<PAGE>
As filed with the Securities and Exchange Commission on February 7, 2000
Registration No. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
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>
Michael L. Bengtson, Esq. Donald J. Murray, Esq.
Craig N. Adams, 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. [_]
----------------
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Proposed Maximum
Title of Each Class of Aggregate Offering Amount of
Securities to be Registered Price(1)(2) Registration Fee
- -----------------------------------------------------------------------------
<S> <C> <C>
Common stock, par value $.001 per
share.............................. $100,000,000 $26,400
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) In accordance with Rule 457(o) under the Securities Act of 1933, the number
of shares being registered and the proposed maximum offering price per
share are not included in this table.
(2) Estimated solely for the purpose of calculating the registration fee.
----------------
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PRELIMINARY PROSPECTUS , 2000
Subject to completion
- --------------------------------------------------------------------------------
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+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. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Shares
[LOGO OF LUMINEX]
Common Stock
- --------------------------------------------------------------------------------
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 $ and $ 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 $ $
- -------------------------------------------------------
Underwriting discounts and commissions $ $
- -------------------------------------------------------
Proceeds, before expenses, to Luminex $ $
- -------------------------------------------------------
</TABLE>
The underwriters may also purchase up to 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. This option may be exercised
only to cover over-allotments, if any. If the option is exercised 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>
- --------------------------------------------------------------------------------
[artwork to come]
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Through and including , 2000 (the 25th day after commencement of this
offering), all dealers selling shares of our common stock, whether or not
participating in this offering, may be required to deliver a prospectus. This
delivery requirement is in addition to the obligation of dealers to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<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
Business............................. 31
Management........................... 46
Related party transactions........... 53
Principal stockholders............... 55
Description of capital stock......... 57
Shares eligible for future sale...... 60
Underwriting......................... 62
Legal matters........................ 64
Experts.............................. 64
Where you can find more
information........................ 64
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.
- --------------------------------------------------------------------------------
<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 discussed 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.
The information found on our web site is not a part of this prospectus.
OUR BUSINESS
Luminex Corporation has developed, manufactures and markets a proprietary
technology platform 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 is able to simultaneously perform up to 100 bioassays
on a single drop of fluid. This is accomplished with a compact instrument, the
Luminex 100, that reads biological tests taking place on the surface of
microscopic plastic beads called microspheres. The Luminex 100 combines this
miniaturized bioassay capability with diode 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, biomedical research and pharmacogenomics.
We began marketing the current generation of LabMAP in 1999. As of January 31,
2000, 63 life sciences customers have purchased 100 LabMAP systems. Our
customers include GlaxoWellcome plc, SmithKline Beecham Corporation, Eli Lilly
& Company, Laboratory Corporation of America, Genentech Inc., Abbott
Laboratories, Life Technologies Inc., Bio-Rad Laboratories, Inc., Lawrence
Livermore National Laboratories, Mayo Clinic, Centers for Disease Control and
Prevention and National Institutes of Health.
OUR MARKET OPPORTUNITY
Bioassays are used extensively throughout the life sciences industry to detect
the presence of certain biochemicals, proteins or genes in a sample. They are
broadly used in drug discovery, genetic analysis, pharmacogenomics, clinical
diagnostics and general biomedical research. For example, bioassays can be used
to:
.measure the 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 pathological conditions such
as heart attack or diabetes.
Bioassays are either developed internally to meet the specific needs of the
laboratory or purchased in the form of an off-the-shelf test kit or customized
service. According to industry reports, the global
3
<PAGE>
market for tools used to develop and perform bioassays is estimated to have
been approximately $27.5 billion in 1998 and is expected to grow at an annual
rate of 8%. There are a number of factors contributing to this increase,
including:
.increased research and development spending by pharmaceutical and biomedical
research companies;
.a shift in research and development focus from gene sequencing to 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 are organized into functional groups, such as chemistry,
microbiology, immunology and serology. Similarly, pharmaceutical laboratories
are separated 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 throughput;
.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 by us to purchase additional shares in the
offering.
<TABLE>
<C> <S>
Common stock offered by us................. shares
Common stock to be outstanding after the
offering................................. 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>
Except as otherwise indicated, information in this prospectus is based on the
assumption that all outstanding shares of our preferred stock are converted
into 4,298,340 shares of our common stock upon the closing of this offering.
We are obligated to issue shares of common stock upon exercise of options and
warrants as follows:
. shares issuable if the underwriters' over-allotment option is
exercised in full, as described in "Underwriting";
.1,684,980 shares issuable upon the exercise of options at a weighted average
exercise price of $6.25 per share;
.262,500 shares issuable upon the exercise of warrants at an exercise price of
$4.00 per share; and
. additional shares made available for future grant under our 2000 Long-Term
Incentive Plan. See "Management -- Employee benefit plans -- 2000 Long-Term
Incentive Plan."
The number of shares of common stock outstanding after the offering is based on
shares outstanding as of January 31, 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 shares of our common stock in this offering at an assumed price to
the public of $ 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)
- --------------------------------------------------------------------------------
<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 5,741
Selling, general and
administrative...... 216 731 1,426 2,566 4,422
Amortization of
deferred stock and
stock compensation
expense............. -- -- -- -- 509
------ ------- ------- ------- -------
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.... $(0.12) $(0.33) $(0.44) $(0.87) $(1.31)
====== ======= ======= ======= =======
Shares used in computing
net loss per share,
basic and diluted.... 2,221 5,307 6,295 6,415 6,447
Pro forma net loss per
share, basic and
diluted.............. $(0.84)
=======
Shares used in computing
pro forma net loss
per share, basic and
diluted.............. 10,060
</TABLE>
<TABLE>
<CAPTION>
As of December 31,
1999
Actual As Adjusted
Balance sheet data (In thousands)
- -------------------------------------------------------------------------------
<S> <C> <C>
Cash and cash equivalents.................................. $4,083 $
Working capital............................................ 10,426
Total assets............................................... 12,566
Total stockholders' equity................................. 11,195
</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>
- --------------------------------------------------------------------------------
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 are at an early stage of development, and our business model is still
evolving.
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 may not be able to successfully
implement our business plan or adapt it to changes in the market.
We have a history of substantial losses and negative cash flow from operations,
and we expect to continue to incur losses and negative cash flow from
operations for the foreseeable 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. We cannot
assure you that we will ever achieve or sustain profitability or that our
operating losses will not increase in the future.
Our success depends on market acceptance of our technology, which is new and
unproven.
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
- --------------------------------------------------------------------------------
7
<PAGE>
Risk factors
- --------------------------------------------------------------------------------
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. If our technology platform does not become a widely used method in
the life sciences industry, demand for our products will not develop as
expected, and it is unlikely that we will ever become profitable.
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 realize the goals of our business plan.
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 business will be adversely affected.
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. 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
- --------------------------------------------------------------------------------
8
<PAGE>
Risk factors
- --------------------------------------------------------------------------------
technology. Some of the companies we are targeting as strategic partners offer
products competitive with our LabMAP 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
difficulty expanding our manufacturing capabilities.
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 expanding
production due to, among other things, quality control and assurance, component
supply and availability of qualified personnel. 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
- --------------------------------------------------------------------------------
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 success will depend largely on our ability to attract and retain customer
and technical support personnel. 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 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.
If we fail to manage our growth, our business could be harmed.
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 81 at
January 31, 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 and to attract and retain sufficient
numbers of talented employees. 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. If we
are unable to manage this growth effectively, our business, results of
operations or financial condition may be harmed.
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
- --------------------------------------------------------------------------------
10
<PAGE>
Risk factors
- --------------------------------------------------------------------------------
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, which could adversely affect our results
of operations and financial condition.
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 can be no assurance
that we will be able to attract and retain our personnel.
RISKS RELATED TO OPERATING IN OUR INDUSTRY
The life sciences industry is highly competitive and subject to rapid
technological change.
The life sciences industry is highly competitive. 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.
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
- --------------------------------------------------------------------------------
11
<PAGE>
Risk factors
- --------------------------------------------------------------------------------
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 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 and certain other
countries.
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 adversely affect our business, financial condition and
results of operations. 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
- --------------------------------------------------------------------------------
12
<PAGE>
Risk factors
- --------------------------------------------------------------------------------
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.
Our business is subject to extensive governmental regulation.
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 or recall could have a
material adverse effect on our business, financial condition and results of
operations.
- --------------------------------------------------------------------------------
13
<PAGE>
Risk factors
- --------------------------------------------------------------------------------
Some of our programs are partially supported by government grants, which may be
withdrawn.
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 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.
Because our revenues are received principally from life sciences companies and
government and research institutes, 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 have
a material adverse effect on our business, financial condition and results of
operations.
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 business,
financial condition and results of operations could be materially adversely
affected.
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.
- --------------------------------------------------------------------------------
14
<PAGE>
Risk factors
- --------------------------------------------------------------------------------
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 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;
- --------------------------------------------------------------------------------
15
<PAGE>
Risk factors
- --------------------------------------------------------------------------------
.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, which could harm our business.
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 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 % 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
% of our outstanding common stock or % 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.
- --------------------------------------------------------------------------------
16
<PAGE>
Risk factors
- --------------------------------------------------------------------------------
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 shares of common stock outstanding
immediately after this offering, or shares if the underwriters exercise
their over-allotment option in full. 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 10,753,122 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 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."
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 $ 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 $ 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.
We may need additional funding to support 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
- --------------------------------------------------------------------------------
17
<PAGE>
Risk factors
- --------------------------------------------------------------------------------
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. Our
inability to raise capital would have a material adverse effect on our
business, financial condition and results of operations.
We have never paid cash dividends.
We have never paid cash dividends on our capital stock and do not anticipate
paying any cash dividends in the foreseeable future.
Anti-takeover provisions in our charter and bylaws and Delaware law could make
a third-party acquisition of us difficult.
Our restated 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."
- --------------------------------------------------------------------------------
18
<PAGE>
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
19
<PAGE>
- --------------------------------------------------------------------------------
Use of proceeds
We estimate that the net proceeds from the sale of the shares of common stock
we are offering will be approximately $ million at an assumed initial public
offering price of $ 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 $ 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.
- --------------------------------------------------------------------------------
20
<PAGE>
- --------------------------------------------------------------------------------
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 4,298,340
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 shares of common stock offered by this
prospectus at an assumed initial public offering price of $ 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 -- 25,000,000 actual,
200,000,000 pro forma and pro forma as
adjusted
Issued and outstanding shares -- 6,454,782
actual, 10,753,122 pro forma and pro
forma as adjusted............................ 6 11
Warrants to purchase 262,500 shares of common
stock......................................... 180 180
Additional paid-in capital....................... 960 29,901
Deferred stock compensation...................... (69) (69)
Accumulated deficit.............................. (18,828) (18,828)
------- ------- --------
Total stockholders' equity...................... 11,195 11,195
------- ------- --------
Total capitalization............................ $11,195 $11,195 $
======= ======= ========
</TABLE>
The table above does not include:
.1,684,980 shares of common stock issuable upon exercise of options outstanding
at a weighted average price of $6.25 per share; and
. additional shares of common stock made available for future issuance
under our 2000 Long-Term Incentive Plan.
To the extent that these options are exercised, there will be further dilution
to new investors. See "Management -- Employee benefit plans."
- --------------------------------------------------------------------------------
21
<PAGE>
- --------------------------------------------------------------------------------
Dilution
Our historical net tangible book value as of December 31, 1999 was
approximately $11.2 million, or $1.73 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 $1.04 per share, based on the pro forma number of shares
outstanding as of December 31, 1999 of 10,753,122, calculated after giving
effect to the automatic conversion of 841,359 shares of our preferred stock
outstanding as of December 31, 1999 into 4,298,340 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
shares in this offering. This represents an immediate increase in
pro forma net tangible book value of $ per share to existing stockholders
and an immediate dilution in pro forma net tangible book value of $ per
share to new investors. The following table illustrates this per share
dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................. $
Historical net tangible book value per share as of December 31,
1999........................................................ $1.73
Decrease attributable to conversion of preferred stock......... (0.69)
-----
Pro forma net tangible book value per share as of December 31,
1999........................................................ 1.04
Increase attributable to the offering..........................
-----
Net tangible book value per share after the offering............
-------
Dilution per share to new investors............................. $
=======
</TABLE>
The following table summarizes, on a pro forma basis as of 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.... 10,753,122 % $30,562,740 % $2.84
New investors............ $
---------- ----- ----------- -----
Total.................... 100% $ 100%
========== ===== =========== =====
</TABLE>
The tables and calculations above assume no exercise of outstanding options or
warrants. As of December 31, 1999, there were:
.1,684,980 shares issuable upon the exercise of options outstanding as of a
weighted average exercise price of $6.25 per share;
.262,500 shares issuable upon the exercise of warrants outstanding as of
December 31, 1999 at a weighted average exercise price of $4.00 per share; and
- --------------------------------------------------------------------------------
22
<PAGE>
Dilution
- --------------------------------------------------------------------------------
. additional shares available for future grant under our 2000 Long-Term
Incentive Plan.
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 % 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 , or approximately % 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 $ per share to
existing stockholders and our pro forma net tangible book value will be
diluted by $ 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 5,741
Selling, general and
administrative........ 216 731 1,426 2,566 4,422
Amortization of deferred
stock and stock
compensation expense.. -- -- -- -- 509
------ ------- ------- ------- -------
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............ $(0.12) $(0.33) $(0.44) $(0.87) $(1.31)
====== ======= ======= ======= =======
Shares used in computing
net loss per share,
basic and diluted...... 2,221 5,307 6,295 6,415 6,447
Pro forma net loss per
share, basic and
diluted................ $(0.84)
=======
Shares used in computing
pro forma net loss per
share, basic and
diluted................ 10,060
</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. 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 $5.7 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 $4.4 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 as well as the costs of facilities, insurance, trade
shows and legal support. 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 and a
$262,000 increase in facilities costs due to the leasing of additional
manufacturing space early in 1999.
Amortization of deferred stock and stock compensation expense
Amortization of deferred stock and stock compensation expense was $509,000 in
1999. 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 was primarily attributable to the issuance of stock options to our
consultants.
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 $536,000. 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 may be limited by the
change of ownership provisions contained in Section 382 of the Internal Revenue
Code. However, we do not believe these limitations will materially impact their
use.
- --------------------------------------------------------------------------------
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
the 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 one share of our
common stock. Each share of our Series B, C, D and E Preferred Stock is
convertible into ten 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 sheet
- --------------------------------------------------------------------------------
29
<PAGE>
Management's discussion and analysis of financial condition and results of
operation
- --------------------------------------------------------------------------------
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 platform 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 is able to simultaneously perform up to 100 bioassays
on a single drop of fluid. This is accomplished with a compact instrument, the
Luminex 100, that reads biological tests taking place on the surface of
microscopic plastic beads called microspheres. The Luminex 100 combines this
miniaturized bioassay capability with diode 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, biomedical research and pharmacogenomics.
We began marketing the current generation of LabMAP in 1999. As of January 31,
2000, 63 life sciences customers have purchased 100 LabMAP systems. Our
customers include GlaxoWellcome plc, SmithKline Beecham Corporation, Eli Lilly
& Company, Laboratory Corporation of America, Genentech Inc., Abbott
Laboratories, Life Technologies Inc., Bio-Rad Laboratories, Inc., Lawrence
Livermore National Laboratories, Mayo Clinic, Centers for Disease Control and
Prevention and National Institutes of Health.
MARKET OPPORTUNITY
Background
Bioassays are used extensively throughout the life sciences industry to detect
the presence of certain biochemicals, proteins or genes in a sample. They are
broadly used in drug discovery, genetic analysis, pharmacogenomics, clinical
diagnostics and general biomedical research. For example, bioassays can be used
to:
.measure the 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 pathological conditions such
as heart attack or diabetes.
Bioassays are either developed internally to meet the specific needs of the
laboratory or purchased in the form of an off-the-shelf test kit or customized
service. According to industry reports, the global market for tools used to
develop and perform bioassays is estimated to have been approximately $27.5
billion in 1998 and is expected to grow at an annual rate of 8%.
- --------------------------------------------------------------------------------
31
<PAGE>
Business
- --------------------------------------------------------------------------------
Markets description
Drug discovery and development
The bioassays employed by the pharmaceutical industry vary in design and
complexity throughout the drug discovery and development process. Simple
bioassays are used to screen a pharmaceutical company's library of chemical
compounds against disease targets. More complex ones are then used in
confirmatory testing as well as in lead optimization. Finally, predictive
toxicity bioassays are used to test the safety of the potential drug.
According to industry reports, the global market for tools to develop and
perform bioassays for the drug discovery and development industry is estimated
to have been approximately $7.2 billion in 1998 and is expected to continue to
grow at an annual rate of 14%. 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 and are expected to
increase spending at an annual rate of 15%. 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 functional
genomics and proteomics. Recently, pharmaceutical companies have focused on
the sequence of the human genome, driven by the objectives of the Human Genome
Project and the activities of such companies as Celera Genomics Group and
Incyte Pharmaceuticals. Pharmaceutical and biotechnology companies are now
focusing 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
Bioassays are broadly used in the clinical diagnostics market. These bioassays
are commonly referred to as in vitro diagnostics, or IVD, and are used to
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.
These applications are performed in a number of different clinical settings,
including hospital laboratories, commercial laboratories and physicians'
offices/ambulatory care centers. 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.
According to an industry report, the global market for IVD products is
estimated to have been approximately $18 billion in 1998 and growing at an
annual rate of 4%. 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 was
originally used to evaluate potential drug candidates and is now the primary
tool for patient monitoring.
.Evolution of pharmacogenomics. There are many studies investigating genetic
variation among individuals, including SNPs, and their linkage to disease.
These studies are principally funded by a consortium of pharmaceutical
companies seeking to correlate the results of an individual's SNP profile with
drug response. 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 will 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 serology. Similarly, pharmaceutical laboratories
are separated 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
.Perform large number .Requires large sample
of individual tests volume
.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 .High sample volume
discrete wells in which clinical .High throughput .Fixed configuration
assays are fixed diagnostics and .Reproducible .High reagent costs
biomedical .Broad formats .Single test per well
research
</TABLE>
- --------------------------------------------------------------------------------
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. The
LabMAP system meets these requirements while also providing the following key
features critical to its function as a universal bioassay platform:
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.
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. Whether producing one million or just 10
microsphere-based tests, there is no change in the manufacturing process or the
required labor. 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, such as diode lasers and digital signal processors, our
products have a comparatively low acquisition cost. In addition, microsphere-
based bioassays are inexpensive compared to test tubes, microtiter wells or
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,
- --------------------------------------------------------------------------------
35
<PAGE>
Business
- --------------------------------------------------------------------------------
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 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
- --------------------------------------------------------------------------------
36
<PAGE>
Business
- --------------------------------------------------------------------------------
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 January 31, 2000, we had sold 100 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 interface with robotic systems that
deliver these plates to the Luminex 100, allowing integration into fully
automated test centers. From market introduction through January 31, 2000, we
had sold 40 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. As of
January 31, 2000, we had approximately 45 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
- --------------------------------------------------------------------------------
37
<PAGE>
Business
- --------------------------------------------------------------------------------
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.
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
- --------------------------------------------------------------------------------
38
<PAGE>
Business
- --------------------------------------------------------------------------------
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 specified transfer fees, as well as 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 January 31, 2000, our customers included the following:
<TABLE>
<CAPTION>
Customer Market Application
- --------------------------------------------------------------------------------------
<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
Quest Diagnostics Incorporated Commercial clinical Clinical testing
laboratory
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.
- --------------------------------------------------------------------------------
39
<PAGE>
Business
- --------------------------------------------------------------------------------
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,
- --------------------------------------------------------------------------------
40
<PAGE>
Business
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
41
<PAGE>
Business
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
42
<PAGE>
Business
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
43
<PAGE>
Business
- --------------------------------------------------------------------------------
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 January 31, 2000, we had 81 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
- --------------------------------------------------------------------------------
44
<PAGE>
Business
- --------------------------------------------------------------------------------
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
and certain other countries, 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 and
certain other countries 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.
- --------------------------------------------------------------------------------
45
<PAGE>
- --------------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------
<C> <C> <S>
Chairman of the Board, President and Chief
Mark B. Chandler, PhD (1).... 46 Executive Officer
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
</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.
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 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.
- --------------------------------------------------------------------------------
46
<PAGE>
Management
- --------------------------------------------------------------------------------
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 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.
- --------------------------------------------------------------------------------
47
<PAGE>
Management
- --------------------------------------------------------------------------------
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.
BOARD COMPOSITION
We currently have nine authorized directors. We intend to fill the vacancy
prior to the consummation of this offering. In accordance with the terms of our
restated 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 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.
- --------------------------------------------------------------------------------
48
<PAGE>
Management
- --------------------------------------------------------------------------------
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.
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 5,000 shares of common stock and one
additional director was granted fully vested options to purchase 30,000 shares
of common stock. In 1999, six non-employee directors were granted a fully
vested option to purchase 15,000 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 restated certificate of incorporation and our amended and restated 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
- --------------------------------------------------------------------------------
49
<PAGE>
Management
- --------------------------------------------------------------------------------
connection with their service for or on our behalf. In addition, the restated
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.
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 $ -- $ -- 250,000 $--
Chairman and Chief
Executive Officer
Van S. Chandler............ 175,000 -- -- 75,000 5,250
Vice President of
Instruments
Ralph L. McDade............ 175,000 -- -- -- 5,250
Vice President of
Scientific Affairs
Michael D. Spain........... 160,000 -- -- 25,000 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 817,100
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
- --------------------------------------------------------------------------------
50
<PAGE>
Management
- --------------------------------------------------------------------------------
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.
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...... 250,000 40% $8 5/20/04 $552,563 $1,221,020
Van S. Chandler.. 75,000 12 8 5/20/04 165,769 366,306
Ralph L. McDade.. -- -- -- -- -- --
Michael D.
Spain......... 25,000 4 8 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 $ 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........ -- $ -- -- 250,000 $--
Van S. Chandler......... -- -- -- 75,000 --
Ralph L. McDade......... -- -- 69,999 55,001
Michael D. Spain........ -- -- 33,332 41,668
James L. Persky......... -- -- 33,333 66,667
</TABLE>
EMPLOYMENT AGREEMENTS
We intend to enter into employment agreements with certain of our executive
officers prior to the completion of this offering.
- --------------------------------------------------------------------------------
51
<PAGE>
Management
- --------------------------------------------------------------------------------
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 2,000,000 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 January 31, 2000, we
had 1,667,100 options to purchase common stock under this plan outstanding to
employees, directors and consultants with a weighted average exercise price of
$6.31 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 was adopted by our board of directors and
will be submitted to our stockholders for approval in February 2000 as a
successor equity plan to our 1996 plan. Up to shares of common stock may be
issued under the 2000 plan.
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.
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 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.
- --------------------------------------------------------------------------------
52
<PAGE>
- --------------------------------------------------------------------------------
Related party transactions
SALES OF SECURITIES
Since January 1, 1997 through January 31, 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 25,000
- --------------------------------------------------------------------------------
53
<PAGE>
Related party transactions
- --------------------------------------------------------------------------------
shares of our common stock at an exercise price of $8.00 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 $228,000 in cash and
issued warrants to Southcoast to purchase 262,500 shares of our common stock at
an exercise price of $4.00 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 140,246 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.
- --------------------------------------------------------------------------------
54
<PAGE>
- --------------------------------------------------------------------------------
Principal stockholders
The following table shows information known to us with respect to the
beneficial ownership of our common stock as of January 31, 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 January 31, 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 11,804,070 shares of our common stock outstanding
prior to this offering and 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. ............ 1,830,246 -- 15.5
Van S. Chandler..................... 939,667 -- 8.0
Ralph L. McDade, Ph.D. ............. -- 93,332 *
Michael D. Spain, M.D. ............. -- 33,332 *
James L. Persky..................... -- 66,667 *
G. Walter Loewenbaum (1)(2)......... 1,690,000 203,876 16.0
A. Sidney Alpert.................... 100,000 5,000 *
Robert J. Cresci.................... 58,750 20,000 *
Laurence E. Hirsch.................. 142,500 20,000 1.4
Fred C. Goad, Jr. (3)............... 120,500 20,000 1.2
Jim D. Kever (4).................... 100,000 37,500 1.2
John E. Koerner, III (5)............ 699,000 20,000 6.1
All directors and executive officers
as a group (13 persons).......... 5,681,997 529,207 52.6
</TABLE>
- --------------------------------------------------------------------------------
55
<PAGE>
Principal stockholders
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of Number of
shares shares underlying Percent owned
Beneficial Owner outstanding options or warrants Percent after this offering
- ------------------------------------------------------------------------------------
Five percent
stockholders
<S> <C> <C> <C> <C>
R. Jerrold Fulton (6)... 820,000 -- 6.9
305 Evergreen Trail
Cedar Hill, Texas 75104
John R. Kettman......... 668,166 -- 5.7
3119 Barton Road
Carrollton, Texas 75007
</TABLE>
- --------
* Less than 1.0%.
(1) Consists of 1,390,000 shares held by Mr. Loewenbaum and 300,000 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 203,876 shares issuable upon the exercise of a warrant, 131,376 of
which are held by Mr. Loewenbaum and 72,000 of which are held by a trust
for the benefit of Mr. Loewenbaum's children.
(3) Includes 300 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 42,064 shares held by Mr. Kever and 57,936 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 625,000 shares held by Koerner Capital Corporation of which Mr.
Koerner is the sole stockholder and 74,000 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 220,000 shares held by Dr. Fulton and 600,000 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.
- --------------------------------------------------------------------------------
56
<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 restated certificate of incorporation and our amended and restated 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 January 31, 2000, there were 6,472,662 shares of common stock
outstanding and held of record by 296 stockholders. There will be shares
of common stock outstanding upon the closing of this offering, which gives
effect to the issuance of 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 January 31, 2000, there were 841,359 shares of convertible preferred
stock outstanding. All outstanding shares of convertible preferred stock will
be converted into 4,298,340 shares of our common stock upon the closing of
this offering and these shares of convertible preferred stock will no longer
be authorized, issued or outstanding. Our restated 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
- -------------------------------------------------------------------------------
57
<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 January 31, 2000, warrants to purchase a total of 262,500 shares of our
common stock, at an exercise price of $4.00 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 262,500 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
- --------------------------------------------------------------------------------
58
<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 restated 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 restated
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 restated certificate of incorporation provide that
the stockholders may amend the bylaws or certain provisions of the restated
certificate of incorporation only with the affirmative vote of 75% of our
capital stock. These provisions of the restated certificate of incorporation
and amended and restated 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
amended and restated 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 .
- --------------------------------------------------------------------------------
59
<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. After this offering, we will have
outstanding shares of common stock. Of these shares, the shares being offered
hereby are freely tradable. This leaves 10,753,122 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
469,739 under Rules 701 and 144
At various times after 180 days from the date of this prospectus,
subject, in some cases, to volume limitations under Rule 144
</TABLE>
Our directors and officers and all of our stockholders, together with the
holders of options to purchase shares of common stock and the holders of
warrants to purchase 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 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 January 31, 2000, options to purchase a total of 1,667,100 shares of
common stock were outstanding, 688,906 of which were currently exercisable, and
all of which are subject to repurchase by us. Of these 1,667,100 shares,
469,739 shares may be eligible for sale in the public market at various times
after 90 days from the date of this prospectus.
- --------------------------------------------------------------------------------
60
<PAGE>
Shares eligible for future sale
- --------------------------------------------------------------------------------
Upon the closing of this offering, we intend to file a registration statement
to register for resale the 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 262,500 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."
- --------------------------------------------------------------------------------
61
<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..............................................................
=====
</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 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 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 $ .
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.
- --------------------------------------------------------------------------------
62
<PAGE>
Underwriting
- --------------------------------------------------------------------------------
The underwriters have reserved for sale, at the initial public offering price,
up to 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.
- --------------------------------------------------------------------------------
63
<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 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.
- --------------------------------------------------------------------------------
64
<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
- --------------------------------------------------------------------------------
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, 25,000,000
shares authorized; shares issued and
outstanding: 6,438,162 and 6,454,782 in
1998 and 1999, respectively; 10,753,122
shares pro forma....................... 6 6 11
Warrants to purchase 262,500 shares of
Common Stock at $4 per share........... 180 180 180
Additional paid-in capital................ 343 960 29,901
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 5,741
Sales, general and administrative................. 1,426 2,566 4,422
Amortization of deferred stock and stock
compensation expense........................... -- -- 509
------- ------- -------
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 ............. $(0.44) $(0.87) $(1.31)
======= ======= =======
Shares used in computing net loss per share, basic
and diluted..................................... 6,295 6,415 6,447
Pro forma net loss per share, basic and diluted
(unaudited)..................................... $(0.84)
=======
Shares used in computing pro forma net loss per
share, basic and diluted (unaudited)............ 10,060
</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 6,295,250 $6 $-- $1,000 $-- $(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 6,295,250 6 180 647 -- (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.............. -- -- 2,666 -- -- 3 -- -- 3
Common stock issued for
assets purchased..... -- -- 140,246 -- -- 561 -- -- 561
Net loss............... -- -- -- -- -- -- -- (5,596) (5,596)
------- ------- ---------- --- ---- ------- ----- -------- -------
Balance at December 31,
1998.................. 758,821 19,041 6,438,162 6 180 343 -- (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.............. -- -- 16,620 -- -- 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 6,454,782 $6 $180 $960 $(69) $(18,828) $11,195
======= ======= ========== === ==== ======= ===== ======== =======
Pro forma balance at
December 31, 1999
(unaudited)........... -- $-- 10,753,122 $11 $180 $29,901 $(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. The Company reserves
for the cost of estimated sales returns as well as uncollectible accounts based
upon experience.
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.
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.
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.
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 Statement 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 Statement 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 Statement 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, during 1998. SFAS No. 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...................................... 6,295 6,415 6,447
======= ======= =======
Basic and diluted net loss per share................ $(0.44) $(0.87) $(1.31)
======= ======= =======
Pro forma basic and diluted:
Shares used above................................... 6,447
Pro forma adjustment to reflect weighted average
effect of assumed conversion of preferred stock.. 3,613
-------
Shares used in computing pro forma basic and diluted
net loss per share............................... 10,060
=======
Basic and diluted pro forma net loss per share...... $(0.84)
=======
</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
3,045,750, 4,834,960 and 6,245,740 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
one share 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 mandatory redemption 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 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 ten 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 mandatory redemption by the
Company at $40.00 per share, (with not less than 30 and not more than 60 days
notice) on the date that a registration statement registering any shares of
Common Stock is declared effective by the Securities and 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 ten 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 ten 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 ten 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 6,454,782 shares of Common Stock issued and
outstanding. In addition, approximately 6,542,000 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 262,500 shares of Common Stock at an exercise price
of $4.00 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 2,000,000 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 18,750 shares of
the Company's Common Stock to a consulting firm at an exercise price of $4.00
per share that expires on January 31, 2002. The Company granted an additional
181,250 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 50,000 shares of the Company's Common Stock at an exercise
price of $4.00 per share. The Company recorded 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.............. (0.44) (0.87) (1.31)
Pro forma diluted net loss per share................ (0.44) (0.90) (1.35)
</TABLE>
The weighted average grant date fair value of options granted was $1.04, $1.72
and $2.13 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........ 199,000 $1.00 $1.00
Granted...................................... 627,000 $4.00 $4.00
Exercised.................................... -- -- --
Surrendered.................................. -- -- --
--------- ------------ -----
Options outstanding, December 31, 1997........ 826,000 $1.00-$ 4.00 $3.28
Granted...................................... 281,500 $6.00-$ 8.00 $7.19
Exercised.................................... (2,666) $1.00 $1.00
Surrendered.................................. (5,334) $1.00-$ 6.00 $4.00
--------- ------------ -----
Options outstanding, December 31, 1998........ 1,099,500 $1.00-$ 8.00 $4.28
Granted...................................... 817,100 $4.00-$12.00 $8.23
Exercised.................................... (16,620) $1.00-$ 4.00 $2.81
Surrendered.................................. (215,000) $4.00 $4.00
--------- ------------ -----
Options outstanding, December 31, 1999........ 1,684,980 $1.00-$12.00 $6.25
========= ============
</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>
$1.00 188,380 1.16 $1.00 158,380 $1.00
4.00 450,000 2.80 4.00 338,318 4.00
6.00 162,000 3.16 6.00 53,994 6.00
8.00 762,500 4.29 8.00 130,829 8.00
12.00 122,100 4.21 12.00 22,933 12.00
--------- -------
1,684,980 704,454
========= =======
</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 $536,000 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 may be
subject to a substantial annual limitation due to an "ownership change"
resulting from the sales of private equity securities. The annual limitation
may result in the expiration 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 140,246 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 $354,000 and issued warrants
to purchase 262,500 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
$4.00 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 25,000 shares of the Company's common
stock to this Director of the Company. The Company recorded 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 5,000 shares of common stock at an exercise
price of $4.00 per share, and one outside director of Luminex was granted fully
vested options to purchase 30,000 shares of common stock at an exercise price
of $4.00 per share.
On May 20, 1999, six outside directors of Luminex were each granted fully
vested options to purchase 15,000 shares of common stock at an exercise price
of $8.00 per share.
In December 1999, the Company issued 25,000 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.
- --------------------------------------------------------------------------------
F-18
<PAGE>
- --------------------------------------------------------------------------------
[Inside back cover]
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
[LOGO OF LUMINEX]
- --------------------------------------------------------------------------------
<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..................................... *
Blue Sky fees and expenses............................................. 5,000
Accountants' fees and expenses......................................... 175,000
Legal fees and expenses................................................ 250,000
Printing and engraving expenses........................................ 125,000
Transfer agent and registrar fees...................................... *
Miscellaneous.......................................................... *
-------
Total................................................................ $ *
=======
</TABLE>
- --------
*To be filed by amendment.
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.................... 627,000 $ 4.00
January 1, 1998 to December 31, 1998.................... 281,500 $ 6.00-$8.00
January 1, 1999 to December 31, 1999.................... 817,100 $4.00-$12.00
January 1, 2000 to January 31, 2000..................... -- --
</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 1,725,600
shares of Common Stock under its 1996 Stock Option Plan at a weighted
average exercise price of $6.52.
(2) On April 2, 1997, the Registrant issued a warrant to purchase 262,500
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 sale of the above securities were deemed to be exempt from registration
under the Securities Act in reliance on Section 4(2) of the Securities Act, or
Regulation D promulgated thereunder, or, with respect
II-2
<PAGE>
to issuances to employees, directors and consultants, Rule 701 promulgated
under Section 3(b) of the Securities Act as transactions by an issuer not
involving a public offering or transactions pursuant to compensatory benefit
plans and contracts relating to compensation as provided under such Rule 701.
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 ten 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 Incentive Stock Option Award Agreement of the Registrant.
10.6* Form of Non-Qualified Stock Option Award Agreement of the Registrant.
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.
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)
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.
(b)Financial Statement Schedules
None.
II-3
<PAGE>
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 February 4, 2000.
Luminex Corporation
/s/ Mark B. Chandler, Ph.D.
By___________________________________
Mark B. Chandler, Ph.D.
Chief Executive Officer
KNOW ALL PERSONS BY THESE PRESENTS, that each of the persons whose names appear
below appoint and constitute 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 the within
Registration Statement, and to sign any and all registration statements
relating to the same offering of securities as this 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.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons on February 4,
2000 in the capacities indicated
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Mark B. Chandler, Ph.D. Chairman of the Board and February 4, 2000
____________________________________ Chief Executive Officer
Mark B. Chandler, Ph.D. (Principal Executive
Officer)
/s/ James L. Persky Vice President, Treasurer February 4, 2000
____________________________________ and Chief Financial Officer
James L. Persky (Principal Financial
Officer)
/s/ Harriss T. Currie Controller (Principal February 4, 2000
____________________________________ Accounting Officer)
Harriss T. Currie
/s/ G. Walter Loewenbaum Director February 4, 2000
____________________________________
G. Walter Loewenbaum
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ A. Sidney Alpert Director February 4, 2000
____________________________________
A. Sidney Alpert
/s/ Robert J. Cresci Director February 4, 2000
____________________________________
Robert J. Cresci
/s/ Laurence E. Hirsch Director February 4, 2000
____________________________________
Laurence E. Hirsch
/s/ Jim D. Kever Director February 4, 2000
____________________________________
Jim D. Kever
/s/ Fred C. Goad, Jr. Director February 4, 2000
____________________________________
Fred C. Goad, Jr.
/s/ John E. Koerner, III Director February 4, 2000
____________________________________
John E. Koerner, III
</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 Incentive Stock Option Award Agreement of the Registrant.
10.6* Form of Non-Qualified Stock Option Award Agreement of the Registrant.
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.
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)
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.
<PAGE>
Exhibit 3.1
FORM
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
LUMINEX CORPORATION
Luminex Corporation, a corporation organized and existing under the laws of
the State of Delaware (the "Corporation"), hereby certifies as follows:
FIRST: The name of the Corporation is Luminex Corporation.
SECOND: The original Certificate of Incorporation of the Corporation was
filed with the Secretary of State of Delaware on June 19, 1998.
THIRD: This Restated Certificate of Incorporation amends and restates
the provisions of the Certificate of Incorporation of the Corporation filed with
the Secretary of State of Delaware on June 19, 1998.
FOURTH: The Board of Directors duly adopted resolutions proposing to
amend and restate the Certificate of Incorporation of the Corporation, declaring
said amendment and restatement to be advisable and in the best interests of the
Corporation and its stockholders, and authorizing the appropriate officers of
the Corporation to obtain the approval of the stockholders therefor.
FOURTH: The Restated Certificate of Incorporation was approved by the
requisite number of shares of the Corporation in accordance with the
requirements of Sections 242 and 245 of the General Corporation Law of the State
of Delaware at the Corporation's annual meeting of stockholders held on February
___, 2000.
FIFTH: The text of the Restated Certificate of Incorporation is hereby
amended and restated to read in its entirety as follows:
ARTICLE I
The name of the corporation is Luminex Corporation (the "Corporation").
ARTICLE II
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 19801, and the name of the Corporation's registered agent
at such address is The Corporation Trust Company.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of the
State of Delaware.
ARTICLE IV
A. Authorized Shares. The aggregate number of shares of capital stock
-----------------
that the Corporation shall have the authority to issue is 205,000,000,
consisting of (i) 200,000,000 shares of common stock, par value $.001 per share
("Common Stock"), and (ii) 5,000,000 shares of preferred stock, par value $.001
per share ("Preferred Stock").
<PAGE>
B. Common Stock.
------------
1. Dividends. Subject to the preferential rights, if any, of the
Preferred Stock, the holders of shares of Common Stock shall be entitled to
receive, when and if declared by the Board of Directors, out of the assets of
the Corporation which are by law available therefore, dividends payable either
in cash, in property or in shares of Common Stock or other securities of the
Corporation.
2. Voting Rights. At every annual or special meeting of shareholders of
the Corporation, every holder of Common Stock shall be entitled to one vote, in
person or by proxy, for each share of Common Stock standing in his or her name
on the books of the Corporation.
3. Liquidation, Dissolution or Winding Up. In the event of any voluntary
or involuntary liquidation, dissolution or winding up of the affairs of the
Corporation, after payment or provision for payment of the debts and other
liabilities of the Corporation and of the preferential amounts, if any, to which
the holders of Preferred Stock may be entitled, the holders of all outstanding
shares of Common Stock shall be entitled to share ratably in the remaining net
assets of the Corporation.
C. Preferred Stock. Shares of Preferred Stock may be issued from time to
---------------
time in one or more series, without further stockholder approval. Pursuant to
Section 151 of the Delaware General Corporation Law, the Board of Directors of
the Corporation is hereby authorized, by resolution or resolutions, to fix or
alter the rights, preferences, privileges and restrictions granted to or imposed
upon each series of Preferred Stock, and the number of shares constituting any
such series and the designation thereof, or of any of them. The Board of
Directors is also authorized to increase or decrease the number of shares of any
series prior or subsequent to the issue of that series, but not below the number
of shares of such series then outstanding. In case the number of shares of any
series shall be so decreased, the shares constituting such decrease shall resume
the status which they had prior to the adoption of the resolution originally
fixing the number of shares of such series.
ARTICLE V
Except to the extent that the General Corporation Law of Delaware prohibits
the elimination or limitation of liability of directors for breaches of
fiduciary duty, no director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for any breach of fiduciary
duty as a director, notwithstanding any provision of law imposing such
liability. No amendment to or repeal of this provision shall apply to or have
any effect on the liability or alleged liability of any director of the
Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment.
ARTICLE VI
A. The Corporation shall indemnify each person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation), by reason of the
fact that he is or was, or has agreed to become, a director or officer of the
Corporation, or is or was serving, or has agreed to serve, at the request of the
Corporation, as a director, officer or trustee of, or in a similar capacity
with, another corporation, partnership, joint venture, trust or other enterprise
(including any employee benefit plan) (all such persons being referred to
hereafter as an "Indemnitee"), or by reason of any action alleged to have been
taken or omitted in such capacity, against all expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or on his behalf in connection with such action, suit or
proceeding and any appeal therefrom, if he acted in good faith and in a manner
he reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful. Notwithstanding
anything to the contrary in this Article, except as set forth in Section G
below, the Corporation shall not indemnify an Indemnitee seeking indemnification
in connection with a proceeding (or part thereof) initiated by the Indemnitee
unless the initiation thereof was approved by the Board of Directors of the
2
<PAGE>
Corporation. Notwithstanding anything to the contrary in this Article, the
Corporation shall not indemnify an Indemnitee to the extent such Indemnitee is
reimbursed from the proceeds of insurance, and in the event the Corporation
makes any indemnification payments to an Indemnitee and such Indemnitee is
subsequently reimbursed from the proceeds of insurance, such Indemnitee shall
promptly refund such indemnification payments to the Corporation to the extent
of such insurance reimbursement.
