<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 13, 2000
REGISTRATION NO. 333-96317
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
LUMINEX CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 8731 74-2747608
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
12212 TECHNOLOGY BOULEVARD
AUSTIN, TEXAS 78727
(512) 219-8020
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
MARK B. CHANDLER, PH.D.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
LUMINEX CORPORATION
12212 TECHNOLOGY BOULEVARD
AUSTIN, TEXAS 78727
(512) 219-8020
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPIES TO:
<TABLE>
<S> <C>
CRAIG N. ADAMS, ESQ. DONALD J. MURRAY, ESQ.
T. CHRISTOPHER PLEDGER, ESQ. DEWEY BALLANTINE LLP
THOMPSON & KNIGHT LLP 1301 AVENUE OF THE AMERICAS
98 SAN JACINTO BOULEVARD, SUITE 1200 NEW YORK, NEW YORK 10019
AUSTIN, TEXAS 78701 (212) 259-8000
(512) 469-6100
</TABLE>
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
PRELIMINARY PROSPECTUS March 13, 2000
Subject to completion
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY +
+NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY PROSPECTUS +
+IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO +
+BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
4,500,000 Shares
[LOGO OF LUMINEX APPEARS HERE]
Common Stock
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This is our initial public offering of shares of our common stock. No public
market currently exists for our common stock. We expect the public offering
price to be between $17.00 and $19.00 per share.
We have applied to have our common stock listed on the Nasdaq National Market
under the symbol "LMNX."
BEFORE BUYING ANY SHARES YOU SHOULD READ THE DISCUSSION OF MATERIAL RISKS OF
INVESTING IN OUR COMMON STOCK IN "RISK FACTORS" BEGINNING ON PAGE 7.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is
a criminal offense.
<TABLE>
<CAPTION>
PER SHARE TOTAL
- -------------------------------------------------------
<S> <C> <C>
Public offering price $ $
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Underwriting discounts and commissions $ $
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Proceeds, before expenses, to Luminex $ $
- -------------------------------------------------------
</TABLE>
The underwriters may also purchase up to 675,000 shares of common stock from us
at the public offering price, less the underwriting discounts and commissions,
within 30 days from the date of this prospectus. The underwriters may exercise
this option only to cover over-allotments, if any. If the underwriters exercise
the option in full, the total underwriting discounts and commissions will be
$ , and the total proceeds, before expenses, to Luminex will be $ .
The underwriters are offering the common stock as set forth under
"Underwriting." Delivery of the shares will be made on or about , 2000.
WARBURG DILLON READ LLC
LEHMAN BROTHERS
DAIN RAUSCHER WESSELS
<PAGE>
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[Inside Front Cover]
Luminex
Representation of dyed microsphere during a bioassay using the LabMAP system.
[Inside Front Cover Gatefold]
LabMAP
The Technology
Luminex has developed a proprietary technology that combines a microscopic
fluid stream and digital signal processing to perform biological tests at high-
speeds and low cost. This miniaturized biological testing format has broad
applications in pharmaceutical, clinical and biomedical research laboratories.
Representation of microsphere--Luminex dyes microscopic plastic beads, called
microspheres.
Representation of a set of 100 dyed microspheres--in 100 different
fluorescently colored sets.
Representation of microsphere with targeted antibodies on its surface--A
biological test occurs on the surface of each microsphere set.
Representation of four different dyed microspheres representing a bioassay
using the LabMAP system--This allows researchers to perform multiple biological
tests in the same sample.
[Inside Front Cover Gatefold]
A microscopic fluid stream carries each biological test through laser beams in
the Luminex 100, generating florescent signals which provide instantaneous test
results.
Representation of the microfluidic system including two small lasers.
Picture of the Luminex 100 product with XY platform and packaged microspheres.
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<PAGE>
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Through and including , 2000 (the 25th day after commencement of this
offering), federal securities law may require all dealers selling shares of our
common stock, whether or not participating in this offering, 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
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<TABLE>
<S> <C>
Prospectus summary................... 3
The offering......................... 5
Summary financial and operating
data............................... 6
Risk factors......................... 7
Forward-looking information.......... 19
Use of proceeds...................... 20
Dividend policy...................... 20
Capitalization....................... 21
Dilution............................. 22
Selected financial data.............. 24
Management's discussion and analysis
of financial condition and results
of operations...................... 26
</TABLE>
<TABLE>
<S> <C>
Business......................... 31
Management....................... 46
Related party transactions....... 55
Principal stockholders........... 57
Description of capital stock..... 59
Shares eligible for future sale.. 62
Underwriting..................... 64
Legal matters.................... 66
Experts.......................... 66
Where you can find more
information.................... 66
Index to financial statements.... F-1
</TABLE>
Luminex(R) and LabMAP(TM) are trademarks of Luminex Corporation. This
prospectus also refers to trademarks and trade names of other organizations.
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<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
Prospectus summary
This summary highlights information contained elsewhere in this prospectus. You
should read the entire prospectus carefully, especially the risks of investing
in our common stock which we discuss under "Risk factors." Our principal
executive offices are located at 12212 Technology Boulevard, Austin, Texas
78727. Our telephone number is (512) 219-8020. Our web site is
http://www.luminexcorp.com. We do not intend the information found on our web
site to be a part of this prospectus.
OUR BUSINESS
Luminex Corporation has developed, manufactures and markets a proprietary
technology that simplifies biological testing for the life sciences industry.
This industry depends on a broad range of tests, called bioassays, to discover
new drugs, identify new genes or simply monitor blood cholesterol levels. The
LabMAP system simultaneously performs up to 100 bioassays on a single drop of
fluid. We accomplish this with the Luminex 100, a compact instrument that reads
biological tests taking place on the surface of microscopic plastic beads
called microspheres. The Luminex 100 combines this miniaturized bioassay
capability with small lasers, digital signal processors and proprietary
software to create a system offering significant advantages in speed,
precision, flexibility and cost. We believe our LabMAP technology is broadly
applicable in the fields of drug discovery, clinical diagnostics, genetic
analysis and biomedical research.
We began marketing the current generation of LabMAP in 1999. As of February 29,
2000, 63 life sciences customers have purchased 114 LabMAP systems. Our
customers include Abbott Laboratories, Bio-Rad Laboratories, Inc., Centers for
Disease Control and Prevention, Eli Lilly and Company, GlaxoWellcome plc,
Laboratory Corporation of America, Lawrence Livermore National Laboratories,
Life Technologies, Inc., Mayo Clinic, National Institutes of Health and
SmithKline Beecham Corporation.
OUR MARKET OPPORTUNITY
The life sciences industry uses bioassays extensively to detect the presence of
certain biochemicals, proteins or genes in a sample. Drug discovery, genetic
analysis, pharmacogenomics, clinical diagnostics and general biomedical
research all broadly use bioassays. For example, bioassays can be used to:
.measure the attraction, or affinity, between a chemical compound and a disease
target for drug discovery and development;
.assist physicians in prescribing the appropriate drug therapy to match the
patient's unique genetic makeup, a process known as pharmacogenomics;
.detect genetic variations, such as single nucleotide polymorphisms or SNPs;
and
.measure the presence and quantity of biochemicals in blood to assist
physicians in diagnosing, treating and monitoring disease conditions such as
heart attack or diabetes.
Laboratories either develop bioassays internally to meet their specific needs
or purchase them in the form of an off-the-shelf test kit or customized
service. Industry reports estimate the global market for
3
<PAGE>
tools the drug discovery and development, clinical diagnostic and biomedical
research industries use to develop and perform bioassays to have been
approximately $27.5 billion in 1998 and expect it to grow at an annual rate of
7.2%. There are a number of factors contributing to this increase, including:
.increased spending by pharmaceutical and biomedical research companies on
research and development;
.a shift in research and development focus from gene sequencing to determining
the function of genes and their protein products, known as functional genomics
and proteomics;
.increased demand for disease-specific diagnostic tests;
.application of disease targets from drug discovery into in vitro diagnostics;
and
.evolution of pharmacogenomics.
The differing bioassay needs of life sciences laboratories have led to the
development of specialized techniques and instrumentation. As a result, most of
these laboratories have become highly compartmentalized. For example, clinical
testing facilities organize into functional groups, such as chemistry,
microbiology, immunology and infectious disease. Similarly, pharmaceutical
companies organize their laboratories by disease target, such as cancer and
hypertension, as well as by the stages of the drug discovery process, from
initial bioassay development to toxicology. This has created inefficiencies in
laboratories since they must now purchase multiple instruments, often from
different vendors, to meet their testing needs. This limits the laboratories'
ability to standardize bioassay techniques, operator training and hardware
maintenance.
THE LUMINEX SOLUTION
Our solution is to provide a single platform, the LabMAP technology, that can
perform a wide range of bioassays in a cost-effective manner. The key features
of our platform include the following:
.performs multiple tests simultaneously;
.flexible in customizing bioassays comprised of multiple tests;
.high rate, or throughput, of test results per day;
.ease of use; and
.low cost to purchase and operate.
OUR STRATEGY
Our goal is to establish our LabMAP system as the industry standard for
performing bioassays. To achieve this goal, we have implemented the following
strategy:
.focus on large, fast-growing segments of the life sciences industry;
.continue to develop strategic partnerships to broaden and accelerate market
acceptance of our LabMAP technology;
.provide an open platform that allows customers to design bioassays using a
single platform;
.expand the functionality of the LabMAP product line; and
.allow easy technology access to encourage rapid market adoption.
4
<PAGE>
The offering
The following information assumes that the underwriters do not exercise the
over-allotment option granted to them to purchase additional shares in the
offering.
<TABLE>
<C> <S>
Common stock we are offering............... 4,500,000 shares
Common stock to be outstanding after the
offering................................. 26,472,821 shares
Proposed Nasdaq National Market symbol..... LMNX
Use of proceeds............................ To fund our operations, including
continued development and
manufacturing of existing
products and research and
development of additional
products, expanding our
facilities to be able to meet the
needs of our growing business,
and for other working capital and
general corporate purposes. See
"Use of proceeds."
</TABLE>
Unless we indicate otherwise, when analyzing the information in this
prospectus, you should assume that all outstanding shares of our preferred
stock convert into 8,768,592 shares of our common stock upon the closing of
this offering.
At February 29, 2000, we were obligated to issue shares of common stock upon
exercise of options and warrants as follows:
.4,342,984 shares issuable upon the exercise of options at a weighted average
exercise price of $5.96 per share;
.535,500 shares issuable upon the exercise of warrants at an exercise price of
$1.96 per share; and
.2,627,900 additional shares available for future grant under our 2000 Long-
Term Incentive Plan. See "Management -- Employee benefit plans -- 2000 Long-
Term Incentive Plan."
In addition, we have agreed to issue an additional 675,000 shares if the
underwriters exercise their over-allotment option in full, which we describe in
"Underwriting". If the underwriters exercise this option in full, 27,147,648
shares of common stock will be outstanding after this offering.
We base our calculation of the number of shares of common stock outstanding
after the offering on shares outstanding as of February 29, 2000. See
"Capitalization."
5
<PAGE>
Summary financial and operating data
The as adjusted balance sheet reflects the receipt of the net proceeds from the
sale of 4,500,000 shares of our common stock in this offering at an assumed
price to the public of $18.00 per share, after deducting the underwriting
discounts and commissions and estimated offering expenses. The pro forma net
loss per share and shares used in computing pro forma net loss per share are
calculated as if all of our convertible preferred stock was converted into
shares of our common stock on the date of their issuance.
<TABLE>
<CAPTION>
Period from
May 24, 1995
(inception) to Year Ended December 31,
December 31, 1995 1996 1997 1998 1999
Statement of operations
data (In thousands, except per share data)
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<S> <C> <C> <C> <C> <C>
Revenue:
Product................ $-- $-- $99 $386 $2,606
Grant.................. -- -- -- -- 506
------ ------- ------- ------- -------
Total revenue......... -- -- 99 386 3,112
Cost of product
revenue.............. -- -- 10 88 1,172
------ ------- ------- ------- -------
Gross margin............ -- -- 89 298 1,940
Operating expenses:
Research and
development......... 58 1,036 1,594 3,611 5,776
Selling, general and
administrative...... 216 731 1,426 2,566 4,896
------ ------- ------- ------- -------
Total operating
expenses........... 274 1,767 3,020 6,177 10,672
------ ------- ------- ------- -------
Loss from operations.... (274) (1,767) (2,931) (5,879) (8,732)
Interest income......... 4 7 178 283 284
------ ------- ------- ------- -------
Net loss................ $(270) $(1,760) $(2,753) $(5,596) $(8,448)
====== ======= ======= ======= =======
Net loss per share,
basic and diluted.... $(0.06) $(0.16) $(0.21) $(0.43) $(0.64)
====== ======= ======= ======= =======
Shares used in computing
net loss per share,
basic and diluted.... 4,531 10,826 12,842 13,086 13,151
Pro forma net loss per
share, basic and
diluted.............. $(0.41)
=======
Shares used in computing
pro forma net loss
per share, basic and
diluted.............. 20,529
</TABLE>
<TABLE>
<CAPTION>
As of December 31,
1999
Actual As Adjusted
Balance sheet data (In thousands)
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<S> <C> <C>
Cash and cash equivalents.................................. $4,083 $78,713
Working capital............................................ 10,426 85,056
Total assets............................................... 12,566 87,196
Total stockholders' equity................................. 11,195 85,825
</TABLE>
Please see Note 2 to our financial statements for an explanation of the method
used to calculate the net loss per share and the number of shares used in the
computation of per share amounts.
6
<PAGE>
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Risk factors
You should carefully consider the risks described below together with all of
the other information included in this prospectus before making an investment
decision. If any of the following risks actually occurs, our business,
financial condition or results of operations could be harmed. In such an event,
the trading price of our common stock could decline, and you may lose all or
part of your investment.
RISKS RELATED TO OUR BUSINESS
WE MAY NOT BE ABLE TO SUCCESSFULLY IMPLEMENT OUR BUSINESS PLAN OR ADAPT IT TO
CHANGES IN THE MARKET.
We are at an early stage of development, and our business model is still
evolving. As a result, we are subject to all of the risks inherent in the
development of new commercial products, such as the need:
.to obtain substantial capital to support the expenses of developing our
technology and commercializing our products;
.to develop a market for our products; and
.to successfully transition from a company with a research focus to a company
capable of supporting commercial activities.
Since commencing operations in May 1995, we have dedicated substantially all of
our resources to the research and development of our products. Because we have
only recently begun to market our products commercially, we have generated
limited revenues from product sales.
WE CANNOT ASSURE YOU THAT WE WILL EVER ACHIEVE OR SUSTAIN PROFITABILITY OR THAT
OUR OPERATING LOSSES WILL NOT INCREASE IN THE FUTURE.
We have incurred operating losses and negative cash flow from operations since
our inception. As of December 31, 1999, we had an accumulated deficit of $18.8
million. For the years ended December 31, 1997, 1998 and 1999, we had net
losses of $2.8 million, $5.6 million and $8.4 million, respectively. We expect
to continue to incur operating and net losses and negative cash flow from
operations, which may increase, for the foreseeable future due in part to
anticipated increases in expenses for research and product development and
expansion of our facilities and sales and marketing capabilities. We anticipate
that our business will generate operating losses until we successfully
implement our commercial development strategy and generate significant
additional revenues to support our level of operating expenses.
IF OUR TECHNOLOGY AND PRODUCTS DO NOT BECOME WIDELY USED IN THE LIFE SCIENCES
INDUSTRY, IT IS UNLIKELY THAT WE WILL EVER BECOME PROFITABLE.
Life sciences companies have historically conducted screening and
identification tests using a variety of technologies, including bead-based
screening. However, compared to other technologies, the LabMAP technology is
new and unproven, and the use of our technology by life sciences companies is
limited. The commercial success of our technology will depend upon the adoption
of this technology as a method to perform bioassays. In order to be successful,
our products must meet the commercial
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7
<PAGE>
RISK FACTORS
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requirements for bioassays within the life sciences industry, and we must
convince potential customers to utilize our system instead of competing
technologies. Market acceptance will depend on many factors, including our
ability to:
.convince prospective strategic partners and customers that our technology is
an attractive alternative to other technologies for pharmaceutical, clinical
and biomedical testing and analysis;
.manufacture products in sufficient quantities with acceptable quality and at
an acceptable cost; and
.place and service sufficient quantities of our products.
Because of these and other factors, our products may not gain market
acceptance.
OUR BUSINESS PLAN MAY NOT SUCCEED UNLESS WE ESTABLISH MEANINGFUL AND SUCCESSFUL
RELATIONSHIPS WITH OUR STRATEGIC PARTNERS.
Our strategy for the development and commercialization of our LabMAP technology
depends in part upon our ability to establish strategic relationships with a
number of partners. Our business plan contemplates that a significant portion
of our future revenues will come from sales of our systems, the development and
sale of bioassay kits utilizing our technology and use of our technology by our
strategic partners in performing services offered to third parties. This
strategy entails a number of risks as more fully described below.
IF WE CANNOT ESTABLISH AND MAINTAIN SUFFICIENT EFFECTIVE STRATEGIC
PARTNERSHIPS, WE WILL NOT BE ABLE TO CREATE SUFFICIENT MARKET DEMAND FOR OUR
PRODUCTS.
Our success depends on our ability to maintain our current strategic
partnerships and establish and maintain additional partnerships. Our ability to
enter into agreements with additional partners depends in part on convincing
them that our technology can help achieve and accelerate their goals or
efforts. This may require substantial time and effort on our part. We will
expend substantial funds and management effort with no assurance that a
strategic relationship will result. We cannot assure you that we will be able
to negotiate additional strategic agreements in the future on acceptable terms,
if at all, or that current or future partners will not pursue or develop
alternative technologies either on their own or in collaboration with others.
Termination of strategic relationships, or the failure to enter into a
sufficient number of additional agreements on favorable terms, could reduce
sales of our products or lower margins on our products.
IF OUR STRATEGIC PARTNERS DO NOT EFFECTIVELY DEVELOP AND MARKET PRODUCTS BASED
ON OUR TECHNOLOGY, OUR ABILITY TO GENERATE REVENUES WILL BE DIMINISHED.
In return for the right to produce bioassay kits incorporating our technology,
our strategic partners will purchase our systems from us for resale to end-
users and will pay royalties to us based on revenues they generate from sales
of the kits. We expect that we will also generate revenue from royalties on
sales of diagnostic testing services by strategic partners utilizing our
technology. This strategy entails a number of risks. We believe that our
strategic partners will have economic incentives to market these products, but
we cannot predict future sales and royalty revenues because our strategic
partner agreements do not include minimum purchase requirements. The amount of
these revenues will depend on a variety of factors that are outside our
control, including the amount and timing of resources that current and future
strategic partners devote to market products incorporating our technology. Some
of the companies we are targeting as strategic partners offer products
competitive with our LabMAP
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8
<PAGE>
RISK FACTORS
- --------------------------------------------------------------------------------
technology. As a result, competition with these companies may hinder or prevent
strategic relationships. Further, the development and marketing of certain
bioassay kits will require our strategic partners to obtain governmental
approvals, which could delay or prevent their commercialization efforts. If our
current or future strategic partners do not effectively develop and market
products based on our technology and obtain any necessary government approvals,
our revenues from product sales and royalties will be significantly reduced.
WE HAVE ONLY PRODUCED OUR PRODUCTS IN LIMITED QUANTITIES, AND WE MAY EXPERIENCE
MANUFACTURING PROBLEMS OR DELAYS THAT COULD LIMIT THE GROWTH OF OUR REVENUE.
We currently produce products incorporating our LabMAP technology in limited
quantities. If we successfully develop and introduce these products to the
marketplace, we may not be able to produce sufficient quantities at an
acceptable cost. In addition, we may encounter difficulties in production due
to, among other things, quality control and assurance and component supply.
These difficulties could result in reduced sales of our products, increased
repair or re-engineering costs due to product returns and defects as well as
increased expenses due to switching to alternative suppliers, all of which
could damage our industry reputation and hurt our profitability.
BECAUSE WE HAVE LIMITED SOURCES OF PRODUCTION AND SUPPLIERS, OUR ABILITY TO
PRODUCE AND SUPPLY OUR PRODUCTS COULD BE IMPAIRED.
We have limited experience producing products for commercial purposes. We
presently outsource most of the assembly of our products to contract
assemblers. In addition, certain key components of our product line are
currently purchased from a limited number of outside sources and may only be
available through a few sources. We do not have agreements with any of our
suppliers or certain of our contract assemblers.
Our reliance on our suppliers and contract assembler exposes us to risks
including:
.the possibility that one or more of our suppliers or assemblers could
terminate their services at any time without penalty;
.the potential inability of our suppliers to obtain required components;
.the potential delays and expenses of seeking alternative sources of supply or
manufacturing services; and
.reduced control over pricing, quality and timely delivery due to the
difficulties in switching to alternative suppliers or assemblers.
Consequently, in the event that components from our suppliers or work performed
by our assembler are delayed or interrupted for any reason, our ability to
produce and supply our products could be impaired.
WE HAVE LIMITED EXPERIENCE IN SELLING AND MARKETING OUR PRODUCTS AND MAY NOT BE
ABLE TO DEVELOP A DIRECT SALES AND MARKETING FORCE THAT CAN MEET OUR CUSTOMERS'
NEEDS.
We intend to sell a portion of our products through our own sales force. We
have limited experience in direct marketing, sales and distribution. Our future
profitability will depend in part on our ability to
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9
<PAGE>
Risk factors
- --------------------------------------------------------------------------------
further develop a direct sales and marketing force to sell our products to our
customers. Our products are technical in nature. As a result, we believe it is
necessary to develop a direct sales force that includes people with scientific
backgrounds and expertise. Competition for such employees is intense. We may
not be able to attract and retain qualified salespeople or be able to build an
efficient and effective sales and marketing force. Failure to attract or retain
qualified salespeople or to build an efficient and effective sales and
marketing force could negatively impact sales of our products, thus reducing
our revenues and profitability.
If we cannot provide quality customer service, we could lose customers and our
operating results could suffer.
Our inability to attract, train or retain the number of highly qualified
customer support and technical services personnel that our business needs may
cause our business and prospects to suffer. We are currently expanding these
areas and will need to increase our staff further to support expected new
customers as well as the expanding needs of existing customers. The
introduction of our products to new customers, the integration of our
technology into our customers' existing systems and the ongoing customer
support can be complex. Accordingly, we need highly trained customer support
and technical personnel. Hiring customer support and technical personnel is
very competitive in our industry due to the limited number of people available
with the necessary technical skills and understanding of our systems and
services.
Our business plan contemplates a period of rapid and substantial growth that
will place a strain on our administrative and operational infrastructure.
We increased the number of our employees from 47 at December 31, 1998 to 87 at
February 29, 2000. Our product revenue increased from $386,000 in 1998 to $2.6
million in 1999. Our ability to manage effectively our operations and growth
requires us to continue to improve our operational, financial and management
controls, reporting systems and procedures. We may not successfully implement
improvements to our management information and control systems in an efficient
or timely manner and may discover deficiencies in existing systems and
controls.
Our research and development efforts may not produce commercially viable
products.
We intend to devote significant personnel and financial resources to research
and development activities designed to advance the capabilities of our LabMAP
technology. Some of these research and development activities will be conducted
by others. We may never realize any benefits from such research and development
activities.
If we make any acquisitions, we will incur a variety of costs and may never
realize the anticipated benefits.
If appropriate opportunities become available, we may attempt to acquire
businesses, technologies, services or products that we believe are a strategic
fit with our business. We currently have no commitments or agreements with
respect to any material acquisitions. If we do undertake any transaction of
this sort, the process of integrating an acquired business, technology, service
or product may result in operating difficulties and expenditures and may absorb
significant management attention that would otherwise be available for ongoing
development of our business. Moreover, we may never realize the anticipated
benefits of any acquisition. Future acquisitions could result in potentially
dilutive issuances of equity securities, the incurrence of debt, contingent
liabilities and/or amortization expenses related to goodwill and other
intangible assets.
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10
<PAGE>
RISK FACTORS
- --------------------------------------------------------------------------------
RISKS RELATED TO OPERATING IN OUR INDUSTRY
THE LIFE SCIENCES INDUSTRY IS HIGHLY COMPETITIVE AND SUBJECT TO RAPID
TECHNOLOGICAL CHANGE, AND WE MAY NOT HAVE THE RESOURCES NECESSARY TO
SUCCESSFULLY COMPETE.
We compete with companies in the United States and abroad that are engaged in
the development and production of similar products. We anticipate competition
primarily from the following two sectors:
.companies marketing conventional testing products based on established
technologies; and
.companies developing their own advanced testing technologies.
Many of our competitors have access to greater financial, technical, research,
marketing, sales, distribution, service and other resources than we do. We
face, and will continue to face, intense competition from organizations serving
the life sciences industry that are pursuing competing technologies. These
organizations may develop technologies that are superior alternatives to our
technologies. Further, our competitors may be more effective at implementing
their technologies to develop commercial products.
The life sciences industry is characterized by rapid and continuous
technological innovation. We may need to develop new applications for our
products to remain competitive. Our present or future products could be
rendered obsolete or uneconomical by technological advances by one or more of
our current or future competitors. In addition, the introduction or
announcement of new products by us or by others could result in a delay of or
decrease in sales of existing products, as customers evaluate these new
products. Our future success will depend on our ability to compete effectively
against current technology as well as to respond effectively to technological
advances.
OUR SUCCESS WILL DEPEND ON OUR ABILITY TO RETAIN PRINCIPAL MEMBERS OF OUR
MANAGEMENT AND SCIENTIFIC STAFF.
We depend on the principal members of our management and scientific staff. The
loss of services of any of these persons could delay or reduce our product
development and commercialization efforts. In addition, recruiting and
retaining qualified scientific personnel to perform future research and
development work will be critical to our success. There is a shortage in our
industry of qualified management and scientific personnel, and competition for
these individuals is intense. There can be no assurance that we will be able to
attract additional and retain existing personnel.
THE INTELLECTUAL PROPERTY RIGHTS WE RELY UPON TO PROTECT THE TECHNOLOGY
UNDERLYING OUR PRODUCTS MAY NOT BE ADEQUATE, WHICH COULD ENABLE THIRD PARTIES
TO USE OUR TECHNOLOGY OR VERY SIMILAR TECHNOLOGY AND COULD REDUCE OUR ABILITY
TO COMPETE IN THE MARKET.
Our success will depend on our ability to obtain, protect and enforce patents
on our technology and to protect our trade secrets. Any patents we own may not
afford meaningful protection for our technology and products. Others may
challenge our patents and, as a result, our patents could be narrowed,
invalidated or rendered unenforceable. In addition, our current and future
patent applications may not result in the issuance of patents in the United
States or foreign countries. Competitors may develop products similar to ours
which are not covered by our patents. Further, there is a substantial backlog
of patent applications at the US Patent and Trademark Office, and the approval
or rejection of patent applications may take several years.
We have obtained a patent in the United States and have pending applications in
certain foreign jurisdictions, except Japan, for our method of "real time"
detection and quantification of multiple
- --------------------------------------------------------------------------------
11
<PAGE>
RISK FACTORS
- --------------------------------------------------------------------------------
analytes from a single sample. We have filed a lawsuit alleging that as a
result of our prior patent counsel's negligence the corresponding patent
application in Japan was not obtained. We are seeking damages caused by this
negligence. We intend, however, to pursue patent protection in Japan for other
aspects of our technology. As a result, we may not be able to prevent
competitors from developing and marketing technologies similar to our LabMAP
technology in Japan.
We require our employees, consultants and advisors to execute confidentiality
agreements. However, we cannot guarantee that these agreements will provide us
with adequate protection against improper use or disclosure of confidential
information. In addition, in some situations, these agreements may conflict
with, or be subject to, the rights of third parties with whom our employees,
consultants or advisors have prior employment or consulting relationships.
Further, others may independently develop substantially equivalent proprietary
information and techniques, or otherwise gain access to our trade secrets. Our
failure to protect our proprietary information and techniques may inhibit or
limit our ability to exclude certain competitors from the market.
WE MAY BE INVOLVED IN LAWSUITS TO PROTECT OR ENFORCE OUR INTELLECTUAL PROPERTY
RIGHTS, WHICH MAY BE EXPENSIVE. IF WE LOSE, WE MAY LOSE THE BENEFIT OF SOME OF
OUR INTELLECTUAL PROPERTY RIGHTS, THE LOSS OF WHICH MAY INHIBIT OR REMOVE OUR
ABILITY TO EXCLUDE CERTAIN COMPETITORS FROM THE MARKET.
In order to protect or enforce our patent rights, we may have to initiate legal
proceedings against third parties, such as infringement suits or interference
proceedings. These legal proceedings could be expensive, take significant time
and divert management's attention from other business concerns. We may also
provoke these third parties to assert claims against us. The patent position of
companies like ours generally is highly uncertain, involves complex legal and
factual questions, and has recently been the subject of much litigation. No
consistent policy has emerged from the US Patent and Trademark Office or the
courts regarding the breadth of claims allowed or the degree of protection
afforded under patents like those we own.
OUR SUCCESS WILL DEPEND PARTLY ON OUR ABILITY TO OPERATE WITHOUT INFRINGING ON
OR MISAPPROPRIATING THE PROPRIETARY RIGHTS OF OTHERS.
We may be sued for infringing on the intellectual property rights of others. In
addition, we may find it necessary, if threatened, to initiate a lawsuit
seeking a declaration from a court that we do not infringe the proprietary
rights of others or that these rights are invalid or unenforceable.
Intellectual property litigation is costly, and, even if we prevail, the cost
of such litigation could affect our profitability. In addition, litigation is
time consuming and could divert management attention and resources away from
our business. If we do not prevail in any litigation, in addition to any
damages we might have to pay, we could be required to stop the infringing
activity or obtain a license. Any required license may not be available to us
on acceptable terms, or at all. In addition, some licenses may be nonexclusive,
and therefore, our competitors may have access to the same technology licensed
to us. If we fail to obtain a required license or are unable to design around a
patent, we may be unable to sell some of our products, which could have a
material adverse affect on our business, financial condition and results of
operations.
We are aware of a European patent granted to Dr. Ioannis Tripatzis, which
covers certain testing agents and certain methods of their use. Dr. Tripatzis
has publicly stated his belief that his patent covers aspects of our
technology. This patent expires in 2004. We cannot assure you that a dispute
with Dr. Tripatzis will not arise or that any dispute with him will be resolved
in our favor.
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12
<PAGE>
Risk factors
- --------------------------------------------------------------------------------
If we fail to comply with the extensive governmental regulations that affect
our business, we could be subject to enforcement actions, injunctions and civil
and criminal penalties that could delay or prevent marketing of our products.
The production, labeling, distribution and marketing of our products for some
purposes and products based on our technology expected to be produced by our
strategic partners are subject to governmental regulation by the United States
Food and Drug Administration in the United States and by similar agencies in
other countries. Depending on their intended applications, some of our products
and products based on our technology expected to be produced by our strategic
partners are subject to approval or clearance by the FDA prior to marketing for
commercial use. Products using our technology for clinical diagnostic purposes
will require such approval or clearance. No such approvals or clearances have
yet been obtained. The process of obtaining necessary FDA clearances or
approvals can be time-consuming, expensive and uncertain. Further, clearance or
approval may place substantial restrictions on the indications for which the
product may be marketed or to whom it may be marketed. In addition, we are also
required to comply with FDA requirements relating to laser safety.
Approved or cleared products are subject to continuing FDA requirements
relating to quality control and quality assurance, maintenance of records and
documentation and labeling and promotion of medical devices. Our inability, or
the inability of our strategic partners, to obtain required regulatory approval
or clearance on a timely or acceptable basis could harm our business. In
addition, failure to comply with applicable regulatory requirements could
subject us or our strategic partners to enforcement action, including product
seizures, recalls, withdrawal of clearances or approvals, restrictions on or
injunctions against marketing our products or products based on our technology,
and civil and criminal penalties.
Medical device laws and regulations are also in effect in many countries
outside the United States. These range from comprehensive device approval
requirements for some or all of our medical device products to requests for
product data or certifications. The number and scope of these requirements are
increasing. Failure to comply with applicable federal, state and foreign
medical device laws and regulations may harm our business, financial condition
and results of operations.
We are also subject to a variety of other laws and regulations relating to,
among other things, environmental protection and work place safety. See
"Business -- Government regulation."
If we become subject to product liability claims, we may be required to pay
damages that exceed our insurance coverage.
Our business exposes us to potential product liability claims that are inherent
in the testing, production, marketing and sale of human diagnostic and
therapeutic products. While we believe that we are reasonably insured against
these risks, there can be no assurance that we will be able to obtain insurance
in amounts or scope sufficient to provide us with adequate coverage against all
potential liabilities. A product liability claim in excess of our insurance
coverage or a recall of one of our products would have to be paid out of our
cash reserves.
Some of our programs are partially supported by government grants, which may be
reduced, withdrawn or delayed.
We have received and may continue to receive funds under United States
government research and technology development programs. Funding by the
government may be significantly reduced in the future for a number of reasons.
For example, some programs are subject to a yearly appropriations
- --------------------------------------------------------------------------------
13
<PAGE>
RISK FACTORS
- --------------------------------------------------------------------------------
process in Congress. Additionally, we may not receive funds under existing or
future grants because of budgeting constraints of the agency administering the
program. We cannot assure you that we will receive significant funding under
government grants.
A portion of our sales have been to universities, government research
laboratories, private foundations and other institutions, where funding is
dependent on grants from government agencies such as the National Institutes of
Health. The funding associated with approved NIH grants for instrumentation
generally becomes available at particular times of the year, as determined by
the government. Although research funding has increased during the past several
years, grants have, in the past, been frozen for extended periods or have
otherwise become unavailable to various institutions, sometimes without advance
notice. Furthermore, increasing political pressures in the United States to
reduce or eliminate budgetary deficits may result in reduced allocations to the
NIH and the other government agencies that fund research and development
activities. If government funding, especially NIH grants, necessary to purchase
our products were to become unavailable to researchers for any extended period
of time or if overall research funding were to decrease, our sales could
decline.
BECAUSE WE RECEIVE REVENUES PRINCIPALLY FROM LIFE SCIENCE COMPANIES, THE
CAPITAL SPENDING POLICIES OF THESE ENTITIES HAVE A SIGNIFICANT EFFECT ON THE
DEMAND FOR OUR PRODUCTS.
Our customers include pharmaceutical, biotechnology, chemical and industrial
companies, and the capital spending policies of these companies can have a
significant effect on the demand for our products. These policies are based on
a wide variety of factors, including the resources available for purchasing
research equipment, the spending priorities among various types of research
equipment and the policies regarding capital expenditures during recessionary
periods. Any decrease in capital spending by life sciences companies could
cause our revenues to decline and impact our profitability.
IF THIRD-PARTY PAYORS INCREASINGLY RESTRICT PAYMENTS FOR HEALTH CARE EXPENSES,
WE MAY EXPERIENCE REDUCED SALES WHICH WOULD HURT OUR BUSINESS AND OUR BUSINESS
PROSPECTS.
Third-party payors, such as government entities, health maintenance
organizations and private insurers, are restricting payments for health care.
These restrictions may decrease demand for our products and the price we can
charge. Increasingly, Medicaid and other third-party payors are challenging the
prices charged for medical services, including clinical diagnostic tests. They
are also attempting to contain costs by limiting coverage and the reimbursement
level of tests and other health care products. Without adequate coverage and
reimbursement, consumer demand for tests will decrease. Decreased demand could
cause sales of our products, and sales and services by our strategic partners,
to fall. In addition, decreased demand could place pressure on us or our
strategic partners to lower prices on these products or services, resulting in
lower margins. Reduced sales or margins by us or our strategic partners would
hurt our business, profitability and business prospects.
RISKS RELATED TO THIS OFFERING
OUR PRODUCTS HAVE LENGTHY SALES CYCLES, WHICH COULD CAUSE OUR OPERATING RESULTS
TO FLUCTUATE SIGNIFICANTLY FROM QUARTER TO QUARTER.
The sale of bioassay testing devices typically involves a significant technical
evaluation and commitment of capital by customers. Accordingly, the sales cycle
associated with our products is expected to be lengthy and subject to a number
of significant risks, including customers' budgetary constraints and
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14
<PAGE>
Risk factors
- --------------------------------------------------------------------------------
internal acceptance reviews that are beyond our control. Due to this lengthy
and unpredictable sales cycle, our operating results could fluctuate
significantly from quarter to quarter. We expect to continue to experience
significant fluctuations as a result of a variety of factors, many of which are
outside of our control. The following factors could affect our operating
results:
.market acceptance of our products;
.the timing and willingness of strategic partners to commercialize our products
which would result in royalties;
.expiration of contracts with strategic partners or government research grants,
which may not be renewed or replaced; and
.general and industry specific economic conditions, which may affect our
collaborative partners' research and development expenditures.
A large portion of our expenses, including expenses for facilities, equipment
and personnel, are relatively fixed. Accordingly, if revenues decline or do not
grow as anticipated, we might not be able to correspondingly reduce our
operating expenses. In addition, we plan to significantly increase operating
expenses in 2000. Failure to achieve anticipated levels of revenues could
therefore significantly harm our operating results for a particular fiscal
period.
Due to the possibility of fluctuations in our revenues and expenses, we believe
that quarter-to-quarter comparisons of our operating results are not a good
indication of our future performance. Our operating results in some quarters
may not meet the expectations of stock market analysts and investors. In that
case, our stock price would probably decline.
Our stock price could be volatile, and your investment could suffer a decline
in value.
The trading price of our common stock is likely to be highly volatile and could
be subject to wide fluctuations in price in response to various factors, many
of which are beyond our control, including:
.actual or anticipated variations in quarterly operating results;
.announcements of technological innovations by us or our competitors;
.new products or services introduced or announced by us or our competitors;
.changes in financial estimates by securities analysts;
.conditions or trends in the biotechnology and pharmaceutical industries;
.announcements by us of significant acquisitions, strategic partnerships, joint
ventures or capital commitments;
.additions or departures of key personnel; and
.sales of our common stock.
In addition, the stock market in general, and the Nasdaq National Market and
the market for technology companies in particular, has experienced significant
price and volume fluctuations that have often been unrelated or
disproportionate to the operating performance of those companies. Further,
there has been particular volatility in the market prices of securities of life
sciences companies. These broad market and industry factors may seriously harm
the market price of our common stock, regardless of our operating performance.
In the past, following periods of volatility in the market price of a company's
securities, securities class action litigation has often been instituted. A
securities class action suit against us could result in substantial costs,
potential liabilities and the diversion of management's attention and
resources.
We may invest or spend the proceeds of this offering in ways with which you may
not agree.
We will retain broad discretion over the use of proceeds from this offering.
You may not agree with how we spend the proceeds, and our use of the proceeds
may not yield a significant return or any
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15
<PAGE>
RISK FACTORS
- --------------------------------------------------------------------------------
return at all. We intend to use a majority of the proceeds from this offering
to fund our operations, including continued development and manufacturing of
existing products as well as research and development of additional products,
hiring additional personnel and expanding our facilities to be able to meet the
needs of our growing business, to acquire or invest in products, technologies
or companies, and for general corporate purposes, including working capital.
Because of the number and variability of factors that determine our use of the
net proceeds from this offering, we cannot assure you that these uses will not
vary substantially from our currently planned uses. Until we use the net
proceeds of this offering for the above purposes, we intend to invest the funds
in short-term, investment grade, interest-bearing securities.
THERE MAY NOT BE AN ACTIVE, LIQUID TRADING MARKET FOR OUR COMMON STOCK.
Prior to this offering, there has been no public market for our common stock.
We cannot assure you that an active trading market for our common stock will
develop following this offering. You may not be able to sell your shares
quickly or at the market price if trading in our stock is not active. The
initial public offering price will be determined by negotiations between us and
representatives of the underwriters based upon a number of factors. The initial
public offering price may not be indicative of prices that will prevail in the
trading market. See "Underwriting" for more information regarding our
arrangement with the underwriters and the factors considered in setting the
initial public offering price.
OUR PRINCIPAL STOCKHOLDERS, DIRECTORS AND EXECUTIVE OFFICERS WILL OWN
APPROXIMATELY 55.6% OF OUR COMMON STOCK, WHICH MAY PREVENT NEW INVESTORS FROM
INFLUENCING CORPORATE DECISIONS.
After this offering, our stockholders who currently own over 5% of our common
stock, our directors and executive officers will beneficially own approximately
55.6% of our outstanding common stock or 54.2% if the underwriters exercise
their over-allotment option in full. These stockholders will be able to
exercise significant influence over all matters requiring stockholder approval,
including the election of directors and the approval of significant corporate
transactions. This concentration of ownership may also delay or prevent a
change in control of the company even if beneficial to our stockholders. See
"Principal stockholders" for additional information on the concentration of
ownership of our common stock.
FUTURE SALES OF OUR COMMON STOCK MAY DEPRESS OUR STOCK PRICE.
The market price of our common stock could decline as a result of sales of
substantial amounts of our common stock in the public market after the closing
of this offering, or the perception that these sales could occur. In addition,
these factors could make it more difficult for us to raise funds through future
offerings of common stock. There will be 26,472,821 shares of common stock
outstanding immediately after this offering, or 27,147,821 shares if the
underwriters exercise their over-allotment option in full, based on the number
of shares outstanding at February 29, 2000. All of the shares sold in the
offering will be freely transferable without restriction or further
registration under the Securities Act, except for any shares purchased by our
"affiliates," as defined in Rule 144 of the Securities Act. The remaining
21,972,821 shares of common stock outstanding will be "restricted securities"
as defined in Rule 144. These shares may be sold in the future without
registration under the Securities Act to the extent permitted by Rule 144 or
other exemptions under the Securities Act.
After this offering, we intend to register approximately 4,342,984 shares of
common stock which are reserved for issuance upon exercise of options granted
under our stock option plan. Once we register these shares, they can be sold in
the public market upon issuance, subject to restrictions under the securities
laws applicable to resales by affiliates. See "Shares eligible for future
sale."
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16
<PAGE>
Risk factors
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You will experience immediate and substantial dilution.
The initial public offering price of our common stock is expected to be
substantially higher than the net tangible book value per share of our common
stock. Therefore, if you purchase shares of our common stock in this offering,
you will incur immediate and substantial dilution of approximately $14.75 in
the pro forma net tangible book value per share of common stock from the price
per share that you pay for the common stock (based upon an assumed initial
public offering price of $18.00 per share). If the holders of outstanding
options or warrants exercise those options or warrants at prices below the
initial public offering price, you will incur further dilution.
If we need but are unable to obtain additional funding to support our
operations, we would have to reduce or cease operations or attempt to sell all
or a part of our operations.
We anticipate that our existing cash and cash equivalents, together with the
net proceeds of this offering, will be sufficient to fund our currently planned
operations through at least December 31, 2001. However, this expectation is
based on our current operating plan, which could change as a result of many
factors, and we could require additional funding sooner than anticipated. Our
requirements for additional capital may be substantial and will depend on many
factors, some of which are beyond our control, including:
.payments received or made under possible future strategic partner agreements;
.market acceptance of our products;
.continued progress of our research and development of our products;
.the cost of protection of patent and other intellectual property rights; or
.further development of production, marketing and sales capabilities.
