertainties. There can be no assurance that
the Company will not incur substantial losses beyond such period as a result of
certain factors set forth in this "Risk Factors" section and elsewhere in this
Prospectus. The Company expects that the amount of such losses will fluctuate
from quarter to quarter as a result of differences in the timing of expenses
incurred and potential revenues from its agreements with Baxter and such
fluctuations may be significant. The Company's ability to achieve a profitable
level of operations will depend on successfully completing development,
obtaining regulatory approvals and achieving market acceptance of its pathogen
inactivation systems. There can be no assurance that the Company will ever
achieve a profitable level of operations. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Reliance on Third-Party Manufacturing; Dependence on Key Suppliers. The
Company has in the past utilized, and intends to continue to utilize, third
parties to manufacture and supply the inactivation compounds for its systems and
Baxter for other system components for use in clinical trials and for the
potential commercialization of its products in development. The Company has no
experience in manufacturing products for commercial purposes and does not have
any manufacturing facilities. Consequently, the Company is
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dependent on contract manufacturers for the production of compounds and on
Baxter for other system components for development and commercial purposes.
Under the Company's agreements with Baxter, the Company is responsible for
supplying compounds to Baxter for inclusion in the pathogen inactivation
systems. The Company has contracted with two manufacturing facilities that have
provided sufficient amounts of S-59 to address the anticipated clinical trial
requirements of both the platelet and FFP pathogen inactivation systems. Only
one of the manufacturers has increased its production capabilities to produce
S-59 in commercial quantities. If such manufacturer is unable to continue to
produce S-59 in commercial quantities, the Company could experience material
delays and shortfalls in compound supply while the alternative manufacturer
increased its production capabilities or while the Company identified another
manufacturer and such manufacturer prepared for production. There can be no
assurance that the existing manufacturers or any new manufacturer will be able
to provide commercial quantities of S-59 needed for the Company's pathogen
inactivation systems in the future.
The Company has produced S-303 for use in its red cell pathogen
inactivation system in only limited quantities for its research and preclinical
development requirements. No assurance can be given that an appropriate clinical
or commercial-scale manufactuer of S-303 will be identified or that the Company
will be able to enter into arrangements for the manufacture of S-303 on
reasonable terms, if at all.
In the event that the Company is unable to obtain or retain third-party
manufacturing, it will not be able to commercialize its products as planned. The
Company's dependence upon third parties, including Baxter, for the manufacture
of critical portions of its pathogen inactivation systems may adversely affect
the Company's operating margins and its ability to develop, deliver and sell
products on a timely and competitive basis. Failure of any third-party
manufacturer to deliver the required quantities of products on a timely basis
and at commercially reasonable prices would materially adversely affect the
Company's business, financial condition and results of operations. In addition,
inclusion of components manufactured by other third parties could require the
Company to seek new approvals from government regulatory authorities, which
could result in delays in product delivery. There can be no assurance that such
approval would be obtained. In the event the Company undertakes to establish its
own commercial manufacturing capabilities, it will require substantial
additional funds, manufacturing facilities, equipment and personnel.
The Company purchases certain key components of its compounds from a
limited number of suppliers. While the Company believes that there are
alternative sources of supply for these components, establishing additional or
replacement suppliers for any of the components in the Company's compounds, if
required, may not be accomplished quickly and could involve significant
additional costs. Any failure by the Company to obtain any of the components
used to manufacture the Company's compounds from alternative suppliers, if
required, could limit the Company's ability to manufacture its compounds and
would have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business -- Manufacturing and Supply"
and "-- Government Regulation."
Risk of Product Liability. The testing, marketing and sale of the
Company's products will entail an inherent risk of product liability, and there
can be no assurance that product liability claims will not be asserted against
the Company. The Company intends to secure limited product liability insurance
coverage prior to the commercial introduction of any product, but there can be
no assurance that the Company will be able to obtain product liability insurance
on acceptable terms or that insurance subsequently obtained will provide
adequate coverage against any or all potential claims. Any product liability
claim against the Company, regardless of its merit or eventual outcome, could
have a material adverse effect upon the Company's business, financial condition
and results of operations.
Environmental Regulation; Use of Hazardous Substances. The Company is
subject to federal, state and local laws, rules, regulations and policies
governing the use, generation, manufacture, storage, air emission, effluent
discharge, handling and disposal of certain materials, biological specimens and
wastes. There can be no assurance that the Company will not be required to incur
significant costs to comply with environmental and health and safety regulations
in the future. The Company's research and development involves the controlled
use of hazardous materials, including certain hazardous chemicals and
radioactive materials. Although the Company believes that its safety procedures
for handling and disposing of such materials comply
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with the standards prescribed by state and federal regulations, the risk of
accidental contamination or injury from these materials cannot be eliminated. In
the event of such an accident, the Company could be held liable for any damages
that result and any such liability could exceed the resources of the Company.
Uncertainty Regarding Health Care Reimbursement and Reform. The future
revenues and profitability of biopharmaceutical and related companies as well as
the availability of capital to such companies may be affected by the continuing
efforts of the United States and foreign governments and third-party payors to
contain or reduce costs of health care through various means. In the United
States, given recent federal and state government initiatives directed at
lowering the total cost of health care, it is likely that the U.S. Congress and
state legislatures will continue to focus on health care reform and the cost of
pharmaceuticals and on the reform of the Medicare and Medicaid systems. While
the Company cannot predict whether any such legislative or regulatory proposals
will be adopted, the announcement or adoption of such proposals could have a
material adverse effect on the Company's business, financial condition and
results of operations.
The Company's ability to commercialize its products successfully will
depend in part on the extent to which appropriate reimbursement levels for the
cost of the products and related treatment of blood components are obtained from
governmental authorities, private health insurers and other organizations, such
as health maintenance organizations ("HMOs"). Third-party payors are
increasingly challenging the prices charged for medical products and services.
The trend toward managed health care in the United States and other countries
and the concurrent growth of organizations such as HMOs, which could control or
significantly influence the purchase of health care services and products, as
well as legislative proposals to reform health care or reduce government
insurance programs, may all result in lower prices for the Company's products.
The cost containment measures that health care payors and providers are
instituting and the effect of any health care reform could materially adversely
affect the Company's ability to operate profitably. See "Business -- Health Care
Reimbursement and Reform."
Control by Existing Stockholders. Upon the closing of this offering and
the Baxter Private Placement, the Company's present directors and executive
officers and their respective affiliates will beneficially own approximately
% of the outstanding Common Stock. In addition, Baxter will own
approximately % of the outstanding Common Stock. As a result, these
stockholders will be able to exercise significant influence over all matters
requiring stockholder approval, including the election of directors and approval
of significant corporate transactions. Such concentration of ownership may also
have the effect of delaying, preventing or deterring a change in control of the
Company. See "Principal Stockholders" and "Description of Capital
Stock -- Antitakeover Effects of Provisions of Charter Documents and Delaware
Law."
Need for Additional Funds. Through June 30, 1996, Baxter has provided
funding to the Company in the form of equity investments, research funding,
license fees and milestone payments, aggregating approximately $16.9 million. In
July 1996, Baxter provided additional funding to the Company in the form of an
equity investment of approximately $3.0 million and a development payment of
approximately $803,000. The Company's cash requirements may vary materially from
those now planned as a result of additional research and development, product
testing results, regulatory requirements, competitive pressures and
technological advances. In addition, the Company may require substantial funds
for its long-term product development, marketing programs and operating
expenses. There can be no assurance that any required funds will be available on
acceptable terms, if at all. If additional funds are raised by issuing equity
securities, substantial dilution to existing stockholders may result. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
Shares Eligible for Future Sale. Sales of substantial numbers of shares of
Common Stock in the public market following this offering could adversely affect
the market price of the Common Stock. Upon the closing of this offering and the
Baxter Private Placement, the Company will have outstanding an aggregate of
shares of Common Stock, based upon the number of shares outstanding as of
July 31, 1996. Of these shares, all of the shares sold in this offering will be
freely tradeable without restriction or further registration under the
Securities Act of 1933, as amended (the "Securities Act"), unless such shares
are held by "affiliates" of the Company as that term is defined in Rule 144
under the Securities Act ("Affiliates"), in which case they will be subject to
the volume, manner of sale and other conditions of Rule 144. The remaining
4,329,600 shares of
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Common Stock held by existing stockholders (the "Restricted Shares") and the
shares sold pursuant to the Baxter Private Placement are "restricted securities"
as that term is defined in Rule 144. Restricted Shares may be sold in the public
market only if registered or if they qualify for an exemption from registration
under Rule 144 or Rule 701 promulgated under the Securities Act. As a result of
contractual restrictions and the provisions of Rule 144 and Rule 701, additional
shares will be available for sale in the public market as follows: (i) no
Restricted Shares will be eligible for immediate sale on the date of this
Prospectus, (ii) 4,183,413 Restricted Shares, 109,292 shares of Common Stock
issuable upon exercise of currently outstanding options and 35,478 shares of
Common Stock issuable upon exercise of currently outstanding warrants will be
eligible for sale upon expiration of certain lock-up agreements 180 days after
the date of this Prospectus and (iii) the remainder of the Restricted Shares
will be eligible for sale from time to time thereafter upon expiration of their
respective two-year holding periods. Pursuant to an agreement between the
Company and the holders (or their permitted transferees) of approximately
3,070,423 shares of Common Stock (plus shares sold pursuant to the
Baxter Private Placement), these holders are entitled to certain rights with
respect to the registration of such shares under the Securities Act. See
"Description of Capital Stock" and "Shares Eligible for Future Sale."
Effects of Certain Charter and Bylaw Provisions. The Company's Amended and
Restated Certificate of Incorporation (the "Restated Certificate") authorizes
the Board of Directors to issue up to five million shares of Preferred Stock and
to determine the price, rights, preferences and privileges, including voting
rights, 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 Restated Certificate and Bylaws, among other
things, provide for a classified Board of Directors, require that stockholder
actions occur at duly called meetings of the stockholders, limit who may call
special meetings of stockholders, do not permit cumulative voting in the
election of directors and require advance notice of stockholder proposals and
director nominations. These provisions contained in the Company's charter
documents and certain applicable provisions of Delaware law could serve to
depress the Company's stock price. In addition, these and other provisions 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, discourage a hostile
bid or delay, prevent or deter a merger, acquisition or tender offer in which
the Company's stockholders could receive a premium for their shares, or a proxy
contest for control of the Company or other change in the Company's management.
See "Management" and "Description of Capital Stock."
Lack of Prior Public Market; Possible Volatility of Stock Price. Prior to
this offering, there has been no public market for the Common Stock, and there
can be no assurance that an active trading market will develop or be sustained.
The initial public offering price for the Common Stock to be sold in this
offering will be determined by agreement between the Company and the
Underwriters and may bear no relationship to the price at which the Common Stock
will trade after the closing of this offering. The market price of the shares of
Common Stock, like that of the common stock of many other companies in similar
industries, is likely to be highly volatile. Factors such as the announcements
of scientific achievements or new products by the Company or its competitors,
governmental regulation, health care legislation, developments in patent or
other proprietary rights of the Company or its competitors, including
litigation, fluctuations in the Company's operating results and market
conditions for health care stocks in general could have a significant impact on
the future price of the Common Stock. In addition, the stock market has from
time to time experienced extreme price and volume fluctuations, which may be
unrelated to the operating performance of particular companies. In the past,
securities class action litigation has often been instituted following periods
of volatility in the market price for a company's securities. Such litigation
could result in substantial costs and a diversion of management attention and
resources, which could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Underwriters."
Dilution. Purchasers of the Common Stock offered hereby will suffer an
immediate dilution in the net tangible book value per share. Such purchasers
will experience additional dilution upon the exercise of outstanding stock
options and warrants. Future capital funding transactions may also result in
dilution to purchasers in this offering. See "Dilution."
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USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of
Common Stock offered by the Company hereby at an assumed initial public offering
price of $ per share are estimated to be approximately $
($ if the Underwriters' over-allotment option is exercised in full),
after deducting underwriting discounts and commissions and estimated offering
expenses payable by the Company. Pursuant to the Baxter Private Placement, the
Company plans to sell directly to Baxter shares of its Common Stock for an
aggregate purchase price of $ million pursuant to an existing agreement
with the Company.
The Company expects to use approximately $ to $ million
of the proceeds of this offering and the Baxter Private Placement for research
and development and funding of clinical trials in support of its pathogen
inactivation systems, approximately $ to $ million for general
and administrative expenses and approximately $ to $ million
for capital expenditures. The Company intends to use the remaining $ to
$ million for working capital and general corporate purposes. A portion
of the net proceeds may also be used to acquire or invest in complementary
businesses or products or to obtain the right to use complementary technologies.
There are no present understandings, commitments or agreements with respect to
any material acquisition of other businesses, products or technologies. The
amounts and timing of the Company's actual expenditures for each purpose may
vary significantly depending upon numerous factors, including the status of the
Company's product development efforts, regulatory approvals, competition,
marketing and sales activities and the market acceptance of any products
introduced by the Company. Pending such uses, the Company intends to invest the
net proceeds of this offering in short-term, investment-grade, interest-bearing
securities.
DIVIDEND POLICY
The Company has not declared or paid any cash dividends since its
inception. The Company currently intends to retain any future earnings to
finance the growth and development of its business and does not intend to pay
any cash dividends in the foreseeable future. Future dividends, if any, will be
determined by the Board of Directors.
15
<PAGE> 19
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1996 (i) on an actual basis, (ii) on a pro forma basis after giving effect
to the July Baxter Purchase, the Warrant Exercise, the conversion of all
outstanding shares of Preferred Stock into Common Stock and the authorization of
5,000,000 shares of undesignated Preferred Stock upon the closing of this
offering, and (iii) as adjusted to give effect to the Baxter Private Placement
and the sale of shares of Common Stock offered by the Company hereby
at an assumed initial public offering price of $ per share (after
deducting underwriting discounts and commissions and estimated offering expenses
payable by the Company). This table should be read in conjunction with the
Financial Statements and Notes thereto and "Management's Discussion and Analysis
of Financial Condition and Results of Operations," appearing elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1996
--------------------------------------
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Capital lease obligations, less current portion........... $ 36 $ 36 $
Stockholders' equity:
Preferred Stock, $.001 par value; 3,199,942 shares
authorized, 2,811,154 shares issued and outstanding,
actual; 5,000,000 shares authorized, no shares issued
and outstanding, pro forma and as adjusted(1)........ 3 --
Common Stock, $.001 par value, 4,681,833 shares
authorized, 1,294,655 shares issued and outstanding,
actual; 50,000,000 shares authorized, 4,329,600
shares issued and outstanding, pro forma; and
shares issued and outstanding, as
adjusted(1).......................................... 1 4
Additional paid-in capital................................ 22,426 25,625
Notes receivable from stockholders........................ (80) (80)
Deferred compensation..................................... (445) (445)
Accumulated deficit....................................... (14,156) (14,156)
------ ------- -------
Total stockholders' equity........................... 7,749 10,948
------ ------- -------
Total capitalization................................. $ 7,785 $ 10,984 $
====== ======= =======
</TABLE>
- ---------------
(1) Excludes as June 30, 1996: (i) 284,891 shares of Common Stock subject to
outstanding options under the Company's 1996 Equity Incentive Plan and
381,864 shares reserved for future issuance thereunder, (ii) 150,000 shares
of Common Stock reserved for future issuance under the Company's Employee
Stock Purchase Plan and (iii) outstanding warrants to purchase 35,478 shares
of Preferred Stock, which will convert into warrants to purchase Common
Stock upon the closing of this offering. See "Management -- Equity Incentive
Plans" and Notes 4 and 7 of Notes to Financial Statements.
16
<PAGE> 20
DILUTION
The pro forma net tangible book value of the Company as of June 30, 1996
was approximately $ , or $ per share. Pro forma net tangible
book value per share represents the amount of the Company's total tangible
assets less total liabilities, divided by the pro forma number of shares of
Common Stock outstanding, after giving effect to the July Baxter Purchase, the
Warrant Exercise and the conversion of all outstanding shares of Preferred Stock
into Common Stock upon the closing of this offering. After giving effect to the
Baxter Private Placement and the sale by the Company of shares of
Common Stock offered hereby at an assumed initial public offering price of
$ per share (after deducting underwriting discounts and commissions and
estimated offering expenses), the pro forma net tangible book value at June 30,
1996 would have been $ , or approximately $ per share. This
represents an immediate increase in pro forma net tangible book value of
$ per share to existing stockholders (including Baxter) and an
immediate dilution of $ per share to new investors of Common Stock in
this offering, as illustrated by the following table:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............ $
Pro forma net tangible book value per share before the
offering.............................................. $
Increase attributable to the Baxter Private Placement....
--------
Pro forma net tangible book value per share after Baxter
Private
Placement.............................................
Increase per share attributable to new investors......... $
--------
Pro forma net tangible book value per share after the
offering.................................................
------------
Dilution per share to new investors........................ $
============
</TABLE>
The following table summarizes, on a pro forma basis as of June 30, 1996
(after giving effect to the July Baxter Purchase, the Warrant Exercise and the
conversion of all outstanding shares of Preferred Stock into Common Stock upon
the closing of this offering), the difference between the number of shares of
Common Stock purchased from the Company, the total consideration paid and the
average price per share paid by existing stockholders (including Baxter) and by
the new investors, before deducting underwriting discounts and commissions and
estimated offering expenses payable by the Company, at an assumed initial public
offering price of $ per share:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------- -------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------- ------- -------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders........... % $ % $
New investors...................
------- ----- -------- -----
Total................. 100.0% 100.0%
======= ===== ======== =====
</TABLE>
The calculation of pro forma net tangible book value per share and the
other above computations assumes no exercise of outstanding stock options to
purchase 284,891 shares of Common Stock at a weighted average exercise price of
$3.18 per share and warrants to purchase 35,478 shares of Preferred Stock at a
weighted average exercise price of $5.56 per share, which will convert into
warrants to purchase Common Stock upon the closing of this offering. If all such
outstanding options and warrants were exercised for cash, the pro forma net
tangible book value per share immediately after the closing of this offering
would be $ per share. This represents an immediate dilution in pro
forma net tangible book value of $ per share to new investors. See
"Management -- Equity Incentive Plans" and Note 4 of Notes to Financial
Statements.
17
<PAGE> 21
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
the Company's Financial Statements and the Notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere herein. The statement of operations data for the years ended
December 31, 1993, 1994 and 1995 and the balance sheet data as of December 31,
1994 and 1995 are derived from financial statements of the Company that have
been audited by Ernst & Young LLP, independent auditors, and are included
elsewhere in this Prospectus. The statement of operations data for the period
from September 19, 1991 (inception) through December 31, 1992 and the balance
data sheet as of December 31, 1992 and 1993 are derived from financial
statements of the Company audited by Ernst & Young LLP that are not included
herein. The statement of operations data for the six months ended June 30, 1995
and 1996 and the balance sheet data as of June 30, 1996 are derived from
unaudited financial statements included elsewhere in this Prospectus. The
unaudited financial statements have been prepared on the same basis as the
audited financial statements and, in the opinion of management, contain all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the Company's operating results and financial position 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 any other interim
period or the current or any future fiscal year.
<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER 19,
1991
(INCEPTION) SIX MONTHS
THROUGH YEARS ENDED DECEMBER 31, ENDED JUNE 30,
DECEMBER 31, ----------------------------- -------------------
1992(1) 1993 1994 1995 1995 1996
------------- ------- ------- --------- ------- ---------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue................................... $ -- $ 230 $ 4,796 $ 6,799 $ 2,735 $ 2,606
Operating expenses:
Research and development................ 1,479 2,485 5,680 8,125 4,963 5,982
General and administrative.............. 905 1,210 1,194 1,517 627 1,009
------- ------- ------- --------- ------- ---------
Total operating expenses........... 2,384 3,695 6,874 9,642 5,590 6,991
------- ------- ------- --------- ------- ---------
Loss from operations...................... (2,384) (3,465) (2,078) (2,843) (2,855) (4,385)
Other income (expense), net............... 61 (50) 278 483 234 227
------- ------- ------- --------- ------- ---------
Net loss.................................. $(2,323) $(3,515) $(1,800) $ (2,360) $(2,621) $ (4,158)
======= ======= ======= ========= ======= =========
Pro forma net loss per share(2)........... $ (0.55) $ (0.93)
Shares used in computing pro forma net loss
per share(2).............................. 4,314,045 4,491,454
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------- JUNE 30,
1992 1993 1994 1995 1996
------------- ------- ------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................. $ 225 $ 6,076 $ 7,802 $ 9,659 $ 8,761
Working capital........................... 23 3,884 5,865 7,263 6,479
Total assets.............................. 821 6,807 9,684 11,349 10,281
Accumulated deficit....................... (2,323) (5,838) (7,638) (9,998) (14,156)
Total stockholders' equity (deficit)...... 532 (516) 5,439 8,663 7,749
</TABLE>
- ---------------
(1) The Company's financial data is not presented separately for 1991 as the
Company did not commence operations until subsequent to December 31, 1991.
(2) See Note 1 of Notes to Financial Statements for a description of the method
used in computing the pro forma net loss per share.
18
<PAGE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the Financial
Statements and the Notes thereto included elsewhere in this Prospectus. This
Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ significantly from
those discussed in these forward-looking statements as a result of certain
factors, including those set forth under "Risk Factors" and elsewhere in this
Prospectus.
OVERVIEW
Since its inception in 1991, Cerus has devoted substantially all of its
efforts and resources to the research, development and clinical testing of
techniques and systems for inactivating pathogens in transfusion blood
components. The Company has been unprofitable since inception and, as of June
30, 1996, had an accumulated deficit of approximately $14.2 million. All of the
Company's planned pathogen inactivation systems are in the research and
development stage. The Company will be required to conduct significant research,
development, testing and regulatory compliance activities on these products
that, together with anticipated general and administrative expenses, are
expected to result in substantial losses at least through 1998. The Company's
ability to achieve a profitable level of operations will depend on successfully
completing development, obtaining regulatory approvals and achieving market
acceptance of its pathogen inactivation systems. There can be no assurance that
the Company will ever achieve a profitable level of operations. To date, the
Company's principal sources of capital have been private equity financings and
funds provided by Baxter under development and commercialization agreements, as
well as United States government grant funding, interest income and lease
financings.
In December 1993, Cerus entered into a development and commercialization
agreement with Baxter to develop a system for inactivation of pathogens in
platelets used for transfusions. The agreement provides for Baxter to share
costs associated with research and development, preclinical studies and clinical
trials for the system. The agreement also provides for a sharing of revenues
after each party is reimbursed its cost of goods above a specified level. Under
this agreement, Baxter purchased 125,000 shares of Series C Preferred Stock for
an aggregate purchase price of $1.0 million and paid the Company up-front
license fees and milestone and development payments totaling $5.2 million. The
Company recognizes the license fees as revenue as the milestones are achieved.
Through July 31, 1996, approximately $2.0 million of the license fees have been
recognized as revenue, and approximately $1.8 million in milestone payments have
been received and recognized as revenue. In January and July 1995, Cerus
received approximately $2.6 million from Baxter in connection with interim
funding agreements related to the development of pathogen inactivation systems
for FFP and red blood cells. In April 1996, Cerus entered into a second
development and commercialization agreement with Baxter, principally focused on
the FFP and red blood cell pathogen inactivation systems. Under this agreement,
the Company and Baxter are to share gross profits from sales of inactivation
system disposables, after deducting from such gross profits a specified
percentage allocation to be retained by the marketing party for marketing and
administration expenses. Under this agreement, Baxter purchased $6.0 million in
Series E Preferred Stock of Cerus in April and July 1996. In addition, this
agreement provides for Baxter to make additional investments in the Common Stock
of the Company of up to $15 million, at 120% of the market price at the time of
each investment, subject to the achievement of certain milestones. See
"Business -- Alliance with Baxter" and Note 2 of Notes to Financial Statements.
To date, the Company has not received any revenues from product sales and
it will not derive revenue from product sales unless and until one or more
planned products receives regulatory approval and achieves market acceptance.
The Company anticipates that its sources of revenue until product sales occur
will be limited to payments under development and commercialization agreements
with Baxter in the area of blood component pathogen inactivation, payments from
the United States government under research grant programs, payments from future
collaboration agreements, if any, and interest income. Under the current
agreements with Baxter, all research, development, preclinical and clinical
costs of the pathogen inactivation projects are shared equally by Cerus and
Baxter. Because more of such research and development is typically performed
internally at Cerus than at Baxter and because Cerus is generally responsible
for engaging third
19
<PAGE> 23
parties to perform certain aspects of these projects, Baxter typically has made
periodic balancing payments to the Company. Through June 30, 1996, the Company
had recognized approximately $12.3 million in revenue under its agreements with
Baxter, including the license fee and milestone amounts described above, and
approximately $2.2 million under United States government grants.
The Company's business is subject to significant risks, including, but not
limited to, the risks inherent in its research and development efforts,
including clinical trials, uncertainties associated both with obtaining and
enforcing its patents and with the patent rights of others, the lengthy,
expensive and uncertain process of seeking regulatory approvals, uncertainties
regarding government reforms and of product pricing and reimbursement levels,
technological change and competition, manufacturing uncertainties, and
dependence on Baxter and other third parties. The Company's pathogen
inactivation systems are in the research and development stage and will require
additional preclinical and clinical testing prior to submission of any
regulatory application for commercial use. The Company currently does not expect
to file a product approval application with the FDA or corresponding regulatory
filings in Europe for its platelet pathogen inactivation system or for any of
its other planned products prior to 1998. No assurance can be given that any of
the Company's development programs will be successfully completed, that any
further IND application will become effective or that additional clinical trials
will be allowed by the FDA or other regulatory authorities, that clinical trials
will commence as planned, that required United States or foreign regulatory
approvals will be obtained on a timely basis, if at all, or that any products
for which approval is obtained will be commercially successful.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1995 AND JUNE 30, 1996
Revenue. Revenue for the six months ended June 30, 1995 was approximately
$2.7 million as compared to approximately $2.6 million for the same period in
1996. Revenue from Baxter decreased by approximately $311,000 from approximately
$2.4 million for the six months ended June 30, 1995 to approximately to $2.1
million for the same period in 1996, primarily due to increased research and
development spending by Baxter resulting in a reduced balancing payment to the
Company. Grant revenue increased from approximately $319,000 for the six months
ended June 30, 1995 to approximately $501,000 for the same period in 1996, as a
result of increased activity under existing programs.
Research and Development Expenses. The Company's research and development
expenses increased from approximately $5.0 million for the six months ended June
30, 1995 to approximately $6.0 million for the same period in 1996. The increase
is primarily attributable to costs associated with personnel increases and to
increased third-party costs associated with preclinical studies and clinical
trials for the platelet pathogen inactivation system. The Company anticipates
that research and development expenses will increase in the future as it expands
its pathogen inactivation system development efforts and related clinical
trials.
General and Administrative Expenses. General and administrative expenses
increased from approximately $627,000 for the six months ended June 30, 1995 to
approximately $1.0 million for the same period in 1996. The increase is
primarily the result of increased personnel costs, professional services and
other costs incurred in connection with the April 1996 Baxter agreement, and
general expenses in support of the Company's increased product development
activities. The Company anticipates that general and administrative expenses
will increase in the future as additional personnel are added to support its
business operations.
Other Income (Expense), Net. Other income (expense), net, consists
primarily of interest income on cash balances and interest expense associated
with capital leases, both of which were at approximately the same level for the
six months ended June 30, 1995 and 1996.
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
Revenue. Revenue earned under agreements with Baxter increased from
$200,000 in 1993 to approximately $3.9 million in 1994 and to approximately $6.0
million in 1995. The increase in 1994 was primarily related to the commencement
of the platelet program in late 1993 and includes approximately $3.9 million in
20
<PAGE> 24
license fees, milestone and development revenue. The increase in 1995 resulted
primarily from revenue associated with the interim funding agreements for FFP
and red blood cells. Government grant revenue increased from approximately
$30,000 in 1993 to approximately $895,000 in 1994 as a result of activity under
several grants transferred to Cerus and two grants awarded to Cerus during 1994.
Grant revenue decreased to approximately $751,000 in 1995, primarily due to
completion of funding under certain grants during the year. Revenues from the
arrangements with Baxter, as a percentage of total revenues, were 87% in 1993,
81% in 1994 and 89% in 1995.
Research and Development Expenses. Research and development expenses
increased from approximately $2.5 million in 1993 to approximately $5.7 million
in 1994 and to approximately $8.1 million in 1995. The increase in 1994 was
attributable primarily to increased activity on the platelet pathogen
inactivation program. The increase in 1995 was due principally to toxicology
studies, compound manufacturing development and initiation of clinical trials
for the platelet program, as well as to increased spending devoted to the FFP
and red blood cell programs. A significant portion of the increase was the
result of increased payroll and other personnel expenses, related laboratory
supplies, equipment and facilities expansion.
General and Administrative Expenses. General and administrative expenses
were approximately $1.2 million in each of 1993 and 1994 and approximately $1.5
million in 1995. The increase in 1995 over 1994 and 1993 was primarily
attributable to increased personnel levels associated with the expansion of the
Company's operations.
Other Income (Expense), Net. Interest income was approximately $26,000 in
1993, approximately $321,000 in 1994 and approximately $500,000 in 1995. These
increases were attributable primarily to increased average cash balances related
to proceeds from the Company's financings and funding under the Baxter platelet
agreement. Interest expense was approximately $76,000 in 1993, $43,000 in 1994
and $17,000 in 1995. Interest expense of approximately $76,000 in 1993 and
approximately $33,000 in 1994 related to bridge financings from certain of the
Company's stockholders. The remaining interest expense in 1994 and all interest
expense in 1995 related to lease financings.
LIQUIDITY AND CAPITAL RESOURCES
From inception to June 30, 1996, Cerus has financed its operations
primarily through private placements of preferred and common equity securities
totaling approximately $21.5 million and project funding provided by Baxter
totaling $12.9 million. During that period, the Company received approximately
$2.2 million under United States government grants and approximately $1.1
million in interest income. At June 30, 1996, the Company had cash and cash
equivalents of approximately $8.8 million. In July 1996, the Company received an
additional $3.0 million in proceeds in connection with the July Baxter Purchase
and approximately $803,000 in recent funding from Baxter.
In 1993, net cash provided by operating activities of approximately $1.7
million was the result of $5.2 million in license fees and milestone and
development payments received from Baxter during the year, offset principally by
a $3.5 million net loss for the year. Net cash used in operating activities for
1994, 1995 and the six months ended June 30, 1996, was approximately $2.8
million, $3.4 million and $3.9 million, respectively, resulting primarily from
net losses. From inception through June 30, 1996, net cash used in investing
activities of approximately $1.4 million resulted from purchases of equipment
and furniture and leasehold improvements.
At December 31, 1995, the Company's net operating loss carryforwards were
approximately $7.2 million and $1.8 million for federal and state income tax
purposes, respectively. The Company's federal research and development tax
credit carryforwards were approximately $300,000 for federal income tax purposes
at December 31, 1995. The federal net operating loss and tax credit
carryforwards expire at various dates from 2007 to 2010. The California state
net operating loss expires in 2000. The Tax Reform Act of 1986 and state tax
statutes contain provisions relating to changes in ownership that may limit the
utilization in any given year of available net operating loss carryforwards and
research and development credits. See Note 5 of Notes to Financial Statements.
21
<PAGE> 25
The Company's future capital requirements and the adequacy of its available
funds will depend on many factors, including progress of the platelet program
and the related clinical trials, progress of the FFP and red blood cell program,
achievement of milestones leading to milestone payments and equity investments,
regulatory approval and successful commercialization of the Company's pathogen
inactivation systems, costs related to creating, maintaining and defending the
Company's intellectual property position, and competitive developments. The
Company believes that its available cash balances, together with the net
proceeds of this offering and anticipated cash flows from existing Baxter and
grant arrangements, will be sufficient to meet its capital requirements through
1999. This estimate of the period for which the Company expects its available
cash balances, net proceeds and anticipated cash flows to be sufficient to meet
its capital requirements is a forward-looking statement that involves risks and
uncertainties. There can be no assurance that the Company will be able to meet
its capital requirements for this period as a result of certain factors set
forth under "Risk Factors" and elsewhere in this Prospectus. In the event that
additional capital is required, the Company may seek to raise that capital
through public or private equity or debt financings or through additional
collaborative arrangements or government grants. Future capital funding
transactions may result in dilution to purchasers in this offering. There can be
no assurance that such capital will be available on favorable terms, if at all.
22
<PAGE> 26
BUSINESS
OVERVIEW
Cerus is developing systems designed to improve the safety of blood
transfusions by inactivating infectious pathogens in blood components
(platelets, FFP and red blood cells) used for transfusion and inhibiting the
leukocyte activity that is responsible for certain adverse immune and other
transfusion-related reactions. Preclinical studies conducted by the Company have
indicated the ability of these systems to inactivate a broad array of viral and
bacterial pathogens that may be transmitted in blood component transfusions and
to inhibit leukocyte activity. The Company believes that, as a result of the
mechanism of action of its proprietary technology, its systems also have the
potential to inactivate many new pathogens before they are identified and before
tests have been developed to detect their presence in the blood supply. Because
the Company's systems are being designed to inactivate rather than merely test
for pathogens, the Company's systems also have the potential to reduce the risk
of transmission of pathogens that would remain undetected by testing.
INDUSTRY BACKGROUND
Blood Supply Market. Blood transfusions are required to treat a variety of
medical conditions, including anemia, low blood volume, surgical bleeding,
trauma, acquired and congenital bleeding disorders and chemotherapy-induced
blood deficiencies. Worldwide, over 90 million whole blood donations occur each
year. Approximately 39 million of those donations occur in North America,
Western Europe and Japan.
Whole blood is composed of plasma, the liquid portion of blood containing
essential clotting proteins, and three cellular blood components: platelets, red
blood cells and white blood cells (leukocytes). Platelets are cellular
components essential to coagulation, while red blood cells carry oxygen to
tissues and carbon dioxide to the lungs. Leukocytes play a critical role in
immune and other defense systems in donors, but can cause harmful immune
transfusion-related reactions in or transmit disease to recipients.
Blood collection centers periodically experience shortages of critical
blood components due to temporary increases in demand, reduced donor
availability during holiday periods and the limited shelf life of cellular blood
components. To efficiently allocate the limited available blood supply and to
optimize transfusion therapy, essentially all donated blood is separated into
its components. Blood components are obtained either by manually processing
donor units of whole blood or by apheresis, a process in which specific blood
components collected from a donor are retained for transfusion, while the other
components are returned to the donor.
Patients requiring transfusions are typically treated with the specific
blood component required for their particular deficiency, except in cases of
rapid, massive blood loss, where whole blood may be transfused. Platelets are
often used to treat cancer patients following chemotherapy or organ
transplantation. Red cells are frequently administered to patients with trauma
or surgical bleeding, acquired chronic anemia or genetic disorders, such as
sickle cell anemia. FFP is generally used to control bleeding. Plasma can also
be "fractionated" or separated into different parts that are used to expand
blood volume, fight infections or treat diseases such as hemophilia.
Blood Supply Contaminants. A primary goal of every blood collection center
is to provide blood components for transfusion that are free of viruses,
bacteria, protozoans and leukocytes. Despite recent improvements in testing and
processing of blood, patients receiving transfusions of blood components face a
number of significant risks from blood contaminants, as well as adverse immune
and other transfusion-related reactions induced by leukocytes. Viruses such as
hepatitis B (HBV), hepatitis C (HCV), human immunodeficiency virus (HIV),
cytomegalovirus (CMV) and human T-cell lymphotropic virus (HTLV) can present
life-threatening risks. Bacteria, the most common agents of
transfusion-transmitted disease, can cause sepsis, which can result in serious
illness or death. Many other agents can transmit disease during transfusion,
including the protozoans that cause malaria and Chagas' disease.
23
<PAGE> 27
Infectious pathogens are not the only cause of adverse events arising out
of the transfusion of blood components. Leukocytes present in a blood unit can
multiply after transfusion, mounting an often fatal "graft-versus-host" immune
response against the recipient. Similarly, alloimmunization, an immune response
that can develop from repeated exposure to transfused leukocytes, can
significantly reduce the efficacy of subsequent transfusions as a result of the
production of antibodies. Moreover, leukocytes themselves may harbor and
transmit bacteria and infectious viruses, such as HIV, CMV and HTLV.
Emerging and unidentified pathogens also present a threat to the blood
supply, a problem illustrated by the recent history of HIV. It is estimated that
HIV was present in the blood supply for at least seven years before it was
identified as the causative agent of AIDS and at least eight years before a test
was commercially implemented to detect the presence of HIV antibodies in donated
blood. During those years, many transfusion recipients were infected with the
virus, including approximately 70% of patients with severe hemophilia.
The risk of transmission of any of these pathogens from an infected donor
is compounded by a number of factors. If a unit of blood contains an infectious
pathogen, dividing the blood into its components may expose three or more
patients to the pathogen in that unit. Similarly, patient populations that
require frequent transfusions, such as patients with cancer, suppressed immune
systems, and kidney and liver disorders, experience a heightened risk of
infection due to multiple exposures.
Current Approaches to Address Blood Supply Contamination. Public awareness
in recent years of the significant rates of hepatitis and HIV transmission from
blood transfusions has led to expanded efforts to improve the safety of the
blood supply. For many years, the only approach available to reduce the risk of
transmission of diseases was donor screening interviews. In addition to required
donor screening, diagnostic tests have been developed to detect the presence of
certain infectious pathogens known to be transmitted in blood. However, there
remain a number of other blood-borne pathogens for which tests have not been
routinely administered or even developed. The table below identifies the
significant infectious pathogens known to be transmitted through transfusions of
platelets, FFP and red cells:
<TABLE>
<S> <C> <C> <C>
----------------------------------------------------------------------------------------------------
ROUTINELY SCREENED
FOR IN THE
UNITED STATES
FAMILY INFECTIOUS PATHOGEN DISEASE
----------------------------------------------------------------------------------------------------
Hepatitis viruses HBV, HCV Hepatitis Yes
HGV Hepatitis No
Retroviruses HIV-1 and -2 AIDS Yes
HTLV-I and -II Malignant lymphoproliferative Yes
disorders, neuropathy
Herpes viruses CMV CMV retinitis, hepatitis, No
pneumonia
EBV Epstein-Barr Syndrome No
Parvoviruses B-19 Aplastic anemia No
Bacteria Gram negative, gram positive Sepsis No
Treponema pallidum Syphilis Yes
Borrelia burgdorferi Lyme disease No
Protozoans T. cruzi Chagas' disease No
B. microti Babesiosis No
L. donovani Leishmaniasis No
Plasmodium sp. Malaria No
----------------------------------------------------------------------------------------------------
</TABLE>
Although donor screening and diagnostic testing of donated blood have been
successful in reducing the incidence of transmission of many of these known
pathogens, testing has a number of limitations. As the preceding table
indicates, tests are currently performed for only a limited number of
blood-borne pathogens. Moreover, these tests occasionally fail, and clerical
errors, such as mistesting or mislabeling, and other mistakes further expose
patients to contaminated blood. All tests currently used in blood centers, with
the exception of the recently developed P-24 antigen test for HIV-1, are
antibody tests, which are intended to
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<PAGE> 28
detect antibodies directed against a pathogen, rather than to detect the
pathogen itself. All of these tests can fail if performed during the
"infectivity window," that is, early in the course of an infection before
antibodies or P-24 antigen appear in detectable quantities. Similarly, tests for
viral infection may be ineffective in detecting a genetic variant of the virus
that the test was not developed to detect. For instance, certain strains of HIV,
such as Subtype O, are sometimes not detected in the standard HIV tests.
Finally, there are no current tests available to screen effectively for many
emerging pathogens, and testing cannot be performed for pathogens that have yet
to be identified. As a result of these limitations, a number of infectious
pathogens still pass into the blood supply.
The risk of pathogen transmission can be significant when no diagnostic
test to detect the blood-borne pathogen is available, such as in the case of
emerging and unidentified pathogens. The risk associated with untested blood
components is illustrated by the table below, which indicates the approximate
risk (per transfusion unit) in the United States for transmission of HIV and HCV
prior to and after the development of diagnostic tests.
<TABLE>
<CAPTION>
PRE-TESTING POST-TESTING
PATHOGEN DISEASE RISK RISK
- -------- ---------- ----------- -------------
<S> <C> <C> <C>
HIV AIDS 1 in 2,500 1 in 400,000
HCV Hepatitis 1 in 220 1 in 3,300
</TABLE>
In addition, the risk of transmission of pathogens may vary greatly because
of regional or demographic differences. For example, prior to the implementation
of diagnostic testing, the risk of HIV in at least one metropolitan area was as
high as one in 50 per transfusion unit. Furthermore, for patients who receive
multiple blood transfusions, the risk of pathogen transmission increases
approximately in proportion to the number of transfusion units received.
In addition, there are many known pathogens for which tests are not
routinely performed. In the United States, tests are not routinely performed to
detect bacteria, although the risk of transmitting bacteria from a random donor
is estimated to be one in 250. A typical pooled random donor therapeutic dose of
platelets is provided by six random donors, with the risk of transmitting
bacteria estimated to be one in 42. In a study conducted in Hong Kong of bone
marrow transplant patients receiving repeated platelet transfusions, the
incidence of symptomatic septicemia (a potentially fatal infection) was reported
to be one in 16 patients.
In light of these continuing concerns, many patients have attempted to
mitigate the risks of transfusion through "autologous donation," donation of
their own blood for anticipated future use, or, where autologous donation is
impracticable, through the designation of donors such as family members.
Although autologous donations eliminate many risks, the blood collected is still
subject to the risk of bacterial growth during storage and is rarely available
in emergency situations. In addition, the statistical incidence of positive
diagnostic test results from designated donor blood has been found to be as high
as in random donor blood.
Blood banks and health care providers have initiated additional procedures
in an effort to address pathogen transmission issues. For example, platelet
apheresis is sometimes used to limit donor exposure from pooled, manually
collected platelets. In addition, blood banks may quarantine single donor plasma
apheresis units until after the infectivity window has elapsed, followed by
confirmatory retesting of the donor, if the donor is available, to verify the
safety of the donated plasma. However, quarantining plasma can be unwieldy,
expensive and difficult to manage in inventory. Moreover, a quarantine cannot be
used with platelets and red blood cells because these components have shelf
lives that are shorter than the infectivity window related to antibody
production. Although no commercial processes are currently available to
eliminate pathogens in platelets and red cells, a number of pathogen
inactivation methods are used commercially in Europe for FFP, including
treatment with solvent-detergent and methylene blue. Both of these processes can
result in degradation of plasma proteins. In addition, because the
solvent-detergent process pools hundreds of units of plasma, the potential risk
of transmitting pathogens not inactivated by the process, such as parvovirus
B-19, is increased.
The current method used by blood centers to inactivate leukocytes utilizes
gamma (x-ray) irradiation. This nonspecific method for inactivating leukocytes
has a narrow window of efficacy: insufficient treatment can
25
<PAGE> 29
leave viable leukocytes in the blood, while excessive treatment can impair the
therapeutic function of the desirable blood components being transfused.
Leukocyte depletion by filtration decreases the concentration of leukocytes in
transfusion units, but does not inactivate or completely eliminate leukocytes.
Economic Costs of Blood Supply Contamination. In economically developed
countries, many of the tests and inactivation measures described above are
mandated by regulatory agencies, resulting in a safer and more uniform blood
supply, but also significantly increasing costs of processing and delivering
blood products. In the United States, based on a study of eight hospitals and
blood centers conducted in July 1996 on behalf of the Company (the "Cost
Study"), the estimated base cost for a transfusion unit of apheresis platelets
ranges from approximately $400 to $640 and for a transfusion unit of random
donor platelets ranges from approximately $220 to $440. These estimates include
donor screening and diagnostic tests, such as those for HIV, HTLV, HBV and HCV.
The table below indicates, based on the Cost Study, the estimated range of costs
to hospitals for the additional procedures for platelet transfusions described
above for each of apheresis and random donor platelet transfusion units. The
frequency of use and additional charge for each procedure vary widely.
<TABLE>
<CAPTION>
ADDED COST PER
----------------------------------------------
APHERESIS RANDOM DONOR
PROCEDURE TRANSFUSION UNIT TRANSFUSION UNIT
---------------------------------------- --------------------------- ----------------
<S> <C> <C>
Gamma irradiation....................... $ 5 to $55 $30 to $325
CMV testing............................. $15 to $35 $90 to $210
Leukocyte filtration.................... $20 to $75 $20 to $ 75
Designated donor........................ $15 to $50 --
</TABLE>
Moreover, the development and widespread use of testing for many unusual or
low-incidence pathogens may not be cost-effective to undertake. For example, the
development of tests to detect the presence of all forms of harmful bacteria
would be extremely expensive. As a result, the only test regularly conducted to
detect the presence of bacteria is the test for the bacterium that causes
syphilis. With managed health care organizations and other third-party payors
increasingly challenging the cost of medical services performed, these cost
limitations may become more pronounced in the future.
The continuing risk of transmission of serious diseases through transfusion
of contaminated blood components from both known and unknown pathogens, together
with the limitations of current approaches to providing a safe blood supply,
have created the need for a new approach to pathogen inactivation that is safe,
easy to implement and cost-effective. To address this need, a successful
approach should have broad application in the effective inactivation of
clinically significant pathogens, whether or not currently identified, while
providing therapeutically functional blood components.
THE CERUS SOLUTION
The Company is developing pathogen inactivation systems to improve the
safety of blood transfusions. These systems employ the Company's proprietary
small molecule compounds. Studies conducted by the Company have indicated the
ability of these compounds to inactivate a broad array of viral and bacterial
pathogens that may be transmitted in blood component transfusions. The Company
believes that, as a result of the mechanism of action of its proprietary
technology, its systems also have the potential to inactivate many new pathogens
before they are identified and before tests are developed to detect their
presence in the blood supply. Because the Company's systems are being designed
to inactivate rather than merely test for pathogens, the Company's systems also
have the potential to reduce the risk of transmission of pathogens that would
remain undetected by testing.
The compounds synthesized by the Company act by preventing the replication
of nucleic acid (DNA or RNA); platelets, FFP and red blood cells do not contain
nuclear DNA or RNA. When the inactivation compounds are introduced into the
blood component for treatment, they cross bacterial cell walls or viral
membranes, then move into the interior of the nucleic acid structure. When
subsequently activated by an energy source, such as light, the compounds bind to
the nucleic acid of the viral or bacterial pathogen,
26
<PAGE> 30
preventing replication of the nucleic acid. A virus, bacteria or other
pathogenic cell must replicate in order to cause infection. The Cerus compounds
react in a similar manner with the nucleic acid in leukocytes. This interaction
inhibits the leukocyte activity that is responsible for certain adverse immune
and other transfusion-related reactions. The Company is designing its pathogen
inactivation systems to provide therapeutically functional platelets, FFP and
red cells following the inactivation treatment process. The Cerus compounds are
being designed to react with nucleic acid only during the pathogen inactivation
process and not after the treated blood component is transfused. The systems are
also being designed to reduce the amount of residual inactivation compound and
breakdown products of the inactivation process prior to transfusion.
The Company's pathogen inactivation systems are being designed to integrate
into current blood collection, processing and storage procedures. Furthermore,
the Company believes that the use of its pathogen inactivation products could,
over time, lead to a reduction in the use of certain costly procedures that are
currently employed in blood component transfusions, such as gamma irradiation,
CMV testing and leukocyte filtration.
CERUS STRATEGY
The Company's objective is to become the global leader in the development
and commercialization of systems to inactivate blood-borne pathogens in blood
components used for transfusions. Key elements of the Company's strategy to
achieve this objective are the following:
Establish Pathogen Inactivation Systems as the Standard of Care. Target
customers for the Company's blood component treatment systems are the fewer than
200 community blood centers collecting approximately 85% of blood in the United
States and there is an even greater concentration in foreign countries. To
achieve its objective of establishing its systems as the standard of care, the
Company has developed strong relationships with prominent transfusion medicine
experts in these centers worldwide. The Company intends to work with these
experts to identify specific needs in blood component treatment technology and
to encourage support for the adoption of its pathogen inactivation systems as
the standard of care.
Leverage Expertise and Core Technology. The Company is using its broad
expertise in nucleic acid chemistry to develop proprietary compounds designed to
inactivate infectious pathogens in blood components. The Company will initially
seek to gain regulatory approval and commercialize its platelet pathogen
inactivation system. The Company's strategy is to build on its core technology
and experience gained in developing its platelet pathogen inactivation system to
develop its FFP and red cell pathogen inactivation systems. The Company believes
that, if regulatory approval of its products is obtained, market penetration
achieved by its platelet product will facilitate the entry into the market of
its FFP and red cell products. In addition, the Company believes that its
platform technology has potential application in a number of health and
research-related fields beyond the initial areas targeted by the Company.
Capitalize on Strategic Alliance with Baxter. The Company intends to
capitalize on the manufacturing, marketing and distribution expertise and
resources of Baxter. The Company believes that Baxter's established position as
a manufacturer and leading supplier of devices, disposables and other products
related to the transfusion of human blood products can provide the Company with
access to an established marketing, sales and distribution network. The pathogen
inactivation systems are being designed to integrate into Baxter's current
product line and into current blood collection, processing and storage
processes. In addition, the economic terms of the Baxter agreements enable the
Company to limit its operating costs and capital expenditures, and thereby
improve its operating margins.
Protect and Enhance Proprietary Position. The Company believes that the
protection of its proprietary technologies is important to its business
prospects and that its intellectual property position may create competitive
barriers to entry into the blood component treatment market. The Company
currently holds issued and allowed patents covering a number of fundamental
aspects of the Company's blood component treatment system technology. The
Company intends to continue to pursue its patent filing strategy and to
vigorously defend its intellectual property position against infringement.
27
<PAGE> 31
PRODUCTS UNDER DEVELOPMENT
The Company is developing treatment systems to inactivate infectious
pathogens in platelets, FFP and red cells and to inactivate leukocytes to reduce
the risk of certain adverse transfusion-related reactions. The following table
identifies the Company's product development programs:
<TABLE>
<S> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------
CERUS PRODUCT
THERAPEUTIC IN INACTIVATION DEVELOPMENT
PROGRAM INDICATION DEVELOPMENT COMPOUND STATUS(1)
-----------------------------------------------------------------------------------------------------
Platelets Surgery, cancer Platelet S-59 Phase 1a Clinical Trial
chemotherapy, Photochemical completed;
transplantation, Treatment Phase 1b Clinical Trial in
bleeding disorders System process; commencement of
Phase 2 Clinical Trial
anticipated in late 1996
Plasma (FFP) Surgery, FFP S-59 Preclinical Development;
transplantation, Photochemical IND and European filing
bleeding disorders Treatment anticipated in early 1997
System
Red Cells Surgery, Red Cell ALE S-303 Preclinical Development;
transplantation, Treatment lead compound selected
anemia, System
cancer
chemotherapy,
trauma
-----------------------------------------------------------------------------------------------------
</TABLE>
(1) Preclinical Development includes conducting in vitro pathogen inactivation
testing and toxicology, formulation and stability testing prior to possible
submission of an IND to the FDA and comparable submissions in Europe.
The Phase 1a Clinical Trial is a clinical trial to determine
post-transfusion platelet recovery and lifespan of treated autologous
platelets in 20 healthy human subjects.
The Phase 1b Clinical Trial is a clinical trial to determine the safety and
tolerability of treated autologous platelets in 10 healthy human subjects.
The Phase 2 Clinical Trial is a clinical trial to determine the
post-transfusion platelet recovery and lifespan of treated autologous
platelets following SRD treatment in 12 to 16 healthy human subjects from
the Phase 1a Clinical Trial.
The Phase 1a Clinical Trial was conducted, and the Phase 1b Clinical Trial
is being conducted, pursuant to an IND submitted to the FDA. The Company
anticipates that the data from the United States clinical trials will be
used to support similar regulatory submissions in Europe.
The Company's current estimate of the commencement of various clinical
trials and the planned submission time of regulatory filings included in this
table and elsewhere in this Prospectus are forward-looking statements that
involve risks and uncertainties. The actual clinical trial and submission dates
could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including the Company's success in
completing preclinical development and the other factors set forth under "Risk
Factors" and elsewhere in this Prospectus. See "-- Government Regulation."
PLATELET PROGRAM
Platelet Usage and Market. Platelets are cellular components of blood that
are an essential part of the clotting mechanism. Platelets facilitate blood
clotting and wound healing by adhering to damaged blood vessels and to other
platelets. Platelet transfusions are used to prevent or control bleeding in
platelet-deficient patients, such as those undergoing cancer chemotherapy or
organ transplant.
The Company estimates the annual production of platelets in 1995 to be 1.8
million transfusion units in North America, 1.2 million transfusion units in
Western Europe and 800,000 transfusion units in Japan. A typical transfusion
unit consists of platelets from either a single apheresis donor or six random
whole blood donors. As indicated in the Cost Study, the estimated cost of an
apheresis transfusion unit of platelets ranges
28
<PAGE> 32
from approximately $400 to $640 and the cost of a pooled random donor
transfusion unit of platelets ranges from approximately $220 to $440. A
principal motivation for platelet apheresis is to limit donor exposure from
pooled, manually collected platelets. Platelet transfusions may also require one
or more additional procedures with additional costs which are summarized in a
prior table. The Company believes that its platelet pathogen inactivation system
may reduce the need for many of these procedures and the motivation for single
donor apheresis platelets.
Platelet Pathogen Inactivation System. The Company's platelet pathogen
inactivation system applies a technology that combines light and the Company's
proprietary inactivation compound, S-59, which is a synthetic small molecule
from a class of compounds known as psoralens. S-59 was selected from over 100
psoralen derivatives synthesized by the Company, following preclinical studies
conducted by the Company to assess safety and ability to inactivate pathogens
and leukocytes while preserving platelet function.
When illuminated, S-59 undergoes a specific and irreversible chemical
reaction with nucleic acid. This chemical reaction renders the genetic material
of a broad array of pathogenic organisms incapable of replication. A virus,
bacteria or other pathogenic cell must replicate in order to cause infection. A
similar reaction with leukocyte nucleic acid inhibits the leukocyte activity
that is responsible for certain adverse immune and other transfusion-related
reactions. Most of the S-59 is converted to breakdown products during and after
the inactivation reaction. Studies conducted by the Company with preclinical
models have indicated that, following transfusion, the S-59 and its breakdown
products are rapidly metabolized and excreted. The system under development
employs a removal process designed, as a further safety measure, to reduce the
amount of residual S-59 and breakdown products prior to transfusion (the S-59
reduction device or "SRD").
The Company's platelet pathogen inactivation system, developed with Baxter,
has been designed for use in the blood center setting. The system consists of a
disposable processing set, containing the S-59 compound and the SRD, and an
illumination device to deliver light to trigger the inactivation reaction. The
current configuration of the platelet photochemical treatment system under
development involves the collection of the platelets, as normally performed,
followed by transfer of the platelets to a disposable treatment container with
the S-59 compound. The mixture of S-59 and platelets is then illuminated for
approximately three minutes. The final step employs the SRD, a passive
adsorption device, to reduce the amount of residual S-59 and S-59 breakdown
products. Following the SRD treatment, which takes approximately eight hours,
the platelets are transferred to the final storage container.
Development Status. Based on discussions with the FDA, the Company
believes that it will be required to provide data from human clinical studies to
demonstrate the safety of treated platelets and their therapeutic comparability
to untreated platelets, but that only data from in vitro studies, not data from
human clinical studies, will be required to demonstrate the system's efficacy in
inactivating pathogens. In light of these criteria, the Company's clinical trial
program for platelets will consist of studies that differ from the usual Phase
1, Phase 2 and Phase 3 studies. Specifically, its Phase 1 studies were designed
to demonstrate in healthy subjects that use of the system does not alter the in
vivo function (therapeutic efficacy) of the platelets treated with the system
and to evaluate in healthy subjects the safety and tolerability of platelets
treated with the system. Phase 2 studies consist of a reevaluation in the
healthy subjects used in the Phase 1 study of the in vivo function of platelets
treated with the system. Phase 3 studies are expected to consist of a study of
the therapeutic efficacy of platelets treated with the system in a larger group
of patients who require transfusions.
There can be no assurance, however, that these means of demonstrating
safety and efficacy will ultimately be acceptable to the FDA or that the FDA
will continue to believe that this clinical protocol is appropriate. Moreover,
even if the FDA considers these means of demonstrating safety and efficacy to be
acceptable in principle, there can be no assurance that the FDA will find the
data submitted sufficient to demonstrate safety and efficacy. In particular,
although the Company anticipates that the FDA will consider in vitro data an
appropriate means of demonstrating efficacy in pathogen inactivation, there can
be no assurance that the FDA will so conclude, and any requirement to provide
other than in vitro data would adversely affect the timing and could affect the
success of the Company's efforts to obtain regulatory approval. See
"-- Government Regulation."
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<PAGE> 33
In vitro studies conducted by the Company have indicated the efficacy of
the Company's platelet pathogen inactivation system for the inactivation of a
broad array of viral pathogens (cell-free HIV, cell-associated HIV, proviral
HIV, human CMV and model viruses for human HBV and HCV) and bacterial pathogens
(six gram-positive strains and seven gram-negative strains) up to concentrations
that the Company believes are present in contaminated platelets when the blood
is donated. There can be no assurance that contamination will never exceed such
concentrations. Similar in vitro studies have indicated inhibition of leukocyte
activity. Because of the mechanism of action of its platelet pathogen
inactivation system, the Company believes that its platelet system may also
inactivate protozoans in platelets. Psoralens other than S-59 have been shown to
inactivate protozoans in cell culture media. However, to date the Company has
conducted no studies on protozoans with S-59 in platelets, and there can be no
assurance that the Company's platelet pathogen inactivation system would
effectively inactivate protozoans.
Human clinical trials of the platelet pathogen inactivation system are
currently being pursued by the Company. Baxter is the sponsor of such trials.
Based upon the assumptions discussed above, the Company currently plans to
conduct clinical trials for the platelet pathogen inactivation system in the
phases described below.
The Company's platelet pathogen inactivation system consists of four new
components not previously tested in humans: the photochemical compound S-59, a
synthetic platelet additive solution (PAS III), the PL 2410 plastic container
for treatment and storage and the SRD. In the initial Phase 1a trial, the
Company compared platelets treated with the pathogen inactivation system
(without the SRD) with non-photochemically treated platelets suspended in the
new PAS III solution and stored in the new PL 2410 plastic container developed
by Baxter, rather than with standard platelets prepared in plasma and stored in
a currently approved container.
The Phase 1a trial, completed in March 1996, consisted of a single blind,
randomized, crossover study in 20 healthy volunteer subjects divided between two
sites. The study compared the post-transfusion recovery (the proportion of
transfused platelets circulating in the first hours after transfusion) and
lifespan (the length of time the transfused platelets circulate in the
recipient's bloodstream) of a small volume (10 ml) of five-day-old treated and
untreated platelets. Under current FDA regulations, platelets may not be stored
for more than five days after collection from the donor.
Post-transfusion recovery and lifespan of five-day-old standard platelets
varies widely, even in healthy individuals. As a result, there is no established
regulatory or clinical standard for post-transfusion recovery and lifespan of
platelets. In the Company's clinical study, the average post-transfusion
recovery of five-day-old platelets treated with the Company's platelet pathogen
inactivation system was lower than that of the untreated five-day-old platelets.
Although this difference was statistically significant, the average post-
transfusion recovery was within the range of average recoveries reported in
published studies funded by the National Institutes of Health (the "NIH") and
Baxter, as well as in a number of other studies reported in the scientific
literature. These published studies used currently approved processing and
storage systems. In addition, in the Company's clinical study, the average
lifespan of treated platelets was shorter than that of untreated platelets.
Although this difference was statistically significant and the average lifespan
was lower than the range of average untreated platelet lifespans reported in the
published studies referred to above, the average lifespan was within the
distribution of ranges of untreated platelet lifespans reported in such studies.
The clinical investigators reported no adverse events attributable to
transfusion with the treated platelets.
In June 1996, a Phase 1b single blind, randomized, crossover study was
commenced in 10 healthy subjects. This study, currently in progress, will
compare the tolerability and safety of photochemically treated platelets
processed with the SRD with untreated platelets. This second study will involve
the transfusion of full therapeutic doses of platelets (300 ml) given at the
maximum tolerable transfusion rate.
In July 1996, a protocol was filed with the FDA to conduct a Phase 2
clinical study designed to measure the post-transfusion platelet recovery and
lifespan of photochemically treated platelets processed with the SRD and stored
for five days. The protocol calls for this study to be carried out in 12 to 16
healthy subjects from the Phase 1a study so that comparisons may be made with
prior results. The Company currently anticipates that the Phase 2 clinical study
will commence in late 1996. If the Phase 2 trial is successfully
30
<PAGE> 34
completed, the Company intends to submit a protocol for a Phase 3 pivotal,
randomized study in 200 to 260 patients requiring platelet transfusion. The
Company currently anticipates that the primary endpoint in this study will be
the increase in platelet count post-transfusion adjusted for platelet dose and
patient size (the "corrected count increment").
The Company believes that, in deciding whether a pathogen inactivation
system is safe and effective, the FDA is likely to take into account whether it
adversely affects the therapeutic efficacy of blood components as compared to
the therapeutic efficacy of blood components not treated with the system, and
that the FDA will weigh the safety and other risks against the benefits of using
the system in a blood supply that has become safer in recent years. The Company
currently does not expect to file a product approval application with the FDA or
comparable regulatory filings in Europe for its platelet pathogen inactivation
system or for any of its other planned products prior to 1998. The results from
preclinical studies and early clinical trials conducted by the Company may not
be predictive of results obtained in later clinical trials, and there can be no
assurance that clinical trials conducted by the Company will demonstrate
sufficient safety and efficacy to obtain the requisite approvals or that
marketable products will result. The rate of completion of the Company's
clinical trials may be delayed by many factors, including slower than
anticipated patient enrollment or any other adverse event occurring during the
clinical trials. No assurance can be given that any of the Company's development
programs will be successfully completed, that any further IND will become
effective or that additional clinical trials will be allowed by the FDA or other
regulatory authorities, that clinical trials will commence as planned, that
required United States or foreign regulatory approvals will be obtained on a
timely basis, if at all, or that any products for which approval is obtained
will be commercially successful. The Company does not intend to make any
labeling claims that the Company's pathogen inactivation systems may inactivate
any pathogens for which it does not have in vitro data supporting such claims.
The Company does not expect that its platelet pathogen inactivation system will
be able to inactivate all known and unknown infectious pathogens.
FFP PROGRAM
FFP Usage and Market. Plasma is a noncellular component of blood that
contains coagulation factors and is essential for maintenance of intravascular
volume. Plasma is either separated from collected units of whole blood or
collected directly by apheresis. The collected plasma is then packaged and
frozen to preserve the coagulation factors. Some of the frozen plasma is made
available for fractionation, while some is designated for use as FFP. FFP is a
source of all blood clotting factors except platelets and is used to control
bleeding in patients who require clotting factors, such as patients undergoing
extensive surgical procedures or transplants and patients with chronic liver
disease or certain genetic clotting factor deficiencies.
The Company estimates the annual production of FFP in 1995 to be 3.4
million transfusion units in North America, 4.8 million transfusion units in
Western Europe and 2.0 million transfusion units in Japan. In the Cost Study,
the estimated base price of a transfusion unit of FFP in the United States
ranges from approximately $35 to $73. A typical therapeutic transfusion consists
of four to six transfusion units of FFP.
FFP Pathogen Inactivation System. The Company's pathogen inactivation
system for FFP will use the same S-59 psoralen compound and is expected to use
an SRD and illumination device similar to those being used by the Company in its
clinical trials for its platelet pathogen inactivation system. The parameters of
the system are expected to be very similar to the platelet treatment system,
with minor changes in the illumination time and treatment volume. The FFP
pathogen inactivation system under development involves the collection of plasma
by either manual or automated procedures. Plasma is then transferred to a
disposable container with S-59. The mixture of S-59 and plasma is then
illuminated for approximately three minutes. The final step employs the SRD to
reduce residual S-59 and breakdown products. Following the SRD treatment, the
plasma is transferred to the final storage container and is frozen in accordance
with standard protocols.
Development Status. The Company believes that the requirements to obtain
regulatory approval of the FFP pathogen inactivation system will be
substantially similar to those applicable to the platelet pathogen inactivation
system.
31
<PAGE> 35
In vitro studies conducted by the Company to date have indicated the
efficacy of the FFP pathogen inactivation system for the inactivation in FFP of
a broad array of viral pathogens. Because of the mechanism of action of its FFP
pathogen inactivation system, the Company believes that its system may also
inactivate protozoans and inhibit leukocyte function. To date, the Company has
conducted no studies on protozoans or to detect inhibition of leukocyte activity
in FFP, and there can be no assurance that the Company's FFP pathogen
inactivation system would effectively inactivate protozoans or leukocytes. The
Company has assessed the impact of S-59 photochemical treatment on the function
of plasma proteins. Plasma derived from whole blood or apheresis must be frozen
within eight hours of collection to meet the standard as "fresh frozen plasma."
After freezing, plasma may be stored for up to one year, thawed once, and must
be transfused within 24 hours of thawing. The Company has measured the in vitro
coagulation function activity of various clotting factors in FFP after
photochemical treatment, SRD treatment, freezing and thawing. These factors are
Fibrinogen (Factor I), Prothrombin (Factor II), Factor V, Factor VII, Hemophilia
A Factor (Factor VIII), Hemophilia B Factor (Factor IX), Factor X and Factor XI.
The Company believes that in vitro data from these studies indicate that treated
FFP maintained adequate levels of coagulation function for FFP. These in vitro
results are not necessarily indicative of coagulation function that may be
obtained in vivo, and there can be no assurance that the FDA or foreign
regulatory authorities would view such levels of coagulation function as
adequate.
The Company believes that the Phase 1 clinical trials for the FFP pathogen
inactivation system will be similar to the clinical protocol for the platelet
pathogen inactivation system. The Company intends to submit an IND to the FDA to
begin Phase 1 clinical trials on the FFP pathogen inactivation system in early
1997. There can be no assurance that the Company will submit such application as
planned or complete clinical trials as planned or that any such trials, if
commenced, will be successful.
RED CELL PROGRAM
Red Cell Usage and Market. Red blood cells are essential components of
blood that carry oxygen to tissues and carbon dioxide to the lungs. Red cells
may be transfused as a single treatment in surgical and trauma patients with
active bleeding or on a repeated basis in patients with acquired anemia or
genetic disorders such as sickle cell anemia, or in connection with
chemotherapy.
The Company estimates the annual production of red blood cells in 1995 to
be 13.7 million transfusion units in North America, 14.3 million transfusion
units in Western Europe and 3.0 million transfusion units in Japan. The Cost
Study indicated that the estimated cost of a transfusion unit of red blood cells
in the United States ranges from approximately $66 to $110. A typical red blood
cell transfusion consists of two or more red blood cell transfusion units. As
shown in the Cost Study, a red blood cell transfusion may also require one or
more additional procedures with additional costs ranging from $10 to $210 for
each procedure. The procedures are used to address problems presented by
leukocytes and to conduct pathogen diagnostic testing beyond the standard
testing.
Red Cell ALE Treatment System. The Company is developing a system for
pathogen inactivation in red blood cells using a compound that binds to nucleic
acid in a manner similar to that of S-59-based systems, but does not require
light. The Company's method for inactivating pathogens in red blood cells is
based on a proprietary ALE compound, S-303, a small molecule synthesized by the
Company. The selection of S-303 was based on preclinical studies of over 100 ALE
compounds synthesized by the Company to assess safety, stability and ability to
inactivate pathogens and leukocytes, while preserving red cell survival and
function.
The red cell ALE treatment system, which is being co-developed with Baxter,
is being designed for implementation in blood center settings with minimal
disruption of current processing practices. The system is being designed for use
with both manual and automated red blood cell collection systems.
Development Status. In vitro studies by the Company have indicated the
efficacy of the ALE process for the inactivation of a broad array of viral and
bacterial pathogens. Because of the mechanism of action of its red cell ALE
treatment system, the Company believes that its system may also inactivate
protozoans and inhibit leukocyte function. However, the Company has conducted no
studies on protozoans or to detect inhibition of leukocyte activity in red
cells, and there can be no assurance that the Company's red cell system
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would be effective to inactivate protozoans or leukocytes. The Company is
currently conducting additional tests on S-303 and expects to commence good
laboratory practice (GLP) toxicology and pathogen inactivation validation
studies on its red cell pathogen inactivation system in early 1997. The
estimated date for the commencement of these additional studies is a
forward-looking statement that involves risk and uncertainties. There can be no
assurance that these studies will not be delayed as a result of certain factors
set forth under "Risk Factors" and elsewhere in this Prospectus.
FUTURE PRODUCT DEVELOPMENT
The Company believes that the technology it has developed for treatment of
platelets, FFP and red cells may have application in treating other blood
products, including plasma fractions, such as Factor VIII and Factor IX clotting
factors, and recombinant equivalents of plasma derivatives. The Company also
believes that the compounds and processes it has developed for inactivation of
pathogens and leukocytes may have other medical applications in which reactions
with nucleic acid may serve to prevent or control the activities of cells or
microorganisms.
ALLIANCE WITH BAXTER
In December 1993, the Company entered into an agreement with Baxter to
develop, manufacture and market worldwide a system for pathogen inactivation of
platelets for transfusion (the "Platelet Agreement"). Under the Platelet
Agreement, Baxter purchased 125,000 shares of Series C Preferred Stock for an
aggregate purchase price of $1.0 million and paid the Company up-front license
fees and milestone and development payments totaling $5.2 million. The agreement
provides for Baxter and the Company to share development expenses and for Baxter
to make additional payments to the Company subject to the achievement of certain
milestones. To date, Baxter has paid the Company $1.75 million based on the
achievement of preclinical and clinical milestones, in addition to payments made
by Baxter to cover its share of development expenses.
In July 1995, the Company entered into interim research funding agreements
with Baxter providing for Baxter and the Company to share research and
development expenses in 1995 for the Company's pathogen inactivation systems for
FFP and red blood cells.
In April 1996, the Company entered into an agreement with Baxter to
develop, manufacture and market systems for pathogen inactivation of FFP and red
blood cells (the "Red Cell/Plasma Agreement"). Under the Red Cell/Plasma
Agreement and a related Series E Preferred Stock Purchase Agreement dated April
1, 1996, Baxter purchased 190,477 shares of Series E Preferred Stock on April 1,
1996 at an aggregate purchase price of $3.0 million and 190,476 shares of Series
E Preferred Stock on July 1, 1996 at an aggregate purchase price of $3.0
million. The agreement provides for Baxter to share expenses for development of
FFP and red cell pathogen inactivation systems commencing on January 1, 1997.
The sharing by Baxter of development expenses is conditioned upon receipt of
regulatory approval to begin Phase 3 clinical trials of its platelet pathogen
inactivation system.
The Red Cell/Plasma Agreement calls for specific equity investments by
Baxter to be made at 120% of the market price at the time of each investment
subject to the achievement of certain milestones as follows: (i) $5 million,
upon the later of January 10, 1997 and the approval to commence a Phase 3 study
in the United States or Europe in the program under the Platelet Agreement, (ii)
either $5 million, upon the later of January 10, 1998 and the achievement of
both (a) the mutual determination by the Company and Baxter that there is
sufficient data to conclude that the Phase 3 platelet trials are likely to
satisfy specified criteria (the "Interim Platelet Determination") and (b) the
filing of an IND with the FDA to begin a Phase 1 study under the red cell
program or comparable filing in Europe under such program, or separate equity
investments of $2 million, upon the later of January 10, 1998 and the Interim
Platelet Determination and $3 million, upon the later of January 10, 1998 and
the approval of an IND by the FDA under the red cell program or comparable
approval in Europe under such program, and (iii) $5 million, upon the later of
January 10, 1999 and the achievement of both (a) the approval by the FDA to
commence a Phase 2 study in the United States or comparable approval in Europe
under the red cell project and the (b) approval of a New Drug Application
("NDA") by the FDA under the platelet program or comparable approval in Europe
under such program.
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Pursuant to the Red Cell/Plasma Agreement, Baxter has agreed that it will
not at any time, nor will it permit any of its affiliates, to own capital stock
of the Company having 20.1% or more of the outstanding voting power of the
Company. Such restrictions on stock purchases will not apply in the event a
third party makes a tender offer for a majority of the outstanding voting
securities of the Company or if the Board of Directors of the Company determines
to liquidate or sell to a third party substantially all of the assets or a
majority of the voting securities of the Company or to approve a merger or
consolidation in which the Company's stockholders will not own a majority of the
voting securities of the surviving entity.
Baxter has the right to purchase a number of shares up to 19.9% of any
equity securities to be sold in this offering and the Baxter Private Placement.
Baxter has committed to purchase the maximum number of shares of Common Stock
permitted by its agreements with the Company at the initial public offering
price, less underwriting discounts and commissions, of $6.9 million (assuming a
total price to public of $30 million), subject to certain conditions, including
the closing of this offering and the satisfaction of any waiting period
requirements under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the regulations promulgated thereunder. The sale of such shares
will not be registered in this offering. Pursuant to an Amended and Restated
Investors' Rights Agreement dated as of April 1, 1996, the Company has granted
to Baxter certain registration rights.
Subject to regulatory approval of a pathogen inactivation system developed
under either agreement, Baxter has the exclusive right and responsibility to
market the system (including both the inactivation system disposables and any
related instruments) worldwide. The Company is obligated to supply the
inactivation compound for the system, with Baxter supplying the remaining
components. Under the Platelet Agreement, the Company is to receive a specified
percentage of revenues from sales of inactivation system disposables after
deducting from such revenues the amount by which Baxter's and the Company's cost
of goods for the inactivation system disposables exceeds certain dollar amounts
specified in the agreement. Under the Red Cell/Plasma Agreement, the Company and
Baxter are to share gross profits from sales of inactivation system disposables,
after deducting from such gross profits a specified percentage allocation to be
retained by the marketing party for marketing and administrative expenses. Under
the Red Cell/Plasma Agreement, the Company and Baxter are also to receive their
respective costs of goods for compounds and components supplied for inactivation
system disposables. Under each agreement, Baxter will retain revenues from the
sales of any related instruments, such as the illumination devices used to
activate S-59. If Baxter does not market a system in a country following its
regulatory approval, ceases to market a system or fails to satisfy certain
market penetration criteria in the case of the platelet system, the Company will
have the non-exclusive right under the Platelet Agreement and the exclusive
right under the Red Cell/Plasma Agreement to market such system in that country.
Pursuant to the Baxter agreements, Baxter has certain discretion in
decisions concerning the development and marketing of pathogen inactivation
systems. There can be no assurance that Baxter will not elect to pursue
alternative technologies or product strategies or that its corporate interests
and plans will remain consistent with those of the Company. The Company is aware
that Baxter is developing an alternative pathogen inactivation system for FFP,
based on a compound known as methylene blue. Other companies are currently
marketing methylene blue-based pathogen inactivation systems for FFP in Europe.
If the Company's agreements with Baxter were terminated or if Baxter's product
development efforts were unsuccessful, the Company may need to obtain additional
funding from other sources and would be required to devote additional resources
to the development of its products, delaying the development of its products.
Any such delay would have a material adverse effect on the Company's business,
financial condition and results of operations. There can also be no assurance
that disputes will not arise in the future with respect to the Baxter
agreements. Possible disagreements between Baxter and the Company could lead to
delays in the research, development or commercialization of certain planned
products or could require or result in time-consuming and expensive litigation
or arbitration and would have a material adverse effect on the Company's
business, financial condition and results of operations.
In the development agreements, Baxter agreed to certain limited
restrictions on its ability to independently develop and market products that
compete with the products under the agreements. There can be no assurance that
these provisions will prevent Baxter from developing or marketing competing
products. The development agreements contain restrictions on the Company's
ability to develop and market pathogen
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inactivation systems for blood components outside the Baxter agreements. The
Company is entitled, however, to enter into development and licensing agreements
with third parties for pathogen inactivation technology for plasma derivatives
and recombinant equivalents of plasma derivatives. Such development and
licensing agreements are free of any rights of Baxter, except that the Company
must offer Baxter the right to license such technology on terms no less
favorable than the terms offered to other plasma derivative manufacturers.
The development programs under either of the Baxter agreements may be
terminated by Baxter or the Company on 90 days' notice. Neither party may give
such notice under the FFP program or the red cell program before January 1, 1998
if program test results are successful. If either party so terminates as to a
program, the other party gains exclusive development and marketing rights to the
program, and the terminating party's sharing in program revenues is
significantly reduced.
The agreements with Baxter expressly provide that they do not and shall not
be deemed to create any relationship or a joint venture or partnership. See
"-- Manufacturing and Supply," "-- Marketing, Sales and Distribution" and
"-- Competition."
RESEARCH GRANTS
The Company has three ongoing federal (R01) grants which are administered
by the NIH relating to the Company's research and development of its pathogen
inactivation systems. Two of the grants were awarded directly to the Company and
are five-year awards totaling approximately $1.7 million and $1.3 million,
respectively. The third grant was transferred from the University of California
at San Francisco to Cerus at the time Dr. Corash, the grant's principal
investigator, began his employment relationship with the Company. The balance of
the grant transferred to the Company was approximately $579,000. These three
federal grants must be renewed annually by submitting an Application for
Continuing Support to the NIH. The Company retains all rights to technology
funded by these grants, subject to certain rights of the federal government if
the Company fails to commercialize the technology in a timely manner. The
government also has a non-exclusive license to such technology for government
purposes.
MANUFACTURING AND SUPPLY
The Company has in the past utilized, and intends to continue to utilize,
third parties to manufacture and supply the inactivation compounds for its
systems and Baxter for other system components for use in clinical trials and
for the potential commercialization of its products in development. The Company
has no experience in manufacturing products for commercial purposes and does not
have any manufacturing facilities. Consequently, the Company is dependent on
contract manufacturers for the production of compounds and on Baxter for other
system components for development and commercial purposes.
The Company is responsible for developing and delivering its proprietary
compounds for effecting pathogen inactivation to Baxter for incorporation into
the final system configuration. This arrangement applies both to the current
supply for clinical trials and, if applicable regulatory approvals are obtained,
the future commercial supply. In order to provide the inactivation compounds for
its platelet and FFP pathogen inactivation systems, the Company has contracted
with two manufacturing facilities for large-scale synthesis of S-59 and
currently has a stock of compound sufficient to support the anticipated
remaining clinical trials planned for the platelet pathogen inactivation system.
Only one of the manufacturers, however, has increased its production
capabilities to produce S-59 in commercial quantities. If such manufacturer is
unable to continue to produce S-59 in commercial quantities, the Company could
experience material delays and shortfalls in compound supply while the
alternative manufacturer increased its production capabilities or while the
Company identified another manufacturer and such manufacturer prepared for
production. There can be no assurance that the existing manufacturers or any new
manufacturers will be able to provide commercial quantities of S-59 needed for
the Company's pathogen inactivation systems in the future.
The red cell pathogen inactivation system will require the manufacture of
S-303, which the Company has produced in only limited quantities for its
research and preclinical development requirements. The Company is in the process
of identifying a pharmaceutical manufacturer to begin production of S-303 for
additional preclinical use. No assurance can be given that an appropriate
clinical or commercial-scale manufacturer of
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S-303 will be identified or that the Company will be able to enter into
arrangements for the manufacture of S-303 on reasonable terms, if at all.
Under the terms of the Company's development agreements with Baxter for all
described pathogen inactivation systems, Baxter is responsible for manufacturing
the disposable units, such as blood storage containers and related tubing, as
well as any device associated with the inactivation processes. If the Company's
agreements with Baxter were terminated or if Baxter otherwise failed to deliver
an adequate supply of components, the Company would be required to identify
other third-party component manufacturers. There can be no assurance that the
Company would be able to identify such manufacturers on a timely basis or enter
into contracts with such manufacturers on reasonable terms, if at all. Any delay
in the availability of devices or disposables from Baxter could affect the
timely submission of products for regulatory approval or the market introduction
and subsequent sales of such products and would have a material adverse effect
on the Company's business, financial condition and results of operations.
Moreover, the inclusion of components manufactured by others could require the
Company to seek new approvals from government regulatory authorities, which
could result in delays in product delivery. There can be no assurance that the
Company would receive any such required regulatory approvals. Any such delay
would have a material adverse effect on the Company's business, financial
condition and results of operations.
There can be no assurance that the Company will be able to contract for the
manufacturing of products and compounds for its pathogen inactivation systems on
reasonable terms, if at all. In the event that the Company is unable to obtain
or retain third-party manufacturing, it will not be able to commercialize its
products as planned. The Company's dependence upon third parties, including
Baxter, for the manufacture of critical portions of its pathogen inactivation
systems may adversely affect the Company's operating margins and its ability to
develop, deliver and sell products on a timely and competitive basis. Failure of
any third-party manufacturer to deliver the required quantities of products on a
timely basis and at commercially reasonable prices could materially adversely
affect the Company's business, financial condition and results of operations. In
the event the Company undertakes to establish its own commercial manufacturing
capabilities, it will require substantial additional funds, manufacturing
facilities, equipment and personnel.
The Company purchases certain key components of its compounds from a
limited number of suppliers. While the Company believes that there are
alternative sources of supply for such components, establishing additional or
replacement suppliers for any of the components in the Company's compounds, if
required, may not be accomplished quickly and could involve significant
additional costs. Any failure by the Company to obtain any of the components
used to manufacture the Company's compounds from alternative suppliers, if
required, could limit the Company's ability to manufacture its compounds and
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "-- Alliance with Baxter."
MARKETING, SALES AND DISTRIBUTION
The market for blood component treatment systems consists of the blood
centers and hospitals that collect, store and distribute blood and blood
components. In the United States, the American Red Cross collects and
distributes approximately 45% of the nation's supply of blood and blood
components. Other major blood centers include the New York Blood Center and
United Blood Services, each of which distributes approximately 6% of the
nation's supply of blood and blood components. In Western Europe and Japan,
various national blood transfusion services or Red Cross organizations collect,
store and distribute virtually all of their respective nations' blood and blood
components supply. Hospital-affiliated blood banks also store and dispense blood
and blood components but generally do not collect significant quantities of
blood. The Company believes that, if the Company's products receive appropriate
regulatory approvals, the relatively concentrated nature of the market may
facilitate the Company's ability to penetrate the market more quickly.
The Company believes that market acceptance of the Company's pathogen
inactivation systems will depend, in part, on the Company's ability to provide
acceptable evidence of the safety, efficacy and cost-effectiveness of its
products, as well as the ability of blood centers to obtain FDA approval and
adequate reimbursement for such products. The Company believes that market
acceptance of its pathogen inactivation systems also will depend upon the extent
to which physicians, patients and health care payors perceive that the
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benefits of using blood components treated with the Company's systems justify
the additional costs and processing requirements in a blood supply that has
become safer in recent years. While the Company believes that its pathogen
inactivation systems are able to inactivate pathogens up to concentrations that
the Company believes are present in contaminated blood components when the blood
is donated, there can be no assurance that contamination will never exceed such
levels. The Company does not expect that its planned products will be able to
inactivate all known and unknown infectious pathogens, and there can be no
assurance that the inability to inactivate certain pathogens will not affect the
market acceptance of its products. There can be no assurance that the Company's
pathogen inactivation systems will gain any significant degree of market
acceptance among blood centers, physicians, patients and health care payors,
even if clinical trials demonstrate safety and efficacy and necessary regulatory
approvals and health care reimbursement approvals are obtained.
If appropriate regulatory approvals are received, Baxter will be
responsible for the marketing, sales and distribution of the Company's pathogen
inactivation systems for blood components worldwide. The Company does not
currently maintain, nor does it intend to develop, its own marketing and sales
organization but instead expects to continue to rely on Baxter to market and
sell its pathogen inactivation systems. There can be no assurance that the
Company will be able to maintain its relationship with Baxter or that such
marketing arrangements will result in payments to the Company. Revenues to be
received by the Company through any marketing and sales arrangement with Baxter
will be dependent on Baxter's efforts, and there can be no assurance that the
Company will benefit from Baxter's present or future market presence or that
such efforts will otherwise be successful. If the Company's agreements with
Baxter were terminated or if Baxter's marketing efforts were unsuccessful, the
Company's business, financial condition and results of operations would be
materially adversely affected. See "-- Alliance with Baxter."
COMPETITION
The Company expects to encounter competition in the sale of products it may
develop. If regulatory approvals are received, the Company's products may
compete with other approaches to blood safety currently in use, as well as with
future products developed by biotechnology and pharmaceutical companies,
hospital supply companies, national and regional blood centers, certain
governmental organizations and agencies. Companies that may be competitors or
potential competitors have substantially greater financial and other resources
than the Company and may have greater experience in preclinical testing, human
clinical trials and other regulatory approval procedures. The Company's ability
to compete successfully will depend, in part, on its ability to develop
proprietary products, develop and maintain products that reach the market first,
are technologically superior to and/or are of lower cost than other products on
the market, attract and retain scientific personnel, obtain patent or other
proprietary protection for its products and technologies, obtain required
regulatory approvals, and manufacture, market and sell any product that it
develops. In addition, other technologies or products may be developed that have
an entirely different approach or means of accomplishing the intended purposes
of the Company's products, or that might render the Company's technology and
products uncompetitive or obsolete. Furthermore, there can be no assurance that
the Company's competitors will not obtain patent protection or other
intellectual property rights that would limit the Company's ability to use the
Company's technology or commercialize products that may be developed.
Several companies are developing technologies which are, or in the future
may be, the basis for products that will directly compete with or reduce the
market for the Company's pathogen inactivation systems. A number of companies
are specifically focusing on alternative strategies for pathogen inactivation or
removal in various blood components. Although no commercial processes are
currently available to eliminate or inactivate pathogens in platelets and red
cells, a number of pathogen inactivation methods are used commercially in Europe
for FFP, including treatment with solvent-detergent and methylene blue. Both of
these processes can result in degradation of the plasma proteins. In addition,
because the solvent-detergent process uses hundreds of units of plasma that have
been combined into large pools, there is increased risk of transmission of
pathogens not inactivated by the process, such as parvovirus B-19. Other groups
are developing synthetic blood product substitutes or products to stimulate the
growth of platelets. If any of these technologies is successfully developed, it
could have a material adverse effect on the Company's business, financial
condition and results of operations.
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The Company believes that the primary competitive factors in the market for
pathogen inactivation systems will include the breadth and effectiveness of
pathogen inactivation processes, ease of use, the scope and enforceability of
patent or other proprietary rights, product price, product supply and marketing
and sales capability. In addition, the length of time required for products to
be developed and to receive regulatory and, in some cases, reimbursement
approval is an important competitive factor. The Company believes it competes
favorably with respect to these factors, although there can be no assurance that
it will be able to continue to do so. The biopharmaceutical field is
characterized by rapid and significant technological changes. Accordingly, the
Company's success will depend in part on its ability to respond quickly to
medical and technological changes through the development and introduction of
new products. Product development involves a high degree of risk, and there can
be no assurance that the Company's product development efforts will result in
any commercially successful products.
The Company relies on Baxter to support preclinical evaluation and clinical
development of its pathogen inactivation systems, as well as to manufacture and
market the systems. Under the terms of the Red Cell/Plasma Agreement, Baxter has
reserved the right to market competing products not within the field of psoralen
or ALE inactivation. Baxter is conducting several independent product
development efforts in blood collection and processing that may improve blood
quality and safety. The Company is aware that Baxter is developing an
alternative pathogen inactivation system for FFP, based on a compound known as
methylene blue. The development and commercialization of the Company's pathogen
inactivation systems could be materially adversely affected by competition with
Baxter or by Baxter's election to pursue alternative strategies or technologies
in lieu of those of the Company. See "-- Alliance with Baxter."
PATENTS, LICENSES AND PROPRIETARY RIGHTS
The Company's success depends in part on its ability to obtain patents, to
protect trade secrets, to operate without infringing upon the proprietary rights
of others and to prevent others from infringing on the proprietary rights of the
Company. The Company's policy is to seek to protect its proprietary position by,
among other methods, filing United States and foreign patent applications
related to its proprietary technology, inventions and improvements that are
important to the development of its business. As of July 31, 1996, the Company
owned 25 issued or allowed United States patents and 13 issued or allowed
foreign patents. In addition, the Company has 33 pending United States patent
applications and has filed 12 corresponding patent applications under the Patent
Cooperation Treaty, three of which are currently pending in Europe, Japan,
Australia and Canada. Proprietary rights relating to the Company's planned and
potential products will be protected from unauthorized use by third parties only
to the extent that they are covered by valid and enforceable patents or are
effectively maintained as trade secrets. There can be no assurance that any
patents owned by, or licensed to, the Company will afford protection against
competitors or that any pending patent applications now or hereafter filed by,
or licensed, to the Company will result in patents being issued. In addition,
the laws of certain foreign countries do not protect the Company's intellectual
property rights to the same extent as do the laws of the United States.
The patent positions of biopharmaceutical companies involve complex legal
and factual questions and, therefore, their enforceability cannot be predicted
with certainty. There can be no assurance that any of the Company's patents or
patent applications, if issued, will not be challenged, invalidated or
circumvented, or that the rights granted thereunder will provide proprietary
protection or competitive advantages to the Company against competitors with
similar technology. Furthermore, there can be no assurance that others will not
independently develop similar technologies or duplicate any technology developed
by the Company. Because of the extensive time required for development, testing
and regulatory review of a potential product, it is possible that, before any of
the Company's products can be commercialized, any related patent may expire or
remain in existence for only a short period following commercialization, thus
reducing any advantage of the patent.
Because patent applications in the United States are maintained in secrecy
until patents issue and since publication of discoveries in the scientific or
patent literature often lag behind actual discoveries, the Company cannot be
certain that it was the first to make the inventions covered by each of its
issued or pending patent applications or that it was the first to file patent
applications for such inventions. There can be no assurance the
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Company's planned or potential products will not be covered by third-party
patents or other intellectual property rights, in which case continued
development and marketing of such products would require a license under such
patents or other intellectual property rights. There can be no assurance that
such required licenses will be available to the Company on acceptable terms, if
at all. If the Company does not obtain such licenses, it could encounter delays
in product introductions while it attempts to design around such patents, or
could find that the development, manufacture or sale of products requiring such
licenses is foreclosed. Litigation may be necessary to defend against or assert
such claims of infringement, to enforce patents issued to the Company, to
protect trade secrets or know-how owned by the Company or to determine the scope
and validity of the proprietary rights of others. In addition, interference
proceedings declared by the United States Patent and Trademark Office may be
necessary to determine the priority of inventions with respect to patent
applications of the Company. Litigation or interference proceedings could result
in substantial costs to and diversion of effort by the Company, and could have a
material adverse effect on the Company's business, financial condition and
results of operations. There can be no assurance that these efforts by the
Company would be successful.
The Company may rely, in certain circumstances, on trade secrets to protect
its technology. However, trade secrets are difficult to protect. The Company
seeks to protect its proprietary technology and processes, in part, by
confidentiality agreements with its employees and certain contractors. There can
be no assurance that these agreements will not be breached, that the Company
will have adequate remedies for any breach, or that the Company's trade secrets
will not otherwise become known or be independently discovered by competitors.
To the extent that the Company's employees or its consultants or contractors use
intellectual property owned by others in their work for the Company, disputes
may also arise as to the rights in related or resulting know-how and inventions.
GOVERNMENT REGULATION
The Company and its products are comprehensively regulated in the United
States by the FDA and, in some instances, by state and local governments, and by
comparable governmental authorities in other countries. The FDA regulates drugs,
medical devices and biologics under the Federal Food, Drug and Cosmetic Act and
other laws, including, in the case of biologics, the Public Health Service Act.
These laws and implementing regulations govern, among other things, the
development, testing, manufacturing, record keeping, storage, labeling,
advertising, promotion and premarket clearance or approval of products subject
to regulation.
The Company believes its pathogen inactivation systems will be regulated by
the FDA as drugs. It is also possible, however, that the FDA will decide to
regulate the pathogen inactivation systems as "biologics," as "combination
products," including drugs or biologics and one or more medical devices, or as
drugs or biologics with one or more medical devices (i.e., the blood bags and
light source) requiring separate approval or clearance. Whether the FDA
regulates the pathogen inactivation systems as drugs or as one or more of the
other alternatives, it is likely that the FDA's Center for Biologics Evaluation
and Review will be principally responsible for regulating the pathogen
inactivation systems.
Before a new drug may be marketed in the United States, the FDA must
approve an NDA for the product. Before a biologic may be marketed in the United
States, the FDA must approve a Biologics License Application ("BLA") or a
Product License Application ("PLA") for the product and an Establishment License
Application ("ELA") for the facility at which the product is manufactured.
Before a medical device may be marketed in the United States, the FDA must clear
a pre-market notification (a "510(k)") or approve a pre-market approval
application ("PMA") for the product. Before a combination product may be
marketed in the United States, it must have an approved NDA, BLA (or PLA/ELA) or
PMA, depending on which statutory authority the FDA elects to use.
Despite the multiplicity of statutory and regulatory possibilities, the
steps required before approval are essentially the same whether the product is
ultimately regulated as a drug, a biologic, a medical device, a combination
product or some combination thereof. The steps required before a drug, biologic
or medical device may be approved for marketing in the United States pursuant to
an NDA, BLA (or PLA/ELA) or
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PMA, respectively, generally include (i) preclinical laboratory and animal
tests, (ii) submission to the FDA of an IND (for drugs or biologics) or an
investigational device exemption ("IDE") (for medical devices) for human
clinical testing, which must become effective before human clinical trials may
begin, (iii) appropriate tests to show the product's safety, (iv) adequate and
well-controlled human clinical trials to establish the product's efficacy for
its intended indications, (v) submission to the FDA of an NDA, BLA (or PLA/ELA)
or PMA, as appropriate and (vi) FDA review of the NDA, BLA (or PLA/ELA) or PMA
in order to determine, among other things, whether the product is safe and
effective for its intended uses. In addition, the FDA inspects the facilities at
which the product is manufactured and will not approve the product unless
compliance with cGMP requirements is satisfactory. The steps required before a
medical device may be cleared for marketing in the United States pursuant to a
510(k) are generally the same, except that instead of conducting tests to
demonstrate safety and efficacy, data, including clinical data if necessary,
must be obtained to show that the product is substantially equivalent to a
legally marketed device, and the FDA must make a determination of substantial
equivalence rather than a determination that the product is safe and effective.
The Company believes that, in deciding whether a pathogen inactivation
system is safe and effective, the FDA is likely to take into account whether it
adversely affects the therapeutic efficacy of blood components as compared to
the therapeutic efficacy of blood components not treated with the system, and
that the FDA will weigh the safety and other risks against the benefits of using
the system in a blood supply that has become safer in recent years.
Based on discussions with the FDA, the Company believes that it will be
required to provide data from human clinical studies to demonstrate the safety
of treated platelets and their therapeutic comparability to untreated platelets,
but that only data from in vitro studies, not data from human clinical studies,
will be required to demonstrate the system's efficacy in inactivating pathogens.
In light of these criteria, the Company's clinical trial program for platelets
will consist of studies that differ from the usual Phase 1, Phase 2 and Phase 3
studies. Specifically, its Phase 1 studies were designed to demonstrate in
healthy subjects that use of the system does not alter the in vivo function
(therapeutic efficacy) of the platelets treated with the system and to evaluate
in healthy subjects the safety and tolerability of platelets treated with the
system. Phase 2 studies will consist of a reevaluation in the healthy subjects
used in the Phase 1 study of the in vivo function of platelets treated with the
system. Phase 3 studies are expected to consist of a study of the therapeutic
efficacy of platelets treated with the system in a larger group of patients who
require transfusions. The Company believes that the Phase 1 clinical trials for
the FFP pathogen inactivation system will be similar to the clinical protocols
for the platelet pathogen inactivation system. To date, The Company has not had
specific discussions with the FDA regarding the FFP or red cell clinical
development programs.
There can be no assurance, however, that these means of demonstrating
safety and efficacy will ultimately be acceptable to the FDA or that the FDA
will continue to believe that this clinical protocol is appropriate. Moreover,
even if the FDA considers these means of demonstrating safety and efficacy to be
acceptable in principle, there can be no assurance that the FDA will find the
data submitted sufficient to demonstrate safety and efficacy. In particular,
although the Company anticipates that the FDA will consider in vitro data an
appropriate means of demonstrating efficacy in pathogen inactivation, there can
be no assurance that the FDA will so conclude, and any requirement to provide
other than in vitro data may adversely affect the timing and could affect the
success of the Company's efforts to obtain regulatory approval.
Even if regulatory approval or clearance is granted, it could include
significant limitations on the indicated uses for which a product could be
marketed. For example, the Company does not believe that it will be able to make
any labeling claims that the Company's pathogen inactivation systems may
inactivate any pathogens for which it does not have in vitro data supporting
such claims. The testing and approval/clearance process requires substantial
time, effort and financial resources, and is generally lengthy, expensive and
uncertain. The approval process is affected by a number of factors, including
the availability of alternative treatments and the risks and benefits
demonstrated in clinical trials. Additional animal studies or clinical trials
may be requested during the FDA review period and may delay marketing approval.
After FDA approval for the initial indications, further clinical trials may be
necessary to gain approval for the use of the product for additional
indications. The FDA may also require post-marketing testing to monitor for
adverse effects, which can involve significant expense. Later discovery of
previously unknown problems with a product may result in
40
<PAGE> 44
restrictions on the product, including withdrawal of the product from the
market. In addition, the policies of the FDA and foreign regulatory bodies may
change, and additional regulations may be promulgated which could prevent or
delay regulatory approval of the Company's planned products. There can be no
assurance that any approval or clearance will be granted on a timely basis, if
at all. Any failure to obtain or delay in obtaining such approvals or
clearances, and any significant limitation on their indicated uses, could have a
material adverse effect on the Company's business, financial condition and
results of operations.
A drug, biologic or medical device, its manufacturer, and the holder of the
NDA, BLA (or PLA/ELA), PMA or 510(k) for the product are subject to
comprehensive regulatory oversight, both before and after approval or clearance
is obtained. Violations of regulatory requirements at any stage, including
during the preclinical and clinical testing process, during the
approval/clearance process or after the product is approved/cleared for
marketing, could result in various adverse consequences, including the FDA's
requiring that a clinical trial be suspended or halted, the FDA's delay in
approving/clearing or refusing to approve/clear a product, withdrawal of an
approved/cleared product from the market and the imposition of criminal
penalties. For example, the holder of an NDA, BLA (or PLA/ELA), PMA or 510(k) is
required to report certain adverse reactions to the FDA, and must comply with
certain requirements concerning advertising and promotional labeling for the
product. Also, quality control and manufacturing procedures must continue to
conform to cGMP regulations after approval or clearance, and the FDA
periodically inspects manufacturing facilities to assess compliance with cGMP.
Accordingly, manufacturers must continue to expend time, monies and efforts on
regulatory compliance, including cGMP compliance. In addition, new government
requirements may be established that could delay or prevent regulatory approval
or clearance of the Company's products under development or otherwise alter the
applicable law. There can be no assurance that the FDA will determine that the
facilities and manufacturing procedures of Baxter or any other third-party
manufacturer of the Company's planned products will conform to cGMP
requirements.
In addition to the regulatory requirements applicable to the Company and
its products, there are also regulatory requirements applicable to the Company's
prospective customers, which are primarily entities that ship blood and blood
products in interstate commerce. Such entities are regulated by the FDA pursuant
to the Food, Drug, and Cosmetic Act and the Public Health Service Act and
implementing regulations. Blood centers and others that ship blood and blood
products interstate will likely be required to obtain approved license
supplements from the FDA before shipping products processed with the Company's
pathogen inactivation systems. This requirement and/or FDA delays in approving
such supplements may deter some blood centers from using the Company's products,
and blood centers that do submit supplements may face disapproval or delays in
approval that could provide further disincentives to use of the systems. The
regulatory impact on potential customers could have a material adverse effect on
the Company's business, financial condition and results of operations.
In addition, transfusion units of random donor platelets, which currently
represent approximately one-half of the platelets transfused in the United
States, certain platelets pooled from six different donors. Because of the risk
of bacterial growth, current FDA rules require that pooled platelets be
transfused within four hours of pooling and, as a result, most pooling occurs at
hospitals. However, the Company's platelet pathogen inactivation system is being
designed to be used at blood centers, not at hospitals, and requires a
processing time of approximately eight hours. Therefore, in order for the
Company's platelet pathogen inactivation system to be effectively implemented
and accepted at blood centers as planned, the FDA-imposed limit on the time
between pooling and transfusion would need to be lengthened or eliminated for
blood products treated with the Company's systems, which are being designed to
inactivate bacteria that would otherwise contaminate pooled platelets. There can
be no assurance, however, that the FDA will change this requirement and, if such
a change is not made, the Company's business, financial condition and results of
operations would be materially adversely affected. In addition, under current
FDA regulations, platelets may not be stored for more than five days after
collection from the donor.
The Company is developing a European investigational plan based on the
platelet treatment systems being categorized as a class 2b device under European
Union regulatory authorities. However, there can be no assurance that this
approach will be accepted by European authorities. The European Union has
promulgated rules that require that medical devices receive by mid-1998 the
right to affix the CE mark, an international
41
<PAGE> 45
symbol of adherence to quality assurance standards and compliance with
applicable European medical device directives. Failure to receive CE mark
certification will prohibit the Company from selling its products in the
European Union.
The Company is subject to federal, state and local laws, rules, regulations
and policies governing the use, generation, manufacture, storage, air emission,
effluent discharge, handling and disposal of certain materials, biological
specimens and wastes. There can be no assurance that the Company will not be
required to incur significant costs to comply with environmental and health and
safety regulations in the future. The Company's research and development
involves the controlled use of hazardous materials, including certain hazardous
chemicals and radioactive materials. Although the Company believes that its
safety procedures for handling and disposing of such materials comply with the
standards prescribed by state and federal regulations, the risk of accidental
contamination or injury from these materials cannot be eliminated. In the event
of such an accident, the Company could be held liable for any damages that
result and any such liability could exceed the resources of the Company.
HEALTH CARE REIMBURSEMENT AND REFORM
The future revenues and profitability of biopharmaceutical and related
companies as well as the availability of capital to such companies may be
affected by the continuing efforts of the United States and foreign governments
and third-party payors to contain or reduce costs of health care through various
means. In the United States, given recent federal and state government
initiatives directed at lowering the total cost of health care, it is likely
that the U.S. Congress and state legislatures will continue to focus on health
care reform and the cost of pharmaceuticals and on the reform of the Medicare
and Medicaid systems. While the Company cannot predict whether any such
legislative or regulatory proposals will be adopted, the announcement or
adoption of such proposals could have a material adverse effect on the Company's
business, financial condition and results of operations.
The Company's ability to commercialize its products successfully will
depend in part on the extent to which appropriate reimbursement levels for the
cost of the products and related treatment are obtained from governmental
authorities, private health insurers and other organizations, such as HMOs.
Third-party payors are increasingly challenging the prices charged for medical
products and services. The trend toward managed health care in the United States
and other countries and the concurrent growth of organizations such as HMOs,
which could control or significantly influence the purchase of health care
services and products, as well as legislative proposals to reform health care or
reduce government insurance programs, may all result in lower prices for the
Company's products. The cost containment measures that health care payors and
providers are instituting and the effect of any health care reform could
materially adversely affect the Company's ability to operate profitably.
FACILITIES
The Company leases approximately 17,400 square feet for its main facility
and approximately 9,900 square feet for an additional facility, both of which
contain laboratory and office space, in Concord, California. The lease of the
main facility extends through 1999 with two five-year renewal options and
provides for an option to expand into an approximately 9,200 square foot
adjacent space. The lease of the additional facility extends through 1998, with
renewal options for up to eight years. The Company believes that these
facilities will be adequate to meet its needs for the foreseeable future.
EMPLOYEES
As of June 30, 1996, the Company had 65 employees, 52 of whom were engaged
in research and development and 13 in finance and other administration. The
Company also had consulting arrangements with seven individuals. No employee of
the Company is covered by collective bargaining agreements, and the Company
believes that its relationship with its employees is good.
42
<PAGE> 46
SCIENTIFIC ADVISORY BOARD
The Company's Scientific Advisory Board is composed of experts in the
fields of transfusion medicine, blood collection, blood component preparation,
virology, chemistry, biochemistry, organic synthesis, hematology and related
fields. The Scientific Advisory Board members work with the Company both as a
group and, less formally and more frequently, on an individual basis. The
Scientific Advisory Board members review the Company's programs for research,
assist in planning its future research directions and provide advice concerning
ongoing product development programs.
The following are members of the Company's Scientific Advisory Board:
Harvey Alter, M.D., is the Chief of the Infectious Diseases Section and
Assistant Director of Research in the Department of Transfusion Medicine
Clinical Center at the National Institutes of Health. His area of expertise is
in the epidemiology of transfusion-associated viral hepatitis.
Harry Greenberg, M.D., is a Professor of Medicine and Chief of
Gastroenterology at Stanford University. His expertise is in infectious viral
diseases.
Jeffrey McCullough, M.D., is a Professor of Laboratory Medicine and
Director of the Blood Bank at the University of Minnesota Hospitals and the
editor-in-chief of the medical journal Transfusion.
Scott Murphy, M.D., is the Chief Medical Officer of the American Red Cross
Blood Services, Penn -- Jersey Region. He is also a Professor of Medicine and
director of the Blood Bank at Thomas Jefferson College of Medicine.
Sherrill Slichter, M.D., is the Director for the Division of Research and
Education at Puget Sound Blood Center, as well as a Professor of Medicine,
Hematology/Medicine, University of Washington.
Robert Stern, M.D., is an Associate Professor of Dermatology at the Harvard
Medical School and Beth Israel Hospital.
All members of the Scientific Advisory Board are employed elsewhere and may
have commitments to and/or consulting contracts with other organizations,
including potential competitors, that may limit their availability to the
Company. Each member has entered into a Nondisclosure Agreement with the
Company, which requires the maintenance of all proprietary information in
complete confidence.
43
<PAGE> 47
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND OTHER KEY EMPLOYEES
The directors, executive officers and other key employees of the Company
and their ages as of July 31, 1996 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------------- ---- -------------------------------------------------------
<S> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS
Stephen T. Isaacs..................... 47 President, Chief Executive Officer and Director
David S. Clayton...................... 52 Vice President, Finance and Chief Financial Officer
Laurence M. Corash.................... 52 Vice President, Medical Affairs
John E. Hearst........................ 61 Vice President, New Science Opportunities and Director
B. J. Cassin(1),(2)................... 62 Chairman of the Board
Peter H. McNerney(1).................. 45 Director
Dale A. Smith......................... 64 Director
Henry E. Stickney(2).................. 63 Director
KEY EMPLOYEES
George D. Cimino...................... 44 Director of Product Development
David N. Cook......................... 38 Director of Red Cell Development
William M. Greenman................... 29 Director of Business Development
Lily Lin.............................. 50 Director of Platelet Development
Tim E. McCullough..................... 47 Director of Preclinical Testing
Lori L. Roll.......................... 36 Controller and Secretary
Ira Wallis............................ 46 Director of Regulatory Affairs
Gary P. Wiesehahn..................... 47 Director of Plasma Development
Kathryn P. Wilke...................... 29 Intellectual Property Counsel
Susan Wollowitz....................... 43 Director of Organic Chemistry
</TABLE>
- ---------------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
STEPHEN T. ISAACS founded the Company in September 1991 and has served as
President, Chief Executive Officer and a member of the Board of Directors since
that time. Mr. Isaacs was previously President and Chief Executive Officer of
HRI, a research and development company that is no longer engaged in operations,
since September 1984. From 1975 to 1986, Mr. Isaacs held a faculty research
position at the University of California at Berkeley.
DAVID S. CLAYTON has been Chief Financial Officer of the Company since May
1996 and Vice President, Finance of the Company since July 1996. From 1992 to
May 1996, Mr. Clayton was a financial consultant to various companies, including
the Company. From 1989 through May 1992, Mr. Clayton was an Executive Vice
President of Trans Ocean Ltd., a company engaged in leasing of international
maritime shipping containers.
LAURENCE M. CORASH, M.D., has been Vice President, Medical Affairs of the
Company since July 1996. From July 1994 until he assumed his current position,
Dr. Corash was Director of Medical Affairs. Dr. Corash was a consultant to the
Company from 1991 to July 1994. Dr. Corash has been a Professor of Laboratory
Medicine at the University of California, San Francisco since July 1985 and
Chief of the Hematology Laboratory for the Medical Center at the University of
California, San Francisco since January 1982. Dr. Corash has served as a
consultant to the FDA Advisory Panel for Hematology Devices since 1990.
JOHN E. HEARST, PH.D., D.SC., was elected Vice President, New Science
Opportunities in July 1996. From January 1996 until July 1996, Dr. Hearst served
as Director, New Science Opportunities. He has served as a member of the Board
of Directors of the Company since January 1992. Dr. Hearst has been a Professor
of Chemistry at the University of California at Berkeley since 1972. In 1984,
Dr. Hearst co-founded HRI.
44
<PAGE> 48
B. J. CASSIN has served as Chairman of the Board of the Company since
December 1992. Mr. Cassin has been a private venture capitalist since 1979.
Previously, Mr. Cassin co-founded Xidex Corporation, a manufacturer of data
storage media, in 1969. Mr. Cassin is currently a director of six private
companies.
PETER H. MCNERNEY has served as a member of the Board of Directors of the
Company since December 1992. Mr. McNerney has been a General Partner of Coral
Ventures, a venture capital investment firm, since 1992. Prior to that, Mr.
McNerney was a Managing Partner of Kensington Group, a management consulting
firm, from 1989 to 1992. Mr. McNerney serves as a director for Aksys, Ltd. and
Optical Sensors, Inc.
DALE A. SMITH has served as a member of the Board of Directors of the
Company since March 1994. From 1978 to July 1995, Mr. Smith was Group Vice
President of Baxter Healthcare Corporation. Mr. Smith serves as a director of
Vical, Inc.
HENRY E. STICKNEY has served as a member of the Board of Directors of the
Company since January 1992. In 1988, Mr. Stickney founded Health IQ Corporation
(formerly, Reimbursement Dynamics, Inc.), a medical consulting company
specializing in health care economics and reimbursement issues, and has served
as its chief executive officer since that time.
GEORGE D. CIMINO, PH.D., has been Director of Product Development for the
Company since January 1992. Prior to that time, Dr. Cimino was Director of
Research for HRI from 1985 to January 1992.
DAVID COOK, PH.D., has been Director of Red Cell Development for the
Company since January 1994. Prior to that time, Dr. Cook was a senior scientist
in the Platelet Program for the Company from February 1993 to January 1994. From
January 1990 to February 1993, Dr. Cook was a Postdoctoral Associate in the
Department of Chemistry at the University of California, Berkeley.
WILLIAM M. GREENMAN has been Director of Business Development for the
Company since September 1995. From May 1993 to August 1995, Mr. Greenman was a
manager in the Corporate Development Group of the Biotech Group at Baxter
International. From March 1991 to May 1993, Mr. Greenman held various marketing
and corporate development positions in the Biotech Group at Baxter
International.
LILY LIN, PH.D., has been Director of Platelet Development for the Company
since April 1996. Prior to that time, Dr. Lin was Director of Biological
Research for the Company from January 1992 to April 1996. From 1989 to February
1994, Dr. Lin was a senior scientist for HRI.
TIM E. MCCULLOUGH, PH.D., has been Director of Preclinical Safety for the
Company since January 1996. From 1988 to January 1996, Dr. McCullough was
Department Head/Director of Toxicology of Roche Bioscience (formerly, Syntex
Discovery Research).
LORI L. ROLL has been the Controller of the Company since October 1992 and
Secretary of the Company since February 1994. From December 1991 to October
1992, Ms. Roll was a financial services consultant for a variety of small
private companies.
IRA WALLIS, PH.D., has been Director of Regulatory Affairs for the Company
since June 1996. Dr. Wallis was Associate Director, Regulatory Affairs for
Genentech, Inc. from February 1993 to June 1996 and Manager, Regulatory Affairs
for Genentech, Inc. from February 1990 to February 1993.
GARY WIESEHAHN, PH.D., has been Director of Plasma Development for the
Company since January 1996. From February 1994 to January 1996, Dr. Wiesehahn
was a senior scientist for the Company. From December 1989 to January 1994, Dr.
Wiesehahn was Vice President of Research of Acrogen, Inc.
KATHRYN P. WILKE, ESQ., has been Intellectual Property Counsel for the
Company since February 1992. From September 1990 to August 1991, Ms. Wilke was a
law clerk for Limbach & Limbach, a law firm.
SUSAN WOLLOWITZ, PH.D., has been Director of Organic Chemistry for the
Company since June 1992. From 1984 to June 1992, Dr. Wollowitz was Senior
Research Chemist/Project Leader for DowElanco (formerly Dow Chemical
Agricultural Products), a joint venture of Dow Chemical Company.
45
<PAGE> 49
BOARD COMMITTEES
The Board of Directors has an Audit Committee and a Compensation Committee.
The Audit Committee, currently comprised of Messrs. Cassin and Stickney, reviews
the internal accounting procedures of the Company and consults with and reviews
the services provided by the Company's independent auditors. The Compensation
Committee, currently comprised of Messrs. Cassin and McNerney, reviews and
recommends to the Board the compensation and benefits of all officers of the
Company and reviews general policy relating to compensation and benefits of the
Company. The Compensation Committee also administers the issuance of stock
options and other awards under the Company's 1996 Equity Incentive Plan and
Employee Stock Purchase Plan.
DIRECTOR COMPENSATION
Directors currently do not receive any cash compensation for their services
as members of the Board of Directors, although they are reimbursed for certain
expenses in connection with attendance at Board and Committee meetings. In
September 1995, the Company granted to Mr. Smith an option to purchase 10,000
shares of Common Stock at an exercise price of $1.05 per share. In May 1996, the
Company granted to Messrs. Cassin, Isaacs, Hearst and Stickney options to
purchase 10,000, 25,000, 5,000 and 10,000 shares of Common Stock, respectively,
at an exercise price of $4.00 per share. All of these options were granted under
the Company's 1992 Stock Option Plan and are fully exercisable. The unvested
shares issued or issuable upon exercise are subject to repurchase by the
Company, with such repurchase right lapsing with respect to 1/48 of the shares
per month from the date of the grant.
EXECUTIVE COMPENSATION
The following table sets forth the compensation awarded to or earned by the
Company's Chief Executive Officer and the other executive officer whose combined
salary and bonus for 1995 was in excess of $100,000 (collectively, the "Named
Executive Officers"):
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------
NAME AND PRINCIPAL POSITION SALARY($) BONUS($)
-------------------------------------------------------- -------- --------
<S> <C> <C>
Stephen T. Isaacs....................................... $210,000 $52,489
President and Chief Executive Officer
Laurence M. Corash...................................... $169,689 $25,954
Vice President, Medical Affairs
</TABLE>
- ---------------
(1) In accordance with the rules of the Securities and Exchange Commission (the
"Commission"), the compensation described in this table does not include
medical, group life insurance or other benefits received by the Named
Executive Officers which are available generally to all salaried employees
of the Company and certain perquisites and other personal benefits received
by the Named Executive Officers, which do not exceed the lesser of $50,000
or 10% of any such officer's salary and bonus disclosed in this table.
OPTION GRANTS IN LAST FISCAL YEAR
No options were granted during fiscal 1995 to the Named Executive Officers.
Subsequent to December 31, 1995, Messrs. Isaacs and Corash were granted stock
options exercisable for 25,000 and 20,000 shares of Common Stock, respectively,
at an exercise price of $4.00 per share.
OPTION EXERCISES IN LAST FISCAL YEAR
No options were exercised during fiscal 1995 or held at the end of fiscal
1995 by the Named Executive Officers.
46
<PAGE> 50
EQUITY INCENTIVE PLANS
1996 Equity Incentive Plan. The Company's 1996 Equity Incentive Plan (the
"Incentive Plan") was adopted by the Board of Directors in July 1996 as an
amendment and restatement of the Company's 1992 Stock Option Plan (the "1992
Plan"). There are currently 1,000,000 shares of Common Stock authorized for
issuance under the Incentive Plan.
The Incentive Plan provides for the grant of incentive stock options under
the Internal Revenue Code of 1986, as amended (the "Code"), and stock
appreciation rights appurtenant thereto to employees (including officers and
employee-directors) and nonstatutory stock options, stock appreciation rights,
restricted stock purchase awards and stock bonuses to employees, directors and
consultants. The Incentive Plan is administered by the Board of Directors, or a
committee appointed by the Board, which determines recipients and types of
awards to be granted, including the exercise price, number of shares subject to
the award and the exercisability thereof.
The terms of stock options granted under the Incentive Plan generally may
not exceed 10 years. The exercise price of options granted under the Incentive
Plan is determined by the Board of Directors, provided that the exercise price
of an incentive stock option cannot be less than 100% of the fair market value
of the Common Stock on the date of the option grant and the exercise price of a
nonstatutory stock option cannot be less than 85% of the fair market value of
the Common Stock on the date of the option grant. Options granted under the
Incentive Plan vest at the rate specified in the option agreement. No stock
option may be transferred by the optionee other than by will or the laws of
descent and distribution or, in certain limited instances, pursuant to a
qualified domestic relations order, provided that the Board of Directors may
grant a nonstatutory stock option that is transferable, and provided further
that an optionee may designate a beneficiary who may exercise the option
following the optionee's death. An optionee whose relationship with the Company
or any related corporation ceases for any reason (other than by death or
disability) may exercise options in the three-month period following such
cessation (unless such options terminate or expire sooner or later by their
terms). Options may be exercised for up to 12 months after an optionee's
relationship with the Company and its affiliates ceases due to disability or for
up to 18 months following an optionee's death (unless such options expire sooner
or later by their terms). Shares subject to stock awards that have expired or
otherwise terminated without having been exercised in full (or vested in the
case of restricted stock awards) will again become available for the grant of
awards under the Incentive Plan. Shares subject to exercised stock appreciation
rights will not again become available for the grant of new awards.
No incentive stock option may be granted to any person who, at the time of
the grant, owns (or is deemed to own) stock possessing more than 10% of the
total combined voting power of the Company or any affiliate of the Company,
unless the option exercise price is at least 110% of the fair market value of
the stock subject to the option on the date of grant and the term of the option
does not exceed five years from the date of grant. The aggregate fair market
value, determined at the time of grant, of the shares of Common Stock with
respect to which incentive stock options are exercisable for the first time by
an optionee during any calendar year (under all such plans of the Company and
its affiliates) may not exceed $100,000. No person may receive options or stock
appreciation rights covering more than 250,000 shares of Common Stock in any
calendar year. The Board of Directors has the authority to reprice outstanding
options and stock appreciation rights and to offer optionees the opportunity to
replace outstanding options and stock appreciation rights with new options and
stock appreciation rights for the same or a different number of shares.
Restricted stock purchase awards granted under the Incentive Plan may be
granted pursuant to a repurchase option in favor of the Company in accordance
with a vesting schedule and at a price determined by the Board of Directors.
Restricted stock purchases must be at a price equal to at least 85% of the
stock's fair market value on the award date, but stock bonuses may be awarded in
consideration of past services without a purchase payment. Rights under a stock
bonus or restricted stock bonus agreement may not be transferred other than by
will, the laws of descent and distribution or, in certain limited instances,
pursuant to a qualified domestic relations order while the stock awarded
pursuant to such an agreement remains subject to the agreement.
47
<PAGE> 51
Upon certain changes in control of the Company, all outstanding awards
under the Incentive Plan will either be assumed, continued or substituted by the
surviving entity. If the surviving entity determines not to assume, continue or
substitute such awards, with respect to persons then performing services as
employees, directors or consultants, the time during which such awards may be
exercised will be accelerated and the awards terminated if not exercised prior
to such change in control.
As of July 31, 1996, 333,245 shares of Common Stock had been issued upon
the exercise of options granted under the Incentive Plan, options to purchase
284,891 shares of Common Stock at a weighted average exercise price of $3.18
were outstanding and 381,864 shares remained available for future grant under
the Incentive Plan. The Incentive Plan will terminate in July 2006 unless sooner
terminated by the Board of Directors. As of July 31, 1996, no stock bonuses,
restricted stock or stock appreciation rights had been granted under the
Incentive Plan.
Employee Stock Purchase Plan. In July 1996, the Company's Board of
Directors approved the Employee Stock Purchase Plan (the "Purchase Plan")
covering an aggregate of 150,000 shares of Common Stock. The Purchase Plan is
intended to qualify as an employee stock purchase plan within the meaning of
Section 423 of the Code. Under the Purchase Plan, the Board of Directors may
authorize participation by eligible employees, including officers, in periodic
offerings following the adoption of the Purchase Plan. The offering period for
any offering may be no more than 27 months.
Employees are eligible to participate if they are employed by the Company
or an affiliate of the Company designated by the Board of Directors and, unless
otherwise determined by the Board of Directors and set forth in the applicable
offering, are employed at least 20 hours per week and five months per year.
Employees who participate in an offering can have up to 15% of their earnings
withheld pursuant to the Purchase Plan and applied, on specified dates
determined by the Board of Directors, to the purchase of shares of Common Stock.
The price of Common Stock purchased under the Purchase Plan will be equal to 85%
of the lower of the fair market value of the Common Stock on the commencement
date of each offering period or the relevant purchase date. Employees may end
their participation in the offering at any time during the offering period, and
participation ends automatically on termination of employment with the Company.
In the event of certain changes of control, the Company and the Board of
Directors has discretion to provide that each right to purchase Common Stock
will be assumed or an equivalent right substituted by the successor corporation,
or the Board may shorten the offering period and provide for all sums collected
by payroll deductions to be applied to purchase stock immediately prior to the
change in control. The Purchase Plan will terminate at the Board's direction.
401(k) Plan. In July 1992, the Company established a 401(k) Plan covering
certain of the Company's employees. Pursuant to the 401(k) Plan, eligible
employees may elect to reduce their current compensation by up to the
statutorily prescribed annual limit ($9,500 in 1996) and have the amount of such
reduction contributed to the 401(k) Plan. The 401(k) Plan permits, but does not
require, additional contributions by the Company on behalf of the participants.
To date, the Company has made no contributions to the 401(k) Plan other than to
cover administrative and certain other expenses of the 401(k) Plan and
participants. The 401(k) Plan is intended to qualify under Section 401 of the
Code, so that contributions by employees or by the Company to the 401(k) Plan,
and income earned on the 401(k) Plan contributions, are not taxable to employees
until withdrawn from the 401(k) Plan, and so that contributions by the Company,
if any, will be deductible by the Company when made. The trustee under the
401(k) Plan, at the direction of each participant, invests the 401(k) Plan
employee salary deferrals in selected investment options.
48
<PAGE> 52
CERTAIN TRANSACTIONS
Since January 1, 1993, the Company has sold, in a series of private
financings, 1,091,593 shares of its Series C Preferred Stock at a price of $8.00
per share, 529,084 shares of its Series D Preferred Stock at a price of $10.50
per share and 380,953 shares of its Series E Preferred Stock at a price of
$15.75 per share. The Company sold these securities pursuant to preferred stock
purchase agreements and an investors' rights agreement on substantially similar
terms (except for terms relating to date and price), under which the Company
made standard representations, warranties and covenants, and which provided the
purchasers thereunder with registration rights, information rights and rights of
first refusal, among other provisions standard in venture capital financings.
Each share of Preferred Stock will convert into shares of Common Stock
upon the closing of this offering. The purchasers of the Preferred Stock
included, among others, the following holders of 5% or more of the Company's
Common Stock and, directors:
<TABLE>
<CAPTION>
SHARES OF PREFERRED STOCK
PURCHASED
----------------------------------
INVESTOR SERIES C SERIES D SERIES E
---------------------------------------------- -------- -------- --------
<S> <C> <C> <C>
Coral Partners II, a limited partnership...... 247,926 95,238 --
Coral Partners IV, a limited partnership...... 125,000 190,476 --
Baxter Healthcare Corporation................. 125,000 -- 380,953
B. J. Cassin.................................. 65,797 4,760 --
Peter H. McNerney............................. 1,250 952 --
Henry E. Stickney............................. 10,690 952 --
</TABLE>
In May 1993, pursuant to a Note and Warrant Purchase Agreement, the Company
issued convertible promissory notes in an aggregate principal amount of $800,000
and sold warrants to purchase shares of Series B Preferred Stock for an
aggregate purchase price of $800. The notes accrued interest at the rate of 8%
per annum and were convertible into shares of Series C Preferred Stock. In March
1994, the outstanding notes and accrued interest, representing an aggregate of
$853,304, were converted into an aggregate of 106,663 shares of the Company's
Series C Preferred Stock. In May 1994, warrants were issued to purchase 15,798
shares of Series B Preferred Stock at an exercise price of $5.065 per share. The
purchasers of the notes and warrants included, among others, the following
holders of 5% or more of the Company's Common Stock and directors: (i) Coral
Partners II, which purchased a convertible promissory note in the principal
amount of $208,220 and a warrant to purchase 4,111 shares of Series B Preferred
Stock, (ii) Mr. Cassin, who purchased a convertible promissory note in the
principal amount of $108,274 and a warrant to purchase 2,138 shares of Series B
Preferred Stock, and (iii) Mr. Stickney, who purchased a convertible promissory
note in the principal amount of $21,655 and a warrant to purchase 428 shares of
Series B Preferred Stock.
In August 1993, pursuant to a Note and Warrant Purchase Agreement, the
Company issued convertible promissory notes in an aggregate principal amount of
$1,194,698 and sold warrants to purchase shares of Series C Preferred Stock for
an aggregate purchase price of $1,200. The notes accrued interest at the rate of
8% per annum and were convertible into shares of Series C Preferred Stock. In
March 1994, the outstanding notes and accrued interest, representing an
aggregate of $1,250,440, were converted into an aggregate of 156,305 shares of
the Company's Series C Preferred Stock. In May 1994, warrants to purchase 17,570
shares of Series C Preferred Stock at an exercise price of $6.80 per share were
issued. The purchasers of the notes and warrants included, among others, the
following holders of 5% or more of the Company's Common Stock and directors: (i)
Coral Partners II, which purchased a convertible promissory note in the
principal amount of $249,658 and a warrant to purchase 3,671 shares of Series C
Preferred Stock, (ii) Mr. Cassin, who purchased a convertible promissory note in
the principal amount of $129,822 and a warrant to purchase 1,909 shares of
Series C Preferred Stock, and (iii) Mr. Stickney, who purchased a convertible
promissory note in the principal amount of $25,965 and a warrant to purchase 382
shares of Series C Preferred Stock.
In June 1995, the Company entered into a Transfer Agreement with HRI
Research, Inc. ("HRI"). Mr. Isaacs is President, Chief Financial Officer and a
director of HRI and Mr. Hearst is a director and Secretary of HRI. Pursuant to
the Transfer Agreement, HRI transferred to the Company all of its right, title
and interest to HRI's technology, trademarks and trade names in consideration of
$52,610. In addition, the
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<PAGE> 53
Company purchased certain assets related to technology for $44,930 from HRI.
From December 1991 to the date of the purchase, the Company had rented such
equipment for an aggregate price of $52,460.
INDEMNIFICATION AND LIMITATION OF DIRECTOR AND OFFICER LIABILITY
In July 1996, the Board authorized the Company to enter into indemnity
agreements with each of the Company's directors and executive officers. The form
of indemnity agreement, which is subject to stockholder approval, provides that
the Company will indemnify against any and all expenses of the director or
executive officer who incurred such expenses because of his or her status as a
director or executive officer, to the fullest extent permitted by the Company's
Bylaws and Delaware law. In addition, the Company's Bylaws provide that the
Company shall indemnify its directors and executive officers to the fullest
extent permitted by Delaware law, subject to certain limitations, and may also
secure insurance, to the fullest extent permitted by Delaware law, on behalf of
any director, officer, employee or agent against any expense, liability or loss
arising out of his or her actions in such capacity.
The Company's Restated Certificate contains certain provisions relating to
the limitation of liability of directors. The Company's Restated Certificate
provides that a director of the Company shall not be personally liable to the
Company or its stockholders for monetary damages for any breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to 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) for unlawful payment of dividends or unlawful stock
repurchases or redemptions, or (iv) for any transaction from which the director
derived an improper benefit. If the Delaware General Corporation Law is amended
to authorize corporate action further eliminating or limiting the personal
liability of a director, then the liability of a Company director shall be
eliminated or limited to the fullest extent permitted by the Delaware General
Corporation Law, as so amended. The provision in the Restated Certificate does
not eliminate the duty of care and, in appropriate circumstances, equitable
remedies such as injunctive or other forms of non-monetary relief will remain
available under Delaware law. The provision also does not affect a director's
responsibilities under any other law, such as the federal securities laws or
state or federal environmental laws.
50
<PAGE> 54
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of July 31, 1996, assuming the
conversion of all shares of Preferred Stock into shares of Common Stock and as
adjusted to reflect the sale of Common Stock offered by the Company hereby and
the Baxter Private Placement for (i) each stockholder who is known by the
Company to own beneficially more than 5% of the Common Stock, (ii) each Named
Executive Officer of the Company, (iii) each director of the Company, and (iv)
all executive officers and directors of the Company as a group. Except as
otherwise indicated in the notes to this table, the Company believes, based on
information furnished by such owners, that the persons named in the table have
voting and investment power with respect to all the shares of Common Stock,
subject to community property laws, where applicable.
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
BENEFICIALLY OWNED(1)
-----------------------
SHARES PRIOR TO AFTER
BENEFICIAL OWNER BENEFICIALLY OWNED(1) OFFERING OFFERING(2)
- ----------------------------------------------------- --------------------- -------- --------
<S> <C> <C> <C>
Coral Partners II, a limited partnership(3).......... 895,361 20.7%
60 South Sixth Street
Suite 3510
Minneapolis, MN 55402
Baxter Healthcare Corporation........................ 505,953 11.7%
One Baxter Parkway
Deerfield, IL 60015
Stephen T. Isaacs(4)................................. 235,995 5.4%
Cerus Corporation
2525 Stanwell Drive, Suite 300
Concord, CA 94520
Laurence M. Corash(5)................................ 177,500 4.1%
John E. Hearst(6).................................... 167,500 3.9%
B. J. Cassin(7)...................................... 218,652 5.0%
Cerus Corporation
2525 Stanwell Drive, Suite 300
Concord, CA 94520
Peter H. McNerney(8)................................. 897,563 20.7%
Coral Group, Inc.
60 South Sixth Street
Suite 3510
Minneapolis, MN 55402
Dale A. Smith(9)..................................... 10,000 *
Henry E. Stickney(10)................................ 56,262 1.3%
All executive officers and directors as a group
(8 persons)(11).................................... 1,809,172 41.0%
</TABLE>
- ---------------
* Less than 1%
(1) Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect
to securities. Percentage of beneficial ownership is based on 4,329,600
shares of Common Stock outstanding as of July 31, 1996 and shares
of Common Stock outstanding after completion of the closing and the Baxter
Private Placement.
(2) Assumes no exercise of the Underwriters' over-allotment option to purchase
up to an aggregate of shares of Common Stock from the Company.
(3) Includes 315,476 shares of Common Stock held by Coral Partners IV.
(4) Includes 5,000 shares held by Stephen T. Isaacs and Kathryn Macbride as
trustees for the Alexandra Isaacs Irrevocable Trust and 5,000 shares held
by Stephen T. Isaacs and Kathryn Macbride as trustees for the Megan Isaacs
Irrevocable Trust. Includes 25,000 shares issuable upon the exercise of
stock options exercisable within 60 days of July 31, 1996, subject to
repurchase of unvested shares.
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<PAGE> 55
(5) Includes 20,000 shares issuable upon the exercise of stock options
exercisable within 60 days of July 31, 1996, subject to repurchase of
unvested shares.
(6) Includes 10,000 shares held by David Paul Hearst Irrevocable Trust and
10,000 shares held by Leslie Jean Hearst Irrevocable Trust. Also includes
5,000 shares of Common Stock issuable upon the exercise of stock options
exercisable within 60 days of July 31, 1996, subject to repurchase of
unvested shares.
(7) Includes 159,100 shares held by Brendan Joseph Cassin and Isabel B. Cassin,
Trustees of the Cassin Family Trust, 25,000 shares held by Cassin Family
Partners, a California Limited Partnership, and 5,505 shares held by Mr.
Cassin as conservator for Robert J. Cassin. Includes 25,000 shares issuable
upon the exercise of stock options exercisable within 60 days of July 31,
1996, subject to repurchase of unvested shares.
(8) Includes 579,885 shares of Common Stock held by Coral Partners II and
315,476 shares of Common Stock held by Coral Partners IV. Mr. McNerney is a
General Partner of Coral Partners II and Coral Partners IV and disclaims
beneficial ownership of the shares held by such entities except to the
extent of his proportionate partnership interest therein.
(9) Includes 10,000 shares issuable upon the exercise of stock options
exercisable within 60 days of July 31, 1996, subject to repurchase of
unvested shares.
(10) Includes 12,452 shares of Common Stock held by Mr. Stickney as Trustee of
the Stickney Family Trust. Includes 20,000 shares issuable upon the
exercise of stock options exercisable within 60 days of July 31, 1996,
subject to repurchase of unvested shares.
(11) Includes information contained in the notes above, as applicable. Includes
45,700 shares of Common Stock held by Mr. Clayton, of which 28,333 are
subject to a right of repurchase in favor of the Company that expires
ratably through May 1999.
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<PAGE> 56
DESCRIPTION OF CAPITAL STOCK
Upon the closing of this offering, the authorized capital stock of the
Company will consist of 50,000,000 shares of Common Stock, par value $.001 per
share, and 5,000,000 shares of Preferred Stock, par value $.001 per share.
COMMON STOCK
As of July 31, 1996, there were 4,329,600 shares of Common Stock (including
Preferred Stock that will be converted into Common Stock upon the closing of
this offering) outstanding held of record by 217 stockholders.
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Subject to
preferences that may be applicable to any outstanding shares of the Preferred
Stock, the holders of Common Stock are entitled to receive ratably such
dividends as may be declared by the Board of Directors out of funds legally
available therefor. See "Dividend Policy." In the event of a liquidation,
dissolution or winding up of the Company, holders of the Common Stock are
entitled to share ratably in all assets remaining after payment of liabilities
and the liquidation preferences of any outstanding shares of Preferred Stock.
Holders of Common Stock have no preemptive rights and no right to convert their
Common Stock into any other securities. There are no redemption or sinking fund
provisions applicable to the Common Stock. All outstanding shares of Common
Stock are, and all shares of Common Stock to be outstanding upon the closing of
this offering will be, fully paid and nonassessable.
PREFERRED STOCK
Pursuant to the Company's Restated Certificate, the Board of Directors has
the authority, without further action by the stockholders, to issue up to
5,000,000 shares of Preferred Stock in one or more series and to fix the
designations, powers, preferences, privileges and relative participating,
optional or special rights and the qualifications, limitations or restrictions
thereof, including dividend rights, conversion rights, voting rights, terms of
redemption and liquidation preferences, any or all of which may be greater than
the rights of the Common Stock. The Board of Directors, without stockholder
approval, can issue Preferred Stock with voting, conversion or other rights that
could adversely affect the voting power and other rights of the holders of
Common Stock. Preferred Stock could thus be issued quickly with terms calculated
to delay or prevent a change in control of the Company or make removal of
management more difficult. Additionally, the issuance of Preferred Stock may
have the effect of decreasing the market price of the Common Stock and may
adversely affect the voting and other rights of the holders of Common Stock.
Upon the closing of this offering, there will be no shares of Preferred Stock
outstanding and the Company has no plans to issue any of the Preferred Stock.
ANTITAKEOVER EFFECTS OF PROVISIONS OF CHARTER DOCUMENTS AND DELAWARE LAW
Charter Documents. The Restated Certificate and Bylaws include a number of
provisions that may have the effect of deterring hostile takeovers or delaying
or preventing changes in control or management of the Company. First, the
Company's Board of Directors will be classified into three classes of directors.
See "Management -- Directors, Executive Officers and Other Key Employees." In
addition, the Restated Certificate provides that all stockholder action must be
effected at a duly called meeting of stockholders and not by a consent in
writing. Further, the Bylaws limit who may call special meetings of the
stockholders. The Company's Restated Certificate does not include a provision
for cumulative voting for directors. Under cumulative voting, a minority
stockholder holding a sufficient percentage of a class of shares may be able to
ensure the election of one or more directors. Finally, the Bylaws establish
procedures, including advance notice procedures, with regard to the nomination
of candidates for election as directors and stockholder proposals. These and
other provisions of the Restated Certificate and Bylaws could discourage
potential acquisition proposals and could delay or prevent a change in control
or management of the Company. See "Risk Factors -- Effects of Certain Charter
and Bylaw Provisions."
53
<PAGE> 57
Delaware Takeover Statutes. The Company is subject to the provisions of
Section 203 of the Delaware General Corporation Law. In general, the statute
prohibits a publicly held Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
For purposes of Section 203, a "business combination" includes a merger, asset
sale or other transaction resulting in a financial benefit to the interested
stockholder, and an "interested stockholder" is a person who, together with
affiliates and associates, owns (or within three years prior, did own) 15% or
more of the corporation's voting stock.
REGISTRATION RIGHTS
Pursuant to an agreement between the Company and the holders (or their
permitted transferees) of approximately 3,070,423 shares of Common Stock
("Holders"), the Holders are entitled to certain rights with respect to the
registration of such shares under the Securities Act. If the Company proposes to
register its Common Stock, subject to certain exceptions, under the Securities
Act, the Holders are entitled to notice of the registration and are entitled to
include, at the Company's expense, such shares therein, provided that the
managing underwriters have the right to limit the number of such shares included
in the registration. Registration rights with respect to this offering have been
waived. In addition, certain of the Holders may require the Company, on no more
than two occasions and, on one of such occasions, at the Company's expense, to
file a registration statement under the Securities Act with respect to their
shares of Common Stock. Such rights may not be exercised until six months after
the closing of this offering. Further, certain Holders, at their expense, may
require the Company to register the shares on Form S-3 when such form becomes
available to the Company, subject to certain conditions and limitations. Such
right expires on the tenth anniversary of the closing of this offering.
TRANSFER AGENT AND REGISTRAR
Norwest Bank Minnesota, National Association has been appointed as the
transfer agent and registrar for the Company's Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
Upon the closing of this offering, the Company will have outstanding
shares of Common Stock, based on the number of shares of Preferred
Stock and Common Stock outstanding as of July 31, 1996 and assuming no exercise
of the Underwriters' over-allotment option. Of these shares, all the shares sold
in this offering will be freely tradeable without restrictions or further
registration under the Securities Act. The remaining 4,329,600 shares of Common
Stock held by existing stockholders are Restricted Shares. Restricted Shares may
be sold in the public market only if registered or if they qualify for an
exemption from registration under Rules 144, 144(k) or 701 promulgated under the
Securities Act. As a result of contractual restrictions and the provisions of
Rule 144 and 701, additional shares will be available for sale in the public
market as follows: (i) no Restricted Shares will be eligible for immediate sale
on the date of this Prospectus, (ii) 4,183,413 Restricted Shares, 109,292 shares
of Common Stock issuable upon exercise of currently outstanding options and
35,478 shares of Common Stock issuable upon exercise of currently outstanding
warrants will be eligible for sale 180 days after the date of this Prospectus
upon expiration of lock-up agreements and (iii) the remainder of the Restricted
Shares will be eligible for sale from time to time thereafter upon expiration of
their respective two-year holding periods.
Each officer, director and substantially all stockholders of the Company
and holders of options to acquire Common Stock have agreed with the
representatives of the Underwriters for a period of 180 days after the effective
date of this Prospectus (the "Lock-Up Period"), subject to certain exceptions,
not to offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, or otherwise transfer or dispose of, directly or
indirectly, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock (whether such shares or any such
securities are then owned by such person or are thereafter acquired directly
from the
54
<PAGE> 58
Company), or to enter into any swap or similar arrangement that transfers, in
whole or in part, the economic risks of ownership of the Common Stock, without
the prior written consent of Morgan Stanley & Co. Incorporated.
As of July 31, 1996, there were 284,891 shares of Common Stock subject to
outstanding options. The Company intends to file registration statements under
the Securities Act to register shares of Common Stock reserved for issuance
under the Incentive Plan, thus permitting the sale of such shares by
non-Affiliates in the public market without restriction under the Securities
Act. Such registration statements will become effective immediately upon filing.