B. The Corporation shall indemnify any Indemnitee who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Corporation to procure a judgment in
its favor by reason of the fact that he is or was, or has agreed to become, a
director or officer of the Corporation, or is or was serving, or has agreed to
serve, at the request of the Corporation, as a director, officer or trustee of,
or in a similar capacity with, another corporation, partnership, joint venture,
trust or other enterprise (including any employee benefit plan), or by reason of
any action alleged to have been taken or omitted in such capacity, against all
expenses (including attorneys' fees) and, to the extent permitted by law,
amounts paid in settlement actually and reasonably incurred by him or on his
behalf in connection with such action, suit or proceeding and any appeal
therefrom, if he acted in good faith and in a manner he reasonably believed to
be in, or not opposed to, the best interests of the Corporation, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery of Delaware shall
determine upon application that, despite the adjudication of such liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses (including attorneys' fees)
which the Court of Chancery of Delaware shall deem proper.
C. Notwithstanding the other provisions of this Article, to the extent
that an Indemnitee has been successful, on the merits or otherwise, in defense
of any action, suit or proceeding referred to in Sections A and B of this
Article, or in defense of any claim, issue or matter therein, or on appeal from
any such action, suit or proceeding, he shall be indemnified against all
expenses (including attorneys' fees) actually and reasonably incurred by him or
on his behalf in connection therewith. Without limiting the foregoing, if any
action, suit or proceeding is disposed of, on the merits or otherwise (including
a disposition without prejudice), without (i) the disposition being adverse to
the Indemnitee, (ii) an adjudication that the Indemnitee was liable to the
Corporation, (iii) a plea of guilty or nolo contendere by the Indemnitee, (iv)
an adjudication that the Indemnitee did not act in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and (v) with respect to any criminal proceeding, an adjudication
that the Indemnitee had reasonable cause to believe his conduct was unlawful,
the Indemnitee shall be considered for the purposes hereof to have been wholly
successful with respect thereto.
D. As a condition precedent to his right to be indemnified, the
Indemnitee must notify the Corporation in writing as soon as practicable of any
action, suit, proceeding or investigation involving him for which indemnity will
or could be sought. With respect to any action, suit, proceeding or
investigation of which the Corporation is so notified, the Corporation will be
entitled to participate therein at its own expense and/or to assume the defense
thereof at its own expense, with legal counsel reasonably acceptable to the
Indemnitee. After notice from the Corporation to the Indemnitee of its election
so to assume such defense, the Corporation shall not be liable to the Indemnitee
for any legal or other expenses subsequently incurred by the Indemnitee in
connection with such claim, other than as provided below in this Section 4. The
Indemnitee shall have the right to employ his own counsel in connection with
such claim, but the fees and expenses of such counsel incurred after notice from
the Corporation of its assumption of the defense thereof shall be at the expense
of the Indemnitee unless (i) the employment of counsel by the Indemnitee has
been authorized by the Corporation, (ii) counsel to the Indemnitee shall have
reasonably concluded that there may be a conflict of interest or position on any
significant issue between the Corporation and the Indemnitee in the conduct of
the defense of such action or (iii) the Corporation shall not in fact have
employed counsel to assume the defense of such action, in each of which cases
the fees and expenses of counsel for the Indemnitee shall be at the expense of
the Corporation, except as otherwise expressly provided by this Article. The
Corporation shall not be entitled, without the consent of the Indemnitee, to
assume the defense of any claim brought by or in the right of the Corporation or
as to which counsel for the Indemnitee shall have reasonably made the conclusion
provided for in clause (ii) above.
E. Subject to the provisions of Section F below, in the event that the
Corporation does not assume the defense pursuant to Section D of this Article of
any action, suit, proceeding or investigation of which the Corporation
3
<PAGE>
receives notice under this Article, any expenses (including attorneys' fees)
incurred by an Indemnitee in defending a civil or criminal action, suit,
proceeding or investigation or any appeal therefrom shall be paid by the
Corporation in advance of the final disposition of such matter; provided,
however, that the payment of such expenses incurred by an Indemnitee in advance
of the final disposition of such matter shall be made only upon receipt of an
undertaking by or on behalf of the Indemnitee to repay all amounts so advanced
in the event that it shall ultimately be determined that the Indemnitee is not
entitled to be indemnified by the Corporation as authorized in this Article.
Such undertaking shall be accepted without reference to the financial ability of
the Indemnitee to make such repayment.
F. In order to obtain indemnification or advancement of expenses pursuant
to Section A, B, C or D of this Article, the Indemnitee shall submit to the
Corporation a written request, including in such request such documentation and
information as is reasonably available to the Indemnitee and is reasonably
necessary to determine whether and to what extent the Indemnitee is entitled to
indemnification or advancement of expenses. Any such indemnification or
advancement of expenses shall be made promptly, and in any event within 60 days
after receipt by the Corporation of the written request of the Indemnitee,
unless with respect to requests under Section A, B or C the Corporation
determines within such 60-day period that the Indemnitee did not meet the
applicable standard of conduct set forth in Section A or B, as the case may be.
Such determination shall be made in each instance by (i) a majority vote of the
directors of the Corporation consisting of persons who are not at that time
parties to the action, suit or proceeding in question ("disinterested
directors"), whether or not a quorum, (ii) a majority vote of a committee of
disinterested directors designated by majority vote of disinterested directors,
whether or not a quorum, (iii) a majority vote of a quorum of the outstanding
shares of stock of all classes entitled to vote for directors, voting as a
single class, which quorum shall consist of stockholders who are not at that
time parties to the action, suit or proceeding in question, (iv) independent
legal counsel (who may, to the extent permitted by law, be regular legal counsel
to the Corporation), or (v) a court of competent jurisdiction.
G. The right to indemnification or advances as granted by this Article
shall be enforceable by the Indemnitee in any court of competent jurisdiction if
the Corporation denies such request, in whole or in part, or if no disposition
thereof is made within the 60-day period referred to above in Section F. Unless
otherwise required by law, the burden of proving that the Indemnitee is not
entitled to indemnification or advancement of expenses under this Article shall
be on the Corporation. Neither the failure of the Corporation to have made a
determination prior to the commencement of such action that indemnification is
proper in the circumstances because the Indemnitee has met the applicable
standard of conduct, nor an actual determination by the Corporation pursuant to
Section F that the Indemnitee has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the Indemnitee has
not met the applicable standard of conduct. The Indemnitee's expenses (including
attorneys' fees) incurred in connection with successfully establishing his right
to indemnification, in whole or in part, in any such proceeding shall also be
indemnified by the Corporation.
H. No amendment, termination or repeal of this Article or of the relevant
provisions of the General Corporation Law of Delaware or any other applicable
laws shall affect or diminish in any way the rights of any Indemnitee to
indemnification under the provisions hereof with respect to any action, suit,
proceeding or investigation arising out of or relating to any actions,
transactions or facts occurring prior to the final adoption of such amendment,
termination or repeal.
I. The indemnification and advancement of expenses provided by this
Article shall not be deemed exclusive of any other rights to which an Indemnitee
seeking indemnification or advancement of expenses may be entitled under any law
(common or statutory), agreement or vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in any other capacity while holding office for the Corporation, and shall
continue as to an Indemnitee who has ceased to be a director or officer, and
shall inure to the benefit of the estate, heirs, executors and administrators of
the Indemnitee. Nothing contained in this Article shall be deemed to prohibit,
and the Corporation is specifically authorized to enter into, agreements with
officers and directors providing indemnification rights and procedures different
from those set forth in this Article. In addition, the Corporation may, to the
extent authorized from time to time by its Board of Directors, grant
indemnification rights to other employees or agents of the Corporation or other
persons serving the Corporation and such rights may be equivalent to, or greater
or less than, those set forth in this Article.
4
<PAGE>
J. If an Indemnitee is entitled under any provision of this Article to
indemnification by the Corporation for some or a portion of the expenses
(including attorneys' fees), judgments, fines or amounts paid in settlement
actually and reasonably incurred by him or on his behalf in connection with any
action, suit, proceeding or investigation and any appeal therefrom but not,
however, for the total amount thereof, the Corporation shall nevertheless
indemnify the Indemnitee for the portion of such expenses (including attorneys'
fees), judgments, fines or amounts paid in settlement to which the Indemnitee is
entitled.
K. The Corporation may purchase and maintain insurance, at its expense,
to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise (including any employee benefit plan) against any expense, liability
or loss incurred by him in any such capacity, or arising out of his status as
such, whether or not the Corporation would have the power to indemnify such
person against such expense, liability or loss under the General Corporation Law
of Delaware.
L. If the Corporation is merged into or consolidated with another
corporation and the Corporation is not the surviving corporation, the surviving
corporation shall assume the obligations of the Corporation under this Article
with respect to any action, suit, proceeding or investigation arising out of or
relating to any actions, transactions or facts occurring prior to the date of
such merger or consolidation.
M. If this Article or any portion hereof shall be invalidated on any
ground by any court of competent jurisdiction, then the Corporation shall
nevertheless indemnify each Indemnitee as to any expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement in connection with any
action, suit, proceeding or investigation, whether civil, criminal or
administrative, including an action by or in the right of the Corporation, to
the fullest extent permitted by any applicable portion of this Article that
shall not have been invalidated and to the fullest extent permitted by
applicable law.
N. Terms used herein and defined in Section 145(h) and Section 145(i) of
the General Corporation Law of Delaware shall have the respective meanings
assigned to such terms in such Section 145(h) and Section
145(i).
O. If the General Corporation Law of Delaware is amended after adoption
of this Article to expand further the indemnification permitted to Indemnitees,
then the Corporation shall indemnify such persons to the fullest extent
permitted by the General Corporation Law of Delaware, as so amended.
ARTICLE VII
The following provisions are inserted for the management of the business
and for the conduct of the affairs of the Corporation and for defining and
regulating the powers of the Corporation and its directors and stockholders:
A. The directors, other than those who may be elected by the holders of
the Preferred Stock or any series thereof, shall be classified, with respect to
the time for which they severally hold office, into three classes, Class One to
serve for a term expiring at the annual meeting of stockholders to be held in
2001, Class Two to serve for a term expiring at the annual meeting of
stockholders to be held in 2002 and Class Three to serve for a term expiring at
the annual meeting of stockholders to be held in 2003, with each class to hold
office until its successors are duly elected and qualified or until their
earlier resignation, death or removal. At each annual meeting of the
stockholders of the Corporation, the date of which shall be fixed by or pursuant
to the Bylaws of the Corporation, the successors of the class of directors whose
term expires at that meeting shall be elected to hold office for a term expiring
at the annual meeting of stockholders held in the third year following the year
of their election and until their successors are duly elected and qualified or
until their earlier resignation, death or removal.
B. The number of directors constituting the entire Board of Directors of
the Corporation is eight. Subject to the provisions of law and the rights of
holders of the Preferred Stock or any series thereof, the number of directors of
the Corporation may be increased or decreased from time to time pursuant to the
Bylaws of the Corporation. No decrease in the number of directors constituting
the Board of Directors shall shorten the term of any incumbent director, and no
action shall be taken by the directors (whether through amendment to the Bylaws
or
5
<PAGE>
otherwise) to increase the number of directors unless at least 75% of the
directors then in office shall concur in said action.
C. Subject to the provisions of law and the rights of holders of the
Preferred Stock or any series thereof, newly created directorships resulting
from any increase in the number of directors and any vacancies on the Board of
Directors resulting from death, resignation, removal or other cause shall be
filled only 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 director elected in accordance with the preceding
sentence of this paragraph shall hold 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 duly
elected and qualified.
D. Subject to provisions of law and the rights of the holders of the
Preferred Stock or any series thereof, 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
paragraph, "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.
E. The Board of Directors of the Corporation is expressly authorized and
empowered to make, alter or repeal the Bylaws, subject only to such limitation,
if any, as may be from time to time imposed by law.
F. Elections of directors need not be by written ballot unless otherwise
provided in the Bylaws of the Corporation.
G. Advance notice of stockholder nominations for election of directors
and other business to be brought by stockholders before a meeting of
stockholders shall be given in the manner provided by the Bylaws of the
Corporation.
H. Notwithstanding any other provisions of law, this Certificate of
Incorporation or the Bylaws of the Corporation, and notwithstanding the fact
that a lesser percentage may be specified by law, the affirmative vote of the
holders of at least seventy-five percent (75%) of the shares of capital stock of
the Corporation issued and outstanding and entitled to vote shall be required to
amend or repeal, or to adopt any provision inconsistent with, this Article VII.
ARTICLE VIII
Stockholders of the Corporation may not take any action by written consent
in lieu of a meeting. Notwithstanding any other provisions of law, this Restated
Certificate of Incorporation or the Bylaws of the Corporation, and
notwithstanding the fact that a lesser percentage may be specified by law, the
affirmative vote of the holders of at least seventy-five percent (75%) of the
shares of capital stock of the Corporation issued and outstanding and entitled
to vote shall be required to amend or repeal, or to adopt any provision
inconsistent with, this Article VIII.
ARTICLE IX
Special meetings of stockholders may be called at any time by only the
Chairman of the Board of Directors, the President or a majority of the Board of
Directors. Business transacted at any special meeting of stockholders shall be
limited to matters relating to the purpose or purposes stated in the notice of
meeting. Notwithstanding any other provision of law, this Restated Certificate
of Incorporation or the Bylaws of the Corporation, and notwithstanding the fact
that a lesser percentage may be specified by law, the affirmative vote of the
holders of at least seventy-five percent (75%) of the shares of capital stock of
the Corporation issued and outstanding and entitled to vote shall be required to
amend or repeal, or to adopt any provision inconsistent with, this Article IX.
6
<PAGE>
ARTICLE X
This certificate shall be effective as of April ___, 2000 at 9:00 a.m.
eastern standard time.
IN WITNESS WHEREOF, the undersigned has executed this Restated Certificate
of Incorporation as of this ____ day of February, 2000.
LUMINEX CORPORATION
By:_______________________________________________
Mark B. Chandler, Ph.D.
Chairman, President and Chief Executive Officer
7
<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.
2
<PAGE>
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.
3
<PAGE>
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
4
<PAGE>
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 V 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.
6
<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.
7
<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
8
<PAGE>
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
9
<PAGE>
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.
10
<PAGE>
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.
12
<PAGE>
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
<PAGE>
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
<PAGE>
EXHIBIT 4.2
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AMENDED, OR ANY STATE
SECURITIES LAWS AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF UNLESS
REGISTERED PURSUANT TO THE PROVISIONS OF THAT ACT OR UNLESS AN OPINION OF
COUNSEL TO THE COMPANY OR OTHER COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY,
IS OBTAINED STATING THAT SUCH DISPOSITION IS IN COMPLIANCE WITH AN AVAILABLE
EXEMPTION FROM SUCH REGISTRATION.
LUMINEX CORPORATION
-------------------
Warrant for the Purchase of Shares of Common Stock
--------------------------------------------------
No. 1 262,500 Shares
FOR VALUE RECEIVED, Luminex Corporation, a Texas corporation (the
"Company"), hereby certifies that Southcoast Capital Corporation or its
permitted assigns, is entitled to purchase from the Company, at any time or from
time to time commencing on April 2, 1997 and prior to 5:00 P.M., New York City
time, on April 2, 2002, Two Hundred Sixty Two Thousand Five Hundred (262,500)
fully paid and non-assessable shares of the common stock, $.001 par value per
share, of the Company for an aggregate purchase price of $1,050,000 (computed on
the basis of $4.00 per share). (Hereinafter, (i) said common stock, together
with any other equity securities which may be issued by the Company with respect
thereto or in substitution therefor, is referred to as the "Common Stock" (ii)
the shares of the Common Stock purchasable hereunder or under any other Warrant
(as hereinafter defined) are referred to individually as a "Warrant Share" and
collectively as the "Warrant Shares," (iii) the aggregate purchase price payable
for the Warrant Shares hereunder is referred to as the "Aggregate Warrant Price"
(iv) the price payable for each of the Warrant Shares hereunder is referred to
as the "Per Share Warrant Price," (v) this Warrant and all Warrants hereafter
issued in exchange or substitution for this Warrant or such similar Warrants are
referred to as the "Warrants" and (vi) the holder of this Warrant is referred to
as the "Holder" and the holder of this Warrant and all other Warrants or Warrant
Shares issued upon the exercise of any Warrant are referred to as the
"Holders.") The Aggregate Warrant Price is not subject to adjustment. The per
Share Warrant Price is subject to adjustment as hereinafter provided; in the
event of any such adjustment, the number of Warrant Shares shall be adjusted by
dividing the Aggregate
<PAGE>
Warrant Price by the Per Share Warrant Price in effect immediately after such
adjustment.
1. Exercise of Warrant. (a) The Holder may exercise this Warrant, in
-------------------
whole or in part, as follows:
(i) By presentation and surrender of this Warrant to the
Company at the address set forth in Subsection 9(a) hereof, with the
Subscription Form annexed hereto (or a reasonable facsimile thereof)
duly executed and accompanied by payment of the Per Share Warrant
Price for each Warrant Share to be purchased. Payment for Warrant
Shares shall be made by certified or official bank check payable to
the order of the Company; or
(ii) By presentation and surrender of this Warrant to the
Company at the address set forth in Subsection 9(a) hereof, with a
Cashless Exercise Form annexed hereto (or a reasonable facsimile
thereof) duly executed (a "Cashless Exercise"). Such presentation and
surrender shall be deemed a waiver of the Holder's obligation to pay
all or any portion of the Aggregate Warrant Price. In the event of a
Cashless Exercise, the Holder shall exchange its Warrant for that
number of shares of Common Stock determined by multiplying the number
of Warrant Shares being exercised by a fraction, the numerator of
which shall be the difference between the then current market price
per share of the Common Stock and the Per Share Warrant Price, and the
denominator of which shall be the then current market price per share
of Common Stock. For purposes of any computation under this Section
1(a)(ii), the then current market price per share of Common Stock at
any date shall be deemed to be the average for the thirty consecutive
business days immediately prior to the Cashless Exercise of the daily
closing prices of the Common Stock on the principal national
securities exchange on which the Common Stock is admitted to trading
or listed, or if not listed or admitted to trading on any such
exchange the closing price as reported by the Nasdaq National Market,
or if not then listed on the Nasdaq National Market, the average of
the highest reported bid and lowest reported asked prices as reported
by the National Association of Securities Dealers, Inc. Automated
Quotations System ("NASDAQ") or if not then publicly traded, the fair
market price of the Common Stock as determined in good faith by the
Board of Directors.
(b) If this Warrant is exercised in part, this Warrant must be
exercised for a number of whole shares of the Common Stock, and the Holder is
entitled to receive a new Warrant covering the Warrant Shares which have not
been exercised and setting forth the proportionate part of the Aggregate Warrant
Price applicable to such Warrant Shares. Upon such surrender of this Warrant,
the Company will (i) issue a certificate or certificates, in such denominations
as are requested for delivery by the
-2-
<PAGE>
Holder, in the name of the Holder for the largest number of whole shares of the
Common Stock to which the Holder shall be entitled and, if this Warrant is
exercised in whole, in lieu of any fractional share of the Common Stock to which
the Holder shall be entitled, pay to the Holder cash in an amount squat to the
fair value of such fractional share (determined in such reasonable manner as the
Board of Directors of the Company shall determine), and (ii) deliver the other
securities and properties receivable upon the exercise of this Warrant, or the
proportionate part thereof if this Warrant is exercisable in part, pursuant to
the provisions of this Warrant. The Holder shall be deemed to be the holder of
record of the shares of Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such shares of Common Stock shall not
then be actually delivered to the Holder.
2. Reservation of Warrant Shares; Listing. The Company agrees that, prior
---------------------------------------
to the expiration of this Warrant, the Company will at all times (a) have
authorized and in reserve, and will keep available, solely for issuance or
delivery upon the exercise of this Warrant, the shares of the Common Stock and
other securities and properties as from time to time shall be receivable upon
the exercise of this Warrant, free and clear of all restrictions on sale or
transfer and free and clear of all preemptive rights and rights of first refuse
and (b) if the Company hereafter lists its Common Stock on any national
securities exchange, keep the shares of the Common Stock receivable upon the
exercise of this Warrant authorized for listing on such exchange upon notice of
issuance.
3. Protection Against Dilution. (a) In case the Company shall hereafter
---------------------------
(i) pay a dividend or make a distribution on its capital stock in shares of
Common. Stock (ii) subdivide its outstanding shares of Common Stock into a
greater number of shares, (iii) combine its outstanding shares of Common Stock
Into a smaller number of shares or (iv) issue by reclassification of its Common
Stock any shares of capital stock of the Company, the Per Share Warrant Price
shall be adjusted so that the Holder upon the exercise hereof shall be entitled
to receive the number of shares of Common Stock or other capital stock of the
Company which he would have owned immediately following such action had such
Warrant been exercised immediately prior thereto. An adjustment made pursuant to
this Subsection 3(a) shall become effective immediately after the record date in
the case of a dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or
reclassification.
(b) at any time or from time to time after the date of this Warrant,
the Company shall issue or distribute to the holders of shares of Common Stock
evidences of its indebtedness, any other securities of the Company or any cash,
property or other assets (excluding a subdivision, combination or
reclassification, or dividend or distribution payable in shares of Common Stock,
referred to in Subsection 3(a), and also excluding cash dividends or cash
distributions paid out of not profits legally available therefor if the full
amount thereof, together with the value of other dividends and distributions
made substantially concurrently therewith or pursuant to a plan which
-3-
<PAGE>
includes payment thereof, is equivalent to not more than 5% of the Company's net
worth) (any such nonexcluded event being herein called a "Special Dividend"),
the Per Share Warrant Price shall be adjusted by multiplying the Per Share
Warrant price then in effect by a fraction, the numerator of which shall be the
then current market price of the Common Stock (defined as the average for the
thirty consecutive business days immediately prior to the record date of the
daily closing price of the Common Stock as reported by the national securities
exchange upon which the Common Stock is then listed or if not listed on any such
exchange, the average of the closing prices as reported by the Nasdaq National
Market, or if not then listed on the Nasdaq National Market, the average of the
highest reported bid and lowest reported asked prices as reported by NASDAQ, or
if not then publicly traded, the fair market price as determined in good faith
by the Company's Board of Directors) less the fair market value (as determined
in good faith by the Company's Board of Directors) of the evidences of
indebtedness, cash, securities or Property, or other assets issued or
distributed in such Special Dividend applicable to one share of Common Stock and
the denominator of which shall be such then current market price per share of
Common Stock. An adjustment made pursuant to this Subsection 8(b) shall become
effective immediately after the record date of any such Special Dividend.
(c) Except as provided in Subsection 3(e), in case the Company shall
prior to June 30, 1998 issue or sell any share of Common Stock for a
consideration per share less than the Per Share Warrant Price on the date of
such issuance or sale, the Per Share Warrant Price shall be adjusted as of the
date of such issuance or sale so that the same shall equal the price determined
by dividing (i) the sum of (A) the number of shares of Common Stock outstanding
immediately prior to such issuance or sale multiplied by the Per Share Warrant
Price plus (B) the consideration received by the Company upon such Issuance or
sale by (ii) the total number of share of Common Stock outstanding after such
issuance or sale.
(d) Except as provided in Subsections 3(b) and 3(e), in case the
Company shall prior to June 30, 1998 issue or sell any rights, options, warrants
or securities convertible into Common Stock entitling the holders thereof to
purchase Common Stock or to convert such securities into Common Stock at a price
per share (determined by dividing (i) the total amount if any, received or
receivable by the Company in consideration of the issuance or sale of such
rights, options, warrants or convertible securities plus the total
consideration, if any, payable to the Company upon exercise or conversion
thereof (the "Total Consideration") by (ii) the number of additional shares of
Common Stock issuable, upon exercise or conversion of such securities) low than
the then current Per Share Warrant Price in effect on the date of such issuance
or sale, the Per Share Warrant Price shall be adjusted as of the date of such
issuance or sale so that the same shall equal the price determined by dividing
(i) the sum of (A) the number of shares of Common Stock outstanding on the date
of such issuance or sales multiplied by the Per Share Warrant Price plus (B) the
Total Consideration by (ii) the number of share of Common Stock outstanding on
the date of such issuance or sale plus the maximum number of additional shares
of Common Stock issuable upon exercise or conversion of such securities.
-4-
<PAGE>
(e) No adjustment in the Per Share Warrant Price shall be required in
the case of (i) the issuance by the Company of options, warrants or rights to
officers, directors and employees to purchase shares of Common Stock or the
issuance of shares of Common Stock upon the exercise thereof, including any such
options, warrants or rights as are issued and outstanding as of the date hereof
and (ii) the issuance by the Company of Common Stock pursuant to the exercise of
any Warrant.
(f) In case of any capital reorganization or reclassification, or any
consolidation or merger to which the Company is a party other than a merger or
consolidation in which the Company is the continuing corporation, or in case of
any sale or conveyance to another entity of the property of the Company as an
entirety or as an entirety, or in the case of any statutory exchange of
securities with another corporation (including any exchange affected in
connection with a merger of a third corporation into the Company), the Holder of
this Warrant shall have the right thereafter to receive on the exercise of this
Warrant the kind and amount of securities, cash or other property which the
Holder would have owned or have been entitled to receive after such
reorganization, consolidation, merger, statutory exchange, age or conveyance
had this Warrant been exercised immediately prior to the effective date of such
reorganization, reclassification, consolidation, merger, statutory exchange,
sale or conveyance and in any such case, if necessary, appropriate adjustment
shall, be made in the application of the provisions set forth in this Section 3
with respect to the rights and interests thereafter of the Holder of this
Warrant to the end that the provisions set forth in this Section 3 shall
thereafter correspondingly be made applicable, as nearly as may reasonably be,
in relation to any shares of stock or other securities or property thereafter
deliverable on the exercise of this Warrant. The above provisions of this
Subsection 3(f) shall similarly apply to successive reorganizations,
consolidations, mergers, statutory exchanges, sales or conveyances. The issuer
of any shares of stock or other securities or property thereafter deliverable on
the exercise of this Warrant shall be responsible for all of the agreements and
obligations of the Company hereunder. Notice of any such reorganization,
reclassification, consolidation, merger, statutory exchange, sale or conveyance
and of said provision so proposed to be made, shall be mailed to the Holders of
the Warrants not less than 30 days prior to such event. A sale of all of the
assets of the Company for a consideration consisting primarily of securities
shall be deemed a consolidation or merger for the foregoing purposes.
(g) In case any event shall occur as to which the other provisions of
this Section 3 are not strictly applicable but as to which the failure to make
any adjustment would not fairly protect the purchase rights represented by this
Warrant in accordance with the essential intent and principles hereof then, in
each such case, the Holders of Warrants representing the right to purchase a
majority of the Warrant Shares subject to all outstanding Warrants may appoint a
firm of independent public accountants of recognized national standing
reasonably acceptable to the Company, which shall give their opinion as to the
adjustment, if any, an a basis consistent with the essential intent and
principles established herein, necessary to preserve the purchase rights
represented by the Warrants. Upon receipt of such opinion, the
-5-
<PAGE>
Company will promptly mail a copy thereof to the Holder of this Warrant and
shall make the adjustments described therein. The fees and expenses of such
independent public accountants shall be borne by the company.
(h) No adjustment in the Per Share Warrant Price shall be required
unless such adjustment would require an increase or decrease of at least $0.05
per share of Common Stock; provided, however, that any adjustments which by
-------- -------
reason of this Subsection 8(h) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment; provided further,
-------- ------
however, that adjustments shall be required and made In accordance with the
provisions of this Section 3 (other than this Subsection 3(h)) not later than
such time as may be required in order to preserve the tax-free nature of a
distribution to the Holder of this Warrant or Common Stock issuable upon
exercise hereof. All calculations under this Section 8 shall be made to the
nearest cent or to the nearest 1/100th of a share, as the case may be. Anything
in this Section 3 to the contrary notwithstanding, the Company shall be entitled
to make such reductions in the Per Share Warrant Price, in addition to those
required by this Section 8, as it in its discretion shall deem to be advisable
in order that any stock dividend, subdivision of shares or distribution of
rights to purchase stock or securities convertible or exchangeable for stock
hereafter made by the Company to its stockholders shall not be taxable.
(i) Whenever the Per Share Warrant Price is adjusted as provided in
this Section 3 and upon any modification of the rights of a Holder of Warrants
in with this Section 3, the Company shall promptly obtain, at its expense, a
certificate of a firm of independent public accountants of recognized standing
selected by the Board of Directors (who may be the regular auditors of the
Company) setting forth the Per Share Warrant Price and the number of Warrant
Shares after such adjustment or the effect of such modification, a brief
statement of the facts requiring such Adjustment or modification and the manner
of computing the same and cause copies of such certificate to be mailed to the
Holders of the Warrants.
(j) If the Board of Directors of the Company shall (i) declare any
dividend or other distribution with respect to the Common Stock, other than a
cash dividend subject to the first parenthetical in Subsection 3(b), (ii) offer
to the holders of sham of Common Stock any additional share of Common Stock any
securities convertible into or exercisable for shares of Common Stock or any
rights to subscribe thereto, or (iii) propose a dissolution, liquidation or
winding up of the Company, the Company shall mail notice thereof to the Holders
of the Warrants not less than 15 days prior to the record date fixed for
determining stockholders entitled to participate In such dividend, distribution,
offer or subscription right or to vote on such dissolution, liquidation or
winding up.
(k) It as a result of an adjustment made pursuant to this Section 8,
the Holder of any Warrant thereafter surrendered for exercise shall become
entitled to receive shares of two or more classes of capital stock or shares of
Common Stock and other capital stock of the Company, the Board of Directors
(whose determination shall
-6-
<PAGE>
be conclusive and shall be described in a written notice to the Holder of any
Warrant promptly after such adjustment) shall determine the allocation of the
adjusted Per Share Warrant Price between or among shares or such classes of
capital stock or shares of Common Stock and other capital stock.
4. Fully Paid Stock; Taxes. The Company agrees that the shares of the
-----------------------
Common Stock represented by each and every certificate for Warrant Shares
delivered on the exercise of this Warrant shall, at the time of such delivery,
be validly issued and outstanding, fully paid and nonassessable, and not subject
to preemptive rights or rights of first refusal and the Company will take all
such actions as may be necessary to assure that the par value or stated value,
if any, per share of the Common Stock is at all times equal to or low than the
then Per Share Warrant Price. The Company further covenants and agrees that it
will pay, when due and payable, any and all Federal and state stamp. original
issue or similar taxes which may be payable in respect of the issue of any
Warrant Share or certificate therefor.
5. Registration Under Securities Act of 1933.
-----------------------------------------
(a) The Company agrees that if, at any time or times six months
following the effective date of an initial public offering of securities of the
Company to the general public covered by a registration statement under the
Securities Act of 1983 (the "Act") the Holder and/or the Holders of any other
Warrants and/or Warrant Shares who or which shall hold not less than 35% of the
Warrants and/or Warrant Shares outstanding at such time and not previously sold
pursuant to this Section 5 shall request that the Company file, under the Act, a
registration statement under the Act covering not less than 35% of the Warrant
Shares issued or Issuable upon the exercise of the Warrants and not so
previously sold, the Company will (i) promptly notify each Holder of the
Warrants and each holder of Warrant Shares not go previously sold that such
registration statement will be filed and that the Warrant Shares which are then
held, and/or may be acquired upon exercise of the Warrants by the Holder and
such Holders, will be included in such registration statement at the Holder's
and such. Holders' request, (ii) cause such registration statement to be filed
with the Securities and Exchange Commission within thirty days of such request
and to cover all Warrant Shares which it had been so requested to include, (iii)
use its best efforts to cause such registration statement to become effective as
soon as practicable and (iv) take all other action necessary under any Federal
or state law or regulation of any governmental authority to permit all Warrant
Shares which it has been so requested to include in such registration statement
to be sold or otherwise disposed of, and will maintain such compliance with each
such Federal and state law and regulation of any governmental authority for the
period necessary for such Holders to effect the proposed sale or other
disposition. The Company shall be required to effect a registration or
qualification pursuant to this Subsection 5(a) on one occasion only.
(b) The Company agrees that if the Board of Directors of the Company
shall authorize the filing of a registration statement (any such registration
statement being hereinafter called a "Subsequent Registration Statement) under
the Act
-7-
<PAGE>
(otherwise than pursuant to Subsection 5(a) hereof, or other than (i) an initial
public offering of the Company's securities, (ii) a registration statement on
Form S-8 or other form which does not include substantially the same information
as would be required in a form for the general registration of securities) or
(iii) an exchange offer or an offering of securities solely to the emitting
shareholders or employees of the Company or the existing shareholders of another
company in connection with a merger or acquisition or otherwise on Form S-4 or
an equivalent form, in connection with the proposed offer of any of its
securities by it or any of its stockholders, the Company will (A) promptly
notify the Holder and each of the Holders, if any, of other Warrants and/or
Warrant Shares not previously sold pursuant to this Section 5 that such
Subsequent Registration Statement will be filed and that the Warrant Share which
are then held, and/or which may be acquired upon the exercise of the Warrants,
by the Holder and such Holders, will at the Holder's and such Holders' request,
be included in such Subsequent Registration Statement and (B) upon the written
request of a Holder made within 20 days after the giving of such notice by the
Company, include in the securities covered by such Subsequent Registration
Statement all Warrant Shares which it has been so requested to include.
The Company shall not be required under this Subsection 5(b) to
include any securities of Holders in an underwritten offering of the Company's
securities unless such Holder accepts the terms of the underwriting as agreed
upon between the Company and the underwriters selected by it, and then on1y in
such quantity as will not, in the opinion of the managing underwriters,
interfere with the successful marketing of the offering by the Company,
provided, however, that any reduction of the amount of securities to be included
- -------- -------
in such offering shall not represent a greater fraction of the amount of
securities intended to be offered by Holders than the fraction of similar
reduction imposed on such other persons or entities (but not the Company) with
respect to the amount of securities they intended to offer in such offering.
(c) Whenever the Company is required pursuant to the provisions of
this Section 5 to include Warrant Shares in a registration statement, the
company shall, (i) furnish each Holder of any such Warrant shares and each
underwriter of such arrant Shares with such copies of the prospectus, conforming
to the Act (and such other documents as each such Holder or each such
underwriter may reasonably request) in order to facilitate the sale or
distribution Of the Warrant Sales, (ii) use its best efforts to register or
qualify such Warrant Shares under the blue sky laws (to the extent applicable)
of such jurisdiction or laws (to the extent applicable) of such jurisdiction or
Jurisdictions as the Holder of any such Warrant Shares and each underwriter of
Warrant Shares being sold by such Holders shall reasonably request and (iii)
take such other actions as may be reasonably necessary or advisable to enable
such Holders and such underwriters to consummate the sale or distribution In
such jurisdiction, or jurisdictions in which such Holders shall have reasonably
requested that the Warrant Shares be sold. Nothing contained in this Warrant
shall be construed as requiring a Holder to exercise its Warrant prior to the
-8-
<PAGE>
closing of an offering pursuant to a registration statement referred to in
Subsection 5(a) or 5(b).
(d) The Company shall furnish to each Holder participating in an
underwritten Owing pursuant to a registration statement under this Section 5 and
to each underwriter, if any a signed counterpart, addressed to such Holder or
underwriter, of (i) an opinion of counsel to the Company, dated the effective
date of such registration statement and an opinion dated the data of the closing
under the underwriting agreement, and (ii) a "comfort" letter dated the
effective date of such registration statement and a letter dated the date of the
closing under the underwriting agreement signed by the independent Public
accountants who have issued a report on the Company's financial statements
included in such registration statement, in each case covering substantially the
same matters with respect to such registration statement (and the prospectus
included therein) and, in the case of such accountants' letter, with respect to
events subsequent to the date of such financial statements as are customarily
covered in opinions of issuer's counsel and in accountants' letters delivered to
underwriters in underwritten public offering of securities.
(e) In connection with an underwritten offering, the Company shall
enter into an underwriting agreement with the managing underwriters reasonably
satisfactory in form and substance to the Company, each Holder and such managing
underwriters, which shall contain such representations, warranties and covenants
by the Company and such other term as are customarily contained in agreements of
that type used by the managing underwriter. The Holder shall be parties to any
underwriting agreement relating to an underwritten sale of their Warrant Shares
and may, at their option, require that any or all representatives, warranties
and covenants of the Company to or for the benefit of such underwriters also be
made to and for the benefit of such Holders.
(f) The Company shall pay all expenses incurred in connection with
any registration statement or Other action, pursuant to the provisions of this
Section 5, including the reasonable fees and expenses of one counsel
representing the Holders of Warrant Shares included in any such registration
statement, other than underwriting discounts, commissions, selling commissions
and applicable transfer taxes relating to the Warrant Shares.
(g) (1) The Company will indemnify and hold harmless each Holder Of
Warrant Shares which are Included in each registration statement referred to in
Subsections 5(a) and 5(b), each of Its officers, directors and partners, and
each Person. if any controlling such Holder within the meaning of Section, 15 of
the Act or Section 20(a) Of the Securities & Exchange Act of 1934, as amended
(the "Exchange Act"), and each underwriter of such Warrant Shares, and each Of
its Officers, directors and partners, and each person if any, who controls any
underwriter, from and against any and all claims, losses, damages and
liabilities (or actions, proceedings or settlements in respect thereof) arising
out of or based upon any untrue statement or alleged untrue statement of a
material fact contained in any registration statement, related prospectus
-9-
<PAGE>
or any amendment or supplement thereto incident to any such registration,
qualification or compliance, or based on any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the therein not misleading, or any violation or alleged violation by the Company
of the Act, the Exchange Act or any rule or regulation promulgated thereunder
applicable to the Company and relating to action or inaction required of the
Company in connection with any such registration, qualification or compliance;
and will reimburse each such Holder, each of its officers, directors and
partners, and each person controlling such Holder, each such underwriter and
each person who controls any such underwriter, promptly as such expenses are
incurred, for any legal and other expenses reasonably incurred in connection
with investigating or defending any such claim, low, damage, liability, action
or proceeding, provided, however, that the Company will not be liable in any
-------- -------
such case to the extent that any such claim loss, damage, liability or expense
arises out of or a based upon any untrue statement or based upon written
information furnished to the Company expressly for use in connection with such
registration by such Holder, underwriter or controlling person, as the case may
be.
(2) Each Holder of Warrant Shares will, if Warrant Shares
held by such Holder are included in the securities a to which registration,
qualification or compliance is being effected, severally and not jointly and
hold harmless the Company, its Directors, its officers who shall have signed any
such registration statement, each underwriter if any, and each person,, if any,
who controls the Company or such underwriter within the meaning of Section 15 of
the Act or Section 20(a) of the Exchange Act and each other Holders, its
officers, directors, partners and each person controlling such other Holders,
from and against all claims, losses, damages and liabilities (or actions,
proceedings or settlements in respect thereof) arising out of or based upon any
untrue statement of a material fact contained in such registration statement,
related prospectus or any amendment or supplement thereto, or any omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading; and will reimburse the Company, each
other Holder, such directors, partners, persons, underwriters or control
persons, promptly as such expenses are incurred, for any legal and other
expenses reasonably incurred in connection with investigating or defending such
claim, loss, damage, liability, action or proceeding, in each case to the
extent, and only to the extent, that such Untrue statement or omission is made
in such registration statement, related prospectus, or any amendment or
supplement thereto in reliance upon and in conformity with written information
furnished to the Company by such Holder and stated to be specifically for use in
connection with the offering of such securities; provided, however, that the
-------- -------
indemnity obligations of any Holder hereunder shall not exceed such Holder's
proceeds from the sale of Warrant them pursuant to such registration.
(3) Each person entitled to indemnification hereunder (the
"Indemnitee") shall promptly notify the indemnifying party (the "Indemnitor") in
writing after the Indemnitee receives any notice of the commencement of any
action, suit,
-10-
<PAGE>
proceeding or investigation or threat thereof for which the Indemnitee will
claim indemnification or contribution pursuant to this Agreement. Unless in the
reasonable judgment of the Indemnitee, an actual Or Potential conflict of
interest exists between the Indemnitee and the Indemnitor with respect to such
claim, the Indemnitee will permit the Indemnitor to assume the defense of such
claim with counsel reasonably satisfactory to the indemnitee. If the Indemnitor
is not entitled, or elects not, to assume the defense of a claim, it need not
pay the fees and expenses of more than one counsel with respect to such claim
unless in an Indemnitee's reasonable judgment, an actual or potential conflict
of interest may exist between such Indemnitee and any other Indemnitee(s) with
respect to such claim. In such event the Indemnitor shall pay the fees and
expenses of such additional counsel or counsels; as may be necessary. The
Indemnitor shall not be subject to any liabilities for any settlement made
without its consent, which consent shall not unreasonably be withheld or
delayed. No Indemnitor shall, except With the consent of each Indemnitee,
consent to entry of any judgment or enter into any settlement which does not
unconditionally require the claimant or Plaintiff to release the Indemnitee from
all liability in respect of such claim or litigation.
(4) If the indemnification provided for in this Subsection
5(g) is unavailable to an Indemnitee here under in respect of any claims,
losses, damages, liabilities or expenses; referred to herein, then the
Indemnitor in lieu of indemnifying such Indemnitee, shall contribute to the
amount paid or payable by such Indemnitee, as a result of such claims, losses,
damages, liabilities or expenses, in such proportion as appropriately reflects
the relative fault of the Indemnitor(s) and Indemnitee(s) in connection with
such claims, losses, damages, liabilities; or expenses, as well as any other
relevant equitable considerations. The relative fault of the Indemnitor(s) and
Indemnitee(s) and relevant equitable considerations shall be determined by
reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact, has been made by, or relates to information
supplied by, such Indemnitor(s) or Indemnitee(s) and their relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, and their benefit therefrom. The amount paid or payable by a party as a
result of the claims, losses, damages, liabilities and expenses referred to
above shall include any legal or other fees; or expenses reasonably incurred by
such party in connection with investigating or defending and action, suit,
proceeding or claim. In no event shall the amount of any such contribution
payable by a Holder exceed the amount payable by that Holder under Subsection
5(g)(2) hereunder. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11 (f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent representation.