We have no credit facility or other committed sources of capital. To the extent
capital resources are insufficient to meet future capital requirements, we will
have to raise additional funds to continue the development of our technologies.
There can be no assurance that funds will be available on favorable terms if at
all. To the extent that additional capital is raised through the sale of equity
or convertible debt securities, the issuance of those securities could result
in dilution to our stockholders. Moreover, incurring debt financing could
result in a substantial portion of our operating cash flow being dedicated to
the payment of principal and interest on such indebtedness, could render us
more vulnerable to competitive pressures and economic downturns and could
impose restrictions on our operations. If adequate funds are not available, we
may be required to curtail operations significantly or to obtain funds through
entering into collaboration agreements on unattractive terms.
Because it is unlikely that we will ever pay dividends, you will only be able
to benefit from holding our stock if the stock price appreciates.
We have never paid cash dividends on our capital stock and do not anticipate
paying any cash dividends in the foreseeable future.
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17
<PAGE>
RISK FACTORS
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ANTI-TAKEOVER PROVISIONS IN OUR CHARTER AND BYLAWS AND DELAWARE LAW COULD MAKE
A THIRD-PARTY ACQUISITION OF US DIFFICULT.
Our certificate of incorporation and bylaws contain provisions that could make
it more difficult for a third party to acquire us, even if doing so would be
beneficial to our stockholders. These provisions could limit the price that
investors might be willing to pay in the future for shares of our common stock.
We are also subject to certain provisions of Delaware law that could delay,
deter or prevent a change in control of us. See "Description of securities --
Anti-takeover effects of provisions of the certificate of incorporation, bylaws
and Delaware law."
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18
<PAGE>
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Forward-looking information
Some of the statements under "Prospectus summary," "Risk factors,"
"Management's discussion and analysis of financial condition and results of
operations," "Business" and elsewhere in this prospectus constitute forward-
looking statements. These statements relate to future events or our future
financial performance and involve known and unknown risks, uncertainties and
other factors that may cause our or our industry's actual results, levels of
activity, performance or achievements to be materially different from those
expressed or implied by any forward-looking statements. Some of these factors
are listed under "Risk factors" and elsewhere in this prospectus. In some
cases, you can identify forward-looking statements by terminology such as
"may," "will," "should," "expects," "plans," "anticipates," "intends,"
"believes," "estimates," "predicts," "potential" or "continue" or the negative
of these terms or other comparable terminology. These statements are only
predictions. Actual events or results may differ materially. Moreover, neither
we nor any other person assumes responsibility for the accuracy and
completeness of those statements. We are under no duty to update any of the
forward-looking statements after the date of this prospectus to conform them to
actual results.
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19
<PAGE>
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Use of proceeds
We estimate that the net proceeds from the sale of the shares of common stock
we are offering will be approximately $74.6 million at an assumed initial
public offering price of $18.00 per share after deducting the estimated
underwriting discounts and commissions and estimated offering expenses. If the
underwriters' over-allotment option is exercised in full, we estimate that the
net proceeds will be approximately $85.9 million.
We currently intend to use the net proceeds to fund our operations, including
continued development and manufacturing of existing products as well as
research and development of additional products. In addition, we also intend to
use a portion of the net proceeds to hire additional personnel and expand our
facilities to be able to meet the growing needs of our business. Although we
have no current plans, agreements or commitments with respect to any
acquisition, we may, if the opportunity arises, use an unspecified portion of
the net proceeds to acquire or invest in products, technologies or companies.
We intend to use the balance of the net proceeds for general corporate
purposes, including working capital. Our management may spend the proceeds from
this offering in ways which the stockholders may not deem desirable.
The timing and amount of our actual expenditures will be based on many factors,
including cash flows from operations and the growth of our business.
Until we use the net proceeds of this offering for the above purposes, we
intend to invest the funds in short-term, investment grade, interest-bearing
securities. We cannot predict whether the proceeds invested will yield a
favorable return.
Dividend policy
We have never declared or paid any cash dividends on our capital stock. We
anticipate that we will retain any earnings to support operations and to
finance the growth and development of our business. Therefore, we do not expect
to pay cash dividends in the foreseeable future. Any future determination
relating to our dividend policy will be made at the discretion of our board of
directors and will depend on a number of factors, including future earnings,
capital requirements, financial conditions and future prospects and other
factors the board of directors may deem relevant.
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20
<PAGE>
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Capitalization
The following table sets forth our capitalization as of December 31, 1999:
.on an actual basis;
.on a pro forma basis to give effect to the conversion of 841,359 shares of our
preferred stock outstanding as of the date this prospectus into 8,768,592
shares of common stock upon the closing of this offering; and
.on a pro forma as adjusted basis to give effect to the conversion of our
preferred stock into common stock and the receipt of the estimated net
proceeds from the sale of 4,500,000 shares of common stock offered by this
prospectus at an assumed initial public offering price of $18.00 per share.
<TABLE>
<CAPTION>
PRO PRO FORMA
ACTUAL FORMA AS ADJUSTED
- -------------------------------------------------------------------------------
(in thousands, except share
amounts)
<S> <C> <C> <C>
Preferred stock, par value $0.001;
Authorized shares -- none actual, 5,000,000 pro
forma and pro forma as adjusted
Issued and outstanding shares -- none actual,
pro forma and pro forma as adjusted......... $ -- $ -- $ --
Convertible preferred stock, par value $2.00;
Authorized shares -- 5,000,000 actual, pro
forma and pro forma as adjusted
Issued and outstanding shares -- 841,359
actual, none pro forma and pro forma as
adjusted.................................... 28,946 -- --
Common stock, par value $0.001;
Authorized shares -- 50,000,000 actual,
200,000,000 pro forma and pro forma as
adjusted
Issued and outstanding shares -- 13,167,754
actual, 21,936,346 pro forma and 26,436,346
pro forma as adjusted....................... 13 22 26
Warrants to purchase 535,500 shares of common
stock........................................ 180 180 180
Additional paid-in capital...................... 953 29,890 104,516
Deferred stock compensation..................... (69) (69) (69)
Accumulated deficit............................. (18,828) (18,828) (18,828)
------- ------- -------
Total stockholders' equity..................... 11,195 11,195 85,825
------- ------- -------
Total capitalization........................... $11,195 $11,195 $85,825
======= ======= =======
</TABLE>
The table above does not include:
.3,437,359 and 4,342,984 shares of common stock issuable upon exercise of
options outstanding at a weighted average price of $3.06 and $5.96 per share
at December 31, 1999 and February 29, 2000, respectively; and
.3,570,000 and 2,627,900 additional shares of common stock available for future
grant under our 2000 Long-Term Incentive Plan at December 31, 1999 and
February 29, 2000, respectively.
To the extent that these options are exercised, there will be further dilution
to new investors. See "Management -- Employee benefit plans."
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21
<PAGE>
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Dilution
Our historical net tangible book value as of December 31, 1999 was
approximately $11.2 million, or $0.85 per share, based on the number of common
shares outstanding as of December 31, 1999. Historical net tangible book value
per share is equal to the amount of our total tangible assets less total
liabilities, divided by the number of shares of common stock outstanding as of
December 31, 1999.
Our pro forma net tangible book value as of December 31, 1999 was approximately
$11.2 million, or $0.51 per share, based on the pro forma number of shares
outstanding as of December 31, 1999 of 21,936,346, calculated after giving
effect to the automatic conversion of 841,359 shares of our preferred stock
outstanding as of December 31, 1999 into 8,768,592 shares of our common stock.
Dilution in pro forma net tangible book value per share represents the
difference between the amount per share paid by purchasers of shares of our
common stock in this offering and the net tangible book value per share of our
common stock immediately afterwards, after giving effect to the sale of
4,500,000 shares in this offering. This represents an immediate increase in pro
forma net tangible book value of $2.74 per share to existing stockholders and
an immediate dilution in pro forma net tangible book value of $14.75 per share
to new investors. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.................. $18.00
Historical net tangible book value per share as of December 31,
1999......................................................... $0.85
Decrease attributable to conversion of preferred stock.......... (0.34)
-----
Pro forma net tangible book value per share as of December 31,
1999......................................................... 0.51
Increase attributable to the offering........................... 2.74
-----
Net tangible book value per share after the offering............. 3.25
------
Dilution per share to new investors.............................. $14.75
======
</TABLE>
The following table summarizes, on a pro forma basis as of December 31, 1999,
after giving effect to this offering, the total number of shares of common
stock purchased from us and the total consideration and the average price per
share paid by existing stockholders and by new investors:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Existing stockholders.. 21,936,346 83% $ 30,562,740 27% $ 1.39
New investors.......... 4,500,000 17% 81,000,000 73% $18.00
---------- --- ------------ ---
Total.................. 26,436,346 100% $111,562,740 100%
========== === ============ ===
</TABLE>
The tables and calculations above assume no exercise of the outstanding options
or warrants described below:
.3,437,359 and 4,342,984 shares issuable upon the exercise of options
outstanding at a weighted average exercise price of $3.06 and $5.96 per share
at December 31, 1999 and February 29, 2000, respectively;
.535,500 shares issuable upon the exercise of warrants outstanding at a
weighted average exercise price of $1.96 per share at December 31, 1999 and
February 29, 2000; and
- --------------------------------------------------------------------------------
22
<PAGE>
DILUTION
- --------------------------------------------------------------------------------
.3,570,000 and 2,627,900 additional shares available for future grant under our
2000 Long-Term Incentive Plan at December 31, 1999 and February 29, 2000,
respectively.
To the extent that these options or warrants are exercised, there will be
further dilution to new investors. See "Management -- Employee benefit plans"
for further information regarding our stock option plan and stock purchase
plan.
If the underwriters exercise their over-allotment option in full, the following
will occur:
.the percentage of shares of our common stock held by existing stockholders
will decrease to approximately 81% of the total number of shares of our common
stock outstanding after this offering;
.the number of shares of our common stock held by new public investors will
increase to 5,175,000, or approximately 19% of the total number of shares of
our common stock outstanding after this offering; and
.our pro forma net tangible book value will increase to $3.58 per share to
existing stockholders and our pro forma net tangible book value will be
diluted by $14.42 per share to new investors.
- --------------------------------------------------------------------------------
23
<PAGE>
- --------------------------------------------------------------------------------
Selected financial data
The following selected financial data should be read in conjunction with the
financial statements and the notes to such statements and "Management's
discussion and analysis of financial condition and results of operations"
included elsewhere in this prospectus. The statement of operations data for the
years ended December 31, 1997, 1998 and 1999, and the balance sheet data as of
December 31, 1998 and 1999, are derived from our financial statements which
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 May 24, 1995 (inception) to December 31, 1995 and for the year ended
December 31, 1996 and the balance sheet data as of December 31, 1995, 1996 and
1997 are derived from audited financial statements not included in this
prospectus. Historical results are not necessarily indicative of the results to
be expected in the future.
The pro forma net loss per share and shares used in computing pro forma net
loss per share are calculated as if all of our convertible preferred stock was
converted into shares of our common stock on the date of their issuance.
<TABLE>
<CAPTION>
Period from
May 24, 1995
(inception) to
December 31, Year Ended December 31,
1995 1996 1997 1998 1999
Statement of operations
data (In thousands, except per share data)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue:
Product ................. $-- $-- $99 $386 $2,606
Grant ................... -- -- -- -- 506
------ ------- ------- ------- -------
Total revenue........... -- -- 99 386 3,112
Costs of product revenue.. -- -- 10 88 1,172
------ ------- ------- ------- -------
Gross margin.............. -- -- 89 298 1,940
Operating expenses:
Research and
development........... 58 1,036 1,594 3,611 5,776
Selling, general and
administrative........ 216 731 1,426 2,566 4,896
------ ------- ------- ------- -------
Total operating
expenses............. 274 1,767 3,020 6,177 10,672
------ ------- ------- ------- -------
Loss from operations...... (274) (1,767) (2,931) (5,879) (8,732)
Interest income........... 4 7 178 283 284
------ ------- ------- ------- -------
Net loss.................. $(270) $(1,760) $(2,753) $(5,596) $(8,448)
====== ======= ======= ======= =======
Net loss per share, basic
and diluted............ $(0.06) $(0.16) $(0.21) $(0.43) $(0.64)
====== ======= ======= ======= =======
Shares used in computing
net loss per share,
basic and diluted...... 4,531 10,826 12,842 13,086 13,151
Pro forma net loss per
share, basic and
diluted................ $(0.41)
=======
Shares used in computing
pro forma net loss per
share, basic and
diluted................ 20,529
</TABLE>
- --------------------------------------------------------------------------------
24
<PAGE>
Selected financial data
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
As of December 31,
1995 1996 1997 1998 1999
Balance sheet data (In thousands)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents.................... $229 $14 $2,821 $8,537 $4,083
Working capital (deficit).................... 138 (249) 2,761 8,391 10,426
Total assets................................. 286 154 3,119 9,590 12,566
Total stockholders' equity (deficit)......... 196 (110) 2,964 9,190 11,195
</TABLE>
- --------------------------------------------------------------------------------
25
<PAGE>
- --------------------------------------------------------------------------------
Management's discussion and analysis of financial condition and results of
operations
The following discussion of our financial condition and results of operations
should be read in conjunction with the financial statements and the notes to
those statements included elsewhere in this prospectus. This discussion may
contain forward-looking statements that involve risks and uncertainties. As a
result of many factors, such as those set forth under "Risk factors" and
elsewhere in this prospectus, our actual results may differ materially from
those anticipated in these forward-looking statements.
Since our inception, we have incurred significant losses and, as of December
31, 1999, we had an accumulated deficit of $18.8 million. We anticipate
incurring additional losses, which may increase, for the foreseeable future.
Prior to 1999, we were considered a development stage company.
We commenced marketing our first generation system, the Luminex R/O system, in
1997 and our second generation technology, the LabMAP system, in 1999. Revenue
on sales of our products is recognized when persuasive evidence of an agreement
exists, delivery has occurred, the fee is fixed and determinable and
collectibility is probable. We expect that each system will generate a
recurring revenue stream from the sale of consumable products. In accordance
with the terms of the grant, grant revenue is recorded as the research expenses
relating to the grant are incurred, provided that the amounts received are not
refundable if the research is not successful. In addition, we may generate
royalty revenue from some of our strategic partners as they sell products
incorporating our technology or provide services to third parties using our
technology.
Our expenses have consisted primarily of costs incurred in research and
development, manufacturing scale-up and business development and from general
and administrative costs associated with our operations. We expect our research
and development expenses to increase in the future as we continue to develop
our products. Also, our selling and marketing expenses will increase as we
commercialize our products, and general and administrative expenses will
increase as we expand our facilities and assume the obligations of a public
reporting company.
We have a limited history of operations. We anticipate that our quarterly
results of operations will fluctuate for the foreseeable future due to several
factors, including market evaluation and acceptance of current or new products,
which may result in a lengthy sales cycle, patent conflicts, the introduction
of new products by our competitors, the timing and extent of our research and
development efforts, and the timing of significant orders. Our limited
operating history makes accurate predictions of future operations difficult or
impossible.
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999 AND 1998
REVENUE
Revenue increased to $3.1 million in 1999 from $386,000 in 1998. The increase
was primarily attributable to the sale of Luminex 100 systems, which were
introduced in the first quarter of 1999, and Luminex XY Platforms, which were
introduced in the fourth quarter of 1999. Revenue from the sale of microspheres
increased $314,000 in conjunction with sales of the Luminex 100 and the
- --------------------------------------------------------------------------------
26
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
- --------------------------------------------------------------------------------
development of additional applications. Offsetting this increase was a decrease
in sales of the Luminex R/O system of $221,000 in 1999, which is consistent
with the phase-out of the Luminex R/O system and the introduction of the
higher-priced Luminex 100.
Also included in 1999 revenue was $506,000 associated with a government grant
that commenced on January 1, 1999. The grant was suspended as of September 30,
1999 when our joint venture partner withdrew due to a change in its business
strategy. We are in the process of evaluating the work plan and budget and may
resume the project with a new partner. We had no grant revenue in 1998.
COST OF PRODUCT REVENUE
Cost of product revenue increased to $1.2 million in 1999 from $88,000 in 1998.
The increase was primarily attributable to the increase in the number of units
of the Luminex 100 sold in 1999 and the higher per unit cost of the Luminex
100, relative to the Luminex R/O system.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses increased to $5.8 million in 1999 from $3.6
million in 1998. These expenses include salaries and related costs of research
and development personnel as well as the costs of consultants, parts and
supplies associated with research and development projects. The increase was
primarily attributable to an increase of $1.0 million in salaries and related
personnel costs from the addition of employees during the year as well as
additional costs to complete the development of the Luminex 100 system. Also,
included in 1999 were costs of $607,000 associated with a government grant.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased to $4.9 million in 1999
from $2.6 million in 1998. These expenses consist primarily of salaries and
related costs for executive, sales and marketing, finance and other
administrative personnel, the costs of facilities, insurance, trade shows and
legal support as well as the amortization of deferred stock and stock
compensation. The increase was attributable to consulting and professional fees
primarily related to the filing of patent applications that were $244,000
higher than in 1998, a $662,000 increase in salary costs, a $262,000 increase
in facilities costs due to the leasing of additional manufacturing space early
in 1999 and amortization of deferred stock and stock compensation expense of
$474,000. Deferred stock compensation represents the difference between the
deemed fair value of our common stock and the exercise price of options at the
date of grant. These amounts are being amortized ratably over the vesting
periods. The increase in amortization of deferred stock and stock compensation
expense was primarily attributable to the issuance of stock options to our
consultants. As a result of stock options granted in 2000, we anticipate
recording an additional $1.5 million in deferred stock compensation which will
be amortized ratably over the three year vesting term.
INTEREST INCOME
Interest income remained relatively unchanged between 1998 and 1999.
INCOME TAXES
As of December 31, 1999, we had federal net operating loss carryforwards of
$17.1 million. As of December 31, 1999, we have recorded a full valuation
allowance for our existing net deferred tax assets due to uncertainties
regarding their realization. We also have federal research tax credit
carryforwards of $572,000. The federal net operating loss and credit
carryforwards begin to expire in 2010, if not utilized. Utilization of the
federal net operating losses and credit carryforwards will be limited by the
change of ownership provisions contained in Section 382 of the Internal Revenue
Code. The annual limitation will result in the expiration of no more than
$750,000 of net operating losses before utilization.
- --------------------------------------------------------------------------------
27
<PAGE>
Management's discussion and analysis of financial condition and results of
operation
- --------------------------------------------------------------------------------
Years ended December 31, 1998 and 1997
Revenue
Revenue increased to $386,000 in 1998 from $99,000 in 1997. The increase was
primarily attributable to higher unit sales of Luminex R/O systems in 1998
compared with 1997.
Cost of product revenue
Cost of product revenue increased to $88,000 in 1998 from $10,000 in 1997. The
increase was primarily attributable to increased unit sales of Luminex R/O
systems in 1998 compared to 1997.
Research and development expenses
Research and development expenses increased to $3.6 million in 1998 from $1.6
million in 1997. The increase was primarily attributable to higher staffing
levels, consulting and professional fees and usage of parts and supplies for
development purposes.
Selling, general and administrative expenses
Selling, general and administrative expenses increased to $2.6 million in 1998
from $1.4 million in 1997 primarily attributable to an increase in facilities
costs, consulting and professional fees and depreciation and amortization.
Interest income
Interest income increased to $283,000 in 1998 from $178,000 in 1997. The
increase was attributable to the higher average cash and cash equivalent
balances resulting from the $11.3 million net proceeds from the sale of our
Series C preferred stock, in mid 1998.
LIQUIDITY AND CAPITAL RESOURCES
We have funded our operations principally with $30.6 million of private equity
financings, $28.9 million of which came from a series of five preferred stock
offerings over the period 1996 through 1999 as follows:
Preferred stock transactions
<TABLE>
<CAPTION>
No. of
Year Shares Amount
(dollar amounts in
Issue millions)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Preferred Stock, Series A.................................. 1996 457,250 $0.9
Preferred Stock, Series B.................................. 1997 150,000 6.0
Preferred Stock, Series C.................................. 1998 151,571 12.1
Preferred Stock, Series D.................................. 1999 57,538 6.9
Preferred Stock, Series E.................................. 1999 25,000 3.0
-----
$28.9
=====
</TABLE>
Each share of Series A Preferred Stock is convertible into 2.04 shares of our
common stock. Each share of our Series B, C, D and E Preferred Stock is
convertible into 20.4 shares of our common stock.
At December 31, 1999, cash, cash equivalents and short-term investments totaled
$9.0 million compared to $8.5 million and $2.8 million at December 31, 1998 and
1997, respectively. Our cash reserves are held in a variety of short term,
interest-bearing instruments including high-grade corporate bonds, commercial
paper, US government backed securities and money market accounts.
- --------------------------------------------------------------------------------
28
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
- --------------------------------------------------------------------------------
Cash used in operations was $8.4 million for the year ended December 31, 1999
compared with $5.1 million and $2.9 million for the years ended December 31,
1998 and 1997, respectively. The net loss for 1999 of $8.4 million was
partially offset by non-cash charges for depreciation, amortization and stock
compensation of $1.0 million and an increase in deferred revenue of $646,000.
Other factors contributing to the increase in operating cash used were an
increase in accounts receivable of $1.2 million and inventory increases of
$616,000.
Our purchases of property and equipment increased to $1.1 million in 1999, from
$399,000 in 1998. The increase was related to machinery, equipment and computer
equipment purchased to meet our operating equipment requirements, to provide
computer equipment for our new employees and to upgrade our network to
accommodate the increased rate of activity.
We expect to have negative cash flow from operations through at least 2000. We
expect to incur increasing research and development expenses, including
expenses related to additions to personnel and production and commercialization
efforts. Our future capital requirements will depend on a number of factors,
including our success in developing markets for our products, payments received
or made under possible future strategic agreements, the availability of
government research grants, continued progress of our research and development
of potential products, the timing and outcome of regulatory approvals, the
costs involved in preparing, filing, prosecuting, maintaining, defending and
enforcing patent claims and other intellectual property rights, the need to
acquire licenses to new technology, the status of competitive products and the
availability of other financing. We believe our existing cash, cash equivalents
and short-term investments, together with the net proceeds of this offering,
will be sufficient to fund our operating expenses and capital equipment
requirements through at least December 31, 2001.
We have no credit facility or other committed sources of capital. To the extent
our capital resources are insufficient to meet future capital requirements, we
will need to raise additional capital or incur indebtedness to fund our
operations. There can be no assurance that additional debt or equity financing
will be available on acceptable terms, if at all. If adequate funds are not
available, we may be required to delay, reduce the scope of or eliminate our
research and development programs, reduce our commercialization efforts or
obtain funds through arrangements with collaborative partners or others that
may require us to relinquish rights to certain technologies or products that we
might otherwise seek to develop or commercialize.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our interest income is sensitive to changes in the general level of US interest
rates, particularly since the majority of our investments are in short-term
instruments. Due to the nature of our short-term investments, we have concluded
that there is no material market risk exposure.
INFLATION
We do not believe that inflation has had a material adverse impact on our
business or operating results during the periods presented.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133 is
effective for fiscal years beginning after June 15, 2000. SFAS No. 133 requires
that all derivative instruments be recorded on the balance
- --------------------------------------------------------------------------------
29
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
- --------------------------------------------------------------------------------
sheet at their fair value. Changes in the fair value of derivatives are
recorded each period in current earnings or other comprehensive income. We do
not expect that the adoption of SFAS No. 133 will have a material impact on our
financial statements because we do not currently hold any derivative
instruments.
On March 31, 1999, the FASB issued an exposure draft entitled "Accounting for
Certain Transactions Involving Stock Compensation," which is a proposed
interpretation of APB Opinion No. 25 which has an effective date for certain
transactions of December 15, 1998. However, the exposure draft has not been
finalized. Once finalized and issued, the current accounting practices for
transactions involving stock compensation may need to change and such changes
could effect our future earnings.
In December 1999, the Securities and Exchange Commission released Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial Statements, which
provides guidance on the recognition, presentation and disclosure of revenue in
financial statements. The application of SAB No. 101 did not have a material
impact on our financial statements.
- --------------------------------------------------------------------------------
30
<PAGE>
- --------------------------------------------------------------------------------
Business
OVERVIEW
Luminex Corporation has developed, manufactures and markets a proprietary
technology that simplifies biological testing for the life sciences industry.
This industry depends on a broad range of tests, called bioassays, to discover
new drugs, identify new genes or simply monitor blood cholesterol levels. The
LabMAP system simultaneously performs up to 100 bioassays on a single drop of
fluid. We accomplish this with the Luminex 100, a compact instrument that reads
biological tests taking place on the surface of microscopic plastic beads
called microspheres. The Luminex 100 combines this miniaturized bioassay
capability with small lasers, digital signal processors and proprietary
software to create a system offering significant advantages in speed,
precision, flexibility and cost. We believe our LabMAP technology is broadly
applicable in the fields of drug discovery, clinical diagnostics, genetic
analysis and biomedical research.
We began marketing the current generation of LabMAP in 1999. As of February 29,
2000, 63 life sciences customers have purchased 114 LabMAP systems. Our
customers include Abbott Laboratories, Bio-Rad Laboratories, Inc., Centers for
Disease Control and Prevention, Eli Lilly and Company, GlaxoWellcome plc,
Laboratory Corporation of America, Lawrence Livermore National Laboratories,
Life Technologies, Inc., Mayo Clinic, National Institutes of Health and
SmithKline Beecham Corporation.
MARKET OPPORTUNITY
BACKGROUND
The life sciences industry uses bioassays extensively to detect the presence of
certain biochemicals, proteins or genes in a sample. Drug discovery, genetic
analysis, pharmacogenomics, clinical diagnostics and general biomedical
research broadly use bioassays. For example, bioassays can be used to:
.measure the attraction, or affinity, between a chemical compound and a disease
target for drug discovery and development;
.assist physicians in prescribing the appropriate drug therapy to match the
patient's unique genetic makeup, a process known as pharmacogenomics;
.detect genetic variations, such as single nucleotide polymorphisms or SNPs;
and
.measure the presence and quantity of biochemicals in blood to assist
physicians in diagnosing, treating and monitoring disease conditions such as
heart attack or diabetes.
Laboratories either develop bioassays internally to meet their specific needs
or purchase them in the form of an off-the-shelf test kit or customized
service. Industry reports estimate the global market for tools the drug
discovery and development, clinical diagnostics and biomedical research
industries use to develop and perform bioassays to have been approximately
$27.5 billion in 1998 and expect it to grow at an annual rate of 7.2%.
- --------------------------------------------------------------------------------
31
<PAGE>
BUSINESS
- --------------------------------------------------------------------------------
MARKETS DESCRIPTION
DRUG DISCOVERY AND DEVELOPMENT
The bioassays the pharmaceutical industry employs vary in design and complexity
throughout the drug discovery and development process. Simple bioassays screen
a pharmaceutical company's library of chemical compounds against disease
targets. Confirmatory testing and lead optimization use more complex bioassays.
Finally, predictive toxicity bioassays are used to test the safety of the
potential drug.
Industry reports estimate the global market for tools to develop and perform
bioassays for the drug discovery and development industry to have been
approximately $7.2 billion in 1998 and project continued growth at an annual
rate of 11%. There are a number of factors driving this growth, including:
.INCREASED RESEARCH AND DEVELOPMENT SPENDING. According to industry reports,
pharmaceutical and biotechnology companies spent in excess of $48 billion
worldwide in 1998 on drug discovery and development. These reports project
spending to increase at an annual rate of 11%. This is the result of
increasing pressure to expand the product pipeline, find new applications for
existing or failed drugs and shorten the drug discovery process in order to
maximize the benefits of the patent protection period. As a result, we believe
the number of identified disease targets for drug discovery will rise.
According to industry reports, each pharmaceutical and biotechnology company
expects to screen, on average, 27 targets in 2001, up from 17 in 1999.
.A SHIFT IN RESEARCH AND DEVELOPMENT FOCUS FROM GENE SEQUENCING TO DETERMINING
THE FUNCTION OF GENES AND THEIR PROTEIN PRODUCTS, KNOWN AS FUNCTIONAL GENOMICS
AND PROTEOMICS. The Human Genomics Project, an international effort to
provide the first complete DNA sequence of a human, as well as the activities
of such companies as Celera Genomics Group and Incyte Pharmaceuticals, are
providing large amounts of information concerning human genes. Pharmaceutical
and biotechnology companies now focus a major part of their research and
development efforts on identifying the role those genes serve in biological
processes and how variations in gene sequences may result in a predisposition
for a disease or an adverse reaction to a drug. These activities are referred
to as functional genomics. Since proteins serve as the mechanism through which
genes control cellular activities, the study of proteins, or proteomics, is
expected to intensify. We expect this shift in focus to lead to a dramatic
rise in the number of identified disease targets and related bioassays.
CLINICAL DIAGNOSTICS
The clinical diagnostics market broadly uses bioassays. These bioassays are
commonly referred to as in vitro diagnostics, or IVD, and detect the presence
and quantity of certain substances in body fluids, such as whole blood, plasma,
serum, urine and saliva, as well as cells and tissues. Applications range from
the simple detection of illegal drugs in urine to the screening and diagnosis
of genetic diseases, infectious diseases and cancer. A number of different
clinical settings, including hospital laboratories, commercial laboratories and
physicians' offices/ambulatory care centers perform these applications. There
are more than 150,000 hospital, commercial clinical and physician office
laboratories registered with the Health Care Financing Administration (HCFA) in
the United States.
An industry report estimates the global market for IVD products to have been
approximately $18 billion in 1998 and to be growing at an annual rate of 5%. We
believe a number of industry trends exist that will drive this growth,
including:
.AN INCREASE IN DISEASE TARGETS FROM THE SUCCESS OF DRUG DISCOVERY EFFORTS. We
believe the rise in research and development spending by pharmaceutical and
biotechnology companies will lead to the
- --------------------------------------------------------------------------------
32
<PAGE>
Business
- --------------------------------------------------------------------------------
identification of a greater number of disease targets. These targets may be
assayed during drug discovery and later developed as IVD products for disease
diagnosis and monitoring. For example, the HIV viral load bioassay originally
used to evaluate potential drug candidates is now the primary tool for patient
monitoring.
.Evolution of pharmacogenomics. Many studies investigate genetic variation
among individuals, including SNPs, and their linkage to disease. A consortium
of pharmaceutical companies seeking to correlate the results of an
individual's SNP profile with drug response funds these studies. In doing so,
pharmaceutical companies are attempting to discover new drugs and revive such
potential blockbuster drugs as Rezulin, an extremely powerful anti-diabetic
with dangerous side effects in a small fraction of users. Pharmacogenomics
allow a physician to tailor a diabetic patient's drug therapy after bioassay
of his or her genetic make-up.
.Consolidation among the clinical diagnostic companies. As a result of industry
consolidation, clinical diagnostic companies have been re-engineering the
laboratory in order to streamline processes, improve productivity and lower
costs. Attempts to integrate the many instruments employed by these
laboratories have been part of this process. We believe, however, that
clinical laboratories will ultimately prefer a single instrument that can
perform the required bioassays.
.Evolution of disease-specific test panels. Traditionally, health care
providers have focused on a single target of a particular disease. Rarely,
though, are diseases confined to a single, isolated molecular abnormality. For
example, the predictive value of a cholesterol test is increased significantly
when the HDL and LDL levels are determined. More recently, physicians have
added homocysteine and C-reactive protein levels to the risk profile for heart
disease. We believe clinical laboratories will demand a system that can
perform all of these tests simultaneously from a single sample in a simple,
cost effective format.
Biomedical research
Biomedical research is focused on understanding biological processes at the
molecular level. Through an understanding of such processes, scientists can
better characterize disease, a critical first step in designing drug therapies.
The National Institutes of Health provides over $12 billion annually in funding
to more than 50,000 scientists. These scientists work in the laboratories of
universities and other not-for-profit research institutions. The pharmaceutical
and biotechnology industries also fund significant research.
According to industry reports, the global market for bioassays in biomedical
research is estimated to have been approximately $2.3 billion in 1998 and
growing at an annual rate of 13%. We believe there are a number of industry
trends that will drive this growth, including:
.Increased research and development spending by pharmaceutical
companies. Pharmaceutical companies have a long history of collaborating with
academic institutions to study biological processes at the molecular and
cellular level. As these collaborations increase and diversify in focus, we
believe the number of bioassays performed will rise.
.Increased demand for SNP studies. Academic and not-for-profit institutions
have played a major role in studying SNPs in the population. The SNP
consortium, a collaboration of academic, not-for-profit research institutions
and pharmaceutical companies, has announced an effort to identify over 300,000
SNPs, some of which may be correlated with disease. As a result, we anticipate
that demand for SNP detection bioassays will increase.
- --------------------------------------------------------------------------------
33
<PAGE>
BUSINESS
- --------------------------------------------------------------------------------
CURRENT ASSAY DEVELOPMENT TECHNOLOGIES AND THEIR LIMITATIONS
The differing bioassay needs of life sciences laboratories have led to the
development of specialized techniques and instrumentation. As a result, most of
these laboratories have become highly compartmentalized. For example, clinical
testing facilities are organized into functional groups, such as chemistry,
microbiology, immunology and infectious diseases. Similarly, pharmaceutical
companies organize their laboratories by disease target, such as cancer and
hypertension, as well as by the stages of the drug discovery process, from
initial bioassay development to toxicology. This has created inefficiencies in
laboratories since they must now purchase multiple instruments, often from
different vendors, to meet their testing needs. This limits the laboratories'
ability to standardize bioassay techniques, operator training and hardware
maintenance.
While advances in bioassay technologies have delivered new capabilities, most
remain highly specialized and reinforce the problems associated with
compartmentalization.
The table below briefly describes the key bioassay technologies in the life
sciences industry and what we consider to be their comparative advantages and
disadvantages.
<TABLE>
<CAPTION>
Key technologies Description Markets served Advantages Disadvantages
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BioChips High-density arrays Biomedical .Performs multiple .High equipment cost
of DNA fragments research tests on a single .High cost per test
attached to a flat platform .Fixed
glass or silicon surface .High throughput configuration/inflexible
.Limited format--can
only perform genetic
bioassays
- -----------------------------------------------------------------------------------------------------------------
Clinical Automated test-tube Clinical .High throughput .High equipment cost-
Immuno-analyzers based platform diagnostics .Reproducible .High cost per test
.Performs large .Requires large sample
number of volume
individual tests .High maintenance costs
.Limited format -- can
only perform
immunologic bioassays
- -----------------------------------------------------------------------------------------------------------------
Gels and Blots Physical separation of Clinical .Low equipment cost . Labor intensive
analytes for diagnostics .Performs multiple .Low throughput
visualization and biomedical bioassays .Cannot perform
research simultaneously enzymatic assays
- -----------------------------------------------------------------------------------------------------------------
Microarrays Low-density arrays Biomedical .Performs multiple . High equipment cost
of DNA fragments research bioassays .Low throughput
attached to a flat simultaneously .Limited format--can
glass or silicon surface .Flexible only perform genetic
configuration bioassays
- -----------------------------------------------------------------------------------------------------------------
Microfluidics chips Miniaturized liquid Biomedical .Low sample volume .High cost per test
handling system research .Low reagent volume .Fixed
on a chip .Performs multiple configuration/inflexible
tests
simultaneously
- -----------------------------------------------------------------------------------------------------------------
Microtiter based assays Plastic trays with Drug discovery, .Ease of use .Requires large sample
discrete wells in which clinical .High throughput volume
assays are fixed diagnostics and .Reproducible .Fixed configuration
biomedical .Broad formats .High reagent costs
research .Single test per well
</TABLE>
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34
<PAGE>
BUSINESS
- --------------------------------------------------------------------------------
THE LUMINEX SOLUTION
Our solution is to provide a single platform, the LabMAP technology, that can
perform a wide range of bioassays in a cost-effective manner. Many technologies
are available to perform bioassays in the niche markets that comprise the life
sciences industry, all of which are accurate, sensitive and reliable. Luminex
believes that the LabMAP system meets these requirements and is the only
commercially available technology that provides each of the following key
features:
MULTI-ANALYTE/MULTI-FORMAT
LabMAP technology is designed to simultaneously perform from one to 100
distinct bioassays on a single sample. Unlike existing technologies that are
capable of performing only one type of bioassay, LabMAP can perform a broad
range of enzymatic, genetic and immunologic tests on a single instrumentation
platform. For example, the system could perform 100 immunologic allergy tests
using a single blood sample, while the next bioassay tested by the instrument
could be a complex genetic SNP panel. Although some DNA microarray technologies
can test for thousands of analytes per sample, we believe that one hundred
tests per sample will serve a significant portion of the DNA testing market.
FLEXIBILITY/SCALABILITY
LabMAP technology allows flexibility in customizing test panels. These panels
can be modified to include new bioassays simply by adding additional
microsphere sets. It is also scalable, meaning that there is no change in the
manufacturing process or the required labor, whether producing one million or
just 10 microsphere-based tests. The system remains cost-effective for the
smallest and largest laboratories.
THROUGHPUT
Our technology's current ability to perform up to 100 tests on a single sample
permits efficient use for high throughput applications. Throughput can be
further enhanced using the Luminex XY Platform, which permits 9,600 unattended
tests to be performed in less than an hour. A high throughput version of the
Luminex 100 being developed, the Luminex HTS, can be interfaced with automated
liquid handling equipment offered by several manufacturers to perform over
15,000 bioassays per hour.
EASE OF USE
Most LabMAP bioassays are simple to perform. A test sample, such as a drop of
blood, is added to a reagent solution containing microspheres and then
analyzed. Our LabMAP technology incorporates proprietary software to automate
all aspects of data acquisition and analysis in real-time. Results are provided
without the need for sophisticated data interpretation and can be directly
downloaded into a user's laboratory information system. The Luminex XY Platform
further simplifies use by enabling walk-away capability through automated
sample handling.
LOW COST
We have designed the LabMAP system to be relatively inexpensive to manufacture
and utilize. Because the Luminex 100 is manufactured using many off-the-shelf
electronic components commonly used in consumer electronics, our products have
a comparatively low acquisition cost. In addition, microsphere-based bioassays
are inexpensive compared to other technologies such as biochips.
STRATEGY
Our goal is to establish LabMAP technology as the industry standard for
performing bioassays. To achieve this goal, we have implemented the following
strategy:
FOCUS ON LARGE, FAST-GROWING SECTORS -- We will continue to focus our
commercialization efforts on large and fast-growing sectors of the life
sciences industry. We have targeted major pharmaceutical companies,
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large clinical laboratories, in vitro diagnostic manufacturers and major
medical institutions for our principal marketing efforts. We believe these
customers provide the greatest opportunity for maximizing the use of LabMAP
technology and that early adoption by these industry leaders will promote wider
market acceptance.
Continue to develop strategic partnerships -- We intend to broaden and
accelerate market acceptance of LabMAP technology by continuing to enter into
development, marketing and distribution partnerships with those leaders in the
life sciences industry that we believe could convert core product lines to the
Luminex platform. They may also develop new applications that take advantage of
unique LabMAP capabilities. By leveraging our partners' strong market positions
and utilizing their distribution channels and marketing infrastructure, we
believe we can expand our installed base.
Provide an open platform -- The LabMAP system allows end users to configure
their own tests without complex and expensive equipment. This open platform
encourages the development of a wide range of bioassays and enables our
strategic partners to deliver a variety of applications to end-users. The value
of LabMAP technology to our customers increases with each new application.
Develop next generation products -- We are committed to expanding the LabMAP
product line. Our research and development group is pursuing a number of
projects, including expanding the number of tests that can be performed on a
given sample and increasing the LabMAP system's throughput. We are also
collaborating with leading industry participants and major medical institutions
to develop additional LabMAP products.
Allow easy technology access -- We do not impose access fees on users of our
technology. We believe maximum value is derived from the recurring revenue
stream generated by widespread and frequent use. This is encouraged by a
pricing structure that combines a low system acquisition cost with inexpensive
consumables.
OUR LABMAP TECHNOLOGY
Our LabMAP technology combines several proven technologies with advanced
digital signal processing and proprietary software. With our technology,
discrete bioassays are performed on the surface of color-coded microspheres.
These microspheres are read in a compact analyzer that utilizes lasers and
high-speed digital signal processing to simultaneously identify the bioassay
and measure its result.
Polystyrene microspheres, approximately the size of a biological cell, are a
fundamental component of LabMAP technology. We purchase raw, undyed
microspheres and, in a proprietary process, dye them in sets with varying
intensities of red and infrared fluorescent dyes to achieve up to 100 distinct
colors. The specific dye proportions permit each color-coded microsphere to be
readily identified based on its fluorescent signature. Our customers create
bioassays by attaching different biochemical reactants to each distinct
microsphere set. The microsphere sets can then be combined in test panels as
required by the user, with a current maximum of 100 tests per panel.
To conduct a bioassay, microspheres with attached biochemicals, or reagents,
are mixed with a test sample. This mixture is then passed through the Luminex
100 instrument. The microspheres travel single file in a fluid stream through
two laser beams. The first laser excites the internal dyes that are used to
identify the microsphere set. The second laser excites a third fluorescent dye
that is used to quantitate the result of the bioassay taking place on the
surface of each individual microsphere. Our proprietary optics, digital signal
processors and software record the fluorescent signature of each microsphere
and compare the
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results to the known identity of each color-coded microsphere set.
Simultaneously, the test is analyzed and the result displayed in real-time.
PRODUCTS
We generally sell our products as a system comprised of one or more instruments
that use LabMAP consumables.
Instruments
Luminex 100
The Luminex 100 is a compact analyzer that integrates fluidics, optics and
digital signal processing to perform up to 100 bioassays simultaneously with a
single drop of fluid. By combining small diode lasers with digital signal
processors and microcontrollers, the Luminex 100 performs rapid, multi-analyte
profiles under the control of a Windows-based personal computer. The Luminex
100 analyzer is sold with a personal computer, LabMAP software and a starter
supply of microspheres for bioassay development. From market introduction
through February 29, 2000, we had sold 114 systems.
Luminex XY Platform
We also offer the Luminex XY Platform, which complements the Luminex 100 by
automating the sequential positioning of each well of a microtiter plate. This
permits a total of up to 9,600 unattended tests per plate to be performed in
less than an hour. It is designed to connect to robotic systems that deliver
these plates to the Luminex 100, allowing integration into fully automated test
centers. From market introduction through February 29, 2000, we had sold 62
Luminex XY platforms.
Consumables
We use polystyrene microspheres in our LabMAP technology that are approximately
5.6 microns in size. We dye them using our proprietary method in up to 100
distinctly colored microsphere sets. Each can carry the reagents of an
enzymatic, genetic or immunologic bioassay. Consumables also include sheath
fluid and other relevant spare parts.
RESEARCH AND DEVELOPMENT
Our research and development program is devoted to advancing the capabilities
of our LabMAP technology and expanding the number of its applications. For the
fiscal year ended December 31, 1999, expenses for our research and development
activities were $5.8 million as compared to $3.6 million for 1998 and $1.6
million for 1997. As of February 29, 2000, we had approximately 49 engineers,
scientists and technicians dedicated to research and development. In addition,
we are collaborating with academic institutions and other companies to increase
the breadth of LabMAP applications.