Holders of substantially all of these option shares have also entered into
agreements not to offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option for contract to sell, grant any
option, right or warrant to purchase, or otherwise transfer or dispose of,
directly or indirectly, any shares of Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock, or to enter into any swap
or similar agreement that transfers, in whole or in part, the economic risks of
ownership of the Common Stock, during the Lock-Up Period without the prior
written consent of Morgan Stanley & Co. Incorporated.
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, any holder, including an Affiliate of the Company,
of Restricted Shares as to which at least two years have elapsed since the later
of the date of the holder's acquisition of such shares from the Company or from
an Affiliate, would be entitled within any three-month period to sell a number
of shares that does not exceed the greater of 1% of the then outstanding shares
of Common Stock (approximately shares immediately after the closing of
this offering assuming no exercise of the Underwriters' over-allotment option)
or the average weekly trading volume of the Common Stock on the Nasdaq National
Market during the four calendar weeks preceding the date on which notice of the
sale is filed with the Commission. Sales under Rule 144 are subject to certain
requirements relating to manner of sale, notice and availability of current
public information about the Company. However, a person (or persons whose shares
are aggregated) who is not deemed to have been an Affiliate of the Company at
any time during the 90 days immediately preceding the sale and who beneficially
owns Restricted Shares is entitled to sell such shares under Rule 144(k) without
regard to the limitations described above, provided that at least three years
have elapsed since the later of the date the shares were acquired from the
Company or from an Affiliate of the Company. The foregoing is a summary of Rule
144 and is not intended to be a complete description of that rule.
Subject to certain limitations on the aggregate offering price of a
transaction and other conditions, Rule 701 may be relied upon with respect to
the resale of securities originally purchased from the Company by its employees,
directors, officers, consultants or advisers prior to the closing of this
offering, pursuant to written compensatory benefit plans or written contracts
relating to the compensation of such persons. In addition, the Commission has
indicated that Rule 701 will apply to stock options granted by the Company
before this offering, along with the shares acquired upon exercise of such
options. Securities issued in reliance on Rule 701 are deemed to be Restricted
Shares and, beginning 90 days after the date of this Prospectus (unless subject
to the contractual restrictions described above), may be sold by persons other
than Affiliates, subject only to the manner of sale provisions of Rule 144 and
by Affiliates under Rule 144 without compliance with its two-year minimum
holding period requirements.
Prior to this offering, there has been no public market for the Company's
Common Stock, and there can be no assurance that an active public market for the
Common Stock will develop or will continue after this offering or that the
market price of the Common Stock will not decline below the initial public
offering price. Future sales of substantial amounts of Common Stock in the
public market could adversely affect market prices prevailing from time to time.
As described herein, only a limited number of shares will be available for sale
shortly after this offering because of certain contractual and legal
restrictions on resale. Sales of substantial amounts of Common Stock of the
Company in the public market after the restrictions lapse could adversely affect
the prevailing market price and the ability of the Company to raise equity
capital in the future.
55
<PAGE> 59
UNDERWRITERS
Under the terms and subject to the conditions contained in an Underwriting
Agreement, the Underwriters named below, for whom Morgan Stanley & Co.
Incorporated and Alex. Brown & Sons Incorporated are serving as Representatives,
have severally agreed to purchase, and the Company has agreed to sell to the
Underwriters, the respective numbers of shares of Common Stock set forth
opposite their respective names below:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
----------------------------------------------------------------- ----------
<S> <C>
Morgan Stanley & Co. Incorporated................................
Alex. Brown & Sons Incorporated..................................
----------
Total..................................................
==========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of Common Stock
offered hereby are subject to the approval of certain legal matters by counsel
and to certain other conditions. The Underwriters are obligated to take and pay
for all of the shares of Common Stock offered hereby (other than those covered
by the over-allotment option described below) if any such shares are taken.
The Underwriters initially propose to offer part of the shares of Common
Stock offered hereby directly to the public at the public offering price set
forth on the cover page hereof and part to certain dealers at a price that
represents a concession not in excess of $ per share. Any Underwriter
may allow, and such dealers may reallow, a concession not in excess of
$ per share to other Underwriters or to certain other dealers.
The Company has granted to the Underwriters an option, exercisable for 30
days from the date of this Prospectus, to purchase up to additional
shares of Common Stock at the initial public offering price set forth on the
cover page hereof, less underwriting discounts and commissions. The Underwriters
may exercise such option to purchase solely for the purpose of covering
over-allotments, if any, incurred in the sale of the shares of Common Stock
offered hereby. To the extent such option is exercised, each Underwriter will
become obligated, subject to certain conditions, to purchase approximately the
same percentage of such additional shares as the number set forth next to such
Underwriter's name in the preceding table bears to the total number of shares of
Common Stock offered hereby to the Underwriters.
The Representatives of the Underwriters have informed the Company that the
Underwriters do not intend to confirm sales in excess of five percent of the
number of shares of Common Stock offered hereby to accounts over which they
exercise discretionary authority.
The Company and the Underwriters have agreed to indemnify each other
against certain liabilities, including liabilities under the Securities Act.
The Company has agreed that, without the prior written consent of Morgan
Stanley & Co. Incorporated, it will not offer, sell, contract to sell, or
otherwise dispose of any shares of Common Stock, for a period of 180 days after
the date of this Prospectus, other than any shares of Common Stock issued upon
the exercise of an option or warrant. In addition, in connection with the
offering, the Company, its executive officers and directors and certain existing
stockholders of the Company, who will own an aggregate of approximately
million shares of Common Stock after the offering, have agreed that,
without the prior written consent of Morgan Stanley & Co. Incorporated on behalf
of the Underwriters, they will not (a) offer, pledge, sell, contract to sell,
sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase, or otherwise transfer or
dispose of, directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock (whether such
shares or any such securities are then owned by such person or are thereafter
acquired directly from the Company), or (b) enter into any swap or similar
arrangement that transfers, in whole or in part, the economic risk of ownership
of the Common Stock, whether any such transaction described in clause (a) or (b)
of this paragraph is to be settled by delivery of such Common Stock or such
other securities, in cash or otherwise, for
56
<PAGE> 60
a period of 180 days after the date of this Prospectus, other than (i) as a bona
fide gift or gifts, (ii) by will or intestacy to the undersigned's immediate
family or to a trust the beneficiaries of which are exclusively the undersigned
and/or a member or members of his or her immediate family, (iii) as a
distribution to limited partners or shareholders of the undersigned, or (iv)
with the prior written consent of Morgan Stanley & Co. Incorporated; provided
that a gift, transfer or distribution pursuant to clause (i), (ii) or (iii)
above shall be conditioned upon such donee, transferee or distributee executing
and delivering a copy of this Lock-up Agreement to Morgan Stanley & Co.
Incorporated.
The Underwriters have reserved for sale, at the initial public offering
price, up to 6% of the Common Stock offered hereby for employees and directors
of the Company and certain other individuals who have expressed an interest in
purchasing such shares of Common Stock in the offering. The number of shares
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 other
shares offered hereby.
PRICING OF THE OFFERING
Prior to this offering, there has been no public market for the Common
Stock. The initial public offering price will be determined by negotiation among
the Company and the Representatives of the Underwriters. Among the factors to be
considered in determining the initial public offering price, in addition to
prevailing market and economic conditions, will be the future prospects of the
Company (including the prospects for, and timing of, future revenues) and its
industry in general, sales, earnings and certain other financial and operating
information of the Company in recent periods, an assessment of the Company's
management, the present stage of the Company's development and clinical and
regulatory status, and the price-earnings ratios, price-sales ratios, market
prices of securities and certain financial and operating information of
companies engaged in activities similar to those of the Company. The estimated
initial public offering price range set forth on the cover page of this
Preliminary Prospectus is subject to change as a result of market conditions and
other factors.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by its counsel, Cooley Godward Castro Huddleson & Tatum
("Cooley Godward"), San Francisco, California. Certain legal matters will be
passed upon for the Underwriters by Wilson, Sonsini, Goodrich & Rosati, P.C.,
Palo Alto, California. As of the date of this Prospectus, GC&H Investments, an
investment partnership composed of certain partners of and persons associated
with Cooley Godward, beneficially owned 15,359 shares of Common Stock of the
Company.
EXPERTS
The financial statements of Cerus Corporation as of 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 statements in this Prospectus under the captions "Risk
Factors -- Patent and License Uncertainties," "Business -- Patents, Licenses and
Proprietary Rights" and other references herein to intellectual property of the
Company have been reviewed and approved by Medlen & Carroll, patent counsel for
the Company, as experts on such matters, and are included herein in reliance
upon that review and approval. As of the date of this Prospectus, certain
members of Medlen & Carroll beneficially owned 47,409 shares of Common Stock of
the Company.
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<PAGE> 61
ADDITIONAL INFORMATION
A Registration Statement on Form S-1, including amendments thereto,
relating to the shares of Common Stock offered hereby has been filed by the
Company with the Commission under the Securities Act. This Prospectus does not
contain all of the information set forth in the Registration Statement and the
exhibits and schedules thereto. Statements contained in this Prospectus as to
the contents of any contract or other document referred to are not necessarily
complete and, in each instance, reference is made to the copy of such contract
or other document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference. For further
information with respect to the Company and the Common Stock offered hereby,
reference is made to such Registration Statement, exhibits and schedules. A copy
of the Registration Statement may be inspected by anyone without charge at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Judiciary Plaza, Washington, D.C. 20549, and copies of all or any part
thereof may be obtained from those offices upon the payment of certain fees
prescribed by the Commission. The Commission maintains a World Wide Web site
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. The address
of the site is http://www.sec.gov.
58
<PAGE> 62
CERUS CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors..................................... F-2
Balance Sheets........................................................................ F-3
Statements of Operations.............................................................. F-4
Statements of Stockholders' Equity (Deficit).......................................... F-5
Statements of Cash Flows.............................................................. F-6
Notes to Financial Statements......................................................... F-8
</TABLE>
F-1
<PAGE> 63
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Cerus Corporation
We have audited the accompanying balance sheets of Cerus Corporation as of
December 31, 1994 and 1995, and the related 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Cerus Corporation at
December 31, 1994 and 1995, and the 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.
Walnut Creek, California
April 3, 1996, except for Note 7
as to which the date is July 24, 1996
The foregoing report is in the form that will be signed upon the completion
of the stock split and reincorporation in Delaware as described in Note 7.
/s/ Ernst & Young LLP
Walnut Creek, California
September 3, 1996
F-2
<PAGE> 64
CERUS CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
UNAUDITED
DECEMBER 31, PRO FORMA
--------------------------- JUNE 30, STOCKHOLDERS'
1994 1995 1996 EQUITY AT
----------- ----------- ------------ JUNE 30,
1996
(UNAUDITED) ------------
(NOTE 7)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................. $ 7,802,275 $ 9,659,017 $ 8,760,884
Other current assets....................... 313,603 258,583 213,752
----------- ----------- ------------
Total current assets......................... 8,115,878 9,917,600 8,974,636
Furniture and equipment at cost:
Laboratory and office equipment............ 317,744 508,384 639,146
Leasehold improvements..................... 1,427,520 1,440,863 1,440,863
----------- ----------- ------------
1,745,264 1,949,247 2,080,009
Less accumulated depreciation.............. 356,720 686,427 919,301
----------- ----------- ------------
Net furniture and equipment.................. 1,388,544 1,262,820 1,160,708
Other assets................................. 179,873 168,429 145,472
----------- ----------- ------------
Total assets................................. $ 9,684,295 $11,348,849 $ 10,280,816
=========== =========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................... $ 503,725 $ 257,610 $ 557,963
Accrued compensation and related
expenses................................ 163,600 355,511 152,575
Accrued third-party toxicology and
development expenses.................... 586,383 -- 796,565
Other accrued expenses..................... 10,766 42,348 273,030
Deferred revenue........................... 933,241 1,900,504 599,084
Current portion of capital lease
obligations............................. 53,067 98,230 115,966
----------- ----------- ------------
Total current liabilities.................... 2,250,782 2,654,203 2,495,183
Deferred revenue............................. 1,900,504 -- --
Capital lease obligations, less current
portion.................................... 93,811 32,007 36,499
Stockholders' equity:
Preferred stock, $.001 par value;
3,199,942 shares authorized
(5,000,000 pro forma):
issuable in series: 2,091,593,
2,620,677, and 2,811,154 shares issued
and outstanding at December 31, 1994,
December 31, 1995 and June 30, 1996,
respectively (none pro forma); aggregate
liquidation preference of $18,485,267
and $21,485,264 at December 31, 1995 and
June 30, 1996, respectively............. 2,092 2,621 2,811 $ --
Common stock, $.001 par value; 4,681,833
shares authorized (50,000,000 pro
forma): 961,410, 964,555 and 1,294,655
shares issued and outstanding at 1994,
1995 and 1996, respectively (4,105,808
shares issued and outstanding pro
forma).................................. 961 964 1,295 4,106
Additional paid-in capital................. 13,155,359 18,738,589 22,426,014 22,426,014
Deferred compensation...................... -- -- (444,421) (444,421)
Notes receivable from stockholders......... (80,588) (80,588) (80,087) (80,087)
Accumulated deficit........................ (7,638,626) (9,998,947) (14,156,478) (14,156,478)
----------- ----------- ------------ ------------
Total stockholders' equity................... 5,439,198 8,662,639 7,749,134 $ 7,749,134
============
----------- ----------- ------------
Total liabilities and stockholders' equity... $ 9,684,295 $11,348,849 $ 10,280,816
=========== =========== ============
</TABLE>
See accompanying notes.
F-3
<PAGE> 65
CERUS CORPORATION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------------------- ---------------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
Licenses, milestones and
development funding......... $ 200,000 $ 3,901,419 $ 6,047,579 $ 2,415,666 $ 2,104,790
Government grants.............. 30,000 894,929 751,356 319,156 500,931
----------- ----------- ----------- ----------- -----------
Total revenue.................... 230,000 4,796,348 6,798,935 2,734,822 2,605,721
Operating expenses:
Research and development....... 2,484,994 5,680,263 8,125,311 4,962,972 5,981,660
General and administrative..... 1,210,357 1,193,838 1,517,152 626,893 1,009,469
----------- ----------- ----------- ----------- -----------
Total operating expenses......... 3,695,351 6,874,101 9,642,463 5,589,865 6,991,129
----------- ----------- ----------- ----------- -----------
Loss from operations............. (3,465,351) (2,077,753) (2,843,528) (2,855,043) (4,385,408)
Other income (expense):
Interest income................ 25,886 320,681 500,028 241,844 236,179
Interest expense............... (76,001) (43,017) (16,821) (7,701) (8,302)
----------- ----------- ----------- ----------- -----------
Total other income (expense)..... (50,115) 277,664 483,207 234,143 227,877
----------- ----------- ----------- ----------- -----------
Net loss......................... $(3,515,466) $(1,800,089) $(2,360,321) $(2,620,900) $(4,157,531)
=========== =========== =========== =========== ===========
Pro forma net loss per share..... $ (0.55) $ (0.93)
=========== ===========
Shares used in computing pro
forma net loss per share....... 4,314,045 4,491,454
=========== ===========
</TABLE>
See accompanying notes.
F-4
<PAGE> 66
CERUS CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
NOTES
PREFERRED STOCK COMMON STOCK ADDITIONAL RECEIVABLE TOTAL
------------------ ------------------ PAID-IN DEFERRED FROM ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION STOCKHOLDERS DEFICIT EQUITY (DEFICIT)
--------- ------ --------- ------ ----------- ------------ ------------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances
at December
31, 1993... 1,125,000 $1,125 1,020,000 $1,020 $ 5,411,557 $ -- $(91,552) $ (5,838,537) $ (516,387)
Issuance of
common
stock... -- -- 4,000 4 3,196 -- -- -- 3,200
Repurchase
of common
stock through
cancellation
of notes
receivable... -- -- (62,590) (63) (6,196) -- 6,259 -- --
Issuance
of Series C
convertible
preferred
stock, net
of issuance
costs of
$59,912... 966,540 967 -- -- 7,671,441 -- -- -- 7,672,408
Issuance
of warrants
to purchase
Series C
preferred
stock... -- -- -- -- 75,000 -- -- -- 75,000
Exercise
of warrants
to purchase
Series C
preferred
stock... 53 -- -- -- 361 -- -- -- 361
Payment on
notes
receivable... -- -- -- -- -- -- 4,705 -- 4,705
Net loss... -- -- -- -- -- -- -- (1,800,089) (1,800,089)
--------- ------ --------- ------ ----------- -------- -------- ----------- ------------
Balances at
December 31,
1994....... 2,091,593 2,092 961,410 961 13,155,359 -- (80,588) (7,638,626) 5,439,198
Exercise
of stock
options... -- -- 3,145 3 1,683 -- -- -- 1,686
Issuance
of Series
D convertible
preferred
stock, net
of issuance
costs of
$60,806... 529,084 529 -- -- 5,494,047 -- -- -- 5,494,576
Issuance
of warrants
to purchase
Series D
preferred stock... -- -- -- -- 87,500 -- -- -- 87,500
Net loss... -- -- -- -- -- -- -- (2,360,321) (2,360,321)
--------- ------ --------- ------ ----------- --------- -------- ------------ ------------
Balances
at December
31, 1995... 2,620,677 2,621 964,555 964 18,738,589 -- (80,588) (9,998,947) 8,662,639
Exercise
of stock
options
(unaudited)... -- -- 330,100 331 250,816 -- -- -- 251,147
Issuance
of Series
E convertible
referred
stock, net
of issuance
costs of
$93,417
(unaudited)... 190,477 190 -- -- 2,906,394 -- -- -- 2,906,584
Payment on
notes
receivable
(unaudited)... -- -- -- -- -- -- 501 -- 501
Deferred
compensation
(unaudited)... -- -- -- -- 530,215 (444,421) -- -- 85,794
Net l
(unaudited)... -- -- -- -- -- -- -- (4,157,531) (4,157,531)
--------- ------ --------- ------ ----------- --------- -------- ------------- -------------
Balance
at June 30,
1996
(unaudited)... 2,811,154 $2,811 1,294,655 $1,295 $22,426,014 $(444,421) $(80,087) $(14,156,478) $ 7,749,134
========= ====== ========= ====== =========== ========= ======== ============ ============
</TABLE>
See accompanying notes.
F-5
<PAGE> 67
CERUS CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
--------------------------------------- -------------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss................................. $(3,515,466) $(1,800,089) $(2,360,321) $(2,620,900) $(4,157,531)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Depreciation and amortization.......... 131,447 269,954 369,267 163,144 236,404
Amortization of deferred
compensation........................ -- -- -- -- 85,794
Common stock issued for consulting
services............................ 4,557 3,200 -- -- --
Issuance of preferred stock for payment
of interest......................... -- 33,210 -- -- --
Changes in operating assets and
liabilities:
Other current assets................ (20,297) (162,134) 72,220 38,617 44,831
Other assets........................ 63,525 (7,157) 42,184 47,553 19,427
Accounts payable.................... (88,506) 367,699 (246,115) (104,393) 300,353
Accrued compensation and related
expenses.......................... 16,317 133,788 191,911 (71,224) (202,936)
Accrued third-party toxicology and
development expenses.............. -- 586,383 (586,383) (345,557) 796,565
Other accrued expenses.............. 44,413 (8,334) 31,582 54,777 230,682
Income taxes payable................ 68,140 (68,140) -- -- --
Deferred revenue.................... 5,000,000 (2,166,255) (933,241) (323,497) (1,301,420)
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in) operating
activities............................. 1,704,130 (2,817,875) (3,418,896) (3,161,480) (3,947,831)
INVESTING ACTIVITIES
Purchases of furniture and equipment..... (280,649) (989,656) (124,359) (84,949) (20,928)
----------- ----------- ----------- ----------- -----------
Net cash used in investing activities.... (280,649) (989,656) (124,359) (84,949) (20,928)
FINANCING ACTIVITIES
Net proceeds from sale of preferred
stock.................................. 2,430,600 5,569,026 5,494,576 5,494,576 2,906,584
Proceeds from issuance of common stock... 1,995 -- 1,686 -- 251,147
Payments on notes receivable from
shareholders........................... -- 4,705 -- -- 501
Proceeds from convertible notes
payable................................ 1,994,698 -- -- -- --
Payments on capital lease obligations.... -- (40,157) (96,265) (25,695) (87,606)
----------- ----------- ----------- ----------- -----------
Net cash provided by financing
activities............................. 4,427,293 5,533,574 5,399,997 5,468,881 3,070,626
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents............................ 5,850,774 1,726,043 1,856,742 2,222,452 (898,133)
Cash and cash equivalents, beginning of
period................................. 225,458 6,076,232 7,802,275 7,802,275 9,659,017
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents, end of
period................................. $ 6,076,232 $ 7,802,275 $ 9,659,017 $10,024,727 $ 8,760,884
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes.
F-6
<PAGE> 68
CERUS CORPORATION
STATEMENTS OF CASH FLOWS -- (CONTINUED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
--------------------------------------- -------------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Supplemental disclosures:
Interest paid.......................... $ 1,162 $ -- $ 16,821 $ 7,701 $ 8,302
=========== =========== =========== =========== ===========
Income taxes paid...................... $ -- $ 68,140 $ -- $ -- $ --
=========== =========== =========== =========== ===========
Supplemental schedule of noncash
investing and financing activities:
Repurchase of common stock through
cancellation of notes receivable.... $ -- $ 6,259 $ -- $ -- $ --
=========== =========== =========== =========== ===========
Issuance of preferred stock warrants in
connection with an operating lease
line................................ $ 29,600 $ 75,000 $ 87,500 $ 87,500 $ --
=========== =========== =========== =========== ===========
Issuance of Series C preferred stock in
exchange for convertible notes
payable and accrued interest........ $ -- $ 2,070,533 $ -- $ -- $ --
=========== =========== =========== =========== ===========
Capital lease obligations incurred..... $ -- $ 187,035 $ 79,624 $ -- $ 109,834
=========== =========== =========== =========== ===========
Deferred compensation related to stock
option grants....................... $ -- $ -- $ -- $ -- $ 530,215
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes.
F-7
<PAGE> 69
CERUS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AT JUNE 30, 1996 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
1. THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
Cerus Corporation (the "Company"), incorporated in California on September
19, 1991 as Steritech, Inc., is developing systems designed to improve the
safety of blood transfusions by inactivating infectious pathogens in transfusion
blood components (platelets, fresh frozen plasma ("FFP") and red blood cells)
and inhibiting the leukocyte (white blood cell) activity that is responsible for
certain adverse immune and other transfusion-related reactions. The Company has
entered into two development and commercialization agreements with Baxter
Healthcare Corporation ("Baxter") to develop, manufacture and market, these
pathogen inactivation systems. The Company has not received any revenues from
product sales, and all revenues recognized by the Company to date have resulted
from the Company's agreements with Baxter and federal research grants. The
Company will be required to conduct significant research, development, testing
and regulatory compliance activities on its pathogen inactivation systems that,
together with anticipated general and administrative expenses, are expected to
result in substantial additional losses.
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 reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
INTERIM FINANCIAL INFORMATION
The financial information at June 30, 1996 and for the six-month periods
ended June 30, 1995 and 1996 is unaudited, but includes all adjustments that the
Company considers necessary for a fair presentation of the financial information
set forth therein, in accordance with generally accepted accounting principles.
The results for the six months ended June 30, 1996 should not be considered
indicative of the results to be expected for any future period or for the entire
year ended December 31, 1996.
REVENUES AND RESEARCH AND DEVELOPMENT EXPENSES
Revenues related to the cost reimbursement provisions under development
contracts are recognized as the costs on the project are incurred. Revenues
related to milestones specified under development contracts are recognized as
the milestones are achieved. Prepaid license fees, included in deferred revenue,
are recognized as revenues on a pro rata basis upon achievement of milestones.
Research and development costs are expensed as incurred.
The Company receives certain United States government grants which support
the Company's research effort in defined research projects. These grants
generally provide for reimbursement of approved costs incurred as defined in the
various grants. Revenues associated with these grants are recognized as costs
under each grant are incurred.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with maturities less
than three months when purchased to be cash and cash equivalents. Substantially
all of the Company's cash and cash equivalents are maintained by two major
financial institutions.
F-8
<PAGE> 70
CERUS CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AT JUNE 30, 1996 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
DEPRECIATION AND AMORTIZATION
Depreciation on equipment is calculated on a straight-line basis over the
estimated useful lives of the assets (principally five years for laboratory
equipment and furniture and three years for office equipment). Leasehold
improvements are amortized on a straight-line basis over the shorter of the
lease term or the estimated useful lives of the improvements.
STOCK-BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"). The Company will adopt SFAS 123 in 1996. It is the
Company's intention to continue to account for employee stock options in
accordance with Accounting Principles Board Opinion No. 25 and to adopt the
"disclosure only" alternative described in SFAS 123.
INCOME TAXES
The Company accounts for income taxes based upon Financial Accounting
Standards Board Statement No. 109, "Accounting for Income Taxes." Under this
method, deferred tax assets and liabilities are determined based on differences
between the financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
NET LOSS PER SHARE
Net loss per share is computed using the weighted average number of shares
of common stock outstanding. Common stock equivalent shares from convertible
preferred stock and from stock options and warrants are not included as the
effect is anti-dilutive. Pursuant to the Securities and Exchange Commission
Staff Accounting Bulletins, common and common equivalent shares (stock options,
warrants and preferred stock) issued by the Company at prices below the initial
public offering price during the twelve-month period prior to the initial public
offering have been included in the calculation as if they were outstanding for
all periods presented (using the treasury stock method at the estimated initial
public offering price for stock options and warrants and the as-if-converted
method for preferred stock). Per share information calculated on the above basis
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 loss per share........... $ (1.83) $ (0.95) $ (1.26) $ (1.40) $ (2.22)
========== ========== ========== ========== ==========
Shares used in computing net
loss per share............. 1,920,222 1,888,495 1,869,729 1,868,680 1,870,777
========== ========== ========== ========== ==========
</TABLE>
PRO FORMA NET LOSS PER SHARE
Pro forma net loss per share has been computed as described above and also
gives effect, even if antidilutive, to common equivalent shares from convertible
preferred shares that will automatically convert to common shares upon the
closing of the Company's initial public offering (using the as-if-converted
method).
F-9
<PAGE> 71
CERUS CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AT JUNE 30, 1996 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
2. LICENSING AGREEMENTS
In December 1993, the Company entered into a development, manufacturing and
marketing agreement with Baxter relating to the development of a system for the
inactivation of pathogens in the platelet component of human blood (the
"Platelet System"). The agreement grants to Baxter the exclusive right to market
and distribute the Platelet System throughout the world, subject to certain
conditions.
In 1993, under the terms of the agreement, the Company received $5.2
million in license fees and milestone and development payments. In 1994 and
1995, the Company received milestone and development payments from Baxter under
this agreement totaling $1.7 million and $2.5 million, respectively. Under this
agreement, the Company is to receive a specified percentage of revenues from
sales of inactivation system disposables after deducting from such revenues the
amount by which Baxter's and the Company's cost of goods for the inactivation
system disposables exceeds certain dollar amounts specified in the agreement.
In July 1995, the Company entered into two interim research funding
agreements with Baxter relating to the development of certain technologies for
the pathogen inactivation of the red cell and FFP components of human blood.
Under the terms of these agreements, the Company received cash proceeds of
$2,580,000 in 1995 to be used for certain incurred and future research and
development expenses.
On April 1, 1996, the Company entered into a development, manufacturing and
marketing agreement with Baxter to develop pathogen inactivation systems for
blood components and products other than platelets. The agreement grants Baxter
the exclusive right to market and distribute the systems throughout the world,
subject to certain conditions. The agreement specifies two initial programs for
pathogen inactivation systems for red cells and FFP. These programs are under
development by the Company. The costs incurred during 1996 on these two programs
will be funded by the Company. Subsequent costs will be shared equally by the
parties upon approval to commence Phase 3 clinical trials for the Platelet
System. Under this agreement, the Company and Baxter are to share gross profits
from sales of inactivation systems after deducting from such gross profits a
specified percentage allocation to be retained by the marketing party for
marketing and administrative expenses. Either party may terminate work on any or
all projects with 90 days written notice. Neither party, however, may terminate
work on the red cell or plasma projects prior to January 1, 1998.
Under the terms of this agreement, Baxter purchased 190,477 shares of
Series E preferred stock at $15.75 per share for $3,000,000 in cash on April 1,
1996, and an additional 190,476 shares of Series E preferred stock on July 1,
1996 at $15.75 per share for $3,000,000 in cash. Subject to certain limitations,
Baxter is also required to purchase specified amounts of equity upon achievement
by the Company of certain milestones, as defined in the agreement. If the
Company is publicly traded at the time of these required purchases, Baxter will
purchase common shares at 20% above fair market value, as defined in the
agreement.
Revenue relating to licenses, milestones and development funding for all
periods presented are as a result of agreements with Baxter.
3. LEASES
The Company leases its office facilities and certain equipment under
non-cancelable operating leases with initial terms in excess of one year which
require the Company to pay operating costs, property taxes, insurance and
maintenance. These facility leases generally contain renewal options and
provisions adjusting the lease payments.
In 1994, the Company entered into various capital lease agreements for
laboratory and office equipment. Capital lease obligations represent the present
value of future rental payments under these leases. The original
F-10
<PAGE> 72
CERUS CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AT JUNE 30, 1996 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
cost and accumulated amortization on the equipment under capital leases is
$187,035 and $37,408, respectively, at December 31, 1994 and $266,659 and
$71,465, respectively, at December 31, 1995.
Future minimum payments under capital and operating leases are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
YEAR ENDING DECEMBER 31, LEASES LEASES
- --------------------------------------------------------------------- -------- ----------
<S> <C> <C>
1996............................................................ $106,490 $ 625,112
1997............................................................ 33,215 540,517
1998............................................................ -- 356,995
1999............................................................ -- 140,209
2000............................................................ -- --
-------- ----------
Total minimum lease payments.................................. 139,705 $1,662,833
==========
Amount representing interest.................................... 9,468
--------
Present value of net minimum lease payments..................... 130,237
Current portion................................................. 98,230
--------
Long-term portion............................................... $ 32,007
========
</TABLE>
Rent expense for office facilities and certain equipment was $460,783,
$602,662, and $801,632 for the years ended December 31, 1993, 1994 and 1995,
respectively.
4. STOCKHOLDERS' EQUITY
PREFERRED STOCK
Preferred stock consists of the following:
<TABLE>
<CAPTION>
SHARES DESIGNATED SHARES ISSUED AND OUTSTANDING
--------------------------------- ---------------------------------
DECEMBER 31, DECEMBER 31,
--------------------- JUNE 30, --------------------- JUNE 30,
1994 1995 1996 1994 1995 1996
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Series A...................... 761,079 761,079 761,079 714,286 714,286 714,286
Series B...................... 305,461 305,461 305,461 285,714 285,714 285,714
Series C...................... 1,147,449 1,147,449 1,147,449 1,091,593 1,091,593 1,091,593
Series D...................... -- 605,000 605,000 -- 529,084 529,084
Series E...................... -- -- 380,953 -- -- 190,477
---------- ---------- ---------- ---------- ---------- ----------
2,213,989 2,818,989 3,199,942 2,091,593 2,620,677 2,811,154
========== ========== ========== ========== ========== ==========
</TABLE>
CONVERTIBLE PREFERRED STOCK
Holders of Series A, B, C, D and E convertible preferred stock are entitled
to receive non-cumulative, annual dividends of $0.46, $0.61, $0.96, $1.26 and
$1.89 per share, respectively, prior to any dividends on common stock. Subject
to certain conversion price provisions, each share of preferred stock is
convertible into one share of common stock at the option of the stockholders.
Preferred stockholders are entitled to the number of votes equal to the number
of shares of common stock into which the preferred stock is convertible. Shares
automatically convert upon the closing of an initial public offering of common
stock with a per share price of
F-11
<PAGE> 73
CERUS CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AT JUNE 30, 1996 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
at least $13.13 per share and with net cash proceeds to the Company of at least
$10,000,000 or at any time more than two-thirds of the shares of preferred stock
authorized, issued and outstanding have been converted.
In the event of liquidation, dissolution, or winding up of the Company,
holders of Series A, B, C, D and E convertible preferred stock have a
liquidation preference over holders of common stock equal to $3.85, $5.075,
$8.00, $10.50 and $15.75 per share, respectively, plus any declared but unpaid
dividends (none as of June 30, 1996). Any remaining assets would be distributed
pro rata to holders of common and preferred shares on an as-converted basis
until the preferred stockholders of Series A, B, C, D and E receive an aggregate
of $15.40, $20.30, $32.00, $31.50 and $15.75, respectively, inclusive of the
respective liquidation preference amounts referred to above.
1992 STOCK OPTION PLAN
In January 1992, the Company's Board of Directors approved the 1992 Stock
Option Plan (the "Plan"), which provides for the grant of stock options to
purchase up to 400,000 of the Company's common stock. An additional 300,000
shares were reserved under the Plan for future grant by the Company's Board of
Directors in 1996. Under the Plan, two types of options may be granted:
Incentive Stock Options ("ISOs") and Non-Qualified Stock Options ("NQSOs"). The
ISOs may be granted at a price per share not less than the fair market value at
the date of grant. The NQSOs may be granted at a price per share not less than
85% of the fair market value at the date of grant. The option term is 10 years.
Vesting, as determined by the Board of Directors, generally occurs ratably over
four years. In the event option holders cease to be employed by the Company,
except in the event of death or disability or as otherwise provided in the
option grant, all unvested options are forfeited and all vested options must be
exercised within a three-month period, otherwise the options are forfeited.
Options granted are immediately exercisable, and unvested (but issued) shares
are subject to repurchase by the Company if the holder is no longer employed by
the Company. As of June 30, 1996, 132,346 shares were subject to this repurchase
provision.
Activity under the Plan is set forth below:
<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
-----------------------------
NUMBER OF
SHARES PRICE PER SHARE
--------- ---------------
<S> <C> <C>
Balances at December 31, 1993...................................... 161,590 $.385-.5065
Granted.......................................................... 180,360 .800
Cancelled........................................................ (3,000) .800
-------- -----------
Balances at December 31, 1994...................................... 338,950 .385- .800
Granted.......................................................... 51,500 1.05
Cancelled........................................................ (43,055) .385- .800
Exercised........................................................ (3,145) .385- .800
-------- -----------
Balances at December 31, 1995...................................... 344,250 .385- 1.05
Granted.......................................................... 274,741 1.05- 6.00
Cancelled........................................................ (4,000) .385- 1.05
Exercised........................................................ (330,100) 1.05- 4.00
-------- -----------
Balances at June 30, 1996.......................................... 284,891 $.385- 6.00
======== ===========
</TABLE>
F-12
<PAGE> 74
CERUS CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AT JUNE 30, 1996 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
At December 31, 1995, options to purchase 204,262 shares of common stock
were exercisable at prices ranging from $.385-$1.05. At June 30, 1996, options
to purchase 258,709 shares of common stock were exercisable at prices ranging
from $.385-$1.05 and options to purchase 81,864 shares of common stock were
available for future grant.
The Company recognized deferred compensation of $444,421 for the difference
between the exercise price and deemed fair value of certain stock options
granted during the six months ended June 30, 1996. This amount is being
amortized by periodic charges to operations over the four year vesting periods
of the individual options. Amortization expense related to deferred compensation
totaled $85,794 for the six-month period ended June 30, 1996.
WARRANTS
The Company had the following warrants outstanding at December 31, 1995 to
purchase shares of preferred stock:
<TABLE>
<CAPTION>
NUMBER PREFERRED EXERCISE DATE
OF SHARES STOCK PRICE PER SHARE ISSUED
- --------- --------- --------------- ------ EXPIRATION OF WARRANTS
-----------------------------------------------
At the earlier of:
<C> <C> <C> <C> <S>
May 2002 or five years after initial public
20,779 Series A $ 3.85 5/92 offering
July 2003 or five years after initial public
3,949 Series B $ 5.07 7/93 offering
15,798 Series B $ 5.07 5/94 May 1998 or initial public offering
17,517 Series C $ 6.80 5/94 August 1998 or initial public offering
May 2004 or five years after initial public
6,250 Series C $ 8.00 5/94 offering
April 2005 or five years after initial public
4,500 Series D $ 10.50 4/95 offering
68,793
</TABLE>
In May 1993 and August 1993, the Company entered into convertible note
payable agreements with investors for $1,994,698 cash with the principal amount
of the notes bearing interest at 8% per annum. The notes were due on demand.
Additionally, the note holders were issued warrants to purchase 15,798 and
17,570 shares of Series B and Series C preferred stock, respectively, which are
included above less any redeemed warrants. The purchase price for the warrants
was $.001 per warrant. In March 1994, these note holders converted their notes
and accrued interest, together with an additional $3,550,321 in cash, for
706,758 shares of Series C preferred stock for $8.00 per share. In September
1994, 53 shares under the Series C warrant were exercised at $6.80 per share.
All of the remaining warrants were issued in connection with an operating lease
line. No value has been ascribed to the above warrant issuances.
F-13
<PAGE> 75
CERUS CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AT JUNE 30, 1996 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
5. INCOME TAXES
Significant components of the Company's deferred tax assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1994 1995
----------- -----------
<S> <C> <C>
Net operating loss carryforward................................... $ 1,600,000 $ 2,600,000
Research and development credit carryforward...................... 300,000 400,000
Deferred revenue.................................................. 1,100,000 800,000
Capitalized research and development.............................. 100,000 300,000
Other............................................................. 100,000 100,000
----------- -----------
Gross deferred tax assets......................................... 3,200,000 4,200,000
Valuation allowance............................................... (3,200,000) (4,200,000)
----------- -----------
Net deferred tax assets........................................... $ -- $ --
=========== ===========
</TABLE>
The valuation allowance increased by $692,000 and $1,000,000 for the fiscal
years ended in 1994 and 1995, respectively.
At December 31, 1995, the Company had net operating loss carryforwards of
approximately $7,200,000 for federal and $1,800,000 for state income tax
purposes. The Company also had research and development tax credit carryforwards
of approximately $300,000 for federal income tax purposes at December 31, 1995.
The federal net operating loss and tax credit carryforwards expire between the
years 2007 and 2010. The state net operating loss expires in 2000.
Utilization of the Company's net operating losses and credits are subject
to a substantial annual limitation due to the ownership change limitations
provided by the Internal Revenue Code. The annual limitation may result in the
expiration of net operating losses and credits before utilization.
6. RETIREMENT PLAN
The Company maintains a defined contribution savings plan (the "401(k)
Plan") that qualifies under the provisions of Section 401(k) of the Internal
Revenue Code and covers all employees of the Company. Under the terms of the
401(k) Plan, employees may contribute varying amounts of their annual
compensation. The Company may contribute a discretionary percentage of qualified
individual employee's salaries, as defined, to the 401(k) Plan. Company
contributions of $2,423, $3,300 and $2,700 were charged to operations in 1993,
1994 and 1995, respectively, in order to cover certain costs of the 401(k) Plan.
7. SUBSEQUENT EVENTS
PROPOSED PUBLIC OFFERING OF COMMON STOCK
On July 24, 1996, the Board of Directors authorized the Company to proceed
with an offering of the Company's common stock. If the offering is consummated
under the terms presently anticipated, all of the outstanding shares of
preferred stock at June 30, 1996 will automatically convert into 2,811,154
shares of common stock. Unaudited pro forma stockholders' equity, as adjusted
for the assumed conversion of all outstanding shares of convertible preferred
stock as of June 30, 1996, is set forth on the accompanying balance sheet.
F-14
<PAGE> 76
CERUS CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AT JUNE 30, 1996 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
REINCORPORATION AND STOCK SPLIT
On July 24, 1996, the Board of Directors approved a change in the name of
the Corporation to "Cerus Corporation," subject to stockholder approval. At the
same time, the Board authorized the Company to proceed with the reincorporation
of the Company into Delaware. In connection with the reincorporation, the
Company will effect a stock split of all outstanding shares of common stock. In
connection with the stock split, the conversion and exercise provisions of the
outstanding shares of preferred stock, stock options and warrants will be
adjusted accordingly. Upon the reincorporation, the authorized stock of the
Company will become 5,000,000 shares of preferred stock, par value $.001 per
share, and 50,000,000 shares of common stock, par value $.001 per share. Also
upon reincorporation, the Board of Directors has the authority, without further
action by the stockholders, to issue up to 5,000,000 shares of preferred stock
in one or more series and to fix the designations, powers, preferences,
privileges, and relative participating, optional or special rights and the
qualifications, limitations, or restrictions thereof, including dividend rights,
conversion rights, voting rights, and terms of redemption and liquidation
preferences, any or all of which may be greater than the rights of the common
stock.
EQUITY INCENTIVE PLAN
On July 24, 1996, the Board of Directors adopted, subject to stockholder
approval, the 1996 Equity Incentive Plan (the "Incentive Plan") as an amendment
and restatement of the Company's 1992 Stock Option Plan, and reserved an
additional 300,000 shares of common stock for issuance thereunder. The Incentive
Plan provides for grants of incentive stock options to employees and non
statutory stock options, restricted stock purchase awards, stock appreciation
rights and stock bonuses to employees, directors and consultants of the Company.
EMPLOYEE STOCK PURCHASE PLAN
On July 24, 1996, the Company's Board of Directors approved the Employee
Stock Purchase Plan (the "Purchase Plan") subject to stockholder approval,
covering an aggregate of 150,000 shares of Common Stock. The Purchase Plan is
intended to qualify as an employee stock purchase plan within the meaning of
Section 423(b) of the Code. Under the Purchase Plan, the Board of Directors may
authorize participation by eligible employees, including officers, in periodic
offerings following the adoption of the Purchase Plan. The offering period for
any offering will be no more than 27 months.
F-15
<PAGE> 77
[CERUS LOGO]
<PAGE> 78
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by the Registrant in connection with the sale
of the shares of Common Stock being registered. All the amounts shown are
estimates except for the SEC registration fee, the NASD filing fee and the
Nasdaq National Market application fee.
<TABLE>
<S> <C>
SEC registration fee............................................... $11,897
NASD filing fee.................................................... 3,950
Nasdaq National Market application fee.............................
Blue sky qualification fee and expenses............................
Printing and engraving expenses....................................
Legal fees and expenses............................................
Accounting fees and expenses.......................................
Transfer agent and registrar fees..................................
Directors and Officers Insurance Premium...........................
Miscellaneous......................................................
-------
Total.................................................... $
=======
</TABLE>
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Section 145 of the Delaware General Corporation Law authorizes a court to
award or a corporation's Board of Directors to grant indemnification to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act. The
Registrant's Bylaws provide for mandatory indemnification of its directors and
executive officers and permissible indemnification of officers, employees and
other agents to the maximum extent permitted by the Delaware General Corporation
Law. The Registrant has entered into indemnification agreements with its
executive officers and directors, a form of which is attached as Exhibit 10.1
hereto and incorporated herein by reference. The indemnification agreements
provide the Registrant's officers and directors with further indemnification to
the maximum extent permitted by the Delaware General Corporation Law. The
Company plans to also obtain directors' and officers' insurance to insure its
directors and officers against certain liabilities, including liabilities under
the Securities Act. Reference is also made to Section 8 of the Underwriting
Agreement contained in Exhibit 1.1 hereto, indemnifying officers and directors
of the Registrant against certain liabilities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since July 1993, the Registrant has sold and issued the following
unregistered securities:
(1) In July 1993, the Company issued warrants to purchase an aggregate
of 3,949 shares of Series B Preferred Stock to Comdisco, Inc., in
connection with an equipment lease, at an exercise price of $5.065 per
share.
(2) In May 1994, the Company issued warrants to purchase an aggregate
of 15,798 shares of Series B Preferred Stock to certain non-employee
investors at an exercise price of $5.065 per share, all of which will
expire upon the closing of this offering.
(3) In May 1994, the Company issued warrants to purchase an aggregate
of 6,250 shares of Series C Preferred Stock to Comdisco, Inc., in
connection with an equipment lease, at an exercise price of $8.00 per
share.
II-1
<PAGE> 79
(4) In May 1994, the Company issued warrants to purchase an aggregate
of 17,570 shares of Series C Preferred Stock to certain non-employee
investors at an exercise price of $6.80 per share. Of these warrants,
warrants to purchase 53 shares of Series C Preferred Stock were exercised.
The remaining warrants will expire upon the closing of this offering.
(5) In December 1993, March through June 1994, the Company sold an
aggregate of 1,091,593 shares of the Company's Series C Preferred Stock to
certain non-employee investors for an aggregate purchase price of
$8,732,680.
(6) In April 1995, the Company issued warrants to purchase an
aggregate of 4,500 shares of Series D Preferred Stock to Comdisco, Inc., in
connection with an equipment lease, at an exercise price of $10.50 per
share.
(7) In April, May and June 1995, the Company sold an aggregate of
529,084 shares of the Company's Series D Preferred Stock to certain
non-employee investors for an aggregate purchase price of $5,555,382.
(8) In April 1996 and July 1996, the Company sold an aggregate of
380,953 shares of the Company's Series E Preferred Stock to Baxter for an
aggregate purchase price of $6,000,000.
(9) From January 1992 to July 1996, the Company granted stock options
to employees, directors and consultants covering an aggregate of 668,191
shares of the Company's Common Stock, at an average exercise price varying
from $0.385 to $6.00. Of such shares, 333,245 shares have been issued and
sold pursuant to the exercise of such options. Options to purchase 50,055
shares of Common Stock have been canceled or have lapsed without being
exercised or otherwise been canceled.
The Company claimed exemptions under the Securities Act from registration
under the Securities Act for the sale and issuance of securities in the
transaction described in paragraphs (1) through (8) by virtue of Section 4(2) or
Regulation D promulgated thereunder as transactions not involving public
offering. The purchasers in each case represented their intention to acquire the
securities for investment only and with a view to the distribution thereof.
Appropriate legends are affixed to the stock certificates issued in such
transactions. All recipients either received adequate information about the
Registrant or had access, through employment or other relationships, to such
information.
The sales and issuances in the transactions described in paragraph (9)
above were deemed to be exempt from registration under the Securities Act by
virtue of Rule 701 promulgated thereunder, in that they were issued pursuant to
a written compensatory benefit plan, as provided by Rule 701.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- ----------------------------------------------------------------------------------
<S> <C>
1.1* Form of Underwriting Agreement.
2.1 Form of Agreement and Plan of Merger to be used in connection with the
Registrant's Reincorporation in Delaware.
3.1 Registrant's Certificate of Incorporation.
3.2 Registrant's Amended and Restated Certificate of Incorporation to be effective
following the closing of this offering.
3.3 Registrant's Bylaws.
4.1 Reference is made to Exhibits 3.1 through 3.3.
4.2* Specimen stock certificate.
5.1* Opinion of Cooley Godward Castro Huddleson & Tatum.
10.1 Form of Indemnity Agreement to be entered into between the Registrant and each of
its directors and executive officers.
10.2 1996 Equity Incentive Plan.
</TABLE>
II-2
<PAGE> 80
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- ----------------------------------------------------------------------------------
<S> <C>
10.3 Form of Incentive Stock Option Agreement under the 1996 Equity Incentive Plan.
10.4 Form of Nonstatutory Stock Option Agreement under the 1996 Equity Incentive Plan.
10.5 1996 Employee Stock Purchase Plan.
10.6* Form of Employee Stock Purchase Plan Offering.
10.7 Warrant Agreement, dated May 11, 1992, between the Registrant and Comdisco, Inc.
to purchase Series A Preferred Stock
10.8 Warrant Agreement, dated July 12, 1993, between the Registrant and Comdisco, Inc.
to purchase Series B Preferred Stock
10.9 Warrant Agreement, dated May 25, 1994, between the Registrant and Comdisco, Inc.
to purchase Series C Preferred Stock
10.10 Warrant Agreement, dated April 25, 1995, between the Registrant and Comdisco, Inc.
to purchase Series D Preferred Stock
10.11 Form of Warrant to purchase shares of Series B Preferred Stock of the Registrant.
10.12 Form of Warrant to purchase shares of Series C Preferred Stock of the Registrant.
10.13 Series D Preferred Stock Purchase Agreement, dated March 1, 1995, between the
Registrant and certain investors.
10.14 Series E Preferred Stock Purchase Agreement, dated April 1, 1996, between the
Registrant and Baxter Healthcare Corporation.
10.15* Common Stock Purchase Agreement, dated September 3, 1996, between the Registrant
and Baxter Healthcare Corporation.
10.16 Amended and Restated Investors' Rights Agreement, dated April 1, 1996, among the
Registrant and certain investors.
10.17+ Development, Manufacturing and Marketing Agreement, dated December 13, 1993,
between the Registrant and Baxter Healthcare Corporation.
10.18+ Development, Manufacturing and Marketing Agreement, dated April 1, 1996, between
the Registrant and Baxter Healthcare Corporation.
10.19+ Supply Agreement, dated July 18, 1994.
10.20+ Custom Synthesis Agreement, dated March 14, 1996.
10.21 Industrial Real Estate Lease, dated October 1, 1992, between the Registrant and
Shamrock Development Company, as amended on May 16, 1994 and December 21, 1995.
10.22 Real Property Lease, dated August 8, 1996, between the Registrant and S.P. Cuff.
10.23 Lease, dated February 1, 1996, between the Registrant and Holmgren Partners.
11.1 Statement Regarding Computation of Net Loss Per Share.
23.1 Consent of Ernst & Young LLP, Independent Auditors. Reference is made to page
II-6.
23.2* Consent of Cooley Godward Castro Huddleson & Tatum. Reference is made to Exhibit
5.1.
23.3* Consent of Medlen & Carroll.
24.1 Power of Attorney. Reference is made to the signature page.
27.1 Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by amendment.
+ Request is being made for confidential treatment of certain portions of this
exhibit.
(b) Financial Statement Schedules.
Schedules are omitted because they are not required, they are not
applicable or the information is already included in the financial statements or
notes thereto.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
II-3
<PAGE> 81
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers, and controlling
persons of the Registrant pursuant to the provisions described in Item 14 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
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that: (1) for purposes of
determining any liability under the Act, the information omitted from the form
of prospectus filed as part of this registration statement in reliance upon Rule
430A and contained in the form of prospectus filed by the Registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Act shall be deemed to be part of the
registration statement as of the time it was declared effective, and (2) for the
purpose of determining any liability under the Act, each post-effective
amendment that contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-4
<PAGE> 82
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Concord, State of
California, on the 3rd day of September, 1996.
CERUS CORPORATION
By: /s/ STEPHEN T. ISAACS
------------------------------------
Stephen T. Isaacs
President and Chief Executive
Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Stephen
T. Isaacs and David S. Clayton as his true and lawful attorney-in-fact and
agent, each acting alone, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
or all amendments (including post-effective amendments) to this Registration
Statement on Form S-1, and to any registration statement filed under Rule 462
under the Securities Act of 1933, and to file the same, with all exhibits
thereto, and all documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorney-in-fact and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------- ------------------
<C> <S> <C>
/s/ STEPHEN T. ISAACS President, Chief Executive September 3, 1996
- ------------------------------------------ Officer and Director (Principal
Stephen T. Isaacs Executive Officer)
/s/ DAVID S. CLAYTON Vice President, Chief Financial September 3, 1996
- ------------------------------------------ Officer (Principal Financial
David S. Clayton and Accounting Officer)
/s/ B. J. CASSIN Chairman of the Board September 3, 1996
- ------------------------------------------
B. J. Cassin
/s/ JOHN E. HEARST Director September 3, 1996
- ------------------------------------------
John E. Hearst
/s/ PETER H. MCNERNEY Director September 3, 1996
- ------------------------------------------
Peter H. McNerney
/s/ DALE A. SMITH Director September 3, 1996
- ------------------------------------------
Dale A. Smith
/s/ HENRY E. STICKNEY Director September 3, 1996
- ------------------------------------------
Henry E. Stickney
</TABLE>
II-5
<PAGE> 83
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG, LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected
Financial Data" and "Experts" and to the use of our report dated April 3, 1996
(except Note 7, as to which the date is July 24, 1996), in the Registration
Statement (Form S-1) and related Prospectus of Cerus Corporation for the
registration of shares of its common stock.
ERNST & YOUNG LLP
Walnut Creek, CA
The foregoing consent is in the form that will be signed upon the
completion of the stock split and reincorporation in Delaware described in Note
7 to the financial statements.
/s/ ERNST & YOUNG LLP
Walnut Creek, CA
September 3, 1996
II-6
<PAGE> 84
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGE
- ----- ---------------------------------------------------------------------- ------------
<C> <C> <S> <C>
1.1 * -- Form of Underwriting Agreement.
2.1 -- Form of Agreement and Plan of Merger to be used in connection with the
Registrant's Reincorporation in Delaware.
3.1 -- Registrant's Certificate of Incorporation.
3.2 -- Registrant's Amended and Restated Certificate of Incorporation to be
effective following the closing of this offering.
3.3 -- Registrant's Bylaws.
4.1 -- Reference is made to Exhibits 3.1 through 3.3.
4.2 * -- Specimen stock certificate.
5.1 * -- Opinion of Cooley Godward Castro Huddleson & Tatum.
10.1 -- Form of Indemnity Agreement to be entered into between the Registrant
and each of its directors and executive officers.
10.2 -- 1996 Equity Incentive Plan.
10.3 -- Form of Incentive Stock Option Agreement under the 1996 Equity
Incentive Plan.
10.4 -- Form of Nonstatutory Stock Option Agreement under the 1996 Equity
Incentive Plan.
10.5 -- 1996 Employee Stock Purchase Plan.
10.6 * -- Form of Employee Stock Purchase Plan Offering.
10.7 -- Warrant Agreement, dated May 11, 1992, between the Registrant and
Comdisco, Inc. to purchase Series A Preferred Stock
10.8 -- Warrant Agreement, dated July 12, 1993, between the Registrant and
Comdisco, Inc. to purchase Series B Preferred Stock
10.9 -- Warrant Agreement, dated May 25, 1994, between the Registrant and
Comdisco, Inc. to purchase Series C Preferred Stock
10.10 -- Warrant Agreement, dated April 25, 1995, between the Registrant and
Comdisco, Inc. to purchase Series D Preferred Stock
10.11 -- Form of Warrant to purchase shares of Series B Preferred Stock of the
Registrant.
10.12 -- Form of Warrant to purchase shares of Series C Preferred Stock of the
Registrant.
10.13 -- Series D Preferred Stock Purchase Agreement, dated March 1, 1995,
between the Registrant and certain investors.
10.14 -- Series E Preferred Stock Purchase Agreement, dated April 1, 1996,
between the Registrant and Baxter Healthcare Corporation.
10.15* -- Common Stock Purchase Agreement, dated September 3, 1996, between the
Registrant and Baxter Healthcare Corporation.
10.16 -- Amended and Restated Investors' Rights Agreement, dated April 1, 1996,
among the Registrant and certain investors.
10.17+ -- Development, Manufacturing and Marketing Agreement, dated December 13,
1993, between the Registrant and Baxter Healthcare Corporation.
10.18+ -- Development, Manufacturing and Marketing Agreement, dated April 1,
1996, between the Registrant and Baxter Healthcare Corporation.
10.19+ -- Supply Agreement, dated July 18, 1994.
</TABLE>
<PAGE> 85
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGE
- ----- ---------------------------------------------------------------------- ------------
<C> <C> <S> <C>
10.20+ -- Custom Synthesis Agreement, dated March 14, 1996.
10.21 -- Industrial Real Estate Lease, dated October 1, 1992, between the
Registrant and Shamrock Development Company, as amended on May 16,
1994 and December 21, 1995.
10.22 -- Real Property Lease, dated August 8, 1996, between the Registrant and
S.P. Cuff.
10.23 -- Lease, dated February 1, 1996, between the Registrant and Holmgren
Partners.
11.1 -- Statement Regarding Computation of Net Loss Per Share.
23.1 -- Consent of Ernst & Young LLP, Independent Auditors. Reference is made
to page II-6.
23.2 * -- Consent of Cooley Godward Castro Huddleson & Tatum. Reference is made
to Exhibit 5.1.
23.3 * -- Consent of Medlen & Carroll.
24.1 -- Power of Attorney. Reference is made to the signature page.
27.1 -- Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by amendment.
+ Request is being made for confidential treatment of certain portions of this
exhibit.
<PAGE> 1
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (hereinafter called the
"Merger Agreement") is made as of _____________, 1996 by and between STERITECH,
INC., a California corporation ("Steritech"), and CERUS CORPORATION, a Delaware
corporation ("Cerus"). Steritech and Cerus are sometimes referred to as the
"Constituent Corporations."
The authorized capital stock of Steritech consists of four
million six hundred eighty-one thousand eight hundred thirty-three (4,681,833)
shares of Common Stock and three million one hundred ninety-nine thousand nine
hundred forty-two (3,199,942) shares of Preferred Stock. The authorized capital
stock of Cerus consists of fifty million (50,000,000) shares of Common Stock,
$.001 par value, and five million (5,000,000) shares of Preferred Stock, $.001
par value.
The directors of the Constituent Corporations deem it
advisable and to the advantage of said corporations that Steritech merge into
Cerus upon the terms and conditions herein provided.
NOW, THEREFORE, the parties do hereby adopt the plan of
reorganization encompassed by this Merger Agreement and do hereby agree that
Steritech shall merge into Cerus on the following terms, conditions and other
provisions:
1. TERMS AND CONDITIONS.
(A) MERGER. Steritech shall be merged with and into Cerus (the
"Merger"), and Cerus shall be the surviving corporation (the "Surviving
Corporation") effective at [_____ a/p.m.] (Eastern Standard Time) on
_________________, 1996 (the "Effective Time").
(B) SUCCESSION. At the Effective Time, Cerus shall continue
its corporate existence under the laws of the State of Delaware, and the
separate existence and corporate organization of Steritech, except insofar as it
may be continued by operation of law, shall be terminated and cease.
(C) TRANSFER OF ASSETS AND LIABILITIES. At the Effective Time,
the rights, privileges, powers and franchises, both of a public as well as of a
private nature, of each of the Constituent Corporations shall be vested in and
possessed by the Surviving Corporation, subject to all of the disabilities,
duties and restrictions of or upon each of the Constituent Corporations; and all
and singular rights, privileges, powers and franchises of each of the
Constituent Corporations, and all property, real, personal and mixed, of each of
the Constituent Corporations, and all debts due to each of the Constituent
Corporations on whatever account, and all things in action or belonging to each
of the Constituent Corporations shall be transferred to and vested in the
Surviving Corporation; and all property, rights, privileges, powers and
franchises, and all and every other interest, shall be thereafter the property
of the Surviving Corporation as they were of the Constituent Corporations, and
the title to any real estate vested by deed or otherwise in either of the
Constituent Corporations shall not revert or be in any way
1.
<PAGE> 2
impaired by reason of the Merger; provided, however, that the liabilities of the
Constituent Corporations and of their shareholders, directors and officers shall
not be affected and all rights of creditors and all liens upon any property of
either of the Constituent Corporations shall be preserved unimpaired, and any
claim existing or action or proceeding pending by or against either of the
Constituent Corporations may be prosecuted to judgment as if the Merger had not
taken place except as they may be modified with the consent of such creditors
and all debts, liabilities and duties of or upon each of the Constituent
Corporations shall attach to the Surviving Corporation, and may be enforced
against it to the same extent as if such debts, liabilities and duties had been
incurred or contracted by it.
(D) COMMON STOCK OF STERITECH AND CERUS. At the Effective
Time, by virtue of the Merger and without any further action on the part of the
Constituent Corporations or their shareholders, (i) each share of Common Stock
of Steritech issued and outstanding immediately prior thereto shall be changed
and converted into _____ fully paid and nonassessable share[s] of Common Stock
of Cerus; and (ii) each share of Common Stock of Cerus issued and outstanding
immediately prior thereto shall be canceled and returned to the status of
authorized but unissued shares.
(E) PREFERRED STOCK OF STERITECH. At the Effective Time, by
virtue of the Merger and without any further action on the part of the
Constituent Corporations or their shareholders, (i) each share of Series A
Preferred Stock of Steritech issued and outstanding immediately prior thereto
shall be changed and converted into one fully paid and nonassessable share of
Series A Preferred Stock of Cerus, (ii) each share of Series B Preferred Stock
of Steritech issued and outstanding immediately prior thereto shall be changed
and converted into one fully paid and nonassessable share of Series B Preferred
Stock of Cerus, (iii) each share of Series C Preferred Stock of Steritech issued
and outstanding immediately prior thereto shall be changed and converted into
one fully paid and nonassessable share of Series C Preferred Stock of Cerus,
(iv) each share of Series D Preferred Stock of Steritech issued and outstanding
immediately prior thereto shall be changed and converted into one fully paid and
nonassessable share of Series D Preferred Stock of Cerus, and (v) each share of
Series E Preferred Stock of Steritech issued and outstanding immediately prior
thereto shall be changed and converted into one fully paid and nonassessable
share of Series E Preferred Stock of Cerus.
(F) STOCK CERTIFICATES. At and after the Effective Time, all
of the outstanding certificates which prior to that time represented shares of
the Common Stock and Preferred Stock of Steritech shall be deemed for all
purposes to evidence ownership of and to represent the shares of Cerus into
which the shares of Steritech represented by such certificates have been
converted as herein provided and shall be so registered on the books and records
of the Surviving Corporation or its transfer agents. The registered owner of any
such outstanding stock certificate shall, until such certificate shall have been
surrendered for transfer or conversion or otherwise accounted for to the
Surviving Corporation or its transfer agent, have and be entitled to exercise
any voting and other rights with respect to and to receive any dividend and
other distributions upon the shares of Cerus evidenced by such outstanding
certificate as above provided.
2.
<PAGE> 3
(G) WARRANTS OF STERITECH. At and after the Effective Time,
the outstanding Warrants which prior to that time represented Warrants of
Steritech shall be deemed for all purposes to evidence ownership of and to
represent Warrants of Cerus and shall be so registered on the books and records
of the Surviving Corporation or its transfer agents.
(H) OPTIONS OF STERITECH. At the Effective Time, the Surviving
Corporation will assume and continue all of Steritech' stock option plans in
existence at the Effective Time, including but not limited to the 1992 Stock
Option Plan (restated as the 1996 Equity Incentive Plan) and the outstanding
options to purchase Common Stock of Steritech, including without limitation all
options outstanding under such stock option plans and any other outstanding
options, shall become options to purchase shares of Common Stock of Cerus,
subject to applicable adjustment provisions with respect to the number of and
price per share, with no other changes in the terms and conditions of such
options. Effective at the Effective Time, Cerus hereby assumes the outstanding
and unexercised portions of such options and the obligations of Steritech with
respect thereto.
(I) EMPLOYEE BENEFIT PLANS. At the Effective Time, the
Surviving Corporation shall assume all obligations of Steritech under any and
all employee benefit plans in effect as of the Effective Time with respect to
which employee rights or accrued benefits are outstanding as of such time,
including, but not limited to the Employee Stock Purchase Plan; provided,
however, that _____ share[s] Common Stock of Cerus shall be substituted for each
share of Common Stock of Steritech (if any) thereunder. At the Effective Time,
the Surviving Corporation shall adopt and continue in effect all such employee
benefit plans upon the same terms and conditions as were in effect immediately
prior to the Merger and shall reserve that number of shares of Cerus Common
Stock with respect to each such employee benefit plan as is equal to the number
of shares of Steritech Common Stock (if any) so reserved at the Effective Time.
2. CHARTER DOCUMENTS, DIRECTORS AND OFFICERS.
(A) CERTIFICATE OF INCORPORATION AND BYLAWS. The Certificate
of Incorporation and Bylaws of Cerus in effect at the Effective Time shall
continue to be the Certificate of Incorporation and Bylaws of the Surviving
Corporation.
(B) DIRECTORS. The directors of Steritech immediately
preceding the Effective Time shall become the directors of the Surviving
Corporation at and after the Effective Time to serve until the expiration of
their terms and until their successors are elected and qualified.
(C) OFFICERS. The officers of Steritech immediately preceding
the Effective Time shall become the officers of the Surviving Corporation at and
after the Effective Time to serve at the pleasure of its Board of Directors.
3. MISCELLANEOUS.
(A) FURTHER ASSURANCES. From time to time, and when required
by the Surviving Corporation or by its successors and assigns, there shall be
executed and delivered on behalf of
3.
<PAGE> 4
Steritech such deeds and other instruments, and there shall be taken or caused
to be taken by it such further and other action, as shall be appropriate or
necessary in order to vest or perfect in or to conform of record or otherwise,
in the Surviving Corporation the title to and possession of all the property,
interests, assets, rights, privileges, immunities, powers, franchises and
authority of Steritech and otherwise to carry out the purposes of this Merger
Agreement, and the officers and directors of the Surviving Corporation are fully
authorized in the name and on behalf of Steritech or otherwise to take any and
all such action and to execute and deliver any and all such deeds and other
instruments.
(B) AMENDMENT. At any time before or after approval by the
shareholders of Steritech, this Merger Agreement may be amended in any manner
(except that, after the approval of the Merger Agreement by the shareholders of
Steritech, the principal terms may not be amended without the further approval
of the shareholders of Steritech) as may be determined in the judgment of the
respective Board of Directors of Cerus and Steritech to be necessary, desirable,
or expedient in order to clarify the intention of the parties hereto or to
effect or facilitate the purpose and intent of this Merger Agreement.
(C) CONDITIONS TO MERGER. The obligation of the Constituent
Corporations to effect the transactions contemplated hereby is subject to
satisfaction of the following conditions (any or all of which may be waived by
either of the Constituent Corporations in its sole discretion to the extent
permitted by law):
(I) the Merger shall have been approved by the
shareholders of Steritech in accordance with applicable provisions of the
General Corporation Law of the State of California; and
(II) Steritech, as sole stockholder of Cerus, shall have
approved the Merger in accordance with the General Corporation Law of the State
of Delaware; and
(III) any and all consents, permits, authorizations,
approvals, and orders deemed in the sole discretion of Steritech to be material
to consummation of the Merger shall have been obtained.
(D) ABANDONMENT OR DEFERRAL. At any time before the Effective
Time, this Merger Agreement may be terminated and the Merger may be abandoned by
the Board of Directors of either Steritech or Cerus or both, notwithstanding the
approval of this Merger Agreement by the shareholders of Steritech or Cerus or
the prior filing of this Merger Agreement with the Secretary of State of the
State of Delaware, or the consummation of the Merger may be deferred for a
reasonable period of time if, in the opinion of the Boards of Directors of
Steritech and Cerus, such action would be in the best interests of such
corporations. In the event of termination of this Merger Agreement, this Merger
Agreement shall become void and of no effect and there shall be no liability on
the part of either Constituent Corporation or its Board of Directors or
shareholders with respect thereto, except that Steritech shall pay all expenses
incurred in connection with the Merger or in respect of this Merger Agreement or
relating thereto.
4.
<PAGE> 5
(E) COUNTERPARTS. In order to facilitate the filing and
recording of this Merger Agreement, the same may be executed in any number of
counterparts, each of which shall be deemed to be an original.
IN WITNESS WHEREOF, this Merger Agreement, having first been
fully approved by the Board of Directors of Steritech and Cerus, is hereby
executed on behalf of each said corporation and attested by their respective
officers thereunto duly authorized.
STERITECH, INC.
ATTEST: a California corporation
- ---------------------------------- By:____________________________________
Lori Roll Stephen T. Isaacs
Secretary President and
Chief Executive Officer
CERUS CORPORATION
ATTEST: a Delaware corporation
- ---------------------------------- By:_____________________________________
Lori Roll Stephen T. Isaacs
Secretary President and
Chief Executive Officer
5.
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
CERUS CORPORATION
The undersigned, a natural person (the "Sole Incorporator"),
for the purpose of organizing a corporation to conduct the business and promote
the purposes hereinafter stated, under the provisions and subject to the
requirements of the laws of the State of Delaware hereby certifies that:
I.
The name of this Corporation is Cerus Corporation.
II.
The address of the registered office of the Corporation in the
State of Delaware is 9 East Loockerman Street, City of Dover, County of Kent,
and the name of the registered agent of the Corporation in the State of Delaware
at such address is the National Registered Agents, Inc.
III.
The purpose of this Corporation is to engage in any lawful act
or activity for which a corporation may be organized under the General
Corporation Law of the State of Delaware.
IV.
A. This Corporation is authorized to issue two classes of
stock to be designated, respectively, "Common Stock" and "Preferred Stock." The
total number of shares which the Corporation is authorized to issue is
fifty-five million (55,000,000) shares. Fifty million (50,000,000) shares shall
be Common Stock, each having a par value of one-tenth of one cent ($.001). Five
million (5,000,000) shares shall be Preferred Stock, each having a par value of
one-tenth of one cent ($.001).
The Preferred Stock may be issued from time to time in one or
more series. The Board of Directors is hereby authorized, by filing a
certificate (a "Preferred Stock Designation") pursuant to the Delaware General
Corporation Law, to fix or alter from time to time the designation, powers,
preferences and rights of the shares of each such series and the qualifications,
limitations or restrictions of any wholly unissued series of Preferred Stock,
and to establish from time to time the number of shares constituting any such
series or any of them; and to increase or decrease the number of shares of any
series subsequent to the issuance of shares of that series, but not below the
number of shares of such series then
1.
<PAGE> 2
outstanding. In case the number of shares of any series shall be decreased in
accordance with the foregoing sentence, the shares constituting such decrease
shall resume the status that they had prior to the adoption of the resolution
originally fixing the number of shares of such series.
B. Seven Hundred Sixty-One Thousand Seventy-Nine (761,079) of
the authorized shares of Preferred Stock are hereby designated "Series A
Preferred Stock" (the "Series A Preferred"), Three Hundred Five Thousand Four
Hundred Sixty-One (305,461) shares of the authorized shares of Preferred Stock
are hereby designated "Series B Preferred Stock" (the "Series B Preferred"), One
Million One Hundred Forty-Seven Thousand Four Hundred Forty-Nine (1,147,449)
shares of the authorized shares of Preferred Stock are hereby designated "Series
C Preferred Stock" (the "Series C Preferred"), Six Hundred Five Thousand
(605,000) shares of the authorized shares of Preferred Stock are hereby
designated Series D Preferred Stock (the "Series D Preferred") and Three Hundred
Eighty Thousand Nine Hundred Fifty-Three (380,953) shares of the authorized
shares of Preferred Stock are hereby designated "Series E Preferred Stock" (the
"Series E Preferred").
C. The rights, preferences, privileges, restrictions and other
matters relating to the Series A Preferred, the Series B Preferred, the Series C
Preferred, the Series D Preferred and the Series E Preferred (hereinafter the
Series A Preferred, the Series B Preferred, the Series C Preferred, the Series D
Preferred and the Series E Preferred shall be referred to collectively as the
"Preferred Stock") are as follows:
1. DIVIDEND RIGHTS.
A. Holders of Preferred Stock, in preference to the
holders of any Common Stock, shall be entitled to receive, when and if declared
by the Board of Directors, but only out of funds that are legally available
therefor, cash dividends at the rate of $0.46 per annum on each outstanding
share of Series A Preferred, $0.61 per annum on each outstanding share of Series
B Preferred, $0.96 per annum on each outstanding share of Series C Preferred,
$1.26 per annum on each outstanding share of Series D Preferred and $1.89 per
annum on each outstanding share of Series E Preferred. Such dividends shall be
non-cumulative, and no right shall accrue to the holders of Preferred Stock by
reason of the fact that dividends on such shares are not declared or paid in any
prior year.
B. So long as any shares of Preferred Stock shall be
outstanding, no dividend, whether in cash or property, shall be paid or
declared, nor shall any other distribution be made, on any Common Stock, nor
shall any shares of any class of stock of the Company be purchased, redeemed, or
otherwise acquired for value by the Company or any subsidiary of the Company,
unless a corresponding dividend, distribution or redemption has been or is
simultaneously declared or made on the Preferred Stock and all declared but
unpaid dividends on the shares of outstanding Preferred Stock shall have been
paid or a sum sufficient for the payment thereof shall have been reserved
therefor. The provisions of this Section 1(b) shall not, however, apply to (i) a
dividend payable solely in stock, (ii) the acquisition of shares of any Common
Stock in exchange for shares of any Common Stock,
2.
<PAGE> 3
(iii) the repurchase of shares of Common Stock held by employees, officers,
directors, consultants or other persons performing services for the Company or
any wholly-owned subsidiary that are subject to restrictive stock purchase
agreements under which the Corporation has the option to repurchase such shares
at cost upon the occurrence of certain events, such as the termination of
employment; or (iv) any repurchase of any outstanding securities of the Company
that is approved by not less than four members of the Company's Board of
Directors. The holders of the Preferred Stock expressly waive their rights, if
any, as described in California Corporations Code Sections 503 and 506 as they
relate to repurchase of shares upon termination of employment.
C. Subject to the foregoing and to any further
limitations set forth herein, the Board of Directors may declare, out of any
funds legally available therefor, dividends upon the then outstanding shares of
any Common Stock; provided, however, that if any cash dividend or other
distribution is declared by the Board of Directors to be paid on the Common
Stock, then an additional dividend shall be paid at the same time to the holders
of the outstanding Preferred Stock at a rate per share (based upon the number of
shares of Common Stock into which the outstanding Preferred Stock is
convertible) equal to the rate at which cash dividends or other distributions
are paid or granted with respect to the Common Stock.
2. VOTING RIGHTS.
A. Except as otherwise provided herein or as required by
law, the shares of the Preferred Stock shall be voted equally with the shares of
the Common Stock of the Company and not as a separate class, at any annual or
special meeting of shareholders of the Company, and may act by written consent
in the same manner as the Common Stock, in either case upon the following basis:
each holder of shares of the Preferred Stock shall be entitled to such number of
votes as shall be equal to the whole number of shares of Common Stock into which
such holder's aggregate number of shares of Preferred Stock are convertible
(pursuant to Section 5 hereof) immediately after the close of business on the
record date fixed for such meeting or the effective date of such written
consent.
B. In addition to any other vote or consent required
herein or by law, the consent of the holders of at least two-thirds (2/3) of the
outstanding Preferred Stock voting together as a separate class, voting in
person or by proxy, either in writing without a meeting, or by a vote at any
meeting called for the purpose, shall be necessary for effecting or validating
the following actions:
(1) Any amendment, alteration, or repeal of any
provision of the Amended and Restated Articles of Incorporation or the Bylaws of
the Company (including any filing of a Certificate of Determination), that
affects adversely the voting powers, preferences, or other special rights or
qualifications, limitations, or restrictions of the Preferred Stock;
3.
<PAGE> 4
(2) Any creation of or any increase, whether by
reclassification or otherwise, in the authorized amount of any class or series
of equity securities of the Company ranking on a parity with or prior to, or
convertible or exercisable into a class or series ranking on a parity with or
prior to, the Preferred Stock in right of liquidation preference, voting or
dividends;
(3) Any agreement to encumber (except in connection
with a financing in the ordinary course of business for other than equity
financing purposes), sell, lease or otherwise dispose of all or substantially
all of the assets, property or business of the Company, or to merge or
consolidate the Company with any person, or permit any other person to merge
into it, or any other reorganization, transaction or series of transactions
pursuant to which the holders of the Company's outstanding voting securities
immediately preceding such merger, consolidation or other transaction or series
of transactions fail to hold equity securities representing a majority of the
voting power of the surviving entity immediately following such consolidation,
merger or other transaction or series of transactions;
(4) Any voluntary liquidation or dissolution of the
Company (as defined in Section 3(c) hereof); and
(5) Any redemption of, or payment of dividends with
respect to, Common Stock, other than a repurchase of Common Stock pursuant to
the exercise of any contractual or other legal rights of first refusal upon
termination of employment or a consulting arrangement or repurchase in
settlement of shareholder disputes; provided that this subparagraph (v) shall
not apply to any redemption of Preferred Stock pursuant to Section 4 hereof, or
any repurchase of any outstanding securities of the Company that is approved by
not less than four members of the Company's Board of Directors.
3. LIQUIDATION RIGHTS.
A. Upon any liquidation, dissolution, or winding up of
the Company, whether voluntary or involuntary, before any distribution or
payment of the assets of the Company shall be made to the holders of any Common
Stock, the holders of Preferred Stock shall be entitled to be paid out of the
assets of the Company an amount equal to the sum of (i) $3.85 plus all declared
but unpaid dividends on such shares to the date of such payment for each share
of Series A Preferred outstanding, (ii) $5.075 plus all declared but unpaid
dividends on such shares to the date of such payment for each share of Series B
Preferred outstanding, (iii) $8.00 plus all declared but unpaid dividends on
such shares to the date of such payment for each share of Series C Preferred
outstanding, (iv) $10.50 plus all declared but unpaid dividends on such shares
to the date of such payment for each share of Series D Preferred outstanding,
and (v) $15.75 plus all declared but unpaid dividends on such shares to the date
of such payment for each share of Series E Preferred outstanding, respectively.
If, upon any liquidation, distribution, or winding up, the assets of the Company
shall be insufficient to make payment in full under this Section 3(a) to all
holders of Preferred Stock, then such assets shall be distributed among the
holders of Preferred Stock
4.
<PAGE> 5
at the time outstanding, ratably in proportion to the full stated amounts to
which they would otherwise be respectively entitled under this Section 3(a).
B. After the payment of the full liquidation preference
of the Preferred Stock as set forth in Section 3(a) above, the holders of the
Common Stock and the holders of the Series A Preferred, Series B Preferred,
Series C Preferred and Series D Preferred shall receive the remaining assets on
a pro rata basis (as if the shares of Series A Preferred, Series B Preferred,
Series C Preferred and Series D Preferred had been converted to shares of Common
Stock as of the liquidation, dissolution or winding up of the Company);
provided, however, that the aggregate distributions made to the holders of
Series A Preferred, Series B Preferred, Series C Preferred and Series D
Preferred pursuant to Section 3(a) and this Section 3(b) shall not exceed $15.40
per share of Series A Preferred, $20.30 per share for each share of Series B
Preferred, $32.00 per share for each share of Series C Preferred, and $31.50 per
share for each share of Series D Preferred, respectively. Holders of series of
Preferred Stock created after the creation of the Series D Preferred will be
entitled to the full liquidation preference set forth in Section 3(a) above or
to convert their shares as provided in Section 5 below. Upon conversion of
shares as provided in Section 5, the holders of the Common Stock arising from
such converted shares will be entitled to receive such remaining assets on a pro
rata basis without being subject to the limitations set forth above in this
Section 3(b).
C. The following events shall be considered a
liquidation, dissolution or winding up under this Section 3:
(1) any consolidation or merger of the Company with
or into any other corporation or other entity or person, or any other corporate
reorganization or other transaction or series of transactions pursuant to which
the holders of the outstanding voting securities of the Company immediately
prior to such consolidation, merger, reorganization or other transaction or
series of transactions fail to hold equity securities representing a majority of
the voting power of the surviving entity immediately following such
consolidation, merger or reorganization or any transaction or series of related
transactions; or
(2) a sale, lease or other disposition of all or
substantially all of the assets of the Company.
D. Any securities to be delivered to the holders of the
Preferred Stock or Common Stock pursuant to a transaction treated as a
liquidation shall be valued as follows:
(1) Securities not subject to investment letter or
other similar restrictions on free marketability:
(I) If traded on a national securities exchange
or the National Market System of the National Association of Securities Dealers,
Inc. (the "NMS"),
5.
<PAGE> 6
the value shall be deemed to be the average of the security's closing prices on
such exchange or the NMS over the thirty (30) day period ending three (3) days
prior to the closing;
(II) If traded over-the-counter (but not on the
NMS), the value shall be deemed to be the average of the mean of the closing bid
and ask prices over the thirty (30) day period ending three (3) days prior to
the closing; or
(III) If there is no active public market, the
value shall be the fair market value thereof, as mutually determined by the
Corporation and the holders of not less than fifty percent (50%) of the
outstanding Preferred Stock, voting together as a single class.
(2) The method of valuation of securities subject
to investment letter or other restrictions on free marketability shall be to
make an appropriate discount from the market value determined as above in
Sections 3(e)(i)(1), (2) or (3) to reflect the approximate fair market value
thereof, as mutually determined by the Corporation and the holders of not less
than fifty percent (50%) of the outstanding Preferred Stock, voting together as
a single class.
4. REDEMPTION.
The Company shall not have any right to require redemption of
the Preferred Stock, nor shall any holder of Preferred Stock be entitled to
require redemption of Preferred Stock.
5. CONVERSION RIGHTS.
The holders of the Preferred Stock shall have the following
rights with respect to the conversion of the Preferred Stock into shares of
Common Stock:
A. OPTIONAL CONVERSION. Subject to and in compliance
with the provisions of this Section 5, any shares of the Preferred Stock may, at
the option of the holder, be converted at any time into fully-paid and
nonassessable shares of Common Stock. The number of shares of Common Stock to
which a holder of Series A Preferred, Series B Preferred, Series C Preferred,
Series D Preferred, or Series E Preferred shall be entitled upon conversion
shall be the product obtained by multiplying, as the case may be, the "Series A
Conversion Rate," the "Series B Conversion Rate," the "Series C Conversion
Rate," the "Series D Conversion Rate," or the "Series E Conversion Rate" then in
effect (determined as provided in Section 5(b)) by the number of shares of
Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred,
or Series E Preferred being converted.
B. SERIES A, SERIES B, SERIES C, SERIES D AND SERIES E
CONVERSION RATES. The conversion rate in effect at any time for conversion of
the Series A Preferred (the "Series A Conversion Rate") shall be the quotient
obtained by dividing $3.85
6.
<PAGE> 7
by the "Series A Conversion Price," calculated as provided in Section 5(c), the
conversion rate in effect at any time for conversion of the Series B Preferred
(the "Series B Conversion Rate") shall be the quotient obtained by dividing
$5.075 by the "Series B Conversion Price," calculated as provided in Section
5(c), the conversion rate in effect at any time for conversion of the Series C
Preferred (the "Series C Conversion Rate") shall be the quotient obtained by
dividing $8.00 by the "Series C Conversion Price," calculated as provided in
Section 5(c), the conversion rate in effect at any time for conversion of the
Series D Preferred (the "Series D Conversion Rate") shall be the quotient
obtained by dividing $10.50 by the "Series D Conversion Price," calculated as
provided in Section 5(c), and the conversion rate in effect at any time for
conversion of the Series E Preferred (the "Series E Conversion Rate") shall be
the quotient obtained by dividing $15.75 by the "Series E Conversion Price,"
calculated as provided in Section 5(c).
C. CONVERSION PRICE. The conversion price for the Series
0A Preferred shall initially be $3.85 (the "Series A Conversion Price"), the
conversion price of the Series B Preferred shall initially be $5.075 (the
"Series B Conversion Price"), the conversion price of the Series C Preferred
shall initially be $8.00 (the "Series C Conversion Price"), the conversion price
of the Series D Preferred shall initially be $10.50 (the "Series D Conversion
Price") and the conversion price of the Series E Preferred shall initially be
$15.75 (the "Series E Conversion Price"). Such initial Conversion Price for each
series of Preferred Stock shall be adjusted from time to time in accordance with
this Section 5. All references to the Conversion Price herein shall mean the
Conversion Price as so adjusted. As used hereinafter, the term "Conversion
Price" shall refer to the Conversion Price for the Series A Preferred, the
Series B Preferred, the Series C Preferred, the Series D Preferred, or the
Series E Preferred, as applicable.
D. MECHANICS OF CONVERSION. Each holder of Preferred
Stock who desires to convert the same into shares of Common Stock pursuant to
this Section 5 shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the Company or any transfer agent for the Preferred
Stock, and shall give written notice to the Company at such office that such
holder elects to convert the same. Such notice shall state the number of shares
and the series of Preferred Stock being converted and the name or names in which
the certificate or certificates for shares of Common Stock are to be issued.
Thereupon, the Company shall promptly issue and deliver at such office to such
holder a certificate or certificates for the number of shares of Common Stock to
which such holder is entitled and shall promptly pay in cash or, to the extent
sufficient funds are not then legally available therefor, in Common Stock (at
the Common Stock's fair market value determined by the Board of Directors as of
the date of such conversion), any declared and unpaid dividends on the shares of
Preferred Stock being converted. Such conversion shall be deemed to have been
made immediately prior to the close of business on the date of such surrender of
the certificates representing the shares of Preferred Stock to be converted, and
the person or persons entitled to receive the shares of Common Stock issuable
upon such conversion shall be treated for all purposes as the record holder of
such shares of Common Stock on such date. If the conversion is in connection
with the underwritten offering of securities registered pursuant to the
Securities Act of 1933, the conversion may, at the option of any
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<PAGE> 8
holder tendering Preferred Stock for conversion, be conditioned upon the closing
with the underwriter of the sale of securities pursuant to such offering, in
which event the persons to receive the Common Stock issuable upon such
conversion of the Preferred Stock shall not be deemed to have converted such
Preferred Stock until immediately prior to the closing of such sale of
securities.
E. ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the
Company shall at any time or from time to time after the date that the first
share of Preferred Stock is issued (the "Original Issue Date") fix a record date
for the effectuation of a split or subdivision of the outstanding Common Stock,
the Conversion Price for the Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred and Series E Preferred in effect immediately
before that subdivision shall be proportionately decreased. Conversely, if the
Company shall at any time or from time to time after the Original Issue Date
combine the outstanding shares of Common Stock into a smaller number of shares,
the Conversion Price for the Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred and Series E Preferred in effect immediately
before the combination shall be proportionately increased. Any adjustment under
this Section 5(e) shall become effective at the close of business on the date
the split, subdivision or combination becomes effective.
F. ADJUSTMENT FOR COMMON STOCK DIVIDENDS AND
DISTRIBUTIONS. If the Company at any time or from time to time after the
Original Issue Date makes, or fixes a record date for the determination of
holders of Common Stock entitled to receive, a dividend or other distribution
payable in additional shares of Common Stock, in each such event the Conversion
Price for the Series A Preferred, Series B Preferred, Series C Preferred, Series
D Preferred and Series E Preferred that is then in effect shall be decreased as
of the time of such issuance or, in the event such record date is fixed, as of
the close of business on such record date, by multiplying the Conversion Price
then in effect with respect to each such series of Preferred Stock by a fraction
(i) the numerator of which is the total number of shares of Common Stock issued
and outstanding immediately prior to the time of such issuance or the close of
business on such record date, and (ii) the denominator of which is the total
number of shares of Common Stock issued and outstanding immediately prior to the
time of such issuance or the close of business on such record date plus the
number of shares of Common Stock issuable in payment of such dividend or
distribution; provided, however, that if such record date is fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, the Conversion Price shall be recomputed accordingly as of the
close of business on such record date and thereafter the Conversion Price shall
be adjusted pursuant to this Section 5(f) to reflect the actual payment of such
dividend or distribution or other securities or rights convertible into, or
entitling the holder thereof to receive directly or indirectly, additional
shares of Common Stock.
G. ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. If
the Company at any time or from time to time after the Original Issue Date makes
or fixes a record date for the determination of holders of Common Stock entitled
to receive a dividend or other distribution payable in securities of the Company
other than shares of Common Stock, in each such event for purposes of this
subsection 5(g), provision shall be made so
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<PAGE> 9
that the holders of the Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred and Series E Preferred shall receive upon
conversion thereof, in addition to the number of shares of Common Stock
receivable thereupon, the amount of other securities of the Company which they
would have received had their Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred and Series E Preferred been converted into Common
Stock as of the record date fixed for the determination of the holders of Common
Stock of the Company entitled to receive such distribution and had they
thereafter, during the period from the date of such event to and including the
conversion date, retained such securities receivable by them as aforesaid during
such period, subject to all other adjustments called for during such period
under this Section 5 with respect to the rights of the holders of the Series A
Preferred, Series B Preferred, Series C Preferred, Series D Preferred, or Series
E Preferred or with respect to such other securities by their terms.
H. ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND
SUBSTITUTION. If at any time or from time to time after the Original Issue Date,
the Common Stock issuable upon the conversion of the Series A Preferred, Series
B Preferred, Series C Preferred, Series D Preferred, or Series E Preferred is
changed into the same or a different number of shares of any class or classes of
stock, whether by recapitalization, reclassification or otherwise (other than a
subdivision or combination of shares or stock dividend or a reorganization,
merger, consolidation or sale of assets provided for elsewhere in this Section 5
or in Section 3), in any such event each holder of Series A Preferred, Series B
Preferred, Series C Preferred, Series D Preferred and Series E Preferred shall
have the right thereafter to convert such stock into the kind and amount of
stock and other securities and property receivable upon such recapitalization,
reclassification or other change by holders of the maximum number of shares of
Common Stock into which such shares of Series A Preferred, Series B Preferred,
Series C Preferred, Series D Preferred and Series E Preferred could have been
converted immediately prior to or as of such recapitalization, reclassification
or change, all subject to further adjustment as provided herein or with respect
to such other securities or property by the terms thereof. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section 5 with respect to the rights of the holders of Series A Preferred,
Series B Preferred, Series C Preferred, Series D Preferred, or Series E
Preferred after such recapitalization, reclassification or change to the end
that the provisions of this Section 5 (including adjustment of the Conversion
Price then in effect and the number of shares issuable upon conversion of the
Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred
and Series E Preferred) shall be applicable after that event and be as nearly
equivalent as practicable.
I. REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES OF
ASSETS. If at any time or from time to time after the Original Issue Date, there
is a capital reorganization of the Common Stock (other than a recapitalization,
subdivision, combination, reclassification, exchange or substitution of shares
provided for elsewhere in this Section 5 or in Section 3), as a part of such
capital reorganization, provision shall be made so that the holders of the
Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred
and Series E Preferred shall thereafter be entitled to receive upon conversion
of the Series A Preferred, Series B Preferred, Series C Preferred, Series D
Preferred and Series E Preferred
9.
<PAGE> 10
the number of shares of stock or other securities or property of the Company or
otherwise to which a holder of the number of shares of Common Stock deliverable
upon conversion would have been entitled on such capital reorganization, subject
to adjustment in respect of such stock or securities by the terms thereof. In
any such case, appropriate adjustment shall be made in the application of the
provisions of this Section 5 with respect to the rights of the holders of Series
A Preferred, Series B Preferred, Series C Preferred, Series D Preferred and
Series E Preferred after the capital reorganization to the end that the
provisions of this Section 5 (including adjustment of the Conversion Price then
in effect and the number of shares issuable upon conversion of the Series A
Preferred, Series B Preferred, Series C Preferred, Series D Preferred and Series
E Preferred) shall be applicable after that event and be as nearly equivalent as
practicable.
J. SALE OF SHARES BELOW CONVERSION PRICE.
(I) If at any time or from time to time after the
Original Issue Date, the Company issues or sells, or is deemed by the express
provisions of this subsection (j) to have issued or sold, Additional Shares of
Common Stock (as hereinafter defined), other than as a dividend or other
distribution on any class of stock as provided in Section 5(f) above, and other
than a subdivision or combination of shares of Common Stock as provided in
Section 5(e) above, for an Effective Price (as hereinafter defined) less than
the then effective Conversion Price for the Series A Preferred, Series B
Preferred, Series C Preferred, Series D Preferred, or Series E Preferred, then
and in each such case the then existing Conversion Price for each such series of
Preferred Stock for which the Effective Price is less than the Conversion Price
shall be reduced, as of the opening of business on the date of such issue or
sale, to a price determined by multiplying the Conversion Price for such series
by a fraction (1) the numerator of which shall be (A) the number of shares of
Common Stock deemed outstanding (as defined in the following sentence) at the
close of business on the day preceding the date of such issue or sale, plus (B)
the number of shares of Common Stock which the aggregate consideration received
(as defined in subsection (j)(ii)) by the Company for the total number of
Additional Shares of Common Stock so issued would purchase at such Conversion
Price, and (2) the denominator of which shall be the number of shares of Common
Stock deemed outstanding (as defined below) at the close of business on the date
of such issue. For the purposes of the preceding sentence, all outstanding
shares of Common Stock and all shares of Common Stock issuable upon conversion
of Series A Preferred, Series B Preferred, Series C Preferred, Series D
Preferred and Series E Preferred or upon exercise of warrants (excluding any
warrants as to which the exercise price then exceeds the Effective Price for
such Additional Shares of Common Stock) and conversion of the Series A
Preferred, Series B Preferred, Series C Preferred, Series D Preferred and Series
E Preferred subject to such warrants that are outstanding as of the close of
business on the day preceding the date of issue or sale of Additional Shares of
Common Stock shall be deemed outstanding.
(II) For the purpose of making any adjustment
required under this Section 5(j), the consideration received by the Company for
any issue or sale of securities shall (1) to the extent it consists of cash, be
computed at the net amount of cash
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received by the Company after deduction of any underwriting or similar
commissions, compensation or concessions paid or allowed by the Company in
connection with such issue or sale but without deduction of any expenses payable
by the Company, (2) to the extent it consists of property other than cash, be
computed at the fair value of that property as determined in good faith by the
Board of Directors, and (3) if Additional Shares of Common Stock, Convertible
Securities (as hereinafter defined) or rights or options to purchase either
Additional Shares of Common Stock or Convertible Securities are issued or sold
together with other stock or securities or other assets of the Company for a
consideration which covers both, be computed as the portion of the consideration
so received that may be reasonably determined in good faith by the Board of
Directors to be allocable to such Additional Shares of Common Stock, Convertible
Securities or rights or options.
(III) For the purpose of the adjustment required
under this Section 5(j), if the Company issues or sells any rights or options
for the purchase of, or stock or other securities then convertible into,
Additional Shares of Common Stock (such convertible stock or securities being
herein referred to as "Convertible Securities") and if the Effective Price of
such Additional Shares of Common Stock is less than the Conversion Price then in
effect with respect to any series of Preferred Stock, in each case the Company
shall be deemed to have issued at the time of the issuance of such rights or
options or Convertible Securities the number of Additional Shares of Common
Stock issuable upon exercise or conversion thereof and to have received as
consideration for the issuance of such shares an amount equal to the total
amount of the consideration, if any, received by the Company for the issuance of
such rights or options or Convertible Securities, plus, in the case of such
rights or options, the amounts of consideration, if any, payable to the Company
upon the exercise of such rights or options, plus, in the case of Convertible
Securities, the amounts of consideration, if any, payable to the Company (other
than by cancellation of liabilities or obligations evidenced by such Convertible
Securities) upon the conversion thereof; provided further that if the amount of
consideration payable to the Company upon the exercise or conversion of rights,
options or Convertible Securities is reduced over time or on the occurrence or
non-occurrence of specified events other than by reason of antidilution
adjustments, the Effective Price shall be recalculated using the figure to which
such amount of consideration is reduced; provided further that if the amount of
consideration payable to the Company upon the exercise or conversion of such
rights, options or Convertible Securities is subsequently increased, the
Effective Price shall be again recalculated using the increased amount of
consideration payable to the Company upon the exercise or conversion of such
rights, options or Convertible Securities. No further adjustment of the
Conversion Price, as adjusted upon the issuance of such rights, options or
Convertible Securities, shall be made as a result of the actual issuance of
Additional Shares of Common Stock on the exercise of any such rights or options
or the conversion of any such Convertible Securities. If any such rights or
options or the conversion privilege represented by any such Convertible
Securities shall expire without having been exercised, the Conversion Price as
adjusted upon the issuance of such rights, options or Convertible Securities
shall be readjusted to the Conversion Price which would have been in effect had
an adjustment been made on the basis that the only Additional Shares of Common
Stock so issued were the Additional Shares of Common Stock, if any, actually
issued or sold on the exercise of such rights or options or
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<PAGE> 12
rights of conversion of such Convertible Securities, and such Additional Shares
of Common Stock, if any, were issued or sold for the consideration actually
received by the Company upon such exercise, plus the consideration, if any,
actually received by the Company for the granting of all such rights or options,
whether or not exercised, plus the consideration received for issuing or selling
the Convertible Securities actually converted, plus the consideration, if any,
actually received by the Company (other than by cancellation of liabilities or
obligations evidenced by such Convertible Securities) on the conversion of such
Convertible Securities, provided that such readjustment shall not apply to prior
conversions of Series A Preferred, Series B Preferred, Series C Preferred,
Series D Preferred and Series E Preferred.
(IV) "Additional Shares of Common Stock" shall mean
all shares of Common Stock issued by the Company, whether or not subsequently
reacquired or retired by the Company, other than (1) shares of Common Stock
issued upon conversion of the Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred and Series E Preferred; (2) shares of Common Stock
(and/or options, warrants or other Common Stock purchase rights, and the Common
Stock issued pursuant to such options, warrants and other rights) issued or to
be issued to employees, officers or directors of, or consultants or advisors to
the Company or any subsidiary pursuant to stock purchase or stock option plans
or other arrangements not to exceed an aggregate of 600,000 shares of Common
Stock as such number may be increased from time to time by the Company's Board
of Directors with the approval of at least four members of the Company's Board
of Directors; (3) shares of Common Stock issued pursuant to the exercise of
options, warrants or convertible securities outstanding as of the Original Issue
Date; (4) shares of Common Stock (and/or options, warrants, preferred stock or
other common stock issued pursuant to such options, warrants, preferred stock or
other rights) issued in connection with leasing arrangements not to exceed an
aggregate of 200,000 shares of Common Stock (and/or options, warrants or other
Common Stock purchase rights, and the Common Stock issued pursuant to such
options, warrants or other rights) as such number may be increased from time to
time by the Company's Board of Directors with the approval of at least four
members of the Company's Board of Directors; and (5) shares of Common Stock
issued as a function of antidilution or similar protective clauses. The
"Effective Price" of Additional Shares of Common Stock shall mean the quotient
determined by dividing the total number of Additional Shares of Common Stock
issued or sold, or deemed to have been issued or sold by the Company under this
Section 5(j), into the aggregate consideration received, or deemed to have been
received by the Company for such issue under this Section 5(j), for such
Additional Shares of Common Stock.
K. ACCOUNTANTS' CERTIFICATE OF ADJUSTMENT. In each case
of an adjustment or readjustment of the Conversion Price for the number of
shares of Common Stock or other securities issuable upon conversion of the
Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred,
or Series E Preferred, if the Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred, or Series E Preferred is then convertible
pursuant to this Section 5, the Company, at its expense, shall compute such
adjustment or readjustment in accordance with the provisions hereof and prepare
a
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<PAGE> 13
certificate showing such adjustment or readjustment, and shall mail such
certificate, by first class mail, postage prepaid, to each registered holder of
Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred,
or Series E Preferred at the holder's address as shown in the Company's books.
The certificate shall set forth such adjustment or readjustment, showing in
detail the facts upon which such adjustment or readjustment is based, including
a statement of (i) the consideration received or deemed to be received by the
Company for any Additional Shares of Common Stock issued or sold or deemed to
have been issued or sold, (ii) the Conversion Price with respect to such series
of Preferred Stock at the time in effect, (iii) the number of Additional Shares
of Common Stock and (iv) the type and amount, if any, of other property which at
the time would be received upon conversion of the Series A Preferred, Series B
Preferred, Series C Preferred, Series D Preferred, or Series E Preferred.
L. AUTOMATIC CONVERSION.
(I) Each share of Preferred Stock shall
automatically be converted into shares of Common Stock, based on the
then-effective Conversion Price with respect to such share; at any time (1) more
than two-third of the shares of Preferred Stock authorized and issued and
outstanding have converted into Common Stock pursuant to this Section 5, or (2)
immediately upon the closing of a firmly underwritten public offering pursuant
to an effective registration statement under the Securities Act of 1933, as
amended, covering the offer and sale of Common Stock for the account of the
Company in which the per share price is at least $13.13, appropriately adjusted
for any stock splits, stock combinations, stock dividends, recapitalizations and
the like, and the gross cash proceeds to the Company, less underwriting
discounts, commissions and fees, are at least $10,000,000.
(II) Upon the occurrence of the event specified in
paragraph (i) above, the outstanding shares of Series A Preferred, Series B
Preferred, Series C Preferred, Series D Preferred and Series E Preferred shall
be converted automatically without any further action by the holders of such
shares and whether or not the certificates representing such shares are
surrendered to the Company or its transfer agent; provided, however, that the
Company shall not be obligated to issue certificates evidencing the shares of
Common Stock issuable upon such conversion unless the certificates evidencing
such shares of Series A Preferred, Series B Preferred, Series C Preferred,
Series D Preferred and Series E Preferred are either delivered to the Company or
its transfer agent as provided below, or the holder notifies the Company or its
transfer agent that such certificates have been lost, stolen or destroyed and
executes an agreement satisfactory to the Company to indemnify the Company from
any loss incurred by it in connection with such certificates. Upon the
occurrence of such automatic conversion of the Preferred Stock, the holders of
Preferred Stock shall surrender the certificates representing such shares at the
office of the Company or any transfer agent for the Preferred Stock. Thereupon,
there shall be issued and delivered to such holder promptly at such office and
in its name as shown on such surrendered certificate or certificates, a
certificate or certificates for the number of shares of Common Stock into which
the shares of Preferred Stock surrendered were convertible on the date on which
such automatic conversion occurred, and the Company shall promptly pay in
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<PAGE> 14
cash or, at the option of the Company, Common Stock (at the Common Stock's fair
market value determined by the Board as of the date of such conversion), or, at
the option of the Company, both, all declared and unpaid dividends on the shares
of Preferred Stock being converted, to and including the date of such
conversion.
M. FRACTIONAL SHARES. No fractional shares of Common
Stock shall be issued upon conversion of Preferred Stock and the number of
shares of Common Stock to be issued shall be rounded to the nearest whole share.
Whether or not fractional shares are issuable upon such conversion shall be
determined on the basis of the total number of shares of Series A Preferred,
Series B Preferred, Series C Preferred, Series D Preferred, or Series E
Preferred the holder is at the time converting into Common Stock and the number
of shares of Common Stock issuable upon such aggregate conversion.
N. RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
Company shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Preferred Stock, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of the Preferred Stock. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Preferred Stock, the
Company will take such corporate action as may, in the opinion of its counsel,
be necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purpose.
O. OTHER ADJUSTMENTS. No adjustment of the Conversion
Price for the Series A Preferred, Series B Preferred, Series C Preferred, Series
D Preferred, or Series E Preferred shall be made in an amount less than one cent
per share, provided that any adjustments which are not required to be made by
reason of this sentence shall be carried forward and shall be either taken into
account in any subsequent adjustment made prior to 3 years from the date of the
event giving rise to the adjustment being carried forward, or shall be made at
the end of 3 years from the date of the event giving rise to the adjustment
being carried forward. Except to the limited extent provided for in subsections
5(j)(iii), no adjustment of such Conversion Price pursuant to subsection 5(j)
shall have the effect of increasing the Conversion Price above the Conversion
Price in effect immediately prior to such adjustment.
P. NOTICES. Any notice required by the provisions of
this Section 5 to be given to the holders of shares of the Preferred Stock shall
be deemed given upon the earlier of actual receipt or seventy-two (72) hours
after the same has been deposited in the United States mail, by certified or
registered mail, return receipt requested, or first class mail postage prepaid,
and addressed to each holder of record at the address of such holder appearing
on the books of the Company.
Q. PAYMENT OF TAXES. The Company will pay all taxes
(other than taxes based upon income) and other governmental charges that may be
imposed with respect
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to the issue or delivery of shares of Common Stock upon conversion of shares of
Preferred Stock, excluding any tax or other charge imposed in connection with
any transfer involved in the issue and delivery of shares of Common Stock in a
name other than that in which the shares of Preferred Stock so converted were
registered.
R. NO DILUTION OR IMPAIRMENT. The Company shall not
amend its Articles of Incorporation or participate in any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, for the purpose of avoiding or seeking
to avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Company, but shall at all times in good faith assist
in carrying out all such action as may be reasonably necessary or appropriate in
order to protect the conversion rights of the holders of the Preferred Stock
against dilution or other impairment.
6. NOTICES OF RECORD.
A. Upon any taking by the Company of a record of the holders
of any class of securities for the purpose of determining the holders thereof
who are entitled to receive any dividend or other distribution, or upon any
capital reorganization of the Company, any reclassification or recapitalization
of the capital stock of the Company, any merger or consolidation of the Company
with or into any other corporation, or any transfer of all or substantially all
the assets of the Company to any other person, or any voluntary or involuntary
dissolution, liquidation or winding up of the Company, or any shareholders'
meeting to approve the terms thereof, the Company shall mail to each holder of
Preferred Stock at least twenty (20) days prior to the record date specified
therein a notice specifying (i) the date on which any such record is to be taken
for the purpose of such dividend or distribution and a description of such
dividend or distribution, (ii) the date on which any such reorganization,
reclassification, transfer, consolidation, merger, dissolution, liquidation or
winding up is expected to become effective, and the date of the shareholders
meeting to approve the terms thereof, if applicable, (iii) the date, if any,
that is to be fixed as to when the holders of record of Common Stock (or other
securities) shall be entitled to exchange their shares of Common Stock (or other
securities) for securities or other property deliverable upon such
reorganization, reclassification, transfer, consolidation, merger, dissolution,
liquidation or winding up, and (iv) the material terms thereof.
7. NO REISSUANCE OF PREFERRED STOCK. No share or shares of Series
A Preferred, Series B Preferred, Series C Preferred, Series D Preferred, or
Series E Preferred acquired by the Corporation by reason of redemption,
purchase, conversion or otherwise shall be reissued. The Articles of
Incorporation shall be appropriately amended to reflect the consequent valuation
in the Company's authorized capital stock.
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V.
A. The following is applicable to the Common Stock:
1. DIVIDEND RIGHTS. Subject to the prior rights of
holders of all classes of stock at the time outstanding having prior rights as
to dividends, the holders of the Common Stock shall be entitled to receive, when
and as declared by the Board of Directors, out of any assets of the Company
legally available therefor, such dividends as may be declared from time to time
by the Board of Directors.
2. LIQUIDATION RIGHTS. Upon the liquidation, dissolution
or winding up of the Company, the assets of the Company shall be distributed as
provided in Section 3, Division C of Article III hereof.
3. REDEMPTION. The Common Stock is not redeemable.
4. VOTING RIGHTS. The holder of each share of Common
Stock shall have the right to one vote, and shall be entitled to notice of any
shareholders' meeting in accordance with the Bylaws of the Company, and shall be
entitled to vote upon such matters and in such manner as may be provided by law.
VI.
For the management of the business and for the conduct of the
affairs of the Corporation, and in further definition, limitation and regulation
of the powers of the Corporation, of its directors and of its stockholders or
any class thereof, as the case may be, it is further provided that:
A.
1. The management of the business and the conduct of the
affairs of the Corporation shall be vested in its Board of Directors. The number
of directors which shall constitute the whole Board of Directors shall be fixed
exclusively by one or more resolutions adopted by the Board of Directors.
2. Subject to the rights of the holders of any series of
Preferred Stock to elect additional directors under specified circumstances,
following the closing of the initial public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the "1933
Act"), covering the offer and sale of Common Stock to the public (the "Initial
Public Offering"), the directors shall be divided into three classes designated
as Class I, Class II and Class III, respectively. Directors shall be assigned to
each class in accordance with a resolution or resolutions adopted by the Board
of Directors. At the first annual meeting of stockholders following the closing
of the Initial Public Offering, the term of office of the Class I directors
shall expire and Class I directors shall be elected for a full term of three
years. At the second annual meeting of stockholders
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<PAGE> 17
following the Closing of the Initial Public Offering, the term of office of the
Class II directors shall expire and Class II directors shall be elected for a
full term of three years. At the third annual meeting of stockholders following
the closing of the Initial Public Offering, the term of office of the Class III
directors shall expire and Class III directors shall be entered for a full-term
of three years. At each succeeding annual meeting of stockholders, directors
shall be elected for a full term of three years to succeed the directors of the
class whose terms expire at such annual meeting.
Notwithstanding the foregoing provisions of this
Article, each director shall serve until his successor is duly elected and
qualified or until his death, resignation or removal. No decrease in the number
of directors constituting the Board of Directors shall shorten the term of any
incumbent director.
3. Subject to the rights of the holders of any series of
Preferred Stock, the Board of Directors or any individual director may be
removed from office at any time (i) with cause by the affirmative vote of the
holders of a majority of the voting power of all the then-outstanding shares of
voting stock of the Corporation, entitled to vote at an election of directors
(the "Voting Stock") or (ii) without cause by the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting
power of all the then-outstanding shares of the Voting Stock.
4. Subject to the rights of the holders of any series of
Preferred Stock, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by the stockholders, except as
otherwise provided by law, be filled only by the affirmative vote of a majority
of the directors then in office, even though less than a quorum of the Board of
Directors, and not by the stockholders. Any director elected in accordance with
the preceding sentence shall hold office for the remainder of the full term of
the director for which the vacancy was created or occurred and until such
director's successor shall have been elected and qualified.
B.
1. Subject to paragraph (h) of Section 43 of the Bylaws,
the Bylaws may be altered or amended or new Bylaws adopted by the affirmative
vote of at least sixty-six and two-thirds percent (66-2/3%) of the voting power
of all of the then-outstanding shares of the Voting Stock. The Board of
Directors shall also have the power to adopt, amend, or repeal Bylaws.
2. The directors of the Corporation need not be elected
by written ballot unless the Bylaws so provide.
3. No action shall be taken by the stockholders of the
Corporation except at an annual or special meeting of stockholders called in
accordance with the Bylaws and
17.
<PAGE> 18
following the closing of the Initial Public Offering no action shall be taken by
the stockholders by written consent.
4. Advance notice of stockholder nominations for the
election of directors and of business to be brought by stockholders before any
meeting of the stockholders of the Corporation shall be given in the manner
provided in the Bylaws of the Corporation.
VII.
A. A director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for any
breach of fiduciary duty as a director, except for liability (i) for any breach
of the director's duty of loyalty to 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 an
improper personal benefit. If the Delaware General Corporation Law is amended
after approval by the stockholders of this Article to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director shall be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law, as so amended.
B. Any repeal or modification of this Article VII shall be
prospective and shall not affect the rights under this Article VII in effect at
the time of the alleged occurrence of any act or omission to act giving rise to
liability or indemnification.
VIII.
A. The Corporation reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, except as provided in paragraph B
of this Article VIII, and all rights conferred upon the stockholders herein are
granted subject to this reservation.
B. Notwithstanding any other provisions of this Certificate
of Incorporation or any provision of law which might otherwise permit a lesser
vote or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the Voting Stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting
power of all of the then-outstanding shares of the Voting Stock, voting together
as a single class, shall be required to alter, amend or repeal Articles VI, VII
and VIII.
18.
<PAGE> 19
The name and the mailing address of the Sole Incorporator is
as follows:
NAME MAILING ADDRESS
Mitchell R. Truelock Cooley Godward Castro Huddleson &
Tatum
One Maritime Plaza
20th Floor
San Francisco, CA 94111
IN WITNESS WHEREOF, this Certificate has been subscribed this
30th day of July, 1996 by the undersigned who affirms that the statements made
herein are true and correct.
/s/ Mitchell R. Truelock
-----------------------------------
Mitchell R. Truelock
SOLE INCORPORATOR
19.
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
CERUS CORPORATION, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, hereby certifies
as follows:
1. The name of the corporation is Cerus Corporation.
2. The corporation's original Certificate of Incorporation was filed
with the Secretary of State on July 31, 1996.
3. The Amended and Restated Certificate of Incorporation of this
corporation, in the form attached hereto as Exhibit A, has been duly adopted in
accordance with the provisions of Sections 242 and 245 of the General
Corporation Law of the State of Delaware by the Board of Directors and by the
stockholders of the corporation, and prompt written notice was duly given
pursuant to Section 228 of the General Corporation Law of the State of Delaware
to those stockholders who did not approve the Amended and Restated Certificate
of Incorporation by written consent.
4. The Amended and Restated Certificate of Incorporation so adopted
reads in full as set forth in Exhibit A attached hereto and hereby incorporated
by reference.
IN WITNESS WHEREOF, Cerus Corporation has caused this Amended and
Restated Certificate of Incorporation to be signed by its President and Chief
Executive Officer and attested to by its Secretary this ___ day of
_________________, 1996.
____________________________________
Stephen T. Isaacs
President and
Chief Executive Officer
ATTEST:
__________________________________
Lori Roll
Secretary
<PAGE> 2
EXHIBIT A
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CERUS CORPORATION
I.
The name of this corporation is Cerus Corporation.
II.
The address of the registered office of the corporation in the State of
Delaware is 9 East Loockerman Street, City of Dover, County of Kent, and the
name of the registered agent of the corporation in the State of Delaware at such
address is the National Registered Agents, Inc.
III.
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware.
IV.
A. This corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the corporation is authorized to issue is fifty-five million
(55,000,000) shares. Fifty million (50,000,000) shares shall be Common Stock,
each having a par value of one-tenth of one cent ($.001). Five million
(5,000,000) shares shall be Preferred Stock, each having a par value of
one-tenth of one cent ($.001).
The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, by filing a certificate (a
"Preferred Stock Designation") pursuant to the Delaware General Corporation Law,
to fix or alter from time to time the designation, powers, preferences and
rights of the shares of each such series and the qualifications, limitations or
restrictions of any wholly unissued series of Preferred Stock, and to establish
from time to time the number of shares constituting any such series or any of
them; and to increase or decrease the number of shares of any series subsequent
to the issuance of shares of that series, but not below the number of shares of
such series then outstanding. In case the number of shares of any series shall
be decreased in accordance with the foregoing
1.
<PAGE> 3
sentence, the shares constituting such decrease shall resume the status that
they had prior to the adoption of the resolution originally fixing the number of
shares of such series.
V.
For the management of the business and for the conduct of the affairs
of the corporation, and in further definition, limitation and regulation of the
powers of the corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
A. 1. The management of the business and the conduct of the affairs of
the corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be fixed
exclusively by one or more resolutions adopted by the Board of Directors.
2. Subject to the rights of the holders of any series of Preferred
Stock to elect additional directors under specified circumstances, the directors
shall be divided into three classes designated as Class I, Class II and Class
III, respectively. Directors shall be assigned to each class in accordance with
a resolution or resolutions adopted by the Board of Directors. At the first
annual meeting of stockholders following the filing of this Amended and Restated
Certificate of Incorporation, the term of office of the Class I directors shall
expire and Class I directors shall be elected for a full term of three years. At
the second annual meeting of stockholders following the filing of this Amended
and Restated Certificate of Incorporation, the term of office of the Class II
directors shall expire and Class II directors shall be elected for a full term
of three years. At the third annual meeting of stockholders following the filing
of this Amended and Restated Certificate of Incorporation, the term of office of
the Class III directors shall expire and Class III directors shall be entered
for a full-term of three years. At each succeeding annual meeting of
stockholders, directors shall be elected for a full term of three years to
succeed the directors of the class whose terms expire at such annual meeting.
Notwithstanding the foregoing provisions of this Article, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
3. Subject to the rights of the holders of any series of Preferred
Stock, the Board of Directors or any individual director may be removed from
office at any time (i) with cause by the affirmative vote of the holders of a
majority of the voting power of all the then-outstanding shares of voting stock
of the corporation, entitled to vote at an election of directors (the "Voting
Stock") or (ii) without cause by the affirmative vote of the holders of at least
sixty-six and two-thirds percent (66-2/3%) of the voting power of all the
then-outstanding shares of the Voting Stock.
2.
<PAGE> 4
4. Subject to the rights of the holders of any series of
Preferred Stock, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by the stockholders, except as
otherwise provided by law, be filled only by the affirmative vote of a majority
of the directors then in office, even though less than a quorum of the Board of
Directors, and not by the stockholders. Any director elected in accordance with
the preceding sentence shall hold office for the remainder of the full term of
the director for which the vacancy was created or occurred and until such
director's successor shall have been elected and qualified.
B. 1. Subject to paragraph (h) of Section 43 of the Bylaws, the Bylaws
may be altered or amended or new Bylaws adopted by the affirmative vote of at
least sixty-six and two- thirds percent (66-2/3%) of the voting power of all of
the then-outstanding shares of the Voting Stock. The Board of Directors shall
also have the power to adopt, amend, or repeal Bylaws.
2. The directors of the corporation need not be elected by written
ballot unless the Bylaws so provide.
3. No action shall be taken by the stockholders of the corporation
except at an annual or special meeting of stockholders called in accordance with
the Bylaws and no action shall be taken by the stockholders by written consent.
4. Advance notice of stockholder nominations for the election of
directors and of business to be brought by stockholders before any meeting of
the stockholders of the corporation shall be given in the manner provided in the
Bylaws of the corporation.
VI.
A. A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for any breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to 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 an improper
personal benefit. If the Delaware General Corporation Law is amended after
approval by the stockholders of this Article to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director shall be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law, as so amended.
B. Any repeal or modification of this Article VI shall be prospective
and shall not affect the rights under this Article VI in effect at the time of
the alleged occurrence of any act or omission to act giving rise to liability or
indemnification.
3.
<PAGE> 5
VII.
A. The corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, except as provided in paragraph B of this
Article VII, and all rights conferred upon the stockholders herein are granted
subject to this reservation.
B. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the Voting Stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting
power of all of the then-outstanding shares of the Voting Stock, voting together
as a single class, shall be required to alter, amend or repeal Articles V, VI
and VII.
4.
<PAGE> 1
EXHIBIT 3.3
BYLAWS
OF
CERUS CORPORATION
(A DELAWARE CORPORATION)
<PAGE> 2
TABLE OF CONTENTS
PAGE
ARTICLE I OFFICES.................................................... 1
Section 1. Registered Office................................. 1
Section 2. Other Offices..................................... 1
ARTICLE II CORPORATE SEAL............................................. 1
Section 3. Corporate Seal.................................... 1
ARTICLE III STOCKHOLDERS' MEETINGS..................................... 1
Section 4. Place of Meetings................................. 1
Section 5. Annual Meeting.................................... 1
Section 6. Special Meetings.................................. 3
Section 7. Notice of Meetings................................ 4
Section 8. Quorum............................................ 4
Section 9. Adjournment and Notice of Adjourned Meetings...... 5
Section 10. Voting Rights..................................... 5
Section 11. Joint Owners of Stock............................. 5
Section 12. List of Stockholders.............................. 5
Section 13. Action Without Meeting............................ 6
Section 14. Organization...................................... 6
ARTICLE IV DIRECTORS.................................................. 7
Section 15. Number and Term of Office......................... 7
Section 16. Powers............................................ 7
Section 17. Classes of Directors.............................. 7
Section 18. Vacancies......................................... 8
Section 19. Resignation....................................... 8
Section 20. Removal........................................... 8
Section 21. Meetings.......................................... 8
(a) Annual Meetings................................... 8
(b) Regular Meetings.................................. 8
(c) Special Meetings.................................. 9
(d) Telephone Meetings................................ 9
(e) Notice of Meetings................................ 9
(f) Waiver of Notice.................................. 9
Section 22. Quorum and Voting................................. 9
Section 23. Action Without Meeting............................ 10
Section 24. Fees and Compensation............................. 10
i.
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
PAGE
Section 25. Committees........................................ 10
(a) Executive Committee............................... 10
(b) Other Committees.................................. 10
(c) Term.............................................. 11
(d) Meetings.......................................... 11
Section 26. Organization...................................... 11
ARTICLE V OFFICERS................................................... 12
Section 27. Officers Designated............................... 12
Section 28. Tenure and Duties of Officers..................... 12
(a) General........................................... 12
(b) Duties of Chairman of the Board of Directors...... 12
(c) Duties of President............................... 12
(d) Duties of Vice Presidents......................... 13
(e) Duties of Secretary............................... 13
(f) Duties of Chief Financial Officer................. 13
Section 29. Delegation of Authority........................... 13
Section 30. Resignations...................................... 13
Section 31. Removal........................................... 14
ARTICLE VI EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES
OWNED BY THE CORPORATION................................... 14
Section 32. Execution of Corporate Instruments................ 14
Section 33. Voting of Securities Owned by the Corporation..... 14
ARTICLE VII SHARES OF STOCK............................................ 15
Section 34. Form and Execution of Certificates................ 15
Section 35. Lost Certificates................................. 15
Section 36. Transfers......................................... 15
Section 37. Fixing Record Dates............................... 16
Section 38. Registered Stockholders........................... 16
ARTICLE VIII OTHER SECURITIES OF THE CORPORATION........................ 16
Section 39. Execution of Other Securities..................... 16
ii.
<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
PAGE
ARTICLE IX DIVIDENDS.................................................. 17
Section 40. Declaration of Dividends.......................... 17
Section 41. Dividend Reserve.................................. 17
ARTICLE X FISCAL YEAR................................................ 17
Section 42. Fiscal Year....................................... 17
ARTICLE XI INDEMNIFICATION............................................ 18
Section 43. Indemnification of Directors, Executive Officers,
Other Officers, Employees and Other Agents........ 18
(a) Directors and Executive Officers.................. 18
(b) Other Officers, Employees and Other Agents........ 18
(c) Expenses.......................................... 18
(d) Enforcement....................................... 19
(e) Non-Exclusivity of Rights......................... 19
(f) Survival of Rights................................ 19
(g) Insurance......................................... 20
(h) Amendments........................................ 20
(i) Saving Clause..................................... 20
(j) Certain Definitions............................... 20
ARTICLE XII NOTICES.................................................... 21
Section 44. Notices........................................... 21
(a) Notice to Stockholders............................ 21
(b) Notice to Directors............................... 21
(c) Affidavit of Mailing.............................. 21
(d) Time Notices Deemed Given......................... 21
(e) Methods of Notice................................. 21
(f) Failure to Receive Notice......................... 22
(g) Notice to Person with Whom Communication Is
Unlawful ......................................... 22
(h) Notice to Person with Undeliverable Address....... 22
ARTICLE XIII AMENDMENTS................................................. 23
Section 45. Amendments........................................ 23
iii.
<PAGE> 5
TABLE OF CONTENTS
(CONTINUED)
PAGE
ARTICLE XIV LOANS TO OFFICERS.......................................... 23
Section 46. Loans to Officers................................. 23
ARTICLE XV MISCELLANEOUS.............................................. 23
Section 47. Annual Report..................................... 23
iv.
<PAGE> 6
BYLAWS
OF
CERUS CORPORATION
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the
corporation in the State of Delaware shall be in the City of Dover, County of
Kent.
SECTION 2. OTHER OFFICES. The corporation shall also have and
maintain an office or principal place of business at such place as may be fixed
by the Board of Directors, and may also have offices at such other places, both
within and without the State of Delaware as the Board of Directors may from time
to time determine or the business of the corporation may require.
ARTICLE II
CORPORATE SEAL
SECTION 3. CORPORATE SEAL. The corporate seal shall consist of
a die bearing the name of the corporation and the inscription, "Corporate
Seal-Delaware." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE III
STOCKHOLDERS' MEETINGS
SECTION 4. PLACE OF MEETINGS. Meetings of the stockholders of
the corporation shall be held at such place, either within or without the State
of Delaware, as may be designated from time to time by the Board of Directors,
or, if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof.
SECTION 5. ANNUAL MEETING.
(A) The annual meeting of the stockholders of the
corporation, for the purpose of election of directors and for such other
business as may lawfully come before it, shall be held on such date and at such
time as may be designated from time to time by the Board of Directors.
1.
<PAGE> 7
(B) At an annual meeting of the stockholders, only such
business shall be conducted as shall have been properly brought before the
meeting. To be properly brought before an annual meeting, business must be: (A)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board of Directors, (B) otherwise properly brought before
the meeting by or at the direction of the Board of Directors, or (C) otherwise
properly brought before the meeting by a stockholder. For business to be
properly brought before an annual meeting by a stockholder, the stockholder must
have given timely notice thereof in writing to the Secretary of the corporation.
To be timely, a stockholder's notice must be delivered to or mailed and received
at the principal executive offices of the corporation not later than the close
of business on the sixtieth (60th) day nor earlier than the close of business on
the ninetieth (90th) day prior to the first anniversary of the preceding year's
annual meeting; provided, however, that in the event that no annual meeting was
held in the previous year or the date of the annual meeting has been changed by
more than thirty (30) days from the date contemplated at the time of the
previous year's proxy statement, notice by the stockholder to be timely must be
so received not earlier than the close of business on the ninetieth (90th) day
prior to such annual meeting and not later than the close of business on the
later of the sixtieth (60th) day prior to such annual meeting or, in the event
public announcement of the date of such annual meeting is first made by the
corporation fewer than seventy (70) days prior to the date of such annual
meeting, the close of business on the tenth (10th) day following the day on
which public announcement of the date of such meeting is first made by the
corporation. A stockholder's notice to the Secretary shall set forth as to each
matter the stockholder proposes to bring before the annual meeting: (i) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (ii) the name
and address, as they appear on the corporation's books, of the stockholder
proposing such business, (iii) the class and number of shares of the corporation
which are beneficially owned by the stockholder, (iv) any material interest of
the stockholder in such business and (v) any other information that is required
to be provided by the stockholder pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), in his capacity as
a proponent to a stockholder proposal. Notwithstanding the foregoing, in order
to include information with respect to a stockholder proposal in the proxy
statement and form of proxy for a stockholder's meeting, stockholders must
provide notice as required by the regulations promulgated under the 1934 Act.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
conducted at any annual meeting except in accordance with the procedures set
forth in this paragraph (b). The chairman of the annual meeting shall, if the
facts warrant, determine and declare at the meeting that business was not
properly brought before the meeting and in accordance with the provisions of
this paragraph (b), and, if he should so determine, he shall so declare at the
meeting that any such business not properly brought before the meeting shall not
be transacted.
(C) Only persons who are nominated in accordance with
the procedures set forth in this paragraph (c) shall be eligible for election as
directors. Nominations of persons for election to the Board of Directors of the
corporation may be made at a meeting of stockholders by or at the direction of
the Board of Directors or by any stockholder of the corporation entitled to vote
in the election of directors at the meeting who complies with the notice
procedures set forth in this paragraph (c). Such nominations, other than those
made by or at the direction of
2.
<PAGE> 8
the Board of Directors, shall be made pursuant to timely notice in writing to
the Secretary of the corporation in accordance with the provisions of paragraph
(b) of this Section 5. Such stockholder's notice shall set forth (i) as to each
person, if any, whom the stockholder proposes to nominate for election or
re-election as a director: (A) the name, age, business address and residence
address of such person, (B) the principal occupation or employment of such
person, (C) the class and number of shares of the corporation which are
beneficially owned by such person, (D) a description of all arrangements or
understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nominations are to
be made by the stockholder, and (E) any other information relating to such
person that is required to be disclosed in solicitations of proxies for election
of directors, or is otherwise required, in each case pursuant to Regulation 14A
under the 1934 Act (including without limitation such person's written consent
to being named in the proxy statement, if any, as a nominee and to serving as a
director if elected); and (ii) as to such stockholder giving notice, the
information required to be provided pursuant to paragraph (b) of this Section 5.
At the request of the Board of Directors, any person nominated by a stockholder
for election as a director shall furnish to the Secretary of the corporation
that information required to be set forth in the stockholder's notice of
nomination which pertains to the nominee. No person shall be eligible for
election as a director of the corporation unless nominated in accordance with
the procedures set forth in this paragraph (c). The chairman of the meeting
shall, if the facts warrant, determine and declare at the meeting that a
nomination was not made in accordance with the procedures prescribed by these
Bylaws, and if he should so determine, he shall so declare at the meeting, and
the defective nomination shall be disregarded.
(D) For purposes of this Section 5, "public
announcement" shall mean disclosure in a press release reported by the Dow Jones
News Service, Associated Press or comparable national news service or in a
document publicly filed by the corporation with the Securities and Exchange
Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.
SECTION 6. SPECIAL MEETINGS.
(A) Special meetings of the stockholders of the
corporation may be called, for any purpose or purposes, by (i) the Chairman of
the Board of Directors, (ii) the Chief Executive Officer, (iii) the Board of
Directors pursuant to a resolution adopted by a majority of the total number of
authorized directors (whether or not there exist any vacancies in previously
authorized directorships at the time any such resolution is presented to the
Board of Directors for adoption) or (iv) by the holders of shares entitled to
cast not less than ten percent (10%) of the votes at the meeting, and shall be
held at such place, on such date, and at such time as the Board of Directors,
shall fix.
(B) If a special meeting is called by any person or
persons other than the Board of Directors, the request shall be in writing,
specifying the general nature of the business proposed to be transacted, and
shall be delivered personally or sent by registered mail or by telegraphic or
other facsimile transmission to the Chairman of the Board of Directors, the
Chief Executive Officer, or the Secretary of the corporation. No business may be
transacted at such special meeting otherwise than specified in such notice. The
Board of Directors shall determine
3.
<PAGE> 9
the time and place of such special meeting, which shall be held not less than
thirty-five (35) nor more than one hundred twenty (120) days after the date of
the receipt of the request. Upon determination of the time and place of the
meeting, the officer receiving the request shall cause notice to be given to the
stockholders entitled to vote, in accordance with the provisions of Section 7 of
these Bylaws. If the notice is not given within sixty (60) days after the
receipt of the request, the person or persons requesting the meeting may set the
time and place of the meeting and give the notice. Nothing contained in this
paragraph (b) shall be construed as limiting, fixing, or affecting the time when
a meeting of stockholders called by action of the Board of Directors may be
held.
SECTION 7. NOTICE OF MEETINGS. Except as otherwise provided by
law or the Certificate of Incorporation, written notice of each meeting of
stockholders shall be given not less than ten (10) nor more than sixty (60) days
before the date of the meeting to each stockholder entitled to vote at such
meeting, such notice to specify the place, date and hour and purpose or purposes
of the meeting. Notice of the time, place and purpose of any meeting of
stockholders may be waived in writing, signed by the person entitled to notice
thereof, either before or after such meeting, and will be waived by any
stockholder by his attendance thereat in person or by proxy, except when the
stockholder attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Any stockholder so waiving notice of such
meeting shall be bound by the proceedings of any such meeting in all respects as
if due notice thereof had been given.
SECTION 8. QUORUM. At all meetings of stockholders, except
where otherwise provided by statute or by the Certificate of Incorporation, or
by these Bylaws, the presence, in person or by proxy duly authorized, of the
holders of a majority of the outstanding shares of stock entitled to vote shall
constitute a quorum for the transaction of business. In the absence of a quorum,
any meeting of stockholders may be adjourned, from time to time, either by the
chairman of the meeting or by vote of the holders of a majority of the shares
represented thereat, but no other business shall be transacted at such meeting.
The stockholders present at a duly called or convened meeting, at which a quorum
is present, may continue to transact business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum. Except as
otherwise provided by law, the Certificate of Incorporation or these Bylaws, all
action taken by the holders of a majority of the vote cast, excluding
abstentions, at any meeting at which a quorum is present shall be valid and
binding upon the corporation; provided, however, that directors shall be elected
by a plurality of the votes of the shares present in person or represented by
proxy at the meeting and entitled to vote on the election of directors. Where a
separate vote by a class or classes or series is required, except where
otherwise provided by the statute or by the Certificate of Incorporation or
these Bylaws, a majority of the outstanding shares of such class or classes or
series, present in person or represented by proxy, shall constitute a quorum
entitled to take action with respect to that vote on that matter and, except
where otherwise provided by the statute or by the Certificate of Incorporation
or these Bylaws, the affirmative vote of the majority (plurality, in the case of
the election of directors) of the votes cast, including abstentions, by the
holders of shares of such class or classes or series shall be the act of such
class or classes or series.
4.
<PAGE> 10
SECTION 9. ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS. Any
meeting of stockholders, whether annual or special, may be adjourned from time
to time either by the chairman of the meeting or by the vote of a majority of
the shares casting votes, excluding abstentions. When a meeting is adjourned to
another time or place, notice need not be given of the adjourned meeting if the
time and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting, the corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than thirty (30) days or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
SECTION 10. VOTING RIGHTS. For the purpose of determining
those stockholders entitled to vote at any meeting of the stockholders, except
as otherwise provided by law, only persons in whose names shares stand on the
stock records of the corporation on the record date, as provided in Section 12
of these Bylaws, shall be entitled to vote at any meeting of stockholders. Every
person entitled to vote shall have the right to do so either in person or by an
agent or agents authorized by a proxy granted in accordance with Delaware law.
An agent so appointed need not be a stockholder. No proxy shall be voted after
three (3) years from its date of creation unless the proxy provides for a longer
period.
SECTION 11. JOINT OWNERS OF STOCK. If shares or other
securities having voting power stand of record in the names of two (2) or more
persons, whether fiduciaries, members of a partnership, joint tenants, tenants
in common, tenants by the entirety, or otherwise, or if two (2) or more persons
have the same fiduciary relationship respecting the same shares, unless the
Secretary is given written notice to the contrary and is furnished with a copy
of the instrument or order appointing them or creating the relationship wherein
it is so provided, their acts with respect to voting shall have the following
effect: (a) if only one (1) votes, his act binds all; (b) if more than one (1)
votes, the act of the majority so voting binds all; (c) if more than one (1)
votes, but the vote is evenly split on any particular matter, each faction may
vote the securities in question proportionally, or may apply to the Delaware
Court of Chancery for relief as provided in the General Corporation Law of
Delaware, Section 217(b). If the instrument filed with the Secretary shows that
any such tenancy is held in unequal interests, a majority or even-split for the
purpose of subsection (c) shall be a majority or even-split in interest.
SECTION 12. LIST OF STOCKHOLDERS. The Secretary shall prepare
and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at said meeting, arranged in
alphabetical order, showing the address of each stockholder and the number of
shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not
specified, at the place where the meeting is to be held. The list shall be
produced and kept at the time and place of meeting during the whole time thereof
and may be inspected by any stockholder who is present.
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SECTION 13. ACTION WITHOUT MEETING.
(A) Unless otherwise provided in the Certificate of
Incorporation, any action required by statute to be taken at any annual or
special meeting of the stockholders, or any action which may be taken at any
annual or special meeting of the stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted.
(B) Every written consent shall bear the date of
signature of each stockholder who signs the consent, and no written consent
shall be effective to take the corporate action referred to therein unless,
within sixty (60) days of the earliest dated consent delivered to the
corporation in the manner herein required, written consents signed by a
sufficient number of stockholders to take action are delivered to the
corporation by delivery to its registered office in the State of Delaware, its
principal place of business or an officer or agent of the corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to a corporation's registered office shall be by hand or
by certified or registered mail, return receipt requested.
(C) Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing. If the action which is consented
to is such as would have required the filing of a certificate under any section
of the General Corporation Law of the State of Delaware if such action had been
voted on by stockholders at a meeting thereof, then the certificate filed under
such section shall state, in lieu of any statement required by such section
concerning any vote of stockholders, that written notice and written consent
have been given as provided in Section 228 of the General Corporation Law of
Delaware.
(D) Notwithstanding the foregoing, no such action by
written consent may be taken following the closing of the initial public
offering pursuant to an effective registration statement under the Securities
Act of 1933, as amended (the "1933 Act"), covering the offer and sale of Common
Stock of the corporation (the "Initial Public Offering").
SECTION 14. ORGANIZATION.
(A) At every meeting of stockholders, the Chairman of
the Board of Directors, or, if a Chairman has not been appointed or is absent,
the President, or, if the President is absent, a chairman of the meeting chosen
by a majority in interest of the stockholders entitled to vote, present in
person or by proxy, shall act as chairman. The Secretary, or, in his absence, an
Assistant Secretary directed to do so by the President, shall act as secretary
of the meeting.
(B) The Board of Directors of the corporation shall be
entitled to make such rules or regulations for the conduct of meetings of
stockholders as it shall deem necessary, appropriate or convenient. Subject to
such rules and regulations of the Board of Directors, if
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any, the chairman of the meeting shall have the right and authority to prescribe
such rules, regulations and procedures and to do all such acts as, in the
judgment of such chairman, are necessary, appropriate or convenient for the
proper conduct of the meeting, including, without limitation, establishing an
agenda or order of business for the meeting, rules and procedures for
maintaining order at the meeting and the safety of those present, limitations on
participation in such meeting to stockholders of record of the corporation and
their duly authorized and constituted proxies and such other persons as the
chairman shall permit, restrictions on entry to the meeting after the time fixed
for the commencement thereof, limitations on the time allotted to questions or
comments by participants and regulation of the opening and closing of the polls
for balloting on matters which are to be voted on by ballot. Unless and to the
extent determined by the Board of Directors or the chairman of the meeting,
meetings of stockholders shall not be required to be held in accordance with
rules of parliamentary procedure.
ARTICLE IV
DIRECTORS
SECTION 15. NUMBER AND TERM OF OFFICE. The authorized number
of directors of the corporation shall be fixed in accordance with the
Certificate of Incorporation. Directors need not be stockholders unless so
required by the Certificate of Incorporation. If for any cause, the directors
shall not have been elected at an annual meeting, they may be elected as soon
thereafter as convenient at a special meeting of the stockholders called for
that purpose in the manner provided in these Bylaws.
SECTION 16. POWERS. The powers of the corporation shall be
exercised, its business conducted and its property controlled by the Board of
Directors, except as may be otherwise provided by statute or by the Certificate
of Incorporation.
SECTION 17. CLASSES OF DIRECTORS. Subject to the rights of the
holders of any series of Preferred Stock to elect additional directors under
specified circumstances, following the closing of the Initial Public Offering,
the directors shall be divided into three classes designated as Class I, Class
II and Class III, respectively. Directors shall be assigned to each class in
accordance with a resolution or resolutions adopted by the Board of Directors.
At the first annual meeting of stockholders following the closing of the Initial
Public Offering, the term of office of the Class I directors shall expire and
Class I directors shall be elected for a full term of three years. At the second
annual meeting of stockholders following the Closing of the Initial Public
Offering, the term of office of the Class II directors shall expire and Class II
directors shall be elected for a full term of three years. At the third annual
meeting of stockholders following the closing of the Initial Public Offering,
the term of office of Class III directors shall expire and Class III directors
shall be elected for a full term of three years. At each succeeding annual
meeting of stockholders, directors shall be elected for a full term of three
years to succeed the directors of the class whose terms expire at such annual
meeting.
Notwithstanding the foregoing provisions of this Article, each
director shall serve until his successor is duly elected and qualified or until
his death, resignation or removal. No
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decrease in the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director.
SECTION 18. VACANCIES. Unless otherwise provided in the
Certificate of Incorporation, any vacancies on the Board of Directors resulting
from death, resignation, disqualification, removal or other causes and any newly
created directorships resulting from any increase in the number of directors,
shall unless the Board of Directors determines by resolution that any such
vacancies or newly created directorships shall be filled by stockholders, be
filled only by the affirmative vote of a majority of the directors then in
office, even though less than a quorum of the Board of Directors. Any director
elected in accordance with the preceding sentence shall hold office for the
remainder of the full term of the director for which the vacancy was created or
occurred and until such director's successor shall have been elected and
qualified. A vacancy in the Board of Directors shall be deemed to exist under
this Bylaw in the case of the death, removal or resignation of any director.
SECTION 19. RESIGNATION. Any director may resign at any time
by delivering his written resignation to the Secretary, such resignation to
specify whether it will be effective at a particular time, upon receipt by the
Secretary or at the pleasure of the Board of Directors. If no such specification
is made, it shall be deemed effective at the pleasure of the Board of Directors.
When one or more directors shall resign from the Board of Directors, effective
at a future date, a majority of the directors then in office, including those
who have so resigned, shall have power to fill such vacancy or vacancies, the
vote thereon to take effect when such resignation or resignations shall become
effective, and each Director so chosen shall hold office for the unexpired
portion of the term of the Director whose place shall be vacated and until his
successor shall have been duly elected and qualified.
SECTION 20. REMOVAL. Subject to the rights of the holders of
any series of Preferred Stock, the Board of Directors or any individual director
may be removed from office at any time (i) with cause by the affirmative vote of
the holders of a majority of the voting power of all the then-outstanding shares
of voting stock of the corporation, entitled to vote at an election of directors
(the "Voting Stock") or (ii) without cause by the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting
power of all the then-outstanding shares of the Voting Stock.
SECTION 21. MEETINGS.
(A) ANNUAL MEETINGS. The annual meeting of the Board of
Directors shall be held immediately before or after the annual meeting of
stockholders and at the place where such meeting is held. No notice of an annual
meeting of the Board of Directors shall be necessary and such meeting shall be
held for the purpose of electing officers and transacting such other business as
may lawfully come before it.
(B) REGULAR MEETINGS. Except as hereinafter otherwise
provided, regular meetings of the Board of Directors shall be held in the office
of the corporation required to be maintained pursuant to Section 2 hereof.
Unless otherwise restricted by the Certificate of
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Incorporation, regular meetings of the Board of Directors may also be held at
any place within or without the State of Delaware which has been designated by
resolution of the Board of Directors or the written consent of all directors.
(C) SPECIAL MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation, special meetings of the Board of Directors may be
held at any time and place within or without the State of Delaware whenever
called by the Chairman of the Board, the President or any two of the directors.