(h) The right to cause the Company to register Warrant Shares granted
by the Company to the Holder under this Section 5 shall be automatically
transferred or assigned by any Holder to permitted transferees or assignees of
such securities, provided, that (a) the Company is, within a reasonable time
--------
after such transfer, furnished written notice of (i) the name and address of
said transferee or assignee and (ii) the securities with respect to which such
registration rights are being transferred
-11-
<PAGE>
or assigned, (b) such assignment in accordance with and permitted by all other
agreements between the transferor or assignor and the Company, and (c)
immediately following such transfer the further disposition of such securities
by the transferee or assignee In restricted under the Act.
6. Transferability. This Warrant may not be sold, transferred, assigned
---------------
or hypothecated by the Holder except in compliance with the provisions of the
Act The Company may treat the registered Holder of this Warrant as he or it
appears on the Company's books at any time as the Holder for all purposes. The
Company shall permit any Holder of a Warrant or his duly authorized attorney,
upon written request during ordinary business hours, to inspect and copy or make
extracts from its books showing the registered holders of Warrants. All Warrants
Issued upon the transfer or assignment of this Warrant will be dated the same
date as this Warrant, and all rights of Holder thereof shall, be identical to
those of the Holder.
7. Loss, etc., of Warrant. Upon receipt of evidence satisfactory to the
----------------------
Company of the loss, theft, destruction or Mutilation of this Warrant, and of
indemnity reasonably satisfactory to the Company, if lost, stolen or destroyed,
and upon surrender and cancellation, of this Warrant, if mutilated, the Company
shall execute and deliver to the Holder a new Warrant of like date, tenor and
denomination.
8. Warrant Holder Not Shareholder. Except as otherwise provided herein,
------------------------------
this Warrant does not confer upon the Holder any right to vote or to consent to
or receive notice as a stockholder of the Company, as such, in respect of any
matters whatsoever, or any other rights or liabilities as a stockholder, prior
to the exercise hereof.
9. Notices. All notices and other communications required or permitted
-------
to be given under this Warrant shall be in writing and shall be deemed to have
been duly given if delivered personally Or by facsimile transmission, or sent by
recognized overnight courier or by certified mail, return receipt requested,
postage paid to the parties hereto as follows:
(a) If to the Company at 12212 Technology Blvd., Austin, Texas,
Att.: Mark B. Chandler, Ph.D., facsimile no. (512) 258-4173, or such
other address as the Company has designated in writing to the Holder,
or
(b) if to the Holder at 277 Park Avenue, New York, New York
10172, Att.: Calvin L. Chrisman, facsimile No. (212) 940-9339 or such
other address or facsimile number as the Holder has designated in
writing to the company.
10. Headings. The headings of this Warrant have been inserted as a matter
--------
of convenience and shall not affect the construction hereof.
-12-
<PAGE>
11. Applicable Law. This Warrant shall be governed by and construed in
--------------
accordance with-the law Of the State of New York without giving effect to the
principles of conflicts of law thereof.
IN WITNESS WHEREOF, Luminex Corporation has caused this Warrant to be
signed by its Chairman and Chief Executive Officer and its corporate seal to be
hereunto affixed and attested by its Secretary this 2nd day of April, 1997.
LUMINEX CORPORATION
By: /s/ Mark B. Chandler
------------------------------------
Mark B. Chandler, Ph.D.
Chairman and Chief Executive Officer
ATTEST:
___________________________
Secretary
[Corporate Seal]
-13-
<PAGE>
CASHLESS EXERCISE FORM
(To be executed upon exercise of Warrant
pursuant to Section 1(a)(ii))
The undersigned hereby irrevocably elects to surrender _____________ shares
purchasable under this Warrant for such shares of Common Stock issuable in
exchange therefor pursuant to the Cashless Exercise provisions of the within
Warrant, as provided for in Section 1(a)(ii) of such Warrant.
Please issue a certificate or certificates for such Common Stock in the
name of, and pay cash for fractional shares to:
Name:______________________________
(Please Print Name, Address and
Social Security No.)
Address:___________________________
___________________________
___________________________
Social Security No.________________
Signature:_________________________
NOTE: The above signature should
correspond exactly with the
name of the first page of
this Warrant or with the
name of the assignee
appearing in the assignment
form below.
Date:______________________________
And if said number of shares shall not be all the shares exchangeable or
purchasable under the within Warrant, a new Warrant is to be issued in the name
of the undersigned for the balance remaining of the shares purchasable
thereunder.
-16-
<PAGE>
EXHIBIT 10.1
LUMINEX CORPORATION
STOCK OPTION PLAN
1. Purpose. The purpose of Luminex Corporation Stock Option Plan (the
"Plan") is to increase shareholder value and to advance the interests of Luminex
Corporation (the "Company") through the issuance of incentive and non-qualified
stock options (the "Options") to purchase shares of common stock, $.01 par value
per share of the Company (the "Common Stock"). In order to effectuate this
purpose, the Board of Directors hereby approves and adopts the Plan.
2. Administration.
2.1. Composition. The Plan shall be administered by the stock option
committee (the "Committee") of the Board of Directors of the Company.
2.2 Authority. The Committee shall have plenary authority to award
Options under the Plan, to interpret the Plan, to establish any rules or
regulations relating to the Plan that it determines to be appropriate, and
to make any other determination that it believes necessary or advisable for
the proper administration of the Plan. Its decisions in matters relating to
the Plan shall be final and conclusive on the Company and participants in
the Plan. The Committee may fully delegate its authority hereunder.
3. Participants. Employees, officers, consultants, and directors of the
Company shall become eligible to receive Options under the Plan designated by
the Committee or its designees. Employees may be designated individually or by
groups or categories as the Committee or its designees deem appropriate.
4. Shares Subject to the Plan.
4.1. Number of Shares. Up to 2,000,000 shares of Common Stock are
authorized to be issued upon the exercise of Options granted under the Plan
(the "Option Shares"). If any Option granted hereunder expires or is
terminated or cancelled prior to exercise, any Option Shares that were
issuable thereunder may again be issued under the Plan.
4.2. Cancellation. The Committee may also determine to cancel, and
agree to the cancellation of, Options in order to make a participant
eligible for the grant of Options at a lower price than the Options to be
cancelled.
4.3. Type of Common Stock. Common Stock issued under the Plan in
connection with Options may be authorized and unissued shares or issued
shares held as treasury shares.
-1-
<PAGE>
5. All Stock Options. An Option is a right to purchase shares of Common
Stock from the Company. Each Option granted by the Committee under this Plan
shall be subject to the following terms and conditions, and such other terms and
conditions as are set forth in the stock option agreement executed in connection
with the grant of Options:
5.1 Price. The Option price per share shall be determined by the
Committee at the time that the Option is granted.
5.2 Number. The number of shares of Common Stock subject to an
Option shall be determined by the Committee subject to adjustment as
provided in Section 8 hereof.
5.3 Duration and Time for Exercise. Subject to earlier termination
as may be provided in the stock option agreement, the term of each Option
shall be determined by the Committee. Each Option shall become exercisable
at such time or times during its term as shall be determined by the
Committee at the time of grant or as shall be accelerated by the Committee
after the date of grant.
5.4 Repurchase. Upon approval of the Committee, the Company may
repurchase a previously granted option from a participant by mutual
agreement before such Option has been exercised by payment to the
participant of the amount per share by which: (i) the Fair Market Value (as
defined in Section 10.7 hereof) of the Common Stock subject to the Option
on the date of purchase exceeds (ii) the Option price.
5.5 Manner of Exercise. An Option may be exercised, in whole or in
part, by giving written notice to the Company, specifying the number of
shares of Common Stock to be purchased and accompanied by the full purchase
price for such shares. The Option price hall be payable upon exercise of
the Option and may be paid by cash, check or in such other manner as may be
authorized from time to time by the Committee. In the case of delivery of
an uncertified check upon exercise of an Option, no shares shall be issued
until the check has been paid in full. Prior to the issuance of shares of
Common Stock upon the exercise of an Option, a participant in the Plan
shall have no rights as a shareholder.
6. Incentive Stock Options. Notwithstanding anything in the Plan to
the contrary, the following additional provisions shall apply to the grant of
Options that are intended to qualify as incentive stock options (as such term is
defined in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"):
(a) Any incentive stock option authorized under the Plan shall
contain such other provisions as the Committee shall deem advisable,
but shall in all events be consistent with and contain or be deemed to
contain all provisions required in order to qualify the Options as
incentive stock options;
(b) All incentive stock options must be granted within ten (10)
years from the date on which this Plan was adopted by the Board of
Directors;
-2-
<PAGE>
(c) The Option price must not be less than the Fair Market Value
of the Common Stock at the time the Option is granted;
(d) Unless sooner exercised, all incentive stock options shall
expire no later than ten (10) years after the date of grant;
(e) No incentive stock option shall be granted to any
participant who, at the time such option is granted, would own (within
the meaning of Section 422 of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of
stock of the employer corporation or of its parent or subsidiary
corporation;
(f) The aggregate Fair Market Value (determined with respect to
each incentive stock option as of the time such incentive stock option
is granted) of the Common Stock with respect to which incentive stock
options are exercisable for the first time by a participant during any
calendar year (under the Plan or any other plan of the Company) shall
not exceed $100,000. To the extent that such limitation is exceeded,
such Options shall not be treated, for federal income tax purposes, as
incentive stock options;
(g) Incentive stock options may be granted under the Plan only
if the Plan has been approved by the shareholders of the Company
within twelve (12) months of the date of adoption of the Plan by the
Board of Directors;
(h) An incentive stock option may not be exercised more than
three (3) months after termination of employment, except in the case
of death or disability. An incentive stock option may not be exercised
more than one (1) year after termination of employment as a result of
disability.
(i) Incentive stock options may not be granted to a director
unless the director is also an employee of the Company.
7. Non-Transferability of Options. Options granted under the Plan shall
not be transferable otherwise than by will or by the laws of descent and
distribution and Options may be exercised during the lifetime of a participant
only by the participant or by the participant's guardian or legal
representative. Any attempted assignment, transfer, pledge, hypothecation, or
other disposition of an Option, or levy of attachment or similar process upon
the Option not specifically permitted herein shall be null and void and without
effect.
8. Adjustment of Options. In the event of any merger, consolidation or
reorganization of the Company with any other corporation or corporations, there
shall be substituted for each of the shares of Common Stock then subject to the
Plan, including shares subject to Options, the number and kind of shares of
stock or other securities to which the holders of the shares of Common Stock
will be entitled pursuant to the transaction. In the event of any
recapitalization, stock dividend, stock
-3-
<PAGE>
split, combination of share or other change in the Common Stock, the number of
shares of Common Stock then subject to the Plan, including shares subject to
Options, shall be adjusted in proportion to the change in outstanding shares of
Common Stock. In the event of any such adjustments, the purchase price of any
Option and the shares of Common Stock issuable pursuant to any Option shall be
adjusted as and to the extent appropriate, in the reasonable discretion of the
Committee, to provide participants in the Plan with the same relative rights
before and after such adjustment.
9. Call Option of the Company
9.1 Call Right. The Company shall have the right to repurchase any
and all Option Shares (a "Call Option") if the holder thereof ceases to be
an employee or director of the Company for any reason other than death,
disability or retirement at normal retirement age.
9.2 The Call Price. The per share price that the Company will be
required to pay upon exercise of the Call Option (the "Call Price") shall
be the Fair Market Value of Common Stock (as defined in Section 10.7
hereof) on the date that the Call Option is exercised.
9.3 Payment of the Call Price. The Call Price may be paid, in the
sole discretion of the Company, in any of the following three ways: (a) in
a lump sum payable on the date the Call Option is exercised; (b) in
substantially equal, annual installments over a period not exceeding ten
years from the date that the Call Option is exercised (with interest
payable at a reasonable rate, as determined by the Board of Directors of
the Company, on any unpaid installment balance), or (c) any combination of
the foregoing.
10. General.
10.1 Duration. The Plan shall remain in effect until all Options
authorized to be granted under the Plan have been granted and have either
been satisfied by the issuance of Option Shares or been terminated under
the terms of the Plan.
10.2 Effect of Termination of Employment or Death. If a participant
in the Plan ceases to be an employee, director, or consultant of the
Company for any reason, including death, any Option may be exercised or
shall expire at such times as shall be set forth in the stock option
agreement between such participant and the Company entered into at the time
the Option is granted.
10.3 Additional Condition. Anything in this Plan to the contrary
notwithstanding: (a) the Company may, if it shall determine it necessary or
desirable for any reason, at the time of the award of any Option or the
issuance of any shares of Common Stock pursuant to any Option, require the
recipient of the Option as a condition to the receipt thereof or to the
receipt of shares of Common Stock issued pursuant thereto, to deliver to
the Company a written representation of present intention to acquire the
shares of Common
-4-
<PAGE>
Stock issued pursuant to the option for his own account for investment and
not for distribution; and (b) if at any time the Company further
determines, in its sole discretion, that the listing, registration or
qualification (or any updating of any such document) of any Option or the
shares of Common Stock issuable pursuant to the Plan is necessary on any
securities exchange or under any federal or state securities or blue sky
law, or that the consent or approval of any governmental regulatory body is
necessary or desirable as a condition of, or in connection with the award
of any Option or the issuance of shares of Common Stock pursuant to the
Plan, such Option shall not be awarded or such shares of Common Stock shall
not be issued, 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 the Company.
10.4 Withholding. The Company shall have the right to withhold at the
time a non-qualified Option is exercised or to collect as a condition of
exercise, any taxes required by law to be withheld.
10.5 No Continued Employment. No participant under the Plan shall
have any right, because of his or her participation herein, to continue in
the employ of the Company for any period of time or any right to continue
his or her present or any other rate of compensation.
10.6 Amendment of the Plan. The Board of Directors of the Company may
amend or discontinue the Plan at any time. However, no such amendment or
discontinuance shall, subject to adjustment under Section 8 hereof, change
or impair, without the consent of the recipient, an Option previously
granted. Shareholder approval of certain Plan amendments may be
necessitated by applicable tax laws.
10.7 Definition of Fair Market Value. Whenever "Fair Market Value" of
Common Stock shall be determined for purposes of this Plan, it shall be
such value as is determined by the Committee in good faith.
-5-
<PAGE>
EXHIBIT 10.2
[FORM OF]
STOCK OPTION AGREEMENT FOR THE GRANT OF STOCK OPTIONS
UNDER LUMINEX CORPORATION STOCK OPTION PLAN
THIS AGREEMENT is entered into effective as of ______ ___ 19___, by and
between Luminex Corporation, a Delaware corporation (the "Company"), and
_________ ("Optionee").
WHEREAS, Optionee is a key employee of the Company and the Company
considers it desirable and in its best interest that Optionee be given an
inducement to acquire a proprietary interest in the Company and an added
incentive to advance the interests of the Company by possessing an option to
purchase shares of Common Stock of the Company in accordance with the Luminex
Corporation Stock Option Plan (the "Plan").
NOW, THEREFORE, in consideration of the premises, it is agreed as follows:
1. DEFINITIONS
For purposes of this Agreement, all capitalized terms, if not otherwise
defined herein, shall have the meanings provided in the Plan.
2. GRANT OF OPTION
The Company hereby grants to Optionee the right, privilege, and option to
purchase _________ shares of Common Stock (the "Option") at a price of $_______
per share (the "Exercise Price"). The Option shall be exercisable as specified
in Section 3 below.
3. TIME OF EXERCISE
3.1 Subject to the provisions of the Plan and Sections 3.2 and 3.3 hereof,
the Optionee shall be entitled to exercise his Option as follows:
With respect to ________ Beginning _______ ___, ______
of the shares subject to
the Option
With respect to ________ Beginning _______ ___, ______
of the shares subject to
the Option, less any
shares previously issued
hereunder
-1-
<PAGE>
With respect to all of the
shares subject to the Beginning ________ ___, _____
Option, less any shares
previously issued hereunder
3.2 The Option may not be exercised later than _______ ___, _____.
3.3 If the Optionee's employment is terminated for any reason, other than
death or disability, the Option must be exercised, to the extent exercisable at
the time of termination of employment, within 30 days of the date on which
Optionee ceases to be an employee, but no later than ________ ___, _____. In
the event of death or disability, the Option must be exercised, to the extent
exercisable at the time of termination of employment, within one year of the
date on which employment terminated as the result of death or disability, but no
later than ______ ___, _____.
4. NO CONTRACT OF EMPLOYMENT INTENDED
Nothing in this Agreement shall confer upon Optionee any right to continue
in the employ of the Company, or interfere in any way with the right of the
Company to terminate Optionee's employment relationship with the Company.
5. BINDING EFFECT
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators and
successors.
6. INCONSISTENT PROVISIONS
The Option granted hereby is subject to the provisions of the Plan as in
effect on the date hereof. If any provision of this Agreement conflicts with
such a provision of the Plan, the Plan provision shall control.
7. COMPLIANCE WITH SECURITIES LAWS
It is the intention of the Company to effect full compliance with all
securities and other applicable laws with respect to the sale of shares pursuant
to the exercise of Options hereunder and subsequent resales by the Optionee.
The Company shall not be required to sell and deliver shares hereunder upon
exercise of this Option in whole or part until the Optionee shall have made such
representations and agreed to the legending of stock certificates in a fashion
as may reasonably be required by the Company's counsel to effect compliance with
all applicable securities or other laws.
-2-
<PAGE>
8. NON-TRANSFERABILITY; CALL OPTION OF THE COMPANY
The Optionee hereby recognizes and acknowledges that the Options granted
hereunder are not transferable other than by will or descent. Further, as
provided in the Plan, the Company shall have the right, but not the obligation,
to repurchase any and all Option Shares if the Optionee ceases to be an employee
of the Company for any reason other than death, disability, or retirement at
normal retirement age (the "Call Option"). The per share price of the Option
Shares repurchased pursuant to the Call Option shall be the Fair Market Value of
the Common Stock on the date that the Call Option is exercised.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed effective as of the day and year first above written.
LUMINEX CORPORATION
By: ___________________________________
Mark B. Chandler
President and CEO
___________________________________
______________________
Optionee
-3-
<PAGE>
EXHIBIT 10.3
[FORM OF]
INCENTIVE STOCK OPTIONS UNDER
LUMINEX CORPORATION STOCK OPTION PLAN
THIS AGREEMENT is entered into effective as of _________ ___, _______, by
and between Luminex Corporation, a Texas corporation (the "Company"), and
____________ ("Optionee").
WHEREAS, Optionee is a key employee of the Company and the Company
considers it desirable and in its best interest that Optionee be given an
inducement to acquire a proprietary interest in the Company and an added
incentive to advance the interests of the Company by possessing an option to
purchase shares of the common stock of the Company in accordance with Luminex
Corporation Stock Option Plan (the "Plan").
NOW, THEREFORE, in consideration of the premises, it is agreed as follows:
1. DEFINITIONS
For purposes of this Agreement, all capitalized terms, if not otherwise
defined herein, shall have the meanings provided in the Plan.
2. GRANT OF OPTION
The Company hereby grants to Optionee the right, privilege and option to
purchase _______ shares of Common Stock (the "Option") at a price of $_____ per
share (the "Exercise Price"), determined by the Committee to be the Fair Market
Value of a share of Common Stock of the Company on ___________ ____, _____, the
date of grant of the Option (the "Date of Grant"). The Option shall be
exercisable as specified in Section 3 below. The Option is an incentive stock
option (as such term is defined in Section 422 of the Code).
3. TIME OF EXERCISE
3.1 Subject to the provisions of the Plan and Sections 3.2 and 3.3 hereof,
the Optionee shall be entitled to exercise his Option as follows:
With respect to ______ of Beginning _________ ____, _____
the shares subject to the
Option
With respect to ________ Beginning _________ ____, ______
of the shares subject to
the Option, less any shares
-1-
<PAGE>
previously issued hereunder
With respect to all of the Beginning ________ ____, _____
shares subject to the
Option, less any shares
previously issued hereunder
3.2 The Option may not be exercised later than _________ ___, _____.
3.3 If the Optionee's employment is terminated for any reason, other than
death or disability, the Option must be exercised, to the extent exercisable at
the time of termination of employment, within 30 days of the date on which
Optionee ceases to be an employee, but no later than ___________ ____, _____. In
the event of death or disability, the Option must be exercised, to the extent
exercisable at the time of termination of employment, within one year of the
date on which employment terminated as the result of death or disability, but no
later than _________ ____, ______.
4. NO CONTRACT OF EMPLOYMENT INTENDED
Nothing in this Agreement shall confer upon Optionee any right to continue
in the employ of the Company, or interfere in any way with the right of the
Company to terminate Optionee's employment relationship with the Company.
5. BINDING EFFECT
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators and
successors.
6. INCONSISTENT PROVISIONS
The Option granted hereby is subject to the provisions of the Plan as in
effect on the date hereof. If any provision of this Agreement conflicts with
such a provision of the Plan, the Plan provision shall control.
7. COMPLIANCE WITH SECURITIES LAWS
It is the intention of the Company to effect full compliance with all
securities and other applicable laws with respect to the sale of shares pursuant
to the exercise of Options hereunder and subsequent resales by the Optionee. The
Company shall not be required to sell and deliver shares hereunder upon exercise
of this Option in whole or part until the Optionee shall have made such
representations and agreed to the legending of stock certificates in a fashion
as may reasonably be required by the Company's counsel to effect compliance with
all applicable securities or other laws.
-2-
<PAGE>
8. RIGHT OF FIRST REFUSAL
The Optionee recognizes that under the By-laws of the Company the Option
Shares may not be sold or transferred unless they are first offered to the
Corporation as provided in the By-laws.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed effective as of the day and year first above written.
LUMINEX CORPORATION
By: ____________________________________
Mark B. Chandler
President and CEO
____________________________________
____________________
Optionee
-3-
<PAGE>
EXHIBIT 10.7
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
DEVELOPMENT AND SUPPLY AGREEMENT
This Development and Supply Agreement (the "Agreement"), effective as of
March 19, 1999 (the "Effective Date"), is made by and between LUMINEX
CORPORATION, a Delaware corporation with principal offices at 12212 Technology
Boulevard, Austin, Texas 78727 ("LUMINEX"), and BIO-RAD LABORATORIES, INC., a
Delaware corporation with principal offices at 1000 Alfred Nobel Drive,
Hercules, California 94547 ("BIO-RAD").
BACKGROUND
A. LUMINEX has developed Standard Beads (as defined below) for detection
and quantification of analytes, either singly or in multiplexed (multiple
analytes simultaneously) form and is developing a system for use with such
Standard Beads.
B. BIO-RAD is an international company which manufactures and sells a
wide variety of research and clinical diagnostics products used in healthcare,
scientific investigation and industry.
C. The parties desire that BIO-RAD develop and distribute Kits
incorporating Tests (as defined below) for use within certain fields, and that
BIO-RAD distribute Luminex100 Systems (as defined below) as incorporated into
BIO-RAD's instrumentation.
NOW THEREFORE, for and in consideration of the covenants, conditions, and
undertakings hereinafter set forth, it is agreed by and between the parties as
follows:
ARTICLE 1
DEFINITIONS
-----------
1.1 "Affiliate" means any entity which controls, is controlled by or is
---------
under common control with a party hereto. For such purposes, "control" shall
mean ownership of more than fifty percent (50%) of the shares of the subject
entity entitled to vote in the election of directors (or, in the case of an
entity that is not a corporation, for the election of the corresponding managing
authority).
1.2 "Beads" means Standard Beads and Magnetic Beads.
-----
1.3 "Bead Specifications" means the specifications for the Standard
-------------------
Beads or Magnetic Beads as designated by LUMINEX from time to time in writing.
1.4 "BIO-RAD Improvement Patents" means [**] during the term of this
---------------------------
Agreement in inventions comprising modifications, extensions or enhancements
conceived or reduced to practice by BIO-RAD to the Standard Beads or Luminex100
Systems or portions thereof (including Included Software) or to the manufacture
or use of the Standard Beads, Luminex100 Systems or portions thereof (including
Included Software). "BIO-RAD Improvement Patents" specifically excludes patent
claims conceived and reduced to practice by BIO-RAD consisting of methods of
sample preparation, methods of conjugating Standard Beads to analytes, the
composition of matter of the specific chemistries of the assays developed by
BIO-RAD, methods of performing the assays (i.e., the protocol for the assay) and
methods of introducing the patient sample into the BIO-RAD System.
1.5 "BIO-RAD System" means the Luminex100 System as incorporated into
--------------
BIO-RAD's instrumentation.
1.6 "End User" shall mean a purchaser of Kits that obtains Kits for the
--------
purpose of generating Test results on behalf of itself or third parties and not
for the purpose of re-sale of the Kit.
- -----------------
[**] Indicates that material has been omitted and confidential treatment
requested therefor. All such material has been filed separately with the
Commission pursuant to Rule 406.
<PAGE>
1.7 "Fields" means the fields set forth in Exhibit A and any such other
------
fields as the parties include hereunder pursuant to Section 3.3. Fields One, Two
and Three as set forth in Exhibit A shall be limited to use in the human
clinical diagnostics industry.
1.8 "Included Software" means [**]
-----------------
1.9 "Intellectual Property Rights" means (i) patent claims to the extent
----------------------------
such claims cover only an apparatus or composition of matter, and not a method
or process; and (ii) copyrights.
1.10 "Kit" means the combination of (i) Standard Beads or Magnetic Beads
---
conjugated to biological reactants, (ii) standards, and (iii) other ancillary
materials supplied by BIO-RAD, e.g. buffers and other solutions, required for
performance of Tests. In order to qualify as a "Kit," it must contain all of
the foregoing components and not one or a subset of the foregoing components and
must be made generally available to BIO-RAD's customers. Except as otherwise
agreed by LUMINEX and BIO-RAD, "Kits" shall not be designed for use in a
Multiplexed Bead Assay of more than one hundred (100) analytes.
1.11 "Luminex100 System" means a laser based fluorescent analytical test
-----------------
system consisting of LUMINEX's instrumentation marketed under the name
Luminex100 and the Software with or without off-the-shelf computer components
(selection of off-the-shelf computer components to be by LUMINEX), and any
functional replacements and line extensions, of the Luminex100 System, including
autosampler-based versions, in each case to the extent made generally available
by LUMINEX to its customers.
1.12 "Luminex100 System Specifications" means the specifications for the
--------------------------------
Luminex100 System as designated by LUMINEX from time to time in writing.
1.13 "Magnetic Beads" means magnetic microsphere beads supplied [**] and
--------------
dyed and modified by LUMINEX for use with Luminex100 Systems.
1.14 "Multiplexed Bead Assays" means a number of assays derived from the
-----------------------
use of fluorescently-dyed microsphere beads with said assays determined
simultaneously on a single sample.
1.15 "Net Sales" means the total amounts invoiced by BIO-RAD to End Users,
---------
Subdistributors or other third parties with respect to the sale or other any
other provision of Kits, less all (i) volume discounts, rebates, and returns;
(ii) customs duties, taxes (e.g., sales, excise, withholding, and value-added
taxes) other than taxes based upon BIO-RAD's income; and (iii) freight,
insurance and other shipment expenses.
1.16 "Panel" means a specified series or group of Tests.
-----
1.17 "Registration Code" means a unique identifier code incorporated into
-----------------
Standard Beads and Magnetic Beads, which code would enable the Software to
identify BIO-RAD as the customer for whom the Standard Beads or Magnetic Beads
were initially supplied, each analyte measured using the Standard Beads or
Magnetic Beads in a particular Test, and other information.
- ---------------
[**] Indicates that material has been omitted and confidential treatment
requested therefor. All such material has been filed separately with the
Commission pursuant to Rule 406.
2
<PAGE>
1.18 "Software" means the software programs in machine executable object
--------
code format incorporated by LUMINEX into the Luminex100 System, and Updates
thereto, in each case that are made available by LUMINEX generally to its
customers as part of the Luminex100 System.
1.19 "Specifications" means the Bead Specifications and Luminex100 System
--------------
Specifications.
1.20 "Standard Beads" means LUMINEX's standard fluorescently-dyed
--------------
microsphere beads supplied by LUMINEX for use with Luminex100 Systems and made
available generally by LUMINEX to its customers.
1.21 "Test" means a single use of Standard Beads or Magnetic Beads in the
----
detection or quantification of an analyte within the Fields for an application
within the Fields.
1.22 "Updates" means error corrections and bug fixes to the Software that
-------
LUMINEX makes generally available to its customers free of charge.
ARTICLE 2
DEVELOPMENT
-----------
2.1 Development.
-----------
(a) BIO-RAD shall be responsible, at its expense, for all Kit design
and development hereunder.
(b) BIO-RAD further shall be responsible, at its expense, for
performing all activities required to secure and maintain all required
regulatory approvals for use of Kits and the BIO-RAD System within the Fields.
LUMINEX will cooperate with BIO-RAD, at BIO-RAD's expense, to the extent
LUMINEX's participation is necessary for BIO-RAD to obtain regulatory approval
for the Kits and BIO-RAD System for use within the Fields. LUMINEX will make
available to BIO-RAD [**] such tangible written information in LUMINEX's
possession and control as is necessary to obtain regulatory approval for the
Kits, it being understood that LUMINEX shall not be required to perform any
tests or studies required for regulatory approval.
(c) LUMINEX may, at BIO-RAD's request and on the terms acceptable to
both parties, conduct initial feasibility studies and/or contract manufacturing
for BIO-RAD.
(d) Subject to the terms and conditions of this Section 2.1(d),
LUMINEX shall use reasonable efforts to treat the Magnetic Beads provided to
LUMINEX by if feasible in LUMINEX's judgment, to permit use of such Magnetic
Beads with the Luminex100 System ("Services"). Such Services shall be subject to
LUMINEX's standard nonrecurring engineering fees then in effect; provided that
BIO-RAD shall not be obligated to pay LUMINEX in excess of [**] Dollars ($[**])
in the aggregate for the Services, and LUMINEX shall not be obligated to provide
services which at LUMINEX's standard rates exceed [**] Dollars ($[**]) with
respect to such Services. It is understood and agreed that LUMINEX's treatment
and BIO-RAD's sale of Magnetic Beads for use with the Luminex100 System will be
subject to LUMINEX's production of a beadmap for the Magnetic Beads that is
acceptable to LUMINEX as determined in accordance with criteria to be set forth
in the Development Agreement (as defined below). BIO-RAD's rights hereunder with
respect to Magnetic Beads shall be subject to agreement upon a tolling fee
payable by BIO-RAD to LUMINEX with respect to each Magnetic Bead dyed for use
with the Luminex100 System or BIO-RAD System. Such supply of Magnetic Beads by
BIO-RAD, the tolling fees payable by BIO-RAD with respect to Magnetic Beads and
any Services provided by LUMINEX with respect to Magnetic Beads is subject to
agreement on the terms and conditions of a development, services and supply
agreement to be negotiated in good faith by the parties ("Development
Agreement"). Notwithstanding any provision of this Agreement to the contrary,
including the provisions of Section 8.3, if the parties do not agree upon a
tolling fee for Magnetic Beads
________________
[**] Indicates that materials has been omitted and confidential treatment
requested therefor. All such material has been filed separately with the
Commission pursuant to Rule 406.
3
<PAGE>
within [**] days of the Effective Date, all rights of BIO-RAD and all
obligations of LUMINEX with respect to Magnetic Beads shall automatically
terminate unless otherwise agreed in writing.
2.2 Commercialization. BIO-RAD shall (i) evaluate and determine in good
-----------------
faith whether regulatory approval is required in each country in which it elects
to market or distribute the Kits and/or BIO-RAD Systems for use within the
Fields and shall obtain all regulatory approvals BIO-RAD so determines are
required for such marketing and distribution; and (ii) have sold Kits for which
a royalty is owed pursuant to Section 4.6(c) (including a Kit within Field Four)
and have commenced marketing, distribution and commercial sale of BIO-RAD
Systems, in each of (i) and (ii) within [**] months after the availability of
the Luminex100 System. BIO-RAD shall have [**] days to file regulatory approvals
which BIO-RAD determined in its good faith judgment were not required but with
respect to which BIO-RAD was later notified by the applicable government agency
were required. Failure by BIO-RAD to comply with (i) and (ii) with respect to
Field Four shall give LUMINEX the right at its sole election to terminate [**]
of Article 3.2 (b) by written notice to BIO-RAD, except to the extent caused
solely by LUMINEX's failure to supply Standard Beads or Luminex100 Systems in
accordance with the terms hereof or the Development Agreement.
2.3 Other. Without limiting the foregoing provisions of this Article 2,
-----
BIO-RAD hereby agrees to keep LUMINEX reasonably informed as to the progress of
the activities undertaken pursuant to this Article 2.
ARTICLE 3
DISTRIBUTION
------------
3.1 Appointment; Covenant Not to Sue. Subject to the terms and conditions
--------------------------------
of this Agreement, LUMINEX appoints BIO-RAD as a distributor of (i) LUMINEX100
Systems only as part of BIO-RAD Systems and replacement parts therefor and (ii)
Kits designed solely for use in a Field. Subject to the terms and conditions of
this Agreement, LUMINEX grants to BIO-RAD a personal, nontransferable immunity
from suit under LUMINEX's Intellectual Property Rights, with respect to the re-
sale of Luminex100 Systems as incorporated into BIO-RAD instrumentation and
Kits; provided that Beads are sold only as part of Kits, and further provided
that BIO-RAD Systems and Kits are designed and sold solely for use in the Fields
and subject to the end user customer restrictions set forth in Section 3.6
below. BIO-RAD further agrees not to provide the BIO-RAD Systems to any third
party if BIO-RAD U.S. Diagnostics Division management becomes aware that such
third party has previously used or intends to use (i) the BIO-RAD System with
beads other than the Standard Beads or Magnetic Beads authorized by LUMINEX or
(ii) the BIO-RAD System or Beads outside the Fields. BIO-RAD agrees not to
provide the Luminex100 Systems or BIO-RAD Systems other than in the development
of Kits to be distributed in accordance with this Agreement. LUMINEX agrees to
grant to End User customers of BIO-RAD a license to use Standard Beads and
Magnetic Beads in conjunction with their operation of BIO-RAD Systems pursuant
to the End User Licenses set forth in Section 3.6 below. It is understood and
agreed that except as expressly provided in this Section 3.1 above, no rights or
licenses under LUMINEX's patent rights are granted hereunder nor shall any such
rights or licenses be implied from the terms hereof. The parties further
acknowledge and agree that the covenant not to sue set forth in this Section 3.1
above shall not imply that purchasers of the BIO-RAD System from BIO-RAD obtain
any rights under LUMINEX's patent rights. Rather, LUMINEX will grant End Users
the right under LUMINEX's patent rights to use the Luminex100 System with Kits
pursuant to the End User Licenses described in Section 3.6 below only when such
Kits are purchased by the End User.
3.2 [**]
- ---------------
[**] Indicates that material has been omitted and confidential treatment
requested therefor. All such material has been filed separately with the
Commission pursuant to Rule 406.
4
<PAGE>
3.3 Expansion of Fields.
-------------------
(a) From time to time during the term of this Agreement, if BIO-RAD
requests that one or more of the Fields granted to BIO-RAD be expanded to
include additional analytes, such analytes will be included as part of a Field
presently covered by this Agreement to the extent set forth in Exhibit A, or as
part of an additional field to be licensed or granted to BIO-RAD, in each case
to the extent mutually agreed in writing by the parties. The [**] to BIO-
RAD for each additional analyte or field made generally available for [**] by
LUMINEX on a nonexclusive basis to LUMINEX's customers shall not exceed one [**]
Dollars ($[**]).
(b) Preferential Right.
(i) Prior to granting to a third party exclusive rights to
develop or distribute Kits for the detection or quantification of one or more
analytes for use within a field within the human clinical diagnostics industry
(such analytes and field of use are referred to collectively herein as the
"Subject Field"), LUMINEX shall provide BIO-RAD with a right of first offer with
respect to such Subject Field, as follows: prior to entering into an agreement
granting a third party exclusive rights to develop and/or distribute Kits within
a Subject Field, LUMINEX shall provide written notification to BIO-RAD, together
with a summary of the Subject Field. Upon request by BIO-RAD within [**]
days after receipt of such a notice, LUMINEX and BIO-RAD shall negotiate in
good faith an agreement with respect to such Subject Field. If BIO-RAD is not
interested in obtaining rights with respect to such Subject Field, BIO-RAD shall
so notify LUMINEX as early as possible during the foregoing [**] day period. If
(i) BIO-RAD does not so request within such [**] day period to commence
negotiations, or notifies LUMINEX that it is not interested in obtaining rights
with respect to such Subject Field, or (ii) the parties do not enter into a
definitive agreement with respect to such Subject Field within [**] days
after BIO-RAD's receipt of LUMINEX's notice under this Section 3.3(b) (in each
of (i) and (ii), the "Negotiation Period"), LUMINEX may proceed to grant rights
or licenses to third parties with respect to all or any part of the Subject
Field, with no further obligation under this Section 3.3. Notwithstanding the
foregoing, BIO-RAD's rights and obligations under this Section 3.3 shall not
apply to a Subject Field for which BIO-RAD does not Control sufficient rights to
commercialize Kits within such Subject Field, where "Control" means ownership or
a license under all applicable intellectual property rights to make, have made,
use, import, sell, offer for sale, and otherwise distribute each Kit within the
Subject Field on a worldwide basis. BIO-RAD's rights and obligations under this
Section 3.3(b) shall terminate [**] years after the Effective Date. For the
avoidance of doubt, it is understood and agreed that LUMINEX shall have no
obligation to disclose to BIO-RAD any information concerning the terms of
LUMINEX's offers to third parties with respect to Subject Fields. It is further
understood and agreed that nothing in this Section 3.3(b) shall restrict LUMINEX
from granting nonexclusive rights to third parties with respect to any analyte
or field of use without any obligation under this Section 3.3(b).
- -------------------
[**] Indicates that material has been omitted and confidential treatment
requested therefor. All such material has been filed seperately with the
Commission pursuant to Rule 406.
5
<PAGE>
(ii) If BIO-RAD disputes LUMINEX'S right to proceed to
grant rights or licenses to third parties with respect to any Subject Field,
BIO-RAD shall request that such dispute be resolved in accordance with Section
12.5 below. If such dispute is not so resolved and BIO-RAD wishes to pursue such
dispute, then prior to ten (10) days after the expiration of the Negotiation
Period described above regarding such Subject Field, or within ten (10) days
after LUMINEX notifies BIO-RAD that LUMINEX believes Section 3.3(b) does not
apply to a Subject Field (as the case may be), BIO-RAD shall submit to LUMINEX a
written notification requesting arbitration pursuant to Section 12.5 below and
including a written report setting forth (without limitation), the specific
basis for the dispute, and the specific actions BIO-RAD believes LUMINEX must
take to resolve the dispute ("Arbitration Notice"). If such Arbitration Notice
is not received within ten (10) days after the expiration of the Negotiation
Period or such ten (10) day period after notice of LUMINEX's belief that this
Section 3.3(b) does not apply (respectively), then notwithstanding Section 12.5
below, BIO-RAD shall have no further right to dispute LUMINEX'S right to grant
any right or license, or otherwise claim rights pursuant to this Section 3.3(b)
in or to the Subject Field. It is further understood that, notwithstanding the
provisions of Section 12.5, the parties and the arbitrators shall complete the
arbitration within sixty (60) days after the appointment of the arbitrators
under Section 12.5. So long as LUMINEX provides to BIO-RAD the notice required
by Section 3.3(b) above, this Section 3.3(b)(ii) is BIO-RAD's sole remedy for
any failure by LUMINEX to comply with this Section 3.3(b) with respect to a
Subject Field.
(iii) It is understood and agreed that a transfer of all or
substantially all of the business or assets of LUMINEX pertaining to the subject
matter of this Agreement to a third party, whether by merger, acquisition or
otherwise, shall not be deemed a grant to a third party of a right or license
with respect to a Subject Field nor give rise to any right or obligation under
Section 3.3(b) above.
3.4 Reservation of Rights. The use by BIO-RAD of any of LUMINEX's
---------------------
Intellectual Property Rights is authorized only for the purposes herein set
forth and upon termination of this Agreement for any reason such authorization
will cease. Nothing in this Agreement (other than Section 3.2 and 3.3(b)) shall
be deemed to restrict LUMINEX's right to exploit the Standard Beads, Magnetic
Beads or Luminex100 Systems. Neither BIO-RAD nor its customers shall receive any
license or rights under LUMINEX's Intellectual Property Rights by virtue of
their purchase of BIO-RAD Systems other than as expressly set forth herein.
Unless otherwise required by applicable law, BIO-RAD shall not remove, alter,
cover or obfuscate any patent markings, copyright notices or other proprietary
rights notices placed on or embedded in the Standard Beads, Magnetic Beads,
Software or Luminex100 Systems. BIO-RAD shall mark all Kits and BIO-RAD Systems
sold or otherwise distributed under this Agreement in accordance with the
applicable statutes and regulations relating to patent marking of the United
States and all other countries in which the Kits or BIO-RAD Systems are made or
sold. LUMINEX will provide copies in writing of the patents to be covered by
such notice and hereby warrants the accuracy of and right to use such notices.