Our current projects include:
.expanding our multiple testing capabilities This effort is primarily driven by
the pharmaceutical industry's demand for advanced genetic testing. In order to
expand the number of tests per sample to 1,000, a more complex instrument will
be required incorporating three lasers instead of the two contained in the
Luminex 100. In addition, a third dye must be incorporated into the
microspheres for classification purposes.
.developing a point-of-care version of LabMAP This version of the LabMAP system
would be designed for the small clinic, ambulance and other non-laboratory
environments where bringing
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testing closer to the patient delivers significant medical benefits. For
example, an ambulance-based instrument could evaluate the multiple indicators
of heart attack and forward this information to the hospital prior to patient
arrival.
.DEVELOPING A HIGH THROUGHPUT SCREENING VERSION OF LABMAP The Luminex HTS is
being developed to meet the ultra-high-throughput demands of some
laboratories. This instrument is being designed to generate up to 400,000
individual bioassay results per day and will readily interface with a number
of existing liquid handling systems.
Our current research collaborations include:
.MAJOR MANUFACTURERS OF LIQUID HANDLING ROBOTIC SYSTEMS The goal of some
laboratories in the pharmaceutical industry is to perform up to a million
bioassays per day. We believe this could be achieved in a cost-effective
manner by integrating existing high-throughput liquid handlers with three
Luminex HTS systems. We are collaborating with major manufacturers of
sophisticated liquid handling equipment to develop the interface with the
Luminex HTS.
.ABBOTT LABORATORIES Luminex is collaborating with Abbott Laboratories to
evaluate the effectiveness of the LabMAP system in "next generation" prostate
specific antigen (PSA) tests.
SALES AND MARKETING
Our sales and marketing strategy is designed to expand the installed base of
LabMAP systems and generate recurring, high-margin revenues from royalties on
bioassay kits and testing services that use our technology, as well as from the
sale of microspheres. The key elements of our strategy include:
.a strategic partner program with leading life sciences companies to act as
resellers of our products to facilitate rapid adoption;
.a direct sales effort to complement the strategic partner program; and
.an extensive customer service program.
Our marketing efforts are divided between identifying leading life sciences
companies and internally generating new leads. We intend to utilize outside
public relations and advertising firms to increase market awareness.
STRATEGIC PARTNER PROGRAM
We intend to use strategic partners as our primary distribution channel in
order to achieve broad market acceptance of our LabMAP technology. We believe
our strategic partners will provide us with complementary capabilities in
product development, regulatory expertise and sales and marketing. We intend to
target leading life sciences companies with established bioassays that we
believe could be converted onto our LabMAP platform. By leveraging our
partners' customer relationships and distribution channels, we believe that we
can achieve rapid market penetration without a large direct sales force. As a
result, we can utilize our internal resources for technology development and
customer support.
We have agreements with partners that contemplate the incorporation of LabMAP
technology in their application-specific bioassay kits and services. Our
partners sell these kits to medical laboratories, hospitals and other end-users
that use standardized sample analysis and screening products and services. Our
strategic partners also use our technology in performing services for third
parties. Under
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these agreements, we have agreed to supply our partners with Luminex 100
systems and microspheres in amounts and at prices that are determined by mutual
agreement. While our strategic partners are not required to purchase any
minimum number of our systems or microspheres, the agreements obligate them to
pay us royalties based on revenues generated by kits and services using our
technology. These agreements also include cross indemnities by our strategic
partners and us for infringement of third party intellectual property rights
and other specified costs and liabilities.
Direct sales
Direct sales are supported by a team of scientists with expertise in the
pharmaceutical industry, clinical diagnostics and biomedical research. We
intend to expand our direct and field sales staff in selected geographic
locations as required by market demand.
Customer service
Customer service supports users through a comprehensive training program and a
toll-free customer support hotline. If a system requires an upgrade or on-site
repair, customer service will dispatch one of our field service technicians.
Our customer service team assists our strategic partners with the development
of their bioassays. This value-added service is designed to facilitate and
expedite the development of applications based on the LabMAP technology.
CUSTOMERS
Our customers consist of a broad range of participants in the life sciences
industry. As of February 29, 2000, our customers included the following:
<TABLE>
<CAPTION>
Customer Market Application
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<C> <S> <C>
Bio-Rad Laboratories, Inc. In vitro diagnostics, Kits
biomedical
research and drug
discovery
Eli Lilly & Company Drug discovery Protein analysis
GlaxoWellcome plc Drug discovery SNP detection
Laboratory Corporation of America Commercial clinical Clinical testing
laboratory
Life Technologies, Inc. Biomedical research and Kits
drug discovery
Novartis Pharma AG Drug discovery Genetic testing
RW Johnson/Pharmaceutical Drug discovery High throughput screening
Research Institute
SmithKline Beecham Corporation Drug discovery Protein analysis
</TABLE>
In 1999, Bio-Rad Laboratories, Inc. accounted for approximately 10% of our
total net revenue. No other customer accounted for more than 10% of our
revenues in 1999.
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MANUFACTURING OPERATIONS
Luminex 100
The basic components of the Luminex 100 are assembled by an ISO 9002 contract
manufacturer. This manufacturer purchases the required system components and
parts for the Luminex 100 from an approved supplier list. Once the manufacturer
has completed its portion of the assembly process, the system is shipped to our
facility in Austin, Texas, where our employees install and align the
optical/laser assembly. At this point, a personal computer with our proprietary
software is added and each unit is run through a quality control protocol.
Parts and component assemblies that comprise the Luminex 100 are obtained from
a number of sources. We intend to develop multiple sources for as many of the
component parts and assemblies as possible.
XY Platform
We purchase the principal components of the XY Platform from several
manufacturers. Final assembly and quality control occurs at our facility in
Austin, Texas.
Microspheres
We buy generic, undyed polystyrene microspheres from any one of three
suppliers. We then dye the microspheres using a proprietary method in our
manufacturing facility in large lots with ten intensities each of red and
infrared dyes to produce 100 distinctly colored microsphere sets. The dyed
microspheres are then repackaged for sale.
INTELLECTUAL PROPERTY
To establish and protect our proprietary technologies and products, we rely on
a combination of patent, copyright, trademark and trade secrets laws, as well
as confidentiality provisions in our contracts.
We have implemented an aggressive patent strategy designed to maximize our
intellectual property rights. We are pursuing patent coverage in the United
States and those foreign countries which correspond to the majority of our
anticipated customer base. We currently own two issued patents in the United
States and have received notices of allowances for two additional patent
applications. In addition, our patent portfolio includes pending patent
applications in the United States and corresponding international and foreign
filings in major industrial nations. One of our patents provides protection for
systems and technology that allows "real time" techniques for the detection and
quantification of many analytes from a single sample. As a result of a
procedural omission, we are unable to obtain comparable patent protection in
Japan.
The issued patents and allowed or pending patent applications claim proprietary
methods for the detection and quantification of analytes from a single sample
in a "real time" format as well as specific aspects and applications of the
LabMAP technology to molecular research.
Generally, United States patents issued from applications filed on or after
June 8, 1995 have a term of 20 years from the application filing date or
earlier claimed priority. Patents in most other countries have a term of 20
years from the date of filing the patent application. All of our patent
applications, including the applications from which both of our issued patents
were derived, were filed after June 8,
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1995. Because the time from filing to issuance of patent applications in the
life sciences industry is often several years, this process may result in a
shortened period of patent protection, which may adversely affect our ability
to exclude competitors from our markets. Our issued United States patents will
expire in 2015. Our success depends to a significant degree upon our ability to
develop proprietary products and technologies and to obtain patent coverage for
the products and technologies. We intend to continue to file patent
applications covering any newly-developed products and technologies.
Patents provide some degree of protection for our proprietary technology.
However, the pursuit and assertion of patent rights, particularly in areas like
medical device development, pharmaceuticals and biotechnology, involve complex
legal and factual determinations and, therefore, are characterized by some
uncertainty. In addition, the laws governing patentability and the scope of
patent coverage continue to evolve, particularly in life sciences. As a result,
we cannot assure you that patents will issue from any of our patent
applications or from applications licensed to us. The scope of any of our
issued patents may not be sufficiently broad to offer meaningful protection. In
addition, our issued patents or patents licensed to us may be successfully
challenged, invalidated, circumvented or rendered unenforceable so that our
patent rights might not create an effective competitive barrier. Moreover, the
laws of some foreign countries may not protect our proprietary rights to the
same extent as do the laws of the United States. There can be no assurance that
any patents issued to us or our strategic partners will provide a legal basis
for establishing an exclusive market for our products or provide us with any
competitive advantages or that the patents of others will not have an adverse
effect on our ability to do business or to continue to use our technologies
freely. In view of these factors, our intellectual property positions bear some
degree of uncertainty.
The source code for our proprietary software is protected both as a trade
secret and as a copyrighted work.
We also rely in part on trade secret protection of our intellectual property.
We attempt to protect our trade secrets by entering into confidentiality
agreements with third parties, employees and consultants. Our employees also
sign agreements requiring that they assign to us their interests in inventions
and original expressions and any corresponding patents and copyrights arising
from their work for us. However, it is possible that these agreements may be
breached, invalidated or rendered unenforceable and if so, there may not be an
adequate corrective remedy available. Despite the measures we have taken to
protect our intellectual property, we cannot assure you that parties to our
agreements will not breach the confidentiality provisions in our contracts or
infringe or misappropriate our patents, copyrights, trademarks, trade secrets
and other proprietary rights. In addition, we cannot assure you that third
parties will not independently discover or invent competing technologies or
reverse engineer our trade secrets, or other technology. Therefore, the
measures we are taking to protect our proprietary technology may not be
adequate.
Although we are not a party to any legal proceedings, in the future, third
parties may file claims asserting that our technologies or products infringe on
their intellectual property. We cannot predict whether third parties will
assert such claims against us or our licensees or against the licensors of
technology licensed to us, or whether those claims will harm our business. If
we are forced to defend against such claims, whether they are with or without
any merit, whether they are resolved in favor of or against us, our licensees
or our licensors, we may face costly litigation and diversion of management's
attention and resources. As a result of such disputes, we may have to develop
at a substantial cost non-infringing technology, or enter into licensing
agreements. These agreements, if necessary, may be unavailable on terms
acceptable to us, or at all, which could seriously harm our business or
financial condition.
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In particular, we are aware of a European patent granted to Dr. Ioannis
Tripatzis, which covers certain testing agents useful for the determination of
antigens and/or antibodies as well as for methods of their use. Dr. Tripatzis
has publicly stated his belief that his patent covers aspects of our bead
technology in Europe. Counterparts of Dr. Tripatzis' European patent exist in
Japan and Canada. While we believe that the overall impact, if any, of Dr.
Tripatzis' patent, which expires in 2004, is limited, we cannot assure you that
any disputes that may arise ultimately will be resolved in our favor or that
the cost of litigating or otherwise resolving any disputes will not materially
adversely affect us.
COMPETITION
Our LabMAP technology can perform many different kinds of tests in many
different fields, including pharmaceutical and biomedical research, clinical
laboratory testing and many other segments of the life sciences industry. For
this reason, the competition we will encounter will necessarily be fragmented
based on the market. There are competitors in every field. Our competition
includes companies marketing conventional testing products based on established
technologies as well as companies developing their own advanced testing
technologies. Most of our competitors are larger than we are and can commit
significantly greater resources to competitive efforts. We cannot assure you
that the LabMAP system will be widely adopted in one or more markets or that we
will be able to compete effectively.
The pharmaceutical industry is the single biggest market for the genomic and
high throughput screening applications of the LabMAP technology. In each
application, Luminex faces a different set of competitors. Genomic testing for
variability in DNA can also be performed by products available from Affymetrix
Inc., Aclara Biosciences, Inc., Clontech Laboratories, Inc., a wholly-owned
subsidiary of Becton Dickinson & Company, and Sequenom, Inc., among others. In
high throughput screening, LJL BioSystems Inc. and Aurora BioSciences
Corporation offer products competitive with ours.
The clinical laboratory market is dominated by several very large competitors.
These include Abbott Laboratories, Bayer Corporation, Bio-Rad, Dade Behring
Inc., a wholly-owned subsidiary of Aventis, and Roche Bioscience, among others.
None currently offer multi-analyte testing systems, but it should be presumed
that programs are underway within at least some of these companies to develop
this capability.
Competition within the biomedical research market is even more fragmented than
that within the pharmaceutical industry. There are hundreds of suppliers to
this market including Amersham Pharmacia Biotech, Molecular Devices
Corporation, PerkinElmer, Inc. and Stratagene Cloning Systems, Inc. Any company
in this field could be a potential competitor with us.
GOVERNMENT REGULATION
We are regulated by the Food and Drug Administration within the framework of
medical devices, pursuant to various statutes including the Federal Food, Drug
and Cosmetic Act as amended and supplemented by the Medical Device Amendments
of 1976, the Safe Medical Devices Act of 1990, the Medical Device Amendments of
1992 and the FDA Modernization Act of 1997. The FDA classifies medical devices
intended for human use into three classes, Class I, Class II and Class III. The
controls applied to the different classifications are those the FDA believes
are necessary to provide reasonable assurance that a device is safe and
effective. Class I devices are noncritical products that can be adequately
regulated by "general controls," including provisions related to labeling,
producer registration, defect notification, records and reports and CGMP
(Current Good Manufacturing
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Practices) requirements. CGMP requirements govern the methods used in, and the
facilities and controls used for, the design, manufacture, packaging and
servicing of all finished medical devices intended for human use. Class II
devices are products for which the general controls of Class I devices alone
are not sufficient to assure the safety and effectiveness of the device and
require special controls. The additional special controls for Class II devices
include performance standards, post-market surveillance patient registries and
the use of FDA guidelines. Standards may include both design and performance
requirements. Class III devices have the most restrictive controls and require
pre-market approval by the FDA. Class III devices include life-sustaining,
life-supporting or implantable devices. The FDA inspects medical device
manufacturers and distributors and has broad authority to order recalls of
medical devices, to seize noncomplying medical devices, to enjoin and/or impose
civil penalties on manufacturers and distributors marketing noncomplying
medical devices and to prosecute criminal violators.
Federal law requires individuals or companies manufacturing most medical
devices intended for human use to file a notice, which is known as a 510(k),
with the FDA at least 90 days before introducing the product into the
marketplace. The 510(k) notice must identify the type of classified device into
which the product falls, the class of that type and the specific marketed
product to which the product claims to be "substantially equivalent." In some
cases the notification must include data from human clinical studies in order
to establish "substantial equivalence." If the registrant states the device is
unclassified, but nonetheless claims substantial equivalence to a marketed
device or recognized diagnostic procedure, it must explain the basis for that
determination. The FDA must affirmatively agree with the claim of substantial
equivalence before the device may be marketed.
The hardware portion of the Luminex 100 is a Class I medical device of a
particular type, which is exempt from the 510(k) notice requirements. Depending
on their intended applications, some of our products and products based on our
technology expected to be produced by our strategic partners are subject to
approval or clearance by the FDA prior to marketing for commercial use.
Products using our technology for clinical diagnostic purposes will require
such approval or clearance. We will assist our strategic partners in filing
their own 510(k)s for their bioassays that will be run on our LabMAP
technology, including providing the verification and validation of our LabMAP
system.
If a product does not qualify for the 510(k) notice procedure (either because
it is not substantially equivalent to a legally marketed device or because it
is a Class III device), the FDA must approve a pre-market approval application
before marketing can begin. Obtaining approval can take several years.
Clearance pursuant to notification can be obtained in less time. In general,
clearance of a 510(k) notification for a device is obtained by the registrant
establishing that the new device is "substantially equivalent" to another
device of such class that is already on the market. This requires the new
device to have the same intended use as a legally marketed predicate device and
have the same technological characteristics as the predicate device. If the
technological characteristics are different, the new device can still be found
to be "substantially equivalent" if information submitted by the applicant
(including clinical data if requested) supports a finding that the new device
is as safe and effective as a legally marketed device and does not raise
questions of safety and efficacy that are different from the predicate device.
There can be no assurance that we will not be required to obtain 510(k)
clearance or pre-market approval prior to commercial distribution of future
products or future applications of current products.
We are registered with the FDA as a device manufacturer. We are subject to
periodic inspection by the FDA for compliance with the FDA's CGMP and other
regulations. These regulations require that we manufacture our products and
maintain our documents in a prescribed manner with respect to manufacturing,
testing and control activities. Further, we are required to comply with various
FDA requirements for labeling. The Medical Device Reporting regulation requires
that a company provide
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information to the FDA whenever there is evidence to reasonably suggest that
one of its devices may have caused or contributed to a death or serious injury,
or a device malfunction would be likely to cause or contribute to a death or
serious injury if the malfunction were to recur. In addition, the FDA prohibits
a company from marketing approved devices for unapproved indications. If the
FDA believes that a company is not in compliance with applicable regulations,
it can institute proceedings to detain or seize products, issue a recall,
impose operating restrictions, enjoin future violations and assess civil and
criminal penalties against the company, its officers or its employees and can
recommend criminal prosecution to the Department of Justice. Other regulatory
agencies may have similar powers. Our strategic partners are subject to the
same requirements and enforcement.
Medical device laws are also in effect in many countries outside of the United
States. These range from comprehensive device approval requirements for some or
all of our medical device products to simpler requests for product data or
certification. The number and scope of these requirements are increasing. In
addition to the requirements relating to medical devices, we will also have to
comply with FDA regulations on the performance of laser products because our
Luminex 100 utilizes lasers in order to identify the bioassays and measure
their result. These regulations are intended to ensure the safety of laser
products by establishing standards to prevent exposure to excess levels of
laser radiation.
Failure to comply with applicable federal, state and foreign medical device
laws and regulations would likely have a material adverse effect on the our
business. In addition, federal, state and foreign regulations regarding the
manufacture and sale of medical devices are subject to future changes. We
cannot predict what impact, if any, such changes might have on our business,
but such change could have a material impact.
We are subject to various federal, state and local laws and regulations
relating to the protection of the environment. In the course of our business,
we are involved in the handling, storage and disposal of certain chemicals. The
laws and regulations applicable to our operations include provisions that
regulate the discharge of materials into the environment. Usually these
environmental laws and regulations impose "strict liability," rendering a
person liable without regard to negligence or fault on the part of such person.
Such environmental laws and regulations may expose us to liability for the
conduct of, or conditions caused by, others, or for acts that were in
compliance with all applicable laws at the time the checks were performed. We
do not believe that we have been required to expend material amounts in
connection with our efforts to comply with environmental requirements or that
compliance with such requirements will have a material adverse effect upon our
capital expenditures, results of operations or competitive position. Because
the requirements imposed by such laws and regulations are frequently changed,
we are unable to predict the cost of compliance with such requirements in the
future, or the effect of such laws on our capital expenditures, results of
operations or competitive position.
EMPLOYEES
As of February 29, 2000, we had 87 employees. None of our employees are covered
by a collective bargaining agreement. We believe that our relations with our
employees are good.
FACILITIES
We occupy approximately 36,000 combined square feet of leased and sub-leased
office space and other facilities in Austin, Texas for our headquarters and as
the base for our marketing and product support
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operations, research and development and manufacturing activities. The monthly
rent on the combined space is approximately $35,000. Substantially all of our
space is leased through early 2002. We intend to use a portion of the proceeds
of this offering to expand our current facilities.
LEGAL PROCEEDINGS
As a result of a procedural omission, we are unable to pursue a patent in Japan
which corresponds to our issued US patent directed to our method of "real time"
detection and quantification of multiple analytes from a single sample. We have
filed a lawsuit alleging negligence on the part of our prior patent counsel in
this matter and seeking to recover the damages we believe will result from any
gaps in our patent protection in Japan as a result of this omission. At this
time, we cannot predict whether this lawsuit will be successful and, if so, the
amount of any damages we may recover.
From time to time, we may be involved in litigation that arises through the
normal course of business. As of the date of this prospectus, we are not a
party to any litigation we believe could reasonably be expected to have a
material adverse effect on our business or results of operations.
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Management
EXECUTIVE OFFICERS AND DIRECTORS
Set forth below is the name, age, position and a brief account of the business
experience of each of our executive officers and directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
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<C> <C> <S>
Chairman of the Board, President and Chief
Mark B. Chandler, PhD (1).... 46 Executive Officer
Executive Vice President, General Counsel
Michael L. Bengtson.......... 42 and Secretary
Van S. Chandler.............. 49 Vice President of Instruments
Ralph L. McDade, PhD......... 45 Vice President of Scientific Affairs
Michael D. Spain, MD......... 47 Vice President of Clinical Affairs
Vice President, Treasurer and Chief
James L. Persky.............. 51 Financial Officer
Randel S. Marfin............. 43 Vice President of Business Development
G. Walter Loewenbaum (1)..... 55 Director
A. Sidney Alpert............. 61 Director
Robert J. Cresci (2)......... 56 Director
Laurence E. Hirsch (1)(2).... 54 Director
Jim D. Kever (2)(3).......... 47 Director
Fred C. Goad, Jr. (3)........ 59 Director
John E. Koerner, III (2)(3).. 57 Director
William L. Roper, MD, MPH.... 51 Director
</TABLE>
- --------
(1) Member of the executive committee
(2) Member of the audit committee
(3) Member of the compensation and stock option committee
Mark B. Chandler, PhD Dr. Chandler founded our company with his brother Van S.
Chandler, in May 1995, and has served as Chairman of the Board and Chief
Executive Officer since that date and as President since June 1999. He also has
served as a member of the executive committee of our board of directors since
its formation in July 1997. In 1982, he founded Inland Laboratories, Inc.,
which provides plant and bacterial toxins to the medical research community. As
the President and CEO of Inland, Dr. Chandler received the KPMG Peat Marwick,
High Technology Entrepreneur of the Year award in 1987. He received his PhD in
Immunology from the University of Texas Southwestern Medical School in Dallas
in 1981.
Michael L. Bengtson Mr. Bengtson has agreed to join our company as Executive
Vice President, General Counsel and Secretary upon completion of this offering.
Since 1984, Mr. Bengtson has been an attorney practicing corporate and
securities law with the law firm of Thompson & Knight LLP and has been a
partner in that firm since 1990. Prior to attending law school, Mr. Bengtson
was a certified public accountant with KPMG LLP. Mr. Bengtson received a BS in
Accounting and Business Administration from the University of Kansas in 1980
and a JD from Arizona State University in 1984.
Van S. Chandler Mr. Chandler, our co-founder, has served as Vice President of
Instruments since January 1998. In addition, Mr. Chandler served as a director
from May 1995 to February 2000 and as an independent contractor from 1995 to
1998. Since 1995, he has led the design and development of the digital signal
processing hardware and data analysis software for the Luminex 100 and Luminex
R/O Systems. In 1990, Mr. Chandler founded Sigma Logic Corp., and while serving
as its President and
- --------------------------------------------------------------------------------
46
<PAGE>
Management
- --------------------------------------------------------------------------------
CEO from 1990 to 1995, he developed an array of law enforcement technologies,
including wireless police data networks and imaging systems for the FBI. Mr.
Chandler founded Concept Communications, Inc. and served as its President and
CEO from 1985 to 1990. He graduated from the University of Texas at Arlington
in 1972 with a BBA in Statistics.
Ralph L. McDade, PhD Dr. McDade has served as Vice President of Scientific
Affairs since June 1999. From January 1996 to June 1999 he served as Vice
President of Development. From 1988 until 1996, he served as Director of
Research and Development for Inland Laboratories. After post-doctoral training
at The University of Connecticut Health Center in Farmington, he held faculty
positions at The Rockefeller University in New York and at Louisiana State
University Medical Center in New Orleans. Dr. McDade received his PhD in
Microbiology from the University of Texas Southwestern Medical School in 1980.
Michael D. Spain, MD Dr. Spain has served as Vice President of Clinical Affairs
of Luminex since March 1997. From 1994 until joining us, he served as Medical
Director of Laboratory Corporation of America in San Antonio, Texas. From 1984
to 1994, he served as Medical Director of Quest Laboratory in Dallas (formerly
Damon Clinical Laboratory). Following a four year residency in pathology at
Baylor University Medical Center in Dallas, he became board certified in 1984.
Dr. Spain received his MD from the University of Texas Southwestern Medical
School in Dallas in 1980.
James L. Persky Mr. Persky joined our company in March 1998 and has served as
Vice President, Treasurer and Chief Financial Officer since that date. Prior to
joining us, he was Executive Vice President-Finance and Administration and
Chief Financial Officer for Southdown, Inc., a publicly-traded cement
manufacturing company where he served for 13 years. Mr. Persky also spent over
thirteen years in the oil and gas industry in various finance and accounting
positions. Mr. Persky received a BBA from the University of Texas in 1971 and
an MS in Accounting from the University of Houston in 1983. He has been a
Certified Public Accountant since 1979.
Randel S. Marfin Mr. Marfin has served as Vice President of Business
Development, since joining our company in June 1999 and has over thirteen years
of clinical laboratory management experience. Prior to joining us, he worked
for three years at SpectraCell Laboratories, Inc., most recently as Vice
President of Sales and Marketing where he was responsible for business
development, acquisitions, strategic planning and sales and marketing. From
1990 to 1998, he served as General Manager of Texas for both Damon Clinical
Laboratories and Nichols Institute. In addition, Mr. Marfin held sales
management and business development positions for Damon Clinical Laboratories
and MPC Labs. Mr. Marfin has a BS in Biochemistry and Biophysics from the
University of Houston and served in the United States Air Force.
G. Walter Loewenbaum Mr. Loewenbaum has served as a member of our board of
directors since May 1995 and served as Vice Chairman of the Board from April
1998 until January 2000. He also has served as a member of the executive
committee of our board of directors since its formation in July 1997. Since
April 1990, he has served as the President, Chairman and CEO of Loewenbaum &
Company Inc. He received a BA from the University of North Carolina.
Mr. Loewenbaum is also Chairman of 3D Systems Corporation.
A. Sidney Alpert Mr. Alpert has served as a member of our board of directors
since December 1996 and as a member of the audit committee of our board of
directors since its formation in July 1997. Since June 1999, he has served as a
legal consultant to Luminex as well as 3D Systems. From January 1996 to June
1999, Mr. Alpert served as Vice President and General Counsel of 3D Systems
where he
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47
<PAGE>
Management
- --------------------------------------------------------------------------------
was also a director from August 1993 to May 1996. From January 1994 through
December 1995, he was an independent intellectual property consultant. From
late 1988 through December 1993, Mr. Alpert served as Chairman of the Board and
CEO of Competitive Technologies Inc.
Robert J. Cresci Mr. Cresci has served as a member of our board of directors
since December 1996 and has served as a member of the compensation and stock
option committee of our board of directors since its formation in July 1997. He
has been a Managing Director of Pecks Management Partners Ltd., an investment
management firm, since September 1990. Mr. Cresci currently serves on the
boards of Sepracor Inc., Arcadia Financial Ltd., Aviva Petroleum Inc., Quest
Education Corporation, Castle Dental Centers, Inc., Candlewood Hotel Co., Inc.,
SeraCare, Inc., E-Stamp Corporation and Film Roman, Inc.
Laurence E. Hirsch Mr. Hirsch has served as a member of our board of directors
since December 1996 and has served as a member of the executive committee of
our board of directors since its formation in July 1997. He is currently the
Chairman of the Board and CEO of Centex Corporation. He has served in these
positions since July 1991 and July 1988, respectively. He joined Centex as
President and Chief Operating Officer and became a member of their board of
directors in 1985. Mr. Hirsch received a BS in Economics from the Wharton
School at the University of Pennsylvania and a JD from the Villanova University
School of Law. He also serves as a director of Centex Construction Products,
Inc. and A.H. Belo Corporation.
Jim D. Kever Mr. Kever has served as a member of our board of directors since
December 1996 and has served as a member of the audit committee of our board of
directors since its formation in July 1997. He is currently the President and
CEO of Envoy Corporation, a wholly-owned subsidiary of Quintiles Corporation.
Mr. Kever joined Envoy Corporation as Treasurer and General Counsel in October
1981. Prior to joining Envoy (and its predecessor) in 1981, Mr. Kever was
employed by Datanet, a pharmaceutical software company. Mr. Kever received a BS
in business and administration from the University of Arkansas in 1974 and JD
from Vanderbilt University School of Law in 1977.
Fred C. Goad, Jr. Mr. Goad has served as a member of our board of directors
since September 1997 and has served as a member of the compensation and stock
option committee of our board of directors since April 1998. He is Senior
Advisor to the Office of the President of Envoy Corporation. He became a
director and President of Envoy Corporation in August 1984 and served as
Chairman of the Board of Directors and co-CEO of Envoy from August 1995 to
March 1999. Mr. Goad spent ten years with IBM, where he contributed in both
staff and line responsibilities. Mr. Goad also serves on the Board of Directors
for Performance Food Group Company and Quintiles Corporation.
John E. Koerner, III Mr. Koerner has served as a member of our board of
directors since September 1997 and has served as a member of the compensation
and stock option committee of our board of directors since April 1998. He has
been President of Koerner Capital Corporation since 1995 and also serves as a
director on the board of Legg Mason, Inc. He earned a BS in 1965, a JD in 1969
and an MBA in 1971, all from Tulane University.
William L. Roper, MD, MPH Dr. Roper has served as a member of our board of
directors since March 2000. Since July 1997, he has served as the dean of the
School of Public Health at the University of North Carolina at Chapel Hill,
professor of health policy and administration in the School of Public Health
and professor of pediatrics in the School of Medicine. From August 1993 to July
1997, Dr. Roper served in a variety of capacities with the Prudential Insurance
Company of America, including Senior Vice President for Medical Management.
Prior to joining Prudential, Dr. Roper was director of the Centers for Disease
Control and Prevention, served on the senior White House staff and was
administrator of the Health Care Financing Administration. He received his MD
from the University of Alabama School of Medicine and his MPH from the
University of Alabama at Birmingham School of Public Health.
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MANAGEMENT
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BOARD COMPOSITION
We currently have nine authorized directors. In accordance with the terms of
our certificate of incorporation, the terms of office of the directors are
divided into three classes:
.Class I, whose term will expire at the annual meeting of stockholders to be
held in 2001;
.Class II, whose term will expire at the annual meeting of stockholders to be
held in 2002; and
.Class III, whose term will expire at the annual meeting of stockholders to be
held in 2003.
The Class I directors are A. Sidney Alpert, William L. Roper and Robert J.
Cresci, the Class II directors are Laurence E. Hirsch, Jim D. Kever and Fred C.
Goad, Jr., and the Class III directors are Mark B. Chandler, G. Walter
Loewenbaum and John E. Koerner, III. At each annual meeting of stockholders
after the initial classification or special meeting in lieu thereof, the
successors to directors whose terms will then expire will be elected to serve
from the time of election and qualification until the third annual meeting
following election or special meeting held in lieu thereof. The authorized
number of directors may be changed only by resolution of the board of directors
or a super-majority vote of the stockholders. Any additional directorships
resulting from an increase in the number of directors will be distributed among
the three classes so that, as nearly as possible, each class will consist of
one third of the directors. This classification of the board of directors may
have the effect of delaying or preventing changes in control or management of
Luminex.
BOARD COMMITTEES
The executive committee of the board of directors was established in July 1997.
The members of our executive committee are Mark B. Chandler, G. Walter
Loewenbaum and Laurence E. Hirsch. The executive committee has broad powers as
delegated by the board of directors.
The audit committee of the board of directors was established in July 1997 and
reviews, acts on and reports to the board of directors on various auditing and
accounting matters, including the recommendation of our independent auditors,
the scope of the annual audits, fees to be paid to the independent auditors,
the performance of our independent auditors and our accounting practices. The
members of our audit committee are Robert J. Cresci, Laurence E. Hirsch, Jim D.
Kever and John E. Koerner, III, each of whom is an independent director.
The compensation and stock option committee of the board of directors was
established in July 1997 and determines the salaries and benefits for our
employees, consultants, directors and other individuals compensated by us. The
compensation and stock option committee also administers our stock option
plans, including determining the stock option grants for our employees,
consultants, directors and other individuals. The members of the compensation
and stock option committee are Jim D. Kever, Fred C. Goad, Jr. and John E.
Koerner, III.
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MANAGEMENT
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DIRECTOR COMPENSATION
We reimburse our non-employee directors for expenses incurred in connection
with attending board and committee meetings but do not compensate them for
their services as board or committee members. We have in the past granted non-
employee directors options to purchase our common stock pursuant to the terms
of our 1996 Stock Option Plan, and our board continues to have discretion to
grant options to new non-employee directors. We anticipate that we will
continue to grant options from time to time under the 2000 Long-Term Incentive
Plan to our non-employee directors. In 1997, seven nonemployee directors were
granted fully vested options to purchase 10,200 shares of common stock and one
additional director was granted fully vested options to purchase 61,200 shares
of common stock. In 1999, six non-employee directors were granted a fully
vested option to purchase 30,600 shares of common stock.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Our compensation and stock option committee currently consists of Messrs.
Kever, Goad and Koerner. No member of the compensation and stock option
committee has been an officer or employee of ours at any time. None of our
executive officers serves as a member of the board of directors or compensation
committee of any other company that has one or more executive officers serving
as a member of our board of directors or compensation and stock option
committee. Prior to the formation of the compensation and stock option
committee in July 1997, the board of directors as a whole made decisions
relating to compensation of our executive officers.
LIMITATION OF LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
Our certificate of incorporation and our bylaws provide that our directors and
officers shall be indemnified by us to the fullest extent authorized by
Delaware law, as it now exists or may in the future be amended, against all
expenses and liabilities reasonably incurred in connection with their service
for or on our behalf. In addition, the certificate of incorporation provides
that our directors will not be personally liable for monetary damages to us for
breaches of their fiduciary duty as directors, unless they violated their duty
of loyalty to us or our stockholders, acted in bad faith, knowingly or
intentionally violated the law, authorized illegal dividends or redemptions or
derived an improper personal benefit from their action as directors. We have
obtained insurance which insures our directors and officers against specified
losses and which insures us against specific obligations to indemnify our
directors and officers.
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50
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MANAGEMENT
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EXECUTIVE COMPENSATION
SUMMARY OF CASH AND OTHER COMPENSATION
The following table shows all compensation received during the year ended
December 31, 1999 by our Chief Executive Officer and our four other highest-
paid executive officers, collectively referred to as the Named Executive
Officers. Other compensaton consists of matching payments made under our
Savings Incentive Match Plan for Employees under Section 408(p) of the Internal
Revenue Code.
SUMMARY COMPENSATION
<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION AWARDS
SECURITIES
OTHER ANNUAL UNDERLYING OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION OPTIONS COMPENSATION
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Mark B. Chandler........... $225,000 $ -- $ -- 510,000 $ --
Chairman and Chief
Executive Officer
Van S. Chandler............ 175,000 -- -- 153,000 5,250
Vice President of
Instruments
Ralph L. McDade............ 175,000 -- -- -- 5,250
Vice President of
Scientific Affairs
Michael D. Spain........... 160,000 -- -- 51,000 4,800
Vice President of Clinical
Affairs
James L. Persky............ 150,000 -- -- -- 4,500
Vice President, Treasurer
and Chief Financial
Officer
</TABLE>
OPTIONS
The following table shows information regarding options granted to the
executive officers listed in the summary compensation table above during the
fiscal year ended December 31, 1999. We have not granted any stock appreciation
rights.
Each option represents the right to purchase one share of our common stock. The
options generally become vested over three years. See "Management--Employee
benefit plans" for more details regarding these options. In the year ended
December 31, 1999, we granted options to purchase an aggregate of 1,666,884
shares of common stock to various officers, employees, directors and
consultants.
The potential realizable value at assumed annual rates of stock price
appreciation for the option term represents hypothetical gains that could be
achieved for the respective options if exercised at the end of the option term.
The 5% and 10% assumed annual rates of compounded stock price appreciation are
required by rules of the SEC and do not represent our estimate or projection of
our future common stock prices. These amounts represent assumed rates of
appreciation in the value of our common stock from the fair market value on the
date of grant. Actual gains, if any, on stock option exercises are dependent on
the future performance of our common stock and overall stock market conditions.
The amounts reflected in the table may not necessarily be achieved.
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51
<PAGE>
Management
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Option grants in last fiscal year
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Individual grants
Potential
realizable
value at assumed
% of annual rates of
Number of total appreciation of
securities options Exercise stock
underlying granted price price for option
options to per Expiration term
Name granted employees share date 5% 10%
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Mark B.
Chandler...... 510 ,000 40% $3.92 5/20/04 $552,563 $1,221,020
Van S. Chandler.. 153,000 12 3.92 5/20/04 165,769 366,306
Ralph L. McDade.. -- -- -- -- -- --
Michael D.
Spain......... 51,000 4 3.92 5/20/04 55,256 122,102
James L. Persky.. -- -- -- -- -- --
</TABLE>
The following table shows information as of December 31, 1999 concerning the
number and value of unexercised options held by each of the executive officers
listed in the summary compensation table above. Options shown as exercisable in
the table below are immediately exercisable. However, we have rights to
repurchase shares of the common stock underlying some of these options upon
termination of the holder's employment with us. There was no public trading
market for the common stock as of December 31, 1999. Accordingly, the value of
unexercised in-the-money options listed below has been calculated on the basis
of the assumed initial public offering price of $18.00 per share, less the
applicable exercise price per share, multiplied by the number of shares
underlying such options.
Aggregated option exercises in the year ended December 31, 1999 and year-end
option values
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of securities
Shares underlying unexercised Value of unexercised
acquired options at December 31, in-the-money options
upon Value 1999 at December 31, 1999
Name exercise realized Exercisable Unexercisable Exercisable Unexercisable
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Mark B. Chandler........ -- $ -- -- 510,000 $ -- $7,180,800
Van S. Chandler......... -- -- -- 153,000 -- 2,154,240
Ralph L. McDade......... -- -- 142,798 112,202 2,010,596 1,579,804
Michael D. Spain........ -- -- 67,997 85,003 957,398 1,196,842
James L. Persky......... -- -- 67,999 136,001 957,426 1,914,894
</TABLE>
EMPLOYMENT AGREEMENTS
Each of our executive officers has employment agreements expiring on March 10,
2003. These agreements provide for set annual base salaries as follows:
<TABLE>
<CAPTION>
Annual
Base
Executive Salary
- --------------------------------------------------------------------------------
<S> <C>
Mark B. Chandler........................................... $275,000
Michael L. Bengtson........................................ 250,000
Ralph L. McDade............................................ 190,000
Van S. Chandler............................................ 190,000
Mike D. Spain.............................................. 190,000
James L. Persky............................................ 180,000
Randel S. Marfin........................................... 160,000
</TABLE>
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MANAGEMENT
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In addition, the agreements provide for incentive bonuses as determined by the
compensation committee or board of directors.
Each of these executives has agreed not to compete with us during the term of
the agreement and for one year after resignation or termination. The agreements
provide for the payment of salary for 12 months after any termination by
Luminex other than for cause, as long as there has not been a change in
control. The employment agreements define "cause" as an employee committing an
immoral crime, materially breaching the employment agreement or failing to obey
written directions of a senior corporate executive. A "change of control" will
be deemed to occur if a substantial portion of our ownership changes or the
constitution of the board changes during any 15-month period without the
approval of our board of directors or stockholders. Further, if the termination
follows a change of control, we will pay the executives a lump sum equal to
2.99 times the executive's average annual base salary plus bonus for the most
recent five calendar years prior to the occurrence of the change of control.
The agreements also provide for additional payments to compensate the
executives for any tax liability imposed on change of control payments to the
extent these payments constitute "parachute payments" under Section 280G of the
Internal Revenue Code. In addition, upon a change of control, all outstanding
options held by executives with employment agreements will vest.
Mr. Bengtson has agreed to join our company as Executive Vice President,
General Counsel and Secretary upon completion of this offering. In addition to
the compensation set forth above, we have granted Mr. Bengtson stock options to
purchase 255,000 shares of common stock at an exercise price of $11.76 per
share. The option agreement provides that the options vest monthly over three
years.
EMPLOYEE BENEFIT PLANS
1996 STOCK OPTION PLAN
Our 1996 Stock Option Plan was approved by our board of directors in March 1996
and subsequently amended by our stockholders on May 11, 1998. Our 1996 plan
authorizes the issuance of up to 4,080,000 shares of our common stock as either
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986 or nonqualified stock options. As of February 29, 2000, we
had 3,400,884 options to purchase common stock under this plan outstanding to
employees, directors and consultants with a weighted average exercise price of
$3.09 per share. After the completion of this offering, no further options will
be granted under this plan.
The board of directors, or a board committee, has the power to determine the
terms of the options, including the exercise price of the options, the number
of shares subject to each option, the exercisability thereof, and the form of
consideration payable on such exercise, provided that the exercise price for
incentive stock options must be at least 100% of fair market value. Incentive
stock options granted to any holder of 10% or more of the combined voting power
of all classes of stock must have an exercise price of not less than 110% of
fair market value and be exercisable for a term of no more than five years.
2000 LONG-TERM INCENTIVE PLAN
Our 2000 Long-Term Incentive Plan has been adopted by our board of directors
and our stockholders as a successor equity plan to our 1996 plan. We may grant
options to purchase up to 3,570,000 shares of common stock under the 2000 plan.
As of February 29, 2000, 942,100 shares were reserved for issuance upon the
exercise of outstanding options and 2,627,900 shares remained available for
future grant.
The 2000 plan provides for the discretionary grant of incentive stock options,
within the meaning of Section 422 of the Internal Revenue Code of 1986, to
employees and for the grant of nonqualified stock options, stock appreciation
rights, dividend equivalents, restricted stock and other incentive awards to
employees, outside directors and consultants. The 2000 plan provides that we
cannot issue incentive stock options after January 2010.
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MANAGEMENT
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The 2000 plan is administered by the board of directors or a board committee.
The administrator has the power to determine the terms of the options or other
awards granted, including the exercise price of the options or other awards,
the number of shares subject to each option or other award (up to 357,000 per
year per participant), the exercisability thereof and the form of consideration
payable upon exercise. In addition, the administrator has the authority to
amend, suspend or terminate the 2000 plan, provided that no such action may
affect any share of common stock previously issued and sold or any option
previously granted under the 2000 plan without the consent of the holder.
The exercise price of all incentive stock options granted under the 2000 plan
must be at least equal to 100% of the fair market value of the common stock on
the date of grant. The exercise price of nonqualified stock options and other
awards granted under the 2000 plan is determined by the administrator, but the
exercise price must be at least 50% of the fair market value of the common
stock on the date of grant. The term of all options granted under the 2000 plan
may not exceed ten years.
Each option and other award is exercisable during the lifetime of the optionee
only by such optionee. Options granted under the 2000 plan must generally be
exercised within 60 days after the end of optionee's status as an employee,
director or consultant, or within one year after such optionee's termination by
disability or death, respectively, but in no event later than the expiration of
the option's term.
The 2000 plan provides that in the event of a merger of our company all options
and other awards shall be assumed or a substitute option or award issued by the
acquiring company unless the board determines in its sole discretion to
accelerate vesting or remove any restrictions.