(D) TELEPHONE MEETINGS. Any member of the Board of
Directors, or of any committee thereof, may participate in a meeting by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in a
meeting by such means shall constitute presence in person at such meeting.
(E) NOTICE OF MEETINGS. Notice of the time and place of
all special meetings of the Board of Directors shall be orally or in writing, by
telephone, facsimile, telegraph or telex, during normal business hours, at least
twenty-four (24) hours before the date and time of the meeting, or sent in
writing to each director by first class mail, charges prepaid, at least three
(3) days before the date of the meeting. Notice of any meeting may be waived in
writing at any time before or after the meeting and will be waived by any
director by attendance thereat, except when the director attends the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
(F) WAIVER OF NOTICE. The transaction of all business at
any meeting of the Board of Directors, or any committee thereof, however called
or noticed, or wherever held, shall be as valid as though had at a meeting duly
held after regular call and notice, if a quorum be present and if, either before
or after the meeting, each of the directors not present shall sign a written
waiver of notice. All such waivers shall be filed with the corporate records or
made a part of the minutes of the meeting.
SECTION 22. QUORUM AND VOTING.
(A) Unless the Certificate of Incorporation requires a
greater number and except with respect to indemnification questions arising
under Section 43 hereof, for which a quorum shall be one-third of the exact
number of directors fixed from time to time in accordance with the Certificate
of Incorporation, a quorum of the Board of Directors shall consist of a majority
of the exact number of directors fixed from time to time by the Board of
Directors in accordance with the Certificate of Incorporation; provided,
however, at any meeting whether a quorum be present or otherwise, a majority of
the directors present may adjourn from time to time until the time fixed for the
next regular meeting of the Board of Directors, without notice other than by
announcement at the meeting.
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(B) At each meeting of the Board of Directors at which a
quorum is present, all questions and business shall be determined by the
affirmative vote of a majority of the directors present, unless a different vote
be required by law, the Certificate of Incorporation or these Bylaws.
SECTION 23. ACTION WITHOUT MEETING. Unless otherwise
restricted by the Certificate of Incorporation or these Bylaws, any action
required or permitted to be taken at any meeting of the Board of Directors or of
any committee thereof may be taken without a meeting, if all members of the
Board of Directors or committee, as the case may be, consent thereto in writing,
and such writing or writings are filed with the minutes of proceedings of the
Board of Directors or committee.
SECTION 24. FEES AND COMPENSATION. Directors shall be entitled
to such compensation for their services as may be approved by the Board of
Directors, including, if so approved, by resolution of the Board of Directors, a
fixed sum and expenses of attendance, if any, for attendance at each regular or
special meeting of the Board of Directors and at any meeting of a committee of
the Board of Directors. Nothing herein contained shall be construed to preclude
any director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor.
SECTION 25. COMMITTEES.
(A) EXECUTIVE COMMITTEE. The Board of Directors may by
resolution passed by a majority of the whole Board of Directors appoint an
Executive Committee to consist of one (1) or more members of the Board of
Directors. The Executive Committee, to the extent permitted by law and provided
in the resolution of the Board of Directors shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the corporation, including without limitation the power or
authority to declare a dividend, to authorize the issuance of stock and to adopt
a certificate of ownership and merger, and may authorize the seal of the
corporation to be affixed to all papers which may require it; but no such
committee shall have the power or authority in reference to amending the
Certificate of Incorporation (except that a committee may, to the extent
authorized in the resolution or resolutions providing for the issuance of shares
of stock adopted by the Board of Directors fix the designations and any of the
preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the corporation or the conversion
into, or the exchange of such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock of the
corporation or fix the number of shares of any series of stock or authorize the
increase or decrease of the shares of any series), adopting an agreement of
merger or consolidation, recommending to the stockholders the sale, lease or
exchange of all or substantially all of the corporation's property and assets,
recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the bylaws of the corporation.
(B) OTHER COMMITTEES. The Board of Directors may, by
resolution passed by a majority of the whole Board of Directors, from time to
time appoint such other committees
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as may be permitted by law. Such other committees appointed by the Board of
Directors shall consist of one (1) or more members of the Board of Directors and
shall have such powers and perform such duties as may be prescribed by the
resolution or resolutions creating such committees, but in no event shall such
committee have the powers denied to the Executive Committee in these Bylaws.
(C) TERM. Each member of a committee of the Board of
Directors shall serve a term on the committee coexistent with such member's term
on the Board of Directors. The Board of Directors, subject to the provisions of
subsections (a) or (b) of this Bylaw may at any time increase or decrease the
number of members of a committee or terminate the existence of a committee. The
membership of a committee member shall terminate on the date of his death or
voluntary resignation from the committee or from the Board of Directors. The
Board of Directors may at any time for any reason remove any individual
committee member and the Board of Directors may fill any committee vacancy
created by death, resignation, removal or increase in the number of members of
the committee. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee, and, in addition, in the absence or
disqualification of any member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member.
(D) MEETINGS. Unless the Board of Directors shall
otherwise provide, regular meetings of the Executive Committee or any other
committee appointed pursuant to this Section 25 shall be held at such times and
places as are determined by the Board of Directors, or by any such committee,
and when notice thereof has been given to each member of such committee, no
further notice of such regular meetings need be given thereafter. Special
meetings of any such committee may be held at any place which has been
determined from time to time by such committee, and may be called by any
director who is a member of such committee, upon written notice to the members
of such committee of the time and place of such special meeting given in the
manner provided for the giving of written notice to members of the Board of
Directors of the time and place of special meetings of the Board of Directors.
Notice of any special meeting of any committee may be waived in writing at any
time before or after the meeting and will be waived by any director by
attendance thereat, except when the director attends such special meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. A majority of the authorized number of members of any such committee
shall constitute a quorum for the transaction of business, and the act of a
majority of those present at any meeting at which a quorum is present shall be
the act of such committee.
SECTION 26. ORGANIZATION. At every meeting of the directors,
the Chairman of the Board of Directors, or, if a Chairman has not been appointed
or is absent, the President, or if the President is absent, the most senior Vice
President, or, in the absence of any such officer, a chairman of the meeting
chosen by a majority of the directors present, shall preside over the
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meeting. The Secretary, or in his absence, an Assistant Secretary directed to do
so by the President, shall act as secretary of the meeting.
ARTICLE V
OFFICERS
SECTION 27. OFFICERS DESIGNATED. The officers of the
corporation shall include, if and when designated by the Board of Directors, the
Chairman of the Board of Directors, the Chief Executive Officer, the President,
one or more Vice Presidents, the Secretary, the Chief Financial Officer, the
Treasurer, the Controller, all of whom shall be elected at the annual
organizational meeting of the Board of Directors. The Board of Directors may
also appoint one or more Assistant Secretaries, Assistant Treasurers, Assistant
Controllers and such other officers and agents with such powers and duties as it
shall deem necessary. The Board of Directors may assign such additional titles
to one or more of the officers as it shall deem appropriate. Any one person may
hold any number of offices of the corporation at any one time unless
specifically prohibited therefrom by law. The salaries and other compensation of
the officers of the corporation shall be fixed by or in the manner designated by
the Board of Directors.
SECTION 28. TENURE AND DUTIES OF OFFICERS.
(A) GENERAL. All officers shall hold office at the
pleasure of the Board of Directors and until their successors shall have been
duly elected and qualified, unless sooner removed. Any officer elected or
appointed by the Board of Directors may be removed at any time by the Board of
Directors. If the office of any officer becomes vacant for any reason, the
vacancy may be filled by the Board of Directors.
(B) DUTIES OF CHAIRMAN OF THE BOARD OF DIRECTORS. The
Chairman of the Board of Directors, when present, shall preside at all meetings
of the stockholders and the Board of Directors. The Chairman of the Board of
Directors shall perform other duties commonly incident to his office and shall
also perform such other duties and have such other powers as the Board of
Directors shall designate from time to time. If there is no President, then the
Chairman of the Board of Directors shall also serve as the Chief Executive
Officer of the corporation and shall have the powers and duties prescribed in
paragraph (c) of this Section 28.
(C) DUTIES OF PRESIDENT. The President shall preside at
all meetings of the stockholders and at all meetings of the Board of Directors,
unless the Chairman of the Board of Directors has been appointed and is present.
Unless some other officer has been elected Chief Executive Officer of the
corporation, the President shall be the chief executive officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
corporation. The President shall perform other duties commonly incident to his
office and shall also perform such other duties and have such other powers as
the Board of Directors shall designate from time to time.
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(D) DUTIES OF VICE PRESIDENTS. The Vice Presidents may assume
and perform the duties of the President in the absence or disability of the
President or whenever the office of President is vacant. The Vice Presidents
shall perform other duties commonly incident to their office and shall also
perform such other duties and have such other powers as the Board of Directors
or the President shall designate from time to time.
(E) DUTIES OF SECRETARY. The Secretary shall attend all
meetings of the stockholders and of the Board of Directors and shall record all
acts and proceedings thereof in the minute book of the corporation. The
Secretary shall give notice in conformity with these Bylaws of all meetings of
the stockholders and of all meetings of the Board of Directors and any committee
thereof requiring notice. The Secretary shall perform all other duties given him
in these Bylaws and other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. The President may direct any Assistant
Secretary to assume and perform the duties of the Secretary in the absence or
disability of the Secretary, and each Assistant Secretary shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time.
(F) DUTIES OF CHIEF FINANCIAL OFFICER. The Chief Financial
Officer shall keep or cause to be kept the books of account of the corporation
in a thorough and proper manner and shall render statements of the financial
affairs of the corporation in such form and as often as required by the Board of
Directors or the President. The Chief Financial Officer, subject to the order of
the Board of Directors, shall have the custody of all funds and securities of
the corporation. The Chief Financial Officer shall perform other duties commonly
incident to his office and shall also perform such other duties and have such
other powers as the Board of Directors or the President shall designate from
time to time. The President may direct the Treasurer or any Assistant Treasurer,
or the Controller or any Assistant Controller to assume and perform the duties
of the Chief Financial Officer in the absence or disability of the Chief
Financial Officer, and each Treasurer and Assistant Treasurer and each
Controller and Assistant Controller shall perform other duties commonly incident
to his office and shall also perform such other duties and have such other
powers as the Board of Directors or the President shall designate from time to
time.
SECTION 29. DELEGATION OF AUTHORITY. The Board of Directors may from
time to time delegate the powers or duties of any officer to any other officer
or agent, notwithstanding any provision hereof.
SECTION 30. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer.
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SECTION 31. REMOVAL. Any officer may be removed from office at any
time, either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or superior officers upon
whom such power of removal may have been conferred by the Board of Directors.
ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND VOTING
OF SECURITIES OWNED BY THE CORPORATION
SECTION 32. EXECUTION OF CORPORATE INSTRUMENTS. The Board of Directors
may, in its discretion, determine the method and designate the signatory officer
or officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation.
Unless otherwise specifically determined by the Board of Directors or
otherwise required by law, promissory notes, deeds of trust, mortgages and other
evidences of indebtedness of the corporation, and other corporate instruments or
documents requiring the corporate seal, and certificates of shares of stock
owned by the corporation, shall be executed, signed or endorsed by the Chairman
of the Board of Directors, or the President or any Vice President, and by the
Secretary or Treasurer or any Assistant Secretary or Assistant Treasurer. All
other instruments and documents requiring the corporate signature, but not
requiring the corporate seal, may be executed as aforesaid or in such other
manner as may be directed by the Board of Directors.
All checks and drafts drawn on banks or other depositories on funds to
the credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.
Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount.
SECTION 33. VOTING OF SECURITIES OWNED BY THE CORPORATION. All stock
and other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman of the Board of Directors, the Chief Executive Officer, the
President, or any Vice President.
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ARTICLE VII
SHARES OF STOCK
SECTION 34. FORM AND EXECUTION OF CERTIFICATES. Certificates for the
shares of stock of the corporation shall be in such form as is consistent with
the Certificate of Incorporation and applicable law. Every holder of stock in
the corporation shall be entitled to have a certificate signed by or in the name
of the corporation by the Chairman of the Board of Directors, or the President
or any Vice President and by the Treasurer or Assistant Treasurer or the
Secretary or Assistant Secretary, certifying the number of shares owned by him
in the corporation. Any or all of the signatures on the certificate may be
facsimiles. In case any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent, or registrar before such certificate is
issued, it may be issued with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue. Each certificate shall state
upon the face or back thereof, in full or in summary, all of the powers,
designations, preferences, and rights, and the limitations or restrictions of
the shares authorized to be issued or shall, except as otherwise required by
law, set forth on the face or back a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, designations,
preferences and relative, participating, optional, or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights. Within a reasonable time after
the issuance or transfer of uncertificated stock, the corporation shall send to
the registered owner thereof a written notice containing the information
required to be set forth or stated on certificates pursuant to this section or
otherwise required by law or with respect to this section a statement that the
corporation will furnish without charge to each stockholder who so requests the
powers, designations, preferences and relative participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights. Except as
otherwise expressly provided by law, the rights and obligations of the holders
of certificates representing stock of the same class and series shall be
identical.
SECTION 35. LOST CERTIFICATES. A new certificate or certificates shall
be issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require or to
give the corporation a surety bond in such form and amount as it may direct as
indemnity against any claim that may be made against the corporation with
respect to the certificate alleged to have been lost, stolen, or destroyed.
SECTION 36. TRANSFERS.
(A) Transfers of record of shares of stock of the corporation
shall be made only upon its books by the holders thereof, in person or by
attorney duly authorized, and upon the surrender of a properly endorsed
certificate or certificates for a like number of shares.
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(B) The corporation shall have power to enter into and perform
any agreement with any number of stockholders of any one or more classes of
stock of the corporation to restrict the transfer of shares of stock of the
corporation of any one or more classes owned by such stockholders in any manner
not prohibited by the General Corporation Law of Delaware.
SECTION 37. FIXING RECORD DATES.
(A) In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, the Board of Directors may fix, in advance, a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which record
date shall not be more than sixty (60) nor less than ten (10) days before the
date of such meeting. If no record date is fixed by the Board of Directors, the
record date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or if notice is waived, at the close
of business on the day next preceding the day on which the meeting is held. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
SECTION 38. REGISTERED STOCKHOLDERS. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and shall not
be bound to recognize any equitable or other claim to or interest in such share
or shares on the part of any other person whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VIII
OTHER SECURITIES OF THE CORPORATION
SECTION 39. EXECUTION OF OTHER SECURITIES. All bonds, debentures and
other corporate securities of the corporation, other than stock certificates
(covered in Section 34), may be signed by the Chairman of the Board of
Directors, the President or any Vice President, or such other person as may be
authorized by the Board of Directors, and the corporate seal impressed thereon
or a facsimile of such seal imprinted thereon and attested by the signature of
the Secretary or an Assistant Secretary, or the Chief Financial Officer or
Treasurer or an Assistant Treasurer; provided, however, that where any such
bond, debenture or other corporate security shall be authenticated by the manual
signature, or where permissible facsimile signature, of a trustee under an
indenture pursuant to which such bond, debenture or other corporate security
shall be issued, the signatures of the persons signing and attesting the
corporate seal on such bond, debenture or other corporate security may be the
imprinted facsimile of the signatures of such persons. Interest coupons
appertaining to any such bond, debenture or other corporate security,
authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an
Assistant Treasurer of the corporation or such other person as may be authorized
by the Board of Directors, or bear imprinted thereon the facsimile signature of
such person. In case any officer who shall have
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signed or attested any bond, debenture or other corporate security, or whose
facsimile signature shall appear thereon or on any such interest coupon, shall
have ceased to be such officer before the bond, debenture or other corporate
security so signed or attested shall have been delivered, such bond, debenture
or other corporate security nevertheless may be adopted by the corporation and
issued and delivered as though the person who signed the same or whose facsimile
signature shall have been used thereon had not ceased to be such officer of the
corporation.
ARTICLE IX
DIVIDENDS
SECTION 40. DECLARATION OF DIVIDENDS. Dividends upon the capital stock
of the corporation, subject to the provisions of the Certificate of
Incorporation, if any, may be declared by the Board of Directors pursuant to law
at any regular or special meeting. Dividends may be paid in cash, in property,
or in shares of the capital stock, subject to the provisions of the Certificate
of Incorporation.
SECTION 41. DIVIDEND RESERVE. Before payment of any dividend, there may
be set aside out of any funds of the corporation available for dividends such
sum or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
ARTICLE X
FISCAL YEAR
SECTION 42. FISCAL YEAR. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.
ARTICLE XI
INDEMNIFICATION
SECTION 43. INDEMNIFICATION OF DIRECTORS, EXECUTIVE OFFICERS,
OTHER OFFICERS, EMPLOYEES AND OTHER AGENTS.
(A) DIRECTORS AND EXECUTIVE OFFICERS. The corporation shall
indemnify its directors and executive officers (for the purposes of this Article
XI, "executive officers" shall have the meaning defined in Rule 3b-7 promulgated
under the 1934 Act) to the fullest extent not prohibited by the Delaware General
Corporation Law; provided, however, that the corporation may modify the extent
of such indemnification by individual contracts with its directors and executive
officers and, provided, further, that the corporation shall not be required to
indemnify
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any director or executive officer in connection with any proceeding (or part
thereof) initiated by such person unless (i) such indemnification is expressly
required to be made by law, (ii) the proceeding was authorized by the Board of
Directors of the corporation, (iii) such indemnification is provided by the
corporation, in its sole discretion, pursuant to the powers vested in the
corporation under the Delaware General Corporation Law or (iv) such
indemnification is required to be made under subsection (d).
(B) OTHER OFFICERS, EMPLOYEES AND OTHER AGENTS. The
corporation shall have power to indemnify its other officers, employees and
other agents as set forth in the Delaware General Corporation Law.
(C) EXPENSES. The corporation shall advance to any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that he is or was a director or
executive officer, of the corporation, or is or was serving at the request of
the corporation as a director or executive officer of another corporation,
partnership, joint venture, trust or other enterprise, prior to the final
disposition of the proceeding, promptly following request therefor, all expenses
incurred by any director or executive officer in connection with such proceeding
upon receipt of an undertaking by or on behalf of such person to repay said
amounts if it should be determined ultimately that such person is not entitled
to be indemnified under this Bylaw or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to paragraph
(e) of this Bylaw, no advance shall be made by the corporation to an executive
officer of the corporation (except by reason of the fact that such executive
officer is or was a director of the corporation in which event this paragraph
shall not apply) in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, if a determination is reasonably and promptly
made (i) by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to the proceeding, or (ii) if such quorum is not
obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, that the facts known
to the decision-making party at the time such determination is made demonstrate
clearly and convincingly that such person acted in bad faith or in a manner that
such person did not believe to be in or not opposed to the best interests of the
corporation.
(D) ENFORCEMENT. Without the necessity of entering into an
express contract, all rights to indemnification and advances to directors and
executive officers under this Bylaw shall be deemed to be contractual rights and
be effective to the same extent and as if provided for in a contract between the
corporation and the director or executive officer. Any right to indemnification
or advances granted by this Bylaw to a director or executive officer shall be
enforceable by or on behalf of the person holding such right in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. The claimant in such enforcement action,
if successful in whole or in part, shall be entitled to be paid also the expense
of prosecuting his claim. In connection with any claim for indemnification, the
corporation shall be entitled to raise as a defense to any such action that the
claimant has not met
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the standards of conduct that make it permissible under the Delaware General
Corporation Law for the corporation to indemnify the claimant for the amount
claimed. In connection with any claim by an executive officer of the corporation
(except in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such executive
officer is or was a director of the corporation) for advances, the corporation
shall be entitled to raise a defense as to any such action clear and convincing
evidence that such person acted in bad faith or in a manner that such person did
not believe to be in or not opposed to the best interests of the corporation, or
with respect to any criminal action or proceeding that such person acted without
reasonable cause to believe that his conduct was lawful. Neither the failure of
the corporation (including its Board of Directors, independent legal counsel or
its stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he has met the applicable standard of conduct set forth in the Delaware
General Corporation Law, nor an actual determination by the corporation
(including its Board of Directors, independent legal counsel or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that claimant has not
met the applicable standard of conduct.
(E) NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any
person by this Bylaw shall not be exclusive of any other right which such person
may have or hereafter acquire under any statute, provision of the Certificate of
Incorporation, Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office. The corporation is specifically
authorized to enter into individual contracts with any or all of its directors,
officers, employees or agents respecting indemnification and advances, to the
fullest extent not prohibited by the Delaware General Corporation Law.
(F) SURVIVAL OF RIGHTS. The rights conferred on any person by
this Bylaw shall continue as to a person who has ceased to be a director,
officer, employee or other agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
(G) INSURANCE. To the fullest extent permitted by the Delaware
General Corporation Law, the corporation, upon approval by the Board of
Directors, may purchase insurance on behalf of any person required or permitted
to be indemnified pursuant to this Bylaw.
(H) AMENDMENTS. Any repeal or modification of this Bylaw shall
only be prospective and shall not affect the rights under this Bylaw in effect
at the time of the alleged occurrence of any action or omission to act that is
the cause of any proceeding against any agent of the corporation.
(I) SAVING CLAUSE. If this Bylaw or any portion hereof shall
be invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director and executive officer to
the full extent not prohibited by any applicable portion of this Bylaw that
shall not have been invalidated, or by any other applicable law.
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(J) CERTAIN DEFINITIONS. For the purposes of this Bylaw, the
following definitions shall apply:
(I) The term "proceeding" shall be broadly
construed and shall include, without limitation, the investigation,
preparation, prosecution, defense, settlement, arbitration and appeal
of, and the giving of testimony in, any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative.
(II) The term "expenses" shall be broadly
construed and shall include, without limitation, court costs,
attorneys' fees, witness fees, fines, amounts paid in settlement or
judgment and any other costs and expenses of any nature or kind
incurred in connection with any proceeding.
(III) The term the "corporation" shall
include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors,
officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation,
or is or was serving at the request of such constituent corporation as
a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in
the same position under the provisions of this Bylaw with respect to
the resulting or surviving corporation as he would have with respect to
such constituent corporation if its separate existence had continued.
(IV) References to a "director," "executive
officer," "officer," "employee," or "agent" of the corporation shall
include, without limitation, situations where such person is serving at
the request of the corporation as, respectively, a director, executive
officer, officer, employee, trustee or agent of another corporation,
partnership, joint venture, trust or other enterprise.
(V) References to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit
plan; and references to "serving at the request of the corporation"
shall include any service as a director, officer, employee or agent of
the corporation which imposes duties on, or involves services by, such
director, officer, employee, or agent with respect to an employee
benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit
plan shall be deemed to have acted in a manner "not opposed to the best
interests of the corporation" as referred to in this Bylaw.
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ARTICLE XII
NOTICES
SECTION 44. NOTICES.
(A) NOTICE TO STOCKHOLDERS. Whenever, under any provisions of
these Bylaws, notice is required to be given to any stockholder, it shall be
given in writing, timely and duly deposited in the United States mail, postage
prepaid, and addressed to his last known post office address as shown by the
stock record of the corporation or its transfer agent.
(B) NOTICE TO DIRECTORS. Any notice required to be given to
any director may be given by the method stated in subsection (a), or by
facsimile, telex or telegram, except that such notice other than one which is
delivered personally shall be sent to such address as such director shall have
filed in writing with the Secretary, or, in the absence of such filing, to the
last known post office address of such director.
(C) AFFIDAVIT OF MAILING. An affidavit of mailing, executed by
a duly authorized and competent employee of the corporation or its transfer
agent appointed with respect to the class of stock affected, specifying the name
and address or the names and addresses of the stockholder or stockholders, or
director or directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall in the absence of fraud, be prima
facie evidence of the facts therein contained.
(D) TIME NOTICES DEEMED GIVEN. All notices given by mail, as
above provided, shall be deemed to have been given as at the time of mailing,
and all notices given by facsimile, telex or telegram shall be deemed to have
been given as of the sending time recorded at time of transmission.
(E) METHODS OF NOTICE. It shall not be necessary that the same
method of giving notice be employed in respect of all directors, but one
permissible method may be employed in respect of any one or more, and any other
permissible method or methods may be employed in respect of any other or others.
(F) FAILURE TO RECEIVE NOTICE. The period or limitation of
time within which any stockholder may exercise any option or right, or enjoy any
privilege or benefit, or be required to act, or within which any director may
exercise any power or right, or enjoy any privilege, pursuant to any notice sent
him in the manner above provided, shall not be affected or extended in any
manner by the failure of such stockholder or such director to receive such
notice.
(G) NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL.
Whenever notice is required to be given, under any provision of law or of the
Certificate of Incorporation or Bylaws of the corporation, to any person with
whom communication is unlawful, the giving of such notice to such person shall
not be required and there shall be no duty to apply to any governmental
authority or agency for a license or permit to give such notice to such person.
Any action or meeting which shall be taken or held without notice to any such
person with
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whom communication is unlawful shall have the same force and effect as if such
notice had been duly given. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the Delaware General Corporation Law, the certificate shall state,
if such is the fact and if notice is required, that notice was given to all
persons entitled to receive notice except such persons with whom communication
is unlawful.
(H) NOTICE TO PERSON WITH UNDELIVERABLE ADDRESS. Whenever
notice is required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve-month period, have been mailed addressed to such
person at his address as shown on the records of the corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required. Any action or meeting which shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given. If any such person shall deliver to the corporation a written notice
setting forth his then current address, the requirement that notice be given to
such person shall be reinstated. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the Delaware General Corporation Law, the certificate need not
state that notice was not given to persons to whom notice was not required to be
given pursuant to this paragraph.
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ARTICLE XIII
AMENDMENTS
SECTION 45. AMENDMENTS. Subject to paragraph (h) of Section 43 of the
Bylaws, the Bylaws may be altered or amended or new Bylaws adopted by the
affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the
voting power of all of the then-outstanding shares of the Voting Stock. The
Board of Directors shall also have the power to adopt, amend, or repeal Bylaws.
ARTICLE XIV
LOANS TO OFFICERS
SECTION 46. LOANS TO OFFICERS. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee or other assistance may
be with or without interest and may be unsecured, or secured in such manner as
the Board of Directors shall approve, including, without limitation, a pledge of
shares of stock of the corporation. Nothing in these Bylaws shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
ARTICLE XV
MISCELLANEOUS
SECTION 47. ANNUAL REPORT.
(A) Subject to the provisions of paragraph (b) of this Bylaw,
the Board of Directors shall cause an annual report to be sent to each
stockholder of the corporation not later than one hundred twenty (120) days
after the close of the corporation's fiscal year. Such report shall include a
balance sheet as of the end of such fiscal year and an income statement and
statement of changes in financial position for such fiscal year, accompanied by
any report thereon of independent accounts or, if there is no such report, the
certificate of an authorized officer of the corporation that such statements
were prepared without audit from the books and records of the corporation. When
there are more than 100 stockholders of record of the corporation's shares, as
determined by Section 605 of the California Corporations Code, additional
information as required by Section 1501(b) of the California Corporations Code
shall also be contained in such report, provided that if the corporation has a
class of securities registered under Section 12 of the 1934 Act, that Act shall
take precedence. Such report shall be sent to stockholders at least fifteen (15)
days prior to the next annual meeting of stockholders after the end of the
fiscal year to which it relates.
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(B) If and so long as there are fewer than 100 holders of
record of the corporation's shares, the requirement of sending of an annual
report to the stockholders of the corporation is hereby expressly waived.
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EXHIBIT 10.1
INDEMNITY AGREEMENT
THIS AGREEMENT is made and entered into this ____ day of , 1996 by and
between STERITECH, INC., a California corporation (the "Corporation"), and
_____________ ("Agent").
RECITALS
WHEREAS, Agent performs a valuable service to the Corporation in his
capacity as a director of the Corporation;
WHEREAS, the stockholders of the Corporation have adopted bylaws (the
"Bylaws") providing for the indemnification of the directors, officers,
employees and other agents of the Corporation, including persons serving at the
request of the Corporation in such capacities with other corporations or
enterprises, as authorized by the California Corporations Code, as amended (the
"Code");
WHEREAS, the Bylaws and the Code, by their non-exclusive nature, permit
contracts between the Corporation and its agents, officers, employees and other
agents with respect to indemnification of such persons; and
WHEREAS, in order to induce Agent to continue to serve as a director of
the Corporation, the Corporation has determined and agreed to enter into this
Agreement with Agent;
NOW, THEREFORE, in consideration of Agent's continued service as a
director after the date hereof, the parties hereto agree as follows:
AGREEMENT
1. SERVICES TO THE CORPORATION. Agent will serve, at the will of the
Corporation or under separate contract, if any such contract exists, as a
director of the Corporation or as a director, officer or other fiduciary of an
affiliate of the Corporation (including any employee benefit plan of the
Corporation) faithfully and to the best of his ability so long as he is duly
elected and qualified in accordance with the provisions of the Bylaws or other
applicable charter documents of the Corporation or such affiliate; provided,
however, that Agent may at any time and for any reason resign from such position
(subject to any contractual obligation that Agent may have assumed apart from
this Agreement) and that the Corporation or any affiliate shall have no
obligation under this Agreement to continue Agent in any such position.
2. INDEMNITY OF AGENT. The Corporation hereby agrees to hold harmless
and indemnify Agent to the fullest extent authorized or permitted by the
provisions of the Bylaws and the Code, as the same may be amended from time to
time (but, only to the extent that such
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amendment permits the Corporation to provide broader indemnification rights than
the Bylaws or the Code permitted prior to adoption of such amendment).
3. ADDITIONAL INDEMNITY. In addition to and not in limitation of the
indemnification otherwise provided for herein, and subject only to the
exclusions set forth in Section 4 hereof, the Corporation hereby further agrees
to hold harmless and indemnify Agent:
(a) against any and all expenses (including attorneys' fees),
witness fees, damages, judgments, fines and amounts paid in settlement and any
other amounts that Agent becomes legally obligated to pay because of any claim
or claims made against or by him in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative (including an action by or in the right of the
Corporation) to which Agent is, was or at any time becomes a party, or is
threatened to be made a party, by reason of the fact that Agent is, was or at
any time becomes a director, officer, employee or other agent of Corporation, or
is or was serving or at any time serves at the request of the Corporation as a
director, officer, employee or other agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise; and
(b) otherwise to the fullest extent as may be provided to
Agent by the Corporation under the non-exclusivity provisions of the Code and
Section 43 of the Bylaws.
4. LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity pursuant to
Section 3 hereof shall be paid by the Corporation:
(a) on account of any claim against Agent for an accounting of
profits made from the purchase or sale by Agent of securities of the Corporation
pursuant to the provisions of Section 16(b) of the Securities Exchange Act of
1934 and amendments thereto or similar provisions of any federal, state or local
statutory law;
(b) on account of Agent's conduct that was knowingly
fraudulent or deliberately dishonest or that constituted willful misconduct;
(c) on account of Agent's conduct that constituted a breach of
Agent's duty of loyalty to the Corporation or resulted in any personal profit or
advantage to which Agent was not legally entitled;
(d) for which payment is actually made to Agent under a valid
and collectible insurance policy or under a valid and enforceable indemnity
clause, bylaw or agreement, except in respect of any excess beyond payment under
such insurance, clause, bylaw or agreement;
(e) if indemnification is not lawful (and, in this respect,
both the Corporation and Agent have been advised that the Securities and
Exchange Commission believes that indemnification for liabilities arising under
the federal securities laws is against public policy and
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is, therefore, unenforceable and that claims for indemnification should be
submitted to appropriate courts for adjudication); or
(f) in connection with any proceeding (or part thereof)
initiated by Agent, or any proceeding by Agent against the Corporation or its
directors, officers, employees or other agents, unless (i) such indemnification
is expressly required to be made by law, (ii) the proceeding was authorized by
the Board of Directors of the Corporation, (iii) such indemnification is
provided by the Corporation, in its sole discretion, pursuant to the powers
vested in the Corporation under the Code, or (iv) the proceeding is initiated
pursuant to Section 9 hereof.
5. CONTINUATION OF INDEMNITY. All agreements and obligations of the
Corporation contained herein shall continue during the period Agent is a
director, officer, employee or other agent of the Corporation (or is or was
serving at the request of the Corporation as a director, officer, employee or
other agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise) and shall continue thereafter so long as Agent
shall be subject to any possible claim or threatened, pending or completed
action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative, by reason of the fact that Agent was serving in
the capacity referred to herein.
6. PARTIAL INDEMNIFICATION. Agent shall be entitled under this
Agreement to indemnification by the Corporation for a portion of the expenses
(including attorneys' fees), witness fees, damages, judgments, fines and amounts
paid in settlement and any other amounts that Agent becomes legally obligated to
pay in connection with any action, suit or proceeding referred to in Section 3
hereof even if not entitled hereunder to indemnification for the total amount
thereof, and the Corporation shall indemnify Agent for the portion thereof to
which Agent is entitled.
7. NOTIFICATION AND DEFENSE OF CLAIM. Not later than thirty (30) days
after receipt by Agent of notice of the commencement of any action, suit or
proceeding, Agent will, if a claim in respect thereof is to be made against the
Corporation under this Agreement, notify the Corporation of the commencement
thereof; but the omission so to notify the Corporation will not relieve it from
any liability which it may have to Agent otherwise than under this Agreement.
With respect to any such action, suit or proceeding as to which Agent notifies
the Corporation of the commencement thereof:
(a) the Corporation will be entitled to participate therein at
its own expense;
(b) except as otherwise provided below, the Corporation may,
at its option and jointly with any other indemnifying party similarly notified
and electing to assume such defense, assume the defense thereof, with counsel
reasonably satisfactory to Agent. After notice from the Corporation to Agent of
its election to assume the defense thereof, the Corporation will not be liable
to Agent under this Agreement for any legal or other expenses subsequently
incurred by Agent in connection with the defense thereof except for reasonable
costs of investigation or otherwise as provided below. Agent shall have the
right to employ separate counsel in such
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action, suit or proceeding but the fees and expenses of such counsel incurred
after notice from the Corporation of its assumption of the defense thereof shall
be at the expense of Agent unless (i) the employment of counsel by Agent has
been authorized by the Corporation, (ii) Agent shall have reasonably concluded
that there may be a conflict of interest between the Corporation and Agent in
the conduct of the defense of such action or (iii) the Corporation shall not in
fact have employed counsel to assume the defense of such action, in each of
which cases the fees and expenses of Agent's separate counsel shall be at the
expense of the Corporation. The Corporation shall not be entitled to assume the
defense of any action, suit or proceeding brought by or on behalf of the
Corporation or as to which Agent shall have made the conclusion provided for in
clause (ii) above; and
(c) the Corporation shall not be liable to indemnify Agent
under this Agreement for any amounts paid in settlement of any action or claim
effected without its written consent, which shall not be unreasonably withheld.
The Corporation shall be permitted to settle any action except that it shall not
settle any action or claim in any manner which would impose any penalty or
limitation on Agent without Agent's written consent, which may be given or
withheld in Agent's sole discretion.
8. EXPENSES. The Corporation shall advance, prior to the final
disposition of any proceeding, promptly following request therefor, all expenses
incurred by Agent in connection with such proceeding upon receipt of an
undertaking by or on behalf of Agent to repay said amounts if it shall be
determined ultimately that Agent is not entitled to be indemnified under the
provisions of this Agreement, the Bylaws, the Code or otherwise.
9. ENFORCEMENT. Any right to indemnification or advances granted by
this Agreement to Agent shall be enforceable by or on behalf of Agent in any
court of competent jurisdiction if (i) the claim for indemnification or advances
is denied, in whole or in part, or (ii) no disposition of such claim is made
within ninety (90) days of request therefor. Agent, in such enforcement action,
if successful in whole or in part, shall be entitled to be paid also the expense
of prosecuting his claim. It shall be a defense to any action for which a claim
for indemnification is made under Section 3 hereof (other than an action brought
to enforce a claim for expenses pursuant to Section 8 hereof, provided that the
required undertaking has been tendered to the Corporation) that Agent is not
entitled to indemnification because of the limitations set forth in Section 4
hereof. Neither the failure of the Corporation (including its Board of Directors
or its stockholders) to have made a determination prior to the commencement of
such enforcement action that indemnification of Agent is proper in the
circumstances, nor an actual determination by the Corporation (including its
Board of Directors or its stockholders) that such indemnification is improper
shall be a defense to the action or create a presumption that Agent is not
entitled to indemnification under this Agreement or otherwise.
10. SUBROGATION. In the event of payment under this Agreement, the
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Agent, who shall execute all documents required and shall
do all acts that may be necessary to secure such rights and to enable the
Corporation effectively to bring suit to enforce such rights.
4.
<PAGE> 5
11. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on Agent by this
Agreement shall not be exclusive of any other right which Agent may have or
hereafter acquire under any statute, provision of the Corporation's Certificate
of Incorporation or Bylaws, agreement, vote of stockholders or directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding office.
12. SURVIVAL OF RIGHTS.
(a) The rights conferred on Agent by this Agreement shall
continue after Agent has ceased to be a director, officer, employee or other
agent of the Corporation or to serve at the request of the Corporation as a
director, officer, employee or other agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise and shall inure
to the benefit of Agent's heirs, executors and administrators.
(b) The Corporation shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Corporation, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform if no such succession
had taken place.
13. SEPARABILITY. Each of the provisions of this Agreement is a
separate and distinct agreement and independent of the others, so that if any
provision hereof shall be held to be invalid for any reason, such invalidity or
unenforceability shall not affect the validity or enforceability of the other
provisions hereof. Furthermore, if this Agreement shall be invalidated in its
entirety on any ground, then the Corporation shall nevertheless indemnify Agent
to the fullest extent provided by the Bylaws, the Code or any other applicable
law.
14. ENTIRE AGREEMENT. This Agreement and the agreements referenced
herein constitute the entire agreement between the parties hereto pertaining to
the subject matter hereof, and any and all other written or oral agreements
existing between the parties hereto pertaining to the subject matters hereof are
superseded and expressly canceled.
15. GOVERNING LAW. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Delaware.
16. AMENDMENT AND TERMINATION. No amendment, modification, termination
or cancellation of this Agreement shall be effective unless in writing signed by
both parties hereto.
17. IDENTICAL COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall for all purposes be deemed to be an
original but all of which together shall constitute but one and the same
Agreement. Only one such counterpart need be produced to evidence the existence
of this Agreement.
5.
<PAGE> 6
18. HEADINGS. The headings of the sections of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction hereof.
19. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given (i)
upon delivery if delivered by hand to the party to whom such communication was
directed or (ii) upon the third business day after the date on which such
communication was mailed if mailed by certified or registered mail with postage
prepaid:
(a) If to Agent, at the address indicated on the signature page hereof.
(b) If to the Corporation, to
Steritech, Inc.
2525 Stanwell Drive, Suite 300
Concord, CA 94520
or to such other address as may have been furnished to Agent by the Corporation.
6.
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
and as of the day and year first above written.
STERITECH, INC.
By:_____________________________________
Name:___________________________________
Title:__________________________________
AGENT
________________________________________
Address:
________________________________________
________________________________________
INDEMNITY AGREEMENT
<PAGE> 1
EXHIBIT 10.2
STERITECH, INC.
1996 EQUITY INCENTIVE PLAN
ADOPTED JULY 24, 1996
APPROVED BY STOCKHOLDERS _______________, 1996
INTRODUCTION.
In January 1992, the Board of Directors adopted the Steritech, Inc. 1992
Stock Option Plan, and it was subsequently amended in March 6, 1996 and April
16, 1996. In July, 1996, the Board of Directors amended and restated the 1992
Stock Option Plan to read as set forth herein.
1. PURPOSES.
(a) The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company and its Affiliates may
be given an opportunity to benefit from increases in value of the common stock
of the Company ("Common Stock") through the granting of (i) Incentive Stock
Options, (ii) Nonstatutory Stock Options, (iii) stock bonuses and (iv) rights to
purchase restricted stock, and (v) stock appreciation rights, all as defined
below.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees, Directors or Consultants, to secure and retain
the services of new Employees, Directors and Consultants, and to provide
incentives for such persons to exert maximum efforts for the success of the
Company and its Affiliates.
(c) The Company intends that the Stock Awards issued under the Plan shall,
in the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c), be
either (i) Options granted pursuant to Section 6 hereof, including Incentive
Stock Options and Nonstatutory Stock Options, or (ii) stock bonuses or rights to
purchase restricted stock granted pursuant to Section 7 hereof, or (iii) stock
appreciation rights granted pursuant to Section 8 hereof. All Options shall be
separately designated Incentive Stock Options or Nonstatutory Stock Options at
the time of grant, and in such form as issued pursuant to Section 6, and a
separate certificate or certificates will be issued for shares purchased on
exercise of each type of Option.
1.
<PAGE> 2
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.
(e) "COMPANY" means Steritech, Inc., a Delaware corporation.
(f) "CONCURRENT STOCK APPRECIATION RIGHT" OR "CONCURRENT RIGHT" means a
right granted pursuant to subsection 8(b)(2) of the Plan.
(g) "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided that the term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.
(h) "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT" means the
employment or relationship as a Director or Consultant is not interrupted or
terminated. The Board, in its sole discretion, may determine whether Continuous
Status as an Employee, Director or Consultant shall be considered interrupted in
the case of: (i) any leave of absence approved by the Board, including sick
leave, military leave, or any other personal leave; or (ii) transfers between
locations of the Company or between the Company, Affiliates or their successors.
(i) "DIRECTOR" means a member of the Board.
(j) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
(k) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
(l) "FAIR MARKET VALUE" means, as of any date, the value of the Common
Stock of the Company determined as follows:
(1) If the Common Stock is listed on any established stock exchange,
or traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair
Market Value of a share of Common Stock shall be the closing sales price for
such stock (or the closing bid, if no
2.
<PAGE> 3
sales were reported) as quoted on such exchange or market (or the exchange or
market with the greatest volume of trading in Common Stock) on the last market
trading day prior to the day of determination, as reported in the Wall Street
Journal or such other source as the Board deems reliable;
(2) In the absence of such markets for the Common Stock, the Fair
Market Value shall be determined in good faith by the Board.
(m) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(n) "INDEPENDENT STOCK APPRECIATION RIGHT" means a right granted pursuant
to subsection 8(b)(3) of the Plan.
(o) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
of 1933 ("Regulation S-K"), does not possess an interest in any other
transaction as to which disclosure would be required under Item 404(a) of
Regulation S-K, and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is
otherwise considered a "non-employee director" for purposes of Rule 16b-3.
(p) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify as
an Incentive Stock Option.
(q) "OFFICER" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(r) "OPTION" means a stock option granted pursuant to the Plan.
(s) "OPTION AGREEMENT" means a written agreement between the Company and
an Optionee evidencing the terms and conditions of an individual Option grant.
Each Option Agreement shall be subject to the terms and conditions of the Plan.
(t) "OPTIONEE" means a person to whom an Option is granted pursuant to the
Plan.
(u) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
3.
<PAGE> 4
at any time, and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(v) "PLAN" means this Steritech, Inc. 1996 Equity Incentive Plan.
(w) "RULE 16B-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3, as in effect when discretion is being exercised with respect to the
Plan.
(x) "STOCK APPRECIATION RIGHT" means any of the various types of rights
which may be granted under Section 8 of the Plan.
(y) "STOCK AWARD" means any right granted under the Plan, including any
Option, any stock bonus, and any right to purchase restricted stock.
(z) "STOCK AWARD AGREEMENT" means a written agreement between the Company
and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.
(aa) "TANDEM STOCK APPRECIATION RIGHT" OR "TANDEM RIGHT" means a right
granted pursuant to subsection 8(b)(1) of the Plan.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until the Board
delegates administration to a Committee, as provided in subsection 3(c).
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible
under the Plan shall be granted Stock Awards; when and how each Stock Award
shall be granted; whether a Stock Award will be an Incentive Stock Option, a
Nonstatutory Stock Option, a stock bonus, a right to purchase restricted stock,
a Stock Appreciation Right, or a combination of the foregoing; the provisions of
each Stock Award granted (which need not be identical), including the time or
times when a person shall be permitted to receive stock pursuant to a Stock
Award; whether a person shall be permitted to receive stock upon exercise of an
Independent Stock Appreciation Right; and the number of shares with respect to
which a Stock Award shall be granted to each such person.
(2) To construe and interpret the Plan and Stock Awards granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.
4.
<PAGE> 5
(3) To amend the Plan or a Stock Award as provided in Section 13.
(4) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.
(c) The Board may delegate administration of the Plan to a committee or
committees ("Committee") of one or more persons. In the discretion of the Board,
a Committee may consist solely of two or more Outside Directors, in accordance
with Code Section 162(m), or solely of two or more Non-Employee Directors, in
accordance with Rule 16b-3. If administration is delegated to a Committee, the
Committee shall have, in connection with the administration of the Plan, the
powers theretofore possessed by the Board (and references in this Plan to the
Board shall thereafter be to the Committee), subject, however, to such
resolutions, not inconsistent with the provisions of the Plan, as may be adopted
from time to time by the Board. The Board may abolish the Committee at any time
and revest in the Board the administration of the Plan.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 12 relating to adjustments upon
changes in stock, the stock that may be issued pursuant to Stock Awards shall
not exceed in the aggregate one million, (1,000,000) shares of Common Stock. If
any Stock Award shall for any reason expire or otherwise terminate, in whole or
in part, without having been exercised in full (or vested in the case of
Restricted Stock), the stock not acquired under such Stock Award shall revert to
and again become available for issuance under the Plan. Shares subject to Stock
Appreciation Rights exercised in accordance with Section 8 of the Plan shall not
be available for subsequent issuance under the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) Incentive Stock Options and Stock Appreciation Rights appurtenant
thereto may be granted only to Employees. Stock Awards other than Incentive
Stock Options and Stock Appreciation Rights appurtenant thereto may be granted
only to Employees, Directors or Consultants.
(b) No person shall be eligible for the grant of an Incentive Stock Option
if, at the time of grant, such person owns (or is deemed to own pursuant to
Section 424(d) of the Code) stock possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or of any of
its Affiliates unless the exercise price of such Option is at least one hundred
ten percent (110%) of the Fair Market Value of such stock at the date of grant
and the Option is not exercisable after the expiration of five (5) years from
the date of grant.
5.
<PAGE> 6
(c) Subject to the provisions of Section 12 relating to adjustments upon
changes in stock, no person shall be eligible to be granted Options and Stock
Appreciation Rights covering more than two hundred fifty thousand (250,000)
shares of Common Stock in any calendar year.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(a) TERM. No Option shall be exercisable after the expiration of ten (10)
years from the date it was granted.
(b) PRICE. The exercise price of each Incentive Stock Option shall be not
less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted, and the exercise price
of each Nonstatutory Stock Option shall be not less than eighty-five percent
(85%) of the Fair Market Value of the stock subject to the Option on the date
the Option is granted. Notwithstanding the foregoing, an Option may be granted
with an exercise price lower than that set forth in the preceding sentence if
such Option is granted pursuant to an assumption or substitution for another
option in a manner satisfying the provisions of Section 424(a) of the Code.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or the Committee, at the time of the grant of the
Option, (A) by delivery to the Company of other Common Stock of the Company, (B)
according to a deferred payment or other arrangement (which may include, without
limiting the generality of the foregoing, the use of other Common Stock of the
Company) with the person to whom the Option is granted or to whom the Option is
transferred pursuant to subsection 6(d), or (C) in any other form of legal
consideration that may be acceptable to the Board.
In the case of any deferred payment arrangement, interest shall be payable
at least annually and shall be charged at the minimum rate of interest necessary
to avoid the treatment as interest, under any applicable provisions of the Code,
of any amounts other than amounts stated to be interest under the deferred
payment arrangement.
(d) TRANSFERABILITY. An Incentive Stock Option shall not be transferable
except by will or by the laws of descent and distribution, and shall be
exercisable during the lifetime of the person to whom the Incentive Stock Option
is granted only by such person. A Nonstatutory Stock Option may be transferred
to the extent provided in the Option Agreement; provided that if the Option
Agreement does not expressly permit the transfer of a Nonstatutory Stock Option,
the Nonstatutory Stock Option shall not be transferable except by will, by the
laws of descent and distribution or pursuant to a domestic relations order
satisfying the requirements of Rule
6.
<PAGE> 7
16b-3, and shall be exercisable during the lifetime of the person to whom the
Option is granted only by such person or any transferee pursuant to a domestic
relations order. Notwithstanding the foregoing, the person to whom the Option is
granted may, by delivering written notice to the Company, in a form satisfactory
to the Company, designate a third party who, in the event of the death of the
Optionee, shall thereafter be entitled to exercise the Option.
(e) VESTING. The total number of shares of stock subject to an Option may,
but need not, be allotted in periodic installments (which may, but need not, be
equal). The Option Agreement may provide that from time to time during each of
such installment periods, the Option may become exercisable ("vest") with
respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. The provisions of this
subsection 6(e) are subject to any Option provisions governing the minimum
number of shares as to which an Option may be exercised.
(f) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR CONSULTANT.
In the event an Optionee's Continuous Status as an Employee, Director or
Consultant terminates (other than upon the Optionee's death or disability), the
Optionee may exercise his or her Option (to the extent that the Optionee was
entitled to exercise it at the date of termination) but only within such period
of time ending on the earlier of (i) the date three (3) months after the
termination of the Optionee's Continuous Status as an Employee, Director or
Consultant (or such longer or shorter period specified in the Option Agreement),
or (ii) the expiration of the term of the Option as set forth in the Option
Agreement. If, after termination, the Optionee does not exercise his or her
Option within the time specified in the Option Agreement, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
An Optionee's Option Agreement may also provide that if the exercise of
the Option following the termination of the Optionee's Continuous Status as an
Employee, Director, or Consultant (other than upon the Optionee's death or
disability) would result in liability under Section 16(b) of the Exchange Act,
then the Option shall terminate on the earlier of (i) the expiration of the term
of the Option set forth in the Option Agreement, or (ii) the tenth (10th) day
after the last date on which such exercise would result in such liability under
Section 16(b) of the Exchange Act. Finally, an Optionee's Option Agreement may
also provide that if the exercise of the Option following the termination of the
Optionee's Continuous Status as an Employee, Director or Consultant (other than
upon the Optionee's death or disability) would be prohibited at any time solely
because the issuance of shares would violate the registration requirements under
the Act, then the Option shall terminate on the earlier of (i) the expiration of
the term of the Option set forth in the first paragraph of this subsection 6(f),
or (ii) the expiration of a period of three (3) months after the termination of
the Optionee's Continuous Status as an Employee, Director or Consultant during
which the exercise of the Option would not be in violation of such registration
requirements.
7.
<PAGE> 8
(g) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous Status
as an Employee, Director or Consultant terminates as a result of the Optionee's
disability, the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it at the date of termination), but only
within such period of time ending on the earlier of (i) the date twelve (12)
months following such termination (or such longer or shorter period specified in
the Option Agreement), or (ii) the expiration of the term of the Option as set
forth in the Option Agreement. If, at the date of termination, the Optionee is
not entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance under the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
(h) DEATH OF OPTIONEE. In the event of the death of an Optionee during, or
within a period specified in the Option after the termination of, the Optionee's
Continuous Status as an Employee, Director or Consultant, the Option may be
exercised (to the extent the Optionee was entitled to exercise the Option at the
date of death) by the Optionee's estate, by a person who acquired the right to
exercise the Option by bequest or inheritance or by a person designated to
exercise the option upon the Optionee's death pursuant to subsection 6(d), but
only within the period ending on the earlier of (i) the date eighteen (18)
months following the date of death (or such longer or shorter period specified
in the Option Agreement), or (ii) the expiration of the term of such Option as
set forth in the Option Agreement. If, at the time of death, the Optionee was
not entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance under the Plan. If, after death, the Option is not exercised within
the time specified herein, the Option shall terminate, and the shares covered by
such Option shall revert to and again become available for issuance under the
Plan.
(i) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject to
the Option prior to the full vesting of the Option. Any unvested shares so
purchased may be subject to a repurchase right in favor of the Company or to any
other restriction the Board determines to be appropriate.
(j) RE-LOAD OPTIONS. Without in any way limiting the authority of the
Board or Committee to make or not to make grants of Options hereunder, the Board
or Committee shall have the authority (but not an obligation) to include as part
of any Option Agreement a provision entitling the Optionee to a further Option
(a "Re-Load Option") in the event the Optionee exercises the Option evidenced by
the Option agreement, in whole or in part, by surrendering other shares of
Common Stock in accordance with this Plan and the terms and conditions of the
Option Agreement. Any such Re-Load Option (i) shall be for a number of shares
equal to the number of shares surrendered as part or all of the exercise price
of such Option; (ii) shall have an expiration date which is the same as the
expiration date of the Option the exercise of which gave rise to such Re-Load
Option; and (iii) shall have an exercise price which is equal to one hundred
percent (100%) of the Fair Market Value of the Common Stock subject to the
Re-Load
8.
<PAGE> 9
Option on the date of exercise of the original Option. Notwithstanding the
foregoing, a Re-Load Option which is an Incentive Stock Option and which is
granted to a 10% stockholder (as described in subsection 5(c)), shall have an
exercise price which is equal to one hundred ten percent (110%) of the Fair
Market Value of the stock subject to the Re-Load Option on the date of exercise
of the original Option and shall have a term which is no longer than five (5)
years.
Any such Re-Load Option may be an Incentive Stock Option or a Nonstatutory
Stock Option, as the Board or Committee may designate at the time of the grant
of the original Option; provided, however, that the designation of any Re-Load
Option as an Incentive Stock Option shall be subject to the one hundred thousand
dollars ($100,000) annual limitation on exercisability of Incentive Stock
Options described in subsection 12(d) of the Plan and in Section 422(d) of the
Code. There shall be no Re-Load Options on a Re-Load Option. Any such ReLoad
Option shall be subject to the availability of sufficient shares under
subsection 4(a) and shall be subject to such other terms and conditions as the
Board or Committee may determine which are not inconsistent with the express
provisions of the Plan regarding the terms of Options.
7. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.
Each stock bonus or restricted stock purchase agreement shall be in such
form and shall contain such terms and conditions as the Board or the Committee
shall deem appropriate. The terms and conditions of stock bonus or restricted
stock purchase agreements may change from time to time, and the terms and
conditions of separate agreements need not be identical, but each stock bonus or
restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions as appropriate:
(a) PURCHASE PRICE. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board or Committee shall
determine and designate in such agreement but in no event shall the purchase
price be less than eighty-five percent (85%) of the stock's Fair Market Value on
the date such award is made. Notwithstanding the foregoing, the Board or the
Committee may determine that eligible participants in the Plan may be awarded
stock pursuant to a stock bonus agreement in consideration for past services
actually rendered to the Company for its benefit.
(b) TRANSFERABILITY. No rights under a stock bonus or restricted stock
purchase agreement shall be transferable except by will or the laws of descent
and distribution or, if the agreement so provides, pursuant to a domestic
relations order satisfying the requirements of Rule 16b-3, so long as stock
awarded under such agreement remains subject to the terms of the agreement.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to a
stock purchase agreement shall be paid either: (i) in cash at the time of
purchase; (ii) at the discretion of the Board or the Committee, according to a
deferred payment or other arrangement with the person to whom the stock is sold;
or (iii) in any other form of legal consideration that may be
9.
<PAGE> 10
acceptable to the Board or the Committee in its discretion. Notwithstanding the
foregoing, the Board or the Committee to which administration of the Plan has
been delegated may award stock pursuant to a stock bonus agreement in
consideration for past services actually rendered to the Company or for its
benefit.
(d) VESTING. Shares of stock sold or awarded under the Plan may, but need
not, be subject to a repurchase option in favor of the Company in accordance
with a vesting schedule to be determined by the Board or the Committee.
(e) TERMINATION OF CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR
CONSULTANT. In the event a Participant's Continuous Status as an Employee,
Director or Consultant terminates, the Company may repurchase or otherwise
reacquire any or all of the shares of stock held by that person which have not
vested as of the date of termination under the terms of the stock bonus or
restricted stock purchase agreement between the Company and such person.
8. STOCK APPRECIATION RIGHTS.
(a) The Board or Committee shall have full power and authority,
exercisable in its sole discretion, to grant Stock Appreciation Rights under the
Plan to Employees and Consultants. To exercise any outstanding Stock
Appreciation Right, the holder must provide written notice of exercise to the
Company in compliance with the provisions of the Stock Award Agreement
evidencing such right. If a Stock Appreciation Right is granted to an individual
who is at the time subject to Section 16(b) of the Exchange Act (a "Section
16(b) Insider"), the Stock Award Agreement of grant shall incorporate all the
terms and conditions at the time necessary to assure that the subsequent
exercise of such right shall qualify for the safe-harbor exemption from
short-swing profit liability provided by Rule 16b-3 promulgated under the
Exchange Act (or any successor rule or regulation). Except as provided in
subsection 5(d), no limitation shall exist on the aggregate amount of cash
payments the Company may make under the Plan in connection with the exercise of
a Stock Appreciation Right.
(b) Three types of Stock Appreciation Rights shall be authorized for
issuance under the Plan:
(1) TANDEM STOCK APPRECIATION RIGHTS. Tandem Stock Appreciation
Rights will be granted appurtenant to an Option, and shall, except as
specifically set forth in this Section 8, be subject to the same terms and
conditions applicable to the particular Option grant to which it pertains.
Tandem Stock Appreciation Rights will require the holder to elect between the
exercise of the underlying Option for shares of stock and the surrender, in
whole or in part, of such Option for an appreciation distribution. The
appreciation distribution payable on the exercised Tandem Right shall be in cash
(or, if so provided, in an equivalent number of shares of stock based on Fair
Market Value on the date of the Option surrender) in an amount up to the excess
of (A) the Fair Market Value (on the date of the Option surrender) of the number
of shares of stock covered by that portion of the surrendered Option in which
the Optionee is vested over (B) the aggregate exercise price payable for such
vested shares.
10.
<PAGE> 11
(2) CONCURRENT STOCK APPRECIATION RIGHTS. Concurrent Rights will be
granted appurtenant to an Option and may apply to all or any portion of the
shares of stock subject to the underlying Option and shall, except as
specifically set forth in this Section 8, be subject to the same terms and
conditions applicable to the particular Option grant to which it pertains. A
Concurrent Right shall be exercised automatically at the same time the
underlying Option is exercised with respect to the particular shares of stock to
which the Concurrent Right pertains. The appreciation distribution payable on an
exercised Concurrent Right shall be in cash (or, if so provided, in an
equivalent number of shares of stock based on Fair Market Value on the date of
the exercise of the Concurrent Right) in an amount equal to such portion as
shall be determined by the Board or the Committee at the time of the grant of
the excess of (A) the aggregate Fair Market Value (on the date of the exercise
of the Concurrent Right) of the vested shares of stock purchased under the
underlying Option which have Concurrent Rights appurtenant to them over (B) the
aggregate exercise price paid for such shares.
(3) INDEPENDENT STOCK APPRECIATION RIGHTS. Independent Rights will
be granted independently of any Option and shall, except as specifically set
forth in this Section 8, be subject to the same terms and conditions applicable
to Nonstatutory Stock Options as set forth in Section 6. They shall be
denominated in share equivalents. The appreciation distribution payable on the
exercised Independent Right shall be not greater than an amount equal to the
excess of (A) the aggregate Fair Market Value (on the date of the exercise of
the Independent Right) of a number of shares of Company stock equal to the
number of share equivalents in which the holder is vested under such Independent
Right, and with respect to which the holder is exercising the Independent Right
on such date, over (B) the aggregate Fair Market Value (on the date of the grant
of the Independent Right) of such number of shares of Company stock. The
appreciation distribution payable on the exercised Independent Right shall be in
cash or, if so provided, in an equivalent number of shares of stock based on
Fair Market Value on the date of the exercise of the Independent Right.
9. CANCELLATION AND RE-GRANT OF OPTIONS.
(a) The Board or the Committee shall have the authority to effect, at any
time and from time to time, (i) the repricing of any outstanding Options and/or
any Stock Appreciation Rights under the Plan and/or (ii) with the consent of any
adversely affected holders of Options and/or Stock Appreciation Rights, the
cancellation of any outstanding Options and/or any Stock Appreciation Rights
under the Plan and the grant in substitution therefor of new Options and/or
Stock Appreciation Rights under the Plan covering the same or different numbers
of shares of stock, but having an exercise price per share not less than:
eighty-five percent (85%) of the Fair Market Value for a Nonstatutory Stock
Option, one hundred percent (100%) of the Fair Market Value in the case of an
Incentive Stock Option or, in the case of an Incentive Stock Option held by a
10% stockholder (as described in subsection 5(b)), not less than one hundred ten
percent (110%) of the Fair Market Value per share of stock on the new grant
date. Notwithstanding the foregoing, the Board or the Committee may grant an
Option and/or Stock Appreciation Right with an exercise price lower than that
set forth above if such Option and/or Stock Appreciation Right is granted as
part of a transaction to which section 424(a) of the Code applies.
11.
<PAGE> 12
(b) Shares subject to an Option or Stock Appreciation Right canceled under
this Section 9 shall continue to be counted against the maximum award of Options
and Stock Appreciation Rights permitted to be granted pursuant to subsection
5(c) of the Plan. The repricing of an Option and/or Stock Appreciation Right
under this Section 9, resulting in a reduction of the exercise price, shall be
deemed to be a cancellation of the original Option and/or Stock Appreciation
Right and the grant of a substitute Option and/or Stock Appreciation Right; in
the event of such repricing, both the original and the substituted Options and
Stock Appreciation Rights shall be counted against the maximum awards of Options
and Stock Appreciation Rights permitted to be granted pursuant to subsection
5(c) of the Plan. The provisions of this subsection 9(b) shall be applicable
only to the extent required by Section 162(m) of the Code.
10. COVENANTS OF THE COMPANY.
(a) During the terms of the Stock Awards, the Company shall keep available
at all times the number of shares of stock required to satisfy such Stock
Awards.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares under Stock Awards; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
of 1933, as amended (the "Securities Act") either the Plan, any Stock Award or
any stock issued or issuable pursuant to any such Stock Award. If, after
reasonable efforts, the Company is unable to obtain from any such regulatory
commission or agency the authority which counsel for the Company deems necessary
for the lawful issuance and sale of stock under the Plan, the Company shall be
relieved from any liability for failure to issue and sell stock upon exercise of
such Stock Awards unless and until such authority is obtained.
11. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Stock Awards shall constitute
general funds of the Company.
12. MISCELLANEOUS.
(a) The Board shall have the power to accelerate the time at which a Stock
Award may first be exercised or the time during which a Stock Award or any part
thereof will vest pursuant to subsection 6(e), 7(d) or 8(b), notwithstanding the
provisions in the Stock Award stating the time at which it may first be
exercised or the time during which it will vest.
(b) Neither an Employee, Director nor a Consultant nor any person to whom
a Stock Award is transferred in accordance with the Plan shall be deemed to be
the holder of, or to have any of the rights of a holder with respect to, any
shares subject to such Stock Award unless and until such person has satisfied
all requirements for exercise of the Stock Award pursuant to its terms.
12.
<PAGE> 13
(c) Nothing in the Plan or any instrument executed or Stock Award granted
pursuant thereto shall confer upon any Employee, Consultant or other holder of
Stock Awards any right to continue in the employ of the Company or any
Affiliate, or to continue serving as a Consultant and Director, or shall affect
the right of the Company or any Affiliate to terminate the employment of any
Employee with or without notice and with or without cause, or the right to
terminate the relationship of any Consultant pursuant to the terms of such
Consultant's agreement with the Company or Affiliate or service as a Director
pursuant to the Company's By-Laws.
(d) To the extent that the aggregate Fair Market Value (determined at the
time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
all plans of the Company and its Affiliates exceeds one hundred thousand dollars
($100,000), the Options or portions thereof which exceed such limit (according
to the order in which they were granted) shall be treated as Nonstatutory Stock
Options.
(e) The Company may require any person to whom a Stock Award is granted,
or any person to whom a Stock Award is transferred in accordance with the Plan,
as a condition of exercising or acquiring stock under any Stock Award, (1) to
give written assurances satisfactory to the Company as to such person's
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters, and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award; and (2) to
give written assurances satisfactory to the Company stating that such person is
acquiring the stock subject to the Stock Award for such person's own account and
not with any present intention of selling or otherwise distributing the stock.
The foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares upon the
exercise or acquisition of stock under the Stock Award has been registered under
a then currently effective registration statement under the Securities Act, or
(ii) as to any particular requirement, a determination is made by counsel for
the Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may, upon advice of counsel to the
Company, place legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends restricting the transfer
of the stock.
(f) To the extent provided by the terms of a Stock Award Agreement, the
person to whom a Stock Award is granted may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of stock
under a Stock Award by any of the following means or by a combination of such
means: (1) tendering a cash payment; (2) authorizing the Company to withhold
shares from the shares of the Common Stock otherwise issuable to the participant
as a result of the exercise or acquisition of stock under the Stock Award; or
(3) delivering to the Company owned and unencumbered shares of the Common Stock
of the Company.
13.
<PAGE> 14
13. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject to
any Stock Award, without the receipt of consideration by the Company (through
merger, consolidation, reorganization, recapitalization, reincorporation, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Company), the Plan will be appropriately adjusted in the class(es) and maximum
number of shares subject to the Plan pursuant to subsection 4(a) and the maximum
number of shares subject to award to any person during any calendar year
pursuant to subsection 5(c), and the outstanding Stock Awards will be
appropriately adjusted in the class(es) and number of shares and price per share
of stock subject to such outstanding Stock Awards. Such adjustments shall be
made by the Board or the Committee, the determination of which shall be final,
binding and conclusive. (The conversion of any convertible securities of the
Company shall not be treated as a "transaction not involving the receipt of
consideration by the Company".)
(b) In the event of: (1) a dissolution, liquidation or sale of
substantially all of the assets of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; or (3) a reverse merger in
which the Company is the surviving corporation but the shares of the Common
Stock outstanding immediately preceding the merger are converted by virtue of
the merger into other property, whether in the form of securities, cash or
otherwise, then to the extent permitted by applicable law: (i) any surviving
corporation or an Affiliate of such surviving corporation shall assume any Stock
Awards outstanding under the Plan or shall substitute similar Stock Awards for
those outstanding under the Plan, or (ii) such Stock Awards shall continue in
full force and effect. In the event any surviving corporation and its Affiliates
refuse to assume or continue such Stock Awards, or to substitute similar options
for those outstanding under the Plan, then, with respect to Stock Awards held by
persons then performing services as Employees, Directors or Consultants, the
time during which such Stock Awards may be exercised shall be accelerated and
the Stock Awards terminated if not exercised prior to such event.
14. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 13 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company to the extent stockholder is necessary for the Plan to satisfy the
requirements of Section 422 of the Code, Rule 16b-3 or any Nasdaq or securities
exchange listing requirements.
(b) The Board may in its sole discretion submit any other amendment to the
Plan for stockholder approval, including, but not limited to, amendments to the
Plan intended to satisfy the requirements of Section 162(m) of the Code and the
regulations thereunder regarding the exclusion of performance-based compensation
from the limit on corporate deductibility of compensation paid to certain
executive officers.
14.
<PAGE> 15
(c) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide eligible Employees,
Directors or Consultants with the maximum benefits provided or to be provided
under the provisions of the Code and the regulations promulgated thereunder
relating to Incentive Stock Options and/or to bring the Plan and/or Incentive
Stock Options granted under it into compliance therewith.
(d) Rights and obligations under any Stock Award granted before amendment
of the Plan shall not be impaired by any amendment of the Plan unless (i) the
Company requests the consent of the person to whom the Stock Award was granted
and (ii) such person consents in writing.
(e) The Board at any time, and from time to time, may amend the terms of
any one or more Stock Award; provided, however, that the rights and obligations
under any Stock Award shall not be impaired by any such amendment unless (i) the
Company requests the consent of the person to whom the Stock Award was granted
and (ii) such person consents in writing.
15. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate ten (10) years from the date the Plan is
adopted by the Board or approved by the stockholders of the Company, whichever
is earlier. No Stock Awards may be granted under the Plan while the Plan is
suspended or after it is terminated.
(b) Rights and obligations under any Stock Award granted while the Plan is
in effect shall not be impaired by suspension or termination of the Plan, except
with the consent of the person to whom the Stock Award was granted.
16. EFFECTIVE DATE OF PLAN.
This amendment and restatement of the Plan shall become effective on the
date of closing of the initial public offering pursuant to an effective
registration statement covering the offer and sale of Common Stock to the
public, but no Stock Awards granted under the Plan shall be exercised unless and
until the Plan has been approved by the stockholders of the Company, which
approval shall be within twelve (12) months before or after the date the Plan is
adopted by the Board.
15.
<PAGE> 1
EXHIBIT 10.3
INCENTIVE STOCK OPTION
_________________________, Optionee:
Steritech, Inc. (the "Company"), pursuant to its 1996 Equity
Incentive Plan (the "Plan"), has granted to you, the optionee named above, an
option to purchase shares of the common stock of the Company ("Common Stock").
This option is intended to qualify as an "incentive stock option" within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code").
The details of your option are as follows:
1. TOTAL NUMBER OF SHARES SUBJECT TO THIS OPTION. The total
number of shares of Common Stock subject to this option is ____________________
(__________).
2. VESTING. Subject to the limitations contained herein,
__________ [fraction or percentage (e.g., 25% or 12/48ths)] of the shares will
vest (become exercisable) on ____________, 19__ and __________ of the shares
will then vest each [month/year] thereafter until either (i) you cease to
provide services to the Company for any reason, or (ii) this option becomes
fully vested.
3. EXERCISE PRICE AND METHOD OF PAYMENT.
(A) EXERCISE PRICE. The exercise price of this option is
___________ ($___________) per share, being not less than the fair market value
of the Common Stock on the date of grant of this option.
(B) METHOD OF PAYMENT. Payment of the exercise price per
share is due in full upon exercise of all or any part of each installment which
has accrued to you. You may elect, to the extent permitted by applicable
statutes and regulations, to make payment of the exercise price under one of the
following alternatives:
(I) Payment of the exercise price per share in cash
(including check) at the time of exercise; or
(II) Payment pursuant to a program developed under
Regulation T as promulgated by the Federal Reserve Board which, prior to the
issuance of Common Stock, results in either the receipt of cash (or check) by
the Company or the receipt of irrevocable instructions to pay the aggregate
exercise price to the Company from the sales proceeds.
4. WHOLE SHARES. This option may not be exercised for any number
of shares which would require the issuance of anything other than whole shares.
1.
<PAGE> 2
5. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the
contrary contained herein, this option may not be exercised unless the shares
issuable upon exercise of this option are then registered under the Act or, if
such shares are not then so registered, the Company has determined that such
exercise and issuance would be exempt from the registration requirements of the
Act.
6. TERM. The term of this option commences on __________, 19__,
the date of grant, and expires on _____________________ (the "Expiration Date,"
which date shall be no more than ten (10) years from the date this option is
granted), unless this option expires sooner as set forth below or in the Plan.
In no event may this option be exercised on or after the Expiration Date. This
option shall terminate prior to the Expiration Date as follows: three (3) months
after the termination of your Continuous Status as an Employee, Director or
Consultant with the Company or an Affiliate of the Company unless one of the
following circumstances exists:
(A) Your termination of Continuous Status as an Employee,
Director or Consultant is due to your disability. This option will then expire
on the earlier of the Expiration Date set forth above or twelve (12) months
following such termination of Continuous Status as an Employee, Director or
Consultant. You should be aware that if your disability is not considered a
permanent and total disability within the meaning of Section 422(c)(6) of the
Code, and you exercise this option more than three (3) months following the date
of your termination of employment, your exercise will be treated for tax
purposes as the exercise of a "nonstatutory stock option" instead of an
"incentive stock option."
(B) Your termination of Continuous Status as an Employee,
Director or Consultant is due to your death or your death occurs within
_________ [days/months] following your termination of Continuous Status as an
Employee, Director or Consultant for any other reason. This option will then
expire on the earlier of the Expiration Date set forth above or eighteen (18)
months after your death.
(C) If during any part of such _________ [day/month]
period you may not exercise your option solely because of the condition set
forth in paragraph 5 above, then your option will not expire until the earlier
of the Expiration Date set forth above or until this option shall have been
exercisable for an aggregate period of three (3) months after your termination
of Continuous Status as an Employee, Director or Consultant.
(D) If your exercise of the option following termination
of your Continuous Status as an Employee, Director or Consultant with the
Company or with an Affiliate of the Company would result in liability under
section 16(b) of the Securities Exchange Act of 1934, then your option will
expire on the earlier of (i) the Expiration Date set forth above, (ii) the tenth
(10th) day after the last date upon which exercise would result in such
liability or (iii) six (6) months and ten (10) days after the termination of
your Continuous Status as an Employee, Director or Consultant with the Company
or an Affiliate of the Company.
2.
<PAGE> 3
However, this option may be exercised following termination of
Continuous Status of an Employee, Director or Consultant only as to that number
of shares as to which it was exercisable on the date of termination of
Continuous Status of an Employee, Director or Consultant under the provisions of
paragraph 2 of this option.
In order to obtain the federal income tax advantages associated with an
"incentive stock option," the Code requires that at all times beginning on the
date of grant of the option and ending on the day three (3) months before the
date of the option's exercise, you must be an employee of the Company or an
Affiliate of the Company, except in the event of your death or permanent and
total disability. The Company has provided for continued vesting or extended
exercisability of your option under certain circumstances for your benefit, but
cannot guarantee that your option will necessarily be treated as an "incentive
stock option" if you provide services to the Company or an Affiliate of the
Company as a consultant or exercise your option more than three (3) months after
the date your employment with the Company and all Affiliates of the Company
terminates.
7. REPRESENTATIONS. By executing this option agreement, you
hereby warrant and represent that you are acquiring this option for your own
account and that you have no intention of distributing, transferring or selling
all or any part of this option except in accordance with the terms of this
option agreement.
8. EXERCISE.
(A) This option may be exercised, to the extent specified
above, by delivering a notice of exercise (in a form designated by the Company)
together with the exercise price to the Secretary of the Company, or to such
other person as the Company may designate, during regular business hours,
together with such additional documents as the Company may then require.
(B) By exercising this option you agree that:
(I) as a precondition to the completion of any
exercise of this option, the Company may require you to enter an arrangement
providing for the payment by you to the Company of any tax withholding
obligation of the Company arising by reason of (A) the exercise of this option;
(B) the lapse of any substantial risk of forfeiture to which the shares are
subject at the time of exercise; or (C) the disposition of shares acquired upon
such exercise;
(II) you will notify the Company in writing
within fifteen (15) days after the date of any disposition of any of the shares
of the Common Stock issued upon exercise of this option that occurs within two
(2) years after the date of this option grant or within one (1) year after such
shares of Common Stock are transferred upon exercise of this option; and
3.
<PAGE> 4
(III) the Company (or a representative of the
underwriters) may, in connection with the first underwritten registration of the
offering of any securities of the Company under the Act, require that you not
sell or otherwise transfer or dispose of any shares of Common Stock or other
securities of the Company during such period (not to exceed one hundred eighty
(180) days) following the effective date (the "Effective Date") of the
registration statement of the Company filed under the Act as may be requested by
the Company or the representative of the underwriters. You further agree that
the Company may impose stop-transfer instructions with respect to securities
subject to the foregoing restrictions until the end of such period.
9. TRANSFERABILITY. This option is not transferable, except by
will or by the laws of descent and distribution, and is exercisable during your
life only by you. Notwithstanding the foregoing, by delivering written notice to
the Company, in a form satisfactory to the Company, you may designate a third
party who, in the event of your death, shall thereafter be entitled to exercise
this option.
10. OPTION NOT A SERVICE CONTRACT. This option is not an
employment contract and nothing in this option shall be deemed to create in any
way whatsoever any obligation on your part to continue in the employ of the
Company, or of the Company to continue your employment with the Company. In
addition, nothing in this option shall obligate the Company or any Affiliate of
the Company, or their respective stockholders, Board of Directors, officers or
employees to continue any relationship which you might have as a Director or
Consultant for the Company or Affiliate of the Company.
11. NOTICES. Any notices provided for in this option or the Plan
shall be given in writing and shall be deemed effectively given upon receipt or,
in the case of notices delivered by the Company to you, five (5) days after
deposit in the United States mail, postage prepaid, addressed to you at the
address specified below or at such other address as you hereafter designate by
written notice to the Company.
12. GOVERNING PLAN DOCUMENT. This option is subject to all the
provisions of the Plan, a copy of which is attached hereto and its provisions
are hereby made a part of this option, including without limitation the
provisions of Section 6 of the Plan relating to option provisions, and is
further subject to all interpretations, amendments, rules and regulations which
4.
<PAGE> 5
may from time to time be promulgated and adopted pursuant to the Plan. In the
event of any conflict between the provisions of this option and those of the
Plan, the provisions of the Plan shall control.
Dated the ____ day of __________________, 19__.
Very truly yours,
____________________________________
By__________________________________
Duly authorized on behalf of the
Board of Directors
ATTACHMENTS:
Company's 1996 Equity Incentive Plan
Notice of Exercise
5.
<PAGE> 6
The undersigned:
(A) Acknowledges receipt of the foregoing option and the
attachments referenced therein and understands that all rights and liabilities
with respect to this option are set forth in the option and the Plan; and
(B) Acknowledges that as of the date of grant of this option, it
sets forth the entire understanding between the undersigned optionee and the
Company and its Affiliates regarding the acquisition of stock in the Company and
supersedes all prior oral and written agreements on that subject with the
exception of (i) the options previously granted and delivered to the undersigned
under stock option plans of the Company, and (ii) the following agreements only:
NONE ________________________
(Initial)
OTHER ________________________
________________________
________________________
__________________________
OPTIONEE
Address:__________________
__________________
6.
<PAGE> 1
EXHIBIT 10.4
NONSTATUTORY STOCK OPTION
________________________, Optionee:
Steritech, Inc. (the "Company"), pursuant to its 1996 Equity
Incentive Plan (the "Plan"), has granted to you, the optionee named above, an
option to purchase shares of the common stock of the Company ("Common Stock").
This option is not intended to qualify and will not be treated as an "incentive
stock option" within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code").
The details of your option are as follows:
1. TOTAL NUMBER OF SHARES SUBJECT TO THIS OPTION. The total
number of shares of Common Stock subject to this option is ___________________
(_______).
2. VESTING. Subject to the limitations contained herein,
__________ [fraction or percentage (e.g., 25% or 12/48ths)] of the shares will
vest (become exercisable) on ____________, 19__ and __________ of the shares
will then vest each ____________ [month/year] thereafter until either (i) you
cease to provide services to the Company for any reason, or (ii) this option
becomes fully vested.
3. EXERCISE PRICE AND METHOD OF PAYMENT.
(A) EXERCISE PRICE. The exercise price of this option is
_________________ ($____________) per share, being not less than 85% of the fair
market value of the Common Stock on the date of grant of this option.
(B) METHOD OF PAYMENT. Payment of the exercise price per
share is due in full upon exercise of all or any part of each installment which
has accrued to you. You may elect, to the extent permitted by applicable
statutes and regulations, to make payment of the exercise price under one of the
following alternatives:
(I) Payment of the exercise price per share in
cash (including check) at the time of exercise; or
(II) Payment pursuant to a program developed
under Regulation T as promulgated by the Federal Reserve Board which, prior to
the issuance of Common Stock, results in either the receipt of cash (or check)
by the Company or the receipt of irrevocable instructions to pay the aggregate
exercise price to the Company from the sales proceeds.
4. WHOLE SHARES. This option may not be exercised for any number
of shares which would require the issuance of anything other than whole shares.
1.
<PAGE> 2
5. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the
contrary contained herein, this option may not be exercised unless the shares
issuable upon exercise of this option are then registered under the Act or, if
such shares are not then so registered, the Company has determined that such
exercise and issuance would be exempt from the registration requirements of the
Act.
6. TERM. The term of this option commences on ___________, 19__,
the date of grant, and expires on _____________________ (the "Expiration Date,"
which date shall be no more than ten (10) years from the date this option is
granted), unless this option expires sooner as set forth below or in the Plan.
In no event may this option be exercised on or after the Expiration Date. This
option shall terminate prior to the Expiration Date as follows: three (3) months
after the termination of your Continuous Status as an Employee, Director or
Consultant with the Company or an Affiliate of the Company (as defined in the
Plan) for any reason or for no reason unless:
(A) such termination of Continuous Status as an Employee,
Director or Consultant is due to your disability, in which event the option
shall expire on the earlier of the Expiration Date set forth above or twelve
(12) months following such termination of Continuous Status as an Employee,
Director or Consultant; or
(B) such termination of Continuous Status as an Employee,
Director or Consultant is due to your death or your death occurs within ________
[days/months] following your termination for any other reason, in which event
the option shall expire on the earlier of the Expiration Date set forth above or
eighteen (18) months after your death; or
(C) during any part of such _________ [day/month] period
the option is not exercisable solely because of the condition set forth in
paragraph 5 above, in which event the option shall not expire until the earlier
of the Expiration Date set forth above or until it shall have been exercisable
for an aggregate period of three (3) months after the termination of Continuous
Status as an Employee, Director or Consultant; or
(D) exercise of the option within following termination
of your Continuous Status as an Employee, Director or Consultant with the
Company or with an Affiliate would result in liability under section 16(b) of
the Securities Exchange Act of 1934 (the "Exchange Act"), in which case the
option will expire on the earlier of (i) the Expiration Date set forth above,
(ii) the tenth (10th) day after the last date upon which exercise would result
in such liability or (iii) six (6) months and ten (10) days after the
termination of your Continuous Status as an Employee, Director or Consultant
with the Company or an Affiliate.
However, this option may be exercised following termination of
Continuous Status as an Employee, Director or Consultant only as to that number
of shares as to which it was exercisable on the date of termination of
Continuous Status as an Employee, Director or Consultant under the provisions of
paragraph 2 of this option.
2.
<PAGE> 3
7. REPRESENTATION. By executing this option agreement, you hereby
warrant and represent that you are acquiring this option for your own account
and that you have no intention of distributing, transferring or selling all or
any part of this option except in accordance with the terms of this option
agreement.
8. EXERCISE.
(A) This option may be exercised, to the extent specified
above, by delivering a notice of exercise (in a form designated by the Company)
together with the exercise price to the Secretary of the Company, or to such
other person as the Company may designate, during regular business hours,
together with such additional documents as the Company may then require.
(B) By exercising this option you agree that:
(I) as a precondition to the completion of any
exercise of this option, the Company may require you to enter an arrangement
providing for the cash payment by you to the Company of any tax withholding
obligation of the Company arising by reason of: (1) the exercise of this option;
(2) the lapse of any substantial risk of forfeiture to which the shares are
subject at the time of exercise; or (3) the disposition of shares acquired upon
such exercise. You also agree that any exercise of this option has not been
completed and that the Company is under no obligation to issue any Common Stock
to you until such an arrangement is established or the Company's tax withholding
obligations are satisfied, as determined by the Company; and
(II) the Company (or a representative of the
underwriters) may, in connection with the first underwritten registration of the
offering of any securities of the Company under the Act, require that you not
sell or otherwise transfer or dispose of any shares of Common Stock or other
securities of the Company during such period (not to exceed one hundred eighty
(180) days) following the effective date (the "Effective Date") of the
registration statement of the Company filed under the Act as may be requested by
the Company or the representative of the underwriters. You further agree that
the Company may impose stop-transfer instructions with respect to securities
subject to the foregoing restrictions until the end of such period.
9. TRANSFERABILITY. This option is not transferable, except by
will or by the laws of descent and distribution or pursuant to a domestic
relations order satisfying the requirements of Rule 16b-3 (a "QDRO"), and is
exercisable during your life only by you or a transferee pursuant to a QDRO.
Notwithstanding the foregoing, by delivering written notice to the Company, in a
form satisfactory to the Company, you may designate a third party who, in the
event of your death, shall thereafter be entitled to exercise this option.
10. OPTION NOT A SERVICE CONTRACT. This option is not an
employment contract and nothing in this option shall be deemed to create in any
way whatsoever any obligation on your part to continue in the employ of the
Company, or of the Company to continue your
3.
<PAGE> 4
employment with the Company. In addition, nothing in this option shall obligate
the Company or any Affiliate, or their respective stockholders, Board of
Directors, officers or employees to continue any relationship which you might
have as a Director or Consultant for the Company or Affiliate.
11. NOTICES. Any notices provided for in this option or the Plan
shall be given in writing and shall be deemed effectively given upon receipt or,
in the case of notices delivered by the Company to you, five (5) days after
deposit in the United States mail, postage prepaid, addressed to you at the
address specified below or at such other address as you hereafter designate by
written notice to the Company.
12. GOVERNING PLAN DOCUMENT. This option is subject to all the
provisions of the Plan, a copy of which is attached hereto and its provisions
are hereby made a part of this option, including without limitation the
provisions of Section 6 of the Plan relating to option provisions, and is
further subject to all interpretations, amendments, rules and regulations which
may from time to time be promulgated and adopted pursuant to the Plan. In the
event of any conflict between the provisions of this option and those of the
Plan, the provisions of the Plan shall control.
Dated the ____ day of __________________, 19__.
Very truly yours,
_______________________________________________
By_____________________________________________
Duly authorized on behalf
of the Board of Directors
ATTACHMENTS:
Company's 1996 Equity Incentive Plan
Notice of Exercise
4.
<PAGE> 5
The undersigned:
(A) Acknowledges receipt of the foregoing option and the
attachments referenced therein and understands that all rights and liabilities
with respect to this option are set forth in the option and the Plan; and
(B) Acknowledges that as of the date of grant of this option, it
sets forth the entire understanding between the undersigned optionee and the
Company and its Affiliates regarding the acquisition of stock in the Company and
supersedes all prior oral and written agreements on that subject with the
exception of (i) the options previously granted and delivered to the undersigned
under stock option plans of the Company, and (ii) the following agreements only:
NONE _______________________
(Initial)
OTHER _______________________
_______________________
_______________________
__________________________________________
OPTIONEE
Address:__________________________________
__________________________________
5.
<PAGE> 1
EXHIBIT 10.5
STERITECH, INC.
EMPLOYEE STOCK PURCHASE PLAN
ADOPTED JULY 24, 1996
APPROVED BY STOCKHOLDERS _____________, 1996
1. PURPOSE.
(A) The purpose of the Employee Stock Purchase Plan (the "Plan")
is to provide a means by which employees of Steritech, Inc., a California
corporation (the "Company"), and its Affiliates, as defined in subparagraph
1(b), which are designated as provided in subparagraph 2(b), may be given an
opportunity to purchase stock of the Company.
(B) The word "Affiliate" as used in the Plan means any parent
corporation or subsidiary corporation of the Company, as those terms are defined
in Sections 424(e) and (f), respectively, of the Internal Revenue Code of 1986,
as amended (the "Code").
(C) The Company, by means of the Plan, seeks to retain the
services of its employees, to secure and retain the services of new employees,
and to provide incentives for such persons to exert maximum efforts for the
success of the Company.
(D) The Company intends that the rights to purchase stock of the
Company granted under the Plan be considered options issued under an "employee
stock purchase plan" as that term is defined in Section 423(b) of the Code.
2. ADMINISTRATION.
(A) The Plan shall be administered by the Board of Directors (the
"Board") of the Company unless and until the Board delegates administration to a
Committee, as provided in subparagraph 2(c). Whether or not the Board has
delegated administration, the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.
(B) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(I) To determine when and how rights to purchase stock of
the Company shall be granted and the provisions of each offering of such rights
(which need not be identical).
1.
<PAGE> 2
(II) To designate from time to time which Affiliates of
the Company shall be eligible to participate in the Plan.
(III) To construe and interpret the Plan and rights granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan, in a manner and to the extent it
shall deem necessary or expedient to make the Plan fully effective.
(IV) To amend the Plan as provided in paragraph 13.
(V) Generally, to exercise such powers and to perform
such acts as the Board deems necessary or expedient to promote the best
interests of the Company and its Affiliates and to carry out the intent that the
Plan be treated as an "employee stock purchase plan" within the meaning of
Section 423 of the Code.
(C) The Board may delegate administration of the Plan to a
committee comprised of one or more persons (the "Committee"), which may be
constituted in accordance with Rule 16b-3 under the Securities Exchange Act of
1934 (the "Exchange Act" and "Rule 16b-3"). If administration is delegated to a
Committee, the Committee shall have, in connection with the administration of
the Plan, the powers theretofore possessed by the Board, subject, however, to
such resolutions, not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board. The Board may abolish the Committee at
any time and revest in the Board the administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
(A) Subject to the provisions of paragraph 12 relating to
adjustments upon changes in stock, the stock that may be sold pursuant to rights
granted under the Plan shall not exceed in the aggregate ONE HUNDRED FIFTY
THOUSAND (150,000) shares of the Company's common stock (the "Common Stock"). If
any right granted under the Plan shall for any reason terminate without having
been exercised, the Common Stock not purchased under such right shall again
become available for the Plan.
(B) The stock subject to the Plan may be unissued shares or
reacquired shares, bought on the market or otherwise.
4. GRANT OF RIGHTS; OFFERING.
The Board or the Committee may from time to time grant or provide for
the grant of rights to purchase Common Stock of the Company under the Plan to
eligible employees (an "Offering") on a date or dates (the "Offering Date(s)")
selected by the Board or the Committee. Each Offering shall be in such form and
shall contain such terms and conditions as the Board or the Committee shall deem
appropriate, which shall comply with the requirements of Section 423(b)(5) of
the Code that all employees granted rights to purchase stock under the Plan
shall
2.
<PAGE> 3
have the same rights and privileges. The terms and conditions of an Offering
shall be incorporated by reference into the Plan and treated as part of the
Plan. The provisions of separate Offerings need not be identical, but each
Offering shall include (through incorporation of the provisions of this Plan by
reference in the document comprising the Offering or otherwise) the period
during which the Offering shall be effective, which period shall not exceed
twenty-seven (27) months beginning with the Offering Date, and the substance of
the provisions contained in paragraphs 5 through 8, inclusive.
5. ELIGIBILITY.
(A) Rights may be granted only to employees of the Company or, as
the Board or the Committee may designate as provided in subparagraph 2(b), to
employees of any Affiliate of the Company. Except as provided in subparagraph
5(b), an employee of the Company or any Affiliate shall not be eligible to be
granted rights under the Plan, unless, on the Offering Date, such employee has
been in the employ of the Company or any Affiliate for such continuous period
preceding such grant as the Board or the Committee may require, but in no event
shall the required period of continuous employment be equal to or greater than
two (2) years. In addition, unless otherwise determined by the Board or the
Committee and set forth in the terms of the applicable Offering, no employee of
the Company or any Affiliate shall be eligible to be granted rights under the
Plan, unless, on the Offering Date, such employee's customary employment with
the Company or such Affiliate is for at least twenty (20) hours per week and at
least five (5) months per calendar year.
(B) The Board or the Committee may provide that, each person who,
during the course of an Offering, first becomes an eligible employee of the
Company or designated Affiliate will, on a date or dates specified in the
Offering which coincides with the day on which such person becomes an eligible
employee or occurs thereafter, receive a right under that Offering, which right
shall thereafter be deemed to be a part of that Offering. Such right shall have
the same characteristics as any rights originally granted under that Offering,
as described herein, except that:
(I) the date on which such right is granted shall be the
"Offering Date" of such right for all purposes, including determination of the
exercise price of such right;
(II) the period of the Offering with respect to such right
shall begin on its Offering Date and end coincident with the end of such
Offering; and
(III) the Board or the Committee may provide that if such
person first becomes an eligible employee within a specified period of time
before the end of the Offering, he or she will not receive any right under that
Offering.
3.
<PAGE> 4
(C) No employee shall be eligible for the grant of any rights
under the Plan if, immediately after any such rights are granted, such employee
owns stock possessing five percent (5%) or more of the total combined voting
power or value of all classes of stock of the Company or of any Affiliate. For
purposes of this subparagraph 5(c), the rules of Section 424(d) of the Code
shall apply in determining the stock ownership of any employee, and stock which
such employee may purchase under all outstanding rights and options shall be
treated as stock owned by such employee.
(D) An eligible employee may be granted rights under the Plan only
if such rights, together with any other rights granted under "employee stock
purchase plans" of the Company and any Affiliates, as specified by Section
423(b)(8) of the Code, do not permit such employee's rights to purchase stock of
the Company or any Affiliate to accrue at a rate which exceeds twenty-five
thousand ($25,000) of fair market value of such stock (determined at the time
such rights are granted) for each calendar year in which such rights are
outstanding at any time.
(E) Officers of the Company and any designated Affiliate shall be
eligible to participate in Offerings under the Plan, provided, however, that the
Board may provide in an Offering that certain employees who are highly
compensated employees within the meaning of Section 423(b)(4)(D) of the Code
shall not be eligible to participate.
6. RIGHTS; PURCHASE PRICE.
(A) On each Offering Date, each eligible employee, pursuant to an
Offering made under the Plan, shall be granted the right to purchase up to the
number of shares of Common Stock of the Company purchasable with a percentage
designated by the Board or the Committee not exceeding fifteen percent (15%) of
such employee's Earnings (as defined by the Board or the Committee in each
Offering) during the period which begins on the Offering Date (or such later
date as the Board or the Committee determines for a particular Offering) and
ends on the date stated in the Offering, which date shall be no later than the
end of the Offering. The Board or the Committee shall establish one or more
dates during an Offering (the "Purchase Date(s)") on which rights granted under
the Plan shall be exercised and purchases of Common Stock carried out in
accordance with such Offering.
(B) In connection with each Offering made under the Plan, the
Board or the Committee may specify a maximum number of shares that may be
purchased by any employee as well as a maximum aggregate number of shares that
may be purchased by all eligible employees pursuant to such Offering. In
addition, in connection with each Offering that contains more than one Purchase
Date, the Board or the Committee may specify a maximum aggregate number of
shares which may be purchased by all eligible employees on any given Purchase
Date under the Offering. If the aggregate purchase of shares upon exercise of
rights granted under the Offering would exceed any such maximum aggregate
number, the Board or the Committee shall make a pro rata allocation of the
shares available in as nearly a uniform manner as shall be practicable and as it
shall deem to be equitable.
4.
<PAGE> 5
(C) The purchase price of stock acquired pursuant to rights
granted under the Plan shall be not less than the lesser of:
(I) an amount equal to eighty-five percent (85%) of the
fair market value of the stock on the Offering Date; or
(II) an amount equal to eighty-five percent (85%) of the
fair market value of the stock on the Purchase Date.
7. PARTICIPATION; WITHDRAWAL; TERMINATION.
(A) An eligible employee may become a participant in the Plan
pursuant to an Offering by delivering a participation agreement to the Company
within the time specified in the Offering, in such form as the Company provides.
Each such agreement shall authorize payroll deductions of up to the maximum
percentage specified by the Board or the Committee of such employee's Earnings
during the Offering (as defined by the Board or Committee in each Offering). The
payroll deductions made for each participant shall be credited to an account for
such participant under the Plan and shall be deposited with the general funds of
the Company. A participant may reduce (including to zero) or increase such
payroll deductions, and an eligible employee may begin such payroll deductions,
after the beginning of any Offering only as provided for in the Offering. A
participant may make additional payments into his or her account only if
specifically provided for in the Offering and only if the participant has not
had the maximum amount withheld during the Offering.
(B) At any time during an Offering, a participant may terminate
his or her payroll deductions under the Plan and withdraw from the Offering by
delivering to the Company a notice of withdrawal in such form as the Company
provides. Such withdrawal may be elected at any time prior to the end of the
Offering except as provided by the Board or the Committee in the Offering. Upon
such withdrawal from the Offering by a participant, the Company shall distribute
to such participant all of his or her accumulated payroll deductions (reduced to
the extent, if any, such deductions have been used to acquire stock for the
participant) under the Offering, without interest, and such participant's
interest in that Offering shall be automatically terminated. A participant's
withdrawal from an Offering will have no effect upon such participant's
eligibility to participate in any other Offerings under the Plan but such
participant will be required to deliver a new participation agreement in order
to participate in subsequent Offerings under the Plan.
(C) Rights granted pursuant to any Offering under the Plan shall
terminate immediately upon cessation of any participating employee's employment
with the Company and any designated Affiliate, for any reason, and the Company
shall distribute to such terminated employee all of his or her accumulated
payroll deductions (reduced to the extent, if any, such deductions have been
used to acquire stock for the terminated employee) under the Offering, without
interest.
5.
<PAGE> 6
(D) Rights granted under the Plan shall not be transferable by a
participant otherwise than by will or the laws of descent and distribution, or
by a beneficiary designation as provided in paragraph 14 and, otherwise during
his or her lifetime, shall be exercisable only by the person to whom such rights
are granted.
8. EXERCISE.
(A) On each Purchase Date specified therefor in the relevant
Offering, each participant's accumulated payroll deductions and other additional
payments specifically provided for in the Offering (without any increase for
interest) will be applied to the purchase of whole shares of stock of the
Company, up to the maximum number of shares permitted pursuant to the terms of
the Plan and the applicable Offering, at the purchase price specified in the
Offering. No fractional shares shall be issued upon the exercise of rights
granted under the Plan. The amount, if any, of accumulated payroll deductions
remaining in each participant's account after the purchase of shares which is
less than the amount required to purchase one share of stock on the final
Purchase Date of an Offering shall be held in each such participant's account
for the purchase of shares under the next Offering under the Plan, unless such
participant withdraws from such next Offering, as provided in subparagraph 7(b),
or is no longer eligible to be granted rights under the Plan, as provided in
paragraph 5, in which case such amount shall be distributed to the participant
after such final Purchase Date, without interest. The amount, if any, of
accumulated payroll deductions remaining in any participant's account after the
purchase of shares which is equal to the amount required to purchase whole
shares of stock on the final Purchase Date of an Offering shall be distributed
in full to the participant after such Purchase Date, without interest.
(B) No rights granted under the Plan may be exercised to any
extent unless the shares to be issued upon such exercise under the Plan
(including rights granted thereunder) are covered by an effective registration
statement pursuant to the Securities Act of 1933, as amended (the "Securities
Act") and the Plan is in material compliance with all applicable state, foreign
and other securities and other laws applicable to the Plan. If on a Purchase
Date in any Offering hereunder the Plan is not so registered or in such
compliance, no rights granted under the Plan or any Offering shall be exercised
on such Purchase Date, and the Purchase Date shall be delayed until the Plan is
subject to such an effective registration statement and such compliance, except
that the Purchase Date shall not be delayed more than twelve (12) months and the
Purchase Date shall in no event be more than twenty-seven (27) months from the
Offering Date. If on the Purchase Date of any Offering hereunder, as delayed to
the maximum extent permissible, the Plan is not registered and in such
compliance, no rights granted under the Plan or any Offering shall be exercised
and all payroll deductions accumulated during the Offering (reduced to the
extent, if any, such deductions have been used to acquire stock) shall be
distributed to the participants, without interest.
6.
<PAGE> 7
9. COVENANTS OF THE COMPANY.
(A) During the terms of the rights granted under the Plan, the
Company shall keep available at all times the number of shares of stock required
to satisfy such rights.
(B) The Company shall seek to obtain from each federal, state,
foreign or other regulatory commission or agency having jurisdiction over the
Plan such authority as may be required to issue and sell shares of stock upon
exercise of the rights granted under the Plan. If, after reasonable efforts, the
Company is unable to obtain from any such regulatory commission or agency the
authority which counsel for the Company deems necessary for the lawful issuance
and sale of stock under the Plan, the Company shall be relieved from any
liability for failure to issue and sell stock upon exercise of such rights
unless and until such authority is obtained.
10. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to rights granted under the
Plan shall constitute general funds of the Company.
11. RIGHTS AS A STOCKHOLDER.
A participant shall not be deemed to be the holder of, or to have any
of the rights of a holder with respect to, any shares subject to rights granted
under the Plan unless and until the participant's shareholdings acquired upon
exercise of rights under the Plan are recorded in the books of the Company.
12. ADJUSTMENTS UPON CHANGES IN STOCK.
(A) If any change is made in the stock subject to the Plan, or
subject to any rights granted under the Plan (through merger, consolidation,
reorganization, recapitalization, reincorporation, stock dividend, dividend in
property other than cash, stock split, liquidating dividend, combination of
shares, exchange of shares, change in corporate structure or other transaction
not involving the receipt of consideration by the Company), the Plan and
outstanding rights will be appropriately adjusted in the class(es) and maximum
number of shares subject to the Plan and the class(es) and number of shares and
price per share of stock subject to outstanding rights. Such adjustments shall
be made by the Board or the Committee, the determination of which shall be
final, binding and conclusive. (The conversion of any convertible securities of
the Company shall not be treated as a "transaction not involving the receipt of
consideration by the Company.")
(B) In the event of: (1) a dissolution or liquidation of the
Company; (2) a merger or consolidation in which the Company is not the surviving
corporation; (3) a reverse merger in which the Company is the surviving
corporation but the shares of the Company's Common Stock outstanding immediately
preceding the merger are converted by virtue of the merger into other property,
whether in the form of securities, cash or otherwise; or (4) the acquisition by
any
7.
<PAGE> 8
person, entity or group within the meaning of Section 13(d) or 14(d) of the
Exchange Act or any comparable successor provisions (excluding any employee
benefit plan, or related trust, sponsored or maintained by the Company or any
Affiliate of the Company) of the beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act, or comparable successor rule) of
securities of the Company representing at least fifty percent (50%) of the
combined voting power entitled to vote in the election of directors, then, as
determined by the Board in its sole discretion (i) any surviving or acquiring
corporation may assume outstanding rights or substitute similar rights for those
under the Plan, (ii) such rights may continue in full force and effect, or (iii)
participants' accumulated payroll deductions may be used to purchase Common
Stock immediately prior to the transaction described above and the participants'
rights under the ongoing Offering terminated.
13. AMENDMENT OF THE PLAN.
(A) The Board at any time, and from time to time, may amend the
Plan. However, except as provided in paragraph 12 relating to adjustments upon
changes in stock, no amendment shall be effective unless approved by the
stockholders of the Company within twelve (12) months before or after the
adoption of the amendment, where the amendment will:
(I) Increase the number of shares reserved for rights
under the Plan;
(II) Modify the provisions as to eligibility for
participation in the Plan (to the extent such modification requires stockholder
approval in order for the Plan to obtain employee stock purchase plan treatment
under Section 423 of the Code; or
(III) Modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to obtain employee stock
purchase plan treatment under Section 423 of the Code or to comply with the
requirements of Rule 16b-3.
It is expressly contemplated that the Board may amend the Plan in any respect
the Board deems necessary or advisable to provide eligible employees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to employee stock purchase plans
and/or to bring the Plan and/or rights granted under it into compliance
therewith.
(B) Rights and obligations under any rights granted before
amendment of the Plan shall not be impaired by any amendment of the Plan, except
with the consent of the person to whom such rights were granted, or except as
necessary to comply with any laws or governmental regulations, or except as
necessary to ensure that the Plan and/or rights granted under the Plan comply
with the requirements of Section 423 of the Code.
8.
<PAGE> 9
14. DESIGNATION OF BENEFICIARY.
(A) A participant may file a written designation of a beneficiary
who is to receive any shares and cash, if any, from the participant's account
under the Plan in the event of such participant's death subsequent to the end of
an Offering but prior to delivery to the participant of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death during an Offering.
(B) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its sole discretion, may
deliver such shares and/or cash to the spouse or to any one or more dependents
or relatives of the participant, or if no spouse, dependent or relative is known
to the Company, then to such other person as the Company may designate.
15. TERMINATION OR SUSPENSION OF THE PLAN.
(A) The Board in its discretion, may suspend or terminate the Plan
at any time. No rights may be granted under the Plan while the Plan is suspended
or after it is terminated.
(B) Rights and obligations under any rights granted while the Plan
is in effect shall not be impaired by suspension or termination of the Plan,
except as expressly provided in the Plan or with the consent of the person to
whom such rights were granted, or except as necessary to comply with any laws or
governmental regulation, or except as necessary to ensure that the Plan and/or
rights granted under the Plan comply with the requirements of Section 423 of the
Code.
16. EFFECTIVE DATE OF PLAN.
The Plan shall become effective on the same day that the Company's
initial public offering of shares of common stock becomes effective, but no
rights granted under the Plan shall be exercised unless and until the Plan has
been approved by the stockholders of the Company within twelve (12) months
before or after the date the Plan is adopted by the Board or the Committee,
which date may be prior to such effective date.
9.
<PAGE> 1
EXHIBIT 10.7
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY
COUNSEL) REASONABLY SATISFACTORY To THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
WARRANT AGREEMENT
To Purchase Shares of the Series A Preferred Stock of
Steritech, Inc.
dated as of May 11, 1992
WHEREAS, Steritech, Inc., a California corporation (the "Company") has
entered into a Master Lease Agreement dated as of May 11, 1992, Equipment
Schedule No. VL-1, and related Summary Equipment Schedules (the "Leases") with
Comdisco, Inc., a Delaware corporation (the "Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in consideration
for such Leases, the right to purchase shares of its Series A Preferred Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Leases and in consideration of mutual covenants and agreements
contained herein, the Company and Warrantholder certify and agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE SERIES A PREFERRED STOCK.
For value received, the Company hereby grants to the
Warrantholder, and the Warrantholder is entitled, upon the terms and subject to
the conditions hereinafter set forth, to subscribe for and purchase, from the
Company, 20,779 fully paid and non-assessable shares of the Company's Series A
Preferred Stock ("Preferred Stock") at a purchase price of $3.85 per share (the
"Exercise Price"). The number and purchase price of such shares are subject to
adjustment as provided in section 8 hereof.
2. TERM OF THE WARRANT AGREEMENT.
Except as otherwise provided for herein, the term of this Warrant
Agreement and the right to purchase Preferred Stock as granted herein shall
commence on the date of execution hereof and shall be exercisable for a period
of (i) ten (10) years after the date of execution hereof, or (ii) five (5)
years from the effective date of the Company's initial public offering,
whichever is shorter.
3. EXERCISE OF THE PURCHASE RIGHTS.
The purchase rights set forth in this Warrant Agreement are
exercisable by the Warrantholder, in whole or in part, at any time, or from
time to time, prior to the expiration of the term set forth in Section 2 above,
by tendering to the Company at its principal office a notice of exercise in the
form attached hereto as Exhibit I
<PAGE> 2
(the "Notice of Exercise"), duly completed and executed. Upon receipt of the
Notice of Exercise and the payment of the purchase price in accordance with the
terms set forth below, the Company shall issue to the Warrantholder a
certificate for the number of shares of Preferred Stock purchased and shall
execute the Notice of Exercise indicating the number of shares which remain
subject to future purchases, if any.
Notwithstanding anything to the contrary contained in section 2 above or
this Section 3, the Warrantholder shall either (i) exercise this Warrant by
paying to the Company, by cash or check, an amount equal to the aggregate
Warrant Price of the shares being purchased, or (ii) receive shares equal to
the value (as determined below) of this Warrant by surrender of the Warrant at
the principal office of the Company together with notice of such election in
which event the Company shall issue to the Warrantholder a number of shares of
Preferred computed using the following formula:
X = Y(A-B)
-------
A
Where: X = the number of shares of Preferred to be issued to the
Warrantholder.
Y = the number of shares of Preferred under this Warrant.
A = the fair market value of one share of Preferred Stock.
B = Exercise Price.
As used herein, current fair market value of Preferred Stock
shall mean with respect to each share of Preferred Stock the average of the
closing prices of the Company's Common Stock (times the number of shares of
Common Stock that a share of Preferred Stock is convertible into) sold on all
securities exchanges on which the Common Stock may at the time be listed, or,
if there have been no sales on any such exchange on any day, the average of the
highest bid and lowest asked prices on all such exchanges at the end of such
day, or, if on any day the Common Stock is not so listed, the average of the
representative bid and asked prices quoted in the NASDAQ System as of 4:00
p.m., New York City time, or, if on any day the Common Stock is not quoted in
the NASDAQ System, the average of the highest bid and lowest asked price on
such day in the domestic over-the-counter market as reported by the National
Quotation Bureau, Incorporated, or any similar successor organization, in each
such case averaged over a period of 21 days consisting of the day as of which
the current fair market value of Common Stock is being determined and the 20
consecutive business days prior to such day. If at any time the Common Stock
is not listed on any securities exchange or quoted in the NASDAQ System or the
over-the-counter market, the current fair market value of Preferred Stock shall
be the highest price per share which the Company could obtain from a willing
buyer (not a current employee or director) for shares of Preferred Stock sold
by the Company, from authorized but unissued shares, as determined in good
faith by the Board of Directors of the Company, unless (i) the Company shall
become subject to a merger, acquisition or other consolidation pursuant to
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<PAGE> 3
which the Company is not the surviving party, in which case the current fair
market value of the Preferred Stock shall be deemed to be the value received by
the holders of the Company's Series A Preferred Stock for each share of Series A
Preferred Stock (or Common Stock if all such shares have been converted into
Common Stock) pursuant to the Company's Acquisition; or (ii) the Warrantholder
shall purchase such shares in conjunction with the initial underwritten public
offering of the Company's Common Stock (times the number of shares of Common
Stock that a share of Preferred Stock is convertible into) pursuant to a
registration statement filed under the Securities Act of 1933, in which case,
the fair market value of the shares of stock subject to this Warrant shall be
the price at which all registered shares are sold to the public in such
offering.
4. RESERVATION OF SHARES.
(a) Authorization and Reservation of Shares. During the term of
this Warrant Agreement, the Company will at all times have authorized and
reserved a sufficient number of shares of its Preferred Stock to provide for
the exercise of the rights to purchase Preferred Stock as provided for herein.
(b) Registration or Listing. If any shares of Preferred Stock
required to be reserved for purposes of exercise of the Warrant Agreement
hereunder require registration with or approval of any governmental authority
under any Federal or State law (other than any registration under the
Securities Act of 1933, as then in effect, or any similar Federal statute then
enforced, or any state securities law, required by reason of any transfer
involved in such conversion), or listing on any domestic securities exchange,
before such shares may be issued upon conversion, the Company will, at its
expense and as expeditiously as possible, use its best efforts to cause such
shares to be duly registered, listed or approved for listing on such domestic
securities exchange, as the case may be.
5. NO FRACTIONAL SHARES OR SCRIP.
No fractional shares or scrip representing fractional shares
shall be issued upon the exercise of the Warrantholder's rights to purchase
Preferred Stock, but in lieu of such fractional shares the Company shall make a
cash payment therefor upon the basis of the Exercise Price then in effect.
6. NO RIGHTS AS SHAREHOLDERS.
This Warrant Agreement does not entitle the Warrantholder to any
voting rights or other rights as a shareholder of the Company prior to the
exercise of the Warrantholder's rights to purchase Preferred Stock as provided
for herein.
7. WARRANTHOLDER REGISTRY.
The Company shall maintain a registry showing the name and
address of the registered holder of this Warrant Agreement.
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<PAGE> 4
8. ADJUSTMENT RIGHTS.
The purchase price per share and the number or character of shares of
Preferred Stock issuable upon exercise of this Warrant (or any shares of stock
or other securities or property at the time received or issuable upon exercise
of this Warrant) are subject to adjustment from time to time, as follows:
(a) Merger and Sale of Assets. If at any time there shall be a
capital reorganization of the shares of the Company's stock (other than a
combination, reclassification, exchange or subdivision of shares otherwise
provided for herein), or a merger or consolidation of the Company with or into
another corporation when the Company is not the surviving corporation, or the
sale of all or substantially all of the Company's properties and assets to any
other person in such a way that holders of Preferred Stock shall be entitled to
receive stock, securities or other assets or property, then, as a part of such
reorganization, merger, consolidation or sale, lawful provision shall be made
so that the Warrantholder shall thereafter be entitled to receive upon exercise
of its rights to purchase Preferred Stock, the number of shares of Preferred
Stock or other securities of the successor corporation resulting from such
merger or consolidation, to which a holder of the Preferred Stock deliverable
upon exercise of the right to purchase Preferred Stock hereunder would have
been entitled in such capital reorganization, merger, consolidation or sale if
the right to purchase such Preferred Stock hereunder had been exercised
immediately prior to such capital reorganization, merger, consolidation or
sale. In any such case, appropriate adjustment (as' determined in good faith
by the Company's Board of Directors) shall be made in the application of the
provisions of this Warrant Agreement with respect to the rights and interest of
the Warrantholder after the reorganization, merger, consolidation or sale to
the end that the provisions of this Warrant Agreement (including adjustments of
the Exercise Price and number of shares of Preferred Stock purchasable pursuant
to the terms and conditions of this Warrant Agreement) shall be applicable
after that event, as near as reasonably may be, in relation to any shares
deliverable after that event upon the exercise of the Warrantholder's rights to
purchase Preferred Stock pursuant to this Warrant Agreement.
(b) Reclassification of Shares. If the Company at any time shall,
by combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of
any other class or classes, this Warrant Agreement shall thereafter represent
the right to acquire such number and kind of securities as would have been
issuable as the result of such change with respect to the securities which were
subject to the purchase rights under this Warrant Agreement immediately prior
to such combination, reclassification, exchange, subdivision or other change.
(c) Subdivision or Combination of Shares. If the Company at any
time shall combine or subdivide its Preferred Stock, the Exercise Price and the
number of shares of Preferred Stock (or any other shares
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<PAGE> 5
of stock or other securities issuable upon exercise of this Warrant) shall be
proportionately adjusted to reflect any such combination or subdivision.
(d) Stock Dividends. If the Company at any time shall pay a
dividend payable in, or make any other distribution (except any distribution
specifically provided for in the foregoing subsections (a), (b) or (c)) with
respect to the Preferred Stock (or any other shares of stock or other
securities at the time issuable upon exercise of this Warrant) then, and in
each such case, the Warrantholder on exercise of its purchase rights under this
Warrant Agreement at any time after the consummation, effective date or record
date of such event, shall receive, in addition to the shares of Preferred Stock
(or such other stock or securities) issuable on such exercise prior to such
date, and without payment of any additional consideration therefor, the
securities or such other property of the Company to which such Warrantholder
would have been entitled upon such date if such Warrantholder had exercised its
purchase rights under this Warrant Agreement as of the date on which holders of
Preferred Stock received or became entitled to receive such shares or all other
additional stock and other securities and property (all subject to further
adjustment as provided in this Warrant Agreement).
(e) Adjustments Set Forth in Articles of Incorporation. In
addition to the foregoing adjustments, the conversion rate of the Preferred
Stock into Common Stock is subject to adjustments as set forth in the Company's
Articles of Incorporation. The Company represents that as of the date of
execution hereof, each share of Preferred Stock was convertible into one share
of Common Stock.
(f) Conversion of Preferred Stock. In case all the authorized
Preferred Stock of the Company is converted, pursuant to the Company's Articles
of Incorporation, into Common Stock or other securities or property, or the
Preferred Stock otherwise ceases to exist, then, in such case, the purchase
rights under this Warrant Agreement as of the date on which the Preferred Stock
is so converted or ceases to exist (the "Termination Date"), shall immediately
become exercisable for, in lieu of the number of shares of Preferred Stock that
would have been issuable upon such exercise immediately prior to the
Termination Date (the "Formerly Issuable Number of Shares of Preferred Stock"),
the stock and other securities and property which the Warrantholder would have
been entitled to receive upon the Termination date if the Warrantholder had
exercised the purchase rights under this Warrant Agreement with respect to the
Formerly Issuable Number of Shares of Preferred Stock immediately prior to the
Termination Date (all subject to further adjustment as provided in this Warrant
Agreement).
(g) Common Stock Dividends. If the Company at any time following
the conversion of the Preferred Stock and prior to the exercise of the purchase
rights under this Warrant Agreement shall pay a dividend with respect to Common
Stock payable in shares of Common Stock, or make any other distribution with
respect to Common Stock, then the Exercise Price shall be adjusted, from and
after the date of determination of the shareholders entitled to receive such
dividend or distribution, to that price determined by multiplying the Exercise
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<PAGE> 6
Price in effect by a fraction (i) the numerator of which shall be the total
number of shares of Common Stock outstanding immediately prior to such dividend
or distribution, and (ii) the denominator of which shall be the total number of
shares of the Common Stock outstanding immediately after such dividend or
distribution.
(h) Notice of Adjustments. In the event that: (i) the Company
shall declare any dividend or distribution upon its stock, whether in cash,
property, stock or other securities; (ii) the Company shall offer for
subscription prorata to the holders of any class of its Preferred or other
convertible stock any additional shares of stock of any class or other rights;
(iii) there shall be any capital reorganization, reclassification,
consolidation, merger or sale of all or substantially all of the Company's
assets; or (iv) there shall be any voluntary or involuntary dissolution,
liquidation or winding up of the Company; then, in connection with each such
event, the Company shall send to the Warrantholder:
(i) At least ten (10) days' prior written notice of the
date on which the books of the Company shall close or a record shall
be taken for such dividend, distribution, subscription rights
(specifying the date on which the holders of Preferred Stock shall
be entitled thereto) or for determining rights to vote in respect of
such capital reorganization, reclassification, consolidation, merger
or sale of all or substantially all of the Company's assets,
dissolution, liquidation or winding up; and
(ii) In the case of any such capital reorganization,
reclassification, consolidation, merger or sale of all or
substantially all of the Company's assets, dissolution, liquidation
or winding up, at least ten (10) days' prior written notice of the
date when the same shall take place (and specifying the date on
which the holders of Preferred Stock shall be entitled to exchange
their Preferred Stock for securities or other property deliverable
upon such capital reorganization, reclassification, consolidation,
merger or sale of all or substantially all of the Company's assets,
dissolution, liquidation or winding up).
Each such written notice shall set forth, in reasonable detail, (i)
the event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Exercise Price, and (v)
the number of shares subject to purchase hereunder after giving effect to such
adjustment.
(i) Registration and Listing. The Company will take all such
actions as may be necessary to assure that all shares of Preferred Stock
issuable pursuant to this Warrant Agreement may be so issued without violation
of any applicable law or regulation or any requirements of any domestic stock
exchange (except for official notice of issuance, which will be immediately
transmitted by the Company upon issuance) upon which shares of Preferred Stock
or other shares of the same class may be listed. The Company will not take any
action which will result in any adjustment of the number of shares of Preferred
Stock issuable upon exercise of this Warrant Agreement if
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<PAGE> 7
the total number of shares of Preferred Stock issuable after such action upon
exercise of the Warrant Agreement then outstanding, together with the total
number of shares of Preferred Stock then outstanding, would exceed the total
number of shares of Preferred Stock then authorized and not reserved for any
purpose other than the purpose of issue upon exercise of the Warrant Agreement.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
Except as set forth in the Schedule of Exceptions attached hereto as
Schedule A, the Company hereby represents and warrants to the Warrantholder as
follows:
(a) Reservation of Preferred Stock. The Preferred Stock issuable
upon exercise of the Warrantholder's rights has been duly and validly reserved
and, when issued in accordance with the provisions of this Warrant Agreement,
will be validly issued, fully paid and nonassessable, and will be free of any
taxes, liens, charges or encumbrances of any nature whatsoever; provided,
however, that the Preferred Stock issuable pursuant to this Warrant Agreement
may be subject to restrictions on transfer under state and/or Federal
securities laws. The Company has made available to the Warrantholder true,
correct and complete copies of its Articles of Incorporation and By-Laws, as
amended, and minutes of all Board of Directors (including all committees of the
Board of Directors, if any) and all Shareholder meetings. The issuance of
certificates for shares of Preferred Stock upon exercise of the Warrant
Agreement shall be made without charge to the Warrantholder for any issuance
tax in respect thereof, or other cost incurred by the company in connection
with such exercise and the related issuance of shares of Preferred Stock;
provided that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved and the issuance and delivery of
any certificate in a name other than that of the Warrantholder. The Company
will not close its books against the transfer of the Warrant Agreement or of
any share of Preferred Stock issued or issuable upon exercise of the Warrant
and any agreement in any manner which interferes with the timely exercise of
the Warrant.
(b) Due Authority. The execution and delivery by the Company of
the Leases, and this Warrant Agreement and the performance of all obligations
of the Company thereunder and hereunder, including the issuance to
Warrantholder of the right to acquire the shares of Preferred Stock set forth
in Section 1 above (which number of shares may be from time to time adjusted
pursuant to the terms of Section 8 above) have been duly authorized by all
necessary corporate action on the part of the Company, and the Leases and this
Warrant Agreement are not inconsistent with the Company's Articles of
Incorporation or ByLaws, do not contravene any law or governmental rule,
regulation or order applicable to it, do not and will not contravene any
provision of, or constitute a default under, any indenture, mortgage, contract
or other instrument to which it is a party or by which it is bound, and the
Leases and this Warrant Agreement constitute legal, valid and binding
agreements of the Company, enforceable in accordance with their respective
terms.
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<PAGE> 8
(c) Consents and Approvals. No consent or approval of, giving of
notice to, registration with, or taking of any other action in respect of any
state, Federal or other governmental authority or agency is required with
respect to the execution, delivery and performance by the Company of its
obligations under this Warrant Agreement, except for the filing of notices
pursuant to Regulation D under the Securities Exchange Act of 1933, as amended,
(the "1933 Act") and Section 25102 (f) of the California Corporate Securities
Law, which filings will be effective by the time required thereby.
(d) Litigation. There are no actions, suits, audits,
investigations or proceedings pending or, to the knowledge of the Company,
threatened against or affecting the Company in any court or before any
governmental commission, board or authority which, if adversely determined,
will have a material adverse effect on the ability of the Company to perform
its obligations under the Leases and this Warrant Agreement.
(e) Subsidiaries or Affiliates. The Company has no subsidiaries
or affiliated companies and does not otherwise own or control, directly or
indirectly, any other corporation, association or business entity.
(f) Issued Securities. All issued and outstanding shares of
Common Stock, Preferred Stock or any other securities of the Company have been
duly authorized and validly issued and are fully paid and nonassessable. All
outstanding shares of Common Stock, Preferred Stock and any other securities
were issued in full compliance with all Federal and state securities laws. In
addition:
(i) The authorized capital of the Company consists of
(A) 4,000,000 shares of Common Stock, of which 1,010,000 shares are
issued and outstanding, and (B) 1,026,014 shares of preferred stock,
of which 740,300 shares have been designated Series A Preferred Stock,
714,286 of which have been issued and are outstanding and 285,714
shares have been designated Series B Preferred Stock, none of which
have been issued or are outstanding. Each share of Series A Preferred
Stock and Series B Preferred Stock is convertible into one share of
Common Stock.
(ii) The Company has reserved (A) 400,000 shares of
Common Stock for issuance under its stock Option Plan, under which
56,500 options have been granted subject to qualification with the
California Department of Corporation at an average price of $.385 per
share. The Company has issued warrants exercisable for 285,714 shares
of Series B Preferred Stock with an exercise price of $5.065 per
share. There are no other options, warrants, conversion privileges or
other rights presently outstanding to purchase or otherwise acquire
any authorized but unissued shares of the Company's capital stock or
other securities of the Company.
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<PAGE> 9
(iii) In accordance with the Company's Articles of
Incorporation, no shareholder of the Company has preemptive rights to
purchase new issuances of the Company's capital stock.
(g) Financial Statements. The Company has delivered to the
Warrantholder its unaudited Consolidated Balance Sheet and Consolidated
Statement of Income for the two (2) month period ending February 29, 1992 (the
"Financial Statements"). The Financial Statements are complete and correct in
all material respects and have been prepared in accordance with generally
accepted accounting principles (except for the absence of footnotes) applied on
a consistent basis throughout the periods indicated. The condition and
operating results of the Company as of the dates and during the periods
indicated therein are true and correct in all material aspects, subject as to
the Consolidated Balance Sheet and Consolidated Statement of Income for the two
(2) month period then ending February 29, 1992 to normal year-end audit
adjustments. Since February 29, 1992 there has been no change in the assets,
liabilities, financial condition or operations of the Company from that
reflected in the Financial Statements other than changes in the ordinary course
of business which have not been, individually or in the aggregate, materially
adverse.
The Company shall deliver to the Warrantholder (i) within one hundred
twenty (120) days after the end of the Company's fiscal year, statements of
income for such fiscal year, a consolidated balance sheet of the Company as of
the end of such year and consolidated statement of the sources and application
of funds for such year, which year-end financial reports shall be in reasonable
detail and certified by independent public accountants of nationally recognized
standing selected by the Company, and (ii) within forty-five (45) days after
the end of each fiscal quarter other than the last fiscal quarter, unaudited
consolidated statements of income and sources and application of funds for such
quarter and a consolidated balance sheet as of the end of such quarter.
(h) Contingent and Absolute Liabilities. The Company has no
material liabilities or obligations, absolute or contingent except the
liabilities and obligations of the Company as set forth in the Financial
Statements and liabilities and obligations which have occurred in the ordinary
course of business, and which have not been materially adverse.
(i) Licenses, Patents and Copyrights. To the best of the
Company's knowledge, the Company owns, possesses, has access to, or can become
licensed on reasonable terms under, all patents, patent applications,
trademarks, trade names, inventions, franchises, licenses, permits, computer
software and copyrights necessary for the operation of its business as now
conducted, with no known infringement of, or conflict with, the rights of
others.
(j) Employee Contracts. To the best of the Company's knowledge,
no employee of the Company is in violation of any material term of any
employment contract, patent disclosure agreement or any other contract or
agreement relating to the relationship of any such employee with
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<PAGE> 10
the Company or any prior employer because of the nature of the business
conducted by the Company.
(k) Insurance. The Company has in full force and effect insurance
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant to the terms of any other contract or
agreement.
(1) Other Commitments to Register Securities. Except as set forth
in this Warrant Agreement and pursuant to that certain Steritech, Inc.
Investors' Right Agreement dated December 27, 1991, the Company is not,
pursuant to the terms of any other agreement currently in existence, under any
obligation to register under the 1933 Act, any of its presently outstanding
securities or any of its securities which may hereafter be issued.
(m) Exempt Transaction. Subject to the accuracy of the
Warrantholder's representations in Section 10 hereof, the issuance of the
Preferred Stock upon exercise of the Warrantholder's right to purchase such
Preferred Stock will constitute transactions exempt from (i) the registration
requirements of Section 5 of the 1933 Act, in reliance upon Section 4(2)
thereof, and (ii) the qualification requirements of the California Corporations
Code, in reliance upon Section 25102(f).
(n) Compliance with Rule 144. At the written request of the
Warrantholder, who proposes to sell Preferred Stock issuable upon the exercise
of the Warrant in compliance with Rule 144 promulgated by the Securities and
Exchange Commission under the 1933 Act, the Company shall furnish to the
Warrantholder, within ten days after receipt of such request, a written
statement confirming the Company's compliance with the filing requirements of
the Securities and Exchange Commission as set forth in such Rule, as such Rule
may be amended from time to time.
(o) No Events of Default, Material Contracts. All material
contracts, agreements and instruments to which the Company is a party
are in full force and effect in all material respects, and are valid, binding
and enforceable by the Company in accordance with their respective terms,
subject to the effect of applicable bankruptcy and other similar laws affecting
the rights of creditors generally, and rules of law concerning equitable
remedies and no event of default, and no event which, with the passing of time
or the giving of notice, or both, would constitute an event of default has
occurred or is continuing under any such contract, agreement or instrument.
(p) Brokers' Fees. The Company has not incurred, and will not
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with the Warrant
Agreement or any other transaction contemplated thereby.
(q) Untrue, Misleading Statements. No representation or warranty
of the Company contained in the Leases, and this Warrant
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<PAGE> 11
Agreement or any certificate or exhibit furnished or to be furnished to
Warrantholder pursuant thereto or in connection with the transactions
contemplated thereby (when read together) contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained therein not misleading.
(r) Indebtedness to Employees and Shareholders. The Company is
not indebted to any employee, shareholder, officer or director of the Company,
and no such employee, shareholder, officer or director is indebted to the
Company.
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
This Warrant Agreement has been entered into by the company in
reliance upon the following representations and covenants of the Warrantholder,
which by its execution hereof the Warrantholder hereby confirms:
(a) Investment Purpose. The right to acquire Preferred Stock or
the Preferred Stock issuable upon exercise of the Warrantholder's rights
contained herein will be acquired for investment and not with a view to the
sale or distribution of any part thereof, and the Warrantholder has no present
intention of selling or engaging in any public distribution of the same except
pursuant to a registration or exemption.
(b) Private Issue. The Warrantholder understands (i) that the
Preferred Stock issuable upon exercise of the Warrantholder's rights contained
herein is not registered under the 1933 Act or qualified under applicable state
securities laws on the ground that the issuance contemplated by this Warrant
Agreement will be exempt from the registration and qualifications requirements
thereof, and (ii) that the Company's reliance on such exemption is predicated
on the representations set forth in this Section 10.
(c) Disposition of Warrantholder's Rights. In no event will the
Warrantholder make a disposition of any of its rights to acquire Preferred
Stock or Preferred Stock issuable upon exercise of such rights unless and until
(i) it shall have notified the Company of the proposed disposition, and (ii) if
requested by the Company, it shall have furnished the Company with an opinion
of counsel (which counsel may either be inside or outside counsel to the
Warrantholder) satisfactory to the Company and its counsel to the effect that
(A) appropriate action necessary for compliance with the 1933 Act has been
taken, or (B) an exemption from the registration requirements of the 1933 Act
is available. Notwithstanding the foregoing, the restrictions imposed upon the
transferability of any of its rights to acquire Preferred Stock or Preferred
Stock issuable on the exercise of such rights do not apply to transfers from
the beneficial owner of any of the aforementioned securities to its nominee or
from such nominee to its beneficial owner, and shall terminate as to any
particular share of Preferred Stock when (1) such security shall have been
effectively registered under the 1933 Act and sold by the holder thereof in
accordance with such registration or (2) such security
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<PAGE> 12
shall have been sold without registration in compliance with Rule 144 under the
1933 Act, or (3) a letter shall have been issued to the Warrantholder at its
request by the staff of the Securities and Exchange Commission or a ruling
shall have been issued to the Warrantholder at its request by such Commission
stating that no action shall be recommended by such staff or taken by such
Commission, as the case may be, if such security is transferred without
registration under the 1933 Act in accordance with the conditions set forth in
such letter or ruling and such letter or ruling specifies that no subsequent
restrictions on transfer are required. Whenever the restrictions imposed
hereunder shall terminate, as hereinabove provided, the Warrantholder or holder
of a share of Preferred Stock then outstanding as to which such restrictions
have terminated shall be entitled to receive from the Company, without expense
to such holder, one or more new certificates for the Warrant or for such shares
of Preferred Stock not bearing any restrictive legend.
(d) Financial Risk. The Warrantholder has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of its investment and has the ability to bear the economic
risks of its investment.
(e) Risk of No Registration. The Warrantholder understands that
if the Company does not register with the Securities and Exchange Commission
pursuant to Section 12 of the 1933 Act, or file reports pursuant to Section 15
(d), of the Securities Exchange Act of 1934 (the "1934 Act"), or if a
registration statement covering the securities under the 1933 Act is not in
effect when it desires to sell (i) the rights to purchase Preferred Stock
pursuant to this Warrant Agreement, or (ii) the Preferred Stock issuable upon
exercise of the right to purchase, it may be required to hold such securities
for an indefinite period. The Warrantholder also understands that any sale of
its rights of the Warrantholder to purchase Preferred Stock or Preferred Stock
which might be made by it in reliance upon Rule 144 under the 1933 Act may be
made only in accordance with the terms and conditions of that Rule.
11. REGISTRATION.
Warrantholder and Company agree that Warrantholder shall be considered a
"Holder" and that all shares of Common Stock issued upon conversion of the
Preferred Stock subject to this Warrant Agreement shall be considered
"Registrable Securities" and be subject to the same terms and conditions with
respect to the registration and sale of such shares as set forth in Sections
2.3 and 2.4 - 2.13 of that certain Steritech, Inc. Investors' Rights Agreement
dated December 27, 1991, by and among the Company and those certain Purchasers
identified therein, attached hereto as Exhibit II.
12. TRANSFERS.
Subject to the terms and conditions contained in section 10
hereof, this Warrant Agreement and all rights hereunder are transferable in
whole or in part by the Warrantholder and any successor transferee, provided,
however, that in no event shall the
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<PAGE> 13
number of transfers of the rights and interests in all of the Warrants exceed
three (3) transfers. The transfer shall be recorded on the books of the
Company upon receipt by the Company of a notice of transfer in the form
attached hereto as Exhibit III (the "Transfer Notice"), at its principal
offices and the payment to the Company of all transfer taxes and other
governmental charges imposed on such transfer.
13. MISCELLANEOUS.
(a) Effective Date. The provisions of this Warrant Agreement
shall be construed and shall be given effect in all respects as if it had been
executed and delivered by the Company on the date hereof. This Warrant Agreement
shall be binding upon any successors or assigns of the Company.
(b) Attorney's Fees. In any litigation, arbitration or court
proceeding between the Company and the Warrantholder relating hereto, the
prevailing party shall be entitled to attorneys' fees and expenses and all
costs of proceedings incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by
and construed for all purposes under and in accordance with the laws of the
State of California.
(d) Counterparts. This Warrant 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.
(e) Titles and Subtitles. The titles of the paragraphs and
subparagraphs of this Warrant Agreement are for convenience and are not to be
considered in construing this Agreement.
(f) Notices. Any notice required or permitted hereunder shall be
given in writing and shall be deemed effectively given upon personal delivery
or upon deposit in the United States mail, by registered or certified mail, or
as of the following business by day express mail addressed (i) to the
Warrantholder at 6111 North River Road, Rosemont, Illinois 60018, attention:
Jim Labe, Venture Leasing Director, cc: Legal Department, and (ii) to the
Company at 2341 Stanwell Drive, Concord, California 94520, or at such other
address as any such party may subsequently designate by written notice to the
other party.
(g) Specific Performance. The Company recognizes and agrees that
the Warrantholder will not have an adequate remedy if the Company fails to
comply with this Agreement and that damages will not be readily ascertainable,
and the Company expressly agrees that, in the event of such failure, it shall
not oppose an application by the Warrantholder or any other person entitled to
the benefit of this Agreement requiring specific performance of any or all
provisions hereof or enjoining the Company from continuing to commit any such
breach of this Agreement.
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<PAGE> 14
(h) Survival. The representations, warranties, covenants and
conditions of the respective parties contained herein or made pursuant to this
Warrant Agreement shall survive the execution and delivery of this Warrant
Agreement.
(i) Severability. In the event any one or more of the provisions
of this Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal
or unenforceable provision.
(j) Amendments. Any provision of this Warrant Agreement may be
amended by a written instrument signed by the Company and by the Warrantholder.
(k) Additional Documents. The Company, upon execution of this
Warrant Agreement, shall provide the Warrantholder with certified resolutions
and an opinion from the Company's counsel addressed to the Warrantholder with
respect to the representations, warranties and covenants set forth in
subparagraphs (a) through (f) and subparagraphs (1), (m) and (o) of Section 9
above and shall also supply such other documents as the Warrantholder may from
time to time reasonably request.
IN WITNESS WHEREOF, the parties hereto have caused this
Warrant Agreement to be executed by its officers thereunto duly authorized.
Company:
STERITECH, INC.
Dated May 3 ,1992 By: /s/ [SIG]
--------------------------------
Title: CEO
--------------------------------
Warrantholder:
COMDISCO, INC.
By: /s/ [SIG]
--------------------------------
Title: President
--------------------------------
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<PAGE> 15
Exhibit I
NOTICE OF EXERCISE
To: ____________________________
(1) The undersigned Warrantholder hereby elects to purchase ______________
shares of the Preferred Stock of Steritech, Inc. pursuant to the terms
of the Warrant Agreement dated the 11th day of May, 1992 (the "Warrant
Agreement") between Steritech, Inc. and the Warrantholder, and tenders
herewith payment of the purchase price for such shares in full,
together with all applicable transfer taxes, if any.
(2) In exercising its rights to purchase the Preferred Stock of Steritech,
Inc., the undersigned hereby confirms and acknowledges the investment
representations and warranties made in Section 10 of the Warrant
Agreement.
(3) Please issue a certificate or certificates representing said shares of
Preferred Stock in the name of the undersigned or in such other name
as is specified below.
_______________________________________
(Name)
_______________________________________
(Address)
Warrantholder: COMDISCO, INC.
By: __________________________________
Title: __________________________________
Date: __________________________________
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<PAGE> 16
ACKNOWLEDGEMENT OF EXERCISE
The undersigned Steritech, Inc. hereby acknowledge receipt of the "Notice
of Exercise" from Comdisco, Inc., to purchase ______________ shares of the
Preferred Stock, of Steritech, Inc. pursuant to the terms of the Warrant
Agreement, and further acknowledges that ____________ shares remain subject to
purchase under the terms of the Warrant Agreement.
Company: STERITECH, INC.
By: _____________________________________
Title: __________________________________
Date: __________________________________
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<PAGE> 17
Exhibit III
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant Agreement execute this
form and supply required information. Do not use this form to
purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to
_____________________________________________________________________________
(Please Print)
whose address is ____________________________________________________________
_____________________________________________________________________________
Dated ________________________________
Holder's Signature ___________________
Holder's Address _____________________
______________________________________
Signature Guaranteed: _______________________________________________________
NOTE: The signature to this Transfer Notice must correspond with the
name as it appears on the face of the Warrant Agreement, without
alteration or enlargement or any change whatever. Officers of
corporations and those acting in a fiduciary or other
representative capacity should file proper evidence of authority
to assign the foregoing Warrant Agreement.
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<PAGE> 1
EXHIBIT 10.8
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY
COUNSEL) REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
WARRANT AGREEMENT
To Purchase Shares of the Series B Preferred Stock of
Steritech, Inc.
dated as of July 12, 1993
WHEREAS, Steritech, Inc., a California corporation (the "Company")
has entered into a Master Lease Agreement dated as of May 11, 1992, Equipment
Schedule No. VL-1, and related Summary Equipment Schedules (the "Leases") with
Comdisco, Inc., a Delaware corporation (the "Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in
consideration for the additional financing provided under such Leases pursuant
to that certain letter dated July 12, 1993, the right to purchase shares of its
Series B Preferred Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Leases and in consideration of mutual covenants and agreements
contained herein, the Company and Warrantholder certify and agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE Series B PREFERRED STOCK.
For value received, the Company hereby grants to the Warrantholder,
and the Warrantholder is entitled, upon the terms and subject to the conditions
hereinafter set forth, to subscribe for and purchase, from the Company, 3,949
fully paid and non-assessable shares of the Company's Series B Preferred Stock
("Preferred Stock") at a purchase price of $5.065 per share (the "Exercise
Price"). The number and purchase price of such shares are subject to adjustment
as provided in Section 8 hereof.
2. TERM OF THE WARRANT AGREEMENT.
Except as otherwise provided for herein, the term of this Warrant
Agreement and the right to purchase Preferred Stock as granted herein shall
commence on the date of execution hereof and shall be exercisable for a period
of (i) ten (10) years after the date of execution hereof, or (ii) five (5) years
from the effective date of the Company's initial public offering, whichever is
shorter.
3. EXERCISE OF THE PURCHASE RIGHTS.
The purchase rights set forth in this Warrant Agreement are
exercisable by the Warrantholder, in whole or in part, at any time, or from time
to time, prior to the expiration of the term set forth in section 2 above, by
tendering to the Company at its principal
<PAGE> 2
office a notice of exercise in the form attached hereto as Exhibit I (the
"Notice of Exercise"), duly completed and executed. Upon receipt of the Notice
of Exercise and the payment of the purchase price in accordance with the terms
set forth below, the Company shall issue to the Warrantholder a certificate for
the number of shares of Preferred Stock purchased and shall execute the Notice
of Exercise indicating the number of shares which remain subject to future
purchases, if any.
Notwithstanding anything to the contrary contained in Section 2 above or
this Section 3, the Warrantholder shall either (i) exercise this Warrant by
paying to the Company, by cash or check, an amount equal to the aggregate
Warrant Price of the shares being purchased, or (ii) receive shares equal to
the value (as determined below) of this Warrant by surrender of the Warrant at
the principal office of the Company together with notice of such election in
which event the Company shall issue to the Warrantholder a number of shares of
Preferred computed using the following formula:
X = Y(A-B)
------
A
Where: X = the number of shares of Preferred to be issued to the
Warrantholder.
Y = the number of shares of Preferred under this Warrant.
A = the fair market value of one share of Preferred Stock.
B = Exercise Price.