3.5 No Right to Manufacture or Modify. Software is licensed, and Beads
---------------------------------
and non-Software portions of the Luminex100 System are sold subject in every
case to the condition that such transfer does not convey any license, expressly
or by implication, to manufacture, reconstruct, modify, duplicate or otherwise
copy or reproduce any of the Beads, Software or the Luminex100 Systems. BIO-RAD
shall not alter, modify, adapt, translate, prepare derivative works from,
decompile, reverse engineer, disassemble, or attempt to derive computer source
code from any Luminex100 System or Software. BIO-RAD will notify LUMINEX
immediately upon BIO-RAD U.S. Diagnostics Division management becoming aware
that BIO-RAD or any third party has engaged in any of the foregoing activities
and shall cease selling BIO-RAD Systems or Beads to any such person or entity.
BIO-RAD further agrees that the Standard Beads or Magnetic Beads and Luminex100
System comprise a single system, and the Luminex100 System may not be used by
BIO-RAD with beads other than the Standard Beads or Magnetic Beads authorized by
LUMINEX.
3.6 End User License. BIO-RAD shall include a copy of the End User Kit
----------------
and Software license agreements attached hereto as Exhibit B (the "End User
Licenses") with each Kit or BIO-RAD System, respectively, shipped to a customer
by or for BIO-RAD. BIO-RAD shall further include the labels set forth in
Exhibit B on every BIO-RAD System and Kit.
6
<PAGE>
3.7 Subdistributors. Subject to all the terms and conditions herein,
---------------
BIO-RAD may appoint third parties within BIO-RAD's normal chain of distribution
to sell Kits in accordance with the provisions of this Article 3 and may appoint
subdistributors within its normal chain of distribution to distribute BIO-RAD
Systems (such subdistributors are referred to collectively herein as
"Subdistributors"); provided that (i) BIO-RAD shall terminate any such
Subdistributor that does not follow the provisions of Article 1 (to the extent
referenced in the following Sections), 3, and 7 and Sections 4.5, 4.13, 5.3,
8.1, 8.4, 8.5, 12.1, 12.3, 12.9, and 12.15 of this Agreement, and (ii) BIO-RAD
shall diligently enforce all such Subdistributor agreements. For the avoidance
of doubt, in no event shall BIO-RAD provide Standard Beads or Magnetic Beads to
third parties except as incorporated into Kits or as replacement components of
Kits. Except as expressly provided in this Section 3.7, BIO-RAD shall have no
right to sublicense its rights or appoint Subdistributors hereunder.
3.8 To LUMINEX. BIO-RAD hereby grants to LUMINEX a nonexclusive,
----------
worldwide, unrestricted license, with the right to grant and authorize
sublicenses, under BIO-RAD Improvement Patents solely for use with Luminex100
Systems and Beads [**]. Such license shall be deemed royalty-free and fully-
paid up.
ARTICLE 4
SUPPLY, PRICING AND ROYALTIES
-----------------------------
4.1 Supply and Use of Standard Beads and Luminex100 Systems. Subject to
-------------------------------------------------------
the terms and conditions of this Agreement, BIO-RAD agrees to acquire from
LUMINEX, and LUMINEX agrees to use reasonable, diligent efforts to supply to
BIO-RAD, BIO-RAD's commercial requirements of Standard Beads and Luminex100
Systems. To ensure the quality and authenticity of the microsphere beads used
with the Luminex100 System, BIO-RAD shall exclusively obtain from LUMINEX
fluorescently-dyed microsphere beads for use with the Luminex100 System, or with
respect to microsphere beads with magnetic properties, have such magnetic beads
dyed and processed by LUMINEX for use with the Luminex100 System.
4.2 Forecasts. Within ten (10) days prior to each calendar quarter,
---------
BIO-RAD and LUMINEX shall agree in writing upon a rolling six month forecast of
delivery requirements of Standard Beads and Luminex100 Systems in each
respective month ("Forecast"). Within ten days following the Effective Date, the
parties shall agree in writing upon the Forecast for the six month period
commencing on March 1, 1999. The first ninety (90) days of the Forecast shall be
binding upon each of the parties hereto. Except as set forth in this Section 4.2
above, The Forecasts shall constitute BIO-RAD's good faith estimates of BIO-
RAD's requirements, and otherwise shall be nonbinding upon either party.
4.3 Orders. LUMINEX shall accept purchase orders from BIO-RAD for
------
Standard Beads and Luminex100 Systems to the extent the volume of Luminex100
Systems is within one hundred thirty percent (130%) of the Forecasts submitted
by BIO-RAD in the calendar month preceding the submission of the purchase order,
and to the extent the volume of Standard Beads is within one hundred fifty
percent (150%) of the Forecasts submitted by BIO-RAD in the calendar month
preceding the submission of the purchase order, in all events subject to the
other terms and conditions of this Agreement. BIO-RAD's orders shall be made
pursuant to written firm purchase orders, and shall provide for shipment in
accordance with LUMINEX's standard lead times then in effect which as of the
Effective Date are ninety (90) days. ANY ADDITIONAL OR INCONSISTENT TERMS OR
CONDITIONS OF ANY PURCHASE ORDER, ACKNOWLEDGMENT OR SIMILAR STANDARDIZED FORM
GIVEN OR RECEIVED PURSUANT TO THIS AGREEMENT SHALL HAVE NO EFFECT AND SUCH TERMS
AND CONDITIONS ARE HEREBY EXCLUDED.
4.4 Delivery. With respect to exact shipping dates, LUMINEX shall use its
--------
reasonable efforts to ship quantities of Standard Beads and Luminex100 Systems
in accordance with purchase orders submitted and accepted in accordance with
Section 4.3 above. All Beads and Luminex100 Systems supplied pursuant to the
terms of this Agreement shall be suitably packed for shipment by LUMINEX and
marked for shipment to the BIO-RAD facility indicated in BIO-RAD's purchase
order. All Beads and Luminex100 Systems will be shipped F.O.B. (U.C.C.) the
- --------------
[**] Indicates that material has been omitted and confidential treatment
requested therefor. All such material has been filed seperately with the
Commission pursuant to Rule 406.
7
<PAGE>
shipping point designated by LUMINEX. The carrier shall be selected by agreement
between LUMINEX and BIO-RAD, provided that in the event no such agreement is
reached, LUMINEX shall select the carrier. All shipping and insurance costs, as
well as any special packaging expenses, shall be paid by BIO-RAD.
4.5 Acceptance. All shipments and all shipping and other charges shall be
----------
deemed correct unless LUMINEX receives from BIO-RAD, no later than thirty (30)
days after BIO-RAD's receipt of a given shipment, a written notice specifying
the shipment, the purchase order number, and the nature of the discrepancy
between the order and the shipment or the nature of the discrepancy in the
shipping or other charges, as applicable. LUMINEX agrees to replace, at no
additional expense to BIO-RAD, any Standard Beads or Luminex100 Systems which
fail to conform to the Bead Specifications or Luminex100 System Specifications,
respectively, with Standard Beads or Luminex100 Systems which conform to the
Bead Specifications or Luminex100 System Specifications, respectively. LUMINEX
may analyze any Standard Beads or Luminex100 Systems rejected by BIO-RAD for
nonconformity and if it is objectively established that the Standard Beads or
Luminex100 Systems were conforming, then BIO-RAD shall be responsible for
payment for such Standard Beads or Luminex100 Systems. BIO-RAD shall, at
LUMINEX's option, return to LUMINEX or destroy, and provide written
certification of destruction, all Standard Beads which do not conform to the
Bead Specifications, and BIO-RAD shall return to LUMINEX all Luminex100 Systems
which do not conform to the Luminex100 System Specifications. All returns shall
be in accordance with LUMINEX's written instructions and shall be at LUMINEX's
expense if the Luminex100 System and/or Standard Beads are confirmed by LUMINEX
as defective in Luminex's reasonable judgment.
4.6 Pricing and Royalties.
---------------------
(a) Standard Bead Pricing. BIO-RAD shall pay to LUMINEX [**]
---------------------
[$**] for every [**] units of Standard Beads purchased, where a "unit" of
Standard Beads is equal to one microsphere bead ("Unit Transfer Fee"). This Unit
Transfer Fee will be effective during the first [**] years of this Agreement,
after which time LUMINEX may, at its option, increase the Unit Transfer Fee
effective on [**] days written notice to BIO-RAD. Such increases may occur no
more frequently than once per year. Each annual increase during the first [**]
years after commercial availability of the first Kit shall not exceed [**]
percent ([**]%) of the Unit Transfer Fee previously in effect and thereafter
shall not exceed the [**]. Any increase in the Unit Transfer Fee shall be
effective for all Standard Beads ordered after such notice. Without limiting the
foregoing, the parties agree to negotiate an equitable adjustment to the fees
for Standard Beads in the event of an increase in LUMINEX's cost of Standard
Beads or components thereof purchased from a third party supplier.
(b) Magnetic Bead Tolling Fee. BIO-RAD shall pay to LUMINEX a
-------------------------
tolling fee with respect to each dyed Magnetic Bead. The amount of the tolling
fee shall be set forth in the Development Agreement (as defined in
Section 2.1(d) above).
(c) Kit Royalties. BIO-RAD shall pay to LUMINEX [**] percent ([**]%)
-------------
of Net Sales for Kits sold by BIO-RAD. With respect to BIO-RAD Systems that are
sold on a reagent rental basis, "Net Sales" shall exclude the purchase price of
the instrumentation, fees received for servicing the instrumentation and the
cost of financing the instrumentation, provided that the cost of financing the
instrumentation shall not exceed [**] percent ([**]%) of the purchase price of
the instrumentation ("Kit Royalty"). Notwithstanding the foregoing, if at the
time of the sale of the Kit by BIO-RAD to a third party, LUMINEX charges a third
party distributor of Kits a royalty for Kits sold of less than [**] percent
([**]%) of Net Sales and also charges such third party distributor a transfer
price for the Standard Beads that equals or exceeds the Unit Transfer Fee set
forth in Section 4.6(a) above under an agreement for distribution of in vitro
--------
diagnostic Kits, LUMINEX will offer such lower Kit Royalty to BIO-RAD.
(d) Combination Sales. In the event that a Kit is sold by BIO-RAD in
-----------------
combination with another test not for the Luminex100 System and is priced as a
single combined unit, the portion of Net Sales attributable
- ---------------
[**] Indicates that material has been omitted and confidential treatment
requested therefor. All such material has been filed separately with the
Commission pursuant to Rule 406.
8
<PAGE>
to the Kit shall be calculated by multiplying the total net sales for the
combination by the fraction A/B, where "A" is BIO-RAD list price for the Kit and
"B" is the sum of BIO-RAD list price for the Kit and BIO-RAD list prices of the
other products sold in combination with the Kit. If BIO-RAD does not have a
separate list price for the Kit or such other products, BIO-RAD and LUMINEX
agree to negotiate in good faith a reasonable allocation.
(e) Advance Against Royalties. Upon the Effective Date, BIO-RAD shall
-------------------------
pay to LUMINEX [**] Dollars ($[**]) for each of Field One, Field Two, Field
Three and Field Four (i.e., a total of [**] Dollars ($[**])) as an advance
against Kit Royalties ("Advance"), which Advance shall be fully creditable
against Kit Royalties earned during the first [**] years of this Agreement. The
parties will discuss and agree upon any Advance owed by BIO-RAD for fields in
addition to the Fields prior to adding the additional field. To the extent BIO-
RAD does not generate Kit Royalties equal to or in excess of the Advance during
such [**] year period, the remainder of the Advance not credited against Kit
Royalties shall be deemed nonrefundable.
(f) Luminex100 System Pricing. BIO-RAD shall pay LUMINEX (i) the amounts
-------------------------
set forth in Exhibit E hereto for each Luminex100 System (excluding off-the-
shelf computer components) and (ii) LUMINEX's cost plus [**] percent ([**]%) for
off-the-shelf computer components if purchased from LUMINEX (collectively, the
"Luminex100 Purchase Price"). [**]. The parties understand that BIO-RAD is not
required to purchase off-the-shelf computer components from LUMINEX, and may
source the same directly from the manufacturer, provided that the Luminex100
System is intended for use only on those brands and configurations of computers
supported by LUMINEX, the complete list of which, together with all updates,
LUMINEX shall provide to BIO-RAD. Use with any off-the-shelf computer components
other than those set forth on said list shall result in the voiding of all
warranties provided by LUMINEX to BIO-RAD hereunder except for any warranty
given by LUMINEX hereunder regarding intellectual property; provided, however,
that if the unlisted off-the-shelf computer components give rise to a claim of
infringement of a third party intellectual property right which infringement
would not have arisen had a listed off-the-shelf computer component been used,
such infringement shall be excluded from any intellectual property warranty or
indemnity provided hereunder.
4.7 Conflicts of Interest. It is understood and agreed that BIO-RAD may
---------------------
sell the Kits or sell BIO-RAD Systems to End Users or Subdistributors who
purchase other products and services of BIO-RAD, and as a result, a conflict of
interest may arise. BIO-RAD agrees that BIO-RAD shall not put into place a
specific marketing, promotional or pricing plan which shall discount kits in
order to achieve higher sales of, or a higher sales price for, another product
or service of BIO-RAD. BIO-RAD further agrees that BIO-RAD will not bundle the
Kits or the Luminex100 Systems in a manner that would disadvantage the Kits or
the Luminex100 Systems in comparison with such other products or services
marketed by BIO-RAD.
4.8 Invoicing. LUMINEX shall submit an invoice to BIO-RAD upon shipment
---------
of Standard Beads or Luminex100 Systems ordered by BIO-RAD hereunder. All
invoices shall be sent to the following address: Bio-Rad Laboratories, Inc.,
Accounts Payable, 4000 Alfred Nobel Drive, Hercules, California 94547, or such
other address as specified in the purchase order therefor, and each such invoice
shall state the fees due for Standard Beads or Luminex100 Systems in a given
shipment, plus any insurance, taxes incident to the purchase or shipment
initially paid by LUMINEX but to be borne by BIO-RAD hereunder.
4.9 Reporting and Payment. Payment of the Unit Transfer Fee and the
---------------------
Luminex100 Purchase Price shall be made within thirty (30) days of BIO-RAD's
receipt of an invoice therefor. Payment of Kit Royalties shall be made within
the first ten days of each calendar month for Net Sales in the calendar month
two months prior to the calendar month in which payment is made (e.g., the Kit
Royalties payable within the first ten days of June will be based on Net Sales
in April). Kit Royalties shall be accompanied by a written report stating the
Net Sales generated
- --------------
[**] Indicates that material has been omitted and confidential treatment
requested therefor. All such material has been filed separately with the
Commission pursuant to Rule 406.
9
<PAGE>
in the calendar month to which the payment pertains and the total Kit Royalties
due. All payments hereunder shall be made in U.S. dollars, by direct bank
transfer to an account designated in LUMINEX's invoice. Any late payments shall
bear interest at the rate of one and one-half percent (1 1/2 %) per month or the
highest rate under applicable law, which ever is less, based on the number of
days overdue.
4.10 Taxes.
-----
(a) Any and all amounts payable hereunder do not include any
government taxes (including without limitation sales, use, excise, and value
added taxes) or duties imposed by any governmental agency that are applicable to
the export, import, or purchase of the Standard Beads or the Luminex100 System
(other than taxes on the net income of LUMINEX), and BIO-RAD shall bear all such
taxes and duties. When LUMINEX has the legal obligation to collect and/or pay
such taxes, the appropriate amount shall be added to BIO-RAD's invoice and paid
by BIO-RAD, unless BIO-RAD provides LUMINEX with a valid tax exemption
certificate authorized by the appropriate taxing authority.
(b) All payments by BIO-RAD specified hereunder are expressed as net
amounts and shall be made free and clear of, and without reduction for, any
withholding taxes. Any such taxes which are otherwise imposed on payments to
LUMINEX shall be the sole responsibility of BIO-RAD. BIO-RAD shall provide
LUMINEX with official receipts issued by the appropriate taxing authority or
such other evidence as is reasonably requested by LUMINEX to establish that such
taxes have been paid. If LUMINEX uses a foreign tax credit received by LUMINEX
as a result of the payment of withholding taxes by BIO-RAD and thereby reduces
the amount of U.S. income tax that LUMINEX otherwise would have paid, LUMINEX
shall refund to BIO-RAD the amount of such reduction with respect to such
foreign tax credit. LUMINEX will use commercially reasonable efforts to obtain
foreign tax credits to which LUMINEX is entitled.
4.11 Improvements to Standard Beads or Luminex100 System. If during the
---------------------------------------------------
term of this Agreement LUMINEX enters into a royalty-bearing license or
agreement or a license or agreement requiring payment of license fees or other
payments for the license or other acquisition of rights to new technologies
applicable to the manufacture, sale or use of the Standard Beads or Luminex100
System, and after consultation with BIO-RAD, BIO-RAD does not agree to pay any
such amounts applicable to the manufacture, sale or use of the Standard Beads or
Luminex100 System, within thirty (30) days after a written request by LUMINEX,
LUMINEX at its option may exclude from this Agreement the subject matter covered
by such license or agreement, and in such event the same shall not be within the
Standard Beads or Luminex100 System for any purposes of this Agreement. The
provisions of this Section 4.11 shall not limit the obligations of the parties
under Article 11.
(a) At the Effective Date, to the knowledge of LUMINEX's senior
management, LUMINEX is not engaged in negotiations to obtain rights to royalty-
bearing technologies to which this Section 4.11 pertains.
(b) LUMINEX represents and warrants to BIO-RAD that it has not, up
through and including the date of this Agreement, received from any third party
any information about or notice of any claim or infringement with respect to or
affecting the validity or enforceability of any of the patents, copyrights,
trademarks or know-how relating to the Standard Beads or the Luminex100 System
or any portions thereof.
4.12 Currency Conversion. If any currency conversion shall be required in
-------------------
connection with the calculation of amounts payable under this Agreement, such
conversion shall be made using the selling exchange rate for conversion of the
foreign currency into U.S. Dollars, quoted for current transactions reported by
the Wall Street Journal (New York Edition) for the last business day of the
calendar period to which such payment pertains.
4.13 BIO-RAD Records; Inspection. BIO-RAD shall keep complete, true and
---------------------------
accurate books of accounts and records for the purpose of determining the
amounts payable under this Article 4 or verifying compliance with Section 8.1.
Such books and records shall be kept for at least three (3) years following the
end of the calendar quarter to which they pertain. Such records will be open for
inspection during such three (3)-year period by an independent
10
<PAGE>
auditor chosen by LUMINEX at BIO-RAD's site for the purpose of verifying the
amounts payable by BIO-RAD under this Article 4 or compliance with Section 8.1.
Such on-site inspections may be made no more than once each calendar year, at
reasonable times and on reasonable notice. LUMINEX's auditor will only be
required to reveal whether correct payment was made and if not, the amount of
the underpayment or overpayment. The auditor will be subject to reasonable
confidentialty restrictions with respect to information learned in the course of
performing the audit. Inspections conducted under this Section 4.13 shall be at
the expense of LUMINEX, unless a variation or error producing an underpayment in
amounts payable exceeding five percent (5%) of the amount paid for any period
covered by the inspection is established in the course of any such inspection,
whereupon all costs relating to the inspection for such period and any unpaid
amounts that are discovered shall be paid by BIO-RAD, together with interest as
specified in Section 4.9 above. The parties will endeavor to minimize disruption
of BIO-RAD's normal business activities to the extent reasonably practicable.
4.14 LUMINEX Records; Inspection. LUMINEX shall keep complete, true and
---------------------------
accurate books of accounts and records for the purpose of verifying its
compliance with the pricing provisions of Section 4.6(b) and 4.6(e). Such books
and records shall be kept for at least three (3) years following the end of the
calendar quarter to which they pertain. Such records will be open for inspection
during such three (3)-year period by an independent auditor chosen by BIO-RAD,
at LUMINEX's site for the sole purpose of verifying LUMINEX's compliance with
the pricing provisions of Section 4.6(c) and 4.6(e). Such on-site inspections
may be made no more than once each calendar year, at reasonable times and on
reasonable notice. BIO-RAD's auditor will only be required to reveal whether
correct invoicing was made and if not, the amount of the overpayment. The
auditor will be subject to reasonable confidentialty restrictions with respect
to information learned in the course of performing the audit. Inspections
conducted under this Section 4.14 shall be at the expense of BIO-RAD unless a
variation or error producing an overpayment in amounts payable exceeding five
percent (5%) of the amount paid for any period covered by the inspection is
established in the course of any such inspection, whereupon all costs relating
to the inspection for such period and any unpaid amounts that are discovered
shall be paid by LUMINEX, together with interest at the rate specified in
Section 4.9 above. The parties will endeavor to minimize disruption of LUMINEX's
normal business activities to the extent reasonably practicable.
4.15 Late Delivery Charges. If LUMINEX fails to deliver Standard Beads in
---------------------
accordance with the requirements of Section 4.3 and 4.4, LUMINEX shall deduct
from invoices submitted to BIO-RAD the following percentage of the sales price
of the Standard Beads:
Days of LUMINEX Delay Percentage of Invoiced Sales Price of Standard
--------------------- ----------------------------------------------
Beads
-----
[**] [**]%
[**] [**]%
[**] [**]%
[**] [**]%
If LUMINEX fails to deliver Luminex100 Systems in accordance with the
requirements of Section 4.3 and 4.4, LUMINEX shall deduct from invoices
submitted to BIO-RAD the following percentage of the sales price of the
Luminex100 System (excluding off-the-shelf computer components):
- ------------
[**] Indicates that material has been omitted and confidential treatment
requested therefor. All such material has been filed separately with the
Commission pursuant to Rule 406.
11
<PAGE>
<TABLE>
<CAPTION>
Days of LUMINEX Delay Percentage of Invoiced Sales Price of Luminex100 System
-------------------- -------------------------------------------------------
<S> <C>
[**] [**]%
[**] [**]%
[**] [**]%
[**] [**]%
</TABLE>
4.16 Manufacturing Capacity.
----------------------
(a) Back-Up Manufacturing Right. A "Supply Failure" shall mean a
---------------------------
failure, in any [**] calendar quarters within any [**] month period, in each
case beginning at least [**] months after BIO-RAD's first commercial sale of a
BIO-RAD System, to supply BIO-RAD with at least seventy-five percent (75%) of
the aggregate quantity of Standard Beads or Luminex100 Systems, as applicable,
ordered pursuant to Section 4.3 by BIO-RAD for such two calendar quarters. In
the event of a Supply Failure, BIO-RAD shall have a back-up supply right as set
forth below (the "Back-Up Right") subject to the additional terms and conditions
set forth below or in the Escrow Agreement (as identified below).
(b) Escrow. The parties will enter into an escrow agreement (the
------
"Escrow Agreement") within thirty (30) days of the execution of this Agreement.
LUMINEX agrees to deposit, subject to Section 4.16(c) below, in the technology
escrow account with a third party escrow agent all technical information, know-
how, supplier lists, bill of materials and related information covering Standard
Beads and Luminex100 Systems that is owned or controlled by LUMINEX and is
necessary for the manufacture of Standard Beads and Luminex100 Systems but in
all events excluding Software source code (the "Escrowed Materials"). For
purposes of this Section 4.13(b), "control" means the ability to grant the
rights set forth in Section 4.13(c) without payment of royalties or other
consideration to third parties or any other restrictions from third parties that
would interfere with BIO-RAD's rights to use the Escrowed Materials. The
Escrowed Materials are to be released to BIO-RAD in the event of a Supply
Failure, all as to be specified in more detail in the Escrow Agreement.
(c) Rights. Upon the occurrence of a Supply Failure with respect to
------
Standard Beads or Luminex100 Systems, the immunity from suit granted under
Section 3.1 shall include the right to manufacture Standard Beads or Luminex100
Systems, respectively, and, at BIO-RAD's option, BIO-RAD may manufacture or have
manufactured, BIO-RAD's requirements for Standard Beads or Luminex100 Systems,
respectively, at royalty rates to be negotiated in good faith by the parties. If
the parties have failed to agree upon the royalty rates for Standard Beads
and/or Luminex100 Systems within two calendar months of BIO-RAD's exercise of
its option to manufacture or have manufactured the Standard Beads and/or
Luminex100 Systems, the parties shall submit the matter of determining a
commercially reasonable royalty with respect to the manufacture and sale of
Standard Beads and/or Luminex100 Systems to arbitration pursuant to Section
12.5. The arbitrator shall be instructed to take into consideration BIO-RAD's
Cost of Goods with respect to the manufacture of the Standard Beads and/or
Luminex100 Systems, where "Cost of Goods" means cost of direct labor, direct
materials and manufacturing overhead incurred in the manufacturing of Standard
Beads and/or Luminex100 Systems as calculated in accordance with U.S. GAAP and
consistent with the methods used by BIO-RAD to calculate direct and indirect
costs for its other product lines, excluding sales, general and administrative
costs (SG&A). In the event that BIO-RAD elects to exercise this option with
respect to Standard Beads or Luminex100 Systems, LUMINEX shall have no further
obligation to supply Standard Beads or Luminex100 Systems, as applicable, to
BIO-RAD and LUMINEX's obligations under Article 7 shall cease. In the event that
LUMINEX cures its Supply Failure, LUMINEX may terminate the rights provided to
BIO-RAD under this Section 4.16 upon one hundred twenty (120) days written
notice to BIO-RAD.
- ------------
[**] Indicates that material has been omitted and confidential treatment
requested therefor. All such material has been filed separately with the
Commission pursuant to Rule 406.
12
<PAGE>
4.17 THE PROVISIONS OF SECTION 4.15 SETS FORTH THE SOLE AND EXCLUSIVE
REMEDY FOR ANY FAILURE BY LUMINEX TO SUPPLY BEADS OR LUMINEX100 SYSTEMS.
ARTICLE 5
---------
REGISTRATION CODE FEE,
----------------------
EXCLUSIVITY OF EFFORTS AND OTHER PROVISIONS
-------------------------------------------
5.1 Registration Code Fee. LUMINEX will designate one (1) Registration
---------------------
Code for each Test with respect to which a Kit may be used, and BIO-RAD agrees
that Standard Beads supplied to BIO-RAD hereunder will include Standard Beads
containing such Registration Codes. BIO-RAD shall pay to LUMINEX Three Hundred
Fifty Dollars ($350) per analyte in a given Test which the Registration Code is
designed to detect; provided that the fee for any given Panel shall not exceed
Five Thousand Dollars ($5,000). With respect to Registration Codes designated as
of the Effective Date, such amounts shall be due and payable on the Effective
Date; with respect to Registration Codes later designated such amounts shall be
due at the time of designation by LUMINEX.
5.2 Exclusivity of Efforts. To avoid conflicts of interest, BIO-RAD and
----------------------
its Affiliates will not manufacture, market, sell or otherwise distribute any
materials, technologies or products, other than Luminex100 System and Kits,
specifically designed for performing Multiplexed Bead Assays using flow
cytometry based detection of particles for use in the human clinical diagnostics
industry within the Field. In addition, BIO-RAD agrees that except for
performing its development obligations as agreed pursuant to Section 2.1, BIO-
RAD's clinical diagnostics division or group will not directly or indirectly
develop any materials, technologies or products specifically designed for
performing Multiplexed Bead Assays within the Fields using flow cytometry based
detection of particles. BIO-RAD further agrees that it will not provide research
and development funding to or license any third party to develop, manufacture,
market, sell or otherwise distribute any materials, technologies or products
specifically designed for performing Multiplexed Bead Assays within the Fields
using flow cytometry based detection of particles. It is understood that the
foregoing sentence shall not apply to passive investments by BIO-RAD in equity
of third parties for use in the human clinical diagnostics industry.
5.3 Compliance with Laws. Each party shall be responsible for complying in
--------------------
all material respects with all directives, laws, rules and regulations relating
to the performance of such party's obligations and exercise of such party's
rights hereunder, including without limitation regulatory reporting regulations.
BIO-RAD further shall be responsible for all activities relating to recalls.
5.4 Luminex100 Systems. In addition to the terms and conditions of this
------------------
Agreement, sale of the Luminex100 System shall be subject to LUMINEX's standard
terms and conditions for labelling and patent marking.
ARTICLE 6
MAINTENANCE, SUPPORT AND TRAINING
---------------------------------
6.1 Maintenance and Support. BIO-RAD will provide front-line maintenance
-----------------------
and support for each Luminex100 System purchased by BIO-RAD. The scope of
maintenance and support services provided by LUMINEX will be limited to the
provision of Updates and LUMINEX's standard telephone hotline support to the
extent that LUMINEX makes such telephone support available generally to its
customers free of charge. LUMINEX shall not be responsible for problems arising
in whole or in part from portions of the BIO-RAD System other than the
Luminex100 System as delivered by LUMINEX, as determined by LUMINEX in LUMINEX's
sole reasonable discretion.
6.2 Training. At BIO-RAD's request, LUMINEX will provide three (3) days a
--------
year of training for BIO-RAD field technicians at LUMINEX's facility. BIO-RAD
will be responsible for all travel, food and lodging expenses incurred by BIO-
RAD in connection with such training.
13
<PAGE>
ARTICLE 7
LIMITED WARRANTY
----------------
LUMINEX makes the warranties set forth in Exhibit C to BIO-RAD. BIO-RAD
agrees not to represent the Standard Beads or Luminex100 System in a manner that
is inconsistent with the Specifications or otherwise misrepresent the Standard
Beads or Luminex100 System. EXCEPT AS EXPRESSLY PROVIDED IN EXHIBIT C, LUMINEX
MAKES NO WARRANTIES OR CONDITIONS (EXPRESS, IMPLIED, STATUTORY OR OTHERWISE)
WITH RESPECT TO THE SUBJECT MATTER HEREOF, AND LUMINEX SPECIFICALLY DISCLAIMS
ANY AND ALL IMPLIED WARRANTIES OR CONDITIONS OF MERCHANTABILITY AND FITNESS FOR
A PARTICULAR PURPOSE.
ARTICLE 8
TERM AND TERMINATION
--------------------
8.1 Term. The term of this Agreement shall commence on the Effective Date
----
and continue in full force and effect for a period of [**] years after the [**]
by BIO-RAD ("Initial Term"), unless earlier terminated in accordance with this
Agreement. This Agreement shall be automatically extended for additional [**]
year terms for up to [**] renewal terms; provided, however, that in the event
BIO-RAD does not demonstrate a significant investment in the research and
development of the BIO-RAD System in excess of [**] Dollars ($[**]) by the
expiration of the Initial Term, LUMINEX may terminate this Agreement by a
written notice of termination to BIO-RAD at least ninety (90) days prior to the
expiration of the Initial Term; and further provided that the automatic renewal
of the term of this Agreement for each of the foregoing two year renewal terms
after the first renewal term shall be subject to the parties agreeing upon and
BIO-RAD meeting annual sales goals with respect to BIO-RAD Systems and Kits
which annual sales goals shall be negotiated in good faith by the parties prior
to the commencement of each such renewal term.
8.2 Termination for Breach. This Agreement may be terminated by either
----------------------
party by written notice effective immediately if the other party breaches any
material term or condition of this Agreement and fails to remedy the breach
within thirty (30) days after being given written notice thereof stating the
nonbreaching party's intent to terminate. Without limiting the foregoing, either
party may terminate portions of this Agreement pursuant to Section 12.14.
8.3 Termination for Failure to Commercialize. Beginning [**] years
----------------------------------------
after availability of the Luminex100 System, if at any time BIO-RAD is not
marketing, selling or distributing one or more Kits for an application within
each of the Fields, LUMINEX may terminate the Agreement with respect to those
Fields in which BIO-RAD is not marketing, selling or distributing by written
notice to BIO-RAD. In the event of such termination under this Section 8.3, the
Advance shall become non-refundable. If BIO-RAD has not made commercially
available Kits incorporating Magnetic Beads in each of the Fields within [**]
years of the Effective Date plus any extension of time necessary to produce
Magnetic Beads reasonably acceptable to BIO-RAD, LUMINEX may terminate [**] by
written notice to BIO-RAD.
8.4 Effect of Termination. BIO-RAD may sell BIO-RAD Systems existing in
---------------------
its inventory as of the effective date of termination of this Agreement, and
procure LUMINEX 100 Systems for orders for BIO-RAD Systems existing as of the
effective date of termination, for a period of ninety (90) days after the
effective date of such termination. LUMINEX agrees to supply Standard Beads to
BIO-RAD and/or to process Magnetic Beads for a period of five (5) years after
any termination or expiration of this Agreement other than termination by
LUMINEX pursuant to Section 8.2. The parties agree to negotiate in good faith an
extension of such commitment after the expiration of such five (5) year period.
8.5 Return of Materials. Within thirty (30) days after the effective date
-------------------
of termination of this Agreement, BIO-RAD shall at LUMINEX's option destroy
LUMINEX's Confidential Information provided to BIO-RAD, and provide written
certification of such destruction, or prepare such LUMINEX Confidential
Information for shipment
- ------------
[**] Indicates that material has been omitted and confidential treatment
requested therefor. All such material has been filed separately with the
Commission pursuant to Rule 406.
14
<PAGE>
to LUMINEX or LUMINEX's designee, as LUMINEX may direct, at LUMINEX's expense.
BIO-RAD shall not make or retain any copies of any LUMINEX Confidential
Information which may have been entrusted to it except for one (1) archival
copy.
8.6 Survival. It is understood that termination of this Agreement shall
--------
not relieve a party from any liability which, at the time of such termination,
has already accrued to the other party. The provisions of Sections 3.1, 3.5,
3.6, 3.7, 4.1, the first sentence of 4.2, 4.4, 4.5, 4.6, 4.7, 4.8, 4.9, 4.10,
4.11, 4.12, 4.13, 4.14 and 4.15 and the last sentence of Section 4.3 hereof
shall survive with respect to Beads supplied during the five year period set
forth in Section 8.4. In addition, the following provisions shall survive any
expiration or termination of this Agreement: Articles 6, 7, 9, 10 (for a period
of five years after expiration of the period set forth in Section 8.4), 11, and
12, and Sections 3.4, 3.5, 3.6, 3.8, 4.10, 4.13, 5.3, 8.4, 8.5, and 8.6. Except
as otherwise expressly provided in this Article 8, all other rights and
obligations of the parties shall terminate upon termination of this Agreement.
End User Licenses shall survive expiration or termination of this Agreement.
ARTICLE 9
LUMINEX TRADEMARKS
------------------
9.1 Trademarks. All BIO-RAD Systems, Luminex100 Systems and Kits will be
----------
branded with LUMINEX's Trademarks in a manner to be mutually agreed upon in
writing. Subject to the provisions of this Article 9, during the term of this
Agreement, BIO-RAD shall have the right to indicate to the public that the Kits
contain Standard Beads or Magnetic Beads, and to advertise the Standard Beads or
Magnetic Beads as incorporated into the Kits under the trademarks, marks, and
trade names of LUMINEX set forth in Exhibit D, as same may be amended in writing
by LUMINEX from time to time ("LUMINEX's Trademarks"), subject to LUMINEX's
prior inspection and written approval of the Kits, BIO-RAD Systems and
Luminex100 Systems in which the LUMINEX Trademarks are attached. In addition,
BIO-RAD shall affix and display LUMINEX's Trademarks, which may be subordinate
to BIO-RAD's product trademark or trademarks, on the external casing, packaging
and labeling of Kits in a manner approved in writing by LUMINEX. All
representations of LUMINEX's Trademarks that BIO-RAD intends to use shall first
be submitted to LUMINEX for approval (which shall not be unreasonably withheld)
of design, color and other details, or shall be exact copies of those used by
LUMINEX. BIO-RAD shall fully comply with all guidelines, if any, communicated by
LUMINEX concerning the use of LUMINEX's Trademarks. LUMINEX may modify any
LUMINEX Trademarks, or substitute an alternative mark for any LUMINEX Trademark
upon sixty (60) days prior notice to BIO-RAD; provided that BIO-RAD shall not be
obligated to modify catalogs until the next scheduled update to the catalog
unless LUMINEX pays the incremental cost of making the modification in advance
of the next scheduled release. BIO-RAD shall not incur any such incremental cost
without LUMINEX's prior written approval of such cost.
9.2 Use. Except as otherwise expressly agreed in writing, BIO-RAD shall
---
not alter or remove any of LUMINEX's Trademarks affixed to or otherwise
contained on or within the Luminex100 System. Except as set forth in this
Article 9, nothing contained in this Agreement shall grant or shall be deemed to
grant to BIO-RAD any right, title or interest in or to LUMINEX's Trademarks. All
uses of LUMINEX's Trademarks will inure solely to LUMINEX, BIO-RAD shall obtain
no rights with respect to any of LUMINEX's Trademarks, other than as expressly
set forth herein, and BIO-RAD irrevocably assigns to LUMINEX all such right,
title and interest, if any, in any of LUMINEX's Trademarks. At no time during
the term of this Agreement or the period of supply set forth in Section 8.4
shall BIO-RAD challenge or assist others to challenge the No Challenge
Trademarks (except to the extent expressly required by applicable law) or the
registration thereof or attempt to register any trademarks, marks or trade names
confusingly similar to the No Challenge Trademarks. For purposes of this Section
9.2, "No Challenge Trademarks" shall mean the marks listed on Exhibit D at the
Effective Date and such other marks as Luminex adds to Exhibit D pursuant to
Section 9.1, provided that the inclusion of such additional marks within the
definition of No Challenge Marks shall be subject to the approval of BIO-RAD
which approval shall not be unreasonably withheld. Upon termination of this
Agreement, BIO-RAD shall immediately cease to use all LUMINEX's Trademarks and
any listing by BIO-RAD of LUMINEX's name in any telephone book, directory,
public record or elsewhere, shall be removed by BIO-RAD as soon as possible, but
in any event not later than the subsequent issue of such publication;
15
<PAGE>
provided, however, that the foregoing shall not apply to any stock of brochures
or products existing at the time of such termination.
9.3 Registered User Agreements. At LUMINEX's option and expense, LUMINEX
--------------------------
and BIO-RAD shall enter into registered user agreements with respect to the
LUMINEX's Trademarks pursuant to applicable trademark law requirements
worldwide. BIO-RAD shall be responsible for proper filing of the registered user
agreement with government authorities worldwide. The parties shall share equally
all costs or fees associated with such filing.
ARTICLE 10
CONFIDENTIALITY
---------------
10.1 Confidential Information. Each party may from time to time disclose
------------------------
to the other party, or such other party may otherwise learn, Confidential
Information. As used herein, "Confidential Information" shall mean any
information which if disclosed in tangible form is marked "Confidential" or with
other similar designation to indicate its confidential or proprietary nature or
if disclosed orally is indicated orally to be confidential or proprietary by the
disclosing party at the time of such disclosure. Notwithstanding the foregoing
or anything herein to the contrary, Confidential Information shall not include
any information that, in each case as demonstrated by written documentation: (i)
was already known to the receiving party, other than under an obligation of
confidentiality, at the time of disclosure; (ii) was generally available to the
public or otherwise part of the public domain at the time of its disclosure to
the receiving party; (iii) became generally available to the public or otherwise
part of the public domain after its disclosure and other than through any act or
omission of the receiving party in breach of this Agreement; (iv) was
subsequently lawfully disclosed to the receiving party by a person other than
the disclosing party; or (v) can be shown by the receiving party to have been
independently developed thereby.
10.2 Confidentiality. Each party agrees to hold and maintain in strict
---------------
confidence all Confidential Information. Each party further agrees not to
disclose any Confidential Information except to those employees and consultants
who have a need to know and provided that each person to whom Confidential
Information is disclosed agrees to be bound by the same terms regarding the
disclosure and use of Confidential Information as set forth in this Article 10.
Without limiting the foregoing, neither party shall use Confidential Information
except as permitted by this Agreement, or as may be necessary to exercise its
rights or perform its obligations under this Agreement. Nothing contained in
this Article 10 shall prevent either party from disclosing any Confidential
Information as is required by law or regulation to be disclosed; provided,
however, that the party disclosing Confidential Information under such a duty to
disclose has provided written notice to the other party promptly upon receiving
notice of such requirement in order to enable such other party to seek a
protective order or otherwise prevent disclosure of such Confidential
Information.
10.3 Review of Publication. As soon as is practicable prior to the oral
---------------------
public disclosure, and prior to the submission to any outside person for public
dissemination of a manuscript describing the scientific data with respect to
Standard Beads or Magnetic Beads, in each case to the extent the contents of the
oral disclosure or manuscript have not been previously disclosed pursuant to
this Section 10.3 before such proposed disclosure, BIO-RAD shall disclose to
LUMINEX the disclosure or manuscript to be made or submitted, and shall allow
LUMINEX at least thirty (30) days to determine whether such disclosure or
manuscript contains subject matter for which patent protection should be sought
prior to publication or which LUMINEX reasonably believes should be modified to
avoid (i) disclosure of information of a confidential or proprietary nature, or
(ii) regulatory or other similar problems.
(a) Publication Rights. After the expiration of thirty (30) days
------------------
from the date of mailing such disclosure or manuscript, unless BIO-RAD has
received the written notice specified below, BIO-RAD shall be free to submit
such manuscript for publication or make the oral disclosure.
(b) Delay of Publication. Prior to the expiration of the thirty (30)
--------------------
day period specified in Section 10.3(a) above, LUMINEX may notify BIO-RAD in
writing of its determination that such oral presentation or manuscript contains
confidential or objectionable material or material that consists of patentable
16
<PAGE>
subject matter for which patent protection should be sought. If so notified,
BIO-RAD shall withhold its proposed public disclosure and the parties shall
mutually consult in good faith to determine the best course of action to take in
order to modify the disclosure or to obtain patent protection. After resolution
of the confidentiality, regulatory or other issues, including without limitation
the filing of a patent application, to both parties' reasonable satisfaction,
BIO-RAD shall be free to submit the manuscript and/or make its public oral
disclosure.