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<PAGE>
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Related party transactions
SALES OF SECURITIES
Since January 1, 1997 through February 29, 2000, we have issued the following
securities in private placement transactions:
.150,000 shares of our Series B convertible preferred stock, at a purchase
price of $40.00 per share, for an aggregate purchase price of $6,000,000
between February and April 1997;
.151,571 shares of our Series C convertible preferred stock, at a purchase
price of $80.00 per share, for an aggregate purchase price of $12,125,680 in
June and July 1998;
.57,538 shares of our Series D convertible preferred stock, at a purchase price
of $120.00 per share, for an aggregate purchase price of $6,904,560 between
August and December 1999; and
.25,000 shares of our Series E convertible preferred stock, at a purchase price
of $120.00 per share, for an aggregate purchase price of $3,000,000 in
December 1999.
All preferred stock was issued to accredited investors in reliance upon
exemption from registration under Regulation D of the Securities Act.
The purchasers of more than $60,000 of these securities include, among others,
the following directors of Luminex:
<TABLE>
<CAPTION>
Shares of preferred stock
- -------------------------------------------------------------------------------
Total
Series B Series C Series D Series E consideration
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Robert J. Cresci............. 1,875 1,500 -- -- $195,000
Laurence E. Hirsch........... 5,000 6,250 -- -- 700,000
Jim D. Kever(1).............. 5,000 2,000 -- -- 360,000
Fred C. Goad, Jr. ........... 3,750 6,000 300 -- 666,000
John E. Koerner, III(2)...... 25,000 12,500 -- 25,000 5,000,000
</TABLE>
- --------
(1) Includes 3,621 shares of Series B preferred stock held by a trust in which
Mr. Kever is the trustee. Mr. Kever disclaims beneficial ownership of the
shares held by the trust.
(2) These shares are held by Koerner Capital Corporation of which Mr. Koerner
is the sole stockholder.
For additional information regarding the ownership of securities by executive
officers, directors and stockholders who beneficially own 5% or more of our
outstanding common stock, please see "Principal stockholders."
CONSULTING AGREEMENT
On June 1, 1999 we entered into a consulting agreement with A. Sidney Alpert, a
director of Luminex, whereby Mr. Alpert agreed to provide us with consulting
services one day per week. In consideration for those services, we paid Mr.
Alpert $5,833 per month and granted him options to purchase 51,000
- --------------------------------------------------------------------------------
55
<PAGE>
Related party transactions
- --------------------------------------------------------------------------------
shares of our common stock at an exercise price of $3.92 per share. The options
vest on June 1, 2000. On November 1, 1999, we amended that agreement to
increase the number of days to two per week and to increase the consulting fee
to be paid to Mr. Alpert to $11,666 per month.
OTHER TRANSACTIONS
In April 1997, we paid Southcoast Capital Corporation $266,000 in cash and
issued warrants to Southcoast to purchase 535,500 shares of our common stock at
an exercise price of $1.96 per share for acting as placement agent for the sale
of our Series B convertible preferred stock. The warrants may be exercised in
whole or in part at any time prior to April 3, 2002. At the time of the
transaction, G. Walter Loewenbaum was the chairman and chief executive officer
of Southcoast.
During 1997, we paid Van Chandler, a director of Luminex, $136,000 for
consulting services.
On January 1, 1998, we purchased office and laboratory equipment from Inland
Laboratories, Inc. for $208,782 in cash and 286,102 shares of our common stock.
Mark B. Chandler, our chairman, president and chief executive officer, is the
sole stockholder of Inland.
In July 1998, we paid Loewenbaum & Company $849,000 for acting as placement
agent for the sale of our Series C convertible preferred stock. At the time of
the transaction, G. Walter Loewenbaum was the majority stockholder of
Loewenbaum & Company.
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56
<PAGE>
- --------------------------------------------------------------------------------
Principal stockholders
The following table shows information known to us with respect to the
beneficial ownership of our common stock as of February 29, 2000, and as
adjusted to reflect the sale of the shares of common stock offered under this
prospectus by:
.each person or group of affiliated persons who is known by us to own
beneficially 5% or more of our common stock;
.each of our directors;
.each executive officer listed in the "Summary compensation" table above; and
.all of our directors and executive officers as a group.
Except as indicated in the footnotes to this table and subject to community
property laws where applicable, the persons named in the table have sole voting
and investment power with respect to all shares of our common stock shown as
beneficially owned by them. Beneficial ownership and percentage ownership are
determined in accordance with the rules of the SEC. The table below includes
the number of shares underlying options and warrants which are exercisable
within 60 days from February 29, 2000 and assumes the conversion of all shares
of our preferred stock into shares of our common stock prior to this offering.
It is therefore based on 21,972,821 shares of our common stock outstanding
prior to this offering and 26,472,821 shares outstanding immediately after this
offering. The address for those individuals for which an address is not
otherwise indicated is: 12212 Technology Boulevard, Austin, Texas 78727.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF PERCENT OWNED
SHARES SHARES UNDERLYING BEFORE THIS PERCENT OWNED
BENEFICIAL OWNER OUTSTANDING OPTIONS OR WARRANTS OFFERING AFTER THIS OFFERING
- ---------------------------------------------------------------------------------------------------------
Directors and Named Executive Officers
<S> <C> <C> <C> <C>
Mark B. Chandler, Ph.D. ............ 3,733,702 172,777 17.6 14.6
Van S. Chandler..................... 1,916,921 52,389 8.9 7.4
Ralph L. McDade, Ph.D. ............. 8,160 191,787 * *
Michael D. Spain, M.D. ............. -- 120,110 * *
James L. Persky..................... -- 137,110 * *
G. Walter Loewenbaum (1)(2)......... 3,447,600 415,907 17.2 14.4
A. Sidney Alpert.................... 204,000 10,200 * *
Robert J. Cresci.................... 119,850 20,400 * *
Laurence E. Hirsch.................. 290,700 20,400 1.4 1.2
Fred C. Goad, Jr. (3)............... 245,820 20,400 1.2 1.0
Jim D. Kever (4).................... 203,998 20,400 1.0 *
John E. Koerner, III (5)............ 1,425,960 30,600 6.6 5.5
William L. Roper MD, MPH............ -- 30,600 * *
All directors and executive officers
as a group (15 persons).......... 11,670,491 1,370,583 55.9 46.8
</TABLE>
- --------------------------------------------------------------------------------
57
<PAGE>
PRINCIPAL STOCKHOLDERS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF PERCENT OWNED
SHARES SHARES UNDERLYING BEFORE THIS PERCENT OWNED
BENEFICIAL OWNER OUTSTANDING OPTIONS OR WARRANTS OFFERING AFTER THIS OFFERING
- ------------------------------------------------------------------------------------------
Five percent
stockholders
<S> <C> <C> <C> <C>
R. Jerrold Fulton (6)... 1,672,800 -- 7.6 6.3
305 Evergreen Trail
Cedar Hill, Texas 75104
John R. Kettman......... 1,363,059 -- 6.2 5.2
3119 Barton Road
Carrollton, Texas 75007
</TABLE>
- --------
* Less than 1.0%.
(1) Consists of 2,835,000 shares held by Mr. Loewenbaum and 612,000 shares of
held by a partnership in which Mr. Loewenbaum is the general partner. Mr.
Loewenbaum disclaims beneficial ownership of the shares held by the
partnership.
(2) Includes 415,907 shares issuable upon the exercise of a warrant, 268,007 of
which are held by Mr. Loewenbaum and 146,880 of which are held by a trust
for the benefit of Mr. Loewenbaum's children.
(3) Includes 612 shares held by a trust of which Mr. Goad is the trustee. Mr.
Goad disclaims beneficial ownership of the shares held by the trust.
(4) Consists of 85,811 shares held by Mr. Kever and 118,189 shares held by a
trust of which Mr. Kever is the trustee. Mr. Kever disclaims beneficial
ownership of the shares held by the trust.
(5) Includes 1,275,000 shares held by Koerner Capital Corporation of which Mr.
Koerner is the sole stockholder and 150,960 shares held by two trusts for
the benefit of his children. Mr Koerner disclaims beneficial ownership of
the shares held by the trusts.
(6) Consists of 448,800 shares held by Dr. Fulton and 1,224,000 shares held by
a partnership in which Dr. Fulton is the general partner. Dr. Fulton
disclaims beneficial ownership of the shares held by the partnership.
- --------------------------------------------------------------------------------
58
<PAGE>
- --------------------------------------------------------------------------------
Description of capital stock
The following information describes our common stock and preferred stock, as
well as options and warrants to purchase our common stock, and provisions of
our certificate of incorporation and our bylaws, all as will be in effect upon
the closing of this offering. This description is only a summary. You should
also refer to the certificate and bylaws which have been filed with the SEC as
exhibits to our registration statement, of which this prospectus forms a part.
The descriptions of the common stock and preferred stock, as well as options
and warrants to purchase our common stock, reflect changes to our capital
structure that will occur upon the closing of this offering in accordance with
the terms of the certificate.
Upon completion of this offering, our authorized capital stock will consist of
200,000,000 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 February 29, 2000, there were 13,204,229 shares of common stock
outstanding and held of record by 127 stockholders. There will be 26,472,821
shares of common stock outstanding upon the closing of this offering, which
gives effect to the issuance of 4,500,000 shares of common stock offered by us
under this prospectus and the conversion of preferred stock discussed below.
Each share of common stock has identical rights and privileges in every
respect. The holders of our common stock are entitled to vote upon all matters
submitted to a vote of our stockholders and are entitled to one vote for each
share of common stock held.
Subject to the prior rights and preferences, if any, applicable to shares of
preferred stock or any series of preferred stock, the holders of common stock
are entitled to receive such dividends, payable in cash, stock or otherwise, as
may be declared by our board out of any funds legally available for the payment
of dividends.
If we voluntarily or involuntarily liquidate, dissolve or wind-up, the holders
of common stock will be entitled to receive after distribution in full of the
preferential amounts, if any, to be distributed to the holders of preferred
stock or any series of preferred stock, all of the remaining assets available
for distribution ratably in proportion to the number of shares of common stock
held by them. Holders of common stock have no preferences or any preemptive
conversion or exchange rights.
PREFERRED STOCK
As of February 29, 2000, there were 841,359 shares of convertible preferred
stock outstanding. Upon the closing of this offering, all outstanding shares of
convertible preferred stock will be converted into 8,768,592 shares of our
common stock and will be held of record by 214 stockholders. These shares of
convertible preferred stock will no longer be authorized, issued or
outstanding. Our certificate of incorporation authorizes the issuance of
5,000,000 shares of preferred stock, par value $.001 per share.
Our board is authorized to provide for the issuance of shares of preferred
stock in one or more series, and to fix for each series voting rights, if any,
designations, preferences and relative, participating, optional or other
special rights and such qualifications, limitations or restrictions as provided
in a
- --------------------------------------------------------------------------------
59
<PAGE>
Description of capital stock
- --------------------------------------------------------------------------------
resolution or resolutions adopted by the board. The board may authorize the
issuance of shares of preferred stock with terms and conditions which could
discourage a takeover or other transaction that holders of some or a majority
of shares of common stock might believe to be in their best interests or in
which holders of common stock might receive a premium for their shares over the
then market price.
WARRANTS
As of February 29, 2000, warrants to purchase a total of 535,500 shares of our
common stock, at an exercise price of $1.96 per share, were outstanding. The
warrants contain anti-dilution provisions providing for adjustments of the
exercise price and the number of shares underlying the warrants upon the
occurrence of certain events, including any recapitalization, reclassification,
stock dividend, stock split, stock combination or similar transaction. The
warrants expire April 2, 2002. The warrants grant to the holders registration
rights with respect to the common stock issuable upon their exercise, which are
described below. All of these warrants will be exercisable immediately before
this offering.
REGISTRATION RIGHTS
At any time six months following the effective date of this offering, the
holders of warrants to purchase 535,500 shares of common stock will be entitled
to demand the registration of their shares under the Securities Act of 1933. We
are not required to effect more than one registration for such holders pursuant
to these demand registration rights, which expire on April 2, 2002. In
addition, after the closing of this offering these holders will be entitled to
piggyback registration rights with respect to the registration of the shares of
common stock underlying their warrants. If we propose to register any shares of
common stock either for our account or for the account of other security
holders, the holders of shares having piggyback rights are entitled to receive
notice of the registration and are entitled to include their shares in the
registration. These registration rights are subject to conditions and
limitations, among which is the right of the underwriters of an offering to
limit the number of shares of common stock held by security holders with
registration rights to be included in such registration. We are generally
required to bear all of the expenses of all these registrations, including the
reasonable fees of a single counsel acting on behalf of all selling
stockholders, except underwriting discounts and selling commissions.
Registration of any of the shares of our common stock held by security holders
with registration rights would result in such shares becoming freely tradable
without restriction under the Securities Act of 1933 immediately upon
effectiveness of such registration.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE CERTIFICATE OF INCORPORATION, BYLAWS
AND DELAWARE LAW
We are subject to Section 203 of the Delaware General Corporation Law, or DGCL
Section 203, which regulates corporate acquisitions. DGCL Section 203 prevents
certain Delaware corporations, including those whose securities are listed for
trading on the Nasdaq National Market, from engaging, under certain
circumstances in a "business combination" with any "interested stockholder" for
three years following the date that such stockholder became an interested
stockholder. For purposes of DGCL Section 203, a "business combination"
includes, among other things, a merger or consolidation involving Luminex and
the interested stockholder and the sale of more than ten percent (10%) of
Luminex's assets. In general, DGCL Section 203 defines an "interested
stockholder" as any entity or person beneficially owning 15% or more of the
outstanding voting stock of Luminex and any entity or person affiliated with or
controlling or controlled by such entity or person. A Delaware corporation may
"opt out" of DGCL Section 203 with an express provision in its original
certificate of
- --------------------------------------------------------------------------------
60
<PAGE>
DESCRIPTION OF CAPITAL STOCK
- --------------------------------------------------------------------------------
incorporation or an express provision in its certificate of incorporation or
bylaws resulting from amendments approved by the holders of at least a majority
of the corporation's outstanding voting shares. We have not "opted out" of the
provisions of DGCL Section 203.
Our certificate of incorporation provides that the board of directors is
divided into three classes of directors, with each class serving a staggered
three-year term. The classification system of electing directors may tend to
discourage a third party from making a tender offer or otherwise attempting to
obtain control of Luminex and may maintain the incumbency of the board of
directors, as the classification of the board of directors generally increases
the difficulty of replacing a majority of the directors. The certificate of
incorporation also provides that all stockholder actions must be effected at a
duly called meeting and not by a consent in writing. Further, certain
provisions of our certificate of incorporation provide that the stockholders
may amend the bylaws or certain provisions of the certificate of incorporation
only with the affirmative vote of 75% of our capital stock. These provisions of
the certificate of incorporation and bylaws could discourage potential
acquisition proposals and could delay or prevent a change in control of
Luminex. These provisions are intended to enhance the likelihood of continuity
and stability in the composition of the board of directors and in the policies
formulated by the board of directors and to discourage certain types of
transactions that may involve an actual or threatened change of control of
Luminex. These provisions are designed to reduce our vulnerability to an
unsolicited acquisition proposal. The provisions also are intended to
discourage certain tactics that may be used in proxy fights. However, such
provisions could have the effect of discouraging others from making tender
offers for our shares and, as a consequence, they also may inhibit fluctuations
in the market price of our shares that could result from actual or rumored
takeover attempts. Such provisions also may have the effect of preventing
changes in our management.
Our bylaws provide that any action required or permitted to be taken by our
stockholders at an annual meeting or special meeting of stockholders may only
be taken if each stockholder is given proper advance notice of the action. The
bylaws further provide that special meetings of stockholders may only be called
by a majority of our board of directors, our chairman of the board of directors
or our president. The foregoing provisions could have the effect of delaying
until the next stockholders meeting stockholder actions which are favored by
the holders of a majority of our outstanding voting securities.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is Chase Mellon
Shareholder Services.
- --------------------------------------------------------------------------------
61
<PAGE>
- --------------------------------------------------------------------------------
Shares eligible for future sale
Prior to this offering, there has been no public market for our common stock.
The market price of our common stock after this offering could decline as a
result of the sale of a large number of shares of our common stock in the
market, or the perception that such sales could occur. Such sales also could
make it more difficult for us to sell equity securities in the future at a time
and price that we deem appropriate. Based on the number of shares outstanding
at February 29, 2000, after this offering, we will have 26,472,821 outstanding
shares of common stock. Of these shares, the shares being offered hereby are
freely tradable. This leaves 21,972,821 shares eligible for sale in the public
market as follows:
<TABLE>
<CAPTION>
NUMBER
OF SHARES DATE
- -----------------------------------------------------------------------------
<C> <S>
-- After the date of this prospectus
At various times after 90 days from the date of this prospectus
791,054 under Rule 701
21,181,767 At various times after 180 days from the date of this prospectus,
subject, in some cases, to volume limitations under Rule 144
</TABLE>
The holders of 98.8% of our common stock, including all of our directors and
officers, together with the holders of options to purchase 2,177,700 shares of
common stock and the holders of warrants to purchase 535,500 shares of common
stock, have entered into lock-up agreements under which they have agreed with
the underwriters not to offer, sell, contract to sell, hedge or otherwise
dispose of, directly or indirectly, or file with the SEC a registration
statement under the Securities Act relating to, any of its common stock or
securities convertible into or exchangeable for shares of common stock during
the period from the date of this prospectus continuing through the date 180
days after the date of this prospectus, without the prior written consent of
Warburg Dillon Read LLC.
In general, under Rule 144 of the Securities Act of 1933, a person or persons
whose shares are required to be aggregated, including an affiliate, whose
shares have been owned for at least one year is entitled to sell, within any
three-month period after the date of this prospectus, a number of shares that
does not exceed the greater of 1% of the then outstanding shares of common
stock -- approximately 264,728 shares immediately after this offering -- or the
average weekly trading volume in our common stock during the four calendar
weeks preceding the date on which notice of such sale is filed, subject to
certain restrictions. In addition, a person who is not deemed to have been an
affiliate of ours at any time during the 90 days preceding a sale and whose
shares have been beneficially owned by nonaffiliates for at least two years
would be entitled to sell such shares under Rule 144(k) without regard to the
requirements described above. To the extent that shares were acquired from one
of our affiliates, such person's holding period for the purpose of effecting a
sale under Rule 144 commences on the date of transfer from the affiliate.
Following 90 days after the date of this prospectus, shares issued upon
exercise of options that we granted prior to the date of this offering will
also be available for sale in the public market pursuant to Rule 701 under the
Securities Act of 1933. Rule 701 permits resales of such shares in reliance
upon Rule 144 under the Securities Act of 1933 but without compliance with the
restrictions, including the holding-period requirement, imposed under Rule 144.
As of February 29, 2000, options to purchase a total of 4,342,984 shares of
common stock were outstanding, 1,214,651 of which were currently exercisable,
and all of which are subject to repurchase by us. Of these 4,342,984 shares,
791,054 shares may be eligible for sale in the public market at various times
after 90 days from the date of this prospectus.
- --------------------------------------------------------------------------------
62
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
- --------------------------------------------------------------------------------
Upon the closing of this offering, we intend to file a registration statement
to register for resale the 4,342,984 shares of common stock reserved for
issuance under our stock option plans. We expect the registration statement to
become effective immediately upon filing. Shares issued upon the exercise of
stock options granted under our stock option plans will be eligible for resale
in the public market from time to time subject to vesting and, in the case of
certain options, the expiration of the lock-up agreements referred to above.
Stockholders holding warrants to purchase 535,500 shares of common stock have
the right, subject to various conditions and limitations, to include their
shares in registration statements relating to our securities. By exercising
their registration rights and causing a large number of shares to be registered
and sold in the public market, these holders may cause the price of the common
stock to fall. In addition, any demand to include such shares in our
registration statements could have a material adverse effect on our ability to
raise needed capital. See "Management -- Benefit plans," "Principal
stockholders," "Shares eligible for future sale" and "Underwriting."
- --------------------------------------------------------------------------------
63
<PAGE>
- --------------------------------------------------------------------------------
Underwriting
Luminex and the underwriters for the offering named below have entered into an
underwriting agreement concerning the shares being offered. Subject to
conditions, each underwriter has severally agreed to purchase the number of
shares indicated in the following table. Warburg Dillon Read LLC, Lehman
Brothers Inc. and Dain Rauscher Incorporated are the representatives of the
underwriters.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
- --------------------------------------------------------------------------------
<S> <C>
Warburg Dillon Read LLC..............................................
Lehman Brothers Inc..................................................
Dain Rauscher Incorporated...........................................
---------
Total.............................................................. 4,500,000
=========
</TABLE>
If the underwriters sell more shares than the total number set forth in the
table above, the underwriters have a 30-day option to buy from us up to an
additional 675,000 shares at the initial public offering price less the
underwriting discounts and commissions to cover these sales. If any shares are
purchased under this option, the underwriters will severally purchase shares in
approximately the same proportion as set forth in the table above.
The following table shows the per share and total underwriting discounts and
commissions we will pay to the underwriters. These amounts are shown assuming
both no exercise and full exercise of the underwriters' option to purchase up
to an additional 675,000 shares.
<TABLE>
<CAPTION>
NO EXERCISE FULL EXERCISE
- --------------------------------------------------------------------------------
<S> <C> <C>
Per share............................................ $ $
Total.............................................. $ $
</TABLE>
We estimate that the total expenses of the offering payable by us, excluding
underwriting discounts and commissions, will be approximately $700,000.
Shares sold by the underwriters to the public will initially be offered at the
initial public offering price set forth on the cover of this prospectus. Any
shares sold by the underwriters to securities dealers may be sold at a discount
of up to $ per share from the initial public offering price. Any of
these securities dealers may resell any shares purchased from the underwriters
to other brokers or dealers at a discount of up to $ per share from
the initial public offering price. If all the shares are not sold at the
initial public offering price, the representatives may change the offering
price and the other selling terms.
The underwriters have informed us that they do not expect discretionary sales
to exceed 5% of the shares of common stock to be offered.
Luminex, its directors, officers and certain of its stockholders have agreed
with the underwriters not to offer, sell, contract to sell, hedge or otherwise
dispose of, directly or indirectly, or file with the SEC a registration
statement under the Securities Act relating to, any of its common stock or
securities convertible into or exchangeable for shares of common stock during
the period from the date of this prospectus continuing through the date 180
days after the date of this prospectus, without the prior written consent of
Warburg Dillon Read LLC.
- --------------------------------------------------------------------------------
64
<PAGE>
UNDERWRITING
- --------------------------------------------------------------------------------
The underwriters have reserved for sale, at the initial public offering price,
up to 225,000 shares of our common stock being offered for sale to our
customers and business partners. At the discretion of our management, other
parties, including our employees, may participate in the reserve shares
program. The number of shares available for sale to the general public in the
offering will be reduced to the extent these persons purchase reserved shares.
Any reserved shares not so purchased will be offered by the underwriters to the
general public on the same terms as the other shares in this offering.
Prior to this offering, there has been no public market for our common stock.
The initial public offering price will be negotiated by us and the
representatives. The principal factors to be considered in determining the
initial public offering price include:
.the information set forth in this prospectus and otherwise available to the
representatives;
.the history and the prospects for the industry in which we compete;
.the ability of our management;
.our prospects for future earnings, the present state of our development, and
our current financial position;
.the general condition of the securities markets at the time of this offering;
and
.the recent market prices of, and the demand for, publicly traded common stock
of generally comparable companies.
In connection with the offering, the underwriters may purchase and sell shares
of common stock in the open market. These transactions may include short sales,
stabilizing transactions and purchases to cover positions created by short
sales. Short sales involve the sale by the underwriters of a greater number of
shares than they are required to purchase in the offering. Stabilizing
transactions consist of bids or purchases made for the purpose of preventing or
retarding a decline in the market price of the common stock while the offering
is in progress.
The underwriters also may impose a penalty bid. This occurs when a particular
underwriter repays to the underwriters a portion of the underwriting discount
received by it because the representatives have repurchased shares sold by or
for the account of that underwriter in stabilizing or short covering
transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the
open market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected on the Nasdaq
National Market, in the over-the-counter market or otherwise.
We have agreed to indemnify the several underwriters against some liabilities,
including liabilities under the Securities Act of 1933 and to contribute to
payments that the underwriters may be required to make in respect thereof.
- --------------------------------------------------------------------------------
65
<PAGE>
- --------------------------------------------------------------------------------
Legal matters
The validity of the shares of common stock offered hereby will be passed upon
for Luminex Corporation by Thompson & Knight LLP, Austin, Texas. Certain
partners of Thompson & Knight LLP maintain beneficial ownership of 26,520
shares of our common stock. Dewey Ballantine LLP, New York, New York, is acting
as counsel for the underwriters in connection with various legal matters
relating to the shares of common stock offered by this prospectus.
Experts
Ernst & Young LLP, independent auditors, have audited our financial statements
at December 31, 1998 and 1999, and for each of the three years in the period
ended December 31, 1999 as set forth in their report. We have included our
financial statements in this prospectus in reliance on Ernst & Young LLP's
report given on their authority as experts in accounting and auditing.
Where you can find more information
We have filed with the SEC a registration statement on Form S-1 (including
exhibits, schedules and amendments) under the Securities Act with respect to
the shares of common stock to be sold in this offering. This prospectus does
not contain all the information set forth in the registration statement. For
further information with respect to us and the shares of common stock to be
sold in this offering, reference is made to the registration statement.
Statements contained in this prospectus as to the contents of any contract,
agreement or other document referred to are not necessarily complete. Whenever
a reference is made in this prospectus to any contract or other document of
ours, the reference may not be complete, and you should refer to the exhibits
that are apart of the registration statement for a copy of the contract or
document.
You may read and copy all or any portion of the registration statement or any
other information Luminex files at the SEC's public reference room at 450 Fifth
Street, N.W., Washington, D.C. 20549. You can request copies of these
documents, upon payment of a duplicating fee, by writing to the SEC. Please
call the SEC at 1-800-SEC-0330 for further information on the operation of the
public reference rooms. Our SEC filings, including the registration statement,
are also available to you on the SEC's web site (http://www.sec.gov).
As a result of this offering, we will become subject to the information and
reporting requirements of the Securities Exchange Act, and, in accordance with
those requirements, will file periodic reports, proxy statements and other
information with the SEC.
This prospectus includes statistical data that were obtained from industry
publications. These industry publications generally indicate that the authors
of these publications have obtained information from sources believed to be
reliable, but do not guarantee the accuracy and completeness of their
information. While we believe these industry publications to be reliable, we
have not independently verified their data.
- --------------------------------------------------------------------------------
66
<PAGE>
Luminex Corporation
- --------------------------------------------------------------------------------
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
- --------------------------------------------------------------------------------
<S> <C>
Report of Independent Auditors............................................. F-2
Balance Sheets............................................................. F-3
Statements of Operations................................................... F-4
Statements of Changes in Stockholders' Equity.............................. F-5
Statements of Cash Flows................................................... F-6
Notes to Financial Statements.............................................. F-7
</TABLE>
- --------------------------------------------------------------------------------
F-1
<PAGE>
Luminex Corporation
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Luminex Corporation
We have audited the accompanying balance sheets of Luminex Corporation as of
December 31, 1998 and 1999, and the related statements of operations, changes
in stockholders' equity and cash flows for each of the three years in the
period ended December 31, 1999. 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 auditing standards generally
accepted in the United States. 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 Luminex Corporation at
December 31, 1998 and 1999, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Austin, Texas
January 28, 2000, except for Notes 4 and 10,
as to which the date is March 9, 2000
- --------------------------------------------------------------------------------
F-2
<PAGE>
LUMINEX CORPORATION
- --------------------------------------------------------------------------------
BALANCE SHEETS
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
EQUITY
DECEMBER 31, DECEMBER 31,
1998 1999 1999
- -------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................. $8,537 $4,083
Short-term investments.................... -- 4,929
Accounts receivable, net of allowance for
doubtful accounts of $14 in 1998 and
$64 in 1999............................ 146 1,341
Inventory................................. 47 663
Other..................................... 61 181
-------- --------
Total current assets....................... 8,791 11,197
Property and equipment, net................ 799 1,369
-------- --------
Total assets............................... $9,590 $12,566
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................... $168 $373
Accrued liabilities....................... 158 278
Deferred revenue.......................... 74 120
-------- --------
Total current liabilities.................. 400 771
Deferred revenue........................... -- 600
Stockholders' equity:
Preferred Stock, $2 par value, 5,000,000
shares authorized:
Series A Convertible Preferred Stock, $2
stated value, shares issued and
outstanding: 457,250 in 1998 and 1999;
no shares pro forma................... 915 915 $--
Series B Convertible Preferred Stock, $40
stated value, shares issued and
outstanding: 150,000 in 1998 and 1999;
no shares pro forma................... 6,000 6,000 --
Series C Convertible Preferred Stock, $80
stated value, shares issued and
outstanding: 151,571 in 1998 and 1999;
no shares pro forma................... 12,126 12,126 --
Series D Convertible Preferred Stock,
$120 stated value, shares issued and
outstanding: 57,538 in 1999; no shares
pro forma............................. -- 6,905 --
Series E Convertible Preferred Stock,
$120 stated value, shares issued and
outstanding: 25,000 in 1999; no shares
pro forma............................. -- 3,000 --
Common Stock, $.001 par value, 50,000,000
shares authorized; shares issued and
outstanding: 13,133,849 and 13,167,754
in 1998 and 1999, respectively;
21,936,346 shares pro forma............ 13 13 22
Warrants to purchase 535,500 shares of
Common Stock at $1.96 per share........ 180 180 180
Additional paid-in capital................ 336 953 29,890
Deferred stock compensation............... -- (69) (69)
Accumulated deficit....................... (10,380) (18,828) (18,828)
-------- -------- -------
Total stockholders' equity................. 9,190 11,195 $11,195
-------- -------- =======
Total liabilities and stockholders'
equity.................................. $9,590 $12,566
======== ========
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
F-3
<PAGE>
Luminex Corporation
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Year ended December 31,
1997 1998 1999
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue:
Product........................................... $99 $386 $2,606
Grant............................................. -- -- 506
------- ------- -------
Total revenue...................................... 99 386 3,112
Cost of product revenue............................ 10 88 1,172
------- ------- -------
Gross margin....................................... 89 298 1,940
Operating expenses:
Research and development.......................... 1,594 3,611 5,776
Selling, general and administrative............... 1,426 2,566 4,896
------- ------- -------
Total operating expenses........................... 3,020 6,177 10,672
------- ------- -------
Loss from operations............................... (2,931) (5,879) (8,732)
Interest income.................................... 178 283 284
------- ------- -------
Net loss........................................... $(2,753) $(5,596) $(8,448)
======= ======= =======
Net loss per share, basic and diluted ............. $(0.21) $(0.43) $(0.64)
======= ======= =======
Shares used in computing net loss per share, basic
and diluted..................................... 12,842 13,086 13,151
Pro forma net loss per share, basic and diluted
(unaudited)..................................... $(0.41)
=======
Shares used in computing pro forma net loss per
share, basic and diluted (unaudited)............ 20,529
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
F-4
<PAGE>
LUMINEX CORPORATION
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands, except share amounts)
<TABLE>
<CAPTION>
CONVERTIBLE TOTAL
PREFERRED STOCK COMMON STOCK ADDITIONAL DEFERRED STOCKHOLDERS'
NUMBER NUMBER PAID-IN STOCK ACCUMULATED EQUITY
OF SHARES AMOUNT OF SHARES AMOUNT WARRANTS CAPITAL COMPENSATION DEFICIT (DEFICIT)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1996.................. 457,250 $915 12,842,308 $13 $-- $993 $-- $(2,031) $(110)
Issuance of Preferred
Stock,
Series B............. 150,000 6,000 -- -- -- -- -- -- 6,000
Stock issuance costs... -- -- -- -- 180 (353) -- -- (173)
Net loss............... -- -- -- -- -- -- -- (2,753) (2,753)
------- ------- ---------- --- ---- ------- ----- -------- -------
Balance at December 31,
1997.................. 607,250 6,915 12,842,308 13 180 640 -- (4,784) 2,964
Issuance of Preferred
Stock,
Series C............. 151,571 12,126 -- -- -- -- -- -- 12,126
Stock issuance costs... -- -- -- -- -- (868) -- -- (868)
Exercise of stock
options.............. -- -- 5,439 -- -- 3 -- -- 3
Common stock issued for
assets purchased..... -- -- 286,102 -- -- 561 -- -- 561
Net loss............... -- -- -- -- -- -- -- (5,596) (5,596)
------- ------- ---------- --- ---- ------- ----- -------- -------
Balance at December 31,
1998.................. 758,821 19,041 13,133,849 13 180 336 -- (10,380) 9,190
Issuance of Preferred
Stock,
Series D............. 57,538 6,905 -- -- -- -- -- -- 6,905
Issuance of Preferred
Stock,
Series E............. 25,000 3,000 -- -- -- -- -- -- 3,000
Stock issuance costs... -- -- -- -- -- (8) -- -- (8)
Exercise of stock
options.............. -- -- 33,905 -- -- 47 -- -- 47
Stock options granted
to consultants....... -- -- -- -- -- 578 (578) -- --
Amortization of
deferred stock and
stock compensation
expense.............. -- -- -- -- -- -- 509 -- 509
Net loss............... -- -- -- -- -- -- -- (8,448) (8,448)
------- ------- ---------- --- ---- ------- ----- -------- -------
Balance at December 31,
1999.................. 841,359 $28,946 13,167,754 $13 $180 $953 $(69) $(18,828) $11,195
======= ======= ========== === ==== ======= ===== ======== =======
Pro forma balance at
December 31, 1999
(unaudited)........... -- $-- 21,936,346 $22 $180 $29,890 $(69) $(18,828) $11,195
======= ======= ========== === ==== ======= ===== ======== =======
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
F-5
<PAGE>
Luminex Corporation
- --------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Year ended December 31,
1997 1998 1999
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net loss........................................... $(2,753) $(5,596) $(8,448)
Adjustment to reconcile net loss to cash used in
operating activities:
Depreciation expense.............................. 69 220 330
Amortization expense.............................. -- 143 186
Amortization of deferred stock and stock
compensation expense........................... -- -- 509
Changes in operating assets and liabilities:
Accounts receivable.............................. (39) (108) (1,195)
Inventory........................................ (44) (3) (616)
Other assets..................................... (13) (48) (120)
Accounts payable................................. 59 64 205
Accrued liabilities.............................. (167) 107 120
Deferred revenue................................. -- 74 646
------- ------- -------
Net cash used in operating activities.............. (2,888) (5,147) (8,383)
Investing activities
Purchase of short-term investments................. -- -- (4,929)
Purchase of property and equipment................. (132) (399) (1,085)
------- ------- -------
Net cash used in investing activities.............. (132) (399) (6,014)
Financing activities
Proceeds from issuance of Common Stock............. -- 3 47
Proceeds from issuance of Preferred Stock.......... 6,000 12,126 9,904
Stock issuance costs............................... (173) (867) (8)
------- ------- -------
Net cash provided by financing activities.......... 5,827 11,262 9,943
Increase in cash and cash equivalents.............. 2,807 5,716 (4,454)
Cash and cash equivalents, beginning of year....... 14 2,821 8,537
------- ------- -------
Cash and cash equivalents, end of year............. $2,821 $8,537 $4,083
======= ======= =======
Non-cash activities
Common stock issued to acquire property and
equipment from related party.................... $-- $561 $--
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
F-6
<PAGE>
LUMINEX CORPORATION
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
Luminex Corporation (the "Company") was incorporated in the state of Texas in
May 1995. In June 1998, the Company reincorporated in the state of Delaware.
Since its formation, the Company's activities have been focused primarily on
the research and development of a unique molecular measurement and analysis
system (the LabMAP System) capable of performing multiple tests rapidly and
economically on a single patient sample.
From its inception through December 31, 1998, the Company's activities were
focused primarily on research and development and raising capital and,
accordingly, the Company was considered to be a development stage company. In
1999, the Company commenced shipments of its intended product, the Luminex 100,
and is no longer considered a development stage company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual amounts and results could differ from those estimates, and such
differences could be material to the financial statements.
REVENUE RECOGNITION
Revenues from sales of the Company's products are recognized when persuasive
evidence of an agreement exists, delivery of the product has occurred, the fee
is fixed and determinable and collectibility is probable. Revenues from
royalties related to agreements with strategic partners are recognized when
such amounts are reported to the Company. No royalty revenues have been
recognized through December 31, 1999. The Company reserves for uncollectible
accounts based upon experience.
In accordance with the terms of the grant, grant revenue is recorded as
research expenses relating to the grant are incurred, provided that the amounts
received are not refundable if the research is not successful.
Amounts billed or collected in excess of revenue recognized is recorded as
deferred revenue.
CASH EQUIVALENTS
Cash equivalents consist of cash deposits and investments with original
maturities of three months or less when purchased.
SHORT-TERM INVESTMENTS
In accordance with Statement of Financial Accounting Standards ("SFAS") No.
115, Accounting for Certain Investments in Debt and Equity Securities, the
Company's short-term investments are classified as held-to-maturity. Short-term
investments are classified as held-to maturity as the Company has the positive
intent and ability to hold the securities to maturity. Held-to-maturity
securities are stated at amortized cost, adjusted for amortization of premiums
and accretion of discounts to maturity. Such amortization is included in
interest income. Interest on securities classified as held-to-maturity is also
included in interest income.
All of the short-term investments mature within one year of December 31, 1999.
CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS
Financial instruments which potentially subject the Company to concentrations
of credit risk consist of short-term investments and trade receivables. The
Company's short-term investments consist of investments in high credit quality
financial institutions and issuers.
- --------------------------------------------------------------------------------
F-7
<PAGE>
Luminex Corporation
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
The Company provides credit, in the normal course of business, to a number of
customers geographically dispersed primarily throughout the U.S. The Company
performs ongoing credit evaluations of its customers and maintains allowances
for potential credit losses.
The following table summarizes the changes in the allowance for doubtful
accounts for 1997, 1998, and 1999 (in thousands):
<TABLE>
<S> <C>
Balance at December 31, 1996............................................... $--
Additions charged to costs and expenses.................................. --
Write-off of uncollectible accounts...................................... --
---
Balance at December 31, 1997............................................... --
Additions charged to costs and expenses.................................. 14
Write-off of uncollectible accounts...................................... --
---
Balance at December 31, 1998............................................... 14
Additions charged to costs and expenses.................................. 64
Write-off of uncollectible accounts...................................... (14)
---
Balance at December 31, 1999............................................... $64
===
</TABLE>
Sales to individual customers constituting 10% or more of total revenues for
each year were as follows (in thousands):
<TABLE>
<CAPTION>
Year ended
December 31,
1997 1998 1999
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Customer No. 1................................................... 14% -- --
Customer No. 2................................................... 10 -- --
Customer No. 3................................................... 10 -- --
Customer No. 4................................................... 10 -- --
Customer No. 5................................................... 10 -- --
Customer No. 6................................................... -- -- 10%
</TABLE>
Inventory
Inventory, consisting primarily of raw materials and purchased components, is
stated at the lower of cost or market. Cost is determined by the weighted
average method. The Company routinely assesses its on-hand inventory for timely
identification and measurement of obsolete, slow-moving, or otherwise impaired
inventory. As of December 31, 1998 and 1999, no such inventory had been
identified and no inventory reserves were recorded.
Property and equipment
Property and equipment are stated at cost. Property and equipment are
depreciated on a straight-line basis over the useful lives of the assets, which
are generally three to seven years. Leasehold improvements are amortized on a
straight-line basis over the shorter of the remaining term of the lease or its
estimated useful life.
Software costs
Purchased software is capitalized at cost and amortized over the estimated
useful life, generally five years. Software developed for use in the Company's
products is expensed as incurred and is classified as research and development
expense.
- --------------------------------------------------------------------------------
F-8
<PAGE>
LUMINEX CORPORATION
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
IMPAIRMENT OF LONG-LIVED ASSETS
In accordance with SFAS No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of, if indicators of impairment
exist, the Company assesses the recoverability of the affected long-lived
assets by determining whether the carrying value of such assets can be
recovered through undiscounted future operating cash flows. If impairment is
indicated, the Company will measure the amount of such impairment by comparing
the carrying value of the asset to the present value of the expected future
cash flows associated with the use of the asset. To date, no such indicators of
impairment have been identified.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed in the period incurred. SFAS No.
86, Accounting for the Costs of Software to be Sold, Leased or Otherwise
Marketed, requires capitalization of certain software development costs
subsequent to the establishment of technological feasibility. Based on the
Company's product development process, technological feasibility is established
upon completion of a working model. Costs related to software development
incurred between completion of the working model and the point at which the
product is ready for general release have been insignificant. Through December
31, 1999, all software development costs have been expensed.
PATENT COSTS
Costs related to patent applications and prosecution are expensed as incurred
as recoverability of such expenditures is uncertain.
INCOME TAXES
The Company accounts for income taxes in accordance with SFAS No. 109,
Accounting for Income Taxes. This statement prescribes the use of the liability
method whereby deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and
liabilities, and are measured using enacted tax rates and laws that will be in
effect when the differences are expected to reverse.
ADVERTISING COSTS
The Company expenses advertising costs as incurred. Advertising expenses were
not significant for all years presented.
STOCK-BASED COMPENSATION
SFAS No. 123, Accounting for Stock-Based Compensation ("SFAS 123"), prescribes
accounting and reporting standards for all stock-based compensation plans,
including employee stock options. As allowed by SFAS 123, the Company has
elected to continue to account for its employee stock-based compensation in
accordance with Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees.
COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
Reporting Comprehensive Income ("SFAS 130"), which establishes standards for
reporting comprehensive income and its components in a full set of financial
statements. The Company adopted SFAS 130 during the year ended December 31,
1998. There was no impact to the Company as a result of the adoption of SFAS
130, as there no differences between net loss and comprehensive loss for all
periods.
SEGMENT REPORTING
The Company adopted SFAS No. 131, Disclosures About Segments of an Enterprise
and Related Information ("SFAS 131"), during 1998. SFAS 131 requires the use of
a management approach in identifying segments of an enterprise. Management has
determined that the Company operates in one business segment.
- --------------------------------------------------------------------------------
F-9
<PAGE>
Luminex Corporation
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
Net loss per share
In accordance with SFAS No. 128, Earnings Per Share, and SEC Staff Accounting
Bulletin (or SAB) No. 98, basic net income (loss) per share is computed by
dividing the net income (loss) for the period by the weighted average number of
common shares outstanding during the period. Diluted net income (loss) per
share is computed by dividing the net income (loss) for the period by the
weighted average number of common and common equivalent shares outstanding
during the period. Potentially dilutive securities composed of incremental
common shares issuable upon the exercise of stock options and warrants, and
common shares issuable on conversion of preferred stock, were excluded from
historical diluted loss per share because of their anti-dilutive effect.
Under the provisions of SAB No. 98, common shares issued for nominal
consideration, if any, would be included in the per share calculations as if
they were outstanding for all periods presented. No common shares have been
issued for nominal consideration.
Pro forma net loss per share has been computed as described above and also
gives effect to common equivalent shares arising from preferred stock that will
automatically convert upon the closing of the initial public offering
contemplated by this prospectus (using the as-if converted method from the
original date of issuance).