As used herein, current fair market value of Preferred Stock
shall mean with respect to each share of Preferred Stock the average of the
closing prices of the Company's Common Stock (times the number of shares of
Common Stock that a share of Preferred Stock is convertible into) sold on all
securities exchanges on which the Common Stock may at the time be listed, or,
if there have been no sales on any such exchange on any day, the average of the
highest bid and lowest asked prices on all such exchanges at the end of such
day, or, if on any day the Common Stock is not so listed, the average of the
representative bid and asked prices quoted in the NASDAQ System as of 4:00
p.m., New York City time, or, if on any day the Common Stock is not quoted in
the NASDAQ System, the average of the highest bid and lowest asked price on
such day in the domestic over-the-counter market as reported by the National
Quotation Bureau, Incorporated, or any similar successor organization, in each
such case averaged over a period of 21 days consisting of the day as of which
the current fair market value of Common Stock is being determined and the 20
consecutive business days prior to such day. If at any time the Common Stock
is not listed on any securities exchange or quoted in the NASDAQ System or the
over-the-counter market, the current fair market value of Preferred Stock shall
be the highest price per share which the Company could obtain from a willing
buyer (not a current employee or director) for shares of Preferred Stock sold
by the Company, from authorized but unissued shares, as determined in good
faith by the Board of Directors of the Company, unless (i) the Company shall
become
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<PAGE> 3
subject to a merger, acquisition or other consolidation pursuant to which the
Company is not the surviving party, in which case the current fair market value
of the Preferred Stock shall be deemed to be the value received by the holders
of the Company's Series B Preferred Stock for each share of Series B Preferred
Stock (or Common Stock if all such shares have been converted into Common
Stock) pursuant to the Company's Acquisition; or (ii) the Warrantholder shall
purchase such shares in conjunction with the initial underwritten public
offering of the Company's Common Stock (times the number of shares of Common
Stock that a share of Preferred Stock is convertible into) pursuant to a
registration statement filed under the Securities Act of 1933, in which case,
the fair market value of the shares of stock subject to this Warrant shall be
the price at which all registered shares are sold to the public in such
offering.
4. RESERVATION OF SHARES.
(a) Authorization and Reservation of Shares. During the term of
this Warrant Agreement, the Company will at all times have authorized and
reserved a sufficient number of shares of its Preferred Stock to provide for
the exercise of the rights to purchase Preferred Stock as provided for herein.
(b) Registration or Listing. If any shares of Preferred Stock
required to be reserved for purposes of exercise of the Warrant Agreement
hereunder require registration with or approval of any governmental authority
under any Federal or State law (other than any registration under the
Securities Act of 1933, as then in effect, or any similar Federal statute then
enforced, or any state securities law, required by reason of any transfer
involved in such conversion), or listing on any domestic securities exchange,
before such shares may be issued upon conversion, the Company will, at its
expense and as expeditiously as possible, use its best efforts to cause such
shares to be duly registered, listed or approved for listing on such domestic
securities exchange, as the case may be.
5. NO FRACTIONAL SHARES OR SCRIP.
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrantholder's rights to purchase Preferred
Stock, but in lieu of such fractional shares the Company shall make a cash
payment therefor upon the basis of the Exercise Price then in effect.
6. NO RIGHTS AS SHAREHOLDERS.
This Warrant Agreement does not entitle the Warrantholder to any
voting rights or other rights as a shareholder of the Company prior to the
exercise of the Warrantholder's rights to purchase Preferred Stock as provided
for herein.
7. WARRANTHOLDER REGISTRY.
The company shall maintain a registry showing the name and address of
the registered holder of this Warrant Agreement.
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<PAGE> 4
8. ADJUSTMENT RIGHTS.
The purchase price per share and the number or character of shares of
Preferred Stock issuable upon exercise of this Warrant (or any shares of stock
or other securities or property at the time received or issuable upon exercise
of this Warrant) are subject to adjustment from time to time, as follows:
(a) Merger and Sale of Assets. If at any time there shall be a
capital reorganization of the shares of the Company's stock (other than a
combination, reclassification, exchange or subdivision of shares otherwise
provided for herein), or a merger or consolidation of the Company with or into
another corporation when the Company is not the surviving corporation, or the
sale of all or substantially all of the Company's properties and assets to any
other person in such a way that holders of Preferred Stock shall be entitled to
receive stock, securities or other assets or property, then, as a part of such
reorganization, merger, consolidation or sale, lawful provision shall be made
so that the Warrantholder shall thereafter be entitled to receive upon exercise
of its rights to purchase Preferred Stock, the number of shares of Preferred
Stock or other securities of the successor corporation resulting from such
merger or consolidation, to which a holder of the Preferred Stock deliverable
upon exercise of the right to purchase Preferred Stock hereunder would have
been entitled in such capital reorganization, merger, consolidation or sale if
the right to purchase such Preferred Stock hereunder had been exercised
immediately prior to such capital reorganization, merger, consolidation or
sale. In any such case, appropriate adjustment (as determined in good faith by
the Company's Board of Directors) shall be made in the application of the
provisions of this Warrant Agreement with respect to the rights and interest of
the Warrantholder after the reorganization, merger, consolidation or sale to
the end that the provisions of this Warrant Agreement (including adjustments of
the Exercise Price and number of shares of Preferred Stock purchasable pursuant
to the terms and conditions of this Warrant Agreement) shall be applicable
after that event, as near as reasonably may be, in relation to any shares
deliverable after that event upon the exercise of the Warrantholder's rights to
purchase Preferred Stock pursuant to this Warrant Agreement.
(b) Reclassification of Shares. If the Company at any time shall,
by combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of
any other class or classes, this Warrant Agreement shall thereafter represent
the right to acquire such number and kind of securities as would have been
issuable as the result of such change with respect to the securities which were
subject to the purchase rights under this Warrant Agreement immediately prior
to such combination, reclassification, exchange, subdivision or other change.
(c) Subdivision or Combination of Shares. If the Company at any
time shall combine or subdivide its Preferred Stock, the Exercise Price and the
number of shares of Preferred Stock (or any other shares
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<PAGE> 5
of stock or other securities issuable upon exercise of this Warrant) shall be
proportionately adjusted to reflect any such combination or subdivision.
(d) Stock Dividends. If the Company at any time shall pay a
dividend payable in, or make any other distribution (except any distribution
specifically provided for in the foregoing subsections (a), (b) or (c)) with
respect to the Preferred Stock (or any other shares of stock or other
securities at the time issuable upon exercise of this Warrant) then, and in
each such case, the Warrantholder on exercise of its purchase rights under this
Warrant Agreement at any time after the consummation, effective date or record
date of such event, shall receive, in addition to the shares of Preferred Stock
(or such other stock or securities) issuable on such exercise prior to such
date, and without payment of any additional consideration therefor, the
securities or such other property of the Company to which such Warrantholder
would have been entitled upon such date if such Warrantholder had exercised its
purchase rights under this Warrant Agreement as of the date on which holders of
Preferred Stock received or became entitled to receive such shares or all other
additional stock and other securities and property (all subject to further
adjustment as provided in this Warrant Agreement).
(e) Adjustments Set Forth in Articles of Incorporation. In
addition to the foregoing adjustments, the conversion rate of the Preferred
Stock into Common Stock is subject to adjustments as set forth in the Company's
Articles of Incorporation. The Company represents that as of the date of
execution hereof, each share of Preferred Stock was convertible into one share
of Common Stock.
(f) Conversion of Preferred Stock. In case all the authorized
Preferred Stock of the Company is converted, pursuant to the Company's Articles
of Incorporation, into Common Stock or other securities or property, or the
Preferred Stock otherwise ceases to exist, then, in such case, the purchase
rights under this Warrant Agreement as of the date on which the Preferred Stock
is so converted or ceases to exist (the "Termination Date"), shall immediately
become exercisable for, in lieu of the number of shares of Preferred Stock that
would have been issuable upon such exercise immediately prior to the
Termination Date (the "Formerly Issuable Number of Shares of Preferred Stock"),
the stock and other securities and property which the Warrantholder would have
been entitled to receive upon the Termination date if the Warrantholder had
exercised the purchase rights under this Warrant Agreement with respect to the
Formerly Issuable Number of Shares of Preferred Stock immediately prior to the
Termination Date (all subject to further adjustment as provided in this Warrant
Agreement).
(g) Common Stock Dividends. If the Company at any time following
the conversion of the Preferred Stock and prior to the exercise of the purchase
rights under this Warrant Agreement shall pay a dividend with respect to Common
Stock payable in shares of Common Stock, or make any other distribution with
respect to Common Stock, then the Exercise Price shall be adjusted, from and
after the date of determination of the shareholders entitled to receive such
dividend or distribution, to that price determined by multiplying the Exercise
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<PAGE> 6
Price in effect by a fraction (i) the numerator of which shall be the total
number of shares of Common Stock outstanding immediately prior to such dividend
or distribution, and (ii) the denominator of which shall be the total number of
shares of the Common Stock outstanding immediately after such dividend or
distribution.
(h) Notice of Adjustments. In the event that: (i) the Company
shall declare any dividend or distribution upon its stock, whether in cash,
property, stock or other securities; (ii) the Company shall offer for
subscription prorata to the holders of any class of its Preferred or other
convertible stock any additional shares of stock of any class or other rights;
(iii) there shall be any capital reorganization, reclassification,
consolidation, merger or sale of all or substantially all of the Company's
assets; or (iv) there shall be any voluntary or involuntary dissolution,
liquidation or winding up of the Company; then, in connection with each such
event, the Company shall send to the Warrantholder:
(i) At least ten (10) days' prior written notice of the
date on which the books of the Company shall close or a record shall
be taken for such dividend, distribution, subscription rights
(specifying the date on which the holders of Preferred Stock shall be
entitled thereto) or for determining rights to vote in respect of such
capital reorganization, reclassification, consolidation, merger or
sale of all or substantially all of the Company's assets, dissolution,
liquidation or winding up; and
(ii) In the case of any such capital reorganization,
reclassification, consolidation, merger or sale of all or
substantially all of the Company's assets, dissolution, liquidation or
winding up, at least ten (10) days' prior written notice of the date
when the same shall take place (and specifying the date on which the
holders of Preferred Stock shall be entitled to exchange their
Preferred Stock for securities or other property deliverable upon such
capital reorganization, reclassification, consolidation, merger or
sale of all or substantially all of the Company's assets, dissolution,
liquidation or winding up).
Each such written notice shall set forth, in reasonable detail, (i)
the event requiring the adjustment, (ii) the amount of the adjustment, (iii)
the method by which such adjustment was calculated, (iv) the Exercise Price,
and (v) the number of shares subject to purchase hereunder after giving effect
to such adjustment.
(i) Registration and Listing. The Company will take all such
actions as may be necessary to assure that all shares of Preferred Stock
issuable pursuant to this Warrant Agreement may be so issued without violation
of any applicable law or regulation or any requirements of any domestic stock
exchange (except for official notice of issuance, which will be immediately
transmitted by the company upon issuance) upon which shares of Preferred Stock
or other shares of the same class may be listed. The Company will not take any
action which will result in any adjustment of the number of shares of Preferred
Stock issuable upon exercise of this Warrant Agreement if
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<PAGE> 7
the total number of shares of Preferred stock issuable after such action upon
exercise of the warrant Agreement then outstanding, together with the total
number of shares of Preferred Stock then outstanding, would exceed the total
number of shares of Preferred Stock then authorized and not reserved for any
purpose other than the purpose of issue upon exercise of the Warrant Agreement.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
Except as set forth in the Schedule of Exceptions attached hereto as
Schedule A, the Company hereby represents and warrants to the Warrantholder as
follows:
(a) Reservation of Preferred Stock. The Preferred Stock issuable
upon exercise of the Warrantholder's rights has been duly and validly reserved
and, when issued in accordance with the provisions of this Warrant Agreement,
will be validly issued, fully paid and nonassessable, and will be free of any
taxes, liens, charges or encumbrances of any nature whatsoever; provided,
however, that the Preferred Stock issuable pursuant to this Warrant Agreement
may be subject to restrictions on transfer under state and/or Federal
securities laws. The Company has made available to the Warrantholder true,
correct and complete copies of its Articles of Incorporation and By-Laws, as
amended, and minutes of all Board of Directors (including all committees of the
Board of Directors, if any) and all Shareholder meetings. The issuance of
certificates for shares of Preferred Stock upon exercise of the Warrant
Agreement shall be made without charge to the Warrantholder for any issuance
tax in respect thereof, or other cost incurred by the Company in connection
with such exercise and the related issuance of shares of Preferred Stock;
provided that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved and the issuance and delivery of
any certificate in a name other than that of the Warrantholder. The Company
will not close its books against the transfer of the Warrant Agreement or of
any share of Preferred Stock issued or issuable upon exercise of the Warrant
and any agreement in any manner which interferes with the timely exercise of
the Warrant.
(b) Due Authority. The execution and delivery by the Company of
the Leases, and this Warrant Agreement and the performance of all obligations
of the Company thereunder and hereunder, including the issuance to
Warrantholder of the right to acquire the shares of Preferred Stock set forth
in Section I above (which number of shares may be from time to time adjusted
pursuant to the terms of Section 8 above) have been duly authorized by all
necessary corporate action on the part of the Company, and the Leases and this
Warrant Agreement are not inconsistent with the Company's Articles of
Incorporation or ByLaws, do not contravene any law or governmental rule,
regulation or order applicable to it, do not and will not contravene any
provision of, or constitute a default under, any indenture, mortgage, contract
or other instrument to which it is a party or by which it is bound, and the
Leases and this Warrant Agreement constitute legal, valid and binding
agreements of the Company, enforceable in accordance with their respective
terms.
-7-
<PAGE> 8
(c) Consents and Approvals. No consent or approval of, giving of
notice to, registration with, or taking of any other action in respect of any
state, Federal or other governmental authority or agency is required with
respect to the execution, delivery and performance by the Company of its
obligations under this Warrant Agreement, except for the filing of notices
pursuant to Regulation D under the Securities Exchange Act of 1933, as amended,
(the 1933 Act") and Section 25102(f) of the California Corporate Securities
Law, which filings will be effective by the time required thereby.
(d) Litigation. There are no actions, suits, audits,
investigations or proceedings pending or, to the knowledge of the Company,
threatened against or affecting the Company in any court or before any
governmental commission, board or authority which, if adversely determined,
will have a material adverse effect on the ability of the Company to perform
its obligations under the Leases and this Warrant Agreement.
(e) Subsidiaries or Affiliates. The Company has no subsidiaries
or affiliated companies and does not otherwise own or control, directly or
indirectly, any other corporation, association or business entity.
(f) Issued Securities. All issued and outstanding shares of
Common Stock, Preferred stock or any other securities of the Company have been
duly authorized and validly issued and are fully paid and nonassessable. All
outstanding shares of Common Stock, Preferred Stock and any other securities
were issued in full compliance with all Federal and state securities laws. In
addition:
(i) The authorized capital of the Company consists of (A)
4,000,000 shares of Common Stock, of which 1,020,000 shares are
issued and outstanding, and (B) 1,026,014 shares of preferred stock,
of which 740,300 shares have been designated Series A Preferred Stock,
714,286 of which have been issued and are outstanding and 285,714
shares have been designated Series B Preferred Stock, 285,714 of which
have been issued and are outstanding. Each share of Series B
Preferred Stock and Series B Preferred Stock is convertible into one
share of Common Stock.
(ii) The Company has reserved (A) 400,000 shares of Common
Stock for issuance under its Stock Option Plan, under which 163,840
options have been granted subject to qualification with the California
Department of Corporation at an average price ranging from $.385 to
$5.065 per share. In connection with the issuance of certain bridge
notes, the Company has agreed with certain investors to issue warrants
to purchase shares of Series C Convertible Preferred Stock (or under
certain conditions, Series B Convertible Preferred Stock). The exact
number of shares to be subject to such warrants and the exercise price
are to be determined, but the total number of shares that are provided
to be covered by such warrants will not exceed 39,487, and the exercise
price will be not less than $5.065 per share (subject to stock splits,
stock dividends and the like). There are no other options, warrants,
conversion privileges or other rights presently outstanding to purchase
or otherwise acquire any authorized but unissued shares of the
Company's capital stock or other securities of the Company.
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<PAGE> 9
(iii) In accordance with the Company's Articles of
Incorporation, no shareholder of the company has preemptive rights to
purchase new issuances of the Company's capital stock.
(g) Financial Statements. The Company has delivered to the
Warrantholder its unaudited Consolidated Balance Sheet and Consolidated
Statement of Income for the two (2) month period ending February 29, 1992 (the
"Financial Statements"). The Financial Statements are complete and correct in
all material respects and have been prepared in accordance with generally
accepted accounting principles (except for the absence of footnotes) applied on
a consistent basis throughout the periods indicated. The condition and
operating results of the Company as of the dates and during the periods
indicated therein are true and correct in all material aspects, subject as to
the Consolidated Balance Sheet and Consolidated Statement of Income for the two
(2) month period then ending February 29, 1992 to normal year-end audit
adjustments. Since February 29, 1992 there has been no change in the assets,
liabilities, financial condition or operations of the Company from that
reflected in the Financial Statements other than changes in the ordinary course
of business which have not been, individually or in the aggregate, materially
adverse.
The Company shall deliver to the Warrantholder (i) within one hundred
twenty (120) days after the end of the Company's fiscal year, statements of
income for such fiscal year, a consolidated balance sheet of the Company as of
the end of such year and consolidated statement of the sources and application
of funds for such year, which year-end financial reports shall be in reasonable
detail and certified by independent public accountants of nationally recognized
standing selected by the Company, and (ii) within forty-five (45) days after
the end of each fiscal quarter other than the last fiscal quarter, unaudited
consolidated statements of income and sources and application of funds for such
quarter and a consolidated balance sheet as of the end of such quarter.
(h) Contingent and Absolute Liabilities. The Company has no
material liabilities or obligations, absolute or contingent except the
liabilities and obligations of the Company as set forth in the Financial
Statements and liabilities and obligations which have occurred in the ordinary
course of business, and which have not been materially adverse.
(i) Licenses, Patents and Copyrights. To the best of the Company's
knowledge, the Company owns, possesses, has access to, or can become licensed
on reasonable terms under, all patents, patent applications, trademarks, trade
names, inventions, franchises, licenses, permits, computer software and
copyrights necessary for the operation of its business as now conducted, with
no known infringement of, or conflict with, the rights of others.
(j) Employee Contracts. To the best of the Company's knowledge,
no employee of the Company is in violation of any material term of any
employment contract, patent disclosure agreement or any other contract or
agreement relating to the relationship of any such employee with
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<PAGE> 10
the Company or any prior employer because of the nature of the business
conducted by the Company.
(k) Insurance. The Company has in full force and effect insurance
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant to the terms of any other contract or
agreement.
(l) Other Commitments to Register Securities. Except as set forth
in this Warrant Agreement and pursuant to that certain Steritech, Inc.
Investors' Right Agreement dated December 27, 1991, the Company is not,
pursuant to the terms of any other agreement currently in existence, under any
obligation to register under the 1933 Act, any of its presently outstanding
securities or any of its securities which may hereafter be issued.
(m) Exempt Transaction. Subject to the accuracy of the
Warrantholder's representations in Section 10 hereof, the issuance of the
Preferred Stock upon exercise of the Warrantholder's right to purchase such
Preferred Stock will constitute transactions exempt from (i) the registration
requirements of Section 5 of the 1933 Act, in reliance upon Section 4(2)
thereof, and (ii) the qualification requirements of the California Corporations
Code, in reliance upon Section 25102 (f ) .
(n) Compliance with Rule 144. At the written request of the
Warrantholder, who proposes to sell Preferred Stock issuable upon the exercise
of the Warrant in compliance with Rule 144 promulgated by the Securities and
Exchange Commission under the 1933 Act, the Company shall furnish to the
Warrantholder, within ten days after receipt of such request, a written
statement confirming the Company's compliance with the filing requirements of
the Securities and Exchange Commission as set forth in such Rule, as such Rule
may be amended from time to time.
(o) No Events of Default, Material Contracts. All material
contracts, agreements and instruments to which the Company is a party are in
full force and effect in all material respects, and are valid, binding and
enforceable by the Company in accordance with their respective terms, subject
to the effect of applicable bankruptcy and other similar laws affecting the
rights of creditors generally, and rules of law concerning equitable remedies
and no event of default, and no event which, with the passing of time or the
giving of notice, or both, would constitute an event of default has occurred or
is continuing under any such contract, agreement or instrument.
(p) Brokers' Fees. The Company has not incurred, and will not
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with the Warrant
Agreement or any other transaction contemplated thereby.
(q) Untrue, Misleading Statements. No representation or warranty
of the Company contained in the Leases, and this Warrant
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<PAGE> 11
Agreement or any certificate or exhibit furnished or to be furnished to
Warrantholder pursuant thereto or in connection with the transactions
contemplated thereby (when read together) contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained therein not misleading.
(r) Indebtedness to Employees and Shareholders. The Company is
not indebted to any employee, shareholder, officer or director of the Company,
and no such employee, shareholder, officer or director is indebted to the
Company.
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
This Warrant Agreement has been entered into by the Company in
reliance upon the following representations and covenants of the Warrantholder,
which by its execution hereof the Warrantholder hereby confirms:
(a) Investment Purpose. The right to acquire Preferred Stock or
the Preferred Stock issuable upon exercise of the Warrantholder's rights
contained herein will be acquired for investment and not with a view to the
sale or distribution of any part thereof, and the Warrantholder has no present
intention of selling or engaging in any public distribution of the same except
pursuant to a registration or exemption.
(b) Private Issue. The Warrantholder understands (i) that the
Preferred Stock issuable upon exercise of the Warrantholder's rights contained
herein is not registered under the 1933 Act or qualified under applicable state
securities laws on the ground that the issuance contemplated by this Warrant
Agreement will be exempt from the registration and qualifications requirements
thereof, and (ii) that the Company's reliance on such exemption is predicated
on the representations set forth in this Section 10.
(c) Disposition of Warrantholder's Rights. In no event will the
Warrantholder make a disposition of any of its rights to acquire Preferred
Stock or Preferred Stock issuable upon exercise of such rights unless and until
(i) it shall have notified the Company of the proposed disposition, and (ii) if
requested by the Company, it shall have furnished the Company with an opinion
of counsel (which counsel may either be inside or outside counsel to the
Warrantholder) satisfactory to the Company and its counsel to the effect that
(A) appropriate action necessary for compliance with the 1933 Act has been
taken, or (B) an exemption from the registration requirements of the 1933 Act
is available. Notwithstanding the foregoing, the restrictions imposed upon the
transferability of any of its rights to acquire Preferred Stock or Preferred
Stock issuable on the exercise of such rights do not apply to transfers from
the beneficial owner of any of the aforementioned securities to its nominee or
from such nominee to its beneficial owner, and shall terminate as to any
particular share of Preferred Stock when (1) such security shall have been
effectively registered under the 1933 Act and sold by the holder thereof in
accordance with such registration or (2) such security
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<PAGE> 12
shall have been sold without registration in compliance with Rule 144 under the
1933 Act, or (3) a letter shall have been issued to the Warrantholder at its
request by the staff of the Securities and Exchange Commission or a ruling
shall have been issued to the Warrantholder at its request by such Commission
stating that no action shall be recommended by such staff or taken by such
Commission, as the case may be, if such security is transferred without
registration under the 1933 Act in accordance with the conditions set forth in
such letter or ruling and such letter or ruling specifies that no subsequent
restrictions on transfer are required. Whenever the restrictions imposed
hereunder shall terminate, as hereinabove provided, the Warrantholder or holder
of a share of Preferred Stock then outstanding as to which such restrictions
have terminated shall be entitled to receive from the Company, without expense
to such holder, one or more new certificates for the Warrant or for such shares
of Preferred Stock not bearing any restrictive legend.
(d) Financial Risk. The Warrantholder has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of its investment and has the ability to bear the economic
risks of its investment.
(e) Risk of No Registration. The Warrantholder understands that
if the Company does not register with the Securities and Exchange Commission
pursuant to Section 12 of the 1933 Act, or file reports pursuant to Section 15
(d), of the Securities Exchange Act of 1934 (the "1934 Act"), or if a
registration statement covering the securities under the 1933 Act is not in
effect when it desires to sell (i) the rights to purchase Preferred Stock
pursuant to this Warrant Agreement, or (ii) the Preferred Stock issuable upon
exercise of the right to purchase, it may be required to hold such securities
for an indefinite period. The Warrantholder also understands that any sale of
its rights of the Warrantholder to purchase Preferred Stock or Preferred stock
which might be made by it in reliance upon Rule 144 under the 1933 Act may be
made only in accordance with the terms and conditions of that Rule.
11. REGISTRATION.
Warrantholder and Company agree that Warrantholder shall be considered
a "Holder" and that all shares of Common Stock issued upon conversion of the
Preferred Stock subject to this Warrant Agreement shall be considered
"Registrable Securities" and be subject to the same terms and conditions with
respect to the registration and sale of such shares as set forth in Sections
2.3 and 2.4 - 2.13 of that certain Steritech, Inc. Investors' Rights
Agreement dated December 27, 1991, by and among the Company and those certain
Purchasers identified therein, attached hereto as Exhibit II.
12. TRANSFERS.
Subject to the terms and conditions contained in section 10 hereof,
this Warrant Agreement and all rights hereunder are transferable in whole or in
part by the Warrantholder and any successor transferee, provided, however, that
in no event shall the
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<PAGE> 13
number of transfers of the rights and interests in all of the Warrants exceed
three (3) transfers. The transfer shall be recorded on the books of the
Company upon receipt by the Company of a notice of transfer in the form
attached hereto as Exhibit III (the "Transfer Notice"), at its principal
offices and the payment to the Company of all transfer taxes and other
governmental charges imposed on such transfer.
13. MISCELLANEOUS.
(a) Effective Date. The provisions of this Warrant Agreement
shall be construed and shall be given effect in all respects as if it had been
executed and delivered by the Company on the date hereof. This Warrant
Agreement shall be binding upon any successors or assigns of the Company.
(b) Attorney's Fees. In any litigation, arbitration or court
proceeding between the Company and the Warrantholder relating hereto, the
prevailing party shall be entitled to attorneys' fees and expenses and all
costs of proceedings incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by
and construed for all purposes under and in accordance with the laws of the
State of California.
(d) Counterparts. This Warrant 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.
(e) Titles and Subtitles. The titles of the paragraphs and
subparagraphs of this Warrant Agreement are for convenience and are not to be
considered in construing this Agreement.
(f) Notices. Any notice required or permitted hereunder shall be
given in writing and shall be deemed effectively given upon personal delivery
or upon deposit in the United States mail, by registered or certified mail,
or as of the following business by day express mail addressed (i) to the
Warrantholder at 6111 North River Road, Rosemont, Illinois 60018, attention:
Jim Labe, Venture Leasing Director, cc: Legal Department, and (ii) to the
Company at 2341 Stanwell Drive, Concord, California 94520, or at such other
address as any such party may subsequently designate by written notice to the
other party.
(g) Specific Performance. The Company recognizes and agrees that
the Warrantholder will not have an adequate remedy if the Company fails to
comply with this Agreement and that damages will not be readily ascertainable,
and the Company expressly agrees that, in the event of such failure, it shall
not oppose an application by the Warrantholder or any other person entitled to
the benefit of this Agreement requiring specific performance of any or all
provisions hereof or enjoining the Company from continuing to commit any such
breach of this Agreement.
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<PAGE> 14
(h) Survival. The representations, warranties, covenants and
conditions of the respective parties contained herein or made pursuant to this
Warrant Agreement shall survive the execution and delivery of this Warrant
Agreement.
(i) Severability. In the event any one or more of the provisions
of this Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal
or unenforceable provision.
(j) Amendments. Any provision of this Warrant Agreement may be
amended by a written instrument signed by the Company and by the Warrantholder.
(k) Additional Documents. The Company, upon execution of this
Warrant Agreement, shall provide the Warrantholder with certified resolutions
and an opinion from the Company's counsel addressed to the Warrantholder with
respect to the representations, warranties and covenants set forth in
subparagraphs (a) through (f) and subparagraphs (1), (m) and (o) of Section 9
above and shall also supply such other documents as the Warrantholder may from
time to time reasonably request.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant
Agreement to be executed by its officers thereunto duly authorized.
Company:
STERITECH, INC.
Dated July 12, 1993 By: /s/ [SIG]
-------------------------------
Title: President/CEO
-----------------------------
Warrantholder:
COMDISCO, INC.
By: /s/ [SIG]
-------------------------------
Title: President
-----------------------------
10/11/93
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<PAGE> 15
Exhibit I
NOTICE OF EXERCISE
To:
----------------------------------
(1) The undersigned Warrantholder hereby elects to purchase -------------
shares of the Preferred Stock of Steritech, Inc. pursuant to the terms
of the Warrant Agreement dated the 11th day of May, 1992 (the "Warrant
Agreement") between Steritech, Inc. and the Warrantholder, and tenders
herewith payment of the purchase price for such shares in full,
together with all applicable transfer taxes, if any.
(2) In exercising its rights to purchase the Preferred Stock of Steritech,
Inc., the undersigned hereby confirms and acknowledges the investment
representations and warranties made in Section 10 of the Warrant
Agreement.
(3) Please issue a certificate or certificates representing said shares of
Preferred Stock in the name of the undersigned or in such other name
as is specified below.
--------------------------------
(Name)
--------------------------------
(Address)
Warrantholder: COMDISCO, INC.
By:
-----------------------------
Title:
--------------------------
Date:
--------------------------
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<PAGE> 16
ACKNOWLEDGEMENT OF EXERCISE
The undersigned Steritech, Inc. hereby acknowledge receipt of the
"Notice of Exercise" from Comdisco, Inc., to purchase_______ shares of the
Preferred Stock, of Steritech, Inc. pursuant to the terms of the Warrant
Agreement, and further acknowledges that_______ shares remain subject to
purchase under the terms of the Warrant Agreement.
Company: STERITECH, INC.
By:
-----------------------------
Title:
--------------------------
Date:
--------------------------
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<PAGE> 17
Exhibit III
TRANSFER NOTICE
(To transfer or assign the foregoing warrant Agreement execute this
form and supply required information. Do not use this form to
purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to
- ------------------------------------------------------------------------------
(Please Print)
whose address is
--------------------------------------------------------------
- ------------------------------------------------------------------------------
Dated
---------------------------------------
Holder's Signature
--------------------------
Holder's Address
----------------------------
Signature Guaranteed:
---------------------------------------------------------
NOTE: The signature to this Transfer Notice must
correspond with the name as it appears on the face
of the Warrant Agreement, without alteration or
enlargement or any change whatever. Officers of
corporations and those acting in a fiduciary or
other representative capacity should file proper
evidence of authority to assign the foregoing
Warrant Agreement.
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<PAGE> 1
EXHIBIT 10.9
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY
COUNSEL) REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
WARRANT AGREEMENT
To Purchase Shares of the Series C Preferred Stock of
Steritech, Inc.
dated as of May 25, 1994
WHEREAS, Steritech, Inc., a California corporation (the "Company") has
entered into a Master Lease Agreement dated as of May 11, 1992, Equipment
Schedule No. VL-2, and related Summary Equipment Schedules (the "Leases") with
Comdisco, Inc., a Delaware corporation (the "Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in consideration
for such Leases, the right to purchase shares of its Series C Preferred Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Leases and in consideration of mutual covenants and agreements
contained herein, the Company and Warrantholder certify and agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE SERIES C PREFERRED STOCK.
For value received, the Company hereby grants to the
Warrantholder, and the Warrantholder is entitled, upon the terms and subject to
the conditions hereinafter set forth, to subscribe for and purchase, from the
Company, 6,250 fully paid and non-assessable shares of the Company's Series C
Preferred Stock ("Preferred Stock") at a purchase price of $8.00 per share (the
"Exercise Price"). The number and purchase price of such shares are subject to
adjustment as provided in Section 8 hereof.
2. TERM OF THE WARRANT AGREEMENT.
Except as otherwise provided for herein, the term of this Warrant
Agreement and the right to purchase Preferred Stock as granted herein shall
commence on the date of execution hereof and shall be exercisable for a period
of (i) ten (10) years after the date of execution hereof, or (ii) five (5) years
from the effective date of the Company's initial public offering, whichever is
shorter.
3. EXERCISE OF THE PURCHASE RIGHTS.
The purchase rights set forth in this Warrant Agreement are exercisable
by the Warrantholder, in whole or in part, at any time, or from time to time,
prior to the expiration of the term set forth in Section 2 above, by tendering
to the Company at its principal office a notice of exercise in the form attached
hereto as Exhibit I
<PAGE> 2
(the "Notice of Exercise") , duly completed and executed. Upon receipt of the
Notice of Exercise and the payment of the purchase price in accordance with the
terms set forth below, the Company shall issue to the Warrantholder a
certificate for the number of shares of Preferred Stock purchased and shall
execute the Notice of Exercise indicating the number of shares which remain
subject to future purchases, if any.
Notwithstanding anything to the contrary contained in Section 2 above or
this Section 3, the Warrantholder shall either (i) exercise this Warrant by
paying to the Company, by cash or check, an amount equal to the aggregate
Warrant Price of the shares being purchased, or (ii) receive shares equal to
the value (as determined below) of this Warrant by surrender of the Warrant at
the principal office of the Company together with notice of such election in
which event the Company shall issue to the Warrantholder a number of shares of
Preferred computed using the following formula:
X = Y(A-B)
------
A
Where: X = the number of shares of Preferred to be issued to the
Warrantholder.
Y = the number of shares of Preferred under this Warrant.
A = the fair market value of one share of Preferred Stock.
B = Exercise Price.
As used herein, current fair market value of Preferred Stock shall mean
with respect to each share of Preferred Stock the average of the closing prices
of the Company's Common Stock (times the number of shares of Common Stock that
a share of Preferred Stock is convertible into) sold on all securities
exchanges on which the Common Stock may at the time be listed, or, if there
have been no sales on any such exchange on any day, the average of the highest
bid and lowest asked prices on all such exchanges at the end of such day, or,
if on any day the Common Stock is not so listed, the average of the
representative bid and asked prices quoted in the NASDAQ System as of 4:00
p.m., New York City time, or, if on any day the Common Stock is not quoted in
the NASDAQ System, the average of the highest bid and lowest asked Price on
such day in the domestic over-the-counter market as reported by the National
Quotation Bureau, Incorporated, or any similar successor organization, in each
such case averaged over a period of 21 days consisting of the day as of which
the current fair market value of Common Stock is being determined and the 20
consecutive business days prior to such day. If at any time the Common Stock
is not listed on any securities exchange or quoted in the NASDAQ System or the
over-the-counter market, the current fair market value of Preferred Stock shall
be the highest price per share which the Company could obtain from a willing
buyer (not a current employee or director) for shares of Preferred Stock sold
by the Company, from authorized but unissued shares, as determined in good
faith by the Board of Directors of the Company, unless (i)the Company shall
become subject to a merger, acquisition or other consolidation pursuant to
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<PAGE> 3
which the Company is not the surviving party, in which case the current fair
market value of the Preferred Stock shall be deemed to be the value received by
the holders of the Company's Series A Preferred Stock for each share of Series
A Preferred Stock (or Common Stock if all such shares have been converted into
Common Stock) pursuant to the Company's Acquisition; or (ii) the Warrantholder
shall purchase such shares in conjunction with the initial underwritten public
offering of the Company's Common Stock (times the number of shares of Common
Stock that a share of Preferred Stock is convertible into) pursuant to a
registration statement filed under the Securities Act of 1933, in which case,
the fair market value of the shares of stock subject to this Warrant shall be
the price at which all registered shares are sold to the public in such
offering.
4. RESERVATION OF SHARES.
(a) Authorization and Reservation of Shares. During the term of
this Warrant Agreement, the Company will at all times have authorized and
reserved a sufficient number of shares of its Preferred Stock to provide for
the exercise of the rights to purchase Preferred Stock as provided for herein.
(b) Registration or Listing. If any shares of Preferred Stock
required to be reserved for purposes of exercise of the Warrant Agreement
hereunder require registration with or approval of any governmental authority
under any Federal or State law (other than any registration under the
Securities Act of 1933, as then in effect, or any similar Federal statute then
enforced, or any state securities law, required by reason of any transfer
involved in such conversion) , or listing on any domestic securities exchange,
before such shares may be issued upon conversion, the Company will, at its
expense and as expeditiously as possible, use its best efforts to cause such
shares to be duly registered, listed or approved for listing on such domestic
securities exchange, as the case may be.
5. NO FRACTIONAL SHARES OR SCRIP.
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrantholder's rights to purchase Preferred
Stock, but in lieu of such fractional shares the Company shall make a cash
payment therefor upon the basis of the Exercise Price then in effect.
6. NO RIGHTS AS SHAREHOLDERS.
This Warrant Agreement does not entitle the Warrantholder to any
voting rights or other rights as a shareholder of the Company prior to the
exercise of the Warrantholder's rights to purchase Preferred Stock as provided
for herein.
7. WARRANTHOLDER REGISTRY.
The Company shall maintain a registry showing the name and address of
the registered holder of this Warrant Agreement.
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<PAGE> 4
8. ADJUSTMENT RIGHTS.
The purchase price per share and the number or character of shares of
Preferred Stock issuable upon exercise of this Warrant (or any shares of stock
or other securities or property at the time received or issuable upon exercise
of this Warrant) are subject to adjustment from time to time, as follows:
(a) Merger and Sale of Assets. If at any time there shall be a
capital reorganization of the shares of the Company's stock (other than a
combination, reclassification, exchange or subdivision of shares otherwise
provided for herein), or a merger or consolidation of the Company with or into
another corporation when the company is not the surviving corporation, or the
sale of all or substantially all of the Company's properties and assets to any
other person in such a way that holders of Preferred Stock shall be entitled to
receive stock, securities or other assets or property, then, as a part of such
reorganization, merger, consolidation or sale, lawful provision shall be made so
that the Warrantholder shall thereafter be entitled to receive upon exercise of
its rights to purchase Preferred Stock, the number of shares of Preferred Stock
or other securities of the successor corporation resulting from such merger or
consolidation, to which a holder of the Preferred Stock deliverable upon
exercise of the right to purchase Preferred Stock hereunder would have been
entitled in such capital reorganization, merger, consolidation or sale if the
right to purchase such Preferred Stock hereunder had been exercised immediately
prior to such capital reorganization, merger, consolidation or sale. In any
such case, appropriate adjustment (as determined in good faith by the Company's
Board of Directors) shall be made in the application of the provisions of this
Warrant Agreement with respect to the rights and interest of the Warrantholder
after the reorganization, merger, consolidation or sale to the end that the
provisions of this Warrant Agreement (including adjustments of the Exercise
Price and number of shares of Preferred Stock purchasable pursuant to the terms
and conditions of this Warrant Agreement) shall be applicable after that event,
as near as reasonably may be, in relation to any shares deliverable after that
event upon the exercise of the Warrantholder's rights to purchase Preferred
Stock pursuant to this Warrant Agreement.
(b) Reclassification of Shares. If the Company at any time shall,
by combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of
any other class or classes, this Warrant Agreement shall thereafter represent
the right to acquire such number and kind of securities as would have been
issuable as the result of such change with respect to the securities which were
subject to the purchase rights under this Warrant Agreement immediately prior
to such combination, reclassification, exchange, subdivision or other change.
(c) Subdivision or Combination of Shares. If the Company at any
time shall combine or subdivide its Preferred Stock, the Exercise Price and the
number of shares of Preferred Stock (or any other shares
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<PAGE> 5
of stock or other securities issuable upon exercise of this Warrant) shall be
proportionately adjusted to reflect any such combination or subdivision.
(d) Stock Dividends. If the Company at any time shall pay a
dividend payable in, or make any other distribution (except any distribution
specifically provided for in the foregoing subsections (a) , (b) or (c)) with
respect to the Preferred Stock (or any other shares of stock or other
securities at the time issuable upon exercise of this Warrant) then, and in
each such case, the Warrantholder on exercise of its purchase rights under this
Warrant Agreement at any time after the consummation, effective date or record
date of such event, shall receive, in addition to the shares of Preferred Stock
(or such other stock or securities) issuable on such exercise prior to such
date, and without payment of any additional consideration therefor, the
securities or such other property of the Company to which such Warrantholder
would have been entitled upon such date if such Warrantholder had exercised its
purchase rights under this Warrant Agreement as of the date on which holders of
Preferred Stock received or became entitled to receive such shares or all other
additional stock and other securities and property (all subject to further
adjustment as provided in this Warrant Agreement).
(e) Adjustments Set Forth in Articles of Incorporation. In
addition to the foregoing adjustments, the conversion rate of the Preferred
Stock into Common Stock is subject to adjustments as set forth in the Company's
Articles of Incorporation. The Company represents that as of the date of
execution hereof, each share of Preferred Stock was convertible into one share
of Common Stock.
(f) Conversion of Preferred Stock. In case all the authorized
Preferred Stock of the Company is converted, pursuant to the Company's Articles
of Incorporation, into Common Stock or other securities or property, or the
Preferred Stock otherwise ceases to exist, then, in such case, the purchase
rights under this Warrant Agreement as of the date on which the Preferred Stock
is so converted or ceases to exist (the "Termination Date"), shall immediately
become exercisable for, in lieu of the number of shares of Preferred Stock that
would have been issuable upon such exercise immediately prior to the
Termination Date (the "Formerly Issuable Number of Shares of Preferred Stock"),
the stock and other securities and property which the Warrantholder would have
been entitled to receive upon the Termination date if the Warrantholder had
exercised the purchase rights under this Warrant Agreement with respect to the
Formerly Issuable Number of Shares of Preferred Stock immediately prior to the
Termination Date (all subject to further adjustment as provided in this Warrant
Agreement).
(g) Common Stock Dividends. If the Company at any time following
the conversion of the Preferred Stock and prior to the exercise of the purchase
rights under this Warrant Agreement shall pay a dividend with respect to Common
Stock payable in shares of Common Stock, or make any other distribution with
respect to Common Stock, then the Exercise Price shall be adjusted, from and
after the date of determination of the shareholders entitled to receive such
dividend or distribution, to that price determined by multiplying the Exercise
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<PAGE> 6
Price in effect by a fraction (i) the numerator of which shall be the total
number of shares of Common Stock outstanding immediately prior to such dividend
or distribution, and (ii) the denominator of which shall be the total number of
shares of the Common Stock outstanding immediately after such dividend or
distribution.
(h) Notice of Adjustments. In the event that: (i) the Company
shall declare any dividend or distribution upon its stock, whether in cash,
property, stock or other securities; (ii) the Company shall offer for
subscription prorata to the holders of any class of its Preferred or other
convertible stock any additional shares of stock of any class or other rights;
(iii) there shall be any capital reorganization, reclassification,
consolidation, merger or sale of all or substantially all of the Company's
assets; or (iv) there shall be any voluntary or involuntary dissolution,
liquidation or winding up of the Company; then, in connection with each such
event, the Company shall send to the Warrantholder:
(i) At least ten (10) days' prior written notice of the
date on which the books of the Company shall close or a record shall
be taken for such dividend, distribution, subscription rights
(specifying the date on which the holders of Preferred Stock shall be
entitled thereto) or for determining rights to vote in respect of such
capital reorganization, reclassification, consolidation, merger or
sale of all or substantially all of the Company's assets, dissolution,
liquidation or winding up; and
(ii) In the case of any such capital reorganization,
reclassification, consolidation, merger or sale of all or substantially
all of the Company's assets, dissolution, liquidation or winding up, at
least ten (10) days' prior written notice of the date when the same
shall take place (and specifying the date on which the holders of
Preferred Stock shall be entitled to exchange their Preferred Stock for
securities or other property deliverable upon such capital
reorganization, reclassification, consolidation, merger or sale of all
or substantially all of the Company's assets, dissolution, liquidation
or winding up).
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Exercise Price, and
(v) the number of shares subject to purchase hereunder after giving effect to
such adjustment.
(i) Registration and Listing. The Company will take all such
actions as may be necessary to assure that all shares of Preferred Stock
issuable pursuant to this Warrant Agreement may be so issued without violation
of any applicable law or regulation or any requirements of any domestic stock
exchange (except for official notice of issuance, which will be immediately
transmitted by the Company upon issuance) upon which shares of Preferred Stock
or other shares of the same class may be listed. The Company will not take any
action which will result in any adjustment of the number of shares of Preferred
Stock issuable upon exercise of this Warrant Agreement if
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<PAGE> 7
the total number of shares of Preferred Stock issuable after such action upon
exercise of the Warrant Agreement then outstanding, together with the total
number of shares of Preferred Stock then outstanding, would exceed the total
number of shares of Preferred Stock then authorized and not reserved for any
purpose other than the purpose of issue upon exercise of the Warrant Agreement.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
Except as set forth in the Schedule of Exceptions attached hereto
as Schedule A, the Company hereby represents and warrants to the Warrantholder
as follows:
(a) Reservation of Preferred Stock. The Preferred Stock issuable
upon exercise of the Warrantholder's rights has been duly and validly reserved
and, when issued in accordance with the provisions of this Warrant Agreement,
will be validly issued, fully paid and nonassessable, and will be free of any
taxes, liens, charges or encumbrances of any nature whatsoever; provided,
however, that the Preferred Stock issuable pursuant to this Warrant Agreement
may be subject to restrictions on transfer under state and/or Federal
securities laws. The Company has made available to the Warrantholder true,
correct and complete copies of its Articles of Incorporation and By-Laws, as
amended, and minutes of all Board of Directors (including all committees of the
Board of Directors, if any) and all Shareholder meetings. The issuance of
certificates for shares of Preferred Stock upon exercise of the Warrant
Agreement shall be made without charge to the Warrantholder for any issuance
tax in respect thereof, or other cost incurred by the Company in connection
with such exercise and the related issuance of shares of Preferred Stock;
provided that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved and the issuance and delivery of
any certificate in a name other than that of the Warrantholder. The Company
will not close its books against the transfer of the Warrant Agreement or of
any share of Preferred Stock issued or issuable upon exercise of the Warrant
and any agreement in any manner which interferes with the timely exercise of
the Warrant.
(b) Due Authority. The execution and delivery by the Company of
the Leases, and this Warrant Agreement and the performance of all obligations
of the Company thereunder and hereunder, including the issuance to
Warrantholder of the right to acquire the shares of Preferred Stock set forth
in Section 1 above (which number of shares may be from time to time adjusted
pursuant to the terms of Section 8 above) have been duly authorized by all
necessary corporate action on the part of the Company, and the Leases and this
Warrant Agreement are not inconsistent with the Company's Articles of
Incorporation or ByLaws, do not contravene any law or governmental rule,
regulation or order applicable to it, do not and will not contravene any
provision of, or constitute a default under, any indenture, mortgage, contract
or other instrument to which it is a party or by which it is bound, and the
Leases and this Warrant Agreement constitute legal, valid and binding
agreements of the Company, enforceable in accordance with their respective
terms.
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<PAGE> 8
(c) Consents and Approvals. No consent or approval of, giving of
notice to, registration with, or taking of any other action in respect of any
state, Federal or other governmental authority or agency is required with
respect to the execution, delivery and performance by the Company of its
obligations under this Warrant Agreement, except for the filing of notices
pursuant to Regulation D under the Securities Exchange Act of 1933, as amended,
(the "1933 Act") and Section 25102 (f) of the California Corporate Securities
Law, which filings will be effective by the time required thereby.
(d) Litigation. There are no actions, suits, audits,
investigations or proceedings pending or, to the knowledge of the Company,
threatened against or affecting the Company in any court or before any
governmental commission, board or authority which, if adversely determined,
will have a material adverse effect on the ability of the Company to perform
its obligations under the Leases and this Warrant Agreement.
(e) Subsidiaries or Affiliates. The Company has no subsidiaries
or affiliated companies and does not otherwise own or control, directly or
indirectly, any other corporation, association or business entity.
(f) Issued Securities. All issued and outstanding shares of
Common Stock, Preferred Stock or any other securities of the Company have been
duly authorized and validly issued and are fully paid and nonassessable. All
outstanding shares of Common Stock, Preferred Stock and any other securities
were issued in full compliance with all Federal and state securities laws. In
addition:
(i) The authorized capital of the Company consists of
(A) 4,000,000 shares of Common Stock, of which 1,020,000 shares
are issued and outstanding, and (B) 2,198,191 shares of
preferred stock, of which 761,079 shares have been designated
Series A Preferred Stock, 714,286 of which have been issued and
are outstanding and 289,663 shares have been designated
Series B Preferred Stock, 285,714 of which have been issued
and are outstanding and 1,147,449 of which are designated
Series C Preferred Stock, 914,884 of which are issued and
outstanding. Each share of Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock is convertible
into one share of Common Stock.
(ii) The Company has reserved (A) 400,000 shares of
Common Stock for issuance under its Stock Option Plan, under
which 267,140 options have been granted subject to
qualification with the California Department of Corporation at
an average price ranging from of $.385 to $.80 per share. The
Company has issued warrants exercisable for 20,779 shares of
Series A Preferred Stock with an exercise price of $3.85,
19,747 shares of Series B Preferred stock with an exercise
price of $5.065 per share and 17,570 shares of Series C
Preferred Stock at $6.80 per share. There are no other
options, warrants, conversion privileges or other rights
presently outstanding to purchase or otherwise acquire any
authorized but unissued shares of the Company's capital stock
or other securities of the Company.
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<PAGE> 9
(iii) In accordance with the Company's Articles of
Incorporation, no shareholder of the Company has preemptive
rights to purchase new issuances of the Company's capital
stock.
(g) Financial Statements. The Company has delivered to the
Warrantholder its unaudited Consolidated Balance Sheet and Consolidated
Statement of Income for the 4 month period ending 4/30/94 the "Financial
Statements"). The Financial Statements are complete and correct in all
material respects and have been prepared in accordance with generally accepted
accounting principles (except for the absence of footnotes) applied on a
consistent basis throughout the periods indicated. The condition and operating
results of the Company as of the dates and during the periods indicated therein
are true and correct in all material aspects, subject as to the Consolidated
Balance Sheet and Consolidated Statement of Income for the 4 months then ending
April 30, 1994 to normal year-end audit adjustments. Since April 30, 1994
there has been no change in the assets, liabilities, financial condition or
operations of the Company from that reflected in the Financial Statements other
than changes in the ordinary course of business which have not been,
individually or in the aggregate, materially adverse.
The Company shall deliver to the Warrantholder (i) within one hundred
twenty (120) days after the end of the Company's fiscal year, statements of
income for such fiscal year, a consolidated balance sheet of the Company as of
the end of such year and consolidated statement of the sources and application
of funds for such year, which year-end financial reports shall be in reasonable
detail and certified by independent public accountants of nationally recognized
standing selected by the Company, and (ii) within forty-five (45) days after
the end of each fiscal quarter other than the last fiscal quarter, unaudited
consolidated statements of income and sources and application of funds for such
quarter and a consolidated balance sheet as of the end of such quarter.
(h) Contingent and Absolute Liabilities. The Company has no
material liabilities or obligations, absolute or contingent except the
liabilities and obligations of the Company as set forth in the Financial
Statements and liabilities and obligations which have occurred in the ordinary
course of business, and which have not been materially adverse.
(i) Licenses, Patents and Copyright. To the best of the Company's
knowledge, the Company owns, possesses, has access to, or can become licensed
on reasonable terms under, all patents, patent applications, trademarks, trade
names, inventions, franchises, licenses, permits, computer software and
copyrights necessary for the operation of its business as now conducted, with
no known infringement of, or conflict with, the rights of others.
(j) Employee Contracts. To the best of the Company's knowledge,
no employee of the Company is in violation of any material term of any
employment contract, patent disclosure agreement or any other contract or
agreement relating to the relationship of any such employee with
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<PAGE> 10
the Company or any prior employer because of the nature of the business
conducted by the Company.
(k) Insurance. The Company has in full force and effect insurance
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant to the terms of any other contract or
agreement.
(1) Other Commitments to Register Securities. Except as set forth
in this Warrant Agreement and pursuant to that certain Steritech, Inc.
Investors' Right Agreement dated December 27, 1991, the Company is not,
pursuant to the terms of any other agreement currently in existence, under any
obligation to register under the 1933 Act, any of its presently outstanding
securities or any of its securities which may hereafter be issued.
(m) Exempt Transaction. Subject to the accuracy of the
Warrantholder's representations in Section 10 hereof, the issuance of the
Preferred Stock upon exercise of the Warrantholder's right to purchase such
Preferred Stock will constitute transactions exempt from (i) the registration
requirements of Section 5 of the 1933 Act, in reliance upon Section 4(2)
thereof, and (ii) the qualification requirements of the California Corporations
Code, in reliance upon Section 25102(f).
(n) Compliance with Rule 144. At the written request of the
Warrantholder, who proposes to sell Preferred Stock issuable upon the exercise
of the Warrant in compliance with Rule 144 promulgated by the Securities and
Exchange Commission under the 1933 Act, the Company shall furnish to the
Warrantholder, within ten days after receipt of such request, a written
statement confirming the Company's compliance with the filing requirements of
the Securities and Exchange Commission as set forth in such Rule, as such Rule
may be amended from time to time.
(o) No Events of Default, Material Contracts. All material
contracts, agreements and instruments to which the Company is a party are in
full force and effect in all material respects, and are valid, binding and
enforceable by the Company in accordance with their respective terms, subject
to the effect of applicable bankruptcy and other similar laws affecting the
rights of creditors generally, and rules of law concerning equitable remedies
and no event of default, and no event which, with the passing of time or the
giving of notice, or both, would constitute an event of default has occurred or
is continuing under any such contract, agreement or instrument.
(p) Brokers' Fees. The Company has not incurred, and will not
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with the Warrant
Agreement or any other transaction contemplated thereby.
(q) Untrue, Misleading Statements. No representation or warranty
of the Company contained in the Leases, and this Warrant
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<PAGE> 11
Agreement or any certificate or exhibit furnished or to be furnished to
Warrantholder pursuant thereto or in connection with the transactions
contemplated thereby (when read together) contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained therein not misleading.
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
This Warrant Agreement has been entered into by the Company in reliance
upon the following representations and covenants of the Warrantholder, which by
its execution hereof the Warrantholder hereby confirms:
(a) Investment Purpose. The right to acquire Preferred Stock or
the Preferred Stock issuable upon exercise of the Warrantholder's rights
contained herein will be acquired for investment and not with a view to the
sale or distribution of any part thereof, and the Warrantholder has no present
intention of selling or engaging in any public distribution of the same except
pursuant to a registration or exemption.
(b) Private Issue. The Warrantholder understands (i) that the
Preferred Stock issuable upon exercise of the Warrantholder's rights contained
herein is not registered under the 1933 Act or qualified under applicable state
securities laws on the ground that the issuance contemplated by this Warrant
Agreement will be exempt from the registration and qualifications requirements
thereof, and (ii) that the Company's reliance on such exemption is predicated
on the representations set forth in this Section 10.
(c) Disposition of Warrantholder's Rights. In no event will the
Warrantholder make a disposition of any of its rights to acquire Preferred
Stock or Preferred Stock issuable upon exercise of such rights unless and until
(i) it shall have notified the Company of the proposed disposition, and (ii) if
requested by the Company, it shall have furnished the Company with an opinion
of counsel (which counsel may either be inside or outside counsel to the
Warrantholder) satisfactory to the Company and its counsel to the effect that
(A) appropriate action necessary for compliance with the 1933 Act has been
taken, or (B) an exemption from the registration requirements of the 1933 Act
is available. Notwithstanding the foregoing, the restrictions imposed upon the
transferability of any of its rights to acquire Preferred Stock or Preferred
Stock issuable on the exercise of such rights do not apply to transfers from
the beneficial owner of any of the aforementioned securities to its nominee or
from such nominee to its beneficial owner, and shall terminate as to any
particular share of Preferred Stock when (1) such security shall have been
effectively registered under the 1933 Act and sold by the holder thereof in
accordance with such registration or (2) such security shall have been sold
without registration in compliance with Rule 144 under the 1933 Act, or (3) a
letter shall have been issued to the Warrantholder at its request by the staff
of the Securities and Exchange Commission or a ruling shall have been issued to
the Warrantholder at its request by such Commission stating that no action
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<PAGE> 12
shall be recommended by such staff or taken by such Commission, as the case may
be, if such security is transferred without registration under the 1933 Act in
accordance with the conditions set forth in such letter or ruling and such
letter or ruling specifies that no subsequent restrictions on transfer are
required. Whenever the restrictions imposed hereunder shall terminate, as
hereinabove provided, the Warrantholder or holder of a share of Preferred Stock
then outstanding as to which such restrictions have terminated shall be entitled
to receive from the Company, without expense to such holder, one or more new
certificates for the Warrant or for such shares of Preferred Stock not bearing
any restrictive legend.
(d) Financial Risk. The Warrantholder has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of its investment and has the ability to bear the economic
risks of its investment.
(e) Risk of No Registration. The Warrantholder understands that if
the Company does not register with the Securities and Exchange Commission
pursuant to Section 12 of the 1933 Act, or file reports pursuant to Section
15(d), of the Securities Exchange Act of 1934 (the "1934 Act"), or if a
registration statement covering the securities under the 1933 Act is not in
effect when it desires to sell (i) the rights to purchase Preferred Stock
pursuant to this Warrant Agreement, or (ii) the Preferred Stock issuable upon
exercise of the right to purchase, it may be required to hold such securities
for an indefinite period. The Warrantholder also understands that any sale of
its rights of the Warrantholder to purchase Preferred Stock or Preferred Stock
which might be made by it in reliance upon Rule 144 under the 1933 Act may be
made only in accordance with the terms and conditions of that Rule.
11. REGISTRATION.
Warrantholder and Company agree that Warrantholder shall be considered
a "Holder" and that all shares of Common Stock issued upon conversion of the
Preferred Stock subject to this Warrant Agreement shall be considered
"Registrable Securities" and be subject to the same terms and conditions with
respect to the registration and sale of such shares as set forth in Sections 2.3
and 2.4 - 2.13 of that certain Steritech, Inc. Investors' Rights Agreement dated
December 27, 1991, by and among the Company and those certain Purchasers
identified therein, attached hereto as Exhibit II.
12. TRANSFERS.
Subject to the terms and conditions contained in Section 10 hereof,
this Warrant Agreement and all rights hereunder are transferable in whole or in
part by the Warrantholder and any successor transferee, provided, however, that
in no event shall the number of transfers of the rights and interests in all of
the Warrants exceed three (3) transfers. The transfer shall be recorded on the
books of the Company upon receipt by the Company of a notice of transfer in the
form attached hereto as Exhibit III (the "Transfer Notice"), at its principal
offices and the payment to the Company of
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<PAGE> 13
all transfer taxes and other governmental charges imposed on such transfer.
13. MISCELLANEOUS.
(a) Effective Date. The provisions of this Warrant Agreement
shall be construed and shall be given effect in all respects as if it had been
executed and delivered by the Company on the date hereof. This Warrant
Agreement shall be binding upon any successors or assigns of the Company.
(b) Attorney's Fees. In any litigation, arbitration or court
proceeding between the Company and the Warrantholder relating hereto, the
prevailing party shall be entitled to attorneys' fees and expenses and all
costs of proceedings incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by
and construed for all purposes under and in accordance with the laws of the
State of California.
(d) Counterparts. This Warrant 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.
(e) Titles and Subtitles. The titles of the paragraphs and
subparagraphs of this Warrant Agreement are for convenience and are not to be
considered in construing this Agreement.
(f) Notices. Any notice required or permitted hereunder shall be
given in writing and shall be deemed effectively given upon personal delivery
or upon deposit in the United States mail, by registered or certified mail, or
as of the following business by day express mail addressed (i) to the
Warrantholder at 6111 North River Road, Rosemont, Illinois 60018, attention:
Jim Labe, Venture Leasing Director, cc: Legal Department, and (ii) to the
Company at 2525 Stanwell Drive, Suite 300, Concord, California 94520, or at
such other address as any such party may subsequently designate by written
notice to the other party.
(g) Specific Performance. The Company recognizes and agrees that
the Warrantholder will not have an adequate remedy if the Company fails to
comply with this Agreement and that damages will not be readily ascertainable,
and the Company expressly agrees that, in the event of such failure, it shall
not oppose an application by the Warrantholder or any other person entitled to
the benefit of this Agreement requiring specific performance of any or all
provisions hereof or enjoining the Company from continuing to commit any such
breach of this Agreement.
(h) Survival. The representations, warranties, covenants and
conditions of the respective parties contained herein or made pursuant to this
Warrant Agreement shall survive the execution and delivery of this Warrant
Agreement.
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<PAGE> 14
(i) Severability. In the event any one or more of the provisions
of this Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal
or unenforceable provision.
(j) Amendments. Any provision of this Warrant Agreement may be
amended by a written instrument signed by the Company and by the Warrantholder.
(k) Additional Documents. The Company, upon execution of this
Warrant Agreement, shall provide the Warrantholder with certified resolutions
and an opinion from the Company's counsel addressed to the Warrantholder with
respect to the representations, warranties and covenants set forth in
subparagraphs (a) through (f) and subparagraphs (1), (m) and (o) of Section 9
above and shall also supply such other documents as the Warrantholder may from
time to time reasonably request.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant
Agreement to be executed by its officers thereunto duly authorized.
Company:
STERITECH, INC.
Dated June 27, 1994 By: /s/ [SIG]
-------------------------------
Title: Controller/Corp. Sec.
-------------------------------
Warrantholder:
COMDISCO, INC.
By: /s/ [SIG]
-------------------------------
Title:
-------------------------------
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<PAGE> 15
Exhibit I
NOTICE OF EXERCISE
To:
-----------------------------------------
(1) The undersigned Warrantholder hereby elects to purchase______ shares of
the Preferred Stock of Steritech, Inc. pursuant to the terms of the
Warrant Agreement dated the 25th day of May, 1994 (the "Warrant
Agreement") between Steritech, Inc. and the Warrantholder, and tenders
herewith payment of the purchase price for such shares in full, together
with all applicable transfer taxes, if any.
(2) In exercising its rights to purchase the Preferred Stock of Steritech,
Inc., the undersigned hereby confirms and acknowledges the investment
representations and warranties made in Section 10 of the Warrant
Agreement.
(3) Please issue a certificate or certificates representing said shares of
Preferred Stock in the name of the undersigned or in such other name as
is specified below.
---------------------------------------
(Name)
---------------------------------------
(Address)
Warrantholder: COMDISCO, INC.
By:
------------------------------------
Title:
---------------------------------
Date:
-----------------------------------
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<PAGE> 16
ACKNOWLEDGEMENT OF EXERCISE
The undersigned Steritech, Inc. hereby acknowledge receipt of the
"Notice of Exercise" from Comdisco, Inc., to purchase ________ shares of the
Preferred Stock, of Steritech, Inc. pursuant to the terms of the Warrant
Agreement, and further acknowledges that ________ shares remain subject to
purchase under the terms of the Warrant Agreement.
Company: STERITECH, INC.
By:
------------------------------
Title:
---------------------------
Date:
----------------------------
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<PAGE> 17
Exhibit III
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant Agreement execute this
form and supply required information. Do not use this form to
purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to
- -----------------------------------------------------------------------------
(Please Print)
whose address is
------------------------------------------------------------
- -----------------------------------------------------------------------------
Dated
-----------------------------
Holder's Signature
-----------------
Holder's Address
------------------
-----------------------------------
Signature Guaranteed:
-------------------------------------------------------
NOTE: The signature to this Transfer Notice must correspond
with the name as it appears on the face of the
Warrant Agreement, without alteration or enlargement
or any change whatever. officers of corporations and
those acting in a fiduciary or other representative
capacity should file proper evidence of authority to
assign the foregoing Warrant Agreement.
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<PAGE> 1
EXHIBIT 10.10
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR
AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL) REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER
THE SECURITIES ACT OF 1933.
WARRANT AGREEMENT
To Purchase Shares of the Series D Preferred Stock of
Steritech, Inc.
dated as of April 25, 1995
WHEREAS, Steritech, Inc., a California corporation (the "Company") has
entered into a Master Lease Agreement dated as of May 11, 1992, Equipment
Schedule No. VL-3, and related Summary Equipment Schedules (the "Leases") with
Comdisco, Inc., a Delaware corporation (the "Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in consideration
for such Leases, the right to purchase shares of its Series C Preferred Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Leases and in consideration of mutual covenants and agreements
contained herein, the Company and Warrantholder certify and agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE SERIES D PREFERRED STOCK.
For value received, the Company hereby grants to the
Warrantholder, and the Warrantholder is entitled, upon the terms and subject to
the conditions hereinafter set forth, to subscribe for and purchase, from the
Company, 4,500 fully paid and non-assessable shares of the Company's Series D
Preferred Stock ("Preferred Stock") at a purchase price of $10.50 per share
(the "Exercise Price"). The number and purchase price of such shares are
subject to adjustment as provided in Section 8 hereof.
2. TERM OF THE WARRANT AGREEMENT.
Except as otherwise provided for herein, the term of this Warrant
Agreement and the right to purchase Preferred Stock as granted herein shall
commence on the date of execution hereof and shall be exercisable for a period
of (i) ten (10) years after the date of execution hereof, or (ii) five (5)
years from the effective date of the Company's initial public offering,
whichever is shorter.
3. EXERCISE OF THE PURCHASE RIGHTS.
The purchase rights set forth in this Warrant Agreement are
exercisable by the Warrantholder, in whole or in part, at any time, or from
time to time, prior to the expiration of the term set forth in Section 2 above,
by tendering to the Company at its principal office a notice of exercise in the
form attached hereto as Exhibit I
<PAGE> 2
(the "Notice of Exercise"), duly completed and executed. Upon receipt of the
Notice of Exercise and the payment of the purchase price in accordance with the
terms set forth below, the Company shall issue to the Warrantholder a
certificate for the number of shares of Preferred Stock purchased and shall
execute the Notice of Exercise indicating the number of shares which remain
subject to future purchases, if any.
Notwithstanding anything to the contrary contained in section 2 above or
this Section 3, the Warrantholder shall either (i) exercise this Warrant by
paying to the Company, by cash or check, an amount equal to the aggregate
Warrant Price of the shares being purchased, or (ii) receive shares equal to
the value (as determined below) of this Warrant by surrender of the Warrant at
the principal office of the Company together with notice of such election in
which event the Company shall issue to the Warrantholder a number of shares of
Preferred computed using the following formula:
X = Y(A-B)
-------
A
Where: X = the number of shares of Preferred to be issued to
the Warrantholder.
Y = the number of shares of Preferred under this
Warrant.
A = the fair market value of one share of Preferred
Stock.
B = Exercise Price.
As used herein, current fair market value of Preferred Stock
shall mean with respect to each share of Preferred Stock the average of the
closing prices of the Company's Common Stock (times the number of shares of
Common Stock that a share of Preferred Stock is convertible into) sold on all
securities exchanges on which the Common Stock may at the time be listed, or,
if there have been no sales on any such exchange on any day, the average of the
highest bid and lowest asked prices on all such exchanges at the end of such
day, or, if on any day the Common Stock is not so listed, the average of the
representative bid and asked prices quoted in the NASDAQ System as of 4:00
p.m., New York City time, or, if on any day the Common Stock is not quoted in
the NASDAQ System, the average of the highest bid and lowest asked price on
such day in the domestic over-the-counter market as reported by the National
Quotation Bureau, Incorporated, or any similar successor organization, in each
such case averaged over a period of 21 days consisting of the day as of which
the current fair market value of Common Stock is being determined and the 20
consecutive business days prior to such day. If at any time the Common Stock
is not listed on any securities exchange or quoted in the NASDAQ System or the
over-the-counter market, the current fair market value of Preferred Stock shall
be the highest price per share which the Company could obtain from a willing
buyer (not a current employee or director) for shares of Preferred Stock sold
by the Company, from authorized but unissued shares, as determined in good
faith by the Board of Directors of the Company, unless (i) the Company shall
become subject to a merger, acquisition or other consolidation pursuant to
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<PAGE> 3
which the Company is not the surviving party, in which case the current fair
market value of the Preferred Stock shall be deemed to be the value received by
the holders of the Company's Series D Preferred Stock for each share of Series
D Preferred Stock (or Common Stock if all such shares have been converted into
Common Stock) pursuant to the Company's Acquisition; or (ii) the Warrantholder
shall purchase such shares in conjunction with the initial underwritten public
offering of the Company's Common Stock (times the number of shares of Common
Stock that a share of Preferred Stock is convertible into) pursuant to a
registration statement filed under the Securities Act of 1933, in which case,
the fair market value of the shares of stock subject to this Warrant shall be
the price at which all registered shares are sold to the public in such
offering.
4. RESERVATION OF SHARES.
(a) Authorization and Reservation of Shares. During the term of
this Warrant Agreement, the Company will at all times have authorized and
reserved a sufficient number of shares of its Preferred Stock to provide for
the exercise of the rights to purchase Preferred Stock as provided for herein.
(b) Registration or Listing. If any shares of Preferred Stock
required to be reserved for purposes of exercise of the Warrant Agreement
hereunder require registration with or approval of any governmental authority
under any Federal or State law (other than any registration under the
Securities Act of 1933, as then in effect, or any similar Federal statute then
enforced, or any state securities law, required by reason of any transfer
involved in such conversion), or listing on any domestic securities exchange,
before such shares may be issued upon conversion, the Company will, at its
expense and as expeditiously as possible, use its best efforts to cause such
shares to be duly registered, listed or approved for listing on such domestic
securities exchange, as the case may be.
5. NO FRACTIONAL SHARES OR SCRIP.
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrantholder's rights to purchase Preferred
Stock, but in lieu of such fractional shares the Company shall make a cash
payment therefor upon the basis of the Exercise Price then in effect.
6. NO RIGHTS AS SHAREHOLDERS.
This Warrant Agreement does not entitle the Warrantholder to any
voting rights or other rights as a shareholder of the Company prior to the
exercise of the Warrantholder's rights to purchase Preferred Stock as provided
for herein.
7. WARRANTHOLDER REGISTRY.
The Company shall maintain a registry showing the name and address of
the registered holder of this Warrant Agreement.
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<PAGE> 4
8. ADJUSTMENT RIGHTS.
The purchase price per share and the number or character of shares of
Preferred Stock issuable upon exercise of this Warrant (or any shares of stock
or other securities or property at the time received or issuable upon exercise
of this Warrant) are subject to adjustment from time to time, as follows:
(a) Merger and Sale of Assets. If at any time there shall be a capital
reorganization of the shares of the Company's stock (other than a combination,
reclassification, exchange or subdivision of shares otherwise provided for
herein), or a merger or consolidation of the Company with or into another
corporation when the Company is not the surviving corporation, or the sale of
all or substantially all of the Company's properties and assets to any other
person in such a way that holders of Preferred Stock shall be entitled to
receive stock, securities or other assets or property, then, as a part of such
reorganization, merger, consolidation or sale, lawful provision shall be made so
that the Warrantholder shall thereafter be entitled to receive upon exercise of
its rights to purchase Preferred Stock, the number of shares of Preferred Stock
or other securities of the successor corporation resulting from such merger or
consolidation, to which a holder of the Preferred Stock deliverable upon
exercise of the right to purchase Preferred Stock hereunder would have been
entitled in such capital reorganization, merger, consolidation or sale if the
right to purchase such Preferred Stock hereunder had been exercised immediately
prior to such capital reorganization, merger, consolidation or sale. In any
such case, appropriate adjustment (as determined in good faith by the Company's
Board of Directors) shall be made in the application of the provisions of this
Warrant Agreement with respect to the rights and interest of the Warrantholder
after the reorganization, merger, consolidation or sale to the end that the
provisions of this Warrant Agreement (including adjustments of the Exercise
Price and number of shares of Preferred Stock purchasable pursuant to the terms
and conditions of this Warrant Agreement) shall be applicable after that event,
as near as reasonably may be, in relation to any shares deliverable after that
event upon the exercise of the Warrantholder's rights to purchase Preferred
Stock pursuant to this Warrant Agreement.
(b) Reclassification of Shares. If the Company at any time shall, by
combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of any
other class or classes, this Warrant Agreement shall thereafter represent the
right to acquire such number and kind of securities as would have been issuable
as the result of such change with respect to the securities which were subject
to the purchase rights under this Warrant Agreement immediately prior to such
combination, reclassification, exchange, subdivision or other change.
(c) Subdivision or Combination of Shares. If the Company at any time
shall combine or subdivide its Preferred Stock, the Exercise Price and the
number of shares of Preferred Stock (or any other shares
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<PAGE> 5
of stock or other securities issuable upon exercise of this Warrant) shall be
proportionately adjusted to reflect any such combination or subdivision.
(d) Stock Dividends. If the Company at any time shall pay a
dividend payable in, or make any other distribution (except any distribution
specifically provided for in the foregoing subsections (a), (b) or (c)) with
respect to the Preferred Stock (or any other shares of stock or other
securities at the time issuable upon exercise of this Warrant) then, and in
each such case, the Warrantholder on exercise of its purchase rights under this
Warrant Agreement at any time after the consummation, effective date or record
date of such event, shall receive, in addition to the shares of Preferred Stock
(or such other stock or securities) issuable on such exercise prior to such
date, and without payment of any additional consideration therefor, the
securities or such other property of the Company to which such Warrantholder
would have been entitled upon such date if such Warrantholder had exercised its
purchase rights under this Warrant Agreement as of the date on which holders of
Preferred Stock received or became entitled to receive such shares or all other
additional stock and other securities and property (all subject to further
adjustment as provided in this Warrant Agreement).
(e) Adjustments Set Forth in Articles of Incororation. In
addition to the foregoing adjustments, the conversion rate of the Preferred
Stock into Common Stock is subject to adjustments as set forth in the Company's
Articles of Incorporation. The Company represents that as of the date of
execution hereof, each share of Preferred Stock was convertible into one share
of Common Stock.
(f) Conversion of Preferred Stock. In case all the authorized
Preferred Stock of the Company is converted, pursuant to the Company's Articles
of Incorporation, into Common Stock or other securities or property, or the
Preferred Stock otherwise ceases to exist, then, in such case, the purchase
rights under this Warrant Agreement as of the date on which the Preferred Stock
is so converted or ceases to exist (the "Termination Date"), shall immediately
become exercisable for, in lieu of the number of shares of Preferred Stock that
would have been issuable upon such exercise immediately prior to the
Termination Date (the "Formerly Issuable Number of Shares of Preferred Stock"),
the stock and other securities and property which the Warrantholder would have
been entitled to receive upon the Termination date if the Warrantholder had
exercised the purchase rights under this Warrant Agreement with respect to the
Formerly Issuable Number of Shares of Preferred Stock immediately prior to the
Termination Date (all subject to further adjustment as provided in this Warrant
Agreement).
(g) Common Stock Dividends. If the Company at any time following
the conversion of the Preferred Stock and prior to the exercise of the purchase
rights under this Warrant Agreement shall pay a dividend with respect to Common
Stock payable in shares of Common Stock, or make any other distribution with
respect to Common Stock, then the Exercise Price shall be adjusted, from and
after the date of determination of the shareholders entitled to receive such
dividend or distribution, to that price determined by multiplying the Exercise
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Price in effect by a fraction (i) the numerator of which shall be the total
number of shares of Common Stock outstanding immediately prior to such dividend
or distribution, and (ii) the denominator of which shall be the total number of
shares of the Common Stock outstanding immediately after such dividend or
distribution.
(h) Notice of Adjustments. In the event that: (i) the Company
shall declare any dividend or distribution upon its stock, whether in cash,
property, stock or other securities; (ii) the Company shall offer for
subscription prorata to the holders of any class of its Preferred or other
convertible stock any additional shares of stock of any class or other rights;
(iii) there shall be any capital reorganization, reclassification,
consolidation, merger or sale of all or substantially all of the Company's
assets; or (iv) there shall be any voluntary or involuntary dissolution,
liquidation or winding up of the Company; then, in connection with each such
event, the Company shall send to the Warrantholder:
(i) At least ten (10) days' prior written notice of the
date on which the books of the Company shall close or a record shall
be taken for such dividend, distribution, subscription rights
(specifying the date on which the holders of Preferred Stock shall be
entitled thereto) or for determining rights to vote in respect of such
capital reorganization, reclassification, consolidation, merger or
sale of all or substantially all of the Company's assets, dissolution,
liquidation or winding up; and
(ii) In the case of any such capital reorganization,
reclassification, consolidation, merger or sale of all or
substantially all of the Company's assets, dissolution, liquidation or
winding up, at least ten (10) days' prior written notice of the date
when the same shall take place (and specifying the date on which the
holders of Preferred Stock shall be entitled to exchange their
Preferred Stock for securities or other property deliverable upon such
capital reorganization, reclassification, consolidation, merger or
sale of all or substantially all of the Company's assets, dissolution,
liquidation or winding up).
Each such written notice shall set forth, in reasonable detail, (i)
the event requiring the adjustment, (ii) the amount of the adjustment, (iii)
the method by which such adjustment was calculated, (iv) the Exercise Price,
and (v) the number of shares subject to purchase hereunder after giving effect
to such adjustment.
(i) Registration and Listing. The Company will take all such
actions as may be necessary to assure that all shares of Preferred Stock
issuable pursuant to this Warrant Agreement may be so issued without violation
of any applicable law or regulation or any requirements of any domestic stock
exchange (except for official notice of issuance, which will be immediately
transmitted by the Company upon issuance) upon which shares of Preferred Stock
or other shares of the same class may be listed. The Company will not take any
action which will result in any adjustment of the number of shares of Preferred
Stock issuable upon exercise of this Warrant Agreement if
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the total number of shares of Preferred Stock issuable after such action upon
exercise of the Warrant Agreement then outstanding, together with the total
number of shares of Preferred Stock then outstanding, would exceed the total
number of shares of Preferred Stock then authorized and not reserved for any
purpose other than the purpose of issue upon exercise of the Warrant Agreement.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
Except as set forth in the Schedule of Exceptions attached hereto as
Schedule A, the Company hereby represents and warrants to the Warrantholder as
follows:
(a) Reservation of Preferred Stock. The Preferred Stock issuable
upon exercise of the Warrantholder's rights has been duly and validly reserved
and, when issued in accordance with the provisions of this Warrant Agreement,
will be validly issued, fully paid and nonassessable, and will be free of any
taxes, liens, charges or encumbrances of any nature whatsoever; provided,
however, that the Preferred Stock issuable pursuant to this Warrant Agreement
may be subject to restrictions on transfer under state and/or Federal
securities laws. The Company has made available to the Warrantholder true,
correct and complete copies of its Articles of Incorporation and By-Laws, as
amended, and minutes of all Board of Directors (including all committees of the
Board of Directors, if any) and all Shareholder meetings. The issuance of
certificates for shares of Preferred Stock upon exercise of the Warrant
Agreement shall be made without charge to the Warrantholder for any issuance
tax in respect thereof, or other cost incurred by the Company in connection
with such exercise and the related issuance of shares of Preferred Stock;
provided that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved and the issuance and delivery of
any certificate in a name other than that of the Warrantholder. The Company
will not close its books against the transfer of the Warrant Agreement or of
any share of Preferred Stock issued or issuable upon exercise of the Warrant
and any agreement in any manner which interferes with the timely exercise of
the Warrant.
(b) Due Authority. The execution and delivery by the Company of
the Leases, and this Warrant Agreement and the performance of all obligations
of the Company thereunder and hereunder, including the issuance to
Warrantholder of the right to acquire the shares of Preferred Stock set forth
in Section 1 above (which number of shares may be from time to time adjusted
pursuant to the terms of Section 8 above) have been duly authorized by all
necessary corporate action on the part of the Company, and the Leases and this
Warrant Agreement are not inconsistent with the Company's Articles of
Incorporation or By-Laws, do not contravene any law or governmental rule,
regulation or order applicable to it, do not and will not contravene any
provision of, or constitute a default under, any indenture, mortgage, contract
or other instrument to which it is a party or by which it is bound, and the
Leases and this Warrant Agreement constitute legal, valid and binding
agreements of the Company, enforceable in accordance with their respective
terms.
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<PAGE> 8
(c) Consents and Approvals. No consent or approval of, giving of
notice to, registration with, or taking of any other action in respect of any
state, Federal or other governmental authority or agency is required with
respect to the execution, delivery and performance by the Company of its
obligations under this Warrant Agreement, except for the filing of notices
pursuant to Regulation D under the Securities Exchange Act of 1933, as amended,
(the "1933 Act") and Section 25102 (f) of the California Corporate Securities
Law, which filings will be effective by the time required thereby.
(d) Litigation. There are no actions, suits, audits,
investigations or proceedings pending or, to the knowledge of the Company,
threatened against or affecting the Company in any court or before any
governmental commission, board or authority which, if adversely determined,
will have a material adverse effect on the ability of the Company to perform
its obligations under the Leases and this Warrant Agreement.
(e) Subsidiaries or Affiliates. The Company has no subsidiaries
or affiliated companies and does not otherwise own or control, directly or
indirectly, any other corporation, association or business entity.
(f) Issued Securities. All issued and outstanding shares of
Common Stock, Preferred Stock or any other securities of the Company have been
duly authorized and validly issued and are fully paid and nonassessable. All
outstanding shares of Common Stock, Preferred Stock and any other securities
were issued in full compliance with all Federal and state securities laws. In
addition:
(i) The authorized capital of the Company consists of (A)
4,280,339 shares of Common Stock, of which 961,410 shares are issued
and outstanding, and (B) 2,818,989 shares of preferred stock, of which
761,079 shares have been designated Series A Preferred Stock, 714,286
of which have been issued and are outstanding and 305,461 shares have
been designated Series B Preferred Stock, 285,714 of which have been
issued and are outstanding and 1,147,449 of which are designated
Series C Preferred Stock, 1,096,593 of which are issued and
outstanding, and 605,000 shares have been designated Series D
Preferred Stock, 449,660 of which are issued and outstanding. Each
share of Series A Preferred Stock, Series B Preferred Stock and Series
C Preferred Stock and is convertible into one share of Common Stock.
(ii) The Company has reserved (A) 400,000 shares of Common
Stock for issuance under its Stock Option Plan, under which 338,950
options have been granted subject to qualification with the California
Department of Corporation at an average price ranging from of $.385 to
$.80 per share. The Company has issued warrants exercisable for
20,779 shares of Series A Preferred Stock with an exercise price of
$3.85, 19,747 shares of Series B Preferred stock with an exercise
price of $5.065 per share and 17,517 shares of Series C Preferred
Stock at $6.80 per share and 6,250 shares of Series C Preferred Stock
at $8.00 per share. There are no other options, warrants, conversion
privileges or
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<PAGE> 9
other rights presently outstanding to purchase or otherwise acquire
any authorized but unissued shares of the Company's capital stock or
other securities of the Company.
(iii) In accordance with the Company's Articles of
Incorporation, no shareholder of the Company has preemptive rights to
purchase new issuances of the Company's capital stock.
(g) Financial Statements. The Company has delivered to the
Warrantholder its unaudited Consolidated Balance Sheet and Consolidated
Statement of Income for the 12 month period ending 12/31/94 (the "Financial
Statements"). The Financial Statements are complete and correct in all
material respects and have been prepared in accordance with generally accepted
accounting principles (except for the absence of footnotes) applied on a
consistent basis throughout the periods indicated. The condition and operating
results of the Company as of the dates and during the periods indicated therein
are true and correct in all material aspects, subject as to the Consolidated
Balance Sheet and Consolidated Statement of Income for the 12 months then
ending 12/31/94 to normal year-end audit adjustments. Since 12/31/94 there has
been no change in the assets, liabilities, financial condition or operations of
the Company from that reflected in the Financial Statements other than changes
in the ordinary course of business which have not been, individually or in the
aggregate, materially adverse.
The Company shall deliver to the Warrantholder (i) within one hundred
twenty (120) days after the end of the Company's fiscal year, statements of
income for such fiscal year, a consolidated balance sheet of the Company as of
the end of such year and consolidated statement of the sources and application
of funds for such year, which year-end financial reports shall be in reasonable
detail and certified by independent public accountants of nationally recognized
standing selected by the Company, and (ii) within forty-five (45) days after
the end of each fiscal quarter other than the last fiscal quarter, unaudited
consolidated statements of income and sources and application of funds for such
quarter and a consolidated balance sheet as of the end of such quarter.
(h) Contingent and Absolute Liabilities. The Company has no
material liabilities or obligations, absolute or contingent except the
liabilities and obligations of the Company as set forth in the Financial
Statements and liabilities and obligations which have occurred in the ordinary
course of business, and which have not been materially adverse.
(i) Licenses, Patents and Copyrights. To the best of the
Company's knowledge, the Company owns, possesses, has access to, or can become
licensed on reasonable terms under, all patents, patent applications,
trademarks, trade names, inventions, franchises, licenses, permits, computer
software and copyrights necessary for the operation of its business as now
conducted, with no known infringement of, or conflict with, the rights of
others.
(j) Employee Contracts. To the best of the Company's knowledge,
no employee of the Company is in violation of any material term of any
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<PAGE> 10
employment contract, patent disclosure agreement or any other contract or
agreement relating to the relationship of any such employee with the Company or
any prior employer because of the nature of the business conducted by the
Company.
(k) Insurance. The Company has in full force and effect insurance
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant to the terms of any other contract or
agreement.
(l) Other Commitments to Register Securities. Except as set forth
in this Warrant Agreement and pursuant to that certain Steritech, Inc.
Investors' Right Agreement dated December 27, 1991, the Company is not,
pursuant to the terms of any other agreement currently in existence,under any
obligation to register under the 1933 Act, any of its presently outstanding
securities or any of its securities which may hereafter be issued.
(m) Exempt Transaction. Subject to the accuracy of the
Warrantholder's representations in Section 10 hereof, the issuance of the
Preferred Stock upon exercise of the Warrantholder's right to purchase such
Preferred Stock will constitute transactions exempt from (i) the registration
requirements of Section 5 of the 1933 Act, in reliance upon Section 4(2)
thereof, and (ii) the qualification requirements of the California Corporations
Code, in reliance upon Section 25102(f).
(n) Compliance with Rule 144. At the written request of the
Warrantholder, who proposes to sell Preferred Stock issuable upon the exercise
of the Warrant in compliance with Rule 144 promulgated by the Securities and
Exchange Commission under the 1933 Act, the Company shall furnish to the
Warrantholder, within ten days after receipt of such request, a written
statement confirming the Company's compliance with the filing requirements of
the Securities and Exchange Commission as set forth in such Rule, as such Rule
may be amended from time to time.
(o) No Events of Default, Material Contracts. All material
contracts, agreements and instruments to which the Company is a party are in
full force and effect in all material respects, and are valid, binding and
enforceable by the Company in accordance with their respective terms, subject
to the effect of applicable bankruptcy and other similar laws affecting the
rights of creditors generally, and rules of law concerning equitable remedies
and no event of default, and no event which, with the passing of time or the
giving of notice, or both, would constitute an event of default has occurred or
is continuing under any such contract, agreement or instrument.
(p) Brokers' Fees. The Company has not incurred, and will not
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with the Warrant
Agreement or any other transaction contemplated thereby.
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<PAGE> 11
(q) Untrue, Misleading Statements. No representation or warranty
of the Company contained in the Leases, and this Warrant Agreement or any
certificate or exhibit furnished or to be furnished to Warrantholder pursuant
thereto or in connection with the transactions contemplated thereby (when read
together) contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained therein not
misleading.
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
This Warrant Agreement has been entered into by the Company in
reliance upon the following representations and covenants of the Warrantholder,
which by its execution hereof the Warrantholder hereby confirms:
(a) Investment Purpose. The right to acquire Preferred Stock or
the Preferred Stock issuable upon exercise of the Warrantholder's rights
contained herein will be acquired for investment and not with a view to the
sale or distribution of any part thereof, and the Warrantholder has no present
intention of selling or engaging in any public distribution of the same except
pursuant to a registration or exemption.
(b) Private Issue. The Warrantholder understands (i) that the
Preferred Stock issuable upon exercise of the Warrantholder's rights contained
herein is not registered under the 1933 Act or qualified under applicable state
securities laws on the ground that the issuance contemplated by this Warrant
Agreement will be exempt from the registration and qualifications requirements
thereof, and (ii) that the Company's reliance on such exemption is predicated
on the representations set forth in this Section 10.
(c) Disposition of Warrantholder's Rights. In no event will the
Warrantholder make a disposition of any of its rights to acquire Preferred
Stock or Preferred Stock issuable upon exercise of such rights unless and until
(i) it shall have notified the Company of the proposed disposition, and (ii) if
requested by the Company, it shall have furnished the Company with an opinion
of counsel (which counsel may either be inside or outside counsel to the
Warrantholder) satisfactory to the Company and its counsel to the effect that
(A) appropriate action necessary for compliance with the 1933 Act has been
taken, or (B) an exemption from the registration requirements of the 1933 Act
is available. Notwithstanding the foregoing, the restrictions imposed upon the
transferability of any of its rights to acquire Preferred Stock or Preferred
Stock issuable on the exercise of such rights do not apply to transfers from
the beneficial owner of any of the aforementioned securities to its nominee or
from such nominee to its beneficial owner, and shall terminate as to any
particular share of Preferred Stock when (1) such security shall have been
effectively registered under the 1933 Act and sold by the holder thereof in
accordance with such registration or (2) such security shall have been sold
without registration in compliance with Rule 144 under the 1933 Act, or (3) a
letter shall have been issued to the Warrantholder at its request by the staff
of the Securities and
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<PAGE> 12
Exchange Commission or a ruling shall have been issued to the Warrantholder at
its request by such Commission stating that no action shall be recommended by
such staff or taken by such Commission, as the case may be, if such security is
transferred without registration under the 1933 Act in accordance with the
conditions set forth in such letter or ruling and such letter or ruling
specifies that no subsequent restrictions on transfer are required. Whenever
the restrictions imposed hereunder shall terminate, as hereinabove provided,
the Warrantholder or holder of a share of Preferred Stock then outstanding as
to which such restrictions have terminated shall be entitled to receive from
the Company, without expense to such holder, one or more new certificates for
the Warrant or for such shares of Preferred Stock not bearing any restrictive
legend.
(d) Financial Risk. The Warrantholder has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of its investment and has the ability to bear the economic
risks of its investment.
(e) Risk of No Registration. The Warrantholder understands that
if the Company does not register with the Securities and Exchange Commission
pursuant to Section 12 of the 1933 Act, or file reports pursuant to Section 15
(d), of the Securities Exchange Act of 1934 (the "1934 Act"), or if a
registration statement covering the securities under the 1933 Act is not in
effect when it desires to sell (i) the rights to purchase Preferred Stock
pursuant to this Warrant Agreement, or (ii) the Preferred Stock issuable upon
exercise of the right to purchase, it may be required to hold such securities
for an indefinite period. The Warrantholder also understands that any sale of
its rights of the Warrantholder to purchase Preferred Stock or Preferred Stock
which might be made by it in reliance upon Rule 144 under the 1933 Act may be
made only in accordance with the terms and conditions of that Rule.
11. REGISTRATION.
Warrantholder and Company agree that Warrantholder shall be considered a
"Holder" and that all shares of Common Stock issued upon conversion of the
Preferred Stock subject to this Warrant Agreement shall be considered
"Registrable Securities" and be subject to the same terms and conditions with
respect to the registration and sale of such shares as set forth in Sections 2.3
and 2.4 - 2.13 of that certain Steritech, Inc. Investors' Rights Agreement
dated December 27, 1991, by and among the Company and those certain Purchasers
identified therein, attached hereto as Exhibit II.
12. TRANSFERS.
Subject to the terms and conditions contained in Section 10 hereof, this
Warrant Agreement and all rights hereunder are transferable in whole or in part
by the Warrantholder and any successor transferee, provided, however, that in no
event shall the number of transfers of the rights and interests in all of the
Warrants exceed three (3) transfers. The transfer shall be recorded on the
books of the Company upon receipt by the Company of a notice of
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<PAGE> 13
transfer in the form attached hereto as Exhibit III (the "Transfer Notice"), at
its principal offices and the payment to the Company of all transfer taxes and
other governmental charges imposed on such transfer.
13. MISCELLANEOUS.
(a) Effective Date. The provisions of this Warrant Agreement
shall be construed and shall be given effect in all respects as if it had been
executed and delivered by the Company on the date hereof. This Warrant
Agreement shall be binding upon any successors or assigns of the Company.
(b) Attorney's Fees. In any litigation, arbitration or court
proceeding between the Company and the Warrantholder relating hereto, the
prevailing party shall be entitled to attorneys' fees and expenses and all
costs of proceedings incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by
and construed for all purposes under and in accordance with the laws of the
State of California.
(d) Counterparts. This Warrant 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.
(e) Titles and Subtitles. The titles of the paragraphs and.
subparagraphs of this Warrant Agreement are for convenience and are not to be
considered in construing this Agreement.
(f) Notices. Any notice required or permitted hereunder shall be
given in writing and shall be deemed effectively given upon personal delivery
or upon deposit in the United States mail, by registered or certified mail, or
as of the following business by day express mail addressed (i) to the
Warrantholder at 6111 North River Road, Rosemont, Illinois 60018, attention:
Jim Labe, Venture Leasing Director, cc: Legal Department, and (ii) to the
company at 2525 Stanwell Drive, Suite 300, Concord, California 94520, or at
such other address as any such party may subsequently designate by written
notice to the other party.
(g) Specific Performance. The Company recognizes and agrees that
the Warrantholder will not have an adequate remedy if the Company fails to
comply with this Agreement and that damages will not be readily ascertainable,
and the Company expressly agrees that, in the event of such failure, it shall
not oppose an application by the Warrantholder or any other person entitled to
the benefit of this Agreement requiring specific performance of any or all
provisions hereof or enjoining the Company from continuing to commit any such
breach of this Agreement.
(h) Survival. The representations, warranties, covenants and
conditions of the respective parties contained herein or made pursuant
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<PAGE> 14
to this Warrant Agreement shall survive the execution and delivery of this
Warrant Agreement.
(i) Severability. In the event any one or more of the provisions
of this Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal
or unenforceable provision.
(j) Amendments. Any provision of this Warrant Agreement may be
amended by a written instrument signed by the Company and by the Warrantholder.
(k) Additional Documents. The Company, upon execution of this
Warrant Agreement, shall provide the Warrantholder with certified resolutions
and an opinion from the Company's counsel addressed to the Warrantholder with
respect to the representations, warranties and covenants set forth in
subparagraphs (a) through (f) and subparagraphs (1), (m) and (o) of Section 9
above and shall also supply such other documents as the Warrantholder may from
time to time reasonably request.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant
Agreement to be executed by its officers thereunto duly authorized.
Company:
STERITECH, INC.
Dated May 8, 1995 By: /s/ [SIG]
------------------------------
Title: CEO
---------------------------
Warrantholder:
COMDISCO, INC.
By: /s/ [SIG]
------------------------------
Title:
---------------------------
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<PAGE> 15
Exhibit I
NOTICE OF EXERCISE
To:
-----------------------------------------
(1) The undersigned Warrantholder hereby elects to purchase ____ shares of
the Preferred Stock of Steritech, Inc. pursuant to the terms of the
Warrant Agreement dated the 25th day of May, 1994 (the "Warrant
Agreement") between Steritech, Inc. and the Warrantholder, and tenders
herewith payment of the purchase price for such shares in full,
together with all applicable transfer taxes, if any.
(2) In exercising its rights to purchase the Preferred Stock of Steritech,
Inc., the undersigned hereby confirms and acknowledges the investment
representations and warranties made in Section 10 of the Warrant
Agreement.
(3) Please issue a certificate or certificates representing said shares of
Preferred Stock in the name of the undersigned or in such other name
as is specified below.
'
------------------------------------
(Name)
------------------------------------
(Address)
Warrantholder: COMDISCO, INC.
By:
---------------------------------
Title:
------------------------------
Date:
-------------------------------
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<PAGE> 16
ACKNOWLEDGEMENT OF EXERCISE
The undersigned Steritech, Inc. hereby acknowledge receipt of the
"Notice of Exercise" from Comdisco, Inc., to purchase ____ shares of the
Preferred Stock, of Steritech, Inc. pursuant to the terms of the Warrant
Agreement, and further acknowledges that ____ shares remain subject to purchase
under the terms of the Warrant Agreement.
Company: STERITECH, INC.
By:
---------------------------------
Title:
------------------------------
Date:
-------------------------------
-16-
<PAGE> 17
Exhibit III
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant Agreement execute this
form and supply required information. Do not use this form to
purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to
- -----------------------------------------------------------------------------
(Please Print)
whose address is
-------------------------------------------------------------
- -----------------------------------------------------------------------------
Dated
-------------------------------------------
Holder's Signature
------------------------------
Holder's Address
--------------------------------
------------------------------------------------
Signature Guaranteed:
--------------------------------------------------------
NOTE: The signature to this Transfer Notice must correspond with
the name as it appears on the face of the Warrant Agreement,
without alteration or enlargement or any change whatever.
Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of
authority to assign the foregoing Warrant Agreement.
-17-
<PAGE> 1
EXHIBIT 10.11
No. PBW-__
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
THIS WARRANT AND THE SHARES PURCHASABLE HEREUNDER ARE SUBJECT TO RESTRICTIONS ON
TRANSFER CONTAINED IN THAT CERTAIN STERITECH, INC. NOTE AND WARRANT PURCHASE
AGREEMENT, DATED MAY 14, 1993, WHICH RESTRICTIONS ON TRANSFER ARE INCORPORATED
BY REFERENCE.
WARRANT TO PURCHASE A MAXIMUM OF
__________ SHARES OF SERIES B PREFERRED STOCK OF
STERITECH, INC.
(Void after May 14, 1998)
This certifies that ___________________ (the "Holder"), or assigns, for
value received, is entitled to purchase from Steritech, Inc., a California
corporation (the "Company"), having a place of business at 2525 Stanwell Drive,
Concord, California 94520, a maximum of ________ fully paid and nonassessable
shares of the Company's Series C Preferred Stock ("Preferred Stock") for cash at
a price of ______ ($.__) per share (the "Stock Purchase Price") at any time or
from time to time up to and including 5:00 p.m. (Pacific time) on the earlier of
(i) the closing of the initial public offering of the Company's Common Stock
pursuant to a registration statement under the Securities Act of 1933, as
amended, (ii) May 14, 1998, such earlier day being referred to herein as the
"Expiration Date", upon surrender to the Company at its principal office (or at
such other location as the Company may advise the Holder in writing) of this
Warrant properly endorsed with the Form of Subscription attached hereto duly
filled in and signed and, if applicable, upon payment in cash or by check of the
aggregate Stock Purchase Price for the number of shares for which this Warrant
is being exercised determined in accordance with the provisions hereof. The
Stock Purchase Price and the number of shares purchasable hereunder are subject
to adjustment as provided in Section 3 of this Warrant. The Preferred Stock to
be issued upon exercise or conversion of this Warrant will be authorized prior
to the closing of the Company's Series C Preferred Stock financing anticipated
to occur on or before August 31, 1993. If such financing does not occur by such
date or within sixty (60) days thereafter, at Holder's request, this Warrant
shall become a warrant to purchase the Company's Series B Preferred Stock at an
exercise price of $5.065 per share and the Company will use reasonable diligent
efforts to authorize and reserve
1.
<PAGE> 2
Series B Preferred Stock in sufficient amounts to cover the exercise of this
Warrant. In such event, the term "Preferred Stock" shall refer to such Series B
Preferred Stock.
This Warrant is subject to the following terms and conditions:
1. EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
1.1 GENERAL. This Warrant is exercisable at the option of the holder of
record hereof, at any time or from time to time, up to the Expiration Date for
all or any part of the shares of Preferred Stock (but not for a fraction of a
share) which may be purchased hereunder. The Company agrees that the shares of
Preferred Stock purchased under this Warrant shall be and are deemed to be
issued to the Holder hereof as the record owner of such shares as of the close
of business on the date on which this Warrant shall have been surrendered,
properly endorsed, the completed, executed Form of Subscription delivered and
payment made for such shares. Certificates for the shares of Preferred Stock so
purchased, together with any other securities or property to which the Holder
hereof is entitled upon such exercise, shall be delivered to the Holder hereof
by the Company at the Company's expense within a reasonable time after the
rights represented by this Warrant have been so exercised. In case of a purchase
of less than all the shares which may be purchased under this Warrant, the
Company shall cancel this Warrant and execute and deliver a new Warrant or
Warrants of like tenor for the balance of the shares purchasable under the
Warrant surrendered upon such purchase to the Holder hereof within a reasonable
time. Each stock certificate so delivered shall be in such denominations of
Preferred Stock as may be requested by the Holder hereof and shall be registered
in the name of such Holder.
1.2 NET ISSUE EXERCISE. Notwithstanding any provisions herein to the
contrary, if the fair market value of one share of the Company's Preferred Stock
is greater than the Stock Purchase Price (at the date of calculation as set
forth below), in lieu of exercising this Warrant for cash, the Holder may elect
to receive shares equal to the value (as determined below) of this Warrant (or
the portion thereof being canceled) by surrender of this Warrant at the
principal office of the Company together with the properly endorsed Form of
Subscription and notice of such election in which event the Company shall issue
to the Holder a number of shares of Preferred Stock computed using the following
formula:
Y (A-B)
X = -------
A
Where X = the number of shares of Preferred Stock to be issued to the Holder
Y = the number of shares of Preferred Stock purchasable under
the Warrant or, if only a portion of the Warrant is being
exercised, the portion of the Warrant being canceled (at the
date of such calculation)
2.
<PAGE> 3
A = the fair market value of one share of the Company's
Preferred Stock (at the date of such calculation)
B = Stock Purchase Price (as adjusted to the date of such
calculation)
For purposes of the above calculation, fair market value of one share of
Preferred Stock shall be determined by the Company's Board of Directors in good
faith; provided, however, that in the event the Company makes an initial public
offering of its Common Stock the fair market value per share shall be the
product of (i) the per share offering price to the public of the Company's
initial public offering, and (ii) the number of shares of Common Stock into
which each share of Preferred Stock is convertible at the time of such exercise.
2. SHARES TO BE FULLY PAID; RESERVATION OF SHARES. The Company covenants
and agrees that all shares of Preferred Stock which may be issued upon the
exercise of the rights represented by this Warrant will, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable and free from all
preemptive rights of any shareholder and free of all taxes, liens and charges
with respect to the issue thereof. The Company further covenants and agrees
that, except as noted in the last two sentences of the introductory paragraph of
this Warrant, during the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized and
reserved, for the purpose of issue or transfer upon exercise of the subscription
rights evidenced by this Warrant, a sufficient number of shares of authorized
but unissued Preferred Stock, or other securities and property, when and as
required to provide for the exercise of the rights represented by this Warrant.
The Company will take all such action as may be necessary to assure that such
shares of Preferred Stock may be issued as provided herein without violation of
any applicable law or regulation, or of any requirements of any domestic
securities exchange upon which the Preferred Stock may be listed; provided,
however, that the Company shall not be required to effect a registration under
Federal or State securities laws with respect to such exercise. The Company will
not take any action which would result in any adjustment of the Stock Purchase
Price (as defined in Section 3 hereof) (i) if the total number of shares of
Preferred Stock issuable after such action upon exercise of all outstanding
warrants, together with all shares of Preferred Stock then outstanding and all
shares of Preferred Stock then issuable upon exercise of all options and upon
the conversion of all convertible securities then outstanding, would exceed the
total number of shares of Preferred Stock then authorized by the Company's
Articles of Incorporation, or (ii) if the total number of shares of Common Stock
issuable after such action upon the conversion of all such shares of Preferred
Stock, together with all shares of Common Stock then issuable upon exercise of
all options and upon the conversion of all such shares of Preferred Stock,
together with all shares of Common Stock then outstanding and all shares of
Common Stock then issuable upon exercise of all options and upon the conversion
of all convertible securities then outstanding would exceed the total number of
shares of Common Stock then authorized by the Company's Articles of
Incorporation.
3.
<PAGE> 4
3. ADJUSTMENT OF STOCK PURCHASE PRICE AND NUMBER OF SHARES. The Stock
Purchase Price and the number of shares purchasable upon the exercise of this
Warrant shall be subject to adjustment from time to time upon the occurrence of
certain events described in this Section 3. Upon each adjustment of the Stock
Purchase Price, the Holder of this Warrant shall thereafter be entitled to
purchase, at the Stock Purchase Price resulting from such adjustment, the number
of shares obtained by multiplying the Stock Purchase Price in effect immediately
prior to such adjustment by the number of shares purchasable pursuant hereto
immediately prior to such adjustment, and dividing the product thereof by the
Stock Purchase Price resulting from such adjustment.
3.1 SUBDIVISION OR COMBINATION OF STOCK. In case the Company shall
at any time subdivide its outstanding shares of Preferred Stock into a greater
number of shares, the Stock Purchase Price in effect immediately prior to such
subdivision shall be proportionately reduced, and conversely, in case the
outstanding shares of Preferred Stock of the Company shall be combined into a
smaller number of shares, the Stock Purchase Price in effect immediately prior
to such combination shall be proportionately increased.
3.2 DIVIDENDS IN PREFERRED STOCK, OTHER STOCK, PROPERTY,
RECLASSIFICATION. If at any time or from time to time the Holders of Preferred
Stock (or any shares of stock or other securities at the time receivable upon
the exercise of this Warrant) shall have received or become entitled to receive,
without payment therefor,
(A) Preferred Stock or any shares of stock or other securities
which are at any time directly or indirectly convertible into or exchangeable
for Preferred Stock, or any rights or options to subscribe for, purchase or
otherwise acquire any of the foregoing by way of dividend or other distribution,
(B) any cash paid or payable otherwise than as a cash
dividend, or
(C) Preferred Stock or additional stock or other securities or
property (including cash) by way of spinoff, split-up, reclassification,
combination of shares or similar corporate rearrangement, (other than (i) shares
of Preferred Stock issued as a stock split, adjustments in respect of which
shall be covered by the terms of Section 3.1 above or (ii) an event for which
adjustment is otherwise made pursuant to Section 3.4 below), then and in each
such case, the Holder hereof shall, upon the exercise of this Warrant, be
entitled to receive, in addition to the number of shares of Preferred Stock
receivable thereupon, and without payment of any additional consideration
therefor, the amount of stock and other securities and property (including cash
in the cases referred to in clauses (B) and (C) above) which such Holder would
hold on the date of such exercise had he been the holder of record of such
Preferred Stock as of the date on which holders of Preferred Stock received or
became entitled to receive such shares or all other additional stock and other
securities and property.
4.
<PAGE> 5
3.3 REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE.
If any capital reorganization of the capital stock of the Company, or any
consolidation or merger of the Company 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 Preferred Stock shall be entitled to receive
stock, securities, or other assets or property, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, lawful and
adequate provisions shall be made whereby the holder hereof shall thereafter
have the right to purchase and receive (in lieu of the shares of the Preferred
Stock of the Company immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby) such shares of stock, securities or
other assets or property as may be issued or payable with respect to or in
exchange for a number of outstanding shares of such Preferred Stock equal to the
number of shares of such stock immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby; provided,
however, that in the event the value of the stock, securities or other assets or
property (determined in good faith by the Board of Directors of the Company)
issuable or payable with respect to one share of the Preferred Stock of the
Company immediately theretofore purchasable and receivable upon the exercise of
the rights represented hereby is in excess of the Stock Purchase Price hereof
effective at the time of the merger and securities received in such
reorganization, if any, are publicly traded, then this Warrant shall expire
unless exercised prior to the reorganization. In any reorganization described
above, appropriate provision shall be made with respect to the rights and
interests of the Holder of this Warrant to the end that the provisions hereof
(including, without limitation, provisions for adjustments of the Stock Purchase
Price and of the number of shares purchasable and receivable upon the exercise
of this Warrant) shall thereafter be applicable, as nearly as may be, in
relation to any shares of stock, securities or assets thereafter deliverable
upon the exercise hereof. The Company will not effect any such consolidation,
merger or sale unless, prior to the consummation thereof, the successor
corporation (if other than the Company) resulting from such consolidation or the
corporation purchasing such assets shall assume by written instrument, executed
and mailed or delivered to the registered Holder hereof at the last address of
such Holder appearing on the books of the Company, the obligation to deliver to
such Holder such shares of stock, securities or assets as, in accordance with
the foregoing provisions, such Holder may be entitled to purchase.
3.4 ADJUSTMENTS SET FORTH IN ARTICLES OF INCORPORATION. In addition
to the foregoing adjustments, the conversion rate of the Series C Preferred
Stock into Common Stock is subject to adjustments as set forth in the Company's
Articles of Incorporation. The Company represents that as of the date this
Warrant was first issued, each share of Series C Preferred Stock was convertible
into one share of Common Stock.
3.5 NOTICE OF ADJUSTMENT. Upon any adjustment of the Stock Purchase
Price or in the conversion ratio of the Series C Preferred Stock or any increase
or decrease in the number of shares purchasable upon the exercise of this
Warrant, the Company shall give written notice thereof, by first class mail,
postage prepaid, addressed to the registered Holder of this Warrant at the
address of such Holder as shown on the books of the Company.
5.
<PAGE> 6
The notice shall be signed by the Company's chief financial officer and shall
state the Stock Purchase Price resulting from such adjustment and the increase
or decrease, if any, in the number of shares purchasable at such price upon the
exercise of this Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
3.6 OTHER NOTICES. If at any time:
(1) the Company shall declare any cash dividend upon its
Preferred Stock;
(2) the Company shall declare any dividend upon its Preferred
Stock payable in stock or make any special dividend or other distribution to the
holders of its Preferred Stock;
(3) the Company shall offer for subscription pro rata to the
holders of its Preferred Stock any additional shares of stock of any class or
other rights;
(4) there shall be any capital reorganization or
reclassification of the capital stock of the Company; or consolidation or merger
of the Company with, or sale of all or substantially all of its assets to,
another corporation;
(5) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company; or
(6) there shall be an initial public offering of Company
securities;
then, in any one or more of said cases, the Company shall give, by first class
mail, postage prepaid, addressed to the Holder of this Warrant at the address of
such Holder as shown on the books of the Company, (a) at least thirty (30) days'
prior written notice of the date on which the books of the Company 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, winding-up or public
offering, at least thirty (30) days' prior written notice of the date when the
same shall take place; provided, however, that the Holder shall make a best
efforts attempt to respond to such notice as early as possible after the receipt
thereof. Any notice given in accordance with the foregoing clause (a) shall also
specify, in the case of any such dividend, distribution or subscription rights,
the date on which the holders of Preferred Stock shall be entitled thereto. Any
notice given in accordance with the foregoing clause (b) shall also specify the
date on which the holders of Preferred Stock shall be entitled to exchange their
Preferred Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, winding-up, conversion or public offering, as the case may be.
6.
<PAGE> 7
3.7 CERTAIN EVENTS. If any change in the outstanding Preferred Stock
of the Company or any other event occurs as to which the other provisions of
this Section 3 are not strictly applicable or if strictly applicable would not
fairly protect the purchase rights of the Holder of the Warrant in accordance
with such provisions, then the Board of Directors of the Company shall make an
adjustment in the number and class of shares available under the Warrant, the
Stock Purchase Price or the application of such provisions, so as to protect
such purchase rights as aforesaid. The adjustment shall be such as will give the
Holder of the Warrant upon exercise for the same aggregate Stock Purchase Price
the total number, class and kind of shares as he would have owned had the
Warrant been exercised prior to the event and had he continued to hold such
shares until after the event requiring adjustment.
4. ISSUE TAX. The issuance of certificates for shares of Preferred Stock
upon the exercise of the Warrant shall be made without charge to the Holder of
the Warrant for any issue tax (other than any applicable income taxes) in
respect thereof; provided, however, that the Company shall not be required to
pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than that of the then
Holder of the Warrant being exercised.
5. CLOSING OF BOOKS. The Company will at no time close its transfer books
against the transfer of any warrant or of any shares of Preferred Stock issued
or issuable upon the exercise of any warrant in any manner which interferes with
the timely exercise of this Warrant.
6. NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY. Nothing
contained in this Warrant shall be construed as conferring upon the holder
hereof the right to vote or to consent or to receive notice as a shareholder of
the Company or any other matters or any rights whatsoever as a shareholder of
the Company. No dividends or interest shall be payable or accrued in respect of
this Warrant or the interest represented hereby or the shares purchasable
hereunder until, and only to the extent that, this Warrant shall have been
exercised. No provisions hereof, in the absence of affirmative action by the
holder to purchase shares of Preferred Stock, and no mere enumeration herein of
the rights or privileges of the holder hereof, shall give rise to any liability
of such holder for the Stock Purchase Price or as a shareholder of the Company,
whether such liability is asserted by the Company or by its creditors.
7. REGISTRATION RIGHTS AGREEMENT. The registration rights of the Holder
(including Holders' successors) with respect to this Warrant and the underlying
stock will be the same as granted to the holders of the Company's Preferred
Stock.
8. WARRANTS TRANSFERABLE. Subject to compliance with applicable federal
and state securities laws and the transfer restrictions set forth in the Note
and Warrant Purchase Agreement dated as of May 14, 1993, under which this
Warrant was purchased, this Warrant
7.
<PAGE> 8
and all rights hereunder are transferable, in whole or in part, without charge
to the holder hereof (except for transfer taxes), upon surrender of this Warrant
properly endorsed and compliance with the provisions of the Warrant Purchase
Agreement. Each taker and holder of this Warrant, by taking or holding the same,
consents and agrees that this Warrant, when endorsed in blank, shall be deemed
negotiable, and that the holder hereof, when this Warrant shall have been so
endorsed, may be treated by the Company, at the Company's option, and all other
persons dealing with this Warrant as the absolute owner hereof for any purpose
and as the person entitled to exercise the rights represented by this Warrant,
or to the transfer hereof on the books of the Company any notice to the contrary
notwithstanding; but until such transfer on such books, the Company may treat
the registered owner hereof as the owner for all purposes.
9. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT. The rights and
obligations of the Company, of the holder of this Warrant and of the holder of
shares of Preferred Stock issued upon exercise of this Warrant, referred to in
Sections 7 and 8 shall survive the exercise of this Warrant.
10. MODIFICATION AND WAIVER. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought, provided
that any change, waiver, discharge or termination agreed to in writing by a
majority in interest of holders of Warrants of the Company of even date issued
pursuant to the Note and Warrant Purchase Agreement shall be binding on Holder
and assigns.
11. NOTICES. Any notice, request or other document required or permitted
to be given or delivered to the holder hereof or the Company shall be delivered
or shall be sent by certified mail, postage prepaid, to each such holder at its
address as shown on the books of the Company or to the Company at the address
indicated therefor in the first paragraph of this Warrant or such other address
as either may from time to time provide to the other.
12. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets. All of the obligations of the
Company relating to the Preferred Stock issuable upon the exercise of this
Warrant shall survive the exercise and termination of this Warrant. All of the
covenants and agreements of the Company shall inure to the benefit of the
successors and assigns of the holder hereof.
13. DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description headings of
the several sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. This Warrant shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the laws of the State of California.
8.
<PAGE> 9
14. LOST WARRANTS. The Company represents and warrants to the Holder
hereof that upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction, or mutilation of this Warrant and, in the case of
any such loss, theft or destruction, upon receipt of an indemnity reasonably
satisfactory to the Company, or in the case of any such mutilation upon
surrender and cancellation of such Warrant, the Company, at its expense, will
make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Warrant.
15. FRACTIONAL SHARES. No fractional shares shall be issued upon exercise
of this Warrant. The Company shall, in lieu of issuing any fractional share, pay
the holder entitled to such fraction a sum in cash equal to such fraction
multiplied by the then effective Stock Purchase Price.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its officers, thereunto duly authorized this 14th day of May, 1993.
STERITECH, INC.
A CALIFORNIA CORPORATION
By____________________________________
Title_________________________________
ATTEST:
______________________________
Secretary
9.
<PAGE> 10
EXHIBIT A
SUBSCRIPTION FORM
Date: ____________, 19__
Steritech, Inc.
2525 Stanwell Drive
Concord, California 94520
Gentlemen:
[ ] The undersigned hereby elects to exercise the warrant issued to it by
Steritech, Inc. (the "Company") and dated May 14, 1993 Warrant No. PBW-__
(the "Warrant") and to purchase thereunder ____________ shares of the
Common Stock of the Company (the "Shares") at a purchase price of
_________________________________________ ($_____) per Share or an
aggregate purchase price of __________________________ Dollars ($______)
(the "Purchase Price").
[ ] The undersigned hereby elects to convert ______________________ percent
(__%) of the value of the Warrant pursuant to the provisions of Section
1.2 of the Warrant.
Pursuant to the terms of the Warrant the undersigned has delivered the
Purchase Price herewith in full in cash or by certified check or wire transfer.
The undersigned also makes the representations set forth on the attached Exhibit
B of the Warrant.
Very truly yours,
_____________________________
By____________________________________
Title_________________________________
1.
<PAGE> 11
EXHIBIT B
INVESTMENT REPRESENTATIONS
THIS AGREEMENT MUST BE COMPLETED, SIGNED AND RETURNED TO STERITECH, INC. ALONG
WITH THE SUBSCRIPTION FORM BEFORE THE COMMON STOCK ISSUABLE UPON EXERCISE OF THE
WARRANT CERTIFICATE DATED ____________, 1993, WILL BE ISSUED.
_____________________, 19__
Steritech, Inc.
2525 Stanwell Drive
Concord, California 94520
Attention: President
The undersigned,_____("Purchaser"), intends to acquire up to shares of the
Series B Preferred Stock (the "Preferred Stock") of Steritech, Inc. (the
"Company") from the Company pursuant to the exercise or conversion of certain
Warrants to purchase Preferred Stock held by Purchaser. The Preferred Stock will
be issued to Purchaser in a transaction not involving a public offering and
pursuant to an exemption from registration under the Securities Act of 1933, as
amended (the "1933 Act") and applicable state securities laws. In connection
with such purchase and in order to comply with the exemptions from registration
relied upon by the Company, Purchaser represents, warrants and agrees as
follows:
Purchaser is acquiring the Preferred Stock for its own account, to hold
for investment, and Purchaser shah not make any sale, transfer or other
disposition of the Preferred Stock in violation of the 1933 Act or the General
Rules and Regulations promulgated thereunder by the Securities and Exchange
Commission (the "SEC") or in violation of any applicable state securities law.
Purchaser has been advised that the Preferred Stock has not been
registered under the 1933 Act or state securities laws on the ground that this
transaction is exempt from registration, and that reliance by the Company on
such exemptions is predicated in pan on Purchaser's representations set forth in
this letter.
Purchaser has been informed that under the 1933 Act, the Preferred Stock
must be held indefinitely unless it is subsequently registered under the 1933
Act or unless an exemption from such registration (such as Rule 144) is
available with respect to any proposed transfer or disposition by Purchaser of
the Preferred Stock. Purchaser further agrees that the Company
1.
<PAGE> 12
may refuse to permit Purchaser to sell, transfer or dispose of the Preferred
Stock (except as permitted under Rule 144) unless there is in effect a
registration statement underthe 1933 Act and any applicable state securities
laws coveting such transfer, or unless Purchaser furnishes an opinion of counsel
reasonably satisfactory to counsel for the Company, to the effect that such
registration is not required.
Purchaser also understands and agrees that there will be placed on the
certificate(s) for the Preferred Stock, or any substitutions therefor, a legend
stating in substance:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"), or
any state securities laws. These shares have been acquired for investment
and may not be sold or otherwise transferred in the absence of an
effective registration statement for these shares under the Securities Act
and applicable state securities laws, or an opinion of counsel
satisfactory to the Company that registration is not required and that an
applicable exemption is available."
Purchaser has carefully read this letter and has discussed its
requirements and other applicable limitations upon Purchaser's resale of the
Preferred Stock with Purchaser's counsel.
Very truly yours,
______________________________
By:___________________________________
2.
<PAGE> 1
EXHIBIT 10.12
No. PCW-__
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
THIS WARRANT AND THE SHARES PURCHASABLE HEREUNDER ARE SUBJECT TO RESTRICTIONS ON
TRANSFER CONTAINED IN THAT CERTAIN STERITECH, INC. NOTE AND WARRANT PURCHASE
AGREEMENT, DATED AUGUST 13, 1993, WHICH RESTRICTIONS ON TRANSFER ARE
INCORPORATED BY REFERENCE.
WARRANT TO PURCHASE A MAXIMUM OF
__________ SHARES OF SERIES C PREFERRED STOCK OF
STERITECH, INC.
(Void after August 13, 1998)
This certifies that ___________________ (the "Holder"), or assigns, for
value received, is entitled to purchase from Steritech, Inc., a California
corporation (the "Company"), having a place of business at 2525 Stanwell Drive,
Concord, California 94520, a maximum of ________ fully paid and nonassessable
shares of the Company's Series C Preferred Stock ("Preferred Stock") for cash at
a price of ______ ($.__) per share (the "Stock Purchase Price") at any time or
from time to time up to and including 5:00 p.m. (Pacific time) on the earlier of
(i) the closing of the initial public offering of the Company's Common Stock
pursuant to a registration statement under the Securities Act of 1933, as
amended, (ii) August 13, 1998, such earlier day being referred to herein as the
"Expiration Date", upon surrender to the Company at its principal office (or at
such other location as the Company may advise the Holder in writing) of this
Warrant properly endorsed with the Form of Subscription attached hereto duly
filled in and signed and, if applicable, upon payment in cash or by check of the
aggregate Stock Purchase Price for the number of shares for which this Warrant
is being exercised determined in accordance with the provisions hereof. The
Stock Purchase Price and the number of shares purchasable hereunder are subject
to adjustment as provided in Section 3 of this Warrant. The Preferred Stock to
be issued upon exercise or conversion of this Warrant will be authorized prior
to the closing of the Company's Series C Preferred Stock financing anticipated
to occur on or before December 31, 1993. If such financing does not occur by
such date or within sixty (60) days thereafter, at Holder's request, this
Warrant shall become a warrant to purchase the Company's Series B Preferred
Stock at an exercise price of $5.065 per share and the Company will use
reasonable diligent efforts to authorize and reserve
1.
<PAGE> 2
Series B Preferred Stock in sufficient amounts to cover the exercise of this
Warrant. In such event, the term "Preferred Stock" shall refer to such Series B
Preferred Stock.
This Warrant is subject to the following terms and conditions:
1. EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
1.1 GENERAL. This Warrant is exercisable at the option of the holder of
record hereof, at any time or from time to time, up to the Expiration Date for
all or any part of the shares of Preferred Stock (but not for a fraction of a
share) which may be purchased hereunder. The Company agrees that the shares of
Preferred Stock purchased under this Warrant shall be and are deemed to be
issued to the Holder hereof as the record owner of such shares as of the close
of business on the date on which this Warrant shall have been surrendered,
properly endorsed, the completed, executed Form of Subscription delivered and
payment made for such shares. Certificates for the shares of Preferred Stock so
purchased, together with any other securities or property to which the Holder
hereof is entitled upon such exercise, shall be delivered to the Holder hereof
by the Company at the Company's expense within a reasonable time after the
rights represented by this Warrant have been so exercised. In case of a purchase
of less than all the shares which may be purchased under this Warrant, the
Company shall cancel this Warrant and execute and deliver a new Warrant or
Warrants of like tenor for the balance of the shares purchasable under the
Warrant surrendered upon such purchase to the Holder hereof within a reasonable
time. Each stock certificate so delivered shall be in such denominations of
Preferred Stock as may be requested by the Holder hereof and shall be registered
in the name of such Holder.
1.2 NET ISSUE EXERCISE. Notwithstanding any provisions herein to the
contrary, if the fair market value of one share of the Company's Preferred Stock
is greater than the Stock Purchase Price (at the date of calculation as set
forth below), in lieu of exercising this Warrant for cash, the Holder may elect
to receive shares equal to the value (as determined below) of this Warrant (or
the portion thereof being canceled) by surrender of this Warrant at the
principal office of the Company together with the properly endorsed Form of
Subscription and notice of such election in which event the Company shall issue
to the Holder a number of shares of Preferred Stock computed using the following
formula:
Y (A-B)
X = -------
A
Where X = the number of shares of Preferred Stock to be issued to the Holder
Y = the number of shares of Preferred Stock purchasable under
the Warrant or, if only a portion of the Warrant is being
exercised, the portion of the Warrant being canceled (at the
date of such calculation)
2.
<PAGE> 3
A = the fair market value of one share of the Company's
Preferred Stock (at the date of such calculation)
B = Stock Purchase Price (as adjusted to the date of such
calculation)
For purposes of the above calculation, fair market value of one share of
Preferred Stock shall be determined by the Company's Board of Directors in good
faith; provided, however, that in the event the Company makes an initial public
offering of its Common Stock the fair market value per share shall be the
product of (i) the per share offering price to the public of the Company's
initial public offering, and (ii) the number of shares of Common Stock into
which each share of Preferred Stock is convertible at the time of such exercise.
2. SHARES TO BE FULLY PAID; RESERVATION OF SHARES. The Company covenants
and agrees that all shares of Preferred Stock which may be issued upon the
exercise of the rights represented by this Warrant will, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable and free from all
preemptive rights of any shareholder and free of all taxes, liens and charges
with respect to the issue thereof. The Company further covenants and agrees
that, except as noted in the last two sentences of the introductory paragraph of
this Warrant, during the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized and
reserved, for the purpose of issue or transfer upon exercise of the subscription
rights evidenced by this Warrant, a sufficient number of shares of authorized
but unissued Preferred Stock, or other securities and property, when and as
required to provide for the exercise of the rights represented by this Warrant.
The Company will take all such action as may be necessary to assure that such
shares of Preferred Stock may be issued as provided herein without violation of
any applicable law or regulation, or of any requirements of any domestic
securities exchange upon which the Preferred Stock may be listed; provided,
however, that the Company shall not be required to effect a registration under
Federal or State securities laws with respect to such exercise. The Company will
not take any action which would result in any adjustment of the Stock Purchase
Price (as defined in Section 3 hereof) (i) if the total number of shares of
Preferred Stock issuable after such action upon exercise of all outstanding
warrants, together with all shares of Preferred Stock then outstanding and all
shares of Preferred Stock then issuable upon exercise of all options and upon
the conversion of all convertible securities then outstanding, would exceed the
total number of shares of Preferred Stock then authorized by the Company's
Articles of Incorporation, or (ii) if the total number of shares of Common Stock
issuable after such action upon the conversion of all such shares of Preferred
Stock, together with all shares of Common Stock then issuable upon exercise of
all options and upon the conversion of all such shares of Preferred Stock,
together with all shares of Common Stock then outstanding and all shares of
Common Stock then issuable upon exercise of all options and upon the conversion
of all convertible securities then outstanding would exceed the total number of
shares of Common Stock then authorized by the Company's Articles of
Incorporation.
3.
<PAGE> 4
3. ADJUSTMENT OF STOCK PURCHASE PRICE AND NUMBER OF SHARES. The Stock
Purchase Price and the number of shares purchasable upon the exercise of this
Warrant shall be subject to adjustment from time to time upon the occurrence of
certain events described in this Section 3. Upon each adjustment of the Stock
Purchase Price, the Holder of this Warrant shall thereafter be entitled to
purchase, at the Stock Purchase Price resulting from such adjustment, the number
of shares obtained by multiplying the Stock Purchase Price in effect immediately
prior to such adjustment by the number of shares purchasable pursuant hereto
immediately prior to such adjustment, and dividing the product thereof by the
Stock Purchase Price resulting from such adjustment.
3.1 SUBDIVISION OR COMBINATION OF STOCK. In case the Company shall
at any time subdivide its outstanding shares of Preferred Stock into a greater
number of shares, the Stock Purchase Price in effect immediately prior to such
subdivision shall be proportionately reduced, and conversely, in case the
outstanding shares of Preferred Stock of the Company shall be combined into a
smaller number of shares, the Stock Purchase Price in effect immediately prior
to such combination shall be proportionately increased.
3.2 DIVIDENDS IN PREFERRED STOCK, OTHER STOCK, PROPERTY,
RECLASSIFICATION. If at any time or from time to time the Holders of Preferred
Stock (or any shares of stock or other securities at the time receivable upon
the exercise of this Warrant) shall have received or become entitled to receive,
without payment therefor,
(A) Preferred Stock or any shares of stock or other securities
which are at any time directly or indirectly convertible into or exchangeable
for Preferred Stock, or any rights or options to subscribe for, purchase or
otherwise acquire any of the foregoing by way of dividend or other distribution,
(B) any cash paid or payable otherwise than as a cash
dividend, or
(C) Preferred Stock or additional stock or other securities or
property (including cash) by way of spinoff, split-up, reclassification,
combination of shares or similar corporate rearrangement, (other than (i) shares
of Preferred Stock issued as a stock split, adjustments in respect of which
shall be covered by the terms of Section 3.1 above or (ii) an event for which
adjustment is otherwise made pursuant to Section 3.4 below), then and in each
such case, the Holder hereof shall, upon the exercise of this Warrant, be
entitled to receive, in addition to the number of shares of Preferred Stock
receivable thereupon, and without payment of any additional consideration
therefor, the amount of stock and other securities and property (including cash
in the cases referred to in clauses (B) and (C) above) which such Holder would
hold on the date of such exercise had he been the holder of record of such
Preferred Stock as of the date on which holders of Preferred Stock received or
became entitled to receive such shares or all other additional stock and other
securities and property.
4.
<PAGE> 5
3.3 REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE.
If any capital reorganization of the capital stock of the Company, or any
consolidation or merger of the Company 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 Preferred Stock shall be entitled to receive
stock, securities, or other assets or property, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, lawful and
adequate provisions shall be made whereby the holder hereof shall thereafter
have the right to purchase and receive (in lieu of the shares of the Preferred
Stock of the Company immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby) such shares of stock, securities or
other assets or property as may be issued or payable with respect to or in
exchange for a number of outstanding shares of such Preferred Stock equal to the
number of shares of such stock immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby; provided,
however, that in the event the value of the stock, securities or other assets or
property (determined in good faith by the Board of Directors of the Company)
issuable or payable with respect to one share of the Preferred Stock of the
Company immediately theretofore purchasable and receivable upon the exercise of
the rights represented hereby is in excess of the Stock Purchase Price hereof
effective at the time of the merger and securities received in such
reorganization, if any, are publicly traded, then this Warrant shall expire
unless exercised prior to the reorganization. In any reorganization described
above, appropriate provision shall be made with respect to the rights and
interests of the Holder of this Warrant to the end that the provisions hereof
(including, without limitation, provisions for adjustments of the Stock Purchase
Price and of the number of shares purchasable and receivable upon the exercise
of this Warrant) shall thereafter be applicable, as nearly as may be, in
relation to any shares of stock, securities or assets thereafter deliverable
upon the exercise hereof. The Company will not effect any such consolidation,
merger or sale unless, prior to the consummation thereof, the successor
corporation (if other than the Company) resulting from such consolidation or the
corporation purchasing such assets shall assume by written instrument, executed
and mailed or delivered to the registered Holder hereof at the last address of
such Holder appearing on the books of the Company, the obligation to deliver to
such Holder such shares of stock, securities or assets as, in accordance with
the foregoing provisions, such Holder may be entitled to purchase.
3.4 ADJUSTMENTS SET FORTH IN ARTICLES OF INCORPORATION. In addition
to the foregoing adjustments, the conversion rate of the Series C Preferred
Stock into Common Stock is subject to adjustments as set forth in the Company's
Articles of Incorporation. The Company represents that as of the date this
Warrant was first issued, each share of Series C Preferred Stock was convertible
into one share of Common Stock.
3.5 NOTICE OF ADJUSTMENT. Upon any adjustment of the Stock Purchase
Price or in the conversion ratio of the Series C Preferred Stock or any increase
or decrease in the number of shares purchasable upon the exercise of this
Warrant, the Company shall give written notice thereof, by first class mail,
postage prepaid, addressed to the registered Holder of this Warrant at the
address of such Holder as shown on the books of the Company.
5.
<PAGE> 6
The notice shall be signed by the Company's chief financial officer and shall
state the Stock Purchase Price resulting from such adjustment and the increase
or decrease, if any, in the number of shares purchasable at such price upon the
exercise of this Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
3.6 OTHER NOTICES. If at any time:
(1) the Company shall declare any cash dividend upon its
Preferred Stock;
(2) the Company shall declare any dividend upon its Preferred
Stock payable in stock or make any special dividend or other distribution to the
holders of its Preferred Stock;
(3) the Company shall offer for subscription pro rata to the
holders of its Preferred Stock any additional shares of stock of any class or
other rights;
(4) there shall be any capital reorganization or
reclassification of the capital stock of the Company; or consolidation or merger
of the Company with, or sale of all or substantially all of its assets to,
another corporation;
(5) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company; or
(6) there shall be an initial public offering of Company
securities;
then, in any one or more of said cases, the Company shall give, by first class
mail, postage prepaid, addressed to the Holder of this Warrant at the address of
such Holder as shown on the books of the Company, (a) at least thirty (30) days'
prior written notice of the date on which the books of the Company 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, winding-up or public
offering, at least thirty (30) days' prior written notice of the date when the
same shall take place; provided, however, that the Holder shall make a best
efforts attempt to respond to such notice as early as possible after the receipt
thereof. Any notice given in accordance with the foregoing clause (a) shall also
specify, in the case of any such dividend, distribution or subscription rights,
the date on which the holders of Preferred Stock shall be entitled thereto. Any
notice given in accordance with the foregoing clause (b) shall also specify the
date on which the holders of Preferred Stock shall be entitled to exchange their
Preferred Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, winding-up, conversion or public offering, as the case may be.
6.
<PAGE> 7
3.7 CERTAIN EVENTS. If any change in the outstanding Preferred Stock
of the Company or any other event occurs as to which the other provisions of
this Section 3 are not strictly applicable or if strictly applicable would not
fairly protect the purchase rights of the Holder of the Warrant in accordance
with such provisions, then the Board of Directors of the Company shall make an
adjustment in the number and class of shares available under the Warrant, the
Stock Purchase Price or the application of such provisions, so as to protect
such purchase rights as aforesaid. The adjustment shall be such as will give the
Holder of the Warrant upon exercise for the same aggregate Stock Purchase Price
the total number, class and kind of shares as he would have owned had the
Warrant been exercised prior to the event and had he continued to hold such
shares until after the event requiring adjustment.
4. ISSUE TAX. The issuance of certificates for shares of Preferred Stock
upon the exercise of the Warrant shall be made without charge to the Holder of
the Warrant for any issue tax (other than any applicable income taxes) in
respect thereof; provided, however, that the Company shall not be required to
pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than that of the then
Holder of the Warrant being exercised.
5. CLOSING OF BOOKS. The Company will at no time close its transfer books
against the transfer of any warrant or of any shares of Preferred Stock issued
or issuable upon the exercise of any warrant in any manner which interferes with
the timely exercise of this Warrant.
6. NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY. Nothing
contained in this Warrant shall be construed as conferring upon the holder
hereof the right to vote or to consent or to receive notice as a shareholder of
the Company or any other matters or any rights whatsoever as a shareholder of
the Company. No dividends or interest shall be payable or accrued in respect of
this Warrant or the interest represented hereby or the shares purchasable
hereunder until, and only to the extent that, this Warrant shall have been
exercised. No provisions hereof, in the absence of affirmative action by the
holder to purchase shares of Preferred Stock, and no mere enumeration herein of
the rights or privileges of the holder hereof, shall give rise to any liability
of such holder for the Stock Purchase Price or as a shareholder of the Company,
whether such liability is asserted by the Company or by its creditors.
7. REGISTRATION RIGHTS AGREEMENT. The registration rights of the Holder
(including Holders' successors) with respect to this Warrant and the underlying
stock will be the same as granted to the holders of the Company's Preferred
Stock.
8. WARRANTS TRANSFERABLE. Subject to compliance with applicable federal
and state securities laws and the transfer restrictions set forth in the Note
and Warrant Purchase Agreement dated as of May 14, 1993, under which this
Warrant was purchased, this Warrant
7.
<PAGE> 8
and all rights hereunder are transferable, in whole or in part, without charge
to the holder hereof (except for transfer taxes), upon surrender of this Warrant
properly endorsed and compliance with the provisions of the Warrant Purchase
Agreement. Each taker and holder of this Warrant, by taking or holding the same,
consents and agrees that this Warrant, when endorsed in blank, shall be deemed
negotiable, and that the holder hereof, when this Warrant shall have been so
endorsed, may be treated by the Company, at the Company's option, and all other
persons dealing with this Warrant as the absolute owner hereof for any purpose
and as the person entitled to exercise the rights represented by this Warrant,
or to the transfer hereof on the books of the Company any notice to the contrary
notwithstanding; but until such transfer on such books, the Company may treat
the registered owner hereof as the owner for all purposes.
9. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT. The rights and
obligations of the Company, of the holder of this Warrant and of the holder of
shares of Preferred Stock issued upon exercise of this Warrant, referred to in
Sections 7 and 8 shall survive the exercise of this Warrant.
10. MODIFICATION AND WAIVER. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought, provided
that any change, waiver, discharge or termination agreed to in writing by a
majority in interest of holders of Warrants of the Company of even date issued
pursuant to the Note and Warrant Purchase Agreement shall be binding on Holder
and assigns.
11. NOTICES. Any notice, request or other document required or permitted
to be given or delivered to the holder hereof or the Company shall be delivered
or shall be sent by certified mail, postage prepaid, to each such holder at its
address as shown on the books of the Company or to the Company at the address
indicated therefor in the first paragraph of this Warrant or such other address
as either may from time to time provide to the other.
12. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets. All of the obligations of the
Company relating to the Preferred Stock issuable upon the exercise of this
Warrant shall survive the exercise and termination of this Warrant. All of the
covenants and agreements of the Company shall inure to the benefit of the
successors and assigns of the holder hereof.
13. DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description headings of
the several sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. This Warrant shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the laws of the State of California.
8.
<PAGE> 9
14. LOST WARRANTS. The Company represents and warrants to the Holder
hereof that upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction, or mutilation of this Warrant and, in the case of
any such loss, theft or destruction, upon receipt of an indemnity reasonably
satisfactory to the Company, or in the case of any such mutilation upon
surrender and cancellation of such Warrant, the Company, at its expense, will
make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Warrant.
15. FRACTIONAL SHARES. No fractional shares shall be issued upon exercise
of this Warrant. The Company shall, in lieu of issuing any fractional share, pay
the holder entitled to such fraction a sum in cash equal to such fraction
multiplied by the then effective Stock Purchase Price.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its officers, thereunto duly authorized this 13th day of August,
1993.
STERITECH, INC.
A CALIFORNIA CORPORATION
By____________________________________
Title_________________________________
ATTEST:
______________________________
Secretary
9.
<PAGE> 10
EXHIBIT A
SUBSCRIPTION FORM
Date: ____________, 19__
Steritech, Inc.
2525 Stanwell Drive
Concord, California 94520
Gentlemen:
[ ] The undersigned hereby elects to exercise the warrant issued to it by
Steritech, Inc. (the "Company") and dated May 14, 1993 Warrant No. PCW-__
(the "Warrant") and to purchase thereunder ____________ shares of the
Common Stock of the Company (the "Shares") at a purchase price of
_________________________________________ ($_____) per Share or an
aggregate purchase price of __________________________ Dollars ($______)
(the "Purchase Price").
[ ] The undersigned hereby elects to convert ______________________ percent
(__%) of the value of the Warrant pursuant to the provisions of Section
1.2 of the Warrant.
Pursuant to the terms of the Warrant the undersigned has delivered the
Purchase Price herewith in full in cash or by certified check or wire transfer.
The undersigned also makes the representations set forth on the attached Exhibit
B of the Warrant.
Very truly yours,
_____________________________
By____________________________________
Title_________________________________
1.
<PAGE> 11
EXHIBIT B
INVESTMENT REPRESENTATIONS
THIS AGREEMENT MUST BE COMPLETED, SIGNED AND RETURNED TO STERITECH, INC. ALONG
WITH THE SUBSCRIPTION FORM BEFORE THE COMMON STOCK ISSUABLE UPON EXERCISE OF THE
WARRANT CERTIFICATE DATED ____________, 1993, WILL BE ISSUED.
_____________________, 19__
Steritech, Inc.
2525 Stanwell Drive
Concord, California 94520
Attention: President
The undersigned,_____("Purchaser"), intends to acquire up to shares of the
Series C Preferred Stock (the "Preferred Stock") of Steritech, Inc. (the
"Company") from the Company pursuant to the exercise or conversion of certain
Warrants to purchase Preferred Stock held by Purchaser. The Preferred Stock will
be issued to Purchaser in a transaction not involving a public offering and
pursuant to an exemption from registration under the Securities Act of 1933, as
amended (the "1933 Act") and applicable state securities laws. In connection
with such purchase and in order to comply with the exemptions from registration
relied upon by the Company, Purchaser represents, warrants and agrees as
follows:
Purchaser is acquiring the Preferred Stock for its own account, to hold
for investment, and Purchaser shah not make any sale, transfer or other
disposition of the Preferred Stock in violation of the 1933 Act or the General
Rules and Regulations promulgated thereunder by the Securities and Exchange
Commission (the "SEC") or in violation of any applicable state securities law.