ARTICLE 11
INTELLECTUAL PROPERTY INDEMNIFICATION
-------------------------------------
11.1 LUMINEX Indemnity. LUMINEX shall defend and/or settle any claim,
-----------------
complaint, suit, proceeding or cause of action (collectively and individually
referred to as a "Claim") brought against BIO-RAD by a third party for
infringement of any third party copyright, trademark, trade secret or patent by
the Standard Beads or Luminex100 System, each as delivered by LUMINEX hereunder,
subject to the requirements of Section 11.2 below. LUMINEX shall pay [**]
amounts finally awarded against BIO-RAD (including reasonable attorneys' fees
and court costs) together with any costs of End Users or purchasers of the BIO-
RAD System to the extent specifically included under Section 11.4 below, in each
event only to the extent attributable to such Claim. Notwithstanding the
provisions of this Section 11.1, LUMINEX will not have any obligation under this
Article 11 to the extent a Claim for infringement is based upon (i) modified
Standard Beads or Luminex100 System if such infringement would have been avoided
by use of the Standard Beads or Luminex100 System as provided by LUMINEX (unless
such modifications are made by LUMINEX), (ii) use of the Standard Beads or
Luminex100 System in applications or for purposes other than for which the same
were intended within the Fields, or (iii) completed products or equipment or any
assembly, combination, method or process in which the Standard Beads or
Luminex100 System are used, to the extent the infringement would not have
resulted if the Standard Beads and Luminex100 System were not incorporated into
the BIO-RAD System. It is understood and agreed that if the use of the
Luminex100 System would infringe a third party patent if used with Standard
Beads bound to any analyte generally, the Claim of infringement would be
included as part of LUMINEX's indemnification obligations under this Section
11.1.
11.2 BIO-RAD Indemnity. At LUMINEX's written request, BIO-RAD shall defend
-----------------
and/or settle any claim, complaint, suit, proceeding or cause of action
(collectively and individually referred to as a "Claim") brought against LUMINEX
by a third party for infringement of any third party copyright, trademark, trade
secret or patent by the (i) the BIO-RAD System except to the extent such Claim
is covered under Section 11.1 above, (ii) any Kit or assay sold by BIO-RAD for
use with the BIO-RAD System or Luminex100 System except to the extent such Claim
is covered under Section 11.1 above, or (iii) the manufacture or use of any of
the items set forth in (i) or (ii) above, subject to the requirements of Section
11.2 below. BIO-RAD shall pay all resulting damages or settlement amounts
finally awarded against LUMINEX (including reasonable attorneys' fees and court
costs) to the extent attributable to such Claim.
11.3 Indemnification Procedure. The indemnified party shall (i) promptly
-------------------------
notify the indemnifying party of each Claim, provided that the indemnifying
party shall only be excused from its indemnification obligations due to delay in
notice if and to the extent the indemnifying party is prejudiced by such delay,
(ii) provide the indemnifying party with sole control over the defense and/or
settlement thereof, and (iii) at the indemnifying party's request and expense,
provide full information and reasonable assistance to the indemnifying party
with respect to such Claims.
11.4 Alternatives. Without limiting Section 11.1 above, if the Standard
------------
Beads or Luminex100 System are or in LUMINEX' reasonable judgment may become
subject of any Claim of infringement of third party intellectual property
rights, or if a court determines that the Standard Beads or Luminex100 System
infringe any third party intellectual property rights, LUMINEX, at its option
and expense, may (i) procure for BIO-RAD the right under such third party
intellectual property rights to use the Standard Beads or Luminex100 System in
accordance with the terms and conditions of this Agreement; or (ii) replace the
Standard Beads or Luminex100 System with other suitable noninfringing product
having functionality substantially the same as the Standard Beads or Luminex100
System so
- ------------
[**] Indicates that material has been omitted and confidential treatment
requested therefor. All such material has been filed separately with the
Commission pursuant to Rule 406.
17
<PAGE>
replaced; or (iii) modify the Standard Beads or Luminex100 System to make the
same noninfringing provided they have substantially the same functionality as
the unmodified Standard Beads and Luminex100 System; or (iv) in the event (i),
(ii) or (iii) above are not commercially reasonable in LUMINEX's judgment,
terminate BIO-RAD's distribution rights with respect to the infringing subject
matter and at LUMINEX's option require that BIO-RAD remove the Standard Beads
and/or Luminex100 System or portion thereof from use. If LUMINEX requires
removal of Standard Beads and/or Luminex100 Systems, the costs of removal from
use of End Users or other purchasers of the BIO-RAD System shall be at LUMINEX's
expense, provided that BIO-RAD shall not incur any such costs without first
obtaining LUMINEX's prior written approval.
11.5 Entire Liability. THE FOREGOING PROVISIONS OF THIS ARTICLE 11 STATE
----------------
THE ENTIRE LIABILITY AND OBLIGATIONS OF LUMINEX AND THE EXCLUSIVE REMEDY OF BIO-
RAD WITH RESPECT TO ANY ALLEGED INFRINGEMENT OF PATENT RIGHTS, TRADE SECRETS,
COPYRIGHTS OR OTHER INTELLECTUAL PROPERTY RIGHTS WITH RESPECT TO THE STANDARD
BEADS, MAGNETIC BEADS OR LUMINEX100 SYSTEM.
ARTICLE 12
MISCELLANEOUS
-------------
12.1 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
-------------
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE UNITED STATES AND THE STATE OF
CALIFORNIA WITHOUT REFERENCE TO CONFLICT OF LAWS PRINCIPLES AND EXCLUDING THE
1980 U.N. CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS.
12.2 Disputes. If LUMINEX and BIO-RAD, are unable to resolve any dispute
--------
between them, either LUMINEX or BIO-RAD may, by written notice to the other,
have such dispute referred to the Chief Executive Officers (or equivalent) of
LUMINEX and BIO-RAD Vice-President Diagnostics Group, for attempted resolution
by good faith negotiations within fourteen (14) days after such notice is
received. Unless otherwise mutually agreed, the negotiations between the
designated officers shall be conducted by telephone, within three (3) days and
at times within the period stated above offered by the designated officer of
BIO-RAD to the designated officer of LUMINEX for consideration. If the parties
are unable to resolve such dispute in accordance with the aforementioned
procedure or within such fourteen (14) day period, either party shall have the
right to pursue any and all other remedies available to such party.
12.3 Jurisdiction; Venue. All disputes arising out of or related to this
-------------------
Agreement, except disputes arising under Section 3.3(b) or Section 4.16 which
will be subject to arbitration pursuant to Section 12.5 below) will be subject
to the exclusive jurisdiction and venue of the California state courts of Contra
Costa County (or, if there is exclusive federal jurisdiction, the Northern
District Court of California), and the parties consent to the personal and
exclusive jurisdiction of these courts.
12.4 Indemnity. Except for warranty claims for which LUMINEX is liable
---------
under Article 7 and infringement claims covered by Section 11.1, and claims to
the extent directly resulting from LUMINEX's negligence or willful misconduct,
BIO-RAD agrees to indemnify and hold LUMINEX, its officers, directors, employees
and agents harmless from and against any cost, loss, damages, liability or
expense (including attorneys' fees) arising out of third party claims brought
against LUMINEX, its officers, directors, employees or agents relating to use or
distribution by BIO-RAD of the Standard Beads, Magnetic Beads, BIO-RAD Systems
or Luminex100 Systems.
12.5 Arbitration. Any dispute, controversy or claim arising out of Section
-----------
3.3 or the establishment of royalties under Section 4.16(c) shall be settled by
binding arbitration in the manner described in this Section 12.5. The
arbitration shall be conducted pursuant to the Commercial Rules and
Supplementary Procedures for Large, Complex Disputes of the American Arbitration
Association then in effect. Notwithstanding those rules, the following
provisions shall apply to the arbitration hereunder:
18
<PAGE>
(a) Arbitrators. The arbitration shall be conducted by a single
-----------
arbitrator; provided that at the request of either party, the arbitration shall
be conducted by a panel of three (3) arbitrators, with one (1) arbitrator chosen
by each of BIO-RAD and LUMINEX and the third appointed by the other two (2)
arbitrators. If the parties are unable to agree upon a single arbitrator, or the
third arbitrator in case of a panel of three (3), such single or third
arbitrator (as the case may be) shall be appointed in accordance with the rules
of the American Arbitration Association. In any event, the arbitrator or
arbitrators selected in accordance with this Section 12.5 are referred to herein
as the "Panel." With respect to disputes arising under Section 3.3(b) or the
establishment of royalties due under Section 4.16(c), the arbitrators shall be
independent experts in the in vitro diagnostics industry.
--------
(b) Proceedings. The parties and the arbitrators shall use their
-----------
best efforts to complete the arbitration within sixty (60) days after the
appointment of the Panel under Section 12.5(a) above. The Panel shall, in
rendering its decision, apply the substantive law of the State of California,
without regard to its conflict of laws provisions, except that the
interpretation of and enforcement of this Section 12.5 shall be governed by the
U.S. Federal Arbitration Act. The proceeding shall take place in Contra Costa
County, California. The fees of the Panel shall be shared equally by the
parties. Neither party shall initiate an arbitration hereunder unless it has
attempted to resolve the matter in accordance with Section 12.1 above.
12.6 Force Majeure. Except with respect to payment obligations,
-------------
nonperformance of any party shall be excused to the extent that performance is
rendered impossible by strike, fire, earthquake, flood, governmental acts,
orders or restrictions, or other similar causes beyond the reasonable control of
the nonperforming party.
12.7 Assignment. BIO-RAD's rights and obligations under this Agreement may
----------
not be assigned or otherwise transferred to a third party without the prior
written consent of LUMINEX which approval shall not be unreasonably withheld.
LUMINEX may assign or otherwise transfer its rights and obligations under this
Agreement without BIO-RAD's prior consent to a successor-in-interest to all or
substantially all of the business or assets of LUMINEX pertaining to the subject
matter hereof whether by merger, reorganization, asset sale or otherwise. Any
attempted assignment by BIO-RAD in violation of this Section 12.7 shall be null
and void. Subject to the foregoing, this Agreement shall be binding upon and
inure to the benefit of the parties hereto, their successors and assigns.
Notwithstanding the foregoing provisions of this Section 12.7 or any other
provision of this Agreement, in no event shall BIO-RAD gain any rights
whatsoever in an or to any product, technology, invention or other intellectual
property (i) that was conceived, developed or reduced to practice by any
successor-in-interest to the business or assets of LUMINEX pertaining to the
subject matter hereof prior to or after the effective date of the assignment or
other transfer of LUMINEX's business or assets pertaining to the subject matter
hereof ("Transfer"). It is further understood and agreed that the provisions of
Section 3.2 shall not apply to any Acquiror of LUMINEX with respect to products,
technologies, inventions or other intellectual property other than the
Luminex100 System and Beads as they exist at the effective date of the Transfer.
12.8 Notices. Any notice or report required or permitted to be given or
-------
made under this Agreement by either party shall be in writing and delivered to
the other party at its address indicated below (or to such other address as a
party may specify by notice hereunder) by courier or by registered or certified
airmail, postage prepaid, or by facsimile; provided, however, that all facsimile
notices shall be promptly confirmed, in writing, by registered or certified
airmail, postage prepaid. All notices shall be effective as of the date
received by the addressee.
If to LUMINEX: Luminex Corporation
12212 Technology Boulevard
Austin, Texas 78727
Attention: General Counsel
Fax: (512) 258-4173
19
<PAGE>
If to BIO-RAD: Bio-Rad Laboratories, Inc.
Corporate Offices
1000 Alfred Nobel Drive
Hercules, California 94547
Attention: General Counsel
Fax: (510) 741-5815
with a copy to:
Bio-Rad Laboratories, Inc. Diagnostics Group
4000 Alfred Nobel Drive
Hercules, California 94547
Attention: Vice-President, Diagnostics Group
Fax: (510) 741-6499
12.9 Limitation of Liability. Except as otherwise expressly provided here
-----------------------
in, neither party's liability arising out of this Agreement and/or the sale of
Standard Beads, Magnetic Beads and sale of Luminex100 Systems shall exceed to
the total amount paid by BIO-RAD to LUMINEX hereunder. IN NO EVENT SHALL EITHER
PARTY BE LIABLE TO THE OTHER PARTY OR ANY OTHER PERSON FOR ANY SPECIAL,
CONSEQUENTIAL, EXEMPLARY OR INCIDENTAL DAMAGES (INCLUDING LOST OR ANTICIPATED
REVENUES OR PROFITS RELATING TO THE SAME), ARISING FROM OR RELATING TO THIS
AGREEMENT OR THE SUBJECT MATTER HEREOF, WHETHER BASED IN CONTRACT, TORT
(INCLUDING NEGLIGENCE) OR OTHERWISE, AND EVEN IF SUCH PARTY IS ADVISED OF THE
POSSIBILITY OR LIKELIHOOD OF SAME. THESE LIMITATIONS SHALL APPLY NOTWITHSTANDING
ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY PROVIDED HEREIN. THE
FOREGOING LIMITATIONS SHALL NOT APPLY TO LIABILITY OF BIO-RAD ARISING UNDER
LIABILITY OF LUMINEX ARISING UNDER ARTICLE 10 OR SECTION 3.2, 3.3 OR 11.1,
provided, however, that with respect to liability of LUMINEX arising under
- --------- -------
Section 3.3, such liability shall not exceed the lower of (a) [**]
($[**]) dollars, or (b) ten times the total amount paid by BIO-RAD to
LUMINEX hereunder.
12.10 Confidential Terms. Except as expressly provided herein, each party
------------------
agrees not to disclose any terms of this Agreement to any third party without
the consent of the other party, except to prospective investors and to such
party's accountants, attorneys and other professional advisors or as required by
securities or other applicable laws, in which case the disclosing party shall
seek confidential treatment to the extent available.
12.11 Foreign Corrupt Practices Act. In conformity with the United States
-----------------------------
Foreign Corrupt Practices Act and BIO-RAD and its employees and agents shall not
directly or indirectly make any offer, payment, or promise to pay; authorize
payment; nor offer a gift, promise to give, or authorize the giving of anything
of value for the purpose of influencing any act or decision of an official of
any government (including a decision not to act) or inducing such a person to
use his or her influence to affect any such governmental act or decision in
order to assist LUMINEX in obtaining, retaining or directing any such business.
12.12 Export Control. BIO-RAD further understands and acknowledges that
--------------
LUMINEX is subject to regulation by agencies of the United States, including,
but not limited to, the U.S. Department of Commerce, which prohibit export or
diversion of certain products and technology to certain countries. Any and all
obligations of LUMINEX to provide the Standard Beads, Magnetic Beads or
Luminex100 System, as well as any other technical information or assistance
shall be subject in all respects to such laws and regulations as shall from time
to time govern the license and delivery of technology and products abroad by
persons subject to the jurisdiction of the United States, including without
limitation the U.S. Export Administration Act of 1979, as amended, any successor
legislation, and the Export Administration Regulations issued by the U.S.
Department of Commerce, Bureau of Export Administration. BIO-RAD agrees to
cooperate with LUMINEX including without limitation, providing required
documentation, in order to obtain export licenses or exemptions therefrom.
BIO-RAD agrees that it will
- --------------
[**] Indicates that material has been omitted and confidential treatment
requested therefor. All such material has been filed separately with the
Commission pursuant to Rule 406.
20
<PAGE>
comply with the U.S. Export Administration Regulations and other laws and
regulations governing exports in effect from time to time. BIO-RAD further
agrees not to knowingly provide Standard Beads, Magnetic Beads, Luminex100
Systems or BIO-RAD Systems to any organization, public or private, which engages
in the research or production of military devices, armaments, or any instruments
of warfare, including biological, chemical and nuclear warfare.
12.13 Headings. Headings included herein are for convenience only, do not
--------
form a part of this Agreement and shall not be used in any way to construe or
interpret this Agreement.
12.14 Non-Waiver. Any waiver of the terms and conditions hereof must be
----------
explicitly in writing. The waiver by either of the parties of any breach of any
provision hereof by the other shall not be construed to be a waiver of any
succeeding breach of such provision or a waiver of the provision itself.
12.15 Severability. Should any section, or portion thereof, of this
------------
Agreement be held invalid by reason of any law, statute or regulation existing
now or in the future in any jurisdiction by any court of competent authority or
by a legally enforceable directive of any governmental body, either party may
terminate this Agreement by written notice to the other party within thirty (30)
days after such holding. If this Agreement is not so terminated, such section or
portion thereof shall be validly reformed so as to approximate the intent of the
parties as nearly as possible and, if unreformable, shall be deemed divisible
and deleted with respect to such jurisdiction, but the Agreement shall not
otherwise be affected.
12.16 Independent Contractors. The relationship of BIO-RAD and LUMINEX
-----------------------
established by this Agreement is that of independent contractors. Nothing in
this Agreement shall be construed to create any other relationship between BIO-
RAD and LUMINEX. Neither party shall have any right, power or authority to
assume, create or incur any expense, liability or obligation, express or
implied, on behalf of the other.
12.17 Entire Agreement. The terms and provisions contained in the
----------------
Agreement, including the Exhibits hereto, constitute the entire agreement
between the parties and shall supersede all previous communications,
representations, agreements or understandings, either oral or written, between
the parties. The parties agree that the terms and conditions of this Agreement
shall prevail, notwithstanding contrary or additional terms, in any purchase
order, sales acknowledgment, confirmation or any other document issued by either
party effecting the sale of Standard Beads, Magnetic Beads or sale of Luminex100
Systems. No agreement or understanding varying or extending this Agreement shall
be binding upon either party hereto, unless set forth in a writing which
specifically refers to the Agreement signed by duly authorized officers or
representatives of the respective parties, and the provisions hereof not
specifically amended thereby shall remain in full force and effect.
12.18 Counterparts. This Agreement may be executed in counterparts, each
------------
of which shall be deemed an original, but which together shall constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
representatives to execute this Agreement.
BIO-RAD LABORATORIES, INC. LUMINEX CORPORATION
By: /s/ Sanford S. Wadler By: /s/ Mark Chandler
----------------------------- -----------------------------
Name: Sanford S. Wadler Name: Mark Chandler
-------------------------- ---------------------------
Title: Vice President and General Counsel Title: Chairman & CEO
----------------------------------- --------------------------
21
<PAGE>
EXHIBIT A
FIELDS
1. "Field One" means [**]
---------
2. "Field Two" means [**]
---------
3. "Field Three" means [**]
-----------
4. "Field Four" means [**]
----------
BIO-RAD may add, [**] an additional [**] analytes (either DNA or protein) to
each Field listed above which analytes are not included within the the Field
definitions at the Effective Date. The foregoing, right is exercisable by
written notice to LUMINEX of the analytes. In addition, BIO-RAD may expand each
Field listed above by an additional [**] analytes (either DNA or protein) by
written notice of such additional analytes and payment to LUMINEX of [**]
Dollars [**] per Field so expanded.
_________
[**] Indicates that material has been omitted and confidential treatment
requested therefor. All such material has been filed separately with the
Commission pursuant to Rule 406.
<PAGE>
EXHIBIT B
END USER LICENSES
Label/Sticker for Luminex 100 System:
No rights or licenses under any of Luminex's patents are granted by or
shall be implied from the sale of this unit of Luminex100 instrumentation
or license of Luminex software to you, the purchaser, and you do not
receive any right under Luminex's patent rights by virtue of your purchase
of Luminex100 instrumentation or license of Luminex software. You agree
that the Luminex100 instrumentation and Luminex software are sold only for
use with fluorescently labeled microsphere beads authorized by Luminex and
you may obtain a royalty-free license under Luminex's patents, if any, to
use this unit of Luminex100 instrumentation with fluorescently labeled
microsphere beads authorized by Luminex by registering this unit of
Luminex100 instrumentation with Luminex in accordance with the instructions
accompanying the Luminex100 instrumentation.
Label License/Sticker for Kit:
By purchasing this Kit, which contains fluorescently labeled microsphere
beads authorized by Luminex, you, the customer, acquire the right under
Luminex's patent rights, if any, to use this Kit or any portion of this Kit,
including without limitation the microsphere beads contained herein, only with
Luminex's laser based fluorescent analytical test instrumentation marketed under
the name Luminex100.
End-User License Agreement (EULA) for Luminex100(TM) Operating System
This Luminex End-User License Agreement ("EULA") is a legal agreement
between you (either an individual or a single entity) the end-user and
Luminex Corporation ("Luminex") regarding the use of the Luminex software
product identified above, which includes computer software and online or
electronic documentation and may include associated media and printed
materials (if any) ("SOFTWARE PRODUCT" or "SOFTWARE"). By clicking on the
button below labeled "Accept", you represent that you have read, understand
and agree to be bound by the terms of this EULA. If you do not agree to be
bound by the terms of this EULA, please click on the button below labeled
"Decline". If you do not agree to be bound by the terms of this EULA, you
are not authorized to use the SOFTWARE PRODUCT and shall discontinue use
immediately. Any unauthorized use is a violation of the law and acts as a
total nullification of all warranties.
The SOFTWARE PRODUCT is protected by copyright laws and international
copyright treaties, as well as other intellectual property laws and treaties.
The SOFTWARE PRODUCT is licensed, not sold.
1. GRANT OF LICENSE. Subject to the terms and conditions of this EULA, Luminex
hereby grants to you a nonexclusive, nontransferable, nonassignable license
(without right to sublicense) under Luminex's copyrights and trade secrets
to use the SOFTWARE PRODUCT on a hardware platform purchased from Luminex
pursuant to Luminex's terms and conditions of sale. You may make one (1)
copy of the SOFTWARE PRODUCT for backup or archival purposes only. Although
no rights or licenses under any of Luminex's patents are granted by or shall
be implied from the license of the SOFTWARE or the sale of Luminex100
instrumentation to you, the purchaser, you may obtain a license under
Luminex's patents, if any, to use this unit of Luminex100 instrumentation
with fluorescently labeled microsphere beads authorized by Luminex by
purchasing such beads from Luminex or an authorized Luminex reseller.
<PAGE>
2. RESTRICTIONS.
. You must maintain all proprietary notices on all copies of the SOFTWARE
PRODUCT.
. You may not distribute copies of the SOFTWARE PRODUCT to third parties.
. You may not reverse-engineer, decompile, disassemble, or otherwise attempt
to derive source code from the SOFTWARE PRODUCT.
. You may not copy (other than one backup or archival copy), distribute,
sublicense, rent, lease, transfer or grant any rights in or to all or any
portion of the SOFTWARE PRODUCT.
. You must comply with all applicable laws regarding the use of the SOFTWARE
PRODUCT.
. You may not modify or prepare derivative works of the SOFTWARE PRODUCT.
. You may not use the SOFTWARE PRODUCT in a computer-based service business or
publicly display visual output of the SOFTWARE PRODUCT.
. You may not transmit the SOFTWARE PRODUCT over a network, by telephone, or
electronically by any means.
3. TERM AND TERMINATION. Your rights under this EULA are effective until
termination. You may terminate this EULA at any time by destroying the
SOFTWARE PRODUCT, including all computer programs and documentation, and
erasing any copies residing on your computer equipment. Luminex may
terminate this EULA upon thirty (30) days written notice to you. Your rights
under this EULA automatically terminate without further action on the part
of Luminex if you do not comply with any of the terms or conditions of this
EULA. Upon any termination of this EULA, you agree to destroy the SOFTWARE
PRODUCT and erase any copies residing on your computer equipment.
4. RIGHTS IN SOFTWARE. All rights and title in and to the SOFTWARE PRODUCT and
any copies thereof are owned by Luminex or its suppliers. This EULA is not a
sale and does not transfer to you any title or ownership interest in or to
the SOFTWARE or any patent, copyright, trade secret, trade name, trademark
or other intellectual property right therein. You shall not remove, alter,
or obscure any proprietary notices contained on or within the SOFTWARE and
shall reproduce such notices on any back-up copy of the SOFTWARE. All title
and intellectual property rights in and to the content which may be accessed
through use of the SOFTWARE PRODUCT is the property of the respective
content owner and may be protected by applicable copyright or other
intellectual property laws and treaties. This EULA grants you no rights to
use such content.
5. EXPORT RESTRICTIONS. You agree that you will not export or re-export the
SOFTWARE PRODUCT to any country, person, entity, or end-user subject to
U.S.A. export restrictions. You hereby warrant no state or federal agency
has suspended, revoked, or denied your export privileges.
6. NO WARRANTY. THE SOFTWARE PRODUCT IS LICENSED "AS IS." ANY USE OF THE
SOFTWARE PRODUCT IS AT YOUR OWN RISK. THE SOFTWARE PRODUCT IS PROVIDED FOR
USE ONLY WITH LUMINEX PRODUCTS. TO THE MAXIMUM EXTENT PERMITTED BY
APPLICABLE LAW, LUMINEX AND ITS SUPPLIERS DISCLAIM ALL WARRANTIES, EITHER
EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, IMPLIED WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND NONINFRINGEMENT.
24
<PAGE>
7. LIMITATION OF LIABILITY. IN NO EVENT SHALL LUMINEX OR ITS SUPPLIERS BE
LIABLE FOR ANY SPECIAL, INCIDENTAL, INDIRECT, OR CONSEQUENTIAL DAMAGES
WHATSOEVER (INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF BUSINESS
PROFITS, BUSINESS INTERRUPTION, LOSS OF BUSINESS INFORMATION, OR ANY OTHER
PECUNIARY LOSS) ARISING OUT OF THE USE OF OR INABILITY TO USE THE SOFTWARE
PRODUCT, EVEN IF LUMINEX HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES.
8. MISCELLANEOUS. This EULA is governed by the laws of the State of Texas,
U.S.A., without reference to conflicts of laws principles. You shall not
assign or sublicense or otherwise transfer the rights or license granted
hereunder, by agreement or by operation of law, without the prior written
consent of Luminex, and all assignments in violation of this prohibition
shall be null and void. This EULA is the complete and exclusive agreement of
Luminex and you and supersedes all other communications, oral or written,
relating to the subject matter hereof. No change to this EULA shall be valid
unless in writing and signed by the party against whom enforcement is
sought. The waiver or failure of Luminex or you to exercise in any respect
any right or rights provided for herein shall not be deemed a waiver of any
further right hereunder. If any provision of this EULA is held
unenforceable, the remainder of this EULA will continue in full force and
effect.
25
<PAGE>
EXHIBIT C
LIMITED WARRANTY
1. Limited Warranty. LUMINEX warrants to BIO-RAD that for one year from
----------------
delivery to an End User, but no more than fifteen (15) months from delivery to
BIO-RAD, the Standard Beads and the Luminex100 System (for purposes of this
Exhibit C, each of the Standard Beads and Luminex100 System is referred to as a
"Product") substantially conform to LUMINEX's published functional
specifications therefor, subject to use in accordance with documentation
provided by LUMINEX that accompanies such Product, including but not limited to
the instructions-for-use; provided, that LUMINEX is reasonably satisfied that
the claimed nonconformities actually exist and were not caused by unusual
physical or electrical stress, misuse, neglect, alteration, improper
installation, unauthorized repair or improper testing. Notwithstanding the
foregoing, the warranty provided herein specifically excludes any software or
hardware not provided by LUMINEX. Subject to LUMINEX's warranty return policies
for Product set forth in paragraph 2 below, LUMINEX's sole liability and
BIO-RAD's exclusive remedy for breach of the foregoing warranty, shall be at
LUMINEX's option, repair or replacement of the Product with a conforming Product
or refund of a percentage of the fee paid by BIO-RAD for the Product which
percentage would be computed based on prior usage. Except as otherwise expressly
set forth in this Agreement, LUMINEX MAKES NO OTHER WARRANTIES OR CONDITION WITH
RESPECT TO THE PRODUCT, EXPRESS OR IMPLIED, AND SPECIFICALLY DISCLAIMS THE
IMPLIED WARRANTIES AND CONDITION OF MERCHANTABILITY, NONINFRINGEMENT AND FITNESS
FOR A PARTICULAR PURPOSE.
Warranty Return Policies. In the event that a Product fails to conform to
------------------------
the warranty set forth in paragraph 1 above, during the warranty period (i)
BIO-RAD shall notify LUMINEX in a timely manner in writing that such Product
failed to conform and shall furnish a detailed explanation of any alleged
nonconformity; and (ii) at LUMINEX's option and election, BIO-RAD shall return
such nonconforming Product to LUMINEX F.O.B. (U.C.C.) LUMINEX's manufacturing
facility or destroy such Product and provide LUMINEX with written certification
of destruction. Except as expressly provided in this paragraph, BIO-RAD would
not have the right to return a Product to LUMINEX without LUMINEX's prior
written consent.
<PAGE>
EXHIBIT D
TRADEMARKS
Luminex
Luminex100
<PAGE>
EXHIBIT E
LUMINEX100 SYSTEM PRICING
-------------------------
Product
Number Item Description
- ------ ----------------
51-00001 Luminex100 System [**]
[**]
This Luminex100 Purchase Price will be effective during the first [**] years of
this Agreement, after which time LUMINEX may, at its option, increase the
Luminex100 Purchase Price effective on [**] days written notice to BIO-
RAD, provided that such increases may occur no more frequently than once per
year. Any increase in the Luminex100 Purchase Price shall be effective for all
Luminex100 Systems ordered after such notice.
_____________
[**] Indicates that material has been omitted and confidential treatment
requested therefor. All such material has been filed separately with the
Commission pursuant to Rule 406.
<PAGE>
EXHIBIT 10.8
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
AMENDMENT TO DEVELOPMENT AND SUPPLY AGREEMENT
This Amendment to Development and Supply Agreement ("Amendment"), effective
as of January 13, 2000 (the "Amendment Effective Date"), by and between Luminex
Corporation, a Delaware corporation with principal offices at 12212 Technology
Boulevard, Austin, Texas 79727 ("LUMINEX") and Bio-Rad Laboratories, Inc., a
Delaware corporation with principal offices at 1000 Alfired Nobel Drive,
Hercules, California 94547 ("BIO-RAD") (LUMINEX and BIO-RAD collectively, the
"Parties"), amends that certain Development and Supply Agreement by and between
the Parties effective as of March 19, 1999 (the "Agreement").
WHEREAS, the Parties desire to amend the Agreement as set forth herein
below.
NOW, THEREFORE, the Parties agree as follows:
AMENDMENT. This Amendment hereby amends the Agreement to incorporate the
terms and conditions set forth in this Amendment. The relationship of the
Parties shall continue to be governed by the terms and conditions of the
Agreement, as amended herein; and in the event that there is any conflict
between the terms and conditions of the Agreement and this Amendment, the term
and conditions of this Amendment shall control. As used in this Amendment, all
capitalized terms shall have the meanings defined for such terms in this
Amendment or, if not defined in the Amendment, the meanings defined in the
Agreement
MODIFICATIONS TO THE AGREEMENT.
I. Exhibit A to the Agreement is hereby amended to add the following:
[**]
2. "Field Two" in Exhibit A of the Agreement is deleted and replaced with
the following: [**]
3. Section 1.7 of the Agreement is hereby amended to add the following:
"Fields Five and Six, as set forth in Exhibit A, shall be limited to
Research Use.
4. The Agreement is hereby amended to add the following Section 1.23:
- -----------
[**] Indicates that material has been omitted and confidential treatment
requested therefor. All such material has been filed separately with the
Commission pursuant to Rule 406.
<PAGE>
"1.23 "Research Use" means the performance of basic life science
-------------
research, including high throughput screening, but in all events
excluding laboratory testing for human clinical diagnostic
purposes."
5. Section 2.1 (d) of the Agreement is hereby amended to delete the last
sentence of such section and replace it with the following:
"Notwithstanding any provision of this Agreement to the contrary,
including the provisions of Section 8.3, if the parties do not agree by
June 1, 2000 upon: (i) a tolling fee for Magnetic Beads of less than or
equal to [**] ($[**]) for every three thousand (3000) units of Magnetic
Beads purchased, where a "unit" of Magnetic Beads is equal to one
microsphere bead, and (ii) the development of a beadmap for Magnetic
Beads which shall be capable of discriminating between [**] analytes
with a minimum accuracy level of [**] percent ([**]%) and no more than
[**] percent ([**]%) misclassification, all rights of BIO-RAD to have
LUMINEX treat the Magnetic Beads hereunder and all obligations of
LUMINEX with respect to the treatment or processing of Magnetic Beads
for BIO-RAD hereunder shall automatically terminate unless otherwise
agreed in writing, provided, however, that in such event BIO-RAD shall
-------- -------
have the right to have the Magnetic Beads processed by BIO-RAD or a
third party and, for the avoidance of doubt, BIO-RAD shall retain the
exclusivity rights with respect to Magnetic Beads set forth in Section
3.2 of this Agreement."
6. Section 3.1 of the Agreement is hereby amended to add the following
after the phrase "only as part of BIO-RAD Systems":
"'or, within Fields Five and Six, Luminex100 Systems separately"
7. Section 3.1 of the Agreement is hereby further amended to add the
following after the phrase "BIO-RAD U.S. Diagnostics Division
management":
"or BIO-RAD U.S. Life Sciences Division management"
8. Section 3.1 of the Agreement is hereby further amended to add the
following after the phrase "in conjunction with their operation of BIO-
RAD Systems":
"and Luminex100 Systems"
9. Section 3.3(b)(i) of the Agreement is hereby amended to add the
following after the phrase "human clinical diagnostics industry":
"or the life science research industry"
10. Section 3.5 of the Agreement is hereby amended to add the following
after the phrase "BIO-RAD U.S. Diagnostics Division management":
"or BIO-RAD U.S. Life Sciences Division management"
------------
[**] Indicates that material has been omitted and confidential
treatment requested therefor. All such material has been filed
separately with the Commission pursuant to Rule 406.
-2-
<PAGE>
11. Section 4.6(c) of the Agreement is hereby amended to add the following
after the phrase "in vitro diagnostic Kits":
--------
"or Kits for Research Use"
12. Section 4.8 of the Agreement is hereby amended to add the following
after the phrase "All invoices shall be sent to the following
address:"
"For Clinical Diagnostics Group, Bio-Rad Laboratories, Accounts
Payable, 4000 Alfred Nobel Drive, Hercules, California 49547, or for
Life Sciences Group, Bio Rad Laboratories, Accounts Payable, 2000
Alfred Nobel Drive, Hercules, California."
13. Section 4.11 (a) of the Agreement is hereby amended to add the
following after the phrase "At the Effective Date:"
"and at the Amendment Effective Date"
14. Section 4.11(b) of the Agreement is hereby amended to add the
following after the phrase "the date of this Agreement:"
"and at the Amendment Effective Date"
15. Section 5.2 of the Agreement is hereby amended to read in its entirety
as follows:
"Exclusivity of Efforts. To avoid conflicts of interest, BIO-RAD and
----------------------
its Affiliates will not manufacture, market, sell or otherwise
distribute any materials, technologies or products, other than
Luminex100 Systems, Bio-Rad Systems and Kits, specifically designed
for performing Multiplexed Bead Assays using flow cytometry based
detection of particles for use in the human clinical diagnostics
industry or for Research Use within the Fields. In addition, BIO-RAD
agrees that except for performing its development obligations as
agreed pursuant to Section 2.1 and the development and manufacture of
Bio-Rad Systems, neither BIO-RAD's clinical diagnostics division or
group nor BIO-RAD's life sciences division or group will directly or
indirectly develop any materials, technologies or products
specifically designed for performing Multiplexed Bead Assays within
the Fields using flow cytometry based detection of particles. BIO-RAD
further agrees that it will not provide research and development
funding to or license any third party to develop, manufacture, market,
sell or otherwise distribute any materials, technologies or products
specifically designed for performing Multiplexed Bead Assays within
the Fields using flow cytometry based detection of particles. It is
understood that the foregoing sentence shall not apply to passive
investments by BIO-RAD in equity of third parties for use in the human
clinical diagnostics industry or for Research Use."
-3-
<PAGE>
16. Section 8.1 of the Agreement is hereby amended to add the following
after the words "each such renewal term":
"but which in no case shall vary by more than [**] percent ([**]%)
from the average of the three prior years' sales. Notwithstanding the
foregoing provisions of this Section 8.1, Fields Five and Six shall be
included in the Agreement during each of the renewal terms only if the
parties agree upon and BIO-RAD meets annual sales goals with respect
to Kits in Fields Five and Six, which annual sales goals shall be
negotiated in good faith by the parties prior to the commencement of
each such renewal term but which in no case shall vary by more than
[**] percent ([**]%) from the average of the three prior years'
sales."
17. Section 8.3 of the Agreement is hereby amended to add the following
after the phrase "Luminex100 System" in the second line of that
Section:
"(or, with respect to Fields other than Fields One, Two, Three or
Four, beginning five (5) years after the addition to the Agreement of
such Field or Fields)"
18. Section 8.3 of the Agreement is hereby further amended to delete the
last sentence thereof and replace if with the following:
"If BIO-RAD has not made commercially available Kits incorporating
Magnetic Beads in each of Fields One, Two, Three and Four within [**]
years of the Effective Date plus any extension of time necessary to
produce Magnetic Beads reasonably acceptable to BIO-RAD, LUMINEX may
terminate BIO-RAD's exclusive rights with respect to Magnetic Beads in
Fields One, Two, Three and Four by written notice to BIO-RAD. If BIO-
RAD has not made commercially available Kits incorporating Magnetic
Beads in each of Fields Five and Six within [**] years of the
Amendment Effective Date plus any extension of time necessary to
produce Magnetic Beads reasonably acceptable to BIO-RAD, LUMINEX may
terminate BIO-RAD's exclusive rights with respect to Magnetic Beads in
Five and Six by written notice to BIO- RAD.
19. Section 12.2 of the Agreement is hereby amended to add the following
after the word "Group" in the third line of that Section:
"or BIO-RAD Vice-President Life Sciences Division, as appropriate,"
20. Section 12.8 of the Agreement is hereby amended to add the following
at the end of that Section:
"with a further copy to:
Bio-Rad Laboratories, Inc. Life Science Group
2000 Alfred Nobel Drive
Hercules, California 94547
Attention: Vice-President, Life Science Group"
- --------------
[**] Indicates that material has been omitted and confidential treatment
requested therefor. All such material has been filed separately with the
Commission pursuant to Rule 406.
-4-
<PAGE>
Fax: (510) 741-5803"
21. ADDITIONAL TERM: ADVANCE AGAINST ROYALTIES. Upon the effective date of
this Amendment, BIO-RAD shall pay to LUMINEX an aggregate of [**] Dollars
($[**]) for both of Fields Five and Six as an Advance.
22. The additional fee for expansion of Field Two set forth in Exhibit A of
the Agreement is waived.
ENTIRE AGREEMENT. Notwithstanding the first sentence of Section 12.17 of the
Agreement, together the Agreement (including the Exhibits thereto) and this
Amendment constitute the entire agreement between the Parties in connection
with the subject matter thereof and supersede all prior and contemporaneous
agreements, understandings, negotiations and discussions, whether oral or
written, of the Parties.
IN WITNESS WHEREOF, the Parties have executed this Amendment.
LUMINEX CORPORATION BIO-RAD LABORATORIES, INC.
By: /s/ Randel S. Marfin By: /s/ Sanford Wadler
---------------------- --------------------
Name: Randel S. Marfin Name: Sanford Wadler
---------------------- --------------------
Title: Vice President - Business Development Title: Vice President
-------------------------------------- --------------------
- ----------
[**] Indicates that material has been omitted and confidential treatment
requested therefor. All such material has been filed separately with the
Commission pursuant to Rule 406.
-5-
<PAGE>
EXHIBIT 10.9
Confidential Materials omitted and filed separately with the Securities and
Exchange Commissions, Asterisks denote omissions.
AGREEMENT FOR ELECTRONIC MANUFACTURING SERVICES
This Agreement between Luminex Corporation, a Delaware corporation
with principal offices at 12212 Technology Boulevard, Austin, Texas 78727
(hereinafter "Luminex"), and Sanmina Corporation, having a place of business at
2300 Highway 79 South, Guntersville, Alabama 35976 (hereinafter "Sanmina") is
entered into effective as of January 1, 2000 (the "Effective Date"). Sanmina
shall perform manufacturing services for Luminex under the terms and conditions
set forth herein.
NOW THEREFORE, for and in consideration of the covenants, conditions, and
undertakings hereinafter set forth, it is agreed by and between the parties as
follows:
I. Term
This Agreement shall be in effect for four (4) years from the
Effective Date of this Agreement. Unless either party gives the other party
written notice of its intent not to renew this Agreement at least ninety (90)
days prior to the expiration of the current term, the Agreement shall renew
under the then current terms for successive one (1) year terms.
II. Scope of Work Performed
A. Luminex wishes Sanmina to manufacture on behalf of Luminex a
range of products, assemblies, and/or subassemblies, hereafter
called the "Products," identified in and at the prices in Exhibit
A, as amended in writing from time to time by mutual agreement.
Sanmina and Luminex shall mutually agree upon a delivery schedule
for the Products per Section IV of this Agreement.
B. Luminex shall be liable for material(s), components, or parts
that Sanmina procures or otherwise contracts for in order to
manufacture the products that Luminex wishes to buy from Sanmina
on a turnkey basis (hereinafter the "Material" or "Materials").
This liability shall be determined by defining the process that
incurs this liability and describing the situations or
circumstances under which Luminex is liable for Material that
Sanmina has procured per Section IV of this Agreement.
III. Pricing
The prices for the Products shown in Exhibit A shall remain fixed for
six (6) months after the Effective Date, thereafter to be reviewed by the
Parties on a semiannual basis. Sanmina agrees that there shall be no increase in
Build Time not due to an ECO (defined below) or a change request from Luminex.
"Build Time" means the amount of time Sanmina requires to assemble and test the
Materials into a finished Product. Notwithstanding the foregoing, the following
exceptions allow prices to be increased or decreased:
1. ECO - Engineering Change Order (referred to in Section IV.G.) or
change request; or
2. Material variations on the market price of components that are the
basis of the Purchase Order. This will be reviewed and mutually agreed
to quarterly unless abnormal ["abnormal" defined as greater ten
percent (10%) variation in Sanmina's cost of Material(s)] changes are
experienced in material costs; or
3. If the monthly volume of Products ordered by Luminex under this
Agreement meets or exceeds [**] units per month for [**]
consecutive months (the "Established Level"), then the
____________
[**] Indicates that material has been omitted and confidential treatment
requested therefor. All such material has been filed separately with the
Commission pursuant to Rule 406.