The following is a reconciliation of the numerator and denominator of basic and
diluted net loss per share (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1998 1999
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Basic and diluted:
Net loss............................................ $(2,753) $(5,596) $(8,448)
======= ======= =======
Weighted average shares of common stock
outstanding...................................... 12,842 13,086 13,151
======= ======= =======
Basic and diluted net loss per share................ $(0.21) $(0.43) $(0.64)
======= ======= =======
Pro forma basic and diluted:
Shares used above................................... 13,151
Pro forma adjustment to reflect weighted average
effect of assumed conversion of preferred stock.. 7,378
-------
Shares used in computing pro forma basic and diluted
net loss per share............................... 20,529
=======
Basic and diluted pro forma net loss per share...... $(0.41)
=======
</TABLE>
The Company has excluded all convertible preferred stock, outstanding stock
options, outstanding warrants to purchase stock and shares subject to
repurchase from the calculation of diluted loss per common share because all
such securities are antidilutive for all applicable periods presented. The
total number of shares excluded from the calculations of diluted net loss per
share, prior to application of the treasury stock method for options, was
6,213,330, 9,863,318 and 12,741,278 for the years ended December 31, 1997, 1998
and 1999, respectively. Such securities, had they been dilutive, would have
been included in the computations of diluted net loss per share. See Note 4 for
further information on these securities.
- --------------------------------------------------------------------------------
F-10
<PAGE>
LUMINEX CORPORATION
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
UNAUDITED PRO FORMA STOCKHOLDERS' EQUITY
The unaudited pro forma stockholders' equity information at December 31, 1999
reflects the conversion of the convertible preferred stock.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, as amended by SFAS No. 137, which is
effective for fiscal years beginning after June 15, 2000. This statement
requires companies to record derivatives on the balance sheet as assets or
liabilities measured at fair value. Gains or losses resulting from changes in
the values of those derivatives would be accounted for depending on the use of
the derivative and whether it qualifies for hedge accounting. SFAS No. 133 will
be effective for the Company's financial statements for the year ending
December 31, 2001. Management believes that this statement will not have a
material impact on the Company's financial position or results of operations.
In March 1999, the FASB issued an exposure draft entitled Accounting for
Certain Transactions involving Stock Compensation, which is a proposed
interpretation of APB Opinion No. 25. However, the exposure draft has not been
finalized. Once finalized and issued, the current accounting practices for
transactions involving stock compensation may need to change and such changes
could affect the Company's future operating results.
In December 1999, the Securities and Exchange Commission staff released Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial Statements (SAB
No. 101), which provides guidance on the recognition, presentation and
disclosure of revenue in financial statements. The application of SAB No. 101
did not have a material impact on the financial statements of the Company.
RECLASSIFICATION
Certain amounts in the prior year financial statements have been reclassified
to conform to current year presentation.
3. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at December 31 (in
thousands):
<TABLE>
<CAPTION>
1998 1999
- --------------------------------------------------------------------------------
<S> <C> <C>
Laboratory equipment............................................ $783 $1,180
Computer equipment.............................................. 128 264
Leasehold improvements.......................................... 229 609
Purchased software and intangibles.............................. 56 123
Furniture and fixtures.......................................... 87 192
------ ------
1,283 2,368
Less accumulated amortization and depreciation.................. (484) (999)
------ ------
$799 $1,369
====== ======
</TABLE>
- --------------------------------------------------------------------------------
F-11
<PAGE>
Luminex Corporation
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
4. Stockholders' equity
Series A Preferred Stock
A total of 457,250 shares of Series A Preferred Stock ("Series A Stock") were
issued in 1995 and 1996 at $2.00 per share. The Series A Stock does not
currently pay a dividend but is entitled to receive a dividend on a pro rata
basis if any dividend is paid to holders of the Common Stock. The Series A
Stock is entitled to one vote on all matters in which shares of Common Stock
are entitled to vote except in certain circumstances under the Delaware General
Corporation Law ("DGCL") where the holders are entitled to vote as a class.
Each share of Series A Stock is convertible at the option of the holder into
2.04 shares of Common Stock subject to adjustment to protect against dilution,
and has a preference in liquidation of $2.00.
With at least 30 days notice to each holder, the Company may, at its option,
redeem all but not part of the Series A Stock. All outstanding shares of Series
A Stock are subject to automatic conversion into fully paid and nonassessable
shares of Common Stock by the Company at $2.00 per share of Common Stock, on
the date that a registration statement registering any shares of Common Stock
under the Securities Act is declared effective by the Securities Exchange
Commission.
Series B Preferred Stock
A total of 150,000 shares of Series B Preferred Stock ("Series B Stock") were
issued in 1997 at $40.00 per share. The Series B Stock does not currently pay a
dividend but is entitled to receive a dividend on a pro rata basis if any
dividend is paid to the holders of the Common Stock. The Series B Stock is
entitled to ten votes on all matters in which shares of Common Stock are
entitled to vote except in certain circumstances under the DGCL where the
holders are entitled to vote as a class. Each share of Series B Stock is
convertible at the option of the holder into 20.4 shares of Common Stock,
subject to adjustment to protect against dilution, and has a preference in
liquidation of $40.00.
The Company may at its option, with not less than 30 and not more than 60 days
notice, redeem all but not part of the Series B Stock for $40.00 per share. All
outstanding shares of Series B Stock are subject to automatic conversion into
fully paid and nonassessable shares of Common Stock by the Company at $4.00 per
share of Common Stock, on the date that a registration statement registering
any shares of Common Stock under the Securities Act is declared effective by
the Securities Exchange Commission.
Series C Preferred Stock
A total of 151,571 shares of Series C Preferred Stock ("Series C Stock") were
issued in 1998 at $80.00 per share. The Series C Stock does not currently pay a
dividend but is entitled to receive a dividend on a pro rata basis if any
dividend is paid to holders of the Common Stock. The Series C Stock is entitled
to ten votes on all matters in which shares of Common Stock are entitled to
vote except in certain circumstances under the DGCL where the holders are
entitled to vote as a class. Each share of Series C Stock is convertible at the
option of the holder into 20.4 shares of Common Stock subject to adjustment to
protect against dilution, and has a preference in liquidation of $80.00.
The Company may, at its option, with not less than 30 and not more than 60 days
notice, redeem all but not part of the Series C Stock for $80.00 per share. All
outstanding shares of Series C Stock are subject to automatic conversion into
fully paid and nonassessable shares of Common Stock by the Company at $8.00 per
share of common stock, on the date that a registration statement registering
any shares of Common Stock under the Securities Act is declared effective by
the Securities and Exchange Commission.
- --------------------------------------------------------------------------------
F-12
<PAGE>
LUMINEX CORPORATION
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SERIES D PREFERRED STOCK
A total of 57,538 shares of Series D Preferred Stock ("Series D Stock") were
issued in 1999 at $120.00 per share. The Series D Stock does not currently pay
a dividend but is entitled to receive a dividend on a pro rata basis if any
dividend is paid to holders of the Common Stock. The Series D Stock is entitled
to ten votes on all matters in which shares of Common Stock are entitled to
vote except in certain circumstances under the DGCL where the holders are
entitled to vote as a class. Each share of Series D Stock is convertible at the
option of the holder into 20.4 shares of Common Stock subject to adjustment to
protect against dilution, and has a preference in liquidation of $120.00.
The Company may, at its option, with not less than 30 and not more than 60 days
notice, redeem all but not part of the Series D Stock for $120.00 per share.
All outstanding shares of Series D Stock are subject to automatic conversion
into fully paid and nonassessable shares of Common Stock by the Company at
$12.00 per share of common stock, on the date that a registration statement
registering any shares of Common Stock under the Securities Act is declared
effective by the Securities and Exchange Commission.
SERIES E PREFERRED STOCK
A total of 25,000 shares of Series E Preferred Stock ("Series E Stock") were
issued in 1999 at $120.00 per share. The Series E Stock does not currently pay
a dividend but is entitled to receive a dividend on a pro rata basis if any
dividend is paid to holders of the Common Stock. The Series E Stock is entitled
to ten votes on all matters in which shares of Common Stock are entitled to
vote except in certain circumstances under the DGCL where the holders are
entitled to vote as a class. Each share of Series E Stock is convertible at the
option of the holder into 20.4 shares of Common Stock subject to adjustment to
protect against dilution, and has a preference in liquidation of $120.00.
The Company may, at its option, with not less than 30 and not more than 60 days
notice, redeem all but not part of the Series C Stock for $120.00 per share.
All outstanding shares of Series E Stock are subject to automatic conversion
into fully paid and nonassessable shares of Common Stock by the Company at
$12.00 per share of common stock, on the date that a registration statement
registering any shares of Common Stock under the Securities Act is declared
effective by the Securities and Exchange Commission.
COMMON STOCK
At December 31, 1999, there were 13,167,754 shares of Common Stock issued and
outstanding. In addition, approximately 13,344,749 shares were reserved for
future issuance upon exercise of stock options and warrants and upon conversion
of convertible securities.
WARRANTS TO PURCHASE COMMON STOCK
In conjunction with the sale of the Series B Stock, the Company issued warrants
to purchase an aggregate of 535,500 shares of Common Stock at an exercise price
of $1.96 per share. The warrants may be exercised, in whole or in part, at any
time prior to April 3, 2002. (See also Note 8.)
STOCK OPTION PLAN
Under the Company's Stock Option Plan, which was amended in May 1998 (the
"Plan"), options to purchase up to 4,080,000 shares of the Company's Common
Stock may be granted to employees, officers, non-employee directors and
advisors of the Company. The Plan is administered by the Stock Option Committee
of the Board of Directors which has the authority to determine the terms and
- --------------------------------------------------------------------------------
F-13
<PAGE>
LUMINEX CORPORATION
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
conditions under which options will be granted, including the number of shares,
option price, vesting schedule and term. Under certain circumstances, the
Company may repurchase previously granted options or shares issued upon the
exercise of a previously granted option.
Since inception, the Company has granted options to employees at estimated fair
market value on the date of grant. Employee options generally vest one-third on
each of the first, second and third anniversary dates from the date of grant
and have a term of five years.
In 1997, the Company granted a fully vested option to purchase 38,250 shares of
the Company's Common Stock to a consulting firm at an exercise price of $1.96
per share that expires on January 31, 2002. The Company granted an additional
369,750 options to this consulting firm with vesting based on the achievement
of identified milestones. No amount was allocated to the value of these options
as such amounts were insignificant. In 1999, the consulting firm surrendered
all the options in exchange for issuance by the Company of a fully vested
option to purchase 102,000 shares of the Company's Common Stock at an exercise
price of $1.96 per share. The Company recorded, in selling, general and
administrative expenses, stock compensation in the amount of approximately
$433,000 in connection with the issuance of stock options to the consulting
firm.
Pro forma information regarding net loss is required by Statement 123, and has
been determined as if the Company had accounted for its employee stock options
under the minimum value method of that Statement. The minimum value for these
options was estimated at the date of grant using a minimum value option pricing
model with the following assumptions for 1997, 1998 and 1999; volatility of 0%;
risk free interest rate of 6%; expected life of the options of 5 years; and an
expected dividend yield of 0%.
For purposes of pro forma disclosures, the estimated fair value of the options
is expensed over the options' vesting periods. The Company's pro forma
information is as follows (in thousands):
<TABLE>
<CAPTION>
1997 1998 1999
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net loss as reported................................ $(2,753) $(5,596) $(8,448)
Pro forma net loss.................................. (2,800) (5,753) (8,714)
Diluted net loss per share as reported.............. (0.21) (0.43) (0.64)
Pro forma diluted net loss per share................ (0.22) (0.44) (0.66)
</TABLE>
The weighted average grant date fair value of options granted was $0.51, $0.84
and $1.04 for 1997, 1998 and 1999, respectively.
- --------------------------------------------------------------------------------
F-14
<PAGE>
LUMINEX CORPORATION
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
A summary of the changes in Common Stock options is as follows:
<TABLE>
<CAPTION>
WEIGHTED
RANGE OF AVERAGE
EXERCISE EXERCISE
SHARES PRICES PRICE
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Options outstanding, December 31, 1996......... 405,960 $0.49 $0.49
Granted....................................... 1,279,080 $1.96 $1.96
Exercised..................................... -- -- --
Surrendered................................... -- -- --
--------- ----------- -----
Options outstanding, December 31, 1997......... 1,685,040 $0.49-$1.96 $1.61
Granted....................................... 574,260 $2.94-$3.92 $3.52
Exercised..................................... (5,439) $0.49 $0.49
Surrendered................................... (10,881) $0.49-$2.94 $1.96
--------- ----------- -----
Options outstanding, December 31, 1998......... 2,242,980 $0.49-$3.92 $2.10
Granted....................................... 1,666,884 $1.96-$5.88 $4.03
Exercised..................................... (33,905) $0.49-$1.96 $1.38
Surrendered................................... (438,600) $1.96 $1.96
--------- ----------- -----
Options outstanding, December 31, 1999......... 3,437,359 $0.49-$5.88 $3.06
========= ===========
</TABLE>
The following table summarizes information about options outstanding at
December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
WEIGHTED AVERAGE WEIGHTED NUMBER WEIGHTED
EXERCISE NUMBER REMAINING AVERAGE EXERCISABLE AVERAGE
PRICE OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE AND VESTED EXERCISE PRICE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$0.49 384,295 1.16 $0.49 323,095 $0.49
1.96 918,000 2.80 1.96 690,169 1.96
2.94 330,480 3.16 2.94 110,148 2.94
3.92 1,555,500 4.29 3.92 266,891 3.92
5.88 249,084 4.21 5.88 46,783 5.88
--------- ---------
3,437,359 1,437,086
========= =========
</TABLE>
5. INCOME TAXES
As of December 31, 1999, the Company had federal net operating loss
carryforwards of approximately $17,077,000 and research and development credit
carryforwards of approximately $572,000 that will begin to expire in 2010 if
not utilized.
The Tax Reform Act of 1986 imposes substantial restrictions on the utilization
of net operating losses and tax credits in the event of an "ownership change"
of a corporation. The Company's utilization of the net operating losses will be
subject to an annual limitation due to an "ownership change" resulting from the
sales of private equity securities. The annual limitations will result in the
expiration of no more than $750,000 of net operating losses before utilization.
- --------------------------------------------------------------------------------
F-15
<PAGE>
Luminex Corporation
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax liabilities and assets as of December 31 are as
follows (in thousands):
<TABLE>
<CAPTION>
1998 1999
- --------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Deferred revenue.............................................. $-- $267
Depreciable assets............................................ -- 147
Accrued expenses.............................................. 5 40
Net operating loss and credit carryforwards................... 4,080 6,855
Start-up and organization costs............................... 17 11
Stock compensation............................................ -- 188
------- ------
Total deferred tax assets...................................... 4,102 7,508
Valuation allowance for deferred tax assets................... (4,086) (7,485)
------- ------
Net deferred taxes............................................. 16 23
Deferred tax liabilities:
Prepaid expenses.............................................. (16) (23)
------- ------
Total deferred tax liabilities................................. (16) (23)
------- ------
Net deferred taxes............................................. $-- $--
======= ======
</TABLE>
The Company has established a valuation allowance equal to the net deferred tax
assets due to uncertainties regarding the realization of deferred tax assets
based on the Company's lack of earnings history. The valuation allowance
increased by approximately $2,161,000 and $3,399,000 during 1998 and 1999,
respectively.
The Company's provision for income taxes differs from the expected tax benefit
amount computed by applying the statutory federal income tax rate of 34% to
income before income taxes as a result of the following:
<TABLE>
<CAPTION>
Year Ended
December 31,
1997 1998 1999
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory tax rate...................................... (34.0)% (34.0)% (34.0)%
State taxes, net of federal benefit..................... (3.0) (3.0) (3.0)
Nondeductible expenses.................................. -- 1.0 0.1
R&D credit generated.................................... (5.6) (2.6) (2.7)
Other................................................... -- -- (0.6)
Valuation allowance..................................... 42.6 38.6 40.2
----- ----- -----
-- % -- % -- %
===== ===== =====
</TABLE>
6. Employee benefit plans
Beginning January 1, 1998, the Company instituted a Savings Incentive Match
Plan for Employees ("SIMPLE") under Section 408(p) of the Internal Revenue
Code. Each employee of the Company who received at least $5,000 of compensation
during the year from the Company was eligible to contribute
- --------------------------------------------------------------------------------
F-16
<PAGE>
Luminex Corporation
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
up to $6,000 annually. The Company matches such contributions on a dollar-for-
dollar basis up to a maximum of 3% of the employee's gross salary compensation.
All employee and employer contributions are immediately vested. The Company's
contributions totaled approximately $40,000 in 1998 and $92,000 in 1999.
7. Commitments
Lease arrangements
The Company has various operating leases related primarily to office
facilities. Rental expense for these operating leases for the years 1997, 1998
and 1999 totaled approximately $105,000, $152,000 and $399,000, respectively.
Minimum annual rental commitments as of December 31, 1999 under noncancelable
leases for each of the next five years and in the aggregate are as follows (in
thousands):
<TABLE>
<S> <C>
2000....................................................................... $327
2001....................................................................... 304
2002....................................................................... 74
2003....................................................................... --
2004....................................................................... --
Thereafter................................................................. --
----
Total...................................................................... $705
====
</TABLE>
Legal proceedings
As a result of a procedural omission by the Company's prior patent counsel, the
Company is unable to obtain a patent in Japan and certain other countries for
the Company's method of "real time" detection and quantification of multiple
analytes from a single sample. The Company has filed a lawsuit alleging
negligence on the part of its prior patent counsel in this matter and seeking
to recover the damages believed to result from the lack of this patent
protection in Japan and certain other countries. At this time, management
cannot predict whether this lawsuit will be successful and, if so, the amount
of any damages that may be recovered.
8. Related party transactions
The Company purchased certain office and laboratory equipment from Inland Labs
on January 1, 1998 for $769,766, which was based on the net book value of the
assets acquired by Inland Labs prior to July 1, 1995, and the cost of assets
acquired by Inland Labs subsequent to June 30, 1995. Dr. Chandler was paid
$208,782 in cash and was issued 286,102 shares of the Company's Common Stock. A
committee of outside directors determined that the transaction was fair and in
the best interest of the Company and its stockholders.
In 1997, the Company paid $136,000 to a stockholder and Director of the Company
for consulting services provided in conjunction with the development of the
Company's FlowMetrixTM System and the Luminex 100 diagnostic instrument.
In conjunction with the issuance of the Series B Preferred Stock in 1997, the
Company made cash payments totaling approximately $266,000 and issued warrants
to purchase 535,500 shares of
- --------------------------------------------------------------------------------
F-17
<PAGE>
LUMINEX CORPORATION
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Common Stock to the predecessor of Loewenbaum & Company, Incorporated
("Loewenbaum"), which acted as the placement agent for the Series B Preferred
Stock. G. Walter Loewenbaum is a major stockholder and Director of Luminex and
is Chairman and Chief Executive Officer of Loewenbaum and held such offices
with its predecessor. The cash and warrants were paid to Loewenbaum's
predecessor as the placement fee for the Series B Preferred Stock. The warrants
may be exercised in whole or in part, at any time prior to April 3, 2002 at
$1.96 per share.
In conjunction with the issuance of the Series C Preferred Stock in 1998, the
Company made cash payments totaling approximately $849,000 to Loewenbaum, which
acted as the placement agent for the Series C Preferred Stock. G. Walter
Loewenbaum is a major stockholder and Director of Luminex and is Chairman and
Chief Executive Officer of Loewenbaum. The cash was paid to Loewenbaum as the
placement fee for the Series C Preferred Stock.
On June 1, 1999 the Company entered into a consulting agreement with a director
of Luminex for consulting services. In consideration for those services, the
Company paid the director $5,833 per month. On November 1, 1999, the Company
amended that agreement to increase the level of consulting services and to
increase the consulting fee to $11,666 per month. In addition, the Company
issued stock options for the purchase of 51,000 shares of the Company's common
stock to this Director of the Company. The Company recorded in sales, general
and administrative expense deferred stock compensation in the amount of $74,500
in connection with such transaction of which approximately $41,000 was
amortized during the year.
On September 1, 1997, seven outside directors of Luminex were each granted
fully vested options to purchase 10,200 shares of common stock at an exercise
price of $1.96 per share, and one outside director of Luminex was granted fully
vested options to purchase 61,200 shares of common stock at an exercise price
of $1.96 per share.
On May 20, 1999, six outside directors of Luminex were each granted fully
vested options to purchase 30,600 shares of common stock at an exercise price
of $3.92 per share.
In December 1999, the Company issued 51,000 shares of Series E convertible
preferred stock for an aggregate price of $3,000,000 to Koerner Capital
Corporation, of which John E. Koerner III, one of the Company's directors is
the sole stockholder.
9. JOINT VENTURE RESEARCH ARRANGEMENT
In October 1998, the Company, along with a joint venture partner, was granted a
special assistance award by the National Institute of Standards and Technology
to conduct liquid array technology development. In September 1999, the Company
and its joint venture partner suspended all joint venture activities. During
the year, the Company incurred expenses related to liquid array development
activities totaling approximately $600,000 and recognized grant revenues of
approximately $506,000.
10. SUBSEQUENT EVENT
On March 6, 2000, the number of authorized shares of common stock was increased
from 25,000,000 to 50,000,000, with the total number of authorized shares of
common stock to be increased to 200,000,000 upon completion of an initial
public offering. Additionally, on March 9, 2000, the Board of Directors of the
Company approved a 2.04-for-1 stock split of common stock in the form of a
stock dividend. All common stock and per share information has been adjusted to
reflect the stock dividend as if such stock dividend had taken place at the
inception of the Company.
- --------------------------------------------------------------------------------
F-18
<PAGE>
- --------------------------------------------------------------------------------
[LOGO OF LUMINEX APPEARS HERE]
- --------------------------------------------------------------------------------
<PAGE>
Part II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. Other Expenses of Issuance and Distribution
The following is an itemized statement of the amounts of all expenses payable
by the Registrant in connection with the registration of the common stock
offered hereby (estimated except for the Registration Fee, NASD Filing Fee and
Nasdaq National Market listing fee), other than underwriting discounts and
commissions:
<TABLE>
<S> <C>
Registration Fee--Securities and Exchange Commission.................. $ 26,400
NASD Filing Fee....................................................... 10,500
Nasdaq National Market listing fee.................................... 95,000
Blue Sky fees and expenses............................................ 5,000
Accountants' fees and expenses........................................ 180,000
Legal fees and expenses............................................... 250,000
Printing and engraving expenses....................................... 125,000
Transfer agent and registrar fees..................................... 3,600
Miscellaneous......................................................... 4,500
--------
Total............................................................... $700,000
========
</TABLE>
ITEM 14. Indemnification of Directors and Officers
Pursuant to Sections 102(b)(7) and 145 of the Delaware General Corporation Law,
our Restated Certificate of Incorporation and Amended and Restated Bylaws
include provisions eliminating or limiting the personal liability of the
members of our board of directors to our company and our stockholders for
monetary damages for breach of fiduciary duty as a director. This does not
apply for any breach of a director's duty of loyalty to our company or our
stockholders, for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of the law, for paying an
unlawful dividend or approving an illegal stock repurchase, or for any
transaction from which a director derived an improper personal benefit.
Our Restated Certificate of Incorporation and Amended and Restated Bylaws also
provide that we have the power to indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding (other than an action by or in the right of our
company) by reason of the fact that the person is or was a director, officer,
employee or agent of any corporation, partnership, joint venture, trust or
other enterprise, against any and all expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement and reasonably incurred in
connection with such action, suit or proceeding. Our power to indemnify applies
only if the person acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of our corporation, and with
respect to any criminal action or proceeding, had no reasonable cause to
believe the person's conduct was unlawful.
In the case of an action by or in the right of our company, no indemnification
may be made with respect to any claim, issue or matter as to which such person
shall have been adjudged to be liable to us unless and only to the extent that
the court in which such action or suit was brought shall determine that despite
the adjudication of liability such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper. To the extent a
director or officer of our company has been successful in the defense of any
action, suit or proceeding referred to above or in the defense of any claim,
issue or matter therein, he shall be indemnified against expenses (including
attorney's fees) actually and reasonably incurred by him in connection
therewith.
II-1
<PAGE>
We have the power to purchase and maintain insurance on behalf of any person
covering any liability incurred by such person in his capacity as a director,
officer, employee or agent of our company, or arising out of his status as
such, whether or not we would have the power to indemnify him against such
liability.
The foregoing summaries are necessarily subject to the complete text of the
statute, Amended and Restated Bylaws and Restated Certificate of Incorporation
referred to above and are qualified in their entirety by reference thereto.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
A. In the three years preceding the filing of this registration statement, the
Registrant from time to time has granted stock options to employees and
consultants in reliance upon exemption from registration pursuant to either
(1) Section 4(2) of the Securities Act of 1933 or (2) Rule 701 promulgated
under the Securities Act of 1933. The following table sets forth certain
information regarding such grants:
<TABLE>
<CAPTION>
NUMBER EXERCISE
OF SHARES PRICES
- --------------------------------------------------------------------------------
<S> <C> <C>
January 1, 1997 to December 31, 1997.................... 1,279,080 $1.96
January 1, 1998 to December 31, 1998.................... 574,260 $2.94-$3.92
January 1, 1999 to December 31, 1999.................... 1,666,884 $1.96-$5.88
January 1, 2000 to February 29, 2000.................... 942,100 $11.74-$18.00
</TABLE>
For additional information concerning these transactions, please see
"Management -- Employee benefit plans" in the prospectus included in this
registration statement.
B. Set forth in chronological order is information regarding all securities
sold by the Registrant in the three years preceding the filing of this
registration statement.
(1) Since January 1, 1997, the Registrant has granted to employees,
directors and consultants options to purchase an aggregate of 4,462,324
shares of Common Stock under its 1996 Stock Option Plan and 2000 Long-
Term Incentive Plan at a weighted average exercise price of $5.96.
(2) On April 2, 1997, the Registrant issued a warrant to purchase 535,500
shares of common stock to Southcoast Capital Corporation or its
permitted assigns for an aggregate purchase price of $1,050,000.
(3) In April 1997, the Registrant issued 150,000 shares of its Series B
convertible preferred stock to individuals and entities for an
aggregate purchase price of $6,000,000.
(4) In July 1999, the Registrant issued 151,571 shares of its Series C
convertible preferred stock to individuals and entities for an
aggregate purchase price of $12,125,680.
(5) In December 1999, the Registrant issued 57,538 shares of its Series D
convertible preferred stock to individuals and entities for an
aggregate price of $6,904,560.
(6) In December 1999, the Registrant issued 25,000 shares of our Series E
convertible preferred stock to an entity for an aggregate purchase
price of $3,000,000.
The issuances to employees, directors and consultants described in (1) were
deemed to be exempt from registration under Rule 701 promulgated under Section
3(b) of the Securities Act of 1933 as transactions by an issuer not involving a
public offering or transactions pursuant to compensatory benefit plans and
contracts relating to compensation. The sales described in (2) through (6) were
made only to "accredited investors" and were deemed to be exempt from
registration under the Securities Act of 1933 in reliance on Section 4(2) of
the Securities Act, or Regulation D promulgated thereunder.
II-2
<PAGE>
Other than the placement agent utilized in connection with sales of our Series
B and C preferred stock, no underwriters were involved in the foregoing sales
of securities. Each share of the Registrant's convertible preferred stock
listed above will convert automatically into 20.4 shares of the Registrant's
common stock upon the effectiveness of this registration statement.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------------------------------------------------------------------------------
<C> <S>
1.1* Form of Underwriting Agreement
3.1++ Form of Restated Certificate of Incorporation of the Registrant
3.2 Amended and Restated Bylaws of the Registrant
4.1* Form of Common Stock Certificate
4.2++ Warrant for the Purchase of Shares of Common Stock dated as of April
2, 1997 by and between the Registrant and Southcoast Capital
Corporation.
5.1 Opinion of Thompson & Knight L.L.P.
10.1++ 1996 Stock Option Plan of the Registrant, as amended.
10.2++ Form of Stock Option Agreement of the Registrant.
10.3++ Form of Incentive Stock Option Agreement of the Registrant.
10.4 2000 Long-Term Incentive Plan of the Registrant.
10.5 Form of Stock Option Award Agreement of the Registrant.
10.6 Reserved
10.7+++ Development and Supply Agreement dated as of March 19, 1999 by and
between the Registrant and Bio-Rad Laboratories, Inc.
10.8+++ Amendment to Development and Supply Agreement dated as of January 13,
2000 by and between the Registrant and Bio-Rad Laboratories, Inc.
10.9+++ Agreement for Electronic Manufacturing Services dated as of January 1,
2000 by and between the Registrant and Sanmina Corporation.
10.10++ Consultant Agreement dated as of June 1, 1999 by and between the
Registrant and A. Sidney Alpert.
10.11++ Amendment to Consultant Agreement dated as of November 1, 1999 by and
between the Registrant and A. Sidney Alpert.
10.12++ Standard Commercial Lease Agreement dated as of August 21, 1989 by and
between the Registrant and Aetna Life Insurance Company, as amended,
for facilities situated at 12112 Technology Boulevard, Austin, Texas
78727.
10.13++ Sublease Agreement dated as of December 20, 1999 by and between the
Registrant and American Innovations, Ltd., for facilities situated at
12112 Technology Boulevard, Austin, Texas 78727.
10.14++ First Amendment to Sublease Agreement dated as of December 20, 1999 by
and between the Registrant and American Innovations, Ltd., for
facilities situated at 12112 Technology Boulevard, Austin, Texas
78727.
10.15 Form of Employment Agreement between the Registrant and each of Mark B
Chandler, Ph.D., Michael L. Bengtson, Ralph L. McDade, M.D., Van S.
Chandler, Michael D. Spain, M.D., James L. Persky and Randel S.
Marfin.
23.1++ Consent of Thompson & Knight L.L.P. (included as part of Exhibit 5.1
hereto)
23.2 Consent of Independent Auditors
24.1++ Power of Attorney (included on signature page of the Registration
Statement hereto)
24.2 Power of Attorney of William L. Roper, M.D., M.P.H.
27.1 Financial Data Schedule
</TABLE>
- --------
* To be filed by amendment.
+ Confidential treatment requested for certain portions of this Exhibit
pursuant to Rule 406 promulgated under the Securities Act, which portions
are omitted and filed separately with the Securities and Exchange
Commission.
++ Previously filed.
II-3
<PAGE>
(b)Financial Statement Schedules
None.
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.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the SEC 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 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 Securities Act of
1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to
be part of this registration statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at the time shall be deemed to be the initial bona fide offering
thereof.
II-4
<PAGE>
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 Austin, State of Texas,
on March 10, 2000.
Luminex Corporation
/s/ Mark B. Chandler, Ph.D.
By___________________________________
Mark B. Chandler, Ph.D.
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons on March 10,
2000 in the capacities indicated
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Mark B. Chandler, Ph.D. Chairman of the Board and March 10, 2000
____________________________________ Chief Executive Officer
Mark B. Chandler, Ph.D. (Principal Executive
Officer)
* Vice President, Treasurer
____________________________________ and Chief Financial Officer
James L. Persky (Principal Financial
Officer)
* Controller (Principal
____________________________________ Accounting Officer)
Harriss T. Currie
* Director
____________________________________
G. Walter Loewenbaum
* Director
____________________________________
A. Sidney Alpert
* Director
____________________________________
Robert J. Cresci
* Director
____________________________________
Laurence E. Hirsch
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Director
____________________________________
Jim D. Kever
* Director
____________________________________
Fred C. Goad, Jr.
* Director
____________________________________
John E. Koerner, III
* Director
____________________________________
William L. Roper, M.D., M.P.H.
*By: /s/ Mark B. Chandler, Ph.D.
Mark B. Chandler, Ph.D.
Attorney-in-fact
</TABLE>
II-6
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------------------------------------------------------------------------------
<C> <S>
1.1* Form of Underwriting Agreement
3.1++ Form of Restated Certificate of Incorporation of the Registrant
3.2 Amended and Restated Bylaws of the Registrant
4.1* Form of Common Stock Certificate
4.2++ Warrant for the Purchase of Shares of Common Stock dated as of April
2, 1997 by and between the Registrant and Southcoast Capital
Corporation.
5.1 Opinion of Thompson & Knight L.L.P.
10.1++ 1996 Stock Option Plan of the Registrant, as amended.
10.2++ Form of Stock Option Agreement of the Registrant.
10.3++ Form of Incentive Stock Option Agreement of the Registrant.
10.4 2000 Long-Term Incentive Plan of the Registrant.
10.5 Form of Stock Option Award Agreement of the Registrant.
10.6 Reserved
10.7+++ Development and Supply Agreement dated as of March 19, 1999 by and
between the Registrant and Bio-Rad Laboratories, Inc.
10.8+++ Amendment to Development and Supply Agreement dated as of January 13,
2000 by and between the Registrant and Bio-Rad Laboratories, Inc.
10.9+++ Agreement for Electronic Manufacturing Services dated as of January 1,
2000 by and between the Registrant and Sanmina Corporation.
10.10++ Consultant Agreement dated as of June 1, 1999 by and between the
Registrant and A. Sidney Alpert.
10.11++ Amendment to Consultant Agreement dated as of November 1, 1999 by and
between the Registrant and A. Sidney Alpert.
10.12++ Standard Commercial Lease Agreement dated as of August 21, 1989 by and
between the Registrant and Aetna Life Insurance Company, as amended,
for facilities situated at 12112 Technology Boulevard, Austin, Texas
78727.
10.13++ Sublease Agreement dated as of December 20, 1999 by and between the
Registrant and American Innovations, Ltd., for facilities situated at
12112 Technology Boulevard, Austin, Texas 78727.
10.14++ First Amendment to Sublease Agreement dated as of December 20, 1999 by
and between the Registrant and American Innovations, Ltd., for
facilities situated at 12112 Technology Boulevard, Austin, Texas
78727.
10.15 Form of Employment Agreement between the Registrant and each of Mark
B. Chandler, M.D., Michael L. Bengtson, Ralph L. McDade, M.D., Van S.
Chandler, Michael D. Spain, M.D., James L. Persky and Randel S.
Marfin.
23.1++ Consent of Thompson & Knight L.L.P. (included as part of Exhibit 5.1
hereto)
23.2 Consent of Independent Auditors
24.1++ Power of Attorney (included on signature page of the Registration
Statement hereto)
24.2 Power of Attorney of William L. Roper, M.D., M.P.H.
27.1 Financial Data Schedule
</TABLE>
- --------
* To be filed by amendment.
+ Confidential treatment requested for certain portions of this Exhibit
pursuant to Rule 406 promulgated under the Securities Act, which portions
are omitted and filed separately with the Securities and Exchange
Commission.
++ Previously filed.
<PAGE>
Exhibit 3.2
AMENDED AND RESTATED BYLAWS
OF
LUMINEX CORPORATION
February 4, 2000
<PAGE>
AMENDED AND RESTATED BYLAWS
OF
LUMINEX CORPORATION
ARTICLE I
CORPORATE OFFICES
Section 1.1 Registered Office. The address of the Corporation's
-----------------
registered office in the State of Delaware is Corporation Trust Center, 1209
Orange Street, in the City of Wilmington County of New Castle Center 19801. The
name of its registered agent at such address is the Corporation Trust Company.
Section 1.2 Other Offices. The Board of Directors may at any time
-------------
establish other offices at any place or places where the Corporation is
qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 2.1 Place of Meetings. Meetings of stockholders shall be held
-----------------
at any place, within or outside the State of Delaware, designated by the Board
of Directors. In the absence of any such designation, stockholders' meetings
shall be held at the registered office of the Corporation.
Section 2.2 Annual Meeting.
--------------
(a) The annual meeting of stockholders shall be held each year on
a date and at a time designated by the Board of Directors. At the meeting,
directors shall be elected and any other proper business may be transacted.
(b) For nominations of persons for election to the Board of
Directors of the Corporation and the proposal of business to be transacted by
the stockholders may be made at an annual meeting of stockholders (i) pursuant
to the Corporation's notice with respect to such meeting, (ii) by or at the
direction of the Board of Directors or (iii) by any stockholder of the
Corporation who was a stockholder of record at the time of giving of the notice
provided for in this Section 2.2, who is entitled to vote at the meeting and who
has complied with the notice procedures set forth in this Section 2.2.
(c) For nominations of persons for election as directors of the
Corporation or for other business to be properly brought before an annual
meeting by a stockholder pursuant to clause (iii) of paragraph (b) of this
Section 2.2, the stockholder must have given timely notice thereof in
<PAGE>
writing to the secretary of the Corporation and such business must be a proper
matter for stockholder action under the Delaware General Corporation Law. To be
timely, a stockholder's notice shall be delivered to the secretary at the
principal executive offices of the Corporation not less than 30 days nor more
than 90 days prior to the first anniversary of the preceding year's annual
meeting of stockholders; provided, however, that in the event that the date of
the annual meeting is more than 30 days prior to or more than 60 days after such
anniversary date, notice by the stockholder to be timely must be so delivered
not earlier than the 90th day prior to such annual meeting and not later than
the close of business on the later of the 20th day prior to such annual meeting
or the 10th day following the day on which public announcement of the date of
such meeting is first made. Such stockholder's notice shall set forth (i) as to
each person whom the stockholder proposes to nominate for election or re-
election as a director all 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 Securities
Exchange Act of 1934, as amended (the "Exchange Act") (including such person's
written consent to being named in the proxy statement as a nominee and to
serving as a director if elected); (ii) as to any other business that the
stockholder proposes to bring before the meeting, a brief description of such
business, the reasons for conducting such business at the meeting and any
material interest in such business of such stockholder and the beneficial owner,
if any, on whose behalf the proposal is made; and (iii) as to the stockholder
giving the notice and the beneficial owner, if any, on whose behalf the
nomination or proposal is made:
(A) The name and address of such stockholder, as they appear on
the Corporation's books, and of such beneficial owner; and
(B) The class and number of shares of capital stock of the
Corporation that are owned beneficially and of record by such stockholder and
such beneficial owner.
(d) Only such business shall be conducted at an annual meeting of
stockholders as shall have been brought before the meeting in accordance with
the procedures set forth in this Section 2.2. The chairman of the meeting shall
determine whether a nomination or any business proposed to be transacted by the
stockholders has been properly brought before the meeting and, if any proposed
nomination or business has not been properly brought before the meeting, the
chairman shall declare that such proposed business or nomination shall not be
presented for stockholder action at the meeting.
(e) For purposes of this Section 2.2, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or a comparable national news service or the filing of
information with the Securities and Exchange Commission via the EDGAR filing
system.
(f) Nothing in this Section 2.2 shall be deemed to affect any rights
of stockholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 (or any successor rule) promulgated under the
Exchange Act.
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Section 2.3 Special Meeting.
---------------
(a) A special meeting of the stockholders may be called at any
time by the Board of Directors, the chairman of the board or the president of
the Corporation.
(b) Nominations of persons for election to the Board of Directors
may be made at a special meeting of stockholders at which directors are to be
elected pursuant to such notice of meeting (i) by or at the direction of the
Board of Directors or (ii) by any stockholder of the Corporation who is a
stockholder of record at the time of giving of notice provided for in Section
2.4, who shall be entitled to vote at the meeting and who complies with the
notice procedures set forth in Section 2.4.
Section 2.4 Notice of Stockholder's Meetings; Affidavit of Notice.
-----------------------------------------------------
(a) All notices of meetings of stockholders shall be in writing
and shall be sent or otherwise given in accordance with this Section 2.4 of
these Bylaws not less than 10 nor more than 60 days before the date of the
meeting to each stockholder entitled to vote at such meeting (or such longer or
shorter time as is required by Section 2.5 of these Bylaws, if applicable). The
notice shall specify the place, date, and hour of the meeting, and, in the case
of a special meeting, the purpose or purposes for which the meeting is called.
(b) Written notice of any meeting of stockholders, if mailed, is
given when deposited in the United States mail, postage prepaid, directed to the
stockholder at his or her address as it appears on the records of the
Corporation. An affidavit of the secretary or an assistant secretary or of the
transfer agent of the Corporation that the notice has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated therein.
Section 2.5 Quorum. The holders of a majority of the stock issued and
------
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
Certificate of Incorporation. If, however, such quorum is not present or
represented at any meeting of the stockholders, then either (a) the chairman of
the meeting or (b) a majority of the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum is present or represented. At such adjourned meeting at
which a quorum is present or represented, any business may be transacted that
might have been transacted at the meeting as originally noticed. If the
adjournment is for more than 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 2.6 Conduct of Business. The chairman of any meeting of
-------------------
stockholders shall determine the order of business and the procedure at the
meeting, including the manner of voting and the conduct of business.
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Section 2.7 Voting. The stockholders entitled to vote at any meeting of
------
stockholders shall be determined in accordance with the provisions of Section
2.9 of these Bylaws, subject to the provisions of Sections 217 and 218 of the
Delaware General Corporation Law (relating to voting rights of fiduciaries,
pledgors and joint owners of stock and to voting trusts and other voting
agreements). Except as may be otherwise provided in the Certificate of
Incorporation, each stockholder shall be entitled to one vote for each share of
capital stock held by such stockholder.
Section 2.8 Waiver of Notice. Whenever notice is required to be given
----------------
under any provision of the Delaware General Corporation Law or of the
Certificate of Incorporation or these Bylaws, a written waiver thereof, signed
by the person entitled to notice, whether before or after the time stated
therein, shall be deemed equivalent to notice. Attendance of a person at a
meeting shall constitute a waiver of notice of such meeting, except when the
person attends a meeting for the express purpose of objecting, at the beginning
of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the stockholders need be specified
in any written waiver of notice unless so required by the Certificate of
Incorporation or these Bylaws.
Section 2.9 Record Date for Stockholder Notice. In order that the
----------------------------------
Corporation may determine the stockholders entitled to notice of or to vote at
any meeting of stockholders or any adjournment thereof or entitled to receive
payment of any dividend or other distribution or allotment of any rights, or
entitled to exercise any rights in respect of any change, conversion or exchange
of stock or for the purpose of any other lawful action, the Board of Directors
may fix, in advance, a record date, which shall not be more than 60 nor less
than 10 days before the date of such meeting, nor more than 60 days prior to any
other action. If the Board of Directors does not so fix a record date:
(a) 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.
(b) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
Section 2.10 Proxies. Each stockholder entitled to vote at a meeting of
-------
stockholders may authorize another person or persons to act for such stockholder
by a written proxy, signed by the stockholder and filed with the secretary of
the Corporation, but no such proxy shall be voted or acted upon after three
years from its date, unless the proxy provides for a longer period. A proxy
shall be deemed signed if the stockholder's name is placed on the proxy (whether
by manual signature, typewriting, telegraphic transmission or otherwise) by the
stockholder or the stockholder's
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attorney-in-fact. The revocability of a proxy that states on its face that it is
irrevocable shall be governed by the provisions of Section 212(e) of the
Delaware General Corporation Law.
Section 2.11 Stockholder Action by Unanimous Written Consent without a
---------------------------------------------------------
Meeting. Unless otherwise restricted by the Certificate of Incorporation or
- -------
these Bylaws, any action required or permitted to be taken at any meeting of the
stockholders of the Corporation may be taken without a meeting if holders of all
the shares of capital stock entitled to vote thereon consent thereto in writing.