Purchaser has been advised that the Preferred Stock has not been
registered under the 1933 Act or state securities laws on the ground that this
transaction is exempt from registration, and that reliance by the Company on
such exemptions is predicated in pan on Purchaser's representations set forth in
this letter.
Purchaser has been informed that under the 1933 Act, the Preferred Stock
must be held indefinitely unless it is subsequently registered under the 1933
Act or unless an exemption from such registration (such as Rule 144) is
available with respect to any proposed transfer or disposition by Purchaser of
the Preferred Stock. Purchaser further agrees that the Company
1.
<PAGE> 12
may refuse to permit Purchaser to sell, transfer or dispose of the Preferred
Stock (except as permitted under Rule 144) unless there is in effect a
registration statement underthe 1933 Act and any applicable state securities
laws coveting such transfer, or unless Purchaser furnishes an opinion of counsel
reasonably satisfactory to counsel for the Company, to the effect that such
registration is not required.
Purchaser also understands and agrees that there will be placed on the
certificate(s) for the Preferred Stock, or any substitutions therefor, a legend
stating in substance:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"), or
any state securities laws. These shares have been acquired for investment
and may not be sold or otherwise transferred in the absence of an
effective registration statement for these shares under the Securities Act
and applicable state securities laws, or an opinion of counsel
satisfactory to the Company that registration is not required and that an
applicable exemption is available."
Purchaser has carefully read this letter and has discussed its
requirements and other applicable limitations upon Purchaser's resale of the
Preferred Stock with Purchaser's counsel.
Very truly yours,
______________________________
By:___________________________________
2.
<PAGE> 1
EXHIBIT 10.13
STERITECH, INC.
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
MARCH 1, 1995
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
1. AGREEMENT TO SELL AND PURCHASE........................................................ 1
1.1 Authorization of Shares............................................. 1
1.2 Sale and Purchase of Series D Shares................................ 1
2. CLOSING, DELIVERY AND PAYMENT......................................................... 2
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................................... 2
3.1 Organization, Good Standing and Qualification....................... 2
3.2 Capitalization...................................................... 3
3.3 Authorization; Binding Obligations.................................. 3
3.4 Agreements; Action.................................................. 4
3.5 Obligations to Related Parties...................................... 5
3.6 Financial Statements................................................ 5
3.7 Changes............................................................. 5
3.8 Title to Properties and Assets; Liens, etc.......................... 6
3.9 Patents and Trademarks.............................................. 6
3.10 Compliance with Other Instruments................................... 7
3.11 Litigation.......................................................... 7
3.12 Tax Returns and Payments............................................ 7
3.13 Employees........................................................... 8
3.14 Restricted Stock Purchase Agreements................................ 8
3.15 Registration Rights................................................. 8
3.16 Compliance with Laws................................................ 8
3.17 Offering Valid...................................................... 9
3.18 Securities Exemption................................................ 9
3.19 Full Disclosure..................................................... 9
3.20 Permits............................................................. 9
3.21 Insurance........................................................... 9
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS...................................... 10
4.1 Requisite Power and Authority....................................... 10
4.2 Consents............................................................ 10
4.3 Investment Representations.......................................... 10
(a) Purchaser Bears Economic Risk..................... 10
(b) Acquisition for Own Account....................... 11
(c) Purchaser Can Protect Its Interest................ 11
(d) Company Information............................... 12
5. CONDITIONS TO CLOSING................................................................. 12
5.1 Conditions to Purchasers' Obligations at the Closing................ 12
</TABLE>
i.
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
(a) Representations and Warranties True; Performance of
Obligations.................................................. 12
(b) Legal Investment............................................. 12
(c) Consents, Permits, and Waivers............................... 12
(d) Corporate Documents.......................................... 12
(e) Reservation of and Conversion Shares......................... 12
(f) Filing of Restated Articles.................................. 12
(g) Certificate of Status........................................ 12
(h) Compliance Certificate....................................... 13
(i) Amended Investors' Rights Agreement.......................... 13
(j) Proceedings and Documents.................................... 13
(k) Legal Opinion................................................ 13
5.2 Conditions to Obligations of the Company. ............................ 13
(a) Representations and Warranties True.......................... 13
(b) Performance of Obligations................................... 13
(c) Filing of Restated Articles.................................. 13
(d) Amended Investors' Rights Agreement.......................... 13
6. MISCELLANEOUS................................................................... 13
6.1 Governing Law.......................................................... 13
6.2 Survival............................................................... 14
6.3 Successors and Assigns................................................. 14
6.4 Entire Agreement....................................................... 14
6.5 Separability........................................................... 14
6.6 Amendment and Waiver................................................... 14
6.7 Delays or Omissions.................................................... 15
6.8 Notices, etc........................................................... 15
6.9 Expenses............................................................... 15
6.10 Attorneys' Fees........................................................ 15
6.11 Titles and Subtitles................................................... 15
6.12 Counterparts........................................................... 15
6.13 Broker's Fees.......................................................... 16
</TABLE>
ii.
<PAGE> 4
LIST OF EXHIBITS
Exhibit A SCHEDULE OF PURCHASERS
Exhibit B AMENDED AND RESTATED ARTICLES OF INCORPORATION
Exhibit C SCHEDULE OF EXCEPTIONS
Exhibit D AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
Exhibit E OPINION OF COUNSEL TO THE COMPANY
Exhibit F FINANCIAL STATEMENTS OF THE COMPANY
iii.
<PAGE> 5
STERITECH, INC.
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES D PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is
entered into as of March 1, 1995, by and among STERITECH, INC., a California
corporation (the "Company") and each of those persons and entities, severally
and not jointly, whose names are set forth on the Schedule of Purchasers
attached hereto as Exhibit A (which persons and entities are hereinafter
collectively referred to as "Purchasers" and each individually as a
"Purchaser").
RECITALS
WHEREAS, the Company has authorized the sale and issuance of an
aggregate of shares of its Series D Preferred Stock (the "Series D Shares" or
the "Shares"); and
WHEREAS, Purchasers desire to purchase the Series D Shares on the terms
and conditions set forth herein; and
WHEREAS, the Company desires to issue and sell the Series D Shares to
Purchasers on the terms and conditions set forth herein; and
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the parties hereto agree as follows:
1. AGREEMENT TO SELL AND PURCHASE.
1.1 AUTHORIZATION OF SHARES. On or prior to the Closing (as
defined in Section 2 below), the Company shall have authorized the sale and
issuance to Purchasers of the Shares having the rights, preferences, privileges
and restrictions set forth in the Amended and Restated Articles of Incorporation
of the Company, as amended, in the form attached hereto as Exhibit B (the
"Restated Articles"). The Company has, or prior to the Closing will have,
adopted and filed the Restated Articles with the Secretary of State of the State
of California.
1.2 SALE AND PURCHASE OF SERIES D SHARES. Subject to the terms and
conditions hereof, the Company hereby agrees to issue and sell to each Purchaser
and each Purchaser agrees to purchase from the Company, the number of Series D
Shares set forth opposite such Purchaser's name on Exhibit A, at a purchase
price of $10.50 per share.
1.
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2. CLOSING, DELIVERY AND PAYMENT.
The closing of the sale and purchase of the Series D Shares
under this Agreement (the "Closing") shall take place at 10:00 a.m., local time,
on March 21, 1995 at the offices of Cooley Godward Castro Huddleson & Tatum, One
Maritime Plaza, 20th floor, San Francisco, California 94111, or at such other
time or place as the Company and Purchasers purchasing a majority of the Shares
may mutually agree. At the Closing, subject to the terms and conditions hereof,
the Company will deliver to each Purchaser a certificate representing the number
of Series D Shares purchased by such Purchaser from the Company, as set forth on
Exhibit A, against payment by or on behalf of such Purchaser of the purchase
price therefor, as set forth on Exhibit A, by wire transfer, check made payable
to the order of the Company, cancellation of indebtedness of the Company to such
Purchaser, or by such other means as shall be mutually agreeable to such
Purchaser and the Company. If not all of the authorized Series D Shares are
purchased at the Closing, the Company may, at any time until sixty (60) days
after the Closing (unless the sixty (60) day period is further extended by
resolution of the Company's Board of Directors), sell and issue the balance of
the authorized but unissued Series D Shares, under purchase agreements
substantially similar to this Agreement, at an additional closing or closings
(hereinafter the "Additional Closing") at the same price per share as the Series
D Shares purchased and sold at the Closing. The purchasers of such remaining
Series D Shares shall be deemed "Purchasers" and such shares of Series D
purchased by them shall be deemed "Series D Shares" for the purposes of this
Agreement. The Additional Closings of the purchase and sale of the Series D
Shares hereunder shall take place at such time and place as the Company and the
additional Purchasers may agree. In the event that Additional Closings pursuant
to this Agreement occur, the term "Closing" with respect to such later sales of
Series D Shares shall refer to such later closing or closings and the term
"Closing Date" shall refer to the date on which each such Closing or Closings
occur.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth on the Schedule of Exceptions attached
hereto as Exhibit C, the Company hereby represents and warrants to each
Purchaser as follows:
3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is
a corporation duly organized, validly existing, and in good standing under the
laws of the State of California. The Company has full power and authority to own
and operate its properties and assets, and to carry on its business as presently
conducted. The Company is duly qualified and is authorized to do business and is
in good standing as a foreign corporation in all jurisdictions in the aggregate
in which the nature of its activities and of its properties (both owned and
leased) makes such qualification necessary, except for those jurisdictions, in
the aggregate, in which failure to do so would not have a material adverse
effect on the Company or its business. The Company has no subsidiaries and owns
no equity securities of any other corporation, limited partnership or similar
entity.
2.
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3.2 CAPITALIZATION. The authorized capital stock of the Company,
immediately prior to the Closing, consists of four million two hundred eighty
thousand three hundred ninety-nine (4,280,399) shares of Common Stock, nine
hundred sixty-one thousand four hundred ten (961,410) shares of which are issued
and outstanding; and two million eight hundred eighteen thousand nine hundred
eighty-nine (2,818,989) shares of Preferred Stock, seven hundred sixty-one
thousand seventy-nine (761,079) of which are designated Series A Preferred
Stock, seven hundred fourteen thousand two hundred eighty-six (714,286) of which
are issued and outstanding and three hundred five thousand four hundred
sixty-one (305,461) of which are designated Series B Preferred Stock, two
hundred eighty-five thousand seven hundred fourteen (285,714) of which are
issued and outstanding, and one million one hundred forty-seven thousand four
hundred forty-nine (1,147,449) of which are designated Series C Preferred Stock,
one million ninety-one thousand five hundred ninety-three (1,091,593) of which
are issued and outstanding, and six hundred five thousand (605,000) of which are
designated Series D Preferred Stock, none of which are outstanding. Immediately
prior to the Closing, four hundred thousand (400,000) shares of Common Stock are
reserved for future issuance upon the exercise of options for shares of Common
Stock and two million one hundred fifty-five thousand eight hundred eighty-six
(2,155,886) shares of Common Stock are reserved for issuance upon exercise or
conversion, respectively, of outstanding warrants for and shares of Series A,
Series B and Series C Preferred Stock. All issued and outstanding shares of the
Company's Common Stock have been duly authorized and validly issued, are fully
paid and nonassessable, and were issued in compliance with all applicable state
and federal laws concerning the issuance of securities. The rights, preferences,
privileges and restrictions of the Shares are as stated in the Restated
Articles. The shares of Common Stock issuable upon the conversion of the Shares
(the "Conversion Shares") have been duly and validly reserved for issuance and,
when issued in accordance with the Restated Articles, will be validly issued,
fully paid and nonassessable. Except for: (i) the conversion privileges of the
Series A Shares, Series B Shares and Series C Shares, (ii) the right of first
refusal applicable to the Company's Common Stock set forth in the Company's
Bylaws, (iii) the options for shares of Common Stock identified above, (iv) the
warrants issued in connection with certain leasing transactions, (v) the
warrants for Series B and Series C Preferred Stock issued in connection with the
May 14, 1993 and August 13, 1993 bridge financings, and (vi) that certain
Investors' Rights Agreement dated December 27, 1991, as amended on December 10,
1993 and March 14, 1994 (the "Investors' Rights Agreement"), there are no
outstanding options, warrants, rights (including conversion or preemptive
rights), proxy or shareholder agreements, or agreements of any kind for the
purchase or acquisition from the Company of any of its securities.
3.3 AUTHORIZATION; BINDING OBLIGATIONS. All corporate action on
the part of the Company, its officers, directors and shareholders necessary for
the authorization, execution and delivery of this Agreement, the Amended and
Restated Investors' Rights Agreement, in the form attached hereto as Exhibit D
(the "Amended Investors' Rights Agreement"), and the Restated Articles, and the
sale and issuance of the Shares and the Conversion Shares pursuant hereto, and
for the performance of the Company's obligations hereunder and under the Amended
Investors' Rights Agreement has been taken or will be taken prior to the
Closing. The Agreement and the Amended Investors' Rights Agreement, when
executed and delivered, will be valid and binding obligations of the Company
enforceable in accordance with their terms.
3.
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The sale of the Series D Shares and the subsequent conversion of Shares into
Conversion Shares are not and will not be subject to any preemptive rights or
rights of first refusal that have not been properly waived or complied with.
When issued in compliance with the provisions of this Agreement and the Restated
Articles, the Shares and the Conversion Shares will be validly issued, fully
paid and nonassessable, and will be free of any liens or encumbrances; provided,
however, that the Shares and the Conversion Shares may be subject to
restrictions on transfer under state and/or federal securities laws as set forth
herein or as otherwise required by such laws at the time a transfer is proposed.
3.4 AGREEMENTS; ACTION.
(a) Except for agreements explicitly
contemplated hereby and the Investors' Rights Agreement, there are no
agreements, understandings or proposed transactions between the Company and any
of its officers, directors and affiliates, or any affiliate thereof.
(b) There are no agreements, understandings,
instruments, contracts, proposed transactions, judgments, orders, writs or
decrees to which the Company is a party or by which it is bound which may
involve (i) obligations (contingent or otherwise) of, or payments to, the
Company in excess of $25,000, or (ii) the license of any patent, copyright,
trade secret or other proprietary right to or from the Company or (iii)
provisions restricting or affecting the development, manufacture or distribution
of the Company's products or services or (iv) indemnification by the Company
with respect to infringements of proprietary rights.
(c) The Company has not (i) declared or paid any
dividends, or authorized or made any distribution upon or with respect to any
class or series of its capital stock, (ii) incurred any indebtedness for money
borrowed or any other liabilities individually in excess of $50,000 or, in the
case of indebtedness and/or liabilities individually less than $25,000, in
excess of $125,000 in the aggregate, (iii) made any loans or advances to any
person, other than ordinary advances for travel expenses, or (iv) sold,
exchanged or otherwise disposed of any of its assets or rights, or contracted to
do so, other than the sale of its inventory in the ordinary course of business.
(d) For the purposes of subsections (b) and (c)
above, all indebtedness, liabilities, agreements, understandings, instruments,
contracts and proposed transactions involving the same person or entity
(including persons or entities the Company has reason to believe are affiliated
therewith) shall be aggregated for the purpose of meeting the individual minimum
dollar amounts of such subsections.
(e) The Company is not a party to and is not
bound by any contract, agreement or instrument, or subject to any restriction
under its Restated Articles or Bylaws, which adversely affects its business as
now conducted or as proposed to be conducted, in its properties or its financial
condition.
4.
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3.5 OBLIGATIONS TO RELATED PARTIES. No employee, officer,
or director of the Company or member of his or her immediate family is indebted
to the Company, nor is the Company indebted (or committed to make loans or
extend or guarantee credit) to any of them. To the best of the Company's
knowledge, none of such persons has any direct or indirect ownership interest in
any firm or corporation with which the Company is affiliated or with which the
Company has a business relationship, or any firm or corporation that competes
with the Company, except for equity interest in HRI Research, Inc. and except
that employees, officers, or directors of the Company and members of their
immediate families may own stock in publicly traded companies that may compete
with the Company. No member of the immediate family of any officer or director
of the Company is directly or indirectly interested in any material contract
with the Company.
3.6 FINANCIAL STATEMENTS. Attached hereto as Exhibit F
are copies of the Company's unaudited balance sheet and income statement for the
year ended December 31, 1994 and of the Company's audited financial statements
for the twelve (12) months ended December 31, 1993 (the "Financial Statements").
The Financial Statements fairly present the financial condition and operating
results of the Company as of the dates, and for the periods, indicated therein
and have been prepared in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the period,
subject, in the case of the unaudited balance sheet and income statement for the
twelve (12) months ended December 31, 1994, to the absence of footnotes and
year-end adjustments that are not in the aggregate expected to be material.
3.7 CHANGES. Since December 31, 1994, there has not been:
(a) Any change in the assets, liabilities,
financial condition or operations of the Company as shown on the balance sheet
at December 31, 1994 contained in the Financial Statements, other than changes
in the ordinary course of business, none of which individually or in the
aggregate has had or is expected to have a material adverse effect on such
assets, liabilities, financial condition, or operations of the Company;
(b) Any change, except in the ordinary course of
business, in the contingent obligations of the Company by way of guaranty,
endorsement, indemnity, warranty, or otherwise;
(c) Any damage, destruction, or loss, whether or
not covered by insurance, materially and adversely affecting the properties,
business, financial condition, operations or prospects of the Company;
(d) Any waiver by the Company of a valuable
right or of a material debt owed to it;
(e) Any direct or indirect loans made by the
Company to any shareholder, employee, officer, or director of the Company, other
than advances made in the ordinary course of business;
5.
<PAGE> 10
(f) Any declaration or payment of any dividend
or other distribution of the assets of the Company;
(g) Any labor organization activity;
(h) Any debt, obligation, or liability incurred,
assumed or guaranteed by the Company, except current liabilities incurred in the
ordinary course of business (the sum of which does not exceed $10,000);
(i) Any change in any material agreement to
which the Company is a party or by which it or any of its assets are bound or
subject, including compensation agreements with the Company's employees; or
(j) To the best of the Company's knowledge, any
other event or condition of any character that, either individually or
cumulatively, has materially and adversely affected, or, so far as the Company
may now foresee, in the future may materially and adversely affect the business,
assets, liabilities, financial condition, operations or prospects of the
Company.
3.8 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. The
Company has good and marketable title to its properties and assets, and good
title to its leasehold estates, in each case subject to no mortgage, pledge,
lien, lease, encumbrance, or charge, other than (i) those resulting from taxes
which have not yet become delinquent and (ii) minor liens and encumbrances which
do not materially detract from the value of the property subject thereto or
materially impair the operations of the Company.
3.9 PATENTS AND TRADEMARKS. The Company has sufficient
title and ownership of all trade names, copyrights, trade secrets, proprietary
information, patents, trademarks, service marks, rights and processes necessary
for its business as now conducted and as proposed to be conducted without any
conflict with or infringement of the rights of others. There are no outstanding
options, licenses, or agreements of any kind relating to the foregoing, nor is
the Company bound by or a party to any options, licenses or agreements of any
kind with respect to the patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses, information, proprietary rights and
processes of any other person or entity. The Company has not received any
communications alleging that the Company has violated or, by conducting its
business as proposed, would violate any of the patents, trademarks, service
marks, trade names, copyrights or trade secrets or other proprietary rights of
any other person or entity. The Company is not aware that any of its employees
is obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with the use of his
best efforts to promote the interests of the Company or that would conflict with
the Company's business as proposed to be conducted. Neither the execution nor
delivery of this Agreement, or the Amended Investors' Rights Agreement, nor the
carrying on of the Company's business by the employees of the Company, nor the
conduct of the Company's business as proposed, will, to the Company's knowledge,
conflict with or result in a breach of the terms,
6.
<PAGE> 11
conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any of such employees is now obligated. The
Company does not believe it is or will be necessary to utilize any inventions of
any of its employees (or people it currently intends to hire) made prior to
their employment by the Company.
3.10 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not
in violation or default of any term of its Restated Articles or Bylaws, nor is
it in material violation or default of any mortgage, indenture, contract,
agreement, instrument, judgment, decree, order or any statute, rule, or
regulation applicable to the Company. The execution, delivery, and performance
of and compliance with this Agreement and the Amended Investors' Rights
Agreement and the issuance and sale of the Series D Shares pursuant hereto and
of the Conversion Shares pursuant to the Restated Articles, will not result in
any such violation, or be in conflict with or constitute a default under any
such term, or result in the creation of any mortgage, pledge, lien, encumbrance,
or charge upon any of the properties or assets of the Company. There is no such
term that materially and adversely affects, or in the future may be reasonably
expected to materially and adversely affect the business, assets, liabilities,
financial condition, operations or prospects of the Company as now conducted or
as proposed to be conducted. The Company has avoided every condition, and has
not performed any act, the occurrence of which would result in the Company's
loss of any right granted under any license, distribution or other agreement.
3.11 LITIGATION. There is no action, suit, proceeding or
investigation pending or currently threatened against the Company which
questions the validity of this Agreement, the Amended Investors' Rights
Agreement or the right of the Company to enter into them, or to consummate the
transactions contemplated hereby, or which might result, either individually or
in the aggregate, in any material adverse changes in the assets, condition,
affairs or prospects of the Company, financially or otherwise, or any change in
the current equity ownership of the Company, nor is the Company aware that there
is any basis for the foregoing. The foregoing includes, without limitation,
actions pending or threatened (or any basis therefor known to the Company)
involving the prior employment of any of the Company's employees, their use in
connection with the Company's business of any information or techniques
allegedly proprietary to any of their former employers, or their obligations
under any agreements with prior employers. The Company is not a party or subject
to the provisions of any order, writ, injunction, judgment or decree of any
court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company currently pending or which the
Company intends to initiate.
3.12 TAX RETURNS AND PAYMENTS. The Company has filed all
tax returns (federal, state and local) required to be filed by it. All taxes
shown to be due and payable on such returns, any assessments imposed, and all
other taxes due and payable by the Company on or before the Closing have been
paid or will be paid prior to the time they become delinquent. The Company has
not elected pursuant to the Internal Revenue Code of 1986, as amended ("Code"),
to be treated as a collapsible corporation or a Subchapter S corporation
pursuant to Section 341(f) or Section 1362(a) of the Code, nor has it made any
other elections pursuant to the Code (other than elections which relate solely
to methods of accounting, depreciation or
7.
<PAGE> 12
amortization) which would have a material effect on the Company, its financial
condition, its business as presently conducted or proposed to be conducted or on
any of its properties or material assets.
3.13 EMPLOYEES. The Company has no collective bargaining
agreements with any of its employees. There is no labor union organizing
activity pending or, to the Company's knowledge, threatened with respect to the
Company. No employee has any agreement or contract, written or verbal, regarding
his or her employment. To the Company's knowledge, no employee of the Company,
nor anyone with whom the Company has contracted, is in violation of any term of
any employment contract, patent disclosure agreement or any other agreement
relating to the right of any such individual to be employed by, or to contract
with, the Company because of the nature of the business to be conducted by the
Company; and the continued employment by the Company of its present employees,
and the performance of the Company's contracts with its independent contractors,
will not result in any such violation. The Company has not received any notice
alleging that any such violation has occurred. Each officer, employee and
consultant of the Company has executed a Proprietary Information and Inventions
Agreement. The Company, after reasonable investigation, is not aware that any of
its employees, officers or consultants are in violation thereof, and the Company
will use its best efforts to prevent any such violation. The Company is not
aware that any officer or key employee, or that any group of key employees,
intends to terminate their employment with the Company, nor does the Company
have a present intention to terminate the employment of any of the foregoing.
Subject to general principles related to wrongful termination of employees, the
employment of each officer and employee of the Company is terminable at the will
of the Company. No officer of the Company has been granted the right to any
material compensation following termination of employment with the Company.
3.14 RESTRICTED STOCK PURCHASE AGREEMENTS. All currently
outstanding shares of common stock of the Company are subject to the Company's
repurchase option and/or right of first refusal, as set forth in copies of
Restricted Stock Purchase Agreements and the Company's Bylaws.
3.15 REGISTRATION RIGHTS. Except as required pursuant to
the Investors' Rights Agreement, the Company is presently not under any
obligation, and has not granted any rights, to register (as defined in Section
1.2 of the Investors' Rights Agreement) any of the Company's presently
outstanding securities or any of its securities that may hereafter be issued.
3.16 COMPLIANCE WITH LAWS. The Company has complied in all
material respects with all applicable statutes, rules, regulations, orders and
restrictions of any domestic or foreign government or any instrumentality or
agency thereof in respect of the conduct of its business and ownership of its
properties. No governmental orders, permissions, consents, approvals or
authorizations are required to be obtained and no registrations or declarations
are required to be filed in connection with the execution and delivery of this
Agreement and the Amended Investors' Rights Agreement, and the issuance of the
Shares or the Conversion Shares, except such as have been duly and validly
obtained or filed, or with respect to any filings that must be made after the
Closing, except such as will be filed in a timely manner.
8.
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3.17 OFFERING VALID. Assuming the accuracy of the
representations and warranties of the Purchasers contained in Section 4.3
hereof, the offer, sale and issuance of the Shares and the Conversion Shares
will be exempt from the registration requirements of the Securities Act of 1933,
as amended (the "Securities Act") and will have been registered or qualified (or
are exempt from registration and qualification) under the registration, permit
or qualification requirements of all applicable state securities laws.
3.18 SECURITIES EXEMPTION. Neither the Company nor any
agent on its behalf has solicited or will solicit any offers to sell or has
offered to sell or will offer to sell all or any part of the Shares to, or
otherwise approach or communicate in respect of all or any part of such Shares
with, any person or persons so as to bring the sale of such Shares by the
Company within the registration provisions of the Securities Act. The Company
shall seek and obtain all necessary permits and other authorizations or orders
of exemption as may be necessary or appropriate under the California Corporate
Securities Law of 1968, as amended, and any other applicable state securities
laws, with respect to the Company's offer and sale of the Shares and the
Conversion Shares.
3.19 FULL DISCLOSURE. This Agreement, the Exhibits hereto,
the Amended Investors' Rights Agreement and all other documents delivered by the
Company to Purchasers or their attorneys or agents in connection herewith or
therewith or with the transactions contemplated hereby or thereby, do not, when
taken as a whole, contain any untrue statement of a material fact nor, omit to
state a material fact necessary in order to make the statements contained herein
or therein not misleading. There are no facts which (individually or in the
aggregate) materially adversely affect the business, assets, liabilities,
financial condition, prospects or operations of the Company that have not been
set forth in the Agreement, the Exhibits hereto, the Amended Investors' Rights
Agreement or in other documents delivered to Purchasers or their attorneys or
agents in connection herewith.
3.20 PERMITS. The Company has all franchises, permits,
licenses, and any similar authority necessary for the conduct of its business as
now being conducted by it, the lack of which could materially and adversely
affect the business, properties, prospects, or financial condition of the
Company and believes it can obtain, without undue burden or expense, any similar
authority for the conduct of its business as planned to be conducted. The
Company is not in default in any material respect under any of such franchises,
permits, licenses, or other similar authority.
3.21 INSURANCE. The Company has or will obtain prior to or
promptly following the Closing insurance with financially sound and reputable
insurers, with respect to its properties that are of a character customarily
insured by entities engaged in the same or a similar business similarly
situated, against loss or damage of the kinds customarily insured against by
such entities, which insurance is of such types (including public liability
insurance) as are customarily carried under similar circumstances by such other
entities.
9.
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4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.
Each Purchaser hereby represents and warrants to the Company
as follows (such representations and warranties do not lessen or obviate the
representations and warranties of the Company set forth in this Agreement):
4.1 REQUISITE POWER AND AUTHORITY. Purchaser has all
necessary power and authority under all applicable provisions of law to execute
and deliver this Agreement and the Amended Investors' Rights Agreement and to
carry out their provisions. All action on Purchaser's part required for the
lawful execution and delivery of this Agreement and the Amended Investors'
Rights Agreement has been or will be effectively taken prior to the Closing.
Upon their execution and delivery, this Agreement and the Amended Investors'
Rights Agreement will be valid and binding obligations of Purchaser, enforceable
in accordance with their terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
affecting enforcement of creditors' rights; (ii) general principles of equity
that restrict the availability of equitable remedies; and (iii) to the extent
that the enforceability of the indemnification provisions of Section 2.9 of the
Amended Investors' Rights Agreement may be limited by applicable laws.
4.2 CONSENTS. All consents, approvals, orders,
authorizations, registrations, qualifications, designations, declarations or
filings with any governmental or banking authority on the part of Purchaser
required in connection with the consummation of the transactions contemplated in
the Agreement and the Amended Investors' Rights Agreement have been or shall
have been obtained prior to and be effective as of the Closing.
4.3 INVESTMENT REPRESENTATIONS. Purchaser understands
that the Shares and Conversion Shares have not been registered under the
Securities Act. Purchaser also understands that the Shares are being offered and
sold pursuant to an exemption from registration contained in the Securities Act
based in part upon Purchaser's representations contained in the Agreement.
Purchaser hereby represents and warrants as follows:
(a) PURCHASER BEARS ECONOMIC RISK. Purchaser
must bear the economic risk of this investment indefinitely unless the Shares or
the Conversion Shares are registered pursuant to the Securities Act, or an
exemption from registration is available. Purchaser understands that the Company
has no present intention of registering the Shares the Conversion Shares or any
shares of its Common Stock. Purchaser understands that it has no registration
rights with respect to the Shares or the Conversion Shares except as provided in
the Amended Investors' Rights Agreement. Purchaser also understands that there
is no assurance that any exemption from registration under the Securities Act
will be available and that, even if available, such exemption may not allow
Purchaser to transfer all or any portion of the Shares or the Conversion Shares
under the circumstances, in the amounts or at the times Purchaser might propose.
10.
<PAGE> 15
Purchaser further represents that Purchaser is an Accredited Investor
within the meaning of Rule 501(a) of Regulation D under the Securities Act and
that one or more of the following criteria are applicable to such Purchaser. If
Purchaser cannot make the following representations, Purchaser shall set forth
his or her initials on the appropriate line provided therefor on the signature
page of this Agreement, and such Purchaser shall provide such information as the
Company may reasonably require to establish that the offer and sale of the
Shares and the Conversion Shares to such Purchaser shall not bring the offer and
sale of the Shares and Conversion Shares within the registration provisions of
the Securities Act or similar registration requirements under applicable state
securities laws and regulations.
(i) The Purchaser is a director or
executive officer of the Company; or
(ii) The Purchaser is a natural person
who has a net worth or joint net worth with the Purchaser's spouse exceeding
$1,000,000 at the time of purchase; or
(iii) The Purchaser is a natural person
who had an individual income in excess of $200,000 in each of the two most
recent years and who reasonably expects an income in excess of $200,000 in the
current year; or
(iv) The Purchaser is either (a) a
business development company as defined in Section 2(a)(48) of such Act, or (b)
a Small Business Investment Company licensed by the U.S. Small Business
Administration under Section 301(c) or 301(d) of the Small Business Investment
Act of 1958; or
(v) The Purchaser is a private business
development company as defined in Section 202(a)(22) of the Investment Advisers
Act of 1940; or
(vi) The Purchaser is a corporation,
partnership or trust, and each and every equity owner of such entity certifies
that it meets the qualifications set forth in (i), (ii), (iii), (iv) or (v)
above.
(b) ACQUISITION FOR OWN ACCOUNT. Purchaser is
acquiring the Shares and the Conversion Shares for Purchaser's own account for
investment only, and not with a view towards their distribution.
(c) PURCHASER CAN PROTECT ITS INTEREST.
Purchaser represents that by reason of its, or of its management's, business or
financial experience, Purchaser has the capacity to protect its own interests in
connection with the transactions contemplated in this Agreement and the Amended
Investors' Rights Agreement. Further, Purchaser is aware of no publication of
any advertisement in connection with the transactions contemplated in the
Agreement. Purchaser is not a corporation, trust or partnership specifically
formed for the purpose of consummating these transactions.
11.
<PAGE> 16
(d) COMPANY INFORMATION. Purchaser has had an
opportunity to discuss the Company's business, management and financial affairs
with directors, officers and management of the Company and has had the
opportunity to review the Company's operations and facilities. Purchaser has
also had the opportunity to ask questions of and receive answers from, the
Company and its management regarding the terms and conditions of this
investment.
5. CONDITIONS TO CLOSING.
5.1 CONDITIONS TO PURCHASERS' OBLIGATIONS AT THE CLOSING.
Purchasers' obligations to purchase the Series D Shares at the Closing are
subject to the satisfaction, at or prior to the Closing, of the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE;
PERFORMANCE OF OBLIGATIONS. The representations and warranties made by the
Company in Section 3 hereof shall be true and correct in all material respects
as of the Closing with the same force and effect as if they had been made as of
the Closing, and the Company shall have performed all obligations and conditions
herein required to be performed or observed by it on or prior to the Closing.
(b) LEGAL INVESTMENT. At the time of the
Closing, the sale and issuance of the Series D Shares and Conversion Shares
shall be legally permitted by all laws and regulations to which Purchasers and
the Company are subject.
(c) CONSENTS, PERMITS, AND WAIVERS. The Company
shall have obtained any and all consents, permits, and waivers necessary or
appropriate for consummation of the transactions contemplated by the Agreement
and the Amended Investors' Rights Agreement (except for such as may be properly
obtained subsequent to the Closing).
(d) CORPORATE DOCUMENTS. The Company shall have
delivered to Purchasers or their counsel, copies of all corporate documents of
the Company as Purchasers shall reasonably request.
(e) RESERVATION OF AND CONVERSION SHARES. The
Conversion Shares issuable upon conversion of the Shares shall have been duly
authorized and reserved for issuance upon such exercise or conversion.
(f) FILING OF RESTATED ARTICLES. The Restated
Articles shall have been filed with the Secretary of State of the State of
California.
(g) CERTIFICATE OF STATUS. The Company shall
have obtained a Certificate of Status from the California Secretary of State
dated as of a recent date prior to Closing.
12.
<PAGE> 17
(h) COMPLIANCE CERTIFICATE. The Company shall
have delivered to Purchasers a Compliance Certificate, executed by the President
and the Chief Financial Officer of the Company, dated the date of the Closing,
to the effect that the conditions specified in subparagraphs (a) through (g) of
this Section 5.1 have been satisfied.
(i) AMENDED INVESTORS' RIGHTS AGREEMENT. The
Amended Investors' Rights Agreement shall have been executed and delivered by
the parties thereto.
(j) PROCEEDINGS AND DOCUMENTS. All corporate and
other proceedings in connection with the transactions contemplated at the
Closing hereby and all documents and instruments incident to such transactions
shall be reasonably satisfactory in substance and form to the Purchasers and
their special counsel, and the Purchasers and their special counsel shall have
received all such counterpart originals or certified or other copies of such
documents as they may reasonably request.
(k) LEGAL OPINION. The Purchasers shall have
received from legal counsel to the Company an opinion addressed to them, dated
as of the Closing, substantially in the form attached hereto as Exhibit E.
5.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The
Company's obligation to issue and sell the Shares at the Closing is subject to
the satisfaction, on or prior to the Closing, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The
representations and warranties made by Purchasers in Section 4 hereof shall be
true and correct in all material respects at the date of the Closing, with the
same force and effect as if they had been made on and as of said date.
(b) PERFORMANCE OF OBLIGATIONS. Purchasers shall
have performed and complied with all agreements and conditions herein required
to be performed or complied with by Purchasers on or before the Closing.
(c) FILING OF RESTATED ARTICLES. The Restated
Articles shall have been filed with the Secretary of State of the State of
California. The Company agrees to use its best efforts to effect such action.
(d) AMENDED INVESTORS' RIGHTS AGREEMENT. The
Amended Investors' Rights Agreement shall have been executed and delivered by
the parties thereto. The Company agrees to use its best efforts to effect such
action.
6. MISCELLANEOUS.
6.1 GOVERNING LAW. This Agreement shall be governed in
all respects by the laws of the State of California.
13.
<PAGE> 18
6.2 SURVIVAL. The representations, warranties, covenants,
and agreements made herein shall survive any investigation made by any Purchaser
and the closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or other instrument delivered by or
on behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.
6.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors, and administrators of
the parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Shares from time to time; provided, however,
that prior to the receipt by the Company of adequate written notice of the
transfer of any Shares specifying the full name and address of the transferee,
the Company may deem and treat the person listed as the holder of such Shares in
its records as the absolute owner and holder of such Shares for all purposes,
the payment of any dividends or any redemption price.
6.4 ENTIRE AGREEMENT. This Agreement, the Exhibits and
Schedules hereto and the Amended Investors' Rights Agreement and the other
documents delivered pursuant hereto constitute the full and entire understanding
and agreement between the parties with regard to the subjects hereof and no
party shall be liable or bound to any other in any manner by any
representations, warranties, covenants, and agreements except as specifically
set forth herein. Nothing in this Agreement or the Amended Investors' Rights
Agreement, express or implied, is intended to confer upon any party, other than
the parties hereto, and their respective successors and assigns, any rights,
remedies, obligations, or liabilities under or by reason of this Agreement or
the Amended Investors' Rights Agreement, except as expressly provided herein.
6.5 SEPARABILITY. In case any provision of the Agreement
shall be invalid, illegal, or unenforceable, the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
6.6 AMENDMENT AND WAIVER.
(a) This Agreement may be amended or modified
only upon the written consent of the holders of not less than a majority in
interest of the Shares (treated as if converted and including any Conversion
Shares into which the Shares have been converted that have not been sold to the
public).
(b) The obligations of the Company and the
rights of the holders of the Shares and the Conversion Shares under the
Agreement may be waived only with the written consent of the holders of not less
than a majority of the Shares (treated as if converted and including any
Conversion Shares into which the Shares have been converted that have not been
sold to the public).
14.
<PAGE> 19
(c) Except to the extent provided in this
Section 6.6, neither this Agreement nor any provision hereof may be changed,
waived, discharged, or terminated, except by a statement in writing signed by
the party against which enforcement of the change, waiver, discharge, or
termination is sought.
6.7 DELAYS OR OMISSIONS. It is agreed that no delay or
omission to exercise any right, power, or remedy accruing to any Purchaser, upon
any breach, default or noncompliance of the Company under this Agreement, the
Amended Investors' Rights Agreement or under the Restated Articles, shall impair
any such right, power, or remedy, nor shall it be construed to be a waiver of
any such breach, default or noncompliance, or any acquiescence therein, or of or
in any similar breach, default or noncompliance thereafter occurring. It is
further agreed that any waiver, permit, consent, or approval of any kind or
character on any Purchaser's part of any breach, default or noncompliance under
this Agreement, the Amended Investors' Rights Agreement or under the Restated
Articles or any waiver on such Purchaser's part of any provisions or conditions
of the Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, the Amended Investors' Rights Agreement, the Restated Articles, by
law, or otherwise afforded to Purchasers, shall be cumulative and not
alternative.
6.8 NOTICES, ETC. All notices and other communications
required or permitted hereunder shall be in writing and shall be sent by
registered or certified mail, return receipt requested, postage prepaid, or by
means of a nationally recognized overnight courier service, and, if to an
address outside the United States of America, by telex transmitted substantially
concurrently with the mailing of such written notice, addressed: (a) if to a
Purchaser, at such Purchaser's address as set forth on the Company's records, or
at such other address as such Purchaser shall have furnished to the Company in
writing or (b) if to the Company, at its address as set forth at the end of this
Agreement, or at such other address as the Company shall have furnished to the
Purchasers in writing.
6.9 EXPENSES. The Company shall pay all costs and
expenses that it incurs with respect to the negotiation, execution, delivery and
performance of the Agreement, and the Purchasers shall pay all costs and
expenses that they incur with respect to the negotiation, execution, delivery
and performance of the Agreement.
6.10 ATTORNEYS' FEES. If legal action is brought to
enforce or interpret this Agreement, the prevailing party shall be entitled to
recover its reasonable attorneys' fees and legal costs in connection therewith.
6.11 TITLES AND SUBTITLES. The titles of the paragraphs
and subparagraphs of the Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
6.12 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
15.
<PAGE> 20
6.13 BROKER'S FEES. Each party hereto represents and
warrants that no agent, broker, investment banker, person or firm acting on
behalf of or under the authority of such party hereto is or will be entitled to
any broker's or finder's fee or any other commission directly or indirectly in
connection with the transactions contemplated herein. Each party hereto further
agrees to indemnify each other party for any claims, losses or expenses incurred
by such other party as a result of the representation in this Section 6.13 being
untrue.
16.
<PAGE> 21
IN WITNESS WHEREOF, the parties hereto have executed the Agreement as
of the date set forth in the first paragraph hereof.
COMPANY:
STERITECH, INC.
2525 Stanwell Drive
Concord, CA 94520
By: /s/ Stephen T. Isaacs
-----------------------------
Stephen T. Isaacs
President
PURCHASERS:
H. RAYMOND BINGHAM
Initial In Space Below If Purchaser CANNOT
make the Investment Representations in
Section 4.3 hereof:
By:/s/ H. Raymond Bingham
-----------------------------
--------
----------------------------- Initials
(Title, if applicable)
B. J. CASSIN Initial In Space Below If Purchaser CANNOT
make the Investment Representations in
By:/s/ B. J. Cassin Section 4.3 hereof:
-----------------------------
--------
----------------------------- Initials
(Title, if applicable)
17.
<PAGE> 22
B. J. CASSIN, CONSERVATOR FOR ROBERT Initial In Space Below If Purchaser CANNOT
CASSIN make the Investment Representations in
Section 4.3 hereof:
--------
By:/s/ B. J. Cassin Initials
-------------------------------
Conservator
-------------------------------
(Title, if applicable)
WARREN G. CHRISTIANSON Initial In Space Below If Purchaser CANNOT
make the Investment Representations in
Section 4.3 hereof:
--------
By:/s/ Warren G. Christianson Initials
-------------------------------
-------------------------------
(Title, if applicable)
J. ROBERT COLEMAN, JR. AND DIANE S. Initial In Space Below If Purchaser CANNOT
COLEMAN make the Investment Representations in
Section 4.3 hereof:
--------
By:/s/ J. Robert Coleman, Jr. Initials
------------------------------
By:/s/ Diane S. Coleman
------------------------------
------------------------------
(Title, if applicable)
COMDISCO, INC. Initial In Space Below If Purchaser CANNOT
make the Investment Representations in
Section 4.3 hereof:
By:/s/ Jill C. Hanses
------------------------------ --------
Initials
Assistant Vice President
- ---------------------------------
(Title, if applicable)
18.
<PAGE> 23
A. CRAWFORD COOLEY Initial In Space Below If Purchaser CANNOT
make the Investment Representations in
Section 4.3 hereof:
By:/s/ A. Crawford Cooley
----------------------------- --------
Initials
- --------------------------------
(Title, if applicable)
ROBERT A. COOLEY Initial In Space Below If Purchaser CANNOT
make the Investment Representations in
Section 4.3 hereof:
--------
By:/s/ Robert A. Cooley Initials
-----------------------------
- --------------------------------
(Title, if applicable)
CORAL PARTNERS II, A LIMITED Initial In Space Below If Purchaser CANNOT
PARTNERSHIP make the Investment Representations in
Section 4.3 hereof:
By: Coral Management Partners,
II, its general partner
--------
Initials
By:/s/ Peter H. McNerney
-----------------------------
General Partner
- --------------------------------
(Title, if applicable)
CORAL PARTNERS IV, A LIMITED Initial In Space Below If Purchaser CANNOT
PARTNERSHIP make the Investment Representations in
Section 4.3 hereof:
By: Coral Management Partners
IV, its general partner
--------
Initials
By:/s/ Peter H. McNerney
-----------------------------
General Partner
- --------------------------------
(Title, if applicable)
19.
<PAGE> 24
JOSEPH B. COSTELLO AND MARGARET M. Initial In Space Below If Purchaser
COSTELLO, TRUSTEES OF THE COSTELLO CANNOT make the Investment
FAMILY TRUST UDT DTD 10/21/92 Representations in Section 4.3
hereof:
--------
By:/s/ Joseph B. Costello Initials
-----------------------------
By:/s/ Margaret M. Costello
-----------------------------
Trustees
- --------------------------------
(Title, if applicable)
DAIN BOSWORTH, INC., CUSTODIAN FBO Initial In Space Below If Purchaser
YUVAL ALMOG SEP-IRA CANNOT make the Investment
Representations in Section 4.3
hereof:
--------
By:/s/ P.H. Colbert Initials
-----------------------------
- --------------------------------
(Title, if applicable)
DELAWARE CHARTER GUARANTEE & Initial In Space Below If Purchaser
TRUST COMPANY TTEE FBO DONALD CANNOT make the Investment
GRIERSON MONEY-PURCHASE PENSION Representations in Section 4.3
PLAN 14-60330 hereof:
--------
Initials
By:/s/ Gilbert E. Posada
-----------------------------
Sr. Administrator
- --------------------------------
(Title, if applicable)
20.
<PAGE> 25
ANGELO DELAPORTA, TRUSTEE OF THE Initial In Space Below If Purchaser CANNOT
DELAPORTA FAMILY TRUST DTD 8/16/82 make the Investment Representations in
Section 4.3 hereof:
--------
By:/s/ Angelo Delaporta Initials
-----------------------------
Trustee
-----------------------------
(Title, if applicable)
GERALD C. DOWN Initial In Space Below If Purchaser CANNOT
make the Investment Representations in
Section 4.3 hereof:
--------
Initials
By:/s/ Gerald C. Down
-----------------------------
- --------------------------------
(Title, if applicable)
GERDES HUFF INVESTMENTS Initial In Space Below If Purchaser CANNOT
make the Investment Representations in
Section 4.3 hereof:
--------
Initials
By:/s/ Larry Gerdes
-----------------------------
General Partner
- --------------------------------
(Title, if applicable)
THE TRUSTEES OF THE WALLACE R. Initial In Space Below If Purchaser CANNOT
HAWLEY AND ALEXANDRA HAWLEY make the Investment Representations in
REVOCABLE TRUST, U/A/D 7/30/92 Section 4.3 hereof:
--------
Initials
By:/s/ Wallace Hawley
-----------------------------
Trustee
- --------------------------------
(Title, if applicable)
21.
<PAGE> 26
JEFFREY O. HENLEY AND JUDY HENLEY, Initial In Space Below If Purchaser CANNOT
TTTEES JEFFREY AND JUDY HENLEY make the Investment Representations in
TRUST I, DTD 10/23/89 Section 4.3 hereof:
--------
Initials
By:/s/ Jeffrey O. Henley
-----------------------------
By:/s/ Jedy Henley
- --------------------------------
Trustee
- --------------------------------
(Title, if applicable)
FRANK C. HERRINGER AND MARYELLEN C. Initial In Space Below If Purchaser CANNOT
HERRINGER make the Investment Representations in
Section 4.3 hereof:
--------
Initials
By:/s/ Frank C. Herringer
-----------------------------
By:/s/ Maryellen C. Herringer
- --------------------------------
- --------------------------------
(Title, if applicable)
PETER HOWLEY Initial In Space Below If Purchaser CANNOT
make the Investment Representations in
Section 4.3 hereof:
--------
Initials
By:/s/ Peter Howley
-----------------------------
- --------------------------------
(Title, if applicable)
PAUL K. JOAS Initial In Space Below If Purchaser CANNOT
make the Investment Representations in
Section 4.3 hereof:
By:/s/ Paul K. Joas --------
----------------------------- Initials
- --------------------------------
(Title, if applicable)
22.
<PAGE> 27
VISIPLEX INVESTMENTS LIMITED, A Initial In Space Below If Purchaser CANNOT
DELAWARE LIMITED PARTNERSHIP make the Investment Representations in
Section 4.3 hereof:
--------
Initials
By:/s/ I. Ben Joseph
-----------------------------
General Partner
- --------------------------------
(Title, if applicable)
SAN FRANCISCO INTERNATIONAL Initial In Space Below If Purchaser CANNOT
INVESTORS make the Investment Representations in
Section 4.3 hereof:
--------
Initials
By:/s/ Robert E. King
-----------------------------
Managing Partner
- --------------------------------
(Title, if applicable)
ROBERT ELIOT KING, TRUSTEE UNDER Initial In Space Below If Purchaser CANNOT
THE TRUST OF THE R.E.K. PROFIT make the Investment Representations in
SHARING PLAN Section 4.3 hereof:
--------
Initials
By:/s/ Robert Eliot King
-----------------------------
Trustee
- --------------------------------
(Title, if applicable)
ROY KIRKORIAN Initial In Space Below If Purchaser CANNOT
make the Investment Representations in
Section 4.3 hereof:
--------
Initials
By:/s/ Roy Kirkorian
-----------------------------
- --------------------------------
(Title, if applicable)
23.
<PAGE> 28
PETER H. MCNERNEY Initial In Space Below If Purchaser CANNOT
make the Investment Representations in
Section 4.3 hereof:
--------
By:/s/ Peter H. McNerney Initials
---------------------------
- ------------------------------
(Title, if applicable)
WAYNE W. MILLS Initial In Space Below If Purchaser CANNOT
make the Investment Representations in
Section 4.3 hereof:
--------
Initials
By:/s/ Wayne W. Mills
---------------------------
- ------------------------------
(Title, if applicable)
MOTETE CORPORATION Initial In Space Below If Purchaser CANNOT
make the Investment Representations in
Section 4.3 hereof:
--------
By:/s/ Gabriel De La Guardia Initials
---------------------------
Attorney-In-Fact
- ------------------------------
(Title, if applicable)
ALBERTO PEREZ Initial In Space Below If Purchaser CANNOT
make the Investment Representations in
Section 4.3 hereof:
--------
By:/s/ Alberto Perez Initials
---------------------------
- ------------------------------
(Title, if applicable)
24.
<PAGE> 29
NOEL P. RAHN Initial In Space Below If Purchaser CANNOT
make the Investment Representations in
Section 4.3 hereof:
--------
By:/s/ Noel P. Rahn Initials
-----------------------------
- --------------------------------
(Title, if applicable)
HENRY E. STICKNEY, TRUSTEE OF THE Initial In Space Below If Purchaser CANNOT
STICKNEY FAMILY TRUST, DTD 11/26/86 make the Investment Representations in
Section 4.3 hereof:
--------
Initials
By:/s/ Henry E. Stickney
-----------------------------
Trustee
- --------------------------------
(Title, if applicable)
GREGORY V. VAUGHAN Initial In Space Below If Purchaser CANNOT
make the Investment Representations in
Section 4.3 hereof:
--------
By:/s/ Gregory V. Vaughan Initials
-----------------------------
- --------------------------------
(Title, if applicable)
JEFFREY L. WALKER Initial In Space Below If Purchaser CANNOT
make the Investment Representations in
Section 4.3 hereof:
--------
By:/s/ Jeffrey L. Walker Initials
-----------------------------
- --------------------------------
(Title, if applicable)
25.
<PAGE> 30
JEFF WEBALOWSKY Initial In Space Below If Purchaser CANNOT
make the Investment Representations in
Section 4.3 hereof:
--------
By:/s/ Jeff Webalowsky Initials
-----------------------------
- --------------------------------
(Title, if applicable)
KURT A. LATTA, TTEE FOR THE LATTA Initial In Space Below If Purchaser CANNOT
1990 FAMILY TRUST make the Investment Representations in
Section 4.3 hereof:
--------
Initials
By:/s/ Kurt A. Latta
-----------------------------
Trustee
- --------------------------------
(Title, if applicable)
RICHARD M. LUCAS CANCER FOUNDATION Initial In Space Below If Purchaser CANNOT
make the Investment Representations in
Section 4.3 hereof:
--------
By:/s/ Donald L. Lucas Initials
-----------------------------
Chairman of the Board
- --------------------------------
(Title, if applicable)
HAROLD W. MILNER Initial In Space Below If Purchaser CANNOT
make the Investment Representations in
Section 4.3 hereof:
--------
By:/s/ Harold W. Milner Initials
-----------------------------
- --------------------------------
(Title, if applicable)
26.
<PAGE> 31
GC&H INVESTMENTS Initial In Space Below If Purchaser CANNOT
make the Investment Representations in
Section 4.3 hereof:
--------
By:/s/ John L. Cardoza Initials
-----------------------------
Executive Partner
- --------------------------------
(Title, if applicable)
DOUGLAS AND KIMBERLY STICKNEY Initial In Space Below If Purchaser CANNOT
make the Investment Representations in
Section 4.3 hereof:
--------
By:/s/ Douglas Stickney Initials
-----------------------------
/s/ Kimberly Stickney
- --------------------------------
- --------------------------------
(Title, if applicable)
CLAUDE GANZ Initial In Space Below If Purchaser CANNOT
make the Investment Representations in
Section 4.3 hereof:
--------
By:/s/ Claude Ganz Initials
-----------------------------
- --------------------------------
(Title, if applicable)
27.
<PAGE> 32
EXHIBIT A
STERITECH, INC.
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
CASH NO. OF
INVESTORS INVESTMENT SHARES
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
H. Raymond Bingham $24,990.00 2,380
c/o Cadence Design Systems
2655 Sealy Ave., Bldg. 5
San Jose, CA 95134
- -------------------------------------------------------------------------------------------------------------------------
B.J. Cassin $24,990.00 2,380
3000 Sand Hill Road, #3-210
Menlo Park, CA 94025
- -------------------------------------------------------------------------------------------------------------------------
B.J. Cassin, Conservator for Robert Cassin $24,990.00 2,380
3000 Sand Hill Road, #3-210
Menlo Park, CA 94025
- -------------------------------------------------------------------------------------------------------------------------
Warren G. Christianson $49,990.50 4,761
c/o The Springs Club
#2 Tulane Court
Rancho Mirage, CA 92270
- -------------------------------------------------------------------------------------------------------------------------
J. Robert Coleman, Jr. and Diane S. Coleman $26,250.00 2,500
148 Dracena Avenue
Piedmont, CA 94611
- -------------------------------------------------------------------------------------------------------------------------
Comdisco, Inc. $49,990.50 4,761
3000 Sand Hill Road, Suite 1-290
Menlo Park, CA 94025
- -------------------------------------------------------------------------------------------------------------------------
A. Crawford Cooley $ 9,996.00 952
Post Office Box 1146
Novato, CA 94947
- -------------------------------------------------------------------------------------------------------------------------
Robert A. Cooley $ 7,497.00 714
Post Office Box 676
Sonoma, CA 95476
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
29.
<PAGE> 33
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
CASH NO. OF
INVESTORS INVESTMENT SHARES
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Coral Partners II, a limited partnership $ 999,999.00 95,238
60 South Sixth Street, Suite 3510
Minneapolis, MN 55402
Attn: Mark C. Headrick
- -------------------------------------------------------------------------------------------------------------------------
Coral Partners IV, Limited Partnership $1,999,998.00 190,476
60 South Sixth Street, Suite 3510
Minneapolis, MN 55402
Attn: Mark C. Headrick
- -------------------------------------------------------------------------------------------------------------------------
Joseph B. Costello and Margaret M. Costello, $ 44,992.50 4,285
TTEES of the Costello Family Trust UDT dtd
10/21/92
55 Stadler Drive
Woodside, CA 94062
- -------------------------------------------------------------------------------------------------------------------------
Dain Bosworth, Inc. $ 19,992.00 1,904
Custodian FBO Yuval Almog Sep.-IRA
IFG Operations Group/IRA Dept.
312 S. 3rd Street
Minneapolis, MN 55415
Attn: Marcie Foss
- -------------------------------------------------------------------------------------------------------------------------
Delaware Charter Guarantee & Trust TTEE FBO $ 99,991.50 9,523
Don Grierson Money-Purchase Pension Plan 14-
60330
10777 Northwest Freeway, #700
Houston, TX 77092
- -------------------------------------------------------------------------------------------------------------------------
Angelo Delaporta, Trustee Delaporta Family Trust $ 26,250.00 2,500
DTD 8/16/82
89 Mandarin Way
Atherton, CA 94027
- -------------------------------------------------------------------------------------------------------------------------
Gerald C. Down $ 24,990.00 2,380
578 Cresta Vista Lane
Portola Valley, CA 94028
- -------------------------------------------------------------------------------------------------------------------------
Gerdes Huff Investments $ 399,997.50 38,095
3353 Peachtree Road NE, #1030
Atlanta, GA 30326
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
29.
<PAGE> 34
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
CASH NO. OF
INVESTORS INVESTMENT SHARES
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
The Trustees of The Wallace R. Hawley and $24,990.00 2,380
Alexandra Hawley Revocable Trust, U/A/D 7/30/92
3000 Sand Hill Road, Suite 3-255
Menlo Park, CA 94025
- --------------------------------------------------------------------------------------------------------------
Jeffrey O. Henley & Judy Henley, TTEES, Jeffrey $24,990.00 2,380
and Judy Henley Trust I, DTD 10/23/89
51 Monte Vista
Atherton, CA 94027
- --------------------------------------------------------------------------------------------------------------
Frank C. Herringer & Maryellen C. Herringer $49,990.50 4,761
600 Montgomery Street
San Francisco, CA 94111
- --------------------------------------------------------------------------------------------------------------
Peter Howley $74,991.00 7,142
25 Cornwall Street
Mill Valley, CA 94941
- --------------------------------------------------------------------------------------------------------------
Paul K. Joas $49,990.50 4,761
6209 South Knoll Drive
Edina, MN 55436
- --------------------------------------------------------------------------------------------------------------
Visiplex Investments Limited, A Delaware limited $29,998.50 2,857
partnership
c/o Ben Joseph
Advanced Telecommunications Service, Inc.
1161-C Lake Cook Road
Deerfield, IL 60015
- --------------------------------------------------------------------------------------------------------------
San Francisco International Investors $24,990.00 2,380
c/o R. Eliot King & Associates
3000 Sand Hill Road, Suite 2-245
Menlo Park, CA 94025
Attn: Robert E. King, Managing Partner
- --------------------------------------------------------------------------------------------------------------
Robert Eliot King, Trustee under the trust of the $74,991.00 7,142
R.E.K. Profit Sharing Plan
R. Eliot King & Associates
3000 Sand Hill Road, Suite 2-245
Menlo Park, CA 94025
- --------------------------------------------------------------------------------------------------------------
Roy Kirkorian $49,990.50 4,761
211 Lafayette Avenue
Piedmont, CA 94611
- --------------------------------------------------------------------------------------------------------------
</TABLE>
30.
<PAGE> 35
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
CASH NO. OF
INVESTORS INVESTMENT SHARES
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Peter H. McNerney $ 9,996.00 952
Coral Group, Inc.
60 S. Sixth Street, Suite 3510
Minneapolis, MN 55402
- ---------------------------------------------------------------------------------------------------------------
Wayne Mills $ 19,992.00 1,904
R. J. Steichen
1660 South Highway 100, Suite 300
St. Louis Park, MN 55416
- ---------------------------------------------------------------------------------------------------------------
MOTETE Corporation $ 26,250.00 2,500
c/o Gabriel de la Guardia
P.O. Box 8052
Panama 7, Republic of Panama
- ---------------------------------------------------------------------------------------------------------------
Alberto Perez $ 26,250.00 2,500
P.O. Box 6072-1000
San Jose, Costa Rica
Costa rica
- ---------------------------------------------------------------------------------------------------------------
Noel P. Rahn $299,995.50 28,571
c/o Investment Advisers, Inc.
3700 First Bank Place
601 2nd Avenue S.
Minneapolis, MN 55402
- ---------------------------------------------------------------------------------------------------------------
Henry E. Stickney, Trustee of the Stickney Family $ 9,996.00 952
Trust, DTD 11/26/86
c/o Valley Baseball
8408 Chester Street
Rancho Cucamonga, CA 91730
- ---------------------------------------------------------------------------------------------------------------
Gregory V. Vaughan $ 19,992.00 1,904
Morgan Stanley & Co.
555 California Street
San Francisco, CA 94104
- ---------------------------------------------------------------------------------------------------------------
Jeffrey L. Walker $ 24,990.00 2,380
30 Hill Road
P.O. Box 1309
Ross, CA 94957
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
31.
<PAGE> 36
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
CASH NO. OF
INVESTORS INVESTMENT SHARES
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Jeff Werbalowsky $19,992.00 1,904
Houlihan, Lokey, Howard & Zukin
601 Second Avenue South, Suite 3250
Minneapolis, MN 55402
- --------------------------------------------------------------------------------------------------------------
</TABLE>
32.
<PAGE> 37
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
CASH NO. OF
INVESTORS INVESTMENT SHARES
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Kurt A. Latta, Ttte of the Latta 1990 Family Trust
750 Menlo Avenue, # 250 $ 24,150 2,300
Menlo Park, CA 94025
- --------------------------------------------------------------------------------------------------------------
TOTALS: $4,721,430.000 449,660.00
- --------------------------------------------------------------------------------------------------------------
</TABLE>
33.
<PAGE> 1
EXHIBIT 10.14
STERITECH, INC.
SERIES E PREFERRED STOCK PURCHASE AGREEMENT
APRIL 1, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
1. AGREEMENT TO SELL AND PURCHASE................................................................ 1
1.1 Authorization of Shares.............................................................. 1
1.2 Sale and Purchase of Series E Shares................................................. 1
2. CLOSING, DELIVERY AND PAYMENT................................................................. 1
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................................. 2
3.1 Organization, Good Standing and Qualification........................................ 2
3.2 Capitalization....................................................................... 2
3.3 Authorization; Binding Obligations................................................... 3
3.4 Agreements; Action................................................................... 3
3.5 Obligations to Related Parties....................................................... 4
3.6 Financial Statements................................................................. 4
3.7 Changes.............................................................................. 5
3.8 Title to Properties and Assets; Liens, etc........................................... 6
3.9 Patents and Trademarks............................................................... 6
3.10 Compliance with Other Instruments.................................................... 6
3.11 Litigation........................................................................... 7
3.12 Tax Returns and Payments............................................................. 7
3.13 Employees............................................................................ 7
3.14 Restricted Stock Purchase Agreements................................................. 8
3.15 Registration Rights.................................................................. 8
3.16 Compliance with Laws................................................................. 8
3.17 Offering Valid....................................................................... 8
3.18 Securities Exemption................................................................. 8
3.19 Full Disclosure...................................................................... 8
3.20 Permits.............................................................................. 9
3.21 Insurance............................................................................ 9
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER................................................... 9
4.1 Requisite Power and Authority........................................................ 9
4.2 Consents............................................................................. 9
4.3 Investment Representations........................................................... 10
(a) Purchaser Bears Economic Risk............................................... 10
(b) Acquisition for Own Account................................................. 10
(c) Purchaser Can Protect Its Interest.......................................... 10
(d) Company Information......................................................... 10
5. CONDITIONS TO CLOSING......................................................................... 10
5.1 Conditions to Purchaser's Obligations at the Closing................................. 10
(a) Representations and Warranties True; Performance of
Obligations.......................................................................... 11
</TABLE>
i.
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
(b) Legal Investment............................................................ 11
(c) Consents, Permits, and Waivers.............................................. 11
(d) Corporate Documents......................................................... 11
(e) Reservation of Conversion Shares............................................ 11
(f) Filing of Restated Articles................................................. 11
(g) Certificate of Status....................................................... 11
(h) Compliance Certificate...................................................... 11
(i) Investors' Rights Agreement................................................. 11
(j) Proceedings and Documents................................................... 11
(k) Legal Opinion............................................................... 12
5.2 Conditions to Obligations of the Company. .......................................... 12
(a) Representations and Warranties True......................................... 12
(b) Performance of Obligations.................................................. 12
(c) Filing of Restated Articles................................................. 12
(d) Investors' Rights Agreement................................................. 12
6. MISCELLANEOUS................................................................................. 12
6.1 Governing Law........................................................................ 12
6.2 Survival............................................................................. 12
6.3 Successors and Assigns............................................................... 12
6.4 Entire Agreement..................................................................... 13
6.5 Separability......................................................................... 13
6.6 Amendment and Waiver................................................................. 13
6.7 Delays or Omissions.................................................................. 13
6.8 Notices, etc......................................................................... 14
6.9 Expenses............................................................................. 14
6.10 Attorneys' Fees...................................................................... 14
6.11 Titles and Subtitles................................................................. 14
6.12 Counterparts......................................................................... 14
6.13 Broker's Fees........................................................................ 14
</TABLE>
ii.
<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
LIST OF EXHIBITS
Exhibit A AMENDED AND RESTATED ARTICLES OF INCORPORATION
Exhibit B SCHEDULE OF EXCEPTIONS
Exhibit C INVESTORS' RIGHTS AGREEMENT
Exhibit D OPINION OF COUNSEL TO THE COMPANY
Exhibit E FINANCIAL STATEMENTS OF THE COMPANY
iii.
<PAGE> 5
STERITECH, INC.
SERIES E PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES E PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is
entered into as of April 1, 1996, by and between STERITECH, INC., a California
corporation (the "Company") and BAXTER HEALTHCARE CORPORATION, a Delaware
corporation ("Purchaser").
RECITALS
WHEREAS, the Company has authorized the sale and issuance of an
aggregate of Three Hundred Eighty Thousand Nine Hundred Fifty-Three (380,953)
shares of its Series E Preferred Stock (the "Series E Shares" or the "Shares");
and
WHEREAS, Purchaser desire to purchase the Series E Shares on the terms
and conditions set forth herein; and
WHEREAS, the Company desires to issue and sell the Series E Shares to
Purchaser on the terms and conditions set forth herein; and
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the parties hereto agree as follows:
1. AGREEMENT TO SELL AND PURCHASE.
1.1 AUTHORIZATION OF SHARES. On or prior to the Initial
Closing (as defined in Section 2 below), the Company shall have authorized the
sale and issuance to Purchaser of the Shares having the rights, preferences,
privileges and restrictions set forth in the Amended and Restated Articles of
Incorporation of the Company, as amended, in the form attached hereto as Exhibit
A (the "Restated Articles"). The Company has, or prior to the Initial Closing
will have, adopted and filed the Restated Articles with the Secretary of State
of the State of California.
1.2 SALE AND PURCHASE OF SERIES E SHARES. Subject to the terms
and conditions hereof, the Company hereby agrees to issue and sell to Purchaser
and Purchaser agrees to purchase from the Company, at the Initial Closing, One
Hundred Ninety Thousand Four Hundred Seventy-Seven (190,477) Series E Shares and
at the Second Closing (as defined in Section 2 below), One Hundred Ninety
Thousand Four Hundred Seventy-Six (190,476) Series E shares at a purchase price
of Fifteen Dollars and Seventy-Five Cents ($15.75) per share.
2. CLOSING, DELIVERY AND PAYMENT.
The initial closing of the sale and purchase of the Series E
Shares under this Agreement (the "Initial Closing") shall take place at 10:00
a.m., local time, on April 1, 1996
1.
<PAGE> 6
at the offices of Cooley Godward Castro Huddleson & Tatum, One Maritime Plaza,
20th floor, San Francisco, California 94111, or at such other time or place as
the Company and Purchaser may mutually agree. The second closing of the sale and
purchase of the Shares under this Agreement (the "Second Closing") shall take
place at the same time and place as the First Closing on July 1, 1996 unless the
Company and Purchaser mutually agree upon another date for the Second Closing.
Each of the Initial Closing and the Second Closing is referred to herein as a
"Closing," and the date of each such Closing is referred to as a "Closing Date."
At each Closing, subject to the terms and conditions hereof, the Company will
deliver to Purchaser a certificate representing the number of Series E Shares to
be purchased at such closing by Purchaser from the Company against payment by or
on behalf of Purchaser of the purchase price therefor by cash, wire transfer, or
by such other means as shall be mutually agreeable to Purchaser and the Company.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth on the Schedule of Exceptions attached
hereto as Exhibit B, including any changes thereto necessary to make such
Schedule accurate as of the date of each Closing, the Company hereby represents
and warrants to Purchaser as follows:
3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company
is a corporation duly organized, validly existing, and in good standing under
the laws of the State of California. The Company has full power and authority to
own and operate its properties and assets, and to carry on its business as
presently conducted. The Company is duly qualified and is authorized to do
business and is in good standing as a foreign corporation in all jurisdictions
in the aggregate in which the nature of its activities and of its properties
(both owned and leased) makes such qualification necessary, except for those
jurisdictions, in the aggregate, in which failure to do so would not have a
material adverse effect on the Company or its business. The Company has no
subsidiaries and owns no equity securities of any other corporation, limited
partnership or similar entity.
3.2 CAPITALIZATION. The authorized capital stock of the
Company consists of four million six hundred eighty-one thousand eight hundred
thirty-three (4,681,833) shares of Common Stock, nine hundred sixty-four
thousand five hundred fifty-five (964,555) shares of which are issued and
outstanding; and three million one hundred ninety-nine thousand nine hundred
forty-two (3,199,942) shares of Preferred Stock, seven hundred sixty-one
thousand seventy-nine (761,079) of which are designated Series A Preferred
Stock, seven hundred fourteen thousand two hundred eighty-six (714,286) of which
are issued and outstanding and three hundred five thousand four hundred
sixty-one (305,461) of which are designated Series B Preferred Stock, two
hundred eighty-five thousand seven hundred fourteen (285,714) of which are
issued and outstanding, and one million one hundred forty-seven thousand four
hundred forty-nine (1,147,449) of which are designated Series C Preferred Stock,
one million ninety-one thousand five hundred ninety-three (1,091,593) of which
are issued and outstanding, six hundred five thousand (605,000) of which are
designated Series D Preferred Stock, five hundred twenty-nine thousand
eighty-four (529,084) of which are issued and outstanding, and three hundred
eighty thousand nine hundred fifty-three (380,953) of which are designated
Series E Preferred Stock, none of which are issued and outstanding. Six hundred
thousand (600,000) shares of
2.
<PAGE> 7
Common Stock are reserved for future issuance upon the exercise of options for
shares of Common Stock and two million six hundred eighty-nine thousand four
hundred seventy (2,689,470) shares of Common Stock are reserved for issuance
upon exercise or conversion, respectively, of outstanding warrants for or shares
of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock
and Series D Preferred Stock. All issued and outstanding shares of the Company's
Common Stock have been duly authorized and validly issued, are fully paid and
nonassessable, and were issued in compliance with all applicable state and
federal laws concerning the issuance of securities. The rights, preferences,
privileges and restrictions of the Shares are as stated in the Restated
Articles. The shares of Common Stock issuable upon the conversion of the Shares
(the "Conversion Shares") have been duly and validly reserved for issuance and,
when issued in accordance with the Restated Articles, will be validly issued,
fully paid and nonassessable. Except for (i) the conversion privileges of the
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock, (ii) the rights of first refusal applicable to the
Company's Common Stock set forth in the Company's Bylaws and in the Investors'
Rights Agreement dated December 27, 1991, as amended on December 10, 1993, and
March 14, 1994, and as amended and restated on March 1, 1995 (the "Investors'
Rights Agreement"), (iii) the options for shares of Common Stock identified
above, (iv) the warrants issued in connection with certain leasing transactions
and (v) the warrants for Series B and Series C Preferred Stock issued in
connection with the May 14, 1993 and August 13, 1993 bridge financings, there
are no outstanding options, warrants, rights (including conversion or preemptive
rights), proxy or shareholder agreements, or agreements of any kind for the
purchase or acquisition from the Company of any of its securities.
3.3 AUTHORIZATION; BINDING OBLIGATIONS. All corporate action
on the part of the Company, its officers, directors and shareholders necessary
for the authorization, execution and delivery of this Agreement, the Investors'
Rights Agreement, in the form attached hereto as Exhibit C, and the Restated
Articles, and the sale and issuance of the Shares and the Conversion Shares
pursuant hereto, and for the performance of the Company's obligations hereunder
and under the Investors' Rights Agreement has been taken or will be taken prior
to each Closing. The Agreement and the Investors' Rights Agreement, when
executed and delivered, will be valid and binding obligations of the Company
enforceable in accordance with their terms. The sale of the Series E Shares and
the subsequent conversion of Shares into Conversion Shares are not and will not
be subject to any preemptive rights or rights of first refusal that have not
been properly waived or complied with. When issued in compliance with the
provisions of this Agreement and the Restated Articles, the Shares and the
Conversion Shares will be validly issued, fully paid and nonassessable, and will
be free of any liens or encumbrances; provided, however, that the Shares and the
Conversion Shares may be subject to restrictions on transfer under state and/or
federal securities laws as set forth herein or as otherwise required by such
laws at the time a transfer is proposed.
3.4 AGREEMENTS; ACTION.
(A) Except for agreements explicitly
contemplated hereby and the Investors' Rights Agreement, there are no
agreements, understandings or proposed transactions between the Company and any
of its officers, directors and affiliates, or any affiliate thereof.
3.
<PAGE> 8
(B) There are no agreements, understandings,
instruments, contracts, proposed transactions, judgments, orders, writs or
decrees to which the Company is a party or by which it is bound which may
involve (i) obligations (contingent or otherwise) of, or payments to, the
Company in excess of $25,000, or (ii) the license of any patent, copyright,
trade secret or other proprietary right to or from the Company or (iii)
provisions restricting or affecting the development, manufacture or distribution
of the Company's products or services or (iv) indemnification by the Company
with respect to infringements of proprietary rights.
(C) The Company has not (i) declared or paid any
dividends, or authorized or made any distribution upon or with respect to any
class or series of its capital stock, (ii) incurred any indebtedness for money
borrowed or any other liabilities individually in excess of $50,000 or, in the
case of indebtedness and/or liabilities individually less than $25,000, in
excess of $125,000 in the aggregate, (iii) made any loans or advances to any
person, other than ordinary advances for travel expenses, or (iv) sold,
exchanged or otherwise disposed of any of its assets or rights, or contracted to
do so, other than the sale of its inventory in the ordinary course of business.
(D) For the purposes of subsections (b) and (c)
above, all indebtedness, liabilities, agreements, understandings, instruments,
contracts and proposed transactions involving the same person or entity
(including persons or entities the Company has reason to believe are affiliated
therewith) shall be aggregated for the purpose of meeting the individual minimum
dollar amounts of such subsections.
(E) The Company is not a party to and is not
bound by any contract, agreement or instrument, or subject to any restriction
under its Restated Articles or Bylaws, which adversely affects its business as
now conducted or as proposed to be conducted, in its properties or its financial
condition.
3.5 OBLIGATIONS TO RELATED PARTIES. No employee, officer, or
director of the Company or member of his or her immediate family is indebted to
the Company, nor is the Company indebted (or committed to make loans or extend
or guarantee credit) to any of them. To the best of the Company's knowledge,
none of such persons has any direct or indirect ownership interest in any firm
or corporation with which the Company is affiliated or with which the Company
has a business relationship, or any firm or corporation that competes with the
Company, except for equity interest in HRI Research, Inc. and except that
employees, officers, or directors of the Company and members of their immediate
families may own stock in publicly traded companies that may compete with the
Company. No member of the immediate family of any officer or director of the
Company is directly or indirectly interested in any material contract with the
Company.
3.6 FINANCIAL STATEMENTS. Attached hereto as Exhibit E are
copies of the Company's unaudited balance sheet and income statement for the
year ended December 31, 1995 and of the Company's audited financial statements
for the twelve (12) months ended December 31, 1994 (the "Financial Statements").
The Financial Statements fairly present the financial condition and operating
results of the Company as of the dates, and for the periods, indicated therein
and have been prepared in accordance with generally accepted accounting
4.
<PAGE> 9
principles ("GAAP") applied on a consistent basis throughout the period,
subject, in the case of the unaudited balance sheet and income statement for the
twelve (12) months ended December 31, 1995, to the absence of footnotes and
year-end adjustments that are not in the aggregate expected to be material.
3.7 CHANGES. Since December 31, 1995, there has not
been:
(A) Any change in the assets, liabilities,
financial condition or operations of the Company as shown on the balance sheet
at December 31, 1995 contained in the Financial Statements, other than changes
in the ordinary course of business, none of which individually or in the
aggregate has had or is expected to have a material adverse effect on such
assets, liabilities, financial condition, or operations of the Company;
(B) Any change, except in the ordinary course of
business, in the contingent obligations of the Company by way of guaranty,
endorsement, indemnity, warranty, or otherwise;
(C) Any damage, destruction, or loss, whether or
not covered by insurance, materially and adversely affecting the properties,
business, financial condition, operations or prospects of the Company;
(D) Any waiver by the Company of a valuable
right or of a material debt owed to it;
(E) Any direct or indirect loans made by the
Company to any shareholder, employee, officer, or director of the Company, other
than advances made in the ordinary course of business;
(F) Any declaration or payment of any dividend
or other distribution of the assets of the Company;
(G) Any labor organization activity;
(H) Any debt, obligation, or liability incurred,
assumed or guaranteed by the Company, except current liabilities incurred in the
ordinary course of business (the sum of which does not exceed $10,000);
(I) Any change in any material agreement to
which the Company is a party or by which it or any of its assets are bound or
subject, including compensation agreements with the Company's employees; or
(J) To the best of the Company's knowledge, any
other event or condition of any character that, either individually or
cumulatively, has materially and adversely affected, or, so far as the Company
may now foresee, in the future may materially and adversely affect the business,
assets, liabilities, financial condition, operations or prospects of the
Company.
5.
<PAGE> 10
3.8 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. The Company
has good and marketable title to its properties and assets, and good title to
its leasehold estates, in each case subject to no mortgage, pledge, lien, lease,
encumbrance, or charge, other than (i) those resulting from taxes which have not
yet become delinquent and (ii) minor liens and encumbrances which do not
materially detract from the value of the property subject thereto or materially
impair the operations of the Company.
3.9 PATENTS AND TRADEMARKS. The Company has sufficient title
and ownership of all trade names, copyrights, trade secrets, proprietary
information, patents, trademarks, service marks, rights and processes necessary
for its business as now conducted and as proposed to be conducted without any
conflict with or infringement of the rights of others. There are no outstanding
options, licenses, or agreements of any kind relating to the foregoing, nor is
the Company bound by or a party to any options, licenses or agreements of any
kind with respect to the patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses, information, proprietary rights and
processes of any other person or entity. The Company has not received any
communications alleging that the Company has violated or, by conducting its
business as proposed, would violate any of the patents, trademarks, service
marks, trade names, copyrights or trade secrets or other proprietary rights of
any other person or entity. The Company is not aware that any of its employees
is obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with the use of his
best efforts to promote the interests of the Company or that would conflict with
the Company's business as proposed to be conducted. Neither the execution nor
delivery of this Agreement, or the Investors' Rights Agreement, nor the carrying
on of the Company's business by the employees of the Company, nor the conduct of
the Company's business as proposed, will, to the Company's knowledge, conflict
with or result in a breach of the terms, conditions or provisions of, or
constitute a default under, any contract, covenant or instrument under which any
of such employees is now obligated. The Company does not believe it is or will
be necessary to utilize any inventions of any of its employees (or people it
currently intends to hire) made prior to their employment by the Company.
3.10 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in
violation or default of any term of its Restated Articles or Bylaws, nor is it
in material violation or default of any mortgage, indenture, contract,
agreement, instrument, judgment, decree, order or any statute, rule, or
regulation applicable to the Company. The execution, delivery, and performance
of and compliance with this Agreement and the Investors' Rights Agreement and
the issuance and sale of the Series E Shares pursuant hereto and of the
Conversion Shares pursuant to the Restated Articles, will not result in any such
violation, or be in conflict with or constitute a default under any such term,
or result in the creation of any mortgage, pledge, lien, encumbrance, or charge
upon any of the properties or assets of the Company. There is no such term that
materially and adversely affects, or in the future may be reasonably expected to
materially and adversely affect the business, assets, liabilities, financial
condition, operations or prospects of the Company as now conducted or as
proposed to be conducted. The Company has avoided every condition, and has not
performed any act, the occurrence of which would result in the Company's loss of
any right granted under any license, distribution or other agreement.
6.
<PAGE> 11
3.11 LITIGATION. There is no action, suit, proceeding or
investigation pending or currently threatened against the Company which
questions the validity of this Agreement, the Investors' Rights Agreement or the
right of the Company to enter into them, or to consummate the transactions
contemplated hereby, or which might result, either individually or in the
aggregate, in any material adverse changes in the assets, condition, affairs or
prospects of the Company, financially or otherwise, or any change in the current
equity ownership of the Company, nor is the Company aware that there is any
basis for the foregoing. The foregoing includes, without limitation, actions
pending or threatened (or any basis therefor known to the Company) involving the
prior employment of any of the Company's employees, their use in connection with
the Company's business of any information or techniques allegedly proprietary to
any of their former employers, or their obligations under any agreements with
prior employers. The Company is not a party or subject to the provisions of any
order, writ, injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or which the Company intends to initiate.
3.12 TAX RETURNS AND PAYMENTS. The Company has filed all tax
returns (federal, state and local) required to be filed by it. All taxes shown
to be due and payable on such returns, any assessments imposed, and all other
taxes due and payable by the Company on or before each Closing have been paid or
will be paid prior to the time they become delinquent. The Company has not
elected pursuant to the Internal Revenue Code of 1986, as amended ("Code"), to
be treated as a collapsible corporation or a Subchapter S corporation pursuant
to Section 341(f) or Section 1362(a) of the Code, nor has it made any other
elections pursuant to the Code (other than elections which relate solely to
methods of accounting, depreciation or amortization) which would have a material
effect on the Company, its financial condition, its business as presently
conducted or proposed to be conducted or on any of its properties or material
assets.
3.13 EMPLOYEES. The Company has no collective bargaining
agreements with any of its employees. There is no labor union organizing
activity pending or, to the Company's knowledge, threatened with respect to the
Company. No employee has any agreement or contract, written or verbal, regarding
his or her employment. To the Company's knowledge, no employee of the Company,
nor anyone with whom the Company has contracted, is in violation of any term of
any employment contract, patent disclosure agreement or any other agreement
relating to the right of any such individual to be employed by, or to contract
with, the Company because of the nature of the business to be conducted by the
Company; and the continued employment by the Company of its present employees,
and the performance of the Company's contracts with its independent contractors,
will not result in any such violation. The Company has not received any notice
alleging that any such violation has occurred. Each officer, employee and
consultant of the Company has executed a Proprietary Information and Inventions
Agreement. The Company, after reasonable investigation, is not aware that any of
its employees, officers or consultants are in violation thereof, and the Company
will use its best efforts to prevent any such violation. The Company is not
aware that any officer or key employee, or that any group of key employees,
intends to terminate their employment with the Company, nor does the Company
have a present intention to terminate the employment of any of the foregoing.
Subject to general principles related to wrongful termination of employees,
7.
<PAGE> 12
the employment of each officer and employee of the Company is terminable at the
will of the Company. No officer of the Company has been granted the right to any
material compensation following termination of employment with the Company.
3.14 RESTRICTED STOCK PURCHASE AGREEMENTS. All currently
outstanding shares of common stock of the Company are subject to the Company's
repurchase option and/or right of first refusal, as set forth in copies of
Restricted Stock Purchase Agreements and the Company's Bylaws.
3.15 REGISTRATION RIGHTS. Except as required pursuant to the
Investors' Rights Agreement, the Company is presently not under any obligation,
and has not granted any rights, to register (as defined in Section 1.2 of the
Investors' Rights Agreement) any of the Company's presently outstanding
securities or any of its securities that may hereafter be issued.
3.16 COMPLIANCE WITH LAWS. The Company has complied in all
material respects with all applicable statutes, rules, regulations, orders and
restrictions of any domestic or foreign government or any instrumentality or
agency thereof in respect of the conduct of its business and ownership of its
properties. No governmental orders, permissions, consents, approvals or
authorizations are required to be obtained and no registrations or declarations
are required to be filed in connection with the execution and delivery of this
Agreement and the Investors' Rights Agreement, and the issuance of the Shares or
the Conversion Shares, except such as have been duly and validly obtained or
filed, or with respect to any filings that must be made after each Closing,
except such as will be filed in a timely manner.
3.17 OFFERING VALID. Assuming the accuracy of the
representations and warranties of the Purchaser contained in Section 4.3 hereof,
the offer, sale and issuance of the Shares and the Conversion Shares will be
exempt from the registration requirements of the Securities Act of 1933, as
amended (the "Securities Act") and will have been registered or qualified (or
are exempt from registration and qualification) under the registration, permit
or qualification requirements of all applicable state securities laws.
3.18 SECURITIES EXEMPTION. Neither the Company nor any agent
on its behalf has solicited or will solicit any offers to sell or has offered to
sell or will offer to sell all or any part of the Shares to, or otherwise
approach or communicate in respect of all or any part of such Shares with, any
person or persons so as to bring the sale of such Shares by the Company within
the registration provisions of the Securities Act. The Company shall seek and
obtain all necessary permits and other authorizations or orders of exemption as
may be necessary or appropriate under the California Corporate Securities Law of
1968, as amended, and any other applicable state securities laws, with respect
to the Company's offer and sale of the Shares and the Conversion Shares.
3.19 FULL DISCLOSURE. This Agreement, the Exhibits hereto,
and all other documents delivered by the Company to Purchaser or their attorneys
or agents in connection herewith or therewith or with the transactions
contemplated hereby or thereby, do not, when taken as a whole, contain any
untrue statement of a material fact nor, omit to state a material fact necessary
in order to make the statements contained herein or therein not misleading.
There
8.
<PAGE> 13
are no facts which (individually or in the aggregate) materially adversely
affect the business, assets, liabilities, financial condition, prospects or
operations of the Company that have not been set forth in the Agreement, the
Exhibits hereto, or in other documents delivered to the Purchaser or its
attorney or agent in connection herewith.
3.20 PERMITS. The Company has all franchises, permits,
licenses, and any similar authority necessary for the conduct of its business as
now being conducted by it, the lack of which could materially and adversely
affect the business, properties, prospects, or financial condition of the
Company and believes it can obtain, without undue burden or expense, any similar
authority for the conduct of its business as planned to be conducted. The
Company is not in default in any material respect under any of such franchises,
permits, licenses, or other similar authority.
3.21 INSURANCE. The Company has or will obtain prior to or
promptly following each Closing, insurance with financially sound and reputable
insurers, with respect to its properties that are of a character customarily
insured by entities engaged in the same or a similar business similarly
situated, against loss or damage of the kinds customarily insured against by
such entities, which insurance is of such types (including public liability
insurance) as are customarily carried under similar circumstances by such other
entities.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
Purchaser hereby represents and warrants to the Company as
follows (such representations and warranties do not lessen or obviate the
representations and warranties of the Company set forth in this Agreement):
4.1 REQUISITE POWER AND AUTHORITY. Purchaser has all
necessary power and authority under all applicable provisions of law to execute
and deliver this Agreement and the Investors' Rights Agreement and to carry out
their provisions. All action on Purchaser's part required for the lawful
execution and delivery of this Agreement and the Investors' Rights Agreement has
been or will be effectively taken prior to each Closing. Upon their execution
and delivery, this Agreement and the Investors' Rights Agreement will be valid
and binding obligations of Purchaser, enforceable in accordance with their
terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights; (ii) general principles of equity that
restrict the availability of equitable remedies; and (iii) to the extent that
the enforceability of the indemnification provisions of Section 2.9 of the
Investors' Rights Agreement may be limited by applicable laws.
4.2 CONSENTS. All consents, approvals, orders,
authorizations, registrations, qualifications, designations, declarations or
filings with any governmental or banking authority on the part of Purchaser
required in connection with the consummation of the transactions contemplated in
the Agreement and the Investors' Rights Agreement have been or shall have been
obtained prior to and be effective as of each Closing.
9.
<PAGE> 14
4.3 INVESTMENT REPRESENTATIONS. Purchaser understands that the
Shares and Conversion Shares have not been registered under the Securities Act.
Purchaser also understands that the Shares are being offered and sold pursuant
to an exemption from registration contained in the Securities Act based in part
upon Purchaser's representations contained in the Agreement. Purchaser hereby
represents and warrants as follows:
(A) PURCHASER BEARS ECONOMIC RISK. Purchaser
must bear the economic risk of this investment indefinitely unless the Shares or
the Conversion Shares are registered pursuant to the Securities Act, or an
exemption from registration is available. Purchaser understands that the Company
has no present intention of registering the Shares the Conversion Shares or any
shares of its Common Stock. Purchaser understands that it has no registration
rights with respect to the Shares or the Conversion Shares except as provided in
the Investors' Rights Agreement. Purchaser also understands that there is no
assurance that any exemption from registration under the Securities Act will be
available and that, even if available, such exemption may not allow Purchaser to
transfer all or any portion of the Shares or the Conversion Shares under the
circumstances, in the amounts or at the times Purchaser might propose.
Purchaser further represents that Purchaser is an Accredited Investor
within the meaning of Rule 501(a) of Regulation D under the Securities Act.
(B) ACQUISITION FOR OWN ACCOUNT. Purchaser is
acquiring the Shares and the Conversion Shares for Purchaser's own account for
investment only, and not with a view towards their distribution.
(C) PURCHASER CAN PROTECT ITS INTEREST.
Purchaser represents that by reason of its, or of its management's, business or
financial experience, Purchaser has the capacity to protect its own interests in
connection with the transactions contemplated in this Agreement and the
Investors' Rights Agreement. Further, Purchaser is aware of no publication of
any advertisement in connection with the transactions contemplated in the
Agreement. Purchaser is not a corporation, trust or partnership specifically
formed for the purpose of consummating these transactions.
(D) COMPANY INFORMATION. Purchaser has had an
opportunity to discuss the Company's business, management and financial affairs
with directors, officers and management of the Company and has had the
opportunity to review the Company's operations and facilities. Purchaser has
also had the opportunity to ask questions of and receive answers from, the
Company and its management regarding the terms and conditions of this
investment.
5. CONDITIONS TO CLOSING.
5.1 CONDITIONS TO PURCHASER'S OBLIGATIONS AT THE CLOSING.
Purchaser's obligations to purchase the Series E Shares identified in Section
1.2 of the Agreement at each Closing are subject to the satisfaction, at or
prior to the Closing, of the following conditions:
10.
<PAGE> 15
(A) REPRESENTATIONS AND WARRANTIES TRUE;
PERFORMANCE OF OBLIGATIONS. The representations and warranties made by the
Company in Section 3 hereof shall be true and correct in all material respects
as of the Closing with the same force and effect as if they had been made as of
the Closing, and the Company shall have performed all obligations and conditions
herein required to be performed or observed by it on or prior to the Closing.
(B) LEGAL INVESTMENT. At the time of the
Closing, the sale and issuance of the Series E Shares and Conversion Shares
shall be legally permitted by all laws and regulations to which Purchaser and
the Company are subject.
(C) CONSENTS, PERMITS, AND WAIVERS. The Company
shall have obtained any and all consents, permits, and waivers necessary or
appropriate for consummation of the transactions contemplated by the Agreement
and the Investors' Rights Agreement (except for such as may be properly obtained
subsequent to the Closing).
(D) CORPORATE DOCUMENTS. The Company shall have
delivered to Purchaser or its counsel, copies of all corporate documents of the
Company as Purchaser shall reasonably request.
(E) RESERVATION OF CONVERSION SHARES. The
Conversion Shares issuable upon conversion of the Shares shall have been duly
authorized and reserved for issuance upon such exercise or conversion.
(F) FILING OF RESTATED ARTICLES. The Restated
Articles shall have been filed with the Secretary of State of the State of
California.
(G) CERTIFICATE OF STATUS. The Company shall
have obtained a Certificate of Status from the California Secretary of State
dated as of a recent date prior to the Closing.
(H) COMPLIANCE CERTIFICATE. The Company shall
have delivered to Purchaser a Compliance Certificate, executed by the President
and the Chief Financial Officer of the Company, dated the date of the Closing,
to the effect that the conditions specified in subparagraphs (a) through (g) of
this Section 5.1 have been satisfied.
(I) INVESTORS' RIGHTS AGREEMENT. The Investors'
Rights Agreement shall have been executed and delivered by the parties thereto.
(J) PROCEEDINGS AND DOCUMENTS. All corporate
and other proceedings in connection with the transactions contemplated at the
Closing hereby and all documents and instruments incident to such transactions
shall be reasonably satisfactory in substance and form to the Purchaser and its
counsel, and Purchaser and its counsel shall have received all such counterpart
originals or certified or other copies of such documents as they may reasonably
request.
11.
<PAGE> 16
(K) LEGAL OPINION. Purchaser shall have
received from legal counsel to the Company an opinion addressed to it, dated as
of the Closing, substantially in the form attached hereto as Exhibit D,
including any changes thereto necessary to make such opinion accurate as of the
date of each Closing.
5.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The Company's
obligation to issue and sell the Shares at each Closing is subject to the
satisfaction, on or prior to the Closing, of the following conditions:
(A) REPRESENTATIONS AND WARRANTIES TRUE. The
representations and warranties made by Purchaser in Section 4 hereof shall be
true and correct in all material respects at the date of the Closing, with the
same force and effect as if they had been made on and as of said date.
(B) PERFORMANCE OF OBLIGATIONS. Purchaser shall
have performed and complied with all agreements and conditions herein required
to be performed or complied with by Purchaser on or before the Closing.
(C) FILING OF RESTATED ARTICLES. The Restated
Articles shall have been filed with the Secretary of State of the State of
California. The Company agrees to use its best efforts to effect such action.
(D) INVESTORS' RIGHTS AGREEMENT. The Investors'
Rights Agreement shall have been executed and delivered by the parties thereto.
The Company agrees to use its best efforts to effect such action.
6. MISCELLANEOUS.
6.1 GOVERNING LAW. This Agreement shall be governed in all
respects by the laws of the State of California.
6.2 SURVIVAL. The representations, warranties, covenants, and
agreements made herein shall survive any investigation made by Purchaser and the
closing of the transactions contemplated hereby. All statements as to factual
matters contained in any certificate or other instrument delivered by or on
behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.
6.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors, and administrators of
the parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Shares from time to time; provided, however,
that prior to the receipt by the Company of adequate written notice of the
transfer of any Shares specifying the full name and address of the transferee,
the Company may deem and treat the person listed as the holder of such Shares in
its records as the absolute owner and holder of such Shares for all purposes,
the payment of any dividends or any redemption price.
12.
<PAGE> 17
6.4 ENTIRE AGREEMENT. This Agreement, the Exhibits and
Schedules hereto and the Investors' Rights Agreement and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and no party
shall be liable or bound to any other in any manner by any representations,
warranties, covenants, and agreements except as specifically set forth herein.
Nothing in this Agreement or the Investors' Rights Agreement, express or
implied, is intended to confer upon any party, other than the parties hereto,
and their respective successors and assigns, any rights, remedies, obligations,
or liabilities under or by reason of this Agreement or the Investors' Rights
Agreement, except as expressly provided herein.
6.5 SEPARABILITY. In case any provision of the Agreement shall
be invalid, illegal, or unenforceable, the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
6.6 AMENDMENT AND WAIVER.
(A) This Agreement may be amended or modified
only upon the written consent of the holders of not less than a majority in
interest of the Shares (treated as if converted and including any Conversion
Shares into which the Shares have been converted that have not been sold to the
public).
(B) The obligations of the Company and the
rights of the holders of the Shares and the Conversion Shares under the
Agreement may be waived only with the written consent of the holders of not less
than a majority of the Shares (treated as if converted and including any
Conversion Shares into which the Shares have been converted that have not been
sold to the public).
(C) Except to the extent provided in this
Section 6.6, neither this Agreement nor any provision hereof may be changed,
waived, discharged, or terminated, except by a statement in writing signed by
the party against which enforcement of the change, waiver, discharge, or
termination is sought.
6.7 DELAYS OR OMISSIONS. It is agreed that no delay or
omission to exercise any right, power, or remedy accruing to Purchaser, upon any
breach, default or noncompliance of the Company under this Agreement, the
Investors' Rights Agreement or under the Restated Articles, shall impair any
such right, power, or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of or in
any similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent, or approval of any kind or character on
Purchaser's part of any breach, default or noncompliance under this Agreement,
the Investors' Rights Agreement or under the Restated Articles or any waiver on
Purchaser's part of any provisions or conditions of the Agreement must be in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement, the Investors' Rights
Agreement, the Restated Articles, by law, or otherwise afforded to Purchaser,
shall be cumulative and not alternative.
13.
<PAGE> 18
6.8 NOTICES, ETC. All notices and other communications
required or permitted hereunder shall be in writing and shall be sent by
registered or certified mail, return receipt requested, postage prepaid, or by
means of a nationally recognized overnight courier service, and, if to an
address outside the United States of America, by facsimile transmitted
substantially concurrently with the mailing of such written notice, addressed:
(a) if to Purchaser, at Purchaser's address as set forth on the Company's
records, or at such other address as Purchaser shall have furnished to the
Company in writing or (b) if to the Company, at its address as set forth at the
end of this Agreement, or at such other address as the Company shall have
furnished to Purchaser in writing.
6.9 EXPENSES. The Company shall pay all costs and expenses
that it incurs with respect to the negotiation, execution, delivery and
performance of the Agreement, and Purchaser shall pay all costs and expenses
that it incurs with respect to the negotiation, execution, delivery and
performance of the Agreement.
6.10 ATTORNEYS' FEES. If legal action is brought to enforce
or interpret this Agreement, the prevailing party shall be entitled to recover
its reasonable attorneys' fees and legal costs in connection therewith.
6.11 TITLES AND SUBTITLES. The titles of the paragraphs and
subparagraphs of the Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
6.12 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
6.13 BROKER'S FEES. Each party hereto represents and warrants
that no agent, broker, investment banker, person or firm acting on behalf of or
under the authority of such party hereto is or will be entitled to any broker's
or finder's fee or any other commission directly or indirectly in connection
with the transactions contemplated herein. Each party hereto further agrees to
indemnify each other party for any claims, losses or expenses incurred by such
other party as a result of the representation in this Section 6.13 being untrue.
14.
<PAGE> 19
IN WITNESS WHEREOF, the parties hereto have executed the Agreement as
of the date set forth in the first paragraph hereof.
COMPANY:
STERITECH, INC.
2525 Stanwell Drive
Concord, CA 94520
By: /s/ Stephen T. Isaacs
-----------------------
STEPHEN T. ISAACS
President
PURCHASER:
BAXTER HEALTHCARE CORPORATION
One Baxter Parkway
Deerfield, Illinois 60015
By: /s/ Victor Schmitt
-----------------------
(Signature)
Its: President,
Venture Management
-----------------------
15.
<PAGE> 1
EXHIBIT 10.16
STERITECH, INC.
AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
I. DEFINITIONS................................................................................... 1
II. REGISTRATION; RESTRICTIONS ON TRANSFER........................................................ 3
2.1 Restrictions on Transfer...................................................................... 4
2.2 Demand Registration........................................................................... 5
2.3 Piggyback Registrations....................................................................... 7
2.4 Form S-3 Registration......................................................................... 8
2.5 Obligations of the Company.................................................................... 9
2.6 Termination of Registration Rights............................................................ 10
2.7 Furnish Information........................................................................... 10
2.8 Delay of Registration......................................................................... 10
2.9 Indemnification............................................................................... 10
2.10 Assignment of Registration Rights............................................................. 12
2.11 "Market Stand-Off" Agreement.................................................................. 13
2.12 Amendment of Registration Rights.............................................................. 13
2.13 Limitation on Subsequent Registration Rights.................................................. 13
III. COVENANTS OF THE COMPANY...................................................................... 14
3.1 Basic Financial Information and Reporting..................................................... 14
3.2 Inspection Rights............................................................................. 14
3.3 Confidentiality of Records.................................................................... 15
3.4 Insurance..................................................................................... 15
3.5 Proprietary Information Agreements............................................................ 15
3.6 Employee Agreements........................................................................... 15
3.7 Observer Rights............................................................................... 16
3.8 Termination of Covenants...................................................................... 16
IV. RIGHTS OF FIRST REFUSAL....................................................................... 16
4.1 Subsequent Offerings.......................................................................... 16
4.2 Exercise of Rights............................................................................ 16
4.3 Issuance of Equity Securities to Other Persons................................................ 17
4.4 Termination of Rights of First Refusal........................................................ 17
4.5 Transfer of Rights of First Refusal........................................................... 17
4.6 Excluded Securities........................................................................... 17
V. MISCELLANEOUS................................................................................. 18
5.1 Governing Law................................................................................. 18
5.2 Survival...................................................................................... 18
5.3 Successors and Assigns........................................................................ 18
5.4 Separability.................................................................................. 19
5.5 Amendment and Waiver.......................................................................... 19
5.6 Delays or Omissions........................................................................... 19
</TABLE>
i.
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
5.7 Notices, etc.................................................................................. 19
5.8 Attorneys' Fees............................................................................... 20
5.9 Titles and Subtitles.......................................................................... 20
5.10 Counterparts.................................................................................. 20
</TABLE>
ii.
<PAGE> 4
AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
THIS AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT (the "Agreement")
is entered into as of the 1st day of April, 1996, by and among (i) STERITECH,
INC., a California corporation (the "Company"), (ii) the purchasers of the
Company's Series A Preferred Stock ("Series A Stock") and warrants exercisable
for shares of the Company's Series B Preferred Stock (the "Series B Stock")
pursuant to that certain Series A Preferred Stock Purchase Agreement/Series B
Preferred Stock Warrant Agreement dated as of December 27, 1991 (the "Series
A/Series B Purchasers"), (iii) the purchasers of the Company's Series C
Preferred Stock (the "Series C Stock") pursuant to those certain Series C
Preferred Stock Purchase Agreements dated as of December 10, 1993 and March 14,
1994 (the "Series C Purchasers"), (iv) the purchasers of the Company's Series D
Preferred Stock (the "Series D Stock") pursuant to that certain Series D
Preferred Stock Purchase Agreement dated as of March 1, 1995 (the "Series D
Purchasers"), (v) the purchasers of warrants for Series B Stock and Series C
Stock pursuant to those certain Note and Warrant Purchase Agreements dated May
14, 1993 and August 13, 1993 (the "Warrant Holders"), (vi) the purchaser of the
Company's Series E Preferred Stock (the "Series E Stock") pursuant to that
certain Series E Preferred Stock Purchase Agreement dated as of April 1, 1996
(the "Series E Purchaser") and (vii) COMDISCO, INC. ("Comdisco"). Each of the
Series A/Series B Purchasers, the Series C Purchasers, the Series D Purchasers,
the Warrant Holders, the Series E Purchaser and Comdisco, and their transferees,
shall be known as an "Investor".
In consideration of the mutual agreements, covenants and considerations
and releases contained herein, the parties hereto hereby agree as follows:
I.
DEFINITIONS
1.1 The term "HOLDER" means:
(a) any person owning of record Registrable Securities
that have not been sold to the public; or
(b) any assignee of record of such Registrable Securities
in accordance with Section 2.10 of the Agreement; provided, however:
(i) that for purposes of the Agreement, a record
holder of Series A Stock, Series B Stock, Series C Stock, Series D Stock or
Series E Stock convertible into such Registrable Securities shall be treated as
the Holder of such Registrable Securities, except that the record holder of any
of such shares that are issued upon exercise of the warrants originally issued
to Comdisco in connection with leasing transactions: (A) to purchase 20,779
shares of Series A Preferred Stock, (B) to purchase 3,949 shares of Series B
Preferred Stock, (C) to
1.
<PAGE> 5
purchase 6,250 shares of Series C Stock and (D) to purchase 4,500 shares of
Series D Preferred Stock (the "Comdisco Shares") shall be considered a Holder
only for purposes of Sections 2.3 - 2.13 of the Agreement and under those
provisions shall be subject to the same terms and conditions with respect to the
registration and sale of the shares as would any other Holder; and
(ii) that the Company shall in no event be
obligated to register the Series A Stock, Series B Stock, Series C Stock, Series
D Stock, Series E Stock or the warrants held by the Warrant Holders and
Comdisco, and that Holders of Registrable Securities will not be required to
convert or exercise, respectively, the Series A Stock, Series B Stock, Series C
Stock, Series D Stock, Series E Stock or the warrants held by the Warrant
Holders and Comdisco, into Common Stock in order to exercise registration rights
granted hereunder, until immediately before the closing of the offering to which
the registration relates.
1.2 The terms "REGISTER," "REGISTERED," and "REGISTRATION" refer
to an registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of
effectiveness of such registration statement or document.
1.3 The term "REGISTRABLE SECURITIES" means:
(a) Common Stock of the Company issued or issuable upon
conversion of:
(i) the Series A Stock issued pursuant to the
Series A/Series B Purchase Agreement;
(ii) the Series B Stock issued pursuant to those
certain warrants identified on Exhibit A of the Series A/Series B Purchase
Agreement;
(iii) the Series C Stock issued pursuant to the
Series C Stock Purchase Agreements dated as of December 10, 1993 and March 14,
1994;
(iv) the Series B Stock and the Series C Stock
issued or issuable upon exercise of the warrants issued in connection with the
May 14 and August 13, 1993 bridge loan financings by the Company;
(v) the Series D Stock issued pursuant to the
Series D Stock Purchase Agreement dated as of March 1, 1995;
(vi) the equity securities issuable pursuant to
Sections 4.1 and 4.2 of that certain Development, Manufacturing and Marketing
Agreement, dated as of April 1, 1996, between Baxter Healthcare Corporation, a
Delaware corporation (together with its affiliates (as such term is defined in
the Baxter Agreement), "Baxter"), and the Company (the "Baxter Agreement") and
issued to Baxter pursuant to this Agreement; and
(b) any Common Stock of the Company issued as (or
issuable upon the conversion or exercise of any warrant, right or other security
which is issued as) a dividend or
2.
<PAGE> 6
other distribution with respect to, or in exchange for or in replacement of,
such above-described securities; and
(c) for purposes of Sections 2.3 - 2.13 of the Agreement,
the term "Registrable Securities" also includes:
(i) Common Stock of the Company issued or
issuable upon conversion of the Preferred Stock issued pursuant to the exercise
of the warrants to purchase the Comdisco Shares, and
(ii) any Common Stock of the Company issued as
(or issuable upon the conversion or exercise of any warrant, right or other
security which is issued as) a dividend or other distribution with respect to,
or in exchange for or in replacement of, such above-described securities.
Notwithstanding the foregoing, Registrable Securities shall not include
any securities sold by a person to the public either pursuant to a registration
statement, Rule 144 or Rule 144A or sold in a private transaction in which the
transferor's rights are not assigned pursuant to Section 2.10 of the Agreement.
1.4 The number of shares of "REGISTRABLE SECURITIES THEN
OUTSTANDING" shall be determined by the calculating total number of shares of
the Company's Common Stock that are Registrable Securities and either (1) are
then issued and outstanding or (2) are issuable pursuant to then exercisable or
convertible securities.
1.5 "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
1.6 "SECURITIES LAW" shall mean the California Corporate
Securities Law of 1968, as amended.
1.7 The term "FORM S-3" means such form under the Securities Act
as in effect on the date hereof or any successor registration form under the
Securities Act subsequently adopted by the SEC which permits inclusion or
incorporation of substantial information by reference to other documents filed
by the Company with the SEC.
1.8 The term "SEC" or "COMMISSION" means the Securities and
Exchange Commission.
3.
<PAGE> 7
II.
REGISTRATION; RESTRICTIONS ON TRANSFER
2.1 RESTRICTIONS ON TRANSFER.
(a) Each Holder agrees not to make any disposition of all or
any portion of the Registrable Securities (or the Common Stock issuable upon the
conversion thereof) unless and until the transferee has agreed in writing for
the benefit of the Company to be bound by this Section 2.1 and Section 2.11
hereof, provided and to the extent such Sections are then applicable and:
(i) There is then in effect a
registration statement under the Securities Act covering such proposed
disposition and such disposition is made in accordance with such registration
statement; or
(ii) (A) Such Holder shall have
notified the Company of the proposed disposition and shall have furnished the
Company with a detailed statement of the circumstances surrounding the proposed
disposition, and
(B) if reasonably requested by
the Company, such Holder shall have furnished the Company with an opinion of
counsel, reasonably satisfactory to the Company, that such disposition will not
require registration of such shares under the Securities Act. It is agreed that
the Company will not require opinions of counsel for transactions made pursuant
to Rule 144 except in unusual circumstances.
(iii) Notwithstanding the provisions of
paragraphs (i) and (ii) above, no such registration statement or opinion of
counsel shall be necessary for a transfer by a Holder which is a partnership to
a partner of such partnership or a retired partner of such partnership who
retires after the date hereof, or to the estate of any such partner or retired
partner or the transfer by gift, will or intestate succession of any partner to
his spouse or to the siblings, lineal descendants or ancestors of such partner
or his spouse, if the transferee agrees in writing to be subject to the terms
hereof to the same extent as if he were an original Holder hereunder.
(b) Each certificate representing Series A Stock, Series B
Stock, Series C Stock, Series D Stock, Series E Stock or Registrable Securities
shall (unless otherwise permitted by the provisions of the Agreement) be stamped
or otherwise imprinted with legends substantially similar to the following (in
addition to any legend required under applicable state securities laws or as
provided elsewhere in the Agreement):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL OR BASED ON
OTHER WRITTEN EVIDENCE IN FORM AND SUBSTANCE SATISFACTORY TO THE
4.
<PAGE> 8
ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR
HYPOTHECATION IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT OF
FIRST REFUSAL OPTION IN FAVOR OF THE COMPANY AND/OR ITS ASSIGNEE(S), AS
PROVIDED IN THE BYLAWS OF THE COMPANY, AND IN FAVOR OF THE OTHER
STOCKHOLDERS, AS PROVIDED IN THE INVESTORS' RIGHTS AGREEMENT.
(c) The Company shall be obligated to reissue promptly
unlegended certificates at the request of any Holder thereof if the Holder shall
have delivered to the Company an opinion of counsel reasonably acceptable to the
Company to the effect that the securities proposed to be disposed of may
lawfully be so disposed of without registration, qualification or legend.
(d) Any legend endorsed on an instrument pursuant to
applicable state securities laws and the stop-transfer instructions with respect
to such securities, shall be removed upon receipt by the Company of an order of
the appropriate blue sky authority authorizing such removal.
2.2 DEMAND REGISTRATION.
(a) Subject to the conditions of this Section 2.2, if the
Company shall receive at any time after the earlier of (i) January 15, 1995, or
(ii) one hundred eighty (180) days from the first underwritten public offering
of the Company's Securities (the "Initial Offering"), a written request from the
Holders of not less than thirty percent (30%) of the Registrable Securities Then
Outstanding (the "Initiating Holders") that the Company file a registration
statement under the Securities Act covering the registration of at least twenty
percent (20%) of the Registrable Securities owned by the Initiating Holders (or
any lesser percentage if the anticipated aggregate offering price, net of
underwriting discounts and commission, would exceed $2,000,000), then the
Company shall, within ten (10) days of the receipt thereof, give written notice
of such request to all Holders, and subject to the limitations of Section
2.2(b), effect, as soon as practicable, and in any event within 90 days the
registration under the Securities Act of all Registrable Securities that the
Holders request to be registered in a written request given within twenty (20)
days of the receipt of such notice from the Company.
(b) If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
this Section 2.2 and the Company shall include such information in the written
notice referred to in Section 2.2(a). In such event, the right of any Holder to
include his Registrable Securities in such registration shall be conditioned
upon such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting (unless otherwise mutually
agreed by a majority in interest of the Initiating Holders and such Holder) to
the extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by a majority in interest of the Initiating Holders.
Notwithstanding any other provision of this Section
5.
<PAGE> 9
2.2, if the underwriter advises the Company in writing that marketing factors
require a limitation of the number of securities to be underwritten (including
Registrable Securities) then the Company shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares that may be included in the underwriting shall be
allocated to the Holders of such Registrable Securities (prior to any allocation
to holders of shares other than Registrable Securities) on a pro rata basis
based on the number of Registrable Securities held by all such Holders
(including the Initiating Holders). Any Registrable Securities excluded or
withdrawn from such underwriting shall be withdrawn from the registration, and
the number of shares that may be included in the underwriting shall be
reallocated pursuant to the above allocation formula.
(c) The Company is obligated to effect only two (2) such
registrations pursuant to this Section 2.2. A registration pursuant to this
Section 2.2 may be the Initial Offering.
(d) The Company shall not be required to effect a registration
pursuant to this Section 2.2 during the period starting with the date of filing
of, and ending on the date 180 days following the effective date of the
registration statement pertaining to the Initial Offering, provided that the
Company is making reasonable and good faith efforts to cause such registration
statement to become effective. In addition, the Company shall not be required to
effect a registration pursuant to this Section 2.2 if within thirty (30) days of
receipt of a written request from Initiating Holders pursuant to Section 2.2(a),
the Company gives notice to the Holders of the Company's intention to make its
Initial Offering and the registration statement pertaining to such Initial
Offering is actually filed within ninety (90) days after such notice.
(e) Notwithstanding the foregoing, if the Company furnishes to
Holders requesting a registration statement pursuant to this Section 2.2 a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its shareholders for such registration statement
to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer such filing
for a period of not more than ninety (90) days after receipt of the request of
the Initiating Holders; provided, however, that such right to delay a request
shall be exercised by the Company no more than once in any one-year period.
(f) The Company shall bear all the expenses incurred in
connection with the first registration requested pursuant to this Section 2.2
(excluding underwriters' discounts and commissions, which shall be paid by the
selling Holders pro rata), including without limitation all registration,
filing, qualification, printers' and accounting fees, fees and disbursements of
counsel for the Company, and the reasonable fees and disbursements of one
special counsel for the selling Holders; provided, however, that the Company
shall not be required to pay for any expenses of any registration proceeding
begun pursuant to Section 2.2 if the registration request is subsequently
withdrawn, unless the Holders of a majority in interest of the Registrable
Securities agree to forfeit their right to one (1) of the demand registrations
permitted pursuant to this Section 2.2; and provided further that if the
withdrawal of the registration request results from either (a) intentional
actions by the Company outside the normal course of business, or (b) the
discovery of information about the Company that is not known at the time of the
Initiating
6.
<PAGE> 10
Holders' request made pursuant to Section 2.2(a) that materially reduces the
feasibility of the registration proceeding, the Company shall be required to pay
expenses pursuant to this subparagraph (f) without the Holders forfeiting their
right to a demand registration and such registration shall not be deemed to have
been requested. All expenses incurred in connection with any subsequent
registration requested pursuant to this Section 2.2 shall be borne by the
Holders in proportion to the number of Registrable Securities owned by the
Holders included in the registration at the time it goes effective. A
registration request shall be deemed to be withdrawn and the Company shall have
no obligation with respect to any registration requested pursuant to this
Section 2.2 if by reason of withdrawal therefrom by a Holder of Registrable
Securities, the number of shares or aggregate anticipated offering price is less
than the amount needed to initially effectuate the Company's obligations
pursuant to this Section 2.2; provided, that the Holders shall not be deemed to
have forfeited their right to a demand registration and such registration shall
not be deemed to have been requested.
2.3 PIGGYBACK REGISTRATIONS. The Company shall notify all Holders of
Registrable Securities in writing at least thirty (30) days prior to filing any
registration statement under the Securities Act for purposes of a public
offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company and registration statements initiated by others, but excluding
registration statements relating to employee benefit plans and corporate
reorganizations) and will afford each such Holder an opportunity to include in
such registration statement all or part of such Registrable Securities held by
such Holder. Each Holder desiring to include in any such registration statement
all or any part of the Registrable Securities held by it shall, within twenty
(20) days after receipt of the above-described notice from the Company, so
notify the Company in writing. Such notice shall state the intended method of
disposition of the Registrable Securities by such Holder. If a Holder decides
not to include all of its Registrable Securities in any registration statement
thereafter filed by the Company, such Holder shall nevertheless continue to have
the right to include any Registrable Securities in any subsequent registration
statement or registration statements as may be filed by the Company with respect
to offerings of its securities, all upon the terms and conditions set forth
herein.
(a) UNDERWRITING. If the registration statement under which
the Company gives notice under this Section 2.3 is for an underwritten offering,
the Company shall so advise the Holders of Registrable Securities. In such
event, the right of any such Holder to be included in a registration pursuant to
this Section 3.3 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting. Notwithstanding any other provision of the
Agreement, if the underwriter determines in good faith that marketing factors
require a limitation of the number of shares to be underwritten, the number of
shares that may be included in the underwriting shall be allocated, first, to
the Company; and second, to the Holders on a pro rata basis based on the total
number of Registrable Securities held by the Holders. No such reduction shall
reduce the securities being offered by the Company for its own account to be
included in the registration and underwriting, except that in no event shall the
amount of securities of the selling Holders included in the
7.
<PAGE> 11
registration be reduced below twenty percent (20%) of the total amount of
securities included in such registration, unless such offering is the Initial
Offering, in which event any or all of the Registrable Securities of the Holders
may be excluded in accordance with the immediately preceding sentence. For
purposes of the preceding concerning apportionment, for any selling shareholder
which is a holder of Registrable Securities and which is a partnership or
corporation, the partners, retired partners and shareholders of such holder, or
the estates and family members of any such partners and retired partners and any
trusts for the benefit of any of the foregoing persons shall be deemed to be a
single "selling shareholder", and any pro-rata reduction with respect to such
"selling shareholder" shall be based upon the aggregate amount of shares
carrying registration rights owned by all entities and individuals included in
such "selling shareholder", as defined in this sentence. If any Holder
disapproves of the terms of any such underwriting, he may elect to withdraw
therefrom by written notice to the Company and the underwriter, delivered at
least five (5) days prior to the effective date of the registration statement.
Any Registrable Securities excluded or withdrawn from such underwriting shall be
withdrawn from the registration.
(b) REGISTRATION EXPENSES. The Company shall bear all fees and
expenses incurred in connection with the first three registrations under this
Section 2.3 (excluding underwriters' discounts and commissions, which shall be
paid by the selling Holders pro rata), including without limitation all
registration, filing, qualification, printers' and accounting fees, fees and
disbursements of counsel to the Company, and the reasonable fees and
disbursements of one special counsel to the selling Holders. Subsequent
registrations under this Section 2.3 shall be borne by the Holders in proportion
to the number of Registrable Securities owned by the Holders included in such
registration at the time it goes effective.
2.4 FORM S-3 REGISTRATION. In case the Company shall receive a written
request from the Holder of not less than thirty percent (30%) of the Registrable
Securities Then Outstanding that the Company effect a registration on Form S-3
and any related qualification or compliance with respect to all or a part of the
Registrable Securities owned by such Holders, the Company will:
(a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders of Registrable
Securities; and
(b) as soon as practicable, effect such registration and all
such qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of such Holders'
Registrable Securities as are specified in such request, together with all or
such portion of the Registrable Securities of any other Holders joining in such
request as are specified in a written request given within fifteen (15) days
after receipt of such written notice from the Company; provided, however, that
the Company shall not be obligated to effect any such registration,
qualification or compliance pursuant to this Section 2.4: (i) if Form S-3 is not
available for such offering by the Holders, (ii) if the Holders, together with
the holders of any other securities of the Company entitled to inclusion in such
registration, propose to sell Registrable Securities and such other securities
(if any) at an aggregate price to the public of less than $500,000, (iii) if the
Company shall furnish to the Holders a certificate signed by the President of
the Company stating that in the good faith
8.
<PAGE> 12
judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its shareholders for such Form S-3 Registration
to be effected at such time, in which event the Company shall have the right to
defer the filing of the Form S-3 registration statement for a period of not more
than ninety (90) days after receipt of the request of the Holder or Holders
under this Section 2.4, provided that the Company shall not have the right to
make such deferral more than one time in any twelve month period, (iv) if the
Company has, within the twelve (12) month period preceding the date of such
request, already effected two (2) registrations on Form S-3 for the Holders
pursuant to this Section 2.4, or (v) in any particular jurisdiction in which the
Company would be required to qualify to do business or to execute a general
consent to service of process in effecting such registration, qualification or
compliance.
(c) Subject to the foregoing, the Company shall file a Form
S-3 registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after receipt of
the request or requests of the Holders. All expenses incurred in connection with
any registration requested pursuant to this Section 2.4 shall be borne by the
Holders in proportion to the number of Registrable Securities owned by the
Holders included in such registration at the time it goes effective.
Registrations pursuant to this Section 2.4 do not reduce the number of
registrations to which Holders are entitled pursuant to Section 2.2 or 2.3
hereof.
2.5 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities pursuant to this Agreement, the
Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder, keep
such registration statement effective for up to one hundred twenty (120) days.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement.
(c) Furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
9.
<PAGE> 13
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting will also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated thereon or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Furnish, at the request of any Holder requesting
registration of Registrable Securities, on the date that such Registrable
Securities are delivered to the underwriters for sale, if such securities are
being sold through underwriters, or, if such securities are not being sold
through underwriters, on the date that the registration statement with respect
to such securities becomes effective, (i) an opinion, dated as of such date, of
the counsel representing the Company for the purposes of such registration, in
form and substance as is customarily given to underwriters in an underwritten
public offering and reasonably satisfactory to a majority in interest of the
Holders requesting registration, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities and (ii) a letter
dated as of such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering and
reasonably satisfactory to a majority in interest of the Holders requesting
registration, addressed to the underwriters, if any, and to the Holders
requesting registration of Registrable Securities.
2.6 TERMINATION OF REGISTRATION RIGHTS. The registration rights granted
under Section 2.2 and Section 2.3 shall terminate and be of no further force and
effect on the dates five (5) years and ten (10) years, respectively, following
the Company's Initial Offering.
2.7 FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Sections 2.2, 2.3 or
2.4 that the selling Holders shall furnish to the Company such information
regarding themselves, the Registrable Securities held by them, and the intended
method of disposition of such securities as shall be required to effect the
registration of their Registrable Securities.
2.8 DELAY OF REGISTRATION. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Article II.
2.9 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under Section 2.2, 2.3 or 2.4:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, the partners, officers and directors of each
Holder, any underwriter (as
10.
<PAGE> 14
defined in the Securities Act) for such Holder and each person, if any, who
controls such Holder or underwriter within the meaning of the Securities Act or
the Securities Exchange Act of 1934, as amended, (the "1934 Act"), against any
losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Securities Act, the 1934 Act or other federal or state
law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation") by the Company: (i) any
untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained thereon or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, or
(iii) any violation or alleged violation by the Company of the Securities Act,
the 1934 Act, any state securities law or any rule or regulation promulgated
under the Securities Act, the 1934 Act or any state securities law in connection
with the offering covered by such registration statement; and the Company will
reimburse as incurred, each such Holder, partner, officer or director,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the indemnity
agreement contained in this Section 2.9(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by such Holder, partner, officer, director, underwriter
or controlling person or such Holder.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who have signed the registration statement, each person, if any, who
controls the Company within the meaning of the Securities Act, any underwriter
and any other Holder selling securities under such registration statement or any
of such other Holder's partners, directors or officers or any person who
controls such Holder, against any losses, claims, damages or liabilities (joint
or several) to which the Company or any such director, officer, controlling
person, underwriter or other such Holder, or partner, director, officer or
controlling person of such other Holder may become subject under the Securities
Act, the 1934 Act or other federal or state law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereto) arise out of or are based
upon any Violation, in each case to the extent (and only to the extent) that
such Violation occurs in reliance upon and in conformity with written
information furnished by such Holder expressly for use in connection with such
registration; and each such Holder will reimburse, as incurred, any legal or
other expenses reasonably incurred by the Company or any such director, officer,
controlling person, underwriter or other Holder, or partner, officer, director
or controlling person of such other Holder in connection with investigating or
defending any such loss, claim, damage, liability or action if it is judicially
determined that there was such a Violation; provided, however, that the
indemnity agreement contained in this Section 2.9(b) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld;
11.
<PAGE> 15
provided further, that in no event shall any indemnity under this Section 2.9(b)
exceed the gross proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 2.9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 2.9, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnified party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 2.9, but the omission so to deliver
written notice to the indemnifying party will not relieve otherwise than under
this Section 2.9.
(d) If the indemnification provided for in this Section 2.9 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any losses, claims, damages or liabilities referred to
herein, the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with Violation(s) that resulted in such loss,
claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be whether the untrue or alleged untrue statement of a
material fact supplied by the indemnifying party or by the indemnified party and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.
(e) The obligations of the Company and Holders under this
Section 2.9 shall survive the completion of any offering of Registrable
Securities in a registration statement, and otherwise.
2.10 ASSIGNMENT OF REGISTRATION RIGHTS. Except as otherwise provided
herein, the rights contained in this Article II may be assigned or otherwise
conveyed to a transferee or assignee of Registrable Securities, who shall be
considered a "Holder" for purposes of this Article II, provided that (i) such
transfer is effected in accordance with applicable federal and state securities
laws, (ii) such transferee or assignee becomes a party to this Agreement or
agrees in writing to be subject to the terms hereof to the same extent as if he
were an original purchaser hereunder and (iii) such transferee or assignee (A)
is a wholly owned subsidiary or constituent partner (including limited partners)
or affiliate of the transferring Holder, or (B) acquires at least ten thousand
(10,000) shares (as presently constituted) of the Registrable Securities, or
12.
<PAGE> 16
(C) acquires all of the shares then held by the transferring Holder and,
provided further, that the Company is given written notice by such Holder at the
time of or within a reasonable time after said transfer, stating the name and
address of said transferee or assignee and identifying the securities with
respect to which such registration rights are being assigned.
For the purposes of determining the number of shares of Registrable
Securities held by a transferee or assignee, the holdings of transferees and
assignees of a partnership (including spouses and ancestors, lineal descendants
and siblings of such partners or spouses who acquire Registrable Securities by
gift, will or intestate succession) shall be aggregated together and with the
partnership; provided that all assignees and transferees who would not qualify
individually for assignment of registration rights shall have a single
attorney-in-fact for the purpose of exercising any rights, receiving notices or
taking any action under this Article II.
2.11 "MARKET STAND-OFF" AGREEMENT. Each Holder hereby agrees that,
during the period or duration specified by the Company and any underwriter of
common stock or other securities of the Company following the effective date of
a registration statement of the Company filed under the Act, it shall not, to
the extent requested by the Company and such underwriter, directly or
indirectly, sell, offer to sell, contract to sell (including, without
limitation, any short sale), grant any option to purchase or otherwise transfer
or dispose of (other than to donees who agree to be similarly bound) any
securities of the Company held by it at any time during such period except
common stock included in such registration; provided, however, that:
(a) such agreement shall be applicable only to the first such
registration statement of the Company which covers common stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
(b) such period shall not exceed 180 days; and
(c) all officers and directors of the Company and all other
persons with registration rights (whether or not pursuant to this Agreement)
enter into similar agreements.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
2.12 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Article II
may be amended, and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holders of not less than two-thirds (2/3)
in interest of the Registrable Securities. Any amendment or waiver effected in
accordance with this Section 2.12 shall be binding upon each Holder and the
Company. By acceptance of any benefits under this Article II, Holders of
Registrable Securities hereby agree to be bound by the provisions hereunder.
2.13 LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS. After the date of
this Agreement, the Company shall not, without the prior written consent of the
Holders of not less than two-thirds (2/3) in interest of the Registrable
Securities, enter into any agreement with any
13.
<PAGE> 17
holder or prospective holder of any securities of the Company that would permit
such holder to require the Company to register any securities held by such
holder if the granting of such registration rights has been authorized by a vote
of at least four members of the Board of Directors; provided, however, that the
Company may obligate itself to register securities issued in connection with
credit or leasing transactions without the prior written consent of the Holders.
III.
COVENANTS OF THE COMPANY
3.1 BASIC FINANCIAL INFORMATION AND REPORTING.
(a) The Company will maintain true books and records of
account in which full and correct entries will be made of all its business
transactions pursuant to a system of accounting established and administered in
accordance with generally accepted accounting principles consistently applied,
and will set aside on its books all such proper accruals and reserves as shall
be required under generally accepted accounting principles consistently applied.
(b) So long as a Holder shall own shares of Series A Stock,
Series B Stock, Series C Stock, Series D Stock and Series E Stock with an
aggregate original issuance price of $500,000, the Company shall: (i) as soon as
practicable after the end of each fiscal year of the Company, and in any event
within 90 days thereafter, furnish such Holder a consolidated balance sheet of
the Company, as of the end of such fiscal year, and a consolidated statement of
income and a consolidated statement of cash flows of the Company, for such year,
all prepared in accordance with generally accepted accounting principles
("GAAP") and setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail (such balance sheet and statement
of income shall be accompanied by a report and opinion thereon by independent
certified public accountants of national standing selected by the Company's
Board of Directors); (ii) as soon as practicable after the end of the first,
second and third quarterly accounting periods in each fiscal year of the
Company, and in any event within 30 days thereafter, furnish such Holder a
consolidated balance sheet of the Company as of the end of each such quarterly
period, and a statement of income and a consolidated statement of cash flows of
the Company for such period and for the current fiscal year to date, prepared in
accordance with GAAP, with the exception that no notes need be attached to such
statements and year-end audit adjustments may not have been made; and (iii)
furnish at least thirty (30) days prior to the beginning of each fiscal year an
annual budget and operating plans for such fiscal year; and (iv) within thirty
(30) days after the end of each month, an unaudited balance sheet and a
statement of operations, prepared in accordance with GAAP, which also set forth
applicable budget figures and variances from budget, and within a reasonable
time after a request therefor, all reports relating to the Company that the
Board of Directors of the Company deems reasonable to provide.
3.2 INSPECTION RIGHTS. So long as a Holder shall own shares of
Series A Stock, Series B Stock, Series C Stock, Series D Stock and Series E
Stock with an aggregate original issuance price of $500,000, such Holder shall
have the right to visit and inspect any of the
14.
<PAGE> 18
properties of the Company or any of its subsidiaries, and to discuss the
affairs, finances and accounts of the Company or any of its subsidiaries with
its officers, all at such reasonable times and as often as may be reasonably
requested; provided, however, that the Company shall not be obligated pursuant
to this Section 3.2 to provide access to any information which it reasonably
considers to be a trade secret or similar confidential information.
3.3 CONFIDENTIALITY OF RECORDS. Each Holder agrees to use its best
efforts to insure that its authorized representatives use, the same degree of
care as such Holder uses to protect its own confidential information to keep
confidential any information furnished to it which the Company identifies as
being confidential or proprietary (so long as such information is not in the
public domain), except that such Holder may disclose such proprietary or
confidential information (excluding technical information but including
financial and other general business information) with the prior written consent
of the Company. Notwithstanding the foregoing, the prior written consent of the
Company shall not be required if such non-technical proprietary or confidential
information is to be disclosed to a Holder's counsel or accountant, or to an
officer, director, parent, subsidiary or general or limited partner of a Holder,
or to employees of, or consultants to, a Holder on a "need to know" basis,
provided that the Holder shall inform the recipient of the confidential nature
of such information.
3.4 INSURANCE. The Company will maintain "key-person" life insurance on
the lives of George D. Cimino, Laurence Corash, John E. Hearst, Stephen T.
Isaacs and Lily Lin, in the amount of $1,000,000 for each person, with the
Company named as beneficiary. The Company will maintain insurance coverage
against loss or damage to the Company's properties and business in the amounts
and on the terms and conditions as Board of Directors shall reasonably
determine.
3.5 PROPRIETARY INFORMATION AGREEMENTS. The Company shall enter into
agreements substantially in the form of Exhibit A attached hereto, in a timely
manner, with each of its technical employees and consultants.
3.6 EMPLOYEE AGREEMENTS. All current and future employees, officers and
consultants of the Company who shall, subsequent to the Closing Date, purchase
or receive options to purchase shares of the Company's Common Stock shall
(unless the Board of Directors shall direct otherwise) be required to execute
stock purchase or option agreements providing for vesting of shares no less
restrictive than as follows: one-eighth of the total number of shares subject to
such an agreement six months after the date of employment or commencement of
consulting relationship and one forty-eighth of the total number of shares
subject to such an agreement each month thereafter. Upon the termination of an
employee, officer or consultant, with or without cause, the Company or its
assignee will (unless the Board of Directors shall direct otherwise) have the
option to repurchase the unvested portion of such shares held by the employee,
officer or consultant at cost. Such stock purchase or option agreements shall
(unless the Board of Directors shall direct otherwise) also provide for (i) no
transfers prior to vesting, (ii) a right of first refusal on any vested shares
terminating not prior to the initial public offering of the Company's securities
and (iii) a "lock-up" provision of at least 180 days after the initial public
offering of the Company's securities.
15.
<PAGE> 19
3.7 OBSERVER RIGHTS. If the Holders do not have a member on the
Company's Board of Directors for whatsoever reason, the Company shall invite at
least one representative of the Holders (chosen by written consent of a majority
in interest of the Holders) to attend all meetings of its Board of Directors in
a nonvoting observer capacity and, in this respect, shall give such
representative copies of all notices, minutes, consents, and other materials
that it provides to its directors; provided, however, that such representative
shall agree to hold in confidence and trust and to act in a fiduciary manner
with respect to all information so provided; and, provided further, that the
Company reserves the right to withhold any information and to exclude such
representative from any meeting or portion thereof if access to such information
or attendance at such meeting could adversely affect the attorney-client
privilege between the Company and its counsel.
3.8 TERMINATION OF COVENANTS. The covenants contained in this Article
III hereof shall expire and terminate upon the consummation of the Initial
Offering.
IV.
RIGHTS OF FIRST REFUSAL
4.1 SUBSEQUENT OFFERINGS.
(a) So long as the Baxter Agreement is in effect and Baxter is
not in material breach of its obligations thereunder, Baxter shall have a right
of first refusal to purchase up to nineteen and nine-tenths percent (19.9%) of
all Equity Securities, as defined below, that the Company may, from time to
time, propose to sell and issue after the date of this Agreement, other than the
Equity Securities excluded by Section 4.6 below.
(b) Each Holder other than Baxter shall have a right of first
refusal to purchase its pro rata share of all Equity Securities remaining, if
any, after taking into account Baxter's exercise of its rights of first refusal
set forth in Sections 4.1(a) and 4.2(a) hereof. Each Holder's pro rata share of
Equity Securities shall be defined as the ratio of the number of Registrable
Securities with respect to which such Holder is deemed to be holder immediately
prior to the issuance of such Equity Securities to the total number of shares of
Common Stock of the Company outstanding or issuable upon conversion of
outstanding Equity Securities (excluding any of the same held by Baxter).
(c) The term "Equity Securities" shall mean (i) any capital
stock of the Company, (ii) any security convertible, with or without
consideration, into any stock or similar security, (iii) any option, warrant or
right to subscribe to or purchase any capital stock.
4.2 EXERCISE OF RIGHTS.
(a) If the Company proposes to issue any Equity Securities, it
shall give Baxter written notice of its intention, describing the Equity
Securities, the price, and the terms and conditions upon which the Company
proposes to issue the same. Baxter shall have twenty (20)
16.
<PAGE> 20
days from the giving of such notice (the "Baxter Notice Period") to agree to
purchase up to the nineteen and nine-tenths percent (19.9%) of such Equity
Securities for the price and upon the terms and conditions specified in the
notice by giving written notice to the Company and stating therein the quantity
of such Equity Securities to be purchased.
(b) As soon as practically possible after the end of the
Baxter Notice Period, the Company shall give the Holders other than Baxter
written notice of its intention to issue those Equity Securities remaining after
Baxter's exercise of its right of first refusal, which notice shall describe
such Equity Securities, the price, and the conditions upon which the Company
proposes to issue the same. Each Holder other than Baxter shall have twenty (20)
days from the giving of such notice to agree to purchase its pro rata share of
Equity Securities for the price and upon the terms and conditions specified in
the notice by giving written notice to the Company and stating therein the
quantity of such Equity Securities to be purchased. If any such Holder does not
elect to purchase its full pro rata share of such Equity Securities, the Company
shall promptly inform each Holder other than Baxter which purchases all of the
Equity Securities available to it ("Fully Exercising Holder") of any other
Holder's failure to do likewise. During the ten-day period commencing after the
mailing of such information, each Fully Exercising Holder shall be entitled to
purchase its pro rata share of Equity Securities offered by the Company but
unsold. Duly Registrable Securities held by Fully Exercising Holders shall be
considered in determining each Fully Exercising Holder's pro rata share.
4.3 ISSUANCE OF EQUITY SECURITIES TO OTHER PERSONS. The Company shall
have sixty (60) days after the end of the Baxter Notice Period to sell those
Equity Securities offered by the Company but not sold at a price and upon terms
and conditions no more favorable to the purchasers thereof than those specified
in the Company's notices to the Holders pursuant to Section 4.2 hereof. If the
Company has not sold the Equity Securities within such sixty (60) days, the
Company shall not thereafter issue or sell any Equity Securities, without first
offering such securities to the Holders provided above.
4.4 TERMINATION OF RIGHTS OF FIRST REFUSAL. The rights of first
refusal established by this Article IV shall terminate immediately prior to the
consummation of the Initial Offering.
4.5 TRANSFER OF RIGHTS OF FIRST REFUSAL.
(a) The rights of first refusal of Baxter under this
Article IV may not be transferred.
(b) The rights of first refusal of each Holders under
this Article IV may be transferred to a party to whom a transfer or assignment
of registration rights may be made pursuant to Section 2.10 hereof and only if
made concurrently with the transfer of such registration rights to such party.
4.6 EXCLUDED SECURITIES. The rights of first refusal established by
this Article IV shall have no application to any of the following Equity
Securities:
17.
<PAGE> 21
(a) shares of Common Stock (and/or options, warrants or other
Common Stock purchase rights issued pursuant to such options, warrants or other
rights) issued or to be issued to employees, officers or directors of, or
consultants or advisors to the Company or any subsidiary, pursuant to stock
purchase or stock option plans or other arrangements;
(b) stock issued pursuant to any rights or agreements
outstanding as of the date of that certain Series E Stock Purchase Agreement by
and between the Company and Baxter entered into as of April 1, 1996, including,
without limitation, convertible securities, options and warrants; and stock
issued pursuant to any such rights or agreements granted after the date of such
agreement, provided that the rights of first refusal established by this Article
IV applied with respect to the initial sale or grant by the Company of such
rights or agreements;
(c) any Equity Securities issued for consideration other than
cash pursuant to a merger, consolidation, acquisition or similar business
combination;
(d) any Equity Securities that are issued by the Company as
part of an Initial Offering;
(e) shares of Common Stock issued in connection with any stock
split, stock dividend or recapitalization by the Company;
(f) shares of Common Stock issued pursuant to any leasing or
credit arrangement for other than primarily equity financing purposes; and
(g) Equity Securities sold to Baxter pursuant to Sections 4.1
or 4.2 of the Baxter Agreement.
V.
MISCELLANEOUS
5.1 GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the State of California.
5.2 SURVIVAL. The representations, warranties, covenants, and
agreements made herein shall survive any investigation made by any Holder and
the closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or other instrument delivered by or
on behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.
5.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of Registrable Securities from time to time;
18.
<PAGE> 22
provided, however, that prior to the receipt by the Company of adequate written
notice of the transfer of any Registrable Securities specifying the full name
and address of the transferee, the Company may deem and treat the person listed
as the holder of such shares in its records as the absolute owner and holder of
such shares for all purposes, including the payment of dividends or any
redemption price.
5.4 SEPARABILITY. In case any provision of the Agreement shall be
invalid, illegal, or unenforceable, the validity, legality, and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
5.5 AMENDMENT AND WAIVER.
(a) This Agreement may be amended or modified only upon the
written consent of the Holders of not less than a two-thirds (2/3) in interest
of the Registrable Securities. Notwithstanding the foregoing, so long as Baxter
is not in default of the Baxter Agreement or this Agreement and continues to
hold at least ninety percent (90%) of the stock that it has purchased pursuant
to the Baxter Agreement and this Agreement, through the date of the proposed
amendment or modification of this Agreement, Sections 4.1(a) and 4.2(a) of this
Agreement may be amended or modified only upon the written consent of Baxter.
(b) The obligations of the Company and the rights of the
Holders under this Agreement may be waived only with the written consent of the
Holders of not less than a two-thirds (2/3) in interest of the Registrable
Securities.
(c) Except to the extent provided in this Section 5.5, neither
this Agreement nor any provision hereof may be changed, waived, discharged, or
terminated, except by a statement in writing signed by the party against which
enforcement of the change, waiver, discharge, or termination is sought.
5.6 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any Holder, upon any breach,
default or noncompliance of the Company under this Agreement shall impair any
such right, power, or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of or in
any similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent, or approval of any kind or character on
any Holder's part of any breach, default or noncompliance under the Agreement or
any waiver on such Holder's part of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, by law, or otherwise afforded to Holders, shall be cumulative and not
alternative.
5.7 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be sent by registered or
certified mail, return receipt requested, postage prepaid, and, if to an address
outside the United States of America, by telex or facsimile transmitted
substantially concurrently with the mailing of such written notice, addressed:
(a) if to a Holder, at such Holder's address as set forth on the Company's
records,
19.