<PAGE>
Materials Mark-up and Profit Gross-up percentages stated in Exhibit A
will be reviewed and agreed upon at lower or higher percentages,
respectively. These new percentages will be applied to all subsequent
shipments. Notwithstanding the foregoing, if the monthly volume of
Products ordered by Luminex under this Agreement drops below the
Established Level then in effect, then the percentages will be
reviewed and agreed upon to lower (Gross-up) or higher (Mark-up)
percentages, not to exceed the original percentages set out herein as
of the Effective Date; or
IV. Forecasting and Ordering
A. Sanmina shall purchase Materials for the Products in accordance
with an Approved Vendor List ("AVL"), as provided by Luminex to
Sanmina from time to time. In the event Sanmina cannot purchase
Materials from an approved vendor for any reason, including
unavailability or commercial unfeasibility of the purchase of such
Materials, Sanmina may purchase such Materials from an alternate
vendor with the prior written consent of Luminex.
B. General Planning and Procurement Process
1. On the date this Agreement is executed and the first business
day of each calendar month thereafter, Luminex shall provide
Sanmina with monthly, rolling purchase orders covering a minimum
period of three (3) months ("Purchase Order").
2. On the same dates, Luminex shall provide Sanmina with an
additional monthly, rolling nine (9) month forecast ("Forecast")
covering the nine (9) months immediately following the Purchase
Order period. Forecast does not incur any liability for either
Sanmina or Luminex except that of any long lead-time Materials
for which the forecast would cause procurement activity, and,
even in such a situation such liability for Luminex would be
limited per Section IV.C.
3. Sanmina will take the Purchase Orders and Forecast referred to
in Subsections 1 and 2 above and generate a Master Production
Schedule ("MPS") for a twelve (12) month period using the
process described in Subsection 4 below.
4. The MPS will define the master plan on which Sanmina will base
its procurement, internal capacity projections, and commitments:
(a) Sanmina will use the Purchase Orders referred to in
Subsection 1 above to generate the first three (3) months of
the MPS.
(b) Sanmina will use the Forecast referred to in Subsection 2
above to generate the following nine (9) months of the MPS.
5. Sanmina will release (launch) orders to suppliers of Materials
sometime prior to the anticipated date that the Material is
needed. When these orders are launched will depend on the Vendor
Lead Time that Sanmina will determine from time to time and
maintain as a parameter of Sanmina's manufacturing or materials
planning systems.
6. Sanmina, through its MRP System will also issue an instruction
("MRP Signal") to its procurement group to buy the Material in
order to meet the delivery schedule as specified in the
respective Purchase Order.
2
<PAGE>
7. When Sanmina places an order with its suppliers per the sections
above, Sanmina will order Materials in various quantities (defined
in periods-worth-of-supply) that are defined by the Material's ABC
Classification. This classification as well as the expected
distribution or characteristics of various classes of Materials,
and, the periods-worth-of-supply (Periods-of-Supply) that will be
bought for each class of Material is shown on Exhibit C.
8. In addition to ordering Materials for various periods-of-supply and
in order to obtain volume discounts, Sanmina will order Materials
according to various minimum-buy quantities, tape and reel
quantities, and multiples of packaging quantities in accordance
with the Excess Materials provisions of Subsection IV.D.5.
C. Liabilities for Materials
1. For the purposes of Sections C, D, and E of Article IV,
"Materials" means without the cost of the Materials Mark-up and is
at Sanmina's cost. Also, for the purposes of Sections C, D, and E
of Article IV, Luminex's liability for Materials under these
section is separate and exclusive of any liability for Materials
used in completed Products purchased from Sanmina by Luminex per
the Product Pricing of Exhibit A.
2. Luminex's financial liability for Materials that Sanmina has
procured under this Agreement under valid Forecasts and/or
Purchase Orders and separate and exclusive of any liability for
Materials used in completed Products purchased from Sanmina by
Luminex per the Product Pricing of Exhibit A ("Materials
Liability"), is limited to the following:
(a) Materials that Sanmina, having ordered per the guidelines in
Section IV.B. above, cannot cancel prior to its receipt. This
includes Materials that may not be cancelable by virtue of
having insufficient time between the MRP signal to cancel and
the expected or real receipt date at Sanmina. If the receipt
of Material cannot be stopped but the Materials can be
returned, they will be covered under Subsection (b) below or
Section IV.C.2.; and
(b) Materials that Sanmina, having ordered per the guidelines
above, cannot return to the suppliers that the Materials came
from, or other 3/rd/ party, and where Sanmina has made
reasonable efforts to return the Materials. Prior to being
included in Luminex's liability, Luminex shall be given the
option to try to arrange a return for Sanmina; and
(c) Material which Luminex and Sanmina agree that the return of
such Materials is not required.
3. Luminex shall also be liable to Sanmina for other Material-related
costs separate and exclusive of any liability for Materials used
in completed Products purchased from Sanmina by Luminex per the
Product Pricing of Exhibit A. ("Other Material Costs"), which
shall include:
(a) Instances in which Sanmina is able to return Materials with
reasonable re-stocking or other fees, those fees shall become
part of Luminex's Total Liability in place of the costs of
those Materials and markups; and
3
<PAGE>
(b) Associated reasonable expenses related to purchasing,
ordering, manufacturing (labor and overhead), shipping,
storing, and eliminating such Materials that Sanmina
purchases or orders to fulfill a Purchase Order and/or the
Forecast on behalf of Luminex to manufacture the Products
shall constitute a part of Luminex's Total Liability, such
amount not to exceed the current Materials Mark-up; and
(c) If necessary and with Luminex's prior, written consent,
Sanmina shall purchase any necessary tools to fulfill the
Purchase Order and Forecast. Such tools shall be deemed a
part of Luminex's Total Liability. All such tooling purchased
by Sanmina shall remain Luminex's sole property, and Sanmina
shall return such tooling (normal wear and tear excepted) to
Luminex upon request, the completion of the relevant order,
or the termination of the Agreement. Such tooling may only be
used by Sanmina to fulfill its obligations hereunder to
Luminex.
4. Except as otherwise provided herein, Luminex's total financial
liability for Materials and separate and exclusive of any
liability for Materials used in completed Products purchased from
Sanmina by Luminex per the Product Pricing of Exhibit A ("Total
Liability"), shall be the sum of: (i) Materials Liability plus the
agreed upon Materials Mark-up per Exhibit A, and (ii) Other
Material Costs. Sanmina shall use commercially reasonable efforts
to minimize the Total Liability consistent with meeting the
production requirements of this Agreement.
D. Excess Material
1. "Excess Material" and "Excess Materials" mean Materials greater
than the quantity needed to fulfill all outstanding or open
Purchase Orders submitted to Sanmina by Luminex hereunder.
2. Sanmina agrees to provide Luminex with monthly progress Excess
Reserve Detail Reports which shall detail any Excess Materials.
Luminex agrees to review and notify Sanmina, in writing, within
thirty (30) days of any issues regarding the composition of the
Excess Materials, in response to the Excess Reserve Detail Report.
Sanmina agrees to use commercially reasonable efforts to reduce
the amount of Excess Material(s) consistent with meeting the
production requirements of this Agreement.
3. If, at any time at which the total dollar amount of Excess
Materials exceeds twenty-five thousand dollars ($25,000.00), the
Parties will, within thirty (30) days, conduct a review of the
composition of Excess Materials and alternative means of reducing
the level of such Excess Materials; e.g., by returns, sales, etc..
If, after such review, Luminex's responsibility for Excess
Materials would still exceed twenty-five thousand dollars
($25,000.00), then Luminex will, within fourteen (14) days, either
(1) issue a Purchase Order for the delivery of that portion over
twenty-five thousand dollars ($25,000.00), or (2) issue sufficient
top level Purchase Orders to result in the consumption of said
Excess Materials.
4. Upon termination of this agreement by notice per Section X.A.,
Luminex agrees to purchase Excess and Unallocated Material it is
responsible for creating through MRP driven demand for forecast,
production, and minimum buy requirements per the provisions of
Section IV. Within thirty (30) days of notification of
termination, Luminex will provide Sanmina with the address where
Excess Material is to be shipped, or arrange for pick-up by third
party purchasers from Sanmina's facility.
4
<PAGE>
5. In order to simplify and expedite the process of placing orders
with vendors, where minimum buys are required, and the minimum buy
order would create an Excess Material condition, this Agreement
authorizes Sanmina to make those purchases under the following
guidelines:
(a) Sanmina may make purchases for line items which total extended
excess cost to Sanmina does not exceed five hundred dollars
($500.00); and
(b) In the event a line item increases Excess Materials by five
hundred dollars ($500.00) or more, Sanmina shall notify
Luminex in writing within one (1) week. Luminex will, within
one (1) week, provide written authorization to place the
order.
E. Unallocated Materials
1. "Unallocated Material" and "Unallocated Materials" are defined as
Material or Materials for which there are no open or outstanding
Purchase Orders. Unallocated Material is identified on Excess
Reserve Detail Reports as those items having zero (0) demand.
2. Sanmina agrees to include in the aforementioned monthly Excess
Reserve Detail Reports details of any Unallocated Materials.
Luminex agrees to review and notify Sanmina, in writing, within
thirty (30) days of any issues regarding the composition of
Unallocated Material, in response to the Excess Reserve Detail
Report. After such review, Luminex will, within fourteen (14)
days, either (1) issue a Purchase Order for the delivery of
Unallocated Material, or (2) issue sufficient top level Purchase
Orders to result in the consumption of said Unallocated Material.
F. Reschedules
1. Luminex may reschedule delivery dates of Products subject to the
matrix set forth on Exhibit D.
2. For a decrease in quantity of Products to be delivered on a
specific delivery date, Sanmina and Luminex shall mutually agree
upon a date to deliver the undelivered Products.
3. For an increase in quantity of Products to be delivered on a
specific delivery date, Sanmina, on a best efforts basis, will
attempt to accommodate such increase.
4. If any change in the delivery dates of any results in additional
expenses to Sanmina to store such Products or to acquire
additional Materials, such additional expenses as are reasonably
incurred and documented shall be deemed part of Luminex's Total
Liability with Luminex's prior approval.
G. Revisions
In the event Luminex requests an engineering change to a product,
Sanmina shall notify Luminex of any impact on the cost and/or scheduled
delivery of such Products within five (5) business days of the receipt of
Luminex's request in reasonable detail with supporting documentation.
Sanmina will use its best efforts to reduce the impact the costs of any
change order. Unless Luminex consents to the amended notification from
Sanmina, the requested
5
<PAGE>
engineering change shall be deemed canceled and Luminex will be notified in
writing. Any increases in the cost of the Products resulting from such
Engineering Change Order ("ECO") shall be deemed a part of Luminex's Total
Liability. Similarly, any Materials made obsolete or excess as a result of
such an ECO shall be deemed part of Luminex's Total Liability.
H. Cancellations
Luminex may cancel any Purchase Order by notifying Sanmina in writing at
least thirty (30) days prior to the delivery date of such order. Within
thirty (30) days of such cancellation, Sanmina shall provide Luminex with
the amount of the Total Liability under Section IV related to such canceled
Purchase Order. To the extent practical, any Materials resulting from a
cancellation shall be used to fulfill other Purchase Orders. If a
sufficient amount of purchases is not forecasted to consume such materials
within the next sixty (60) day period, with respect to the Excess Materials
Luminex shall pay such cancellation amount to Sanmina on a net-30 day
basis. After receipt of such cancellation amount, Sanmina shall deliver to
Luminex, at Luminex's expense, any remaining Materials purchased but unused
as a result of such cancellation, or scrap Materials, at the sole
discretion of Luminex.
V. Delivery
A. Delivery of all items under this Agreement shall be delivered F.O.B.
Sanmina's Plant located at the address specified in Exhibit A to the
common carrier specified from time to time by Luminex ("Delivery
Point"). Upon delivery to the common carrier, risk of loss and title
shall pass to Luminex. Sanmina will provide insurance for the value of
the Material (with any deductible to be approved by Luminex) until
delivery to the common carrier, and shall name Luminex as an additional
insured on such policies and furnish Luminex with certificates of
same..
B. Sanmina shall use its best efforts to deliver the Products to the
Delivery Point on the agreed upon delivery dates. If Products pursuant
to a Purchase Order are more than thirty (30) days late, then Luminex
shall have the option to cancel that Purchase Order. If Products
pursuant to any Purchase Order are more than forty-five (45) days late,
Sanmina shall be in breach of this Agreement and Luminex shall have the
option to terminate this Agreement. If Luminex terminates this
Agreement for Sanmina's failure to timely deliver the Products, Luminex
shall be liable for the Materials per Section IV.
C. Sanmina shall transport the Products using the common carrier and such
shipment terms as are designated by Luminex from time to time to
Luminex's address or to an address specified in writing by Luminex. All
freight, insurance, and other shipping expenses from the delivery point
shall be borne by Luminex. When special packaging is requested or, in
the opinion of Sanmina is required under the circumstances, the
additional expenses related to such special packaging shall also be
borne by Luminex if agreed to in advance by Luminex.
VI. Payment and Invoicing
Payment terms will be net-30 (thirty) days from invoice date, provided it
is not earlier than the ship date. Sanmina will provide Luminex with a credit
limit adequate to equal or exceed six (6) months of projected shipments of the
Products to Luminex. In the event that Luminex exceeds this credit limit or has
undisputed outstanding invoices for more than sixty (60) days and such credit
limit remains exceeded or such invoices remain outstanding, as applicable, ten
(10) days after Luminex has received notice thereof, Sanmina may stop shipments
of Products to Luminex until Luminex makes sufficient payment to
6
<PAGE>
bring its account consistent with terms outlined above. Sanmina may reduce the
credit limit with sixty (60) days prior written notice to Luminex, provided,
that Luminex may terminate this Agreement on thirty (30) days prior written
notice if such credit limit is reduced by more than ten percent (10%).
VII. Warranty
A. Sanmina warrants that each Product shall at the time of delivery be
new and free and clear of all liens and encumbrances. Sanmina warrants
that the Products shall be free from any defects in workmanship for a
period of one (1) year from the date of manufacture except to the
extent that such defects are caused by components purchased from
third-party vendors but not Sanmina-owned companies ("Vendor
Components"). Warranty on components is limited to the warranty
provided by the component manufacturer. Sanmina, to the extent
permitted, hereby agrees to assign to Luminex any unexpired warranties
for such Vendor Components provided by third-party vendors or passed
on by such third-party vendors from the original manufacturers until
the expiration of such warranties. Sanmina shall execute any documents
necessary to assign such warranties to Luminex. As Luminex's remedy
under Sanmina's warranty, Sanmina will, at no charge, rework, repair,
and retest any such Products returned to Sanmina and found to contain
defects in workmanship, provided, however, in the event such Product
cannot be repaired or replaced within thirty (30) days of return by
Luminex, Luminex may elect a refund of the purchase price for the
applicable Product. Sanmina will return defective Vendor Components to
third party vendors for warranty replacement or repair from the
original manufacturers. All reasonable transportation and expenses
arising from shipping the non-conforming Products to and the
replacement Products from the shipping location shall be paid by
Sanmina to the extent the Products are defective due to Sanmina's
workmanship. However, if a Product returned to Sanmina for replacement
proves to be not defective, Luminex shall reimburse Sanmina for all
transportation expenses incurred by Sanmina in connection with the
shipment of such Products to Sanmina and its return by Sanmina.
Warranty coverage does not include failures due to Luminex design
errors, the supply or selection by Luminex of improper or defective
parts or materials used by Luminex, damages caused by Luminex's
misuse, unauthorized repair, or negligence. Sanmina does not assume
any liability for low-cost, expendable items such as lamps and fuses.
Sanmina reserves the right to inspect the Products, Materials, and
Vendor Components and verify that they are defective or non-
conforming.
B. The performance of any repair or replacement by Sanmina does not
extend the warranty period for any Products beyond the period
applicable to the Products originally delivered; provided, however,
that the warranty period shall extend for a period of time equal to
the time elapsed from notice to Sanmina of a warranty claim until
redelivery of the repaired or reworked product.
C. EXCEPT FOR THE ABOVE EXPRESS WARRANTIES, SANMINA MAKES AND LUMINEX
RECEIVES NO WARRANTIES OR CONDITIONS ON, THE PRODUCTS, EXPRESS,
IMPLIED, STATUTORY, OR OTHERWISE, AND SANMINA SPECIFICALLY DISCLAIMS
ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE.
VIII. General Indemnity
A. Sanmina shall defend, indemnify and save harmless Luminex from any
liability or claim (including, without limitation, the costs and
reasonable attorney's fee in connection therewith) to the extent such
liability or claim is based upon an allegation that, by reason of
processes
7
<PAGE>
used by Sanmina or otherwise, a Product infringes, under the
applicable law of the United States, Canada or any other country to
which Sanmina or Luminex may have delivered the allegedly infringing
Product, any Intellectual Property of a third party. Luminex shall
promptly notify Sanmina of any such claim or proceeding brought
against it and grant Sanmina the right of defense in any such claim or
proceeding, and Luminex shall provide all information and reasonable
assistance, all at Sanmina's expense, in the defense of such a claim
or proceeding.
B. Sanmina's obligation to indemnify Luminex under this Article shall not
apply to any liability for such infringement based solely upon a
Product being manufactured in compliance with Luminex's specific
design requirements, or the application of a Product by Luminex in an
unintended manner. Each party shall indemnify the other party against,
and hold it harmless from any loss, cost, liability, or expense
(including court costs and the reasonable fees of attorneys and other
professionals) to the extent that such loss, cost, liability, or
expense arises out of, or in connection with, in whole or in part, (A)
infringements of any patent, trademark, copyright, or other
intellectual property of another party by the other party or (B) any
gross negligence or willful misconduct by the other party, its
employees or agents and subcontractors, including but not limited to
any such act or omission that causes: (i) any bodily injury, sickness,
disease, or death; (ii) any injury or destruction to tangible or
intangible property of the injured party or any loss of use resulting
therefrom; or (iii) any violation of any statute, ordinance, or
regulation.
IX. Quality, Inspection, and Reporting
A. Luminex will have the right at reasonable times, upon reasonable
advance notice, to visit Sanmina's plant to inspect the work performed
on the Products, the Materials, and the Vendor Components. Such
inspection shall not relieve Sanmina of any of its obligations under
the Agreement or Purchase Orders. Sanmina shall provide Luminex with
all mutually agreed upon quality reports at agreed upon intervals.
Sanmina reserves the right to restrict Luminex's access to the plant
or any area within it as necessary to protect confidential information
of Sanmina or its other Customers.
B. If Luminex demands inspection of the Products prior to the delivery of
such Products as a condition of acceptance of such Products, Luminex
must inspect the Products within five business (5) days of a
transmission of written notice by facsimile or other electronic or
telephonic delivery system from Sanmina informing Luminex that the
Products are ready to be shipped. If Luminex does not inspect the
Products within such five-business-day period, Luminex shall be deemed
to have waived its right to inspect the Products as a condition of
acceptance of such Products. This does not disallow rejection of the
Products after incoming inspection if such inspection determines that
the shipment does not meet the agreed to specifications.
C. Luminex and Sanmina will implement a joint quality improvement program
that will develop and implement a continuous quality improvement.
D. Luminex and Sanmina will agree on what reports and other items (such
as reports on component part inventory, products shipped and copies of
invoices) will be prepared by Sanmina and delivered to Luminex.
8
<PAGE>
X. Termination
A. Either party may, without penalty, terminate this Agreement upon thirty
(30) days written notice to the other party in either one of the
following events:
1. The other party materially breaches this Agreement and such breach
remains uncured for thirty (30) days following written notice of
breach by the non-breaching party; or
2. The other party becomes involved in any voluntary or involuntary
bankruptcy or other insolvency petition or proceeding for the
benefit of its creditors, and such petition, assignment or
proceeding is not dismissed within sixty (60) days after it was
filed.
B. Luminex may, without penalty, terminate this Agreement upon thirty (30)
days written notice to Sanmina in the event Sanmina has not met, or is
reasonably expected not to be able to meet, Luminex's requirements for
Products for a period in excess of sixty (60) days.
C. Luminex may, without penalty, terminate this Agreement upon one hundred
twenty (120) days written notice to Sanmina.
D. Upon termination, Sanmina shall provide Luminex with an invoice of
Luminex's Total Liabilities per Section IV. In addition, Luminex shall
be liable for work-in-progress and any outstanding charges per Section
IV. Upon termination, Luminex shall pay all undisputed invoice charges
on a net thirty (30) days basis.
XI. Limitation of Liability
IN NO EVENT WILL EITHER PARTY BE LIABLE FOR ANY SPECIAL, INDIRECT,
CONSEQUENTIAL, OR INCIDENTAL DAMAGES, HOWEVER CAUSED AND ON ANY THEORY OF
LIABILITY, ARISING IN ANY WAY OUT OF THIS AGREEMENT. THIS LIMITATION WILL APPLY
EVEN IF A PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, AND
NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY PROVIDED
HEREIN.
XII. Miscellaneous
A. Notices. Any notice or report required or permitted to be given or made
under this Agreement by either party shall be in writing and delivered
to the other party at its address indicated below (or to such other
address as a party may specify by notice hereunder) by courier or by
registered or certified airmail, postage prepaid, or by facsimile;
provided, however, that all facsimile notices shall be promptly
confirmed, in writing, by registered or certified airmail, postage
prepaid. All notices shall be effective as of the date received by the
addressee.
Sanmina address:
Sanmina Corporation
2300 Highway 79 South
Guntersville, AL 35976
9
<PAGE>
Luminex address:
Luminex Corporation
12212 Technology Blvd.
Austin, TX 78727
B. Confidential Information. "Confidential Information" shall mean all
confidential documentation and information provided to the other
party under this Agreement and all information previously supplied
by Luminex to Sanmina regarding the Luminex 100 or Luminex
technology or intellectual property. All Confidential Information
shall remain the property of its owner. The parties grant to each
other a nontransferable and nonexclusive right to use Confidential
Information, solely in the performance of this Agreement and, unless
prior consent in writing is obtained or disclosure is required by
law (in which case the disclosing party shall provide the other
party advance notice and an opportunity to prevent disclosure of
such Confidential Information), such Confidential Information shall
not be disclosed, except for any part thereof that is known to be
free of any obligation to keep it in confidence or that becomes
generally known to the public through acts not attributable to the
party under an obligation to keep the Confidential Information
confidential.
C. Intellectual Property. Except as expressly provided in this
Agreement, nothing in this Agreement is to be construed as granting
to Sanmina a license or any other intellectual property right to
utilize any information (including Confidential Information)
received from Luminex or under any patent or other intellectual
property right, and Sanmina recognizes that Luminex is the owner of
all such rights, including all goodwill relating thereto.
D. Governing Law. This Agreement will be governed by and interpreted
under the laws of the State of Texas, without reference to conflict
of laws principles.
E. Jurisdiction. For any dispute arising out of this Agreement, the
parties consent to personal and exclusive jurisdiction of and venue
in the state and federal courts within Travis County, Texas.
F. Entire Agreement; Enforcement of Rights. This Agreement sets forth
the entire agreement and understanding of the parties relating to
the subject matter herein and therein and merges all prior
discussions between them. No modification of or amendment to this
Agreement, nor any waiver of any rights under this Agreement, will
be effective unless in writing and signed by a duly authorized
representative of the party to be charged. The failure by either
party to enforce any rights thereunder will not be construed as a
waiver of any rights of such party.
G. Severability. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under present or future state or
federal laws or rules and regulations promulgated thereunder
effective during the term hereof, such provision shall be fully
severable, and this Agreement shall be construed and enforced as if
such illegal, invalid, or unenforceable provision had never
comprised a part hereof, and the remaining provisions hereof shall
remain in full force and effective and shall not be affected by the
illegal, invalid, or unenforceable provision or by its severance
herefrom. Furthermore, the parties hereto agree to negotiate in good
faith to modify and amend this Agreement so as to effect the
original intent of the parties as closely as possible with respect
to those provisions which were held to be illegal, invalid, or
unenforceable.
10
<PAGE>
H. Assignment. The rights and liabilities of the parties hereto will
bind and incur to the benefit of their successors, executors or
administrators; provided, that this Agreement may not be assigned by
either party hereto without the prior written consent of the other
party, which shall not be unreasonably withheld. Any assignment or
any attempted assignment without such written consent shall be void
and of no effect. For purposes hereof, any transaction or series of
related transactions (whether by sale of stock, issuance of new
stock, merger or otherwise) that results in the transfer of
ownership of 50% or more of the capital stock of Sanmina shall be
deemed to be an assignment.
I. Force Majeure. Neither party will be liable to the other for any
default thereunder if such default is caused by an event beyond such
party's control, including without limitation acts or failures to
act of the other party, strikes or labor disputes, component
shortages, unavailability of transportation, floods, fires,
governmental requirements and acts of God (a "Force Majeure Event").
In the event of threatened or actual non-performance as a result of
any of the above causes, the non-performing party will exercise
reasonable efforts to avoid and cure such non-performance. Should a
Force Majeure Event prevent a party's performance thereunder for a
period in excess of forty-five (45) days, then the other party may
elect to terminate this Agreement by written notice thereof.
J. Allocation. In the event of Force Majeure or any other shortfall in
Sanmina's manufacturing capacity, Sanmina will allocate to Luminex
Products capacity allocation no less favorable than that offered to
any other Sanmina customer.
K. Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original and all of
which together will constitute one instrument.
L. Non-Exclusive. This Agreement is not exclusive and, subject to the
obligations of this agreement, including but not limited to
confidentiality and the intellectual property rights of each party,
Luminex shall be free to have other parties manufacture products for
Luminex, and Sanmina shall be free to manufacture products for other
purchasers.
M. Advice of Counsel. Sanmina and Luminex have each consulted counsel
of their choice regarding this Agreement, and each acknowledges and
agrees that this Agreement shall not be deemed to have been drafted
by one party or another and will be construed accordingly.
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
representatives to execute this Agreement.
SANMINA CORPORATION LUMINEX CORPORATION
By: /s/ Gary Switzer By: /s/ Van S. Chandler
-------------------------- ---------------------------------
Name: Gary Switzer Name: Van S. Chandler
------------------------ -------------------------------
Title: Director of Operations Title: Vice President of Instruments
----------------------- ------------------------------
11
<PAGE>
Exhibit A
PRODUCT PRICING
Products Covered: Luminex 100 and Various Subassemblies
Pricing for Products on a per unit basis:
<TABLE>
<CAPTION>
_________________________________________________________________________________________________________
<S> <C>
Cost of Materials Cost of Materials to Sanmina
- ---------------------------------------------------------------------------------------------------------
Materials Mark-up Cost of Materials multiplied by [**]% (the "Materials Mark-up")
- ---------------------------------------------------------------------------------------------------------
Labor Build Time multiplied by $[**]
- ---------------------------------------------------------------------------------------------------------
Subtotal Sum of Cost of Materials, Materials Mark-up and Labor
- ---------------------------------------------------------------------------------------------------------
Total Subtotal [**] (the "Profit Gross-up")
- ---------------------------------------------------------------------------------------------------------
</TABLE>
The parties agree that the Product Pricing per this exhibit shall be reviewed
quarterly
- -----------
[**] Indicates that material has been omitted and confidential treatment
requested therefor. All such material has been filed separately with the
Commission pursuant to Rule 406.
12
<PAGE>
EXHIBIT B
ABC CLASSIFICATIONS, DESCRIPTIONS AND PERIODS-OF-SUPPLY
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Expected Periods Worth of Supply
Class Expected Percentage of Total to be Bought with Each
Percentage of Value (Gross Order (if necessary to
Total Materials Requirements) meet the scheduled
requirements)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
A 3% 80% 1 Month
- -------------------------------------------------------------------------------------------------------
B 17% 17% 3 Months
- -------------------------------------------------------------------------------------------------------
C 80% 3% 6 Months
- -------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
EXHIBIT C
RESCHEDULES
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Notice Prior to Original Delivery Date (or Current Delivery Percentage of Original Quantity that
Date if valid for more than 30 days calendar days) can be Rescheduled
- ---------------------------------------------------------------------------------------------------------
<S> <C>
0 to 30 days 10%
- ---------------------------------------------------------------------------------------------------------
31 to 60 days 45%
- ---------------------------------------------------------------------------------------------------------
61 to 90 days 90%
- ---------------------------------------------------------------------------------------------------------
Beyond 90 Days 100%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
As an example, if Luminex notifies Sanmina in writing between thirty-one (31)
and sixty (60) days prior to the scheduled delivery date of the Products,
Luminex may reschedule a maximum of forty-five percent (45%) of the total amount
of the Products to be delivered on such date.
14
<PAGE>
EXHIBIT 10.10
CONSULTANT AGREEMENT
--------------------
THIS CONSULTANT AGREEMENT (the "Agreement") is made and entered into
as of this 1st day of June, 1999 (the "Effective Date"), by and between A.
Sidney Alpert ("Consultant") and Luminex Corporation (the "Company"). In
consideration of the covenants, representations and agreements set forth below,
the Company and Consultant hereby agree as follows:
1. Retention as Consultant. The Company hereby retains Consultant, and
-----------------------
Consultant hereby agrees to render services to the Company, upon the terms and
conditions contained in this Agreement.
2. Term of the Agreement. The initial term of this Agreement (the "Term")
---------------------
shall commence upon the Effective Date and shall terminate one (1) year
thereafter (the "Termination Date"), unless sooner terminated as provided
herein; provided, however, that if, prior to the Termination Date, the Company
-------- -------
and Consultant mutually agree to renew the Agreement, it shall continue for an
additional one (1) year term (the "Additional Term").
3. Services to be Provided by Consultant.
-------------------------------------
3.1 Scope, Responsibilities and Duties. Consultant agrees to provide
----------------------------------
consulting services to the Company, generally in the fields of intellectual
property, contract negotiations, and general business strategy, approximately
one working day in each working week, so that the Company may have the benefit
of the experience and knowledge possessed by Consultant (the "Services").
Consultant will determine the method, details, and means of performing the
Services in conjunction with the Company. It shall be the duty of Consultant in
rendering the Services to make such periodic reports to the Company as the
officers or directors of the Company may, from time to time, reasonably request.
3.2. Non-exclusivity. Subject to the provisions of Section 7 below,
---------------
Consultant by reason of the obligations ascribed to him hereunder, shall not be
required to devote more than the time set forth in Section 3.1 to the affairs of
the Company, and Consultant may accept other employment and perform services for
others.
4. Compensation. As sole compensation for the Services to be provided by
------------
Consultant to the Company, the Company shall pay to Consultant, and Consultant
agrees to accept, the sum of Five Thousand Eight Hundred Thirty-Three Dollars
($5,833.00) per month. Consultant shall not be entitled to any other
compensation for the Services to be provided hereunder, except as provided
herein. The Company shall not be responsible for withholding from the
compensation payable to Consultant any amounts for federal, state or local
income taxes, social security or state disability or unemployment insurance.
5. Expenses. Upon receipt of itemized vouchers, expense account reports
--------
and supporting documents submitted to the Company in accordance with the
Company's procedures, then in effect, the Company shall reimburse Consultant for
all reasonable and necessary business expenses incurred ordinarily and
necessarily by Consultant in connection with the performance of Consultant's
duties hereunder.
6. Termination. Termination pursuant to this Section shall become
-----------
effective immediately upon receipt by Consultant of written notice from the
Company of such termination.
<PAGE>
6.1 Termination for Cause. The Company may terminate this Agreement
---------------------
for cause at any time during the Term or any Additional Term without further
obligation or liability to Consultant. For purposes of this subsection, "cause"
shall mean (a) a willful breach by Consultant of any material provision of this
Agreement; or (b) if Consultant is convicted of a felony.
6.2 Termination by Incapacity or Disability of Consultant. If,
-----------------------------------------------------
during the Term or any Additional Term, Consultant shall become unable to fully
perform the Services in accordance with the terms of this Agreement due to
incapacity, ill health or disability for a consecutive period of four weeks, the
Company may, at its option, terminate this Agreement.
6.3 Death of Consultant. Upon the death of Consultant, this
-------------------
Agreement shall terminate without further obligation or liability on the part of
the Company to Consultant's estate.
7. Covenant Not to Compete, Confidentiality and Trade Secrets.
----------------------------------------------------------
7.1 Covenant Not to Compete. Consultant shall not, during the Term
-----------------------
or any Additional Term of this Agreement and for a period of two (2) years
immediately following the termination of this Agreement, or any extension
thereof, for any reason, either directly or indirectly: (a) call on, solicit, or
take away any of the Company's customers or potential customers about whom
Consultant became aware as a result of Consultant's services to the Company,
either for Consultant or for any other person or entity; or (b) solicit or take
away or attempt to solicit or take away any of the Company's employees or
contractors either for Consultant or for any other person or entity. Consultant
further agrees that, during the Term or any Additional Term of this Agreement,
he shall not, at any time, directly or indirectly, whether or not for
compensation, engage in or have any interest in any person, firm, corporation or
business (whether as an employee, shareholder, proprietor, officer, manager,
director, agent, security holder, trustee, consultant, partner, creditor lending
credit or money for the purpose of establishing or operating any such business
or otherwise) which engages in flow cytometry based assays or testing technology
or which directly competes with the business of the Company; provided however,
-------- -------
that Consultant may own securities of another entity, so long as such ownership
of securities does not constitute more than five percent (5%) of the outstanding
securities of such company.
7.2 Confidentiality. Consultant acknowledges and agrees that during
---------------
the Term or any Additional Term of this Agreement, he will become privy to
important proprietary, confidential business information and trade secrets that
are the exclusive property of the Company. This information includes, without
limitation, business plans, marketing concepts, designs, proposals, product
information, financial information, technology and costs, pricing information,
customer lists, and key accounts, including their credit information and product
wants and needs (the "Confidential Information"). This Confidential Information
derives independent economic value, both actual and potential, from not being
generally known to the public or to other persons who can obtain economic value
from its disclosure and use. As the Company has always held the Confidential
Information as proprietary, confidential trade secret information and has taken
steps to insure that the Confidential Information is not disclosed outside of
Luminex, the Confidential Information constitutes "trade secrets" under the
Uniform Trade Secrets Act. In light of the foregoing, Consultant therefore
agrees that: (1) he will not at any time, now or in the future, share,
disseminate, disclose, discuss or use the Confidential Information in any way;
and (2) upon termination of this Agreement, Consultant will return to the
Company all property, writings and/or documents in his possession or custody
belonging to or relating to the affairs of the Company or any of its
subsidiaries or affiliates, or comprising or relating to the Confidential
Information.
2
<PAGE>
8. Ownership of Intellectual Property.
----------------------------------
8.1 Consultant hereby acknowledges and agrees that any and all
copyrightable works authored by Consultant in connection with the performance of
the Services, alone or with others, during the Term or any Additional Term of
this Agreement, shall be deemed to have been specially ordered or commissioned
for use as either a contribution to a collective work, as a translation, as a
supplementary work, as a compilation, or as an instructional text and, as such,
shall be deemed to be "works for hire" under the United States copyright laws
from the inception of creation or such works. In the event that any such works
shall be deemed by a court of competent jurisdiction not to be a "work made for
hire," this Agreement shall operate as an irrevocable assignment by Consultant
to the Company of all right, title and interest in and to such works, including
without limitation, all worldwide copyright interests therein, in perpetuity.
The fact that such copyrightable works are created by Consultant outside of the
Company's facilities or other than during Consultant's working hours with the
Company, shall not diminish Company's rights with respect to such works which
otherwise fall within this subsection. Consultant agrees to execute and deliver
to Company such further instruments or documents as may be requested by the
Company in order to effectuate the purposes of this subsection.
9. Relationship of the Parties.
---------------------------
9.1 Consultant enters into this Agreement as, and shall continue
to be, an independent contractor. The parties agree that no employment
relationship, partnership, joint venture or other association shall be deemed
created by this Agreement. Under no circumstances shall Consultant look to the
Company as his employer, or as a partner, agent, or principal. Consultant shall
not be entitled to any benefits accorded to the Company's employees including,
without limitation, workers' compensation, disability insurance, vacation or
sick pay.
9.2 Consultant shall have the entire responsibility to discharge
any and all obligations under federal, state or local laws, regulations or
orders now or hereafter in effect, relating to taxes, unemployment compensation
or insurance, social security, workers' compensation, disability pensions and
tax withholdings (the "Tax Obligations"). Consultant hereby agrees to indemnify
and hold the Company harmless for any and all claims, losses, costs, fees,
liabilities, damages or injuries suffered by the Company arising out of
Consultant's failure to properly discharge the Tax Obligations.
10. Stock Options. Concurrently with the execution of this Agreement,
-------------
Consultant and the Company are executing and delivering the Stock Option
Agreement (the "Option Agreement") attached hereto as Exhibit A and incorporated
herein by this reference, which grants to Consultant the option to purchase
twenty-five thousand (25,000) shares of the Common Stock of the Company at an
exercise price of $8.00 per share over a period of three(3) years, upon the
terms and conditions set forth in the Option Agreement which shall be issued to
and governed in accordance with the Luminex Corporation Stock Option Plan (the
"Plan").
11. Arbitration.
-----------
11.1 Any dispute regarding any aspect of this Agreement or any
act which would violate any provision in this Agreement (hereafter referred to
as "arbitrable dispute") shall be resolved by an experienced arbitrator licensed
to practice law in the State of Texas and selected in accordance with the rules
of the American Arbitration Association, as the exclusive remedy for such
dispute. Judgment on any award rendered by such arbitrator may be entered in any
court having proper jurisdiction.
3
<PAGE>
11.2 Should Consultant or the Company institute any legal action or
administrative proceeding regarding any dispute or matter covered by this
Section by any method other than said arbitration, the responding party shall be
entitled to recover from the other party all damages, costs, expenses and
attorneys' fees incurred as a result of such action.
12. Severability and Governing Law.
------------------------------
12.1 Should any of the provisions in this Agreement be declared or be
determined to be illegal or invalid, all remaining parts, terms or provisions
shall be valid, and the illegal or invalid part, term or provision shall be
deemed not to be a part of this Agreement.
12.2 This Agreement is made and entered into in the State of Texas and
shall in all respects be interpreted, enforced and governed under the laws of
Texas.
13. Proper Construction.
-------------------
13.1 The language of all parts of this Agreement shall in all cases be
construed as a whole according to its fair meaning, and not strictly for or
against any of the parties.
13.2 As used in this Agreement, the term "or" shall be deemed to
include the term "and/or" and the singular or plural number shall be deemed to
include the other whenever the context so indicates or requires.
13.3 The paragraph headings used in this Agreement are intended solely
for convenience of reference and shall not in any manner amplify, limit, modify
or otherwise be used in the interpretation of any of the provisions hereof.
14. Entire Agreement. This Agreement is the entire agreement between
----------------
Consultant and the Company and fully supersedes any and all prior agreements or
understandings between the parties pertaining to its subject matter.
15. Notices. All notices, requests, demands and other communications
-------
called for or contemplated under this Agreement shall be in writing and shall be
deemed to have been duly given when personally delivered, on the date of
transmission if sent by facsimile, on the third day after mailing if mailed to
the party to whom notice is to be given, by first class mail, postage prepaid,
and properly addressed as follows:
If to the Company: Luminex Corporation
12212 Technology Drive
Austin, TX 78727-6115
Attention: John Dapper
If to Consultant: A. Sidney Alpert
26078 Bates Place
Stevenson Ranch, CA 91381
16. Amendments. This Agreement may not be amended, supplemented,
----------
canceled, or discharged except by written instrument executed by the parties
hereto.
4
<PAGE>
17. Waivers. All waivers hereunder shall be in writing. No waiver by any
-------
party hereto of any breach or anticipated breach of any provision of this
Agreement by any other party shall be deemed a waiver of any other
contemporaneous, preceding, or succeeding breach or anticipated breach, whether
or not similar, on the part of the same or any other party.
IN WITNESS WHEREOF, the parties hereto have hereby executed this Agreement as of
the day and year first written above.
LUMINEX CORPORATION
/s/ A. Sidney Alpert By: /s/ Mark B. Chandler
- ----------------------------- ----------------------------
A. Sidney Alpert Mark B. Chandler
President & CEO
5
<PAGE>
EXHIBIT 10.11
AMENDMENT
AMENDMENT, made and entered into as of this 1/st/ day of November, 1999, to that
certain Consultant Agreement ("Agreement"), entered into on June 1, 1999, by and
between A. Sidney Alpert and Luminex Corporation.
WHEREAS, at this time, Luminex Corporation and Mr. Alpert, wish to revise the
terms and conditions of the Agreement.
NOW, THEREFORE, all of the terms and conditions set forth in the Agreement shall
remain in effect as stated, except as follows:
1. The term of the Agreement shall be extended through October 31, 2000.
2. Article 3.1 of the Agreement shall be amended by changing the phrase, "one
working day" to "two working days."
3. The compensation set forth in Article 4 of the Agreement shall be changed
to the sum of Eleven Thousand Six Hundred Sixty-Six and No/100 Dollars
($11,666.00) per month.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the
day and year first written above.
LUMINEX CORPORATION
/s/ A. Sidney Alpert By /s/ Mark Chandler
- ------------------------------- -----------------------------------
A. Sidney Alpert Mark B. Chandler
President and CEO
<PAGE>
EXHIBIT 10.12
STANDARD COMMERCIAL LEASE AGREEMENT Approximately 5,906 gross sq. ft.