Written consents representing actions taken by the stockholders of the
Corporation may be executed by telex, telecopy or other facsimile transmission,
and such facsimile shall be valid and binding to the same extent as if it were
an original.
ARTICLE III
DIRECTORS
Section 3.1 Powers. Subject to the provisions of the Delaware General
------
Corporation Law and any limitations in the Certificate of Incorporation or these
Bylaws relating to action required to be approved by the stockholders, the
business and affairs of the Corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the Board of Directors.
Section 3.2 Number of Directors. Subject to the limitations contained in
-------------------
the Certificate of Incorporation, the number of directors of the Corporation
shall be fixed from time to time by resolution adopted by a vote of a majority
of the entire Board of Directors, provided that the number so fixed shall not be
less than five nor more than 15.
Section 3.3 Election, Qualification and Term of Office of Directors.
-------------------------------------------------------
Subject to the provisions of Article VII of the Certificate of Incorporation
concerning a classified board of directors and except as provided in Section 3.4
of these Bylaws, the successors of the class of directors whose term expires at
that annual meeting of stockholders shall be elected to hold office until the
annual meeting of stockholders held in the third year following the year of
their election. Directors need not be stockholders unless so required by the
Certificate of Incorporation, wherein other qualifications for directors may be
prescribed. Each director, including a director elected to fill a vacancy,
shall hold office until his or her successor is elected and qualified or until
his or her earlier resignation or removal. Elections of directors need not be
by written ballot.
Section 3.4 Resignation and Vacancies. Any director may resign at any
-------------------------
time upon written notice to the attention of the secretary of the Corporation.
When one or more directors so resign and the resignation is effective at a
future date, a majority of the directors then in office, including those who
have so resigned, shall have the sole power to fill such vacancy or vacancies,
the vote thereon to take effect when such resignation or resignations shall
become effective. Subject to the rights of holders of capital stock of the
Corporation pursuant to any valid and binding agreement, any vacancy occurring
on the Board of Directors created by reason of newly created directorships
resulting from the issuance of any class or series of capital stock of the
Corporation or newly created directorships resulting from any increase in the
number of directors and any vacancy occurring on the Board of
5
<PAGE>
Directors resulting from death, resignation, removal or other cause shall be
filled solely by the affirmative vote of a majority of the remaining directors
then in office, even though less than a quorum of the Board of Directors, or by
a sole remaining director. Any such director elected to fill a vacancy on the
Board of Directors shall hold such office for the remainder of the full term of
the class of directors in which the new directorship was created or the vacancy
occurred and until such director's successor shall have been elected and
qualified.
Unless otherwise provided in the Certificate of Incorporation or these
Bylaws, whenever any holders of a class or series of capital stock of the
Corporation have the right to elect one or more directors pursuant to the
Certificate of Incorporation or the provisions of any valid and binding
agreement, vacancies in directorships to which such right relates may be filled
by a majority of the directors elected by the holders of such class or classes
or series then in office, or by a sole remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
Corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the Certificate of Incorporation or these Bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in Section 211 of the Delaware General Corporation Law.
Section 3.5 Place of Meetings; Meetings by Telephone.
----------------------------------------
(a) The Board of Directors of the Corporation may hold meetings, both
regular and special, either within or outside the State of Delaware.
(b) Unless otherwise restricted by the Certificate of Incorporation or
these Bylaws, members of the Board of Directors, or any committee designated by
the Board of Directors, may participate in a meeting of the Board of Directors,
or any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
Section 3.6 Regular Meetings. Regular meetings of the Board of Directors
----------------
may be held without notice at such time and at such place as shall from time to
time be determined by the Board of Directors.
Section 3.7 Special Meetings; Notice.
------------------------
(a) Special meetings of the Board of Directors for any purpose or purposes
may be called at any time by the chairman of the board, the president or any two
directors.
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<PAGE>
(b) Notice of the time and place of special meetings shall be delivered to
each directors (i) personally, (ii) by telephone, (iii) by facsimile, (iv) by
electronic mail, or (v) sent by first-class mail, addressed to each director at
that director's address as it is shown on the records of the Corporation. If
the notice is mailed, it shall be deposited in the United States mail at least
four days before the time of the holding of the meeting. If the notice is
delivered personally, by telephone, by facsimile or by electronic mail, it shall
be delivered at least 24 hours before the time of the holding of the meeting.
Any oral notice given personally or by telephone may be communicated either to
the director or to a person at the office of the director who the person giving
the notice has reason to believe will promptly communicate it to the director.
The notice need not specify the purpose or the place of the meeting, if the
meeting is to be held at the principal executive office of the Corporation.
Section 3.8 Quorum. At all meetings of the Board of Directors, a
------
majority of the authorized number of directors shall constitute a quorum for the
transaction of business and the act of a majority of the directors present at
any meeting at which there is a quorum shall be the act of the Board of
Directors, except as may be otherwise specifically provided by statute or by the
Certificate of Incorporation. If a quorum is not present at any meeting of the
Board of Directors, then the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum is present.
A meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of directors, if any action taken is
approved by at least a majority of the required quorum for that meeting.
Section 3.9 Waiver of Notice. Whenever notice is required to be given
----------------
under any provision of the Delaware General Corporation Law or of the
Certificate of Incorporation or these Bylaws, a written waiver thereof, signed
by the person entitled to notice, whether before or after the time stated
therein, shall be deemed equivalent to notice. Attendance of a person at a
meeting shall constitute a waiver of notice of such meeting, except when the
person attends a meeting for the express purpose of objecting, at the beginning
of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the directors, or members of a
committee of directors, need be specified in any written waiver of notice unless
so required by the Certificate of Incorporation or these Bylaws.
Section 3.10 Board Action by Written Consent without a Meeting. Unless
-------------------------------------------------
otherwise restricted by the Certificate of Incorporation or these Bylaws, any
action required or permitted to be taken at any meeting of the Board of
Directors, or of any committee thereof, may be taken without a meeting if all
members of the Board of Directors or committee, as the case may be, consent
thereto in writing and the writing or writings are filed with the minutes of
proceedings of the Board of Directors or committee. Written consents
representing actions taken by the board or committee may be executed by telex,
telecopy or other facsimile transmission, and such facsimile shall be valid and
binding to the same extent as if it were an original.
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<PAGE>
Section 3.11 Fees and Compensation of Directors. Unless otherwise
----------------------------------
restricted by the Certificate of Incorporation or these Bylaws, the Board of
Directors shall have the authority to fix the compensation of directors and no
such compensation shall preclude any director from serving the Corporation in
any other capacity and receiving compensation therefor.
Section 3.12 Approval of Loans to Officers. The Corporation may lend
-----------------------------
money to, or guarantee any obligation of, or otherwise assist any officer or
other employee of the Corporation or of its subsidiary, including any officer or
employee who is a director of the Corporation or its subsidiary, whenever, in
the judgment of the directors, such loan, guaranty or assistance may reasonably
be expected to benefit the Corporation. The loan, guaranty or other assistance
may be with or without interest and may be unsecured, or secured in such manner
as the Board of Directors shall approve, including, without limitation, a pledge
of shares of stock of the Corporation. Nothing contained in this Section 3.12
shall be deemed to deny, limit or restrict the powers of guaranty or warranty of
the Corporation at common law or under any statute.
Section 3.13 Removal of Directors. Subject to provisions of the Delaware
--------------------
General Corporation Law and the rights of the holders of any shares of capital
stock of the Corporation, any director may be removed from office only for cause
and only by the affirmative vote of the holders of a majority of the combined
voting power of the then outstanding shares of voting capital stock of the
Corporation, voting together as a single class. For purposes of this Section
3.13, "cause" shall mean the willful and continuous failure of a director
substantially to perform such director's duties to the Corporation (other than
any such failure resulting from incapacity due to physical or mental illness) or
the willful engaging by a director in gross misconduct materially and
demonstrably injurious to the Corporation.
Section 3.14 Chairman of the Board of Directors. The Corporation may also
----------------------------------
have, at the discretion of the Board of Directors, a chairman of the Board of
Directors who shall not be considered an officer of the Corporation.
ARTICLE IV
COMMITTEES
Section 4.1 Committees of Directors. The Board of Directors may, by
-----------------------
resolution passed by a majority of the whole Board of Directors, designate one
or more committees, with each committee to consist of one or more of the
directors of the Corporation. 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. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not such
member or members constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the Board of Directors or in the Bylaws of the Corporation, shall
have and may exercise all the powers and authority of the Board of Directors in
the management of the business and affairs of the
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Corporation, and may authorize the seal of the Corporation to be affixed to all
papers that may require it; but no such committee shall have the power or
authority to (a) amend the Certificate of Incorporation (except that committee
may, to the extent authorized in the resolution or resolutions providing for the
issuance of shares of stock adopted by the Board of Directors as provided in
Section 151(a) of the Delaware General Corporation Law, 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), (b) adopt an
agreement of merger or consolidation under Sections 251, 252, 254, 255, 256,
257, 258, 263 or 264 of the Delaware General Corporation Law, (c) recommend to
the stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, (d) recommend to the stockholders a
dissolution of the Corporation or a revocation of a dissolution, or (e) amend
the Bylaws of the Corporation; and, unless the Board resolution establishing the
committee, the Bylaws or the Certificate of Incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend, to
authorize the issuance of stock, or to adopt a certificate of ownership and
merger pursuant to Section 253 of the Delaware General Corporation Law.
Section 4.2 Committee Minutes. Each committee shall keep regular minutes
-----------------
of its meetings and report the same to the Board of Directors when required.
Section 4.3 Meetings and Action of Committees. Meetings and actions of
---------------------------------
committees shall be governed by, and held and taken in accordance with, the
provisions of Section 3.5 (place of meetings and meetings by telephone), Section
3.6 (regular meetings), Section 3.7 (special meetings and notice), Section 3.8
(quorum), Section 3.9 (waiver of notice), and Section 3.10 (action without a
meeting) of these Bylaws, with such changes in the context of such provisions as
are necessary to substitute the committee and its members for the Board of
Directors and its members; provided, however, that the time of regular meetings
of committees may be determined either by resolution of the Board of Directors
or by resolution of the committee, that special meetings of committees may also
be called by resolution of the Board of Directors and that notice of special
meetings of committees shall also be given to all alternate members, who shall
have the right to attend all meetings of the committee. The Board of Directors
may adopt rules for the governance of any committee not inconsistent with the
provisions of these Bylaws.
ARTICLE V
OFFICERS
Section 5.1 Officers. The officers of the Corporation shall be a chief
--------
executive officer, a president, a secretary and a chief financial officer. The
Corporation may also have, at the discretion of the Board of Directors, one or
more vice presidents, a treasurer, one or more assistant secretaries, one or
more assistant treasurers and any such other officers as may be appointed in
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accordance with the provisions of Section 5.3 of these Bylaws. Any number of
offices may be held by the same person.
Section 5.2 Appointment of Officers. The officers of the Corporation,
-----------------------
except such officers as may be appointed in accordance with the provisions of
Sections 5.3 or 5.5 of these Bylaws, shall be elected by the Board of Directors,
subject to the rights, if any, of an officer under any contract of employment.
Section 5.3 Subordinate Officers. The Board of Directors may appoint, or
--------------------
empower the chief executive officer or the president to appoint, such other
officers and agents as the business of the Corporation may require, each of whom
shall hold office for such period, have such authority, and perform such duties
as are provided in these Bylaws or as the Board of Directors may from time to
time determine.
Section 5.4 Removal and Resignation of Officers. Subject to the rights,
-----------------------------------
if any, of an officer under any contract of employment, any officer may be
removed, either with or without cause, by an affirmative vote of the majority of
the Board of Directors at any regular or special meeting of the Board of
Directors or, except in the case of an officer chosen by the Board of Directors,
by any officer upon whom such power of removal may be conferred by the Board of
Directors.
Any officer may resign at any time by giving written notice to the
attention of the secretary of the Corporation. Any resignation shall take
effect at the date of the receipt of that notice or at any later time specified
in that notice; and, unless otherwise specified in that notice, the acceptance
of the resignation shall not be necessary to make it effective. Any resignation
is without prejudice to the rights, if any, of the Corporation under any
contract to which the officer is a party.
Section 5.5 Vacancies in Offices. Any vacancy occurring in any office of
--------------------
the Corporation shall be filled by the Board of Directors.
Section 5.6 Chief Executive Officer. Subject to such supervisory powers,
-----------------------
if any, as may be given by the Board of Directors to the chairman of the board,
if any, the chief executive officer of the Corporation shall, subject to the
control of the Board of Directors, have general supervision, direction and
control of the business and the officers of the Corporation. He or she shall
preside at all meetings of the stockholders and, in the absence or nonexistence
of a chairman of the board, at all meetings of the Board of Directors and shall
have the general powers and duties of management usually vested in the office of
chief executive officer of a corporation and shall have such other powers and
duties as may be prescribed by the Board of Directors or these Bylaws.
Section 5.7 President. Subject to such supervisory powers, if any, as may
---------
be given by the Board of Directors to the chairman of the board (if any) or the
chief executive officer, the president shall have general supervision, direction
and control of the business and other officers of the Corporation. He or she
shall have the general powers and duties of management usually vested in the
office of the chief operating officer of a corporation and such other powers and
duties as may be prescribed by the Board of Directors or these Bylaws.
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Section 5.8 Vice Presidents. In the absence or disability of the chief
---------------
executive officer and president, the vice presidents, if any, in order of their
rank as fixed by the Board of Directors or, if not ranked, a vice president
designated by the Board of Directors, shall perform all the duties of the
president and when so acting shall have all the powers of, and be subject to all
the restrictions upon, the president. The vice presidents shall have such other
powers and perform such other duties as from time to time may be prescribed for
them respectively by the Board of Directors, these Bylaws, the chief executive
officer, the president or the chairman of the board.
Section 5.9 Secretary. The secretary shall keep or cause to be kept, at
---------
the principal executive office of the Corporation or such other place as the
Board of Directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors, and stockholders. The minutes shall show the
time and place of each meeting, the names of those present at directors'
meetings or committee meetings, the number of shares present or represented at
stockholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive
office of the Corporation or at the office of the Corporation's transfer agent
or registrar, as determined by resolution of the Board of Directors, a share
register, or a duplicate share register, showing the names of all stockholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates evidencing such shares, and the number and date of
cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of
the stockholders and of the Board of Directors required to be given by law or by
these Bylaws. He or she shall keep the seal of the Corporation, if one be
adopted, in safe custody and shall have such other powers and perform such other
duties as may be prescribed by the Board of Directors or by these Bylaws.
Section 5.10 Chief Financial Officer. The chief financial officer shall
-----------------------
keep and maintain, or cause to be kept and maintained, adequate and correct
books and records of accounts of the properties and business transactions of the
Corporation, including accounts of its assets, liabilities, receipts,
disbursements, gains, losses, capital, retained earnings and shares. The books
of account shall at all reasonable times be open to inspection by any director.
The chief financial officer shall deposit all moneys and other valuables in
the name and to the credit of the Corporation with such depositories as may be
designated by the Board of Directors. He or she shall disburse the funds of the
Corporation as may be ordered by the Board of Directors, shall render to the
president, the chief executive officer, or the directors, upon request, an
account of all his or her transactions as chief financial officer and of the
financial condition of the Corporation, and shall have other powers and perform
such other duties as may be prescribed by the Board of Directors or the Bylaws.
Section 5.11 Representation of Shares of Other Corporations. The
----------------------------------------------
chairman of the board, the chief executive officer, the president, any vice
president, the chief financial officer, the secretary or assistant secretary of
this Corporation, or any other person authorized by the Board of Directors
11
<PAGE>
or the chief executive officer or the president or a vice president, is
authorized to vote, represent, and exercise on behalf of this Corporation all
rights incident to any and all shares of any other corporation or corporations
standing in the name of this Corporation. The authority granted herein may be
exercised either by such person directly or by any other person authorized to do
so by proxy or power of attorney duly executed by the person having such
authority.
Section 5.12 Authority and Duties of Officers. In addition to the
--------------------------------
foregoing authority and duties, all officers of the Corporation shall
respectively have such authority and perform such duties in the management of
the business of the Corporation as may be designated from time to time by the
Board of Directors or the stockholders.
ARTICLE VI
RECORDS AND REPORTS
Section 6.1 Maintenance and Inspection of Records. The Corporation shall,
-------------------------------------
either at its principal executive offices or at such place or places as
designated by the Board of Directors, keep a record of its stockholders listing
their names and addresses and the number and class of shares held by each
stockholder, a copy of these Bylaws as amended to date, accounting books, and
other records.
Any stockholder of record, in person or by attorney or other agent, shall,
upon written demand under oath stating the purpose thereof, have the right
during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
Corporation at its registered office in Delaware or at its principal place of
business.
Section 6.2 Inspection by Directors. Any director shall have the right
-----------------------
to examine the Corporation's stock ledger, a list of its stockholders, and its
other books and records for a purpose reasonably related to his or her position
as a director. The Court of Chancery is hereby vested with the exclusive
jurisdiction to determine whether a director is entitled to the inspection
sought. The Court may summarily order the Corporation to permit the director to
inspect any and all books and records, the stock ledger, and the stock list and
to make copies or extracts therefrom. The Court may, in its discretion,
prescribe any limitations or conditions with reference to the inspection, or
award such other and further relief as the Court may deem just and proper.
Section 6.3 Annual Statement to Stockholders. The Board of Directors
--------------------------------
shall present at each annual meeting, and at any special meeting of the
stockholders when called for by vote of the stockholders, a full and clear
statement of the business and condition of the Corporation.
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ARTICLE VII
GENERAL MATTERS
Section 7.1 Checks. From time to time, the Board of Directors shall
------
determine by resolution which person or persons may sign or endorse all checks,
drafts, other orders for payment of money, notes or other evidences of
indebtedness that are issued in the name of or payable to the Corporation, and
only the persons so authorized shall sign or endorse those instruments.
Section 7.2 Execution of Corporate Contracts and Instruments. The Board
------------------------------------------------
of Directors, except as otherwise provided in these Bylaws, may authorize any
officer or officers, or agent or agents, to enter into any contract or execute
any instrument in the name of and on behalf of the Corporation; such authority
may be general or confined to specific instances. Unless so authorized or
ratified by the Board of Directors or within the agency power of an officer, no
officer, agent or employee shall have any power or authority to bind the
Corporation by any contract or engagement or to pledge its credit or to render
it liable for any purpose or for any amount.
Section 7.3 Stock Certificates; Partly Paid Shares. The shares of the
--------------------------------------
Corporation shall be represented by certificates, provided that the Board of
Directors of the Corporation may provide by resolution or resolutions that some
or all of any or all classes or series of its stock shall be uncertificated
shares. Any such resolution shall not apply to shares represented by a
certificate until such certificate is surrendered to the Corporation.
Notwithstanding the adoption of such a resolution by the Board of Directors,
every holder of stock represented by certificates and upon request every holder
of uncertificated shares shall be entitled to have a certificate signed by, or
in the name of the Corporation by the chairman or vice chairman of the Board of
Directors, or the chief executive officer or the president or vice president,
and by the chief financial officer or an assistant treasurer, or the secretary
or an assistant secretary of the Corporation representing the number of shares
registered in certificate form. Any or all of the signatures on the certificate
may be a facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate has
ceased to be such officer, transfer agent or registrar before such certificate
is issued, it may be issued by the Corporation with the same effect as if he or
she were such officer, transfer agent or registrar at the date of issue. The
Corporation may issue the whole or any part of its shares as partly paid and
subject to call for the remainder of the consideration to be paid therefor. Upon
the face or back of each stock certificate issued to represent any such partly
paid shares, upon the books and records of the Corporation in the case of
uncertificated partly paid shares, the total amount of the consideration to be
paid therefor and the amount paid thereon shall be stated. Upon the declaration
of any dividend on fully paid shares, the Corporation shall declare a dividend
upon partly paid shares of the same class, but only upon the basis of the
percentage of the consideration actually paid thereon.
Section 7.4 Special Designation on Certificates. If the Corporation is
-----------------------------------
authorized to issue more than one class of stock or more than one series of any
class, then the powers, the designations, the preferences, and the relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights
13
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shall be set forth in full or summarized on the face or back of the certificate
that the Corporation shall issue to represent such class or series of stock;
provided, however, that, except as otherwise provided in Section 202 of the
Delaware General Corporation Law, in lieu of the foregoing requirements there
may be set forth on the face or back of the certificate that the Corporation
shall issue to represent such class or series of stock a statement that the
Corporation will furnish without charge to each stockholder who so requests the
powers, the designations, the preferences, and the relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights.
Section 7.5 Lost Certificates. Except as provided in this Section 7.5,
-----------------
no new certificates for shares shall be issued to replace a previously issued
certificate unless the latter is surrendered to the Corporation and canceled at
the same time. The Corporation may issue a new certificate of stock or
uncertificated shares in the place of any certificate previously issued by it,
alleged to have been lost, stolen or destroyed, and the Corporation may require
the owner of the lost, stolen or destroyed certificate, or the owner's legal
representative, to give the Corporation a bond sufficient to indemnify it
against any claim that may be made against it on account of the alleged loss,
theft or destruction of any such certificate or the issuance of such new
certificate or uncertificated shares.
Section 7.6 Construction; Definitions. Unless the context requires
-------------------------
otherwise, the general provisions, rules of construction, and definitions in the
Delaware General Corporation Law shall govern the construction of these Bylaws.
Without limiting the generality of this provision, the singular number includes
the plural, the plural number includes the singular, and the term "person"
includes both a corporation and a natural person.
Section 7.7 Dividends. The directors of the Corporation, subject to any
---------
restrictions contained in (a) the Delaware General Corporation Law or (b) the
Certificate of Incorporation, may declare and pay dividends upon the shares of
its capital stock. Dividends may be paid in cash, in property, or in shares of
the Corporation's capital stock.
The directors of the Corporation may set apart out of any of the funds of
the Corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not
be limited to equalizing dividends, repairing or maintaining any property of the
Corporation, and meeting contingencies.
Section 7.8 Fiscal Year. The fiscal year of the Corporation shall be
-----------
fixed by resolution of the Board of Directors and may be changed by the Board of
Directors.
Section 7.9 Seal. The Corporation may adopt a corporate seal, which may
----
be altered at pleasure, and may use the same by causing it or a facsimile
thereof, to be impressed or affixed or in any other manner reproduced.
Section 7.10 Transfer of Stock. Upon surrender to the Corporation or the
-----------------
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the Corporation to issue a new
14
<PAGE>
certificate to the person entitled thereto, cancel the old certificate, and
record the transaction in its books.
Section 7.11 Stock Transfer Agreements. 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 Delaware General Corporation
Law.
Section 7.12 Registered Stockholders. The Corporation shall be entitled
-----------------------
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends and to vote as such owner, shall be
entitled to hold liable for calls and assessments the person registered on its
books as the owner of shares, and shall not be bound to recognize any equitable
or other claim to or interest in such share or shares on the part of another
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of Delaware.
ARTICLE VIII
AMENDMENTS
Section 8.1 By the Board of Directors. The Bylaws may be altered, amended
-------------------------
or repealed or now bylaws may be adopted by the affirmative vote of a majority
of the directors present at any regular or special meeting of the Board of
Directors at which a quorum is present.
Section 8.2 By the Stockholders. These Bylaws may be altered, amended or
-------------------
repealed or new bylaws may be adopted by the affirmative vote of the holders of
a majority of the shares of the capital stock of the Corporation issued and
outstanding and entitled to vote at any regular or special meeting of
stockholders, provided notice of such alteration amendment, repeal or adoption
of new bylaws shall have been stated in the notice of such regular or special
meeting.
15
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Exhibit 5.1
[Thompson & Knight Letterhead]
March 10, 2000
Luminex Corporation
12212 Technology Boulevard
Austin, Texas 78727
Ladies and Gentlemen:
We have acted as counsel for Luminex Corporation, a Delaware corporation
(the "Company"), in connection with the offering and sale by the Company (the
"Offering") of 5,175,000 shares (the "Shares") of Common Stock, par value $0.001
per share ("Common Stock"), of the Company, consisting of (i) 4,500,000 shares
(the "Firm Shares") of Common Stock to be sold to the underwriters (the
"Underwriters") that will be named in the Underwriting Agreement to be entered
into between the Company and Warburg Dillon Read LLC, Lehman Brothers and Dain
Rauscher Wessels, as representatives of the Underwriters (the "Underwriting
Agreement"), and (ii) 675,000 additional shares (the "Over-Allotment Shares") of
Common Stock that will be purchasable by the Underwriters pursuant to an over-
allotment option contained in the Underwriting Agreement. The Firm Shares and,
if the over-allotment option is exercised by the Underwriters, the Over-
Allotment Shares are to be offered to the public by the Underwriters pursuant to
the Underwriting Agreement.
We have participated in and are familiar with the corporate proceedings of
the Company relating to the preparation of the Company's Registration Statement
on Form S-1 (the "Registration Statement") filed with the Securities and
Exchange Commission on this date with respect to the registration of the Shares
under the Securities Act of 1933, as amended (the "1933 Act").
In connection with the foregoing, we have examined the originals or copies
certified or otherwise authenticated to our satisfaction of the Registration
Statement, and such corporate records of the Company, certificates of public
officials, and other agreements, instruments and documents as we have deemed
necessary to require as a basis for the opinion hereinafter expressed.
Based upon the foregoing and in reliance thereon, and subject to the
assumptions and qualifications hereinafter specified, it is our opinion that the
Shares have been duly authorized by all necessary corporate action on the part
of the Company, and, when sold and paid for in accordance with the terms of the
Underwriting Agreement, will be validly issued, fully paid and nonassessable.
In rendering the opinion expressed herein, we have assumed that no action
heretofore taken by the Board of Directors of the Company in connection with the
matters described or referred to herein will be modified, rescinded or withdrawn
after the date hereof. We have also assumed that the Underwriting Agreement
will be executed and delivered by one or more officers of the Company duly
authorized to do so by the Board of Directors of the Company.
<PAGE>
Luminex Corporation
March 10, 2000
Page 2
We hereby consent to the reference to this firm in the Prospectus included
in the Registration Statement under the caption "Legal Matters" as the attorneys
who will pass upon the legal validity of the Shares, and to the filing of this
opinion as Exhibit 5.1 to the Registration Statement. The foregoing, however,
shall not constitute an admission to our being experts as provided for in
Sections 7 and 11 of the 1933 Act.
Respectfully submitted,
/s/ Thompson & Knight L.L.P.
THOMPSON & KNIGHT L.L.P.
<PAGE>
Exhibit 10.4
LUMINEX CORPORATION
2000 LONG-TERM INCENTIVE PLAN
ARTICLE 1. ESTABLISHMENT AND PURPOSE
1.1 Establishment. Luminex Corporation, a Delaware corporation, hereby
establishes the Luminex Corporation 2000 Long-Term Incentive Plan, as set forth
in this document.
1.2 Purpose. The purposes of the Plan are to attract able persons to
enter the employ of the Company, to encourage Employees to remain in the employ
of the Company and to provide motivation to Employees to put forth maximum
efforts toward the continued growth, profitability and success of the Company,
by providing incentives to such persons through the ownership and performance of
the Common Stock of Luminex. A further purpose of the Plan is to provide a
means through which the Company may attract able persons to become directors,
consultants and independent contractors of the Company and to provide such
individuals with incentive and reward opportunities. Toward these objectives,
Awards may be granted under the Plan to Employees, Consultants and Outside
Directors on the terms and subject to the conditions set forth in the Plan.
1.3 Effectiveness. The Plan shall become effective as of February 4,
2000, the date of its adoption by the Board, provided it is duly approved by the
holders of at least a majority of the shares of Common Stock present or
represented and entitled to vote at a meeting of the stockholders of Luminex
duly held in accordance with applicable law within twelve months after the date
of adoption of the Plan by the Board. If the Plan is not so approved, the Plan
shall terminate and any Award granted hereunder shall be null and void.
ARTICLE 2. DEFINITIONS
2.1 Affiliate. "Affiliate" means a "parent corporation" or a "subsidiary
corporation" of Luminex, as those terms are defined in Section 424(e) and (f) of
the Code.
2.2 Award. "Award" means any Option, SAR, Restricted Stock, Dividend
Equivalent or Other Incentive Award granted under the Plan, whether singly, in
combination or in tandem, to a Participant.
2.3 Award Agreement. "Award Agreement" means a written agreement between
Luminex and a Participant that sets forth the terms, conditions, restrictions
and/or limitations applicable to an Award.
2.4 Board. "Board" means the Board of Directors of Luminex.
2.5 Code. "Code" means the Internal Revenue Code of 1986, as amended
from time to time, including regulations thereunder and successor provisions and
regulations thereto.
<PAGE>
2.6 Committee. "Committee" means the Compensation Committee of the
Board, or such other Committee of the Board as may be designated by the Board to
administer the Plan; provided that the Committee shall consist of two or more
directors of Luminex, all of whom are both a "Non-Employee Director" within the
meaning of Rule 16b-3 under the Exchange Act and an "outside director" within
the meaning of the definition of such term as contained in Treasury Regulation
Section 1.162-27(e)(3) interpreting Section 162(m) of the Code, or any successor
definitions adopted. The members of the Committee shall be appointed from time
to time by, and shall serve at the discretion of, the Board.
2.7 Common Stock. "Common Stock" means the Common Stock, par value $.001
per share, of Luminex, or any stock or other securities of Luminex hereafter
issued or issuable in substitution or exchange for the Common Stock.
2.8 Company. "Company" means Luminex and its Affiliates.
2.9 Consultant. "Consultant" means any individual who performs services
for and is treated by Luminex or an Affiliate as an independent contractor for
employment tax purposes, but shall not include an Outside Director.
2.10 Dividend Equivalents. "Dividend Equivalents" means an Award granted
to a Participant pursuant to Article 10.
2.11 Effective Date. "Effective Date" means the date an Award is
determined to be effective by the Board upon the grant of such Award.
2.12 Employee. "Employee" means any person treated as an employee by
Luminex or an Affiliate. "Employee" shall not include a Consultant or an
Outside Director.
2.13 Exchange Act. "Exchange Act" means the Securities Exchange Act of
1934, as amended.
2.14 Fair Market Value. "Fair Market Value" means the closing sale price
per share on the date in question, or if no reported sale on such date, on the
last preceding date on which any reported sale occurred of the Common Stock on
the Nasdaq National Market or any national stock exchange or, if the Common
Stock is not traded publicly, the fair market value per share as determined in
good faith by the Board.
2.15 Incentive Stock Option. "Incentive Stock Option" means an Option
that is intended to meet the requirements of Section 422(b) of the Code.
2.16 Luminex. "Luminex" means Luminex Corporation, a Delaware
corporation, and any successor thereto.
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2.17 Nonqualified Stock Option. "Nonqualified Stock Option" means an
Option that is not intended to meet the requirements of Section 422(b) of the
Code.
2.18 Option. "Option" means an option to purchase shares of Common Stock
granted to a Participant pursuant to Article 7, and includes both Incentive
Stock Options and Nonqualified Stock Options.
2.19 Other Incentive Award. "Other Incentive Award" means an Award
granted to a Participant pursuant to Article 11.
2.20 Outside Director. "Outside Director" means a member of the Board who
is not also an Employee.
2.21 Participant. "Participant" means any Employee, Consultant or Outside
Director to whom an Award has been granted under the Plan.
2.22 Plan. "Plan" means this Luminex Corporation 2000 Long-Term Incentive
Plan.
2.23 Restricted Stock. "Restricted Stock" means an Award of shares of
Common Stock granted to a Participant pursuant to, and with such restrictions as
are imposed under, Article 9. Restricted Stock shall constitute issued and
outstanding shares of Common Stock for all corporate purposes.
2.24 SARs. "SARs" means an Award of stock appreciation rights granted to
a Participant pursuant to Article 8.
ARTICLE 3. PLAN ADMINISTRATION
3.1 Plan Administration. The Plan shall be administered by the Board.
The Board may delegate responsibility for administration of the Plan to a
Committee appointed by and serving at the pleasure of the Board, under such
terms and conditions as the Board shall determine. Any reference to the Board
in the Plan (other than references to the Board in Article 13) shall be
construed as a reference to the Committee if the Board shall have delegated
responsibility for administration of the Plan to a Committee.
3.2 Authority of Administrator. The Board shall have total and exclusive
responsibility to control, operate, manage and administer the Plan in accordance
with its terms. The Board shall have all the authority that may be necessary or
helpful to enable it to discharge its responsibilities with respect to the Plan.
Without limiting the generality of the preceding sentence, the Board shall have
the exclusive right to: (i) interpret the Plan and the Award Agreements executed
hereunder; (ii) determine eligibility for participation in the Plan; (iii)
decide all questions concerning eligibility for, and the amount of, Awards
payable under the
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<PAGE>
Plan; (iv) construe any ambiguous provision of the Plan or any Award Agreement;
(v) prescribe the form of the Award Agreements embodying Awards granted under
the Plan; (vi) correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award Agreement; (vii) issue administrative
guidelines as an aid to administer the Plan and make changes in such guidelines
as it from time to time deems proper; (viii) make regulations for carrying out
the Plan and make changes in such regulations as it from time to time deems
proper; (ix) determine whether Awards should be granted singly, in combination
or in tandem; (x) to the extent permitted under the Plan, grant waivers of Plan
terms, conditions, restrictions and limitations; (xi) accelerate the exercise,
vesting or payment of an Award when such action or actions would be in the best
interests of the Company; (xii) grant Awards in replacement of Awards previously
granted under the Plan or any other employee benefit plan of the Company; and
(xiii) take any and all other actions it deems necessary or advisable for the
proper operation or administration of the Plan.
3.3 Discretionary Authority. The Board shall have full discretionary
authority in all matters related to the discharge of its responsibilities and
the exercise of its authority under the Plan, including, without limitation, its
construction of the terms of the Plan and its determination of eligibility for
participation and Awards under the Plan. The decisions of the Board and its
actions with respect to the Plan shall be final, conclusive and binding on all
persons having or claiming to have any right or interest in or under the Plan,
including Participants and their respective estates, beneficiaries and legal
representatives.
3.4 Liability; Indemnification. No member of the Board nor any person to
whom authority has been delegated, shall be personally liable for any action,
interpretation or determination made in good faith with respect to the Plan or
Awards granted hereunder, and each member of the Board (or delegatee of the
Board) shall be fully indemnified and protected by Luminex with respect to any
liability he or she may incur with respect to any such action, interpretation or
determination, to the extent permitted by applicable law.
3.5 Public Company. From and after such time as the Luminex registers a
class of equity securities under Section 12 of the Exchange Act, it is intended
that this Plan be administered in accordance with the disinterested
administration requirements of Rule 16b-3 promulgated by the Securities and
Exchange Commission, or any successor rule thereto. With respect to persons
subject to Section 16 of the Exchange Act, if any, transactions under the Plan
are intended to comply with the applicable conditions of Rule 16b-3, or any
successor rule thereto. Notwithstanding the above, it shall be the
responsibility of such persons, not Luminex, the Board or the Committee, to
comply with the requirements of Section 16 of the Exchange Act.
ARTICLE 4. ELIGIBILITY
All Employees, Consultants and Outside Directors are eligible to
participate in the Plan. The Board shall recommend, from time to time,
Participants from those Employees, Consultants and Outside Directors who, in the
opinion of the Board, can further the Plan purposes. Once a
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<PAGE>
Participant is recommended for an Award by the Board, the Board shall determine
the type and size of Award to be granted to the Participant and shall establish
in the related Award Agreement the terms, conditions, restrictions and/or
limitations applicable to the Award, in addition to those set forth in the Plan
and the administrative rules and regulations, if any, established by the Board.
ARTICLE 5. FORM OF AWARDS
Awards may, at the Board's sole discretion, be granted under the Plan in
the form of Options pursuant to Article 7, SARs pursuant to Article 8,
Restricted Stock pursuant to Article 9, Dividend Equivalents pursuant to Article
10, Other Incentive Awards pursuant to Article 11 or a combination thereof. All
Awards shall be subject to the terms, conditions, restrictions and limitations
of the Plan. The Board may, in its sole judgment, subject any Award to such
other terms, conditions, restrictions and/or limitations (including, but not
limited to, the time and conditions of exercise, vesting or payment of an Award
and restrictions on transferability of any shares of Common Stock issued or
delivered pursuant to an Award), provided they are not inconsistent with the
terms of the Plan. Awards under a particular Article of the Plan need not be
uniform, and Awards under two or more Articles of the Plan may be combined into
a single Award Agreement. Any combination of Awards may be granted at one time
and on more than one occasion to the same Participant.
ARTICLE 6. SHARES SUBJECT TO THE PLAN
6.1 Available Shares. The maximum number of shares of Common Stock that
shall be available for grant of Awards under the Plan shall not exceed a total
of 1,750,000, subject to adjustment as provided in Sections 6.2 and 6.3. Shares
of Common Stock issued pursuant to the Plan may be shares of original issuance
or treasury shares or a combination of the foregoing, as the Board, in its
discretion, shall from time to time determine.
6.2 Adjustments for Recapitalizations and Reorganizations.
(a) The shares with respect to which Awards may be granted under the
Plan are shares of Common Stock as presently constituted, but if, and
whenever, prior to the expiration or satisfaction of an Award theretofore
granted, Luminex shall effect a subdivision or consolidation of shares of
Common Stock or the payment of a stock dividend on Common Stock without
receipt of consideration by Luminex, the number of shares of Common Stock
with respect to which such Award may thereafter be exercised or satisfied,
as applicable, (i) in the event of an increase in the number of outstanding
shares shall be proportionately increased, and the exercise price per share
shall be proportionately reduced, and (ii) in the event of a reduction in
the number of outstanding shares shall be proportionately reduced, and the
exercise price per share shall be proportionately increased.
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(b) If Luminex recapitalizes or otherwise changes its capital
structure, thereafter upon any exercise or satisfaction, as applicable, of
an Award theretofore granted the Participant shall be entitled to (or
entitled to purchase, if applicable) under such Award, in lieu of the
number of shares of Common Stock then covered by such Award, the number and
class of shares of stock or other securities to which the Participant would
have been entitled pursuant to the terms of the recapitalization if,
immediately prior to such recapitalization, the Participant had been the
holder of record of the number of shares of Common Stock then covered by
such Award.
(c) In the event of changes in the outstanding Common Stock by
reason of a Corporate Transaction (as hereinafter defined),
recapitalizations, reorganizations, mergers, consolidations, combinations,
separations (including a spin-off or other distribution of stock or
property), exchanges, or other relevant changes in capitalization occurring
after the date of grant of any Award and not otherwise provided for by this
Section 6.2, any outstanding Awards and any Award Agreements evidencing
such Awards shall be subject to adjustment by the Board at its discretion
as to the number, price and kind of shares or other consideration subject
to, and other terms of, such Awards to reflect such changes in the
outstanding Common Stock.
(d) In the event of any changes in the outstanding Common Stock
provided for in this Section 6.2, the aggregate number of shares available
for grant of Awards under the Plan may be equitably adjusted by the Board,
whose determination shall be conclusive. Any adjustment provided for in
this Section 6.2 shall be subject to any required stockholder action.
6.3 Adjustments for Awards. The Board shall have full discretion to
determine the manner in which shares of Common Stock available for grant of
Awards under the Plan are counted. Without limiting the discretion of the Board
under this Section 6.3, unless otherwise determined by the Board, the following
rules shall apply for the purpose of determining the number of shares of Common
Stock available for grant of Awards under the Plan:
(a) Options and Restricted Stock. The grant of Options and
Restricted Stock shall reduce the number of shares available for grant of
Awards under the Plan by the number of shares subject to such Award.
(b) SARs. The grant of SARs shall not affect the number of shares
available for grant of Awards under the Plan.
(c) Dividend Equivalents. The grant of Dividend Equivalents shall
not affect the number of shares available for grant of Awards under the
Plan, but such number of shares shall be reduced by any shares issued in
payment or settlement of Dividend Equivalents.
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(d) Other Incentive Awards. The grant of an Other Incentive Award in
the form of Common Stock or that may be paid or settled only in Common
Stock shall reduce the number of shares available for grant of Awards under
the Plan by the number of shares subject to such Award. The grant of an
Other Incentive Award that may be paid or settled only for cash shall not
affect the number of shares available for grant of Awards under the Plan.
The grant of an Other Incentive Award that may be paid or settled in either
Common Stock or cash shall reduce the number of shares available for grant
of Awards under the Plan by the number of shares subject to such Award.
(e) Termination. If any Award referred to in paragraphs (a) and (d)
above (other than an Other Incentive Award that may be paid or settled only
for cash) is canceled or forfeited, or terminates, expires or lapses, for
any reason (other than the termination of a Related Option (as defined in
Section 8.1) upon exercise of its corresponding SARs), the shares then
subject to such Award shall again be available for grant of Awards under
the Plan.
(f) Payment of Exercise Price and Withholding Taxes. If previously
acquired shares of Common Stock are used to pay the exercise price of an
Award, or shares of Common Stock that would be acquired upon exercise of an
Award are withheld to pay the exercise price of such Award, the number of
shares available for grant of Awards under the Plan other than Incentive
Stock Options shall be increased by the number of shares delivered or
withheld as payment of such exercise price. If previously acquired shares
of Common Stock are used to pay withholding taxes payable upon exercise,
vesting or payment of an Award, or shares of Common Stock that would be
acquired upon exercise, vesting or payment of an Award are withheld to pay
withholding taxes payable upon exercise, vesting or payment of such Award,
the number of shares available for grant of Awards under the Plan other
than Incentive Stock Options shall be increased by the number of shares
delivered or withheld as payment of such withholding taxes.
ARTICLE 7. OPTIONS
7.1 General. Awards may be granted to Employees, Consultants and
Outside Directors in the form of Options. With respect to Employees, Options
granted under the Plan may be Incentive Stock Options or Nonqualified Stock
Options, or a combination of both; provided, however, that no Incentive Stock
Options shall be granted later than 10 years from the date of adoption of the
Plan by the Board. For Consultants and Outside Directors, these Options may only
be in the form of Nonqualified Stock Options.
7.2 Terms and Conditions of Options. An Option shall be exercisable in
whole or in such installments and at such times as may be determined by the
Board. The price at which a share of Common Stock may be purchased upon
exercise of a Nonqualified Stock Option shall be determined by the Board, but
such exercise price shall not be less than 50% of the Fair Market
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Value per share of Common Stock on the Effective Date of the Option's grant;
provided, however, that, with respect to Options granted to an Outside Director,
such exercise price shall not be less than the Fair Market Value per share of
Common Stock on the Effective Date of the Option's grant. Except as otherwise
provided in Section 7.3, the term of each Option shall be as specified by the
Board; provided, however, that unless otherwise designated by the Board, no
Options shall be exercisable later than 10 years from the Effective Date of the
Option's grant.
7.3 Restrictions Relating to Incentive Stock Options. Options granted in
the form of Incentive Stock Options shall, in addition to being subject to the
terms and conditions of Section 7.2, comply with Section 422(b) of the Code.