<PAGE> 23
or at such other address as such Holder shall have furnished to the Company in
writing or (b) if to the Company, at its address as set forth at the end of this
Agreement, or at such other address as the Company shall have furnished to the
Holders in writing.
5.8 ATTORNEYS' FEES. If legal action is brought to enforce or
interpret this Agreement, the prevailing party shall be entitled to recover its
reasonable attorneys' fees and legal costs in connection therewith.
5.9 TITLES AND SUBTITLES. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
5.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
20.
<PAGE> 24
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth in the first paragraph hereof.
COMPANY:
STERITECH, INC.
2525 Stanwell Drive, Suite 300
Concord, CA 94520
By: /s/ Stephen T. Isaacs
-------------------------
Title: President
-------------------------
INVESTORS:
MR. VINCENT E. WRIGHT
By: /s/ Vincent Wright
-------------------------
Title:
-------------------------
(Title)
MR. CLAUDE L. GANZ
By: /s/ Claude L. Ganz
-------------------------
(Title)
DOWN, ANN M., TRUSTEE FBO ANN M. DOWN REV TRUST U/A/D 09/22/95
By: /s/ Ann M. Down
-------------------------
Trustee
-------------------------
(Title)
21.
<PAGE> 25
MR. JAMES D. WOLFENSOHN
By: /s/ James D. Wolfensohn
-------------------------
-------------------------
(Title)
MR. GEORGE D. CIMINO
By: /s/ George D. Cimino
-------------------------
-------------------------
(Title)
KURT A. LATTA PROFIT SHARING PLAN
By: /s/ Kurt A. Latta
-------------------------
Trustee
-------------------------
(Title)
MR. KURT A. LATTA TRUSTEE OF THE KURT A. LATTA PENSION PLAN
By: /s/ Kurt A. Latta
-------------------------
Trustee
-------------------------
(Title)
MR. LATTA, KURT A., TTEE (FOR RACHEL LATTA) OF THE 1990 LATTA IRREVOCABLE
TRUST, SUBTRUST FOR RACHEL LATTA
By: /s/ Kurt A. Latta
-------------------------
Trustee
-------------------------
(Title)
22.
<PAGE> 26
MR. LATTA, KURT A., TTEE (FOR ANTHONY LATTA) OF THE 1990 LATTA IRREVOCABLE
TRUST, SUBTRUST FOR ANTHONY LATTA
By: /s/ Kurt A. Latta
-------------------------
Trustee
-------------------------
(Title)
MR. LATTA, KURT A., TTEE (FOR ALEXANDRA LATTA) OF THE 1990 LATTA IRREVOCABLE
TRUST, SUBTRUST FOR ALEXANDRA LATTA
By: /s/ Kurt A. Latta
-------------------------
Trustee
-------------------------
(Title)
MR. LATTA, KURT A., TTEE OF THE 1990 FAMILY TRUST
By: /s/ Kurt A. Latta
-------------------------
Trustee
-------------------------
(Title)
KING, ROBERT ELIOT, DOROTHY JONES KING, TRUSTEES OF THE KING LIVING TRUST
U/A/D JUNE 19, 1989
By: /s/ Robert Eliot King
-------------------------
By: /s/ Dorothy Jones King
-------------------------
Trustees
-------------------------
(Title)
23.
<PAGE> 27
SAN FRANCISCO INTERNATIONAL INVESTORS
By: /s/ Robert E. King
-------------------------
Managing Partner
-------------------------
(Title)
THE R.E.K. PROFIT SHARING PLAN
By: /s/ Robert E. King
-------------------------
Trustee
-------------------------
(Title)
KING, ROBERT ELIOT, TRUSTEE UNDER THE TRUST OF THE R.E.K. PROFIT SHARING PLAN
By: /s/ Robert E. King
-------------------------
Trustee
-------------------------
(Title)
DONALD L. LUCAS, TTEE DONALD L. LUCAS PROFIT SHARING TRUST DATED 1/1/87
By: /s/ Donald L. Lucas
-------------------------
Successor Trustee
-------------------------
(Title)
RICHARD M. LUCAS CANCER FOUNDATION
By: /s/ Donald L. Lucas
-------------------------
Chairman of the Board
-------------------------
(Title)
24.
<PAGE> 28
DONALD L. LUCAS, TTEE, DONALD L. LUCAS & LYGIA S. LUCAS TRUST AGREEMENT
DATED 12/3/84
By: /s/ Donald L. Lucas
-------------------------
Trustee
-------------------------
(Title)
CAROL P. PALKOVIC
By: /s/ Carol P. Palkovic
-------------------------
-------------------------
(Title)
SAND HILL FINANCIAL COMPANY
By: /s/ Donald L. Lucas
-------------------------
General Partner
-------------------------
(Title)
ST. MARY'S COLLEGE
By: /s/ Raymond J. White
-------------------------
Chief Financial Officer
-------------------------
(Title)
MR. CARL HANSON
By: /s/ Carl Hanson
-------------------------
-------------------------
(Title)
25.
<PAGE> 29
THE TRUSTEES OF THE WALLACE R. HAWLEY AND ALEXANDRA HAWLEY REVOCABLE
TRUST, U/A/D 7/30/92
By: /s/ Wallace R. Hawley
-------------------------
Trustee
-------------------------
(Title)
MR. ROBERT J. OSTER TRUSTEE OF THE NIKLAS OSTERSMITH 1995 IRREVOCABLE TRUST,
DATED APRIL 16, 1995
By: /s/ Robert J. Oster
-------------------------
Trustee
-------------------------
(Title)
ROBERT J. & MARION E. OSTER, TTEES OSTER FAMILY REVOCABLE TRUST, DTD 10/5/76
By: /s/ Robert J. Oster
-------------------------
Trustee
-------------------------
(Title)
MARK & SUZANNE OSTERSMITH
By: /s/ Robert Ostersmith
-------------------------
Power of Attorney
-------------------------
(Title)
MR. ROY KIRKORIAN
By: /s/ Roy Kirkorian
-------------------------
-------------------------
(Title)
26.
<PAGE> 30
A. CRAWFORD COOLEY
By: /s/ A. Crawford Cooley
-------------------------------
-------------------------------
(Title)
FRANK C. HERRINGER & MARYELLEN CATTANI HERRINGER
By: /s/ Frank C. Herringer
-------------------------------
By: /s/ Maryellen Cattani Herringer
-------------------------------
-------------------------------
(Title)
ERTOLA, ALEXANDRA LUCAS, C/F FOR JOHN PATRICK ERTOLA UTMA CA 21
By: /s/ Alexandra Ertola
-------------------------------
Custodian
-------------------------------
(Title)
ERTOLA, ALEXANDRA LUCAS, C/F FOR JOSEPH LUCAS ERTOLA UTMA CA 21
By: /s/ Alexandra Ertola
-------------------------------
Custodian
-------------------------------
(Title)
ERTOLA, ALEXANDRA LUCAS, C/F FOR NICHOLAS ALEXANDER ERTOLA UTMA CA 21
By: /s/ Alexandra Ertola
-------------------------------
Custodian
-------------------------------
(Title)
27.
<PAGE> 31
QUEST VENTURES INTERNATIONAL
By: /s/ Lucien Ruby
------------------------------------------
General Partner of the General Partnership
------------------------------------------
(Title)
QUEST VENTURES II
By: /s/ Lucien Ruby
------------------------------------------
General Partner of the General Partnership
------------------------------------------
(Title)
JOHN W. LUCAS, CO-TTEE LUCAS FAMILY TRUST, DTD 6/4/80
By: /s/ John W. Lucas
------------------------------------------
Co-Trustee
------------------------------------------
(Title)
GERALD C. DOWN
By: /s/ Gerald C. Down
------------------------------------------
------------------------------------------
(Title)
MR. MORTON L. TOPFER
By: /s/ Morton L. Topfer
------------------------------------------
------------------------------------------
(Title)
28.
<PAGE> 32
MR. ROBERT DAVID SPRENG
By:/s/ Robert David Spreng
--------------------------------
--------------------------------
(Title)
DR. SCOTT MURPHY
By:/s/ Scott Murphy
--------------------------------
--------------------------------
(Title)
JOHN W. AND MARY G. LUCAS, CO-TTEE LUCAS TRUST A - UWO LEO J. LUCAS
By:/s/ John W. Lucas
--------------------------------
Co-Trustee
--------------------------------
(Title)
DAIN BOSWORTH, INC., CUSTODIAN FBO YUVAL ALMOG SEP.-IRA IFG OPERATIONS
GROUP/IRA DEPT.
By:/s/ P. H. Colbert
--------------------------------
First Vice President
--------------------------------
(Title)
JOSEPH B. COSTELLO AND MARGARET M. COSTELLO, TTEES OF THE COSTELLO FAMILY
TRUST DTD 10/21/92
By:/s/ Joseph B. Costello
--------------------------------
--------------------------------
(Title)
29.
<PAGE> 33
MR. LAURENCE CORASH
By:/s/ Laurence Corash
--------------------------------
--------------------------------
(Title)
MR. DAVID KOEHLER
By:/s/ David Koehler
--------------------------------
--------------------------------
(Title)
VISIPLEX INVESTMENTS LIMITED, A DELAWARE LIMITED PARTNERSHIP
By:/s/ Ben Joseph
--------------------------------
General Partner
--------------------------------
(Title)
MR. MICHAEL L. SWEENEY
By:/s/ Michael L. Sweeney
--------------------------------
--------------------------------
(Title)
MS. LAURI S. GRUBB
By:/s/ Lauri S. Grubb
--------------------------------
--------------------------------
(Title)
30.
<PAGE> 34
I. P. (KIP) KNELMAN
By:/s/ I. P. (Kip) Knelman
--------------------------------
--------------------------------
(Title)
MR. LARRY R. HILL
By:/s/ Larry R. Hill
--------------------------------
--------------------------------
(Title)
MR. WARREN G. CHRISTIANSON
By:/s/ W. G. Christianson
--------------------------------
--------------------------------
(Title)
THERESE ANDERSON
By:/s/ Therese M. Anderson
--------------------------------
--------------------------------
(Title)
MR. HAROLD W. MILNER
By:/s/ Harold W. Milner
--------------------------------
--------------------------------
(Title)
31.
<PAGE> 35
DR. JEFFERY MCCULLOUGH
By:/s/ Jeffery McCullough
--------------------------------
--------------------------------
(Title)
MR. PAUL K. JOAS
By:/s/ Paul K. Joas
--------------------------------
--------------------------------
(Title)
CHERI L. AND THOMAS G. KAMP
By:/s/ Thomas G. Kamp
--------------------------------
By:/s/ Cheri L. Kamp
--------------------------------
--------------------------------
(Title)
MR. RICHARD E. STRUTHERS
By:/s/ Richard E. Struthers
--------------------------------
--------------------------------
(Title)
ROBERT F. SHAW, M.D., TTEE ROBERT FRANCIS SHAW 1990 TRUST
By:/s/ Robert F. Shaw, M.D.
--------------------------------
Trustee
--------------------------------
(Title)
32.
<PAGE> 36
CLEARWATER VENTURES, L.P.
By:/s/ Donald W. Weeden
--------------------------------
General Partner
--------------------------------
(Title)
MR. WAYNE G. JOHNSON
By:/s/ Wayne Johnson
--------------------------------
--------------------------------
(Title)
MOTETE CORPORATION
By:/s/ Gabriel de la Guardia
--------------------------------
President
--------------------------------
(Title)
MR. DOUGLAS H. STICKNEY AND KIMBERLY A. STICKNEY
By:/s/ Douglas Stickney
--------------------------------
By:/s/ Kimberly A. Stickney
--------------------------------
--------------------------------
(Title)
MR. FRANK W. MCBEE JR.
By:/s/ Frank W. McBee
--------------------------------
--------------------------------
(Title)
33.
<PAGE> 37
MR. JAYE F. DYER
By:/s/ Jaye F. Dyer
--------------------------------
--------------------------------
(Title)
N. BUD GROSSMAN REVOCABLE TRUST, DTD 8/22/83
By:/s/ N. Bud Grossman
--------------------------------
Trustee
--------------------------------
(Title)
MS. BEVERLY N. GROSSMAN
By:/s/ Beverly N. Grossman
--------------------------------
--------------------------------
(Title)
MR. KENNETH W. STICKNEY
By:/s/ Ken W. Stickney
--------------------------------
--------------------------------
(Title)
MR. ALBERTO PEREZ
By:/s/ Alberto Perez
--------------------------------
--------------------------------
(Title)
34.
<PAGE> 38
MR. JAMES DODGE
By:/s/ James Dodge
--------------------------------------------
--------------------------------------------
(Title)
MS. SUZANNE KNELMAN
By:/s/ Suzanne Knelman
--------------------------------------------
--------------------------------------------
(Title)
BAXTER HEALTHCARE CORPORATION
By:/s/ Victor Schmitt
--------------------------------------------
President, Venture Management, Biotech Group
--------------------------------------------
(Title)
DR. HARRY B. GREENBERG
By:/s/ Harry Greenberg
--------------------------------------------
--------------------------------------------
(Title)
MR. STEVEN G. ROTHMEIER
By:/s/ Steven G. Rothmeier
--------------------------------------------
--------------------------------------------
(Title)
35.
<PAGE> 39
MR. WAYNE MILLS
By:/s/ Wayne W. Mills
---------------------------------------
---------------------------------------
(Title)
MR. JEFF WERBALOWSKY
By:/s/ Jeffery Werbalowsky
---------------------------------------
---------------------------------------
(Title)
J. ROBERT COLEMAN & DIANE S. COLEMAN
By:/s/ Diane S. Coleman
---------------------------------------
By:/s/ J. Robert Coleman
---------------------------------------
---------------------------------------
(Title)
MR. NEIL N. LAPIDUS, C.P.A.
By:/s/ Neil Lapidus
---------------------------------------
---------------------------------------
(Title)
MS. ANNE F. HOLLORAN
By:/s/ Anne F. Holloran
---------------------------------------
---------------------------------------
(Title)
36.
<PAGE> 40
CORAL PARTNERS II, A LIMITED PARTNERSHIP
By: Coral Partners IV, Limited Partnership,
its general partner
By:/s/ Peter H. McNerney
---------------------------------------
General Partner
---------------------------------------
(Title)
CORAL PARTNERS IV, LIMITED PARTNERSHIP
By:/s/ Peter H. McNerney
---------------------------------------
General Partner
---------------------------------------
(Title)
PETER H. MCNERNEY
By:/s/ Peter H. McNerney
---------------------------------------
---------------------------------------
(Title)
YUVAL ALMOG
By:/s/ Yuval Almog
---------------------------------------
---------------------------------------
(Title)
MR. MARK C. HEADRICK
By:/s/ Mark C. Headrick
---------------------------------------
---------------------------------------
(Title)
37.
<PAGE> 41
LINDA L. WATCHMAKER
By:/s/ Linda L. Watchmaker
---------------------------------------
---------------------------------------
(Title)
LUCAS, DONALD A. C/F MARY A. LUCAS UTMA CA 21
By:/s/ Donald A. Lucas
---------------------------------------
Custodian
---------------------------------------
(Title)
LUCAS, DONALD A. C/F JACK B. LUCAS UTMA CA UNTIL AGE 21
By:/s/ Donald A. Lucas
---------------------------------------
Custodian
---------------------------------------
(Title)
KEN PREMINGER
By:/s/ Ken Preminger
---------------------------------------
---------------------------------------
(Title)
HEARST, DAVID PAUL IRREVOCABLE TRUST, U/A 4/7/89
By:/s/ John E. Hearst
---------------------------------------
Trustee
---------------------------------------
(Title)
38.
<PAGE> 42
HEARST, LESLIE JEAN IRREVOCABLE TRUST, U/A 4/7/89
By:/s/ John E. Hearst
---------------------------------------
Trustee
---------------------------------------
(Title)
MR. JOHN E. HEARST
By:/s/ John E. Hearst
---------------------------------------
---------------------------------------
(Title)
MR. PETER HOWLEY
By:/s/ Peter Howley
---------------------------------------
---------------------------------------
(Title)
ANDREW L. CHASE OR LAURA A. CHASE, TTEES CHASE 1991 REVOCABLE TRUST, DTD
4/2/91
By:/s/ Andrew Chase
---------------------------------------
---------------------------------------
(Title)
ARNOLD N. SILVERMAN, TTEE SILVERMAN FAMILY TRUST DTD 6/22/88
By:/s/ Arnold N. Silverman
---------------------------------------
Truestee
---------------------------------------
(Title)
39.
<PAGE> 43
CHASE 1991 REVOCABLE TRUST, DTD 4/2/91
By:/s/ Andrew Chase
---------------------------------------
---------------------------------------
(Title)
THIBODEAU, GEORGE M. C/F MICHAEL A. THIBODEAU UTMA CA 21
By:/s/ George M. Thibodeau
---------------------------------------
Custodian
---------------------------------------
(Title)
GC&H INVESTMENTS
By:/s/ Kenneth L. Guernsey
---------------------------------------
Executive Partner
---------------------------------------
(Title)
MR. JEFFREY L. WALKER
By:/s/ Jeffrey Walker
---------------------------------------
---------------------------------------
(Title)
THIBODEAU, GEORGE M., C/F ANN ALEANDRA THIBODEAU UTMA CA 21
By:/s/ George M. Thibodeau
---------------------------------------
Custodian
---------------------------------------
(Title)
40.
<PAGE> 44
MS. LILY LIN
By:/s/ Lily Lin
---------------------------------------
---------------------------------------
(Title)
MR. HENRY RAPOPORT
By:/s/ Henry Rapoport
---------------------------------------
---------------------------------------
(Title)
MR. WALTER S. HUFF, JR.
By:/s/ Walter S. Huff
---------------------------------------
---------------------------------------
(Title)
LARRY G. GERDES IRREVOCABLE TRUST
By:/s/
---------------------------------------
Trustee
---------------------------------------
(Title)
GERDES HUFF INVESTMENTS
By:/s/ Larry Gerdes
---------------------------------------
General Partner
---------------------------------------
(Title)
41.
<PAGE> 45
MR. LARRY G. GERDES
By:/s/ Larry Gerdes
---------------------------------------
---------------------------------------
(Title)
THE BC GROUP
By:/s/ Larry Gerdes
---------------------------------------
Agent
---------------------------------------
(Title)
HENRY STICKNEY, TRUSTEE OF THE STICKNEY FAMILY TRUST DTD 11/26/86
By:/s/ Henry E. Stickney
---------------------------------------
Trustee
---------------------------------------
(Title)
MR. B.J. CASSIN CONSERVATOR FOR ROBERT CASSIN
By:/s/ B. J. Cassin
---------------------------------------
---------------------------------------
(Title)
BRENDAN JOSEPH CASSIN AND ISABEL B. CASSIN, TRUSTEES OF THE CASSIN FAMILY TRUST
U/D/T DATED JANUARY 31, 1996
By:/s/ B. J. Cassin
---------------------------------------
Trustee
---------------------------------------
(Title)
42.
<PAGE> 46
MR. JOHN TESSMAN
By:/s/ John Tessman
---------------------------------------
---------------------------------------
(Title)
CASSIN FAMILY PARTNERS, A CALIFORNIA LIMITED PARTNERSHIP
By:/s/ B. J. Cassin
---------------------------------------
General Partner
---------------------------------------
(Title)
THE TRUSTEES OF THE WALLACE R. HAWLEY AND ALEXANDRA HAWLEY REVOCABLE
TRUST U/A/D 07/30/92
By:/s/ Wallace R. Hawley
---------------------------------------
Trustee
---------------------------------------
(Title)
JANICE STICKNEY
By:/s/ Janice L. Stickney
---------------------------------------
---------------------------------------
(Title)
MR. GREGORY VAUGHAN
By:/s/ Gregory Vaughan
---------------------------------------
---------------------------------------
(Title)
43.
<PAGE> 47
STEPHEN F. BULLOCK, TTEE STEPHEN F. BULLOCK & LINDA BULLOCK TRUST, DTD
11/15/90
By:/s/ Stephen F. Bullock
--------------------------------------------------
Trustee
--------------------------------------------------
(Title)
MR. ROBERT A. COOLEY
By:/s/ Robert A. Cooley
--------------------------------------------------
--------------------------------------------------
(Title)
STANFORD UNIVERSITY
By:/s/ Carol Gilmer
--------------------------------------------------
Assistant Secretary, the Board of
Trustees of the Leland Standford Junior University
--------------------------------------------------
(Title)
MR. RAYMOND BINGHAM
By:/s/ Raymond Bingham
--------------------------------------------------
--------------------------------------------------
(Title)
MR. RONALD P. ANTIPA
By:/s/ Ronald P. Antipa
--------------------------------------------------
--------------------------------------------------
(Title)
44.
<PAGE> 48
DELAPORTA PARTNERSHIP
By:/s/ Angelo Delaporta
---------------------------------------
General Partner
---------------------------------------
(Title)
ANGELO DELLAPORTA, TRUSTEE DELLAPORTA FAMILY TRUST, DTD 8/16/82
By:/s/ Angelo Dellaporta
---------------------------------------
Trustee
---------------------------------------
(Title)
MR. STEPHEN T. ISAACS
---------------------------------------
By:/s/ Stephen Isaacs
---------------------------------------
---------------------------------------
(Title)
45.
<PAGE> 1
EXHIBIT 10.17
DEVELOPMENT, MANUFACTURING AND
MARKETING AGREEMENT
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
1. BACKGROUND......................................................1
2. DEFINITION OF TERMS.............................................1
3. COOPERATIVE DEVELOPMENT WORK....................................7
3.1 Period; Objective........................................7
3.2 Baxter Benchmarks........................................7
3.3 Steritech Benchmarks.....................................7
3.4 Project Committee........................................7
3.5 Management Board.........................................7
3.6 Review of Budget, Benchmarks, etc........................7
3.7 Exchange of Information..................................8
3.8 Expenditures.............................................8
3.9 Payment Schedule.........................................8
3.10 Testing and Regulatory Expenses..........................9
3.10.1 Testing Expenses..................................9
3.10.2 Regulatory Expenses...............................9
3.11 Budget Contingencies.....................................9
3.12 Reconciliation of Expenditures
Following Regulatory Approval...........................10
3.13 Reconciliation of Expenditures
Prior to Regulatory Approval............................10
3.14 Funding Contingency.....................................10
4. MILESTONE PAYMENTS.............................................11
4.1 General.................................................11
4.2 Funding.................................................11
5. SUPPLY OF STERITECH COMPOUND AND SYSTEM
MANUFACTURING..................................................11
5.1 Baxter Responsibilities..................................11
5.2 Instrument Production....................................11
5.3 System Specifications....................................11
5.4 Steritech Specifications.................................11
5.5 Source of Supply.........................................12
5.6 Failure of Steritech to Meet Baxter Requirements........12
5.7 Upgrades.................................................12
</TABLE>
i
<PAGE> 3
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
<S> <C> <C>
6. MARKETING AND DISTRIBUTION RIGHTS: LOSS OR RETENTION
OF EXCLUSIVE DISTRIBUTION RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.1 Exclusive Right to Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.2 Sales Performance Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.3 Meetings Concerning Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7. REVENUE SHARING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.1 Revenue Sharing Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.2 Exception to Revenue Sharing Payments of 7.1 . . . . . . . . . . . . . . . . . . . . 14
7.3 Adjustments to Revenue Sharing Payments . . . . . . . . . . . . . . . . . . . . . . . 15
8. PATENTS, KNOW-HOW, LICENSE GRANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.1 Steritech Sole Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.2 Baxter Sole Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.3 Joint Patents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.4 License to Baxter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.5 Notice of Sole Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.6 Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.7 Right of First Refusal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.8 Right of First Negotiation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.9 Additional Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.10 Sublicenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.11 Regulatory Files . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
9. PROSECUTION OF PATENT RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
9.1 Steritech Patents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
9.2 Baxter Patents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
9.3 Joint Patents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
9.4 Prior Art; Review and Comment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
9.5 Election Not to Pay Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
10. TRADEMARKS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
10.1 Baxter Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
10.2 Steritech Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
11. COMPETITIVE ACTIVITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
11.1 Restrictions on Steritech . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
11.2 Restriction on Baxter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>
ii
<PAGE> 4
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
<S> <C> <C>
12. CONFIDENTIAL INFORMATION . . . . . . . . . . . . . . . . . . . . 19
12.1 Confidentiality Agreement . . . . . . . . . . . . . . . . . 19
12.2 Use of Consultants. . . . . . . . . . . . . . . . . . . . . 19
13. CESSATION OF COOPERATIVE DEVELOPMENT WORK. . . . . . . . . . . . 20
13.1 Cessation . . . . . . . . . . . . . . . . . . . . . . . . . 20
13.2 Steritech Continuing Rights . . . . . . . . . . . . . . . . 20
13.3 Baxter Continuing Rights. . . . . . . . . . . . . . . . . . 21
14. REPORTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.1 Quarterly Sales Reports . . . . . . . . . . . . . . . . . . 21
15. BOOKS AND RECORDS. . . . . . . . . . . . . . . . . . . . . . . . 22
15.1 Records . . . . . . . . . . . . . . . . . . . . . . . . . . 22
15.2 Retention . . . . . . . . . . . . . . . . . . . . . . . . . 22
15.3 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . 22
16. TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
17. BREACH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
17.1 Material Breach . . . . . . . . . . . . . . . . . . . . . . 23
17.2 Steritech Rights. . . . . . . . . . . . . . . . . . . . . . 23
17.3 Baxter Rights . . . . . . . . . . . . . . . . . . . . . . . 23
18. REPRESENTATIONS AND INDEMNITIES. . . . . . . . . . . . . . . . . 24
18.1 Steritech Representations . . . . . . . . . . . . . . . . . 24
18.2 Steritech Indemnification . . . . . . . . . . . . . . . . . 24
18.3 Baxter Representations. . . . . . . . . . . . . . . . . . . 24
18.4 Baxter Indemnification. . . . . . . . . . . . . . . . . . . 25
19. INDEMNIFICATION, LIABILITY, INFRINGEMENT . . . . . . . . . . . . 25
19.1 Defense of Third Party Infringement Suits . . . . . . . . . 25
19.2 Third Party Patent Expenses . . . . . . . . . . . . . . . . 25
19.3 Suits for Infringement by Others. . . . . . . . . . . . . . 25
20. GENERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
20.1 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . 26
20.2 Relationship of Parties . . . . . . . . . . . . . . . . . . 26
20.3 Senior Baxter Contact . . . . . . . . . . . . . . . . . . . 26
</TABLE>
iii
<PAGE> 5
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
<S> <C> <C>
20.4 Senior Steritech Contact...................................... 26
20.5 Severability ................................................. 26
20.6 Force Majeure................................................. 27
20.7 Notices ...................................................... 27
20.8 Binding ...................................................... 27
20.9 Governing Law ................................................ 28
20.10 Venue ........................................................ 28
</TABLE>
iv
<PAGE> 6
DEVELOPMENT, MANUFACTURING AND
MARKETING AGREEMENT
THIS AGREEMENT ("Agreement") between BAXTER HEALTHCARE CORPORATION, a
Delaware corporation ("Baxter") with principal offices at One Baxter Parkway,
Deerfield, Illinois 60015, and STERITECH, INC., a California corporation
("Steritech") with principal offices at 2525 Stanwell Drive, Concord,
California 94520, is effective as of the tenth day of December, 1993
("Effective Date").
1. BACKGROUND.
1.1 Steritech has substantial knowledge and expertise in the area
of decontamination of pathogens in blood products using photoactive compounds.
Baxter has substantial knowledge and expertise in the research, development,
manufacture and distribution of healthcare products including those relating to
the collection, preservation, processing, manipulation, storage and treatment
of blood and blood components.
1.2 The parties are interested in the development and
commercialization of products and/or systems which provide a customer with
instrumentation, disposables and photoactive compounds for use in the
inactivation of pathogens in human platelet concentrate.
1.3 Concurrently with the execution and delivery of this
Agreement, Baxter is executing and delivering a Stock Purchase Agreement dated
the date of this Agreement with respect to the purchase of Series C Preferred
Stock of Steritech for a purchase price of $1,000,000.
2. DEFINITION OF TERMS.
The words appearing in capitalized form throughout this Agreement
shall have the meanings assigned to them in this Section 2.
ADDITIONAL COST OF GOODS shall mean that portion of the Cost of Goods
as (defined below) that exceeds the Anticipated Cost of Goods (defined below).
ANTICIPATED COST OF GOODS shall mean [*] for Baxter's Cost of Goods
for the Inactivation Package and [*] for Steritech's Cost of Goods for the
Steritech Compound.
BAXTER shall mean Baxter Healthcare Corporation and its affiliates,
including, but not limited to, divisions and subsidiaries, and also including
its parent company, Baxter
*[Confidential Treatment Requested]
1
<PAGE> 7
International Inc. and its affiliates, including, but not limited to, divisions
and subsidiaries. A company shall be considered an affiliate if it is at least
forty percent (40%) owned or controlled by Baxter Healthcare Corporation or
Baxter International Inc.
BAXTER BENCHMARKS shall mean the accomplishments set forth on Schedule
A of this Agreement, to be accomplished by Baxter.
BAXTER KNOW-HOW shall mean unpatented inventions, data, processes,
compositions, techniques and other technical information proprietary to Baxter
relating to the Field and the System including, methods for manufacture or use
of a System or portion thereof.
BAXTER PATENTS shall mean all United States and foreign patent
applications and patents that relate to the Field and have claims reading on a
System or portion thereof or methods for manufacture or use thereof, owned by
Baxter or licensed to Baxter with the right to sublicense and claiming an
invention conceived solely by employees and/or agents and/or licensors of
Baxter both prior to the Effective Date and during the term of this Agreement
pursuant to the Cooperative Development Work, including any continuations,
divisions, reissues, re-examinations and all foreign counterparts thereof.
BAXTER LICENSED KNOW-HOW shall mean all Baxter Know-How in existence
as of the Effective Date or created or acquired during the term of the
Cooperative Development Work, but not after December 31, 1998 unless such
Know-How is used in a System that is sold pursuant to this Agreement or the
parties shall otherwise agree in writing.
BAXTER LICENSED PATENTS shall mean all Baxter Patents in existence as
of the Effective Date of this Agreement or created and reduced to practice or
acquired during the term of the Cooperative Development Work, but not after
December 31, 1998 unless such Patent is used in a System that is sold under
this Agreement or the parties shall otherwise agree in writing.
BENCHMARKS shall mean Steritech Benchmarks and Baxter Benchmarks.
BULK FORM shall mean Steritech Compounds which are not packaged in
single dosage final form.
COOPERATIVE DEVELOPMENT WORK shall mean the Cooperative Development
Work described at Section 3 herein.
COST OF GOODS for any item shall mean the [*], as determined by
generally accepted cost accounting procedures, except that such costs shall
not include [*] or other allocations which are not
*[Confidential Treatment Requested]
2
<PAGE> 8
directly related to [*] and shall not include [*].
EUROPE shall mean Austria, the Benelux countries, Denmark, Finland,
France, Germany, Ireland, Italy, Norway, Spain, Sweden, Switzerland, and the
United Kingdom.
FDA shall mean the United States Food and Drug Administration.
THE FIELD shall mean the [*] for transfusion in [*]-specific (but not
[*]) inactivation systems.
INACTIVATION PACKAGE shall mean the package containing the psoralen as
well as the delivery system.
INITIAL BUDGET shall mean the budget attached as Schedule B hereto.
INSTRUMENT shall mean the instrument to be developed under the
Cooperative Development Work that will provide illumination as required for
photochemical inactivation and may include associated data tracking systems.
INTERCONTINENTAL shall mean any country not included in the definition
of [*] and [*] and excluding [*].
JOINT PATENTS shall mean all United States and foreign patent
applications and patents claiming an invention conceived jointly by employees
and/or agents of both Steritech and Baxter, including any continuations,
divisions, reissues, re-examinations and all foreign counterparts thereof. A
schedule listing such applications and patents shall be appended to this
Agreement during its term and amended from time to time. Ownership of an
invention shall conclusively be considered "joint" when one or more employees
or agents from Baxter and one or more employees or agents from Steritech must
be indicated as co-inventors under United States patent laws on a patent
application for the invention. As of the Effective Date, no Joint Patents
exist.
MANAGEMENT BOARD shall mean the Management Board created pursuant to
Section 3.5 hereof.
MARKET LAUNCH of the System in a given country is deemed to be the
earlier of (1) the date of first commercial sale following Regulatory Approval
for sale of the System in that particular country or (2) the ninetieth (90th)
day following Regulatory Approval for commercial sale of that System in that
country.
*[Confidential Treatment Requested]
3
<PAGE> 9
NET SALES shall mean
(a) in the case the inactivation Package is sold as a
stand-alone item, the amount invoiced by Baxter and Baxter affiliates for sales,
leases, or licenses of Inactivation Packages, less credits or allowances, if
any, for rejections or returns, customary trade discounts actually given, less
customs and duties paid; less separately invoiced and actually incurred taxes
and other governmental charges that are imposed directly on or measured by the
sale, transfer, transportation, delivery or use of an Inactivation Package; and
less freight on shipment from Baxter to end users, and
(b) In the case in which the Inactivation Package is sold
as an integral part of a set with other collection and/or storage items, the
Value Added attributable to the Inactivation Package multiplied by the number of
such sets shipped to third parties by Baxter and Baxter affiliates. The Value
Added shall mean the amount by which the addition of the Inactivation Package to
such set increases the price of such set to ultimate purchasers or users in
comparison to a set that does not contain such inactivation package.
For the purpose of clause (a) of this definition:
(i) Any Inactivation Package [*] products for
whatever reason, including a special promotional offer, or other than a bona
fide arms length transaction exclusively for money, or upon any use of such
Inactivation Package for purposes which do not result in a disposal of such
products in consideration of sales revenue customary of use, such sale or other
disposal or use shall be (unless the parties agree otherwise) deemed to
constitute a sale at the then current average selling price for Inactivation
Packages. (ii) In the case of sales by Baxter to a distributor, the Net Sales
shall be computed on the distributor's invoice price to the ultimate purchaser
or user. In the event that Baxter is not able to determine the price charged by
a distributor to the ultimate purchaser or user, such price shall be the
recommended price which Baxter in its sole discretion recommends the distributor
to charge to its end customers (which may vary from territory to territory).
In computing Net Sales of Inactivation Packages, no deduction from
invoice price or Value Added shall be made with respect to the costs of the
Instruments or with respect to any rental surcharge for Instruments. In the
event that the ultimate purchaser or end user is assessed a charge on a
per-inactivation or other usage basis, the amount of such charge shall be
included in Net Sales.
NORTH AMERICA shall mean the United States and Canada.
PATENT ROYALTY PAYMENT means a patent royalty payment made to a
third party for manufacture, use or sale of a System or portion thereof.
*[Confidential Treatment Requested]
4
<PAGE> 10
PREMIUM shall mean the Net Sales price minus Additional Cost of Goods.
PRODUCT MARKET in a given country shall mean the anticipated annual
market (expressed in number of Inactivation Packages) for Baxter systems for
decontamination of platelets in such country as determined by Baxter reasonably
and in good faith at the time of Regulatory Approval in such country, provided
that for each country in North America and Europe such market shall be not less
than the [*] in that country. Baxter shall notify Steritech of such
determination within sixty days after Regulatory Approval in such country.
PROJECT COMMITTEE shall mean a committee consisting of two (2)
representatives from each party whose purpose is to oversee, coordinate and
manage the Cooperative Development Work to ensure that a coordinated plan
exists to take the System from conception through to commercialization. Each
party will nominate one of its representatives on the Project Committee as the
party's "Leader," subject to approval by the other party.
PROOF OF PRINCIPLES shall mean that tests have been conducted
demonstrating to Baxter's scientific satisfaction the inactivation of pathogens
and a reasonable level of preservation of cellular or protein function.
REGULATORY APPROVAL shall mean (1) in the United States, approval from
the FDA for marketing and promotion of the System, or (2) outside of the United
States, an analogous order by a non-U.S. governmental agency which requires
regulatory approval prior to marketing and promotion of a System in such
non-U.S. country.
REVENUE SHARING FORMULA shall mean the relative percentage interest of
Baxter and Steritech as set forth in Section 7 hereof.
REVENUE SHARING PAYMENTS shall mean the payments that Steritech is
entitled to receive pursuant to Section 7.
SPECIFICATIONS FOR STERITECH COMPOUND shall mean the performance,
cost, quality and reliability requirements which the Project Committee and
Management Board agree must be met by a Steritech Compound for such Steritech
Compound to be acceptable for commercial implementation under Section 5.3. The
Project Committee and Management Board shall prepare written specifications for
Steritech Compound. Such specifications shall include a provision that
Steritech Compound be made according to Good Manufacturing Practices in a
facility licensed by the FDA or (if Steritech shall elect to manufacture
Steritech Compound outside the United States) other applicable regulatory
authority.
*[Confidential Treatment Requested]
5
<PAGE> 11
STERITECH shall mean Steritech, Inc., a company organized under the
laws of California and its affiliates, including, but not limited to, divisions
and subsidiaries. A company shall be considered an affiliate if it is at least
forty percent (40%) owned or controlled by Steritech.
STERITECH COMPOUND shall mean any and all psoralen compounds,
developed by, licensed to, acquired by or otherwise commercially accessible to
Steritech prior to the Effective Date or in the course of the Cooperative
Development Work but does not include the psoralen compound that at this time
is designated by Steritech as [*].
STERITECH KNOW-HOW shall mean unpatented inventions, data, processes,
compositions, techniques and other technical information relating to the Field
proprietary to Steritech relating to the System, including methods for
manufacture or use of, Steritech Compounds and Systems or portions thereof.
STERITECH LICENSED KNOW-HOW shall mean all Steritech Know-How in
existence as of the Effective Date or created or acquired during the term of
the Cooperative Development Work, but not after December 31, 1998 unless the
parties shall otherwise agree in writing.
STERITECH PATENTS shall mean all United States and foreign patent
applications and patents relating to the Field having claims reading on
Steritech Compounds or compositions or formulations thereof, or otherwise
reading on a System or portion thereof, or methods for manufacture or use of
such System or Steritech Compound owned by or licensed to Steritech and
claiming an invention conceived solely by employees and/or licensors, agents of
Steritech, prior to the Effective Date, or during the term of Cooperative
Development Work, including any continuations, divisions, reissues,
re-examinations and foreign counterparts thereof. Steritech Patents in
existence as of the Effective Date are listed in the Attached Schedule B.
Schedule B shall be amended from time to time to include Steritech Patents as
to applications filed and patents issued during the term of this Agreement and
forthwith provided to Baxter.
STERITECH LICENSED PATENTS shall mean all Steritech Patents in
existence as of the effective date of this Agreement or created and reduced to
practice or acquired during the term of the Cooperative Development Work, but
not after December 31, 1998 unless the parties shall otherwise agree in
writing.
STERITECH MILESTONES shall mean the accomplishments set forth in
Section 4.0 of this Agreement, to be accomplished by Steritech.
SYSTEM shall mean a product developed pursuant to the Cooperative
Development Work for use in the Field, incorporating the [*]
*[Confidential Treatment Requested]
6
<PAGE> 12
[*] and also incorporating or employing one or more Steritech Compounds.
SYSTEM SPECIFICATIONS shall mean the performance, cost, quality and
reliability requirements as the Project Committee and Management Board agree
must be met by a System in order for the System to be acceptable for marketing
and distribution hereunder.
3. COOPERATIVE DEVELOPMENT WORK.
3.1 PERIOD; OBJECTIVE. From the Effective Date until the date the
System obtains Regulatory Approval in the United States, Europe (C.E. Mark) and
Japan, Baxter and Steritech shall work together to develop and obtain
Regulatory Approval of a System for use in the Field ("Cooperative Development
Work").
3.2 BAXTER BENCHMARKS. Baxter shall develop the Instrument and
disposables for the System and attempt to achieve the Baxter Benchmarks by the
dates set forth for each Benchmark on Schedule A.
3.3 STERITECH BENCHMARKS. Steritech shall attempt to achieve the
Steritech Benchmarks by the dates set forth for each Benchmark on Schedule C.
3.4 PROJECT COMMITTEE. Steritech and Baxter will appoint a
Project Committee under the definition of such term in Article 2. The Project
Committee will meet at mutually acceptable times to review the Cooperative
Development Work.
3.5 MANAGEMENT BOARD. Steritech and Baxter will appoint a six (6)
person Management Board consisting of two (2) senior executives designated by
each company and each company's Leader from the Project Committee. The purpose
of the Management Board will be to facilitate the overall relationship of the
parties under this Agreement. System Specifications recommended by the Project
Committee shall not be deemed finalized until they are unanimously approved by
the Management Board. The Management Board shall meet from time to time as
appropriate, but no less frequently than two (2) times during each calendar
year, which meetings shall be in June and December, alternating between the
offices of the parties, unless the parties shall agree otherwise. The
Management Board shall review expenditures at least once during each calendar
year. All decisions of the Management Board shall be made by unanimous vote,
with Baxter and Steritech each having one vote regardless of the number of
representatives attending any meeting, in good faith, and considering the
interests of both parties.
3.6 REVIEW OF BUDGET, BENCHMARKS, ETC. The Benchmarks, budget and
a timetable will be reviewed by the Project Committee and Management Board from
time to time during the Cooperative Development Work with the intent that the
parties move
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expeditiously and effectively toward commercialization of the System. The
Initial Budget is attached hereto as Schedule D and is deemed approved by the
Management Board. No revision shall be made to the budget without unanimous
approval of the Management Board.
3.7 EXCHANGE OF INFORMATION. During the term of the Cooperative
Development Work, the parties shall exchange all information developed pursuant
to the Cooperative Development Work including the exchange of Baxter Know-How
and Steritech Know-How relating to the Field. The exchange shall occur
pursuant to Section 12.
3.8 EXPENDITURES. It is a principal goal of the parties that
Baxter and Steritech make approximately the same financial contribution to the
Cooperative Development Work.
3.8.1 Each party shall maintain detailed records which
accurately identify costs and expenses incurred and paid in connection with the
Cooperative Development Work. Each party shall submit this information to the
Management Board as of the 15th day of November or May for the prior six (6)
months along with an estimate of expenses to be incurred during the current six
months. Expenses internally generated because tasks are performed by a party's
own staff will be accounted for based upon actual employee salaries and fringe
benefits and variable expenses and directly applicable overhead allocations,
however, for Baxter expenses will include, to the extent applicable, any
internal corporate charge-backs. Only the reported actual cash outlays and
expenses which are previously unanimously approved by the Management Board as
part of the budget established and approved under Section 3.6 shall be
considered as actual cash outlays and expenses incurred by the parties in
connection with the Cooperative Development Work.
3.8.2 Each party will be responsible for all costs with
respect to participation of its own staff on the Management Board and the
Project Committee during the Cooperative Development Work, including travel
expenses for meetings and participation on the Management Board or Project
Committee. The goal of equality in expenditures shall be disregarded with
respect to these costs, and these costs shall not be subject to cost sharing.
3.9 PAYMENT SCHEDULE.
3.9.1 On December 13, 1993, Baxter will make a payment of [*]
to Steritech in consideration of the rights given under this Agreement to Baxter
to Steritech Patents and Steritech Know-How. Additionally, on December 13,
1993, Baxter will also make to Steritech a research and development payment for
future developments in the amount of [*].
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3.9.2 Baxter will make development payments to Steritech,
except as provided in Section 3.9.3, to Steritech on the first business day
for the indicated months for each of the following years:
<TABLE>
<CAPTION>
January July
<S> <C> <C>
1994 [*]
1995 [*] [*]
1996 [*] [*]
1997 [*] [*]
</TABLE>
3.9.3 With respect to the payments under Section 3.9.2, at
any time there are delays in achievement of any Benchmark that justify a
deferral of funding of amounts that were budgeted for prepayment of outside
contract expenses for the next six month period (see Schedule E attached),
Baxter may defer such payment with respect to such outside expenses (but not
with respect to Steritech budgeted internal expenses) until such Benchmark is
reached or the Management Board determines that progress is otherwise
satisfactory.
3.9.4 Unless otherwise agreed between the parties, all
development payments under Section 3.9 and all Steritech Milestone payments
under Article 4.0 hereof shall be paid on or before the due date by wire
transfer to the bank account of Steritech specified in writing by Steritech to
Baxter.
3.10 TESTING AND REGULATORY EXPENSES.
3.10.1 TESTING EXPENSES. Expenses incurred in connection
with any testing whose primary function is marketing of the System, rather than
for developing or obtaining Regulatory Approval of the System, shall be borne
solely by Baxter and shall not be considered expenses subject to cost sharing.
3.10.2 REGULATORY EXPENSES. The Management Board shall
determine the countries in which Regulatory Approval will be sought and the
timing of seeking such Regulatory Approval. All expenses incurred to obtain
Regulatory Approval will be paid by the parties pursuant to the Cooperative
Development Work budget.
3.11 BUDGET CONTINGENCIES. If a Benchmark is not completed
within the budget for such Benchmark, upon the recommendation of the Project
Committee, and subject to the approval of the Management Board, the Management
Board shall set a new budget for completion of such Benchmark. Unless the
Management Committee shall determine otherwise, Steritech and Baxter will each
fund one-half of the amount needed to complete such Benchmark. Steritech shall
not be obligated to fund more than [*] dollars in the aggregate under this
Agreement. To the extent that budget
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over-runs could obligate Steritech to spend more than [*] dollars, the
Management Committee can modify the time lines and budget items to allow Baxter,
if it desires, to fund budget over-runs that would obligate Steritech to spend
more than [*] dollars. To the extent Baxter pays more than Steritech in budget
over-runs, Baxter can recoup 50% of the difference ("Excess Payment") plus its
cost of debt capital plus [*] per annum (collectively not to exceed [*]) for the
Excess Payment from the Revenue Sharing Payments due Steritech.
3.12 RECONCILIATION OF EXPENDITURES FOLLOWING REGULATORY
APPROVAL. Within sixty (60) days following Regulatory Approval in the United
States, the Management Board will determine whether the actual cash outlays and
expenses incurred by Steritech and Baxter and approved by the Management Board
up to such Regulatory Approval are equal. If they are not equal, the party
incurring fewer expenses shall make a cash payment to the other party equal to
one-half (1/2) the difference between the parties' expenses up to such
Regulatory Approval, except to the extent that the Management Board shall
previously have determined that particular expenses shall be borne in a
different ratio. The payment shall be made in cash within sixty (60) days
following the determination by the Management Board.
3.13 RECONCILIATION OF EXPENDITURES PRIOR TO REGULATORY APPROVAL.
If the parties jointly decide that they will both cease Cooperative Development
Work prior to Regulatory Approval in the United States, then within sixty (60)
days following the joint decision, the Management Board will determine whether
the actual cash outlays and expenses incurred by Steritech and Baxter and
approved by the Management Board up to the date of such decision for the System
are equal. If they are not equal, the party incurring fewer expenses shall
make a cash payment to the other party equal to one-half (1/2) the difference
between the parties' expenses up to that date, except to the extent that the
Management Board shall previously have determined that particular expenses
shall be borne in a different ratio. The payment shall be made in cash within
sixty (60) days following the determination by the Management Board.
3.14 FUNDING CONTINGENCY. Subject to the rights of Baxter under
Section 13 and Section 17 hereof, if Steritech anticipates that for any reason
it will be unable to reasonably provide its share of the development funding
for any period, and shall provide to Baxter ninety (90) days written notice of
such anticipated funding shortfall, Baxter may, at its sole discretion, provide
to Steritech amounts sufficient to bridge such funding shortfall. To the
extent such payment shortfall is not otherwise reconciled as provided in this
Agreement, Baxter will be entitled to recoup such amounts plus Baxter's cost of
debt capital plus [*] percent per annum (collectively not to exceed [*]) by
deducting Revenue Sharing Payments otherwise due to Steritech in each calendar
quarter until such amounts and interest have been recouped.
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4. MILESTONE PAYMENTS.
4.1 GENERAL. In furtherance of the research and development
efforts conducted by Steritech with respect to the System, Baxter shall make
the payments to Steritech specified below. These payments are to be used
solely for the development of the System.
4.2 FUNDING. Baxter shall make the following payments to
Steritech during the term of the Agreement:
<TABLE>
<S> <C>
[*] Milestone and budget agreement (Previously paid)
[*] On December 13, 1993
[*] Upon IND toxicology initiation (Milestone A)
[*] Upon initiation of Phase I Clinical Trials (Milestone B)
[*] Upon initiation of Phase II Clinical Trials (Milestone C)
</TABLE>
These payments shall not be subject to cost sharing.
Baxter shall pay Steritech [*] on December 13, 1993 to fund the
achievement of Milestone A, as set forth above. Thereafter, Baxter shall make
payments to Steritech to fund the achievement of additional research steps: [*]
toward the achievement of Milestone B, payable upon completion of Milestone A,
[*] toward the achievement of Milestone C, payable upon completion of Milestone
B, and [*] toward the achievement of additional research efforts upon completion
of Milestone C.
5. SUPPLY OF STERITECH COMPOUND AND SYSTEM MANUFACTURING.
5.1 BAXTER RESPONSIBILITIES. Subject to this Section 5, all
aspects of and costs related to scale-up, production, marketing and
distribution of the System, but not including the compound, shall be the
responsibility of Baxter.
5.2 INSTRUMENT PRODUCTION. Baxter shall, at its own expense,
tool and scale up the production model of the Instrument. Baxter shall be
responsible for production and manufacture of the Instrument and associated
software of the System.
5.3 SYSTEM SPECIFICATIONS. Baxter's manufacture of each System
shall be in accordance with Systems Specifications as finally approved in
writing by the Project Committee and Management Board. Any change in Systems
Specifications must be approved in writing by the Management Board.
5.4 STERITECH SPECIFICATIONS. Steritech shall supply Steritech
Compounds in Bulk Form to Baxter to be used as a component of a System and
Baxter shall obtain Steritech Compounds to meet its requirements of photoactive
compounds for use in the
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Field from Steritech. Steritech Compounds shall meet the Specifications for
Steritech Compounds as finally approved in writing by the Project Committee and
Management Board. Any change in specifications for Steritech Compounds must be
approved in writing by the Management Board.
5.5 SOURCE OF SUPPLY. In the event Baxter recommends that
Steritech change Steritech's source of raw materials or Steritech Compound
because of actual or anticipated irregularity of supply, or failure to meet
specifications and a viable alternative source of supply is available,
Steritech will support Baxter in Steritech's obtaining such alternate source to
the extent commercially reasonable.
5.6 FAILURE OF STERITECH TO MEET BAXTER REQUIREMENTS. In the event
that Steritech cannot meet Baxter's requirements for Steritech Compound, Baxter
shall be free to obtain Steritech Compound from a third party. Steritech
agrees to provide to the third party that Baxter selects with the necessary
information and Steritech Know-How to allow the third party to make the
Steritech Compound. The monies Baxter expends in obtaining Steritech Compound
from a third party shall be reimbursed to Baxter and therefore treated as an
Additional Cost of Goods to Baxter.
5.7 UPGRADES. During the term of this Agreement, Steritech will
cooperate with Baxter in making adjustments to the System to meet changing
market needs, provided such activities do not require material expense on the
part of Steritech, such as initiation of new toxicology or clinical trials.
6. MARKETING AND DISTRIBUTION RIGHTS: LOSS OR RETENTION OF EXCLUSIVE
DISTRIBUTION RIGHTS.
6.1 EXCLUSIVE RIGHT TO MARKET. Baxter shall have the exclusive
right to and shall market and distribute the System directly through its
distributors throughout the world pursuant to the terms of this Agreement.
6.2 SALES PERFORMANCE REQUIREMENTS.
6.2.1 For the purpose of determining whether Baxter may
retain exclusive distribution rights to each System in a country, Baxter's sales
performance shall be evaluated annually over a twelve (12) month period on a
country-by-country basis commencing with the twelve (12) month period beginning
on the first day of the first calendar quarter following the third anniversary
of the Market Launch of a System in a Country ("Evaluation Period").
6.2.2 In order to retain exclusive distribution rights
to the System in a given country, the number of Inactivation Packages sold by
Baxter in that country during the
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Evaluation Period must represent for the first year of the Evaluation Period [*]
of the Product Market, for the second year of the Evaluation Period [*] of the
Product Market and for every year after the second year of the Evaluation Period
[*] of the Product Market, except for countries that fall within the definition
of Intercontinental where Baxter's obligations shall be only [*] of Product
Market for the first year of the Evaluation Period, [*] of Product Market
for the second year of the Evaluation Period, and [*] of Product Market for
every year thereafter. These percentages assume that during such period there
are not competitive systems in the country that represent at least [*], [*] for
an Intercontinental country, of the Product Market. If there are competitive
systems in such country and the competitive system(s) represent at least [*] for
[*] or [*] for an Intercontinental country, of the anticipated share of the
Product Market then Baxter is obligated only to sell an amount that is equal to
the [*] . If more than one competitive system exists in a country then
Baxter's obligations are reduced by the [*].
6.2.3 Within ninety (90) days following each Evaluation Period,
Baxter shall provide Steritech with a written report in sufficient detail to
facilitate Steritech's evaluation of whether Baxter's sales comply with the
performance criteria in Section 6.2.2. Baxter shall permit an independent
certified public accountant designated by Steritech and approved by Baxter to
audit Baxter's records solely for the purpose of verifying the accuracy of
Baxter's reports, provided such accountant agrees to execute a confidentiality
agreement reasonably satisfactory to Baxter. The cost of such audit shall be
the sole expense of Steritech unless Baxter's report differs from the
accountant's report in Baxter's favor by ten percent (10%) or more, in which
case, Baxter shall pay the entire expense of such audit.
6.2.4 If Baxter fails to meet the criteria set forth in Section 6.2.2 in a
particular country, on ninety (90) days written notice to Baxter, Steritech may
convert Baxter's exclusive distribution rights with respect to that System in
that country to non-exclusive distribution rights for that System in that
country. In such event, Baxter hereby grants Steritech a non-exclusive license
bearing a royalty of [*] of Steritech's Net Sales, under Baxter Patents and
Know-How to make, have made and use, and sell Systems in the Field in such
country terminating upon expiration of the last to expire of the Baxter Patents.
Upon Steritech's request, Baxter shall, if it has the present capability,
manufacture or have manufactured and sell Systems and/or components thereof to
Steritech at a price equal to [*] of Baxter's actual fully loaded cost of goods.
Steritech shall not have the right to distribute Systems through a third party
manufacturer or distributor of blood packs or automated blood collection systems
unless specific approval from Baxter is obtained.
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6.2.5 FAILURE TO MARKET. In addition to the rights set forth in
Section 6.2.3 above, in the event that, following Regulatory Approval in a
country, Baxter shall not undertake, or shall cease, active marketing and
distribution of the System in a country for a period of 12 months Steritech may
by notice to Baxter market and distribute, on a non-exclusive basis, Systems in
that country and Steritech shall have a royalty-free license with respect to
Baxter's Patents and Know-How to make, have made and use, and sell Systems in
such country. Steritech shall not have the right to distribute Systems through
a third party manufacturer or distributor of blood packs or automated blood
collection systems unless specific approval from Baxter is obtained.
6.2.6 Notwithstanding the provisions of Sections 6.2.1 through
6.2.6, the parties agree that Steritech's right to convert Baxter's rights
shall be suspended if any failure of Baxter to meet the criteria set forth in
Section 6.2.2-6 during any Evaluation Period results from recall or withdrawal
of government approval or a delay in manufacturing or sales beyond the
reasonable control and occurring without the fault of Baxter, as a result of
which it would be commercially infeasible for any entity to achieve the
requirements of Section 6.2.2-6. This right shall be suspended only for the
duration of the event that precluded Baxter from meeting the Section 6.2.2-6
criteria.
6.3 MEETINGS CONCERNING MARKETING. During those periods when
Baxter is the exclusive distributor of the System in a Region, the parties will
meet from time to time to discuss marketing strategies in order to optimize
customer acceptance and effective promotion of the System. All final decisions
regarding System marketing, distribution and pricing shall be made by Baxter.
However, Baxter will consult with Steritech prior to any pricing decision that
will cause the Premium to be less than [*].
7. REVENUE SHARING.
7.1 REVENUE SHARING PAYMENTS. In consideration of the Cooperative
Development Work to be undertaken and other obligations set forth herein, the
parties agree to share Net Sales, as follows: Subject to the provisions of
Sections 7.2, 13, and 17, no later than forty-five (45) days after the first and
all subsequent calendar quarters following the Market Launch of the System,
Baxter shall pay to Steritech a sum equal to [*] of the Premium during such
calendar quarter ("Revenue Sharing Payments"). The Revenue Sharing Payments due
and payable hereunder shall be computed for each calendar quarter in the
currency in which the sale was made, but shall be definitively discharged by
payment to Steritech at Concord, California in U.S. dollars converted from such
currency using the closing spot exchange rate between the two currencies quoted
in the Wall Street Journal (or, if not available, such other mutually agreeable
financial publication of international circulation) in effect on the last
business day of the calendar quarter to which the payment relates.
7.2 EXCEPTION TO REVENUE SHARING PAYMENTS OF 7.1. If the Premium
for the Inactivation Package is [*], then Steritech shall receive as its sole
Revenue
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Sharing Payment [*] for each Inactivation Package sold at that Premium. If the
Premium for the Inactivation Package is [*], then Steritech shall receive [*] of
the Premium for each Inactivation Package sold at that Premium. In no event
shall Steritech receive less than [*] per Inactivation Package sold or more than
[*] for each Inactivation Package sold, unless the United States consumer price
index (CPI) in any year exceeds the 1993 CPI by [*] or more in which case the
[*] figure shall increase [*] for each [*] above the 1993 CPI.
7.3 ADJUSTMENTS TO REVENUE SHARING PAYMENTS. To the extent that
Baxter's or Steritech's Cost of Goods exceeds the Anticipated Cost of Goods,
the Additional Cost of Goods per Inactivation Package will be provided to the
appropriate party and deducted from Net Sales to determine the Premium.
8. PATENTS, KNOW-HOW, LICENSE GRANTS.
8.1 STERITECH SOLE OWNERSHIP. Steritech shall own all Steritech
Patents and Steritech Know-How.
8.2 BAXTER SOLE OWNERSHIP. Baxter shall own all Baxter Patents
and Baxter Know-How.
8.3 JOINT PATENTS. Steritech and Baxter shall jointly own all Joint
Patents, provided that either party that shall exploit a Joint Patent outside
the Field shall pay to the other party a reasonable royalty of [*] of Net Sales
unless the Management Committee sets a different royalty rate with respect to
such exploitation. Joint Patents within the Field may be exploited by either
party only through the development, manufacture and sale of Systems under and
in accordance with the terms of this Agreement.
8.4 LICENSE TO BAXTER. Subject to the terms and conditions of this
Agreement, for Systems whose manufacture, use or sale is covered by a claim of a
Steritech Licensed Patent, or which use Steritech Licensed Know-How, Steritech
hereby grants Baxter an exclusive, paid-up, royalty free (except as provided
herein) license under Steritech Licensed Patents and Steritech Licensed Know-How
to make, have made, and use, sell or have sold such Systems, solely with
Inactivation Packages pursuant to this Agreement worldwide, solely for use in
the Field. Notwithstanding the foregoing, for any period or country where such
- -marketing rights become nonexclusive pursuant to the Agreement, such license
shall automatically become nonexclusive for such period or in that country.
Except as set forth in Section 5.6, and 17.3, such license shall exclude the
right to make and have made Steritech Compounds. As to Steritech Compounds,
such license shall be limited to the Steritech Compound that is selected by the
Management Board to proceed with clinical trials and that is incorporated in the
System that receives Regulatory Approval, provided that if for technical or
other reasons the Management Board substitutes another Steritech Compound in
such process, such license shall cover such substituted Steritech Compound.
Notwithstanding anything in this Section or elsewhere
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in this Agreement, Baxter shall not have any license or distribution rights in
or to any Steritech Patent or Steritech Know-How to the extent relating to (a)
the inactivation of Bacteria, viruses, parasites or other pathogens through use
of compounds other than psoralens, or (b) the [*] inactivation system
development at Steritech as further described on Schedule hereto, (c) synthetic
media, or (d) use outside the Field.
8.5 NOTICE OF SOLE RIGHTS. After the Effective Date of this
Agreement, a party asserting sole ownership of any patent rights or know-how in
the Field developed pursuant to the Cooperative Development Work shall provide
reasonable notice to the Management Board of its intention to seek patent
protection or to assert proprietary interest in such know-how. The Management
Board shall have the right to a reasonable opportunity to review and comment on
such assertions prior to patent applications being filed.
8.6 OTHER AGREEMENTS. Steritech shall not terminate, alter or
amend the terms of the following agreements in a manner that would limit
Steritech's or Baxter's rights under this Agreement without the prior written
approval of Baxter: the Technology Transfer Agreement and the License Agreement
between Steritech and HRI Research, Inc. each dated December 13, 1991.
Baxter shall respond within thirty (30) days of receipt of written
proposed changes to such agreements. Baxter's approval of proposed changes
shall not be unreasonably withheld.
8.7 RIGHT OF FIRST REFUSAL. Steritech hereby grants Baxter a
right of first refusal with respect to a development, manufacturing and
marketing agreement for any technology Steritech, its employees, or agents may
develop during the term of the Cooperative Development Work relating to [*].
Steritech and Baxter shall negotiate in good faith for an exclusive license to
any such Technology. If the parties fail to reach agreement with respect to any
such Technology, Steritech may solicit other offers and engage in negotiations
with third parties with respect to that specific Technology. However, prior to
concluding any such Agreement with any third party, Steritech must offer Baxter
the option to accept the proposed Agreement with respect to the Technology on
the terms agreed to with the third party. If not accepted in forty-five (45)
days of such offer in writing by Baxter, Steritech will be free to enter into an
agreement with the third party on such terms. This right of first refusal shall
expire if Baxter breaches this Agreement and does not cure the breach pursuant
to Section 17 or if Baxter unilaterally ceases development work pursuant to
Section 13. 1.
8.8 RIGHT OF FIRST NEGOTIATION. In the event that Steritech,
during the term of the Cooperative Development Work, determines to pursue a
corporate partnership arrangement for the development, manufacturing and
distribution of a system (other than a system based on [*] for [*]
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[*], Steritech will notify Baxter in writing. Baxter will promptly notify
Steritech (in no event later than 30 days after Steritech's notice) whether
Baxter intends to enter negotiations for such an agreement. If so, Baxter will
have the exclusive right, for a period of 120 days from the date of Steritech's
notice, to negotiate with Steritech for the right to fund development of, and to
manufacture and distribute such system.
In the event that Baxter and Steritech do not enter into a definitive
written agreement within such period, Baxter will provide to Steritech prior to
the end of such period a precise definitive written statement of terms on which
Baxter is willing to enter such an agreement (the "Baxter Terms"). The Baxter
Terms shall include up-front payments, development funding, revenue sharing and
any other material terms. Steritech may thereafter negotiate with third
parties for the development, manufacturing and marketing of the system.
Steritech may not, however, enter into such an agreement with any third party
on terms ("Third Party Terms") which, taken as a whole, are more favorable to
the third party than the Baxter Terms unless Steritech shall have first
presented to Baxter such Third Party Terms, or the form of definitive agreement
with the third party incorporating the Third Party Terms, and Baxter shall not
have given to Steritech Baxter's unqualified commitment in writing to such
Third Party Terms or definitive agreement, as the case may be, within thirty
days thereafter. Third Party Terms shall not be considered more favorable than
the Baxter Terms if they afford an equal or lower net present value (based on
reasonable projections) or materially lesser rights to the third party than the
Baxter Terms. This right of first negotiation shall expire if Baxter breaches
this Agreement and does not cure the breach pursuant to Section 17 or
unilaterally ceases the development work pursuant to Section 13. 1.
8.9 ADDITIONAL CONSIDERATION. In consideration of the Rights of
First Refusal and Negotiation, Baxter will pay Steritech [*] upon
Steritech providing Baxter with Proof of Principles of a red blood cell
inactivation system on or after January 1, 1995. Should the parties not enter
into a development, manufacturing, and marketing agreement with respect to such
red blood cell inactivation system, Steritech will refund the [*]
payment to Baxter within 120 days after written request by Baxter.
8.10 SUBLICENSES. Neither Baxter nor Steritech shall not have the
right to grant to any third party sublicenses to the licenses granted above.
8.11 REGULATORY FILES. Baxter and Steritech shall each have full
access to all materials filed and correspondence with the FDA and other
regulatory agencies in connection with the Cooperative Development Work and the
System, and shall be entitled to use and rely on such materials with respect to
any regulatory approvals for a product sought by either, whether or not such
product relates to this Agreement.
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9. PROSECUTION OF PATENT RIGHTS.
9.1 STERITECH PATENTS. Steritech shall have the right but no
obligation to timely prepare, file, prosecute and maintain, under its exclusive
control and at its expense, Steritech Patents.
9.2 BAXTER PATENTS. Baxter shall have the right but no obligation
to timely prepare, file, prosecute and maintain, under its exclusive control
and at its expense, Baxter Patents.
9.3 JOINT PATENTS. Steritech and Baxter shall employ mutually
acceptable counsel for the purpose of timely preparing, filing, prosecuting and
maintaining Joint Patents. Whenever possible, the parties shall file
internationally under the Patent Cooperation Treaty and/or the European Patent
Convention in order to minimize expenses. The reasonable expenses of
preparing, filing, prosecuting and maintaining corresponding Joint Patents in
the countries of the United States, Australia, Canada, the United Kingdom,
Germany, Belgium, France, Italy, Netherlands, and Japan, and all other
countries that are agreeable to Baxter and Steritech, as evidenced in writing
shall be borne equally. Unless such other countries are agreed to by the
parties in writing, such other country filings shall not be made. Baxter shall
pay such patent expenses and will deduct Steritech's share of such expenses
from Revenue Sharing Payments otherwise due Steritech.
9.4 PRIOR ART; REVIEW AND COMMENT. Each party shall cooperate
with the other to ensure that all prior art that is pertinent to the
examination of a Joint Patent is brought to the attention of the other party.
The parties to this Agreement shall have the right to review and comment on
substantive documents prepared in connection with the preparation, filing,
prosecution and maintenance of the Joint Patents prior to the filing of such
papers; however, such review and comment shall be performed expeditiously so as
not to negatively affect patent rights.
9.5 ELECTION NOT TO PAY EXPENSES. If either party elects for any
reason not to pay its share of the reasonable expenses for a particular Joint
Patent, then, at the option of the other party:
(a) the joint ownership of that nonpaying party under this
Agreement with respect to that particular patent application or patent shall
immediately terminate and the paying party shall exclusively own that
particular patent or patent application, without affecting the nonpaying
party's rights under another patent applications and patents; or
(b) the application or patent shall be allowed to lapse.
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In the event the paying party elects option (a) above, the nonpaying
party hereby agrees to execute documents necessary to transfer its interest in
such patent or patent application to the paying party.
10. TRADEMARKS
10.1 BAXTER TRADEMARKS. Steritech shall make no use of any Baxter
trademark without the prior written approval of Baxter.
10.2 STERITECH TRADEMARKS. Baxter shall include the Steritech name
and mark in a prominent manner on and on packaging, literature and promotional
material and advertising for the System unless Baxter makes a good faith
determination that the Steritech name cannot be used due to third party rights.
Baxter shall, to the extent practical, provide to Steritech for review copies
of all proposed uses of the Steritech name and mark and references to
Steritech. At Steritech's reasonable request, Baxter shall refer to the
Steritech Compounds by the Steritech trademark that Steritech indicates is
appropriate. Baxter shall include on material bearing such trademarks an
acknowledgement that such trademarks are the property of Steritech. If
necessary in any market to maintain Steritech's rights in the Steritech
trademarks, Baxter shall enter into a registered user agreement regulating its
use of the Steritech trademarks. Except as provided in this Section, no rights
to Steritech trademarks are hereby granted to Baxter.
11. COMPETITIVE ACTIVITY.
11.1 RESTRICTIONS ON STERITECH. During the period when Baxter has
exclusive rights to market a System in a country, Steritech shall not sell,
transfer or otherwise make available to any third party in that country the
Steritech Compounds for use in the Field.
11.2 RESTRICTION ON BAXTER. Except as provided in Section 13.4.5
hereof, during the term of this Agreement, Baxter shall not manufacture,
distribute or sell any systems that use chemicals or chemical agents for the
inactivation of pathogens in platelet concentrates other than the System.
12. CONFIDENTIAL INFORMATION.
12.1 CONFIDENTIALITY AGREEMENT. The use and disclosure of
information designated by either party as confidential shall be governed by the
attached Schedule F Confidentiality Agreement. The Schedule F Confidentiality
Agreement shall survive termination of this Agreement.
12.2 USE OF CONSULTANTS. The parties contemplate that from time to
time during the term Of this Agreement third party technical consultants may be
employed by either party in connection with the development of Steritech
Compounds or Systems. The parties agree that information designated as
confidential may be disclosed to such
19
<PAGE> 25
consultants provided that the other party is given reasonable notice of the
circumstances and nature of the intended disclosure and that the disclosure is
limited to information necessary to enable the technical consultant to provide
technical consulting services. The consultant will be required to sign an
agreement with both Steritech and Baxter setting forth the consultant's
obligations with respect to confidential information.
13. CESSATION OF COOPERATIVE DEVELOPMENT WORK.
13.1 CESSATION. After January 1, 1995, either party may
unilaterally cease all participation in all Cooperative Development Work upon
ninety (90) days written notice of its intent. At any time thereafter, the
party who did not unilaterally cease participation in the Cooperative
Development Work shall have the right to proceed with the independent
development of the System at its own expense. Should a party so proceed, the
following terms and conditions shall apply.
13.2 STERITECH CONTINUING RIGHTS. In the event that Baxter chooses
to exercise its rights pursuant to Section 13.1 above, and Steritech proceeds
independently of Baxter to develop, manufacture or sell the System, then:
13.2.1 For Systems whose manufacture, use or sale is covered
by a claim of a Baxter Patent or uses Baxter Know-How, Baxter hereby grants
Steritech a worldwide non-exclusive license under the Baxter Patents and
Know-How to make, have made and use, sell or have sold such Systems in the
Field, terminating upon expiration of the last to expire of the Baxter Patents.
The license shall bear a [*] Royalty to Baxter on Steritech's Net Sales of
Systems in each country where a valid Baxter Patent subsists and would
be infringed but for a license, otherwise the license shall be royalty free.
Only a single Patent Royalty shall be paid by Steritech and Baxter on the sale
of each System. Royalty Payments shall be made within sixty (60) days of the
end of each calendar quarter.
13.2.2 For a period of two (2) years following the Notice
Period or until twelve (12) months following the date on which Steritech enters
into a contract with a third party for manufacture of Systems, whichever occurs
earlier, upon Steritech's request, Baxter shall manufacture or have manufactured
and sell Systems and/or components thereof to Steritech, to the extent Baxter
has at the time the present capability including manufacturing capability, at a
price equal to [*] of Baxter's actual fully loaded cost of goods. This
provision applies only to Systems which Baxter had received Regulatory
Approval or Systems or components the development of which had been
substantially completed prior to the Notice Period.
13.2.3 Except for the Royalty provided for in Section 13.2.1,
Baxter shall have no share in Net Sales from Steritech's sales of Systems made
pursuant to this Section 13.2.
*[Confidential Treatment Requested]
20
<PAGE> 26
13.2.4 Should Baxter's decision to exercise its rights under
13.1 not be based on either: (i) Baxter's good faith determination that the
Steritech Compound does not comply with the specifications for Steritech
Compound, or (ii) Baxter's good faith determination that the marketplace no
longer will support an Inactivation Package, then Baxter shall pay Steritech a
one time payment of [*] at the time it unilaterally ceases to participate in
the Cooperative Development Work.
13.3 BAXTER CONTINUING RIGHTS. In the event that Steritech chooses to
exercise its rights under Section 13.1 above, and Baxter proceeds independently
of Steritech to develop, manufacture or sell the Systems, then:
13.3.1 The license grant under the Steritech Patents, and
Steritech Know-How shall become a worldwide non-exclusive license grant to
Baxter, terminating upon expiration of the last to expire of the Steritech
Patents. This license shall bear a [*] Royalty to Steritech on Baxter's Net
Sales of Systems in each country where a valid Steritech Patent subsists and
would be infringed but for a license, otherwise the license shall be Royalty
free. Only a single Patent Royalty shall be paid by Baxter to Steritech on the
sale of each System. Royalty Payments shall be made within sixty (60) days of
the end of each calendar quarter.
13.3.2 Baxter will retain all distribution rights on an
exclusive basis.
13.3.3 For a period of two (2) years following the Notice
Period or until twelve (12) months following the date on which Baxter enters
into a contract with a third party for manufacture of Steritech Compound,
whichever occurs earlier, upon Baxter's request, Steritech shall manufacture or
have manufactured and sell Steritech Compound thereof to Baxter, to the extent
Steritech has at the time the present capability including manufacturing
capability, at a price equal to [*] of Steritech's actual fully loaded cost of
goods.
13.3.4 Except for the Royalty provided for in Section
13.3.1, Steritech shall have no share in Net Sales from Baxter's sale of
Systems.
14. REPORTS.
14.1 QUARTERLY SALES REPORTS. Each quarterly payment made to Steritech
under Section 7 shall be accompanied by a full and accurate accounting of all
Net Sales of Products by Baxter and Baxter for the calendar year. Each such
report shall include at least the following information as to each country and
Region:
14.1.1 The number of Inactivation Packages sold to third
parties by Baxter and Baxter affiliates;
*[Confidential Treatment Requested]
21
<PAGE> 27
14.1.2 The Net Sales, with a breakdown between Net Sales
falling within clause (a) and clause (b) of the definition of such term of
Section 2 hereof;
14.1.3 Additional Cost of Goods (if applicable) together
with substantiation and breakdown thereof;
14.1.4 Baxter's computation of the Revenue Sharing Payment
due to Steritech; and
14.1.5 Price lists for Inactivation Packages, and for
disposable sets with and without Inactivation Packages, as then in effect.
Each report shall include the certification of the Controller of Baxter
attesting to the fact that the report is an accurate and complete accounting of
all information required hereunder.
14.1.6 Any deductions from Revenue Sharing Payments.
15. BOOKS AND RECORDS.
15.1 RECORDS. Baxter and each of its affiliates shall keep full
and accurate books of account containing all particulars that may be necessary
for the purpose of calculating all amounts owing to Steritech. Books of
account maintained by Baxter and each of its affiliates shall be kept at the
principal place of business of Baxter. All such reports and data shall be open
for inspection on a confidential basis at all reasonable times and Steritech
may conduct at its own expense, once every year during normal business hours
through an independent certified public accountant designated by Steritech and
reasonably acceptable to Baxter, an examination of the accounts contemplated
above. If any audit conducted on behalf of Steritech shall show that Baxter or
any of its affiliates underpaid the royalties due to Steritech under the
licenses herein as to the period subject of the audit, then Baxter shall
immediately pay to Steritech any such deficiency with interest thereon in
accordance with Section 15.3. If the underpayment shall exceed ten percent
(10%) of the amount owed for any calendar year, Baxter shall also reimburse
Steritech for costs related to such audit.
15.2 RETENTION. Books and records required to be maintained by
Baxter and its affiliates hereunder shall be retained for at least two (2)
years from the date of the royalty payment to which they pertain.
15.3 INTEREST. All payments due hereunder from Baxter that are not
paid to Steritech when due and payable hereunder shall bear interest at an
annual rate equal to 4% above the U.S. dollar reference rate ("prime rate")
charged from time to time by Bank of America N.T. & S.A. from the date due
until paid or at such lower rate as shall be the maximum rate permitted by law.
22
<PAGE> 28
16. TERM. The term of this Agreement shall be for an initial period of
fifteen (15) years commencing with the Effective Date unless terminated
earlier pursuant to Section 13.1 or 17.1. Thereafter, the parties shall make
good faith efforts to negotiate a renewal hereafter for additional successive
periods of three (3) years unless either party provides the other with written
notice of termination no later than twelve (12) months prior to the conclusion
of the initial term or any subsequent renewal term.
17. BREACH.
17.1 MATERIAL BREACH. Either party may terminate this Agreement
for any material breach by the other party sixty (60) days after providing the
other party with written details of the breach if the breach remains uncured at
the end of the sixty (60) day notice period. Notwithstanding the preceding
sentence, Baxter acknowledges that the ability of Steritech to carry on the
Cooperative Development work will be substantially adversely affected in the
event that Baxter does not make payment when due of development payments under
Section 3 hereof or Milestone payments under Section 4 hereof. Accordingly, in
the event of the failure to make any of such payments that are due and owing a
forty-five (45) day notice period shall apply in lieu of such sixty (60) day
notice period in the preceding sentence. To the extent Steritech is in breach
for failing to fund its development efforts under this Agreement, Steritech
will have one hundred eighty (180) days to cure such breach. If the breach
remains uncured after one hundred and eighty (180) days. Baxter can terminate
the Agreement pursuant to the procedure set forth above in this Section.
17.2 STERITECH RIGHTS. In the event of termination by Steritech as
provided in Section 17.1, without limiting any other rights or remedies, Baxter
shall immediately upon such termination pay to Steritech the amount of [*] after
the date of termination pursuant to Section 3.9 (as the same may have been
revised pursuant to budget modifications previously approved by the Management
Board) and the amount of [*], in each case whether or not then earned, and any
other amounts owing from Baxter to Steritech hereunder. In addition, Steritech
shall be entitled to all the rights in Section 13.2.1 through Section 13.2.4 on
an exclusive basis, subject to the terms of such sections.
17.3 BAXTER RIGHTS. In the event of termination by Baxter as
provided in Section 17.1, without limiting any other rights or remedies,
Steritech shall immediately upon such termination pay to Baxter any amounts
then owing from Steritech to Baxter hereunder. Additionally, Steritech shall
return to Baxter any monies paid by Baxter under Section 3.9 that have not been
expended pursuant to Cooperative Development Work as of the date of breach. In
addition, Baxter shall be entitled to all rights in Section 13.3.1 through
13.3.4 on an exclusive basis.
*[Confidential Treatment Requested]
23
<PAGE> 29
18. REPRESENTATIONS IN INDEMNITIES
18.1 STERITECH REPRESENTATIONS. Steritech represents and warrants
that as of the Effective Date:
(a) It has granted no prior license or assignment of
rights under the Steritech Patents in the Field.
(b) There are no foreign or United States administrative,
judicial or Patent and Trademark Office proceedings contesting the inventorship
or ownership of any Steritech Patent;
(c) Neither the execution and delivery of this Agreement,
nor the performance of the obligations of Steritech hereunder shall result in a
violation, breach or event of default (or any event or condition which with
notice or the passage of time or both would constitute an event of default) of
or with respect to any agreement, mortgage, indenture or order of any court of
competent jurisdiction binding upon Steritech or upon the property of
Steritech;
(d) It is party to no contract materially adverse to the
obligations undertaken and rights granted in this Agreement;
(e) The execution of this Agreement and delivery to
Baxter does not conflict with the terms of any agreement to which Steritech is
bound.
(f) The Technology Transfer Agreement and the License
Agreement between Steritech and HRI Research, Inc. each dated December 13, 1991
are in full force and effect and are binding and enforceable in accordance with
their terms.
(g) That Steritech has advised Baxter of any knowledge of
any third party patent or know-how that might be infringed by the Steritech
Compound; and
(h) Steritech is unaware of any technology not licensed
to Baxter hereunder, that it believes would be necessary to optimally use the
Steritech Compound.
18.2 STERITECH INDEMNIFICATION. Steritech shall indemnify Baxter
for any losses sustained or expenses incurred by Baxter as a result of a breach
by Steritech of any of the foregoing representations and warranties.
18.3 BAXTER REPRESENTATIONS. Baxter represents and warrants to
Steritech that as of the Effective Date:
(a) neither the execution and deliver of this Agreement,
nor the performance of the obligations of Baxter hereunder shall result in a
violation, breach or
24
<PAGE> 30
event of default (or any event or condition which with notice or the passage Of
time or both would constitute an event of default) of or with respect to any
agreement, mortgage, indenture, or order of any court of competent jurisdiction
being upon Baxter or upon the property of Baxter.
(b) it is party to no contract materially adverse to the
obligations undertaken in this Agreement.
(c) Baxter has no current agreements with other parties
for systems for the photo-inactivation of pathogens in platelet concentrates.
18.4 BAXTER INDEMNIFICATION. Baxter shall indemnify Steritech for
losses sustained or expenses incurred by Steritech as a result of a breach by
Baxter of either of the foregoing representations and warranties.
19. INDEMNIFICATION, LIABILITY, INFRINGEMENT.
19.1 DEFENSE OF THIRD PARTY INFRINGEMENT SUITS. In the event that
a third party shall sue either party alleging that the manufacture, use or sale
of the System, or any part thereof, infringes a patent of such third party,
then the party sued shall promptly notify the other party in writing. The
party sued shall have the option to control the defense of such suit. The
parties shall provide reasonable cooperation in the defense of such suit and
furnish all evidence in their control. All attorney's fees as well as any
judgments, settlements, or damages payable with respect to such suit shall be
deducted from the Net Sales and paid to the party incurring the expenses.
Neither party shall enter into any settlement that materially affects the other
party's rights or interests without such other party's prior written consent,
which consent shall not be unreasonably withheld.
19.2 THIRD PARTY PATENT EXPENSES. If the Management Board shall
approve the payment to a third-party of Patent Royalty Payments with respect to
the sale or use of the System or any portion thereof, then Baxter and Steritech
shall bear the Patent Royalty Payment under such license equally, and Baxter
may deduct Steritech's share of such Patent Royalty Payment from Revenue
Sharing Payments due to Steritech.
19.3 SUITS FOR INFRINGEMENT BY OTHERS. In the event Baxter or
Steritech becomes aware of any actual or threatened infringement the Steritech
Licensed Patents or the Steritech Licensed Know-How, that party shall promptly
notify the other and the parties shall discuss the most appropriate action to
take. If the infringing product competes with a System in the Field, Baxter
shall have the first right to bring, at its own expense, an infringement action
against the third party infringer. If Baxter does not bring such action within
six (6) months from date of notification, then Steritech may bring such action
at its own expense. The party not conducting such suit shall assist the other
party without expense to the party requesting assistance. The award in such
suit shall first be
25
<PAGE> 31
used to pay the expenses of such suit and any balance shall be divided between
the parties in proportion to the Revenue Sharing Payment.
In the event the accused product is not in competition with a System
in the Field, then
(a) Steritech alone may, in its sole discretion and at
its expense, initiate and conduct an infringement action relating to alleged
infringement of Steritech Patents or Steritech Know-How and keep any settlement
or award which may be obtained.
(b) Baxter alone may, in its sole discretion and at its
expense, initiate and conduct an infringement action relating to alleged
infringement of Baxter Patents or Baxter Know-How and keep any settlement or
award which may be obtained.
20. GENERAL
20.1 ENTIRE AGREEMENT. The following three agreements contain the
entire agreement between the parties relating to the subject matter hereof and
all prior understandings, representations and warranties between the parties
are superseded; provided, however, that the confidential disclosure letter
agreement dated March 17, 1993 shall continue to govern the disclosures made
thereunder. (1) This Agreement, (2) the attached Schedule F Confidentiality
Agreement of even date, and (3) the Stock Purchase Agreement of even date.
None of the terms of this Agreement shall be deemed to be waived or amended by
either party unless such a waiver or amendment specifically references this
Agreement and is in writing signed by the party to be bound.
20.2 RELATIONSHIP OF PARTIES. Baxter acknowledges that it is not
an agent of Steritech and has no authority to speak for, represent, or obligate
Steritech in any way. Steritech acknowledges that it is not an agent of Baxter
and has no authority to speak for, represent, or obligate Baxter in any way.
This Agreement does not and shall not be deemed to create any relationship of a
joint venture or a partnership.
20.3 SENIOR BAXTER CONTACT. The senior Baxter contact of the
purpose of administering this Agreement is the President of the Fenwal Division
of Baxter Healthcare Corporation, One Baxter Parkway, Deerfield, Illinois
60015. At present, Mr. Roberto Perez occupies this position.
20.4 SENIOR STERITECH CONTACT. The senior Steritech contact for
the purpose of administering this Agreement is the President of Steritech at
the address first above written. At present, Mr. Stephen T. Isaacs occupies
this position.
20.5 SEVERABILITY. The parties do not intend to violate any public
policy or statutory or common law. However, if any sentence, paragraph, clause
or combination of this Agreement is in violation of any law or is found to be
otherwise unenforceable by
26
<PAGE> 32
a court from which there is no appeal, or no appeal is taken, such sentence,
paragraph, clause, or combination of the same shall be deleted and the
remainder of this Agreement shall remain binding, provided that such deletion
does not alter the basic structure of this Agreement. In such event, the
parties shall renegotiate this Agreement in good faith, but should such
negotiations not result in a new agreement within ninety (90) days of the
initiation of such negotiations, then this Agreement may be terminated by
either party by thirty (30) days notice to the other.
20.6 FORCE MAJEURE. Any party shall be excused from the
performance of its obligations under this Agreement and shall not be liable for
damages to the other if such performance is prevented by circumstances beyond
its effective control. Such excuse from performance shall continue so long as
the condition responsible for such excuse continues and for a thirty (30) day
period thereafter. For the purposes of this Agreement, circumstances beyond
the control of a party which excuse that party from performance shall include,
but shall not be limited to, acts of God, acts, regulations or laws of any
government including currency controls, war, civil commotion, commandeer,
destruction of facility or materials by fire, earthquake, storm or other
casualty, labor disturbances, judgment or injunction of any court, epidemic,
and failure of public utilities or common carrier.
20.7 NOTICES. All notices and demands required or permitted to be
given or made pursuant to this Agreement shall be in writing and shall be
effective when personally given or made or when placed in an envelope and
deposited in the United States mail postage prepaid, addressed as follows:
IF TO BAXTER: IF TO STERITECH, IN CARE OF:
General Counsel President and Chief Executive Officer
Baxter Healthcare Corporation Steritech, Inc.
One Baxter Parkway 2525 Stanwell Drive
Deerfield, Illinois 60015 Concord, California 94520
WITH A COPY TO: WITH A COPY TO:
President, Fenwal Division Cooley, Godward, Castro, Huddleson & Tatum
Baxter Healthcare Corporation 1 Maritime Plaza, 20th Floor
One Baxter Parkway San Francisco, CA 94111
Deerfield, Illinois 60015 Attn: Howard Ervin
or to such other address as to which either party may notify the other.
20.8 BINDING. This Agreement shall be binding upon and inure to
the benefit of the parties, their successors and assigns. This Agreement shall
be assignable: (i) by
27
<PAGE> 33
either party without the consent of the other to any Affiliate of the party (an
Affiliate being defined as any entity in which the party or its parent owns or
controls directly or indirectly, 40% or more of the voting securities); (ii) by
either party with the written consent of the other; or (iii) by either party
without the consent of the other to the purchase of substantially all the
assets of its business to which this Agreement relates. Any attempted
assignment which does not comply with the terms of this Section shall be void.
20.9 GOVERNING LAW. This Agreement is deemed to have been executed
in and shall be governed by and construed according to the laws of the State of
Illinois.
20.10 VENUE. In the event that Baxter files suit against Steritech,
it shall do so in, and hereby agrees to submit to, the jurisdiction of a court
in U.S. District Court, N.D. California. In the event that Steritech files
suit against Baxter, it shall do so in, and hereby agrees to submit to, the
jurisdiction of the U.S. District Court N.D. Illinois.
IN WITNESS WHEREOF, this Agreement is signed by duly authorized
representatives of each party as of the Effective Date.
STERITECH, INC. BAXTER HEALTHCARE CORPORATION
By: STEPHEN T. ISAACS By: TIMOTHY B. ANDERSON
-------------------- --------------------
STEPHEN T. ISAACS TIMOTHY B. ANDERSON
Title: President Title: President Biotech
Date: December 11, 1993 Date: December 13, 1993
----------------- -----------------
28
<PAGE> 34
SCHEDULE A
BAXTER BENCHMARKS
[*]
o Provide [*] studies that are modified to be suitable for [*]
o Technical Exchange of Information between Steritech and Baxter Nivelles.
o [*] engineering team in place.
o [*] survey in place.
o [*] from Steritech to Nivelles completed.
[*]
o [*] studies to define adequacy of [*] initiated.
o Define priority of [*].
o Provide [*] for backup [*] that are modified to be suitable for [*]
[*]
o Finalize design for [*] (based on marketing input/BB survey results).
o Finalize design for [*] (based on marketing input/BB survey results).
o [*] completed, [*] delivered.
[*]
o Provide [*] of the presumed [*].
[*]
o Provide [*] for validation studies of [*].
o Provide [*] for validation studies of [*].
o [*] to begin on [*].
[*]
o Provide [*] to Steritech for [*].
o Provide [*].
[*]
o Provide complete data on [*]; provide relevant [*].
[*]
o Provide required number of [*].
[*]
o Finalize marketing and promotional/sales materials for [*].
*[Confidential Treatment Requested]
<PAGE> 35
SCHEDULE B
Steritech Patents: United States
--------------------------------
<TABLE>
<CAPTION>
No. Pat. /App No. Date Title
<S> <C> <C> <C>
1 [*] [*] DEVICE AND METHOD FOR
PHOTOINACTIVATION
2 [*] [*] ACTIVATION COMPOUNDS
AND METHODS OF SYNTHESIS
OF ACTIVATION COMPOUNDS
3 [*] [*] COMPOUNDS FOR THE
[*] IN BLOOD
4 [*] [*] METHODS FOR RENDERING
AMPLIFIED NUCLEIC ACID
SUBSEQUENTLY UNAMPLIFIABLE
5 [*] [*] DEVICE AND METHOD
FOR PHOTOACTIVATION
6 [*] [*] DEVICE AND METHOD FOR
PHOTOACTIVATION
7 [*] [*] DECONTAMINATING BLOOD
COMPONENTS
8 [*] [*] DEVICE AND METHOD FOR
PHOTOACTIVATlON
9 [*] [*] METHOD FOR INHIBITING
TEMPLATE DEPENDENT
ENZYMATIC SYNTHESIS
10 [*] [*] PHOTOCHEMICAL
DECONTAMINATION
TREATMENT OF WHOLE
BLOOD OR BLOOD COMPONENTS
</TABLE>
*[Confidential Treatment Requested]
1
<PAGE> 36
<TABLE>
<CAPTION>
Foreign
--------
<S> <C> <C> <C>
1 [*] [*] DECONTAMINATING BLOOD
COMPONENTS
2 [*] [*] ACTIVATION COMPOUNDS
AND METHODS FOR NUCLEIC
ACID STERILIZATION
3 [*] [*] ACTIVATION COMPOUNDS
AND METHODS FOR NUCLEIC
ACID STERILIZATION
4 [*] [*] ACTIVATION COMPOUNDS
AND METHODS OF NUCLEIC
ACID STERILIZATION
5 [*] [*] ACTIVATION COMPOUNDS
AND METHODS FOR NUCLEIC
ACID STERILIZATION
</TABLE>
*[Confidential Treatment Requested]
<PAGE> 37
SCHEDULE C
STERITECH BENCHMARKS
1. [*] PROGRAM INITIATED
(requires [*])
DATE: [*]
2. INITIATION OF [*]
(requires [*])
DATE: [*]
3. INITIATION OF [*]
(requires successful completion of [*])
DATE: [*]
4. [*]
(Requires successful completion of [*]).
DATE: [*]
*[Confidential Treatment Requested]
<PAGE> 38
SCHEDULE D
BAXTER/STERITECH JOINT PROGRAM BUDGET
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 TOTAL
<S> <C> <C> <C> <C> <C> <C>
STERITECH [*] [*] [*] [*] [*] [*]
BAXTER [*] [*] [*] [*] [*] [*]
OUTSIDE [*] [*] [*] [*] [*] [*]
TOTAL [*] [*] [*] [*] [*] [*]
</TABLE>
STERITECH BAXTER
[*] [*]
[*] [*]
[*]
[*]
[*]
* (US DOLLARS IN THOUSANDS)
*[Confidential Treatment Requested]
<PAGE> 39
SCHEDULE E
----------
DEFERRABLE OUTSIDE CONTRACT EXPENSES*
<TABLE>
<CAPTION>
Six Month Period Total Contract Expense Maximum Deferrable Amt. (50%)
- ---------------- ---------------------- ----------------------------
<S> <C> <C>
7/1/94 - 12/31/94 [*] [*]
1/1/95 - 6/30/95 [*] [*]
7/1/95 - 12/31/95 [*] [*]
1/1/96 - 6/30/95 [*] [*]
7/1/96 - 12/31/96 [*] [*]
1/1/97 - 6/30/97 [*] [*]
7/1/97 - 12/31/97 [*] [*]
</TABLE>
*Limited to the extent of deferral of prepayment of outside contract
expenses per contract section 3.9.3.
*[Confidential Treatment Requested]
<PAGE> 40
Schedule F
----------
CONFIDENTIALITY AGREEMENT
THIS AGREEMENT, made on the Effective Date of the Development,
Manufacturing and Marketing Agreement ("Agreement") between Baxter and
Steritech to which this document is appended, is between Steritech, Inc.
("STERITECH"), having a principal place of business at 2525 Stanwell Drive,
Concord, California and Baxter Healthcare Corporation ("BAXTER"), a corporation
having a principal place of business at One Baxter Parkway, Deerfield, Illinois
60015, to assure the protection and preservation of Proprietary Information to
be disclosed or made available to each other in connection with the Agreement.
WHEREAS, the parties have entered into a development, manufacturing
and marketing collaboration pursuant to the Agreement;
WHEREAS, the parties desire to assure the confidential status of the
information which may be disclosed to each other during the Agreement;
NOW THEREFORE, in reliance upon and in consideration of the following
undertakings, the parties agree as follows:
1. All information disclosed to the other party shall be deemed
to be "Proprietary Information." In particular, Proprietary Information shall
be deemed to include any information, process, technique, algorithm, program,
design, drawing, formula or test data relating to any research project, work in
progress, future development, engineering, manufacturing, marketing, servicing,
financing or personnel matter relating to the disclosing party, its present or
future products, sales, suppliers, clients, customers, employees, investors, or
business. Any Proprietary Information outside the scope of the Agreement shall
be identified by the disclosing party in writing and marked "Confidential" or
if such Proprietary Information is disclosed orally, within 30 days after such
disclosure the Proprietary Information shall be reduced to writing and marked
"Confidential" by the disclosing party and such writing forwarded to the
receiving party.
2. The term "Proprietary Information" shall not be deemed to
include information which: (i) is now, or hereafter becomes, through no act or
failure to act on the part of the receiving party, generally known or
available; (ii) is known by the receiving party at the time of receiving such
information as evidenced by its records, (iii) is furnished to the receiving
party by a third party who the receiving party believes has a right to disclose
such information; (iv) is independently developed by the receiving party
without any breach of this Confidentiality Agreement; and (v) is the subject of
a written permission to disclose provided by the disclosing party.
<PAGE> 41
3. Each party shall maintain in trust and confidence and not
disclose to any third party or use for any unauthorized purpose any Proprietary
Information received from the other party. However, each party may disclose
Proprietary Information to its affiliates who are bound by this Agreement
(affiliates include: any company owning 40% or more of a party, or a subsidiary
of the party, or a subsidiary of a party owning 40% or more of the party).
Each party may use such Proprietary Information only to the extent required
under the Agreement.
4. The responsibilities of the parties with respect to the
Proprietary Information are limited to using the same degree of care used to
protect their own Proprietary Information from unauthorized use or disclosure.
Both parties shall advise their employees or agents who might have access to
such Proprietary Information of the confidential nature thereof.
5. This Confidentiality Agreement shall continue in full force
and effect for so long as the parties continue to exchange Proprietary
Information under the Agreement. The termination of the Agreement shall not
relieve either party of the obligations imposed by this Confidentiality
Agreement with respect to Proprietary Information disclosed prior to the
effective date of such termination, which obligations shall survive the
termination of the Agreement for a period of two (2) years from the date of
disclosure.
6. Each party hereby acknowledges and agrees that in the event of
any breach of this Confidentiality Agreement by the other party, including,
without limitation, the actual or threatened disclosure of a disclosing party's
Proprietary Information without the prior express written consent of the
disclosing party, the disclosing party will suffer an irreparable injury, such
that no remedy at law will afford it adequate protection against, or
appropriate compensation for, such injury. Accordingly, each party hereby
agrees that the other party shall be entitled to any injunctive relief as may
be granted by a court of competent jurisdiction.
AGREED TO: AGREED TO:
STERITECH, INC. BAXTER HEALTHCARE
CORPORATION
By: STEPHEN T. ISAACS By: TIMOTHY B. ANDERSON
------------------------ -----------------------
STEPHEN T. ISAACS TIMOTHY B. ANDERSON
Title: President Title: President Biotech
Date: December 11, 1993 Date: December 13, 1993
------------------------ ----------------------
2
<PAGE> 1
EXHIBIT 10.18
DEVELOPMENT, MANUFACTURING
AND
MARKETING AGREEMENT
BETWEEN
BAXTER HEALTHCARE CORPORATION
AND
STERITECH, INC.
APRIL 1, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
1. BACKGROUND............................................................................................. 1
2. DEFINITION OF TERMS.................................................................................... 1
3. COOPERATIVE DEVELOPMENT WORK........................................................................... 9
3.1 Period; Objective............................................................................. 9
3.2 Management Board.............................................................................. 9
(a) Constitution......................................................................... 9
(b) Project Committees................................................................... 9
(c) Voting............................................................................... 10
(d) Disputes............................................................................. 10
3.3 Review Of Budget, Benchmarks; Approved Projects............................................... 11
(a) The Red Cell Project................................................................. 11
(b) The Fresh Frozen Plasma Project...................................................... 12
(c) Other Projects....................................................................... 13
3.4 Exchange Of Information....................................................................... 13
3.5 Cost Sharing.................................................................................. 13
3.6 Testing And Regulatory Expenses............................................................... 14
(a) Testing Expenses..................................................................... 14
(b) Regulatory Expenses.................................................................. 14
3.7 Budget Contingencies.......................................................................... 15
(a) Exceeding Initial Budget............................................................. 15
(b) Reconciliation Of Expenditures....................................................... 15
3.8 Baxter Participation In 1996.................................................................. 15
4. EQUITY PURCHASE........................................................................................ 15
4.1 Baxter Purchase Of Equity In Steritech........................................................ 15
4.2 Option To Purchase Equity In Steritech........................................................ 19
4.3 Standstill By Baxter.......................................................................... 20
</TABLE>
i.
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
5. SUPPLY OF STERITECH COMPOUND AND SYSTEM MANUFACTURING.................................................. 23
5.1 Steritech Responsibilities.................................................................... 23
5.2 Baxter Responsibilities....................................................................... 23
5.3 Instrument Production......................................................................... 23
5.4 System Specifications......................................................................... 23
5.5 Steritech Specifications...................................................................... 23
5.6 Source Of Supply.............................................................................. 23
5.7 Failure Of Steritech To Meet Baxter Requirements.............................................. 23
5.8 System Improvements........................................................................... 23
6. MARKETING AND DISTRIBUTION RIGHTS: EXCLUSIVE DISTRIBUTION RIGHTS...................................... 24
6.1 Commercialization............................................................................. 24
6.2 Meetings Concerning Marketing................................................................. 24
6.3 Reserved Right To Compete..................................................................... 24
6.4 Competing Products............................................................................ 24
6.5 Commencement, Cessation Of Marketing.......................................................... 24
6.6 Achievement Of Market Share................................................................... 25
6.7 Supply Of Baxter Goods........................................................................ 25
6.8 Requalification............................................................................... 25
6.9 Management Board Access To And Review Of Marketing And
Distribution Information...................................................................... 26
7. REVENUE SHARING........................................................................................ 26
7.1 Revenue Sharing Payments...................................................................... 26
7.2 Baxter Sourcing Steritech Compounds........................................................... 26
7.3 Steritech As Seller Of Systems................................................................ 26
7.4 Licensing..................................................................................... 27
7.5 Distributor Sales............................................................................. 27
8. PATENTS, KNOW-HOW, LICENSE GRANTS...................................................................... 27
8.1 Steritech Sole Ownership...................................................................... 27
8.2 Baxter Sole Ownership......................................................................... 27
8.3 Joint Patents................................................................................. 27
8.4 License....................................................................................... 28
8.5 Steritech Rights.............................................................................. 28
</TABLE>
ii.
<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
(a) Decontaminated Products.............................................................. 28
(b) Other................................................................................ 29
8.6 Cross-License................................................................................. 29
8.7 Excluded Products............................................................................. 29
8.8 Notice Of Sole Rights......................................................................... 29
8.9 Other Agreements.............................................................................. 30
8.10 Regulatory Files.............................................................................. 30
8.11 Rights Under Government-Sponsored Research.................................................... 30
9. PROSECUTION OF PATENT RIGHTS........................................................................... 30
9.1 Steritech Patents............................................................................. 30
9.2 Baxter Patents................................................................................ 30
9.3 Joint Patents................................................................................. 30
9.4 Prior Art; Review And Comment................................................................. 30
9.5 Election Not To Pay Expenses.................................................................. 31
10. TRADEMARKS............................................................................................. 31
10.1 Baxter Trademarks............................................................................. 31
10.2 Steritech Trademarks.......................................................................... 31
11. CONFIDENTIAL INFORMATION............................................................................... 31
11.1 Confidentiality Agreement..................................................................... 31
11.2 Use Of Consultants............................................................................ 32
12. CESSATION OF COOPERATIVE DEVELOPMENT WORK.............................................................. 32
12.1 Cessation..................................................................................... 32
12.2 Cessation Payment............................................................................. 33
13. REPORTS................................................................................................ 33
13.1 Quarterly Sales Reports....................................................................... 33
13.2 Cost Of Goods/Base Revenue.................................................................... 34
</TABLE>
iii.
<PAGE> 5
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
14. BOOKS AND RECORDS...................................................................................... 34
14.1 Records....................................................................................... 34
14.2 Retention..................................................................................... 34
14.3 Interest...................................................................................... 34
15. TERM................................................................................................... 34
16. BREACH................................................................................................. 35
16.1 Material Breach............................................................................... 35
16.2 Rights On Termination......................................................................... 35
17. REPRESENTATIONS AND INDEMNITIES........................................................................ 35
17.1 Steritech Representations..................................................................... 35
17.2 Steritech Indemnification -- Representations And Warranties................................... 36
17.3 Steritech Indemnification -- Products......................................................... 36
17.4 Insurance..................................................................................... 36
17.5 Baxter Representations........................................................................ 36
17.6 Baxter Indemnification -- Representations And Warranties...................................... 37
17.7 Baxter Indemnification-Products............................................................... 37
17.8 Baxter Insurance.............................................................................. 37
18. INFRINGEMENT........................................................................................... 38
18.1 Defense Of Third Party Infringement Suits..................................................... 38
18.2 Third Party Patent Expenses................................................................... 38
18.3 Suits For Infringement By Others.............................................................. 38
19. GENERAL................................................................................................ 39
19.1 Entire Agreement.............................................................................. 39
19.2 Relationship Of Parties....................................................................... 39
19.3 Senior Baxter Contact......................................................................... 39
19.4 Senior Steritech Contact...................................................................... 39
19.5 Severability.................................................................................. 39
19.6 Force Majeure................................................................................. 39
19.7 Notices....................................................................................... 40
</TABLE>
iv.
<PAGE> 6
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
19.8 Binding....................................................................................... 40
19.9 Governing Law................................................................................. 40
19.10 Venue......................................................................................... 40
19.11 Disbursements................................................................................. 41
</TABLE>
<TABLE>
<S> <C>
Schedule A Red Cell Budget and Tasks
Schedule B FFP Budget and Tasks
Schedule C Phase II Platelet Interim Determination Criteria
Schedule D Plasma Derivatives Letter
Schedule E Confidentiality Agreement
Schedule F Baxter Participation 1996
Schedule G Stock Purchase Agreement
</TABLE>
v.
<PAGE> 7
DEVELOPMENT, MANUFACTURING
AND MARKETING AGREEMENT
THIS AGREEMENT ("Agreement") between BAXTER HEALTHCARE CORPORATION, a
Delaware corporation ("Baxter") with principal offices at One Baxter Parkway,
Deerfield, Illinois 60015, and STERITECH, INC., a California corporation
("Steritech") with principal offices at 2525 Stanwell Drive, Concord, California
94520, is effective as of the 1st day of April, 1996 ("Effective Date").
1. BACKGROUND.
1.1 Steritech has substantial knowledge and expertise in the area of
inactivation of pathogens for the decontamination of blood products. Baxter has
substantial knowledge and expertise in the research, development, manufacture
and distribution of healthcare products including those relating to the
collection, preservation, processing, manipulation, storage and treatment of
blood and blood components.
1.2 The parties are interested in the development and commercialization
of products and/or systems which provide a customer with instrumentation,
disposables and compounds for use in ex-vivo inactivation of pathogens for the
decontamination of all human blood cells, Protein Preparations and human blood
components intended for human use.
2. DEFINITION OF TERMS.
The words appearing in capitalized form throughout this Agreement shall
have the meanings assigned to them in this Section 2.
APPROVED DISTRIBUTOR means any company, other than a company (or any of
its affiliates) that manufactures blood collection products or any distributor
of blood collection products identified in a letter from Baxter to Steritech of
even date with this Agreement. For the purposes of this definition, an
"affiliate" of a company shall mean an entity controlling, controlled by, or
under common control with such company. "Control" for the purposes of this
definition shall mean fifty percent (50%) ownership.
ALE has the meaning set forth in that certain letter dated March 14,
1996 from Kathryn P. Wilke of Steritech to Joseph B. Barrett of Baxter.
BASE REVENUE means for any Integrated Inactivation Set as of any
measurement date the average net sales price (computed using the same
adjustments as provided in paragraphs (a) and (b) of the definition of NET
SALES) of a comparable set without an Inactivation Package ("Base Set") during
the three full calendar months preceding such date, and in the case of each new
Integrated Inactivation Set, during the three full months preceding the first
sale of such Integrated Inactivation Set ("Initial Base Revenue"). Base Revenue
shall be adjusted, with
1.
<PAGE> 8
respect to the sales of each Integrated Inactivation Set in each quarter
commencing with the first full calendar quarter after its first sale, to
(a) an amount equal to the average net sales price (computed
using the same adjustments as provided in paragraphs (a) and (b) of the
definition of NET SALES) of a comparable Base Set during three full calendar
months preceding the first day of such calendar quarter, if there exists
throughout such period a large blood collection market for such comparable Base
Set, or
(b) if there does not exist throughout such period a large
blood collection market for such Base Set, an amount equal to:
(w) which bears the same ratio to (x) the average Net
Sales price for such Integrated Inactivation Set in such quarter
as the ratio of (y) the Base Revenue for such Base
Set during the most recent three full month period in which there
continuously existed a large clinical market for such Base Set to (z)
the average Net Sales price for such Integrated Inactivation Set during
such three full month period (or shorter period since first sale of
such Integrated Inactivation Set).
Baxter shall provide to Steritech information supporting such average net sales
price within sixty (60) days after the last day of the first calendar quarter in
which the first sale of each Integrated Inactivation Set occurs and sixty (60)
days after the last day of each calendar quarter thereafter. For the purposes of
this definition, a "large blood collection market" shall be deemed to exist for
any Base Set in any three-month period if Baxter has sales of such Base Set into
the blood collection (for transfusion) market of at least twenty-five percent
(25%) of the number of units of such Base Set that were sold in the three-month
period immediately preceding the first sale of the comparable Integrated
Inactivation Set. Baxter shall provide to Steritech within sixty (60) days after
the last day of each calendar quarter information for each such Base Set
evidencing whether or not there exists a large clinical market.
BASE SET has the meaning set forth in the definition of Base Revenue.
BAXTER means Baxter Healthcare Corporation and its affiliates,
including, but not limited to, divisions and subsidiaries, and also including
its parent company, Baxter International Inc. and its affiliates, including, but
not limited to, divisions and subsidiaries. A company shall be considered an
affiliate of Baxter if it is at least forty percent (40%) owned or controlled by
Baxter Healthcare Corporation or Baxter International Inc.
BAXTER KNOW-HOW means unpatented inventions, data, processes,
compositions, techniques and other technical information proprietary to Baxter,
which is solely owned by Baxter or which Baxter has the right to control the use
of, relating to the Field and any Systems including methods for manufacture or
use of Systems or portion thereof.
2.
<PAGE> 9
BAXTER LICENSED KNOW-HOW means all Baxter Know-How in existence as of
the Effective Date or created or acquired during the term of the Cooperative
Development Work.
BAXTER LICENSED PATENTS means all Baxter Patents in existence as of the
Effective Date of this Agreement, or claiming an invention conceived or
discovery made, or which are acquired, during the term of the Cooperative
Development Work.
BAXTER NONCASH CONTRIBUTION shall be deemed to be [*] million for
the Red Cell Project, [*] million for the FFP Project and such amount as the
parties may agree for any other Project, provided that if the parties do not so
agree, the Baxter Noncash Contribution for such Project shall be one-half of the
Initial Budget for the total Project, the amount of the Baxter Noncash
Contribution in each case being subject to adjustment as provided herein.
BAXTER PATENTS means all United States and foreign patent applications
and patents that relate to the Field and have claims reading on a System or
portion thereof or methods for manufacture or use thereof, owned by Baxter or
licensed to Baxter with the right to sublicense and claiming an invention
conceived solely by employees and/or agents and/or licensors of Baxter both
prior to the Effective Date and during the term of this Agreement pursuant to
the Cooperative Development Work, including any continuations, divisions,
reissues, re-examinations and all foreign counterparts thereof.
BULK FORM means Steritech Compounds which are not packaged in final
form.
COOPERATIVE DEVELOPMENT WORK means the Cooperative Development Work
defined in Section 3.1 of this Agreement.
COST OF GOODS means, for either party, such party's [*] such items, in
accordance with generally accepted accounting principles, consistently applied
("GAAP") and in accordance with Baxter's normal accounting policies, all
consistently applied. Cost of Goods shall not include [*] which are not directly
related to [*] and shall not include [*] or expenses falling under the category
designated by Baxter "other costs of sales" or similar category, however
designated, unless otherwise agreed by the Management Board. Capital
expenditures for facilities and/or equipment and capitalized manufacturing
start-up costs will be amortized and included in Cost of Goods In the event any
item is acquired by a party from an affiliate of such party, [*] shall be deemed
to mean such affiliate's [*].
COST OF GOODS/BASE REVENUE for Steritech means Steritech's Cost of
Goods. For Baxter COST OF GOODS/BASE REVENUE means:
(a) in the case in which the Inactivation Package is sold as a
stand-alone item, Baxter's Cost of Goods, or
*[Confidential Treatment Requested]
3.
<PAGE> 10
(b) in the case in which the Inactivation Package is sold as a
part of an Integrated Inactivation Set in any calendar year, the greater of (i)
Baxter's Cost of Goods for the Integrated Inactivation Set plus a percentage of
Baxter's Base Revenue equal to the percentage applied to Net Sales in such
calendar year under the definition of Marketing and Administrative Expenses (for
marketing and administration expenses associated with Base Revenue), or (ii)
Baxter's Base Revenue PLUS Baxter's Cost of Goods for the Inactivation Package.
DISTRIBUTOR PORTION means, for any Inactivation Package or Integrated
Inactivation Set sold through a distributor, the amount by which Net Sales price
therefrom exceeds the revenues from the sale of such items to the Distributor.
EUROPE means any of the countries within the definition of Europe, as
such term is defined in the Platelet Agreement.
EXCLUDED PRODUCT has the meaning provided in Section 8.7 of this
Agreement.
FDA means the United States Food and Drug Administration.
THE FIELD means the use of [*] in each case that are obtained from [*]
. The Field includes [*] for [*]. The Field does not include, however, any [*]
to make, enable, or improve the [*]. The preceding sentence is not intended,
however, to exclude (a) the use of such [*] falling within the clauses (i),
(ii) or (iii) above, or (b) the [*] falling within clauses (i), (ii) or (iii)
above, in which the [*]. (Steritech reserves all rights to [*] in which the
intended use of the [*].) The Field also excludes [*].
FINAL PROJECT TOTAL BUDGET means the total cost and expense of
developing a System up to and including obtaining Regulatory Approval to market
the System in the countries in which the Management Board determines that
Regulatory Approval should be sought and any other items of cost or expense that
this Agreement expressly requires to be included in Final Project Total Budget.
In the event either party, to the extent permitted under Section 3.6(b) of this
Agreement, elects not to share in the costs of Regulatory Approval of a Project
in a particular country, the Final Project Total Budget shall be adjusted solely
as to such country by adding to the overall Final Project Total Budget the
amount of the incremental expenditures incurred by the party bearing the costs
of Regulatory Approval in such country and such party's cash contribution to the
Project solely as to such country will be increased by adding the amount of such
expenditures to such party's overall cash contribution to the Project.
*[Confidential Treatment Requested]
4.
<PAGE> 11
INACTIVATION PACKAGE means the package containing the Steritech
Compound as well as the delivery system (consisting of all disposables and
compound removal device, if any, associated with a System).
INITIAL BUDGET means the budget first approved by the Management Board
for developing a particular Project to Regulatory Approval, which for the
Initial Budget for the Red Cell Project means Regulatory Approval in the United
States and Europe, and for the Initial Budget for the Fresh Frozen Plasma
Project means Regulatory Approval in the United States.
INSTRUMENT means an instrument or instruments to be developed or
adapted under the Cooperative Development Work and may include associated data
tracking systems.
INTEGRATED INACTIVATION SET means an integrated set containing an
Inactivation Package and other collection or storage items.
JOINT PATENTS means all United States and foreign patent applications
and patents claiming an invention conceived or discovery made jointly by
employees and/or agents of both Steritech and Baxter, including any reissues,
re-examinations and all foreign counterparts thereof. Ownership of an invention
or discovery shall conclusively be considered "joint" when one or more employees
or agents from Baxter and one or more employees or agents from Steritech must be
indicated as co-inventors under United States patent laws on a patent
application for the invention.
MANAGEMENT BOARD means the Management Board created pursuant to Section
3.2 hereof.
MARKET LAUNCH of a System in a given country is deemed to be the
earlier of (1) the date of first commercial sale following Regulatory Approval
for sale of the System in that particular country or (2) the ninetieth (90th)
day following Regulatory Approval for commercial sale of that System in that
country.
MARKETING AND ADMINISTRATIVE EXPENSES for a party in any calendar year
is that percentage of such party's Net Sales (minus Base Revenue in the case of
sales of Integrated Inactivation Sets) for costs incurred in marketing, selling
and administering the Systems, established as follows:
<TABLE>
<CAPTION>
AGGREGATE NET SALES PERCENTAGE APPLIED
OF SUCH PARTY TO ALL NET SALES IN
IN SUCH CALENDAR YEAR SUCH CALENDAR YEAR
--------------------- -------------------
<S> <C>
Under [*] [*]
[*] up to [*] [*]
[*] up to [*] [*]
Over [*] [*]
</TABLE>
*[Confidential Treatment Requested]
5.
<PAGE> 12
(All dollar amounts in this definition are expressed in U.S. dollars, converted
from foreign currencies in accordance with Section 7.1 hereof). For the purpose
of determining Premium for the first three quarterly Revenue Sharing Payments
for any calendar year, the percentage used as set forth above to compute a
party's Marketing and Administrative Expenses will be based on the party's bona
fide forecast of Net Sales in such calendar year used for its internal
management purposes (which information will be provided to the Management
Board). If actual aggregate annual Net Sales vary from such projections to an
extent that would cause a change in the applicable percentage rate for such
calendar year, such first three quarterly Revenue Sharing Payments will be
appropriately adjusted retroactively in the final Revenue Sharing Payment for
such calendar year (i.e., the First Revenue Sharing Payment date in the
following calendar year) and additional payments will be made to the receiving
party, or amounts reimbursed from the receiving party, to yield the actual
Revenue Sharing Payment to which the receiving party is entitled based on the
level of actual Net Sales in such calendar year.
NET SALES means
(a) in the case of the Inactivation Package sold as a
stand-alone item or as part of an Integrated Inactivation Set, the amount
invoiced by Baxter for sales, leases, or licenses of the stand-alone
Inactivation Package or Integrated Inactivation Set, less credits or allowances,
if any, for rejections or returns, customary trade discounts actually given,
less customs and duties paid; less separately invoiced and actually incurred
taxes and other governmental charges that are imposed directly on or measured by
the sale, transfer, transportation, delivery or use of an Inactivation Package;
and less freight paid by Baxter on shipment from Baxter to end users.
(b) In the event any Inactivation Package or Integrated
Inactivation Set is bundled (whether or not invoiced separately) and sold at a
discount with other products for whatever reason, including a special
promotional offer, or in the event of any transaction other than a bona fide
arms length transaction exclusively for money, or upon any use of such
Inactivation Package or Integrated Inactivation Set for purposes which do not
result in customary sales revenue, such sale or other disposal or use shall be
(unless the parties agree otherwise) deemed to constitute a sale at the then
current average selling price for the Inactivation Package or Integrated
Inactivation Set, as the case may be.
(c) In the case of sales by Baxter to a distributor, the Net
Sales shall be computed on the distributor's invoice price to the ultimate
purchaser or user. In the event that Baxter is not able to determine the price
charged by a distributor to the ultimate purchaser or user, such price shall be
the recommended price which Baxter, at the direction of the Management Board,
recommends the distributor to charge to its end customers (which may vary from
territory to territory).
(d) In the event Baxter, in accordance with policies
established by the Management Board, supplies Instruments to end users without
charge in return for an increased price of Inactivation Packages to such end
users, Baxter may deduct from Net Sales received from such end users the
depreciation of cost of such Instruments. In the event such Instruments
6.
<PAGE> 13
are also used in connection with products supplied by Baxter other than the
Inactivation Packages or Integrated Inactivation Sets developed under this
Agreement, then the amount of such depreciation to be deducted in any quarter
from Net Sales shall be limited to that portion of the depreciation reasonably
allocable to the use of the Instruments in connection with Inactivation Packages
and Integrated Inactivation Sets, in accordance with policies established by the
Management Board.
(e) In the event that the ultimate purchaser or end user is
assessed a charge on a per-inactivation or other usage basis, the amount of such
charge shall be included in Net Sales.
(f) If the term "Net Sales" is used in reference to Systems
sold by Steritech, the word "Baxter" in this definition shall be deemed to mean
"Steritech".
NONCASH CONTRIBUTION means the Baxter Noncash Contribution and/or the
Steritech Noncash Contribution, as the context requires.
PATENT ROYALTY PAYMENT means a patent royalty payment made to a third
party for manufacture, use or sale of a System or portion thereof.
PLATELET AGREEMENT means that certain Development, Manufacturing and
Marketing Agreement between the parties dated as of December 10, 1993.
PREMIUM means the Net Sales price of an Inactivation Package or
Integrated Inactivation Set minus each Party's Cost of Goods/Base Revenue in the
Inactivation Package or Integrated Inactivation Set, and minus Marketing and
Administrative Expenses.
PROJECT means the Cooperative Development Work performed by the Parties
to develop, obtain Regulatory Approval of, and market a System for a specific
application within the Field.
PROTEIN PREPARATIONS shall mean all blood derived products in which the
therapeutic component is a protein, such as coagulation factors.
REGULATORY APPROVAL means (1) in the United States, approval from the
FDA for marketing and promotion of the System, or (2) outside of the United
States, an analogous order by a non-U.S. governmental agency which requires
regulatory approval prior to marketing and promotion of a System in such
non-U.S. country.
REVENUE SHARING FORMULA means the relative percentage interest of
Baxter and Steritech as set forth in Section 7 hereof.
REVENUE SHARING PAYMENTS has the meaning set forth in Section 7.1
hereof.
SPECIFICATIONS FOR STERITECH COMPOUND means the performance, quality
and reliability requirements which the Project Committee and Management Board
agree must be met by a
7.
<PAGE> 14
Steritech Compound for such Steritech Compound to be acceptable for commercial
implementation under Section 6. The Management Board shall prepare written
specifications for Steritech Compound. Such specifications shall include a
provision that Steritech Compound be made according to Good Manufacturing
Practices in a facility licensed by the FDA or (if Steritech shall elect to
manufacture Steritech Compound outside the United States) other applicable
regulatory authority.
STAND-ALONE OR STAND-ALONE, in reference to an Inactivation Package,
means an Inactivation Package that is not integrated with other collection or
storage items, and which may take the form, for example, of a bag and tube set
that may be sterile docked, a syringe or ampule.
STERITECH means Steritech, Inc., a company organized under the laws of
California and its affiliates, including, but not limited to, divisions and
subsidiaries. A company shall be considered an affiliate of Steritech if it is
at least forty percent (40%) owned or controlled by Steritech.
STERITECH COMPOUND(S) means any and all psoralen compounds and anchor
linker effector ("ALE") compounds, developed by, licensed to, acquired by or
otherwise commercially accessible to Steritech prior to the Effective Date or in
the course of the Cooperative Development Work but does not include the psoralen
compound that at this time is designated by Steritech as [*].
STERITECH KNOW-HOW means unpatented inventions, data, processes,
compositions, techniques and other technical information proprietary to
Steritech, which is solely owned by Steritech or which Steritech has the right
to control the use of, relating to the Field and the System, including methods
for manufacture or use of Steritech Compounds and Systems or portions thereof.
STERITECH LICENSED KNOW-HOW means all Steritech Know-How in existence
as of the Effective Date or created or acquired during the term of the
Cooperative Development Work.
STERITECH LICENSED PATENTS means all Steritech Patents in existence as
of the effective date of this Agreement, or claiming an invention conceived or
discovery made, or which are acquired, during the term of the Cooperative
Development Work.
STERITECH NONCASH CONTRIBUTION shall be deemed to be [*] million for
the Red Cell Project, [*] million for the FFP Project and such amount as the
parties may agree for any other Project, provided that if the parties do not so
agree, the Steritech Noncash Contribution for such Project shall be one-half of
the Initial Budget for the total Project, the amount of the Steritech Noncash
Contribution in each case being subject to adjustment as provided herein.
STERITECH PATENTS means all United States and foreign patent
applications and patents that relate to the Field and have claims reading on
Steritech Compounds or compositions or
*[Confidential Treatment Requested]
8.
<PAGE> 15
formulations thereof, or otherwise reading on a System or portion thereof, or
methods for manufacture or use of such System or Steritech Compound owned by or
licensed to Steritech with the right to sublicense and claiming an invention
conceived solely by employees and/or agents and/or licensors of Steritech both
prior to the Effective Date and during the term of the Cooperative Development
Work, including any continuations, divisions, reissues, reexaminations and all
foreign counterparts thereof.
SYSTEM(S) means a product developed pursuant to the Cooperative
Development Work for use in the Field, incorporating one or more Steritech
Compounds, an Instrument, if any, and associated computer software, and any
disposables, delivery system or other components.
SYSTEM IMPROVEMENTS means those improvements of commercial Systems
approved by the Management Board. The Management Board shall approve and manage
a budget for all System Improvements (System Improvement Costs).
SYSTEM SPECIFICATIONS means the performance, cost, quality and
reliability requirements as the Management Board agree must be met by a System
in order for the System to be acceptable for marketing and distribution
hereunder.
3. COOPERATIVE DEVELOPMENT WORK.
3.1 PERIOD; OBJECTIVE. From the Effective Date, Baxter and Steritech
shall work together to develop and obtain Regulatory Approval for (the
"Cooperative Development Work") and thereafter market Systems in the Field. The
Management Board shall from time-to-time approve specific Projects for the
Steritech Compounds within the Field.
3.2 MANAGEMENT BOARD.
(a) CONSTITUTION. Steritech and Baxter will appoint a five (5)
person Management Board consisting of two (2) senior executives designated by
each company and one (1) independent member chosen by mutual agreement of the
Parties. The purpose of the Management Board will be to facilitate the overall
relationship of the parties under this Agreement and to manage the research,
development and marketing of Projects within the Field. System Specifications
recommended by the Parties shall not be deemed finalized until they are approved
by the Management Board. The Management Board shall meet from time to time as
appropriate, but no less frequently than four (4) times during each calendar
year, alternating between the offices of the parties, unless the parties shall
agree otherwise. The Management Board shall review and approve budgets, resource
allocations, Projects undertaken within the Field, sales and marketing plans and
expenditures.
(b) PROJECT COMMITTEES. To assist the Management Board in its
work, the Management Board may, from time-to-time, at its sole discretion,
create project committees, including Management Board and non-Management Board
members. A project committee shall only have that authority specifically granted
to it by the Management Board. A project
9.
<PAGE> 16
committee may be created to oversee a Project or a specific aspect or a Project.
However, a project committee shall never have the authority to disperse funds or
reimburse expenses.
(c) VOTING. All decisions of the Management Board shall be
made by majority vote or written consent, with Baxter and Steritech each having
one vote regardless of the number of representatives attending any meeting. The
independent member shall vote on all deadlocks of the Management Board; however,
the independent member shall not vote on matters pertaining to any dispute
concerning the parties' legal obligations to each other for disbursement of
funds or the reimbursement of expenses under any circumstances. In the event of
a deadlock that may be broken by the independent member, either Baxter or
Steritech may notify the other party and the independent member in writing of
the existence of such deadlock and provide to each the specific resolution that
such party proposes to be adopted by the Management Board. Each party will have
thirty (30) days from such notice to present its position to the independent
member, which shall include at least one meeting at which both parties and the
independent member are present. Either Baxter, Steritech or the independent
member may, by notice to the others, shorten such time period if such party
believes that urgent action is required on the matter at issue. The independent
member shall render his or her vote on such resolution as promptly as possible,
and in no event later than twenty (20) days after such time period. In the event
of a deadlock between the parties on a decision whether to discontinue
Cooperative Development Work on a Project or to reduce funding for a Project,
the independent member shall not break the deadlock and the Project will
continue without reduction of funding level, subject to the right of either
party to cease participation in such Project, as provided in Section 12 hereof.
Any compensation of the independent member shall be by mutual agreement of the
Parties and shall be subject to cost sharing. The independent member shall vote
on all matters in a manner that in the good faith judgment of the independent
member is in Baxter and Steritech's best interests as risk and revenue sharers
under this Agreement (i.e. in the same manner that a corporate director would
vote in the best interests of the shareholders of a corporation). Baxter and
Steritech will indemnify and hold harmless the independent member against any
claim arising from a decision made by the independent member, so long as such
decision was made in good faith. The independent member may be removed and/or
replaced by mutual written consent of Baxter and Steritech.
(d) DISPUTES. With regard to the disputes concerning the
parties' legal obligations to each other for disbursement of funds or
reimbursement of expenses, in the event of a deadlock of the Management Board on
these particular issues, if they are unable to reach agreement within thirty
(30) days of the onset of the deadlock, then the matter shall be finally settled
by arbitration, to be held in Chicago, Illinois, in accordance with the
Commercial Arbitration Rules of the American Arbitration Association ("AAA").
Any such dispute or controversy shall be arbitrated before one arbitrator,
acceptable to both parties. If the parties are unable to agree on an arbitrator,
one shall be selected in accordance with the rules of the AAA. The arbitrator's
decision shall be final and binding upon the parties. The parties shall be
entitled to full discovery in any such arbitration. Each party shall bear one
half of the cost of such arbitration, unless the arbitrator otherwise allocates
such costs. During the period of any arbitration, each party shall pay to the
other party any amounts that are or become due and owing to such other party,
other than amounts being contested in good faith in the arbitration.
10.
<PAGE> 17
In addition, in the event that there is a deadlock on any other issue within the
authority of the Management Board as to which the independent member would be
authorized to break the deadlock, and at that time there is not an independent
member (or for any reason the independent member does not break such deadlock),
either party may apply to the AAA to appoint an individual, in accordance with
the rules of the AAA who will act in the capacity of independent member solely
for the purpose of breaking such deadlock and resolving such issue. Prior to
making such application, a party will provide to the other party ten (10) days'
advance written notice of its intent to do so. During such ten (10) day period,
the parties will use their good faith best efforts to resolve such issue in a
meeting between the chief executive officer of Steritech and the highest ranking
officer of Baxter Biotech or comparable successor division or entity, or failing
such resolution, to agree upon appointment of an independent member. Each party
will in all cases cooperate in providing the independent member such information
as the independent member may request in considering any matter.
3.3 REVIEW OF BUDGET, BENCHMARKS; APPROVED PROJECTS. The benchmarks,
budget and timetable for all Projects will be reviewable by the Management Board
from time-to-time during the Cooperative Development Work with the intent that
the parties move expeditiously and effectively toward commercialization of any
System.
(a) THE RED CELL PROJECT. The Initial Budget for one Project
approved, as of the Effective Date of this Agreement, by the Management Board is
the Red Cell Project, attached hereto as Schedule A. Each party shall perform
the respective tasks set forth on Schedule A.
(i) All funding of the Red Cell Project shall be
provided by Steritech, until [*], except as provided in Subsection 3.3(a)(ii).
Steritech will use reasonable commercial development efforts to conduct such
program in 1996 in accordance with the budget for 1996 on Schedule A, including
expenditure of the amounts called for in such budget for 1996. Upon achievement
of the Platelet Milestone, Baxter shall participate in the Red Cell Project in
accordance with this Agreement, including without limitation the obligation to
share fifty percent (50%) of the costs and expenses of the Cooperative
Development Work incurred on or after January 1, 1997, and to market and sell
the Systems for Red Cells developed under this Agreement. Baxter shall pay to
Steritech on the later of (a) the date of achievement of the Platelet Milestone,
or (b) January 1, 1997, fifty percent (50%) of the amount (if any) expended by
Steritech under the Project budget from January 1, 1997 to the date of payment,
and shall also pay to Steritech on such date, and on the first day of each
calendar year thereafter, the amount by which Steritech's budgeted expenditures
under the then current Project budget for the then current calendar year
(including amounts budgeted to be expended by Steritech on outside expenses)
exceeds fifty percent (50%) of the budgeted expenditures for such period.
(ii) Notwithstanding Subsection 3(a)(i), in the event
that, for any reason, the Platelet Milestone is not achieved by September 30,
1997, then Baxter must provide notice of its commitment to participate ("Red
Cell Commitment Notice") in the Red Cell Project,
*[Confidential Treatment Requested]
11.
<PAGE> 18
and commence participation in accordance with the terms of this Agreement, by
October 31, 1997 or Baxter shall be deemed to have elected not to participate,
and decontamination systems for Red Cells will thereafter be deemed to be an
Excluded Product. Baxter shall pay to Steritech on the date of the Red Cell
Commitment Notice, fifty percent (50%) of the amount expended by Steritech under
the Project budget from January 1, 1997 to the date of payment, and shall also
pay to Steritech on such date, and on the first day of each calendar year
thereafter, the amount by which Steritech's budgeted expenditures under the then
current budget for the remainder of then current calendar year exceeds fifty
percent (50%) of the budgeted expenditures for such period. The Commitment
Notice shall evidence Baxter's obligation to participate in and share fifty
percent (50%) of the cost of the Cooperative Development Work on the Red Cell
Project from and after the date of such notice and to market and sell Systems
for Red Cells developed under this Agreement. Steritech's obligation to proceed
with such Cooperative Development Work will be contingent on the negotiation by
Baxter and Steritech of a revision of the equity purchase schedule under Section
4 hereof to provide funding for Steritech to support such Cooperative
Development Work. Nothing in this subsection should be construed as any
expectation that achievement of the Platelet Milestone will be delayed.
(b) THE FRESH FROZEN PLASMA PROJECT. The Initial Budget for
one project approved by the Management Board as of the Effective Date of this
Agreement is the Fresh Frozen Plasma Project, attached hereto as Schedule B.
Each Party shall perform the respective tasks set forth on Schedule B.
(i) All funding of the Fresh Frozen Plasma Project
shall be provided by Steritech, until [*], except as provided in Subsection
3.3(b)(ii). Steritech will use reasonable commercial development efforts to
conduct such program in 1996 in accordance with the budget for 1996 on Schedule
B, including expenditure of the amounts called for in such budget for 1996. Upon
achievement of the Platelet Milestone, Baxter shall participate in the Fresh
Frozen Plasma Project in accordance with this Agreement, including without
limitation the obligation to share fifty percent (50%) of the costs and expenses
of the Cooperative Development Work incurred on or after January 1, 1997, and to
market and sell the Systems for Fresh Frozen Plasma developed under this
Agreement. Baxter shall pay to Steritech on the later of (a) the date of
achievement of the Platelet Milestone, or (b) (i) January 1, 1997, fifty percent
(50%) of the amount (if any) expended by Steritech under the Project budget from
January 1, 1997 to the date of payment, and shall also pay to Steritech on such
date, and on the first day of each calendar year thereafter, the amount by which
Steritech's budgeted expenditures under the then current Project budget for the
then current calendar year (including amounts budgeted to be expended by
Steritech on outside expenses) exceeds fifty percent (50%) of the budgeted
expenditures for such period.
(ii) Notwithstanding Subsection 3(b)(i), in the event
that, for any reason, the Platelet Milestone is not achieved by September 30,
1997, then Baxter must provide notice of its commitment to participate ("FFP
Commitment Notice") in the Fresh Frozen Plasma Project, and commence
participation in accordance with the terms of this Agreement, by October 31,
1997 or Baxter shall be deemed to have elected not to participate, and
*[Confidential Treatment Requested]
12.
<PAGE> 19
decontamination systems for Fresh Frozen Plasma will thereafter be deemed to be
an Excluded Product. Baxter shall pay to Steritech on the date of the FFP
Commitment Notice, fifty percent (50%) of the amount expended by Steritech under
the Project budget from January 1, 1997 to the date of payment, and shall also
pay to Steritech on such date, and on the first day of each calendar year
thereafter, the amount by which Steritech's budgeted expenditures under the then
current budget for the remainder of then current calendar year exceeds fifty
percent (50%) of the budgeted expenditures for such period. The Commitment
Notice shall evidence Baxter's obligation to participate in and share fifty
percent (50%) of the cost of the Cooperative Development Work on the Fresh
Frozen Plasma Project from and after the date of such notice and to market and
sell Systems for Fresh Frozen Plasma developed under this Agreement. Steritech's
obligation to proceed with such Cooperative Development Work will be contingent
on the negotiation by Baxter and Steritech of a revision of the equity purchase
schedule under Section 4 hereof to provide funding for Steritech to support such
Cooperative Development Work. Nothing in this subsection should be construed as
any expectation that achievement of the Platelet Milestone will be delayed.
(c) OTHER PROJECTS. The budget for each other project shall be
approved by the Management Board. Baxter shall pay to Steritech upon the
approval of the Initial Budget for each such project, and upon each anniversary
of the date thereof, the amount by which Steritech's budgeted expenditures under
the then current budget for the succeeding twelve month period exceeds 50% of
the total then budgeted expenditures for such period.
3.4 EXCHANGE OF INFORMATION. During the term of the Cooperative
Development Work, the parties shall exchange all material information developed
pursuant to the Cooperative Development Work including the exchange of Baxter
Know-How and information concerning Baxter Patents and Steritech Know-How and
information concerning Steritech Patents relating to the Field. The exchange
shall occur pursuant to Section 11. The Systems shall embody and use such
Steritech Licensed Patents and Steritech Licensed Know-How and Baxter Licensed
Patents and Baxter Licensed Know-How as shall be determined by the Management
Board.
3.5 COST SHARING. Except as otherwise provided in this Agreement,
commencing January 1, 1997, Baxter will fund fifty percent (50%) and Steritech
will fund fifty percent (50%) of the Cooperative Development Work with respect
to each Project, and Steritech will fund one hundred percent (100%) of the cost
of the Cooperative Development Work, as set forth in the Initial Budget, with
respect to the Red Cell Project and the Fresh Frozen Plasma Project prior to
that date. Funding shall include all costs and expenses incurred in connection
with the Cooperative Development Work. These costs and expenses shall be shared
equally for each Project, fifty percent (50%) paid by Baxter and fifty percent
(50%) paid by Steritech. Cost and expenses shall include only those expenditures
made in accordance with Project budgets approved by the Management Board related
to, research, development, clinical trials, and Regulatory Approval and other
expenses that this Agreement expressly provides shall be subject to cost
sharing. In the event that the funding for the Cooperative Development Work for
any project is not shared equally commencing January 1, 1997, then (except as
otherwise provided in Section 12 or Section 16 hereof) the Revenue Sharing
Formula in Section 7.1 for such Project shall be adjusted such that the
percentage of Premium received by a party will equal the
13.
<PAGE> 20
percentage contributed by such party to the sum of (a) the cash contributed to
the Final Project Total Budget commencing January 1, 1997 (excluding carryovers
of 1996 expenditures, as provided below in this Section), plus (b) Noncash
Contribution to the Project. Nothing in this Section 3.5 shall be construed to
imply that prior to achievement of the Platelet Milestone Baxter shall have any
obligation to provide funds for Cooperative Development Work. Capital
expenditures for facilities and/or equipment and capitalized manufacturing
start-up costs will not be included in costs and expenses shared. Steritech
agrees to expend on the Red Cell Project and the Fresh Frozen Plasma Project the
respective amounts set forth on Schedules C and D for 1996; provided that if
such amounts cannot for any reason be spent in 1996, the unexpended amounts will
be carried over and expended in 1997 (without reducing Steritech's obligations
with respect to the 1997 budget).
(a) All expenses and costs incurred by the parties in
connection with the Cooperative Development Work commencing January 1, 1997
shall be subject to cost sharing pursuant to Section 3.5. Each party shall
maintain detailed records which accurately identify costs and expenses incurred
and paid in connection with the Cooperative Development Work for each specific
Project. Each party shall submit this information to the Management Board on the
on the last business day of February for the period ending December 31, and on
the last business day of August for the period ending June 30 (or such
alternative dates as the Management Board may establish) along with an estimate
of expenses to be incurred during the current six months. Expenses internally
generated because tasks are performed by a party's own staff will be accounted
for on a uniform average cost per full time equivalent basis.
(b) All costs with respect to participation on the Management
Board during the Cooperative Development Work, including travel expenses for
meetings and participation on the Management Board, shall be subject to cost
sharing.
3.6 TESTING AND REGULATORY EXPENSES.
(a) TESTING EXPENSES. All expenses incurred in connection with
any testing whose primary function is marketing of the System, rather than
developing the System or obtaining Regulatory Approval of the System, shall be
borne solely by Baxter and shall not be considered expenses subject to cost
sharing, unless the Management Board determines that such expenses should be
considered part of the Cooperative Development Work.
(b) REGULATORY EXPENSES. The Management Board shall determine
the countries in which Regulatory Approval will be sought and the timing of
seeking such Regulatory Approval. All expenses incurred to obtain Regulatory
Approval are expenses subject to cost sharing under Section 3.5 and shall be
part of the Final Project Total Budget; provided, however, that either party
may, by notice given to the other party within thirty (30) days after such
Management Board decision with respect to a particular country, elect to not
share in the costs of Regulatory Approval in not more than five (5) countries
outside of North America and Europe, which will result in an adjustment for each
such country of Final Project Total Budget (as further provided in the
definition of "Final Project Total Budget").
14.
<PAGE> 21
3.7 BUDGET CONTINGENCIES.
(a) EXCEEDING INITIAL BUDGET. If the Management Board
establishes a budget for a new Project, or determines that the budget for an
approved Project within the Field must be increased over the previously
established budget for the Project, then Baxter will fund fifty percent (50%)
and Steritech will fund fifty percent (50%) of the new Project budget or of any
increase in the previously approved budget. In the event of any new Project
budget or budget increase, however, either party may, by written notice to the
other party, elect to fund less than its full share (50%) of such new Project
budget or budget increase. In such an event, the funding party may, by written
notice to the non-funding party, elect to assume responsibility for the funding
of such unfunded amount, in which event (except as otherwise provided in Section
12 and Section 16 hereof) the Revenue Sharing Formula in Section 7.1 for such
Project will be adjusted such that the percentage of Premium to be received by a
party will equal the percentage contributed by such party to the sum of (i) the
cash contributed to Final Project Total Budget commencing January 1, 1997
(excluding 1996 carryovers as described in Section 3.5), plus (ii) total Noncash
Contribution to the Project.
(b) RECONCILIATION OF EXPENDITURES. Unless otherwise agreed,
the Management Board shall reconcile actual cash outlays and expenses approved
by the Management Board with respect to a Project on an annual basis such that
costs have been incurred in the proportion of fifty percent (50%) by Baxter and
fifty (50%) by Steritech, or such other ratio as is established pursuant to
Section 3.7(a). If they are not in such proportion, Steritech will make a cash
payment to Baxter, or Baxter will make a cash payment to Steritech, in order to
achieve such proportion. The payment shall be made in cash within thirty (30)
days following the determination by the Management Board.