--------------------------------
BUILDING) 79 12212 Technology Blvd., Suite K
--------------------------------
Austin, Texas 78727
--------------------------------
(McNeil #4)
Lease Agreement
THIS LEASE AGREEMENT, made and entered into by and between AEtna Life
Insurance Company hereinafter referred to as "Landlord" and Mark Chandler,
Individually hereinafter referred to as "Tenant";
W I T N E S S E T H:
1. Premises and Term. In consideration of the obligation of Tenant to pay
rent as herein provided, and in consideration of the other terms, provisions and
covenants hereof, Landlord hereby demises and leases to Tenant, and Tenant
hereby accepts and leases from Landlord certain premises situated within the
County of Travis, State of Texas, more particularly described an Exhibit "A"
attached hereto and incorporated herein by reference, together with all rights,
privileges, easements, appurtenances and immunities belonging to or in any way
pertaining to the premises and together with the buildings and other
improvements situated upon said premises (said real property, buildings and
improvements hereinafter referred to as the "premises").
TO HAVE AND TO HOLD the same for a term commencing on November 1, 1989 and
ending 55 months thereafter. Tenant acknowledges that it has inspected and
accepts the premises, and specifically the buildings and improvements comprising
the same, in their present condition as suitable for the purpose for which the
premises are leased. Taking of possession by Tenant shall be deemed conclusively
to establish that said buildings and other improvements are in good and
satisfactory condition as of when possession was taken. Tenant further
acknowledges that no representations as to the repair of the premises nor
premises to alter, remodel or improve the premises have been made by Landlord,
unless such are expressly set forth in this lease. If this lease is executed
before the premises become vacant or otherwise available and ready for
occupancy, or if any present tenant or occupant of the premises holds over, and
Landlord cannot acquire possession of the premises prior to the date above
recited as the commencement date of this lease, Landlord shall not be deemed to
be in default hereunder, and Tenant agrees to accept possession of the premises
at such time as Landlord is able to tender the same, which date shall
thenceforth be deemed the "commencement date"; and Landlord hereby waives
payment of rent covering any period prior to the tendering of possession to
Tenant hereunder. After the commencement date Tenant shall, upon demand, execute
and deliver to Landlord a letter of acceptance of delivery of the premises.
2. Base Rent and Security Deposit.
A. Tenant agrees to pay to Landlord rent for the premises, in advance,
without demand, deduction or set off, for the entire term hereof at the rate of
see "Rental Rate" paragraph on attached Addendum Dollars ($________) per month.
One such monthly installment shall be due and payable on the date hereof and a
like monthly installment shall be due and payable or before the first day of
each calendar month succeeding the commencement date recited above during the
hereby demised term, except that the rental payment for any fractional calendar
month at the commencement or end of the lease period shall be prorated.
B. In addition, Tenant agrees to deposit with Landlord on the date hereof the
sum of Two Thousand Nine Hundred Fifty-Three and No/Dollars ($2,953.00), which
sum shall be held by Landlord, without obligation for interest, as security for
the performance of Tenant's covenants and obligations under this lease, it being
expressly understood and agreed that such deposit is not an advance rental
deposit or a measure of Landlord's damages in case of Tenant's default. Upon the
occurrence of any event of default by Tenant, Landlord may, from time to time,
without prejudice to any other remedy provided herein or provided by law, use
such fund to the extent necessary to make good any arrears of rent or other
payments due hereunder, and any other damage, injury, expense or liability
caused by such event of default; and Tenant shall pay to Landlord on demand the
amount so applied in order to restore the security deposit to its original
amount. Although the security deposit shall be deemed the property of Landlord,
any remaining balance of such deposit shall be returned by Landlord to Tenant at
such time after termination of this lease that all of Tenant's obligations under
this lease have been fulfilled.
3. Use. The demised premises shall be used only for the purpose of receiving,
storing, shipping and selling (other than retail) products, materials and
merchandise made and/or distributed by Tenant and for such other lawful purposes
as may be incidental thereto. Outside storage, including without limitation,
trucks and other vehicles, is prohibited without Landlord's prior written
consent. Tenant shall at its own cost and expense obtain any and all licenses
and permits necessary for any such use. Tenant shall comply with all
governmental laws, ordinances and regulations applicable to the use of the
premises, and shall promptly comply with all governmental orders and directives
for the correction, prevention and abatement of nuisances in or upon, or
connected with, the premises, all at Tenant's sole expense. Tenant shall not
permit any objectionable or unpleasant odors, smoke, dust, gas, noise or
vibrations to emanate from the premises, nor take any other action which would
constitute a nuisance or would disturb or endanger any other tenants of the
building in which the premises are situated or unreasonably interfere with their
use of their respective premises. Without Landlord's prior written consent,
Tenant shall not receive, store or otherwise handle any product, material or
merchandise which is explosive or highly inflammable. Tenant will not permit the
premises to be used for any purpose or in any manner (including without
limitation any method of storage) which would render the insurance thereon void
or the insurance risk more hazardous or cause the State Board of Insurance or
other insurance authority to disallow any sprinkler credits.
4. Taxes.
A. Landlord agrees to pay before they become delinquent all taxes,
assessments and governmental charges of any kind and nature whatsoever
(hereinafter collectively referred to as "taxes") lawfully levied or assessed
against the building and the grounds, parking areas, driveways and alleys around
the building; provided, however, that the maximum amount of taxes to be paid by
Landlord hereunder during any one real estate tax year shall be -0-. Tenant
shall pay prorata share of all real estate taxes. If in any real estate tax year
during the term hereof or any renewal or extension the taxes levied or assessed
against the building and the grounds, parking areas, driveways and alleys
around the building during such tax year shall exceed the sum set forth in the
proceeding sentence, Tenant shall pay to Landlord as additional rental, upon
demand, the amount of such excess. In the event any such amount is not paid
within twenty (20) days after the date of Landlord's invoice to Tenant, the
unpaid amount shall bear interest at the rate of ten percent (10%) per annum
from the date of such invoice until payment by Tenant.
B. In the event the premises constitute a portion of a multiple occupancy
building, Tenant agrees to pay to Landlord, as additional rental, upon demand,
the amount of Tenant's "proportionate share" of the excess taxes referred to in
Paragraph A above. Tenant's "proportionate share", as used in this lease, shall
mean a fraction, the numerator of which is the space contained in the premises
and the denominator of which is the entire space contained within the building.
C. If at any time during the term of this lease, the present method of
taxation shall be charged so that in lieu of the whole or any part of any taxes,
assessments or governmental charges levied, assessed or imposed on real estate
and the improvements thereon, there shall be levied, assessed or imposed on
Landlord a capital levy or other tax directly on the rents received therefrom
and/or a franchise tax, assessment, levy or charge measured by or based in
whole or in part, upon such rents for the present or any future building or
buildings on the premises, then all such taxes, assessments, levies, or charges,
or the part thereof so, measured or based, shall be deemed to be included within
the term "taxes" for the purpose hereof. Landlord tax statement with respect to
the premises shall be made available for inspection by Tenant.
D. The Landlord shall have the right to employ a tax consulting firm to
attempt to assure a fair tax burden on the building and grounds within the
applicable taxing jurisdiction, Tenant shall pay to Landlord upon demand, from
time to time, as additional rent, the amount of Tenant's "proportionate share"
(as defined in subparagraph 4(B) above) of the cost of such service.
E. Any payment to be made pursuant to this Paragraph 4 with respect to the
real estate tax year in which this lease commences or terminates shall be
prorated.
5. Landlord's Repairs. Landlord shall at his expense maintain only the roof,
foundation and the structural soundness of the exterior walls of the building in
good repair, reasonable wear and tear excepted. Tenant shall repair and pay for
any damage caused by the negligence of Tenant, or Tenant's employees, agents or
invitees, or caused by Tenant's default hereunder. The term "walls" as used
herein shall not include windows, glass and plate glass, doors, and special
store fronts and office entrys. Tenant shall immediately give Landlord written
notice of defect or need for repairs after which Landlord shall have twenty (20)
days to repair same or cure such defect or show evidence of intent to repair
same or cure defect within a reasonable period of time. Landlord's liability
with respect to any defects, repairs or maintenance for which Landlord is
responsible under any of the provisions of this lease, shall be limited to the
cost of such repairs or maintenance or the curing of such defect.
6. Tenant's Repairs
A. Tenant shall at its own cost and expense keep and maintain all parts of
the premises (except those for which Landlord is expressly responsible under the
terms of this lease) in good condition, promptly making all necessary repairs
and replacements, including but on limited to windows, glass and plate glass,
doors, any special office entry, interior walls and finish work, floors and
floor covering, downspouts, heating and air conditioning systems, dock boards,
truck doors, dock bumpers, paving, plumbing work and fixtures, termite and pest
extermination, regular removal of trash and debris, regular mowing of any grass,
trimming, weed removal and general landscape maintenance. Tenant shall not be
obligated to repair any damage caused by fire, tornado or other casualty covered
by the insurance to be maintained by Landlord pursuant to subparagraph 12(A)
below, except that Tenant shall be obligated to repair all wind damage to glass
except with respect to tornado or hurricane damage.
B. Tenant shall not damage any demising wall or disturb the integrity and
support provided by any demising wall and shall, at its sole cost and expense
promptly repair any damage or injury to any demising wall caused by Tenant or
its employees, agents or invitees.
C. In the event the premises constitute a portion of a multiple occupancy
building, Tenant and its employees, customers and licensees shall have the
exclusive right to use the parking areas, if any, as may be designated by
Landlord in writing, subject to such reasonable rule
<PAGE>
and regulations as Landlord may from time to time prescribe and subject to
rights of ingress and egress of other tenants. Landlord shall not be responsible
for enforcing Tenant's exclusive parking rights against any third parties.
Further, in multiple occupancy buildings, Landlord reserves the right to perform
the paving and landscape maintenance, exterior painting and common sewage line
plumbing which are otherwise Tenant's obligations under subparagraph A above,
and Tenant shall, in lieu of the obligations set forth under subparagraph A
above with respect to such items, be liable for its proportionate share (as
defined in subparagraph 4(B) above) of the cost and expense of the care for the
grounds around the building, including but not limited to, the mowing of grass,
care of shrubs, general landscaping, maintenance of parking areas, driveways and
alleys, exterior repainting and common sewage line plumbing; provided, however,
that Landlord shall have the right to require Tenant to pay such other
reasonable proportion of said mowing, shrub care and general landscaping costs
as may be determined by Landlord in its sole discretion; and further provided
that if Tenant or any other particular tenant of the building can be clearly
identified as being responsible for obstructions or stoppage of the common
sanitary sewage line, then Tenant, if Tenant is responsible, or such other
responsible tenant, shall pay the entire cost thereof, with thirty (30) days
written notice as additional rent, Tenant shall pay when due
its share, determined as aforesaid, of such costs and expenses along with the
other tenants of the building to Landlord upon demand, as additional rent, for
the amount of its share as aforesaid of such costs and expenses in the event
Landlord elects to perform or cause to be performed such work.
E. Tenant shall, at its own cost and expense, enter into a regularly
scheduled preventive maintenance/service contract with a maintenance contractor
for servicing all hot water, heating and air conditioning systems and equipment
within the premises. The maintenance contractor and the contract must be
approved by Landlord. The service contract must include all services suggested
by the equipment manufacturer within the operation/maintenance manual and must
become effective (and a copy thereof delivered to Landlord) with thirty (30)
days of the date Tenant takes possession of the premises.
7. Alterations. Tenant shall not make any alterations, additions or
improvements to the premises (including but not limited to roof and wall
penetrations) without the prior written consent of Landlord. Tenant may, without
the consent of Landlord, but at its own cost and expense and in good workmanlike
manner erect such shelves, bins, machinery, and trade fixtures as it may deem
advisable, without altering the basic character of the building or improvements
and without overloading or damaging such building or improvements, and in each
case complying with all applicable governmental laws, ordinances, regulations
and other requirements. All alterations, additions, improvements, and partitions
erected by Tenant shall be and remain the property of Tenant during the term of
this lease and Tenant shall, unless Landlord otherwise elects as hereinafter
provided, remove all alterations, additions, improvements and partitions erected
by Tenant and paid for by Tenant and restore the premises to their original
condition by the date of termination of this lease or upon earlier vacating of
the premises; provided, however, that if Landlord so elects prior to termination
of this lease or upon earlier vacating of premises, such alterations, additions,
improvements, and partitions shall become the property of Landlord as of the
date of termination of this lease or upon earlier vacating of the premises and
shall be delivered up to the Landlord with the premises. All shelves, bins,
machinery and trade fixtures installed by Tenant may be removed by Tenant prior
to the termination of this lease if Tenant so elects, and shall be removed by
the date of termination of this lease or upon earlier vacating of the premises
if required by Landlord; upon any such removal Tenant shall restore the
premises to their original condition. All such removals and restoration shall be
accomplished in a good workmanlike manner so as not to damage the primary
structure or structural qualities of the buildings and other improvements
situated on the premises.
8. Signs. Tenant shall have the right to install signs upon the premises
only when first approved in writing by Landlord and subject to any applicable
governmental laws, ordinances, regulations and other requirements. Tenant shall
remove all such signs by the termination of this lease. Such installations and
removals shall be made in such manner as to avoid injury or defacement of the
building and other improvements, and Tenant shall repair any injury or
defacement, including without limitation discoloration, caused by such
installation and/or removal.
9. Inspection. Landlord and Landlord's agents and representatives shall have
the right to enter and inspect the premises at any reasonable time during
business hours, for the purpose of ascertaining the condition of the premises or
in order to make such repairs as may be required or permitted to be made by
Landlord under the terms of this lease. During the period that is six (6)
months prior to the end of the term hereof, Landlord and Landlord's agents and
representatives shall have the right to enter the premises at any reasonable
time during business hours for the purpose of showing the premises and shall
have the right to erect on the premises a suitable sign indicating the premises
are available. Tenant shall give written notice to Landlord at least thirty
(30) days prior to vacating the premises and shall arrange to meet with Landlord
for a joint inspection of the premises prior to vacating. In the event of
Tenant's failure to give such notice or arrange such joint inspection,
Landlord's inspection at or after Tenant's vacating the premises shall be
conclusively deemed correct for purposes of determining Tenant's reasonable
responsibility for repairs and restoration.
10. Utilities. Landlord agrees to provide at its cost water, electricity and
telephone service connections into the premises; but Tenant shall pay for all
water, gas, heat, light, power, telephone, sewer, sprinkler charges and other
utilities and services used on or from the premises, together with any taxes,
penalties, surcharges of the like pertaining thereto and any maintenance charges
for utilities and shall furnish all electric light bulbs and tubes. If any such
services are not separately metered to Tenant, Tenant shall pay a reasonable
proportion as determined by Landlord of all charges jointly metered with other
premises. Landlord shall in no event be liable for any interruption or failure
of utility services on the premises.
11. Assignment and Subletting. Tenant shall not have the right to assign
this lease or to sublet the whole or any part of the premises without the prior
written consent of Landlord which consent shall not be unreasonable withheld.
Notwithstanding any permitted assignment or subletting, Tenant shall at all
times remain directly, primarily and fully responsible and liable for the
payment of the rent herein specified and for compliance with all of its other
obligations under the terms, provisions and covenants of this lease. Upon the
occurrence of an "event of default" as hereinafter defined, if the premises or
any part thereof are then assigned or sublet, Landlord, in addition to any other
remedies herein provided, or provided by law, may at its option collect directly
from such assignee or subtenant all rents becoming due to Tenant under such
assignment or sublease and apply such rent against any sums due to Landlord from
Tenant hereunder, and no such collection shall be construed to constitute a
novation or a release of Tenant from the further performance of Tenant's
obligations hereunder.
12. Fire and Casualty Damage.
A. Landlord agrees to maintain standard fire and extended coverage insurance
covering the building of which the premises are a part in an amount not less
than 80% (or such greater percentage as may be necessary to comply with the
provisions of any co-insurance clauses of the policy) of the "replacement cost"
thereof as such term is defined in the Replacement Cost Endorsement to be
attached thereto, insuring against the perils of Fire, Lightning, and Extended
Coverage, such coverages and endorsements to be as defined, provided and limited
in the standard bureau forms prescribed by the insurance regulatory authority
for the State in which the premises are situated for use by insurance companies
admitted in such state for the writing of such insurance on risks located within
such state. Subject to the provisions of subparagraphs 12(C), 12(D), and 12(E)
below, such insurance shall be for the sole benefit of Landlord and under its
sole control. If during the second full lease year after the commencement date
of this lease, or during any subsequent year of the primary term or any renewal
or extension, Landlord's cost of maintaining such insurance shall exceed
Landlord's cost of maintaining such insurance for the first full lease year of
the term hereof, Tenant agrees to pay to Landlord, as additional rent, the
amount of such excess (or in the event the premises constitute a portion of a
multiple occupancy building, Tenant's full proportionate share (as defined in
subparagraph 4(B) above) of such excess). Said payments shall be made to
Landlord within ten (10) days after presentation to Tenant of Landlord's
statement setting forth the amount due. Any payment to be made pursuant to this
subparagraph A with respect to the year in which this lease commences or
terminates shall bear the same ratio to the payment which would be required to
be made for the full year as the part of such year covered by the term of this
lease bears to a full year.
B. If the buildings situated upon the premises should be damaged or
destroyed by fire, tornado, or other casualty, Tenant shall give immediate
written notice thereof to Landlord.
C. If the buildings situated upon the premises should be totally destroyed
by fire, tornado, or other casualty, or if they should be so damaged thereby
that rebuilding or repairs cannot in Landlord's estimation be completed within
one hundred fifty (150) days after the date upon which Landlord is notified by
Tenant of such damage, this lease shall terminate and the rent shall be abated
during the unexpired portion of this lease, effective upon the date of the
occurrence of such damage.
D. If the buildings situated upon the premises should be damaged by any
peril covered by the insurance to be provided by Landlord under subparagraph
12(A) above, but only to such extent that rebuilding or repairs can in
Landlord's estimation be completed within one hundred fifty (150) days after the
date upon which the Landlord is notified by Tenant of such damage, this lease
shall not terminate, and Landlord shall at its sole cost and expense thereupon
proceed with reasonable diligence to rebuild and repair such buildings to
substantially the condition in which they existed prior to such damage, except
that Landlord shall not be required to rebuild, repair or replace any part of
the partitions, fixtures, additions and other improvements which may have been
placed in, on or about the premises by Tenant. If the premises are untentantable
in whole or in part following such damage, the rent payable hereunder during the
period in which the are untentantable shall be reduced to such extent as may be
fair and reasonable under all the circumstances. In the event that Landlord
should fail to complete such repairs and rebuilding within one hundred fifty
(150) days after the date upon which Landlord is notified by Tenant of such
damage, Tenant may at its option terminate this lease by delivering written
notice of termination to Landlord as Tenant's exclusive remedy, whereupon all
rights and obligations hereunder shall cease and terminate.
E. Notwithstanding anything herein to the contrary, in the event the holder
of any indebtedness secured by a mortgage or deed of trust covering the premises
requires that the insurance proceeds be applied to such indebtedness, then
Landlord shall have the right to terminate this lease by delivering written
notice of termination to Tenant within fifteen (15) days after such requirement
is made by any such holder, whereupon all rights and obligations hereunder shall
cease and terminate.
F. Each of Landlord and Tenant hereby releases the other from any loss or
damage to property caused by fire or any other perils insured through or under
them by way of subrogation or otherwise for any loss or damage to property
caused by fire or any other perils insured in policies of insurance covering
such property, even if such loss or damage shall have been caused by the fault
or negligence of the other party, or anyone for whom such party may be
responsible; provided, however, that this release shall be applicable and in
force and effect only with respect to loss or damage occurring during such times
as the releasor's policies shall contain a clause or endorsement to the effect
that any such release shall not adversely affect or impair said policies or
prejudice the right of the releasor to recover thereunder and then only to the
extent of the insurance proceeds payable under such policies. Each of the
Landlord and Tenant agrees that it will request its insurance carriers to
include in its policies such a clause or endorsement. If extra cost shall be
charged therefor, each party shall advise the other thereof and of the amount of
the extra cost, and the other party, at its election, may pay the same, but
shall not be obligated to do so.
13. Liability. Landlord shall not be liable to Tenant or Tenant's employees,
agents, patrons or visitors, or to any other person whomsoever, for any injury
to person or damage to property on or about the premises, resulting from and/or
caused in part or whole by the negligence or misconduct of Tenant, its agents,
servants or employees, or of any person entering upon the premises, or caused by
the buildings and improvements located on the premises becoming our of repair,
or caused by leakage of gas, oil, water or steam or by electricity emanating
from the premises, or due to any cause whatsoever, and Tenant hereby covenants
and agrees that it will at all times indemnify and hold safe and harmless the
property, the Landlord (including without limitation the trustee and
beneficiaries if Landlord is a trust), Landlord's
<PAGE>
agents and employees from any loss, liability, claims, suits, costs, expenses,
including without limitation attorney's fees and damages, both real and alleged,
arising out of such damage or injury; except injury to persons or damage to
property the sole cause of which is negligence of Landlord or the failure of
Landlord to repair any part of the premises which Landlord is obligated to
repair and maintain hereunder within a reasonable time after the receipt of
written notice from Tenant of needed repairs. Tenant shall procure and maintain
throughout the term of this lease a policy or policies of insurance, at its sole
cost and expense, insuring both Landlord and Tenant against all claims, demands
or actions arising out of or in connection with: (i) the premises; (ii) the
condition of the premises; (iii) Tenant's operations in and maintenance and use
of the premises; and (iv) Tenant's liability assumed under this lease, the
limits of such policy or policies to be in the amount of not less than $300,000
per occurrence in respect of injury to persons (including death), and in the
amount of not less than $50,000 per occurrence in respect of property damage or
destruction, including loss of use thereof. All such policies shall be procured
by Tenant from responsible insurance companies satisfactory to Landlord.
Certified copies of such policies, together with receipt evidencing payment of
premiums therefor, shall be delivered to Landlord prior to the commencement date
of this lease. Not less than fifteen (15) days prior to the expiration date of
any such policies, certified copies of the renewals thereof (bearing notations
evidencing the payment of renewal premiums) shall be delivered to Landlord. Such
policies shall further provide that not less than thirty (30) days written
notice shall be given to Landlord before such policy may be cancelled or changed
to reduce insurance provided thereby.
14. Condemnation.
A. If the whole or any substantial part of the premises should he taken for
any public or quasi-public use under governmental law, ordinance or regulation,
or by right of eminent domain, or by private purchase in lieu thereof and the
taking would prevent or materially interfere with the use of the premises or the
normal operation of the company for the purpose which they are being used, this
lease shall terminate and the rent shall be abated during the unexpired portion
of this lease, effective When the physical taking of said premises shall occur.
B. If part of the promises shall be taken for any public or quad-public use
under any governmental law, ordinance or regulation, or by right of eminent
domain, or by private purchase in lieu thereof, and this lease is not terminated
as provided in the subparagraph above, this lease shall not terminate but the
rent payable hereunder during the unexpired portion of this lease shall be
reduced to such extent as may be fair and reasonable under all of the
circumstances.
C. In the event of any such taking or private purchase in lieu thereof,
Landlord and Tenant shall each be entitled to receive and retain such separate
awards and/or portion of lump sum awards as may be allocated to their respective
interests in any condemnation proceedings.
15. Holding Over. Tenant will, at the termination of this lease by lapse of
time or otherwise, yield up immediate possession to Landlord. If Landlord agrees
in writing that Tenant may hold over after the expiration or termination of this
lease, unless the parties hereto otherwise agree in writing on the terms of such
holding over, the hold over tenancy shall be subject to termination by Landlord
at any time upon not less than five (5) days advance written notice, or by
Tenant at any time upon not less than thirty (30) days advance written notice,
and all of the other terms and provisions of this lease shall be applicable
during that period, except that Tenant shall pay Landlord from time to time upon
demand, as rental for the period of any hold over, an amount equal to one and
one-half (1 1/2) the rent in effect on the termination date, computed on a daily
basis for each day of the hold over period. No holding over by Tenant, whether
with or without consent of Landlord, shall operate to extend this lease except
as otherwise expressly provided. The preceding provisions of this paragraph 15
shall not be construed as Landlord's consent for Tenant to hold over.
16. Quiet Enjoyment. Landlord covenants that it now has, or will acquire
before Tenant takes possession of the premises, good title to the premises, free
and clear of all liens and encumbrances, excepting only the lien for current
taxes not yet due, such mortgage or mortgages as are permitted by the terms of
this lease, zoning ordinances, and other building and fire ordinances and
governmental regulations relating to the use of such property, and easements,
restrictions and other conditions of record. In the event this lease is a
sublease, then Tenant agrees to take the premises subject to the provisions of
the prior leases. Landlord represents and warrants that it has full right and
authority to enter into this lease and that Tenant, upon paying the rental
herein set forth and performing its other covenants and agreements herein set
forth, shall peaceably and quietly have, hold and enjoy the premises for the
term hereof without hindrance or molestation from Landlord, subject to the terms
and provisions of this lease.
17. Events of Default. The following events shall be deemed to be events of
default by Tenant under this lease:
(a) Tenant shall fail to pay any installment of the rent herein reserved
when due, or any payment with respect to taxes hereunder when due, or any
other payment or reimbursement to Landlord required herein when due, and such
failure shall continue for a period of five (5) days from the date such
payment was due.
(b) Tenant shall become insolvent, or shall make a transfer in fraud of
creditors, or shall make an assignment for the benefit of creditors.
(c) Tenant shall file a petition under any section or chapter of the
National Bankruptcy Act, as amended, or under any similar law or statute of
the United States or any State thereof; or Tenant shall be adjudged bankrupt
or insolvent in proceedings filed against Tenant thereunder.
(d) A receiver or trustee shall be appointed for all or substantially all
of the assets of Tenant
(e) Tenant shall desert or vacate any substantial portion of the
promises.
(f) Tenant shall fail to comply with any term, provision or covenant of
this lease (other than the foregoing in this paragraph 17), and shall not
cure such failure within thirty (30) days after written notice thereof to
Tenant.
18. Remedies. Upon the occurrence of any such event of default described in
paragraph 17 hereof, Landlord shall have the option to pursue any one or more of
the following remedies without notice or demand whatsoever:
(a) Terminate this lease, in which event Tenant shall immediately
surrender the premises to Landlord, and if Tenant fails so to do, Landlord
may, without prejudice to any other remedy which it may have for possession
or arrearages in rent, enter upon and take possession of the premises, and
expel or remove Tenant and any other person who may be occupying such
premises or any part thereof, and Tenant agrees to pay to Landlord on demand
the amount of all loss and damage which Landlord may suffer by reason of such
termination, whether through inability to relet the premises on satisfactory
terms or otherwise.
(b) Enter upon and take possession of the premises and expel or remove
Tenant and any other person who may be occupying such premises or any part
thereof, by force if necessary, without being liable for prosecution or any
claim for damages therefor, and relet the premises and receive the rent
therefor; and Tenant agrees to pay to the Landlord on demand any deficiency
that may arise by reason of such reletting. In the event Landlord is
successful in reletting the premises at a rental in excess of that agreed to
be paid by Tenant pursuant to the terms of this lease, Landlord and Tenant
each mutually agree that Tenant shall not be entitled, under any
circumstances, to such excess rental, and Tenant does hereby specifically
waive any claim to such excess rental.
(c) Enter upon premises, and do whatever Tenant is obligated to do under
the terms of this lease; and Tenant agrees to reimburse Landlord on demand
for any expenses which Landlord may incur in thus effecting compliance with
Tenant's obligations under this lease.
In the event Tenant fails to pay any installment of rent hereunder as and when
such installment is due, to help defray the additional cost to Landlord for
processing such late payments Tenant shall pay to Landlord on demand a late
charge in an amount equal to five (5%) of such installment; and the failure to
pay such amount within twenty (20) days after demand therefor shall be an event
of default hereunder. The provision for such late charge shall be in addition
to all of Landlord's other rights and remedies hereunder or at law and shall not
be construed as liquidated damage or as limiting Landlord's remedies in any
manner.
Pursuit of any of the foregoing remedies shall not preclude pursuit of any of
the other remedies herein provided or any other remedies provided by law, nor
shall pursuit of any remedy herein provided constitute a forfeiture or waiver of
any rent due to Landlord hereunder or of any damages accruing to Landlord by
reason of the violation of any of the terms, provisions and covenants herein
contained. No act or thing done by the Landlord or its agents during the term
hereby granted shall be deemed a termination of this lease or an acceptance of
the surrender of the premises, and no agreement to terminate this lease or
accept a surrender of said premises shall be valid unless in writing signed by
Landlord. No waiver by Landlord of any violation or breach of any of the terms,
provisions and covenants herein contained be deemed or construed to constitute a
waiver of any other violation or breach of any of the terms, provisions and
covenants herein contained. Landlord's acceptance of the payment of rental or
other payments hereunder after the occurrence of an event of default shall not
be construed as a waiver of such default, unless Landlord so notifies Tenant in
writing. Forbearance by Landlord to enforce one or more of the remedies herein
provided upon an event of default shall not be deemed or construed to constitute
a waiver of such default or of Landlord's right to enforce any such remedies
with respect to such default or subsequent default. If, on account of any breach
or default by Tenant in Tenant's obligations under the terms and conditions of
this lease, it shall become necessary or appropriate for Landlord to employ or
consult with an attorney concerning or to enforce or defend any of Landlord's
rights or remedies hereunder, Tenant agrees to pay any reasonable attorneys fees
so incurred. This clause shall be mutually applied to Landlord or Tenant.
19. Landlord's Lien. In addition to any statutory lien for rent in
Landlord's favor, Landlord shall have and Tenant hereby grant to Landlord a
continuing security interest for all rentals and other sums of money becoming
due hereunder from Tenant, upon all goods, wares, equipment, fixtures,
furniture, inventory, accounts, contract rights, chattel paper and other
personal property of Tenant situated on the premises, and such property shall
not be removed therefrom without the consent of Landlord until all arrearages in
rent as well as any and all other sums of money then due to Landlord hereunder
shall first have been paid and discharged. In the event of a default under this
lease, Landlord shall have, in addition to any other remedies provided herein or
by law, all rights and remedies under the Uniform Commercial Code, including
without limitation the right to sell the property described in this Paragraph 19
at public or private sale upon ten (10) days notice to Tenant. Tenant hereby
agrees to execute such financing statements and other instruments necessary or
desirable in Landlord's discretion to perfect the security interest hereby
created. Any statutory lien for rent is not hereby waived, the express
contractual lien herein granted being in addition and supplementary thereto.
20. Mortgages. Tenant accepts this lease subject and subordinate to any
mortgage(s) and/or deed(s) of trust now or at any time here after constituting a
lien or charge upon the premises or the improvements situated thereon, provided,
however, that if the mortgagee trustee or holder of any such mortgage or deed of
trust elects to have Tenant's interest in this lease superior to such lien,
whether this lease was executed before or after said mortgage or deed of trust.
Tenant shall at any time hereafter on demand execute any instruments, releases
or other documents which may be required by any mortgagee for the purpose of
subjecting and subordinating this lease to the lien of any such mortgage.
21. Landlord's Default. In the event Landlord should become in default in
any payments due on any such mortgage described in Paragraph 20, hereof or in
the payment of taxes or any other items which might become a lien upon the
premises and which Tenant is not obligated to pay under the terms and provisions
of this lease, Tenant is authorized and empowered after giving Landlord five (5)
days prior written notice of such default and Landlord's failure to cure such
default, to pay any such items for and on behalf of Landlord, and the amount of
any item so paid by Tenant for or on behalf of Landlord, together with any
interest or penalty required to be paid in connection therewith, shall
<PAGE>
be payable on demand by Landlord to Tenant; provided, however, that Tenant shall
not be authorized and empowered to make any payment under the terms of this
Paragraph 21 unless the item paid shall be superior to Tenant's interest
hereunder. In the event Tenant pays any mortgage debt in full, in accordance
with this paragraph, it shall, at its election, be entitled to the mortgage
security by assignment or subrogation.
22. Mechanic's Liens. Tenant shall have no authority, express or implied, to
create or place any lien or encumbrance of any kind or nature whatsoever upon,
or in any manner to bind, the interest of Landlord in the premises or to charge
the rentals payable hereunder for any claim in favor of any person dealing with
Tenant, including those who may furnish materials or perform labor for any
construction or repairs, and each such claim shall affect and each such lien
shall attach to, If at all, only the leasehold interest granted to Tenant by
this instrument. Tenant covenants and agrees that it will pay or cause to be
paid all sums legally due and payable by it on account of any labor performed
or materials furnished in connection with any work performed on the premises on
which any lien is or can be validly and legally asserted against its leasehold
interest in the premises or the improvements thereon and that it will save and
hold Landlord harmless from any and all loss, cost or expense based on or
arising out of asserted claims or liens against the leasehold estate or against
the right, title and interest of the Landlord in the premises or under the terms
of this lease.
23. Notices. Each provision of this instrument or of any applicable
governmental laws, ordinances, regulations and other requirements with reference
to the sending, mailing or delivery of any notice or the making of any payment
by Landlord to Tenant or with reference to the sending, mailing or delivery of
any notice or the making of any payment by Tenant to Landlord shall be deemed to
be complied with when and if the following steps are taken:
(a) All rent and other payments required to be made by Tenant to Landlord
hereunder shall be payable to Landlord at the address hereinbelow set forth
or at such other address as Landlord may specify from time to time by written
notice delivered in accordance herewith. Tenant's obligation to pay rent and
any other amounts to Landlord under the terms of this lease shall not be
deemed satisfied until such rent and other amounts have been actually
received by Landlord.
(b) All payments required to be made by Landlord to Tenant hereunder
shall be payable to Tenant at the address hereinbelow set forth, or at such
other address within the continental United States as Tenant may specify
from time to time by written notice delivered in accordance herewith.
(c) Any notice or document required or permitted to be delivered
hereafter shall be deemed to be delivered whether actually received or not
when deposited in the United States Mail, postage prepaid, Certified or
Registered Mail, addressed to the parties hereto at the respective addresses
set out below, or at such other address as they have theretofore specified
by written notice delivered in accordance herewith.
LANDLORD: TENANT:
AEtna Life Insurance Company Mark Chandler, Individually
------------------------------------ ----------------------------------
c/o Trammell Crow Company 12212 Technology Blvd., Suite K
------------------------------------ ----------------------------------
301 Congress Avenue, Suite 1300 Austin, Texas 78727
------------------------------------ ----------------------------------
Austin, Texas 78701
------------------------------------
(P.O. Box 2176, Austin, TX 78768)
If and when included within the term "Landlord" as used in this instrument,
there are more than one person, firm or corporation, all shall jointly arrange
among themselves for their joint execution of such a notice specifying some
individual at some specific address for the receipt of notices and payments to
Landlord if and when included within the term "Tenant", as used in this
instrument, there are more than one person, firm or corporation, all shall
jointly arrange among themselves for their joint execution of such a notice
specifying some individual at some specific address within the continental
United States for the receipt of notices and payments to Tenant. All parties
included within the terms "Landlord" and "Tenant", respectively, shall be bound
by notices given in accordance with the provisions of this paragraph to the same
effect as if each had received such notice.
24. Miscellaneous.
A. Words of any gender used in this lease shall be held and construed to
include any other gender, and words in the singular number shall be held to
include the plural, unless the context otherwise requires.
B. The terms, provisions and covenants and conditions contained in this
lease shall apply to, inure to the benefit of, and be binding upon, the parties
hereto and upon their respective heirs, legal representative, successors and
permitted assigns, except as otherwise herein expressly provided. Landlord shall
have the right to assign any of its rights and obligations under this lease.
Each party agrees to furnish to the other, promptly upon demand a corporate
resolution, proof of due authorization by partners, or other appropriate
documentation evidencing the due authorization, of such party to enter into this
lease.
C. The captions inserted in this lease are for convenience only and in no
way define, limit or otherwise describe the scope or intent of this lease, or
any provision hereof, or in any way affect the interpretation of this lease.
D. Tenant agrees from time to time within test (10) days after request of
Landlord, to deliver to Landlord, or Landlord's designee an estoppel certificate
stating that this lease is in full force and effect, the date to which rent has
been paid, the unexpired term of this lease and such other matters pertaining to
this lease as may be requested by Landlord. It is understood and agreed that
Tenant's obligation to furnish such estoppel certificates in a timely fashion is
a material inducement for Landlord's execution of this lease.
E. This lease may not be altered, changed or amended except by an instrument
in writing signed by both parties hereto.
F. All obligations of Tenant hereunder not fully performed as of the
expiration or earlier termination of the term of this lease shall survive the
expiration or earlier termination of the term hereof including without
limitation all payment obligations with respect to taxes and insurance and all
obligations concerning the condition of the premises. Upon this expiration or
earlier termination of the term hereof. and prior to Tenant vacating the
premises, Tenant shall pay to Landlord any amount reasonably estimated by
Landlord as necessary to put the premises, including without limitation all
heating and air conditioning systems and equipment therein, In good condition
and repair. Tenant shall also, prior to vacating the premises, pay to Landlord
the amount, as estimated by Landlord, of Tenant's obligation hereunder for real
estate taxes and insurance premiums for the year in which the lease expires or
terminates. All such amounts shall be used and held by Landlord for payment of
such obligations of Tenant hereunder, with Tenant being liable for any
additional costs therefor upon demand by Landlord, or with any excess to be
returned to Tenant after all such obligations have been determined and
satisfied, as the case may be. Any security deposit held by Landlord shall be
credited against the amount payable by Tenant under this Paragraph 24(F).
G. If any clause or provision of this lease is Illegal, invalid or
unenforceable under present or future laws effective during the term of this
lease, then and in that event, it is the intention of the parties hereto that
the remainder of the lease shall not be affected thereby, and it is also the
intention of the parties to this lease that in lieu of each clause or provision
of this lease that is illegal, invalid or unenforceable, there be added as a
part of this lease contract a clause or provision as similar in terms to such
illegal, invalid or unenforceable clause of provision as may be possible and be
legal, valid and enforceable.
H. Because the premises are on the open market and are presently being
shown, this lease shall be treated as an offer with the premises being subject
to prior lease and such offer subject to withdrawal or non-acceptance by
Landlord or to other use of the premises without notice, and this lease shall
not be valid or binding unless and until accepted by Landlord in writing and a
fully executed copy delivered to both parties hereto.
I. All references in this lease to "the data hereof" or similar references
shall be deemed to refer to the last date, in point of time, on which all
parties hereto have executed this lease.
25. Additional Provisions. See Addendum and Exhibits "A" and "B" attached
hereto and made a part thereof.
EXECUTED BY LANDLORD, this day of , 19 .
Attest/Witness; Aetna Life Insurance Company
----------------------------------------
/s/ [ILLEGIBLE] By /s/ [ILLEGIBLE]
- ---------------------------------- -------------------------------------
Title: Leasing Agent Title: Assistant Vice President
---------------------------- ---------------------------------
EXECUTED BY TENANT, this 1 day of August, 1989
Attest/Witness
________________________________________
/s/ Mark Chandler By /s/ Mark Chandler
- ---------------------------------- --------------------------------------
Title:____________________________ ________________________________________
<PAGE>
ADDENDUM TO LEASE AGREEMENT BETWEEN
AETNA LIFE INSURANCE COMPANY, AS LANDLORD
AND MARK CHANDLER, INDIVIDUALLY
RENTAL RATE
- -----------
The monthly base rental shall be paid according to the following schedule:
Months 1 - 6 @ $2,000.00 gross (common area maintenance and taxes will not be
due during this period.)
Months 7 - 55 @ $2,953.00 triple net (common area maintenance and taxes will
be due during this period.)
CONSTRUCTION AND WORKMANSHIP WARRANTIES
- ---------------------------------------
The Tenant shall be assigned the entire rights of Landlord in all warranties
provided by the subcontractors relating to the finish-out construction of the
demised premises. This assignment of rights and warranties shall coincide with
the term of the lease. If for any reason the Tenant no longer occupies the
premises before the expiration of any warranties, then the assignment of the
warranties shall revert back to the Landlord. Landlord shall be responsible for
contracting and supervising the construction of the improvements to be
constructed in the demised space, as described in Exhibit "B" attached hereto.
Landlord warrants that HVAC has been serviced and is in good working order for a
period of 90 days following occupancy.
PARKING
- -------
The Tenant shall have the right to use fifteen (15) parking spaces of the total
spaces provided for the building on a non-exclusive basis during the term of the
lease. These spaces shall be provided at no cost to the Tenant. If no such
event shall the Tenant be entitled to paint, mark or otherwise identify any such
spaces for its exclusive use. Tenant shall prevent its employees from parking
on the streets adjacent to the premises and use its best effort to prevent all
other invitees from parking on such streets.
COMMON AREA MAINTENANCE
- -----------------------
In addition to the obligations and responsibilities of the Tenant documented in
Paragraph 6 "Tenant Repairs" of the lease, Tenant shall be responsible for its
proportionate share of all costs involving the non-structural maintenance of (1)
the exterior of the building, (2) the building and park landscaping, (3) the
parking lots and driveways, (4) interior and exterior sprinkler systems and any
other miscellaneous costs of the common area maintenance of the building and
park or park security.
ESCROW DEPOSIT
- --------------
During each month of the term of this lease, Tenant shall make a monthly escrow
deposit with Landlord equal to 1/12 of its proportionate share of the taxes,
common area maintenance charges and common utility charges which will be due and
payable for that particular year and which are Tenant's obligations pursuant to
Paragraphs 4, 6, and 10 of the Lease, respectively. Tenant authorizes Landlord
to use the funds so deposited with Landlord to pay such costs. Within ninety
(90) days after execution of this lease by both parties, Landlord shall estimate
all such costs for the year in question. The initial monthly escrow payment
required above shall be based upon Tenant's proportionate share of the estimated
costs, and the monthly escrow payments are subject to increase or decrease as
determined by Landlord to reflect an accurate monthly escrow of Tenant's
estimated proportionate share of all such costs. The escrow payment account of
Tenant shall be reconciled annually. If the Tenant's total escrow payments are
less than Tenant's actual proportionate share of all such costs, Tenant shall
pay Landlord upon demand the difference; if the total escrow payments of Tenant
are more than Tenant's actual proportionate share of all such costs, Landlord
shall retain such excess and credit it to Tenant's next accruing escrow account
payments.