Accordingly, to the extent that the aggregate Fair Market Value (determined at
the time the respective Incentive Stock Option is granted) of Common Stock with
respect to which Incentive Stock Options are exercisable for the first time by
an individual during any calendar year under all incentive stock option plans of
Luminex and its Affiliates exceeds $100,000, such excess Incentive Stock Options
shall be treated as options which do not constitute Incentive Stock Options. The
price at which a share of Common Stock may be purchased upon exercise of an
Incentive Stock Option shall be determined by the Board, but such exercise price
shall not be less than 100% of the Fair Market Value of a share of Common Stock
on the Effective Date of the Option's grant. No Incentive Stock Option shall be
granted to an Employee under the Plan if, at the time such Option is granted,
such Employee owns stock possessing more than 10% of the total combined voting
power of all classes of stock of Luminex or an Affiliate, within the meaning of
Section 422(b)(6) of the Code, unless (i) on the Effective Date of grant of such
Option, the exercise price of such Option is at least 110% of the Fair Market
Value of the Common Stock subject to the Option and (ii) such Option by its
terms is not exercisable after the expiration of five years from the Effective
Date of the Option's grant.
7.4 Additional Terms and Conditions. The Board may subject any Award of
an Option to such other terms, conditions, restrictions and/or limitations as it
determines are necessary or appropriate, provided they are not inconsistent with
the Plan.
7.5 Exercise of Options. Subject to the terms and conditions of the
Plan, Options shall be exercised by the delivery of a written notice of exercise
to Luminex, setting forth the number of shares of Common Stock with respect to
which the Option is to be exercised, accompanied by full payment for such
shares.
The exercise price of an Option shall become immediately due upon exercise
of the Option and shall, subject to the provisions of the documents evidencing
the Option, be payable in cash or check made payable to Luminex. Should the
Common Stock be registered under Section 12 of the Exchange Act at the time the
Option is exercised, then the exercise price may also be paid as follows:
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(i) in shares of Common Stock held for the requisite period of
time necessary to avoid a charge to Luminex's earnings for financial
reporting purposes and valued at Fair Market Value on the date of exercise
at the discretion of the Committee; or
(ii) to the extent the Option is exercised for shares of Common
Stock that are not subject to restrictions (other than restrictions imposed
under applicable federal and state securities laws), through a special sale
and remittance procedure pursuant to which the optionee shall concurrently
provide irrevocable instructions (A) to a brokerage firm designated by
Luminex to effect the immediate sale of the purchased shares and remit to
Luminex, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate exercise price payable for the
purchased shares plus all applicable federal, state and local income and
employment taxes required to be withheld by Luminex or an Affiliate by
reason of such exercise and (B) to Luminex to deliver the certificates for
the purchased shares directly to such brokerage firm in order to complete
the sale.
In addition, any grant of a Nonqualified Stock Option under the Plan may,
at the discretion of the Board, provide that payment of the exercise price of
the Nonqualified Stock Option may also be made in whole or in part in the form
of shares of Restricted Stock or other shares of Common Stock that are subject
to risk of forfeiture or restrictions on transfer. Unless otherwise determined
by the Board at the time of grant of such Nonqualified Stock Option, whenever
the exercise price of such Nonqualified Stock Option is paid in whole or in part
by means of the form of consideration specified in the immediately preceding
sentence, the shares of Common Stock received by the Participant upon the
exercise of such Nonqualified Stock Option shall be subject to the same risk of
forfeiture and restrictions on transfer as those that applied to the
consideration surrendered by the Participant. However, the risk of forfeiture
and restrictions on transfer shall apply only to the same number of shares of
Common Stock received by the Participant upon exercise as applied to the
forfeitable or restricted Common Stock surrendered by the Participant in payment
of the exercise price.
As soon as reasonably practicable after receipt of written notification of
exercise of an Option and full payment of the exercise price and any required
withholding taxes, Luminex shall deliver to the Participant, in the
Participant's name, a stock certificate or certificates in an appropriate amount
based upon the number of shares of Common Stock purchased under the Option.
7.6 Termination of Service. Each Award Agreement embodying the Award of
an Option shall set forth the extent to which the Participant shall have the
right to exercise the Option following termination of the Participant's
employment or service with the Company. Such provisions shall be determined in
the sole discretion of the Board, need not be uniform among all Options granted
under the Plan and may reflect distinctions based on the reasons for termination
of employment or service. Subject to Section 6.2 and Article 12, in the event
that a Participant's Award Agreement embodying the Award of an Option does not
set forth such
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termination provisions, the following termination provisions shall apply with
respect to such Award.
(a) Death or Disability. If the employment or service of a
Participant shall terminate by reason of death or permanent and total
disability (within the meaning of Section 22(e)(3) of the Code),
outstanding Options held by the Participant may be exercised, to the extent
then vested, no more than one year from the date of such termination,
unless the Options, by their terms, expire earlier.
(b) Other Termination. If the employment or service of a Participant
shall terminate for any reason other than the reasons set forth in
paragraph (a) above, whether on a voluntary or involuntary basis,
outstanding Options held by the Participant may be exercised, to the extent
then vested, no more than 60 days from the date of such termination, unless
the Options, by their terms, expire earlier.
(c) Termination for Cause. Notwithstanding paragraphs (a) and (b)
above, if the employment or service of a Participant shall be terminated by
reason of such Participant's fraud, dishonesty or performance of other acts
detrimental to the Company, all outstanding Options held by the Participant
shall immediately be forfeited to the Company and no additional exercise
period shall be allowed, regardless of the vested status of the Options.
7.7 Maximum Option Grants. Any provision of the Plan (other than Section
7.8) notwithstanding, the maximum number of shares of Common Stock for which
Options and SARs may be granted under the Plan to any one Employee during a
calendar year is 175,000, subject to adjustment as provided in Sections 6.2 and
6.3.
7.8 Award of Options to Directors. Notwithstanding anything contained in
the Plan to the contrary, all Options granted to an Outside Director shall be
subject to the following limitations:
(a) each such Option shall have an exercise price of not less than
the Fair Market Value of the Common Stock as of the Effective Date of such
Option's grant;
(b) the initial grant of an Option to an Outside Directors shall not
exceed 5,000 shares of Common Stock (subject to adjustment as provided in
Sections 6.2 and 6.3); and
(c) following the initial grant of an Option to an Outside
Directors, the maximum number of shares of Common Stock for which Options
may be granted to such Outside Director shall not exceed 2,000 shares of
Common Stock (subject to adjustment as provided in Sections 6.2 and 6.3) in
any one calendar year.
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ARTICLE 8. SARs
8.1 General. The Board may from time to time grant SARs in conjunction
with all or any portion of any Option (the "Related Option") either (i) at the
time of the initial Option grant (not including any subsequent modification that
may be treated as a new grant of an Incentive Stock Option for purposes of
Section 424(h) of the Code) or (ii) with respect to Nonqualified Stock Options,
at any time after the initial Option grant while the Nonqualified Stock Option
is still outstanding. SARs shall not be granted other than in conjunction with
an Option granted hereunder. SARs shall not be granted to Outside Directors.
8.2 Terms and Conditions. SARs granted hereunder shall comply with the
following conditions and also with the terms of the Award Agreement governing
the Related Option:
(a) The SAR shall expire no later than the expiration of the Related
Option.
(b) Upon the exercise of an SAR, the Participant shall be entitled
to receive from Luminex or the appropriate Affiliate in cash an amount
equal to the excess of the aggregate Fair Market Value of the shares of
Common Stock with respect to which the SAR is then being exercised
(determined as of the date of such exercise) over the aggregate purchase
price of such shares as provided in the Related Option.
(c) SARs shall be exercisable (i) only at such time or times and
only to the extent that the Related Option shall be exercisable, (ii) only
when the Fair Market Value of the shares subject to the Related Option
exceeds the purchase price of the shares as provided in the Related Option,
and (iii) only upon surrender of the Related Option or any portion thereof
with respect to the shares for which the SARs are then being exercised.
(d) Upon the exercise of an SAR, the Related Option shall be deemed
to have been terminated to the extent of the number of shares of Common
Stock with respect to which such SARs are exercised. Upon the exercise or
termination of the Related Option, the SARs with respect to such Related
Option shall be deemed to have been terminated to the extent of the number
of shares of Common Stock with respect to which the Related Option was so
exercised or terminated.
8.3 Exercise of SARs. Each exercise of SARs, or a portion thereof, shall
be evidenced by a notice in writing to Luminex.
ARTICLE 9. RESTRICTED STOCK
9.1 General. Awards may be granted to Employees, Consultants and Outside
Directors in the form of Restricted Stock. Restricted Stock shall be awarded in
such numbers and at such times as the Board shall determine.
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9.2 Restriction Period. At the time an Award of Restricted Stock is
granted, the Board shall establish a period of time or other triggering event
(the "Restriction Period") applicable to such Restricted Stock. Each Award of
Restricted Stock may have a different Restriction Period, in the discretion of
the Board. The Restriction Period applicable to a particular Award of
Restricted Stock shall not be changed except as permitted by Section 6.2,
Section 9.3 or Article 12.
9.3 Other Terms and Conditions. Restricted Stock awarded to a
Participant under the Plan shall be represented by a stock certificate
registered in the name of the Participant or, at the option of Luminex, in the
name of a nominee of Luminex. Subject to the terms and conditions of the Award
Agreement, a Participant to whom Restricted Stock has been awarded shall have
the right to receive dividends thereon during the Restriction Period, to vote
the Restricted Stock and to enjoy all other stockholder rights with respect
thereto, except that (i) the Participant shall not be entitled to possession of
the stock certificate representing the Restricted Stock until the Restriction
Period shall have expired, (ii) Luminex shall retain custody of the Restricted
Stock during the Restriction Period, (iii) the Participant may not sell,
transfer, pledge, exchange, hypothecate or otherwise dispose of the Restricted
Stock during the Restriction Period and (iv) a breach of the terms and
conditions established by the Board pursuant to the Award of the Restricted
Stock shall cause a forfeiture of the Restricted Stock. At the time of an Award
of Restricted Stock, the Board may, in its sole discretion, prescribe additional
terms, conditions, restrictions and/or limitations applicable to the Restricted
Stock, including, but not limited to, rules pertaining to the termination of
employment or service (by reason of death, permanent and total disability, or
otherwise) of a Participant prior to expiration of the Restriction Period.
9.4 Payment for Restricted Stock. A Participant shall not be required to
make any payment for Restricted Stock awarded to the Participant, except to the
extent otherwise required by the Board or by applicable law.
9.5 Miscellaneous. Nothing in this Article 9 shall prohibit the exchange
of shares of Restricted Stock issued under the Plan pursuant to a plan of
reorganization for stock or securities of Luminex or another corporation that is
a party to the reorganization, but the stock or securities so received for
shares of Restricted Stock shall, except as provided in Section 6.2 or Article
12, become subject to the restrictions applicable to the Award of such
Restricted Stock. Any shares of stock received as a result of a stock split or
stock dividend with respect to shares of Restricted Stock shall also become
subject to the restrictions applicable to the Award of such Restricted Stock.
ARTICLE 10. DIVIDEND EQUIVALENTS
Dividend Equivalents may be granted under the Plan to Employees,
Consultants and Outside Directors, either as a component of another Award or as
a separate Award, subject to such terms, conditions, restrictions and/or
limitations as the Board may establish. In general, and
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subject to such terms, conditions, restrictions and/or limitations as the Board
may establish, an Award of Dividend Equivalents shall confer upon the
Participant a right to receive, in the event of a cash or stock dividend or
other distribution paid or made on the outstanding shares of Common Stock, an
amount equal to the dividend or other distribution that would have been received
by the Participant had the shares of Common Stock covered by the Award been
issued and outstanding on the record date established for such dividend or other
distribution. Dividend Equivalents may be paid currently or may be deemed to be
reinvested in additional shares of Common Stock (which may thereafter accrue
additional Dividend Equivalents). Any such reinvestment shall be at the Fair
Market Value of the Common Stock at the time thereof. Dividend Equivalents may
be paid in cash, shares of Common Stock, other Awards or other property, or a
combination thereof, in a single payment or in installments, and at such time or
times as the Board shall determine. Dividend Equivalents granted as a component
of another Award may provide that such Dividend Equivalents shall be paid upon
exercise, payment or settlement of or lapse of restrictions on such other Award,
and that such Dividend Equivalents shall expire or be forfeited under the same
conditions as such other Award. Dividend Equivalents granted as a component of
another Award may also contain terms and conditions different from such other
Award.
ARTICLE 11. OTHER INCENTIVE AWARDS
Other Incentive Awards may be granted under the Plan to Employees,
Consultants and Outside Directors based upon, payable in or otherwise related
to, in whole or in part, shares of Common Stock if the Board, in its sole
discretion, determines that such Other Incentive Awards are consistent with the
purposes of the Plan. Subject to the terms and provisions of the Plan, Other
Incentive Awards may be granted to Employees, Consultants and Outside Directors
in such amount, upon such terms and at any time and from time to time as shall
be determined by the Board. Each grant of an Other Incentive Award shall be
evidenced by an Award Agreement that shall specify the amount of the Other
Incentive Award and the terms, conditions, restrictions and/or limitations
applicable to such Award. Payment of Other Incentive Awards shall be made at
such times and in such form, which may be cash, shares of Common Stock or other
property (or a combination thereof),a s established by the Board, subject to the
terms of the Plan.
ARTICLE 12. CORPORATE TRANSACTIONS
12.1 Definition of Corporate Transaction. A "Corporate Transaction" shall
mean any of the following transactions with respect to which Luminex is a party:
(a) a merger or consolidation in which (i) Luminex is not the
surviving entity or (ii) Luminex survives only as a subsidiary of an entity
other than a previously wholly-owned subsidiary of Luminex;
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(b) a tender offer or share exchange resulting in the transfer of
ownership of more than fifty percent (50%) of the total outstanding voting
power of Luminex immediately after such transaction; or
(c) the sale, lease, transfer or other disposition of all or
substantially all of the assets of Luminex (other than to a wholly-owned
subsidiary of Luminex).
12.2 Effect on Outstanding Awards. Notwithstanding anything to the
contrary contained herein, no later than 30 days after (i) the approval by the
stockholders of Luminex of a Corporate Transaction of the type described in
Section 12.1(a) or (c) or (ii) the public announcement of a Corporate
Transaction of the type described in Section 12.1(b), the Board, acting in its
sole discretion without the consent or approval of any Participant, may act to
effect one or more of the following alternatives, which may vary among
individual Participants and which may vary among Awards held by any individual
Participant:
(a) accelerate the vesting of and the time at which Awards then
outstanding may be exercised so that such Awards may be exercised in full
(irrespective of whether such Awards are fully exercisable prior to the
date of such Corporate Transaction) for a limited period of time on or
before a specified date fixed by the Board (which date may be before or
after the date of such Corporate Transaction), after which specified date
all unexercised Awards and all rights of Participants thereunder shall
terminate;
(b) require the mandatory surrender to Luminex by selected
Participants of some or all of the outstanding Awards held by such
Participants (irrespective of whether such Awards are fully exercisable
prior to the date of such Corporate Transaction) as of a date specified by
the Board (which date may be before or after the date of such Corporate
Transaction), in which event the Board shall thereupon cancel such Awards
and Luminex shall pay to each Participant an amount of cash per share equal
to the excess, if any, of the following amount, whichever is applicable:
(i) the per share price offered to stockholders of Luminex in
a merger or consolidation transaction described in Section 12.1(a),
less the applicable exercise price payable by Participant pursuant to
such Award;
(ii) the price per share offered to stockholders of Luminex in
a tender offer or share exchange described in Section 12.1(b), less
the applicable exercise price payable by Participant pursuant to such
Award;
(iii) if such Corporate Transaction occurs pursuant to a type
of transaction described in Section 12.1(c), the Fair Market Value per
share of Common Stock subject to such Award, as determined by the
Board as of the date determined by the Board to be the date of such
transaction, less the applicable exercise price, if any, payable by
the Participant pursuant to such Award.
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In the event that the consideration offered to stockholders of Luminex in
any Corporate Transaction consists of anything other than cash, the Board
shall determine the fair cash equivalent of the portion of the
consideration offered which is other than cash.
(c) make such adjustments to Awards then outstanding so that such
Awards thereafter cover the number and class of shares of stock or other
securities or property (including, without limitation, cash) to which the
Participant would have been entitled pursuant to the terms of the Corporate
Transaction had the Participant been the holder of record of the number of
shares of Common Stock covered by such Award; or
(d) in the event of a Corporate Transaction in which the holders of
Luminex's Common Stock receive shares of stock in the acquiring entity
("Acquiror Stock"), convert Awards into Awards to acquire shares of
Acquiror Stock ("Substitute Awards"). Each Substitute Award shall be
exercisable on substantially the same terms and conditions contained in the
applicable Award, and shall cover such number of shares of Acquiror Stock
and have such exercise price and other terms as the Board shall, in its
discretion, deem appropriate in order to approximate with the Substitute
Award an economic equivalent to the applicable Award.
In the event of Corporate Transaction, the Board may, but shall not be required
to, take any such action set forth in Sections 12.3(a) through (d) above or
shall be permitted to allow any or all outstanding Awards to remain so
outstanding in accordance with the terms and conditions of the related Award
Agreement.
ARTICLE 13. AMENDMENT AND TERMINATION
The Board may at any time suspend, terminate, amend or modify the Plan, in
whole or in part; provided, however, that no amendment or modification of the
Plan shall become effective without the approval of such amendment or
modification by the stockholders of Luminex if such amendment or modification
(i) increases the maximum number of shares subject to the Plan or (ii) changes
the designation or class of persons eligible to receive Awards under the Plan
unless counsel for Luminex determines that such approval is otherwise required
by applicable law. Upon termination of the Plan, the terms and provisions of
the Plan shall, notwithstanding such termination, continue to apply to Awards
granted prior to such termination. No suspension, termination, amendment or
modification of the Plan shall adversely affect in any material way any Award
previously granted under the Plan, without the consent of the Participant
holding such Award.
Except as otherwise provided in Article 12, the Board may amend the terms
of any outstanding Award granted pursuant to this Plan, but any amendment that
would adversely affect the Participant's rights under an outstanding Award shall
not be made without the written consent of the Participant. The Board may, with
a Participant's written consent, cancel any outstanding Award or accept any
outstanding Award in exchange for a new Award.
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ARTICLE 14. MISCELLANEOUS
14.1 Award Agreements. After the Board grants an Award under the Plan to
a Participant, Luminex and the Participant shall enter into an Award Agreement
setting forth the terms, conditions, restrictions and/or limitations applicable
to the Award and such other matters as the Board may determine to be
appropriate. The terms and provisions of the respective Award Agreements need
not be identical. All Award Agreements shall be subject to the provisions of the
Plan. In the event of any conflict between an Award Agreement and the Plan, the
terms of the Plan shall govern.
14.2 Additional Conditions. Notwithstanding anything in the Plan to the
contrary: (i) Luminex may, if it shall determine it necessary or desirable for
any reason, at the time of grant of any Award or the issuance of any shares of
Common Stock pursuant to any Award, require the recipient of the Award or such
shares of Common Stock, as a condition to the receipt thereof, to deliver to
Luminex a written representation of present intention to acquire the Award or
such shares of Common Stock for his or her own account for investment and not
for distribution; and (ii) if at any time Luminex further determines, in its
sole discretion, that the listing, registration or qualification (or any
updating of any such document) of any Award or shares of Common Stock issuable
pursuant thereto is necessary on any securities exchange or market or under any
federal or state securities or blue sky laws, or that the consent or approval of
any governmental or regulatory body is necessary or desirable as a condition of,
or in connection with, the grant of any Award, the issuance of shares of Common
Stock pursuant thereto or the removal of any restrictions imposed on such
shares, such Award shall not be awarded or such shares of Common Stock shall not
be issued or such restrictions shall not be removed, as the case may be, in
whole or in part, unless such listing, registration, qualification, consent or
approval shall have been effected or obtained free of any conditions not
acceptable to Luminex.
14.3 Legends on Stock Certificates. Unless the shares of Common Stock
issued pursuant to an Award shall have been registered under the Securities Act
of 1933, as amended, each certificate representing such shares shall have
conspicuously stamped, printed or typed on the face or back thereof the
following legend:
THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED UNLESS SUCH SHARES ARE FIRST REGISTERED
THEREUNDER OR UNLESS THE COMPANY RECEIVES A WRITTEN OPINION OF
COUNSEL, WHICH OPINION AND COUNSEL ARE ACCEPTABLE TO THE COMPANY, TO
THE EFFECT THAT REGISTRATION THEREUNDER IS NOT REQUIRED.
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14.4 Nonassignability. Except as otherwise provided in the Award
Agreement, no Award granted under the Plan may be sold, transferred, pledged,
exchanged, hypothecated or otherwise disposed of, other than by will or pursuant
to the applicable laws of descent and distribution. Further, no such Award
shall be subject to execution, attachment or similar process. Any attempted
sale, transfer, pledge, exchange, hypothecation or other disposition of an Award
not specifically permitted by the Plan or the Award Agreement shall be null and
void and without effect. All Awards granted to a Participant under the Plan
shall be exercisable during his or her lifetime only by such Participant or, in
the event of the Participant's legal incapacity, by his or her guardian or legal
representative.
14.5 Withholding Taxes. The Company shall be entitled to deduct from any
payment made under the Plan, regardless of the form of such payment, the amount
of all applicable income and employment taxes required by law to be withheld
with respect to such payment, may require the Participant to pay to the Company
such withholding taxes prior to and as a condition of the making of any payment
or the issuance or delivery of any shares of Common Stock under the Plan and
shall be entitled to deduct from any other compensation payable to the
Participant any withholding obligations with respect o Awards under the Plan.
In accordance with any applicable administrative guidelines it establishes, the
Board may allow a Participant to pay the amount of taxes required by law to be
withheld from or with respect to an Award by (i) withholding shares of Common
Stock from any payment of Common Stock due as a result of such Award or (ii)
permitting the Participant to deliver to the Company previously acquired shares
of Common Stock held for the requisite period of time necessary to avoid a
charge to Luminex's earnings for financial reporting purposes, in each case
having a Fair Market Value equal to the amount of such required withholding
taxes. No payment shall be made and no shares of Common Stock shall be issued
pursuant to any Award unless and until the applicable tax withholding
obligations have been satisfied.
14.6 No Fractional Shares. No fractional shares of Common Stock shall be
issued or delivered pursuant to the Plan or any Award granted hereunder, and no
payment or other adjustment shall be made in respect of any such fractional
share.
14.7 Notices. All notices required or permitted to be given or made
under the Plan or any Award Agreement shall be in writing and shall be deemed to
have been duly given or made if (i) delivered personally, (ii) transmitted by
first class registered or certified United States mail, postage prepaid, return
receipt requested, (iii) sent by prepaid overnight courier service or (iv) sent
by telecopy or facsimile transmission, answer back requested, to the person who
is to receive it at the address that such person has theretofore specified by
written notice delivered in accordance herewith. Such notices shall be effective
(i) if delivered personally or sent by courier service, upon actual receipt by
the intended recipient, (ii) if mailed, upon the earlier of five days after
deposit in the mail or the date of delivery as shown by the return receipt
therefor or (iii) if sent by telecopy or facsimile transmission, when the answer
back is received. Luminex or a Participant may change, at any time and from time
to time, by written notice to the other, the address that it or such Participant
had theretofore specified for receiving notices. Until such address is changed
in accordance herewith, notices hereunder or under an Award Agreement
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shall be delivered or sent (i) to a Participant at his or her address as set
forth in the records of the Company or (ii) to Luminex at the principal
executive offices of Luminex clearly marked "Attention: John Dapper".
14.8 Binding Effect. The obligations of Luminex under the Plan shall be
binding upon any successor corporation or organization resulting from the
merger, consolidation or other reorganization of Luminex, or upon any successor
corporation or organization succeeding to all or substantially all of the assets
and business of Luminex. The terms and conditions of the Plan shall be binding
upon each Participant and his or her heirs, legatees, distributees and legal
representatives.
14.9 Severability. If any provision of the Plan or any Award Agreement
is held to be illegal or invalid for any reason, the illegality or invalidity
shall not affect the remaining provisions of the Plan or such agreement, as the
case may be, but such provision shall be fully severable and the Plan or such
agreement, as the case may be, shall be construed and enforced as if the illegal
or invalid provision had never been included herein or therein.
14.10 No Restriction of Corporate Action. Nothing contained in the Plan
shall be construed to prevent Luminex or any Affiliate from taking any corporate
action (including any corporate action to suspend, terminate, amend or modify
the Plan) that is deemed by Luminex or such Affiliate to be appropriate or in
its best interest, whether or not such action would have an adverse effect on
the Plan or any Awards made or to be made under the Plan. No Participant or
other person shall have any claim against Luminex or any Affiliate as a result
of such action.
14.11 Governing Law. The Plan shall be governed by and construed in
accordance with the internal laws (and not the principles relating to conflicts
of laws) of the State of Delaware, except as superseded by applicable federal
law.
14.12 No Right, Title or Interest in Company Assets. No Participant shall
have any rights as a stockholder of Luminex as a result of participation in the
Plan until the date of issuance of a stock certificate in his or her name and,
in the case of Restricted Stock, unless and until such rights are granted to the
Participant under the Plan. To the extent any person acquires a right to
receive payments from the Company under the Plan, such rights shall be no
greater than the rights of an unsecured creditor of the Company, and such person
shall not have any rights in or against any specific assets of the Company. All
of the Awards granted under the Plan shall be unfunded.
14.13 Risk of Participation. Nothing contained in the Plan shall be
construed either as a guarantee by Luminex or its Affiliates, or their
respective stockholders, directors, officers or employees, of the value of any
assets of the Plan or as an agreement by Luminex or its Affiliates, or their
respective stockholders, directors, officers or employees, to indemnify anyone
for any losses, damages, costs or expenses resulting from participation in the
Plan.
-18-
<PAGE>
14.14 No Guarantee of Tax Consequences. No person connected with the Plan
in any capacity, including, but not limited to, Luminex and the Affiliates and
their respective directors, officers, agents and employees, makes any
representation, commitment or guarantee that any tax treatment, including, but
not limited to, federal, state and local income, estate and gift tax treatment,
will be applicable with respect to any Awards or payments thereunder made to or
for the benefit of a Participant under the Plan or that such tax treatment will
apply to or be available to a Participant on account of participation in the
Plan.
14.15 Other Benefits. No Award granted under the Plan shall be considered
compensation for purposes of computing benefits or contributions under any
retirement plan of Luminex or any Affiliate, nor affect any benefits or
compensation under any other benefit or compensation plan of Luminex or any
Affiliate now or subsequently in effect.
14.16 Continued Employment or Service. Nothing contained in the Plan or
in any Award Agreement shall confer upon any Participant the right to continue
in the employ or service of the Company, or interfere in any way with the rights
of the Company to terminate his or her employment or service at any time, with
or without cause.
14.17 Miscellaneous. Headings are given to the articles and sections of
the Plan solely as a convenience to facilitate reference. Such headings shall
not be deemed in any way material or relevant to the construction of the Plan or
any provisions hereof. The use of the masculine gender shall also include within
its meaning the feminine. Wherever the context of the Plan dictates, the use of
the singular shall also include within its meaning the plural, and vice versa.
IN WITNESS WHEREOF, this Plan has been executed as of February 4, 2000.
LUMINEX CORPORATION
By:
-----------------------------------------
Mark Chandler, Chief Executive Officer
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<PAGE>
Exhibit 10.5
LUMINEX CORPORATION 2000 LONG-TERM INCENTIVE PLAN
SUMMARY OF STOCK OPTION GRANT
You have been granted the following option to purchase shares of Common Stock of
Luminex Corporation, a Delaware corporation (the "Company"), on the terms and
conditions set forth below and in accordance with the Stock Option Award
Agreement (the "Agreement") to which this Summary of Stock Option Grant is
attached and the Luminex Corporation 2000 Long-Term Incentive Plan (the "Plan"):
Optionee Name:
----------------------------------
Total Number of Shares Granted:
----------------------------------
Date of Grant (the "Effective Date"): __________ ___, 200__
Date of Expiration: __________ ___, 200__
Exercise Price per Share: $ _________________________________
Type of Option (check one): [ ] Incentive Stock Option
[ ] Nonqualified Stock Option
Vesting Schedule: The Option shall vest over a period of time and
shares of Common Stock subject to the Option shall
become purchasable in accordance with the following
schedule:
Option May be Pledged (check one): [ ] Yes
[ ] No
By your signature and the signature of the Company's representative below, you
and the Company agree that the Option is granted under and governed by the terms
and conditions of the Plan and the Agreement, both of which are attached to and
made a part of this document.
OPTIONEE LUMINEX CORPORATION
By:
- ---------------------------------- -----------------------
Name:
-----------------------
Address:
----------------------- Title: -----------------------
-----------------------
-----------------------
<PAGE>
LUMINEX CORPORATION 2000 LONG-TERM INCENTIVE PLAN
CONSENT OF OPTIONEE'S SPOUSE
I have reviewed the Stock Option Award Agreement, the Summary of Stock
Option Grant, and the Luminex Corporation 2000 Long-Term Incentive Plan and
agree to and accept all of the terms set forth therein to the extent of any
interest I may now have or may have in the future pursuant to the grant of the
Option described therein to my spouse.
OPTIONEE'S SPOUSE:
__________________________________________
[Signature of Optionee's Spouse, if any]
<PAGE>
STOCK OPTION AWARD AGREEMENT
THIS AGREEMENT is made as of the Effective Date (as set forth on the
Summary of Stock Option Grant) between Luminex Corporation, a Delaware
corporation (the "Company"), and Optionee, pursuant to the Company's 2000 Long-
Term Incentive Plan (the "Plan").
The Board of Directors of the Company (the "Board") or a Committee
designated by the Board has authority to grant Options under the Plan to
employees, outside directors and consultants of the Company and its Affiliates.
The Board or the Committee, as appropriate, has determined to award
Optionee the Option described in this Agreement;
The Company and Optionee agree as follows:
1. Effect of Plan and Authority of Board. This Agreement and the Option
-------------------------------------
granted hereunder are subject to the Plan, which is incorporated herein by
reference. The Board is authorized to make all determinations and
interpretations with respect to matters arising under the Plan, this Agreement
and the Option granted hereunder. Capitalized terms used and not otherwise
defined herein have the respective meanings given them in the Plan or in the
Summary of Stock Option Grant, which is attached hereto and incorporated herein
by this reference for all purposes.
2. Grant of Option. On the terms and conditions set forth in this
---------------
Agreement, the Summary of Stock Option Grant and the Plan, as of the Effective
Date, the Company hereby grants to Optionee the option to purchase the number of
shares of Common Stock set forth on the Summary of Stock Option Grant at the
Exercise Price per share set forth on the Summary of Stock Option Grant (the
"Option"). The Option is intended to be an Incentive Stock Option or a
Nonqualified Stock Option, as provided in the Summary of Stock Option Grant. If
the Option is intended to be an Incentive Stock Option, it is agreed that the
exercise price is at least 100% of the Fair Market Value of a share of Common
Stock on the Effective Date (110% of Fair Market Value if Optionee owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or an Affiliate, within the meaning of Section 422(b)(6) of
the Code).
3. Exercise of Option.
------------------
(a) General. Except as provided in Section 7.6 of the Plan, the Option
may not be exercised unless Optionee shall have been in the continuous employ of
the Company or an Affiliate from the Effective Date until the date of exercise
of the Option.
(b) Exercise for Non-restricted Common Stock. To the extent that the
Option has not otherwise been previously exercised pursuant to paragraph 3(c)
hereof, the Option shall become exercisable for shares of non-restricted Common
Stock in installments in accordance with the Vesting Schedule set forth on the
Summary of Stock Option Grant, provided that Optionee has remained in the
continuous employment of the Company or an Affiliate from the Effective Date
until each respective vesting date. Each such installment shall be exercisable,
as to any or all the shares
<PAGE>
covered by the installment, at any time or times after such vesting date and
until the expiration or termination of the Option.
(c) Exercise for Restricted Stock. Notwithstanding the provisions in
subparagraph (b) above relating to the exercise of the Option for non-restricted
Common Stock in installments pursuant to the Vesting Schedule set forth on the
Summary of Stock Option Grant, while Optionee remains in the employ of the
Company or an Affiliate the Option may be exercised as to any and all shares of
Common Stock covered hereby prior to the dates set forth for the vesting thereof
pursuant to the Vesting Schedule; provided, however, that any shares of Common
Stock purchased pursuant to the exercise of the Option in excess of the number
of shares otherwise then exercisable pursuant to the Vesting Schedule shall be
shares of Restricted Stock, the Restriction Period for which shall begin on the
Effective Date and end on the date such shares could otherwise have been
purchased pursuant to this Option in accordance with the Vesting Schedule set
forth on the Summary of Stock Option Grant. During the Restriction Period the
shares of Restricted Stock shall be subject to (i) the restrictions set forth in
a Restricted Stock Agreement in a form prescribed by the Board or the Committee,
as the case may be, which Optionee shall be required to enter into as a
condition precedent to Optionee's exercise of the Option pursuant to this
paragraph 3(c) and (ii) the following provisions and restrictions, in addition
to the restrictions and provisions otherwise set forth herein and in the Plan:
(i) In the event of Optionee's termination of employment or
service with the Company and its Affiliates during the Restriction
Period, all shares of Restricted Stock with respect to which the
Restriction Period has not ended shall be forfeited to the Company and
the Company shall pay to Optionee an amount equal to the lesser of the
price paid by Optionee upon exercise of the shares so forfeited or the
Fair Market Value of the shares on the date of forfeiture;
(ii) Optionee shall not be entitled to possession of the
stock certificate representing the Restricted Stock until the
Restriction Period has expired and the Company shall retain custody of
the Restricted Stock during the Restriction Period; and
(iii) Optionee may not sell, transfer, pledge, exchange,
hypothecate or otherwise dispose of the Restricted Stock during the
Restriction Period.
(d) In no event shall the Option be exercisable in whole or in part after
the Expiration Date as set forth on the Summary of Stock Option Grant.
(e) Upon exercise of the Option, the exercise price of the Option shall be
payable to the Company in the manner specified in Section 7.5 of the Plan.
(f) Promptly after demand by the Company, and at its direction, Optionee
shall pay to the Company or the appropriate Affiliate an amount equal to the
applicable withholding taxes due in connection with the exercise of the Option.
Pursuant to Section 14.5 of the Plan, such withholding taxes may be paid in cash
or, subject to the further provisions of this Section 2(f), in
2
<PAGE>
whole or in part, by having the Company withhold from the shares of Common Stock
otherwise issuable upon exercise of the Option a number of shares of Common
Stock having a value equal to the amount of such withholding taxes or by
delivering to the Company or the appropriate Affiliate a number of issued and
outstanding shares of Common Stock (excluding restricted shares still subject to
a risk of forfeiture) having a value equal to the amount of such withholding
taxes. The value of any shares of Common Stock so withheld by or delivered to
the Company or the appropriate Affiliate shall be based on the Fair Market Value
(as defined in the Plan) of such shares on the date on which the tax withholding
is to be made. Optionee shall pay to the Company or the appropriate Affiliate in
cash the amount, if any, by which the amount of such withholding taxes exceeds
the value of the shares of Common Stock so withheld or delivered. An election by
Optionee to have shares withheld or to deliver shares to pay withholding taxes
(an "Election") must be made at or prior to the time of exercise of the Option.
All Elections shall be made in the same manner as is required for the exercise
of the Option and shall be made on a form approved by the Company.
4. Delivery of Shares. Delivery of the certificates representing the
------------------
shares of Common Stock purchased upon exercise of the Option shall be made
promptly after receipt of notice of exercise and full payment of the exercise
price and any required withholding taxes; provided, however, that delivery of
the certificates representing the shares of Restricted Stock purchased upon
exercise of the Option with respect to which the Restriction Period has ended
shall be made promptly after the later of receipt of notice of exercise and full
payment of the exercise price and the end of Restriction Period, subject to full
payment of any required withholding taxes. If the Company so elects, its
obligation to deliver shares of Common Stock upon the exercise of the Option and
Restricted Stock purchased upon exercise of the Option with respect to which the
Restriction Period has ended shall be conditioned upon its receipt from the
person exercising the Option of an executed investment letter, in form and
content satisfactory to the Company and its legal counsel, evidencing the
investment intent of such person and such other matters as the Company may
reasonably require. If the Company so elects, the certificate or certificates
representing the shares of Common Stock, including any Restricted Stock with
respect to which the Restriction Period has ended, issued upon exercise of the
Option shall bear a legend in substantially the following form:
THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF l933 OR APPLICABLE
STATE SECURITIES LAWS AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED UNLESS
SUCH SHARES ARE FIRST REGISTERED THEREUNDER OR UNLESS THE COMPANY RECEIVES
A WRITTEN OPINION OF COUNSEL, WHICH OPINION AND COUNSEL ARE ACCEPTABLE TO
THE COMPANY, TO THE EFFECT THAT REGISTRATION THEREUNDER IS NOT REQUIRED.
5. Market Stand-Off. In connection with any underwritten public offering
----------------
by the Company of its equity securities pursuant to an effective registration
statement filed under the Securities Act of 1933, as amended, including the
Company's initial public offering, Optionee shall not directly or indirectly
sell, make any short sale of, loan, hypothecate, pledge, offer, grant or sell
any option or other contract for the purchase of, purchase any option or other
contract for the sale of, or otherwise dispose of or transfer or agree to engage
in any of the foregoing transactions with
3
<PAGE>
respect to, any shares acquired under this Agreement without the prior written
consent of the Company or its underwriters. Such restriction (the "Market Stand
Off") shall be in effect for such period of time following the date of the final
prospectus for the offering as may be requested by the Company or such
underwriters. In no event, however, shall such period exceed 180 days. The
Market Stand-Off shall in any event terminate two years after the date of the
Company's initial public offering. In the event of the declaration of a stock
dividend, a spin-off, a stock split, an adjustment in conversion ratio, a
recapitalization or a similar transaction affecting the Company's outstanding
securities without receipt of consideration, any new, substituted or additional
securities which are by reason of such transaction distributed with respect to
any shares subject to the Market Stand-Off, or into which such shares thereby
become convertible, shall immediately be subject to the Market Stand-Off. In
order to enforce the Market Stand-Off, the Company may impose stop-transfer
instructions with respect to the shares acquired under this Agreement until the
end of the applicable stand-off period. The Company's underwriters shall be
beneficiaries of the agreement set forth in this Section 5. This Section shall
not apply to shares registered in the public offering under the Securities Act
of 1933, as amended, and Optionee shall be subject to this Section 5 only if the
directors and officers of the Company are subject to similar arrangements.
6. Nonassignability. Unless otherwise indicated on the Summary of Stock
----------------
Option Grant, the Option granted hereunder may not be sold, transferred,
pledged, exchanged, hypothecated or otherwise disposed of, other than by will or
pursuant to the applicable laws of descent and distribution. If the Option may
be pledged as indicated on the Summary of Stock Option Grant, the terms and
conditions of such pledge agreement shall be subject to the approval of the
Board or Committee, as appropriate. In the case of the death of Optionee or
other person entitled to exercise the Option, the Company may require, as a
condition to the transfer of the Option by will or pursuant to the laws of
descent and distribution or the exercise thereof, that the person entitled to
exercise the Option execute and deliver to the Company such instruments and
documents as may be reasonably requested by the Company to evidence and confirm
such person's right and title to the Option.
7. Notices. All notices between the parties hereto shall be in writing.
-------
Notices to the Company shall be given to Luminex Corporation, 12212 Technology
Boulevard, Austin, Texas 78727; Attention: General Counsel. Notices to Optionee
shall be given at the address set forth on the Summary of Stock Option Grant.
Either party may change their respective address for notice by giving written
notice to the other party.
8. Relationship With Contract of Employment.
----------------------------------------
(a) The grant of an Option does not form part of Optionee's
entitlement to remuneration or benefit pursuant to his contract of employment,
if any, nor does the existence of a contract of employment between any person
and the Company or an Affiliate give such person any right or entitlement to
have an Option granted to him or any expectation that an Option might be granted
to him whether subject to any conditions or at all.
(b) The rights and obligations of Optionee under the terms of his
contract of employment with the Company or an Affiliate, if any, shall not be
affected by the grant of an Option.
4
<PAGE>
(c) The rights granted to Optionee upon the grant of an Option shall
not afford Optionee any rights or additional rights to compensation or damages
in consequence of the loss or termination of his office or employment with the
Company or an Affiliate for any reason whatsoever.
(d) Optionee shall not be entitled to any compensation or damages for
any loss or potential loss which he may suffer by reason of being or becoming
unable to exercise an Option in consequence of the loss or termination of his
office or employment with the Company or an Affiliate for any reason (including,
without limitation, any breach of contract by his employer) or in any other
circumstances whatsoever.
9. Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the internal laws (and not the principles relating to
conflicts of laws) of the State of Delaware, except as superseded by applicable
federal law.
* * * * *
5
<PAGE>
Exhibit 10.15
FORM OF
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement"), dated as of March 10, 2000 is
between Luminex Corporation, a Delaware corporation, and [Exhibit A]
("Executive").
R E C I T A L S
A. Executive has been employed by Employer, and Employer and Executive
desire to enter into a written agreement to specify the terms and conditions of
Executive's continued employment with Employer.
B. Employer considers the maintenance of a sound management team,
including Executive, essential to protecting and enhancing its best interests
and those of its stockholders.
C. Employer recognizes that the possibility of a change in control of
Employer may result in the departure or distraction of management to the
detriment of Employer and its stockholders.
D. Executive is an executive officer of Employer and an integral member of
its management team.
E. Employer has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of selected
members of Employer's management team to their assigned duties without the
distraction arising from the possibility of a change in control of Employer.
In consideration of Executive's past and future employment with Employer
and other good and valuable consideration the parties agree as follows:
SECTION 1. Employment. Employer hereby employs Executive, and Executive
hereby accepts employment, upon the terms and subject to the conditions
hereinafter set forth.
SECTION 2. Duties. Executive shall be employed as [Exhibit A] of the
Company, or such other position of comparable or greater responsibilities and
that are within Executive's area of expertise to which he may be appointed by
the Board of Directors. Executive agrees to devote his full time and best
efforts to the performance of the duties attendant to his executive position
with Employer.
SECTION 3. Term. The term of employment of Executive hereunder shall
commence on the date of [Exhibit A] (the "Commencement Date") and continue until
March 9, 2003 unless earlier terminated pursuant to Section 6 or Section 10;
provided, however, that commencing on March 9, 2002 the term shall automatically
be extended on each day from that date for an additional year.
SECTION 4. Compensation and Benefits. In consideration for the services
of Executive hereunder, Employer shall compensate Executive as follows:
(a) Base Salary. Until the termination of Executive's employment
hereunder, Employer shall pay Executive a base salary at an annual rate of not
less than $[Exhibit A] (as may be increased from time to time, the "Base
Salary") payable in accordance with the then current payroll policies of
Employer. Any increase in the Base Salary shall be in the sole discretion of the
Board of Directors of the Company or the appropriate committee thereof.