3.8 BAXTER PARTICIPATION IN 1996. In calendar year 1996, Baxter will in
good faith provide non-incremental Baxter resources at no cost to Steritech to
support the program under the Cooperative Development Work. In addition, in such
calendar year Baxter will use good faith efforts to supply other resources to
Steritech at Steritech's request and at Steritech's expense from time to time on
a reasonable time and materials basis to carry out the activities set forth on
Schedule F. To the extent Baxter cannot supply such services with its existing
resources, Baxter and Steritech will consult in good faith concerning Baxter's
adding additional internal resources or using outside services to perform such
activities.
4. EQUITY PURCHASE.
4.1 BAXTER PURCHASE OF EQUITY IN STERITECH. Baxter shall purchase
equity in Steritech according to the following terms and schedule:
(a) Purchase six million dollars ($6,000,000.00 U.S.) of Series E
Preferred Stock in Steritech at fifteen dollars and
seventy-five cents ($15.75 U.S.) per share, Three Million
Dollars ($3,000,000 U.S.) of which will be purchased on April
1, 1996 and Three Million Dollars ($3,000,000 U.S.) will be
purchased on July 1, 1996.
15.
<PAGE> 22
(b) Purchase five million dollars ($5,000,000.00 U.S.) of
Steritech equity upon approval to commence a Phase II study in
the United States or Europe in the program under the Platelet
Agreement ("Tranche 2 Milestone") consisting of Common Stock
at a purchase price equal to open market plus twenty percent
(20%) if Steritech is publicly traded at the time of such
purchase, or if then privately held, Preferred Stock at the
[*] last private third-party financing round, provided that
this clause (ii) shall apply only if there has been a
third-party private financing round of [*] since the date of
the last equity purchase by Baxter pursuant to this Section
3.11. Such purchase will be consummated and the purchase price
paid not later than January 10, 1997, or within fifteen (15)
business days after such Tranche 2 Milestone, if later. As
used in this Section 4.1, "open market" means the average
closing price of the Steritech stock, as reported in the Wall
Street Journal, for the thirty (30) trading days (or lesser
number of trading days that Steritech stock is publicly
traded) prior to and including the trading day that is two (2)
trading days prior to the date the purchase is consummated. A
"trading day" is a day when the Steritech stock may be traded
on the relevant exchange or over the counter.
(c) Either purchase five million dollars ($5,000,000.00 U.S.) of
Steritech equity upon the completion of both Phase II Platelet
Interim Determination and filing of an IND with the F.D.A. to
begin a Phase I study under the Red Cell Project, or
comparable filing in Europe under such Project (the "Tranche 3
Milestone") or, at Steritech's election, purchase two million
dollars ($2,000,000 U.S.) of Steritech equity upon the
completion of the Phase II Platelet Interim Determination
("Tranche 3a Milestone") and purchase three million dollars
($3,000,000 U.S.) upon the approval of an IND by the F.D.A.
under the Red Cell Project or comparable approval in Europe
under such Project ("Tranche 3b Milestone") consisting of
Common Stock at a purchase price equal to open market price
plus twenty percent (20%) if Steritech is publicly traded at
the time of such purchase or, if then privately held,
Preferred Stock at the [*] last private third-party financing
round provided that this clause (ii) shall apply only if there
has been a third-party private financing round of [*] since
the date of the last equity purchase by Baxter pursuant to
this Section 3.11. Such purchase will be consummated and the
purchase price paid not later than January 10, 1998, or within
fifteen (15) days after such Tranche 3 Milestone, Tranche 3a
Milestone or Tranche 3b Milestone, as the case may be, if
later. The purchase price stated in clause (i) above, however,
shall be increased from [*] to [*] if both the Tranche 3a
Milestone and Tranche 3b Milestone are achieved by January 31,
1998. If a closing under this subparagraph 3(c) has previously
occurred at the [*] price, the price per share shall be
retroactively increased to [*], and Baxter shall promptly make
an additional payment to Steritech to
*[Confidential Treatment Requested]
16.
<PAGE> 23
yield an effective price of [*] per share on such purchase.
For the purposes of this Section, the "Phase II Platelet
Interim Determination" means a point in the Phase II clinical
trials under the Platelet Agreement at which Baxter and
Steritech determine that there is sufficient data to determine
that such Phase II trials are likely to have a successful
outcome pursuant to the criteria set forth on Schedule C to
this Agreement. The point in the Phase II trials at which such
determination shall be made shall be included as part of the
protocol agreed upon by Baxter and Steritech for the Phase II
trials. Baxter and Steritech shall make such determination in
good faith.
(d) Purchase five million dollars ($5,000,000.00 U.S.) of
Steritech equity upon (i) the approval by the F.D.A. to
commence a Phase II study in the United States or comparable
approval in Europe under the Red Cell Project, and (ii) the
approval of an NDA by the F.D.A. under the Platelet Agreement
or comparable approval in Europe under such Agreement
("Tranche 4 Milestone") consisting of Common Stock at a
purchase price equal to open market price plus twenty percent
(20%) if Steritech is publicly traded, at the time of such
purchase, or if then privately held, Preferred Stock at the
[*] last private third-party financing round provided that
clause (y) shall apply only if there has been a third-party
private financing round of [*] since the date of the last
equity purchase by Baxter pursuant to this Section 3.11. Such
purchase will be consummated and the purchase price paid not
later than January 10, 1999, or within fifteen (15) days after
such Tranche 4 Milestone, if later. The purchase price stated
in clause (x) above, however, shall be increased from [*] to
the following price per share if the events set forth in
clause (ii) above has occurred in both the U.S. and Europe on
or before the following dates:
<TABLE>
<CAPTION>
DATE PRICE PER SHARE
<S> <C>
January 31, 1999 $ [*]
June 30, 1999 $ [*]
</TABLE>
or if the event set forth in clause (ii) above has occurred in
Europe on or before the following date:
<TABLE>
<S> <C>
September 30, 1998 $ [*]
</TABLE>
If a closing under this subparagraph 3(d) has previously
occurred at the [*] price, the price per share shall be
retroactively increased to the applicable price per share set
forth in the above table, and Baxter shall promptly make an
additional payment to Steritech to yield such applicable price
per share on such purchase. Notwithstanding the foregoing,
Steritech may, in its discretion, elect to refrain from
selling equity to Baxter, or may elect to sell less than five
million
*[Confidential Treatment Requested]
17.
<PAGE> 24
dollars ($5,000,000) of equity to Baxter, pursuant to this
subsection (d). If, at the time the event set forth in clause
(ii) above has occurred, Steritech has not yet achieved the
event set forth in clause (i) above, then until completion of
the full Tranche 4 Milestone, in the event that Steritech
conducts a third-party equity financing round of at least five
million dollars ($5,000,000), then upon Steritech's written
request, Baxter will purchase in such round nineteen and
nine-tenths (19.9%) (but not exceeding $5,000,000 in purchase
price) of the shares being sold in such round on the same
terms and conditions as the other investors in such round. The
dollar amount purchased by Baxter in such round will reduce
the dollar amount required to be purchased under this
subsection (d) upon achievement of the Tranche 4 Milestone.
(e) The purchase prices set forth above in Subsections (c), (d)
and (e), excluding prices set by open market price, will be
appropriately adjusted for stock splits, stock dividends and
the like.
(f) The purchases of equity set forth above will be made in
accordance with an agreement substantially in the form of the
Preferred Stock Purchase Agreement in the form of Schedule G
to this Agreement, with appropriate changes to reflect share
price, class and series of stock being purchased and to make
accurate representations and warranties as of the date of the
subsequent equity purchases; such changes shall not affect the
equity purchase and sale obligations hereunder. While it is
anticipated that the parties will separately execute and
deliver such Stock Purchase Agreements and associated
documents for subsequent equity purchases, the obligation to
purchase and sell equity as set forth in this Section are
enforceable obligations upon the signing of this Agreement
irrespective of whether there is a separate execution and
delivery of such Stock Purchase Agreements and associated
documents. It is understood that from and after the date of
Steritech's initial public offering or other conversion of
Steritech's outstanding Preferred Stock to Common Stock, the
shares purchased hereunder will be shares of Steritech Common
Stock. Prior to such time, the shares purchased hereunder will
be shares of Steritech Preferred Stock. Steritech will use
reasonable efforts to provide Baxter fifteen (15) days prior
notice of the expected date of achievement of milestones under
subparagraphs (b), (c) and (d).
(g) Notwithstanding Subsections (b), (c) and (d) above, in the
event that any purchase of equity pursuant to such subsection
would cause Baxter to own in excess of twenty and one-tenth
percent (20.1%) of issued and outstanding capital stock of
Steritech, Steritech may limit such purchase of equity by
Baxter to a number of shares of capital stock that would cause
Baxter to own not more than twenty and one-tenth percent
(20.1%) of such issued and outstanding capital stock.
(h) Notwithstanding subsections (b), (c) and (d) above, in the
event that any purchase pursuant to such subsection would
cause Baxter to own in excess of nineteen and nine-tenths
percent (19.9%) of issued and outstanding capital stock of
Steritech,
18.
<PAGE> 25
Baxter may limit such purchase of equity to a number of shares
of capital stock that would cause Baxter to own not more than
nineteen and nine-tenths percent (19.9%) of the issued and
outstanding capital stock of Steritech; provided that in each
such instance, upon the written request of Steritech, Baxter
shall pay to Steritech as a research and development payment
an amount equal to the difference between five million dollars
($5,000,000 U.S.) and the dollar amount of capital stock being
purchased. Such research and development payment will be made
to Steritech on the date for consummation of purchase of such
capital stock. Unless Steritech notifies Baxter, as set forth
below, that Steritech elects to repay to Baxter the amount of
such research and development payment, such research and
development payment will be treated as if Baxter had made an
additional contribution of cash to the Final Project Total
Budget for the purposes of the fourth sentence of Section 3.5
(allocated among then ongoing Projects in proportion to the
size of the then approved budget for each Project). (Such
research and development payment shall not, however, change
the actual approved budget for any Project nor Steritech's
contribution thereto.) Steritech must notify Baxter in writing
at the time of such research and development payment whether
or not Steritech elects to repay to Baxter the amount of such
research and development payment. If Steritech notifies Baxter
that Steritech elects to repay such amount, Steritech will, if
such amount is not earlier repaid, pay to Baxter fifty percent
(50%) of the Revenue Sharing Payments received by Steritech
hereunder, until such amount is repaid. In the event that
Baxter makes any such research and development payment to
Steritech pursuant to this subsection (h), Steritech will
grant to Baxter a warrant to purchase capital stock of
Steritech on the following terms: (i) the exercise price will
be the price per share to Baxter established under subsection
(b), (c) or (d) above (i.e., the subsection applicable to the
then current Baxter equity purchase); (ii) the term of the
warrant shall extend until two (2) years following market
launch in the U.S. or Europe of the first product developed
under the Platelet Agreement, but not to exceed seven (7)
years from the date such research and development payment was
made, subject to earlier termination in the event of merger or
acquisition of Steritech; and (iii) the number of shares
subject to the warrant shall be equal to ten percent (10%)
times the amount of such research and development payment
divided by such exercise price. The number of shares subject
to the warrant will be appropriately adjusted from time to
time for stock splits, stock dividends and the like. Repayment
of the amount of the research and development payment will not
terminate the warrant.
4.2 OPTION TO PURCHASE EQUITY IN STERITECH. Steritech grants to Baxter
the following options to purchase equity in Steritech according to the following
terms and schedule:
(a) The Investors' Rights Agreement grants to Baxter the option to
participate in other non-public sale of equity in Steritech by
purchasing up to nineteen and nine-tenths percent (19.9%) of
the Equity Securities sold in such offering, as such term
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is defined in and in accordance with the terms of the
Investors' Rights Agreement; and
(b) Steritech agrees that in the event of an initial public
offering of equity in Steritech, Baxter has the option of
acquiring nineteen and nine-tenths percent (19.9%) of the
shares offered to the public at the initial public offering
price, net of underwriter discount. The terms and conditions
of such a sale to Baxter shall be identical to those terms
sold to the public at the initial public offering; provided
that the shares will be subject the same to lock-up provisions
agreed to by officers, directors and major shareholders. Such
option shall be exercised as follows:
At such time as Steritech shall begin serious efforts toward
undertaking its initial public offering, Steritech will so
notify Baxter in writing. Steritech shall not have any
liability arising from any notice or alleged failure to give
timely notice under this Section, nor shall any dispute
concerning such notice in any way limit or delay Steritech's
ability to conduct its initial public offering or expend any
rights of Baxter.
In order to guarantee its participation in the offering Baxter
must provide notice to Steritech within fourteen (14) days
prior to the anticipated filing date of the registration
statement for the initial public offering, stating the
percentage of such offering, not exceeding nineteen and
nine-tenths percent (19.9%), that Baxter will commit to buy
(the "commitment notice") (Baxter may also specify a maximum
dollar amount of shares it will purchase, which may reduce the
percentage of the offering that Baxter would otherwise
receive.) In the event that Baxter is unable to provide such
commitment notice within such fourteen day period, but
notifies Steritech within such period that it is strongly
interested in participating in the offering, Steritech will
make all reasonable efforts to include Baxter in the offering
up to the limits specified above, provided that Steritech will
not, in such regard, be obligated to take any action that
would delay or otherwise interfere with the offering. In the
event the offering is withdrawn, the above procedure will be
reinstituted at the time Steritech elects to proceed with a
new offering. In the event that the registration statement
does not become effective within ninety (90) days after the
date of filing of the registration statement, Baxter may by
written notice give within seven (7) days thereafter, withdraw
its commitment notice.
4.3 STANDSTILL BY BAXTER. Baxter agrees that it will not at any time,
nor will it permit any of its Affiliates to, without the prior written consent
of Steritech:
(a)(i) acquire, directly or indirectly, by purchase or otherwise, of
record or beneficially, other than by the transactions set forth in Sections 4.1
and 4.2 of this Agreement, any securities of Steritech or rights or options to
acquire any securities from any holder of such securities if after such
acquisition (and giving effect to the exercise of any such
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rights or options) Baxter and its Affiliates would own capital stock of
Steritech having twenty and one-tenth percent (20.1%) or more of the voting
power of the outstanding capital stock of Steritech; provided, however, that
neither (1) the purchase of shares of Common Stock pursuant to Sections 4.1 or
4.2 of this Agreement or (2) subsequent reductions in the number of shares of
outstanding capital stock of Steritech (or rights or options therefor) shall be
deemed to have caused a violation of this Section 4.3(a);
(ii) To the extent Baxter and/or its Affiliates owns, beneficially
or of record, securities of Steritech constituting twenty and one-tenth percent
(20.1%) or more of the voting power of the outstanding capital stock of
Steritech and such securities include securities of Steritech other than those
purchased pursuant to Sections 4.1 or 4.2, Baxter and/or its Affiliates shall be
deemed to own "Prohibited Securities." Baxter agrees that neither it nor any of
its Affiliates shall (and neither it nor any of its Affiliates shall be entitled
to) vote any Prohibited Securities with respect to any matter subject to the
vote or written consent of Steritech's stockholders (provided, however, that the
foregoing shall not be deemed to limit Steritech's remedies in the event that
the excess securities were acquired in violation of this Section);
(iii) Baxter hereby covenants and agrees that it will provide
written notice to Steritech of any purchase, sale or other acquisition or
disposition, on the open market or in private transactions, by Baxter or any of
its Affiliates of any securities of Steritech (or if Baxter or such Affiliates
shall direct any third party to take any such actions on behalf of Baxter or
such Affiliates). Such notice shall be transmitted to Steritech by facsimile
(with telephonic notice) within three (3) business days after any such
transaction on the open market or within ten (10) business days after any such
private transaction, and shall specify the person or entity effecting the
transaction, the date of such transaction, the number of securities and the
price per security with respect to such transaction;
(b) solicit proxies with respect to any securities of Steritech under
any circumstances for change in the directors or management of Steritech or
relating to merger or acquisition of the Company or deposit any securities of
Steritech in a voting trust or subject them to a voting agreement or other
agreement of similar effect (other than subjecting shares owned by Baxter to a
revocable proxy);
(c) initiate, propose or otherwise solicit any stockholder for the
approval of one or more stockholder proposals at any time, or induce or attempt
to induce any other person to initiate any stockholder proposal for change in
the directors or management of Steritech or relating to merger or acquisition of
the Company; or
(d) take any action individually or jointly with any partnership,
limited partnership, syndicate, or other group or assist any other person,
corporation, entity or group in taking any action it could not take individually
under the terms of this Section 4.3.
The preceding provisions of this Section 4.3 shall terminate in the
event (i) any Person (defined below) or 13D Group (defined below) other than an
Affiliate of Baxter) shall have
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commenced a tender offer for a majority of the outstanding shares of Common
Stock (including any other outstanding voting securities) of Steritech or (ii)
Steritech's Board of Directors (the "Board") shall determine to (A) approve any
transaction set forth in clause (i) immediately preceding, (B) liquidate
Steritech or sell all or substantially all of the assets of Steritech to another
person, (C) approve a merger or consolidation of Steritech with any other person
that would result in the voting securities of Steritech outstanding immediately
prior thereto continuing to represent less than a majority of the combined
voting power of the voting securities of Steritech or such surviving entity
outstanding immediately after such merger or consolidation or (D) sell to any
person a majority of Steritech's outstanding voting securities. In the event of
any determination by the Board pursuant to the immediately preceding clause
(ii), Steritech shall notify Baxter at least 15 days prior to the final approval
of such transaction, and any such Board determination shall be conditioned upon
the notification by Steritech of Baxter in compliance with this sentence. For
purposes of this Section 4.3, a "13D Group" means any group formed for the
purpose of acquiring, holding, voting or disposing of securities of Steritech
that would be required under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and the rules and regulations promulgated thereunder, to
file a statement on Schedule 13D with the (United States Securities Exchange
Commission) as a "Person" within the meaning of Section 13(d)(3) of the Exchange
Act if such group beneficially owned sufficient securities to require such a
filing. All of the provisions of this Section 4.3 shall be reinstated and shall
apply in full force according to their terms in the event that: (x) if the
preceding provisions of this Section 4.3 shall have terminated as a result of a
tender offer, such tender offer (as originally made or as extended or modified)
shall have terminated (without closing) prior to the commencement of a tender
offer by Baxter or any of its Affiliates that would have been permitted to be
made pursuant to the preceding provisions of this paragraph as a result of such
third-party tender offer, (y) any tender offer by Baxter or any of its
Affiliates (as originally made or as extended or modified) that was permitted to
be made pursuant to the preceding provisions of this paragraph shall have
terminated (without closing), or (z) if the preceding provisions of this Section
4.3 shall have terminated as a result of a Board determination referred to in
the preceding clause (ii), the Board shall have determined not to take any of
such actions (and no such transaction considered by the Board shall have closed)
prior to the commencement of a tender offer by Baxter or any of its Affiliates
that would have been permitted to be made pursuant to the preceding provisions
of this paragraph as a result of the initial Board determination referred to in
the preceding clause (ii), unless prior to such Board determination not to take
any of such actions, any of the events described in the preceding clause (i)
shall have occurred. Upon reinstatement of the provisions of this Section 4.3,
the preceding provisions of this paragraph shall continue to govern (including,
without limitation, those that provide for the termination of the preceding
provisions of this Section 4.3) in the event that any of the events described in
the preceding clauses (i) or (ii) shall occur. Upon the closing of any tender
offer for, or acquisition by Baxter or its Affiliates of, any securities of
Steritech or rights or options to acquire any such securities that would have
been prohibited by the preceding provisions of this Section 4.3 but for the
provisions of this paragraph, all provisions of this Section 4.3 shall
terminate.
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5. SUPPLY OF STERITECH COMPOUND AND SYSTEM MANUFACTURING.
5.1 STERITECH RESPONSIBILITIES. Steritech shall at all times use
commercially reasonable efforts to supply, or have supplied, Baxter's demand for
the Steritech Compounds used in each System. The Parties shall agree in good
faith upon a forecasting, order, supply and delivery mechanism for the Steritech
compounds.
5.2 BAXTER RESPONSIBILITIES. Baxter shall be responsible for all
aspects relating to scale-up, production, marketing and distribution of each
System, but not including manufacturing of the inactivation compound.
5.3 INSTRUMENT PRODUCTION. Baxter shall tool and scale up the
production model of any Instrument needed for each System. Baxter shall be
responsible for production and manufacture of the Instrument and associated
software of each System.
5.4 SYSTEM SPECIFICATIONS. Baxter's manufacture of each System shall be
in accordance with Systems Specifications as finally approved in writing by the
Management Board. Any change in Systems Specifications must be approved in
writing by the Management Board.
5.5 STERITECH SPECIFICATIONS. Steritech shall supply Steritech
Compounds in Bulk Form to Baxter to be used as a component of a System and
Baxter shall obtain Steritech Compounds to meet its requirements of inactivation
compounds for use in the Field from Steritech. Steritech Compounds shall meet
the Specifications for Steritech Compounds as finally approved in writing by the
Management Board. Any change in specifications for Steritech Compounds must be
approved in writing by the Management Board.
5.6 SOURCE OF SUPPLY. In the event Baxter recommends that Steritech
change Steritech's source of raw materials or Steritech Compound because of
actual or anticipated irregularity of supply, or failure to meet specifications
and a viable alternative source of supply is available, Steritech will support
Baxter in Steritech's obtaining such alternate source to the extent commercially
reasonable.
5.7 FAILURE OF STERITECH TO MEET BAXTER REQUIREMENTS. To the extent
that Steritech cannot meet Baxter's requirements for Steritech Compound, Baxter
shall be free to obtain Steritech Compound from a third party. Steritech agrees
to provide the third party that Baxter selects with the necessary information
and Steritech Know-How to allow the third party to make the Steritech Compound.
5.8 SYSTEM IMPROVEMENTS. During the term of this Agreement, as approved
by the Management Board, the Parties will cooperate in making improvements to
each System to meet changing market needs. The costs for such System
Improvements of Inactivation Packages shall be budgeted by the Management Board
and subject to cost sharing pursuant to Section 3.5 and shall be added to the
Final Project Total Budget.
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6. MARKETING AND DISTRIBUTION RIGHTS: EXCLUSIVE DISTRIBUTION RIGHTS.
6.1 COMMERCIALIZATION. Baxter shall use commercially reasonable efforts
to market and sell Systems developed under this Agreement in those countries of
the world in which the Management Board determines that such Systems should be
marketed and sold.
6.2 MEETINGS CONCERNING MARKETING. The Management Board shall meet from
time-to-time to discuss and approve marketing strategies in order to optimize
customer acceptance and effective promotion of the System. All final decisions
regarding System marketing, distribution and pricing shall be made by the
Management Board reasonably and in good faith. Baxter shall follow the
strategies established by the Management Board. In the event that any product is
sold by Baxter for a price less than the price established by the Management
Board for such product, for the purpose of computation of Net Sales, the product
will be deemed to be sold at the price established by the Management Board.
6.3 RESERVED RIGHT TO COMPETE. With the exception of psoralens or ALE
compounds, Baxter expressly reserves the right to research, develop and market
inactivation/decontamination products (expressly including
inactivation/decontamination products which compete indirectly or directly with
the Systems developed and marketed under this Agreement) which incorporate
technology owned or licensed by Baxter, and/or third parties to make, use and
sell such inactivation/decontamination products. Nothing herein shall be
interpreted to limit in any manner such right of Baxter. Baxter shall notify
Steritech in writing if Baxter commences development internally or with a third
party of a competing inactivation or decontamination product in a program in
which Baxter has budgeted at least one million dollars ($1,000,000) in any
twelve (12) month period of research and development expenses (or equity
investment), acquires marketing rights to a competing inactivation or
decontamination product or commences marketing of a competing inactivation or
decontamination product, or files an application for 510(k) or I.N.D., or
foreign equivalent, for such a competing product.
6.4 COMPETING PRODUCTS. In the event Baxter markets within a specific
country or territory an inactivation/decontamination product that competes
directly with a specific System developed under this Agreement, Baxter's rights
under this Agreement shall become co-exclusive with Steritech for the specific
System in that specific country or territory only, allowing Steritech to market,
sell and distribute the System itself within the specific country or territory
or, if Steritech chooses, through a single Approved Distributor (or Approved
Distributors, so long as only one Approved Distributor is appointed per
geographic region) within the specific country or territory. The sharing of
Premium shall be adjusted according to Section 7.3.
6.5 COMMENCEMENT, CESSATION OF MARKETING. If (a) according to the
Management Board, Baxter (through its own efforts or those of its distributors)
has not marketed a specific System within a specific country or territory
following Market Launch within a reasonable time, but not less than one year nor
more than three years from Market Launch, or (b) after commencement of marketing
of a specific System in a particular country or territory, Baxter shall cease
marketing (or be prevented from marketing by governmental action concerning
Baxter) of such System in such country or territory in the manner required under
this
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Agreement, Steritech shall have exclusive rights to market that specific System
in that specific country or territory only, allowing Steritech to market, sell
and distribute the System itself within the specific country or territory, or if
Steritech chooses, through an Approved Distributor (or Approved Distributors, so
long as only one Approved Distributor is appointed per geographic region) within
the specific country or territory. The sharing of Premium shall be adjusted
according to Section 7.3. If, according to the Management Board, Steritech
(through its own efforts or those of its distributors) has failed to gain a
sufficient market share for a particular System within a specific country or
territory within three (3) years after Steritech has obtained marketing rights
in such country or territory, or to gain or maintain sufficient market share in
such country at any time thereafter, or has ceased marketing of a Specific
System in any country or territory, Steritech's rights under this Agreement
shall become co-exclusive with Baxter for that specific System in that specific
country or territory, allowing Baxter to market, sell and distribute the System
itself within the specific country or territory or, if Baxter chooses, through a
single Approved Distributor (or Approved Distributors, so long as only one
Approved Distributor is appointed per geographic region) within the specific
country or territory.
6.6 ACHIEVEMENT OF MARKET SHARE. If, according to the Management Board,
Baxter (through its own efforts and those of its distributors) has not gained a
sufficient market share for a particular System within a specific country or
territory within three (3) years following Market Launch, or has not to gained
or maintained sufficient market share in such country at any time thereafter,
Baxter's rights under this Agreement shall become co-exclusive with Steritech
for that specific System in that specific country or territory, allowing
Steritech to market, sell and distribute the System itself within the specific
country or territory or, if Steritech chooses, through a single Approved
Distributor (or Approved Distributors, so long as only one Approved Distributor
is appointed per geographic region) within the specific country or territory.
The sharing of Premium shall be adjusted according to Section 7.3.
6.7 SUPPLY OF BAXTER GOODS. Baxter shall provide the necessary Baxter
disposables, Blood Pack Units(R), Instruments, or other components necessary for
Steritech, or Steritech's Approved Distributor, to sell Systems under Sections
6.4, 6.5 and 6.6. Steritech shall forecast its needs for such Baxter
disposables, apheresis kits, Blood Pack Unit(R), Instruments or other components
under Sections 6.4, 6.5 and 6.6. Baxter's Cost of Goods/Base Revenue under this
section shall be reimbursed under Section 7.3. Baxter shall not, however, be
obligated to develop, reconfigure, modify, qualify or seek Regulatory approval
for any disposables, apheresis kits, Blood Pack Units(R), Instruments or other
components supplied to Steritech or Steritech's Approved Distributor under this
Section.
6.8 REQUALIFICATION. In the event Steritech obtains marketing rights
under Section 6.5, 12 or 16, or in the event Baxter does not supply sufficient
goods under Section 6.7 to meet Steritech's needs (without limiting Baxter's
obligation to supply such goods) Steritech may, or may license third parties to,
make, have made, use, sell and have sold products using the Steritech Compounds
or under the Steritech Patents or Steritech Know-How, and under any patents or
know-how under which Steritech is licensed pursuant to Section 8.5(b) hereof,
for the use and in the particular country or countries for which Steritech has
marketing rights, provided
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that such products are qualified for regulatory approval on Steritech's or such
third party's own system.
6.9 MANAGEMENT BOARD ACCESS TO AND REVIEW OF MARKETING AND DISTRIBUTION
INFORMATION. A party marketing and distributing products under this Agreement
will provide to the Management Board all information in such party's possession
as the Management Board may reasonably require from time to time to review and
make decisions concerning marketing and distribution, including without
limitation breakdown and substantiation of any data provided pursuant to Section
13 of this Agreement. If the information requested of a party is information
that is not normally collected by the party, and requires substantial additional
expense of such party to collect and provide, such additional expense shall be
borne equally by the parties.
7. REVENUE SHARING.
7.1 REVENUE SHARING PAYMENTS. In consideration of the Cooperative
Development Work to be undertaken and other obligations set forth herein, the
parties agree to share Net Sales as follows: Subject to the provisions of
Sections 3.5, 3.7(a), 7.2, 7.3, 7.4, and 12, no later than sixty (60) days after
the first and all subsequent calendar quarters following the Market Launch of
the System, (a) Baxter shall pay to Steritech, with respect to Net Sales in such
calendar quarter, a sum equal to: (1) Steritech's Cost of Goods/Base Revenue;
and (2) fifty percent (50%) (or such other percentage is established pursuant to
Section 3.5 hereof) of the Premium during such calendar quarter ("Revenue
Sharing Payments"), and (b) Baxter shall retain for itself the balance of the
proceeds of Net Sales of Systems shipped during such Calendar Quarter. On each
such date a party that has received in such calendar quarter a royalty, license
fee or other consideration for licensing or sublicensing rights hereunder shall
pay to the other party the amount due to such party under Section 7.4. The
Revenue Sharing Payments due and payable hereunder shall be computed for each
calendar quarter in the currency in which the sale was made, but shall be
definitively discharged by payment to Steritech in U.S. dollars converted from
such currency using the average of spot rates for such currency for the last
business day of the second and third months of such quarter and of the first
month of the subsequent quarter, as quoted in the Wall Street Journal (or such
other mutually agreeable financial publication of international circulation or
rates published by Baxter's corporate treasury, if mutually agreed).
7.2 BAXTER SOURCING STERITECH COMPOUNDS. In the event Baxter sources
the Steritech compounds from an alternate source, Baxter shall retain for itself
the Cost of Goods/Base Revenue for the Steritech Compounds in the Systems
shipped during such calendar duration.
7.3 STERITECH AS SELLER OF SYSTEMS. In the event Steritech, or an
Approved Distributor appointed by Steritech, is the seller of the Systems under
Sections 6.4, 6.5 or 6.6, Steritech shall retain for itself its Cost of
Goods/Base Revenue, and the Marketing and Administrative Expenses, and pay to
Baxter, Baxter's Cost of Goods/Base Revenue and the percentage of Premium
received by each of the parties will equal the percentage contributed by such
party to the sum of (a) cash contributed to the final Project Total Budget, PLUS
(b) Noncash Contribution to the Project, provided that for the purposes of
computations under this Section, Baxter's Noncash Contribution shall be reduced
by (i) fifty percent (50%) if such sales are made
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pursuant to Section 6.4 or 6.6, or (ii) by seventy-five percent (75%) if such
sales are made pursuant to Section 6.5. In the event that Steritech purchases
any components from Baxter, as provided in Section 6.7, Baxter's share of the
Premium split shall be not less than fifty percent (50%) of Baxter's Cost of
Goods for such components.
7.4 LICENSING. In the event either Steritech (pursuant to Section 6.8
hereof) or Baxter (pursuant to Section 8.4 hereof) licenses or sublicenses a
third party to rights arising under this Agreement, all royalties, license fees
and other consideration received from such licensing or sublicensing (excluding
research or development payments) shall be shared by the parties according to
the percentage of the sum of (a) funding by each party in the Final Project
Total Budget (or such lesser amount as shall have been expended by Baxter and
Steritech to enable the parties to license or sublicense the rights hereunder
and to comply with their development obligations under the license or sublicense
agreement), plus (b) Noncash Contribution to such Project made by each party,
provided that for the purposes of this Section, Steritech's and Baxter's Noncash
Contributions will be equitably adjusted to reflect the relative contribution of
Steritech Patents and Steritech Know-How and Baxter Patents and Baxter Know-How
to the rights being licensed or sublicensed, but in all events Baxter's Noncash
Contribution shall be reduced by not less than seventy-five percent (75%).
Notwithstanding the foregoing, Steritech will not have any obligation to pay any
royalty, license fee or other consideration with respect to any licensing by
Steritech to third parties pursuant to the rights of Steritech under Section
8.5(a) of this Agreement.
7.5 DISTRIBUTOR SALES. In the event that either party sells
Inactivation Packages or Integrated Inactivation Sets through a distributor, Net
Sales shall be computed as set forth in paragraph (c) of the definition of Net
Sales, and the Distributor Portion will not diminish the Revenue Sharing Payment
receivable by the other party.
8. PATENTS, KNOW-HOW, LICENSE GRANTS.
8.1 STERITECH SOLE OWNERSHIP. Steritech shall own all Steritech Patents
and Steritech Know-How.
8.2 BAXTER SOLE OWNERSHIP. Baxter shall own all Baxter Patents and
Baxter Know-How.
8.3 JOINT PATENTS.
(a) Baxter shall own, and is hereby assigned, all Joint
Patents specifically reading on materials and configuration of blood bags and
associated tubes and connections, developed under this Agreement. Except as
provided in Section 8.3(b), Steritech shall own, and is hereby assigned, all
other Joint Patents, including without limitation Joint Patents reading on the
compounds, and methods of using or removing compounds, developed under this
Agreement.
(b) Steritech shall own, and is hereby assigned, all Joint
Patents specifically reading on the illumination device elements of Instruments
developed under this agreement,
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including hardware and software associated with the illumination device
elements. Baxter shall own, and is hereby assigned, all Joint Patents
specifically reading on all other elements of Instruments developed under this
Agreement.
(c) Within the Field the parties shall use any Joint Patents
solely for the development, sale or licensing of Systems pursuant to this
Agreement.
8.4 LICENSE.
Subject to the terms and conditions of this Agreement, for
Systems whose manufacture, use or sale is covered by a claim of a Steritech
Licensed Patent, or which use Steritech Licensed Know-How, Steritech hereby
grants Baxter an exclusive, paid-up, royalty free (except as provided herein)
license, with the right to sublicense (if such sublicense is approved in advance
by the Management Board), under Steritech Licensed Patents and Steritech
Licensed Know-How to make, have made, sell or have sold such Systems, and to use
such Systems solely for promotion and sale thereof, worldwide, solely for use in
the Field. Notwithstanding the foregoing, for any country or territory where
such marketing rights become co-exclusive or exclusive to Steritech pursuant to
Sections 6.4, 6.5 or 6.6 of the Agreement, such license shall automatically
become co-exclusive with Steritech, or the rights shall revert exclusively to
Steritech, as the case may be, for such country or territory. Except as set
forth herein in Section 5.7, such license shall exclude the right to make or
have made Steritech Compounds. As to Steritech Compounds, such license shall be
limited to the Steritech Compounds that are selected by the Management Board for
a specific Project within the Field. Notwithstanding anything in this Section or
elsewhere in this Agreement, Baxter shall not have any license or distribution
rights in or to any Steritech Patent or Steritech Know-How to the extent
relating to (a) the inactivation of bacteria, viruses, parasites or other
pathogens through use of compounds other than psoralens or ALE compounds, or (b)
the [*] inactivation system development at Steritech, or (c) use outside the
Field, except as provided in Section 8.6 of this Agreement.
8.5 STERITECH RIGHTS.
(a) DECONTAMINATED PRODUCTS. Baxter and Steritech have
previously entered into a letter agreement dated January 18, 1996 Re
Non-Exclusive License for Plasma Derivatives a copy of which is attached hereto
as Schedule D (the "Plasma Derivatives Letter"). Baxter and Steritech agree that
the terms of the Plasma Derivatives Letter, rather than this Agreement, shall
apply to all products in the Field where the product to be produced or sold is a
decontaminated blood cell, Protein Preparation, recombinant equivalent or blood
component or other product, rather than a System containing a disposable
Inactivation Package. The Plasma Derivatives letter will apply to such other
products to the same extent and in the same manner as if such other products
were expressly listed with plasma derivatives in the Plasma Derivatives Letter.
Accordingly, the license set forth in Section 8 is subject to the exclusive
right retained by Steritech in the Steritech Patents and Steritech Know-How to
inactivate pathogens in such products and license others to inactivate pathogens
in such products, including the right to make, have made, use and sell compounds
and other components applicable to such inactivation
*[Confidential Treatment Requested]
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process; provided that Steritech shall accord to Baxter the rights set forth in
the Plasma Derivatives letter.
(b) OTHER. The license to Baxter set forth above is subject to
the right retained by Steritech to grant licenses to third parties under
Steritech Patents and Steritech Know-How, and exercise other rights, as provided
in Section 6.8 of this Agreement. Baxter further grants to Steritech paid-up,
royalty-free (except as provided herein) license, with right to sublicense (a)
co-exclusive in the Field, to any Baxter Patents or Baxter Know-How developed in
the course of the Cooperative Development Work, and (b) non-exclusive in the
Field to any Baxter Patents or Baxter Know-How otherwise embodied or used within
a System; solely for the purposes of granting licenses and exercising other
rights pursuant to Section 6.8 or exercising Steritech's rights under Section 12
or 16 of this Agreement. The foregoing clause (b) shall exclude, however, any
Baxter proprietary materials or Baxter proprietary configuration of blood bags
and associated tubes and connections, or Baxter proprietary processes to
manufacture any of the same, unless Baxter shall consent in writing to license
of the same to Steritech.
8.6 CROSS-LICENSE. Steritech hereby grants to Baxter, and Baxter hereby
grants to Steritech, a worldwide, non-exclusive, paid-up, royalty-free license,
with right to sublicense, to make, have made, and use, sell or have sold,
outside the Field, products under any patents and know-how of the granting party
used or embodied in any Instrument or in any [*] developed under this
Agreement. In addition, Baxter hereby grants to Steritech a worldwide,
non-exclusive, paid-up, royalty-free (except as provided herein) license, with
right to sublicense, under the Baxter Patents and Baxter Know-How to make, have
made, and use, sell or have sold Instruments in connection with the exercise by
Steritech of any rights under Sections 6.4, 6.5, 6.6, 6.7, 6.8, 8.5 or 12 of
this Agreement in the event Baxter is unable to supply the same to Steritech at
a cost to Steritech equal to or less than the cost from an alternative supplier.
8.7 EXCLUDED PRODUCTS. The term Excluded Product means any product in
the Field that Baxter, in its sole discretion, specifically notifies Steritech
in writing that Baxter has no interest in developing and marketing. In the event
that Steritech proposes in writing a product for development under the
Cooperative Development Work, Baxter will consider such proposal in good faith
and will notify Steritech in writing if Baxter has no interest in developing and
marketing such product in the reasonably foreseeable future. Notwithstanding any
other provision of this Agreement, all rights and licenses hereunder as to any
Excluded Product shall revert to Steritech, including without limitation the
right to make, have made, and use, sell and have sold the Excluded Product.
Steritech shall not have any obligation to account to Baxter for any proceeds
from sale of any Excluded Product.
8.8 NOTICE OF SOLE RIGHTS. After the Effective Date of this Agreement,
a party asserting sole ownership of any patent rights or know-how in the Field
developed pursuant to the Cooperative Development Work shall provide reasonable
notice to the Management Board of its intention to seek patent protection or to
assert proprietary interest in such Know-How. The Management Board shall have
the right to a reasonable opportunity to review and comment on such assertions
prior to patent applications being filed.
*[Confidential Treatment Requested]
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8.9 OTHER AGREEMENTS. Steritech shall not terminate, alter or amend the
terms of the following agreements in a manner that would limit Steritech's or
Baxter's rights under this Agreement without the prior written approval of
Baxter: The Technology Transfer Agreement and the License Agreement between
Steritech and HRI Research, Inc. each dated December 13, 1991. Baxter shall
respond within thirty (30) days of receipt of written proposed changes to such
agreements. Baxter's approval of proposed changes shall not be unreasonably
withheld.
8.10 REGULATORY FILES. Baxter and Steritech shall each have full access
to all materials filed and correspondence with the FDA and other regulatory
agencies in connection with the Cooperative Development Work and each System,
and shall be entitled to use and rely on such materials with respect to any
regulatory approvals for a product sought by either, whether or not such product
relates to this Agreement. In the event that product registration is in the name
of Baxter in any country and Steritech obtains marketing rights for such product
in such country, then Baxter will, at Steritech's expense, cause the product to
be co-registered in Steritech's name or take other steps so that Steritech may
market and sell the product under such registration.
8.11 RIGHTS UNDER GOVERNMENT-SPONSORED RESEARCH. Any licenses hereunder
to any "subject invention," if any, as defined in 35 U.S.C. Section 201, shall
be subject to the rights of the United States Government under 35 U.S.C.
Section, 200 et seq.
9. PROSECUTION OF PATENT RIGHTS.
9.1 STERITECH PATENTS. Steritech shall have the right but no obligation
to timely prepare, file, prosecute and maintain, under its exclusive control and
at its expense, Steritech Patents.
9.2 BAXTER PATENTS. Baxter shall have the right but no obligation to
timely prepare, file, prosecute and maintain, under its exclusive control and at
its expense, Baxter patents.
9.3 JOINT PATENTS. The party to whom a Joint Patent is assigned
pursuant to Section 8.3 hereof shall employ counsel for the purpose of timely
preparing, filing, prosecuting and maintaining the Joint Patents which are
assigned to such party pursuant to such Section 8.3. The other party shall have
the right to approve such counsel, which approval shall not be unreasonably
withheld. Whenever possible, the parties shall file internationally under the
Patent Cooperation Treaty and/or the European Patent Convention in order to
minimize expenses. The reasonable expenses of preparing, filing, prosecuting and
maintaining corresponding Joint Patents in the countries of the United States,
Australia, Canada, the United Kingdom, Germany, Belgium, France, Italy,
Netherlands, and Japan, and all other countries that are agreeable to Baxter and
Steritech, as evidenced in writing shall be borne equally. Unless such other
countries are agreed to by the parties in writing, such other country filings
shall not be made. Baxter shall pay such patent expenses and will deduct
Steritech's share of such expenses from Revenue Sharing Payments otherwise due
Steritech.
9.4 PRIOR ART; REVIEW AND COMMENT. Each party shall cooperate with the
other to ensure that all prior art that is pertinent to the examination of a
Joint Patent is brought to the
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attention of the other party. The parties to this Agreement shall have the right
to review and comment on substantive documents prepared in connection with the
preparation, filing, prosecution and maintenance of the Joint Patents prior to
the filing of such papers; however, such review and comment shall be performed
expeditiously so as not to negatively affect patent rights.
9.5 ELECTION NOT TO PAY EXPENSES. If either party elects for any reason
not to pay its share of the reasonable expenses for a particular Joint Patent,
then, at the option of the other party:
(a) the joint ownership of that nonpaying party under this
Agreement with respect to that particular patent application or patent shall
immediately terminate and the paying party shall exclusively own that particular
patent or patent application, without affecting the nonpaying party's rights
under all other patent applications and patents; or
(b) the application or patent shall be allowed to lapse.
In the event the paying party elects option (a) above, the nonpaying
party hereby agrees to execute documents necessary to transfer its interest in
such patent or patent application to the paying party.
10. TRADEMARKS.
10.1 BAXTER TRADEMARKS. Steritech shall make no use of any Baxter
trademark without the prior written approval by Baxter.
10.2 STERITECH TRADEMARKS. Baxter shall include the Steritech name and
mark (or successor name and mark) in a prominent manner on and on packaging,
literature and promotional material and advertising for the System unless Baxter
makes a good faith determination that the Steritech name cannot be used due to
third party rights. Baxter shall, to the extent practical, provide to Steritech
for review copies of all proposed uses of the Steritech name and mark and
references to Steritech. At Steritech's reasonable request, Baxter shall refer
to the Steritech Compounds by the Steritech trademark that Steritech indicates
is appropriate. Baxter shall include on material bearing such trademarks an
acknowledgment that such trademarks are the property of Steritech. If necessary
in any market to maintain Steritech's rights in the Steritech trademarks, Baxter
shall enter into a registered user agreement regulating its use of the Steritech
trademarks. Except as provided in this Section, no rights to Steritech
trademarks are hereby granted to Baxter.
11. CONFIDENTIAL INFORMATION.
11.1 CONFIDENTIALITY AGREEMENT. The use and disclosure of information
designated by either party as confidential shall be governed by the attached
Schedule E Confidentiality Agreement. The Schedule E Confidentiality Agreement
shall survive termination of this Agreement.
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11.2 USE OF CONSULTANTS. The parties contemplate that from time to time
during the term of this Agreement third party technical consultants may be
employed by either party in connection with the development of Steritech
Compounds or Systems. The parties agree that information designated as
confidential may be disclosed to such consultants provided that the other party
is given reasonable notice of the circumstances and nature of the intended
disclosure and that the disclosure is limited to information necessary to enable
the technical consultant to provide technical consulting services. The
consultant will be required to sign an agreement committing the consultant to
protect such confidential information.
12. CESSATION OF COOPERATIVE DEVELOPMENT WORK.
12.1 CESSATION. Either party may unilaterally cease all participation
on a specific approved Project or all Cooperative Development Work under this
Agreement upon ninety (90) days written notice of its intent. At any time
thereafter, the party who did not unilaterally cease participation in the
Cooperative Development Work shall have the right to proceed with the
independent development of such System at its own expense. Should a party so
proceed, the following terms and conditions shall apply:
(a) The Premium Sharing Formula in Section 7.1 will be
adjusted. The Premium shall be split between the
Parties based on the percentage of the sum of (i)
Final Project Total Budget funded by each Party, plus
(ii) Noncash Contributions to the Project made by
each party, adjusted as provided in clauses (b) and
(c) below. Such percentage being calculated as
follows: for purposes of this Section only, after the
cessation of funding by one Party, the funds provided
by the other Party thereafter to support the
Cooperative Development Work shall be considered
doubled when calculating the Final Project Total
Budget and the corresponding respective percentage
funded by each Party. All funds provided by either
Party prior to a Party's cessation shall be credited
but not doubled.
(b) In the event that Steritech unilaterally ceases all
participation, then at Baxter's election by written
notice, all marketing rights and licenses of
Steritech hereunder to the System(s) developed or
being developed under such Project, or under the
Development Work, as the case may be shall terminate,
and Baxter shall source the Steritech Compounds from
an alternative source with the cooperation of
Steritech, and the Revenue Sharing Formula in Section
7.1 will be adjusted under Sections 7.2 and 12.1(a);
(c) In the event that Baxter unilaterally ceases all
participation, then at Steritech's election by
written notice, all marketing rights and licenses of
Baxter to the System(s) developed or being developed
under such Project, or under the Cooperative
Development Work, as the case may be, shall terminate
and Steritech shall have exclusive rights to market,
sell and distribute such System throughout the world.
Baxter shall provide the
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necessary Baxter disposables, apheresis kits, Blood
Pack Units(R) or other components necessary for
Steritech, or Steritech's Approved Distributor to
sell Systems under Section 6.7. Revenue Sharing under
Section 7.1 shall be adjusted under Sections 7.3, 7.4
and 12.1(a).
12.2 CESSATION PAYMENT. In the event that either party gives notice of
unilateral cessation of participation on a specific approved Project or all
Cooperative Development Work under this Agreement, such party shall, not later
than twenty (20) days after the date of such notice, pay to the other party an
amount equal to [*] following the date of such cessation. Such cessation payment
need not be applied by the receiving party to continuation of work on such
Project or Cooperative Development Work. Neither party shall be entitled to give
notice of unilateral cessation of participation on the Red Cell Project or the
Fresh Frozen Plasma Project prior to January 1, 1998 or on any other Project
prior to two years after the approval of the Management Board to commence the
Project, provided, however, that either party shall have the right to give
notice of unilateral cessation of a Project prior to that date if such party
concludes, reasonably and in good faith, based on an unambiguous, unsuccessful
outcome in a critical test in the Project test protocol that there is no
reasonable likelihood that the Project will attain Regulatory Approval.
13. REPORTS.
13.1 QUARTERLY SALES REPORTS. Each quarterly payment made under Section
7 shall be accompanied by a full and accurate accounting of all Net Sales of
Systems by Baxter and Steritech, as the case may be, for the calendar quarter.
Each such report shall include at least the following information for each type
of System separately as to each of the following regions: U.S., Europe, Japan,
rest of world:
(a) The number of stand-alone Inactivation Packages and
Integrated Inactivation Sets sold to third parties by Baxter or Steritech, as
the case may be;
(b) The Net Sales, with a breakdown between Net Sales of
stand-alone Inactivation Packages and Integrated Inactivations Sets;
(c) Cost of Goods/Base Revenue with a breakdown between
stand-alone Inactivation Packages and Integrated Inactivation Sets;
(d) Computation of the Revenue Sharing Payment due to the
other party.
(e) Customer published price lists for Systems; and
(f) Any deductions from Revenue Sharing Payments.
*[Confidential Treatment Requested]
33.
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Each report shall include the certification of the party making the report
attesting to the fact that the report is an accurate and complete accounting of
all information required hereunder.
To the extent Baxter is unable to provide any such information when due, Baxter
will provide to Steritech at such time Baxter's best estimates of such
information, and will provide actual information as soon as it is available,
provided, however, that Baxter will, in any event, provide reports when due of
actual Net Sales and Cost of Goods/Base Revenue.
13.2 COST OF GOODS/BASE REVENUE. To the extent not provided under
Section 13.1 above, each party will furnish quarterly reports to the other party
on such party's Cost of Goods/Base Revenue for components supplied by such
party.
14. BOOKS AND RECORDS.
14.1 RECORDS. Baxter and Steritech shall keep full and accurate books
of account containing all particulars that may be necessary for the purpose of
calculating all amounts owing to either party. Books of account maintained by
the parties shall be kept at their principal place of business. All such reports
and data shall be open for inspection on a confidential basis at all reasonable
times and either party may conduct at its own expense, once every year during
normal business hours through an independent certified public accountant, an
examination of the accounts contemplated above. If any audit shall show that the
selling party underpaid amounts due under this Agreement herein as to the period
subject of the audit, then the party which underpaid shall immediately pay to
the other any such deficiency with interest thereon in accordance with Section
14.3. If the underpayment shall exceed ten percent (10%) of the amount owed for
any calendar year, the party underpaying shall also reimburse the other for
costs related to such audit.
14.2 RETENTION. Books and records required to be maintained by the
parties hereunder shall be retained for at least two (2) years from the date of
the payment to which they pertain.
14.3 INTEREST. All payments due hereunder that are not paid when due
and payable hereunder shall bear interest at an annual rate equal to 4% (four
percent) above the U.S. dollar reference rate ("prime rate") charged from time
to time by Bank of America N.T. & S.A. from the date due until paid or at such
lower rate as shall be the maximum rate permitted by law.
15. TERM.
This Agreement shall continue so long as any System is being developed
or marketed under this Agreement, unless terminated earlier pursuant to Section
16.1, and provided that Cooperative Development Work may be earlier terminated
pursuant to Section 12.1. Further, upon expiration of the agreement, except as
otherwise provided herein, no Party shall be obligated to provide materials,
disposables, Blood Pack Units(R), apheresis kits, delivery systems, Instruments
and chemicals to the other Party. Upon termination of any Project by the
Management Board or by mutual consent, all licenses hereunder shall terminate
with respect to the subject matter of such Project (which shall not affect
licenses with respect to any other
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Project). In the event that either party hereunder does not commence
participation, or ceases participation, in the Cooperative Development work for
the Red Blood Cell Project, other than pursuant to the proviso in the last
sentence of Section 12.2, all licenses of such party under this Agreement shall
terminate except such licenses as may be necessary or useful in connection with
other then ongoing approved Projects. Any license under Section 8.6 hereof,
however, shall survive any termination of this Agreement.
16. BREACH.
16.1 MATERIAL BREACH. Either party may terminate this Agreement for any
material breach by the other party sixty (60) days after providing the other
party with written details of the breach if the breach remains uncured at the
end of the sixty (60) day notice period. Notwithstanding the preceding sentence,
each party acknowledges that the ability of the other party to carry on the
Cooperative Development work will be substantially adversely affected in the
event that such party does not make payment when due to the other party.
Accordingly, in the event of the failure to make any payments that are due and
owing, or fund any equity purchase, a thirty (30) day notice period shall apply
in lieu of such sixty (60) day notice period in the preceding sentence.
16.2 RIGHTS ON TERMINATION. In the event of termination by either party
as provided in Section 16.1, without limiting any other rights or remedies, such
party shall have the rights provided for under Section 12 of the Agreement as if
the other party had unilaterally ceased participation in the Cooperative
Development Work.
17. REPRESENTATIONS AND INDEMNITIES.
17.1 STERITECH REPRESENTATIONS. Steritech represents and warrants that
as of the Effective Date:
(a) It has granted no prior license or assignment of rights
under the Steritech Patents in the Field.
(b) There are no foreign or United States administrative,
judicial or Patent and Trademark Office proceedings contesting the inventorship
or ownership of any Steritech Patent;
(c) Neither the execution and delivery of this Agreement, nor
the performance of the obligations of Steritech hereunder shall result in a
violation, breach or event of default (or any event or condition which with
notice or the passage of time or both would constitute an event of default) of
or with respect to any agreement, mortgage, indenture or order of any court of
competent jurisdiction binding upon Steritech or upon the property of Steritech;
(d) It is party to no contract materially adverse to the
obligations undertaken and rights granted in this Agreement;
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(e) The execution of this Agreement and delivery to Baxter
does not conflict with the terms of any agreement to which Steritech is bound.
(f) The Technology Transfer Agreement and the License
Agreement between Steritech and HRI Research, Inc. each dated December 13, 1991
are in full force and effect and are binding and enforceable in accordance with
their terms.
(g) That Steritech has advised Baxter of any knowledge of any
third party patent or Know-How that might be infringed by the incorporation of
any Steritech Patent or Steritech Know-How likely to be embodied or used in a
System; and
(h) Steritech is unaware of any technology not licensed to
Baxter hereunder, that it believes would be necessary to optimally use the
Steritech Compound.
17.2 STERITECH INDEMNIFICATION -- REPRESENTATIONS AND WARRANTIES.
Steritech shall indemnify Baxter for any losses sustained or expenses incurred
by Baxter as a result of a breach by Steritech of any of the foregoing
representations and warranties.
17.3 STERITECH INDEMNIFICATION -- PRODUCTS. Steritech shall defend,
indemnify and hold Baxter harmless from and against any and all claims, damages,
liability, suits, actions and expenses, including reasonable attorney's fees, by
reason of liability imposed by law upon Baxter resulting from the sale of
Systems to the extent any such liability, expressly including, but not limited
to products liability, arises from the failure to conform to Specifications for
Steritech Compounds incorporated into Systems; provided that Baxter shall give
Steritech prompt written notice of such claim and Steritech shall have the right
to defend such claim (Baxter having the right to participate in any such defense
at Baxter's own expense).
17.4 INSURANCE. Steritech shall, at its own expense, establish and at
all times during the period from Market Launch until three (3) years after the
last delivery of a System under this Agreement products liability insurance in
an amount not less than $5,000,000 each occurrence combined single limit bodily
injury and property damage, provided that such insurance is available on
commercially reasonable terms. The insurance policy shall be endorsed to name
Baxter as an additional insured and to provide for written notification to
Baxter by the insurer not less than thirty (30) days prior to cancellation,
non-renewal or material change. A certificate of insurance evidencing compliance
with this section and referencing this Agreement shall be furnished to Baxter by
Steritech within ten (10) days of Market Launch.
17.5 BAXTER REPRESENTATIONS. Baxter represents and warrants to
Steritech that as of the Effective Date:
(a) It has granted no prior license or assignment of rights
under the Baxter Patents that would materially impair its ability to develop,
manufacture or sell Systems.
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(b) There are no foreign or United States administrative,
judicial or Patent and Trademark Office proceedings contesting the inventorship
or ownership of any Baxter Patent that is likely to be embodied or used in a
System.
(c) neither the execution and deliver of this Agreement, nor
the performance of the obligations of Baxter hereunder shall result in a
violation, breach or event of default (or any event or condition which with
notice or the passage of time or both would constitute an event of default) of
or with respect to any agreement, mortgage, indenture, or order of any court of
competent jurisdiction binding upon Baxter or upon the property of Baxter.
(d) it is party to no contract materially adverse to the
obligations undertaken in this Agreement.
(e) The execution of this Agreement and delivery to Steritech
does not conflict with the terms of any agreement to which Baxter is bound.
(f) Baxter has no current agreements with other parties for
systems for the inactivation of pathogens in FFP or Red Cells.
(g) Baxter has advised Steritech of any knowledge of any third
party patent or know-how that might be infringed by the incorporation by Baxter
of any Baxter Patent or Baxter Know-How likely to be embodied or used in a
System.
(h) Baxter is unaware of any technology not licensed to Baxter
it believes would be necessary to optimally use the Baxter Patents or Baxter
Know-How in a System.
17.6 BAXTER INDEMNIFICATION -- REPRESENTATIONS AND WARRANTIES. Baxter
shall indemnify Steritech for losses sustained or expenses incurred by Steritech
as a result of a breach by Baxter of the foregoing representations and
warranties.
17.7 BAXTER INDEMNIFICATION-PRODUCTS. Baxter shall indemnify and hold
Steritech harmless from and against any and all claims, damages, liability,
suits actions and expenses, including reasonable attorney's fees, by reason of
liability imposed by law upon Steritech resulting from the sale of Systems to
the extent any such liability, including but not limited to product liability,
arises from the failure of components of Systems by Baxter, excluding
Instruments if manufactured by a third party (provided that Baxter shall
contractually require any third-party manufacturer to indemnify Steritech to the
full extent that Baxter is indemnified by such manufacturer), to conform to
specifications; provided that Steritech shall give Baxter prompt written notice
of such claim and Baxter shall have the right to defend such claim (Steritech
having the right to participate in such defense at its own expense).
17.8 BAXTER INSURANCE. In the event that the net worth of Baxter shall
at any time be reduced to less than $2 billion U.S., Baxter shall, at its own
expense, establish and at all times that such net worth is not maintained until
three (3) years after the last delivery of a System under this Agreement
maintain products liability insurance in an amount not less than $5,000,000
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each occurrence combined single limit bodily injury and property damage,
provided that such insurance is available on commercially reasonable terms. The
insurance policy shall be endorsed to name Steritech as an additional insured
and to provide for written notification to Steritech by the insurer not less
than thirty (30) days prior to cancellation, non-renewal or material change. A
certificate of insurance evidencing compliance with this section and referencing
this Agreement shall be furnished to Steritech by Baxter within ten (10) days of
the date that Baxter becomes obligated to establish such insurance.
18. INFRINGEMENT.
18.1 DEFENSE OF THIRD PARTY INFRINGEMENT SUITS. In the event that a
third party shall sue either party alleging that the manufacture, use or sale of
a System, or any part thereof, infringes a patent of such third party, then the
Management Board shall have the option to control the defense of such suit. The
parties shall provide reasonable cooperation in the defense of such suit and
furnish all evidence in their control. All attorneys' fees as well as any
judgments, settlements, or damages payable with respect to such suit shall be
subject to cost sharing pursuant to Section 3.5 and shall be added to the Final
Project Total Budget. Neither party shall enter into any settlement that
materially affects the other party's rights or interests without such other
party's prior written consent, which consent shall not be unreasonably withheld.
18.2 THIRD PARTY PATENT EXPENSES. If the Management Board shall approve
the payment to a third-party of Patent Royalty Payments with respect to the sale
or use of a System or any portion thereof, then Baxter and Steritech shall bear
the Patent Royalty Payment under such license proportionately to the Revenue
Sharing Formula, and Baxter may deduct Steritech's share of such Patent Royalty
Payment from Revenue Sharing Payments due to Steritech.
18.3 SUITS FOR INFRINGEMENT BY OTHERS. In the event Baxter or Steritech
becomes aware of any actual or threatened infringement of the Steritech Licensed
Patents or the Steritech Licensed Know-How, or the Baxter Licensed Patents or
Baxter Licensed Know-How, that party shall promptly notify the Management Board
and the Management Board shall determine the most appropriate action to take.
All expenses for pursuing such suit shall be subject to cost sharing. Any award
in such suit shall be divided between the parties in proportion to the parties'
relative combined cash contributions and Noncash Contributions to the product or
process that is subject to the infringement.
In the event the accused product is not in competition with a System in the
Field,
(a) Steritech alone may, in its sole discretion and at its
expense, initiate and conduct an infringement action relating to alleged
infringement of Steritech Patents or Steritech Know-How and keep any settlement
or award which may be obtained.
(b) Baxter alone may, in its sole discretion and at its
expense, initiate and conduct an infringement action relating to alleged
infringement of Baxter Patents or Baxter Know-How and keep any settlement or
award which may be obtained.
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19. GENERAL.
19.1 ENTIRE AGREEMENT. (1) This Agreement and Schedules, (2) the
attached Schedule E Confidentiality Agreement of even date, (3) each stock
purchase agreement pursuant to Section 4.1 hereof, and (4) the Plasma
Derivatives Letter contain the entire agreement between the parties relating to
the subject matter hereof and all prior understandings, representations and
warranties between the parties are superseded; provided, however, that this
Agreement does not limit any agreement restricting disclosure or use of
confidential or proprietary information previously entered into between the
parties. None of the terms of this Agreement shall be deemed to be waived or
amended by either party unless such a waiver or amendment specifically
references this Agreement and is in writing signed by the party to be bound.
Nothing in this Agreement is intended to amend or modify the Platelet Agreement,
except that this Agreement supersedes Sections 8.7 and 8.8 of such agreement,
which provisions shall cease to be effective upon the execution and delivery of
this Agreement.
19.2 RELATIONSHIP OF PARTIES. Baxter acknowledges that it is not an
agent of Steritech and has no authority to speak for, represent, or obligate
Steritech in any way. Steritech acknowledges that it is not an agent of Baxter
and has no authority to speak for, represent, or obligate Baxter in any way.
This Agreement does not and shall not be deemed to create any relationship of a
joint venture or a partnership.
19.3 SENIOR BAXTER CONTACT. The senior Baxter contact of the purpose of
administering this Agreement is President, Fenwal, One Baxter Parkway,
Deerfield, Illinois 60015. At present, Kim Bush occupies this position.
19.4 SENIOR STERITECH CONTACT. The senior Steritech contact for the
purpose of administering this Agreement is the President of Steritech at the
address first above written. At present, Mr. Stephen T. Isaacs occupies this
position.
19.5 SEVERABILITY. The parties do not intend to violate any public
policy or statutory or common law. However, if any sentence, paragraph, clause
or combination of this Agreement is in violation of any law or is found to be
otherwise unenforceable by a court from which there is no appeal, or no appeal
is taken, such sentence, paragraph, clause, or combination of the same shall be
deleted and the remainder of this Agreement shall remain binding, provided that
such deletion does not alter the basic structure of this Agreement. In such
event, the parties shall renegotiate this Agreement in good faith, but should
such negotiations not result in a new agreement with ninety (90) days of the
initiation of such negotiations, then this Agreement may be terminated by either
party by thirty (30) days notice to the other.
19.6 FORCE MAJEURE. Any party shall be excused from the performance of
its obligations under this Agreement and shall not be liable for damages to the
other if such performance is prevented by circumstances beyond its effective
control. Such excuse from performance shall continue so long as the condition
responsible for such excuse continues and for a thirty (30) day period
thereafter. For the purposes of this Agreement, circumstances beyond the control
of a party which excuse that party from performance shall include, but shall
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not be limited to, acts of God, acts, regulations or laws of any government
including currency controls, war, civil commotion, commandeer, destruction of
facility or materials by fire, earthquake, storm or other casualty, labor
disturbances, judgment or injunction of any court, epidemic, and failure of
public utilities or common carrier.
19.7 NOTICES. All notices and demands required or permitted to be given
or made pursuant to this Agreement shall be in writing and shall be effective
when personally given or made or when placed in an envelope and deposited in the
United States mail postage prepaid, addressed as follows:
IF TO BAXTER: IF TO STERITECH, IN CARE OF:
General Counsel President and Chief Executive Officer
Baxter Healthcare Corporation Steritech, Inc.
One Baxter Parkway 2525 Stanwell Drive
Deerfield, Illinois 60015 Concord, California 94520
WITH A COPY TO: WITH A COPY TO:
Kim Bush
President, Fenwal Howard G. Ervin
Baxter Healthcare Corporation Cooley, Godward, Castro, Huddleson & Tatum
One Baxter Parkway One Maritime Plaza, 20th Floor
Deerfield, Illinois 60015 San Francisco, California 94111
or to such other address as to which either party may notify the other.
19.8 BINDING. This Agreement shall be binding upon and inure to the
benefit of the parties, their successors and assigns. This Agreement shall be
assignable: (i) by either party without the consent of the other to any
Affiliate of the party (an Affiliate being defined as any entity in which the
party or its parent owns or controls directly or indirectly, forty percent (40%)
or more of the voting securities); (ii) by either party with the written consent
of the other; (iii) by either party without the consent of the other in
connection with the purchase or other acquisition of substantially all the
assets of its business to which this Agreement relates; or (iv) by either party
in connection with a reincorporation under the laws of another state. Any
attempted assignment which does not comply with the terms of this Section shall
be void.
19.9 GOVERNING LAW. This Agreement is deemed to have been executed in
and shall be governed by and construed according to the laws of the State of
Illinois.
19.10 VENUE. In the event that Baxter files suit against Steritech, it
shall do so in, and hereby agrees to submit to, the jurisdiction of a court in
U.S. District Court, N.D. California. In the event that Steritech files suit
against Baxter, it shall do so in, and hereby agrees to submit to, the
jurisdiction of the U.S. District Court N.D, Illinois.
40.
<PAGE> 47
19.11 DISBURSEMENTS. Unless otherwise agreed between the parties, all
disbursements from one party to another under this Agreement shall be paid on or
before the due date by wire transfer to the bank account specified in writing by
the party receiving the disbursement.
IN WITNESS WHEREOF, this Agreement is signed by duly authorized
representatives of each party as of the Effective Date.
BAXTER HEALTHCARE CORPORATION STERITECH, INC.
By: /s/ Victor Schmitt By: /s/ Stephen T. Isaacs
__________________________________ _______________________________
Victor Schmitt Stephen T. Isaacs
Title: President, Venture Management Title: President
Date: April 1, 1996 Date: March 15, 1996
________________________________ _____________________________
41.
<PAGE> 48
SCHEDULE A
RED CELL BUDGET AND TASKS
11 Pages
<PAGE> 49
RED CELL PROGRAM
Revised Budget
February 28, 1996
<TABLE>
<CAPTION>
PROJECT
1996 1997 1998 1999 2000 2001 TOTAL
--------------- -------------- -------------- -------------- -------------- -------------- -------------
FTE $ FTE $ FTE $ FTE $ FTE $ FTE $
--------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STERITECH R&D
Personnel......... [*] $ [*] [*] $ [*] [*] $ [*] [*] $ [*] [*] $ [*] [*] $[*] $ [*]
Out of Pocket..... $ [*] $ [*] $ [*] $ [*] $ [*] $[*] $ [*]
Instrument........ $ [*] $ [*] $ [*] $ [*] $ [*] $[*] $ [*]
BAXTER R&D
Personnel......... [*] $ [*] [*] $ [*] [*] $ [*] [*] $ [*] [*] $ [*] [*] $[*] $ [*]
Out of Pocket..... $ [*] $ [*] $ [*] $ [*] $ [*] $[*] $ [*]
Instrument........ $ [*] $ [*] $ [*] $ [*] $ [*] $[*] $ [*]
OUTSIDE
[*] $ [*] $ [*] $ [*] $ [*] $ [*] $[*] $ [*]
[*] $ [*] $ [*] $ [*] $ [*] $ [*] $[*] $ [*]
[*] $ [*] $ [*] $ [*] $ [*] $ [*] $[*] $ [*]
[*] $ [*] $ [*] $ [*] $ [*] $ [*] $[*] $ [*]
[*] $ [*] $ [*] $ [*] $ [*] $ [*] $[*] $ [*]
------ ------ ------ ------ ------ ----- ------
TOTAL............. $ [*] $ [*] $ [*] $ [*] $ [*] $[*] $ [*]
====== ====== ====== ====== ====== ==== =======
</TABLE>
*[Confidential Treatment Requested]
<PAGE> 50
RED CELL BUDGET, 1996 PROJECTION: STERITECH R&D
<TABLE>
<CAPTION>
CATEGORY EXPLANATION FTE/$
- -------- ----------- --------
<S> <C> <C>
Out of Pocket $ [*]
[*] [*] [*]
Instrument [*] $ [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
Project Leader [*] [*]
========
[*]
Total $ [*]
--------
</TABLE>
5 Year Budget (Revised 28 Feb 96)
*[Confidential Treatment Requested]
Page 2
<PAGE> 51
RED CELL BUDGET, 1996 PROJECTION: BAXTER R&D
<TABLE>
<CAPTION>
CATEGORY EXPLANATION FTE/$
- -------- ----------- -------
<S> <C> <C>
Out of Pocket $ [*]
Instrument [*] [*]
[*] [*] [*]
[*] [*] [*]
Project Coordinator [*]
=======
[*]
TOTAL $ [*]
-------
</TABLE>
RED CELL BUDGET, 1996 PROJECTION: OUTSIDE EXPENSES
<TABLE>
<CAPTION>
CATEGORY EXPLANATION $
- -------- ----------- ---------
<S> <C> <C>
[*] [*] $ [*]
[*] [*] $ [*]
[*] [*] $ [*]
=========
Total $ [*]
---------
</TABLE>
5 Year Budget (Revised 28 Feb 96)
*[Confidential Treatment Requested]
Page 3
<PAGE> 52
RED CELL BUDGET, 1997 PROJECTION: STERITECH R&D
<TABLE>
<CAPTION>
CATEGORY EXPLANATION FTE/$
- -------- ----------- --------
<S> <C> <C>
Out of Pocket $ [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
Project Leader [*]
========
[*]
TOTAL $ [*]
--------
</TABLE>
5 Year Budget (Revised 28 Feb 96)
*[Confidential Treatment Requested]
Page 4
<PAGE> 53
RED CELL BUDGET, 1997 PROJECTION: BAXTER R&D
<TABLE>
<CAPTION>
CATEGORY EXPLANATION FTE/$
- --------------------- ----------------------------------------- ----------
<S> <C> <C>
Out of Pocket $ [*]
Instrument [*] $ [*]
[*] [*] [*]
[*] [*] [*]
Instrument [*] [*]
[*] [*] [*]
Other Technical [*]
Project Leader [*]
==========
[*]
TOTAL $ [*]
----------
</TABLE>
RED CELL BUDGET, 1997 PROJECTION: OUTSIDE EXPENSES
<TABLE>
<CAPTION>
CATEGORY EXPLANATION $
- --------------------- ----------------------------------------- ----------
<S> <C> <C>
[*] [*] $ [*]
[*] [*] [*]
[*] [*] [*]
==========
Total $ [*]
----------
</TABLE>
5 Year Budget (Revised 28 Feb 96)
*[Confidential Treatment Requested]
Page 5
<PAGE> 54
RED CELL BUDGET, 1998 PROJECTION: STERITECH R&D
<TABLE>
<CAPTION>
Category Explanation FTE/$
- -------- ----------- --------
<S> <C> <C>
Out of Pocket $ [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
Project Leader [*]
========
[*]
TOTAL $ [*]
--------
</TABLE>
5 Year Budget (Revised 28 Feb 96)
*[Confidential Treatment Requested]
Page 6
<PAGE> 55
RED CELL BUDGET, 1998 PROJECTION: BAXTER R&D
<TABLE>
<CAPTION>
CATEGORY EXPLANATION FTE/$
- -------- ----------- ----------
<S> <C> <C>
Out of Pocket $ [*]
Instrument [*] $ [*]
[*] [*] [*]
Instrument [*] [*]
[*] [*] [*]
Other Technical [*]
Project Leader [*]
==========
[*]
TOTAL $ [*]
----------
</TABLE>
RED CELL BUDGET, 1998 PROJECTION: OUTSIDE EXPENSES
<TABLE>
<CAPTION>
CATEGORY EXPLANATION FTE/$
- -------- ----------- ----------
<S> <C> <C>
[*] [*] $ [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
==========
Total $ [*]
----------
</TABLE>
5 Year Budget (Revised 28 Feb 96)
*[Confidential Treatment Requested]
Page 7
<PAGE> 56
RED CELL BUDGET, 1999 PROJECTION: STERITECH R&D
<TABLE>
<CAPTION>
CATEGORY EXPLANATION FTE/$
- -------- ----------- --------
<S> <C> <C>
Out of Pocket $ [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
Project Leader [*]
========
[*]
Total $ [*]
--------
</TABLE>
5 Year Budget (Revised 28 Feb 96)
*[Confidential Treatment Requested]
Page 8
<PAGE> 57
RED CELL BUDGET, 1999 PROJECTION: BAXTER R&D
<TABLE>
<CAPTION>
CATEGORY EXPLANATION FTE/$
- -------- ----------- --------
<S> <C> <C>
Out of Pocket $ [*]
Instrument [*] [*]
[*] [*] [*]
[*] [*] [*]
Project Leader [*]
========
[*]
TOTAL $ [*]
--------
</TABLE>
RED CELL BUDGET, 1999 PROJECTION: OUTSIDE EXPENSES
<TABLE>
<CAPTION>
CATEGORY EXPLANATION $
- -------- ----------- ----------
<S> <C> <C>
[*] [*] $ [*]
[*] [*] $ [*]
[*] [*] $ [*]
[*] [*] $ [*]
==========
Total $ [*]
----------
</TABLE>
5 Year Budget (Revised 28 Feb 96)
*[Confidential Treatment Requested]
Page 9
<PAGE> 58
RED CELL BUDGET, 2000 PROJECTION: STERITECH R&D
<TABLE>
<CAPTION>
CATEGORY EXPLANATION FTE/$
- -------- ----------- -----
<S> <C> <C>
Out of Pocket $ [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
Project Leader [*]
========
[*]
TOTAL $ [*]
--------
</TABLE>
RED CELL BUDGET, 2000 PROJECTION: BAXTER R&D
<TABLE>
<CAPTION>
CATEGORY EXPLANATION FTE/$
- -------- ----------- -----
<S> <C> <C>
Out of Pocket $ [*]
[*] [*] [*]
[*] [*] [*]
=======
[*]
TOTAL $ [*]
--------
</TABLE>
5 Year Budget (Revised 28 Feb 96)
*[Confidential Treatment Requested]
Page 10
<PAGE> 59
RED CELL BUDGET, 2000 PROJECTION: OUTSIDE EXPENSES
<TABLE>
<CAPTION>
CATEGORY EXPLANATION $
- -------- ----------- -----
<S> <C> <C>
[*] [*] $ [*]
[*] [*] $ [*]
==========
Total $ [*]
----------
</TABLE>
RED CELL BUDGET, 2001 PROJECTION: BAXTER R&D
<TABLE>
<CAPTION>
CATEGORY EXPLANATION FTE/$
- -------- ----------- -----
<S> <C> <C>
Out of Pocket $ [*]
Instrument [*] $ [*]
Technical support [*] [*]
========
[*]
TOTAL $ [*]
--------
</TABLE>
5 Year Budget (Revised 28 Feb 96)
*[Confidential Treatment Requested]
Page 11
<PAGE> 60
SCHEDULE B
FFP BUDGET AND TASKS
11 Pages
<PAGE> 61
FFP PROGRAM
Revised Budget
February 28, 1996
<TABLE>
<CAPTION>
1996 1997 1998 1999 2000 PROJECT TOTAL
--------------- -------------- -------------- -------------- -------------- -------------
FTE $ FTE $ FTE $ FTE $ FTE $
--------------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STERITECH R&D
Personnel......... [*] $ [*] [*] $ [*] [*] $ [*] [*] $ [*] [*] $[*] $ [*]
Out of Pocket..... $ [*] $ [*] $ [*] $ [*] $[*] $ [*]
$ [*]
BAXTER R&D
Personnel......... [*] $ [*] [*] $ [*] [*] $ [*] [*] $ [*] [*] $[*] $ [*]
Out of Pocket..... $ [*] $ [*] $ [*] $ [*] $[*] $ [*]
Instrument........ $ [*] $ [*] $ [*] $ [*] $[*] $ [*]
Outside
[*] $ [*] $ [*] $ [*] $ [*] $[*] $ [*]
[*] $ [*] $ [*] $ [*] $ [*] $[*] $ [*]
[*] $ [*] $ [*] $ [*] $ [*] $[*] $ [*]
[*] $ [*] $ [*] $ [*] $ [*] $[*] $ [*]
------ ------ ------ ------ ---- ------
TOTAL............. $ [*] $ [*] $ [*] $ [*] $[*] $ [*]
====== ====== ====== ====== ==== ======
</TABLE>
*[Confidential Treatment Requested]
<PAGE> 62
FFP BUDGET, 1996 PROJECTION: STERITECH R&D
<TABLE>
<CAPTION>
CATEGORY EXPLANATION FTE/$
- -------- ----------- -------
<S> <C> <C>
Out of Pocket [*] $ [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
=======
TOTAL $ [*]
-------
</TABLE>
*[Confidential Treatment Requested]
Page 1
<PAGE> 63
FFP BUDGET, 1996 PROJECTION: BAXTER R&D
<TABLE>
<CAPTION>
CATEGORY EXPLANATION FTE/$
- --------------------- ----------------------------------------- --------
<S> <C> <C>
Out of Pocket [*] $ [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
Project Leader [*] [*]
==========
TOTAL $ [*]
--------
</TABLE>
FFP BUDGET, 1996 PROJECTION: OUTSIDE EXPENSES
<TABLE>
<CAPTION>
CATEGORY EXPLANATION $
- --------------------- ----------------------------------------- --------
<S> <C> <C>
[*] [*] $ [*]
[*] [*] [*]
========
TOTAL $ [*]
--------
</TABLE>
*[Confidential Treatment Requested]
Page 2
<PAGE> 64
FFP BUDGET, 1997 PROJECTION: STERITECH R&D
<TABLE>
<CAPTION>
CATEGORY EXPLANATION FTE/$
- --------------------- ------------------------------------------- --------
<S> <C> <C>
Out of Pocket [*] $ [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
Project Leader [*] [*]
========
$ [*]
--------
</TABLE>
*[Confidential Treatment Requested]
Page 3
<PAGE> 65
FFP BUDGET, 1997 PROJECTION: BAXTER R&D
<TABLE>
<CAPTION>
CATEGORY EXPLANATION FTE/$
- -------- ----------- -----
<S> <C> <C>
Out of Pocket [*]
[*] [*] $ [*]
[*] [*] $ [*]
[*] [*] $ [*]
Project Leader [*] $ [*]
$ [*]
========
TOTAL [*]
$ [*]
--------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY EXPLANATION $
- -------- ----------- ----------
<S> <C> <C>
[*] [*] $ [*]
[*] [*] $ [*]
[*] [*] $ [*]
==========
TOTAL $ [*]
----------
</TABLE>
*[Confidential Treatment Requested]
Page 4
<PAGE> 66
FFP BUDGET, 1998 PROJECTION: STERITECH R&D
<TABLE>
<CAPTION>
CATEGORY EXPLANATION FTE/$
- -------- ----------- -----
<S> <C> <C>
Out of Pocket [*] $ [*]
[*] [*] $ [*]
[*] [*] $ [*]
[*] [*] $ [*]
[*] [*] $ [*]
[*] [*] $ [*]
Project Leader [*] $ [*]
=======
TOTAL [*]
$ [*]
-------
</TABLE>
*[Confidential Treatment Requested]
Page 5
<PAGE> 67
FFP, 1998 PROJECTION: BAXTER R&D
<TABLE>
<CAPTION>
Category Explanation FTE/$
- -------- ----------- -----
<S> <C> <C>
Out of Pocket [*] $ [*]
[*] [*] $ [*]
[*] [*] $ [*]
$ [*]
Project Leader [*] $ [*]
========
TOTAL [*]
$ [*]
--------
</TABLE>
FFP BUDGET, 1998 PROJECTION: OUTSIDE EXPENSES
<TABLE>
<CAPTION>
Category Explanation $
- -------- ----------- -----
<S> <C> <C>
[*] [*] $ [*]
[*] [*] $ [*]
========
Total $ [*]
--------
</TABLE>
*[Confidential Treatment Requested]
<PAGE> 68
FFP BUDGET, 1999 PROJECTION: STERITECH R&D
<TABLE>
<CAPTION>
CATEGORY EXPLANATION FTE/$
- -------- ----------- -------
<S> <C> <C>
Out of Pocket [*] [*]
[*] [*] [*]
[*] [*] [*]
Project Leader [*] [*]
=======
TOTAL [*]
$ [*]
-------
</TABLE>
*[Confidential Treatment Requested]
Page 7
<PAGE> 69
FFP, 1999 PROJECTION: BAXTER R&D
<TABLE>
<CAPTION>
CATEGORY EXPLANATION FTE / $
- -------- ----------- -------
<S> <C> <C>
Out of Pocket [*] $ [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
Project Leader [*] [*]
=======
TOTAL [*]
$ [*}
-------
</TABLE>
FFP BUDGET, 1999 PROJECTION: OUTSIDE EXPENSES
<TABLE>
<CAPTION>
CATEGORY EXPLANATION $
- -------- ----------- --------
<S> <C> <C>
[*] [*] [*]
========
Total $ [*]
--------
</TABLE>
*[Confidential Treatment Requested]
Page 8
<PAGE> 70
FFP BUDGET, 2000 PROJECTION: STERITECH R&D
<TABLE>
<CAPTION>
CATEGORY EXPLANATION FTE/$
- -------- ----------- -----
<S> <C> <C>
Out of Pocket [*] $ [*]
[*] [*] [*]
Project Leader [*] [*]
=======
TOTAL [*]
$ [*]
-------
</TABLE>
*[Confidential Treatment Requested]
Page 9
<PAGE> 71
FFP, 2000 PROJECTION: BAXTER R&D
<TABLE>
<CAPTION>
CATEGORY EXPLANATION FTE/$
- -------- ----------- -----
<S> <C> <C>
[*] [*] [*]
[*] [*] [*]
Project Leader [*] [*]
=======
TOTAL [*]
[*]
--------
</TABLE>
FFP BUDGET, 2000 PROJECTION: OUTSIDE EXPENSES
<TABLE>
<CAPTION>
CATEGORY EXPLANATION [*]
- -------- ----------- -----
<S> <C> <C>
[*] [*] [*]
======
Total [*]
------
</TABLE>
*[Confidential Treatment Requested]
Page 10
<PAGE> 72
SCHEDULE C
[*] INTERIM DETERMINATION CRITERIA
The results of the [*] will be evaluated on an interim basis. [*] will be
evaluated. In accord with the [*], each will have received a [*] of the
specified [*] (should such [*] be specified in the [*].) [*] following [*] will
be compared. The definition of a successful outcome is defined as a [*] to the
mean reference product corrected count increments. [*] values shall be at least
[*].
*[Confidential Treatment Requested]
<PAGE> 73
SCHEDULE D
PLASMA DERIVATIVES LETTER
<PAGE> 74
[BAXTER HEALTHCARE CORPORATION LETTERHEAD]
Schedule D
January 18, 1996
Mr. Stephen T. Isaacs
President and CEO
Steritech, Inc.
2525 Stanwell Drive
Suite 300
Concord, CA 94520
Re: [*]
Dear Steve:
Thank you for your letter of December 26, 1995 discussing the rescission of your
Notice dated November 10, 1995. As we discussed on several occasions, Baxter is
[*]. It has always been the position of Baxter that the Steritech
decontamination technology would be [*]. With this in mind, this letter confirms
the agreement of Baxter and Steritech that:
(i) Steritech is entitled to negotiate and enter into agreements
with third parties for the development and/or licensing to such third parties
of [*], free of any rights of Baxter and without obligation to Baxter, except
as set forth in clause (ii) below.
(ii) In those cases where Steritech licenses [*] other than Baxter,
Steritech shall, at Baxter's written request, license such Steritech technology
to Baxter for such product on terms no less favorable than the terms received by
such other manufacturer.
Steritech will notify Baxter of the names of the third-party manufacturers with
whom Steritech is negotiating for licenses to Steritech's [*].
This letter agreement supersedes [*] of the Development, Manufacturing and
Marketing Agreement between Steritech and Baxter, dated as of December 10, 1993,
insofar as such section concerns [*]. (For the purposes of this letter, the term
[*] includes the term [*] used in such section.)
*[Confidential Treatment Requested]
<PAGE> 75
Mr. Stephen T. Isaacs
January 18, 1996
Page 2
Upon the execution and delivery by Steritech of this letter where indicated
below, the Notice dated November 10, 1996 is rescinded.
Sincerely,
/s/ Kim C. Bush
- ------------------
Kim C. Bush
President, Fenwal Division
Biotech Group
AGREED AS SET FORTH ABOVE
Steritech, Inc.
By: /s/ Stephen T. Isaacs
------------------------
Stephen T. Isaacs
President
<PAGE> 76
SCHEDULE E
CONFIDENTIALITY AGREEMENT
THIS AGREEMENT, made on March 18, 1996 with respect to the Development,
Manufacturing and Marketing Agreement ("Agreement") between Baxter and
Steritech dated as of April 1, 1996 between STERITECH, INC. ("Steritech"),
having a principal place of business at 2525 Stanwell Drive, Concord,
California and BAXTER HEALTHCARE CORPORATION ("Baxter"), a corporation having a
principal place of business at One Baxter Parkway, Deerfield, Illinois 60015,
to assure the protection and preservation of Proprietary Information disclosed
or to be disclosed or made available to each other in connection with the
Agreement.
WHEREAS, the parties have entered into a development, manufacturing and
marketing collaboration pursuant to the Agreement;
WHEREAS, the parties desire to assure the confidential status of the
information which may be disclosed to each other in connection with the
Agreement;
NOW THEREFORE, in reliance upon and in consideration of the following
undertakings, the parties agree as follows:
1. All information disclosed to the other party shall be deemed to be
"Proprietary Information." In particular, Proprietary Information shall be
deemed to include any information, process, technique, algorithm, program,
design, drawing, formula or test data relating to any research project, work in
progress, future development, engineering, manufacturing, marketing, servicing,
financing or personnel matter relating to the disclosing party, its present or
future products, sales, suppliers, clients, customers, employees, investors, or
business. Any Proprietary Information outside the scope of the Agreement shall
be identified by the disclosing party in writing and marked "Confidential" or
if such Proprietary Information is disclosed orally, within 30 days after such
disclosure the Proprietary Information shall be reduced to writing and marked
"Confidential" by the disclosing party and such writing forwarded to the
receiving party.
2. The term "Proprietary Information" shall not be deemed to include
information which: (i) is now, or hereafter becomes, through no act or failure
to act on the part of the receiving party, generally known or available; (ii)
is known by the receiving party at the time of receiving such information as
evidenced by its records; (iii) is furnished to the receiving party by a third
party whom the receiving party believes has a right to disclose such
information; (iv) is independently developed by the receiving party without any
breach of this Confidentiality Agreement; and (v) is the subject of a written
permission to disclose provided by the disclosing party.
3. Each party shall maintain in trust and confidence and not disclose
to any third party or use for any unauthorized purpose any Proprietary
Information received from the other
1.
<PAGE> 77
party. However, each party may disclose Proprietary Information to its
affiliates who are bound by this Agreement (affiliates include: any company
owning 40% or more of a party, or a subsidiary of the party, or a subsidiary of
a party owning 40% or more of the party). Each party may use such Proprietary
Information only to the extent required under the Agreement.
4. The responsibilities of the parties with respect to the Proprietary
Information are limited to using the same degree of care used to protect their
own Proprietary Information from unauthorized use or disclosure. Both parties
shall advise their employees or agents who might have access to such Proprietary
Information of the confidential nature thereof.
5. This Confidentiality Agreement shall continue in full force and
effect for so long as the parties continue to exchange Proprietary Information
under the Agreement. The termination of the Agreement shall not relieve either
party of the obligations imposed by this Confidentiality Agreement with respect
to Proprietary Information disclosed prior to the effective date of such
termination, which obligations shall survive the termination of the Agreement
for a period of two (2) years from the date of disclosure.
6. Each party hereby acknowledges and agrees that in the event of any
breach of this Confidentiality Agreement by the other party, including, without
limitation, the actual or threatened disclosure of a disclosing party's
Proprietary Information without the prior express written consent of the
disclosing party, the disclosing party will suffer an irreparable injury, such
that no remedy at law will afford it adequate protection against, or
appropriate compensation for, such injury. Accordingly, each party hereby
agrees that the other party shall be entitled to any injunctive relief as may
be granted by a court of competent jurisdiction.
AGREED TO: AGREED TO:
STERITECH, INC. BAXTER HEALTHCARE CORPORATION
By: Stephen T. Isaacs By: Kim Bush
President President, Fenwal Division
2.
<PAGE> 78
SCHEDULE F
BAXTER PARTICIPATION IN 1996
RED CELL ESTIMATED FTES
1. Consult on [*] [*]
2. Consult on [*] [*]
3. Consult on [*] [*]
FRESH FROZEN PLASMA
1. Consultants to review and comment on [*] TBD
2. [*] Baxter - I.V. Systems and/or Baxter Fenwal Europe [*]
will consult
3. Disposable/Device - Final phase development of a
disposable for use in toxicology and clinical trials.
Ongoing production of bags for use in [*]
work/toxicology trials/clinical trials [*]
4. [*] -- Development and validation of [*] [*]
*[Confidential Treatment Requested]
<PAGE> 79
SCHEDULE G
STOCK PURCHASE AGREEMENT
Reference is hereby made to Exhibit 10.14,
which is hereby incorporated herein by reference.
<PAGE> 1
EXHIBIT 10.19
SUPPLY AGREEMENT FOR STERITECH COMPOUND [*]
Agreement effective as of July 18, 1994, by and between [*], [*]
("[*]"), and STERITECH, INC., a California corporation with offices at 2525
Stanwell Drive, Concord, California 94520 ("Steritech").
WITNESSETH:
WHEREAS, Steritech is the owner of certain intellectual property rights
respecting, and engages in certain research regarding the uses of, the compound
designated [*] (the "Compound"); and
WHEREAS, [*] is able to synthesize and supply the Compound,
manufactured in accordance with current U.S. Good Manufacturing Practices
("GMP") standards and meeting Food and Drug Administration ("FDA") quality
standards;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereby agree as follows:
1. Promptly upon mutual agreement regarding amount of Compound to
be manufactured as set forth in a requisition (sample shown in Exhibit A), [*]
shall commence, and thereafter, as expeditiously as possible, shall proceed with
the synthesis of Compound and shall deliver the completed Compound, meeting the
analytical specifications defined in Exhibit B, to Steritech within a maximum
time of ninety (90) days from date of requisition. [*] also agrees to deliver
to Steritech all batch records and analytical data confirming conformance to
specifications for each raw material, isolated intermediate and final products.
The first requisition shall be for a minimum of [*] of Compound and future
requisitioned amounts shall be within the limits of [*] present
manufacturing capacity.
2. In consideration of the supply by [*] of the Compound as
provided in this Agreement, Steritech agrees that it shall pay to [*] the amount
agreed upon in writing at the time of the request to manufacture. Such payments
shall be made by Steritech upon final delivery by [*] of the Compound conforming
to agreed upon specifications and all test and batch records relating to its
preparation. Steritech agrees to pay [*] for the first requisitioned material
and future costs shall be commensurate allowing for mutually agreed upon changes
in process parameters.
3. In connection with performance of this Agreement, [*] shall:
a. Purchase, test and release raw materials and intermediates
as defined in specifications agreed upon by both parties. Raw materials shall
conform to American Chemical Society (ACS), United States Pharmacopoeia/National
Formulary (USP/NF) or European Pharmacopoeia (EP) specifications. Any
exceptions to these specifications are shown in Exhibit C of this contract. All
isolated intermediates as well as the Compound shall be analyzed at each step by
[*] to adequately identify, characterize and assess purity of materials per
attributes, limits and test methods specified by Steritech. Such test methods
may include spectral and/or chromatographic characterization and
*[Confidential Treatment Requested]
<PAGE> 2
elemental analysis in conformance with stringent elemental analyses established
by the Journal of Medicinal Chemistry or equivalent when requested by
Steritech.
b. Prepare data sheets, spectral/chromatographic sheets, and
description of preparative methods for all materials. [*] shall utilize a
data sheet format that conforms to the requirements for a Batch Production
Record as described in Part 211 of Title 21 of the Code of Federal Regulations.
Further, Steritech reserves the right to review and approve all such records
prior to their use in the production of intermediates or bulk drug substances.
The preparative methods shall be sufficiently detailed for filing with the FDA
as bulk manufacturing processes. This includes details of sources, purities and
lot numbers of all raw materials and solvents used, their quantities, and
detailed methodology of isolation and/or purification procedures.
c. Retain samples of Compound for one year after manufacture. Samples
of this material will be made available to Steritech upon request.
d. Analyze Compound by test methods agreed upon by both parties that
conform to USP or EP methods. Upon Steritech's request and approval, samples
of Compound shall be made available to a third party for analytical testing.
e. Provide Steritech with a copy of each data sheet or Batch
Production Record and all pertinent analytical data for its review and approval
prior to delivery of each batch of Compound.
f. Provide evidence of the use of validated cleaning methods for
equipment as per present manufacturing standards.
4. [*] shall also provide Steritech with samples of specified
intermediates defined in the requisition (Exhibit A) for monitoring purposes
only. Results obtained by such studies will have no effect on the acceptance
and approval by Steritech of the final Compound.
5. [*] shall comply with all Government health and safety regulations:
a. FDA: [*] shall be registered with the FDA as a manufacturer of
bulk drug substances. [*] shall inform Steritech of any facilities inspection
or any other FDA action relative to the continued approval of its facilities by
FDA for the manufacture of bulk drug substances and shall supply a copy of any
FDA Form 483 or any other regulatory compliance letter or notice issued by the
FDA to [*] during the term of this contract. Facilities shall meet FDA
standards in accordance with the current Good Manufacturing Practices (cGMP).
If during the course of the contract FDA inspections cite deficiencies which, in
the opinion of Steritech, are judged to compromise the purity and/or quality of
materials to be delivered, Steritech will have the right, by written notice to
[*] and without incurring liability, to terminate the contract, without
limitation of any other rights or remedies. An FDA facilities Drug Master File
is available and on file with the FDA and is updated annually as required by FDA
regulations.
b. Occupational Safety and Health Administration (OSHA): [*] shall
comply with OSHA regulations.
*[Confidential Treatment Requested]
2.
<PAGE> 3
c. Environmental Protection Agency (EPA): [*] shall
comply with EPA regulations regarding the discharge of water and air pollutants
and for assuring that disposal of all chemicals residues meet current EPA
regulations.
d. Good laboratory safety controls and procedures shall be
followed by [*] in carrying out the activities for this project.
6. In connection with the performance of the Agreement, Steritech
shall:
a. Furnish reference samples needed for the required analyses.
b. Retain samples of the Compound for internal use and to
support a Compound Drug Master File and Steritech's Investigational New Drug
(IND) application.
c. Approve all specifications and production records prior to
manufacture of the Compound.
7. Upon approval by Steritech, materials prepared shall be shipped
as directed by Steritech. Containers shall be previously approved by
Steritech. Batch records and required test samples must be received and
approved prior to acceptance of the bulk shipment. Compound that does not meet
the agreed upon specifications shall not be accepted under this agreement.
8. Steritech reserves the right to inspect [*]' facilities,
equipment, and controls for the manufacture of Steritech's compounds at dates
and times that are mutually acceptable. Steritech also reserves the right to
delegate such inspections to qualified third party auditor of its choosing as
long as such auditors are bound by the same confidentiality agreement currently
in effect between the two parties.
9. [*] further consents to the review by Steritech of [*]' Master
File for the Compound and the facility's Drug Master File. If requested by
Steritech, [*] will provide such additional form of consent or authorization as
the FDA may require in connection with such review. Steritech may include this
Agreement and/or such additional form in Steritech's IND application.
10. This agreement shall apply to all requisitions of the Compound
within three (3) years of the signing of this agreement unless superseded by a
mutually agreed upon in subsequent agreement. This agreement does not obligate
Steritech to request or pay for a specified number of batches or quantity of
the Compound. Recognizing that a timely supply of Compound is critical to the
ability of Steritech to proceed in its business, [*] shall give ninety
(90) days notice in writing if it does not intend to accept one or several
future requests for Compound under the terms of this agreement.
11. The Nondisclosure Agreement dated April 13, 1993 between the
parties shall be deemed incorporated herein by reference and apply to all
information disclosed by Steritech to [*] and all information generated
hereunder. The chemicals prepared or handled under this contract shall be
regarded as proprietary in nature. Under no circumstances shall chemicals or
any information associated with these chemicals be released or divulged without
prior approval of Steritech.
12. [*] will make prompt written disclosure to Steritech,
will hold in trust for the sole right and benefit of Steritech, and hereby
assigns to Steritech all right, title and interest in and to any inventions,
developments, improvements or trade secrets, including without limitation
optimized procedures, which [*], its employees or
* [Confidential Treatment Requested]
3.
<PAGE> 4
agents may solely or jointly conceive or reduce to practice, in the course of or
as a result of the work hereunder concerning the Compound (including without
limitation processes associated with its manufacture). [*] will assist
Steritech in every proper way to obtain and enforce United States and foreign
property rights relating to any and all inventions, development, improvements or
trade secrets of Steritech in any and all countries. To that end [*] will
execute, verify and deliver such documents and perform such other acts
(including appearing as a witness) Steritech may reasonably request for use in
applying for, obtaining, evidencing, sustaining and enforcing such proprietary
rights and the assignment thereof. In addition, [*] will execute, verify and
deliver assignments of such proprietary rights to Steritech or its designee.
Steritech shall compensate [*] at a reasonable rate for the time actually spent
by [*] at Steritech's request on such assistance. In the event Steritech is
unable for any reason, after reasonable effort, to secure [*]' signature on any
document needed in connection with the actions specified in the preceding
paragraph, [*] hereby irrevocably designates and appoints Steritech and its duly
authorized officers and agents as its agent and attorney-in-fact, to act for and
in its behalf to execute, verify and file any such documents and to do all other
lawfully permitted acts to further the purposes of the preceding paragraph with
the same legal force and effect as if executed by [*].
13. If any provision or clause of this Agreement, or portion
thereof, shall for any reason be held to be invalid, illegal or unenforceable,
such invalidity, illegality, or unenforceability shall not effect any other
provision of this Agreement, but this Agreement shall be construed as if such
provision or clause, or portion thereof, had never been contained in this
Agreement, and there shall be deemed substituted therefor such other provision
or clause, or portion thereof, as will most nearly accomplish the intent of the
parties as expressed in this Agreement to the fullest extent permitted by law.
14. This Agreement shall be governed by and construed and enforced
under the internal laws of the State of California (and not its principles of
conflicts of law). The parties consent and submit to the jurisdiction of the
courts of the State of California and of the United States for a judicial
district within the territorial limits of the State of California and of the
United States for a judicial district within the territorial limits of the State
of California for all purposes with respect to any action or proceeding in
connection with this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their respective authorized representatives as of the
effective date first above written.
STERITECH, INC. [*]
By [SIG] /s/STEPHEN T. ISAACS By /s/[*]
--------------------------- ------------------------------
Name (Print): Stephen T. Isaacs Name (Print): [*]
-------------------------- -----------------------------
Title (Print): President/CEO Title (Print): President
------------------------- -----------------------------
Date 7/22/94 Date 7/21/94
------------------------- -----------------------------
* [Confidential Treatment Requested]
<PAGE> 5
STERITECH, INC. LETTERHEAD
EXHIBIT A
Page No. P.O.No. Order Date Vend No.
1 1695 7/15/94
PURCHASE ORDER
VENDOR SHIP TO
[*] [*]
[*] [*]
[*] [*]
[*]
[*]
[*]
[*]
<TABLE>
<S> <C> <C> <C> <C>
ORDER DATE CANCELLATION DATE SHIP VIA F.O.B. TERMS
7/15/94 to be determined Net 30 days
RESALE NO. RESPONSIBILITY BRANCH
ITEM NO. DESCRIPTION REG. DATE QUANTITY QUANTITY QTY UNIT PRICE EXTENSION
MFG NO. LOCATION ORDERED BACK ORD. REC
[*] [*] [*] [*]
[*]
[*]
To be delivered to Steritech by Sept. 16, 1994.
Shipping requirements: Send [*] to Steritech plus [*] from
each additional container. Upon approval, send rest of order to
[*] unless specified otherwise.
Intermediates requested: Send to Steritech samples 1g of [*]
[*], [*] and [*] prepared and used for the manufacture of
this lot of [*].
*As per agreement signed July 18, 1994. "Supply Agreement for Steritech
Compound '[*]'"
SUBTOTAL [*]
PURCHASE ORDER NO. 1695
TOTAL ORDER
VALUE
</TABLE>
____________________________________
AUTHORIZED SIGNATURE
ORDER TERMS AND CONDITIONS
1. INVOICES must bear exact same prices and terms or authorization for changes
must be received from our company in writing prior to shipping.
2. Goods not in accordance with specifications will be rejected and held at
vendor's risk awaiting disposal. Vendor must pay freight on all rejected
material.
3. The right is reserved, to cancel all or part of this order if not delivered
within the time specified.
4. Packing slips must accompany all shipments.
5. By acceptance of this order, vendor warrants that all merchandise shipped
under this order does comply with all laws and regulations of Federal and State
governments.
6. Back orders must be prepaid when less than a minimum freight shipment.
7. In the event of interruption of our business in whole or in part by reason
of fire, flood, windstorm, earthquake, war, strike, embargo, acts of God,
governmental action, or any causes beyond our control, we shall have the option
of cancelling undelivered orders in whole or part.
8. Acceptance of the purchase order, or shipment of any part of it will
constitute an agreement to all of its specifications as to terms, delivery and
prices.
*[Confidential Treatment Requested]
<PAGE> 6
Exhibit B
SPECIFICATIONS FOR [*]
([*])
I. Identify
A. IR spectrum spectrum compares with reference
B. NMR spectrum compares with reference
[*]
II. Purity
A. HPLC [*] of reference standard by peak area
[*].
B. Loss on Drying [*] by weight
FOR DOCUMENTATION PURPOSES ONLY, THE FOLLOWING OTHER ANALYSES OF
PURITY SHALL ALSO BE COMPLETED:
Elemental Anaylysis Analysis shall be [*]
NMR Analysis shall be [*]
HPLC Analysis shall be [*]
*[Confidential Treatment Requested]
<PAGE> 7
Exhibit C
Raw materials to be used in the manufacture of Steritech's [*] ([*]) that do not
conform to ACS, USP/NF or EP specifications for these reagents, or such
specifications are not available:
[*]
Part Number and
Effective date Description and Vendor Information
- -------------- ----------------------------------
[*] [*]
22 Feb 93 Vendor: [*]
[*] [*]
28 Mar 94 Vendor: [*] (cat. no. [*])
[*] [*]
8 Feb 94 Vendor: [*] (cat. no. [*]) or equivalent
[*] [*]
8 Feb 94 Vendor: [*] (cat. no. [*]) or
equivalent
[*] [*]
8 Feb 94 Vendor: [*] (cat. no. [*]) or equilvalent
[*] [*]
7 Mar 94 Vendor: [*] (cat. no. N/A), [*]
(cat. no. [*]) or equivalent
[*] [*]
8 Feb 94 Vendor: [*] (cat. no. N/A)
ALL OTHER RAW MATERIALS USED IN THIS MANUFACTURING PROCESS ARE OF ACS, USP/NF
OR EP GRADE.
*[Confidential Treatment Requested]
<PAGE> 1
EXHIBIT 10.20
[[*] LOGO]
[*]
[*]
[*]
[*]
[*]
CUSTOM SYNTHESIS AGREEMENT
CUSTOMER Steritech, Concord, USA.
PROCESS Production of S-59.
The following are the general terms and conditions covering the above
conversion:
1. All work is undertaken under Confidentiality Agreement.
2. All work will be carried out in accordance with GMP.
3. Except as expressly stated process details will be supplied by
Steritech and [*] do not guarantee yields or quality of product
produced save to the extent that yields or quality are substantially
affected by the negligence or wilful misconduct of [*] personnel.
4. The project supervisors who are authorised to contract the work and to
whom all reports should be furnished are:
Steritech : Dr Susan Wollowitz
[*] : [*]
5. Written reports will be furnished to Steritech in a manner and
timescale agreed between the project supervisors.
6. [*] will undertake to :
a. convert two batches of a minimum of [*] each of [*] to
S-59 in a campaign using a combination of our multi-purpose
glass lined plant and out [*] pilot plant,
b. provide analytical support for the production campaign at
[*],
C. isolate and handle the final product in a controlled
environment,
d. clean down the plant after the second batch of S-59 and after
each recrystallisation.
7. Steritech are responsible for supplying [*] of [*] of the
required quality to [*] before 1 April 1996. The minimum batch
size which can be processed by [*] is [*] of [*] per batch.
Should the campaign not take place due to non availability or non
suitability of starting material at the reserved time and [*] is
unable to fill the production slot, Steritech will be responsible for
the charges under this proposal.
8. Steritech, by virtue of contracting this work, will own all
intellectual property generated directly from the work and [*]
will co-operate in any reasonable manner in transferring the
intellectual property to Steritech. [*] will charge Steritech at
standard rates for all time expended on this work.
*[Confidential Treatment Requested]
<PAGE> 2
[ [*] LOGO]
[*]
[*]
[*]
[*]
[*]
Page 2
9. [*] will carry out the testing of the final product in accordance
with TS295 (copy appended)
10. The costs for the work to be undertaken under this project will be as
follows: 10.1 Conversion Cost [*]
10.2 Chemist Time
Any development work requested will be charged at the following rates:
Senior Chemist [*] per week
Development Chemist [*] per week
10.3 Materials and Other
Materials and outside analytical services, which will only be
contracted from [*] approved vendors, will be charged at cost to
[*] plus 10% to cover administration. Any other out of pocket
expenses will be charged at cost.
10.4 Invoicing
Work will only be undertaken on receipt of a written purchase order
from Steritech. Invoices will be raised at the end of the production
campaign and will be due for payment within 30 days from date of
invoice by way of transfer of funds to a bank account nominated on the
invoice. Charges will be supported by appropriate documentation which
will be available on request for inspection at [*]'s premises.
[*]
- -----------------
[*]
Finance Director
Accepted for and on behalf of Steritech Inc.:
/S/[SIG] Steven T. Isaacs 3/14/96
- ----------------- ----------------- -----------------
Signature Print Name Date
*[Confidential Treatment Requested]
<PAGE> 1
Exhibit 10.21
INDUSTRIAL REAL ESTATE LEASE (MULTI-TENANT FACILITY)
ARTICLE ONE: BASIC TERMS
This Article One contains the Basic Terms of this Lease between the
Landlord and Tenant named below. Other Articles, Sections and Paragraphs of the
Lease referred to in this Article One explain and define the Basic Terms and
are to be read in conjunction with the Basic Terms.
Section 1.01. DATE OF LEASE: October 1, 1992
Section 1.02. LANDLORD (INCLUDE LEGAL ENTITY): Shamrock Development
Company, a California Corporation
Address of Landlord: 1333 Willow Pass Road, Suite 211, Concord, CA 94520
- --------------------------------------------------------------------------------
Section 1.03. TENANT (INCLUDE LEGAL ENTITY): Steritech, Inc., a
California Corporation
Address of Tenant: 2525 Stanwell Drive, Suite 500, Concord, California 94520
- --------------------------------------------------------------------------------
Section 1.04. PROPERTY: The Property is part of Landlord's
multi-tenant real property development known as Buchanan Oaks IV (the
"Project"). The Project includes the land, the buildings and all other
improvements located on the land, and the common areas described in Paragraph
4.05(a). The Property is (include street address, approximate square footage
and description) Located at 2525 Stanwell Drive, Suite 500, Concord, CA,
consisting of approximately 9.131 rentable square feet of office, laboratory,
warehouse space.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Section 1.05. LEASE TERM: five (5) years zero (0) months beginning on
February 1, 1993 or such other date as is specified in this Lease, and ending
on January 31, 1998
Section 1.06. PERMITTED USES: (SEE ARTICLE FIVE) General office and
the operation of a laboratory facility; and any other legally permitted use
approved in advance by Landlord**
Section 1.07. TENANT'S GUARANTOR: (If none, so state) None
Section 1.08. BROKERS: (SEE ARTICLE FOURTEEN) (If none, so state)
Landlord's Broker: TRI Commercial Real Estate Services (Mike Hurd)
Tenant's Broker: LCB Associates (Steve Banker)
Section 1.09. COMMISSION PAYABLE TO LANDLORD'S BROKER: (SEE ARTICLE
FOURTEEN) $ Per separate agreement
Section 1.10. INITIAL SECURITY DEPOSIT: (SEE SECTION 3.03) $9,922.00
Section 1.11. VEHICLE PARKING SPACES ALLOCATED TO TENANT: (SEE SECTION
4.05) *(see below)
Section 1.12. RENT AND OTHER CHARGES PAYABLE BY TENANT:
(a) BASE RENT: Nine thousand nine hundred Twenty-Two & no/100 dollars
($9,922.00) per month, for the first twenty-four months, as provided in Section
3.01, and shall be increased on the first day of the 25th, 37th and 49th
month(s) after the Commencement Date, either (i) as provided in Section 3.02,
or (ii) however base rent shall not increase more than five percent (5%) in any
single annual adjustment period for during years 1-3 and ten percent (10%) in
years 4 & 5. (If (ii) is completed, then (i) and Section 3.02 are inapplicable.)
(b) OTHER PERIODIC PAYMENTS: (i) Real Property Taxes above the "Base
Real Property Taxes" (See Section 4.02); (ii) Utilities (See Section 4.03);
(iii) Increased Insurance Premiums above "Base Premiums" (See Section 4.04);
(iv) Tenant's Initial Pro Rata Share of Common Area Expenses 34.1% (See Section
4.05); (v) Impounds for Tenant's Share of Insurance Premiums and Property Taxes
(See Section 4.08); (vi) Maintenance, Repairs and Alterations (See Article Six).
Section 1.13. COSTS AND CHARGES PAYABLE BY LANDLORD: (a) Base Real
Property Taxes (See Section 4.02); (b) Base Insurance Premiums (See Section
4.04(c)); (c) Maintenance and Repair (See Article Six).
Section 1.14. LANDLORD'S SHARE OF PROFIT ON ASSIGNMENT OR SUBLEASE:
(See Section 9.05) thirty percent (30%) of the Profit (the "Landlord's Share").
Section 1.15. RIDERS: The following Riders are attached to and made a
part of this Lease: (If none, so state) See Lease Rider and Exhibits A, B and C
attached and made a part hereof.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
*Twenty-four (24) non-exclusive on-site parking spaces and 12 non-exclusive
spaces in the exclusive parking easement across the street.
1988 Southern California Chapter Initials [illegible]
of the Society of Industrial [logo] -------------------
and Office Realtors,! Inc. [illegible]
1
(Multi-Tenant Gross Form)
** which approval shall not unreasonably be withheld.
<PAGE> 2
ARTICLE TWO: LEASE TERM
SECTION 2.01. Lease of Property For Lease Term. Landlord leases the
Property to Tenant and Tenant leases the Property from Landlord for the Lease
Term. The Lease Term is for the period stated in Section 1.05 above and shall
begin and end on the dates specified in Section 1.05 above, unless the
beginning or end of the Lease Term is changed under any provision of this
Lease. The "Commencement Date" shall be the date specified in Section 1.05
above for the beginning of the Lease Term, unless advanced or delayed under any
provision of this Lease.
SECTION 2.03. Early Occupancy. If Tenant occupies the Property prior to
the Commencement Date, Tenant's occupancy of the Property shall be subject to
all of the provisions of this Lease. Early occupancy of the Property shall not
advance the expiration date of this Lease. Tenant shall pay Base Rent and all
other charges specified in this Lease for the early occupancy period.
SECTION 2.04. Holding Over. Tenant shall vacate the Property upon the
expiration or earlier termination of this Lease. Tenant shall reimburse
Landlord for and indemnify Landlord against all damages which Landlord incurs
from Tenant's delay in vacating the Property. If Tenant does not vacate the
Property upon the expiration or earlier termination of the Lease and Landlord
thereafter accepts rent from Tenant, Tenant's occupancy of the Property shall
be a "month-to-month" tenancy, subject to all of the terms of this Lease
applicable to a month-to-month tenancy, except that the Base Rent then in
effect shall be increased by twenty-five percent (25%).
ARTICLE THREE: BASE RENT
SECTION 3.01. Time and Manner of Payment. Upon execution of this Lease,
Tenant shall pay Landlord the Base Rent in the amount stated in Paragraph
1.12(a) above for the first month of the Lease Term. On the first day of the
second month of the Lease Term and each month thereafter, Tenant shall pay
Landlord the Base Rent, in advance, without offset, deduction or prior demand.
The Base Rent shall be payable at Landlord's address or at such other place as
Landlord may designate in writing.
SECTION 3.02. Cost of Living Increases. The Base Rent shall be
increased on each date (the "Rental Adjustment Date") stated in Paragraph
1.12(a) above in accordance with the increase in the United States Department of
Labor, Bureau of Labor Statistics. Consumer Price Index for All Urban Consumers
(all items for the geographical Statistical Area in which the Property is
located on the basis of 1982-1984 = 100) (the "Index") as follows:
(a) The Base Rent (the "Comparison Base Rent") in effect immediately
before each Rental Adjustment Date shall be increased by the percentage that
the Index has increased from the date (the "Comparison Date") on which payment
of the Comparison Base Rent began through the month in which the applicable
Rental Adjustment Date occurs. The Base Rent shall not be reduced by reason of
such computation. Landlord shall notify Tenant of each increase by a written
statement which shall include the Index for the applicable Comparison Date, the
Index for the applicable Rental Adjustment Date, the percentage increase
between those two indices, and the new Base Rent. Any increase in the Base Rent
provided for in this Section 3.02 shall be subject to any minimum or maximum
increase, if provided for in Paragraph 1.12(a).
(b) Tenant shall pay the new Base Rent from the applicable Rental
Adjustment Date until the next Rental Adjustment Date. Landlord's notice may be
given after the applicable Rental Adjustment Date of the increase, and Tenant
shall pay Landlord the accrued rental adjustment for the months elapsed between
the effective date of the increase and Landlord's notice of such increase
within ten (10) days after Landlord's notice. If the format or components of
the Index are materially changed after the Commencement Date, Landlord shall
substitute an index which is published by the Bureau of Labor Statistics or
similar agency and which is most nearly equivalent to the Index in effect on
the Commencement Date. The substitute index shall be used to calculate the
increase in the Base Rent unless Tenant objects to such index in writing within
fifteen (15) days after receipt of Landlord's notice. If Tenant objects,
Landlord and Tenant shall submit the selection of the substitute index for
binding arbitration in accordance with the rules and regulations of the
American Arbitration Association at its office closest to the Property. The
costs of arbitration shall be borne equally by Landlord and Tenant.
SECTION 3.03. Security Deposit; Increases:
(a) Upon the execution of this Lease, Tenant shall deposit with
Landlord a cash Security Deposit in the amount set forth in Section 1.10 above.
Landlord may apply all or part of the Security Deposit to any unpaid rent or
other charges due from Tenant or to cure any other defaults of Tenant. If
Landlord uses any part of the Security Deposit, Tenant shall restore the
Security Deposit to its full amount within ten (10) days after Landlord's
written request. Tenant's failure to do so shall be a material default under
this Lease. No interest shall be paid on the Security Deposit. Landlord shall
not be required to keep the Security Deposit separate from its other accounts
and no trust relationship is created with respect to the Security Deposit.
(b) Each Time the Base Rent is increased, Tenant shall deposit
additional funds with Landlord sufficient to increase the Security Deposit to
an amount which bears the same relationship to the adjusted Base Rent as the
Initial Security Deposit bore to the Initial Base Rent. However as long as
Tenant has not been in default of its Lease over the first two (2) years of its
tenancy this Section 3.03 (b) shall not apply.
1988 Southern California Chapter Initials [illegible]
of the Society of Industrial [logo] -------------------
and Office Realtors,! Inc. [illegible]
2
(Multi-Tenant Gross Form)
<PAGE> 3
Section 3.04 TERMINATION: ADVANCE PAYMENTS. Upon termination of this
Lease under Article Seven (Damage or Destruction), Article Eight (Condemnation)
or any other termination not resulting from Tenant's default, and after Tenant
has vacated the Property in the manner required by this Lease, Landlord shall
refund or credit to Tenant (or Tenant's successor) the unused portion of the
Security Deposit, any advance rent or other advance payments made by Tenant to
Landlord and any amounts paid for real property taxes and other reserves which
apply to any time periods after termination of the Lease.
ARTICLE FOUR: OTHER CHARGES PAYABLE BY TENANT
Section 4.01 ADDITIONAL RENT. All charges payable by Tenant other than
Base Rent are called "Additional Rent". Unless this Lease provides otherwise,
Tenant shall pay all Additional Rent then due with the next monthly installment
of Base Rent. The term "rent" shall mean Base Rent and Additional Rent.
Section 4.02 PROPERTY TAXES.
(a) REAL PROPERTY TAXES. Landlord shall pay the "Base Real Property
Taxes" on the Property during the Lease Term. Base Real Property Taxes are real
property taxes applicable to the Property as shown on the tax bill for the most
recent tax fiscal year ending prior to the Commencement Date. However, if the
structures on the Property are not completed by the tax lien date of such tax
fiscal year, the Base Real Property Taxes are the taxes shown on the first tax
bill showing the full assessed value of the Property after completion of the
structures. Tenant shall pay Landlord the amount, if any, by which the real
property taxes during the Lease Term exceed the Base Real Property Taxes.
Subject to Paragraph 4.02(c), Tenant shall make such payments within fifteen
(15) days after receipt of Landlord's statement showing the amount and
computation of such increase. Landlord shall reimburse Tenant for any real
property taxes paid by Tenant covering any period of time prior to or after the
Lease Term.
(b) DEFINITION OF "REAL PROPERTY TAX." "Real property tax" means: (i)
any fee, license fee, license tax, business license fee, commercial rental tax,
levy, charge, assessment, penalty or tax imposed by any taxing authority
against the Property; (ii) any tax on the Landlord's right to receive, or the
receipt of, rent or income from the Property or against Landlord's business of
leasing the Property; (iii) any tax or charge for fire protection, streets,
sidewalks, road maintenance, refuse or other services provided to the Property
by any governmental agency; (iv) any tax imposed upon this transaction or based
upon a reassessment of the Property due to a change of ownership, as defined by
applicable law, or other transfer of all or part of Landlord's interest in the
Property; and (v) any charge or fee replacing any tax previously included
within the definition of real property tax. "Real property tax" does not,
however, include Landlord's federal or state income, franchise, inheritance or
estate taxes. There shall be no increase in Tenant's liability for taxes due to
a sale of the Project during the first three (3) years of Tenant's occupancy.
(c) JOINT ASSESSMENT. If the Property is not separately assessed,
Landlord shall reasonably determine Tenant's share of the real property tax
payable by Tenant under Paragraph 4.02(a) from the assessor's worksheets or
other reasonably available information. Tenant shall pay such share to Landlord
within fifteen (15) days after receipt of Landlord's written statement.
(d) PERSONAL PROPERTY TAXES.
(i) Tenant shall pay all taxes charged against trade fixtures,
furnishings, equipment or any other personal property belonging to Tenant.
Tenant shall try to have personal property taxed separately from the Property.
(ii) If any of Tenant's personal property is taxed with the
Property, Tenant shall pay Landlord the taxes for the personal property within
fifteen (15) days after Tenant receives a written statement from Landlord for
such personal property taxes.
(e) *
Section 4.03. UTILITIES. Tenant shall pay, directly to the appropriate
supplier, the cost of all natural gas, heat, light, power, sewer service,
telephone, water, refuse disposal and other utilities and services supplied to
the Property. However, if any services or utilities are jointly metered with
other property, Landlord shall make a reasonable determination of Tenant's
proportionate share of the cost of such utilities and services and Tenant shall
pay such share to Landlord within fifteen (15) days after receipt of Landlord's
written statement.
Section 4.04. INSURANCE POLICIES.
(a) LIABILITY INSURANCE. During the Lease Term, Tenant shall maintain a
policy of commercial general liability insurance (sometimes known as broad form
comprehensive general liability insurance) insuring Tenant against liability
for bodily injury, property damage (including loss of use of property) and
personal injury arising out of the operation, use or occupancy of the Property.
Tenant shall name Landlord as an additional insured under such policy. The
initial amount of such insurance shall be One Million Dollars ($1,000,000) per
occurrence and shall be subject to periodic increase based upon inflation,
increased liability awards, recommendation of Landlord's professional insurance
advisers and other relevant factors. The liability insurance obtained by Tenant
under this Paragraph 4.04(a) shall (i) be primary and non-contributing; (ii)
contain cross-liability endorsements; and (iii) insure Landlord against
Tenant's performance under Section 5.05, if the matters giving rise to the
indemnity under Section 5.05 result from the negligence of Tenant. The amount
and coverage of such insurance shall not limit Tenant's liability nor relieve
Tenant of any other obligation under this Lease. Landlord may also obtain
comprehensive public liability insurance in an amount and with coverage
determined by Landlord insuring Landlord against liability arising out of
ownership, operation, use or occupancy of the Property. The policy obtained by
Landlord shall not be contributory and shall not provide primary insurance.
(b) PROPERTY AND RENTAL INCOME INSURANCE. During the Lease Term,
Landlord shall maintain policies of insurance covering loss of or damage to the
Property in the full amount of its replacement value. Such policy shall contain
an inflation Guard Endorsement and shall provide protection against all perils
included within the classification of fire, extended coverage, vandalism,
malicious mischief, special extended perils (all risk), sprinkler leakage and
any other perils which landlord deems reasonably necessary. Landlord shall have
the right to obtain flood and earthquake insurance if required by any lender
holding a security interest in the Property. Landlord shall not obtain insurance
for Tenant's fixtures or equipment or building improvements installed by Tenant
on the Property. During the Lease Term, Landlord shall also maintain a rental
income insurance policy, with loss payable to Landlord, in an amount equal to
one year's Base Rent, plus estimated real property taxes and insurance premiums.
Tenant shall be liable for the payment of any deductible amount under Landlord's
or Tenant's insurance policies maintained pursuant to this Section 4.04 in an
amount not to exceed Ten Thousand Dollars ($10,000). Tenant shall not do or
permit anything to be done which invalidates any such insurance policies.
* In the event Real Property Taxes are increased because of Tenant's Tenant
Improvements, Tenant shall be responsible for that increased amount which is in
excess of the portion attributable to Landlord's contribution of $106,310.00
toward such improvements.
Tenant
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(c) PAYMENT OF PREMIUMS.
(i) Landlord shall pay the "Base Premiums" for the insurance
policies maintained by Landlord under Paragraph 4.04(b) if the Property
has been previously fully occupied, the "Base Premiums" are the
insurance premiums paid during or applicable to the last twelve (12)
months of such prior occupancy. If the Property has not been previously
fully occupied or has been occupied for less than twelve (12) months,
the Base Premiums are the lowest annual premiums reasonably obtainable
for the required insurance for the Property as of the Commencement Date.
(ii) Tenant shall pay Landlord the amount, if any, by which
the insurance premiums for all policies maintained by Landlord under
Paragraph 4.04(b) have increased over the Base Premiums, whether such
increases result from the nature of Tenant's occupancy, any act or
omission of Tenant, the requirement of any lender referred to in Article
Eleven (Protection of Lenders), the increased value of the Property or
general rate increases. However, if Landlord substantially increases the
amount of insurance carried or the percentage of insured value after the
period during which the Base Premiums were calculated, Tenant shall only
pay Landlord the amount of increased premiums which would have been
charged by the insurance carrier if the amount of insurance or
percentage of insured value had not been substantially increased by
Landlord. This adjustment in the amount due from Tenant shall be made
only once during the Lease Term. Thereafter, Tenant shall be obligated
to pay the full amount of any additional increases in the insurance
premiums, including increases resulting from any further increases in
the amount of insurance or percentage of insured value. Subject to
Section 4.05, Tenant shall pay Landlord the increases over the Base
Premiums within fifteen (15) days after receipt by Tenant of a copy of
the premium statement or other evidence of the amount due. If the
insurance policies maintained by Landlord cover improvements or real
property other than the Property, Landlord shall also deliver to Tenant
a statement of the amount of the premiums applicable to the Property
showing, in reasonable detail, how such amount was computed. If the
Lease Term expires before the expiration of the insurance period,
Tenant's liability shall be pro rated on an annual basis.
(d) GENERAL INSURANCE PROVISIONS.
(i) Any insurance which Tenant is required to maintain under
this Lease shall include a provision which requires the insurance
carrier to give Landlord not less than thirty (30) days' written notice
prior to any cancellation or modification of such coverage.
(ii) If Tenant fails to deliver any policy, certificate or
renewal to Landlord required under this Lease within the prescribed time
period or if any such policy is cancelled or modified during the Lease
Term without Landlord's consent, Landlord may obtain such insurance, in
which case Tenant shall reimburse Landlord for the cost of such
insurance within fifteen (15) days after receipt of a statement that
indicates the cost of such insurance.
(iii) Tenant shall maintain all insurance required under this
Lease with companies holding a "General Policy Rating" of A-12 or
better, as set forth in the most current issue of "Best Key Rating
Guide". Landlord and Tenant acknowledge the insurance markets are
rapidly changing and that insurance in the form and amounts described in
this Section 4.04 may not be available in the future. Tenant
acknowledges that the insurance described in this Section 4.04 is for
the primary benefit of Landlord. If at any time during the Lease Term,
Tenant is unable to maintain the insurance required under the Lease,
Tenant shall nevertheless maintain insurance coverage which is customary
and commercially reasonable in the insurance industry for Tenant's type
of business, as that coverage may change from time to time. Landlord
makes no representation as to the adequacy of such insurance to protect
Landlord's or Tenant's interests. Therefore, Tenant shall obtain any
such additional property or liability insurance which Tenant deems
necessary to protect Landlord and Tenant.
(iv) Unless prohibited under any applicable insurance
policies maintained, Landlord and Tenant each hereby waive any and all
rights of recovery against the other, or against the officers,
employees, agents or representatives of the other, for loss of or damage
to its property or the property of others under its control, if such
loss or damage is covered by any insurance policy in force (whether or
not described in this Lease) at the time of such loss or damage. Upon
obtaining the required policies of insurance, Landlord and Tenant shall
give notice to the insurance carriers of this mutual waiver of
subrogation.
Section 4.05. COMMON AREAS; USE, MAINTENANCE AND COSTS.
(a) COMMON AREAS. As used in this Lease, "Common Areas" shall mean
all areas within the Project which are available for the common use of tenants
of the Project and which are not leased or held for the exclusive use of Tenant
or other tenants, including, but not limited to, parking areas, driveways,
sidewalks, loading areas, access roads, corridors, landscaping and planted
areas. Landlord, from time to time, may change the size, location, nature and
use of any of the Common Areas, convert Common Areas into leaseable areas,
construct additional parking facilities (including parking structures) in the
Common Areas, and increase or decrease Common Area land and/or facilities.
Tenant acknowledges that such activities may result in inconvenience to Tenant.
Such activities and changes are permitted if they do not materially affect
Tenant's use of the Property.
(b) USE OF COMMON AREAS. Tenant shall have the nonexclusive right
(in common with other tenants and all others to whom Landlord has granted or
may grant such rights) to use the Common Areas for the purposes intended,
subject to such reasonable rules and regulations as Landlord may establish from
time to time. Tenant shall abide by such rules and regulations and shall use
its best effort to cause others who use the Common Areas with Tenant's express
or implied permission to abide by Landlord's rules and regulations. At any
time, Landlord may close any Common Areas to perform any acts in the Common
Areas as, in Landlord's judgment, are desirable to improve the Project. Tenant
shall not interfere with the rights of Landlord, other tenants or any other
person entitled to use the Common Areas.
(c) SPECIFIC PROVISION RE: VEHICLE PARKING. Tenant shall be
entitled to use the number of vehicle parking spaces in the Project allocated
to Tenant in Section 1.11 of the Lease without paying any additional rent.
Tenant's parking shall not be reserved and shall be limited to vehicles no
larger than standard size automobiles or pickup utility vehicles. Tenant shall
not cause large trucks or other large vehicles to be parked within the Project
or on the adjacent public streets. Temporary parking of large delivery vehicles
in the Project may be permitted by the rules and regulations established by
Landlord. Vehicles shall be parked only in striped parking spaces and not in
driveways, loading areas or other locations not specifically designated for
parking. Handicapped spaces shall only be used by those legally permitted to
use them. If Tenant parks more vehicles in
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the parking area than the number set forth in Section 1.11 of this Lease, such
conduct shall be a material breach of this Lease in addition to Landlord's
other remedies under the Lease. Tenant shall pay a daily charge determined by
Landlord for each such additional vehicle.
(d) [ See Lease Rider.] MAINTENANCE OF COMMON AREAS. *Which increase
above the 1993 Base Year expenses for the Project.
(e) TENANT'S SHARE AND PAYMENT. Tenant shall pay Tenant's annual pro
rata share of all Common Area costs (prorated for any fractional month) upon
written notice from Landlord that such costs are due and payable, and in any
event prior to delinquency. Tenant's pro rata share shall be calculated by
dividing the square foot area of the Property, as set forth in Section 1.04 of
the Lease, by the aggregate square foot area of the Project which is leased or
held for lease by tenants, as of the date on which the computation is made. Any
changes in the Common Area costs and/or the aggregate area of the Project
leased or held for lease during the Lease Term shall be effective on the first
day of the month after such change occurs. Landlord may, at Landlord's
election, estimate in advance and charge to Tenant as Common Area costs, all
real property taxes for which Tenant is liable under Section 4.02 of the Lease,
all insurance premiums for which Tenant is liable under Section 4.04 of the
Lease, all maintenance and repair costs for which Tenant is liable under
Section 6.04 of the Lease, and all other Common Area costs payable by Tenant
hereunder. At Landlord's election, such statements of estimated Common Area
costs shall be delivered monthly, quarterly or at any other periodic intervals
to be designated by Landlord. Landlord may adjust such estimates at any time
based upon Landlord's experience and reasonable anticipation of costs. Such
adjustments shall be effective as of the next rent payment date after notice to
Tenant. Within sixty (60) days after the end of each calendar year of the Lease
Term, Landlord shall deliver to Tenant a statement prepared in accordance with
generally accepted accounting principles setting forth, in reasonable detail,
the Common Area costs paid or incurred by Landlord during the preceding
calendar year and Tenant's pro rata share. Upon receipt of such statement,
there shall be an adjustment between Landlord and Tenant, with payment to or
credit given by Landlord (as the case may be) so that Landlord shall receive
the entire amount of Tenant's share of such costs and expenses for such period.
Section 4.06. LATE CHARGES. Tenant's failure to pay rent promptly may
cause Landlord to incur unanticipated costs. The exact amount of such costs are
impractical or extremely difficult to ascertain. Such costs may include, but
are not limited to, processing and accounting charges and late charges which
may be imposed on Landlord by any ground lease, mortgage or trust deed
encumbering the Property. Therefore, if Landlord does not receive any rent
payment within ten (10) days after it becomes due. Tenant shall pay Landlord a
late charge equal to ten percent (10%) of the overdue amount. The parties agree
that such late charge represents a fair and reasonable estimate of the costs
Landlord will incur by reason of such late payment.
Section 4.07. INTEREST ON PAST DUE OBLIGATIONS. Any amount owed by
Tenant to Landlord which is not paid when due shall bear interest at the rate
of fifteen percent (15%) per annum from the due date of such amount. However,
interest shall not be payable on late charges to be paid by Tenant under this
Lease. The payment of interest on such amounts shall not excuse or cure any
default by Tenant under this Lease. If the interest rate specified in this
Lease is higher than the rate permitted by law, the interest rate is hereby
decreased to the maximum legal interest rate permitted by law.
ARTICLE FIVE: USE OF PROPERTY
Section 5.01. PERMITTED USES. Tenant may use the Property only for
the Permitted Uses set forth in Section 1.06 above.
Section 5.01. MANNER OF USE. Tenant shall not cause or permit the
Property to be used in any way which constitutes a violation of any law,
ordinance, or governmental regulation or order, which annoys or interferes with
the rights of tenants of the Project, or which constitutes a nuisance or
waste. Tenant shall obtain and pay for all permits, including a Certificate of
the Project, or which constitutes a nuisance or waste. Tenant shall obtain any
pay for all permits, including a Certificate of Occupancy, required for
Tenant's occupancy of the Property and shall promptly take all actions
necessary to comply with all applicable statutes, ordinances, rules,
regulations, orders and requirements regulating the use by Tenant of the
Property, including the Occupational Safety and Health Act.
Section 5.03. HAZARDOUS MATERIALS. As used in this Lease, the term
"Hazardous Material" means any flammable items, explosives, radioactive
materials, hazardous or toxic substances, material or waste or related
materials, including any substances defined as or included in the definition of
"hazardous substances", "hazardous wastes", "hazardous materials" or "toxic
substances" now or subsequently regulated under any applicable federal, state
or local laws or regulations, including without limitation petroleum-based
products, paints, solvents, lead, cyanide, DDT, printing inks, acids,
pesticides, ammonia
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See Lease Rider for revised text.
Section 5.04 SIGNS AND AUCTIONS. Tenant shall not place any signs on
the Property without Landlord's prior written consent. Tenant shall not conduct
or permit any auctions or sheriff's sales at the Property.
Section 5.05 INDEMNITY. Trust shall indemnify Landlord against and hold
Landlord harmless from any and all costs, claims or liability arising from: (a)
Tenant's use of the Property; (b) the conduct of Tenant's business or anything
else done or permitted by Tenant to be done in or about the Property, including
any contamination of the Property or any other property resulting from the
presence or use of Hazardous Material caused or permitted by Tenant; (c) any
breach or default in the performance of Tenant's obligations under this Lease;
(d) any misrepresentation or breach of warranty by Tenant under this Lease; or
(e) other acts or omissions of Tenant shall defend Landlord against any such
cost, claim or liability at Tenant's expense with counsel reasonably acceptable
to Landlord or, at Landlord's election. Tenant shall reimburse Landlord for any
legal fees or costs incurred by Landlord in connection with any such claim. As a
material part of the consideration to Landlord, Tenant assumes all risk of
damage to property or injury to persons in or about the Property arising from
any cause, and Tenant hereby waives all claims in respect thereof against
Landlord, except for any claim arising out of Landlord's gross negligence or
willful misconduct. As used in this Section, the term "Tenant" shall include
Tenant's employees, agents, contractors and invitees, if applicable.
Section 5.06 LANDLORD'S ACCESS. Landlord or its agents may enter the
Property with 24 hours advance notice excepting the last seven (7) months of the
Lease term when advance telephone notice will suffice to show the Property to
potential buyers, investors or tenants or other parties; to do any other act or
to inspect and conduct tests in order to monitor Tenant's compliance with all
applicable environmental laws and all laws governing the presence and use of
Hazardous Material; or for any other purpose Landlord deems necessary. Landlord
shall give Tenant prior notice of such entry, except in the case of an
emergency. Landlord may place customary "For Sale" or "For Lease" signs on the
Property.
Section 5.07 QUIET POSSESSION. If Tenant pays the rent and complies
with all other terms of this Lease, Tenant may occupy and enjoy the Property for
the full Lease Term, subject to the provisions of this Lease.
ARTICLE SIX: CONDITION OF PROPERTY; MAINTENANCE, REPAIRS AND ALTERATIONS
Section 6.01 EXISTING CONDITIONS. See Lease Rider
Section 6.02 EXEMPTION OF LANDLORD FROM LIABILITY. Landlord shall not
be liable for any damage or injury to the person, business (or any loss of
income therefrom), goods, wares, merchandise or other property of Tenant,
Tenant's employees, invitees, customers or any other person in or about the
Property, whether such damage or injury is caused by or results from: (a) fire,
steam, electricity, water, gas or rain; (b) the breakage, leakage, obstruction
or other defects of pipes, sprinklers, wires, appliances, plumbing, air
conditioning or lighting fixtures or any other cause; (c) conditions arising in
or about the Property or upon other portions of the Project, or from other
sources or places; or (d) any act or omission of any other tenant of the
Project. Landlord shall not be liable for any such damage or injury even though
the cause of or the means of repairing such damage or injury are not accessible
to Tenant. The provisions of this Section 6.02 shall not, however, exempt
Landlord from liability for Landlord's gross negligence or willful misconduct.
Section 6.03 LANDLORD'S OBLIGATIONS. Subject to the provisions of
Article Seven (Damage or Destruction) and Article Eight (Condemnation), and
except for damage caused by any act or omission of Tenant, or Tenant's
employees, agents, contractors or invitees, Landlord shall keep the foundation,
roof and structural portions of exterior walls of the improvements on the
Property and the Project plumbing and electrical systems in good order,
condition and repair. However, Landlord shall not be obligated to maintain or
repair windows, doors, plate glass or the surfaces of walls. Landlord shall not
be obligated to make any repairs under this Section 6.03 until a reasonable time
after receipt of a written notice from Tenant of the need for such repairs.
Tenant waives the benefit of any present or future law which might give Tenant
the right to repair the Property at Landlord's expense or to terminate the Lease
because of the condition of the Property.
Section 6.04 TENANT'S OBLIGATIONS.
(a) Except as provided in Section 6.03. Article Seven (Damage or
Destruction) and Article Eight (Condemnation), Tenant shall keep all portions of
the Property (including structural, nonstructural, interior, systems and
equipment) in good order, condition and repair (including interior repainting
and refinishing, as needed). If any portion of the Property or any system or
equipment in the Property which Tenant is obligated to repair cannot be fully
repaired or restored. Tenant shall promptly replace such portion of the Property
or system or equipment in the Property, regardless of whether the benefit of
such replacement extends beyond the Lease Term; but if the benefit or useful
life of such replacement extends beyond the Lease Term (as such term may be
extended by exercise of any options), the useful life of such replacement shall
be prorated over the remaining portion of the Lease Term (as extended), and
Tenant shall be liable only for that portion of the cost which is applicable to
the Lease Term (as extended). Tenant shall maintain a preventive maintenance
contract providing for the regular inspection and maintenance of the heating and
air conditioning system by a licensed heating and air conditioning contractor.
Landlord shall have the right, upon written notice to Tenant, to undertake the
responsibility for preventive maintenance of the heating and air conditioning
system at Tenant's expense. In addition, Tenant shall, at Tenant's expense,
repair any damage to the roof, foundation or structural portions of walls caused
by Tenant's acts or omissions. It is the intention of Landlord and Tenant that,
at all times during the Lease Term. Tenant shall maintain the Property in an
attractive, first-class and fully operative condition.
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*Provided Tenant maintains its HVAC maintenance contract and keeps the doors to
its Premises closed when said system is operational. Landlord shall repair or
replace any HVAC equipment needing such repair or replacement not covered by
such maintenance contract.
(b) Tenant shall fulfill all of Tenant's obligations under this Section 6.04
at Tenant's sole expense. If Tenant fails to maintain, repair or replace the
Property as required by this Section 6.04, Landlord may, upon ten (10) days'
prior notice to Tenant (except that no notice shall be required in the case of
an emergency), enter the Property and perform such maintenance or repair
(including replacement, as needed), on behalf of Tenant. In such case, Tenant
shall reimburse Landlord for all costs incurred in performing such maintenance
or repair immediately upon demand.*
Section 6.05. ALTERATIONS, ADDITIONS, AND IMPROVEMENTS.
(a) Tenant shall not make any alterations, additions, or improvements to the
Property without Landlord's prior written consent, except for non-structural
alterations which do not exceed Twenty-five Thousand Dollars ($25,000) in cost
cumulatively over the Lease Term and which are not visible from the outside of
any building of which the Property is part. Landlord may require Tenant to
provide demolition and/or lien and completion bonds in form and amount
satisfactory to Landlord. Tenant shall promptly remove any alterations,
additions, or improvements constructed in violation of this Paragraph 6.05(a)
upon Landlord's written request. All alterations, additions, and improvements
shall be done in a good and workmanlike manner, in conformity with all
applicable laws and regulations, and by a contractor approved by Landlord. Upon
completion of any such work, Tenant shall provide Landlord with "as built"
plans, copies of all construction contracts, and proof of payment for all labor
and materials. See Lease Rider.