Tenant shall escrow estimated common area maintenance and property tax charges
during months 7 through 55.
<PAGE>
ADDENDUM TO LEASE AGREEMENT BETWEEN
AETNA LIFE INSURANCE COMPANY, AS LANDLORD AND
MARK CHANDLER, INDIVIDUALLY, AS TENANT
PAGE TWO OF TWO
FINISH OUT
- ----------
Finish out will be constructed according to Tenant and Landlord approved plans
and specifications to be attached at a later date. In no event shall Tenant
finish out exceed $45,000.00.
SIGNAGE
- -------
Landlord will pay for building standard sign or pay for moving and installing
Tenant's existing sign.
RENEWAL OPTION
- --------------
Tenant shall have the right and option to renew this lease for one (1)
additional five (5) year term by delivering written notice thereof to Landlord
at lease One Hundred and eighty (180) days prior to the expiration date of the
lease term, provided that at the time of such notice and at the end of the lease
term, Tenant is not in default hereunder. Upon the delivery of said notice and
subject to the conditions set forth in the preceding sentence, this lease shall
be extended upon the same terms, covenants and conditions as provided in this
lease, except that the rental payable during said extended term shall be at the
prevailing market rental rate for space of comparable size, quality and location
at the commencement of such extended term. If a conflict arises in the
determination of such a Fair Market Value rental rate, a three-member committee,
selected from the Austin Board of Realtors, shall determine the Fair Market
Value rental rate. The first two members of such committee shall be selected by
Landlord and Tenant respectively, which two members shall select the third. In
no event shall the rate decrease below the rate Tenant is currently paying.
Landlord agrees to subordinate its contractual lien hereunder to any purchase
money or working capital line of credit financing.
Tenant must notify Landlord in writing upon each and every "secured party"
desiring to perfect their purchase money or working capital line of credit
financing.
<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION: Lot 10 of the McNeil Commercial Subdivision, Section Two, a
- -----------------
subdivision in Travis County, Texas
LOCAL ADDRESS: 12212-K Technology Blvd.
- --------------
Austin, Texas 78759
[Map Appears Here]
<PAGE>
EXHIBIT "B"
The tenant finish improvements will be constructed in accordance with the
"Industrial Standards and Specifications" dated February 1986, unless noted
otherwise on the construction drawings relating to the leased premises.
Actual construction plans will be accepted and agreed to as a separate document.
<PAGE>
FIRST AMENDMENT TO LEASE AGREEMENT BETWEEN
AETNA LIFE INSURANCE COMPANY, AS LANDLORD AND
MARK CHANDLER, INDIVIDUALLY, AS TENANT
DATED: 10/4/89
This Amendment, shall attach to and form a part of
the Lease Agreement and shall supersede and amend
such Lease as follows:
Toxic Waste
- -----------
Tenant covenants not to introduce any form of hazardous or toxic materials, as
defined by the U.S. Environmental Protection Agency onto the Premises without:
a) first obtaining Landlords written consent: and b) complying with all
applicable Federal, State and local laws or ordinances pertaining to the
transportation, storage, use or disposal of such material, including but not
limited to obtaining proper permits.
If Tenant's transportation, storage, use or disposal of hazardous or toxic
materials the Premises results in: 1) contamination of the soil or surface or
ground water: or 2) loss or damage to person(s) or property, then Tenant
agrees to respond in accordance with the following paragraph.
Tenant agrees: (i) to notify Landlord immediately of any contamination, claim of
contamination, loss or damage; (ii) after consultation and approval by Landlord,
to clean up the contamination in full compliance with all applicable statutes,
regulations and standard, and (iii) to indemnify, claims, suits, causes of
action, costs and fees, including attorney's fees, arising from or connected
with any such contamination, claim on contamination, loss or damage. This
provision shall survive termination of this lease.
WITNESS: AETNA LIFE INSURANCE COMPANY:
_________________________________ /s/ [ILLEGIBLE]
----------------------------------
WITNESS: MARK CHANDLER, INDIVIDUALLY
/s/ [ILLEGIBLE] /s/ Mark Chandler
- ---------------------------------- -----------------------------------
<PAGE>
SECOND AMENDMENT TO LEASE AGREEMENT BETWEEN
AETNA LIFE INSURANCE COMPANY, AS LANDLORD AND
MARK CHANDLER, INDIVIDUALLY, AS TENANT
To be attached to and form a part of Lease made the 1st day of
August, 1989, (which together with any amendments, modifications
and extensions thereof, is hereafter called the Lease), between,
Landlord and Tenant, covering a total of 2,625 squaw feet and
located at 12212 Technology Boulevard, Suite K, Austin, Texas.
WITNESSETH, THAT
WHEREAS, Tenant needs additional space for its business purposes and
Landlord has available an area adjacent hereto.
NOW, THEREFORE, in consideration of the premises, Landlord and Tenant
covenant and agree as follows:
1. Effective January 1, 1992 through end of Term, the demised promises
stall contain, in addition to the approximately 5,906 square feet originally
demised, an additional area hereinafter called the "new space", containing
approximately 2,625 square feet immediately adjacent thereto (see Exhibit "A"
attached hereto), thus making the aggregate area of the demised premises
approximately 8,531 square feet.
2. Landlord shall provide Tenant with a tenant finish allowance of
$10,000.00. All improvements must comply with Landlord's Standards and
------------------------
Specifications for Office/Warehouse Buildings.
- ---------------------------------------------
3. Effective January 1, 1992, the monthly rental for the entire 8,531
square feet shall be $4,265.50 Triple Net, payable on the first day of each
month during the balance of the term.
Except as herein and hereby modified and amended the Agreement of
Lease shall remain in full force and effect and all the terms, provisions,
covenants and conditions thereof are hereby ratified and confirmed.
DATE AS OF THE 10 DAY OF DECEMBER, 1991
WITNESS: AETNA LIFE INSURANCE COMPANY:
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
- ---------------------------------- -----------------------------------
BY:
TITLE: Director
WITNESS: MARK CHANDLER INDIVIDUALLY:
/s/ [ILLEGIBLE] BY: /s/ Mark Chandler
- ---------------------------------- --------------------------------
TITLE: President
-----------------------------
<PAGE>
EXHIBIT "A"
BUILDING: McNeil #4
LEGAL DESCRIPTION: Lot 10, McNeil Road Commercial Subdivision,
Section 2
ADDRESS: 12212 Technology Boulevard, suites J & K,
Austin, Texas 78727
NEW SPACE ORIGINAL SPACE
2,625 s.f. 5,906 s.f.
[MAP APPEARS HERE]
<PAGE>
THIRD AMENDMENT TO LEASE AGREEMENT BETWEEN
AETNA LIFE INSURANCE COMPANY, AS LANDLORD, AND
MARK CHANDLER, INDIVIDUALLY, AS TENANT
To be attached to and form a part of Lease made the 1st day of
August, 1989 (which together with any amendments, modifications
and extensions thereof, is hereinafter called the Lease), between
Landlord and Tenant, covering a total of 8,531 square feet and
located at 12212 Technology Boulevard, Austin, Texas, known as
McNeil 4..
1. WITNESSETH that the Lease is hereby extended and renewed for a further
term of Sixty (60) months to commence on the 1st day of June, 1994, on condition
that Landlord and Tenant comply with all terms, covenants and conditions
contained in the Lease, and the monthly base rental shall be Four Thousand Nine
Hundred Forty Seven and 98/100 Dollars ($4,947.98) plus property taxes, common
area maintenance, and insurance as provided in the Lease. The Tenant shall
accept the space in its current "as is" condition.
2. Landlord shall provide a tenant finish allowance of $2.00 per square
foot ($17,062.00) to be applied. toward interior improvements. Tenant shall be
responsible for the amount of tenant improvements in excess of the finish-out
allowance of $2.00 per square foot. All improvements must comply with Trammell
Crow Company's standard specifications (see Standards and Specifications for
--------------------------------
Office/Warehouse Buildings) and all applicable governmental regulations. Prior
- --------------------------
to beginning construction of any such improvements, Tenant shall submit
architectural drawings of the proposed improvements to Landlord and shall obtain
Landlord's written consent to begin construction.
3. The Landlord will provide the Tenant with an HVAC Certificate of
Inspection within thirty (30) days of the commencement of the renewal term. If
the HVAC units require repair or replacement, the Landlord will do so at its
cost.
Except as herein and hereby modified and amended the Agreement of Lease
shall remain in full force and effect and all the terms, provisions, covenants
and conditions thereof an hereby ratified and confirmed.
DATED AS OF THE 29 DAY OF APRIL, 1994.
WITNESS: AETNA LIFE INSURANCE COMPANY
___________________________ By: /s/ [ILLEGIBLE]
-----------------------------
Title: Director
--------------------------
WITNESS: MARK CHANDLER, INDIVIDUALLY:
[ILLEGIBLE]
- --------------------------- By: Mark Chandler
-----------------------------
Title:__________________________
<PAGE>
EXHIBIT "A"
BUILDING: McNeil #4
LEGAL DESCRIPTION: Lot 10, McNeil Road Commercial Subdivision,
Section 2
ADDRESS: 12212 Technology Boulevard
Austin, Texas 78727
[MAP APPEARS HERE]
<PAGE>
FOURTH AMENDMENT TO LEASE AGREEMENT BETWEEN
AETNA LIFE INSURANCE COMPANY, AS LANDLORD AND
MARK CHANDLER, INDIVIDUALLY, AS TENANT
To be attached to and form a part of Lease made the 1st day of
August, 1989 (which together with any amendments, modifications
and extensions thereof, is hereinafter called the Lease), between
Landlord and Tenant, covering a total of 8,531 square feet and
located at 12212 Technology Boulevard, Suites J and K, Austin,
Texas, known as McNeil #4.
WITNESSETH That the Lease is hereby amended as follows:
1. The Lease shall be extended and renewed for a further term of four (4)
months to commence on the 1st day of June, 1999, on condition that Landlord and
Tenant comply with all terms, covenants and conditions contained in the Lease,
and the monthly base rental shall be as follows. The Tenant shall accept the
space in its current "as is" condition.
2. WHEREAS, Tenant needs additional space for its business purposes and
Landlord has available an area adjacent hereto, effective on the commencement
date, the demised premises shall contain, in addition to the approximately 8,531
square feet originally demised, an additional area, hereinafter called the "new
space," containing approximately 4,206 square feet adjacent thereto (see Exhibit
"A" attached hereto), thus making the aggregate area of the demised promises
approximately 12,737 square feet. Tenant shall accept the "new space" in its
current "as is" condition and all improvements must comply with Landlord's
Standards and Specifications for Office/Warehouse Buildings.
The commencement due for the new space is defined as thirty (30) days
following existing tenant's vacation of the "new space" and their completion of
responsibilities outlined in Paragraph 4 of this document.
3. The Monthly Rental shall be as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
MONTHLY BASE MONTHLY BASE MONTHLY BASE
RENTAL PSF EXISTING RENTAL EXISTING RENTAL PSF NEW MONTHLY BASE TOTAL MONTHLY
TERM SPACE (8531 SF) SPACE SPACE (4,206 SF) RENTAL NEW SPACE BASE RENTAL
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commencement -
5/30/99 $0.58 $4,947.98 $0.65 $2,733.90 $7,681.88
- --------------------------------------------------------------------------------------------------------------------------
6/1/99 - 9/30/99 $0.58 $4,974.98 $0.65 $2,733.90 $7,681.88
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
These amounts shall be in addition to property taxes, common area maintenance,
and insurance as provided in the Lease.
4. Previous Tenant or Landlord shall be responsible for servicing and
repairing, if necessary, the HVAC system, by a mutually acceptable, licensed
contractor, cleaning the "new space" to broom clean condition and for building
an opening in the demising wall between the "existing space" and the "new space"
prior to occupancy of the "new space" by Tenant.
5. Paragraph 9.B.(i) of the Lease Agreement is hereby amended to name the
Management Company as an additional insured on all Tenant's Liability Insurance
Policies in connection with this Lease (except for the workers' compensation
policy as stated in Paragraph 9.B.(i)).
6. Except as herein and hereby modified and amended the Agreement of
Lease shall remain in full force and effect and all the terms, provisions,
covenants and conditions thereof are hereby ratified and confirmed.
DATED AS OF THE 7 DAY OF JUNE, 1996.
WITNESS: LANDLORD:
AETNA LIFE INSURANCE COMPANY
BY: Alleges Realty Investors, LLC its Agent
and Investment Advisor
/s/ Kim House /s/ [ILLEGIBLE]
- ----------------------- --------------------------------------
Printed Name: [ILLEGIBLE]
-------------------------
Title: Vice President
-------------------------
WITNESS: TENANT:
MARK CHANDLER, INDIVIDUALLY
Kim House /s/ Mark Chandler
- ----------------------- --------------------------------------
Printed Name: Mark Chandler
-------------------------
Title: _________________________
<PAGE>
EXHIBIT "A"
BUILDING: McNeil #4
LEGAL DESCRIPTION: Lot 10, McNeil Road Commercial Subdivision,
Section 2
ADDRESS: 12212 Technology Boulevard
Austin, Texas 78727
[MAP APPEARS HERE]
<PAGE>
FIFTH AMENDMENT TO LEASE AGREEMENT BETWEEN
AETNA LIFE INSURANCE COMPANY, AS LANDLORD, AND
MARK CHANDLER, INDIVIDUALLY, AS TENANT
To be attached to and form a part of Lease made the 1/st/
day of August, 1989 (which together with any amendments,
modifications and extensions thereof, is hereinafter called
the Lease), between Landlord and Tenant, covering a total of
12,737 square feet and located at 12212 Technology Boulevard,
Suites I, J and K, Austin, Texas, known as McNeil #4
WITNESSETH that the Lease is hereby amended as follows:
1. The Lease shall be extended and renewed (see Exhibit "A") for a
further term. of thirty (30) months to commence on the 1/st/ day of October
1999, on condition that Landlord and Tenant comply with all terms, covenants and
conditions contained in the Lease. The Tenant shall accept the space in its
current "as is" condition.
2. WHEREAS, Tenant needs, additional space for its business purposes and
Landlord has available an area nearby effective on Commencement Date, the
demised premises shall contain, in addition to the approximately 12,737 square
feet originally demised ("original space"), and additional area, hereinafter
called the "new space", containing approximately 20,122 square feet located at
12212 Technology Boulevard, Suite 200 (known as McNeil #5) (see Exhibit "B")
attached hereto, thus making the aggregate area of the premises approximately
32,859 square feet.
The Commencement Date for the new space is defined as forty five (45) days
following existing tenant's vacation of the "new space" and the completion of
responsibilities outlined in Paragraph 4 of this document.
3. Monthly Rental shall be as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
MONTHLY BASE MONTHLY BASE MONTHLY BASE
RENTAL PSF EXISTING RENTAL EXISTING PSF NEW MONTHLY BASE TOTAL MONTHLY
TERM SPACE (12,737 SF) SPACE SPACE (20,122 SF) RENTAL NEW SPACE BASE RENTAL
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commencement-9/30/99 $0.6031153 $7,681.88 $0.75 $15,091.50 $22,773.38
- ------------------------------------------------------------------------------------------------------------------------------
10/1/99 - 3/31/02 $ 0.75 $9,552.75 $0.75 $15,091.50 $24,644.25
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
These amounts shall be in addition to property taxes, common area maintenance,
and insurance as provided in the Lease. Tenant shall be obligated to pay its
proportionate share of management fees for the new space as of the Commencement
Date. As of October 1, 1999, Tenant shall pay its proportionate share of
management fees on the original space.
4. Previous tenant or Landlord shall be responsible for servicing and
repairing, if necessary, the HVAC system by a mutually acceptable, licensed
contractor and cleaning the "new space" to broom clean condition, including but
not limited to, removal of trash and previous Tenant's equipment.
5. With one hundred eighty (180) days prior written notice and so long as
--------------
Tenant is not in default under the terms of this Lease, Tenant shall have the
- ------------------------------------------------------
right to cancel the Lease after April 1, 2001. Should Tenant elect to exercise
such option, Tenant shall pay to Landlord a Termination Fee of Ninety Six
Thousand Two Hundred Five and 25/100 Dollars ($96,205.25). Fifty percent (50%)
of such Termination Fee is payable at the time such notice is served. The
remaining fifty percent (50%) is payable a the time of lease termination.
6. Landlord shall provide a tenant finish allowance of $40,224.00 to be
applied toward interior improvements. Tenant shall bear the entire cost of any
interior improvements to be installed by Landlord in the premises in excess of
the finish-out allowance of $40,224.00 and shall pay for such excess over the
allowance as hereinafter provided.
<PAGE>
In no event shall credit be given to Tenant for any allowance not utilized. All
improvements must comply with Trammell Crow Company's standard specifications
(see Standards and Specifications for Office/Warehouse Buildings) and all
-----------------------------------------------------------
applicable governmental regulations. Prior to beginning construction of any such
improvements, Tenant shall submit architectural drawings of the proposed
improvement to Landlord and shall obtain Landlord's written consent to begin
construction. Notwithstanding any provision herein to the contrary, Tenant will
utilize a general contractor, approved by Landlord, to construct the interior
improvements in the new space. Tenant will have the right to access, occupy and
conduct business in the new space up to, but not exceeding, forty five (45) days
prior to the Commencement Date without any rent obligation. Tenant will
construct the interior improvements in the new space with reasonable diligence,
but need not finish them prior to the Commencement Date; such improvements may
be constructed while Tenant is occupying and conducting business in the new
space. Tenant may draw the allowance from Landlord from time to time as
construction bills come due.
7. Witnesseth that the Lease expressly refers to Tenant as Mark Chandler,
Individually. From and after the date hereof, the Tenant shall be Luminex
Corporation and not Mark Chandler, Individually. The Lease and all related
documents are hereby amended such that all references to "Tenant" or "Mark
Chandler, Individually", will translate to mean "Luminex Corporation".
8. Tenant shall have the right and option to renew this Lease for one (1)
additional thirty-six (36) month term by delivering written notice thereof at
least one hundred eighty (180) days prior to the expiration date of the lease
term, provided that at the time of such notice and at the end of the lease term,
Tenant is not in default hereunder. Upon the delivery of said notice and
subject to the conditions set forth in the preceding sentence, this Lease shall
be extended upon the same terms, covenants and conditions as provided in this
Lease, except that the rental payable during said extended term shall be the
prevailing market rental rate for space of comparable size, quality and location
at the commencement of such extended term (the "Market Rate"). The right and
option shall apply to the initial lease term only. In the event Landlord and
Tenant are unable to agree upon the Market Rate, Landlord and Tenant shall each
promptly appoint a real estate broker who is licensed by the Texas Real Estate
Commission (TREC) and active in the Austin industrial market, to assist in the
determination of the Market Rate, and the two brokers shall appoint a third
broker who is also licensed by the Texas Real Estate Commission and active in
the Austin industrial market. The determination of the Market Rate by agreement
of any two of such three brokers shall thereafter be payable until further
adjusted. Landlord and Tenant agree to use all reasonable diligence to cause
their appointed brokers to perform in good faith and in a timely manner in order
to make the determination of the Market Rate on or before the date on which the
Market Rate is to become effective. In the event the brokers to not make such
determination in a timely manner, this Lease shall nevertheless continue in full
force and effect until such determination is made, and the rental for such
period shall be payable at the rate otherwise payable hereunder. Upon the
determination of the Market Rate, the payment of the Market Rate shall commence
on the first day of the month following the date of such determination, and in
addition to such monthly installment of rental, Tenant shall pay to Landlord in
the increase in rental payment hereunder, if any, applicable to the period from
the date on which the Market Rate was scheduled to become effective to the
payment of the first installment at the Market Rate. Landlord and Tenant shall
each bear the cost and fees of their respective brokers and shall share equally
the cost of the third broker, if needed.
9. Tenant, at its own cost and expense, shall enter into a regularly
scheduled preventative maintenance/service contract with a maintenance
contractor approved by Landlord for servicing all hot water, heating and air
conditioning systems and equipment within the Premises. The service contract
must include the replacement of filters on a regular basis and all services
suggested by the equipment manufacturer in its operations/maintenance manual and
must become effective within thirty (30) days of the date Tenant takes
possession of the Premises. Provided that
<PAGE>
Tenant maintains such service contract and is not in default under the terms of
this Lease, Landlord shall be responsible for any repairs or replacements
necessary to maintain the HVAC equipment in the new space for a period of sixty
(60) days following the Commencement Date.
10. Tenant shall have the nonexclusive right to utilize no more than
fifty-six (56) parking spaces at the new space and no more than thirty-nine (39)
parking spaces at the original space.
11. Tenant's "proportionate share" of McNeil #4 is 35.93%. Tenant's
proportionate share of McNeil #5 is 45.34%.
12. Subject to Landlord's written approval of the installation process and
procedure, Tenant, at its expense, shall have the right to install
telecommunication lines connecting the new space and original space.
13. Tenant shall not use, and shall not permit any subtenant licensee,
concessionaire, employee, agent or invitee (hereinafter collectively "Tenant's
Representatives") to use, any portion of the Premises or Building, for the
placement, storage, manufacture, disposal or handling of any hazardous materials
(hereinafter defined) unless Tenant complies with all applicable environmental
laws (federal, state and local), including, but not limited to those for
obtaining proper permits. In the event Tenant or Tenant's Representatives
desire to use or place hazardous materials on the Premises it shall notify
Landlord in writing thirty (30) days prior to such proposed use or placement,
and provide the names of the hazardous materials, procedures to insure
compliance with the applicable environmental laws and such other information as
Landlord may reasonable request.
In the event Tenant or Tenant's Representatives places, releases, or
discovers any hazardous materials on the Premises or Building in violation of
applicable environmental laws, Tenant shall immediately notify Landlord of such
fact in writing within twenty-four (24) hours of the placement, release or
discovery. Tenant shall not attempt any removal, abatement or remediation of
those hazardous materials on the Premises in violation of applicable
environmental laws, without obtaining the additional written consent of
Landlord, which consent may be specifically conditioned on Landlord's right to
approve the scope, timing and techniques of any such work and the appointment of
all contractors, engineers, inspectors and consultants in connection with any
such work. Tenant shall be responsible for the cost of any removal, abatement
and remediation work of any hazardous materials placed, stored, manufactured,
disposed of or handled by Tenant or Tenant's Representatives on the Premises or
any other portion of the Building and for the cost of any removal abatement or
remediation of any hazardous materials which might be disturbed or released as a
result of any remodeling or construction in the Premises by Tenant or Tenant's
Representatives. Such cost shall include, without limitation, the cost of any
supervision by Landlord, its employees or agents, in connection with such work.
Tenant shall comply with all environmental laws in connection with any such
removal.
Tenant shall indemnify Landlord, its shareholders, directors, officers,
employees and agents and hold them harmless, from and against any loss, damage
(including, without limitation, a loss in value of the Building or damages due
to restrictions on marketing contaminated space), cost, liability, expense
(including reasonable attorney's fees and expenses and court costs) arising out
of the placement, storage, use, manufacture, disposal, handling, removal,
abatement or remediation of any hazardous materials by Tenant or Tenant's
Representatives on the Premises or Building, or any removal, abatement or
remediation of any hazardous materials required hereunder to be performed or
paid for by Tenant, with respect to any portion of the Premises or the Building,
or arising out of any breach by Tenant of its obligations under this paragraph.
The term "hazardous materials" as used herein shall mean (i) any "hazardous
waste" as defined by the Resource Conservation and Recovery Act of 1976 (42
U.S.C. Section 6901 et seq.), as amended from time to time, and regulations
promulgated thereunder; (ii) any "hazardous substance" as defined by the
Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42
U.S.C. Section 9601, et seq.), as amended from time to time, and regulations
promulgated thereunder; (iii) asbestos or polychlorinated biphenyls; (iv) any
substance the presence of which on the Building or on the Premises is prohibited
or regulated by any federal, state or local law, regulation, code or rule; and
(v) any other substance
<PAGE>
which requires special handling or notification of any federal, state, or local
governmental entity in its collection, storage, treatment, or disposal.
14. This Lease shall be subordinate to any deed of trust, mortgage, of
other security instrument (a "Mortgage"), of any ground lease, master lease, or
primary lease (a "Primary Lease"). that now or hereafter covers all or any part
of the Premises (the mortgagee under any Mortgage or the lessor under any
Primary Lease is referred to herein as "Landlord's Mortgagee"), including any
modifications, renewals or extensions of such Mortgage or Primary Lease,
provided that it is a condition to the Subordination of this lease that the
Landlord's Mortgagee execute and deliver to Tenant a non-disturbance and
attornment agreement, in recordable form, whereby such Landlord's Mortgagee
agrees that neither this Lease nor Tenant's right to possession will be
terminated so long as Tenant is not in default under this Lease (provided
Landlord's Mortgagee, or successor thereto, maintains its rights to terminate
under other provisions of the Lease, e.g., for a casualty). Notwithstanding the
foregoing, Tenant agrees that any such Landlord's Mortgagee shall have the right
at any time to subordinate such Mortgage or Primary Lease to this lease on such
terms and subject to such conditions as Landlord's Mortgagee may deem
appropriate in its discretion. Tenant agrees upon demand to execute such further
instruments subordinating this Lease or attorning to the Landlord's Mortgagee as
Landlord may request, provided such contains non-disturbance provisions as noted
above and such other provisions which do not affect The substantive provisions
of this Lease. In the event that Tenant should fail to execute any subordination
or other agreement required by this paragraph, within twenty (20) days of
written request, it shall constitute an Event of Default, without further notice
required of Landlord.
Except as herein and hereby modified and amended the Agreement of Lease
shall remain in full force and effect and all the terms, provisions, covenants
and conditions thereof are hereby ratified and confirmed.
DATED AS OF THE 21/st/ DAY OF DECEMBER, 1998.
WITNESS: AETNA LIFE INSURANCE COMPANY:
By: Allegis Realty Investors LLC,
Its Investment Advisor sad Agent
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
------------------------- -----------------------------------
By: [ILLEGIBLE]
-----------------------------------
Title: Senior Vice President
--------------------------------
WITNESS: LUMINEX CORPORATION:
/s/ Mark Chandler
--------------------------------------
By MARK CHANDLER
------------------------------------
Title: CHAIRMAN & CEO
--------------------------------
<PAGE>
EXHIBIT "A"
BUILDING: McNeil #4
LEGAL DESCRIPTION: Lot 10, McNeil Road Commercial Subdivision,
Section 2
ADDRESS: 12212 Technology Boulevard
Austin, Texas 78727
[MAP APPEARS HERE]
<PAGE>
EXHIBIT "B"
BUILDING: McNeil #5
LEGAL DESCRIPTION: Lot 10, McNeil Road Commercial Subdivision,
Section 2
ADDRESS: 12112 Technology Boulevard
Austin, Texas 78727
[MAP APPEARS HERE]
<PAGE>
EXHIBIT 10.13
Sublease Agreement
This Sublease Agreement is made this 20th day of December, 1999 at Travis
County, Texas by and between American Innovations, Ltd., (herein "Sublessor"),
and Luminex Corporation, (herein "Sublessee"). Sublessor is the Lessee under
that certain Lease, (the "Main Lease"), by and between Aetna Life Insurance, as
Landlord, (herein "Lessor") and American Innovations, as Tenant, (herein
"Sublessor") executed on or about July 1996, for the premises described in the
Main Lease, (herein, "Leased Premises"). A true and correct copy of the Main
Lease is attached as Exhibit A and incorporated herein by this reference.
In consideration of the mutual promises contained herein and upon the express
condition of the occurrence of a HVAC and mechanical inspection of the Subleased
Premises satisfactory to Sublessee, Sublessor hereby subleases a portion of the
Leased Premises (herein *Subleased Premises*) to Sublessee, subject to the terms
of the Main Lease, and subject further to the provisions of this Sublease
Agreement, as follows:
1. All the duties and obligations of Sublessee hereunder are expressly
conditioned on the occurrence of an inspection of the Subleased Premises by
a licensed heating and air conditioning service company which is
satisfactory to Sublessee by January 1, 2000. If such an inspection is not
satisfactory to Sublessee, this Sublease Agreement shall terminate effective
immediately and all of Sublessee's duties and obligations hereunder shall be
deemed full and satisfactorily discharged.
2. Sublessee agrees to abide by and observe all the terms, covenants and
conditions of the Main Lease.
3. Insofar as the provisions of the Main Lease do not conflict with the
specific provisions of this Sublease Agreement each of them is incorporated
into this Sublease as if completely rewritten herein. Sublessee agrees to be
bound to Sublessor by all the terms of the Main Lease and to assume towards
Sublessor and Worm all obligations and responsibilities that Sublessor, by
the Main Lease, assumes towards Lessor, except for the payment of rent and
tenant costs by Sublessee to Sublessor, which is governed by Paragraph 5
herein. Sublessee further agrees to indemnify and hold harmless Sublessor
from any claim or liability under the Main Lease. The relationship between
Sublessee and Sublessor shall be the same as between Sublessor and Lessor
under the Main Lease.
4. The premises being subleased is identified in Exhibit B and consists of
approximately 2,500 square feet located within the space leased by Sublessor
from Lessor and adjoining to space leased by Sublessee from Landlord (the
"Subleased Premises*). Prior to the execution of this Sublease Agreement
Sublessee is responsible for ensuring that the Subleased Promises can be
incorporated with Sublessee's adjoining space while maintaining security
satisfactory to Sublessor and meeting fire safety code. Any costs related to
modify the space to comply with security and fire safety shall be the sole
responsibility of Sublessee. Sublessee may instaIl one (1) door where
indicated on Exhibit B. Within fifteen (15) days of the end of the Sublease
Agreement Sublessee shall remove the subject door and repair the wall so
that the wall is consistent with the surrounding walls. Further, Sublessor
gives its consent to Sublessee to make interior improvements to the
Subleased Promises without further approval of Sublessor, limited to the
addition or alteration of the paint, carpet, telephone and data lines.
5. The term of this Sublease Agreement shall be for a term of twelve (15)
months commencing on January 1, 2000 and ending March 31, 2001 provided that
this Sublease Agreement shall sooner terminate upon the termination for any
cause whatsoever of the Main Lease. If Sublessee makes any assignment of
assets for the benefit of creditors, or if a trustee or receiver is
appointed to administer or conduct its business, or it is judged in any
legal proceedings to be bankrupt, then this Sublease Agreement shall
terminate without prior written notice. Unless otherwise terminated as
specified in this paragraph, this Sublease Agreement shall automatically
renew each month until termination of the Main Lease or upon ninety (90)
days written notice by either party, whichever comes first.
6. Sublessee agrees to pay Sublessor, as rent and tenant costs (including
electricity) for the Subleased Premises, the sum of two thousand six hundred
twenty-five dollars ($2,625.00) per month, payable in advance on the 1st day
of each calendar month during the term of this Sublease. The first monthly
installment for rent as set forth above shall be due and payable upon
execution of this Sublease. Upon Execution of this
American Innovations Page #1 Sublease Agreement
<PAGE>
Sublease, Sublessee shall also deposit with Sublessor the sum of two
thousand six hundred twenty-five dollars ($2,625.00) as a security deposit
to be held by Sublessor pursuant to the provisions of the Main Lease.
7. The following events shall be deemed to be events of default by Sublessee
under this Sublease: any events of default by Sublessee, listed as events of
default by Tenant set forth in the Main Lease, or any default in the
provisions of this Sublease Agreement. Upon the occurrence of any such
events of default, and in addition to any other available remedies provided
by law or in equity, Sublessor shall have all remedies granted to Lessor in
the Main Lease.
8. Sublessee, shall have no right to assign any interest in this Sublease
Agreement without first obtaining the written consent of the Lessor and
Sublessor, which consent may or may not be granted by the Lessor or
Sublessor in their sole opinion, judgment or discretion.
9. Sublessor shall have no liability to Sublessee for any wrongful action or
default on the part of Lessor pursuant to the terms of the Main Lease, and
Sublessee hereby agrees to look solely to Lessor in event of any such
default the liability and obligations of Sublessor being solely pursuant to
the terms and conditions of this Sublease Agreement.
10. Any notice pertaining to this Sublease Agreement or the Main Lease shall be
in writing and shall be deemed to be delivered on the date it is hand
delivered to the party to whom such notice is given, or if such notice is
mailed, on the date on that it is sent by overnight courier or by registered
or certified mail (postage prepaid, return receipt requested) to the
respective party at the address listed in the heading of this Sublease
Agreement.
12. If any provisions hereof shall for any reason be held void or unenforceable,
the remaining provisions shall remain in full force. Any provisions of this
Sublease Agreement prohibited by the law of any state shall, as to said
state, be ineffective to the extent of such prohibition without effecting
the remaining provisions of this Sublease Agreement This Sublease Agreement
is governed by the laws of the State of Texas.
13. Except as provided above, no provisions of this Sublease Agreement may be
waived or modified unless agreed to in writing by both parties. This
Sublease Agreement constitutes the entire agreement between the parties with
respect to the subject hereof and supercedes all prior written or oral
agreements between the parties relating to such subject.
14. Each party represents and warrants to the other that it has the requisite
authority to enter into this Sublease Agreement and to perform every term,
provision and obligation of this Sublease Agreement and that neither the
execution of this Sublease Agreement nor the performance hereunder is in
conflict with any other agreement.
15. Nothing contained in this Sublease Agreement shall be construed to: a) give
either party the power to direct or control the day to day activities of the
other, b) constitute a partnership, joint venture or ownership; or c) allow
either party to create or assume any obligation on behalf of the other.
16. Should a dispute arise between the parties, every effort will be made to
resolve the differences by the personnel involved in the dispute. When such
resolution cannot be achieved, the dispute will be referred to the
management level of each party. Should all efforts be exhausted without
satisfactory resolution, then either party may refer the matter to the
American Arbitration Association for resolution under its rules and
requirements. Each party shall be responsible for the costs of their own
witnesses, technical support, lawyers and other assistance. All other costs,
the timing of the arbitration and the location of the proceedings shall be
agreed upon mutually and in writing. The parties agree that any matter
requiring injunctive or temporary relief may be brought in any court having
jurisdiction.
<TABLE>
<S> <C>
ACCEPTED: ACCEPTED:
American Innovations, Ltd. ("Sublessor") Luminex Corporation ("Sublessee")
BY: /s/ Richard J. Smalling BY: /s/ James Persky
-------------------------- ----------------------
Richard J. Smalling James Persky
President Vice President & Chief Financial Officer
Date: 12/20/99 Date: 12/20/99
--------- ---------
</TABLE>
American Innovations Page #2 Sublease Agreement
<PAGE>
(Separate sublease agreement required)
CONSENT TO SUBLEASE
OF LEASE
This Consent to Sublease of Lease (this "Consent") is executed this 4th day
of January, 2000, by AEtna Life Insurance Company ("Landlord").
RECITALS
A. Landlord owns that certain 44,378 square feet located at 12112
Technology Blvd., Austin, Texas, commonly known as McNeil #5 (the "Building").
B. American Innovations, Ltd., ("Tenant") is a tenant leasing 24,256 sf
of space in the Building pursuant to that certain lease document by and between
Landlord and Tenant dated June 21, 1996, as amended (the "Lease").
C. Tenant desires to sublease a portion of its space, amounting to
approximately 2,500 sf, to Luminex Corporation (the "New Tenant") according to
the terms and conditions of the attached sublease agreement.
D. New Tenant has agreed to assume the obligations of Tenant and perform
the obligations thereof as set forth in the Lease pursuant to Sublease Agreement
between American Innovations, Inc. and Luminex Corporation dated as of December
20,1999 (the "Sublease").
AGREEMENT
Now therefor, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the undersigned hereby agree as
follows.
1. The above recitals are incorporated herein by this reference.
2. Effective upon receipt by Landlord of (i) the executed Sublease, and
(ii) a certificate of insurance indicating that New Tenant carries all of the
insurance coverages required to be carried by Tenant under the Lease. Landlord
hereby consents to the Sublease of the Lease from Tenant to New Tenant pursuant
to the Sublease.
3. By acceptance hereof, Tenant acknowledges that Tenant shall be and
remain liable for any claims that Landlord may have under the Lease prior to the
date of the Sublease of the Lease, and New Tenant acknowledges that New Tenant
will assume all obligations under the Lease and be liable for any claims that
Landlord may have under the Lease after die date of such Sublease.
4. This consent relates solely to the Sublease and to no other or future
Sublease of the Lease or with respect to any other matter requiring Landlord's
consent under the Lease.
<PAGE>
5. Except as otherwise expressly stated, nothing contained herein shall:
(a) operate as a representation or warranty by Landlord of any nature
whatsoever;
(b) be construed to modify, waive or affect any of the provisions,
covenants or conditions of the Lease or to waive any breach
thereof or any rights of Landlord thereunder or to increase
Landlord's obligations under the Lease; or
(c) release or discharge the Tenant from any liability under the
Lease and the Tenant shall remain liable and responsible for the
full performance and observance of all of the provisions,
covenants and conditions set forth in the Lease on the part of
the tenant to be performed and observed.
IN WTTNESS WHEREOF, Landlord has executed this Consent as of the date first
written above.
AEtna Life Insurance Company
By: Allegis Realty Investors LLC, its
[investment advisor and agent]
By: /s/[ILLEGIBLE]
--------------------
Name: /s/ [ILLEGIBLE]
--------------------
Its: Vice President
--------------------
ACCEPTED AND AGREED:
American Innovations, Ltd.:
By: /s/ Richard J. Smalling
-------------------------
Name: Richard J. Smalling
Its: President
Luminex Corporation:
By: /s/ James L. Persky
-------------------------
Name: James L. Persky
Its: Chief Financial Officer
<PAGE>
EXHIBIT "B"
[DIAGRAM APPEARS HERE]
<PAGE>
EXHIBIT 10.14
First Amendment to Sublease Agreement between Luminex
("Sublessee") and American Innovations, Ltd. ("Sublessor")
This amendment is to be attached to, and form a part of, the
Sublease Agreement made the 20/th/ day of December, 1999
between Sublessor and Sublessee covering a portion of the
space located at 12112 Technology Blvd., Suite 100, Austin,
Texas known as McNeil #5 and subject to the Main Lease
between Sublessor and Aetna Life Insurance.
1. The premises being subleased is amended as shown in Exhibit A to include an
additional 400 square feet comprising a hallway that will serve as the fire
exit pathway for said premises. Any costs related to modify the additional
space to comply with security and fire safety shall be the sole
responsibility of Sublessee. Sublessee is responsible for installing two
doors where indicated on Exhibit A; one door will separate the premises
being subleased from those being leased by Sublessor and the second door is
required to open the additional hallway covered by this amendment.
2. Sublessee agrees to pay Sublessor rent and tenant costs (including
electricity) for the premises being subleased, including the additional 400
square feet described in this amendment, in the amount of three thousand
forty-five dollars ($3,045.00) per month payable in advance on the 1/st/
day of each calender month during the term of the Sublease Agreement. Upon
execution of this amendment, Sublessee shall pay Sublessor $420 to cover
the difference in rent and tenant costs for the additional 400 square feet
in January 2000.
3. The term of the Sublease Agreement shall be for fifteen (15) months
commencing on January 1, 2000 and ending March 31, 2001 provided that the
Sublease Agreement shall sooner terminate upon the termination for any
cause whatsoever of the Main Lease. The amendment is made to correct a
typographical error in the Sublease Agreement.
4. Addresses were omitted from the Sublease Agreement. For the purposes of
Section 10 of the Sublease Agreement, any notices shall be delivered to the
following addresses:
American Innovations Luminex Corporation
12112 Technology Blvd., Suite 100 12212 Technology Blvd.
Austin, Texas 78727 Austin, Texas 78727
Except as herein modified and amended, the Sublease Agreement shall remain in
full force and effect and all the terms, provisions, covenants and conditions
thereof are hereby confirmed:
ACCEPTED: ACCEPTED:
American Innovations, Ltd. ("Sublessor") Luminex ("Sublessee")
BY: /s/ Richard J. Smalling BY: /s/ James L. Persky
-------------------------------- --------------------------------
Richard J. Smalling James Persky
President Vice President & Chief Financial
Date: January 24, 2000 Officer
Date:___________________________
Page #1
<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, in the
Registration Statement (Form S-1) and related Prospectus of Luminex Corporation
for the registration of shares of its common stock.
/s/ Ernst & Young LLP
Austin, Texas
February 3, 2000
- --------------------------------------------------------------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM LUMNEX 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-31-1999
<PERIOD-END> DEC-31-1998 DEC-31-1999
<CASH> 8,537 4,083
<SECURITIES> 0 4,929
<RECEIVABLES> 146 1,341
<ALLOWANCES> (14) (64)
<INVENTORY> 47 663
<CURRENT-ASSETS> 61 181
<PP&E> 799 1,369
<DEPRECIATION> (484) (999)
<TOTAL-ASSETS> 9,590 12,566
<CURRENT-LIABILITIES> 400 771
<BONDS> 0 0
0 0
19,041 28,946
<COMMON> 6 6
<OTHER-SE> (9,851) (17,751)
<TOTAL-LIABILITY-AND-EQUITY> 9,590 12,566
<SALES> 0 0
<TOTAL-REVENUES> 0 506
<CGS> 88 1,172
<TOTAL-COSTS> 88 1,172
<OTHER-EXPENSES> 6,177 10,672
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (5,596) (8,448)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (5,596) (8,448)
<EPS-BASIC> (.87) (1.31)
<EPS-DILUTED> (.87) (1.31)
</TABLE>