<PAGE>
(b) Management Incentive Bonus. Executive shall be eligible to receive
from Employer such annual management incentive bonuses as may be provided in
management incentive bonus plans adopted from time to time by Employer.
(c) Vacation. Executive shall be entitled to three weeks of paid vacation
per year at the reasonable and mutual convenience of Employer and Executive.
Unless otherwise approved by the Board of Directors of the Company or the
appropriate committee thereof, accrued vacation not taken in any applicable
period shall not be carried forward or used in any subsequent period.
(d) Group Benefits. Executive shall be entitled to participate in all
group benefit plans of Employer in accordance with Employer's regular practices
for its employees. Employer shall provide accident, health, dental, disability
and life insurance for Executive under the group accident, health, dental,
disability and life insurance plans maintained by Employer for its full-time,
salaried employees.
SECTION 5. Expenses. Executive shall be entitled to reimbursement from
Employer for reasonable out-of-pocket expenditures incurred by Executive in the
course of performing Executive's duties hereunder.
SECTION 6. Termination.
(a) General. Executive's employment hereunder shall commence on the
Commencement Date and continue until the end of the term specified in Section 3,
except that the employment of Executive hereunder shall terminate prior to such
time in accordance with the following:
(i) Death or Disability. Upon the death of Executive during the term
of his employment hereunder or, at the option of Employer, in the event of
Executive's Disability, upon 30 days' notice to Executive.
(ii) For Cause. For "Cause" immediately upon written notice by
Employer to Executive. A termination shall be for Cause if:
(1) Executive commits a criminal act involving moral turpitude;
or
(2) Executive commits a material breach of any of the covenants,
terms and provisions hereof or fails to obey lawful and proper written
directions delivered to Executive by Employer's Chairman of the Board,
President, Chief Executive Officer or its Board of Directors.
(iii) Without Cause. Without Cause upon notice by Employer to
Executive. Without limiting the foregoing, the termination of Executive's
employment hereunder upon the expiration of the term of his employment
specified in Section 3 shall be treated as a termination by Employer
without Cause pursuant to this Section 6(a)(iii).
(b) Severance Pay and Bonuses.
2
<PAGE>
(i) Termination Upon Death or Disability. Executive shall not be
entitled to any Separation Payments or any other severance pay or other
compensation upon termination of his employment hereunder pursuant to
Section 6(a)(i) except for the following (which shall be paid promptly
after termination, except as specified in subsection (4) below):
(1) his Base Salary accrued but unpaid as of the date of
termination;
(2) unpaid expense reimbursements under Section 5 for expenses
incurred in accordance with the terms hereof prior to termination;
(3) compensation for accrued, unused vacation as of the date of
termination, determined in accordance with Employer's policies and
procedures then in effect; and
(4) any bonus to which Executive would have been entitled for the
Bonus Period if he were still employed hereunder on the last day of
the Bonus Period. Any such bonus shall be paid to Executive at the
same time bonuses are paid in respect of the Bonus Period to other
employees of Employer entitled to receive bonuses for the Bonus
Period. In the event the determination of Executive's bonus in
respect of the Bonus Period involves any subjective assessment, such
assessment shall be made in a manner most favorable to Executive. For
purposes of this Agreement, the term "Bonus Period" means the full
fiscal year or other applicable bonus period during which Executive's
employment hereunder was terminated (or during which Executive became
Disabled, in the event of a termination for Disability).
(ii) Termination Without Cause. In the event Executive's employment
hereunder is terminated pursuant to Section 6(a)(iii), Employer shall
promptly pay Executive an amount equal to one year's Base Salary at the
then current rate plus the amount of the most recent annual cash bonus
amount in a single lump sum payment as Executive's sole remedy in
connection with such termination. Employer shall also promptly pay
Executive the following:
(1) his Base Salary accrued but unpaid as of the date of
termination;
(2) unpaid expense reimbursements under Section 5 for expenses
incurred in accordance with the terms hereof prior to termination; and
(3) compensation for accrued, unused vacation as of the date of
termination, determined in accordance with Employer's policies and
procedures then in effect.
The payments described in this Section 3(b)(ii) are referred to herein
collectively as the "Separation Payments." This Section 6(b)(ii) is
subject to the provisions of Section 10(j) dealing with the coordination of
payments in the event of a Change in Control.
(iii) Termination For Cause; Voluntary Termination. Executive shall
not be entitled to any Separation Payments or any other severance pay or
other compensation upon termination of his employment hereunder pursuant to
Section 6(a)(ii), or upon Executive's voluntary termination of his
employment hereunder, except for the following (which shall be paid
promptly after termination):
(1) his Base Salary accrued but unpaid as of the date of
termination;
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<PAGE>
(2) unpaid expense reimbursements under Section 5 for expenses
incurred in accordance with the terms hereof prior to termination; and
(3) compensation for accrued, unused vacation as of the date of
termination, determined in accordance with Employer's policies and
procedures then in effect.
(c) Transfers of Employment. Executive's employment hereunder shall
continue until the earlier of the following:
(i) Executive's employment with all Employers terminates; or
(ii) the last Employer (other than the Company) by which Executive is
employed under this Agreement ceases to be a subsidiary or affiliate of the
Company. For purposes of Section 6(b)(ii), the termination of Executive's
employment hereunder pursuant to this Section 6(c)(ii) shall be treated as
a termination by Employer without Cause pursuant to Section 6(a)(iii).
SECTION 7. Inventions; Assignment.
(a) Inventions Defined. All rights to discoveries, inventions,
improvements, designs, work product and innovations (including without
limitation all data and records pertaining thereto) that relate to the business
of Employer, whether or not specifically within Executive's duties or
responsibilities and whether or not patentable, copyrightable or reduced to
writing, that Executive may discover, invent, create or originate during the
term of his employment hereunder or otherwise, and for a period of six months
thereafter, either alone or with others and whether or not during working hours
or by the use of the facilities of Employer ("Inventions"), shall be the
exclusive property of Employer. Executive shall promptly disclose all Inventions
to Employer, shall execute at the request of Employer any assignments or other
documents Employer may deem necessary to protect or perfect its rights therein,
and shall assist Employer, at Employer's expense, in obtaining, defending and
enforcing Employer's rights therein. Executive hereby appoints Employer as his
attorney-in-fact to execute on his behalf any assignments or other documents
deemed necessary by Employer to protect or perfect its rights to any Inventions.
(b) Covenant to Assign and Cooperate. Without limiting the generality of
the foregoing, Executive shall assign and transfer, and does hereby assign and
transfer, to Employer the world-wide right, title and interest of Executive in
the Inventions. Executive agrees that Employer may file copyright registrations
and apply for and receive patents (including without limitation Letters Patent
in the United States) for the Inventions in Employer's name in such countries as
may be determined solely by Employer. Executive shall communicate to Employer
all facts known to Executive relating to the Inventions and shall cooperate with
Employer's reasonable requests in connection with vesting title to the
Inventions and related copyrights and patents exclusively in Employer and in
connection with obtaining, maintaining, protecting and enforcing Employer's
exclusive copyrights and patent rights in the Inventions.
(c) Successors and Assigns. Executive's obligations under this Section 7
shall inure to the benefit of Employer and its successors and assigns and shall
survive the expiration of the term of this Agreement for such time as may be
necessary to protect the proprietary rights of Employer in the Inventions.
(d) Consideration and Expenses . Executive shall perform his
obligations under this Section 7 at Employer's expense, but without any
additional or special compensation therefor.
4
<PAGE>
SECTION 8. Confidential Information.
(a) Acknowledgment of Proprietary Interest. Executive acknowledges that
all Confidential Information is a valuable, special and unique asset of
Employer's business, access to and knowledge of which are essential to the
performance of Executive's duties hereunder. Executive acknowledges the
proprietary interest of Employer in all Confidential Information. Executive
agrees that all Confidential Information learned by Executive during his
employment with Employer or otherwise, whether developed by Executive alone or
in conjunction with others or otherwise, is and shall remain the exclusive
property of Employer. Executive further acknowledges and agrees that his
disclosure of any Confidential Information will result in irreparable injury and
damage to Employer.
(b) Confidential Information Defined. "Confidential Information" means
all confidential and proprietary information of Employer, written, oral or
computerized, as it may exist from time to time, including without limitation
(i) information derived from reports, investigations, experiments, research and
work in progress, (ii) methods of operation, (iii) market data, (iv) proprietary
computer programs and codes, (v) drawings, designs, plans and proposals, (vi)
marketing and sales programs, (vii) client and supplier lists and any other
information about Employer's relationships with others, (viii) historical
financial information and financial projections, (ix) network and system
architecture, (x) all other concepts, ideas, materials and information prepared
or performed for or by Employer and (xi) all information related to the business
plan, business, products, purchases or sales of Employer or any of its suppliers
and customers, other than information that is publicly available.
(c) Covenant Not To Divulge Confidential Information. Employer is
entitled to prevent the disclosure of Confidential Information. As a portion of
the consideration for the employment of Executive and for the compensation being
paid to Executive by Employer, Executive agrees at all times during the term of
his employment hereunder and thereafter to hold in strict confidence and not to
disclose or allow to be disclosed to any person, firm or corporation, other than
to persons engaged by Employer to further the business of Employer, and not to
use except in the pursuit of the business of Employer, the Confidential
Information, without the prior written consent of Employer. This Section 8 shall
survive and continue in full force and effect in accordance with its terms
after, and will not be deemed to be terminated by, any termination of this
Agreement or of Executive's employment with Employer for any reason.
(d) Return of Materials at Termination. In the event of any termination
or cessation of his employment with Employer for any reason, Executive shall
promptly deliver to Employer all property of Employer, including without
limitation all documents, data and other information containing, derived from or
otherwise pertaining to Confidential Information. Executive shall not take or
retain any property of Employer, including without limitation any documents,
data or other information, or any reproduction or excerpt thereof, containing,
derived from or pertaining to any Confidential Information. The obligation of
confidentiality set forth in this Section 8 shall continue notwithstanding
Executive's delivery of such documents, data and information to Employer.
SECTION 9. Noncompetition.
(a) Covenant Not to Compete. Executive acknowledges that during the term
of his employment Employer has agreed to provide to him, and he shall receive
from Employer, special training and knowledge, including without limitation the
Confidential Information. Executive acknowledges that the Confidential
Information is valuable to Employer and, therefore, its protection and
maintenance constitutes a legitimate
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interest to be protected by Employer by the enforcement of the covenant not to
compete contained in this Section 9. Executive also acknowledges that such
covenant not to compete is ancillary to other enforceable agreements of the
parties, including without limitation the agreements regarding Confidential
Information in Section 8 and the agreements regarding the payment of the
Separation Payments and other severance pay and of the Termination Payment in
Section 6 and Section 10, respectively. Therefore, following the termination of
Employee's employment hereunder, Executive shall not directly or indirectly:
(i) for a period of one year following the date of the termination
(unless extended pursuant to the terms of this Section 9) engage, alone or
as a shareholder, partner, member, manager, director, officer, employee of
or consultant to, any entity other than Employer that is in existence on
the date of the termination and is at that time engaged directly, or
indirectly through any subsidiary, division or other business unit
(individually, an "Entity") that engages, anywhere in North America or in
any other geographic area in or with respect to which Executive has any
duties or responsibilities during the term of his employment with Employer,
in any business activities that were conducted by Employer prior to the
date of such termination (the "Designated Industry"); or
(ii) for a period of one year following the date of the termination
(unless extended pursuant to the terms of this Section 9) solicit or
encourage any director, officer, employee of or consultant to Employer to
end his relationship with Employer and commence any such relationship with
any competitor of Employer in the Designated Industry.
(b) Exclusion. Notwithstanding the provisions of this Section 9, Employee's
noncompetition obligations hereunder shall not preclude Employee from owning
less than one percent of the voting power or economic interest in any publicly
traded corporation conducting business activities in the Designated Industry.
(c) No Offset. The representations and covenants contained in this Section
9 on the part of Executive shall be construed as ancillary to and independent of
any other provision of this Agreement, and the existence of any claim (monetary
or otherwise) or cause of action of Executive against Employer or any officer,
director or shareholder of Employer, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by Employer of the
covenants of Executive contained in this Section 9.
(d) Extension and Survival. If Executive violates any covenant contained
in this Section 9, Employer shall not, as a result of such violation or the time
involved in obtaining legal or equitable relief
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therefor, be deprived of the benefit of the full period of any such covenant.
Accordingly, the covenants of Executive contained in this Section 9 shall be
deemed to have durations as specified in Section 9(a), which periods shall be
extended by a number of days equal to the sum of (i) the total number of days
Executive is in violation of any of the covenants contained in this Section 9
prior to the commencement of any litigation relating thereto and (ii) the total
number of days the parties are involved in such litigation, through the date of
entry by a court of competent jurisdiction of a final judgment enforcing the
covenants of Executive in this Section 9. This Section 9 shall survive and
continue in full force and effect in accordance with its terms after, and will
not be deemed to be terminated by, any termination of this Agreement.
(e) Severability. If at any time the provisions of this Section 9 are
determined to be invalid or unenforceable by reason of being vague or
unreasonable as to area, duration or scope of activity, this Section 9 shall be
considered divisible and shall be immediately amended to only such area,
duration or scope of activity as shall be determined to be reasonable and
enforceable by the court or other body having jurisdiction over the matter; and
Executive agrees that this Section 9 as so amended shall be valid and binding as
though any invalid or unenforceable provision had not been included herein.
SECTION 10. Termination of Employment in Connection With a Change In
Control.
(a) Applicability. The provisions of this Section 10 shall apply in lieu
of all conflicting provisions in this Agreement in the event Executive's
employment with Employer is terminated in a Triggering Termination. Each of the
following events constitutes a "Triggering Termination" when Executive's
employment with Employer is:
(i) actually terminated by Employer during an Applicable Period for
any reason other than for Good Reason;
(ii) Constructively Terminated by Employer during an Applicable
Period;
(iii) terminated by Executive for any reason other than death, or for
no reason, within the 180 day period commencing on the date of the Change
in Control; or
(iv) terminated pursuant to Section 6(c)(ii) during an Applicable
Period.
(b) Termination Payment. Upon the occurrence of a Triggering Termination,
Employer shall pay Executive a lump sum payment in cash (the "Termination
Payment") equal to 2.99 times Executive's average annual base salary plus cash
bonus amount for the most recent five calendar years ending prior to the
occurrence of the Triggering Event. Employer shall pay the Termination Payment
to Executive concurrently with the Triggering Termination or, if the Triggering
Termination occurs before the Change in Control, concurrently with the Change in
Control.
(c) Change in Control. A Change in Control means the occurrence during the
term of this Agreement of any of the following events:
(i) Employer is merged, consolidated or reorganized into or with
another corporation or other legal person, and as a result of such merger,
consolidation or reorganization less than 50% of the combined voting
power of the then-outstanding securities entitled to vote generally in the
election of directors ("Voting Stock") of such corporation or person
immediately after such transaction are held in the aggregate by the holders
of Voting Stock of Employer immediately prior to
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such transaction;
(ii) Employer sells or otherwise transfers all or substantially all of
its assets to another corporation or other legal person, and less than 50%
of the combined voting power of the then-outstanding Voting Stock of such
corporation or person is held in the aggregate by the holders of Voting
Stock of Employer immediately prior to such sale or transfer;
(iii) There is a report filed on Schedule 13D or Schedule 14D-1 (or
any successor schedule, form or report), each as promulgated pursuant to
the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
disclosing that any person (as the term "person" is used in Section
13(d)(3) or Section 14(d)(2) of the Exchange Act), other than a Director of
Employer on the date hereof (or any group of such Directors), has become
the beneficial owner (as the term "beneficial owner" is defined under Rule
13d-3 or any successor rule or regulation promulgated under the Exchange
Act) of securities representing 50% or more of the combined voting power of
the then-outstanding Voting Stock of Employer;
(iv) Employer files a report or proxy statement with the Securities
and Exchange Commission pursuant to the Exchange Act disclosing in response
to Form 8-K or Schedule 14A (or any successor schedule, form or report or
item therein) that a change in control of Employer has occurred or will
occur in the future pursuant to any then-existing contract or transaction;
or
(v) If, in connection with a proxy solicitation initiated by a person
or group other than the Board of Directors of Employer, individuals who at
the beginning of such proxy solicitation constitute the Directors of
Employer cease for any reason to constitute at least a majority thereof
within the one year period following the initiation of such proxy
solicitation.
Notwithstanding the foregoing provisions of Sections 10(c)(iii) or
10(c)(iv), unless otherwise determined in a specific case by majority vote of
the Board, a "Change in Control" shall not be deemed to have occurred for
purposes of Section 10(c)(iii) or 10(c)(iv) solely because (A) Employer, (B) an
entity in which Employer directly or indirectly beneficially owns 50% or more of
the outstanding Voting Stock (a "Subsidiary"), or (C) any Employer-sponsored
employee stock ownership plan or any other employee benefit plan of Employer
either files or becomes obligated to file a report or a proxy statement under or
in response to Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any
successor schedule, form or report or item therein) under the Exchange Act
disclosing beneficial ownership by it of shares of Voting Stock of Employer,
whether in excess of 50% or otherwise, or because Employer reports that a change
in control of Employer has occurred or will occur in the future by reason of
such beneficial ownership or any increase or decrease thereof.
(d) Gross Up Payment.
(i) Anything in this Agreement to the contrary notwithstanding, in the
event that it shall be determined (as hereafter provided) that all or any
portion of any payment or distribution by Employer or any of its affiliates
to or for the benefit of Executive pursuant to the terms of this Section 10
or otherwise, including under any stock option or other agreement, plan,
policy, program or arrangement (a "Payment"), would be subject to the
excise tax imposed by Section 4999 of the
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Code (or any successor provision thereto), by reason of being considered
"contingent on a change in ownership or control" of Employer, within the
meaning of Section 280G of the Code (or any successor provision thereto),
or to any similar tax imposed by state or local law, or any interest or
penalties with respect to such tax (such tax or taxes, together with any
such interest and penalties, being hereafter collectively referred to as
the "Excise Tax"), then Executive shall be entitled to receive an
additional payment or payments (collectively, a "Gross-Up Payment");
provided, however, that no Gross-Up Payment shall be made with respect to
the Excise Tax, if any, attributable to (i) any incentive stock option, as
defined by Section 422 of the Code ("ISO") granted prior to the execution
of this Agreement, or (ii) any stock appreciation or similar right, whether
or not limited, granted in tandem with an ISO described in clause (i). The
Gross-Up Payment shall be in an amount such that, after payment by
Executive of all taxes (including any interest or penalties imposed with
respect to such taxes), including any Excise Tax imposed upon the Gross-Up
Payment, the Executive retains an amount of the Gross-Up Payment equal to
the Excise Tax imposed upon the Payment.
(ii) Subject to the provisions of Section 10(d)(vi), all
determinations required to be made under this Section 10(d), including
whether an Excise Tax is payable by Executive and the amount of such Excise
Tax and whether a Gross-Up Payment is required to be paid by Employer to
Executive and the amount of such Gross-Up Payment, if any, shall be made by
a nationally recognized accounting firm (the "Accounting Firm") selected by
Executive in his sole discretion. Executive shall direct the Accounting
Firm to submit its determination and detailed supporting calculations to
both Employer and Executive within 30 calendar days after the Termination
Date, if applicable, and any such other time or times as may be requested
by Employer or Executive. If the Accounting Firm determines that any
Excise Tax is payable by Executive, Employer shall pay the required Gross-
Up Payment to Executive within five business days after receipt of such
determination and calculations with respect to any Gross-Up Payment to
Executive. If the Accounting Firm determines that no Excise Tax is payable
by Executive, it shall, at the same time as it makes such determination,
furnish Employer and Executive a written opinion to the effect that
Executive has substantial authority not to report any Excise Tax on his
federal, state or local income or other tax return. As a result of the
uncertainty in the application of Section 4999 of the Code (or any
successor provision thereto) and the possibility of similar uncertainty
regarding applicable state or local tax law at the time of any
determination by the Accounting Firm hereunder, it is possible that Gross-
Up Payments which will not have been made by Employer should have been made
(an "Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts or fails to pursue its
remedies pursuant to Section 10(d)(vi) and Executive thereafter is required
to make a payment of any Excise Tax, Executive shall direct the Accounting
Firm to determine the amount of the Underpayment that has occurred and to
submit its determination and detailed supporting calculations to both
Employer and Executive as promptly as possible. Any such Underpayment
shall be promptly paid by Employer to, or for the benefit of, Executive
within five business days after receipt of such determination and
calculations.
(iii) Employer and Executive shall each provide the Accounting Firm
access to and copies of any books, records and documents in the possession
of Employer or Executive, as the case may be, reasonably requested by the
Accounting Firm, and otherwise cooperate with the Accounting Firm in
connection with the preparation and issuance of the determinations and
calculations contemplated by this Section 10(d). Any determination by the
Accounting Firm as to the amount of any Gross-Up Payment or Underpayment
shall be binding upon Employer and Executive.
(iv) The federal, state and local income or other tax returns filed by
Executive shall be
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prepared and filed on a consistent basis with the determination of the
Accounting Firm with respect to the Excise Tax payable by Executive.
Executive shall make proper payment of the amount of any Excise Tax, and at
the request of Employer, provide to Employer true and correct copies (with
any amendments) of his federal income tax return as filed with the Internal
Revenue Service and corresponding state and local tax returns, if relevant,
as filed with the applicable taxing authority, and such other documents
reasonably requested by Employer, evidencing such payment. If prior to the
filing of Executive's federal income tax return, or corresponding state or
local tax return, if relevant, the Accounting Firm determines that the
amount of the Gross-Up Payment should be reduced, Executive shall within
five business days pay to Employer the amount of such reduction.
(v) The fees and expenses of the Accounting Firm for its services in
connection with the determinations and calculations contemplated by this
Section 10(d) shall be borne by Employer. If such fees and expenses are
initially paid by Executive, Employer shall reimburse Executive the full
amount of such fees and expenses within five business days after receipt
from Executive of a statement therefor and reasonable evidence of his
payment thereof.
(vi) Executive shall notify Employer in writing of any claim by the
Internal Revenue Service or any other taxing authority that, if successful,
would require the payment by Employer of a Gross-Up Payment. Such
notification shall be given as promptly as practicable but no later than 10
business days after Executive actually receives notice of such claim and
Executive shall further apprize Employer of the nature of such claim and
the date on which such claim is requested to be paid (in each case, to the
extent known by Executive). Executive shall not pay such claim prior to
the earlier of (A) the expiration of the 30-calendar-day period following
the date on which he gives such notice to Employer and (B) the date that
any payment of amount with respect to such claim is due. If Employer
notifies Executive in writing prior to the expiration of such period that
it desires to contest such claim, Executive, subject to the provisions of
Section 10(d) of this Agreement, shall:
(1) provide Employer with any written records or documents in his
possession relating to such claim reasonably requested by Employer;
(2) take such action in connection with contesting such claim as
Employer shall reasonably request in writing from time to time,
including without limitation accepting legal representation with
respect to such claim by an attorney competent in respect of the
subject matter and reasonably selected by Employer;
(3) cooperate with Employer in good faith in order effectively to
contest such claim; and
(4) permit Employer to participate in any proceedings relating to
such claim;
provided, however, that Employer shall bear and pay directly all costs
and expenses (including interest and penalties) incurred in connection
with such contest and shall indemnify and hold harmless Executive, on
an after-tax basis, for and against any Excise Tax or income tax,
including interest and penalties with respect thereto, imposed as a
result of such representation and payment of costs and expenses.
Without limiting the foregoing provisions of this Section 10(d),
Employer shall control all proceedings taken in connection with the
contest of any claim contemplated by this Section 10(d) and, at its
sole option, may pursue or forego any and all administrative appeals,
proceedings, hearings and conferences
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with the taxing authority in respect of such claim (provided, however,
that Executive may participate therein at his own cost and expense)
and may, at its option, either direct Executive to pay the tax claimed
and sue for a refund or contest the claim in any permissible manner,
and Executive agrees to prosecute such contest to a determination
before any administrative tribunal, in a court of initial jurisdiction
and in one or more appellate courts, as Employer shall determine;
provided, however, that if Employer directs Executive to pay the tax
claimed and sue for a refund, Employer shall advance the amount of
such payment to Executive on an interest-free basis and shall
indemnify and hold Executive harmless, on an after-tax basis, from any
Excise Tax or income or other tax, including interest or penalties
with respect thereto, imposed with respect to such advance; and
provided further, however, that any extension of the statute of
limitations relating to payment of taxes for the taxable year of
Executive with respect to which the contested amount is claimed to be
due is limited solely to such contested amount. Furthermore,
Employer's control of any such contested claim shall be limited to
issues with respect to which a Gross-Up Payment would be payable
hereunder and Executive shall be entitled to settle or contest, as the
case may be, any other issue raised by the Internal Revenue Service or
any other taxing authority.
(vii) If, after the receipt by Executive of an amount advanced by
Employer pursuant to Section 10(d), Executive receives any refund with
respect to such claim, Executive shall (subject to Employer's complying
with the requirements of Section 10(d)) promptly pay to Employer the amount
of such refund (together with any interest paid or credited thereon after
any taxes applicable thereto). If, after the receipt by Executive of an
amount advanced by Employer pursuant to Section 10(d)(vi), a determination
is made that Executive shall not be entitled to any refund with respect to
such claim and Employer does not notify Executive in writing of its intent
to contest such denial or refund prior to the expiration of 30 calendar
days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of any such advance shall
offset, to the extent thereof, the amount of Gross-Up Payment required to
be paid by Employer to Executive pursuant to this Section 10(d).
(viii) Any information provided by Executive to Employer under this
Section 10(d) shall be treated confidentially by Employer and will not be
provided by Employer to any other person than Employer's professional
advisors without Executive's prior written consent except as required by
law.
(e) Term. Notwithstanding the provisions of Section 3, if a Change in
Control occurs prior to the termination of this Agreement, Sections 10, 11 and
12 shall continue in effect for a period of 24 months after the date of the
Change in Control.
(f) No Duty to Mitigate Damages. Executive's rights and privileges under
this Section 10 shall be considered severance pay in consideration of his past
service and his continued service to Employer from the Commencement Date, and
his entitlement thereto shall neither be governed by any duty to mitigate his
damages by seeking further employment nor offset by any compensation that he may
receive from future employment.
(g) Arbitration. Any controversy or claim arising out of or relating to
this Section 10, or the breach thereof, shall be settled exclusively by
arbitration in Austin, Texas, in accordance with the Commercial Arbitration
Rules of the American Arbitration Association then in effect. Judgment upon the
award rendered by the arbitrator may be entered in, and enforced by, any court
having jurisdiction thereof.
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(h) No Right To Continued Employment. This Section 10 shall not give
Executive any right of continued employment or any right to compensation or
benefits from Employer except the rights specifically stated herein.
(i) Restricted Stock and Exercise of Stock Options. Executive may hold
options ("Options") issued under the Incentive Plan and such Options shall
become immediately exercisable upon a Change in Control. In addition, Executive
may hold restricted stock ("Restricted Stock") issued under the Incentive Plan,
and all applicable restrictions shall lapse upon a Change in Control. Employer
shall take no action to facilitate a transaction involving a Change in Control,
including without limitation redemption of any rights issued pursuant to any
rights agreement, unless it has taken such action as may be necessary to ensure
that Executive has the opportunity to exercise all Options he may then hold, and
obtain certificates containing no restrictive legends in respect of any
Restricted Stock he may then hold, at a time and in a manner that shall give
Executive the opportunity to sell or exchange the securities of Employer
acquired upon exercise of his Options and upon receipt of unrestricted
certificates for shares of Common Stock in respect of his Restricted Stock, if
any (collectively, the "Acquired Securities"), at the earliest time and in the
most advantageous manner any holder of the same class of securities as the
Acquired Securities is able to sell or exchange such securities in connection
with such Change in Control. Employer acknowledges that its covenants in the
preceding sentence (the "Covenants") are reasonable and necessary in order to
protect the legitimate interests of Employer in maintaining Executive as one of
its employees and that any violation of the Covenants by Employer would result
in irreparable injuries to Executive, and Employer therefore acknowledges that
in the event of any violation of the Covenants by Employer or its directors,
officers or employees, or any of their respective agents, Executive shall be
entitled to obtain from any court of competent jurisdiction temporary,
preliminary and permanent injunctive relief in order to (i) obtain specific
performance of the Covenants, (ii) obtain specific performance of the exercise
of his Options, delivery of certificates containing no restrictive legends in
respect of his Restricted Stock and the sale or exchange of the Acquired
Securities in the advantageous manner contemplated above or (iii) prevent
violation of the Covenants; provided nothing in this Agreement shall be deemed
to prejudice Executive's rights to damages for violation of the Covenants.
(j) Coordination With Other Payments.
(i) After the termination of Executive's employment hereunder:
(1) if Executive is entitled to receive Separation Payments; and
(2) Executive subsequently becomes entitled to receive a
Termination Payment, Gross Up Payment or both, then,
(ii) prior to the disbursement of the Termination Payment and Gross Up
Payment:
(1) the payment date of all unpaid Separation Payments shall be
accelerated to the payment date of the Termination Payment and such
Separation Payments shall be made (in this event, Employer waives any
requirement that Executive reduce the Separation Payments by the
amount of any income earned by Executive thereafter); and
(2) the Termination Payment shall be reduced by the amount of the
Separation Payments so accelerated and made.
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(k) Outplacement Services. If Executive becomes entitled to receive a
Termination Payment under this Section 10, Employer agrees to reimburse
Executive for the amount of any outplacement consulting fees and expenses
incurred by Executive during any Applicable Period and during the two-year
period following the Change In Control; provided that the aggregate amount
reimbursed by Employer shall not exceed 15% of the amount determined pursuant to
Section 10(b)(i)(1). In addition and as to each reimbursement payment, to the
extent that any reimbursement under this Section 10(k) is subject to federal,
state or local income taxes, Employer shall pay Executive an additional amount
such that the net amount retained by Executive, after deduction of any federal,
state and local income tax on the reimbursement and such additional amount,
shall be equal to the reimbursement payment. All amounts under this Section
10(k) shall be paid by Employer within 15 days after Executive's presentation to
Employer of any statements of such amounts and thereafter shall bear interest at
the rate of 18% per annum or, if different, the maximum rate allowed by law
until paid by Employer, and all accrued and unpaid interest shall bear interest
at the same rate, all of which interest shall be compounded daily.
SECTION 11. General.
(a) Notices. All notices and other communications hereunder shall be in
writing or by written telecommunication, and shall be deemed to have been duly
given if delivered personally or if mailed by certified mail, return receipt
requested or by written telecommunication, to the relevant address set forth
below, or to such other address as the recipient of such notice or communication
shall have specified to the other party in accordance with this Section 11(a):
If to Employer, to: with a copy to:
Luminex Corporation Thompson & Knight L.L.P.
12212 Technology Blvd. 98 San Jacinto Blvd., Suite 1200
Austin, Texas 78727 Austin, Texas 78701
Attention: General Counsel Attention: Craig Adams
Facsimile Number: (512) 219-5195 Facsimile Number (512) 469-6180
If to Executive, to:
12212 Technology Blvd.
Austin, Texas 78727
(b) Withholding; No Offset. All payments required to be made to Executive
by Employer under this Agreement shall be subject to the withholding of such
amounts, if any, relating to federal, state and local taxes as may be required
by law. No payments under Section 10 shall be subject to offset or reduction
attributable to any amount Executive may owe to Employer or any other person.
(c) Legal and Accounting Costs. Employer shall pay all attorneys' and
accountants' fees and costs incurred by Executive as a result of any breach by
Employer of its obligations under this Agreement, including without limitation
all such costs incurred in contesting or disputing any determination made by
Employer under Section 10 or in connection with any tax audit or proceeding to
the extent attributable to the application of Section 4999 of the Code to any
payment under Section 10. Reimbursements of such costs shall be made by
Employer within 15 days after Executive's presentation to Employer of any
statements of such costs and thereafter shall bear interest at the rate of 18%
per annum or, if different, the maximum rate allowed by law until paid by
Employer, and all accrued and unpaid interest shall bear interest at the same
rate,
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all of which interest shall be compounded daily.
(d) Equitable Remedies. Each of the parties hereto acknowledges and agrees
that upon any breach by Executive of his obligations under any of Sections 7, 8
and 9, Employer shall have no adequate remedy at law and accordingly shall be
entitled to specific performance and other appropriate injunctive and equitable
relief.
(e) Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable, such provision shall be fully severable, and
this Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision never comprised a part hereof, and the remaining
provisions hereof shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its severance
herefrom. Furthermore, in lieu of such illegal, invalid or unenforceable
provision, there shall be added automatically as part of this Agreement a
provision as similar in its terms to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid and enforceable.
(f) Waivers. No delay or omission by either party in exercising any right,
power or privilege hereunder shall impair such right, power or privilege, nor
shall any single or partial exercise of any such right, power or privilege
preclude any further exercise thereof or the exercise of any other right, power
or privilege.
(g) Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original, and all of which together shall
constitute one and the same instrument.
(h) Captions. The captions in this Agreement are for convenience of
reference only and shall not limit or otherwise affect any of the terms or
provisions hereof.
(i) Reference to Agreement. Use of the words "herein," "hereof," "hereto,"
"hereunder" and the like in this Agreement refer to this Agreement only as a
whole and not to any particular section or subsection of this Agreement, unless
otherwise noted.
(j) Binding Agreement. This Agreement shall be binding upon and inure to
the benefit of the parties and shall be enforceable by the personal
representatives and heirs of Executive and the successors and assigns of
Employer. This Agreement may be assigned by the Company or any Employer to any
Employer; provided that in the event of any such assignment, the Company shall
remain liable for all of its obligations hereunder and shall be liable for all
obligations of all such assignees hereunder. If Executive dies while any
amounts would still be payable to him hereunder, such amounts shall be paid to
Executive's estate. This Agreement is not otherwise assignable by Executive.
(k) Entire Agreement; Effect on Prior Agreement. This Agreement contains
the entire understanding of the parties, supersedes all prior agreements and
understandings relating to the subject matter hereof (including without
limitation the Prior Agreement, which is hereby terminated) and may not be
amended except by a written instrument hereafter signed by each of the parties
hereto. Executive and the Company hereby agree that, if any other employment
agreement between Executive and the Company (or any other Employer) is in
existence on the Commencement Date, then this Agreement shall supersede such
other employment agreement in its entirety, and such other employment agreement
shall no longer be of any force and effect after the date hereof.
(l) Governing Law. This Agreement and the performance hereof shall be
construed and governed in accordance with the laws of the State of Texas,
without regard to its choice of law principles.
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(m) Gender and Number. The masculine gender shall be deemed to denote the
feminine or neuter genders, the singular to denote the plural, and the plural to
denote the singular, where the context so permits.
(n) Assistance in Litigation. During the term of this Agreement and for a
period of two years thereafter, Executive shall, upon reasonable notice, furnish
such information and proper assistance to Employer as may reasonably be required
by Employer in connection with any litigation in which Employer is, or may
become, a party and with respect to which Executive's particular knowledge or
experience would be useful. Employer shall reimburse Executive for all
reasonable out-of-pocket expenses incurred by Executive in rendering such
assistance. The provisions of this Section 11(n) shall continue in effect
notwithstanding termination of Executive's employment hereunder for any reason.
SECTION 12. Definitions. As used in this Agreement, the following terms
will have the following meanings:
(a) Accounting Firm has the meaning ascribed to it in Section 10(d)(ii).
(b) Acquired Securities has the meaning ascribed to it in Section 10(i).
(c) Agreement has the meaning ascribed to it in the heading of this
document.
(d) Applicable Period means, with respect to any Change In Control, the
period of 27 months commencing 3 months before the Change In Control and ending
24 months after the Change In Control.
(e) Base Salary has the meaning ascribed to it in Section 4(a).
(f) Cause has the meaning ascribed to it in Section 6(a)(ii).
(g) Change In Control has the meaning ascribed to it in Section 10(c).
(h) Code means the Internal Revenue Code of 1986, as amended.
(i) Commencement Date has the meaning ascribed to it in Section 3.
(j) Company means Luminex Corporation, a Delaware corporation.
(k) Confidential Information has the meaning ascribed to it in Section
8(b).
(l) Constructively Terminated with respect to an Executive's employment
with Employer will be deemed to have occurred if Employer:
(i) demotes Executive to a lesser position, either in title or
responsibility, than the highest position held by Executive with Employer
at any time during Executive's employment with Employer;
(ii) decreases Executive's compensation below the highest level in
effect at any time during Executive's employment with Employer or reduces
Executive's benefits and perquisites
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below the highest levels in effect at any time during Executive's
employment with Employer (other than as a result of any amendment or
termination of any employee or group or other executive benefit plan, which
amendment or termination is applicable to all executives of Employer); or
(iii) requires Executive to relocate to a principal place of business
more than 30 miles from the principal place of business occupied by
Employer on the first day of an Applicable Period.
(m) Covenants has the meaning ascribed to it in Section 10(i).
(n) Designated Industry has the meaning ascribed to it in Section
9(a)(i)(1).
(o) Determination has the meaning ascribed to such term in Section 1313(a)
of the Code.
(p) Disability with respect to Executive shall be deemed to have occurred
whenever Executive is rendered unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment
that can be expected to result in death or that has lasted or can be expected to
last for a continuing period of not less than 12 months. In the case of any
dispute, the determination of Disability will be made by a licensed physician
selected by Employer, which physician's decision will be final and binding.
(q) Executive has the meaning ascribed to it in the heading of this
Agreement.
(r) Employer refers collectively to the Company and its subsidiaries and
other affiliates. In Section 10, the term "Employer" shall be deemed to refer
to the Company, and for purposes of Section 10, Executive shall be deemed to be
employed by the Company and all compensation and benefits paid or provided to
Executive by any Employer under this Agreement at any time shall be deemed to
have been paid or provided to Executive by the Company.
(s) Entity has the meaning ascribed to it in Section 10(l)(i)(1).
(t) Exchange Act has the meaning ascribed to it in Section 10(c)(iii).
(u) Excise Tax has the meaning ascribed to it in Section 10(d)(i).
(v) Good Reason means the termination of Executive's employment with
Employer as a result of Executive's commission of a felony or failure to obey
lawful and proper written directions delivered to Executive by Employer's
Chairman of the Board, President, Chief Executive Officer or its Board of
Directors.
(w) Gross Up Payment has the meaning ascribed to it in Section 10(d)(i).
(x) Incentive Plans means any stock option or equity incentive plan adopted
by Employer from time to time.
(y) Inventions has the meaning ascribed to it in Section 7(a).
(z) ISO has the meaning ascribed to it in Section 10(d)(i).
(aa) Options has the meaning ascribed to it in Section 10(i).
16
<PAGE>
(bb) Parachute Payments has the meaning ascribed to such term in Section
280G(b)(2) of the Code.
(cc) Payment has the meaning ascribed to it in Section 10(d)(i).
(dd) Restricted Stock has the meaning ascribed to it in Section 10(i).
(ee) Separation Payment Period has the meaning ascribed to it in Section
6(b)(ii).
(ff) Separation Payments has the meaning ascribed to it in Section 6(b)(ii).
(gg) Target Bonus means, with respect to each Executive, the dollar amount
that is equal to the established percentage of such Executive's Base Salary that
would be paid to Executive under the management incentive bonus plan of Employer
assuming the measurement criteria contained in such plan with respect to
Executive were achieved for the Bonus Period in which the Change In Control
occurred.
(hh) Termination Payment has the meaning ascribed to it in Section
10(b)(i).
(ii) Triggering Termination has the meaning ascribed to it in Section
10(a).
(jj) Underpayment has the meaning as ascribed to it in Section 10(d)(ii).
17
<PAGE>
EXECUTED as of the date and year first above written.
LUMINEX CORPORATION
By: ______________________________________
Mark Chandler
President and Chief Executive Officer
______________________________________
18
<PAGE>
<TABLE>
<CAPTION>
Executive Office Commencement Date Base Salary
--------- ------ ----------------- -----------
<S> <C> <C> <C>
Mark B. Chandler, Ph.D. President and Chief this Agreement 275,000
Executive Officer
Michael L. Bengtson Executive Vice President, that certain Underwriting 250,000
General Counsel and Secretary Agreement between Warburg
Dillon Read LLC, Lehman
Brothers Inc. and Dain Rauscher
Incorporated, as representatives
of the underwriters, and the
Company
Ralph L. McDade, M.D. Vice President of Scientific Affairs this Agreement 190,000
Van S. Chandler Vice President of Instruments this Agreement 190,000
Michael D. Spain, M.D. Vice President of Clinical Affairs this Agreement 190,000
James L. Persky Vice President, Treasurer and this Agreement 180,000
Chief Financial Officer
Randel S. Marfin Vice President of Business Development this Agreement 160,000
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
EXHIBIT 23.2
CONSENT OF 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 January 28, 2000, except
for Notes 4 and 10, as to which the date is March 9, 2000, in the Registration
Statement (Amendment No. 1 to Form S-1) and related Prospectus of Luminex
Corporation for the registration of shares of its common stock.
/s/ Ernst & Young LLP
Austin, Texas
March 9, 2000
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
EXHIBIT 24.2
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that William L. Roper, M.D., M.P.H.
appoints and constitutes Mark B. Chandler, Ph.D. and James L. Persky, and each
of them, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to execute any and all amendments to Luminex
Corporation's Registration Statement on Form S-1 (SEC No. 333-96317) (the
"Registration Statement"), and to sign any and all registration statements
relating to the same offering of securities as the Registration Statement that
are filed pursuant to Rule 462(b) of the Securities Act of 1933, as amended,
and to file the same, together with all exhibits thereto, with the Securities
and Exchange Commission, the National Association of Securities Dealers, Inc.,
and such other agencies, offices and persons as may be required by applicable
law, granting unto each 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 each said attorney-in-fact and agent may lawfully do or cause to be done
by virtue hereof.
/s/ William L. Roper, M.D.,
M.P.H.
_____________________________________
William L. Roper, M.D., M.P.H.
Date: March 9, 2000
- --------------------------------------------------------------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM LUMINEX CORP
12-31-99 AFS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 DEC-31-1999
<CASH> 8,537 4,083
<SECURITIES> 0 4,929
<RECEIVABLES> 160 1,405
<ALLOWANCES> (14) (64)
<INVENTORY> 47 663
<CURRENT-ASSETS> 8,791 11,187
<PP&E> 1,283 2,368
<DEPRECIATION> (484) (999)
<TOTAL-ASSETS> 9,590 12,566
<CURRENT-LIABILITIES> 400 771
<BONDS> 0 0
0 0
19,041 28,946
<COMMON> 13 13
<OTHER-SE> (9,864) (17,764)
<TOTAL-LIABILITY-AND-EQUITY> 9,590 12,566
<SALES> 386 2,606
<TOTAL-REVENUES> 386 3,112
<CGS> 88 1,172
<TOTAL-COSTS> 88 1,172
<OTHER-EXPENSES> 6,163 10,608
<LOSS-PROVISION> 14 64
<INTEREST-EXPENSE> (283) (284)
<INCOME-PRETAX> (5,596) (8,448)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (5,596) (8,448)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (5,596) (8,448)
<EPS-BASIC> (.43) (.64)
<EPS-DILUTED> (.43) (.64)
</TABLE>