(b) Tenant shall pay when due all claims for labor and material furnished to
the Property. Tenant shall give Landlord at least twenty (20) days prior
written notice of the commencement of any work on the Property, regardless of
whether Landlord's consent to such work is required. Landlord may elect to
record and post notices of non-responsibility on the Property.
Section 6.06. CONDITION UPON TERMINATION. Upon the termination of the Lease,
Tenant shall surrender the Property to Landlord, broom clean and in the same
condition as received except for ordinary wear and tear which Tenant was not
otherwise obligated to remedy under any provision of this Lease. However,
Tenant shall not be obligated to repair any damage which Landlord is required
to repair under Article Seven (Damage or Destruction). In addition, Landlord
may require Tenant to remove any alterations, additions or improvements
(whether or not made with Landlord's consent) prior to the expiration of the
Lease and to restore the Property to its prior condition, all at Tenant's
expense. All alterations, additions and improvements which Landlord has not
required Tenant to remove shall become Landlord's property and shall be
surrendered to Landlord upon the expiration or earlier termination of the
Lease, except that Tenant may remove any of Tenant's machinery or equipment
which can be removed without material damage to the Property. Tenant shall
repair, at Tenant's expense, any damage to the Property caused by the removal
of any such machinery or equipment, in no event, however, shall Tenant remove
any of the following materials or equipment (which shall be deemed Landlord's
property) without Landlord's prior written consent: any power wiring or power
panels; lighting or lighting fixtures; wall coverings; drapes, blinds ow other
window coverings; carpets or other floor coverings; heaters, air conditioners
or any other heating or air conditioning equipment; fencing or security gats;
or other similar building equipment and decorations. Tenant may, however,
subject to its obligation to repair damage caused by removal, remove those
items described on Exhibit C.
ARTICLE SEVEN: DAMAGE OR DESTRUCTION
Section 7.01. PARTIAL DAMAGE TO PROPERTY.
(a) Tenant shall notify Landlord in writing immediately upon the occurrence
of any damage to the Property. If the Property is only partially damaged (i.e.,
less than fifty percent (50%) of the Property is untenantable as a result of
such damage or less than fifty percent (50%) of Tenant's operations are
materially impaired) and if the proceeds received by Landlord from the
insurance policies described in Paragraph 4.04(b) are sufficient to pay for the
necessary repairs, this Lease shall remain in effect and Landlord shall repair
the damage as soon as reasonably possible. Landlord may elect (but is not
required) to repair any damage to Tenant's fixtures, equipment, or improvements.
(b) If the insurance proceeds received by Landlord are not sufficient to pay
the entire cost of repair, or if the cause of the damage is not covered by the
insurance policies which Landlord maintains under Paragraph 4.04(b), Landlord
may elect either to (i) repair the damage as soon as reasonably possible, in
which case this Lease shall remain in full force and effect, or (ii) terminate
this Lease as of the date the damage occurred. Landlord shall notify Tenant
within thirty (30) days after receipt of notice of the occurrence of the damage
whether Landlord elects to repair the damage or terminate the Lease. If
Landlord elects to repair the damage, Tenant shall pay Landlord the "deductible
amount" (if any) under the Landlord's insurance policies and, if the damage was
due to an act or omission of Tenant, or Tenant's employees, agents, contractors
or invitees, the difference between the actual cost of repair and any insurance
proceeds received by Landlord. If Landlord elects to terminate the Lease,
Tenant may elect to continue this Lease in full force and effect, in which case
Tenant shall repair any damage to the Property and any building in which the
Property is located, Tenant shall pay the cost of such repairs, except that
upon satisfactory completion of such repairs, Landlord shall deliver to Tenant
any insurance proceeds received by Landlord for the damage repaired by Tenant.
Tenant shall give Landlord written notice of such election within ten (10) days
after receiving Landlord's termination notice.
(c) If the damage to the Property occurs during the last six (6) months of
the Lease Term and such damage will require more than thirty (30) days to
repair, either Landlord or Tenant may elect to terminate this Lease as of the
date the damage occurred, regardless of the sufficiency of any insurance
proceeds. The party electing to terminate this Lease shall given written
notification to the other party of such election within thirty (30) days after
Tenant's notice to Landlord of the occurrence of the damage.
Section 7.02. SUBSTANTIAL OR TOTAL DESTRUCTION. If the Property is
substantially or totally destroyed by any cause whatsoever (i.e., the damage to
the Property is greater than partial damage described in Section 7.01), and
regardless of whether Landlord receives any insurance proceeds, this Lease
shall terminate as of the date the destruction occurred. Notwithstanding the
preceding sentence, if the Property can be rebuilt within six (6) months after
the date of destruction, Landlord may elect to rebuild the Property at
Landlord's own expense, in which case this Lease shall remain in full force and
effect. Landlord shall notify Tenant of such election within thirty (30) days
after Tenant's notice of the occurrence of total or substantial destruction. If
Landlord so elects, Landlord shall rebuild the Property at Landlord's sole
expense, except that if the destruction was caused by an act or omission of
Tenant, Tenant shall pay Landlord the difference between actual cost of
rebuilding and any insurance proceeds received by Landlord.
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Section 7.03. TEMPORARY REDUCTION OF RENT. If the Property is
destroyed or damaged and Landlord or Tenant repairs or restores the Property
pursuant to the provisions of this Article Seven, any rent payable during the
period of such damage, repair and/or restoration shall be reduced according to
the degree, if any, to which Tenant's use of the Property is impaired. However,
the reduction shall not exceed the sum of one year's payment of Base Rent,
insurance premiums and real property taxes. Except for such possible reduction
in Base Rent, insurance premiums and real property taxes, Tenant shall not be
entitled to any compensation, reduction, or reimbursement from Landlord as a
result of any damage, destruction, repair or restoration of or to the Property.
Section 7.04. WAIVER. Tenant waives the protection of any statute,
code or judicial decision which grants a tenant the right to terminate a lease
in the event of the substantial or total destruction of the leased property.
Tenant agrees that the provisions of Section 7.02 above shall govern the rights
and obligations of Landlord and Tenant in the event of any substantial or total
destruction to the Property.
ARTICLE EIGHT: CONDEMNATION
If all or any portion of the Property is taken under the power of
eminent domain or sold under the threat of that power (all of which are called
"Condemnation"), this Lease shall terminate as to the part taken or sold on the
date of the condemning authority takes title or possession, whichever occurs
first, if more than twenty percent (20%) of the floor area of the building in
which the Property is located, or which is located on the Property, is taken,
either Landlord or Tenant may terminate this Lease as of the date the
condemning authority takes title or possession, by delivering written notice to
the other within ten (10) days after receipt of written notice of such taking
(or in the absence of such notice, within ten (10) days after the condemning
authority takes title or possession). If neither Landlord nor Tenant terminates
this Lease, this Lease shall remain in effect as to the portion of the Property
not taken, except that the Base Rent and Additional Rent shall be reduced in
proportion to the reduction in the floor area of the Property. Any Condemnation
award or payment shall be distributed in the following order: (a) first, to any
ground lessor, mortgagee or beneficiary under a deed of trust encumbering the
Property, the amount of its interest in the Property; (b) second, to Tenant,
only the amount of any award specifically designated for loss of or damage to
Tenant's trade fixtures or removable personal property; and (c) third, to
Landlord, the remainder of such award, whether as compensation for reduction in
the value of the leasehold, the taking of the fee, or otherwise. If this Lease
is not terminated, Landlord shall repair any damage to the Property caused by
the Condemnation, except that Landlord shall not be obligated to repair any
damage for which Tenant has been reimbursed by the condemning authority. If the
severance damages received by Landlord are not sufficient to pay for such
repair, Landlord shall have the right to either terminate this lease or make
such repair at Landlord's expense.
ARTICLE NINE: ASSIGNMENT AND SUBLETTING
Section 9.01. LANDLORD'S CONSENT REQUIRED. No portion of the Property
or of Tenant's interest in this Lease may be acquired by any other person or
entity, whether by sale, assignment, mortgage, sublease, transfer, operation of
law, or act of Tenant, without Landlord's prior written consent, except as
provided in Section 9.02 below. Landlord has the right to grant or withhold its
consent as provided in Section 9.05 below. Any attempted transfer without
consent shall be void and shall constitute a non-curable breach of this Lease.
If Tenant is a partnership, any cumulative transfer of more than twenty percent
(20%) of the partnership interests shall require Landlord's consent.
Section 9.02. TENANT AFFILIATE. Tenant may assign this Lease or
sublease the Property, without Landlord's consent, to any corporation which
controls, is controlled by or is under common control with Tenant, or to any
corporation resulting from the merger of or consolidation with Tenant
("Tenant's Affiliate"). In such case, any Tenant's Affiliate shall assume in
writing all of Tenant's obligations under this Lease.
Section 9.03. NO RELEASE OF TENANT. No transfer permitted by this
Article Nine, whether with or without Landlord's consent, shall release Tenant
or change Tenant's primary liability to pay the rent and to perform all other
obligations of Tenant under this Lease. Landlord's acceptance of rent from any
other person is not a waiver of any provision of this Article Nine. Consent to
one transfer is not a consent to any subsequent transfer. If Tenant's transferee
defaults under this Lease, Landlord may proceed directly against Tenant without
pursuing remedies against the transferee. Landlord may consent to subsequent
assignments or modifications of this Lease by Tenant's transferee, without
notifying Tenant or obtaining its consent. Such action shall not relieve
Tenant's liability under this Lease.
Section 9.04. OFFER TO TERMINATE. If Tenant desires to assign the
Lease or sublease the Property, Tenant shall have the right to offer, in
writing, to terminate the Lease as of a date specified in the offer. If
Landlord elects in writing to accept the offer to terminate within twenty (20)
days after notice of the offer, the Lease shall terminate as of the date
specified and all the terms and provisions of the Lease governing termination
shall apply. If Landlord does not so elect, the Lease shall continue in affect
until otherwise terminated and the provisions of Section 9.05 with respect to
any proposed transfer shall continue to apply.
Section 9.05. LANDLORD'S CONSENT.
(a) Tenant's request for consent to any transfer described in Section
9.01 shall set forth in writing the details of the proposed transfer, including
the name, business and financial condition of the prospective transferee,
financial details of the proposed transfer (e.g., the term of and the rent and
security deposit payable under any proposed assignment or sublease), and any
other information Landlord deems relevant. Landlord shall have the right to
withhold consent, if reasonable, or to grant consent, based on the following
factors: (i) the business of the proposed assignee or subtenant and the
proposed use of the Property; (ii) the net worth and financial reputation of
the proposed assignee or subtenant; (iii) Tenant's compliance with all of its
obligations under the Lease; and (iv) such other factors as Landlord may
reasonably deem relevant. If Landlord objects to a proposed assignment solely
because of the net worth and/or financial reputation of the proposed assignee,
Tenant may nonetheless sublease (but not assign), all or a portion of the
Property to the proposed transferee, but only on the other terms of the
proposed transfer.
(b) If Tenant assigns or subleases, the following shall apply:
(i) Tenant shall pay to Landlord as Additional Rent under the Lease
the Landlord's Share (stated in Section 1.14) of the Profit (defined
below) on such transaction as and when received by Tenant, unless
Landlord gives written notice to Tenant and the assignee or subtenant
that Landlord's Share shall be paid by the assignee or subtenant to
Landlord directly.
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of the Society of Industrial [LOGO]
and Office Realtors, ! Inc. _______________
(Multi-Tenant Gross Form)
<PAGE> 9
The Profit means (A) all amounts paid to Tenant for such assignment or
sublease including "key" money monthly rent in excess of the monthly
rent payable under the Lease, and all fees and other consideration paid
for the assignment or sublease, including fees under any collateral
agreements, less (B) costs and expenses directly incurred by Tenant in
connection with the execution and performance of such assignment or
sublease for real estate broker's commissions and costs of renovation or
construction of tenant improvements required under such assignment or
sublease. Tenant is entitled to recover such costs and expenses before
Tenant is obligated to pay the Landlord's Share to Landlord. The Profit
in the case of a sublease of less than all the Property is the rent
allocable to the subleased space as a percentage on a square footage
basis.
(ii) Tenant shall provide Landlord a written statement certifying all
amounts to be paid from any assignment or sublease of the Property
within thirty (30) days after the transaction documentation is signed,
and Landlord may inspect Tenant's books and records to verify the
accuracy of such statement. On written request, Tenant shall promptly
furnish to Landlord copies of all the transaction documentation, all of
which shall be certified by Tenant to be complete, true and correct.
Landlord's receipt of Landlord's Share shall not be a consent to any
further assignment or subletting. The breach of Tenant's obligation
under this Paragraph 9.05(b) shall be a material default of the Lease.
Section 9.06. NO MERGER. No merger shall result from Tenant's sublease
of the Property under this Article Nine. Tenant's surrender of this Lease or
the termination of this Lease in any other manner. In any such event, Landlord
may terminate any or all subtenancies or succeed to the interest of Tenant as
sublandlord under any or all subtenancies.
*
ARTICLE TEN: DEFAULTS, REMEDIES
Section 10.01. COVENANTS AND CONDITIONS. Tenant's performance of each
of Tenant's obligations under this Lease is a condition as well as a covenant.
Tenant's right to continue in possession of the Property is conditioned upon
such performance. Time is of the essence in the performance of all covenants
and conditions.
Section 10.02. DEFAULTS. Tenant shall be in material default under
this Lease:
(a) If Tenant abandons the Property or if Tenant's vacation of the
Property results in the cancellation of any insurance described in Section 4.04;
(b) If Tenant fails to pay rent within three (3) days of written
notice from Landlord or any other charge when due;
(c) If Tenant fails to perform any of Tenant's non-monetary
obligations under this Lease for a period of thirty (30) days after written
notice from Landlord; provided that if more than thirty (30) days are required
to complete such performance, Tenant shall not be in default if Tenant
commences such performance within the thirty (30)-day period and thereafter
diligently pursues its completion. However, Landlord shall not be required to
give such notice if Tenant's failure to perform constitutes a non-curable
breach of this Lease. The notice required by this Paragraph is intended to
satisfy any and all notice requirements imposed by law on Landlord and is not
in addition to any such requirement.
(d) (i) If Tenant makes a general assignment or general arrangement
for the benefit of creditors; (ii) if a petition for adjudication of bankruptcy
or for reorganization or rearrangement is filed by or against Tenant and is not
dismissed within thirty (30) days; (iii) if a trustee or receiver is appointed
to take possession of substantially all of Tenant's assets located at the
Property or of Tenant's interest in this Lease and possession is not restored
to Tenant within thirty (30) days or (iv) if substantially all of Tenant's
assets located at the Property or of Tenant's interest in this Lease is
subjected to attachment, execution or other judicial seizure which is not
discharged within thirty (30) days. If a court of competent jurisdiction
determines that any of the acts described in this subparagraph (d) is not a
default under this Lease, and a trustee is appointed to take possession (or if
Tenant remains a debtor in possession) and such trustee or Tenant transfers
Tenant's interest hereunder, then Landlord shall receive, as Additional Rent,
the excess, if any, of the rent (or any other consideration) paid in connection
with such assignment or sublease over the rent payable by Tenant under this
Lease.
(e) If any guarantor of the Lease revokes or otherwise terminates,
or purports to revoke or otherwise terminate, any guaranty of all or any
portion of Tenant's obligations under the Lease. Unless otherwise expressly
provided, no guaranty of the Lease is revocable.
Section 10.03. REMEDIES. On the occurrence of any material default by
Tenant, Landlord may, at any time thereafter, with or without notice or demand
and without limiting Landlord in the exercise of any right or remedy which
Landlord may have:
(a) Terminate Tenant's right to possession of the Property by any
lawful means, in which case this Lease shall terminate and Tenant shall
immediately surrender possession of the Property to Landlord. In such event,
Landlord shall be entitled to recover from Tenant all damages incurred by
Landlord by reason of Tenant's default, including (i) the worth at the time of
the award of the unpaid Base Rent, Additional Rent and other charges which
Landlord had earned at the time of the termination; (ii) the worth at the time
of the award of the amount by which the unpaid Base Rent, Additional Rent and
other charges which Landlord would have earned after termination until the time
of the award exceeds the amount of such rental loss that Tenant proves Landlord
could have reasonably avoided; (iii) the worth at the time of the award of the
amount by which the unpaid Base Rent, Additional Rent and other charges which
Tenant would have paid for the balance of the Lease Term after the time of
award exceeds the amount of such rental loss that Tenant proves Landlord could
have reasonably avoided; and (iv) any other amount necessary to compensate
Landlord for all the detriment proximately caused by Tenant's failure to
perform its obligations under the Lease or which in the ordinary course of
things would be likely to result therefrom, including, but not limited to, any
costs or expenses Landlord incurs in maintaining or preserving the Property
after such default, the cost of recovering possession of the Property, expenses
of reletting, including necessary renovation or alteration of the Property.
Landlord's reasonable attorneys' fees incurred in connection therewith, and
real estate commission paid or payable. As used in subparts (i) and (ii) above,
the "worth at the time of the award" is computed by allowing interest on unpaid
amounts at the rate of fifteen percent (15%) per annum, or such lesser amount
as may then be the maximum lawful rate. As used in subpart (iii) above, the
"worth at the time of the award" is computed by discounting such amount at the
discount rate of the Federal Reserve Bank of San Francisco at the time of the
award, plus one percent (1%). If Tenant has abandoned the Property, Landlord
hall have the option of (i) retaking possession of the Property and recovering
from Tenant the amount specified in this Paragraph 10.03(a), or (ii) proceeding
under Paragraph 10.03(b):
* Section 9.07. Landlord shall have the right to terminate this Lease as of
the proposed sublease date/assignment date rather than approve
sublease/assignment per the terms and conditions of this Lease. However, Tenant
shall be allowed to
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of the Society of Industrial ------------------------
and Office Realtors, ! Inc. [LOGO] [llegible]
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(Multi-Tenant Gross Form)
concurrently Sublease its space provided Tenant remains the
primary occupant of the Property.
<PAGE> 10
(b) Maintain Tenant's right to possession, in which case this Lease
shall continue in effect whether or not Tenant has abandoned the Property. In
such event, Landlord shall be entitled to enforce all of Landlord's rights and
remedies under this Lease, including the right to recover the rent as it
becomes due:
(c) Pursue any other remedy now or hereafter available to Landlord
under the laws of judicial decisions of the state in which the Property is
located.
Section 10.05. AUTOMATIC TERMINATION. Notwithstanding any other term or
provision hereof to the contrary, the Lease shall terminate on the occurrence
of any act which affirms the Landlord's intention to terminate the Lease as
provided in Section 10.03 hereof, including the filing of an unlawful detainer
action against Tenant. On such termination, Landlord's damages for default
shall include all costs and fees, including reasonable attorneys' fees that
Landlord incurs in connection with the filing, commencement, pursuing and/or
defending of any action in any bankruptcy court or other court with respect to
the Lease; the obtaining of relief from any stay in bankruptcy restraining any
action to evict Tenant; or the pursuing of any action with respect to
Landlord's right to possession of the Property. All such damages suffered
(apart from Base Rent and other rent payable hereunder) shall constitute
pecuniary damages which must be reimbursed to Landlord prior to assumption of
the Lease by Tenant or any successor to Tenant in any bankruptcy or other
proceeding.
Section 10.06. CUMULATIVE REMEDIES. Landlord's exercise of any right or
remedy shall not prevent it from exercising any other right or remedy.
ARTICLE ELEVEN: PROTECTION OF LENDERS
Section 11.01. SUBORDINATION. Landlord shall have the right to
subordinate this Lease to any ground lease, deed of trust or mortgage
encumbering the Property, any advances made on the security thereof and any
renewals, modifications, considerations, replacements or extensions thereof,
whenever made or recorded. Tenant shall cooperate with Landlord and any lender
which is acquiring a security interest in the Property or the Lease. Tenant
shall execute such further documents and assurances as such lender may require,
provided that Tenant's obligations under this Lease shall not be increased in
any material way (the performance of ministerial acts shall not be deemed
material), and Tenant shall not be deprived of its rights under this Lease.
Tenant's right to quiet possession of the Property during the Lease Term shall
not be disturbed if Tenant pays the rent and performs all of Tenant's
obligations under this Lease and is not otherwise in default. If any ground
lessor, beneficiary or mortgagee elects to have this Lease prior to the lien of
its ground Lease, deed of trust or mortgage and gives written notice thereof to
Tenant, this Lease shall be deemed prior to such ground Lease, deed of trust or
mortgage whether this Lease is dated prior or subsequent to the date of said
ground Lease, deed of trust or mortgage or the date of recording thereof.*
Section 11.02. ATTORNMENT. If Landlord's interest in the Property is
acquired by any ground lessor, beneficiary under a deed of trust, mortgagee, or
purchaser at a foreclosure sale, Tenant shall attorn to the transferee of or
successor to Landlord's interest in the Property and recognize such transferee
or successor as Landlord under this Lease. Tenant waives the protection of any
statute or rule of law which gives or purports to give Tenant any right to
terminate this Lease or surrender possession of the Property upon the transfer
of Landlord's interest.
Section 11.03. SIGNING OF DOCUMENTS. Tenant shall sign and deliver any
instrument or documents necessary or appropriate to evidence any such attornment
or subordination or agreement to do so. If Tenant fails to do so within ten (10)
days after written request, Tenant hereby makes, constitutes and irrevocably
appoints Landlord, or any transferee or successor of Landlord, the
attorney-in-fact of Tenant to execute and deliver any such instrument or
document.
Section 11.04. ESTOPPEL CERTIFICATES.
(a) Upon Landlord's written request, Tenant shall execute, acknowledge
and deliver to Landlord a written statement certifying: (i) that none of the
terms or provisions of this Lease have been changed (or if they have been
changed, stating how they have been changed; (ii) that this Lease has not been
cancelled or terminated; (iii) the last date of payment of the Base Rent and
other charges and the time period covered by such payment; (iv) that Landlord
is not in default under this Lease (or, if Landlord is claimed to be in
default, stating why); and (v) such other representations or information with
respect to Tenant or the Lease as Landlord may reasonably request or which any
prospective purchaser or encumbrancer of the Property may require. Tenant shall
deliver such statement to Landlord within ten (10) days after Landlord's
request. Landlord may give any such statement by Tenant to any prospective
purchaser or encumbrancer of the Property. Such purchaser or encumbrancer may
rely conclusively upon such statement as true and correct.
(b) If Tenant does not deliver such statement to Landlord within such
ten (10)-day period, Landlord, and any prospective purchaser or encumbrancer,
may conclusively presume and rely upon the following facts: (i) that the terms
and provisions of this Lease have not been changed except as otherwise
represented by Landlord; (ii) that his Lease has not been cancelled or
terminated except as otherwise represented by Landlord; (iii) that not more
than one month's Base Rent or other charges have been paid in advance; and (iv)
that Landlord is not in default under the Lease. In such event, Tenant shall be
estopped from denying the truth of such facts.
Section 11.05. TENANT'S FINANCIAL CONDITION. Within ten (10) days after
written request from Landlord, Tenant shall delivery to Landlord such financial
statements as Landlord reasonably requires to verify the net worth of Tenant or
any assignee, subtenant, or guarantor of Tenant. In addition, Tenant shall
deliver to any lender designated by Landlord any financial
- --------------
* Landlord will use its best efforts to have the holders of the existing deed
of trust encumbering the Project execute a non-disturbance agreement with
respect to this Lease, in form reasonably acceptable to all parties.
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(Multi-Tenant Gross Form)
<PAGE> 11
statements required by such lender to facilitate the financing or refinancing
of the Property. Tenant represents and warrants to Landlord that each such
financial statement is a true and accurate statement as of the date of such
statement. All financial statements shall be confidential and shall be used
only for the purposes set forth in this Lease.
ARTICLE TWELVE: LEGAL COSTS
Section 12.01. LEGAL PROCEEDINGS. If Tenant or Landlord shall be in
breach or default under this Lease, such party (the "Defaulting Party") shall
reimburse the other party (the "Nondefaulting Party") upon demand for any costs
or expenses that the Nondefaulting Party incurs in connection with any breach
or default of the Defaulting Party under this Lease, whether or not suit is
commenced or judgment entered. Such costs shall include legal fees and costs
incurred for the negotiation of a settlement, enforcement of rights or
otherwise. Furthermore, if any action for breach of or to enforce the
provisions of this Lease is commenced, the court in such action shall award to
the party in whose favor a judgment is entered, a reasonable sum as attorneys'
fees and costs. The losing party in such action shall pay such attorneys' fees
and costs. Tenant shall also indemnify Landlord against and hold Landlord
harmless from all costs, expenses, demands and liability Landlord may incur if
Landlord becomes or is made a party to any claim or action (a) instituted by
Tenant against any third party, or by any third party against Tenant, or by or
against any person holding any interest under or using the Property by license
of or agreement with Tenant; (b) for foreclosure of any lien for labor or
material furnished to or for Tenant or such other person; (c) otherwise arising
out of or resulting from any act or transaction of Tenant or such other person;
or (d) necessary to protect Landlord's interest under this Lease in a
bankruptcy proceeding, or other proceeding under Title 11 of the United States
Code, as amended. Tenant shall defend Landlord against any such claim or action
at Tenant's expense with counsel reasonably acceptable to Landlord or, at
Landlord's election, Tenant shall reimburse Landlord for any legal fees or
costs Landlord incurs in any such claim or action.
Section 12.02 LANDLORD'S CONSENT. Tenant shall pay Landlord's
reasonable attorneys' fees not to exceed $500 incurred in connection with
Tenant's request for Landlord's consent under Article Nine (Assignment and
Subletting), or in connection with any other act which Tenant proposes to do
and which requires Landlord's consent.
ARTICLE THIRTEEN: MISCELLANEOUS PROVISIONS
Section 13.01. NON-DISCRIMINATION. Tenant promises, and it is a
condition to the continuance of this Lease, that there will be no
discrimination against, or segregation of, any person or group of persons on
the basis of race, color, sex, creed, national origin or ancestry in the
leasing, subleasing, transferring, occupancy, tenure or use of the Property or
any portion thereof.
Section 13.02. LANDLORD'S LIABILITY; CERTAIN DUTIES.
(a) As used in this Lease, the term "Landlord" means only the current
owner or owners of the fee title to the Property or Project or the leasehold
estate under a ground lease of the Property or Project at the time in question.
Each Landlord is obligated to perform the obligations of Landlord under this
Lease only during the time such Landlord owns such interest or title. Any
Landlord who transfers its title or interest is relieved of all liability with
respect to the obligations of Landlord under this Lease to be performed on or
after the date of transfer. However, each Landlord shall deliver to its
transferee all funds that Tenant previously paid if such funds have not yet
been applied under the terms of this Lease.
(b) Tenant shall give written notice of any failure by Landlord to
perform any of its obligations under this Lease to Landlord and to any ground
lessor, mortgagee or beneficiary under any deed of trust encumbering the
Property whose name and address have been furnished to Tenant in writing.
Landlord shall not be in default under this Lease unless Landlord (or such
ground lessor, mortgagee or beneficiary) fails to cure such non-performance
within thirty (30) days after receipt of Tenant's notice. However, if such
non-performance reasonably requires more than thirty (30) days to cure. Landlord
shall not be in default if such cure is commenced within such thirty (30)-day
period and thereafter diligently pursued to completion.
(c) Notwithstanding any term or provision herein to the contrary, the
liability of Landlord for the performance of its duties and obligations under
this Lease is limited to Landlord's interest in the Property and the Project,
and neither the Landlord nor its partners, shareholders, officers or other
principals shall have any personal liability under this Lease.
Section 13.03. SEVERABILITY. A determination by a court of competent
jurisdiction that any provision of this Lease or any part thereof is illegal
or unenforceable shall not cancel or invalidate the remainder of such provision
or this Lease, which shall remain in full force and effect.
Section 13.04. INTERPRETATION. The captions of the Articles or
Sections of this Lease are to assist the parties in reading this Lease and are
not a part of the terms or provisions of this Lease. Whenever required by the
context of this Lease, the singular shall include the plural and the plural
shall include the singular. The masculine, feminine and neuter genders shall
each include the other in any provision relating to the conduct, acts or
omissions of Tenant, the term "Tenant" shall include Tenant's agents,
employees, contractors, invitees, successors or others using the Property with
Tenant's expressed or implied permission.
Section 13.05. INCORPORATION OF PRIOR AGREEMENTS; MODIFICATIONS. This
Lease is the only agreement between the parties pertaining to the lease of the
Property and no other agreements are effective. All amendments to this Lease
shall be in writing and signed by all parties. Any other attempted amendment
shall be void.
Section 13.06. NOTICES. All notices required or permitted under this
Lease shall be in writing and shall be personally delivered or sent by
certified mail, return receipt requested, postage prepaid. Notices to Tenant
shall be delivered to the address specified in Section 1.03 above, except that
upon Tenant's taking possession of the Property, the Property shall be Tenant's
address for notice purposes. Notices to Landlord shall be delivered to the
address specified in Section 1.02 above. All notices shall be effective upon
delivery. Either party may change its notice address upon written notice to the
other party.
Section 13.07. WAIVERS. All waivers must be in writing and signed by
the waiving party. Landlord's failure to enforce any provision of this Lease or
its acceptance of rent shall not be a waiver and shall not prevent Landlord
from enforcing that provision or any other provision of this Lease in the
future. No statement on a payment check from Tenant or in a letter accompanying
a payment check shall be binding on Landlord. Landlord may, with or without
notice to Tenant, negotiate such check without being bound to the conditions of
such statement.
Section 13.08. NO RECORDATION. Tenant shall not record this Lease
without prior written consent from Landlord. However, either Landlord or Tenant
may require that a "Short Form" memorandum of this Lease executed by both
parties be recorded. The party requiring such recording shall pay all transfer
taxes and recording fees.
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(Multi-Tenant Gross Form)
<PAGE> 12
Section 13.09. BINDING EFFECT; CHOICE OF LAW. This Lease binds any
party who legally acquires any rights or interest in this Lease from Landlord
or Tenant. However, Landlord shall have no obligation to Tenant's successor
unless the rights or interests of Tenant's successor are acquired in accordance
with the terms of this Lease. The laws of the state in which the Property is
located shall govern this Lease.
Section 13.10. CORPORATE AUTHORITY; PARTNERSHIP AUTHORITY. If Tenant is
a corporation, each person signing this Lease on behalf of Tenant represents
and warrants that he has full authority to do so and that this Lease binds the
corporation. Within thirty (30) days after this Lease is signed, Tenant shall
deliver to Landlord a certified copy of a resolution of Tenant's Board of
Directors authorizing the execution of this Lease or other evidence of such
authority reasonably acceptable to Landlord. If Tenant is a partnership, each
person or entity signing this Lease for Tenant represents and warrants that he
or it is a general partner of the partnership, that he or it has full authority
to sign for the partnership and that this Lease binds the partnership and all
general partners of the partnership. Tenant shall give written notice to
Landlord of any general partner's withdrawal or addition. Within thirty (30)
days after this Lease is signed. Tenant shall deliver to Landlord a copy of
Tenant's recorded statement of partnership or certificate of limited
partnership.
Section 13.11. JOINT AND SEVERAL LIABILITY. All parties signing this
Lease as Tenant shall be jointly and severally liable for all obligations of
Tenant.
Section 13.12. FORCE MAJEURE. If Landlord cannot perform any of its
obligations due to events beyond Landlord's control, the time provided for
performing such obligations shall be extended by a period of time equal to the
duration of such events. Events beyond Landlord's control include, but are not
limited to, acts of God, war, civil commotion, labor disputes, strikes, fire,
flood or other casualty, shortages of labor or material, government regulation
or restriction and weather conditions.
Section 13.13 EXECUTION OF LEASE. This Lease may be executed in
counterparts and, when all counterpart documents are executed, the counterparts
shall constitute a single binding instrument. Landlord's delivery of this Lease
to Tenant shall not be deemed to be an offer to lease and shall not be binding
upon either party until executed and delivered by other parties.
Section 13.14. SURVIVAL. All representations and warranties of Landlord
and Tenant shall survive the termination of this Lease.
ARTICLE FOURTEEN: BROKERS
Section 14.01. BROKER'S FEE. Landlord shall pay a real estate
commission to Landlord's Broker named in Section 1.08 above, if any, as
provided in the written agreement between Landlord and Landlord's Broker, for
services rendered to Landlord by Landlord's Broker in this transaction. Such
commission shall be the amount set forth in Landlord's Broker's commission
schedule in effect as of the execution of this Lease. If a Tenant's Broker is
named in Section 1.08 above, Landlord's Broker shall pay fifty percent (50%) of
its commission to Tenant's Broker. Nothing contained in this Lease shall impose
any obligation on Landlord to pay a commission or fee to any party other than
Landlord's Broker. (1) as follows:*
Section 14.02. PROTECTION OF BROKERS. If Landlord sells the Property, or
assigns Landlord's interest in this Lease, the buyer or assignee shall, by
accepting such conveyance of the Property or assignment of the Lease, be
conclusively deemed to have agreed to make all payments to Landlord's Broker
thereafter required of Landlord under this Article Fourteen. Landlord's Broker
shall have the right to bring a legal action to enforce or declare rights under
this provision. The prevailing party in such action shall be entitled to
reasonable attorneys' fees to be paid by the losing party. Such attorneys' fees
shall be fixed by the court in such action. This Paragraph is included in this
Lease for the benefit of Landlord's Broker.
Section 14.03. BROKER'S DISCLOSURE OF AGENCY. Landlord's Broker hereby
discloses to Landlord and Tenant and Landlord and Tenant hereby consent to
Landlord's Broker acting in this transaction as the agent of (check one):
/ X / Landlord exclusively; or
/ / both Landlord and Tenant.
Section 14.04. NO OTHER BROKERS. Tenant represents and warrants to
Landlord that the brokers named in Section 1.08 above are the only agents,
brokers, finders or other parties with whom Tenant has dealt who are or may be
entitled to any commission or fee with respect of this Lease or the Property.
ADDITIONAL PROVISIONS MAY BE SET FORTH IN A RIDER OR RIDERS ATTACHED
HERETO OR IN THE BLANK SPACE BELOW. IF NO ADDITIONAL PROVISIONS ARE INSERTED,
PLEASE DRAW A LINE THROUGH THE SPACE BELOW.
* one-half (1/2) upon Lease signature and one-half (1/2) upon Tenant's
occupancy and payment of rent.
Initials [ILLEGIBLE]
----------------------
[ILLEGIBLE]
----------------------
1988 Southern California Chapter
of the Society of Industrial [LOGO]
and Office Realtors,(!) Inc.
12
(Multi-Tenant Gross Form)
<PAGE> 13
EXHIBIT "B"
ALQUIST-PRIOLO SPECIAL
EARTHQUAKE STUDIES ZONE ACT
This Addendum is attached as Exhibit "B" to the Lease Dated June 25, 1992 in
which Steritech Inc., a California Corporation is referred to as Tenant and
Shamrock Development Company is referred to as Landlord.
The property which is the subject of this Agreement is or may be situated in a
Special Study Zone as designated under the Alquist-Priolo Special Zone Act,
Sections 2621-2630, inclusive of the California Public Resources Code. No
representations on the subject are made by Landlord or By TRI Commercial Real
Estate Services or its agents or employees, and the Tenant should make his own
inquiry or investigation.
Landlord and Tenant have signed this Lease at the place and on the
dates specified adjacent to their signatures below and have initialed all
Riders which are attached to or incorporated by reference in this Lease.
"LANDLORD"
Signed on Oct. 9, 1992 Shamrock Development Company,
a California Corporation
at
----------------------------- By: /s/ Richard L. Rosenberry
---------------------------
Richard L. Rosenberry
Its: President
-------------------------
By:
--------------------------
Its:
-------------------------
"TENANT"
Signed on Oct. 9, 1992 Steritech, Inc.
a California Corporation
at Concord, CA
---------------------------- By: /s/ Stephen T. Isaacs
--------------------------
Stephen T. Isaacs
Its: President
-------------------------
By: /s/ Peter G. Carroll
--------------------------
Peter G. Carroll
Its: Secretary
-------------------------
IN ANY REAL ESTATE TRANSACTION, IT IS RECOMMENDED THAT YOU CONSULT WITH
A PROFESSIONAL, SUCH AS A CIVIL ENGINEER, INDUSTRIAL HYGIENIST OR OTHER PERSON
WITH EXPERIENCE IN EVALUATING THE CONDITION OF THE PROPERTY, INCLUDING THE
POSSIBLE PRESENCE OF ASBESTOS, HAZARDOUS MATERIALS AND UNDERGROUND STORAGE
TANKS.
THIS PRINTED FORM LEASE HAS BEEN DRAFTED BY LEGAL COUNSEL AT THE
DIRECTION OF THE SOUTHERN CALIFORNIA CHAPTER OF THE SOCIETY OF INDUSTRIAL AND
OFFICE REALTORS, INC. NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE
SOUTHERN CALIFORNIA CHAPTER OF THE SOCIETY OF INDUSTRIAL AND OFFICE REALTORS,
INC., ITS LEGAL COUNSEL, THE REAL ESTATE BROKERS NAMED HEREIN, OR THEIR
EMPLOYEES OR AGENTS, AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT OR TAX
CONSEQUENCES OF THIS LEASE OR OF THIS TRANSACTION. LANDLORD AND TENANT SHOULD
RETAIN LEGAL COUNSEL TO ADVISE THEM ON SUCH MATTERS AND SHOULD RELY UPON THE
ADVICE OF SUCH LEGAL COUNSEL.
1988 Southern California Chapter Initials
of the Society of Industrial [LOGO] ------------------------
and Office Realtors,! Inc.
------------------------
13
(Multi-Tenant Gross Form)
<PAGE> 14
LEASE RIDER
This Lease Rider is attached to and made a part of the Lease dated ___________,
1992 between Shamrock Development Company, a California Corporation (Landlord)
and Steritech, Inc., a California Corporation (Tenant).
The parties agree to the following additions to and modifications of the Lease:
NEW SECTION 1.16 TENANT IMPROVEMENTS. Tenant shall have improvements
constructed at the Property in accordance with this section.
(a) Tenant Improvement Allowance. Landlord shall make available to
Tenant for the payment of Tenant's costs for construction of tenant
improvements, demolition, permits and fees, and space planning/architectural
costs (collectively "Tenant Improvements") up to a maximum of $11.64 per
rentable square foot of the Property (i.e., a total of $106,310.00) (the
"Allowance"), which amount shall be used strictly for such purposes, and shall
be payable in the following progress payments:
25% when Tenant Improvements are 10% completed;
25% when Tenant Improvements are 25% completed;
25% when Tenant Improvements are 50% completed; and
25% when Tenant Improvements are 95% completed.
Percentage completion shall be reasonably determined by Tenant's architect. If
Landlord fails to pay (or cause to be paid, as provided in subparagraph (b),
below) any portion of the Allowance to Tenant as provided herein, Tenant shall
be entitled to offset any unpaid amounts against the rent and any other sums
due to Landlord under the Lease.
(b) Payments. When Tenant is entitled to each progress payment as
provided in subparagraph (a) above, Tenant shall submit to Landlord, and
Landlord shall thereupon immediately submit to Concord Commercial Bank, whose
office is located at Concord, California ("Agent"), invoices for costs incurred
in connection with the Tenant Improvements, with instructions to Agent
immediately to issue checks from its escrow account number 001201530 to the
entity or entities to whom payment is due, as shown on said invoices; provided,
however, that in no event shall the total value of such checks exceed the
amount of the progress payment to which Tenant is then entitled. In no event,
however, shall Tenant be entitled to payment for any invoices submitted to
Landlord after April 1, 1993. Agent's failure or inability to issue checks as
provided herein shall not relieve Landlord from its obligation to cause
payments up to the amount of the Allowance to be made to those entitled to
payment on account of the Tenant Improvements.
<PAGE> 15
(c) Development of Plans. Attached to this Lease as Exhibit A is a
preliminary space plan (the "Preliminary Space Plan"), which Landlord hereby
approves. Tenant shall cause to be prepared for Landlord's review plans,
specifications, and working drawings for the construction of the Tenant
Improvements (the "Final Plans"). Landlord shall approve the Final Plans so
long as they are a logical evolution of the Preliminary Space Plan. To the
extent that the Final Plans are not a logical evolution of the Preliminary
Space Plan, Landlord nevertheless shall not unreasonably withhold or delay its
approval of the Final Plans.
(d) Construction. Tenant shall give Landlord not less than five days'
written notice prior to commencement of construction of the Tenant Improvements
to enable Landlord to post notice of nonresponsibility. No construction shall
commence until Tenant has received all governmental permits necessary to permit
Tenant to legally commence the construction of the Tenant Improvements. Tenant
shall be responsible for monitoring and managing the construction of the Tenant
Improvements, and shall cause the same to be constructed with due diligence and
in compliance with all governmental regulations and the Final Plans (as the
same may be revised from time to time with the approval of Landlord, which
shall not be unreasonably withheld or delayed). Landlord shall have the right
to approve the general contractor(s) to be used by Tenant for the construction
of the Tenant Improvements. If Tenant selects the following general contractor,
Landlord will be deemed to have approved the same: RUDOLPH SLETTEN.
(e) Other Tenants. Tenant shall ensure that the construction of the
Tenant Improvements shall not prevent the access of other tenants of the
Project to their respective premises or the parking areas of the Project.
Tenant will also use reasonable efforts to ensure that its contractors avoid
creating undue noise and inconvenience to such other tenants during
construction of the Tenant Improvements. Landlord acknowledges and agrees,
however, that some noise and inconvenience is inevitable, and Tenant shall not
be liable therefor.
(f) Indemnification; Bonds; Proof of Payment. Tenant shall submit for
Landlord's approval evidence of the general contractor's liability and worker's
compensation insurance. Tenant shall maintain the liability insurance required
under Section 4.04(a) of the Lease from and after the date commencement of
construction begins. So long as the estimated total cost of construction of the
Tenant Improvements does not exceed $1,000,000, Tenant shall not be required to
furnish or cause its contractor(s) to furnish payment and completion bonds.
Except to the extent cause by negligence or willful misconduct of Landlord or
its agents, employees, or contractors, Tenant shall indemnify Landlord against
any and all claims made as a result of the construction of the Tenant
Improvements. Tenant shall also provide Landlord copies of proof of payment of
invoices (other than those to be paid through the Agent) on a monthly basis.
-2-
<PAGE> 16
(g) Term Commencement. The term of the Lease (and Tenant's obligation
to pay rent) shall commence on February 1, 1993, or upon Tenant's actually
moving into the Property and commencing operations, whichever occurs first.
Tenant shall be given full access to the Property immediately upon execution of
this Lease for all purposes reasonably related to the constructing the Tenant
Improvements.
(h) Landlord's Consents. Whenever Landlord's consent is required
pursuant to the provisions of this Section, Landlord shall not unreasonably
withhold or delay such consent. If Landlord fails to notify Tenant in writing
of its disapproval of any matter for which consent is requested within five
business days after Tenant's request therefor, Landlord will be deemed to have
granted its consent.
REVISED SECTION 4.05 (d) MAINTENANCE OF COMMON AREAS. Landlord shall maintain
the common areas in good order, condition and repair and shall operate the
project, in Landlord's sole discretion, as a first-class industrial/commercial
real property development. Tenant shall pay Tenant's pro rata share (as
determined below) of all of the following costs incurred by Landlord for the
operation and maintenance of the Common Areas which increase above the 1993
Base Year expenses for the Project: gardening and landscaping; utilities, water
and sewage charges; maintenance of signs (other than tenants' signs); premiums
for liability, property damage, fire and other types of casualty insurance
(excluding earthquake and flood insurance) on the Common Areas and worker's
compensation insurance; all property taxes and assessments levied on or
attributable to the Common Areas and all Common Area improvements; all personal
property taxes levied on or attributable to personal property used in
connection with the Common Areas; straight-line depreciation on personal
property owned by Landlord which is consumed in the operation or maintenance of
the Common Areas; rental or lease payments paid by Landlord for rented or
leased personal property used in the operation or maintenance of the Common
Areas; fees for required licenses and permits; repairing, resurfacing,
repaving, maintaining, painting, lighting, cleaning, refuse removal, security
and similar items; reserves for roof replacement and exterior painting and
other appropriate reserves; and a reasonable allowance to Landlord for
Landlord's supervision of the Common Areas (not to exceed five percent (5%) of
the gross rents of the Project for the calendar year). Landlord may cause any
or all of such services to be provided by third parties and the cost of such
services shall be included in Common Area costs. Notwithstanding any of the
foregoing Common Area costs shall not include depreciation of real property
which forms part of the Common Areas or expenses that would be considered
capital expenses under generally accepted accounting principles.
-3-
<PAGE> 17
REVISED MATERIAL 5.03 HAZARDOUS MATERIALS.
(a) Tenant shall at all times and in all respects comply with all
federal, state and local laws, ordinances and regulations, including, but not
limited to, the Federal Water Pollution Control Act (33 U.S.C. Section 1251, et
seq.), Resource Conservation & Recovery Act (42 U.S.C. Section 6901, et seq.),
Safe Drinking Water Act (42 U.S.C. Section 3000f, et seq.), Toxic Substances
Control Act (15 U.S.C. Section 2601, et seq.), the Clean Air Act (42 U.S.C.
Section 7401, et seq.), Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. Section 9601, et seq.), California Health & Safety
Code (Section 25100, et seq.; Section 39000, et seq.), California Safe Drinking
Water & Toxic Enforcement Act of 1986 (Health & Safety Code Section 25249.5, et
seq.), California Water Code (Section 13000, et seq.), and other comparable
state and federal laws ("Hazardous Material Laws"), relating to the use,
analysis, generation, manufacture, storage, disposal or transportation of any
Hazardous Material.
(b) Tenant shall, at its own expense, procure, maintain in effect and
comply with all conditions of any and all permits, licenses, and other
governmental and regulatory approvals required for Tenant's use of Hazardous
Material on the Property, including, without limitation, discharge of
(appropriately treated) materials or wastes into or through any sanitary sewer
serving the Property. Tenant shall cause any and all of its Hazardous Material
to be removed from the Property solely in compliance with all applicable
Hazardous Material Laws. Tenant shall in all respects handle, treat, deal with
and manage any and all Hazardous Material in, on, under or about the Property
in total conformity with all applicable Hazardous Material Laws and prudent
industry practices regarding management of such Hazardous Material. Upon
expiration or earlier termination of the term, Tenant shall cause all of its
Hazardous Material to be removed from the Property in accordance with and in
compliance with all applicable Hazardous Material Laws.
(c) Tenant shall indemnify, defend (by counsel reasonably acceptable to
Landlord), protect, and hold Landlord and each of Landlord's officers,
shareholders, employees, agents, attorneys, successors and assigns, free and
harmless from and against any and all claims, liabilities, penalties,
forfeitures, losses or expenses (including attorneys' fees) arising from or
caused in whole or in part, directly or indirectly, by (i) an Environmental
Activity by Tenant; or (ii) Tenant's failure to comply with any Hazardous
Material Law. Tenant's obligations under this Section shall include, without
limitation, and whether foreseeable or unforeseeable, all costs of any repair,
cleanup or detoxification or decontamination of the Property and the Project,
or the preparation and implementation of any closure, remedial action or other
plans in connection therewith that are required as a result of any
Environmental Activity by Tenant, and shall survive the expiration or earlier
termination of this Lease. Landlord shall indemnify, defend (by counsel
reasonably acceptable to Tenant),
-4-
<PAGE> 18
protect, and hold Tenant and each of Tenant's officers, shareholders,
employees, agents, attorneys, successors and assigns, free and harmless from and
against any and all liability, loss, suit, claim, action, cost and expense,
including, without limitation, any attorneys' fees, arising from the occurrence
of any Environmental Activity where such Environmental Activity was caused by
(i) Landlord, (ii) another tenant's conduct at the Project, or (iii) anyone's
conduct at the Project before the date of this Lease. The provisions of this
Section shall survive the termination of this Lease. "Environmental Activity"
means any actual, proposed or threatened storage, holding, existence, release,
emission, discharge, generation, processing, abatement, removal, disposition,
handling or transportation of any Hazardous Material from, into or on the
Property or any other activity or occurrence that causes or would cause any
such event to exist.
(d) It is expressly understood and agreed that to the extent that
neither Landlord nor Tenant has expressly agreed to indemnify the other
pursuant to this Section 5.03, the absence of any such indemnity shall not be
construed to be a waiver by either party of any claims, actions, rights or
remedies at law or in equity against the other party or any other person.
REVISED SECTION 6.01 EXISTING CONDITIONS. To the best of Landlord's knowledge,
as of the execution of the Lease, the Project is in compliance with all laws,
ordinances and governmental regulations and orders. Except as provided in this
Lease, Tenant acknowledges that neither Landlord nor any agent of Landlord has
made any representation as to the condition of the Property or its suitability
for Tenant's intended use. Tenant has inspected the Property and determined the
suitability of all utility services, the HVAC system, and fire safety and alarm
features for Tenant's intended use. Subject to Section 1.16, Tenant will be
considered to accept the Property in its condition as of the date possession is
given to Tenant.
ADDITION TO SECTION 6.05(a) ALTERATIONS, ADDITIONS, AND IMPROVEMENTS. Landlord
shall not unreasonably withhold consent to alterations, additions or
improvements proposed by Tenant and requiring Landlord's consent pursuant to
Section 6.05(a) of the Lease, unless such alterations, additions or
improvements are visible from outside the Property. In granting or withholding
consent, Landlord shall in all events be entitled to consider the impact of
Tenant's proposal on the value of the Project, the cost of restoration of the
Property when possession is recovered from Tenant, and the impact of Tenant's
proposal on other Project tenants, and Landlord may condition any approval on
Tenant's giving adequate assurance of full compliance with all terms of the
Lease and amelioration of any such adverse impacts.
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<PAGE> 19
ADDITION TO SECTION 10.02 DEFAULTS.
(f) A release or discharge of Hazardous Material (as that term is
defined in Section 5.03) occurs at the Property in violation of Hazardous
Material Law as a result of Tenant's activities there, upon Landlord's written
notice to Tenant; provided that Tenant can cure such a default by promptly
commencing and completing the removal of, or taking other appropriate remedial
action with respect to, such release or discharge. The removal or remedial
action shall be conducted in accordance with all applicable laws and regulations
and in a manner which is reasonably acceptable to, and which is approved in
writing by, Landlord.
ARTICLE SIXTEEN: BASE YEARS FOR OTHER CHARGES. Notwithstanding Article Four:
(a) Real Property Taxes. The Base Real Property Taxes on the Property
shall be those assessed for the July 1, 1992 -- June 30, 1993 tax fiscal year,
subject to Tenant's liability for real property tax attributable to that
portion of the Tenant Improvements in excess of $106,310.00.
Example: The real property tax assessed against the Property for the July 1,
1992 -- June 30, 1993 tax fiscal year is $7,000. For the July 1, 1993 -- June
30, 1994 tax fiscal year, the real property tax assessed against the Property
is $12,140, of which $5,000 is attributable (according to the Contra Costa
County Assessor's worksheets) to Tenant Improvements amounting to $440,000.
Under Section 4.02(e) of the Lease, Tenant is responsible for $3,931.93 of the
1993-94 taxes ($140 + 333,690/440,000 x $5,000), and the Landlord is
responsible for the remainder, $8,208.07. The latter figure becomes the Base
Real Property Taxes, so that for future tax fiscal years during the Lease term,
Tenant will be responsible for real property taxes assessed against the
Property in excess of $8,208.07, subject to Tenant's protection against tax
increases resulting from a sale of the Project during the first three years of
the initial term. Landlord would have paid all of the 1992-93 assessment of
$7,000; however, if the Assessor made any supplemental assessment for 1992-93
attributable to the Tenant Improvements, the supplemental assessment would be
allocated between Landlord and Tenant according to the principles of Section
4.02(e).
(b) Insurance Premiums. The Base Premiums for Landlord's insurance
shall be those payable by Landlord for the July 1, 1992 -- June 30, 1993
policy year.
(c) Common Area Costs. Tenant shall be responsible for its pro rate
share of increases in Common Area costs over the amount of those costs for
1993. The Property's share of costs for management and water for 1993 shall be
adjusted as if 95% of the rentable square feet in the Project were leased for
the entire year, if the Project occupancy is less.
-6-
<PAGE> 20
(d) Renewal of Term. If Tenant exercises its option to renew pursuant
to Article Seventeen, then during the renewal term, Tenant's additional rent
under Article Four of the Lease will be calculated using real property taxes
assessed on the Property for the July 1, 1997 - June 30, 1998 tax fiscal year
as Base Real Property Taxes, insurance premiums for the July 1 1997 - June 30,
1998 policy year as Base Premiums, and 1998 Common Area costs. Tenant shall
remain responsible, however, for real property tax attributable to that portion
of the Tenant Improvements in excess of $106,310.00, in accordance with (a)
above.
ARTICLE SEVENTEEN: OPTION TO RENEW. Provided the Tenant is not in default of
any terms and conditions of this Lease either at the time the option is
exercised or as of the date of commencement of the renewal term, Landlord shall
grant to Tenant one (1) option to renew this Lease for an additional term of
five (5) years commencing on expiration of the initial term, and on all the
other terms and conditions contained herein, excepting the Base Rent. The new
Base Rent (Section 1.12) shall equal the number of rentable square feet of
space included in the Property (9,131) multiplied by the average rent per
square foot for building standard office space then being charged in the
Project, or if none, then the fair market rent per square foot for building
standard office space at Stanwell Industrial Park, Concord, California, as of
September 1, 1997. In determining such fair market rent, there shall be taken
into account the fact that the Lease is a gross lease with pass throughs of
increases in property taxes, insurance premiums, and Common Area costs, as
provided in Article Sixteen. Tenant shall give Landlord at least one hundred
eighty (180) days' advance written notice prior to the expiration of this Lease
if it intends to exercise this option to renew. This option shall be exclusive
to Tenant and may not be assigned or otherwise transferred, except pursuant to
an approved or otherwise permitted assignment or sublease under this Lease.
Landlord and Tenant shall have 30 days after Tenant notifies Landlord of the
exercise of its option to renew in which to agree to the new Base Rent. If the
parties cannot agree to the new Base Rent within such 30 day period, each party
shall appoint an Appraiser and shall give notice to the other party of the
identity of the Appraiser within 10 days after the expiration of said 30 day
period. For purposes hereof, "Appraiser" means a real estate broker or MAI
designated appraiser, in either case with not less than five years of full time
commercial appraisal or brokerage experience in the area in which the Project
is located and with no prior business dealings with the party appointing such
Appraiser. If either party fails to appoint an Appraiser, the sole Appraiser
appointed shall make the determination of fair market rent per square foot. If
two Appraisers are appointed, they shall immediately meet and attempt to agree
upon the fair market rent per square foot. If they are unable to do so within
15 days after their first meeting, they shall jointly appoint a third Appraiser
to make such determination, and the third Appraiser shall make such
determination within 10 days of
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<PAGE> 21
his/her appointment. If the two Appraisers are unable to agree upon such third
Appraiser, either party may petition the Presiding Judge of the Superior Court
of Contra Costa County to appoint such third Appraiser. The determination of
fair market rent per square foot as provided in this Article shall be binding
upon the parties. In no event, however, shall the new Base Rent be less than
the Base Rent in effect at the time Tenant exercises its option to renew. The
new Base Rent shall be subject to adjustment for increases in the cost of
living (Section 3.02) as of the first day of the 25th, 37th and 49th months of
the renewal term, subject to the limitations and provisions of Section 1.12(a)
of the Lease.
ARTICLE EIGHTEEN: RIGHT TO TERMINATE. Tenant shall have a one time right to
terminate this Lease per the terms and conditions of this Lease effective
January 31, 1996 ("Early Termination Date"). To exercise this right to
terminate, Tenant shall give Landlord written notice of this election on or
before September 1, 1995.
In the event Tenant elects to terminate the Lease on the Early Termination
Date, Tenant shall additionally include with its notice to the Landlord a check
made payable to Landlord in the amount of Ninety-Eight Thousand Dollars
($98,000.00), which represents the remaining unamortized balance for Landlord's
share of Tenant Improvements, brokerage commissions and three months' rent.
ARTICLE NINETEEN: RESTORATION OF PROPERTY. Upon termination of the Lease
pursuant to Article Eighteen, Tenant shall, at Landlord's option, either vacate
the Property as provided in this Lease or shall pay the Landlord within 10 days
of request the sum of Forty-Five Thousand Six Hundred Fifty-Five ($45,655.00)
Dollars for Landlord's demolition of the Property. In any case Tenant shall be
entitled to remove and retain possession of any specialized laboratory
equipment installed in the Property, provided Tenant repairs any damage caused
by the removal.
ARTICLE TWENTY: PRE-TERMINATION ENVIRONMENT TESTING. Three months or more
before expiration of the Lease term, or before the Early Termination Date if
Tenant exercises its right to early termination pursuant to Article Eighteen,
Landlord shall have the right to conduct environmental tests at the Property.
The cost of such tests shall be borne equally by Landlord and Tenant, at a
total cost of not more than $6,000 unless Landlord elects to pay all of any
excess. Tenant at its sole expense shall remedy any Hazardous Material
contamination that may be discovered from such tests that Tenant is responsible
for. If Tenant fails to remedy contamination it is responsible for by the
expiration of the Lease term, Tenant shall be considered to have held over, and
the provisions of Section 2.04 of the Lease shall apply until all such
contamination has been remedied; and in addition Tenant shall be responsible
for any additional loss sustained by Landlord as a result of such
contamination, including diminution in value of the Project, additional costs
of investigation and cleanup, and claims from subsequent tenants for any delays
or other damage sustained by them.
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<PAGE> 22
ARTICLE TWENTY-ONE: LEGAL COMPLIANCE. (a) Tenant expressly assumes the
responsibility of obtaining required governmental approvals for all aspects of
its anticipated use of the Property, including the storage, use and disposal of
Hazardous Material as disclosed in this Lease. Tenant waives application of the
doctrine of commercial frustration to its obligations under this Lease as
regards its anticipated use of the Property. Tenant will assume responsibility
for continuing compliance with all governmental laws and regulations which may
apply to its operations at the Property, including the cost of any preventative
or reparative actions now or in the future required by laws and orders
governing Tenant's use of the Property.
(b) Notwithstanding the foregoing, if Tenant is unable to obtain all
required governmental approvals by October 25, 1992, then Tenant may elect on
written notice to Landlord given on or before that date, and before
commencement of construction of Tenant Improvements, to cancel this Lease. In
the event of such cancellation, Landlord shall be entitled to retain the sum of
$19,176.00 paid by Tenant upon execution of this Lease as liquidated damages to
compensate Landlord for holding the Property off of the market and for all
other damages sustained by Landlord; however, Tenant shall have no further
obligations under this Lease.
In the event a conflict exists between the Lease and the Lease Rider the terms
and conditions of the Lease Rider shall prevail.
Dated as of the date of the Lease.
LANDLORD TENANT
SHAMROCK DEVELOPMENT COMPANY STERITECH, INC.
By /s/ Richard L. Rosenberry By /s/ Stephen T. Isaacs
-------------------------- -------------------------
RICHARD L. ROSENBERRY STEPHEN T. ISAACS
President President
By /s/ Peter G. Carroll
-------------------------
PETER G. CARROLL
Secretary
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<PAGE> 23
FIRST AMENDMENT TO INDUSTRIAL REAL ESTATE LEASE
This Agreement is made between STANWELL DRIVE PROPERTIES, A CALIFORNIA
LIMITED PARTNERSHIP ("Landlord"), a California limited partnership, and
STERITECH, INC. ("Tenant"), a California corporation.
RECITALS
A. Landlord is the successor to Shamrock Development Co. as owner
and lessor of that certain office building in the City of Concord, Contra Costa
County, California, commonly known as Buchanan Oaks IV, located at 2525
Stanwell Drive ("the Project").
B. Tenant is a tenant of a portion of the Project under a lease
agreement entitled Industrial Real Estate Lease (Multi-Tenant Facility)
("Lease") dated October 1, 1992, entered into between Tenant and Landlord's
predecessor in ownership.
C. The parties wish to modify the provisions of the Lease to
embrace additional space within the Project and to modify other provisions of
the Lease as to the rent, the term, and other matters more particularly set
forth below.
AGREEMENT
IT IS THEREFORE AGREED BETWEEN THE PARTIES AS FOLLOWS:
1. AMENDMENT TO BASIC TERMS.
The following sections of Article One of the Lease are amended as
follows:
SECTION 1.04. PROPERTY: As of the date of execution of this Agreement,
the Property shall include:
(a) 2525 Stanwell Drive, Suite 300, Concord, California,
consisting of approximately 9,131 rentable square feet of office, laboratory
and warehouse space ("the Original Premises"); and
(b) 2525 Stanwell Drive, Suite 100, Concord, California, of
approximately 8,270 rentable square feet of office, laboratory and warehouse
space ("the Expansion Premises").
<PAGE> 24
SECTION 1.05. LEASE TERM: Subject to Paragraph 5(b) below, for the
Original Premises the Lease Term shall be six years five months, beginning on
February 1, 1993, and ending on June 30, 1999, and for the Expansion Premises,
the Lease Term shall be five years beginning on July 1, 1994, and ending on
June 30, 1999.
SECTION 1.11 VEHICLE PARKING SPACES ALLOCATED TO TENANT (SEE SECTION
4.05): Forty (40) non-exclusive on-site parking spaces and 32 non-exclusive
parking spaces in the exclusive parking easement across the street.
SECTION 1.12 RENT AND OTHER CHARGES PAYABLE BY TENANT:
(a) BASE RENT:
(1) The Base Rent for the Original Premises, payable
as provided in Section 3.01, shall be $9,922.00 per month for the period from
February 1, 1993, until January 31, 1995. This Base Rent shall be adjusted on
February 1, 1995, and on each February 1 thereafter during the Lease Term in
the manner provided in Section 3.02; however, the maximum increase at any
single Rental Adjustment Date shall be $992.20 (10% of the initial Base Rent).
In addition, the increase as of February 1, 1995, shall be further limited to
an amount equal to the sum of:
(i) The lesser of $446.10 or the amount of the
increase which would have applied under Section 3.02 as of February 1, 1994,
if that date were a Rental Adjustment Date; and
(ii) The lesser of $446.10 or the amount of
the increase which would have applied under Section 3.02 of February 1, 1995,
if February 1, 1994, were a Rental Adjustment Date.
(2) The Base Rent for the Expansion Premises, payable
on July 1, 1994, and on the first day of each month thereafter and otherwise in
accordance with the terms of Section 3.01, shall be $8,683.50 per month for the
period from July 1, 1994, until June 30, 1996. This Base Rent shall be adjusted
on July 1, 1996, and on each July 1 thereafter during the Lease Term in the
manner provided in Section 3.02; however, the maximum increase at any single
Rental Adjustment Date shall be $868.35 (10% of the initial Base Rent). In
addition, the increase as of July 1, 1996, shall be further limited to an
amount equal to the sum of:
(i) The lesser of $434.17 or the amount of the
increase which would have applied under Section 3.02 as of July 1, 1995, if
that date were a Rental Adjustment Date; and
(ii) The lesser of $434.18 or the amount of the
increase which would have applied under Section 3.02 as of July 1, 1996, if
July 1, 1995, were a Rental Adjustment Date.
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<PAGE> 25
(3) If the Lease Term is extended by reason of Tenant's
exercise of its option under Paragraph 5 below, the Base Rent for both the
Original Premises and the Expansion Premises shall continue to be adjusted as
set forth above on the same basis.
(b) OTHER PERIODIC PAYMENTS: Pursuant to Section 4.05(e) of the Lease,
Tenant will be responsible for 34.3% of Common Area expense increases over the
1993 base year for the Original Premises, and 31.1% of the Common Area expense
increases above the 1994 base year for the Expansion Premises.
SECTION 1.14. LANDLORD'S SHARE OF PROFIT ON ASSIGNMENT OR SUBLEASE:
The Landlord's Share shall be increased from 30% to 50% of the Profit.
2. INCREASE IN SECURITY DEPOSIT.
Effective on execution of this instrument, the Security Deposit
required of Tenant under the Lease shall be $12,000, and Tenant shall at that
time pay to Landlord the sum of $2,078 in order to increase the Security
Deposit to the sum of $12,000. The provisions of Section 3.03(b) of the Lease
shall not apply.
3. TENANT IMPROVEMENTS.
Landlord shall make available to Tenant for the payment of Tenant's
costs for construction of Tenant improvements, demolition, permits and fees,
and space planning/architectural costs (collectively "Tenant Improvements") to
the Expansion Premises up to a maximum of $10 per rentable square foot (i.e., a
total of $82,700) ("the Allowance") which amount shall be used strictly for
such purposes. The schedule and other terms of payment to be made by Landlord
for these Tenant Improvements shall be in accordance with the following
provisions:
(a) Schedule. The Allowance is payable in the following
progress payments:
25% when Tenant Improvements are 10% completed;
25% when Tenant Improvements are 25% completed;
25% when Tenant Improvements are 50% completed; and
25% when Tenant Improvements are 95% completed.
Percentage completion shall be reasonably determined by Tenant's architect. If
Landlord fails to pay any portion of the Allowance to Tenant as provided
herein, Tenant shall be entitled to offset any unpaid amounts against the rent
and any other sums due to Landlord under the Lease.
(b) Payments. When Tenant is entitled to each progress payment
as provided in subparagraph (a) above, Tenant shall submit to Landlord invoices
for
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<PAGE> 26
costs incurred in connection with the Tenant Improvements; provided, however,
that in no event shall the amount then payable to Tenant exceed the amount of
the progress payment to which Tenant is then entitled.
(c) Development of Plans. Attached to this Agreement as Exhibit 1 is a
preliminary space plan (the "Preliminary Space Plan"), which Landlord hereby
approves. Tenant shall cause to be prepared for Landlord's review plans,
specifications, and working drawings for the construction of the Tenant
Improvements (the "Final Plans"). Landlord shall approve the Final Plans so
long as they are a logical evolution of the Preliminary Space Plan. To the
extent that the Final Plans are not a logical evolution of the Preliminary
Space Plan, Landlord nevertheless shall not unreasonably withhold or delay its
approval of the Final Plans.
(d) Construction. Tenant shall give Landlord not less than five days'
written notice prior to commencement of construction of the Tenant Improvements
to enable Landlord to post notice of nonresponsibility. No construction shall
commence until Tenant has received all governmental permits necessary to permit
Tenant to legally commence the construction of the Tenant Improvements. Tenant
shall be responsible for monitoring and managing the construction of the Tenant
Improvements, and shall cause the same to be constructed with due diligence and
in compliance with all governmental regulations and the Final Plans (as the
same may be revised from time to time with the approval of Landlord, which
shall not be unreasonably withheld or delayed). Landlord shall have the right
to approve the general contractor(s) to be used by Tenant for the construction
of the Tenant Improvements. If Tenant selects the following general contractor,
Landlord will be deemed to have approved the same: WESTFOUR CONSTRUCTION.
(e) Other Tenants. Tenant shall ensure that the construction of the
Tenant Improvements shall not prevent the access of other tenants of the
Project to their respective premises or the parking areas of the Project.
Tenant will also use reasonable efforts to ensure that its contractors avoid
creating undue noise and inconvenience to such other tenants during
construction of the Tenant Improvements. Landlord acknowledges and agrees,
however, that some noise and inconvenience is inevitable, and Tenant shall not
be liable therefor.
(f) Indemnification; Bonds; Proof of Payment. Tenant shall submit for
Landlord's approval evidence of the general contractor's liability and worker's
compensation insurance. Tenant shall maintain the liability insurance required
under Section 4.04(a) of the Lease from and after the date commencement of
construction begins. So long as the estimated total cost of construction of the
Tenant Improvements does not exceed $1,000,000, Tenant shall not be required to
furnish or cause its contractor(s) to furnish payment and completion bonds.
Except to the extent caused by negligence or willful misconduct of Landlord
or its agents, employees, or contractors, Tenant shall indemnify Landlord
against any and all claims made as a result of the
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<PAGE> 27
construction of the Tenant Improvements. Tenant shall also provide Landlord
copies of proof of payment of invoices on a monthly basis.
(g) Term Commencement. As to the Expansion Space, the Lease Term (and
Tenant's obligation to pay rent) shall commence on July 1, 1994, or upon
Tenant's actually moving into the Expansion Premises and commencing operations,
whichever occurs first. Tenant shall be given full access to the Expansion
Premises immediately upon execution of this Agreement for all purposes
reasonably related to the constructing the Tenant Improvements.
(h) Landlord's Consents. Whenever Landlord's consent is required
pursuant to the provisions of this Paragraph 3, Landlord shall not unreasonably
withhold or delay such consent. If Landlord fails to notify Tenant in writing
of its disapproval of any matter for which consent is requested within five
business days after Tenant's request therefor, Landlord will be deemed to have
granted its consent.
4. EARLY TERMINATION.
Articles Eighteen and Nineteen of the Lease Rider to the Lease are
hereby revoked and deleted.
5. FUTURE EXPANSION OPTION.
Landlord hereby grants to Tenant the option to lease approximately
9,205 rentable square feet ("Additional Space") within the Project known as
2525 Stanwell Drive, Suite 200, presently occupied by Spine and Sports Medicine
Institute of Northern California, Inc. ("SSMI") under a lease dated February 6,
1992, subject to the terms and conditions of this paragraph. Tenant may notify
Landlord of its election to exercise the option at any time before December 31,
1995, accompanied by payment in the sum of $265,000 payable to Landlord in
order to pay the costs of relocating SSMI or its successor occupying the
Additional Space. Notwithstanding any other provision of the Lease, the failure
of Landlord to receive both Tenant's notice of exercise of the option plus the
required payment on or before December 31, 1995, shall result in the automatic
termination of Tenant's option rights to the Additional Space. If Tenant does
effectively exercise the option:
(a) Landlord shall immediately take steps to terminate any lease then
in effect for the Additional Space, and will use its best efforts to deliver
possession of the Additional Space within 180 days after Tenant's exercise of
the option. In all events Landlord shall deliver possession of the Additional
Space to Tenant within 270 days after Tenant's exercise of the option. Without
limiting Tenant's other remedies, including without limitation the right to
damages and specific performance, if Landlord fails to deliver possession of
the Additional Space to Tenant within 270 days after Tenant's exercise of the
option, Tenant shall have the right to withdraw its exercise of
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<PAGE> 28
the option at any time before possession is actually tendered to Tenant, by
giving notice of its election to Landlord. Upon receipt of such notice,
Landlord shall refund to Tenant the amount of the payment which accompanied
Tenant's exercise of the option, with interest at the rate then payable by
Concord Commercial Bank on six month certificates of deposit in excess of
$250,000. If Landlord fails to so refund to Tenant within 10 days of receipt of
notice, the amount due Tenant shall thereafter accrue interest at the rate of
15% per annum, or the maximum legal rate, whichever is less, until paid, and
Tenant shall have the right to deduct said amount from rent or any other sums
due Landlord under the Lease.
(b) The Lease Term as to the Additional Space and payment of Base Rent
for the Additional Space shall commence on delivery of possession of that space
to Tenant. Landlord shall give Tenant at least 90 days' advance notice of the
date as of which the Additional Space shall be available, and Tenant shall not
be obligated to take possession before expiration of that notice period. The
Base Rent for the Additional Space shall equal the number of rentable square
feet multiplied by 96.63374% of the Base Rent per rentable square foot of the
Original Premises, as then in effect and as subsequently modified in accordance
with the terms of the Lease, as amended. If the Lease Term for the Additional
Space commences on a date other than the first day of a month, the Base Rent
for that partial month shall be prorated, and thereafter Base Rent for the
Additional Space shall be payable on the first day of each month thereafter.
The entire Lease Term shall be extended from June 30, 1999, until June 30,
2002. In calculating the Additional Rent payable by Tenant with respect to the
Additional Space under Article Four of the Lease, the Base Real Property Taxes
on the Additional Space shall be those assessed for the July 1, 1992-June 30,
1993 tax fiscal year, the Base Premiums for Landlord's Insurance shall be those
payable by Landlord for the July 1, 1992-June 30, 1993 policy year, and
Tenant's share of increases in Common Area costs shall be calculated on the
basis of the amount of those costs for calendar year 1993, the same as for the
Original Premises, with Tenant's initial pro rata share of Common Area expenses
attributable to the Additional Space equal to 34.6%.
(c) Prior to December 31, 1995, Tenant may on at least 72 hours
advance notice to Landlord arrange for an inspection of the Additional Space,
accompanied by Landlord's representative. In exercising the option, Tenant will
be considered to have inspected the Additional Space and determined the
suitability of all utility services, the HVAC system, and fire safety and alarm
features for Tenant's intended use and to have accepted the Additional Space in
its condition as of the date of the exercise of its option. Landlord shall be
required only to tender possession of the Additional Space to Tenant in
essentially the same condition as when Tenant exercised the option, and shall
not be obligated to pay for any tenant improvements to that space. Upon
receiving possession of the Additional Space, Tenant shall immediately pay to
Landlord the unamortized portion of the original brokerage costs for SSMI
determined from the table attached as Exhibit 2 (calculated on the basis of
$43,000, the amount of the leasing commission, amortized monthly at 9.5%
interest over ten years from July 1, 1992).
- 6 -
<PAGE> 29
(d) Tenant shall have improvements constructed at the Additional
Space in accordance with this section. Tenant shall cause to be prepared for
Landlord's review a preliminary space plan (the "Preliminary Space Plan") for
the construction of the Tenant Improvements of a similar nature to improvements
made by Tenant in the Original Premises and the Expansion Premises. Landlord
shall not unreasonably withhold or delay its approval of the Preliminary Space
Plan. Tenant shall then cause to be prepared for Landlord's review plans,
specifications and working drawings for the construction of the Tenant
Improvements (the "Final Plans"). Landlord shall approve the Final Plans so long
as they are a logical evolution of the Preliminary Space Plan. To the extent
that the Final Plans are not a logical evolution of the Preliminary Space Plan,
Landlord nevertheless shall not unreasonably withhold or delay its approval of
the Final Plans. The terms of this Agreement relating to Tenant Improvements
shall apply as stated in Paragraph 3 (d), (e), (f) and (h).
(e) At the time possession of the Additional Space is given to
Tenant, the parties agree to execute an amendment to the Lease confirming the
commencement date for the Lease Term as to the Additional Space. Except as
otherwise provided above, all the remaining terms of the Lease as amended shall
apply to the Additional Space.
6. LANDLORD'S RIGHT TO TERMINATE.
The parties hereby revoke and delete Section 9.07 of the Lease.
7. AMENDMENT TO EXHIBIT C.
Exhibit C to the Lease (referenced in Section 6.06 of the Lease)
is modified to delete the following from the list of Tenant's removable
property: specialized lab casework (including wall-mounted cases). The parties
intend and agree that by deleting this item from Exhibit C, it will become
Landlord's property upon termination of the Lease. The parties further agree
that Landlord's said right to require Tenant to remove any alterations,
additions or improvements pursuant to Section 6.06 of the Lease will in any
event not apply with respect to alterations, additions or improvements made by
Tenant to (i) the Original Premises pursuant to Section 1.16 of the Lease Rider
to the Lease, (ii) the Expansion Premises pursuant to Paragraph 3 of this
Agreement, or (iii) the Additional Space pursuant to Paragraph 5 of this
Agreement, except for those items listed in Exhibit C as amended by this
Agreement. If Tenant exercises its option to renew granted in Paragraph 8(a) of
this Agreement, Exhibit C to the Lease shall be modified to delete the following
additional equipment: fume hoods; water system; and non-portable bio safety
cabinets. The parties intend and agree that by deleting those items from Exhibit
C, they will become Landlord's property upon termination of the Lease.
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<PAGE> 30
8. OPTIONS TO RENEW.
Article Seventeen of the Lease Rider to the Lease is amended to read as
follows:
(a) Provided Tenant is not in default of any terms and
conditions of the Lease either at the time the option is exercised or as
of the date of commencement of the renewal term, Landlord grants to
Tenant an option to renew the Lease for an additional term of five (5)
years commencing on expiration of the initial term, as amended, and on
all the other terms and conditions contained in the Lease as amended,
excepting the Base Rent. The new Base Rent (Section 1.12) shall equal
the number of rentable square feet of space included in the Property
then under the Lease multiplied by the fair market rent per square foot
for building standard office space at Stanwell Industrial Park, Concord,
California, as of the date four months prior to expiration of the
initial term, as amended. In determining such fair market rent, there
shall be taken into account the fact that the Lease is a gross lease
with pass-throughs of increases in property taxes, insurance premiums,
and Common Area costs, as provided in Article Sixteen of the Lease
Rider, as well as periodic cost of living increases as provided in
Sections 1.12 and 3.02 of the Lease.
(b) Provided Tenant has exercised the option granted under (a)
above, and is not in default of any terms and conditions of the Lease
either at the time the second option is exercised or as of the date of
commencement of the second renewal term, Landlord grants to Tenant a
second option to renew the Lease for an additional term of five years
commencing on expiration of the first renewal term, and on all the other
terms and conditions contained in the Lease as amended, excepting the
Base Rent. The new Base Rent (Section 1.12) initially shall equal the
number of rentable square feet of space included in the Property then
under the Lease multiplied by the fair market rent per square foot for
building standard office space at Stanwell Industrial Park, Concord,
California, as of the date four months prior to expiration of the first
renewal term; and then as of the beginning of the 31st month of the
second renewal term, the Base Rent shall be recalculated to equal the
number of rentable square feet of space included in the Property then
under the Lease multiplied by the average of (i) the fair market rent
per square foot for building standard office space at Stanwell
Industrial Park, Concord California, as of the date four months prior to
the commencement of the 31st month of the second extension term, and
(ii) the fair market rent per square foot for fully improved biotech
laboratory space in buildings with spaces of comparable amenities, age
and size in Alameda and Contra Costa Counties as of the same date. In
determining
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<PAGE> 31
such fair market rent, there shall be taken into account the location of the
Project in the City of Concord, California, and the fact that the Lease is a
gross lease with pass-throughs of increases in property taxes, insurance
premiums, and Common Area costs, as provided in Article Sixteen of the Lease
Rider, as well as periodic cost of living increases as provided in Sections
1.12 and 3.02 of the Lease.
(c) Tenant shall give Landlord at least one hundred eighty (180)
days' advance written notice prior to the expiration of the then current term
of the Lease if it intends to exercise an option to renew. All options shall be
exclusive to Tenant and may not be assigned or otherwise transferred, except
pursuant to an approved or otherwise permitted assignment or sublease under the
Lease.
(d) Landlord and Tenant shall have until the date four months
before new Base Rent is to become effective under this Article to agree to the
new Base Rent. If the parties cannot agree to the new Base Rent by that date,
each party shall appoint an Appraiser and shall give notice to the other party
of the identity of the Appraiser within 10 days after that date. For purposes
hereof, "Appraiser" means a real estate broker or MAI designated appraiser, in
either case with not less than five years of full time commercial appraisal or
brokerage experience in the area in which the Project is located and with no
prior business dealings with the party appointing such Appraiser. If either
party fails to appoint an Appraiser, the sole Appraiser appointed shall make
the determination(s) of fair market rent per square foot. If two Appraisers are
appointed, they shall immediately meet and attempt to agree upon the
determination(s) of fair market rent per square foot. If they are unable to do
so within 15 days after their first meeting, they shall jointly appoint a third
Appraiser to make such determination(s), and the third Appraiser shall make
such determination(s) within 10 days of appointment. If the two Appraisers are
unable to agree upon such third Appraiser, either party may petition the
presiding judge of the Superior Court of Contra Costa County to appoint such
third Appraiser. The determination(s) of fair market rent per square foot as
provided in this Article shall be binding upon the parties. In no event,
however, shall the new Base Rent be less than the Base Rent in effect at the
time Tenant exercises an option to renew.
(e) During each renewal term the new Base Rent shall be subject to
annual adjustment each July 1 (the Rental Adjustment Date) for increases in the
cost of living (Section 3.02); provided that during each such term the maximum
increase at any single Rental Adjustment Date shall be 10% of the new Base Rent
in effect at commencement of that term.
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<PAGE> 32
9. BASE YEAR DETERMINATIONS.
Subparagraph (d) of Article Sixteen of the Lease Rider to the Lease is
amended to read as follows:
(d) Renewal of Term. If tenant exercises either of its options
to renew pursuant to Article Seventeen as amended, then during each
renewal term, Tenant's additional rent under Article Four of the Lease
will be calculated using real property taxes assessed on the Property
for the first tax fiscal year commencing after the expiring term as Base
Real Property Taxes, insurance premiums for the first policy year
commencing after the expiring term as Base Premiums, and Common Area
Costs for the calendar year in which the renewal term commences. Tenant
shall remain responsible, however, for real property taxes attributable
to that portion of the Tenant Improvements to the Original Premises in
excess of $106,310, in accordance with (a) of this Article, that portion
of the Tenant Improvements to the Expansion Premises in excess of
$82,700, and that portion of the Tenant Improvements installed by Tenant
in the Additional Space, on the same principle.
10. PARKING.
Section 4.05 (c) of the Lease is amended to read as follows:
(c) SPECIFIC PROVISION RE: VEHICLE PARKING. Tenant shall be
entitled to use the number of vehicle parking spaces in the Project
allocated to Tenant in Section 1.11 of the Lease without paying any
additional rent. Tenant's parking shall not be reserved and shall be
limited to vehicles no larger than standard size automobiles or pickup
utility vehicles. Tenant shall not cause large trucks or other large
vehicles to be parked within the Project or on the adjacent public
streets. Temporary parking of large delivery vehicles in the Project may
be permitted by the rules and regulations established by Landlord and in
areas specified by Landlord. Vehicles shall be parked only in striped
parking spaces and not in driveways, loading areas or other locations
not specifically designed for parking. Handicapped spaces shall only be
used by those legally permitted to use them. If Tenant parks more
vehicles in the parking area than the number set forth in Section 1.11
of this Lease, Tenant shall at Landlord's option, immediately remove the
additional vehicles upon notice from Landlord or pay a reasonable daily
charge determined by Landlord for each such additional vehicle.
11. PROPERTY TAXES.
Notwithstanding any provisions of the Lease, as amended, to the
contrary, in no event will Tenant be responsible for paying an increase in real
property taxes
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<PAGE> 33
pursuant to Section 4.02 of the Lease attributable to any tenant improvement
constructed by or on behalf of anyone other than Tenant after May 1, 1994.
12. ENCUMBRANCE OF TENANT'S EQUIPMENT.
Landlord shall execute and deliver such documents as may reasonably be
requested by Tenant's lender or chattel lessor in order to assure the
enforceability of perfected security interests in equipment used by Tenant on
the Property. As a condition to the foregoing obligation, Tenant shall provide
Landlord with a complete copy of the loan or chattel lease documentation, which
shall expressly provide for notice to Landlord of any default by Tenant and
give Landlord the right to cure the default on Tenant's account and, in the
case of a chattel lease, the right to acquire on the same terms available to
Tenant any items which would (if owned by Tenant) have become Landlord's
property on termination of the Lease, pursuant to Paragraph 7 of this
Agreement. Landlord shall have the right to recover from Tenant, in the same
manner as rent, any sums paid by Landlord to Tenant's lender or chattel lessor
pursuant to this paragraph.
13. EXPANSION SPACE LIGHT FIXTURES.
Landlord shall be responsible for the prompt disposal in accordance
with all applicable laws, ordinances and governmental regulations, of all light
fixtures currently stored in the Expansion Premises and all installed light
fixtures in the Expansion Premises disconnected by Tenant's contractors by July
1, 1994.
14. CONFIRMATION OF REMAINING PROVISIONS.
Except as modified by this Agreement, the terms of the Lease remain in
full force and effect between the parties.
Dated: May 16, 1994
LANDLORD TENANT
STANWELL DRIVE PROPERTIES, STERITECH, INC.
A CALIFORNIA LIMITED PARTNERSHIP
BY: SHAMROCK DEVELOPMENT CO.,
General Partner By: /s/ Steven T. Isaacs
--------------------------
STEVEN T. ISAACS,
President
By: /s/ Richard L. Rosenberry
---------------------------
RICHARD L. ROSENBERRY,
President and Secretary By: /s/ Lori L. Roll
--------------------------
LORI ROLL,
Secretary
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<PAGE> 34
EXHIBIT 1
PRELIMINARY PLAN FOR
STERITECH INC.
SCHEME # 3 2-18-94
[FLOOR PLAN]
<PAGE> 35
EXHIBIT 2
================================================================================
MONTH DURING WHICH TENANT RECEIVES AMOUNT PAYABLE BY
POSSESSION OF ADDITIONAL SPACE TENANT TO LANDLORD
================================================================================
1/95 $35,718
2/95 $35,445
3/95 $35,169
4/95 $34,891
5/95 $34,611
6/95 $34,328
7/95 $34,044
8/95 $33,757
10/95 $33,176
11/95 $32,882
12/95 $32,586
1/96 $32,228
2/96 $31,987
3/96 $31,684
4/96 $31,378
5/96 $31,070
6/96 $30,760
7/96 $30,447
8/96 $30,132
9/96 $29,814
10/96 $29,493
11/96 $29,170
12/96 $28,845
- --------------------------------------------------------------------------------
NOTE: If Tenant receives possession on a date other than the first of a month,
the difference between the figure shown for that month and the figure shown for
the following month shall be prorated on a daily basis.
<PAGE> 36
Example 1: On December 29, 1995, Tenant notifies Landlord of its exercise of
the Option to Lease the Additional Space and concurrently pays to Landlord the
sum of $265,000 pursuant to Paragraph 5 of the Agreement. On March 8, 1996,
Landlord notifies Tenant that the Additional Space will be available in 90
days. SSMI in fact vacates the Additional Space by April 25, 1996, and Landlord
tenders possession to Tenant. Tenant elects to go into actual possession as of
May 1, 1996, in lieu of waiting out the full 90 days. Pursuant to Paragraph
5(c), Tenant shall at that time pay to Landlord an additional $31,070 from the
above table together with the first month's Base Rent for the Additional Space.
Example 2: Same facts as in Example 1, except that Tenant does not go into
possession of the Additional Space until June 6, 1996 (90 days after Landlord's
notice of availability). Pursuant to Paragraph 5(c), Tenant shall at that time
pay to Landlord an additional $30,708 ($30,447 + $261 [$30,760 - $30,447 = $313
x 25/30 = $261] = $30,708) from the above table together with 25/30 of the
monthly Base Rent for the Additional Space.
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<PAGE> 37
SECOND AMENDMENT TO INDUSTRIAL REAL ESTATE LEASE
This Agreement is made between STANWELL DRIVE PROPERTIES, A CALIFORNIA
LIMITED PARTNERSHIP ("Landlord"), a California limited partnership, and
STERITECH, INC. ("Tenant"), a California corporation.
RECITALS
A. Landlord is the successor to Shamrock Development Co. as owner
and lessor of that certain office building in the City of Concord, Contra Costa
County, California, commonly known as Buchanan Oaks IV, located at 2525
Stanwell Drive ("the Project").
B. Tenant is a tenant of a portion of the Project under a lease
agreement entitled Industrial Real Estate Lease (Multi-Tenant Facility)
(hereafter "Lease") dated October 1, 1992, entered into between Tenant and
Landlord's predecessor in ownership, as amended by an agreement entitled First
Amendment to Industrial Real Estate Lease (hereafter "First Amendment to
Lease"), dated May 16, 1994, entered into between Tenant and Landlord.
C. The parties wish to modify the provisions of the First
Amendment to Lease to extend the term of the Future Expansion Option granted to
Tenant in the First Amendment at Paragraph 5.
AGREEMENT
IT IS THEREFORE AGREED BETWEEN THE PARTIES AS FOLLOWS:
1. AMENDMENT TO FUTURE EXPANSION OPTION.
Paragraph 5 of the First Amendment, which grants to Tenant the option
to lease approximately 9,205 rentable square feet ("Additional Space") within
the Project known as 2525 Stanwell Drive, Suite 200, presently occupied by
Spine and Sports Medicine Institute of Northern California, Inc. ("SSMI") under
a lease dated February 6, 1992, is amended as follows:
<PAGE> 38
The date by which Tenant may notify Landlord of its election to
exercise the option is hereby extended from December 31, 1995 to January 1,
1997. In accordance with this change, Tenant may arrange for an inspection of
the Additional Space, as provided in Section (c) of Paragraph 5, prior to
January 1, 1997.
2. CONFIRMATION OF REMAINING PROVISIONS
Except as modified by this Second Amendment to Industrial Real Estate Lease,
the terms of the Lease, as modified by the First Amendment to Lease, remain in
full force and effect between the parties.
Dates: December 21, 1995
LANDLORD TENANT
STANWELL DRIVE PROPERTIES, STERITECH, INC.
A CALIFORNIA LIMITED PARTNERSHIP
BY: SHAMROCK DEVELOPMENT CO., By: /s/ Stephen T. Isaacs
General Partner ---------------------------
STEPHEN T. ISAACS
By: /s/ Richard L. Rosenberry, President
-----------------------------
RICHARD L. ROSENBERRY, By: /s/ Lori L. Roll
President and Secretary ---------------------------
LORI L. ROLL,
Secretary
SSMI
SPINE AND SPORTS MEDICINE INSTITUTE
OF NORTHERN CALIFORNIA, INC.
By: /s/ Richard L. Rosenberry
-----------------------------
Name:
---------------------------
Position: CFO
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Exhibit 10.22
[CUFF PROPERTY MANAGEMENT CO. LETTERHEAD]
REAL PROPERTY LEASE
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THIS LEASE is made and entered into by and between S. P. Cuff as trustee of the
Cuff Trust dated 29 April 1982 and owner of the Buchanan Oaks Complex
hereinafter called "Lessor", without regard to number or gender, and Steritech,
Inc. hereinafter called "Lessee", without regard to number or gender.
1. PREMISES: Lessor hereby leases to Lessee and Lessee hereby leases
from Lessor those certain premises in the City of Concord, County of Contra
Costa, State of CALIFORNIA, known as Suite 300, Building "C" 2401 Stanwell
Drive, Concord, CA 94520, the sum totaling approximately 1,380 sq. ft. of the
Buchanan Oaks Complex, 2401 Stanwell Drive, Concord, California. For the
purpose of conducting the following business: Biotechnology R&D Administration.
2. TERM & RENT: The term of this lease shall be for one year. The Lessee
may terminate the lease at the end of six months by giving the Lessor two months
prior notice. The lease will commence on the 1st day of September, 1996 and end
on the 31st day of August, 1997, at a total rent or sum of $21,384.00 DOLLARS,
lawful money of the United States of America, which Lessee agrees to pay to
Lessor, without deduction or offset, at such place or places as may be
designated from time to time by Lessor, in installments as follows:
$1,782 to be paid on execution of this lease. The balance due at $1,782/mo.
payable on the 15th day of each and every month commencing October 15, 1996.
The rental shall be adjusted every twelve (12) months to reflect the change, if
any, of the Consumers Price Index for all Urban Consumers (CPI-U) of San
Francisco, California, for the preceding year in accordance with the formula
stated in paragraph 35 of this lease with the following exceptions:
If there was a change in the Consumer Price Index the increase shall be
limited to 90% of the increase or decrease in the Consumer Price Index.
3. INCREASE IN REAL PROPERTY TAXES: Lessee shall pay any and all
increases in the real property taxes assessed and levied against the demised
premises above the tax presently assessed against the said premises, as well as
any special assessments imposed upon the demised premises for any purpose
whatsoever during the term hereof, whether the increase in said taxes results
from an increase in the assessed evaluation of the demised premises of the
improvements thereon or both. For the purpose of determining the base or
initial tax assess against said demised premises, the payment for the increases
for which the Lessee shall be solely responsible, Lessor and Lessee do hereby
declare as follows:
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Space occupies 4% percent (approx. 1,380 sq. ft.) of the total approx.
35,000 sq. ft. commonly known as The Buchanan Oaks Bldg., 2401 Stanwell Dr.,
Concord, California. This percentage will be multiplied by the tax bill amount
of the 1996 - 1997 tax year to determine the base tax. Lessee will then pay any
increase over and above this base tax in subsequent years.
4. SECURITY DEPOSIT: Lessor acknowledges receipt of a Security
Deposit in the amount of $1,782 upon execution of the lease, as security for
the full and faithful performance of the Lessee of the terms, conditions and
covenants of this Lease. Lessee and Lessor agree that the following disposition
shall apply to the Security Deposit.
a. If the monthly rent shall, from time to time, increase during the term,
or any extension of the term, of this Lease, Lessee shall thereupon deposit
with the Lessor additional Security Deposit so that the total Security Deposit
is equal to the then current monthly rent.
b. Lessor shall not be required to pay interest on the Security Deposit.
Lessors obligation with respect to the Security Deposit are those of debtor and
not a trustee.
c. If at any time during the term hereof Lessee should fail to repair any
damage to the premises leased or any part of the common portions of the
buildings caused by such Lessee or his agent, employees, invitees, or other
visitors through lack of ordinary care for a period of 30 days after written
demand to make such repairs is served on the Lessee by the Lessor, then the
Lessor may appropriate and apply any portion of the Security Deposit as may be
reasonably necessary to fund the repair. Lessee agrees to restore the Security
Deposit to its original amount should resort to the funds be required. Refusal
to restore such amount within 15 days of written demand shall be cause for
termination of this lease.
d. If on the termination of this Lease for any reason Lessee does not
leave the premises in as good condition, except for normal wear and tear, as
when received by the Lessee from the Lessor then the Lessor may appropriate and
apply any portion of the Security Deposit as may be reasonably necessary to
fund the repair.
5. LIABILITY INSURANCE: Lessee agrees during the full term of this
lease to carry public liability and property damage insurance covering the
demised premises in an amount of $250,000 for injury and/or death to any one
person, $500,000 for injury and death to any number of persons in any one
accident and $100,000 property damage liability in so-called Board Companies,
satisfactory to the Lessor, as evidenced by a certificate of insurance with a
10 day written notice of cancellation and to pay the premiums therefore and to
deliver said certificates or documents stating that the Lessee is insured unto
the Lessor, and the failure of the Lessee either to effect said insurance or to
pay the premiums therefore or to deliver said certificates or documents stating
that the Lessee is insured thereof unto the Lessor, and the failure of the
Lessee either to effect said insurance or to pay the premiums therefore or to
deliver said certificates or duplicates thereof unto the Lessor shall permit of
the Lessor itself effecting said insurance and paying the requisite premiums
therefor, which premiums shall be repayable unto it with the next installment
of rental, and failure to repay the sum shall carry with it the same
consequences as failure to pay any installment of rental. Each insurer
mentioned in this paragraph shall agree, by endorsement, upon the policy or
policies issued by it, or by independent instrument furnished to the Lessor,
that it will give the Lessor ten (10) days written notice before the policies
or policy in question shall be altered or canceled.
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6. FIRE INSURANCE: If the fire insurance rate on the building on the
premises is increased by reason of Lessee's occupancy thereof, over and above
the fire rate fixed for Lessor's previous use and occupancy thereof, the Lessee
shall pay to Lessor the additional premium by reason of such increase in
insurance rate for the unexpired portion of the term of this lease. Such
additional premium shall be paid to Lessor on demand and on submission to
Lessee of the proper evidences indicating such increase in rate.
7. POSSESSION: If Lessor, for any reason whatsoever, cannot deliver
possession of the said premises to Lessee at the commencement of the said term,
as hereinbefore specified, this lease shall not be void or voidable, nor shall
Lessor be liable to Lessee for any loss or damage resulting therefrom, but in
that event there shall be a proportionate deduction of rent covering the period
between the commencement of the said term and the time when Lessor can deliver
possession.
8. USES PROHIBITED: Lessee shall not use, or permit said premises, or
any part thereof, to be used, for any purpose or purposes other than the
purpose or purposes for which the said premises are hereby leased; and no use
shall be made or permitted to be made of the said premises, nor acts done,
which will increase the existing rate of insurance upon the building in which
said premises may be located, without the consent of the Lessor, or cause a
cancellation of any insurance policy covering said building, or any part
thereof, nor shall Lessee sell, or permit to be kept, used, or sold, in or
about said premises, any article which may be prohibited by the standard form
of fire insurance policies. Lessee shall, at his sole cost and expense, comply
with any and all requirements, pertaining to said premises, of any insurance
organization or company, necessary for the maintenance of reasonable fire and
public liability insurance, covering said building and appurtenances.
9. WASTE & ALTERATIONS: Lessee shall not commit, or suffer to be
committed, any waste upon the said premises, or any nuisance, or other act or
thing which may disturb the quiet enjoyment of any other tenants in the
building in which the demised premises may be located. Lessee shall not make,
or suffer to be made, any alterations of the said premises, or any part thereof
without the written consent of Lessor first had and obtained, any additions to,
or alterations of, the said premises, except movable furniture and trade
fixtures, shall become at once a part of the realty and belong to Lessor. At
the option of the Lessor the Lessee shall return the premises to the condition
and configuration of the space when first leased.
10. ABANDONMENT: Lessee shall not vacate or abandon the premises at
any time during the term; and if Lessee shall abandon, vacate or surrender said
premises, or be disposed by process of law, or otherwise, any personal property
belonging to Lessee and left on the premises shall be deemed to be abandoned,
at the option of Lessor, except such property as may be mortgaged to Lessor.
11. REPAIRS: Lessee shall, at his sole cost, keep and maintain said
premises and appurtenances and every part thereof including glazing, light
fixtures (and bulbs), plumbing (except buried pipes), any entrance doors and
the interior of the premises, in good and sanitary order, condition and repair,
(excepting exterior walls, roof mounted air conditioning units, common
hallways, common bathrooms, parking area, and roofs, all of which Lessor agrees
to repair), hereby waiving all right to make repairs at the expense of Lessor
as provided in Section 1942 of the Civil Code of the State of California, and
all rights provided for by Section 1941 of said Civil Code. By entry hereunder,
Lessee accepts the premises as being in
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good and sanitary order, condition and repair and agrees on the last day of
said term, or sooner termination of this lease, to surrender unto Lessor all
and singular said premises with said appurtenances in the same condition as
when received reasonable use and wear thereof and damage by fire, act of God or
by the elements excepted, and to remove all of Lessee's signs from said
premises. Lessee agrees to use chair pads under all desk and other chairs or
stools to prevent excessive carpet wear or to repair or replace worn areas or
the entire carpet upon vacating the space should the carpet be damaged beyond
normal wear and tear.
12. FREE FROM LIENS: Lessee shall keep the demised premises and the
property in which the demised premises are situated, free from any liens
arising out of any work performed, materials furnished, or obligations incurred
by Lessee.
13. COMPLIANCE WITH GOVERNMENTAL REGULATIONS: Lessee shall at his sole
cost and expense, comply with all of the requirements of all Municipal, State
and Federal authorities now in force, or which any hereafter be in force,
pertaining to the said premises, and shall faithfully observe in the use of the
premises all Municipal ordinances and State and Federal statutes now in force or
which may hereafter be in force. The judgment of any court of competent
jurisdiction, or the admission of Lessee in any action or proceeding against
Lessee, whether Lessor be a party thereto or not, that Lessee has violated any
such ordinance or statute in the use of the premises, shall be conclusive of
that fact as between Lessor and Lessee.
14. INDEMNIFICATION OF LESSOR: Except for Lessors substantial negligence
or willful misconduct Lessee, as a material part of the consideration to be
rendered to Lessor, hereby waives all claims against Lessor for damages to
goods, wares and merchandise, in, upon or about said premises and for injuries
to persons in or about said premises, for any cause arising at any time, and
Lessee will hold Lessor exempt and harmless from any damage or injury to any
person, or to the goods, wares and merchandise of any person, arising from the
use of the premises by Lessee, or from the failure of Lessee to keep the
premises in good condition and repair as herein provided.
15. ADVERTISEMENTS AND SIGNS: Lessee shall not conduct or permit to be
conducted any sale by auction on said premises. Lessee shall not place or
permit to be placed any projecting or lighted sign, marquee or awning on the
front of the said premises. Lessee, upon request of Lessor, shall immediately
remove any sign or decoration which Lessee has placed or permitted to be placed
in, on, or about the front of the premises and, which, in the opinion of
Lessor, is objectionable or offensive, and if Lessee fails so to do, Lessor may
enter upon said premises and remove the same. Lessee shall not place or permit
to be placed in windows or upon the walls, doors, lawns or roof, any sign,
advertisement or notice without the written consent of Lessor. Lessee shall
not advertise by means of signs or otherwise on or about the demised premises
any sale for the purpose of liquidation in anticipation of terminating business
without the express written consent of Lessor.
16. UTILITIES: Lessor shall pay for all gas, heat, power and light.
Lessor shall pay for water, garbage collection, and other services supplied to
the premises. Lessor shall pay for basic janitorial services. Lessee shall pay
for telephone service.
17. ENTRY BY LESSOR: Lessee shall permit Lessor and his agents to enter
into and upon said premises at all reasonable times with 24 hour notice (except
for emergencies or scheduled janitorial) for the purpose of inspecting the same
or for the purpose of Maintaining
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the building in which said premises are situated, or for the purpose of making
repairs, alterations or additions to any other portion of said building,
included the erection and maintenance of such scaffolding, canopies, fences and
props as may be required, or for the purpose of posting notices of
non-liability for alterations, additions, or repairs or for the purpose of
placing upon the property in which the said premises are located any usual or
ordinary or "for sale" signs, without any rebate of rent and without any
reliability to Lessee for any loss of occupation or quiet enjoyment of the
premises thereby occasioned; and shall permit Lessor, at any time within thirty
days prior to the expiration of this lease, to place upon said premises any
usual or ordinary "to let" or "to lease" signs.
18. DESTRUCTION OF PREMISES: In the event of a partial destruction of
the said premises during the said term, from any cause, Lessor shall forthwith
repair the same, provided such repairs can be made within sixty (60) days under
the laws and regulations of State, Federal, County or Municipal authorities,
but such partial destruction shall in no ways annul or void this lease, except
that Lessee shall be entitled to a proportionate deduction of rent while such
repairs are being made, such proportionate deduction to be based upon the
extent to which the making of such repairs shall interfere with the business
carried on by Lessee in the said premises. If such repairs cannot be made in
sixty (60) days, Lessor may, at his option, make same within a reasonable time,
this lease continuing in full force and effect and the rent to be
proportionately rebated as aforesaid in this paragraph provided. In the event
that Lessor does not so elect to make such repairs which cannot be made in
sixty (60) days, or such repairs cannot be made under such laws and
regulations, this lease may be terminated at the option of either party. In
respect to any partial destruction which Lessor is obligated to repair or may
elect to repair under the terms of this paragraph, the provisions of Section
1932, Subdivision 2, and of Section 1933, Subdivision 4, of the Civil Code of
the State of California are waived by Lessee. In the event that the building in
which the demised premises may be situated be destroyed to the extent of not
less than 33 1/3% of the replacement cost thereof, Lessor may elect to
terminate this lease, whether the demised premises be injured or not. A total
destruction of the building in which the said premises may be situated shall
terminate this lease. In the event of any dispute between Lessor and Lessee
relative to the provisions of this paragraph, they shall each select an
arbitrator, the two arbitrators so selected shall select a third arbitrator and
the three arbitrators so selected shall hear and determine the controversy and
their decision thereon shall be final and binding upon both Lessor and Lessee,
who shall bear the cost of such arbitration equally between them. Said
arbitration shall be conducted under the auspices of the American Arbitration
Association.
19. ASSIGNMENT AND SUB-LETTING: Lessee shall not assign this lease, or
any interest therein, and shall not sublet the said premises or any part
thereof, or any right or privilege appurtenant thereto, or suffer any other
person (the agents and servants of Lessee excepted) to occupy or use the said
premises, or any portion thereof, without the written consent of Lessor first
had and obtained and a consent to one assignment, sub-letting, occupation or use
by any other person, shall not be deemed to be a consent to any subsequent
assignment, sub-letting, occupation or use by another person. Any such
assignment or sub-letting without such consent shall be void, and shall, at the
option of Lessor, terminate this lease. This lease shall not, nor shall any
interest therein, be assignable, as to the interest of Lessee, by operation of
law, without the written consent of Lessor.
20. INSOLVENCY OR BANKRUPTCY: Either (a) the appointment of a receiver
(except a receiver mentioned in paragraph 18 hereof) to take possession of all
or substantially all of the assets of Lessee, or (b) a general assignment by
Lessee for the benefit of creditors,
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of (c) any action taken or suffered by Lessee under any insolvency or
bankruptcy act shall constitute a breach of this lease by Lessee and Lessor may
declare this lease terminated and any assignment pursuant thereto void.
21. DEFAULT: In the event of any breach of this lease by Lessee, then
Lessor besides other rights or remedies he may have, shall have the immediate
right of re-entry and may remove all persons and property from the premises,
such property may be removed and stored in a public warehouse or elsewhere at
the cost of, and for the account of Lessee. Should Lessor elect to re-enter,
as herein provided, or should he take possession pursuant to legal proceedings
or pursuant to any notice provided for by law, he may either terminate this
lease or he may from time to time, without terminating this lease, re-let said
premises or any part thereof for such term or terms (which may be for a term
extending beyond the term of this lease) and at such rental or rentals and upon
each such other terms and conditions as Lessor in his sole discretion may deem
advisable with the right to make alterations and repairs to said premises; upon
each such re-letting (a) Lessee shall be immediately liable to pay to Lessor, in
addition to any indebtedness other than rent due hereunder, the cost and
expenses of such re-letting and of such alterations and repairs, incurred by
Lessor, and the amount, if any, by which the rent reserved in this lease for
the period of such re-letting (up to be not beyond the term of this lease)
exceeds the amount agreed to be paid as rent for the demised premises for such
period on such re-letting; or (b) at the option of Lessor rents received by
such Lessor from such re-letting shall be applied first, to the payment of any
indebtedness, other than rent due hereunder from Lessee to Lessor; second, to
the payment of any costs and expenses of such re-letting and of such
alterations and repair; third, to the payment of rent due and unpaid hereunder
and the residue, if any, shall be held by Lessor and applied in payment of
future rent as the same may become due and payable hereunder. If Lessee has
been credited with any rent to be received by such re-letting under option (a),
and such rent shall not be promptly paid to Lessor by the new tenant, or of
such rentals received from such re-letting under option (b) during any month be
less than that to be paid during that month by Lessee hereunder, Lessee
shall pay any such deficiency to Lessor. Such deficiency shall be calculated
and paid monthly. No such re-entry or taking possession of said premises by
Lessor shall be construed as an election on his part to terminate this lease
unless a written notice of such intention be given to Lessee or unless the
termination thereof be decreed by a court of competent jurisdiction.
Notwithstanding any such re-letting without termination, Lessor may at any time
thereafter elect to terminate this lease for such previous breach. Should
Lessor at any time terminate this lease for any breach, in addition, to any
other remedy he may have, he may recover from Lessee all damages he may incur
by reason of such breach, including the cost of recovering the premises, and
including the worth at the time of such termination of the excess, if any
of the amount of rent and charges equivalent to rent reserved in this lease for
the remainder of the stated term over the then reasonable rental value of the
premises for the remainder of the stated term, all of which amounts shall be
immediately due and payable from Lessee to Lessor.
22. SURRENDER OF LEASE: The voluntary or other surrender of this lease
by Lessee, or a mutual cancellation thereof, shall not work a merger, and
shall, at the option of Lessor, terminate all or any existing sub-leases or
sub-tenancies, or may at the option of Lessor, operate as an assignment to him
of any or all such sub-leases or sub-tenancies.
23. ARBITRATION: Any dispute arising between the parties shall be
settled and decided by arbitration conducted in accordance with the commercial
arbitration rules of the American Arbitration Association (AAA), as then in
effect. The prevailing party in the
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arbitration shall be awarded reasonable attorney's fees, expert and non-expert
witness costs and expenses incurred in connection with said arbitration, unless
the arbitrator for good cause determines otherwise. Costs and fees of the
arbitrator shall be borne by the non-prevailing party. The award of the
arbitrator, which may include equitable relief, shall be final and judgment may
be entered upon it in accordance with applicable law in any court having
jurisdiction thereof. The provisions of Title 9 of the Part 3 of California
Code of Civil Procedure, including Section 1283.05 thereof, permitting expanded
discovery proceedings, shall be applicable to all disputes which are arbitrated
hereunder. Any demand for arbitration shall be in writing and must be made
within a reasonable time after the claim, dispute or other matter in question
has arisen. In no event shall the demand for arbitration be made after the date
that the institution of legal or equitable proceedings based on such claim,
dispute or other matter would be barred by the applicable statute of
limitations.
24. EXPENSES OF ENFORCEMENT: In case any suit shall be brought by the
Lessor against the Lessee to enforce any provision of this lease or for
unlawful detainer of said premises and for recovery of any rent due hereunder
or because of the breach of any other covenant herein, Lessee shall pay to
Lessor all costs incurred including attorney's fees and fees to a collection
agency.
25. RECEIVERSHIP: If a receiver be appointed at the instance of
Lessor in any action against Lessee to take possession of said premises and/or
to collect the rents or profits derived therefrom, the receiver may, if it be
necessary or convenient in order to collect such profits, conduct the business
of Lessee then being carried on in said premises and may take possession of any
personal property belonging to Lessee and used in the conduct of such business,
and may use the same in conducting such business on the premises without
compensation to Lessee for such use. Neither the application for the
appointment of such receiver, nor the appointment of such a receiver, shall be
construed as an election on Lessor's part to terminate this lease unless a
written notice of such intention is given to Lessee.
26. NOTICES: All notices to be given to Lessee may be given in
writing personally or by depositing the same in the United States mail, postage
prepaid, and addressed to Lessee at the said premises, whether or not Lessee
has departed from, abandoned or vacated the premises. All notices from the
Lessee to the Lessor shall be by depositing said notice in the United States
mail, postage prepaid, and addressed to 2525 Stanwell Dr., Concord, CA 94520.
27. TRANSFER OF SECURITY: If any security be given by Lessee to
secure the faithful performance of all or any of the covenants of this lease on
the part of Lessee, Lessor may transfer and/or deliver the security, as such,
to the purchaser of the reversion, in the event that the reversion be sold, and
thereupon Lessor shall be discharged from any further liability in reference
thereto.
28. WAIVER: The waiver by Lessor of any breach of any term, covenant
or condition herein contained shall not be deemed to be a waiver of such term,
covenant or condition or any subsequent breach of the same or any other term,
covenant or condition therein contained. The subsequent acceptance of rent
hereunder by Lessor shall not be deemed to be a waiver of any preceding breach
by Lessee of any term, covenant or condition of this lease, other than the
failure of Lessee to pay such rent.
29. HOLDING OVER: Any holding over after the expiration of the said
term, with the consent of Lessor, shall be construed to be a tenancy from month
to month, at a rental of
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$1,900 per month, and shall otherwise be on the terms and conditions herein
specified, so far as applicable.
30. LEASE YEAR: For the purpose of this lease, the first "leasehold
year" shall be a period commencing on the day the Lessee opens the demised
premises for business and ending on the last day of the twelfth full calendar
month thereafter. After the first leasehold year, the term "leasehold year"
shall mean a fiscal year of twelve months commencing on the first day of the
first month following the close of the first fiscal year and each twelve months
period thereafter.
31. SIGNS: There shall be no signs erected by the Lessee upon the
roof, doors, windows, lawn or exterior walls of the demised premises, save and
except that Lessor grants to Lessee the right to inscribe upon the sign spaces
provided by the Lessor, and only those spaces, on the demised premises a sign
relating to the business of the Lessee conducted therein, which sign shall
conform to the architectural design and color of the signs already thereon and
be approved in writing by the Lessor.
32. MORTGAGE REQUIREMENTS: Lessee agrees to forthwith execute and
deliver to Lessor, upon receipt by it or written request therefrom from Lessor,
without any consideration whatsoever, such instrument or instruments as may be
required by any mortgagee or holder of a deed of trust or other encumbrance on
the real property on which the building containing the demised premises is
located.
33. SALE: In the event of a sale or conveyance by the Lessor of the
building containing the demised premises, the same shall operate to release the
Lessor from any future liability upon any of the covenants or conditions,
express or implied, herein contained in favor of the Lessee, and in such event
the Lessee agrees to look solely to the responsibility of the successor in
interest of the Lessor in and to this lease. If any security be given by Lessee
to secure the faithful performance of all or any of the covenants of this lease
on the part of the Lessee, Lessor may transfer and/or deliver the security, as
such to the purchase of the reversion, in the event that the reversion by sold,
thereupon Lessor shall be discharged from any further liability in reference
thereto.
34. SUBROGATION RIGHTS: Each of the parties hereto does hereby waive
its entire right of recovery against the other for any damages caused by an
occurrence insured against by such party, and the rights of any insurance
carrier to be subrogated to the rights of the insured under the applicable
policy. The foregoing waivers of subrogation shall be effected to the extent
permitted by the Lessor's and Lessee's respective insurers and provided that no
policy of insurance is invalidated as a result of such waivers. Each shall
notify the other in advance if there are lesser limits or if a policy of
insurance is invalidated by a waiver of subrogation.
35. SUCCESSORS AND ASSIGNS: The covenants and conditions herein
contained shall, subject to the provisions as to assignment, apply to and bind
the heirs, successors, executors, administrators and assigns of all of the
parties hereto and all of the parties hereto shall be jointly and severally
liable hereunder.
36. PARKING LOT: Seven parking spaces are assigned to the Lessee on
the property of the Buchanan Oaks Complex. These parking spaces are for the
sole purpose of parking vehicles during the working day. Parking spaces may not
be used for storage, overhaul or
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repair of vehicles. Any other use of parking spaces will not be made without
the written consent of the Lessor. No painting, assembly or storage of
vehicles, trash (or any material) will be done in the parking lot without the
written permission of the Lessor.
37. OPTION TO RENEW: If the Lessee has fully and faithfully kept and
performed all of the terms, covenants, and conditions of this Lease on the part
of the Lessee to be kept and performed, including the full and prompt payment
of all rental herein reserved, then and in such event only Lessee shall, with
the consent of the Lessor requested and granted at the time of written notice,
have the right at its option to renew and extend this Lease for an additional
term of six months. Additional six month options may be exercised for three
year(s) to begin at the expiration of the primary term hereof, provided Lessee
give written notice to Lessor of exercising said option at least two (2) months
prior to the date of the expiration of the term of this Lease or any extension
thereto. Any request to extend the lease by the Lessee shall be responded to
within 10 days of receipt by the Lessor. In the event that the Lessee exercises
the option hereabove described and provided for, rental to be charged shall be
adjusted annually on the anniversary date of the lease as follows:
The value placed upon the consumer price index of San Francisco, California,
all items index on the most recently published report prior to the first day of
the term hereof shall be considered normal. The same Index will be examined on
the most recently published report at the expiration of the term hereof and the
rental for the additional term or any holding over shall be determined by
increasing the normal monthly rental herein reserved by the percentage increase
of said index above or below normal as herein defined; for example, if the most
recently published Index on August, 1982 was 250 points and the most recently
published index prior to July 31, 1984, was 275 points, the rental would be
increased by 10%. The subsequent monthly rent will be determined annually on
the basis of 90% of this value (10%) and, in the case of the example shown
would therefore be 9% for the first year.
38. ENVIRONMENTAL:
a. Lessor agrees to indemnify and save harmless Lessee, Lessee's
successors and assigns and Lessee's present and future officers, directors,
employees and agents (collectively "Indemnities") from and against any and all
liabilities, penalties, fines, forfeitures, demands, damages, loses, claims,
causes of action, suits, judgments, and costs and expenses incidental thereto
(including cost of defense, settlement, arbitration, reasonable attorney's
fees, reasonable consultant's fees and reasonable expert fees), which Lessee or
any of all the Indemnities may hereafter suffer, incur, be responsible for or
disburse as a result of:
1) any government action, order, directive, administrative proceeding
or ruling;
2) personal or bodily injuries (including death) or damage (including
loss of use) to any sites (public or private);
3) any violation or alleged violation of laws, statutes, ordinances,
orders, rules or regulations of any government entity or agency
(collectively "Environmental Liabilities") directly or indirectly caused by or
arising out of any Environmental Hazards existing on or about the Site except
to the extent that any such existence is caused by Lessee's activities at the
Site. The term "Environmental Hazards" shall be defined as hazardous
substances, hazardous wastes, pollutants, asbestos, polychlorinated
9
<PAGE> 10
biphenyls (PCBs), petroleum or other fuels (including crude oil or any fraction
or derivative thereof) and underground storage tanks. The term "hazardous
substances" shall be defined in the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. Section 9601 et seq.) (CERCLA), and
any regulations promulgated pursuant thereto. The term "pollutants" shall be
defined in the Clean Water Act (33 U.S.C. Section 1251 et seq.), and any
regulations promulgated pursuant thereto. This provision shall survive
termination of the Lease.
b. Lessee agrees to indemnify and save harmless Lessor, Lessor's
successors and assigns and Lessor's present and future owner, officers,
trustees, directors, employees and agents (collectively "Indemnities") from and
against any and all liabilities, penalties, fines, forfeitures, demands,
damages, losses, claims, causes of action, suits, judgments, and costs and
expenses incidental thereto (including cost of defense, settlement,
arbitration, reasonable attorneys' fees, reasonable consultant fees and
reasonable expert fees), which Lessor or any or all of the Indemnities may
hereafter suffer, incur, be responsible for or disburse as a result of any
Environmental Hazards existing on or about the site but only to the extent that
any such existence is caused by the Lessee's activities on the Site. This
provision shall survive termination of the Lease.
c. In the event any Environmental Hazards are found at any time to be
in existence on or about the Site other than Environmental Hazards whose
existence is caused by the Lessee's activities on the Site, Lessee shall have
the right to terminate this Lease by so notifying Lessor in writing.
d. Notwithstanding anything to the contrary contained herein, an
environmental clean-up cost or other Environmental Liability for which Lessee
is not responsible pursuant to this paragraph shall not be includable in the
monthly rent paid hereunder.
E. In no event shall Lessee be responsible for environmental
hazards caused by materials on the premises prior to Lessee's tenancy.
39. PROTECTION OF PREMISES: Lessor agrees to use carpet protectors
under all chairs with wheels or to replace worn carpeting caused by the lack of
use of such protectors.
40. TIME: Time is of the essence of this lease.
IN WITNESS WHEREOF, the parties hereto have caused this lease to be executed
this 8th day of August, 1996.
LESSOR: LESSEE:
/s/ S.P. Cuff /s/ Stephen T. Isaacs
- --------------------------------- -----------------------------
S.P. CUFF, Trustee & Owner STEPHEN T. ISAACS
Cuff Trust & Buchanan Oaks Bldgs. Steritech, Inc.
10
<PAGE> 1
Exhibit 10.23
LEASE
This agreement ("LEASE"), made this 1st day of February, 1996 between
Holmgren Partners ("LESSOR") and Steritech, Inc. ("LESSEE").
Premises
For and in consideration of the rents, covenants and agreements
hereinafter agreed by LESSEE to be paid, kept and performed, LESSOR leases unto
LESSEE and LESSEE rents from LESSOR the following described premises situated
in the City of Concord, County of Contra Costa, State of California:
Office building (9,856 sq. ft.) and parking area on lots 5 and 6
Stanwell Industrial Park; ASP #112-251-014, known as "2341 Stanwell Drive".
Term
The term of this lease shall be two years commencing on February 1,
1996, and ending on January 31, 1998.
LESSEE shall pay LESSOR as rent for the premises $80,441.28 annually,
to be paid in increments of 1/12 ($6,703.44) on the first day of each month, in
advance, and to be adjusted annually pursuant to Paragraph 23 below.
This LEASE agreement is entered into between LESSOR and LESSEE
expressly in consideration of the covenants and agreements on LESSOR's and
LESSEE's part hereinafter contained, to-wit:
Utilities
1. LESSEE shall pay LESSOR the said rent in the manner and at the
times herein specified, and in addition thereto shall pay for all water, gas,
heat, electricity and power which may be furnished to or used in or about the
premises during the term of this LEASE.
Holding Over
2. Should LESSEE hold over said premises after this LEASE has
terminated in any manner, such holding over shall be deemed merely a tenancy
from month to month and at the rental of the preceding month, payable monthly
in advance, but otherwise on the same terms and conditions as herein provided.
<PAGE> 2
2
Destruction of Premises
3. In case the premises, or the building in which the same are
situated, are totally destroyed by any cause whatever prior to the commencement
of or during the term of this LEASE, then this LEASE shall thereupon immediately
terminate and neither party hereto shall have any further rights or be under any
further obligations on account of this LEASE, except LESSEE for rent accrued;
and if LESSEE is not then in default in the performance of any of its
obligations under this LEASE, LESSOR shall refund to LESSEE any unearned rents
paid in advance by LESSEE. For the purposes hereof, damage or injury to the
extent of sixty (60) per centum of the value of the premises shall constitute a
total destruction thereof. In case the premises, or the building in which the
same are situated, are partially destroyed by any cause whatever, LESSOR with
reasonable promptness and dispatch, shall repair the same, providing the same
can be repaired and rebuilt under State and Municipal laws and regulations
within thirty (30) working days, and LESSEE shall pay rent during such period of
repair or rebuilding in the proportion that the portion of the premised occupied
by LESSEE bears to the entire premises. For the purposes hereof, damage or
injury which does not amount to sixty (60) per centum of the value of the
premises shall be considered as a partial destruction.
Assignment and Subletting
4. LESSEE may assign or transfer this LEASE or any interest therein,
or sublet the whole or any part of the premises, and LESSOR shall not
unreasonably withhold approval of such transaction.
LESSEE further covenants and agrees that neither this LEASE nor any
interest therein shall be assignable or transferable in any proceedings in
execution against LESSEE, or in any voluntary or involuntary proceedings in
bankruptcy, or insolvency taken by or against LESSEE, or by process of any law
applying to such proceedings without the written consent of LESSOR; and that
upon any assignment, sale or transfer of this LEASE, or any interest therein,
by judgment, execution, bankruptcy or insolvency proceedings, or by any process
of or operation of any law applying to such proceedings, this LEASE shall
immediately terminate at the option of LESSOR.
Tenant Improvements
5. LESSEE may make modifications to the Premises, providing all such
modifications of the Premises by LESSEE shall be done in good workmanship
quality in accordance with local municipal building codes. LESSOR shall support
LESSEE improvements constructed at the Premises to the extent specified in this
section.
<PAGE> 3
3
(a) Tenant Improvement Allowance. LESSOR shall make available to
LESSEE for the payment of LESSEE's costs for construction of LESSEE's
improvements, demolition, permits and fees, and space planning/architectural
costs (collectively "Tenant Improvements") up to a maximum of $11.00 per
rentable square foot of the Premises (the "Allowance"), which amount shall be
used strictly for such purposes, and shall be payable in the following progress
payments:
25% when Tenant Improvements are 10% completed;
25% when Tenant Improvements are 25% completed;
25% when Tenant Improvements are 50% completed;
25% when Tenant Improvements are 95% completed.
Percentage completion shall be reasonably determined by LESSEE's architect. If
LESSOR fails to pay (or cause to be paid, as provided in subparagraph (b),
below) any portion of the Allowance to LESSEE as provided herein, LESSEE shall
be entitled to offset any unpaid amounts against the rent and any other sums
due to LESSOR under the LEASE.
(b) Payments. When LESSEE is entitled to each progress payment as
provided in subparagraph (a) above, LESSEE shall submit to LESSOR, and LESSOR
shall issue payment within fifteen (15) days thereafter.
(c) Development of Plans. LESSEE shall cause to be prepared for
LESSOR's review plans, specifications and working drawings for the construction
of any Tenant Improvements (the "Plans"). LESSOR shall not unreasonably
withhold or delay its approval of the Plans.
(d) Construction. LESSEE shall give LESSOR not less than five
days' written notice prior to commencement of construction of the Tenant
Improvements to enable LESSOR to post notice of nonresponsibility. No
construction shall commence until LESSEE has received all governmental permits
necessary to permit LESSEE to legally commence the construction of the Tenant
Improvements. LESSEE shall be responsible for monitoring and managing the
construction of the Tenant Improvements, and shall cause the same to be
constructed with due diligence and in compliance will all governmental
regulations and the Plans (as the same may be revised from time to time with
the approval of LESSOR, which shall not be unreasonably withheld or delayed).
LESSOR shall have the right to approve the general contractor(s) to be used by
LESSEE for the construction of the Tenant Improvements.
(e) Rent Adjustment. Reasonable Rent adjustments, if any, as a
result of Tenant Improvements which are funded by LESSOR shall take effect
after Tenant Improvements are 100% completed. Such Rent adjustments shall be
agreed upon in writing by LESSOR and LESSEE prior to the initiation of
construction of Tenant Improvements.
<PAGE> 4
4
Use
6. The premises are hereby leased to LESSEE upon the express
condition that LESSEE shall use said premises for general office, research,
manufacturing and related activities and for no other purpose, without the
written consent of LESSOR, during the whole term of the LEASE or which will
increase the present rate of fire insurance upon the building of which said
premises form a part; and upon the further condition that no auction sale shall
be conducted in said premises.
Repairs and Maintenance
7. LESSOR's/LESSEE's Obligations.
LESSOR shall maintain in good order, condition and repair the Building
and all other portions of the Premises not the obligation of LESSEE (as set
forth in this section 7) including the roof and exterior walls, parking lot,
maintenance of trees over 15 feet, sprinkler system, exterior lighting system,
all electrical, lighting, water, plumbing, sewer, and drainage which is
exterior to the Office Building, unless such need for maintenance and repairs
is caused in part or in whole by the act, neglect, fault or omission of any
duty by LESSEE, it agents, servants, employees or invitees, in which case
LESSEE shall pay to LESSOR the reasonable cost of such maintenance and repairs.
LESSOR shall be liable for any failure to make any such repairs or to
perform any maintenance, if such failure shall persist for an unreasonable time
after written notice of the need of such repairs or maintenance is given to
LESSOR by LESSEE.
LESSEE reserves the right to make repairs at LESSOR's expense with
LESSOR's approval and thereafter deduct such expenses from rent or other funds
owed to LESSOR. LESSEE also reserves the right to terminate this LEASE because
of LESSOR's failure to keep the Premises in good order, condition and repair
following notice to LESSOR of the problem and a 15 day period thereafter for
the LESSOR to cure the problem. LESSOR hereby authorizes LESSEE to make
emergency repairs at LESSOR's expense without first obtaining LESSOR's approval
where LESSEE is not able to contact LESSOR within a reasonable time.
<PAGE> 5
LESSEE's Obligations. By taking possession of the Premises, LESSEE
shall be deemed to have accepted the Premises as being in good sanitary order
condition and repair, and LESSEE's obligations to preserve the Premises are as
follows:
LESSEE at LESSEE's sole cost and expense, shall maintain in good order,
condition and repair the following parts of the Premises: the interior
surfaces of the ceilings, walls and floors, all doors, glass and glazing,
equipment installed by or at the expense of LESSEE, and landscaping. LESSEE
shall also be responsible for Minor Repair and Maintenance of interior
plumbing, wiring and heating, ventilating and air conditioning (HVAC) systems,
where Minor Repair and Maintenance does not encompass repairs which cost more
than $500.00 per incident of malfunction. LESSOR and LESSEE hereby agree to
evenly divide the cost of obtaining extended warranties on all newly installed
HVAC systems.
8. LESSEE shall compensate LESSOR upon demand for all damage or
injury to said premises, or the building of which said premises form a part, by
the act or omission of LESSEE, its agents or employees, or of any person or
persons who may be in or upon said premises with the consent of LESSEE.
9. This lease is made upon the express condition that except with
regard to willful negligent acts of LESSOR or its agents, LESSOR shall not be
liable for any damage or claims for damages by reason of any injury or death to
any person or persons while in, upon or in any way connected with said
premises, or the sidewalks adjacent thereto, during the occupancy thereof by
LESSEE; and LESSEE further agrees to hold and save LESSOR harmless from any and
all liability and every and all damages or claims for damages, together with
any and all costs and expenses connected therewith, arising out of the injury
to or the death of any person or persons in or about, or in any way connected
with the premises or the sidewalks adjacent thereto, during the term of this
LEASE.
Waiver of Damages
10. Except with regard to willful or negligent acts of LESSOR or
its agents, LESSEE expressly waives all claim against LESSOR for damage or
injury from any cause whatsoever to any property of any kind, contained in said
premises, or for the destruction thereof from any cause.
Entry and Inspections
11. LESSOR, or its duly authorized representatives, or agents, may
enter upon said premises at any and all reasonable times during the term of
this lease, following reasonable notice to LESSEE, for the purpose of
determining whether LESSEE is complying with the terms and conditions hereof,
or for any other purpose incidental to the rights of LESSOR.
<PAGE> 6
Attorney's Fees
- ---------------
12. If any action shall be brought by either party for the breach or
enforcement of the conditions, covenants or agreements herein set forth, the
other party agrees to pay the prevailing party reasonable attorney's fees and
costs, which shall become a part of the judgment awarded in such action.
Non Waiver of Breach
- --------------------
13. No waiver by either party at any time of any of the terms,
conditions, covenants or agreements of this lease shall be deemed or taken as a
waiver at any time thereafter of any of the same, nor of the strict and prompt
performance thereof by the other party.
Surrender of Premises
- ---------------------
14. LESSEE agrees at the expiration of the term of this lease, or
upon the earlier termination thereof for any reason, to quit and surrender said
premises to LESSOR. LESSEE agrees at the expiration of the lease term hereof or
any prior termination thereof to remove or cause to be removed any and all
signs or fixtures that have been placed upon, in or about the premises by
LESSEE and to repair and restore the premises to the same condition prior to
the time of placing of said signs or fixtures upon, in or about the premises
by LESSEE, LESSEE improvements (pursuant to Section 5 hereof), ordinary wear and
tear and damage by fire, earthquake, act of God or the elements excepted;
LESSEE agrees that at any time after thirty (30) days prior to the termination
of this LEASE, LESSOR may place thereon any usual or ordinary "To Let" or "To
LEASE" or "For Sale" signs.
Default in Rent and Re-Entry
- ----------------------------
15. If the rents herein reserved, or any part thereof, excepting that
portion which LESSEE withholds for maintenance, repairs or Tenant Improvements
as specified in Paragraphs 5 and 7, shall be unpaid for ten days after the date
on which the same shall become due, as aforesaid, or if default on the part of
LESSEE be made in all or any of the agreements herein contained, LESSOR shall
have the option, upon 15 days written notice to LESSEE, to declare this LEASE
forfeited, and the same shall thereupon entirely cease and determine without
written notice; and it shall be lawful for LESSOR to re-enter and take
possession of said premises and remove all persons and property therefrom; and
LESSOR may, after taking possession as aforesaid, at LESSOR's option and
without notice to LESSEE re-let the premises, all without prejudice to LESSOR
of any remedies which might otherwise be used for the collection of the rents
hereinbefore specified, and damages to LESSOR occasioned by such removal is
hereby expressly waived
<PAGE> 7
by LESSEE. It is understood and agreed that each and all of the remedies given
LESSOR hereunder are cumulative and that the exercise of one right or remedy by
LESSOR shall not impair its right to any other remedy.
Uses Prohibited
16. The premises shall not be used or permitted to be used in whole
or in part during the said term of this LEASE for any purpose or use in
violation of any of the laws or ordinances applicable thereto; and LESSEE
agrees at all times during the term of this LEASE to construct, repair,
maintain and do all things necessary to maintain the premises in a clean and
sanitary manner and in compliance with any and all Federal, State or Municipal
regulations or ordinances now or hereafter enacted concerning the conduct of
LESSEE's business in the premises.
Notices
17. Any demand or notice which either party shall be required, or
may desire, to make upon or give to the other, shall be in writing and shall be
delivered personally upon the other, or sent by prepaid registered mail
addressed to the respective parties as follows:
LESSOR: Holmgren Partners
C/O Lynne Holmgren Wolk
1283 Davis Lane
St. Helena, CA 94574
LESSEE: Steritech, Inc.
2525 Stanwell Drive, Suite 300
Concord, CA 94520
Notice by registered mail shall be deemed to be communicated twenty-four (24)
hours from the time of mailing.
Delivery of Possession
18. In the event of the inability of LESSOR to deliver possession
of the premises at the time herein provided, LESSEE agrees that LESSOR shall
not be liable for any damages thereby, and that this lease shall not thereby
become void or voidable but in such time as LESSOR can deliver possession.
<PAGE> 8
8
Terms Defined
19. The words "LESSOR" AND "LESSEE" as used herein shall include the
plural as well as the singular. Words used in masculine gender include the
feminine and neuter. If there be more than one LESSOR or LESSEE the obligations
hereunder imposed upon LESSOR or LESSEE shall be joint and several. The
marginal headings or titles to the paragraphs of this LEASE are not a part of
this LEASE and shall have no effect upon the construction or interpretation of
any part thereof.
Heirs
20. This lease is and shall be binding upon the heirs, executors,
administrators, successors and assigns of the respective parties hereto.
Time
21. Time is hereby expressly declared to be of the essence of this
lease and of all the covenants, agreements, conditions and obligations herein
contained.
Taxes
22. LESSEE shall be liable for all taxes levied or assessed against
the land on which the building of which the demised premises form a part,
including the parking area and the improvements and the building and
improvements on said land, the personal property, trade fixtures and other
property placed by LESSEE in or on about the demised premises, including
without prejudice to the generality of the foregoing, shelves, counters, vaults,
vault doors, wall safes, partitions, fixtures, machinery, plant equipment and
other articles and if any such taxes are levied against LESSOR or LESSOR's
property and if LESSOR pays the same (which LESSOR shall have the right to do
regardless of validity of such levy) or if the assessed value of LESSOR's
property is increased by the inclusion of the value placed on such property or
trade fixtures of LESSEE or placed in the demised premises by LESSEE and if
LESSOR pays the taxes based on such increased assessment (which LESSOR shall
have the right to do, regardless of validity thereof) LESSEE, upon demand
shall, as the case may be, pay to the LESSOR the taxes so levied against LESSOR
or the proportion of such taxes resulting from such increase in the assessment.
LESSEE shall pay all increases in taxes levied or assessed against the land on
which the building of which the demised premises form a part, including the
parking area and the improvements and the buildings and improvements on said
land.
<PAGE> 9
9
Rent Increase
23. The rent for this lease and the option terms shall be adjusted
commencing February 1, 1997, and on each one year anniversary thereafter (an
"Adjustment Date") by a fractional increase, if any, wherein the numerator of
which is the Consumer Price Index (hereinafter defined) published which is
immediately prior to the month in which the annual term commences and
denominator of which is the Consumer Price Index published for the month in
which the initial term of this LEASE commences. The adjusted monthly rent for
that portion of the term following an Adjustment Date until any subsequent
Adjustment Date, or the earlier expiration of the term, shall be the greater of
(i) $6,703.44 or (ii) such sum multiplied by the fraction defined above,
provided that in no case shall an increase or decrease in any given year exceed
2% of the rental paid during the preceding twelve (12) month period. If the
parties are unable to determine the exact amount of the rental due from the
previous period until the exact amount of the rental increase has been
determined, upon such determination, LESSEE shall pay, within ten days after
receipt of an invoice therefore, the cumulative increase amount due for each
month that has passed since the commencement of the new rental term.
As used herein, "Consumer Price Index" means the United States
Department of Labor's Bureau of Labor Statistics Consumer Price Index, All
Urban Consumers, All Items, for the San Francisco-Oakland-San Jose area
(1982-84-100 or any comparable successor index).
Security Deposit
24. LESSOR acknowledges receipt of Five Thousand Five Hundred
Dollars and No/100 ($5,500) as security for LESSEE's faithful performance of
LESSEE's obligations hereunder. If LESSEE performs all of LESSEE's obligation
hereunder, said deposit or so much thereof as had not been applied by LESSOR
shall be returned without interest to LESSEE within ten (10) days after the
expiration of the term hereof, or after LESSEE has vacated the premises,
whichever is later.
LESSOR's Consents
25. If LESSOR fails to notify LESSEE in writing of its disapproval
of any matter for which consent is requested within fifteen (15) business days
after LESSEE's request therefor, LESSOR will be deemed to have granted its
consent.
<PAGE> 10
Option
- ------
26. LESSEE is hereby granted three (3) separate options to extend the
term of this LEASE for an additional period of one (1) year following the two
(2) year term upon the same terms as provided for in this LEASE. Further,
LESSEE is granted an option to extend the term of this LEASE for an additional
period of six (6) years which may be exercised in place of the third one (1)
year option. Each option may be exercised by written notice to LESSOR, given at
least sixty (60) days prior to the expiration date of the Lease.
IN WITNESS WHEREOF the said parties hereto have subscribed their names
as of the day and year first hereinabove written.
LESSEE: LESSOR:
STERITECH, INC. HOLMGREN PARTNERS
By /s/ Stephen T. Isaacs By [Sig]
----------------------------- ----------------------------
Position: CEO Position: Partner
---------------------- ---------------------
<PAGE> 1
EXHIBIT 11.1
CERUS CORPORATION
STATEMENT REGARDING COMPUTATION OF NET LOSS PER SHARE
<TABLE>
<CAPTION>
December 31, June 30,
------------------------------------ --------------------
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net loss $(3,515,466) $(1,800,089) $(2,360,321) $(2,620,900) $(4,157,531)
=========== =========== =========== =========== ===========
Shares used in net loss per share
computation:
Weighted average shares of
common stock outstanding 1,014,000 982,273 963,507 962,458 964,555
Shares related to Staff
Accounting Bulletins 906,222 906,222 906,222 906,222 906,222
----------- ---------- ---------- --------- ----------
Shares used in net loss per
share computation 1,920,222 1,888,495 1,869,729 1,868,680 1,870,777
=========== ========== ========== ========= =========
Net loss per share $ (1.83) $ (0.95) $ (1.26) $ (1.40) (2.22)
=========== ========== ========== ========= =========
Calculation of shares outstanding
for computing pro forma net
loss per share:
Shares used in computing net loss
per share (from above): 1,869,729 1,870,777
Adjusted to reflect the effect of
the assumed conversion of convertible
preferred stock from the date of
issuance: 2,444,316 2,620,677
--------- ---------
Shares used in computing pro forma net loss
per share 4,314,045 4,491,454
========= =========
Pro forma net loss per share $ (0.55) $ (0.93)
========= =========
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG, LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected
Financial Data" and "Experts" and to the use of our report dated April 3, 1996
(except Note 7, as to which the date is July 24, 1996), in the Registration
Statement (Form S-1) and related Prospectus of Cerus Corporation
for the registration of shares of its common stock.
ERNST & YOUNG LLP
Walnut Creek, CA
The foregoing consent is in the form that will be signed upon the
completion of the stock split and reincorporation in Delaware described in Note
7 to the financial statements.
/s/ ERNST & YOUNG LLP
Walnut Creek, CA
September 3, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1993 DEC-31-1994 DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1993 JAN-01-1994 JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1993 DEC-31-1994 DEC-31-1995 JUN-30-1996
<EXCHANGE-RATE> 1 1 1 1
<CASH> 0 7,802,275 9,659,017 8,760,884
<SECURITIES> 0 0 0 0
<RECEIVABLES> 0 0 0 0
<ALLOWANCES> 0 0 0 0
<INVENTORY> 0 0 0 0
<CURRENT-ASSETS> 0 313,603 258,583 213,752
<PP&E> 0 1,745,264 1,949,247 2,080,009
<DEPRECIATION> 0 (356,720) (686,427) (919,301)
<TOTAL-ASSETS> 0 9,684,295 11,348,849 10,280,816
<CURRENT-LIABILITIES> 0 2,250,782 2,654,203 2,495,183
<BONDS> 0 0 0 0
0 0 0 0
0 2,092 2,621 2,811
<COMMON> 0 961 964 1,295
<OTHER-SE> 0 5,436,145 8,659,054 7,745,028
<TOTAL-LIABILITY-AND-EQUITY> 0 9,684,295 11,348,849 10,280,816
<SALES> 0 0 0 0
<TOTAL-REVENUES> 230,000 4,796,348 6,798,935 2,605,721
<CGS> 0 0 0 0
<TOTAL-COSTS> 0 0 0 0
<OTHER-EXPENSES> 3,695,351 6,874,101 9,642,463 6,991,129
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 76,001 43,017 16,821 8,302
<INCOME-PRETAX> (3,515,466) (1,800,089) (2,360,321) (4,157,531)
<INCOME-TAX> 0 0 0 0
<INCOME-CONTINUING> 0 0 0 0
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> (3,515,466) (1,800,089) (2,360,321) (4,157,531)
<EPS-PRIMARY> 0 0 (0.55) (0.93)
<EPS-DILUTED> 0 0 0 0
</TABLE>
